Report of State Auditor 1998 - Laserfiche WebLink

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I Report of The Colorado State Auditor 25 of the $26 million may be reserved needlessly. Some of these projects may have found funding through other sources, while others may have been abandoned altogether. For example, we identified one project that was authorized in 1983 for $8.5 million which is still authorized. Another project has been authorized since 1977 but has never been started. Also, when a project requires fewer funds to construct than authorized, the excess amount should be immediately deauthorized to free up the money for other projects. This occurs fairly frequently because funds are earmarked on the basis of estimated project costs and not actual cost. We found that the Board has about $181,000 in residual funds that are still authorized for projects, even though the projects have been completed for some time. Maintaining Project Authorizations Over Long Time Periods Has Little Benefit for the State The benefit of allowing the projects to be authorized for excessive periods of time is unclear. For example, we found a$412,500 project that was originally authorized in 1987 that needed to have its loan amount increased to $787,500 in 1998 because the cost of the project increased by the time the construction was scheduled to begin. Ideally, in this case the original loan amount should have been deauthorized after three or four years to allow the funds to be used for other purposes. Then, if the project sponsor still needed funding at a later time, it should have reapplied. The Board's current practice is to contact the project sponsor annually to determine if the project should be deauthorized. The Board seeks deauthorization of the funds only upon consent of the project sponsor. However, there is no motivation for project sponsors to allow deauthorization. This is because interest does not accrue on the loan proceeds until construction has started. Thus,maintaining authorization costs the sponsor nothing and allows funding to be available anytime should the project get started. For instance,the Board sent a letter in 1997 to a sponsor whose project had been authorized in 1983 for $8.5 million. Deauthorization was not approved because the project sponsor told the Board that construction might start in the next two years. Therefore,$8.5 million continues to be set aside for this project when it could be used for other projects. The Board has recently established a time limit for spending construction funds. Project contracts have a requirement that construction must be completed within two years of signing the contract. However,there is no time limitation from the approval of the project to signing the contract and starting construction. We found three I I