Report of State Auditor 1998 - Laserfiche WebLink

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I 30 Construction Fund Loan Program Performance Audit-September 1998 maps; socioeconomic information; water demand estimates;cost estimates; I loan repayment information; and project alternatives. The feasibility study also includes, at a minimum, a site inspection to verify topography, hydrologic features, and the location and condition of existing structures. Many Project Loans Are Approved 1 Without a Completed Feasibility Study As part of our audit we reviewed the Board's guidelines for preparing feasibility studies and found them to be reasonable. Further, we concluded that if a project sponsor followed the guidelines,the resulting study report would provide adequate data for the Board to make an informed decision about whether to approve a project for funding. However,we found that the Board approves many projects before they have a completed feasibility study. We reviewed Board minutes covering the period March 1995 to January 1998 to determine how many new loans were considered for approval before staff had received a completed feasibility study. Of the 54 project 1 loans that were approved during this time period, over 76 percent (i.e., 41 loans totaling $16.8 million) did not have a completed feasibility study at the time they were approved. In addition, we found that 13 of the 41 loans, totaling almost $3.9 million, still had no completed feasibility study at the time of our audit, even though some of the loans had received approval over three years ago. The information contained in a completed feasibility study is integral in helping the Board assess whether a particular project is technically feasible and whether a project sponsor has the ability to pay back a loan. Further,many projects that received Board approval without a completed feasibility study are later deauthorized, meaning that the project funds were never used. Specifically, 14 of the 16 loans (88 percent) that were deauthorized during Fiscal Years 1996 to 1998 did not have a completed feasibility study when they were approved. These loans totaled almost $8.8 million. Setting aside funding for projects that may be impractical or financially risky wastes the time and effort of both the Board and the General Assembly and results in less funding being available for those projects which have proven viability. Finally,we found four cases in which a project feasibility study was completed after or during the same month that the project itself was completed. In these cases the Board disbursed construction funds, even though there may have been incomplete information on the project sponsor's financial situation. Because of the timing of the legislative session, there may be situations where it is impractical to complete a feasibility study before a project is presented to the General Assembly for authorization. In these cases, the Board may want to consider conditional approval I