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I <br /> Report of The Colorado State Auditor 43 <br /> Recordkeeping Needs Improvement <br /> During our review of the Board's loan files we observed several recordkeeping <br /> issues. As mentioned previously, many loan files are missing evidence that <br /> feasibility studies were conducted or that sufficient liability insurance or collateral <br /> was obtained. Problems in these areas are discussed at length throughout this report. <br /> Obtaining proper documentation prior to disbursing funds is important to ensure that <br /> the State's interests are protected should repayment problems with a loan arise. <br /> General file maintenance also need improvement. Specifically, we found that the <br /> Board does not have a centralized filing system for its loan records. Older loan <br /> records are kept in multiple binders, whereas a combined filing system is used for <br /> newer loans. Poor file maintenance may result in lost or misfiled documents. When <br /> developing ways to correct these problems,the Board should explore technological <br /> solutions (e.g., scanners). <br /> An Internal Loan Review Process Would Identify <br /> Problem Areas <br /> Many of the problems we observed could be identified and corrected if the Board had <br /> an internal loan review process and better file maintenance procedures. An internal <br /> loan review process could be conducted just prior to a loan approval to ensure that <br /> loan documents are complete and accurate prior to disbursing any funds. Such a <br /> review could be repeated periodically throughout the life of a loan to ensure that <br /> various loan maintenance issues were addressed. By conducting a periodic review <br /> process, the Board can determine whether: <br /> • Contingencies, such as collateral that is expected to be obtained at project <br /> completion, were met. Reviews could also ensure that the State's security <br /> interest in certain collateral was perfected as required. <br /> • Contract amendments were properly prepared and executed. <br /> • Changes to loan conditions were documented and suitably reflected in the <br /> appropriate loan documents (e.g., amortization schedules,billings). <br /> American Institute of Certified Public Accountants (AICPA) guidelines state that a <br /> loan review process is essential in assessing the quality of a lender's loan portfolio <br /> and may help identify weaknesses in the lending process or problems in the methods <br /> used to supervise and collect loans. The Board should also improve its file <br /> maintenance procedures to ensure that loan documents are properly filed and easily <br /> accessible. <br /> I <br />