Report of State Auditor 1998 - Laserfiche WebLink

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I 45 Loan Administration j Chapter 3 I Background After a water project is finished and inspected by Board staff, a project sponsor is notified of its obligation to begin making loan payments. The first payment of the loan is due one year after the State determines that the project is substantially complete. Annual payments are then due until the loan is paid in full. Most loan terms are for a period of 30 years,but terms can range from 10 to 40 years. Annual payments on the principal and interest due on the Board's active loans currently range from about$325 to $1,153,400,with an average of$42,900. Prior to the due date of the first payment,the Board sends the project sponsor a letter that includes information on the following: • Interest payable that may have accrued during the construction phase. • Amount of the first loan payment and its due date. • Amortization schedules. • Requests for proof of current liability insurance. Because projects are finished at various times during the year, the Board receives payments throughout the year. Staff keep track of payment due dates by using a spreadsheet that shows the payments that are due each month. In addition,payments made on each loan are tracked in individual loan files by manually recording information on a ledger. Billin g Procedures Need Basic Improvements Our review of the Board's billing procedures indicated a need for basic improvements. First, the Board sometimes sends bills to borrowers at the wrong time. We found six instances where a borrower was billed late and two where the I borrower was billed early given the due date as noted on the loan contract. Billing borrowers in a timely manner is important to ensure that the interest due on a loan is accurately calculated. In the cases we observed, six borrowers were undercharged I I