Report of State Auditor 1998 - Laserfiche WebLink

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1 SUMMARY 1 2 Construction Fund Loan Program Performance Audit-September 1998 for water projects that will either increase the beneficial consumptive use of Colorado's undeveloped compact-entitled waters and/or repair or rehabilitate existing water storage and delivery systems, maintain the State's satellite monitoring system,or promote efficient management and operation of agricultural and multipurpose water systems. Through our review of the Program's operations,we concluded that the Program needs to make operational improvements to ensure that state resources are being used effectively and efficiently. Problems exist in the Program's loan review, approval, billing, and collection processes. We also found problems in the areas of fiscal management, performance measurement, accounting, statutory compliance,contracting, and recordkeeping. 1 In addition, we found several projects that were completed using Board funding that may not be consistent with statutory funding priorities. For example, statutes require that project sponsors , explore all other means of financing before Fund monies can be made available for a project. We found projects totaling$2.6 million that were approved by the Board and authorized by the General Assembly that were actually built using other funding sources. Further, we found an additional$9 million in loans that were made to refinance existing U.S. Bureau of Reclamation loans. We recommend that the Water Conservation Board establish goals and objectives for managing the Construction Fund Loan Program and closely monitor progress toward improving program operations. In addition, the Board should ensure that all projects receiving funding through the Program clearly adhere to the funding priorities established by law,or it should seek statutory changes. Resources May Exceed Demand Given Current Statutory Spending Priorities I The Construction Fund (Fund) has maintained a large cash balance (i.e., an average of about $91.5 million) over the five previous years. The majority of the cash balance is earmarked for specific projects;however,most of the cash balance is not immediately needed. In fact,we estimate that if the Fund stopped receiving all revenue as of June 30, 1997, (except for principal and interest I payments on existing loans),and maintained the spending rate observed over the four previous years, the Fund would still remain solvent for over seven years. Since this is a revolvin g fund that has both cash inflows and outflows,the level of cash in the Fund should be maintained so that it is high enough to absorb fluctuating revenues and disbursements but low enough to minimize the possibility of excessive amounts of idle funds. We estimate that the amount needed to pay for any anticipated disbursements for program activities and obligations on a day-to-day basis is about$38.8 million. Thus,given the Fund's$89.7 million balance at June 30, 1997, we estimate that the Fund has about$50.9 million that could be used for other purposes. Not only is there more money in the Fund than is being used, the Board has additional funding available for financing water projects. Statutes give the Board the authority to use monies in the Severance Tax Perpetual Base Fund for making water project loans. On the basis of projections I I