Report of State Auditor 1998 - Laserfiche WebLink

Home Browse Search

1 SUMMARY Report of The Colorado State Auditor 3 I made by the Department of Local Affairs, by Fiscal Year 2006 the Board will have an additional $55 million in revenues from this source to spend on water projects. Given the sizeable nature of the Fund's cash balance, it may be prudent for the Board to either increase its rate of disbursements or work with the General Assembly to free up funds for other purposes. We believe increasing disbursements may be difficult, however, because evidence suggests that the Board's current disbursement levels may be in excess of the demand for project funding. For example,we found that the Board has set aside large amounts of funds for projects that were never constructed and others that do not meet statutory spending priorities. We also could not find any evidence of a borrower's ever being denied funding for a water project that met the statutory funding parameters. In addition, there is no evidence of a potential borrower's applying for a loan and not receiving one because there were insufficient funds available. ' The large cash balance in the Fund has resulted in the Board's recognizing the need to estimate cash balances and project its receipts and disbursements over the next ten years. On the basis of these estimates, staff projected the cash balance in the Fund to be about$8 million in Fiscal Year 2006. However, staff have used assumptions that do not reflect the Program's recent experience and, consequently, have forecasted an unrealistically low cash balance. Specifically, the staff did not include severance tax funds in the projections, used inaccurate interest rates, and used large plug figures. By changing three of the Board's assumptions for estimating receipts and disbursements to more accurately reflect prior experience,we estimate the Board will have about$148 million instead of the $8 million originally forecasted. The Water Conservation Board should improve its methods for estimating the receipts and disbursements associated with the Construction Fund Loan Program and,if necessary,work with the General Assembly to make the changes needed to reduce the cash balance of the Construction Fund. Many Project Loans Are Approved Without a Completed Feasibility Study According to statutes and Board procedures, in order to obtain a loan, a project applicant must submit a completed feasibility study. We found that the Board approves many projects before a completed study is submitted. A completed feasibility study helps the Board make an informed decision about whether a project is technically feasible and whether the applicant has the ability to repay its loan. Specifically, when we reviewed Board minutes covering the period March 1995 to January 1998, we found that 41 of the 54 project loans (76 percent) that the Board approved did not have a ' completed feasibility study. These loans totaled$16.8 million. Further, 13 of these project loans totaling almost $3.9 million still had no completed feasibility study at the time of our audit, even though some of the loans were approved over three years ago. We also found four cases where a I I