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<br />20 <br /> <br />Water Conservation Board Construction Fund Performance Audit-February 1993 <br /> <br />. <br /> <br />Loan interest rates were generally set at the minimum of 5 percent <br />permitted by statute. During the period 1981 to 1992, long-term tax- <br />exempt interest rates ranged from 6 to 12 percent. The 5 percent interest <br />rate resulted in reduced cash inflows to the fund and less money <br />available for other projects. ' <br /> <br />. <br /> <br />Interest is not charged on funds advanced to project sponsors during the <br />construction phase of projects. As a result, less money is available for <br />other projects. <br /> <br />. <br /> <br />Project sponsors are not contacted annually to determine if they plan to <br />go ahead and construct projects. Some projects are never constructed <br />and eventually are deauthorized. This means that monies allocated to , <br />these projects from the Construction Fund are not effectively used during <br />this period. <br /> <br />. <br /> <br />Feasibility study costs of the Board are not recovered for projects that <br />are not constructed. If a project is constructed, feasibility costs are <br />recovered through loan repayments. The former practice results in an <br />additional subsidy and less money available for other projects. <br /> <br />Long-Term Financial Plans Need To Be <br />Developed <br /> <br />The Board has not developed a method for projecting the long-term financial <br />status of the Construction Fund. While the Board has identified some long-term <br />project needs, it has not developed a comprehensive implementation plan that <br />shows how it will meet those needs. <br /> <br />Project disbursements <br />could exceed' $120 million <br />over the next 10 years. <br /> <br />The Board recently reported to the Joint Budget <br />Committee that disbursements from the <br />Construction Fund could exceed $120 million <br />over the next 10 years. <br /> <br />In addition, the Board may have to fund unrecoverable operating expenses and <br />studies authorized by the General Assembly. Recently, it began an effort to better <br />define these future requirements on an annual basis. However, a similar <br />forecasting need exists relative to determining how much money will be available <br />in the fund on a long-term basis. <br /> <br />For example, authorized projects may not begin immediately and may require <br />several years to complete. Therefore, it is necessary to plan how the projects will <br />be funded along with other Board projects and activities. The development of a <br />financial plan is an integral part of project and activity planning for the <br />Construction Fund. <br />