Report of the State Auditor 1993

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Report of The Colorado State Auditor 25 Construction Fund inflows during Fiscal Year 1992 could have been $500,000 more if the Board's rate had reflected market conditions using this method. We recognize that this is only an example of one method to set interest rates. However, it shows how the Board could have improved the fund's cash flow and still provided loans with below market interest rates. Cash inflows to the Construction Fund could have been $500,000 higher in FY 1992. Recommendation No.3 The Board sho"uld establish guidelines, for its loan rates to reflect market conditions. The guidelines should be reflected in the projects that will be authorized during the upcoming legislative session. Colorado Water Conservation Board Response: Partially agree. The CWCB established a subcommittee several months ago to work out the details for developing interest rate guidelines. The CWCB utilized a preliminary draft of those guidelines in evaluating and establishing interest rates Jor the loans included in HB 93-1273, the 1993 Construction Fund authorization bill. Although this is a complicated task, the CWCB is committed to completing this process by July 1993. No Interest Is Charged on Cash Funds Advanced During the Construction Period A project sponsor, such as a municipality, water district, or irrigation company is the entity building the project. During the construction phase of a project, a project sponsor is responsible for covering costs incurred in the first month. For the remainder of the construction period, the project sponsor may request monthly reimbursements from the Board. The Board does not require the project sponsor to pay interest on funds advanced during the construction phase of a project. Interest charges begin after the project is completed. However, usually interest is charged on funds, when they are advanced to a borrower in similar situations, such as construction mortgages. As a result, the Board is losing interest on these funds.