An Audit Report on the Economically Distressed Areas Program at the Water Development Board
September 2009
Report Number 10-004
Overall Conclusion
Through its Economically Distressed Areas Program (EDAP) the Water Development Board (Agency) provides grants, loans, or a combination of both to economically distressed areas to plan and construct water and wastewater systems. While the Agency appropriately reviews and approves recipients' applications to ensure eligibility for EDAP funds, it should make improvements in monitoring EDAP contracts and related expenditures. Specifically:
- The Agency did not have a process to ensure that it consistently disbursed funds to EDAP recipients within 30 days of the request for funds. For 28 of 30 disbursements that auditors tested, the Agency disbursed funds to the EDAP recipients within an average of 36 calendar days after the request for funds. This did not meet the 30 calendar days that management asserts is its goal for making disbursements. The delays in disbursements are occasionally due to recipients not submitting all supporting documentation with their original requests for funds. The Agency did not have a process to track the time from when a recipient submitted a complete request for funds to the time the Agency made the disbursement.
- EDAP projects are not consistently completed by original contract completion dates or within original budgets. For 8 EDAP contracts that auditors tested, the average original expected completion time was 3.2 years. However, the average actual completion time for the 6 projects that had been completed through those 8 contracts was 8.4 years. The majority of the extensions were caused by issues relating to construction (47 percent) and planning, acquisition, and design (17 percent). The Agency also adjusted the budgets for the 8 contracts tested from $55,510,489 to $72,717,989, a net increase of $17,207,500 or 31 percent. In addition, the Agency made amendments to the EDAP contracts tested after the existing contract completion dates had expired.
- The Agency did not consistently monitor to ensure that (1) it makes all EDAP disbursements prior to or during its final accounting for an EDAP contract and (2) recipients' requests for funds are supported or properly approved. Auditors tested 30 EDAP disbursements totaling $4,818,414 that the Agency made to EDAP recipients and determined that 6 of those disbursements totaling $347,482 (7 percent) were not paid prior to or during the final accounting, were not adequately supported by documentation such as invoices, or were not properly approved.
- While the Agency made appropriate determinations when it calculated the amount of EDAP grants or loans to award, it should make certain improvements in its ongoing monitoring of recipients' financial condition. For example, the Agency did not always complete accurate summaries of EDAP recipients' audit reports. Preparing accurate summaries is important in verifying whether EDAP recipients have reserved enough funds to meet the debt service requirements on their EDAP loans.
Multiple sections and divisions at the Agency currently have responsibility for overseeing various aspects of EDAP. To improve monitoring of EDAP projects, the Agency should consider designating an employee with sufficient authority to be responsible for coordinating and monitoring all aspects of the EDAP program.
Auditors also identified other less significant issues that were communicated separately in writing to the Agency.
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