Audit Division

Audit Summary

Department of Business and Industry

Industrial Development Revenue Bond Program

Report LA96-3

Results in Brief

IDRB program accounting does not provide accurate and comprehensive financial information. We found program revenues and expenditures were commingled with revenues and expenditures of other programs in the state's accounting records, internal financial reports were either not available or inaccurate, and weak management controls exist.

Procedures to ensure only qualified businesses participate in the IDRB program need to be improved. In addition, timely on-site inspections of projects receiving IDRB financing should be conducted to ensure program requirements are met.

Principal Findings

1. IDRB program financial activity could not be identified in the state's accounting records. Program revenues and expenditures were commingled with revenues and expenditures of other programs. Additionally, IDRB revenues were not accurately recorded in 3 of 4 years examined. (page 9)

2. IDRB revenues were deposited into the Housing Division's outside bank account rather than in the State Treasury as required by statute. On June 30, 1994, the Housing Division reported $111,000 in its account as belonging to the IDRB program. (page 10)

3. The reported escrow account balance for fiscal year 1994 disagreed with support documents by $18,000. IDRB financial reports for fiscal years 1991 and 1992 were not available, and approximately $32,000 in personnel costs were paid from the Consumer Affairs Division budget and not charged to the program. (page 10)

4. Poor management controls have contributed to weaknesses in the program's administration of applicant fees. The agency did not document how processing fees were established. Additionally, procedures to monitor escrow accounts were inadequate. This resulted in the agency unnecessarily holding individual escrow balances of $6,900 and $5,700 for up to 3 years. (page 11)

5. The agency is required to review the competitive effect of a proposed IDRB project and identify facilities of a like nature in the project's area. However, the agency could not provide documentation of compliance with these requirements for 3 of 6 bonds issued. (page 11)

6. On-site inspections for 3 of 6 IDRB projects were not timely. One project was operating 3 years before the agency conducted an inspection. Additionally, all inspections tested were conducted by program officials after our audit was initiated. The purpose of on-site inspections is to ensure program objectives are being met. (page 12)