EDA RLFs Can Expect
Greater Scrutiny

The Department of Commerce’s Office of Inspector General (IG) has intensified its review of EDA Revolving Loan Funds (RLF) compliance with program requirements.

The increased supervision stems from a recent round of audits of RLFs that did not loan their recapitalization funds within the required three years, mainly due to a concurrence of economic factors.

According to David Witschi, Director of EDA’s Economic Adjustment Division, EDA RLFs should expect increased attention by the agency, beginning with sharper monitoring of timely and accurate submission of reports, as well as compliance with the requirement that 75 percent of RLF capital should be in use once funds have started to revolve. In addition, EDA is considering making smaller recapitalization grants.

The IG has developed guidelines to help RLFs avoid a federal audit. The guidelines cover factors that can trigger an audit and what they examine in terms of costs, compliance, and performance (See box on this page for a partial list of these guidelines.)

For More Information Contact: William Amt, NADO EDFS Program Manager, at 202/624-8467 or bamt@nado.org.

Factors that Initiate a Federal Audit
Because RLFs are considered a major and high-risk program, the IG routinely monitors them, focusing on those that either do not submit a single audit to the federal clearinghouse or that have cost or compliance issues. Grant officers at the regional level can recommend a federal audit if problems are found in the RLF semiannual report, if there are site visit or monitoring concerns, or if they have received complaints or allegations about the fund. Federal audits of RLFs may focus on three operational areas: cost, compliance and performance. Some red flags include:

• Improper salary distribution.
• Abnormally high travel expenses.
• Grant draw downs that are slower than the required three years.
• Overstated loan commitments and excess cash reserves.
• The unallowable refinancing of loans.
• Low job creation and retention.
• Inadequate loan portfolio and document management.
• Inadequate marketing of the program.
  

For a complete list of factors that can initiate a federal audit, contact William Amt at 202/624-8467 or email bamt@nado.org.

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