Purpose of Audit

The objective of our audit was to assess the Town’s practices regarding the Board’s revolving loan fund lending practices for the period January 1, 2012, through June 28, 2012.

Background

The Town of New Berlin is located in Chenango County. An elected five-member Town Board, comprising the Town Supervisor, and four Council members, govern the Town. The Town’s annual budget appropriations for 2013 are $1.86 million, financed primarily by real property taxes and sales tax.

Key Finding

• The Board authorized and paid a total of $125,000 toward two loans to a private, not-for-profit ambulance company from a Town “Revolving Loan Fund” which we understand was established using Federal grant monies from one or more federal HUD programs. We have been informed by the United States Department of Housing and Urban Development (HUD) that program income held in certain Revolving Loan Funds continue to be subject to Federal HUD requirements under HUD programs. The Board believed that loaning money to the private not-for-profit ambulance corporation was within the allowable purposes of their loan program. In particular, the Board recognized the need for ambulance protection for their citizenry and had previously loaned money from that fund for other ambulance-related purposes. If the Town was not permitted under Federal law to make loans to the private ambulance company, the Town would have improperly expended moneys from the Revolving Loan Fund. Because the propriety of the use of these funds is governed by Federal, not State law, we are referring this issue to HUD for its consideration.

Key Recommendation

• Obtain a clear understanding of the types of loans that can be legally made using the Revolving Loan Fund.