Denver’s economic development office committed serious accounting errors that have raised questions about whether the department is properly managing the city loan program, according to an outside audit.
In one instance, the department was forced to restate its 2003 financial statement after being off by $21 million, according to the audit by KPMG.
The audit also found accounting problems at Denver International Airport, in the Auditor’s Office and in the city’s revenue department.
Economic development chief John Huggins said that all of the problems have been fixed and that his department has thoroughly reviewed all 797 active loans for accuracy.
“There were a number of errors made under the previous administration in accounting for the loan program,” Huggins said. “We’ve worked hard to fix them.”
But a 2004 $13 million write- off of loans – mostly for housing projects – found by auditors is cause for concern, said City Councilwoman Jeanne Faatz. Not only was the write-off handled without proper documentation, but it was done without being reviewed and approved by Huggins and other managers, the audit found.
“I’m not convinced everything is fixed. We’re still having loans written off when the borrower still has assets,” Faatz said, pointing to the city’s recent decision to allow a Denver development company delinquent on a $3.8 million city loan to get a city contract worth $2.2 million in order to pay back the loan.
The KPMG audit, covering the year ending Dec. 31, 2004, also criticized the economic development office for having 12 percent of loan balances unsupported by documentation, 68 instances in which a borrower’s payments were not posted to the general ledger, and nearly 10 percent of year-end balances unsupported by proof in the file.
The critical audit is only the latest challenge Mayor John Hickenlooper’s administration faces in dealing with problems in the city’s loan program. In June, payments on more than $4.3 million in city housing and economic development loans to private businesses were more than six months late. All of the loans were made before Hickenlooper took office in 2003.
Huggins noted that his department “still has troubled loans to work through” but said his office has established a loan policy review committee to standardize management of commercial and housing loans with consistent policies and procedures.
The audit also faulted other city agencies for writing off some debts. The Denver Public Library, County Court, Fire Department and parking-revenue officials, for instance, collectively wrote off more than $13 million without any documentation supporting how they arrived at that figure.
In its audit response, the city said new fiscal policies would be completed by Sept. 30 and handled by a newly hired controller.
“We’ve clearly made improvements in the city finance process, and the outside auditor clearly recognizes that we have a sincere desire to improve financial accounting,” said city attorney and chief of staff Cole Finegan.
Other audit findings:
Staff writer Karen Crummy can be reached at 303-820-1594 or kcrummy@denverpost.com.
