The state department that oversees a fund that makes loans to families taking care of relatives with developmental disabilities has little information about how the money is actually spent.
Receipts for 98 loans totaling more than $660,000 from the Family Support Loan Fund — half of which are in default — are virtually nonexistent. As a result, officials with the Colorado Department of Health Care Policy and Financing, which administers the loan program, do not know whether borrowers used the money properly or as promised.
The department was able to produce receipts for only 10 loans when The Denver Post asked to review paperwork for all 98 active loans. And four of the project receipts the state provided appear to be for loans paid off years ago and not part of the 98.
Some of the receipts the state provided show projects that clearly would benefit a disabled person, yet others appear less clearly for that purpose.A spokesman for the Department of Health Care Policy and Financing said the agency is rethinking its approach to the loan fund and is conducting a wholesale review as a result of The Postap inquiries.
“We are always reviewing our programs and looking for opportunities to improve, and your inquiries have accelerated our review of the loan program,” spokesman Marc Williams wrote in an e-mail. “Over the coming weeks we will be reviewing our internal processes and working with stakeholders to identify oversight improvements the department can make, as well as the program’s long-term viability.”
Rules established by the Colorado Department of Human Services, which administered the Family Support Loan Fund from its inception in 1993 until Health Care Policy and Financing took it over in 2013, require recipients to provide receipts for loan proceeds within six months of the loan. The requirement appears as part of the application paperwork.
The loan terms are generous. Someone with a 620 credit score, deemed below sub-prime by today’s standards, can take up to five years to repay the unsecured note at less than 1 percent interest. Yet nearly half the 98 loans currently outstanding from the fund are in default — 41 of them totaling $242,722 — with several more close to failure,
Each loan is capped at $8,000 and records show most people take out the maximum amount. Loans are restricted to items directly related to a person’s disability; they can’t be used for items that do not relate to maintaining the person in the home or for the cost of current and future therapies.
But the receipts that are available give a more opaque view of how the funds were actually spent, sometimes supplementing much larger expenses.
The receipts show loans were used for a variety of purposes that clearly are for a disabled individual, such as an in-home elevator or a wheelchair-accessible van.
Other receipts show expenses that are less clear on their purpose, such as remodeled bathrooms, including one with a 60-inch-wide glassed-in shower, or a custom cedar fence that runs completely around a home.
One loan was for part of a $26,000 kitchen remodeling job that included granite countertops, pendant lights and a custom black-marble sink, another for the tuition payment for a child’s out-of-home day-care expenses at the University of Colorado. A bedroom remodeling project for a Telluride couple came with a new furnace, receipts show.
Applicants are not limited by income, so a family living in an $800,000 home just off a golf course in Aurora was able to borrow from the fund in 2008 to partially pay for the installation of a $21,000 elevator, records show. The family paid off the loan two years early, sold the house and moved to another state, The Post learned.
Citing medical privacy laws, the state refused to release detailed information about the loans or the borrowers — or U.S. Bankruptcy Court case numbers for a handful of them who later went broke.
Williams said the department will be “contacting those who haven’t provided receipts for loans since HCPF started managing the program in FY2014-15,” adding that the state will ensure that promissory notes clearly detail when receipts must be submitted.
The number of loans in default exceed national averages for consumer loan defaults, The Post found.
Some defaults show that little if any of the original amount borrowed has been paid, raising questions about how the program is administered.
In one case, an $8,000 loan taken in 2011 to consolidate the borrower’s other debts was to be repaid within four years. More than half the note remains unpaid five years later, state records show. In another, from 2010, less than $200 of the original $8,000 borrowed has been repaid, records show.
The state has not regularly audited the fund. The few times it did, the audits were only cursory reviews designed to send reminder letters to those borrowers who were behind in their payments, The Post found.
