NC Audit: Virus Business Relief Program Lacks Oversight
A North Carolina-based nonprofit foundation that received $83 million to lend to small businesses battling the COVID-19 pandemic failed to create procedures to ensure public money was used properly, state auditors said Wednesday.
The Office of State Auditor Beth Wood’s performance audit said Golden LEAF failed to monitor federal coronavirus relief funds that the General Assembly sent to the foundation in spring 2020 for the program of foundation COVID-19 rapid recovery loans. The foundation’s top executive disputed the findings.
Golden LEAF contracted with the Center for Rural Economic Development of North Carolina and provided them with funds to run the program. Over 1,250 loans have been initiated. Businesses could borrow up to $250,000, which could be used for business items like salaries, rent and utilities. The duration of the loan cannot exceed 10 years.
Auditors said that while recipients were initially required to certify that they were eligible for the loan and would limit its use to business needs, Golden LEAF did not perform procedures to ensure compliance. This could include requiring borrowers to provide expense reports or independently verify such expenses, according to the audit.
Without such oversight, Wood’s office wrote, there was an increased risk that revenues would be misused, and Golden LEAF would be limited in knowing whether the program achieved the results intended by the legislature.
In a written response attached to the audit, Golden LEAF Managing Director Scott Hamilton disagreed with the recommendation to monitor the program’s loan proceeds. Hamilton cited the borrower certification process already in place and that companies must make records of product use available upon request. Requiring businesses to submit loan usage reports is unusual in small business lending, he wrote, and additional paperwork likely would have discouraged some businesses from participating.
In turn, listeners responded to Hamilton, writing that Golden LEAF’s “response included statements that misled the reader”.