Audit: Ag Finance Agency May Have Outlasted Purpose | Eastern North Carolina Now

    Publisher's note: The author of this post is Barry Smith, who is an associate editor for the Carolina Journal, John Hood Publisher.

    N.C. Agricultural Finance Authority provided four loans, lost $270k

    RALEIGH  -  A new state audit questions the efficiency of the N.C. Agricultural Finance Authority and suggests that the General Assembly and N.C. Department of Agriculture might want to restructure the authority's operations.

    The audit, performed by State Auditor Beth Wood's office, questions if the economic conditions that the authority was created to address still exist. The authority was established 25 years ago by the General Assembly to alleviate a shortage of available and affordable loans for agriculture and agricultural exports.

    The head of the authority responded that it operates efficiently and provides benefits to the state.

    The audit points out that that the authority provided only four new loans during the 2011-12 fiscal year. "Only one additional loan for $590,000 has been made as of Feb. 28, 2013," the report says.

    In addition, the report says the authority suffers an operating loss of about $269,890 a year.

    The report also suggests that the authority is overstaffed, with seven full-time employees and one part-time employee.

    "Because of the decreasing loans issued and continued operating losses, state leaders may want to consider whether the authority is having a significant impact on North Carolina's $10.5 billion agricultural industry and whether the authority should continue to operate under its current structure," the report says.

    The report found that the authority has about $7.7 million available for loans. Discontinuing the authority's operations could make about $1 million available to return to the state's General Fund budget. The remaining $6.7 million is restricted by federal regulations.

    Frank Bordeaux, the authority's executive director, didn't challenge the findings, but did take issue with the recommendations.

    "NCAFA is run very efficiently and saves the state money wherever possible," Bordeaux wrote. "The agency has had annual financial statement audits with no deviations and we consider the agency an asset to the state and the people of North Carolina."

    Bordeaux wrote that the number of positions had dropped to five full-time employees and one part-time employee, a result of two employees retiring.

    "NCAFA has had some difficulty in the past four years due to economic factors that all state government budgets have had to endure," Bordeaux wrote. He blamed the operating losses "primarily by the failure of one large loan on a large integrated hog grow out farm operation in North Carolina that failed in April of 2009."

    He wrote that the authority has been issuing Agricultural Development Bonds that convert waste products into green energy. Other bonds, called Qualified Energy Conservation Bonds, which finance renewable energy facilities for the private sector, are issued by the agency, he wrote. He noted that the agency received a fee equal to 1 percent of the face amount of the bonds for administering them.

    The auditor's report responded by saying the audit excluded bad debt expenses, and still questioned the sustainability of the authority.

    "The excess expenses continue to diminish the cash available for financing agricultural projects," the report says.

    The report also suggests that the fees the authority charges for administering the energy conservation bonds provide "no definitive time-line for these projected activities and earnings."