State audit notes problems in Lorain business loans

Metro Creative Connection

By Richard Payerchin, The Morning Journal

Lorain’s state audit for 2014 noted a significant deficiency in the way the city evaluates business development loans that were not repaid.

Meanwhile, the state audit also listed continuing computer problems at the city Clerk of Courts Office, but Clerk of Courts Lori Maiorana said the computer troubles are getting corrected.

The city of Lorain has suspended, for 120 days, any new loans to businesses that want to locate or grow in the city. The loans are made with Community Development Block Grant money from the federal Department of Housing and Urban Development.

The hiatus is needed for the city Department of Building, Housing and Planning to evaluate the process and rules governing the loans, said Mayor Chase Ritenauer and department Director Leon Mason.

The 2014 audit from Ohio Auditor of State Dave Yost’s office noted each year, the city gets loan reports from the Lorain Development Corp., a nonprofit corporation that administers the loans.

The city’s allowance for uncollectable loans had errors overstating the balance by $275,718 and a duplicate loan number overstating the balance by $54,924, according to the state audit.

“Further, when we examined certain loan files designated as uncollectable or write-off, they were incomplete and lacked a clear rationale to be designated as uncollectable or write-off,” the audit report said. “Also, the designation of loans from collectable to uncollectable or written off were inconsistent.

“The aforementioned deficiencies diminish the reliability of the loans receivable balance including the calculation of allowance for uncollectable loans and could result in misstatements to the financial statements.”

The city review process could take less than 120 days, Ritenauer and Mason said. In the state audit, the anticipated completion date is March 31 for the review of the loan policies.

The 2014 audit report also noted a significant deficiency in bank reconciliations for Lorain Municipal Court accounts.

The record problems in the court happened because of a number of computer issues starting when new software went live Oct. 1, 2013, and a computer system crash that resulted in lost data from March 1, 2014, to May 19, 2014.

Maiorana estimated the clerks have corrected 99.5 percent of the errors, although the clerk of court’s computer system remains problematic. The clerk’s office is paying a company to support the existing system and in the next year, aims to find a new computer system, she said.

“We are in the process of completing a manual bank reconciliation currently,” Maiorana’s formal response said. “We have been able to identify and disperse most of our money to the various agencies. We still have approximately $34,000 to properly identify and we are continuing to work on that task.”

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