By Phil Kabler
CHARLESTON, W.Va. — A preliminary legislative audit released Monday has uncovered evidence of mismanagement and a lack of internal controls in a $5 million revolving loan program administered by the state Department of Agriculture.
Auditors found that 25 of 40 outstanding Rural Rehabilitation Loan Program loans are delinquent, and found that in nearly half the loans audited, there was no evidence of any effort to collect on delinquent loans.
The audit also found evidence of potential conflicts of interest between the former commissioner of Agriculture, Gus Douglass, and/or the four-member loan committee, and loan recipients in five of the 19 loans audited.
It did not elaborate on the nature of the conflicts of interest, or identify the loan recipients.
“We’ve got some kind of a rogue loan program without any sort of rules, regulations or oversight,” Senate President Jeff Kessler, D-Marshall, commented during the presentation to the legislative Post Audits committee.
Legislative auditor Aaron Allred said it is believed the program was set up in the late 1960s or early 1970s with federal Department of Agriculture funds, but auditors have been unable to find original documentation for the program.
Currently, the fund has about $1 million, with about $4 million in loans outstanding.
The audit also found a number of loans that lacked sufficient collateral, including a $149,000 loan secured by 2.5 acres of land valued at $15,700, and a $15,000 loan with a truck and camper valued at $6,200 as collateral.
Another two loans were issued to pay off existing bank loans of $200,000 and $50,000, the audit found…