A North Carolina-based nonprofit foundation that received $83 million to lend to small businesses struggling with the COVID-19 pandemic did not create procedures to ensure the public money was used properly, state auditors said Wednesday.
The performance audit by State Auditor Beth Wood's office declared Golden LEAF failed to monitor the federal coronavirus relief funds the General Assembly sent to the foundation in spring 2020 for the foundation's COVID-19 Rapid Recovery Loan Program. The foundation's top leader took issue with the findings.
Golden LEAF contracted with and provided funding to the North Carolina Rural Economic Development Center to operate the program. More than 1,250 loans were initiated. Companies could borrow up to $250,000, which could be used for business items like salaries, rent and utilities. Loan terms can't exceed 10 years.
Auditors said that while recipients initially had to certify that they qualified for the loan and would limit its use to business needs, Golden LEAF did not perform procedures to ensure compliance. That could include requiring borrowers to provide spending reports or verifying such spending independently, according to the audit.
Without such monitoring, Wood's office wrote, there was increased risk that proceeds could be misused, and Golden LEAF would be limited in knowing whether the program achieved the legislature's intended results.
In a written response attached to the audit, Golden LEAF chief executive Scott Hamilton disagreed with a recommendation that the program's loan proceeds be monitored. Hamilton cited the borrower certification process already in place, and that businesses have to make records regarding proceed use available upon request. Requiring businesses to submit loan use reports is unusual in small-business lending, he wrote, and additional administrative duties likely would have discouraged some businesses from participating.
In turn, the auditors responded to Hamilton, writing that Golden LEAF's “response included statements that mislead the reader.”
