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089607 1 (1976-04-20)

handle is hein.gao/gaobacvqw0001 and id is 1 raw text is: 03007? GENERAL GOVERNMENT DIVISION UNITED STATES GENERAL ACCoUNTING OFFICE WASHINGTON, D.C. 20548: APR 2 01976 Mr. John T. Wettach Associate Administrator for Finance and Investment Small Business Administration Dear Mr. Wettach: On March 31, 1976, our report on our review of the section 502 local development company (LDC) loan program was issued to the Congress. That report contained our principal findings, conclusions, and recommendations on the LDC loan program. During our review, however, we identified other issues concerning the Small Business Administration's (SBA) management of the LDC loan program. This report discusses these issues which we believe warrant your attention. As you know our review of the section 502 program was conducted under the Small Business Amendments of 1974 (Public Law 93-386) which directed the General Accounting Office to conduct a full scale audit of SBA. The primary objective,of our review was to evaluate the program's effectiveness in fostering community economic development through loans to LDCs for the construction, conversion or expansion of plants for use by small businesses. We examined 95 loans--20 percent of the loans--made under this program during fiscal years 1970-74 by the SEA district offices in Atlanta, Los Angeles, Madison, and Minneapolis. A discussion of the additional issues follows. LOAN PROCEEDS USED FOR UNAUTHORIZED PURPOSES At the four district offices, we identified 16 cases where loan funds were used for purposes not authorized by the loan agree- ment or by SBA's standard operating procedures or regulations. In 10 cases examined loan funds were used for purposes not authorized in the loan agreement. These included: 0? 7 0 / / nlo? L) Ap qlov-3 L_

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