MarAd has also ‘not fully implemented new procedures for improving oversight of borrowers,” according to the report issued by the Department of Transportation’s Office of Inspector General.
The OIG) said recommendations in two prior audits in 2003 and 2004 ‘to reduce the risks associated with the application process and improve portfolio monitoring’ of loans had not been effectively implemented. Those audits followed a period from February 1998 through April 2002, when nine borrowers defaulted on about $490 million in loan guarantees.
The defaults are significant when compared to the size of the program. Since 2004, Title XI has approved only five applications with commitments totaling $482 million for loan guarantees.
The number of Title XI loans has been dwindling. The OIG said from 1998 to 2002 MarAd approved an average of 11 loan guarantees each year.
The report does not delve into the causes of particular Title XI defaults, such the one stemming from the 2009 bankruptcy of Hawaii Superferry, which had been awarded Title XI loan guarantees of $139.7 million.
The OIG criticized computer systems, files and procedures MarAd uses for monitoring loans, saying ‘there is no assurance that information MarAd needs to effectively oversee the $2.3 billion Title XI program is readily accessible.’
It made three recommendations:
‘ Reconciling the Title XI program with recommendations made in 2004, including commissioning a business process review of the program that is to be competed at the end of May. MarAd’s Office of Marine Financing also hired three financial analysts in June and the agency said they are being ‘trained in a manner consistent with the February 2004 guidance.’
‘ Requiring the Office of Marine Financing and MarAd’s chief information officer develop a comprehensive computer-based financial monitoring system.
‘ Ensuring information needed to oversee borrower compliance with program requirements is readily accessible.
Maritime Administrator David Matsuda said he concurred in a letter to the OIG.
