RALEIGH — North Carolina lawmakers should examine whether it makes sense to keep or revamp a farm loan program that’s generating red ink, a state audit report says.
The North Carolina Agricultural Finance Authority operates with income generated from loan interest and other sources, but for the past four years it has spent more than it generates and has had to cut into the cash available for financing agricultural projects, state Auditor Beth Wood’s office reported Wednesday.
State lawmakers established the authority to fill a shortage of available and affordable credit for agriculture and farm exports, the report said. State taxpayers pumped $2.5 million into the lending authority’s coffers since 1987 to help small farmers and agribusinesses that can’t find financing through banks, the authority said. Agriculture is among North Carolina’s largest industries and generates about $10 billion in sales.
But the authority is making a fraction of the new loans it made less than a decade ago and hasn’t reduced its staff in line with lower activity, the report said. The authority had completed just two loans totaling $670,000 before September, one for $590,000 and the second for just $80,000, auditors said.
The authority also has lost an average of almost $270,000 a year in the past four years before counting the failure of one large loan, auditors said.
“While loan failure expenses are a natural part of the operations of a lending institution, the audit report took a conservative approach and excluded these expenses. Including bad debt expenses would result in an average operating loss of $929,327 for the past four years,” the state audit said.
Frank Bordeaux, executive director of the Agricultural Finance Authority, said he disagreed that the institution’s purpose needs to be re-evaluated.
“NCAFA has had some difficulty in the past four years due to economic factors that all state government budgets have had to endure,” Bordeaux wrote in a response included with the state audit.