I am writing in response to your paper’s City Desk item, “The Rich Get Richer” (4/5). There are a number of inaccuracies about the Economic Development Finance Corporation (EDFC) that need to be corrected.
Although our management, staff, and board of directors understand the authority and responsibilities of the D.C. Auditor’s office and acknowledge its valuable service to the District’s taxpayers, we, however, respectfully disagree with a number of Mr. Smith’s findings and your paper’s conclusions regarding EDFC’s 1994 fiscal-year audit. In particular, the assertions that EDFC wasted $6.8 million and that 50 percent of the outstanding loans EDFC was managing were in default.
In a formal written response, which should have been included as part of the auditor’s final report, dated Feb. 28, 1996, to the D.C. Auditor’s draft program review of EDFC, we stated:
“While the amount of funds appropriated ($6,750,000) is in fact correct, a more accurate depiction of the appropriation process would be to state that $700,000 was appropriated for EDFC, and that $6,050,000 was appropriated for investment in Neighborhood Economic Development Corporation (“NEDCO”). Pursuant to the District of Columbia (the “City Council”), Resolution 6-557, EDFC received this $6,050,000 for investment in the stock of NEDCO and in the subdebt offering of NEDCO.”
Clearly, the majority of the appropriated $6.75 million was used to invest in a public/private partnership, which is NEDCO. EDFC received only 10.4 percent of these appropriated funds; at the same time, we successfully invested that amount into D.C.-based businesses. Please note that EDFC was to receive one million dollars each year for its five years of operation. However, it received only $700,000, which it has invested in D.C.-based businesses. It should also be noted that since 1989, EDFC has not received additional appropriations from the District government, but we continue to remain financially solvent and self-sufficient.
Regarding EDFC’s loan portfolio performance, it is not true that 50 percent of the outstanding loans in FY 1994 were in default; 10 out of 12 loans were current on their repayment obligations as of the end of FY 1994. In fact, the auditor’s office incorrectly included previous years’ charge-offs in the 1994 audit, some of which were not even made by EDFC personnel. There is a difference of fact here.
EDFC’s operating expenses continue to be less than operating income. Are you certain the facts support your characterization of EDFC as an economic-development sinkhole?