Report 2016-133 Recommendation 4 Responses

Report 2016-133: SAFE-BIDCO: At Risk of Insolvency, It Needs Increased Oversight if It Is to Receive State Funding and Continue to Help Small Businesses in California Gain Financing (Release Date: April 2017)

Recommendation #4 To: State Assistance Fund for Enterprise, Business, and Industrial Development Corporation (SAFE-BIDCO)

If it is not established as a program within a state entity, SAFE-BIDCO should take steps to raise funds by seeking donations to obtain needed capital.

6-Month Agency Response

SAFE-BIDCO did not provide a response for the reason noted below in the State Auditor's Assessment of Status.

California State Auditor's Assessment of 6-Month Status: Resolved

SAFE-BIDCO was seized by the California Department of Business Oversight (Business Oversight) in September 2017 and is no longer in operation. Business Oversight in July 2017 required SAFE-BIDCO to prepare plans to liquidate the business. On September 15, 2017, citing our April 2017 audit in part, Business Oversight issued an order taking possession of SAFE-BIDCO and appointing an agent to assist in liquidating the entity. Business Oversight noted in its order many of the same concerns we identified in our audit, including SAFE-BIDCO's operating losses, declining capital, and declining loan production. In particular, Business Oversight found that SAFE-BIDCO had no viable plan for improving its sustainability or protecting its creditors. Business Oversight's action to liquidate SAFE-BIDCO has effectively resolved the need for our recommendations.

60-Day Agency Response

This is an ongoing process. In addition to the recently assumed USDA loan portfolio and loan funds we have applied for a $50,000 grant (through Tri Counties Bank) for Loan Loss Reserves for our Tribal Loan program. We will continue to research other grant and/or loan opportunities.

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2016-133

Agency responses received are posted verbatim.