Statutory Violations

The Colorado Office of the Auditor performance audit of the Conservation Easement Tax Credit Program found several violations of Colorado Statutes. Minutes from the Conservation Easement Oversight Commission reveal that that employees and commissioners were aware of the violations and discussed them openly. Despite formal complaints made to the Colorado Attorney General’s Office there has been no investigation launched or action taken to hold State employees and commissioners accountable for violating state statutes.

Violation CRS 24-75-109(2)(b)- Prepaid Placeholder Certificates – The Audit states, “CEOC collected $144,900 in advance in violation of CRS 24-75-10- (2)(b). From February to June 2014, the Division sold 63 placeholder certificates, collecting a total of $144,900 in advance for preliminary advisory opinion applications fees. The Division also promised future discounts to 11 landowners who submitted complete or partial application for 21 preliminary advisory opinions between January and June 2014.”

Violation CRS 112-61-727(6) – Third Party Placeholders – The Audit states, “Statute authorizes the Division to collect a fee from “landowners” applying for a tax credit certificate or a preliminary advisory opinion. CRS 12-61-727(1)(f) defines the landowners as “the record owner of the surface land and, if applicable owner of the water or water rights beneficially used thereon who creates a conservation easement.” The the Division sold 45 of the 63 placeholder certificates to non land owners including three tax brokers, a land trust, a law firm, and a non-profit organization that helps facilitate conservation easement donations. Division staff did not fully communicate the placeholder process to department budgeting staff and division administrative staff. Department budgeting staff reported being unaware that the purchasers of the placeholder certificates had not submitted applications for preliminary advisory opinions at the time they paid the fee, or that the Division still had outstanding obligations 2 years later to provide preliminary advisory opinions to some purchasers.”

Violation of CRS 24-75-10-(2)(b) – Accounting Errors – The Audit states, “Improper Accounting of funds showing $48,300 as assets instead of liabilities. The proper accounting would have shown the Division running a deficit for years 2014 to 2016. Accounting did not match the applications with the fees paid. Lack of adequate records makes it difficult to reconcile fee payments to applications received. Accounting did not properly track the prepaid placement holder fees. “Shortly after making the accounting adjustments, as of September 30, 2016, the fund balance was $-17,500.00”

Commission operating at a deficit – April 8, 2014 CEOC minutes state, “The Conservation Easement Program has been running a deficit for the new pre-approval process. There are criminal liabilities associated with running a deficit in a state program.” The Audit States, “In Senate Bill 13-221, the General Assembly authorized the Department to borrow from the State’s General Fund without interest during Fiscal Year 2014 to provide financing needed to implement the new review process prior to sufficient moneys becoming available in the fund. However, this loan provision did not help the Department as the General Assembly had intended. According to the State Controller, had the Department obtained the loan authorized by Senate Bill 13-221, any portion of the loan used to fund expenditures that the Department did not pay back by the end of Fiscal Year 2014 with offsetting revenue would have caused the Fund’s balance to be negative and constituted an over-expenditure that violates statute CRS 24-75-109(2)(b).”

Violation of CRS 12-61-727, – Timeliness – the Division of Real Estate (Division) must process each application for a conservation tax easement credit in a timely manner, ensure the appraisal supporting the landowner’s requested tax credit amount is credible and ensure its overall administration of the program is fiscally sound and transparent. The audit states , “We found that the Division exceeded the 120-day statutory limit for the average time spend on initial reviews of tax credit certificate applications that the Division received since January 2015, spending an average of 133 days for the applications received between January 2015 and January 2016.”

2012 Performance Audit of the Conservation Easement Tax Credit Program

2016 Performance Audit of the Conservation Easement Tax Credit Program

April 8, 2014 CEOC Minutes