OIG Comments on Lake Express Title XI Loan-Guarantee Application
We issued a memo to the Administrator of the Maritime Administration (MARAD) regarding the December 2002 application of Lake Express LLC for a Title XI loan guarantee to build a high-speed ferry to provide service on Lake Michigan. As part of the appropriation to MARAD for new Title XI loan guarantees, we are required to certify that the recommendations in our March 27, 2003 report had been implemented before MARAD could access those funds. Although this certification applied to the newly appropriated funds, the Secretary decided that it would be prudent for MARAD to adhere to OIG’s recommendations on any new commitments, even those funded by prior-year appropriations. We also received a congressional request to review the application.
We found in Lake Express’s application: (1) no modifications to the loan-guarantee approval that would require MARAD to impose compensating provisions to mitigate any added risk; and (2) consistent with our recommendation, MARAD retained an independent financial analyst to review Lake Express’s business plan and capitalization and a market analyst to review their market research and demand forecast.