The V.I. Economic Development Authority has $8.5 million in delinquent loans – or 84.5 percent of its loan portfolio of $10.5 million – and nearly $2 million of that is for long-delinquent loans owed by readily findable, prominent Virgin Islanders, according to a V.I. Inspector General report released this week.

The audit, which was requested by EDA, found 383 of the 453 loans, 84.5 percent, in EDA’s nine loan programs were past due at least 30 days. Most of those – 365 loans totaling $8 million were past due more than 120 days. Of that, $7 million is classified as "uncollectible" because it is delinquent more than a year.

EDA’s Small Business Development Authority loans have by far the worst performance,with $4.9 million in delinquent loans, or 94.5 percent of its total loan portfolio of $5.4 million.

The best performing EDA loans are Economic Development loans, where a still-dismal one third of its $395,000 in loans are delinquent.

Many of the bad SBDA and other loans date back decades. At the end of 2010, SBDA had 211 delinquent loans on its books that were awarded between 1971 and 1999, totaling almost $3.7 million.

V.I. Inspector General Steven van Beverhoudt concluded much of the bad debt was inherited, but current lending practices lack sufficient oversight and regulation and collection efforts on old and new debt are too haphazard and inconsistent.

While many of the delinquent loans are old or the borrowers were deceased, others could be collected, van Beverhoudt wrote. His office identified 14 loans valued at $1.86 million owed by former and current senators and well known business leaders in the territory.

Those include:

• A current senator who received an SBDA loan in 1985 of $20,000 and as of Sept. 30, 2010, still owed $8,449 in principal with a total loan pay-off of $21,464;

• A former senator who received an SBDA loan in May 1982 for $100,000 and, as of Sept.30, 2010, owed $95,706 with a total loan pay-off balance of $143,232;

• A "prominent business person "who received two $150,000 loans in 2000 and 2001 and currently owes, for one loan, $146,254 in principal on one with a total loan pay-off of $296,881, and for the other owes $149,326 in principal and $302,421 in total;

• A "prominent contractor "who received an SBDA loan in March 1973 for $75,852, still owes $75,252 in principal and $132,503 altogether.

Van Beverhoudt also found loan processors were not filing all the necessary paperwork and liens to ensure payment, and were not following up with collections efforts on delinquent accounts until far too late in the process. He found loans that were issued without establishing the creditworthiness of the applicant, without proper documentation and sometimes without any proof of residency or even any copies of proof of identity.

The report makes a series of recommendations, ranging from issuing and following loan procedure policies to making sure proper liens are filed. It assesses EDA’s response to its report and declares most of the issues "resolved," with the notable exception of how long to wait before taking legal action on loans.

"We do not agree with the collection process outlined in the response," the report says. "To allow 150 days to pass before referring a loan to the Legal Department is not a good practice. Within 30 days of delinquency the loan officer must contact the borrower and start action. Within 60 days the Legal Department has to get involved. Then after all efforts have been exhausted, the loan is sent to an outside entity for collections."