State audits Iowa Student Loan program

David Pitt

DES MOINES (AP)&#8212 A state auditor’s report on the Iowa Student Loan Liquidity Corp. found no major problems with the lender’s finances but made recommendations for board changes and suggestions for openness in its operations.

The private nonprofit organization agreed to allow the state audit at the request of Sen. Tom Courtney, D-Burlington, co-chairman of the Government Oversight Committee.

The audit request came after the nonpartisan Iowa Legislative Services Agency released a report in February calling for lawmakers to question whether Iowa Student Loan’s mission was being achieved and Gov. Chet Culver raised concerns about openness and possible conflicts of interest with Iowa Student Loan.

The audit report, obtained by The Associated Press, is to be released to the Government Oversight Committee on Monday.

“We are pleased with the findings and constructive actions proposed by the auditor’s office,” said Steve McCullough, the organization’s CEO. “We believe the report is an important step in validating that ISL is a well-managed corporation working for the benefit of Iowans.”

The auditors said a few of the group’s 11 board members may have potential conflicts of interest and consideration should be given to replacing them.

The superintendent of banking could have a conflict because the banking division is responsible for performing annual audits of the ISL.

“As a result, employees of the division of banking must evaluate activities resulting from decisions in which the head of their agency has participated,” the auditors said.

The board member from the Iowa College Student Aid Commission could also have a conflict and should be removed, the auditors said.

The commission is the guarantor agency for federally funded students loans and the commission is responsible for working with the Board of Regents in developing a program to inform parents about options available to finance a student’s education.

Other recommendations made by the state auditors include:

-Filing the corporation’s audit with the state auditor’s office for public review

-Requiring ISL to present an annual or biennial report of its activities supporting its nonprofit mission of helping Iowa students and families plan to pay for college

-Formalizing the organization’s practice of open board meetings.

McCullough said the suggestions are helpful “in enhancing communication between ISL and policy makers and creating better public awareness about the corporation’s role in providing low-cost education financing.”

He said the group looks forward to working with Culver and the Legislature.

The audit report said as of June 30, ISL had $3.3 billion of outstanding student loans and about two-thirds were federally guaranteed. The organization had about $3.5 billion of outstanding bond debt, of which only 15 percent are tax exempt.

During year ended June 30, ISL received principal payments of $589 million on outstanding student loans and acquired about $1 billion of new loans.

The auditors found no issues with the pay of the chief executive, concluding that the $207,000 paid during the fiscal year ending June 30, 2005, “is still less than reported for CEOs of some comparable entities.”

ISL was formed at the request of then-Gov. Robert Ray in 1979 to ensure Iowa students have access to low-cost education financing.

The corporation has served more than 300,000 Iowa students and families by providing approximately $5 billion in federally guaranteed and private higher education loans.