REPORT DIGEST

ILLINOIS STUDENT ASSISTANCE COMMISSION

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2016

Release Date:  January 24, 2017

FINDINGS THIS AUDIT:  1

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  0 -- 0 -- 0
Category 2:  0 -- 0 -- 0
Category 3:  0 -- 1 -- 1
TOTAL:  0 -- 1 -- 1

FINDINGS LAST AUDIT: 1

Category 1:	Findings that are material
weaknesses in internal control and/or a
qualification on compliance with State
laws and regulations (material
noncompliance).
Category 2:	Findings that are
significant deficiencies in internal
control and noncompliance with State laws
and regulations.
Category 3:	Findings that have no
internal control issues but are in
noncompliance with State laws and
regulations.

State of Illinois, Office of the Auditor
General
FRANK J. MAUTINO, AUDITOR GENERAL

To obtain a copy of the Report contact:
Office of the Auditor General, Iles Park
Plaza, 740 E. Ash Street, Springfield, IL
62703
(217) 782-6046 or TTY (888) 261-2887

This Report Digest and Full Report are
also available on the worldwide web at
www.auditor.illinois.gov

INTRODUCTION

The Illinois Student Assistance
Commission’s (Commission) financial audit
report consists of two sets of financial
statements which are the financial
statements of the Illinois Student
Assistance Commission and the financial
statements of the Illinois Prepaid Tuition
Program (Program), a major fund of the
Commission.  Included in the financial
statements of the Illinois Student
Assistance Commission is the major fund
for the Illinois Designated Account
Purchase Program (IDAPP).  This report
covers our financial audit of the
Commission as of June 30, 2016 and for the
year then ended.

SYNOPSIS

• (16-01) The Commission - IDAPP was not
in compliance with two of the covenants
relating to the Commission’s revolving
line of credit agreement.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

DEBT COVENANT VIOLATION

The Commission - IDAPP was not in
compliance with two of the covenants
relating to the agency’s revolving line of
credit agreement.

During our audits of the fiscal year 2009
through 2016 financial statements, we
noted that IDAPP was in violation of one
or more debt covenants related to the
agency’s revolving credit (loan)
agreement.  In addition, the facility
matured on July 27, 2010 and has not been
repaid.  Per the agreement, the minimum
required coverage condition ratio is 104%.
We reviewed monthly reports and noted that
9 months fell under this ratio, ranging
from 103.24% to 103.91%.  Also per the
agreement, the default ratio is set at a
maximum of 6.25%.  We reviewed monthly
reports and noted 9 months fell above this
ratio, ranging from 8.04% to 11.02%.

As a result of the debt covenant violation
and the maturity of the facility, the bank
has certain remedies available to it under
the terms of the loan agreement, principal
of which would be rights to call the loan
and take possession of the collateral (the
underlying student loan portfolio).  The
bank has been made aware of the event of
default and the maturity of the loan and
has not communicated to IDAPP any intent
to exercise the remedies available to it
under the terms of the loan agreement.
The balance of the line of credit with the
bank was $158,256,827 at June 30, 2016.

According to Commission management, the
coverage condition and default issues are
due to the poor performance of the
portfolio.  The portfolio continues to
experience a high level of delinquent
accounts.  The line of credit has not been
refinanced because of the conditions in
the private loan credit market.  (Finding
1, page 149)  This finding was first
reported in 2009.

Commission officials accepted our
recommendation to continue to monitor the
loan covenant violations and continue
seeking remedies from the lender involved.
(For the previous Commission response, see
Digest Footnote #1.)

AUDITOR’S OPINION

Our auditors stated the financial
statements of the Commission as of June
30, 2016 and for the year then ended are
fairly presented in all material respects.
Auditors included a paragraph emphasizing
that the Program has a deficit of $215
million as of June 30, 2016.

FRANK J. MAUTINO
Auditor General

FJM:JGR

SPECIAL ASSISTANT AUDITORS

Our Special Assistant Auditors for this
audit were RSM US LLP.

DIGEST FOOTNOTES

#1 - DEBT COVENANT VIOLATION

2015 – We agree with the recommendation.
The loan covenants are reviewed on a
monthly basis.  We continue to talk to
Citibank about the portfolio.