REPORT DIGEST

ILLINOIS STUDENT ASSISTANCE COMMISSION

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2017

Release Date:  March 1, 2018

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, 2017 and for the
year then ended.

GOLDEN APPLE SCHOLARS OF ILLINOIS PROGRAM

Pursuant to the Higher Education Student
Assistance Act, the Commission administers
the Golden Apple Scholars of Illinois Program
which is managed by the Golden Apple
Foundation for Excellence in Teaching. During
procedures performed, the auditors identified
instances of noncompliance related to the
Golden Apple Scholars of Illinois Program
which is described in a separate agreed-upon
procedures report.

SYNOPSIS

• (17-01) The Commission - IDAPP was not in
compliance with a covenant relating to the
Commission’s revolving line of credit
agreement.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

DEBT COVENANT VIOLATION

The Illinois Student Assistance Commission
(Commission) – Illinois Designated Account
Purchase Program (IDAPP) was not in
compliance with a covenant relating to the
agency’s revolving line of credit agreement.

During our audit of the fiscal year 2017
financial statements, we noted that IDAPP was
in violation of a debt covenant 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 default ratio is set
at a maximum three-month rolling average of
5.0% or a maximum of 6.25% for any settlement
period.  We reviewed monthly reports and
noted 8 months fell above these ratios,
ranging from 5.54% to 7.88% for the three-
month average and 6.48% to 9.73% for the
settlement period.

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 default ratio
issues 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
$135,456,827 at June 30, 2017.

According to Commission management, the
default ratio 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 160)  This finding was first reported
in 2009.

We recommended the IDAPP continue to monitor
the loan covenant violations and continue
seeking remedies from the lender involved.

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

The auditors stated the financial statements
of the Commission as of and for the year
ended June 30, 2017 are fairly stated in all
material respects. The auditors included a
paragraph emphasizing that the Program has a
deficit of $286 million as of June 30, 2017.

This financial audit was conducted by Crowe
Horwath LLP.

JANE CLARK
Division Director

This report is transmitted in accordance with
Section 3-14 of the Illinois State Auditing
Act.

FRANK J. MAUTINO
Auditor General

FJM:JGR

DIGEST FOOTNOTES

#1 - DEBT COVENANT VIOLATION

2016 – We agree with the recommendation. The
loan covenants are reviewed on a monthly
basis.  We continue to talk to Citibank about
the portfolio.