Here is a link to the Performance Audit of the CollegeInvest Scholarship and Loan Forgiveness programs completed recently by the Office of the State Auditor in Colorado. Among its findings were:
- A scholarship program whose policy was to disburse 5% of a Trust Funds's assets disbursed only 0.1% in its first year.
- Used $10 million of its Trust Fund assets to purchase its own loans, which the audit identified as raising "significant conflict of interest" concerns
- Failed to give out 58% of Service Scholarships and Opportunity Scholarships that had been advertised and budgeted.
- Out of $12 million in administrative expenses for 2008-09, 53% of expenses had "insufficient supporting documentation and inadequate approvals or authorizations" with two of the expenses representing a conflict of interest.
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Here are the key findings which focused on the Scholarship and Loan Forgiveness Programs as well as administrative expense control at the agency (pages 2 and 3 of the report):
Scholarship and Loan Forgiveness Programs
We evaluated the scholarship and loan forgiveness programs administered by CollegeInvest to determine if they are successful in increasing access to higher education. Overall, we found that CollegeInvest could significantly improve management of and participation in its scholarship and loan forgiveness programs.
Trust Fund disbursements. CollegeInvest did not follow its policy of annually disbursing 5 percent of the Early Achievers Scholarship Trust Fund’s previous year-end fair market value in scholarships or its plan to disburse 1.25 percent of the Trust Fund’s value per cohort during the “ramp up” phase of the scholarship program. In Fiscal Year 2009, the first year of funding for Early Achievers Scholarships, CollegeInvest disbursed $91,000 in scholarships to 76 students, which represented a 0.1 percent disbursement. Further, we project that CollegeInvest will fall short of its Trust Fund disbursement objectives until Fiscal Year 2013.
Program design and administration. The current design and administration of the Early Achievers Scholarship program is not achieving the goal of increasing access to postsecondary education in an efficient and cost-effective manner. For example, although the Early Achievers program was envisioned as an “early commitment” program in which middle school and early high school students commit to doing well in high school in exchange for guaranteed financial aid, the program lacks key elements of successful early commitment programs in other states, such as guaranteed funding. In addition, the program has cumbersome registration rules, lacks controls to ensure that scholarship recipients meet requirements, puts a burden on higher education institutions for identifying students and verifying eligibility, and has high administrative costs relative to scholarship disbursements.
Trust Fund management. The CollegeInvest Board does not always sufficiently document the rationale behind investment decisions related to the Trust Fund that deviate from its stated investment policy. Specifically, the Board voted in February 2008 to allow CollegeInvest to use all but $10 million of Trust Fund monies to purchase loans from CollegeInvest’s student loan portfolio. The Board reported during the audit that this decision was made primarily to benefit the Trust Fund by moving its funds to more conservative investments, in light of worsening market conditions. However, based on our review of Board minutes, CollegeInvest’s financial statements, and comments from CollegeInvest management, it appears the primary purpose of this decision was to bolster CollegeInvest’s student loan operations by providing liquidity for originating loans, which would not primarily benefit the Trust Fund. In addition, using Trust Fund monies to buy CollegeInvest student loans raises significant conflict-of-interest concerns.
Service Scholarship and Opportunity Scholarship. Between Fiscal Years 2005 and 2009 CollegeInvest failed to give out 330 of the 565 (58 percent) Service Scholarships and Opportunity Scholarships that had been advertised and budgeted and therefore failed to fund $860,000 out of $1.8 million available. As a result, the odds of winning posted in the official sweepstakes rules appeared overstated and the programs’ advertising may have been misleading.
Loan forgiveness program participation. Participation in CollegeInvest’s loan forgiveness programs appears low. For example, the Loan Forgiveness Program for Nursing Teachers has only served 11 participants since the program began in Fiscal Year 2007. We also identified several weaknesses in CollegeInvest’s administration of loan forgiveness programs. For example, CollegeInvest does not effectively target potential candidates for the loan forgiveness programs and, for some programs, requires that applicants hold a CollegeInvest loan to participate, which presents a barrier to participation.
Administrative Expenses
During Fiscal Years 2008 and 2009 CollegeInvest incurred over $12 million in administrative expenses, not including employee salaries and benefits. We reviewed CollegeInvest’s accounting for and administrative controls over expenses and found that they were not sufficient to ensure that expenses were reasonable and conformed to applicable rules and policies.
During Fiscal Years 2008 and 2009 CollegeInvest incurred over $12 million in administrative expenses, not including employee salaries and benefits. We reviewed CollegeInvest’s accounting for and administrative controls over expenses and found that they were not sufficient to ensure that expenses were reasonable and conformed to applicable rules and policies.
Questionable expenses. Out of 40 administrative expenses made by CollegeInvest during Fiscal Years 2008 and 2009 that we reviewed, seven (18 percent) were questionable. For example, two of the expenses were donations, which are generally prohibited by the Colorado Constitution; two of the expenses involved meals for CollegeInvest staff, Board members, and Board members’ families which did not fall within the guidelines for official functions and training functions in which meals can be provided; and two of the expenses represented a conflict of interest. We also found problems with insufficient supporting documentation and inadequate approvals or authorizations for 21 (53 percent) of the expenses. The significant error rates raise concerns about CollegeInvest’s management of administrative expenses.
Cost allocation. CollegeInvest does not allocate administrative expenses consistently or based on the benefits derived by individual programs. For example, one of its College Savings Plans is not included in its direct cost allocations and the Early Achievers Scholarship Trust Fund is not included in its indirect cost allocations. CollegeInvest also does not have written cost-sharing agreements in place for all the costs it shares with College Assist, the State’s student loan guaranty agency.
Related articles:
- Huffington Post: Scholarships Shortchanged Per Audit
- Durango Herald: Auditors Discover Conflicts At Loan Agency
- Pueblo Chieftain: $10 in Administrative Costs For Every $1 Paid in Scholarships
- Chronicle of Higher Education: Colorado Lawmakers Demand More Accountability From Agency Running State Scholarship Program
Full disclosure: I work with CollegeInvest as a vendor.
Only $360k was allocated to the scholarship and loan forgiveness programs – 2.9% of the $12 million. The Denver Post
reporting was inaccurate and a retraction was printed on October 9.
The administrative expenses of $12 million relates to all CollegeInvest administrative expenses for the two year audit period for all of our programs, include a significant amount of non-administrative expenses such as loan origination fees paid to the US Dept of Education.
You can read the full CollegeInvest response here: http://collegeinvest.org/PDF/CollegeInvest-Audit-Response-Letter.pdf
Posted by: Ivy | October 09, 2009 at 11:45 AM