REPORT DIGEST

ILLINOIS STUDENT ASSISTANCE COMMISSION

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2019

Release Date:  March 3, 2020

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, 2019 and for the
year then ended.

SYNOPSIS

• (19-01) The Commission - IDAPP was not in
compliance with one of the covenants relating
to the Commission’s revolving line of credit
agreement.

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.  The
results of procedures performed related to the
Golden Apple Scholars of Illinois Program are
described in a separate agreed-upon procedures
report.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

DEBT COVENANT VIOLATION

The Commission - 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 2019
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 10
months fell above these ratios, ranging from
5.60% to 7.61% for the three-month average and
7.39% to 9.29% 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 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 $93,356,827
at June 30, 2019.  (Finding 1, page 152)  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 and stated the loan covenants
are reviewed monthly and the Commission
continues to talk to the bank about the
portfolio.

AUDITOR’S OPINION

The auditors stated the financial statements
of the Commission as of and for the year ended
June 30, 2019 are fairly stated in all
material respects.   The auditors included a
paragraph emphasizing that the Illinois
Prepaid Tuition Program has a deficit of $295
million as of June 30, 2019.

This financial audit was conducted by Crowe
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