REPORT DIGEST

ILLINOIS STUDENT ASSISTANCE COMMISSION -
ILLINOIS DESIGNATED ACCOUNT PURCHASE PROGRAM

FINANCIAL AUDIT
For the Year Ended June 30, 2014

Release Date:  February 11, 2015

FINDINGS THIS AUDIT:  1

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

FINDINGS LAST AUDIT: 2

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
WILLIAM G. HOLLAND, 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

This report covers our financial audit of the
Illinois Student Assistance Commission
(Commission) - Illinois Designated Account
Purchase Program (IDAPP) as of June 30, 2014
and for the year then ended.

SYNOPSIS

• (14-01)  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 Illinois Student Assistance Commission
(Illinois Designated Account Purchase Program)
was not in compliance with two of the
covenants relating to the agency’s revolving
line of credit agreement.

During our audits of the agency’s June 30,
2009, 2010, 2011, 2012, and 2013 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%,
while the ratio as of June 30, 2014 was
101.7%. Also per the agreement, the default
ratio is set at a maximum of 6.25%, but at
June 30, 2014 this ratio was 6.72%.

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 $211,856,827 at
June 30, 2014.

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 27)  This finding was first
reported in 2009.

Commission officials accepted our finding and
recommendation to continue to monitor the loan
covenant violations and continue seeking
remedies from the lender involved.  Commission
officials indicated the loan covenants are
reviewed on a monthly basis and that they
continue to talk to Citibank about the
portfolio. (For the previous IDAPP response,
see Digest Footnote #1.)

AUDITOR’S OPINION

Our special assistance auditors stated the
financial statements of IDAPP are fairly
presented in all material respects.

WILLIAM G. HOLLAND
Auditor General

WGH:JGR

SPECIAL ASSISTANT AUDITORS

Our Special Assistant Auditors for this audit
were McGladrey LLP.

DIGEST FOOTNOTES

#1 - DEBT COVENANT VIOLATION

2013 – We agree with the recommendation.  The
loan covenants are reviewed on a monthly
basis.  We continue to talk to Citibank about
the portfolio.