Legislators audit loan company
Nonprofit
group that oversees millions of student loans faulted by state
By Leban Pelz
The Collegian
A company that manages $7 billion
annually in federal funding for a million student loans every year in
California has been targeted by the state with an audit.
Seventeen state senators and assembly members earlier this month requested
the California Joint Legislative Audit Committee review of EdFund for
the following: consistent underreporting of finances, abuse of contracting
authority, questionable spending and hiring practices and lack of sufficient
oversight.
The final claim is directed toward the California Student Aid Commission,
which is responsible for the oversight of EdFund, a nonprofit auxiliary
charged with managing Cal Grants and other student financial aid.
The independent audit began last week and is expected to be complete early
next year, the office of Assemblywoman Wilma Chan (D-Oakland) said.
Chan’s office said the company selected to review EdFund’s
structure is Public Works, while Market Value Planners will look into
EdFund’s finances.
“This is a huge amount of money we’re dealing with,”
Chan said. “We’re concerned the funds won’t be there
in the future.”
Chan, one of the legislators who requested the audit, said some examples
of EdFund’s potential misdeeds include many noncompetitive contracts
awarded by the company in 2004, and a nine-member management team that
received what she considers “extremely high bonuses.”
A previous, routine review of EdFund found that nearly a third of the
136 contracts it awarded in the fiscal year 2004 were noncompetitive.
The San Francisco Chronicle reported in April that the company’s
management team received nearly $500,000 in extra pay in 2001 and 2002.
Chan also cited instability among the company’s management. EdFund
President Becky Stilling resigned earlier this month.
Another complaint against EdFund is its misrepresentation of available
funds. Merriah Fairchild, a higher education advocate for the California
Public Interest Research Group, said the last audit of EdFund found the
company padded its cost reports to appear to have less money.
“This affects every student who receives a Cal Grant, every student
who has been denied a Cal Grant because of lack of funding and every student
with a loan,” Fairchild said.
She said this is also an issue for taxpayers, since EdFund uses billions
in federal funding.
Chan’s office wouldn’t say exactly what the consequences of
the audit might be for EdFund, or for the Student Aid Commission, but
said changes will be made if needed.
“If the audit finds problems, they will be addressed,” Chief
of Staff Rachel Richman said.
Jason Warburg, vice president of public affairs for EdFund, said the company’s
only reaction is that it plans to fully cooperate with the audit.
“We get routinely audited about twice a year anyway, so we’re
pretty familiar with the process,” he said.
Warburg said the last time one of these audits found anything negative
was five years ago. He would not discuss any relationship between the
audit and Stilling’s resignation.
Student reaction was mixed Tuesday at Fresno State. Senior criminology
major Nicole Frazier, who has a Cal Grant and loans, said it is awful
if what EdFund is being audited for turns out to be true. She said the
state government doesn’t do enough.
Robert Peabody, a junior environmental sciences major, said the situation
makes him nervous.
“If the audit finds out anything, I may have to pay back some of
my loans earlier,” he said.
Still, Peabody said Sacramento does enough for students on loans.
“At least they’re doing the audit now,” he said.
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