Guaranteed Student Loan Program, Commissioner of Higher Education financial audit for the fiscal year ended ..

26 Pages·1996·0.58 MB·English

by  Montana. Legislature. Legislative Audit Division

s
353.88
L72CHEG
1999
Legislative Audit Division
State of Montana
Report to the Legislature
Financial Audit
October 1999
For the Fiscal Year Ended June 30, 1999
Montana Guaranteed Student Loan
Program
Commissioner of Higher Education
We performed a rinancial audit ofthe Montana Guaranteed Student Loan
Program for the fiscal year ended June 30, 1999. This report contains the
audited financial statements and accompanying notes for fiscal year
1998-99. We issued an unqualified opinion on the financial statements. The
opinion means the reader may rely on the financial statement information
presented.
The current report contains no recommendations to the program. The
prior report also contained no recommendations.
STATE Dnn(?MFNTS COLLECTIOfI
FFR 2000
Direct comments/inquiries to:
Legislative Audit Division MONTANA STArt LIBRARY
Room 135, State Capitol 1515 E- 6th ,'VE
HcLEKA. MONTAt;/- ^,:-^
PO Box 201705
MT
99-06 Helena 59620-1705
Help eliminate fraud, waste, and abuse in state government. Call the Fraud Hotline at 1-800-222-
4446 statewide or 444-4446 in Helena.
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FINANCIAL AUDITS
Financial audits are conducted by the Legislative Audit Division to determine ifan agency's
financial operations are properly conducted, the financial reports are presented fairly, and the
agency has complied with applicable laws and regulations. In performing the audit work, the
audit staffuses standards set forth by the American Institute ofCenified Public Accountants and
the United States General Accounting Office. Financial audit staffmembers hold degrees with
an emphasis in accounting. Most staffmembers hold Certified Public Accountant (CPA) cer-
tificates.
Government Auditing Standards, the Single Audit Act Amendments of 1996 and 0MB Circular
A-133 require the auditor to issue certain financial, internal control, and compliance reports.
This individual agency audit report is not intended to comply with these reponing requirements
and is therefore not intended for distribution to federal grantor agencies. The Legislative Audit
Division issues a statewide biennial Single Audit Report which complies with the above
reporting requirements. The Single Audit Report for the two fiscal years ended June 30, 1999,
will be issued by March 31, 2000. Copies ofthe Single Audit Report, when available, can be
obtained by contacting:
Single Audit Coordinator Legislative Audit Division
Office ofBudget and Program Planning Room 135, State Capitol
State Capitol PO Box 201705
MT MT
Helena 59620 Helena 59620-1705
Phone [phone]
MEMBERS OF THE LEGISLATIVE AUDIT COMMITI EE
LEGISLATIVE AUDIT DIVISION
Deputy Legislative Auditors:
Scott A. Seacal, Legislative Auditor
John W. Northey, Legal Counsel Jim Pellegrini, Performance Audit
Tori Hunthausen, IT & Operations Manager James Gilleii, Financial-Compliance Audit
October 1999
The Legislative Audit Committee
ofthe Montana State Legislattire:
This IS ourreport onthe fiscal year 1998-99 fmancial audit ofthe Commissioner ofHigher Education's Montana
Guaranteed Student Loan Program (MGSLP). The objectives ofa financial audit mclude determinmg ifthe
program's financial statements present fairly its financial position at June 30, 1999, andtheresults ofits
operation forthe fiscal yearthenended. We tested compliance with state and federal laws that have a direct and
m
material impact onthe financial statements. Additional compliancetesting fortheprogram is included our
biennial audit ofthe Office ofthe CommissionerofHigher Education.
The MGSLP was authorized bythe Montana Legislature in 1979 and established July 1, 1980. The MGSLP
allows eligible students to receive loans fi-om lending institutions to pay forpost-secondarv education. The
federal government guarantees the loans made by lendmg institutions andmakes administrative cost
MGSLP
reimbursements tothe for acting as acollection agent.
The MGSLP initially contractedwithUnited StudentAid Funds, Inc., toprocess and service loans. In 1988, the
MGSLP began assuming the admimstrative duties associatedwith the loan guarantee process. By 1990 the
MGSLP assumed complete control, but contuiues to contractwith USA Group Guarantee Services, Inc., for
computer support services.
As ofJune 30, 1999, MGSLP has approximately $624,765,977 ofoutstandmg loans that ithas guaranteed.
MGSLP personnel have calculated a defaultrate of3.33 percent forfederal fiscalyear 1998-99. Giventhe
currentdefaultrate, the federal governmentwill reimburse MGSLP 95 percent ofdefaulted loans issued after
October 1, 1998.
Beginning on page A-1,you will findthe Independent Auditor's Report followed bythe financial statements and
accompanyingnotes. We issued animqualified opinionwhich means thereadercanrelyonthepresented
information. Theprogram'sresponseto our audit is onpage B-1.
Wethankthe CommissionerofHigherEducation andhis stafffortheircooperation and assistance duringthe
audit.
RespectMJy submitted
Legislative Auditor
Room 135, State Capitol Building, PO Box 201705 Helena MT59620-1705
Phone [phone] FAX [phone] E-Mail [email protected]

Appointed and Administrative OfYicials
Office ofthe Commissioner Dr. RichardA. Crofts CommissionerofHigher Education
ofHigher Education
Joyce Scott Deput>' Commissioner forAcademic and
Student Affairs
Rod Sundsted Associate CommissionerforFiscal Affau-s
Laurie O. Neils DirectorofBudget andAccounting
Montana Guaranteed Arlene Hannawalt Director
Student Loan Program
KarenWing Fiscal Manager and Financial Analyst
For additional information concerning the Montana Guaranteed Student
LoanProgram, contactArlene Hannawalt, Director, at:
PO Box 203101
MT
Helena 59620-3101
[phone]
Internet address: [email protected]
Pearl Allenwas the auditor involved inthis audit.
Page
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in 2010 with funding from
IVIontana State Library
http://www.archive.org/details/guaranteedstuden1999mont
LEGISLATIVE AUDIT DIVISION
Scott A. Seacat. Legislative Auditor Deputy Legislative Auditors;
John W. Northey, Legal Counsel Jim Pellegrini, Performance Audit
Tori Hunthausen, IT & Operations Manager James Gillett, Financial-Compliance Audit
INDEPENDENT AUDITOR'S REPORT
The LegislativeAudit Committee
ofthe Montana State Legislature:
Wehave auditedthe Balance Sheet ofthe Comrmssioner ofHigher Education's Montana Guaranteed Student
Loan Program - Special Revenue Fund ofthe state ofMontana as ofJune 30, 1999, andtherelated Statement
ofRevenues, Expenditures, and Changes in Fund Balance - Budget and Actual forthe fiscal yearthenended.
These financial statements are the responsibilityofthe program's management. Ourresponsibility is to
express an opinion on these financial statements based onour audit.
We conducted our audit in accordancewithgenerally accepted auditing standards. Those standards require
thatweplan andperform the audittoobtainreasonable assurance about whetherthe financial statements are
fi-eeofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessmgthe accoimtingprinciples used
and significantestimates madebymanagement, as well as evaluating theoverall financial statementpresen-
We
tation. believethatour auditprovides areasonable basis forouropinion.
As discussed innote 1, the financial statements presentonly the CommissionerofHigherEducation's
Montana Guaranteed Student Loan Program - Special Revenue Fund and arenot mtendedtopresent fairlythe
financial position and results ofoperations ofthe state ofMontana inconformitywithgenerally accepted
accountingprinciples.
In ouropinion, the fmancial statements referredto abovepresent fairly, in all material respects, the fmancial
positionofthe Commissioner ofHigher Education's Montana Guaranteed Student Loan Program - Special
Revenue Fund ofthe state ofMontana as ofJune 30, 1999, and the results ofits operations fortheyearthen
ended in conformitywith generally accepted accountingprinciples.
As discussed innote l.C to the fmancial statements, the CommissionerofHigher Education's Montana
Guaranteed Student Loan Program separated its fimds in accordance withthe HigherEducation Amendments
of 1998. Whenthe program separatedthese fimds, itchanged its methodofrecognizing guarantee fee
income andreclassified amounts held forthereserverecall fi-ompropertyheld intrustto fundbalance, as
discussed innotes 8 and 19, respectively, tothe fmancial statements, becausethe guarantee fees andreserve
recall were accounted for in a fimd ownedbvthe U.S. Government.
Respectfiilly submitted.
jZS^-
Jamlees H. Gillett, CPA
September 17, 1999 Deputy Legislative Auditor
Room 135, State Capitol Building. PO Box 201705 Helena MT 59620-1705
Phone [phone] FAX [phone] E-Mail [email protected] PageA-1

Commissioner of Higher Education
Montana Guaranteed Student Loan Program
Special Revenue Fund
Balance Sheet
As ofJune 30, 1999
Agency
ASSETS
Cash In Treasury
ShortTerm Investments (Note 3)
Interest Receivable
Accounts Receivable
Due From Federal Reserve Fund (Note 13)
Due From Federal Government (Note 2 & Note 10)
Prepaid Expense
Securities Lending Cash Collateral (Note 4)
Federally Backed Securities (Note 5)
Total Assets
Commissioner of Higher Education
Montana Guaranteed Student Loan Program
Special Revenue Fund
Statement of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
For the Period July 1, 1998- June 30, 1999
Agency Operating Fund Federal Student Loan
Reserve Fund
Budget Actual Variance Budget Actual Variance
REVENUE
Guarantee Fee Income(Note8) $325,000
Administrative ExpenseAllowance(Note 9)
Loan Processing and Issuance Fee (Note 10)
Investment Earnings (Note3)
CollectionCosts Retained (Note 11)
Supplemental Pre-claimsAssistance(Note 12)
DefaultAversion Fees (Note 13)
Account Maintenance Fee (Note 14)
Accrued Interest (Note 15)
Non-Reinsured Loan Recoveries (Note 16)
EscrowDisbursementService Fees (Note6)
Retained FFELPConsolidationCosts (Note 11)
Retained FDSLPConsolidation Costs(Note 11)
Reinsurancefrom DeptofEducation (Note20)
NetSecurities Lending IncomeOverExp (Note4)
Miscellaneous
TOTAL REVENUE