Pa. audit: Overhaul student-aid board

HARRISBURG - Pennsylvania's auditor general yesterday advocated slashing the number of legislators on the board that oversees the state's student-loan agency.

The Pennsylvania Higher Education Assistance Agency has spent too money on its operations - including perks for board members and employees - and not enough on student aid, Auditor General Jack Wagner said in an audit.

"While PHEAA's mission remains beyond reproach, the agency . . . has lost its focus," Wagner said during a news conference. "Many of PHEAA's leaders seem to have put their self-interest ahead of the needs of Pennsylvania students."

Sixteen of the board's 20 members are legislators. Wagner said eight of their seats should go instead to people with expertise in higher education and finance: the state secretaries of banking and of community and economic development, leaders of public and private colleges and universities, and one full-time college student.

Changing the board's composition would require legislative approval, and it was unclear yesterday whether legislative leaders agreed with Wagner's findings.

House Majority Leader Bill DeWeese (D., Greene) and his staff had not seen Wagner's audit and would need to evaluate the recommendations, spokesman Tom Andrews said.

"He certainly would be supportive of anything that would help PHEAA maintain or improve its mission," Andrews said.

Senate Majority Leader Dominic Pileggi (R., Delaware) did not immediately return a phone call seeking comment.

Gov. Rendell, who has advocated changes in PHEAA's governance, said yesterday that he believed the board was "too heavily dominated by legislators" and should be restructured.

James Preston, president and chief executive officer of PHEAA, wrote in response to the audit that changes in the board's structure could affect the agency's tax-exempt status. Losing that status would hamper the agency's ability to provide financial aid, he said.

Wagner said his proposal would keep PHEAA a public agency and, therefore, tax-exempt.

He announced in April 2007 that his office would conduct a special performance audit of PHEAA - the first of its kind - citing news reports about hundreds of thousands of dollars being spent on extravagant banquets, bar bills, golf outings spa treatments and other luxuries.

Wagner examined PHEAA's spending and management practices from July 1, 2004, to June 30, 2007. Auditors found that the agency spent $121 million on management salaries; $62.5 million in fees related to contracts with technology and advertising consultants, law firms and lobbyists; and $30 million on advertising and promotion.

During the 2004-05 through 2006-07 school years, the agency spent $1.2 billion on college grants, which students do not have to repay.

Preston said the agency agreed with most of Wagner's other findings and had spent the last 18 months improving its spending practices.

Read the audit at http://go.philly.com/pheaa

EndText