Illinois Designated Account Purchase Program Lender Due Diligence.

Published by the Department of Education, Office of Inspector General on 2005-08-22.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                      OFFICE OF INSPECTOR GENERAL
                                               Chicago/Kansas City Audit Region

                       111 N. Canal St. Ste. 940                           8930 Ward Parkway, Ste 2401
                       Chicago, IL 60606-7297                              Kansas City, MO 64114-3302
                       Phone (312) 886-6503                                Phone (816) 268-0500
                       Fax (312) 353-0244                                  Fax (816) 268-0526

                                                                                                                  August 22, 2005

                                                                                    Control Number ED-OIG/A05F0016

Mr. Tom A. Breyer
Interim Director
Illinois Designated Account Purchase Program
1755 Lake Cook Road
Deerfield, Illinois 60015

Dear Mr. Breyer:

The purpose of this letter is to notify you that we are terminating our audit of the Illinois
Designated Account Purchase Program’s (IDAPP’s) compliance with requirements for the
Federal Family Education Loan Program (FFELP). The objective of our audit was to determine
if IDAPP complied with 34 C.F.R. §§ 682.209 and 682.411 for conversion of a FFELP loan to
repayment status and due diligence in the collection of FFELP loans. Our audit covered the
period January 1, 2005, through March 31, 2005. We have terminated our audit because we did
not identify any reportable instances of noncompliance with 34 C.F.R. §§ 682.209 and 682.411.


To meet our objective, we

1. 	 Reviewed the OMB Circular A-133 audit report for IDAPP, prepared by an independent
     public accountant for the years ended June 30, 2002 and 2003, and reviewed the supporting
     audit documentation for the year ended June 30, 2003.

2. 	 Reviewed written policies and procedures and interviewed IDAPP officials to obtain an
     understanding of the processes IDAPP used to provide reasonable assurance of compliance
     with the FFELP loan conversion and collection due diligence requirements and used this
     review to identify data we needed to test compliance with the program requirements.

3. 	 Identified the universe of defaulted FFELP loan claims (340) for which IDAPP received
     reimbursement and IDAPP’s guarantee agency, Illinois Student Assistance Commission,
     received reinsurance during the period January 1, 2005, to March 31, 2005.

           Our mission is promote the efficiency, effectiveness, and integrity of the Department’s programs and operations.
Mr. Tom Breyer                                                                                          Page 2 of 3

4. 	 Assessed the reliability of computer-processed data by (1) gaining a limited understanding of
     IDAPP’s computer system controls; (2) reviewing and relying in part upon a NELNET
     Corporation SAS 70 report, prepared by an independent public accountant and entitled
     Student Loan Servicing System (Nservice) and Loan Generation System (Ngenius) Service
     Auditor’s Report on Controls Placed in Operation and Tests of Operating Effectiveness, for
     the period January 1, 2004, through November 30, 2004;1 (3) reviewing and relying in part
     upon a National Student Clearinghouse audit report prepared by an independent public
     accountant for the year ended June 30, 2004;1 and (4) testing selected loan data for (a)
     missing data, (b) the relationship of one data element to another, (c) values outside of
     designated ranges, and (d) dates outside of valid timeframes.

5. 	 Tested a randomly selected probe sample of 30 defaulted FFELP loan claims from the
     universe of 340 claims to determine if IDAPP converted the loans to repayment in
     accordance with 34 C.F.R. § 682.209 and performed at least the minimum loan collection
     due diligence activities set forth in 34 C.F.R. § 682.411.

6. 	 Observed IDAPP personnel making and receiving loan collection due diligence telephone
     calls and discussing the loan collection due diligence activities.

7. 	 Discussed staffing levels and workload with IDAPP officials and analyzed their responses to
     determine if staffing was sufficient given the size of IDAPP’s portfolio.

We conducted our field work between May 23, 2005, and July 15, 2005, at IDAPP’s office in
Deerfield, Illinois. We performed our work in accordance with generally accepted government
auditing standards appropriate to the scope of our audit.

Administrative Matters

Our review was limited to the work described above and would not necessarily disclose all
material weaknesses in IDAPP’s administration of the FFELP. Accordingly, the contents of this
letter should not be construed as acceptance or approval of IDAPP’s administration of the
FFELP. The termination of this audit does not preclude further reviews of this or similar areas
by the Office of Inspector General, nor does it preclude the U.S. Department of Education from
taking further action concerning any aspect of IDAPP’s administration of the FFELP. The work
we performed is not a substitute for any other reviews or audits required by law, license, or

In accordance with the Freedom of Information Act (5 U.S.C. § 552), reports and other
documents issued by the Office of Inspector General are available to members of the press and
general public to the extent information contained therein is not subject to exemptions in the Act.

     We did not review the supporting audit documentation or determine the quality of the work performed for this
Mr. Tom Breyer                                                                       Page 3 of3

We wish to express appreciation for the cooperation and assistance extended by your staff during
the audit. Should you have any further questions regarding this review, please contact Darryl
Meador at (816) 268-0513 or Robert Swedberg at (312) 886-8656. No response to this letter is


                                     Richard J. owd
                                     Regional Inspector General
                                     for Audit

cc: 	 Matteo Fontana, General Manager for Financial Partners, FSA
     Roberta Russo, Regional Director, Financial Partners - Northern Region, FSA
     Yolanda Marshall, Audit Liaison Officer, Financial Partners, FSA