Student loan agency under fire

The state agency has been awarding executives millions of dollars in bonuses.

HARRISBURG (AP) — Pennsylvania’s student loan agency held a $108,000 employee outing at Hersheypark in April, one month after its executives had pledged to rein in unnecessary spending, the state government’s elected watchdog said Thursday.

The disclosure by Auditor General Jack Wagner prompted the chairman of the agency’s lawmaker-dominated board to schedule an emergency meeting next week to replace the agency’s president and chief executive officer, Dick Willey.

The Pennsylvanian Higher Education Assistance Agency also paid its employees bonuses totaling $2.5 million during the year that ended June 30, even as it was being battered by public criticism of its lavish spending, Wagner said.

“They must not have taken us seriously, and we were very, very serious” about cutting costs, said Rep. Bill Adolph, the board’s chairman.

Willey announced last week he intends to retire at the end of this year. Adolph said Willey will be asked to resign effective Wednesday, the day before the board meets to choose an interim replacement.

The findings were included in an interim report Wagner released as part of a special performance audit of PHEAA — the first such audit of the agency — that looks back as far as July 2004.

Large agency

“Over the last 40 years, PHEAA has grown into a large state agency, but unfortunately it has lost its focus,” Wagner said during a news conference. “It is no longer putting Pennsylvania families and students first.”

“There was a breakdown in communication,” between Willey and board members about the board’s expectations, said Adolph, a Delaware County Republican.

Sen. Sean Logan, D-Allegheny, the board’s vice chairman, said it was “totally unacceptable” that the board was not told in advance about the outing.

“This is another example of Dick Willey thinking he’s bigger than the board,” he said.

PHEAA spokesman Keith New disputed the figure Wagner cited as the cost of the employee outing.

The agency actually spent about $79,000 of its own money on tickets for employees, some guests and a pavilion rental for the event, New said. The remainder was money PHEAA collected from employees who wanted to buy extra tickets for additional guests, he said.

Logan said the amount was immaterial.

“If it was a dollar, it’s a dollar too much,” he said.

In March, the PHEAA board adopted a stricter travel policy and pledged to curtail unnecessary spending. Wagner announced in April that he would investigate the agency’s performance in expanding access to higher education for Pennsylvanians, citing news reports about expenditures on items such as extravagant banquets, bar bills, golf outings and spa treatments.

About 60 percent of the 2006-07 bonus money — nearly $1.5 million — went to PHEAA’s top 23 executives. More than $900,000 in bonuses were shared among 227 managerial workers in 2006-07, while 75 unionized workers received less than $100,000 collectively that year.

PHEAA also awarded bonuses totaling $2.1 million in 2005-06 and $1.8 million in 2004-05, according to Wagner’s report.

Wagner said PHEAA should eliminate the bonus program altogether.

“They are state employees, not money managers on Wall Street,” he said.

New questioned whether the report shed any new light on PHEAA’s practices. Employee bonuses are public information, and the figures Wagner reported are available to anyone else who asked for them, New said.

The agency links the employee bonuses to business growth, and its total operating revenues exceeded $1 billion during the period that Wagner examined, New said.