Aug 21, 2008 3 min read

The first-ever “special performance audit” of the Pennsylvania Higher Education Assistance Agency by state Auditor General Jack Wagner has chronicled free-spending ways and made some recommendations for curative changes. They should be implemented immediately, so PHEAA stops being synonymous with out-of-control, self-serving use of public money. Foremost, Wagner says the number of state legislators on PHEAA’s 20-member governing board should be halved, from 16 to eight. Currently, the board has a pretty inbred point of view, one carried over from a Legislature where historically no taxpayer-funded perquisite is too large or excessive to cause shame.

Wagner wants the eight slots that open up filled with people whose expertise lies in higher education and finance – including Cabinet secretaries that head the state’s banking and community and economic development agencies. He also favors putting leaders of colleges and universities (public and private) on the board, as well as filling one slot with an actual full-time college student.

But it’s not that easy. This simple change, no matter how meritorious, requires legislative approval. And the jury’s still out on whether the Legislature, which is notoriously slow to consider, debate and adopt any reforms, has the appetite to do the right thing by setting PHEAA on a new and more accountable course.

However, that’s the only way to alter the excessive spending documented by Wagner from 2004 through 2007, a period in which PHEAA, whose mission is helping students pay for college: Spent $121 million on management salaries; $62.5 million on consultants, legal fees and other professional services; $30 million on advertising and promotional items; and $6.4 million on bonuses, predominantly for executives and managers.

PHEAA’s current president and CEO James Preston warns that changes in the governing board could affect the agency’s tax-exempt status. But that appears to be a red herring, as Wagner assures that under his proposal PHEAA would remain a public agency and therefore remain tax-exempt. Many nonprofit corporations exist in Pennsylvania without having any state legislators on the governing board, so it’s hard to imagine one not being able to claim that status for only having eight of them.

It’s important to keep in mind that PHEAA only undertook internal changes – including a stricter employee travel policy and elimination of bonuses – after news organizations were able to gain access to financial information through a costly lawsuit. Preston would prefer that the citizens of Pennsylvania look at what’s happened since then, and some worthy changes have indeed been made.

But Wagner’s recommendations take reform one big needed step further, altering the very composition of the PHEAA governing board to make it more broad-based and more attuned to achieving its mission. The presence of multiple perspectives, rather than a heavy tilt toward those of a state legislator, is bound to have a positive impact.

And with a college student on the board, representing those who struggle to pay rising tuition, at least one voice would likely speak up against a $128 tuxedo rental for a PHEAA employee, which was one of the news media’s findings. The Legislature should follow Wagner’s recommendations without hesitation.