Auditors find conflicts in scholarship programs

September 28, 2009

DENVER • State lawmakers on Monday ordered the agency that runs Colorado's college loan forgiveness and scholarship plans to report to them monthly after auditors found conflicts of interest, expensive gifts to financial advisers and scholarships not being used.

CollegeInvest, the agency that administers the programs, said only 76 people qualified this year for $91,000 in scholarships for students who work hard and promise to go to college. State lawmakers said they had expected about $3.8 million in scholarships to be awarded.

Since 2005, the agency has only given out 235 of 565 service scholarships for students who volunteer in the community, and only 11 nursing teachers got their loans forgiven since 2007.

Auditors said for the past two years, CollegeInvest incurred over $12 million in administrative expenses, not including salaries and benefits for 37 employees.

Lawmakers noted that it cost colleges $10 in administrative costs for every $1 awarded in scholarships to their students.

"I sense that the board is not really doing its job in monitoring how well this program is working," said Sen. Dave Schultheis, a Republican from Colorado Springs and a member of the Legislative Audit Committee that heard the audit Monday.

"It seems like more money has been put into running the organization than getting kids in school," said state Rep. Dianne Primavera, D-Broomfield, who chaired the committee.

Auditors also said members of the board voted to sponsor other programs where they sat on other boards, and in one case gave out $80 golf clubs to financial advisers if they gave the agency their e-mail addresses.

Angela Baier, chief marketing officer for CollegeInvest, said the audit highlighted just a small portion of its operations and the benefits it provides. She said CollegeInvest provided more than $1.7 billion in student loans for about 98,600 current borrowers and managed over $3.2 billion in college savings for 276,800 families as of June 30.

CollegeInvest is a non-profit division of the Colorado Department of Higher Education that receives no state tax dollars.

Debra DeMuth, director of the CollegeInvest Scholarship and Loan Forgiveness Programs, also defended the agency, saying the programs are new and her agency is working to reduce cumbersome regulations to get more students in the programs.

She said the board knew in advance that one of its board members had a conflict of interest when the board voted to approve a $10,000 donation to a nonprofit organization where a member of management also served on that board.

"We do want more participation," she told the audit committee.

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