On The Money: EdFund Take Over
EdFund is making news again – this time for a take over. EdFund is the non-profit agency blasted by the State Auditor for spending hundreds of thousands of dollars in free coffee, gift cards and other perks for employees. Read audit (see pages 76 - 82)
The U.S. Department of Education has announced that a Minnesota company will take over EdFund's student loan portfolio – worth about $38 billion – all this after critical audits showed out-of-control spending at EdFund, an auxiliary of the California Student Aid Commission.
The spending included $93,000 for free coffee – and thousands more for extravagant meals and gift cards for EdFund staffers – money that came directly out of the Student Loan Operating Fund, according to the Bureau of State Audits.
EdFund also paid $349,000 for lobbyists – without approval from the Student Aid Commission or the Department of Finance.
Read agreements betweenEdFund and lobbyists: BrownsteinHyatt Farber Schrek | EsperanzaRoss | LeviPappas & Sadler
Despite that, EdFund executives filed actions with the Victim Compensation and Government Claims Board, demanding $437,000 in bonuses. Victim Compensation and Government Claims Board.
The Federal Government is terminating its relationship (October 31st) with EdFund's parent agency, the Student Aid Commission. The Feds have tapped Educational Credit Management Corporation (ECMC) of Oakdale, Minnesota to take over the student loan portfolio.
H.D. Palmer, a spokesman for the Department of Finance, told CBS 13, "We believe that the new management is going to be as vigilant as we have been in uncovering what we found in our audits at the Department of Finance, what the Bureau of State Audits has found as well."
EdFund has more than 300 employees in the company's Rancho Cordova offices. They will be transferred over to ECMC, effective November 1st – under a 9-12 month contract. The Minnesota company says it's too soon to say what happens to those employees after that.
The takeover protects students by keeping $100 million in the budget for CalGrants.
But what about the managers at EdFund – the ones criticized for overspending?
The feds say that's something to be worked out between EdFund and the new management team.
(See full statement from U.S. Dept. of Education here):
"As part of the transition, ECMC will contract with EdFund to provide the same uninterrupted service for approximately 9 and 12 months (i.e., the transition period). ECMC informed the Department that during the transition period they expect EdFund to operate with approximately the same number of employees as currently employed to provide seamless service to lenders, schools, and borrowers during the transition. Any decisions about EdFund's management will be worked out between ECMC and EdFund during the contracting process."
Sandra Abrevaya
Press Secretary
U.S. Department of Education
Washington, DC 20202
EdFund told CBS 13 its focus is on helping students achieve their higher education goals. "Even during these times of professional uncertainty for our staff, we have never lost focus on that mission."
See EdFund's full statement here:
The U.S. Department of Education's current plans call for EdFund to enter into an initial 9-12 month contract with ECMC for the provision of all the services we currently provide students and borrowers. Therefore, we do not expect that there would be any immediate impact on EdFund staffing.
If you see examples of wasteful spending – send us an e-mail to onthemoney@kovr.com. You can also follow On The Money stories in progress via Twitter at http://twitter.com/mikeluery.
EdFund and its management team are committed to working collaboratively with the U.S. Department of Education, ECMC, the State of California and CSAC to ensure a smooth and seamless transition for students, borrowers and taxpayers.
Our focus is, and always will be, on helping students achieve their higher education goals. Even during these times of professional uncertainty for our staff, we have never lost focus on that mission.
EdFund is pleased that this transition allows us to continue to support the Cal Grant program with $100 million to fund grants for students in the 2010-11 school year. EdFund has generated over $350 million that has been used to fund Cal Grants over the past seven years.
Mary Anne Kelly
EdFund®
AVP Communication
