WIXLIB

South Carolina StateEducation Assistance AuthorityReport on Financial StatementsFor the years ended June 30, 2018 and 2017

South Carolina State Education Assistance AuthorityContentsPageOffice of the State Auditor Transmittal Letter. 1Independent Auditor's Report . 2-3Management’s Discussion and Analysis . 4-7Financial StatementsStatements of Net Position . 8Statements of Revenues, Expenses and Changes in Net Position . 9Statements of Cash Flows . 10-11Notes to Financial Statements . 12-29Supplementary InformationSchedule of Net Position by Fund . 30-31Schedule of Revenues, Expenses and Changes in Net Position by Fund . 32Schedule of Cash Flows by Fund . 33-34Schedule of Organizational Data. 35Independent Auditor's Report on Internal Control OverFinancial Reporting and on Compliance and Other MattersBased on an Audit of Financial Statements Performed inAccordance with Government Auditing Standards . 36-37Schedule of Findings and Responses . 38

September 28, 2018Members of the AuthoritySouth Carolina State Education Assistance AuthorityColumbia, South CarolinaThis report on the audit of the financial statements of the South Carolina State EducationAssistance Authority for the fiscal year ended June 30, 2018, was issued by Elliott Davis, LLC, CertifiedPublic Accountants, under contract with the South Carolina Office of the State Auditor.If you have any questions regarding this report, please let us know.Respectfully submitted,George L. Kennedy, III, CPAState AuditorGLKIII/sag

Independent Auditor's ReportMr. George L. Kennedy, III, CPAState AuditorSouth Carolina Office of the State AuditorColumbia, South CarolinaReport on the Financial StatementsWe have audited the accompanying financial statements of the South Carolina State Education AssistanceAuthority (the “Authority”), a component unit of the State of South Carolina, as of and for the years ended June30, 2018 and 2017, and the related notes to the financial statements, which collectively comprise the Authority’sbasic financial statements as listed in the table of contents.Management's Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these financial statements in accordancewith accounting principles generally accepted in the United States of America; this includes the design,implementation, and maintenance of internal control relevant to the preparation and fair presentation of financialstatements that are free from material misstatement, whether due to fraud or error.Auditor's ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audits. We conducted ouraudits in accordance with auditing standards generally accepted in the United States of America and the standardsapplicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor's judgment, including the assessment of therisks of material misstatement of the financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the entity's preparation and fair presentation ofthe financial statements in order to design audit procedures that are appropriate in the circumstances, but notfor the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, weexpress no such opinion. An audit also includes evaluating the appropriateness of accounting policies used andthe reasonableness of significant accounting estimates made by management, as well as evaluating the overallpresentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion.OpinionIn our opinion, the financial statements referred to above present fairly, in all material respects, the financialposition of the South Carolina State Education Assistance Authority as of June 30, 2018 and 2017, and the changesin its financial position and its cash flows for the years then ended in accordance with accounting principlesgenerally accepted in the United States of America.elliottdavis.com

Required Supplementary InformationAccounting principles generally accepted in the United States of America require that management’s discussionand analysis on pages 4 - 7 be presented to supplement the basic financial statements. Such information, althoughnot a part of the basic financial statements, is required by the Governmental Accounting Standards Board whoconsiders it to be an essential part of financial reporting for placing the basic financial statements in an appropriateoperational, economic, or historical context. We have applied certain limited procedures to the requiredsupplementary information in accordance with auditing standards generally accepted in the United States ofAmerica, which consisted of inquiries of management about the methods of preparing the information andcomparing the information for consistency with management's responses to our inquiries, the basic financialstatements, and other knowledge we obtained during our audit of the basic financial statements. We do notexpress an opinion or provide any assurance on the information because the limited procedures do not provideus with sufficient evidence to express an opinion or provide any assurance.Other InformationOur audit was conducted for the purpose of forming an opinion on the financial statements that collectivelycomprise the Authority’s basic financial statements. The individual fund schedules and schedule of organizationaldata are presented for purposes of additional analysis and are not a required part of the basic financial statements.The individual fund schedules are the responsibility of management and were derived from and relate directly tothe underlying accounting and other records used to prepare the basic financial statements. Such information hasbeen subjected to the auditing procedures applied in the audit of the basic financial statements and certainadditional procedures, including comparing and reconciling such information directly to the underlying accountingand other records used to prepare the basic financial statements or to the basic financial statements themselves,and other additional procedures in accordance with auditing standards generally accepted in the United States ofAmerica. In our opinion, the individual fund schedules are fairly stated, in all material respects, in relation to thebasic financial statements as a whole.The schedule of organizational data has not been subjected to the auditing procedures applied in the audit of thebasic financial statements, and accordingly, we do not express an opinion or provide any assurance on it.Other Reporting Required by Government Auditing StandardsIn accordance with Government Auditing Standards, we have also issued our report dated September 28, 2018 onour consideration of the Authority's internal control over financial reporting and on our tests of its compliancewith certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance andthe results of that testing, and not to provide an opinion on internal control over financial reporting or oncompliance. That report is an integral part of an audit performed in accordance with Government AuditingStandards in considering the Authority's internal control over financial reporting and compliance.Columbia, South CarolinaSeptember 28, 20183

South Carolina State Education Assistance AuthorityManagement’s Discussion and AnalysisThe South Carolina State Education Assistance Authority (the “Authority”) was originally created to fill functionsto provide and guarantee financing for education loans for students and parents. As a provider of financing, theAuthority issued bonds to finance education loans. As a guarantor, the Authority processed loans submitted forguarantee, provided collection assistance for delinquent loans, paid claims for loans in default, collected loans onwhich default claims had been paid, and made appropriate responses to the United States Secretary of Education(the “Secretary”). As stipulated in the Health Care and Education Reconciliation Act (“HCERA”) of 2010, effectiveJuly 1, 2010, all federal loan originations are required to be made through the federal Direct Loan Program.Therefore, the Authority did not provide a guarantee for federal loans originated since July 1, 2010.As a result of the HCERA of 2010 and subsequent actions taken by the federal government which nationalized thefederally-guaranteed student loan program, continuing guarantor operations under the guaranty agreementbetween the Authority and the United States Department of Education (“USDE”) would result in an economic lossto the Authority. Therefore on June 22, 2016, the State Fiscal Accountability Authority ("SFAA") initiated action toterminate the guaranty agreement between the Authority and USDE. Effective December 1, 2016, a USDEdesignated guaranty agency accepted the transfer of all of the Authority's outstanding guarantees and theAuthority's post-claim portfolio. The Authority no longer serves as a guaranty agency for the USDE.As described above, the Authority was originally created to provide a means of making loans to students in orderto enable them to attend eligible institutions, as defined in the Higher Education Act. Such loan financing has beenconducted by the Authority through its Student Loan Finance Program which has been administered by the SouthCarolina Student Loan Corporation (“SCSLC”) since its inception.SCSLC and the Authority have entered into a loan agreement pursuant to terms in which the Authority has agreedto lend bond proceeds to SCSLC to enable SCSLC to make or acquire education loans. The obligation of SCSLC torepay the finance loans is evidenced by a promissory note of SCSLC and is secured by a pledge under the loanagreement.This section of the Authority’s annual financial report presents a discussion and analysis of the Authority’s financialperformance for the fiscal year ended June 30, 2018. Please read it in conjunction with the Authority’s Statementsof Net Position, Statements of Revenue, Expenses and Changes in Net Position, Statements of Cash Flows, and theNotes to Financial Statements, which follow this section.Financial Highlights:The Authority’s total assets at June 30, 2018 were approximately 188,523,000, which is a decrease ofapproximately 6,652,000 or 3% from June 30, 2017. The decrease in assets was primarily due to reductions ofapproximately 7,078,000 in finance loans receivable. The decrease in finance loans receivable reflectedprovisions of the loan agreement with SCSLC related to the Authority’s 2009 Palmetto Assistance Loan ("PAL")General Resolution.4