Filed On 3/31/05 10:18am ET · SEC File 333-82280 · Accession Number 870156-5-46
As Of Filer Filing As/For/On Docs:Pgs Issuer Agent
3/31/05 Nelnet Student Loan Funding LLC 10-K 12/31/04 14:28 Stratus Fund Inc
Annual Report · Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K Annual Report 7 41K
2: EX-99.1 Miscellaneous Exhibit 1 7K
3: EX-99.2 Miscellaneous Exhibit 1 8K
4: EX-99.3 Miscellaneous Exhibit 1 7K
5: EX-99.4 Miscellaneous Exhibit 1 8K
6: EX-99.5 Miscellaneous Exhibit 1 7K
7: EX-99.6 Miscellaneous Exhibit 1 8K
8: EX-99.7 Miscellaneous Exhibit 1 8K
9: EX-99.8 Miscellaneous Exhibit 1 8K
10: EX-99.9 Miscellaneous Exhibit 1 8K
11: EX-99.10 Miscellaneous Exhibit 1 8K
12: EX-99.11 Miscellaneous Exhibit 1 7K
13: EX-99.12 Miscellaneous Exhibit 1 8K
14: EX-99.13 Servicer Compliance Audit 9 39K
EX-99.13 · Servicer Compliance Audit
| EX-99.13 | 1st Page of 9 | TOC | Top | Previous | Next | Bottom | Just 1st |
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Exhibit 99.13
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NELNET
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Compliance Audits (Attestation Engagements) For Lenders and
Lender Servicers Participating in the Federal Family Education Loan Program
Year Ended December 31, 2004
NELNET
TABLE OF CONTENTS
PAGE
Independent Accountants' Report 1
Nelnet Statement of Compliance 3
APPENDIX
A Background 6
B Listing of Lenders Covered by Compliance Attestation 7
INDEPENDENT ACCOUNTANTS' REPORT
The Board of Directors
Nelnet, Inc.:
We have examined management's assertions, included in its representation letter
dated January 14, 2005 that Nelnet, Inc. (Nelnet) complied with the following
compliance requirements specified in the Audit Guide, COMPLIANCE AUDITS
(ATTESTATION ENGAGEMENTS) FOR LENDERS AND LENDER SERVICERS PARTICIPATING IN THE
FEDERAL FAMILY EDUCATION LOAN PROGRAM (the Guide), issued by the U.S. Department
of Education, Office of the Inspector General, dated December 1996, relative to
Nelnet's administration of the Federal Family Education Loan Program on behalf
of its lender clients during the year ended December 31, 2004 and that Nelnet
maintained effective internal control over compliance with the aforementioned
compliance requirements as of December 31, 2004:
o Support for LaRS (formerly known as the ED Form 799)
o Loan Documentation
o Calculation of Loan Origination Fees
o Interest Benefits--Eligibility, Proper Rate and Proper Calculations
o Special Allowance Payments--Eligibility and Proper Calculation of
Average Daily Balances
o Accurate Loan Principal Balances
o Reporting of Sales, Purchases and Transfers
o Recording of Student Status Changes
o Payment Processing
o Due Diligence in the Collection of Loans
o Timely Filing of Claims
o Curing Due Diligence/Timely Filing Violations
As discussed in that representation letter, management is responsible for
Nelnet's compliance with--and the effectiveness of Nelnet's internal control
over compliance with--those requirements. Our responsibility is to express an
opinion on management's assertions about Nelnet's compliance with--and the
effectiveness of Nelnet's internal control over compliance with--the specified
compliance requirements based on our examination.
Our examination was conducted in accordance with attestation standards
established by the American Institute of Certified Public Accountants,
GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United
States, and the Guide and, accordingly, included examining, on a test basis,
evidence about Nelnet's compliance with those requirements; obtaining an
understanding of the internal control over compliance with the specified
compliance requirements, testing, and evaluating the design and operating
effectiveness of the internal control; and performing such other procedures as
we considered necessary in the circumstances. We believe that our examination
provides a reasonable basis for our opinion. Our examination does not provide a
legal determination on Nelnet's compliance with specified requirements.
Because of inherent limitations in any internal control, errors or fraud may
occur and not be detected. Also, projections of any evaluation of the internal
control over compliance with the specified requirements to future periods are
subject to the risk that internal control over compliance may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies and procedures may deteriorate.
In our opinion, management's assertions that Nelnet complied with the
aforementioned compliance requirements for the year ended December 31, 2004 is
fairly stated, in all material respects. Also in our opinion, management's
assertion that Nelnet maintained effective internal control over compliance with
the aforementioned compliance requirements as of December 31, 2004, is fairly
stated, in all material respects, based upon criteria established in INTERNAL
CONTROL-INTEGRATED FRAMEWORK issued by the Committee of Sponsoring Organizations
of the Treadway Commission.
This report is intended solely for the information and use of the audit
committee and management of Nelnet, lender clients, and the U.S. Department of
Education, and is not intended to be, and should not be, used by anyone other
than these specified parties.
/s/ KPMG LLP
January 14, 2005
2
REPORT ON MANAGEMENT'S ASSERTIONS ON COMPLIANCE WITH SPECIFIED
FEDERAL FAMILY EDUCATION LOAN PROGRAM REQUIREMENTS
We, as members of Nelnet, Inc. (Nelnet) are responsible for complying with the
requirements of the Federal Family Education Loan (FFEL) Program. We are
responsible for and we have established and maintained an effective internal
control structure over FFEL Program requirements. We have performed an
evaluation of Nelnet's compliance with the following requirements of the FFEL
Program during the year ended December 31, 2004. Based on this evaluation, we
assert that during the year ended December 31, 2004, Nelnet has materially
complied with the FFEL Program requirements below relative to those services
provided to our clients.
o The loan information (loan types, interest rate, beginning and ending
principal loan balances), and loan status (past due, in grace, in
deferment) reported in Parts I, II, III, IV, and V of either the LaRS
prepared by Nelnet and submitted to ED on behalf of our lender clients or
the billing information prepared by Nelnet and submitted to our lender
clients during the year ended December 31, 2004 agrees with Nelnet's
summary records/ledger and as of December 31, 2004, Nelnet had effective
internal control over compliance with the requirements that such
information be in agreement.
o Nelnet supported loans reported in either the LaRS prepared by Nelnet and
submitted to ED on behalf of our lender clients or the billing information
prepared by Nelnet and submitted to our lender clients during the year
ended December 31, 2004 with--and as of December 31, 2004, Nelnet had
effective internal control over compliance requirements for supporting
loans with--loan records that include all applicable documents listed in
Section II, Compliance Requirements 2, of the Audit Guide that our lender
clients have contracted with Nelnet to store.
o During the year ended December 31, 2004, Nelnet completely reported,
classified and computed, in accordance with LaRS instructions--and as of
December 31, 2004, Nelnet had effective internal control over compliance
with LaRS instructions for classifying and computing--the loan origination
information reported in Part I in either the LaRS prepared by Nelnet and
submitted to ED on behalf of our lender clients or the billing information
prepared by Nelnet and submitted to our lender clients.
Although Nelnet prepared LaRS billing information for our lender clients,
each individual lender client will have to make their own assertion
regarding compliance with requirements for payment to ED of origination
fees in excess of interest and special allowance.
o Loans included in Part II of either the LaRS prepared by Nelnet and
submitted to ED on behalf of our lender clients or the billing information
prepared by Nelnet and submitted to our lender clients during the year
ended December 31, 2004 were--and as of December 31, 2004, Nelnet had
effective internal control over compliance with requirements that loans are
(1) in a status eligible for interest benefits, (2) assigned the correct
interest rate in accordance with Section 427A(a)-(i) of the HEA, as
amended, and (3) classified in the correct interest rate category in
accordance with LaRS instructions. Ending principal amounts, average daily
balances, and interest amounts were calculated in accordance with--and as
of December 31, 2004, Nelnet had effective internal controls over
compliance with requirements for calculation in accordance with--the LaRS
instructions.
3
o Loans included in Part III of either the LaRS prepared by Nelnet and
submitted to ED on behalf of our lender clients or the billing information
prepared by Nelnet and submitted to our lender clients during the year
ended December 31, 2004 were--and as of December 31, 2004, Nelnet had
effective internal control over compliance with requirements that loans
are--(1) in a status eligible for special allowance and (2) properly
categorized on the LaRS in accordance with the LaRS instructions. Ending
principal balances, average daily balances, and adjustments for differences
in average daily balances were calculated in accordance with--and as of
December 31, 2004, Nelnet had effective internal controls over compliance
with requirements for calculation in accordance with--the LaRS
instructions.
o In Parts IV and V of the LaRS prepared by Nelnet and submitted to ED on
behalf of our lender clients or the billing information prepared by Nelnet
and submitted to our lender clients during the year ended December 31,
2004, Nelnet properly classified and accurately reported--and as of
December 31, 2004, Nelnet had effective internal control over compliance
with requirements to properly classify and report--loan principal balances
in accordance with the LaRS instructions and included all outstanding loans
(except those for which the guaranty was voided are not included in Part
VI.)
o Loan purchases and sales made on behalf of our lender clients during the
year ended December 31, 2004 were recorded by Nelnet in accordance
with--and as of December 31, 2004, Nelnet had effective internal control
over compliance for recording loan purchases/sales in accordance with
(identify the applicable documents such as purchase/sales agreements or the
instructions lender provided to Nelnet) with respect to the start/end date
of eligibility for interest, special allowance and responsibility for
payment of loan origination fees. During the year ended December 31, 2004,
Nelnet recorded completely and accurately in the servicer's loan servicing
systems--and as of December 31, 2004, Nelnet had effective internal control
over compliance with requirements to record completely and accurately in
the servicer's loan servicing systems--all applicable LaRS loan data for
loans transferred, including beginning balances.
Although Nelnet prepared LaRS billing information for our lender clients,
each individual lender client will have to make their own assertion
regarding compliance with requirements for payment to ED of origination
fees in excess of interest and special allowance.
o Upon receipt of Student Status Confirmation Reports or other notification
of change information for loans serviced during the year ended December 31,
2004, Nelnet accurately updated--and as of December 31, 2004, Nelnet had
effective internal control over compliance with requirements to accurately
update--loan records for changes to student status, including conversion to
repayment status in accordance with 34 CFR 682.401(b)(20) and 34 CFR
682.209, respectively.
o For loans serviced during the year ended December 31, 2004, Nelnet: (a)
calculated--and as of December 31, 2004, Nelnet had effective internal
control over compliance with requirements to calculate--interest and
principal in accordance with 34 CFR 682.304 and (b) applied--and as of
December 31, 2004, Nelnet had effective internal control over compliance
with requirements to apply (i) loan payments effective with the day of
receipt and (ii) prepayments in accordance with 34 CFR 682.209 or the
documented specific request of the borrower.
o For loans serviced during the year ended December 31, 2004, Nelnet complied
with--and as of December 31, 2004, Nelnet had effective internal control
over compliance with--the due diligence requirements for collection of
delinquent loans, including the requirements for skip-tracing or pre-claims
assistance set forth in 34 CFR 682.411 (c)-(m).
4
o For loans serviced during the year ended December 31, 2004, Nelnet complied
with--and as of December 31, 2004, Nelnet had effective internal control
over compliance with--deadlines for timely filing of claims with the
guaranty agency concerning death, disability, false certification, closed
schools, or bankruptcy contained in 34 CFR 682.402(b), (c), (d), (e), (f)
and (g) for default claims contained in 34 CFR 682.406(a)(5). For loans
serviced during the year ended December 31, 2004, Nelnet accurately
categorized--and as of December 31, 2004, Nelnet had effective internal
control over compliance with requirements for accurately
categorizing--amounts pertaining to claims in the LaRS.
o For loans with timely-filing violations or due diligence violations that
were cured during the year ended December 31, 2004, Nelnet documented that
it performed--and, as of December 31, 2004, Nelnet had effective internal
control over compliance with requirements to perform--cure procedures
required by 34 CFR 682 Appendix D [Bulletin 88-G-138]. For loans on which a
cure was required but that were not cured during the year ended December
31, 2004, Nelnet properly categorized--and, as of December 31, 2004, Nelnet
had effective internal control over compliance with the requirements to
properly categorize the loans in the LaRS prepared and submitted to ED on
behalf of our lender clients or the billing information prepared by Nelnet
and submitted to our lender clients.
Very Truly Yours,
Nelnet, Inc.
/s/ Mike Dunlap /s/ Terry Heimes
------------------------------ -------------------------------
Mike Dunlap Terry Heimes
CHAIRMAN AND CO-CEO CHIEF FINANCIAL OFFICER
5
APPENDIX A
Background
The Higher Education Act of 1965 (HEA), as amended, requires each lender,
as defined in section 428(b)(1)(U) of the HEA, participating in the Federal
Family Education Loan (FFEL) Program to obtain a compliance attestation of
its FFEL Program. These compliance attestations are performed in accordance
with the AICPA's Professional Standards for Attestation Engagements (SSAE)
No. 10, Section 800, the general fieldwork and reporting standards in
GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the
United States; and the Audit Guide, COMPLIANCE AUDITS (ATTESTATION
ENGAGEMENTS) FOR LENDERS AND LENDER SERVICERS PARTICIPATING IN THE FEDERAL
FAMILY EDUCATION LOAN PROGRAM (the Guide) issued by the U.S. Department of
Education, Office of Inspector General, dated December 1996.
Lenders using a third-party service organization(s) to service all or part
of its FFEL Program loan portfolio may not be able to make all of the
assertions required in Section II of the Audit Guide. In those situations,
the Department of Education will accept, as meeting the lender audit
requirement, an independent accountants' report based upon an "alternative
or combined" engagement as defined in Section III of the Audit Guide. The
lender must obtain from the service organization an audit/attestation
report that meets the requirements described in Section III of the Audit
Guide.
The independent accountants' report(s) must include their opinion with
respect to the service organization's compliance with the specified
requirements in Section II of the Audit Guide pertaining to functions
carried out by the servicing organization.
Nelnet, Inc. (Nelnet) is a for profit third-party student loan servicing
organization responsible for the proper and timely performance of many
aspects of student loan processing. Nelnet operates servicing centers in
Denver, CO; Jacksonville, FL; Indianapolis, IN; and Lincoln, NE. The
primary services provided to the loan holders by Nelnet are:
o accepting loan origination and disbursement information on new and
existing borrowers;
o processing of general borrower correspondence, forbearance and
deferment requests and borrower status changes;
o receiving and tracking original, imaged or electronic loan
documentation;
o maintaining borrower demographic information while the student is in
school, billing accrued interest to the appropriate parties, and
combining multiple loans where appropriate;
o processing borrower loans through the grace period, placing the loans
into repayment and calculating monthly payment amounts; and;
o applying loan payments, calculating delinquency periods, collection
activities, claim processing on defaulted loans and cure procedures
for defaulted loans rejected by the guarantor.
The functions described above provide a basis for Nelnet to prepare
information for the quarterly Lender's Interest and Special Allowance
Request and Reports--LaRS.
The lender ID's covered by this report are included in Appendix B.
6
· Download Table
APPENDIX B
LISTING OF LENDERS COVERED BY COMPLIANCE ATTESTATION
203760 802828 805974 811949 823065 828067 830628 833212
213760 802843 805997 812211 823185 828141 830631 833214
231455 802965 806078 812265 823296 828148 830772 833220
233580 802983 806126 813133 823299 828259 830796 833271
313760 802995 806208 813169 823546 828295 830868 833273
331300 803000 806361 813285 823817 828375 830953 833294
421623 803017 806400 813760 823964 828478 830974 833305
428577 803128 806595 814392 824004 828564 830977 833310
430628 803238 806773 815502 824060 828577 831008 833325
508471 803258 807418 815657 824072 828634 831149 833361
521623 803264 807669 815678 824135 828728 831213 833452
528577 803266 807743 815897 824289 828785 831299 833456
530604 803342 807806 815979 824327 828793 831300 833457
530868 803348 808036 816298 824335 828875 831419 833471
531300 803359 808047 816799 824397 829005 831455 833487
605156 803408 808134 817408 824495 829030 831484 833495
605974 803414 808173 817409 824504 829077 831593 833500
607743 803447 808217 817411 824573 829167 831692 833501
608036 803488 808238 817420 824690 829191 831819 833580
608543 803508 808258 817516 824800 829223 831836 833585
610755 803516 808260 817729 825033 829262 831846 833610
611353 803533 808316 818313 825310 829302 831870 833659
619628 803547 808426 819524 825323 829366 831970 833669
620682 803557 808441 819628 825495 829394 832036 833670
622660 803588 808471 819648 825585 829458 832057 833674
630868 803606 808543 819824 825641 829464 832198 833702
631300 803608 808606 819922 826087 829489 832339 833733
631484 803631 808628 819931 826140 829565 832347 833741
633820 803634 808662 820198 826212 829626 832398 833806
633832 803645 808711 820334 826351 829650 832415 833817
700030 803654 808863 820393 826442 829691 832445 833820
700121 803670 808874 820622 826509 829704 832500 833821
705147 803672 808877 820682 826625 829717 832502 833832
713760 803694 808888 820685 826710 829763 832584 833872
724690 803709 808896 820937 826717 829769 832710 833881
728577 803758 808936 820967 826730 830111 832775 833873
732775 803799 808942 821024 826757 830186 832934 833892
733135 803909 808959 821449 826865 830227 832998 833895
800241 804283 809063 821471 826943 830248 833005 833934
800802 804456 809479 821623 826947 830288 833032 833953
801890 804575 809678 821666 826953 830293 833051 834036
801891 804860 809685 821806 826978 830309 833074 834078
801894 804868 810007 821830 827192 830343 833078 834097
801935 804959 810086 822022 827231 830372 833079 834100
801943 805041 810088 822046 827511 830427 833088 834133
801947 805147 810123 822243 827537 830469 833093 834148
801953 805178 810148 822366 827603 830513 833101 888884
802285 805317 810240 822384 827610 830525 833135 888886
802301 805593 810470 822660 827735 830529 833174 899980
802330 805806 810509 822671 827800 830547 833189 899982
802560 805849 810755 822745 827855 830549 833205 899988
802759 805923 811077 822908 827866 830617 833207 999712
802794 805943 811353 822927 827954 830624 833211 999990
7
Dates Referenced Herein and Documents Incorporated By Reference
| Referenced-On Page |
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| This 10-K Filing | | Date | | First | | Last | | | Other Filings |
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| |  |
| For The Period Ended | | 12/31/04 | | 1 | | 7 | | | 8-K |
| | 1/14/05 | | 3 | | 4 |
| Filed On / Filed As Of | | 3/31/05 |
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