State Auditor General Jack Wag-ner said yesterday that there are problems at the Pennsylvania Higher Education Assistance Agency.

No kidding.

After newspaper investigations a year or so ago revealed that PHEAA spent $860,000 sending board members to meetings at luxury resorts between 2000 and 2005, the agency proceeded to spend another $400,000 on unsuccessful legal efforts to keep its spending records secret.

Late this summer, PHEAA announced it had paid $570,000 in bonuses to a few managers. Wagner's audit found that the bonus problem, which only came to light late this summer, is much bigger than initally reported. The pattern of awarding big bonuses went well beyond top executives to include as many as 325 employees.

The ongoing audit reveals that bonuses amounted to $7.5 million since July 1, 2004. Wagner called for an immediate end to the bonus program, which, he noted, also amounted to double dipping because the bonus payments boost recipients' state pensions.

Just a few weeks ago, PHEAA president and CEO Richard Willey announced that he would retire at the end of the year. With the latest revelations, he has announced he will quit next week.

Newspapers followed up Willey's original announcement with reports that he would retire with a whopping $370,000 annual pension, made possible, in part, by his big year-end bonuses. Willey's base salary is $289,118.

With the string of outrageous examples of wasteful spending coming out of PHEAA, it must have been hard for Wagner to know where to start when the special audit began April 17. The auditor general is "responsible for ensuring that all state money is spent legally and properly," according to the department's Web site.

Following the controversy over travel expenses and because of anticipated funding reductions from the federal government, PHEAA announced plans earlier this year to cut expenses and impose fiscal constraints. Wagner's audit revealed that just one month after that announcement, the agency spent $108,000 for an employee appreciation day at Hersheypark.

When looking at the wasteful spending, unwarranted largess and desire to operate in secret, it is important to remember that the 20-member PHEAA board includes 16 state lawmakers. Clearly, the same mentality behind the controversial 2005 pay-raise vote (taken at 2 a.m.) and the related use of unvouchered expenses was at work at PHEAA.

Traditionally, the auditor general does not talk about ongoing audits, but the abuses at PHEAA are so significant that Wagner called for "immediate corrective action" at a news conference yesterday afternoon.

The need for reform at PHEAA is obvious. One important change must include the structure of the board of directors to reduce the number of state lawmakers and replace them with people who are outside the Harrisburg culture.

But there should be more than a few policy changes. Legal action, if possible, should be considered against those responsible for the abuses at PHEAA. Efforts should be made to trim Willey's pension to a reasonable level.

It's hard to imagine that the abuses of the General Assembly — think 2 a.m. pay-raise vote, 50 percent pension boost, unvouchered expenses and legislative bonuses — could be overshadowed. But PHEAA has succeeded.

Wagner's ongoing audit and some proposals in the legislature to reform PHEAA must keep pressure on the agency until meaningful change occurs, and those responsible for the abuses have suffered some consequences for their actions.

It is long overdue for PHEAA spending to be examined in a performance audit. There are more than a few other state agencies that deserve similar scrutiny, but for now Wagner's auditors have their hands full.