The Montana Board of Regents voted 5-2 Tuesday to seek a legislative performance audit of the two financially struggling Montana student-loan entities, the Student Assistance Foundation and Montana Higher Education Student Assistance Corp.

Regent Todd Buchanan of Billings pushed for the legislative performance audit of the two organizations. SAF last week laid off 23 of its staff and quit consolidating future student loans because of financial problems. MHESAC has $175 million set aside for student loans for the 2008-09 school year, but does not yet have financing in place for future years because of the credit and liquidity crunch on Wall Street.

The motion seeking the audit passed after the regents went on record for a resolution supporting SAF's recommendation that Congress pass legislation requiring the U.S. secretary of education or other federal agency to provide standby purchase agreements in terms of financing of the Federal Family Education Loan Program or FFELP.

Jim Stipcich, SAF president and chief executive officer, had announced earlier this month that the SAF board supported this legislation. Congress may pass legislation within the next five to seven days, he said.

Buchanan expressed irritation that Stipcich expected the regents to vote on this federal legislation resolution expeditiously on his behalf, but that MHESAC and SAF hadn't responded with similar dispatch to the recommendations by a task force seeking more accountability and openness from MHEAC and SAF. The task force included staff from the two organizations, the higher education commissioner and state Budget Director David Ewer. Stipcich said he would respond to the regents by their meeting in late May.

In addition, Buchanan also raised questions about SAF and MHESAC leadership.

"There was a conference call six months ago," Buchanan said. "The leadership team of these two organizations arrogantly said there is no risk. That has proven incorrect. I have lost confidence in the leadership."

Stipcich said he had never received one request for information from Buchanan and is willing to meet with Buchanan at any time.

Buchanan said he made such a request at the regents meeting in Dillon in March and at this meeting.

Stipcich said the two organizations undergo 12-14 financial audits a year, which are posted on their Web sites and are sent to the legislative auditor.

"I am requesting to see a legislative audit," Buchanan said.

"To the extent we are authorized by law," added Regent Steve Barrett of Bozeman.

There was some question whether the regents could legally ask for a legislative audit of SAF and MHESAC, which have a legal opinion saying they are private entities, not government agencies. However, a number of the regents and the higher education commissioner and her staff sit on the SAF and MHEAC boards.

Regents Chairwoman Lynn Hamilton of Havre suggested that perhaps the higher education's staff could review all of the previous audits first before seeking a legislative audit.

Ewer said he had examined MHESAC and SAF financial audits and did not find the kind of "comprehensive narrative" addressing the "fundamental questions" that a performance audit would contain. He has been critical of MHESAC's investment decisions and what he considers their "inadequate checks and balances."

Speaking for the administration of Gov. Brian Schweitzer, Ewer backed Buchanan's motion and said MHESAC and SAF should also comply with all open-meeting and open-government state laws. The administration tried but failed to pass a law in 2007 to require that and regular legislative audits. MHESAC and SAF now post their meeting notices and minutes on their Web sites and members of the public now can attend their meetings.

Regent Janine Pease of Billings said she isn't on the SAF or MHESAC board, as some regents are, and feels "behind the door, excluded from information." She said a performance audit would have "some very important virtues to it."

"It would be important to assure our students and their families that our organizations are serving students in the way they were intended," Pease said. "They could expand our confidence in these organizations."

Regent Lila Taylor of Busby questioned the need for a legislative audit.

"If we're having this problem that we don't sit down and talk to each other, why wouldn't we sit down and talk to each other," Taylor said, adding, "It's a nasty market right now because it's a nasty market. We can't turn around and say I told you so."

Buchanan's motion passed 5-2, with Hamilton and Taylor voting against it.