HARRISBURG - State Auditor General Jack Wagner said yesterday that his office would conduct a special performance audit of Pennsylvania's college-loan agency, citing news reports about lavish spending at the agency as a major reason.

The audit of the Pennsylvania Higher Education Assistance Agency (PHEAA) will focus on its performance in improving access to higher education for Pennsylvanians, "including but not limited to an evaluation of the state grant program and an evaluation of compensation, benefits and expenses," Deputy Auditor General Stephanie G. Maurer wrote in a letter to PHEAA president and chief executive Richard Willey.

The audit, which will look back as far as July 2004, is being conducted under the authority of the state fiscal code and the law that established PHEAA.

Wagner said he ordered the audit because of news accounts detailing "excessive and unnecessary" spending at the agency and because of PHEAA's unique legal status. The agency, whose 20-member board includes 16 state legislators, finances its operating expenses from its own income, but dispenses nearly $500 million a year in state taxpayers' money in the form of student grants and subsidies.

A performance audit "digs deeper" than a conventional audit and is aimed at determining whether an agency is fulfilling "expectations of its original mission," said Wagner.

In a written response to Wagner, Willey said the agency is audited more than 40 times a year by regulating authorities and other entities. He pledged that it would cooperate fully with the state auditors.

Willey told Wagner he is "confident that you will discover that PHEAA is an extremely well-run and efficient business operation that is intensely focused on helping Pennsylvania families achieve an affordable higher education."