Following the challenges that have plagued this institution recently, and the interventions we made, I am pleased to announce that the Auditor General (AG) has issued an unqualified audit opinion on the Annual Financial Statements for the National Student Financial Aid Scheme (NSFAS). NSFAS moves from the disclaimer of opinion by the Auditor General in 2010 to an unqualified audit opinion in 2011.
This is an outstanding achievement and vindicates my decision in December 2010 to restructure the Board of NSFAS so that it could deliver on its mandate to provide financial aid to poor students who would not be able to go to university or college without assistance from NSFAS.
Financial support to poor students is one of the main priorities of the Department of Higher Education and Training and NSFAS plays a pivotal role in improving access to post-school education in our country.
The mandate that I gave to the reconstituted board was to urgently address all of the issues that led to the audit disclaimer and which I believed had not been adequately addressed up to that point.
When NSFAS was called before the Standing Committee on Public Accounts (SCOPA) on 15 February this year to explain the 2010 disclaimer, the new board and I gave a frank account of the events that had resulted in the disclaimer. We explained the approach on which we had embarked to remedy the financial, management and governance deficiencies at NSFAS.
The Auditor General’s report of July 2011 has now confirmed that these interventions to return NSFAS to sound financial health and good corporate governance were indeed warranted and correct, even to the extent that board members, including the chairperson of the Audit Committee, were tasked with conducting a due diligence exercise and co-directing the turnaround strategy.
The AG’s management letter says:“the interventions were sound”. I would like to express my gratitude to all those, including the Office of the Auditor General, who have worked with NSFAS to achieve the unqualified audit result.
We are looking forward to returning to SCOPA and to both the Portfolio and Select Committees on Higher Education and Training in Parliament, to explain in detail the successful turnaround of NSFAS’s finances. I will be reporting to them the extraordinary steps we have taken since 2009, and especially in 2011, to fix years of neglect and mismanagement of NSFAS and to get it on track.
All of the reasons for the disclaimer have been addressed to the satisfaction of the Auditor General. These include the five main reasons for the disclaimer, which were:
- failure by management in 2010 to comply with International Accounting Standard 39, which requires that loans should be valued at “Fair Value at Initial recognition”;
- failure to comply with Accounting Standard GRAP 9, which requires that interest should be accounted for over the life of the loan, and not just when a student starts repaying;
- failure to provide scientifically compelling evidence to the AG for writing off R589 million in interest on outstanding loans; and failure to provide evidence as to how management arrived at its estimates for doubtful debts;
- incorrect calculations of interest income of R181 million, when it should have been more;
- a reconciling difference of R42 million between the NSFAS Loan Management System and its accounting records, with no supporting documentation or explanation for this discrepancy.
The work done in 2011 to correct these deficiencies required NSFAS to recalculate every student loan on its books. Through this exercise, NSFAS has confirmed that it has overcharged interest on some student loans in previous years. The Annual Financial Statements show a provision of R77,8 million to refund these former students. NSFAS will be contacting each one to make arrangements for the refund.
One of the main tasks of the turnaround strategy was to correct the value of NSFAS loan book. An extensive exercise was undertaken with the assistance of a team of accounting, auditing and actuarial experts. The NSFAS loan book is now correctly valued at R5, 2 billion.
A troubling finding during the audit process was that during the last financial year NSFAS incurred irregular expenditure of R25,6 million. This is completely unacceptable in a public entity and corrective action has been taken as part of the turnaround plan, to put in place the appropriate supply chain management policies and procedures.
Much work remains to be done in the current financial year and beyond to improve financial management at NSFAS. Executive and senior management posts are currently being filled, a new Loan Management System is being procured and systems and operations are being improved.
The Department of Higher Education and Training and the new Board and staff of NSFAS will be working together to ensure full compliance with all legislative and regulatory requirements and clean audits in future. We are jointly committed to achieving the rest of its turnaround goals:
- improving the way NSFAS communicates its message to learners so that they are aware of the financial assistance that is available long before they leave school;
- increasing the amount available for both loans and bursaries;
- widening the definition of students who are eligible for student financial aid;
- streamlining application processes so that money reaches students quickly and easily;
- introducing new, modern systems to manage the billions of rands that NSFAS distributes annually to students at 23 universities and 50 FET colleges nationwide;
- cracking down on fraud and corruption at institutions to ensure that financial aid reaches the students it is intended for;
- significantly reducing the number of NSFAS students who either fail or drop out by developing programmes in collaboration with our stakeholders to give students the best chance of graduating.
My department and NSFAS are in the process of introducing the far-reaching changes at NSFAS which will see it achieve these goals over the next three years.
NSFAS had been in existence since 1999 and is the successor in law of the Tertiary Education Fund of South Africa (TEFSA). Since its inception, the funds allocated to NSFAS have increased substantially, from R441 million in 1999 to R5,5 billion in 2011/12 providing financial aid to 210 000 students in 2010.
Our plan is to grow this number substantially, as part of realising the goal of progressively providing free education for students from poor families, as mandated by the ruling party. Part of our long term plan is to move to a student centric model to ensure that the money follows the students.
NSFAS, like any other public entity, is legally bound to ensure that the money disbursed can be accounted for and is used to fund financially needy students. As a result, NSFAS will be undertaking periodic audits to ensure that funds allocated to all institutions are utilised accordingly.
R200 million has been provided to enable NSFAS to grant loans to students who have completed their studies but have not received their certificates or graduated, due to outstanding debt. This will enable an estimated 25 000 students to receive their certificates and enter the job market.
All students who met the requirements for graduation between 2000 and 2010 and who are eligible for NSFAS loans can apply for this special funding through their student financial aid offices. Already a number of students have applied for this funding and we expect the number to increase as universities send through completed application forms.
A further R50 million has been provided for postgraduate students who require financial assistance to complete their honours, masters and doctoral degrees. These students will enter into loans agreements with NSFAS and the money they pay back will be earmarked to fund future postgraduate students.
The National Plan for Higher Education (2001) commits our higher education institutions to increase access of learners with special needs. In the 2010 academic year, 1 040 students with disabilities were funded through the DHET disability funding category. For the 2011 academic year R76, 8 million has been provided for bursaries for students with disabilities.
Our commitment is to ensure that NSFAS becomes a model public entity that delivers on its mandate to provide financial assistance to poor students so that we can increase the pool of educated and trained young South Africans. These young people are our future.
