AG decries lack of credible information at NSFAS

Poor accounting records have made it impossible for the auditor-general to make a determination on whether the National Student Financial Aid Scheme (NSFAS) has indeed turned the corner, as its leaders have claimed.

While higher education minister Blade Nzimande appears happy with the progress being made to stabilise the administration of NSFAS over the past two years, the AG's office is not impressed with the entity's accounting records — leading to yet another poor audit outcome.

NSFAS received a qualified audit opinion for the financial year which ended in March 2020.

In the entity's annual report for 2019/20 — which was finally tabled to parliament on Wednesday, according to the legislature's announcements — the auditor-general cited in the main that he was unable to obtain sufficient appropriate audit evidence as the basis for the qualified opinion.

For instance, the AG was unable to obtain sufficient audit evidence that contingent liabilities for student funding had been properly disclosed. This was due to the status of the data supporting management’s estimate, reads the report.

“I was unable to determine an estimate of the contingent liability by alternative means. Consequently, I was unable to determine whether any adjustment was necessary to the contingent liability: student funding disclosure stated at R79,467,782,607 (2019: R38,889 319,416),” said the AG.

The AG also found that NSFAS did not consult with the minister of higher education and training when developing criteria and conditions for granting loans and bursaries to eligible students, and did not publish the revised criteria and conditions in the government gazette.

The auditor-general said NSFAS did not include the required information on irregular expenditure, as required by the Public Finance Management Act. As the public entity did not quantify the full extent of the irregular expenditure, it was impracticable to determine the full understatement of irregular expenditure of R6,869,310,000 it disclosed in its financial statements.

The AG was also unable to obtain sufficient appropriate audit evidence for the amounts owed by institutions due to a lack of reconciliation between the financial records of the NSFAS and those of institutions of higher learning.

“I was unable to confirm the receivable balance by alternative means.

“Consequently, I was unable to determine whether any adjustment was necessary to amounts owing by institutions (exchange), stated at R62,309,000 (current) and R72,423,000 (non-current), bursaries — TVET colleges stated at R5,998,587,000 and impairment loss — amounts owing by institutions (exchange), stated at R115,050,000 in the financial statements.

Due to the same poor status of accounting records, the AG was unable to obtain sufficient appropriate audit evidence that prepayments made to institutions had been properly accounted for.

As a result the AG was unable to determine whether any adjustments were necessary to prepayments to institutions, stated at R7,565,665,000 and amounts due to institutions (non-exchange), stated at R602,622,000 in the financial statements.

The AG could also not obtain sufficient appropriate audit evidence that interest revenue earned on student loans had been properly accounted for, due to the status of the data in support of management’s calculation, neither did he get appropriate audit evidence that bursary expenditure disbursed to universities for the previous year had been properly accounted for.

“Consequently, I was unable to determine whether any adjustment was necessary to bursaries (for) universities, stated at R20,814,059,000 in the financial statements.”

“I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my qualified opinion,” the auditor-general said.

The AG decried lack of credible source information produced by a reliable system and adequate reviews of underlying source information in support of the financial and performance reports.

He identified the lack of a permanent CFO and general manager for finance as having contributed to the slow response by senior management to improve the audit outcome.

“The audit outcome remained qualified on the financial statements, with a regression in the credibility of performance information reported in the annual performance report,” said the AG.

Among the entity's performance highlights were that 346,270 students were assisted at the 50 TVET colleges in the 2019 academic year and 247,769 in the 2018 academic year, and that 393,767 students were assisted at the 26 public universities in the 2019 academic year and 393,781 in the 2018 academic year.

For the 2019/20 financial year a total of R28.1bn was disbursed as compared to 2018/19 where a total of R24.7bn was disbursed.

This includes:

• R6bn (2019: R3.8bn) to TVET colleges (100% bursaries).
• R21.7bn (2019: R20.8bn) to universities.
• R35m (2019: R66m) in convertible loans and R10m (2019: R16m) converted to bursaries based on student performance.
• NSFAS recovered R551m in the year under review, a decrease of R77m from the R628m recovered in the preceding financial year.

According to higher education and training minister Blade Nzimande there has been “significant progress” at the entity.

He attributes the turnaround to administrator Randall Carolissen, appointed first by then higher education minister Naledi Pandor in August 2018, and whose one-year term was extended by Nzimande by another year in August 2019.

“It should be noted that, in 2019 NSFAS disbursed R28bn of its higher education and training bursary grant to 720,000 students, comprising 42% of all university and 70% of all Technical and Vocational Education and Training (TVET) college students,” said Nzimande.

He said the establishment of a capable administration was a prerequisite for the effective functioning of the bursary scheme that replaced the loan scheme in December 2017.

The new bursary scheme introduced a new set of criteria to expand the reach of NSFAS funding as well as promote throughput of students, said Nzimande in the report.

“Under the term of the administrator, internal audit assessment of the controls within and around the disbursement process has noted significant and serious control improvements,” he added.

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