National Student Financial Aid Scheme & South African Qualifications Authority Annual Reports 2012/13

Meeting report

Briefing by National Student Financial Aid Scheme (NSFAS)
Mr Zamayedwa Sogayise, Chairperson, NSFAS, drew the attention of the Committee to the entity’s new logo which, on closer scrutiny, represented the progress which the organisation had made in its 22 years of existence since 1991. During this period it had provided 1 159 579 students with funding for their studies.  Since 2006, there had been a steady and upward trend in the number of students assisted.  

The organisation had made significant advancements in carrying out its mandate during the past year.  All board positions had been filled and the committees were fully functional.  A transformation programme for a new student-centred model had been initiated.  Comprehensive policies for information technology governance, systems and operations, and financial and human resources management, had been developed.  Executive managers had been appointed and the entity had received an unqualified audit for the third year in succession.   The aim of NSFAS was to achieve a clean audit.

Mr Msulwa Daca, Chief Executive Officer, NSFAS, said that disbursements for student loans and bursaries reached R7.7 billion in 2012 – an increase of R1.8 billion over the previous year.  The number of students assisted had risen to 382 943, compared to 289 172 supported in 2011.  The students attended the country’s 23 public universities and 50 Further Education and Training (FET) colleges, as well as agricultural colleges and two National Institutes of Higher Learning.  Since its inception, NSFAS had provided R32.8 billion in financial aid.  It contributed to free education for students from poor and working class families by providing full bursaries and converting loans to bursaries to incentivise good academic performance.

At the end of the financial year, NSFAS had R620m in cash, and cash equivalents, and the goal was to increase this to R2bn.  This was to cater for the “mismatch” in the system, where the academic year ran from January to December, and the NSFAS budget year ran from April to March.   This meant that by the beginning of the academic year, there was a shortage of funds to meet the first quarter commitments.

Turning to the expenditure figures, he highlighted the R4.2m which had been spent on consulting fees.  This had been necessary ahead of the appointment of senior managers in the organisation.  Irregular expenditure of R7.9m was a source of concern, even though it represented a major improvement from the R28.1m recorded the previous year. The internal audit for the first quarter of this year indicated irregular expenditure of R13 000. NSFAS was on the right track, and corrective steps were being introduced to reduce the figure to zero. 

Mr Daca listed several areas where progress was being made in 2013.  The transformation project was nearing completion, and a new loan management system had been developed and was in the process of being implemented.  Memorandums of Understanding (MoUs) had been signed with government departments to share information in order to ensure that funding reached the intended beneficiaries.  A new organisational structure had been approved by the board, in terms of which the staff complement would increase from its current level of 166, to 299 over the next three years.  An additional operational budget would be required to effectively administer and account for public funds of R8.5bn.  The pilot phase of the new student-centred model would be introduced at seven universities and five FET colleges in 2014, and would be fully operational by 2016.

Discussion
Dr L Bosman (DA) commended NSFAS on the progress it had made, but said that during oversight visits to various educational institutions; it had been found that different methods were being used to apply the funds they were receiving. Students were having problems with the times at which funds were being made available, particularly at the beginning of the year.  The “mismatch” of the NSFAS budget year and the academic year posed problems, particularly for new students.  He suggested that a system needed to be introduced to ensure adequate provision was made for the first academic quarter. He asked what percentage of student loans were repaid, and how many had to be written off.  The annual report indicated a 24% staff vacancy rate – had these vacancies been filled yet?

Mr A Mpontshane (IFP) said he appreciated the entity’s quick response to challenges which had developed in the KwaZulu-Natal (KZN) area, but said there were still grey areas in the disbursement of funds.  One of these related to the availability of application forms while potential students were still at school.  There had been an outcry over a lack of funds at Unisa’s Durban campus– what had been the reason for this?   He also felt that too much was being spent on consultants.

Ms D Chili (ANC) asked for details on staff appointments and the nature of training, and for an explanation of how goods could have been procured without prior quotations being received.

Mr K Dikobo (AZAPO) said he found it “horrible” to think that NSFAS was provided with funds for a full year, but that they were used up in the first nine months.  This was wrong, and the system needed to be normalised.  He drew attention to the organisation’s employment equity targets, which showed that there were no targets to employ coloured or Indian men and women in top management positions.  Did this mean NSFAS had no intention of employing them in these positions?  Even scarier was the target for people with disabilities – two men and one woman, and both in the semi-skilled category.  NSFAS needed to interact with organisations dealing with people with disabilities in order to remedy the situation.  The fact that 15 people had resigned during the year was not only too high a figure, but also indicated that NSFAS was not an employer of choice.

Ms N Gina (ANC) said that chairperson of the NSFAS board had indicated there was a full complement of 18 members, but she was concerned at the levels of attendance recorded in the report.  It was also worrying that the Chief Financial Officer was still operating in an acting capacity, and as this was a critical position, the post should be filled permanently.  She asked for an explanation of why certain universities had returned a total of R173.3m arising from credit balances on student accounts.

Prof A Lotriet (DA) asked what effect the difference between the nominal and actual value of NSFAS’s book would have on the entity’s risk profile, and whether this would affect the future funding of bursaries.   She also sought further details on the legal proceedings arising from the dismissal of the previous executive officer.

The Chairperson said the universities and colleges should not be returning unused funds at the end of the academic year, but should plan properly to use the money in January, February and March.  It should also be made clear that the financial year would not be changed to suit the purposes of the universities and colleges.  It was important for the Committee to find out what happened with the reported irregular expenditure – who had conducted transactions without obtaining quotations?   This should be a dismissible offence, and if nothing was done, irregular expenditure would escalate.  It needed to be nipped in the bud.

Mr Daca responded on the methods used to administer NSFAS funding.  One of the main issues was that whether a student was located in Venda or at Fort Hare, the likelihood of receiving a loan should be the same.  That was why the new system was being rolled out slowly over three years, to avoid inconsistencies.

The comments regarding the overlap of the financial year over the academic year were accepted, and NSFAS was putting measures in place to bring the situation under control.  Colleges were complaining about receiving 7% of the allocation up front, and NSFAS wanted to increase this to 30%, as one did not want students not having a place to sleep or food to eat at the beginning of the year.

Student loans did not incur interest until a year after they graduated, and the rate was 80% of the repo rate.  This was factored into value of the NSFAS book.  Another influence on the value was the fact that a loan was not repayable if the student was unemployed.  Both these factors resulted in the book being written down.

NSFAS was working with the Department of Education to resolve the challenges at the Durban campus of Unisa, where more funding was required to cope with the number of eligible students.

Three extra staff had been appointed to address supply chain management issues.  The whole design of the system had been irregular, but this was being changed.  There had not been a deliberate neglect of the rules and laws.

Referring to the resignation of staff, he said NSFAS was in the process of rebuilding the entity’s brand, and was beginning to attract the skills required to run such a large organisation.

NSFAS was trying to enforce the return of student credit balances from universities.   When students received bursaries, say, from Eskom, in the middle of the year, this freed up funds for other loans to be made.  Unfortunately, universities and FETs reported credit balances only at the end of the year, or in January.  Earlier advice was needed.
 
Mr Dikobo said the refund problem was creating tensions.  Students talked to each other, and the situation could soon explode.  This needed to be resolved quickly.

The Chairperson said NSFAS should indicate where there was a shortfall in funding, and what was needed to assist all those students who required assistance.

Mr Shai Makgoba, Chief Director, NSFAS, said that in 2010, there had been a funding shortfall of R9.2bn. Earlier this year, the Department had asked universities to quantify the shortfall, broken down by first, second and final year students.  The allocation from the fiscus for final year students was R783m, but what was required was close to R1.2bn. NSFAS had to use some of its recovered funds to make good the shortfall.  

He agreed with the Committee on the issue of irregular expenditure, and the target for NSFAS was zero.  There should not be any new irregular expenditure.

The Chairperson responded that the Committee was not interested in “future promises.”  If someone concluded a transaction without obtaining quotations, that person should be dismissed.   What action had NSFAS taken in this regard?

Mr Sogayise said the board did not yet have all the answers, but when details became available, it would take the necessary action.

The Chairperson said that in future, when there has been irregular expenditure, the board must have all the information available for the Committee.

Mr Daca, reminded of two unanswered questions, said that about 20 staff members had been trained, drawn mostly from the various supply chain committees, and the legal process involving the dismissed previous CEO had not been finalised.

The Chairperson thanked the NSFAS delegation for the presentation.

Minutes
Briefing by South African Qualifications Authority (SAQA)
Dr Vuyelwa Toni Penxa, Deputy Chairperson, SAQA, introduced the entity’s delegation, and said it was an honour to present the entity’s integrated annual report to the Committee,

Mr Joe Samuels, CEO, SAQA, introduced the presentation by outlining the objectives of the National Qualifications Framework (NQF) and SAQA, which involved developing, fostering and maintaining an integrated and transparent framework for the recognition of learning achievements, and ensuring that South African qualifications met appropriate criteria and were internationally comparable.

Dr Penxa described the structure of the board, and reported that the terms of reference of the audit committee had been amended, so that it was now called the Audit and Risk Committee.  In its quest for environmental sustainability, it had embarked on communication and awareness programmes, and was working towards a paperless environment.  Communication with stakeholders, both locally and abroad, had been strengthened, and SAQA had increased its visibility particularly in rural areas.

Ms Julie Reddy, Deputy CEO, SAQA, said that the organisation had met 94.4% of its 2012-13 annual performance plan targets, and in some areas had exceeded its targets.  She provided details of SAQA’s performance in the areas of leadership, public position, value of staff, enhancement of research capacity and addressing systemic barriers (see presentation).   There was a stable workforce and virtually no vacancies at senior management level.  The staff comprised 65% females, which was almost double the national average, while top management comprised 55% whites and 45% blacks, coloureds and Indians, compared to the national 72;28 ratio.  There was a need to improve performance in meeting employment targets for people with disabilities.

Mr Mark Albertyn, Chief Financial Officer, SAQA, said that the entity had received its 16^th unqualified audit report from the Auditor General, which indicated its funds had been managed responsibly, efficiently and effectively.  It had spent 91% of its budget.

Mr Samuels reported back on matters that had been raised during SAQA’s presentation to the Committee on 24 April, 2013.  There had been a marked increase in the number of annual qualification achievements since 2002, when the total was 2 086.  By 2010, this had risen to 60 591, but there had been a decline to 48 405 in 2011.  Reasons advanced by quality assurance bodies were that it reflected the economic turndown, which also coincided with the introduction of the new National Skills Development Strategy.  Furthermore, several Sector Education and Training Authorities (SETAs) had been placed under administration at that time, which could have affected their performance.

A major concern was the issue of fraudulent qualifications.  For a national qualification not to be fraudulent, there had to be a provider that was accredited and registered by the Department, the qualification had to be registered and the documentation authentic.  One also had to ensure that the person presenting the qualification was the one who had earned it.
Unscrupulous providers lacked accreditation or registration, their qualifications were unregistered and were often internet-based degree and diploma “mills.”   Then there were unscrupulous practices, such as syndicates selling fake certificates, individuals buying or changing certificates, or registered institutions awarding unregistered qualifications.  Another trend was examination fraud, where question papers were leaked or sold, or there was mass copying, marking fraud, or ghost writing (a student had paid a teacher to write an exam for him – and the teacher had failed!).  SAQA provided verification of national qualifications and, in the case of the public service, did pre-appointment checks.  If a South African was going to study at an overseas institution, SAQA could advise him or her if it was reputable.  The verification of foreign qualifications was of particular importance to the Department of Home Afairs (immigration) as well as to universities (admission) and professional bodies (registration).  Confirmed forgeries spanned 23 countries, with the leading five being Ghana, Pakistan, India, Nigeria and Zimbabwe.  It seemed as if syndicates identified areas of scarce skills in South Africa, such as maths or science, and targeted them for fraudulent certificates. 

SAQA’s strategy to counter fraud was to build expertise to identify fraudulent practices, build strong relationships with national and international partners, and improve the security features of all SAQA-issued certificates.  Some certificates, for instance, had only one signature on them.  The public needed to be educated on which were registered and qualified providers. 
Another measure was to shift from paper orientation to paper/electronic verifications, and improve relationships with law enforcement agencies.

Discussion
Mr Dikobo expressed disappointment with the employment equity statistics.  People with disabilities had not been featured in the presentation, and the 55:45 white to black ratio in top management did not fit the national demographics.   He also wanted to know whether the achievement of an unqualified audit represented progress, as he was under the impression that the entity had received a clean audit the previous year.

Ms Gina expressed the view that security of qualifications posed a huge problem, and she was pleased to hear the SAQA was taking steps to address it.

The Chairperson referred to the use of external auditors to perform the internal audit function, and asked whether there was a cost benefit in adopting this approach.   There needed to be a skills transfer involved, and the Department should provide the resources for the establishment of an internal audit unit.

Mr Samuels said that with a staff complement of 182, there should be a target of eight people with disabilities.  There were only two at present, and the organisation was taking steps to deal with this situation.   The board was also working systematically to address the racial imbalance at top management level.

He conceded that the entity had regressed, as it had previously received a clean audit.  This was due to one issue, which the CFO explained was related to the way in which the depreciation of the asset register had been calculated. 

The Chairperson said SAQA must aim for a clean audit this year.

He thanked the delegation for its presentation, and closed the meeting.