Financial resources distribution to universities & colleges: Department of Higher Education and Training & National Student Financial Aid Scheme briefing

Standing Committee on Appropriations

04 February 2014
Chairperson: Mr E Sogoni (ANC)
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Meeting Summary

The Chairperson clarified that the Minister of Higher Education and Training had submitted an apology, which had created some confusion as to whether this meeting would proceed. The fact that this meeting was taking place at the same time as student protests was purely coincidental, and this meeting would not deal with the protest actions (something to be considered by the Portfolio Committee on Higher Education and Training) but instead would focus on funding for 2014, firstly the structure of funding for the institutions of higher learning, and secondly the allocations to students by the National Student Financial Aid Scheme (NSFAS), to try to ensure parity.

The Department of Higher Education and Training (DHET) informed the Committee that a comprehensive review of the funding framework had been undertaken by a Ministerial Review Committee, and that DHET was in the process of drawing new models for funding in response to the recommendations. DHET got funding from the national fiscus and immediately transferred to institutions of higher learning, although the institutions also received other funding, including through the provincial share, municipalities, and the Sector Education and Training Authorities (SETAs). DHET was currently looking into consolidating funding so as to make a more meaningful impact in the system. The NSFAS component of funding had grown to about R9 billion, which must be disbursed to about 430 000 students. The current funding model used a performance based framework, and was skewed more towards the historically advantaged institutions. It was clarified that enrolment planning was done in line with available funds, but funding was not based on a simple head-count, but on the cost of offering the qualifications. There were various grants, for Teaching Development, to help universities improve their graduation rate, which was comparatively larger in the disadvantaged universities, but all universities had to produce plans and were monitored to ensure that they were using the money for projects to improve the teaching outputs. A Research Grant was paid to universities who specialised in research, whilst a Research Development Grant was given to those not yet achieving their normative research output. The Institutional Factor Grant added to the teaching input grant, depending on the proportion of black and coloured South African students. The Infrastructure Grant amounted to R6 billion over the three year period, and aimed to promote collaboration with a view to strengthening and improving teaching, including lecturer exchange and development of programme materials. Student housing received some assistance also, although there was a severe limitation on what could be offered. About 15 000 students were assisted with Foundation Grants, to prepare them for the full degree programmes. South Africa’s budget for universities, seen as a percentage of Gross Domestic Product (GDP), lagged behind the rest of Africa, and the OECD countries, and this had to be improved to avoid creating gaps and to promote graduates of value and innovation. Government funding for those enrolled in Further Education and Training fell by 1% annually between 2000 and 2010, while student tuition fees increased by 3% per year.

The Review Committee had recommended that government should increase funding for higher education, and particularly improve financial dispensation for the historically disadvantaged universities, until backlogs were eradicated, as well as provide support units. Institutional accountability must be promoted. Universities must manage student enrolments prudently to avoid putting strain on resources. An inter-ministerial forum must be established to address problems such as universities not getting sufficient water or power from the municipalities. Monitoring and evaluation by DHET should be improved. It was recommended that the formula-based approach of block grants and earmarked grants should be retained but teaching input units, not headcount, should be used to determine deviations from approved plans.

The National Student Financial Aid Scheme (NSFAS) noted that it would disburse around R9.5 billion in 2014, including funding from other departments and entities. Criteria for eligibility were financial need, and demonstrable academic ability. Demand far outstripped available funds, student debt remained a challenge, particularly where families refused to pay their share, and there was fraud through students attempting to over-claim, citing their grandparents as guardians, although both their parents were working, using false rural addresses, or claiming and not attending classes. All of this deprived students genuinely in need, but NSFAS had managed to tighten its systems and cooperation with SARS and Department of Home Affairs to verify details given on application forms. Unfunded programmes such as BTech were a further challenge, as was the non-alignment of the financial and academic years, although NSFAS was coming up with new models that would fund the student directly, supplying vouchers to be redeemed at university and accommodation, and trying to work more closely with the universities’ staff who allocated the funding.  

Members sought particular clarity on how it was possible to defraud the system and whether there were controls to curb this occurrence. Members questioned the best way to recover money from students who were now employed, asked when loans would be converted to bursaries, who was tracking students, and for how long they would be funded. Clarity was also sought on how FET colleges were funded, and whether NSFAS’s audit of institutions was linked to those institutions who had been placed under administration. Members sought more information on the mergers, and whether they were meant only for the historically disadvantaged universities, and also questioned how degrees from one university could still differ in standard from those awarded by another university, despite the monitoring of standards. Members supported a model to fund students directly but questioned if NSFAS had the capacity to handle it.  They asked if it was more cost-effective for NSFAS to outsource its internal audit.

Meeting report

Chairperson’s Opening remarks
The Chairperson noted that the Minister of Higher Education and Training, Mr Blade Nzimande, had tendered an apology. He said that this meeting had been scheduled since the last year and it was purely coincidental that it was taking place at a time when university students across the country were protesting. It was the responsibility of the Portfolio Committee on Higher Education and Training to debate the issues around student unrest, and the meeting of this Committee would be focusing on finance and funding, and was related to the Medium Term Budget Policy Statement (MTBPS) of October 2013,  which outlined how funding would happen in 2014. The Committee was particularly concerned, firstly, with why the well established universities received more money from government,  which was not clear, since these longer-established universities should have more adequate resources than the smaller universities, even prior to the intervention of government. Secondly, the Committee wanted to hear about the allocation of National Student Financial Aid Scheme (NSFAS) to students. Whilst this Committee understood that there would never be enough funding for any of the government responsibilities it nonetheless wanted t ensure that the little funding that was available was being handled to ensure parity, and wanted to hear if there might be a better way to coordinate resources used to fund students, so as to ensure that as many poor students as possible were reached. Some students went to university with bursaries and yet also received government funding, while others had nothing at all. The impact of the money spent even by private entities on bursaries was not felt because of the way resources were structured.

Finally, the Chairperson noted that the Department was busy preparing for the opening of the two new universities (Mpumalanga University and the Sol Plaatjie University).

Department of Higher Education and Training briefing on funding to universities
Mr Gwebinkundla Qonde, Director General, Department of Higher Education and Training,  said the funding framework currently being implemented by the Department of Higher Education and Training (DHET or the Department) was approved in 2003. A comprehensive review had since been undertaken, and the DHET was in the process of doing modelling, taking into account various components of programme offerings by universities. It was important that, when funding the programmes, DHET did not lead young people into “dead end” programmes or qualifications.

DHET got funding from the national fiscus and immediately transferred it to institutions of higher learning. It was mindful of the fact that universities got funding from elsewhere as well, including, but not limited to, provincial governments and municipalities. DHET was currently looking into ways of consolidating funding so as to make a more meaningful impact in the system.

The NSFAS component of funding had grown substantially, and was currently standing at R9 billion. That amount had to be disbursed to benefit around 430 000 students.

Ms Brenda Swart, Director: Financial Planning, DHET, said funding was skewed more towards the historically disadvantaged institutions. The current funding was using a performance-based funding framework, and thus the money was used to fund a lot of research and teaching output, as well as teaching input. The Minister of Higher Education and Training had appointed a Ministerial Committee to undertake a funding review, whose report would be released later this month. A reference group had been appointed to further model the recommendations coming out of the draft revised funding framework that this committee would suggest.

On the teaching input side, DHET did not fund the head count enrolment, although it had a thorough enrolment planning cycle that took place over a period of three months, for the next three years. Enrolment planning was carefully done, in line with the available funds. She emphasised that the funding was based not on a simple head count, but rather on the qualifications that students undertook. It cost a lot less to offer a qualification in law, than in natural sciences. She took the Committee through the funding ratios used in teaching input and teaching output.

Ms Swart said the Teaching Development Grant was funding earmarked for teaching, with the aim of providing financial support to universities to improve their graduation rate. All universities received the Teaching Development Grant. Well-established universities like Stellenbosch and UCT received smaller portions by way of this grant, while the historically disadvantaged institutions got larger portions. However, all universities had teacher development needs and this was where this particular government grant was used..

Mr Qonde explained that billions of rands were spent by government in other areas of higher education, but there had been a focus on the minuscule amount made available through NSFAS for tuition fees.

Ms Swart continued that there were strict criteria used to allocate the Teaching Development Grant, and universities were expected to develop plans as to how they would use the money. Such plans would be analysed and approved by DHET. Universities would then have to go back and use the money for specific projects, the use would be closely monitored and universities were required to use the money on projects that would improve the teaching outputs.

The Research Output grant was mainly meant for those universities that specialised in research. However, even those universities whose research output component was small still received the money. The Research Development Grant was awarded to institutions who do not achieve the normative research output units as determined by DHET.

Another grant was the Institutional Factor Grant, that was operated by adding an amount to the teaching input grant, depending on the proportion of black and coloured South African students.

The Infrastructure Grant was earmarked for three years and amounted to R6 billion over the three year period. She cited a project undertaken by Fort Hare University and the University of South Africa, where the institutions received funding for a library project in which they were involved.

Mr Qonde added that the intention here was to promote collaboration among universities, with a view to strengthening and improving teaching. Historically disadvantaged institutions were paired with well-established universities who had better personnel capacity. This would improve teaching at these institutions, but the programme also encompassed the exchange of lecturers and development of programme materials. Over time the historically disadvantaged institutions should overcome the hurdles they presently had, and this was what was being fostered at the moment.

Ms Swart said the infrastructure projects also assisted the historically disadvantaged institutions with project management capabilities. Student housing, as a programme, received some funding that would cover for about 9 000 beds, which was very little given that the actual backlog in 2013 was 207 800 beds.

Currently, about 15 000 students were being funded in terms of Foundation Grant provisioning, , but this number would increase with time. She clarified that the Foundation Grant was an extra year, mainly intended for assistance to students, offered in the year prior to the first year for a degree or diploma.

She said South Africa’s state budget for universities, seen as a percentage of Gross Domestic Product (GDP), lagged behind the rest of Africa, and the OECD countries. Although South Africa spent a considerable amount on education, its expenditure on higher education was much lower than desirable.

Mr Qonde cautioned that if education expenditure as a percentage of GDP was not addressed soon it could cause some deficiencies in terms of funding over time. The National Treasury (NT) was engaged on the matter. A country would have to invest a lot of money in education to get quality and the kind of graduates that added value and were innovative. This was something the country needed to address; it had not reached crisis point yet, but it would be important to put measures in place to correct it.

Ms Swart said that, in real terms, government funding per student enrolled in Further Education and Training (FTE) fell by 1% annually between 2000 and 2010, while student tuition fees per FTE increased by 3% per year. Based on the differential increases in fee income and government grants, it could be concluded that the amount of government funding is not sufficient to meet the needs of the public university system.

The recommendations from the Review Committee were that government should increase funding for higher education. The financial dispensation of the historically disadvantaged institutions had to be improved. Government should continue to prioritise historically disadvantaged institutions, both in funding and infrastructure development, until backlogs had been eradicated. A support unit for historically disadvantaged institutions should be established. In addition, a particular attention needed to be paid to institutional accountability in regard to resources allocated. Finally, it was suggested that universities should manage their student enrolments prudently, to avoid unnecessary strain on facilities and resources.

Another recommendation from the Review Committee was that an inter-ministerial forum be established for addressing inadequate municipal services. She cited an example of Rhodes University where students spent weeks without water as a result of the municipal inadequacies. Another incident occurred at the University of Venda, where water could only be found until 12 noon during the day, whilst on some days there was nothing at all from the taps.

It was also recommended that the monitoring and evaluation at DHET be improved.

It was recommended that the formula-based approach consisting of block grants and earmarked grants should be retained. The current principles, policies and overall architecture should be retained. It was also recommended that teaching input units, and not headcount, should be used as the basis for the determination of deviations from approved enrolment plans. Headcount could be misleading.

Finally, Ms Swart briefly took the Committee through how DHET monitored NSFAS and how that entity was constituted (see attached presentation for more information)

National Student Financial Aid Scheme briefing
Mr Msulwa Daca, Executive Officer, NSFAS, said the scheme would disburse about R9.5 billion in 2014. NSFAS did not only disburse funding from DHE, but also funding from various other departments, such as the Funda Lushaka bursary from the Department of Basic Education, and money made available from the Departments of Social Development (DSD), Agriculture (DAFF), Military Veterans (DMV) and other entities such as the National Skills Fund (NSF) and the Sector Education and Training Authorities (SETAs). The criteria for eligibility was that students should demonstrate financial need and academic ability.

There had been substantial growth in funding in the past couple of years. The demand was still far larger than the money available. The core challenge in disbursements was that NSFAS could not fund all students who applied to it. Secondly, student debt from the prior years blocked the award of results and prevented students from registration. This was particularly serious in cases where families refused to pay the family contribution, where NSFAS had not paid fully. Another challenge was over-claims, where students claimed in excess of what the university would be allocated. In 2013 over-claims amounted to R370 million. Another challenge was found where students would sign the loan agreement forms, and be under the impression that fees had been paid, only to find, when they tried to register, that their applications had been unsuccessful.

Mr Qonde clarified that a number of students tried, and sometimes succeeded in, “beating the system”. Situations had been found where both parents of a student were employed, but the grandparents were named as the student’s guardian. Some students registered using addresses from the far flung rural areas that they had in fact never lived in or even visited. Most students in urban areas had money and could easily afford to pay for tuition from the family earnings. The system was being defrauded by the students, and this was a real challenge that had to be addressed, for every instance of fraud in fact disadvantaged those students who were in real need of the money.

Mr Daca said another challenge that the entity faced was the unfunded programmes. NSFAS was a first degree or diploma funder, and yet a number of Bachelor of Technology (BTech) programmes students expected to be funded, because students claimed the BTech was not a post graduate programme. Another challenge was the non-alignment of the academic and financial years. Currently the system was such that there was not money to fund any student during the registration and admissions period, as the money only started flowing at the start of the financial year, in April. For this reason, NSFAS was coming up with a new model under which the funding would follow the student and not the university. Students would apply directly to NSFAS and allowances would go directly to the student, via vouchers that could be redeemed at merchants. The university would still get the tuition portion and the accommodation portion. At present, there was confusion among students regarding financial aid offices and NSFAS offices. NSFAS did not have resident staff at universities and instead, universities used their own staff to allocate NSFAS funding.

Ms A Mfulo (ANC) sought clarity on the comment that it was so easy to defraud the system. She said if this was so, then the Department had challenges with planning, and especially with combating fraud. She fully agreed on the need to tighten controls so as to avoid fraudulent activities. She proposed that the application form be designed in such a way that would be a deterrent to fraud.

Mr Qonde replied that DHET allocated money to NSFAS, as an entity that administered the programme for the Department. NSFAS disbursed the money into institutions, and they in turn administered it at the level of the institution, where they accepted applications. After that, the records having been processed, were forwarded to NSFAS. NSFAS had managed to make some improvements and was working collaboratively with such departments as Home Affairs (DHA) to check records. However, a criminal would always find ways to indulge in criminal actions, and that necessitated improvements being continually made to avoid fraud.

Ms Mfulo voiced support for the programme where students applied directly to the NSFAS. She asked if there was a recovery plan to get the money back from students who dropped out or failed to repay, and wondered if there was anyone tracking those students. She also wondered if there might be some way to make a list of students funded by NSFAS to employers, so that when students started working they could be asked to repay the loans.

Ms Mfulo sought clarity on a statement that funding was not based on headcount, and also wanted to know why the Department paid for two years that had passed.

Ms R Mashigo (ANC) sought clarity on the funding amount that came from sources other than DHET. She asked if there was a way to avoid a situation where those students who failed or took longer to finish their programmes still managed to continually receive funding. She also wanted more detail on the unfunded programmes.

Mr Daca replied that the Minister had made the point that DHET was not funding “professional students”. The Department had adopted the “N+2 rule”. This simply meant a student could be in the system for the duration of his/her degree, plus a grace period of two years.

Mr M Swart (DA) commented that fraud by students was disconcerting. He quipped that perhaps DHET needed to enter an arrangement with DBE, to counter the rising numbers of students dependent on NSFAS funding. The quality of the matric passes was so poor that even after getting entrance to university, many of the students failed there. He sought clarity on the allocation formula for Further Education and Training (FET) colleges. These institutions were crucial to the country, especially in areas of practical skills development. He asked for the audit outcomes of the NSFAS funding. He was worried about the principles of the Teaching Development Grant, which seemed to be incentivising universities that performed poorly. He believed that instead, the priority should be to invest in good quality education.

Ms Swart replied that it was a perception that the Teaching Development Grant funded poor performance. Over the last few years the formula had changed slightly. In the past, UNISA had claimed a larger portion of the grant, to the detriment of other universities, because it had more students, but its success rate was not as good.

Mr Swart commented again that it was dangerous to base an award on the graduation rate, since most universities could adjust their figures so as to get more money.

Ms Swart explained that the Teaching Development Grant and the Research Development Grant were interlinked. Both grants worked towards improving the quality and the qualification of the lecturers. The Review Committee had, however, suggested that the two grants be consolidated.

Another official from DHET replied that the funding function for FET colleges now rested with DHET, and was not any longer with DBE. However the full function shift to place all the FET colleges under DHET and moving the funding to the DHET budget still had to be completed. Engagements were ongoing, and an indication from NT was that the function shift should be completed by January 2015 and all the funding should, from then on, be allocated through DHET. Currently there were two main sources of funding. Firstly, the FET colleges received money from a conditional grant paid to the provinces for spending on that branch of education. Secondly, FET colleges received subsidies, via the DHET vote. From the new financial year, the DHET would be responsible for paying directly to the FET colleges.

Mr L Ramatlakane (COPE) also sought clarity on the 18 institutions that were audited, and whether this had anything to do with those that were under administration.

An official responded that the internal audit of 18 institutions was conducted by NSFAS. These audits were not done as part of putting any institution under administration. The decisions as to which institutions were placed under administration was made by the DHET alone. The audits had nothing to do with the current status of some institutions as under administration.

Mr Ramatlakane said the earlier comments about the decreasing funding were not clear, and he asked whether this was linked to the  budget allocation and expenditure, or the allocation of funding as a percentage of the GDP.

Mr Qonde replied that the funding to universities, seen as a percentage of GDP overall, was lower in South Africa than in other African countries and developed countries. This was something that had to be corrected.

Mr Ramatlakane sought clarity on the historically disadvantaged institutions and mergers. He asked whether the mergers were bringing resources into those poorer universities. Marches by SASCO were prevalent. He noted that a comparison of the resource bases of the historically disadvantaged universities and well established universities still showed a large gap, and something had to be done to address that. He wondered if the intention was to bring the resources closer to those who really needed them because their systems were not working well, or what else could be done to close that gap.

Mr Qonde replied that the term historically disadvantaged did not mean that such institutions would necessarily be subject to merger. The consideration of mergers was a model used to determine whether an institution could be better governed and managed. Being historically disadvantaged was as a result of the past, and was not, and should not be, synonymous with a suggestion that the institution must be merged. He reminded the Committee that the Minister had appointed the Review Committee to look into funding, and the DHET would be moving to implementation of the recommendations in that Committee’s report. He added that the share to the historically disadvantaged institutions had been increased, in all components of funding. Some mergers had worked well, except for that of the Medical University of SA (Medunsa) and the University of Limpopo. That matter had also been considered by the Review Committee, and that merger would be subject to de-merger. The aim was to establish a new university of health sciences that would host Medunsa, and an academic hospital would also be built and attached to the University of Limpopo.

Mr Ramatlakane sought clarity on whether funding students directly would work, given capacity challenges at NSFAS. He demonstrated his point by saying he had called the NSFAS office, on the previous day, but the phone rang for nine minutes before it was answered. He questioned if there was wisdom in changing the current model to another model that might not work.

Mr Daca said the suggestion made that the disbursement process be centralised to NSFAS was intended so that NSFAS could put controls in place. There were 65 different systems as each FET college and each university had their own systems, so it was virtually impossible to put proper standardised controls in place at the moment. The centralisation meant that it would now be easy to verify information with Department of Home Affairs and the South African Revenue Services.

Mr Qonde said that the point about the telephone calls would have to be investigated by NSFAS, and those employed to do the work should be asked to account for the length of time it took to answer a call. He added that loopholes were also found in FET colleges, and policies were being introduced to ensure that government did not lose out. He cited the instances at present where students might erroneously be given a bursary, or that some came and got the transport money, but failed to attend classes. This forced DHET to introduce the attendance policy. The emphasis was that DHET was not funding empty desks, but was funding students actually occupying the desks in an environment of learning and teaching. The reason why it was easy to cheat the system was not because there were no controls, but because the present system had inherent risks. With the current upgrades in the systems the work of checking would become much easier. There were also linkages being established with the government payroll system, PERSAL, because it gave instant information on those who were funded by NSFAS who currently worked for government.

Mr Ramatlakane also sought clarity on the funding streams from DHET that went to the FET colleges, as well as those from DBE. He suggested that there was a need to conduct in-year monitoring of non-payment by deserving students.

Mr Qonde replied that the allocation for FTE colleges from NSFAS was around R2 billion. There were some other funding streams that NSFAS collected from SETAs, but they did not amount to much.

Mr J Gelderblom (ANC) sought clarity on the status of the two new universities and whether they were fully operational. He also asked what financial challenges there were in those two new universities.

Mr Qonde replied that the two universities did not have any financial challenges, as they were still “brand new”.

The Chairperson said the government’s intention was to address the apartheid disparities that resulted in having both well established and historically disadvantaged universities. He asked if it was possible for government to intervene and insist that technical courses should be offered at historically disadvantaged institutions. He questioned how, in one country, the standard of degrees could differ, according to which university had conducted the programme.

Mr Qonde replied that programmes at universities were accredited as suitable programmes, and were quality assured by the Council for Higher Education. If the standards were not met, CHE would remove the accreditation for those programmes. There was no real difference in quality and whether a student chose to attend one or other university should be purely a matter of preference. A graduate, from whichever university, would still be considered a qualified graduate, competent like counterparts from another university.

Having said that, Mr Qonde noted that one programme where difficulties had been experienced was accounting, and DHET intervened with South African Institute for Chartered Accountants (SAICA), through a programme called Thuthuka. A lot of money had been pumped into institutions to ensure that the offerings at these institutions was at an acceptable level. Universities that benefitted included Fort Hare, Zululand, Walter Sisulu, Limpopo, and Venda. This was over and above what NSFAS was doing. The money for the upgrades had come from the National Skills Fund.

The Chairperson asked whether DHET had a mechanism to monitor progress and due performance of students who received funding. He wanted to know if there was any way that the unused funding for the SETAs could be drawn back to the Department. Recently, there had been reported R20 billion underspending by the SETAs and many of the SETAs were not doing well. The money they had should be taken back as it was sorely needed elsewhere.

The Chairperson sought clarity on how the process of loan conversions into bursaries worked.

Mr Qonde replied that NSFAS beneficiaries who, in their final year of study passed and qualified to graduate, would be offered an incentive, and appreciation of their efforts, whereby their entire amount including the loan portion was converted into a bursary. This was meant to increase access and success at university.

Ms Mashigo asked if it was more cost effective to use consultants to run the internal audit of NSFAS than for it to have its own internal unit audit.

An official responded that it was. He understood the concerns of Members when it came to use of consultants, but it was very much more cost effective to outsource than to create a fully fledged internal audit in NSFAS, particularly given the fact that the universities were very far from each other.

Closing remarks
Mr Qonde said there had been complaints at universities on how NSFAS was being administered. The new regime would tighten up efficiencies in administering the funds, as well as improving security mechanisms. DHET had intervened once there had been questions raised as to how NSFAS funding was administered. An assessor would be sent to any institutions where problems were reported, and if the assessor found that there was substance to the allegations, then DHET would come in with an administrator. The duty of the administrator, among other things, would be to establish the veracity of the allegations and draw up a turnaround strategy for such an institution. He committed to work on all the other areas that required further work, so as to report better in the next meeting.

The Chairperson said the challenge of funding was one that Parliamentary Committee continued to work on. He said although the Committee accepted the explanation on standards, there were still perceptions that the opposite was true, and that CHE moderated programmes in the formerly historically disadvantaged institutions. Normalisation of resources for FTE colleges needed to be fast-tracked. This need not take long in the coming year, and he suggested that perhaps this might be done by the final term of the administration. He understood all the interventions, but said that he understood that there would be many challenges that could recur.

The meeting was adjourned.


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