National Student Financial Aid Scheme 2012/13 Annual Report Briefing, in presence of Deputy Minister

NCOP Education and Technology, Sports, Arts and Culture

05 March 2014
Chairperson: Ms M Makgate (ANC, North West)
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Meeting Summary

The National Student Financial Aid Scheme (NSFAS), in the presence of the Deputy Minister, briefed the Committee on its 2012/13 Annual Report. It had made significant progress in the year under review, all board positions were filled and the committees were fully functional.  The Transformation Programme was initiated for a new student-centred model and comprehensive policies for IT governance were developed, complying with legislation and regulations.  Executive managers were appointed. The organisation achieved an unqualified audit for the third year in succession since embarking on the turnaround strategy. NSFAS noted that in 2012, its disbursements by way of education funding to students increased from R5.9 billion to R7.7 billion, and the number of students increased from 289 172 to 382 943 in line with the funding increase from the Department of Higher Education and Training (DHET) and other departments. Of these students, 194 504 were university students and 188 182 were Further Education and Training (FET) college students.  Students at agricultural colleges and the two National Institutes of Higher Education also received funding.  NSFAS contributed to free education for students from poor and working class families by providing full bursaries, as well as converting loans to bursaries in cases where there had been good academic performance with R1 billion was provided for the Final Year programme, with a possibility that up to 100% of that amount could be converted into full bursaries. FET college bursaries amounted to R1.8 billion, R2.5 billion was provided for loans with a 40% conversion to full bursaries, and R2.4 billion for other bursaries. NSFAS provided significantly more in bursaries than in loans to eligible students. NSFAS also tabled the Annual Financial Statements, noting the improvements made to compliance. Three strategic goals were also highlighted; the Transformation Project, which aimed to standardise application processes, new loan managements systems, and the new organisational structure now approved by the Board, as well as the Memorandums of Understanding signed with other departments.

Members asked about the discrepancy between the financial and academic years, and how this affected funding to students, asked if the Board vacancies had been filled, and called for a breakdown of funding, by province. A fuller report was given on the aims of the Transformation Project in answer to questions raised about the registration day processes, the demand for registration fees by some universities, and allegations about over-extension of loan agreements, and questions were asked how NSFAS assisted and monitor the money it had paid to universities. Members asked for the number and amounts of loans that were converted to full bursaries, received clarity that FET funding took the form of bursaries, and asked about recovery, when loans would be written off, and what steps were taken to recover, commenting that it would make sense for NSFAS’s internal employees to deal with this. They questioned the effectiveness of the Board Committees, and targets that were not met. One Member urged NSFAS to ensure gender equality in senior executives. There was substantial discussion on poor accommodation, and NSFAS was asked if it was monitoring what it funded. The Deputy Minister spoke to the importance of decent, safe and academically conducive residences for students, and confirmed that the Department of Higher Education and Training and Presidential Infrastructure Coordinating Commission were committed to ensuring that the Ministerial Task Team report was properly implemented. The gap between enrolment and funding was recognised. Members also questioned how NSFAS was addressing incorrect information given by students, and the situation at some universities where students exchanged their loan credits for cash.

Meeting report

National Student Aid Financial Scheme (NSFAS) 2012/13 Annual Report briefing
Mr Zamayedwa Sogayise, Chairperson, National Student Financial Aid Scheme, said that the NSFAS was mandated by its founding Act to allocate funds for loans and bursaries to eligible students and to recover loans. NSFAS had made significant progress in the year under review. All board positions were filled and the committees were fully functional.  The Transformation Programme was initiated for a new student-centred model. Comprehensive policies for IT governance were developed, in compliance with legislation and regulation. Executive managers were appointed. The NSFAS achieved an unqualified audit, for the third year in succession since it had embarked on its turnaround strategy.

Mr Msulwa Daca, Chief Executive Officer, NSFAS noted that in 2012, disbursements by way of funding to students had increased from R5.9 billion to R7.7 billion, and the number of students assisted increased from 289 172 to 382 943. This was in line with the funding increase from the Department of Higher Education and Training (DHET) and other departments. 

He noted that particular highlights from the Annual Financial Statements (AFS) included the fact that funding was provided to 194 504 university students and to 188 182 Further Education and Training (FET) college students.  Students at agricultural colleges and the two National Institutes of Higher Education also received funding.  NSFAS contributed to free education for students from poor and working class families, by providing full bursaries, and it also had converted loans to bursaries to incentivise good academic performance. R1 billion was provided for the Final Year programme, with a possibility that 100% of that amount could be converted into full bursaries. FET college bursaries amounted to R1.8 billion and R2.5 billion was provided for loans whereby 40% (R1 billion) could be converted to full bursaries. There was R2.4 billion also paid in other bursaries. He noted that NSFAS provided significantly more in bursaries than in loans to eligible students. 

He noted that there had been a fifteen day delay in the approval of the Annual Financial Statements, because the Auditor-General (AG) decided to conduct an actuarial review of the loan book value on 30 July 2013, and had found that the loan book value was incorrectly calculated prior to 2012. However, the error was corrected after the review, to the satisfaction of the AG.

Slides 11-12 (see attached presentation) showed the balance sheet and expenditure for the financial year.  As part of the audit improvement plan, NSFAS had put in place measures that enabled management to adequately monitor compliance with laws and regulations related to Supply Chain Management (SCM).  The full benefit of these audit improvement measures would be visible in the next audit period.

Slides 14-16 showed that three strategic goals that were achieved for the year under review.

He highlighted that specific progress in 2013 included the Transformation Project, which was nearing completion, the new loan management systems that were developed and implemented in October 2013, and the new organisational structure approved by the Board. Memorandums of Understanding were signed with the Department of Basic Education (DBE), to identify learners from rural and quintile 1-3 schools, and with Umalusi, to obtain school results, as also with the Department of Home Affairs (DHA) for student and family identity validation and with the Department of Social Development (DSD), to confirm social grant recipients in all provinces.

Mr M De Villiers (DA, Western Cape) asked if the comments about the academic year and financial year discrepancy could be clarified. 

Mr Daca said the academic year started in January and ended in December, while the financial year started in April and ended in March. 

Mr de Villiers noted that some of the terms of the members of the NFSAS Board had ended, according to the Annual Report, and he asked what happened with regard to those vacancies.

Mr Sogayise said the Minister had filled all the vacancies of the NFSAS board.

Mr de Villiers wanted to know the breakdown of allocated funds to the provinces in which the universities and FET colleges were situated.

Mr Daca said the breakdown of the provincial allocation of funds could be provided to the Committee, but it would be more complicated in the case of universities, since some universities had campuses across provincial boundaries.  

Ms D Rantho (ANC, Eastern Cape) asked why it was so difficult for universities to allocate NSFAS funds at the beginning of the year, because the failure to do so created chaos during registration. She further asked why NSFAS or the DHET did not send representatives to universities during this process to prevent the chaos. She also asked for comment on the allegations made that the chaos during the registration process was caused by universities using the NSFAS allocated funds for other purposes. This led to a question on what monitoring systems NSFAS put in place to monitor money allocated to universities.

Mr Daca said that because the academic year started in January and ended in December, whilst the financial year started in April, the money allocated for the 2012/13 financial year assisted students in the 2012 academic year.  In January, when students needed money for registration, recovered money was advanced to students, because NSFAS’ new cash flow only became available in April. R600 million was used to advance to students at the beginning of the year to cover registration costs. However, the registration systems were run independently by universities. The Transformation Programme was implemented to centralise key points in the system, so that the process could be centrally monitored. Unfortunately this Transformation Programme was in the transitional phase, and at the moment some universities were still not being monitored.

Mr S Plaatjie (COPE, North West) asked how many students had their loans converted into full bursaries for the year under review, wanted to know when and how were loans written off, and why NSFAS could not pay the registration fees of some students on time, based on their academic performances from the previous year.

Mr Daca said that out of the R2.5 billion new loans issued, R1.3 billion was converted into bursaries.

Mr W Faber (DA, Northern Cape) made a follow up question, asking how much of the R5.9 billion allocated the previous year, related to loans and how much to bursaries, and how much of the loan amounts had been recovered.

Mr Lerato Nage, Chief Financial Officer, NSFAS, said the organisation recovered R135 million for the 2011/12 financial year. At the end of the fiscal year the actuaries determined the provision for impairment and projected what could be recovered, based on how students paid newer and older loans.  The nominal loan amount already took into account the credits from the university and the amount was then lowered, with 40% of the loan amount converted to bursaries, up to a possible 100% of the loan amount being converted to bursaries.  Interest could only be charged for one year after a student had finished at university. After that, monies could still be recovered, even though the loan was then deemed “impaired”. In cases of disability or death, NSFAS would not put any resources into attempting to recover loans.  To recover loan amounts, NSFAS had struck a partnership with National Treasury to gain access to government databases to determine what people were earning, because earnings of less than R30 000 annually exempted employees from paying the loan.  A call centre was established to call ex-NSFAS students to try and recover the money. As an alternative, insurance companies were also approached to access those employed in the private sector.

Ms B Mncube (ANC, Gauteng) said that she was worried about the Employment Equity (EE) position of senior executives, as shown by the NSFAS organogram.

Mr Sogayise said the Chief Information officer (CIO) was a woman in an executive position and the Chief Operations Officer post was still vacant and NSFAS was committed to fulfilling their obligations in terms of Employment Equity.

Ms Mncube pointed out that DBE no longer distinguished between quintile 1 to 3 schools, and if NSFAS was still using that qualification, then she felt a lot of students were being excluded.

Mr Daca apologised for the reference to quintile 1 to 3, but pointed out that in the year under review, it had been relevant, although NSFAS was indeed aware of the latest changes.

Ms Mncube said that universities were reluctant to admit students from poor and working class families because of late payments from NFSAS, and she asked what mitigating measures were put in place to address this.

Mr Daca reiterated that the mismatch between the academic and financial year created some issues because NSFAS paid from April until March, and during January and February NSFAS still paid on the previous academic year.  There had been some discussion with DHET to bring forward the cash flow so that universities could be paid on time. However, another challenge was that some universities over paid. If NSFAS allocated R100 million to a university, they would still sometimes sign up students to an amount of R110 million, by giving loan agreements to students for an additional R10 million.  This practice destabilised the system during the registration months, because when students enquired about their unpaid registration costs, they were told that NSFAS had not yet paid. DHET had stepped in since then, and allocated the additional funds to cover those differences, and this had stabilised the situation.

Ms Mncube pointed out that some graduates took as long as six years to get employment, and she asked how long it would be before NSFAS removed a former student from its loan book. 

Mr Nage said a loan was written off in cases of disability, but a medical certificate was required, and death, where the DHA was asked to furnish a copy of the death certificate. 

The Chairperson said during the provincial oversight visits Members had seen some very poor conditions in the accommodation where students were staying. If NSFAS was in fact funding this accommodation, then she asked what monitoring systems were in place to check the conditions.

Mr Daca said the DHET and the Presidential Infrastructure Coordinating Commission (PICC) were involved in the issue of accommodation, especially at the historically disadvantaged campuses. Unfortunately, the money available to the budget was not enough to clear the backlog and the initiative from the PICC was to push and prioritise the building more residences. The DHET had published a report on accommodation, which showed a large shortage of bed space, let alone addressing the quality of that accommodation.

The Chairperson noted that there was increased enrolment annually and an increased need for funding, yet there did not appear to be a close enough match and no clear plan had been put forward to show how NSFAS planned to balance these needs.

Mr Daca agreed that there was an issue of the balance between enrolment and funding, and that this did not only affect NSFAS, but also the DHET.  Even if the projected increase of student enrolments was 10% for the next year, the budget increase was only 6%, and that was something that had to be addressed by National Treasury and the DHET.

The Chairperson also asked how the gap would be closed on misrepresentation of information in the means test.

Mr Daca conceded that NFSAS had been too reliant on affidavits in the past, and there had indeed been misrepresentation by students on their needs. The relationship with the DHA would address this because with the younger generation, a birth certificate of a student was linked to the parents. This would establish whether parents (or grandparents) were alive or deceased, to build a much more credible information database. 

The Chairperson pointed out that comments from the AG since 2010 had highlighted some concerns regarding the effectiveness of the committees.

Mr Sogayise said the effectiveness of the Audit and Risk Committee and the Finance Committee had been a concern because these were long term committees, although others had been recently formed.  The oversight and monitoring of the board needed to be strengthened while these committees were refocused.

The Chairperson said the Committee was interested in the interim measures put in place to address the issue of accommodation.  It was shocking that the aim of the organisation was to provide for accommodation to poor and underprivileged students, but at the same time the same students were subjected to very poor living conditions. It seemed there was no standardised accommodation requirement. She would like to invite representatives of NSFAS to come to North West province and see the living conditions of the students.

Mr Sogayise said NSFAS covered tuition, food, accommodation, transport and books for eligible students and that NSFAS fully shared the concerns regarding accommodation.  He had asked the Deputy Minister to speak to the issue of accommodation.

Ms Rantho said students were taken advantage of, because anybody could just rent out rooms in bad conditions for the purpose of making money, without any monitoring taking place.

Mr Plaatjie added that the issue of accommodation was very important, because students were vulnerable in unsafe conditions, and it was a dangerous situation that should be addressed.   

Ms Rantho was worried that according to the Annual Report, 13 out of the 17 targets were not met, and asked what systems were put in place to address this.

Mr Daca said that the targets were set at a time when the NSFAS system was shifting and the targets still spoke to the old system. However, the AG was correct in reporting that the targets were not met, and NSFAS accepted full responsibility for this.

Ms Rantho referred to practices reported at Walter Sisulu University, where students were allocated funds on a electronic card, but the credits on the cards were then sold for cash. She asked what NSFAS was doing to monitor those monies.

Mr Daca said the problem with students selling their credits was a societal issue that needed to be dealt with, but pointed out that whatever way the money was given, some students would still try to find ways for them to gain access to cash.
Mr Plaatjie said he wanted to know the quantification of the conversion rate of loans to bursaries, and how many students had benefited by such a conversion, for both FET colleges and universities.

Mr Sogayise said there were no loans extended to FET college students, only full bursaries. Loans were extended to university students only. 

Mr Daca said the number of university students whose loans were converted to bursaries would be provided to the Committee. The decision on the conversion depended on the academic performance of students.

Ms Rantho said the collaboration with the private sector to recover money would also mean more money was brought in to be paid out to more students again, from the NSFAS coffers, and asked if this could not be done by existing NSFAS employees.

Mr Plaatjie He asked what percentage of the money collected would go to the employed debt collection agency.

Mr Daca noted that the collection agencies collected 4.2% of recovered debt.

Mr Faber said according to the Annual Financial Statements, R58.4 million was spent on operational expenses, R38.9 million was sent on salaries and R4.2 million was spent on consulting fees. Debt recovery should not be an additional cost to the organisation.  The R135 million recovered was a very slim percentage of the loan amount, and the loans had already increased from R5.9 billion to R7.7 billion, and would continue to grow if there were not control measures put in place. 

Mr Daca said NSFAS had started to build a collections unit and the organogram showed that internal employees were being used primarily for collection purposes, because the organisational structure had increased from 166 to 299.  The number of consultants employed reduced dramatically as the organisational structure grew. The bulk of the consultants were employed on a once-off basis during the development of the Transformation Programme, and primarily for IT related services.

The Chairperson said that where consultants were used there needed to be skills transfer.

Mr Daca said there would be a skills transfer through the use of the consultants.

Ms Mncube said the Minister had been emphasising since 2009 that learners from “no fee” schools should not be held accountable for registration fees by universities. She asked what monitoring systems NSFAS had in place to ensure this. 

Mr Sogayise said the Transformation Programme was being piloted to seven universities and five FET colleges. Under this, the students would be applying online directly to NSFAS for funding. In the year under review, there were 25 different universities who had 25 different registration processes, and 50 FET colleges who also did their processes in different ways .The student-centred model that was being piloted would allow for a centralised process and a centralised monitoring system.

Mr Daca said there had been numerous conversations with universities regarding students from “no fee” schools, but the centralised model would address this issue.

Mr Mduduzi Manana, Deputy Minister of the Department of Higher Education and Training, summarised that a number of challenges were experienced during the academic year, because the demand increased exponentially.  There had been some allegations levelled against some universities with regards to loans disbursement and the DHET had taken specific action against one FET college that had taken a large amount of the R60 million allocated to student bursaries to pay salaries, with that college being put under administration.  The short to medium term plans highlighted in the Annual Report would address these challenges.  A couple of years ago, the Minister appointed a Ministerial Task Team to look into accommodation and there was a report available, although he said that the DHET had not yet succeeded in putting effective monitoring mechanisms in place that would ensure that universities adhered to the recommendations in that report.  It was hoped that the next administration would prioritise this issue, because the DHET was fully aware of the poor condition of some accommodation, had made recommendations, and the DHET was committed to achieving decent, safe and academically conducive residences, to address ongoing complaints.  The PICC was committed to building state of the art residences and it should be made a priority to ensure that students valued these new residences, as well as the money the Government made available for studies. He concluded that NSFAS had done well in this financial year, particularly in its quest to establish a fully functional organisation.

The Chairperson thanked the Deputy Minister and NSFAS and said education could not be politicised.

The meeting was adjourned.

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