NSFAS, Services SETA & NSF on implementation of audit action plan

Higher Education, Science and Innovation

11 March 2022
Chairperson: Ms N Mkhatshwa (ANC)
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Meeting Summary

Video

The Committee met on a virtual platform with the National Skills Fund (NSF), the National Student Financial Aid Scheme (NSFAS) and the Services SETA in the presence of the Department of Higher Education and Training (DHET) and the Auditor-General to receive briefings on the status of the implementation of their audit action plans.

The Services SETA had received qualified audit opinions for three consecutive years and had not shown enough to turn the situation around. The DHET was working closely with the SETA, as it was greatly concerned regarding the repeat findings from previous audit cycles. The targets achieved by the SETA were not aligned with the budget spent, and this had been flagged as a concern by the Department.

NSFAS still had challenges procuring its information communication technology (ICT) system due to a lack of funding. Although the Department had allocated R65 million to NSFAS for purpose, it was not adequate. NSFAS administered a budget of R43 billion but had just over R300 million to do so. 62% of this R302 million was spent on salaries, and after other overheads, what remained was R16 million, which was not sufficient for its ICT budget. When the estimates were conducted last year to ascertain how much would be required for ICT infrastructure and improvements, NSFAS had indicated that it would need just about R200 million.

NSFAS also explained the reason for the delays in finalising the close-out project, stating that nine technical and vocational education and training (TVET) colleges had not submitted their close-out reports even after legal letters had been furnished to those institutions. Members were concerned about the delays, and urged NSFAS to expedite this process, as it sought to address the fundamental issues of disbursements, historic debt and payments to institutions and students, as well as what NSFAS owed to institutions and what institutions owed it.

Members felt that the National Skills Fund presentation was not sufficiently detailed, and asked for further information to be submitted in writing within 14 days. They were not pleased with the performance of the NSF in implementing its audit action plan, asserting that the entity was not expediting the process, and was doing so poorly. The NSF lamented how its organisational structure needed to be separated from the DHET so that it could operate independently and articulate its organisational functions by itself, not through the Department. This affected even the turnaround time for the filling of vacancies, as it had to depend on the DHET's organisational functions to execute its mandate.

Members asked questions about the delays in the close-out project; the NSFAS challenges with its ICT procurement and the funding required for systems improvement; the unfilled vacancies in the NSF and the reasons behind the long turnaround times to fill them; the measures to address outstanding audit findings; remedial action to correct performance management processes; the lack of consequence management; and the delay in transferring R3.2 billion by the NSF to NSFAS.
 

Meeting report

The Chairperson welcomed everyone present and indicated that the Committee would be receiving audit action plans briefings from the National Skills Fund (NSF), the National Student Financial Aid Scheme (NSFAS) and the Services Sector Education and Training Authority (SETA).

DHET's overview

Dr Nkosinathi Sishi, Director-General, Department of Higher Education and Training (DHET), said the Department was responsible for providing oversight to 26 public universities, 50 technical and vocational education and training (TVET) colleges, nine community colleges and the SETAs. The Auditor-General (AG) had completed its audit and made findings on the basis on which the audit plans and turnaround strategy that would be presented today were based. The DHET would ensure that all the presentations would contain the correct information required by the Committee.

The AG had made several findings at the Services SETA, and these would be highlighted and addressed. It had received qualified audit opinions for three consecutive years and had not done enough to turn the situation around. The DHET was working with the SETA to ensure that the identified issues were turned around. The current state of affairs at the SETA was of great concern to the Department. In the 2020/21 audit findings, the AG had repeat findings from the previous audit cycles. This would be elaborated on in the presentation. In previous engagements with the entity, these concerns had been raised, and the Department was working with the SETA on these issues. In the overview of its performance in 2019/20, there were 36 targets set but only 27 were achieved, but 97% of the budget had been spent. In the last audit period, there were 60 targets and only 24 were achieved, with 71% of the budget spent. As they present today, the message was that both the Department and the SETA were committed to ensuring that these issues were dealt with through the audit strategy presented.

As for the NSF, the Department would have wanted to present after the forensic investigation was completed so that Members could have a complete picture of whether the audit plan was sufficient to deal with the issues, particularly consequence management. This was one of the key issues pointed out. Hopefully, the presentation would provide a sense of the work that had been done. The DHET expects the forensic investigation to be completed to report back to the Committee on everything that had been done.

The Department was pleased with the progress at NSFAS but concerned about the number of systemic matters raised at the institutional level and the system downtimes that had been reported. The DHET's oversight over NSFAS had indicated that management was focused, and the Board was supportive and provided the required leadership. The magnitude of the task of NSFAS continued to increase.

National Skills Fund

Mr David Mathebula, Acting Chief Executive Officer, National Skills Fund (NSF), commenced with a response to the previous engagement with the Committee when the annual report and financial statements for 2020/21 were tabled. It had been given a directive on two standing matters to be monitored every quarter by the Committee and reported on by the NSF. These matters were the NSF's turnaround strategy and audit action plan. The presentation therefore focused on the key turnaround performance areas -- progress achieved and outstanding activities -- as well as reporting on progress with the implementation of the audit action plan.

The presentation covered the situational analysis of the NSF, which elaborated on the legislative enactment; performance at the corporate level; the limited corporate management structures; key performance areas that were identified; how the entity was tracking progress; the audit action plan as it pertained to human resources, systems and business processes; acceleration of the turnaround time for project/programme funding; strengthening of project monitoring and evaluation; managing external risks; and ensuring compliance and repairing relationships and financial statements, along with the progress to each function or aspect.

The NSF executive office had established an independent internal audit process to coordinate and monitor the implementation of the audit action plan. Determination testing was underway. and would be reported to the accounting authority (AA) and executive authority (EA) for further action, as informed by the findings. Lastly, the NSF audit committee was guiding and supporting all the entity's managerial efforts to change the fortunes of the organisation.

National Student Financial Aid Scheme

Mr Andile Nongogo, Chief Executive Officer, National Student Financial Aid Scheme (NSFAS), highlighted the progress in the implementation of the audit action plan; the status of material irregularities; the turn-around strategy aimed at improving performance; the close-out project; procurement of a new information communication technology (ICT) system; and NSFAS funding for the 2022 academic year.

In the previous audit cycle, AGSA had issued 35 audit findings, of which 40% (14) had been attended to, and 60% (21) was in progress. Most of the matters that were in the audit action plan would be implemented by the end of the financial year. The implementation of the audit action plan was monitored at the board level and its sub-committees. Management had an established process of monitoring and closing audit findings, which were reviewed by internal audit. An audit steering committee had also been established. The preparation for the current audit cycle was underway. There was a workshop scheduled in March with the AGSA to reconfirm the business understanding and NSFAS process, as the AGSA had a new team.

Although there were no material irregularities reported in the previous audit cycle, disbursements over the contract value, collection of money owed by tertiary institutions, and interest not charged on loan accounts, remained open from the 2019/20 audit cycle.

Following the turnaround strategy, there were now improvements in performance reporting due to the initiation of quarterly and monthly performance reports; operational plans; the enhancement of the ICT system, which was still ongoing; enhanced human resources interventions; and continuous stakeholder engagement.

The objective of the close-out project was to formally reconcile data between NSFAS and institutions to close out the 2017, 2018, 2019 and 2020 academic years for all 50 technical and vocational education and training (TVET) colleges and 26 universities funded by NSFAS. The overall progress of the project was that the reconciliations based on NSFAS data for the 2017 – 2020 academic years had been completed; all reconciliation files had been shared with institutions via OneDrive; all 26 universities had responded to the files; and 41 of the 50 TVET colleges had responded the files discussed in the initial meeting.

Referring to the procurement of the ICT system, he said NSFAS currently had administration budgetary constraints, as highlighted in previous communications to Parliament which had been communicated to the DHET and National Treasury (NT). Given these budgetary constraints, NSFAS had had to opt for a phased implementation of its ICT strategy. The following improvements had already been made:

Enhancement of the applications module to allow for real-time decisions;
Implementation of the in-house appeals system;
Processing of registration data;
Calculation of allowances and related disbursements. 

To enable some of these improvements, the DHET had made a budget of R65 million available for NSFAS to fund some of these ICT improvements, although the budget was not sufficient to cover all the requirements. NSFAS was employing other mechanisms to fast track the implementation of key modules, such as requesting providers to develop these systems at risk.

NSFAS was funding 1 585 363 students this year, made up of 728 999 continuing students and 856 364new applications.

Stakeholders had called for NSFAS to manage appeals centrally for both continuing and new students. A new appeals portal had been rolled out in 2022 and went live on 3 February, but some technical teething glitches were experienced. To manage the risk of registration closing out before students could obtain funding decisions, NSFAS had shared details of students who appealed with institutions so that universities and TVET colleges could manage the risks at the institutional level. The system had since been restarted and was now processing appeals accurately for most of the students. The system issues had now been addressed, and NSFAS was busy with an evaluation of appeals and issuing funding decisions. 27 % of the appeals had been approved, 51% were still under evaluation -- some required re-submissions of supporting documents -- 20% were either withdrawn or were duplicates, and 2% were rejected. 

There was a budget shortfall of approximately R10 billion. Availability of funding was confirmed towards the end of January, leading to delays in the issuing of funding decisions. NSFAS had been ready with the provisional funding list, but there were delays in issuing the funding guidelines. There was a close link between the availability of funding and the funding guidelines. NSFAS had completed the consultative process in December. It no longer had cash reserves -- these had been depleted with the 2020 extended academic year, and it was therefore no longer in a position to provide advances to institutions, particularly universities.

In the current academic cycle, this was exacerbated by the fact that the allocation of R3.2 billion of the 2021 budget shortfall had not yet been received from the NSF. NSFAS was currently engaging with the DHET to fast-track this. There was some available budget for TVET colleges, so it was able to advance 20% of the tuition allocation to the colleges. There was a fundamental timing issue of when NSFAS receives its allocation compared to when institutions start their academic programme, leading to students not receiving allowances on time, thus creating instability at the institutions. For future academic years, NSFAS was preparing a cash flow projection to discuss with the DHET and NT to assess the possibility of receiving its funding allocation earlier to align with institutional academic programs.

Services SETA

Mr Menzi Fakude, Chief Executive Officer, Services SETA, provided an overview of the entity’s performance covering the audit response and the audit and performance update. The AG had flagged the following issues:

expenditure used to calculate the commitments balance could not be relied on;
information reported was not measurable and reliable; and
assessment on irregular, fruitless and wasteful expenditure was not performed.

The SETA had 25 findings from the AG but had since resolved all of them.

The SETA provided a progress report on each target that had not been achieved.

[See the presentation for details]

Discussion

The Chairperson said she was concerned about NSFAS's legacy challenges, which stifle the processing of applications and disbursements. At the beginning of the new management and administration, this had been highlighted as the biggest challenge. The Committee had been told several times that NSFAS was looking into the procurement of a new system, and it looked like they were far from where they needed to be by now. From the beginning of the new administration, a timeline report or analysis should be put together to see fundamental changes that had taken place since it came in. The Committee had not seen the changes in the implementation of the new ICT system. Did the CEO believe that he had made any fundamental changes that were identified at the inception of the new administration and management? It did not look like any progress was being made.

Ms J Mananiso (ANC) said that NSFAS was becoming rhetorical on the ICT system issues. Members needed an indication of the timeframes as to when these ICT matters would be addressed. She was pleased with the visits conducted to institutions but recommended that on those visits, there must be structures established that would work for intervention purposes, such as appeals in those institutions. She also recommended that the NSFAS write to the Committee, detailing an action plan with timeframes.

She concurred that the NSF needed to improve the state of its internal controls. Was the issue stemming from capacity, or was it system-related? She was concerned about the audit outcomes. The filling of vacancies needed to be addressed. She asked for submission of the specifics about the interim structure of the entity. Lastly, she called on the NSF to balance its ICT support with capable human capital. How many investigations were currently underway, and could it provide a detailed report on the demographics of the perpetrators?

She was committed to visiting some of the beneficiaries that were close by, to reconcile what the Services SETA had presented. The SETA should also provide specifics on the demographics of its beneficiaries, as well as specific details on what the problems were in the entity as they related to the findings of the AG, and what it was doing about those findings.

Ms D Sibiya (ANC) said the NSF had indicated that all the support structures were an extension from the DHET to the entity, but had then said that not at all were assisting the growth of the NSF. Could this be detailed? As for the Services SETA, was there any strategy to deal with the unresolved findings?

Ms K Mahlatsi (ANC) directed her questions and comments to the NSF. The presentation was worrisome because the CEO had said that the NSF was a schedule three entity, but it operated like something else. This was a loaded statement, and to bring to the Committee and leave it as it was, was very problematic. The NSF had been qualified by the AG for poor financial practices and skills development, etc, but the presentation provided many excuses on why these things had happened and when they would be resolved. It was not clear on the issues and the intentions of the management to address those issues. There was no clear intention by the NSF to deal with these issues. She requested an organogram of the institution and whether senior managers in the entity had performance contracts. She also requested information on whether the entity had auditors and risk managers. The presentation had failed dismally to address the objective of this briefing. Take for example the posts -- these posts were advertised in March 2021, but they were not yet filled. Why were the posts not filled?

Irregular expenditure and other policies were approved only in March last year. What was happening before that? The Committee needed a list of the approved policies of the institution. Skills development was an important issue that must be unpacked. The presentation said that the discussion was still to happen. She could go slide by slide on the inconsistencies in the presentation. People went to work and did nothing and got paid. Were there even managers in the internal audit function? Risk management services were being outsourced. Who monitored the risk management in the entity on a monthly and quarterly basis?

The audit action plan stated that the audit findings would be resolved by the end of February, yet they were in March. This showed that this was a cut-and-paste presentation. Was it February 2023 that was being referred to? This presentation was extremely disappointing. The NSF must go back and develop a proper action plan that stipulates the matters highlighted, what the intention was to address them and by when these issues would be addressed.

As for NSFAS, she also asked for clarity on the audit action plan.

She applauded Services SETA on how it had presented in the meeting. One got a clear understanding of the issues in the entity, timeframes, audit findings and what needed to happen. The progress was not satisfactory, however.

All three entities were getting into the new financial year, and already the AG was knocking on their doors, but they still had outstanding issues from previous years. This issue of the ICT process in NSFAS was now merely a song that Members had become accustomed to by now, but nothing was happening.

Dr N Khumalo (DA) said Members wanted to see more progress on resolving the audit findings. She was concerned that they were following a reactive approach as opposed to a proactive approach. The internal audit function should be playing a preventative role to ensure compliance, but they were seeing the reverse approach, as outlined in the presentations. She agreed that an institutional review was necessary, but what were the timeframes around that action step? What were the exact remedies put in place to correct performance management processes? One could also see irregular expenditure as a result of weak internal controls resulting in non-compliance – where was this responsibility placed, and what level of accountability had come about? Unless they started holding each other accountable, they would continue to work on just correcting. How were the internal controls and project management being strengthened?

Timeframes were needed to be attached. When it came to consequence management, what actions had been taken and at what level had management been held accountable?

She also asked questions on behalf of Ms C King (DA), who wanted to know the reasons for the delays in the historical close-out report. Nine TVET colleges had not submitted their close-out reports even after legal letters had been sent out -- what was the next step from NSFAS to retrieve this information?

What was regarded as sufficient budget to tackle the ICT challenges and improvements needed at NSFAS? Had local companies been contracted to deal with its ICT challenges?

51% of appeals were under evaluation -- by when were they going to be cleared? Lastly, she asked the Department and the NSF why the earmarked R3.2 billion was not transferred to NSFAS.

Mr W Letsie (ANC) said that he wanted to raise his frustration with the presentations from NSF and NSFAS on the implementation of the audit action plan. The audit plans of the Services SETA looked as if it was well on its way to recovery, and that they had responded to what the Committee had asked. It had taken almost a full year to process 31 of the 62 posts advertised. This was extremely worrying. This meant that only 50% was achieved in one year. Explanations for these delays were needed – what was the problem at NSF? NSF as an entity was dependent on the Department’s human resources division to fill the posts, which meant they were unlikely to get the posts filled. Did it take a full year for the NSF to capture information? If the management of the entity did not see anything wrong with that, it was extremely concerning.

On the five posts that had been recommended, could the Committee be given details of those posts and their status of appointment, and if they were not yet appointed, what were the reasons for the delays?

He was not confident that the AG would go to the NSF and say that it had received a disclaimer and improved on certain aspects. The AG would raise the same issues with the entities. He reminded Members that this meeting was a result of a meeting the Committee had held with the AG last year. They had resolved that they would have quarterly meetings with the entities to ascertain their progress and how the issues raised by the AG were being addressed. The AG had indicated that adequate systems were not in existence to address skills development funding, expenses were not recorded in the correct period; the AG was unable to sufficiently appropriate audit evidence for several areas; the public entity did not account for the impairment of TVET colleges' infrastructure assets by GRAP 21; there was impairment of non-cash generating assets, and the AG was unable to obtain sufficient audit evidence. The presentation did not inspire confidence when the AG came to identifying areas where the entity was doing well and improving. He was not confident that the NSF would receive an improved audit from the two disclaimers received in the previous two audit periods. 

Today, NSFAS had informed the Committee that the target for completion of the close-out project had been moved to June 2022. Why had this deadline been moved? The project had been raised as early as June 2019, but they were now talking about the same thing, and he was not convinced that by June 2022 it would be finalised. The importance of concluding this report was that NSFAS would know how much a university owed NSFAS, but without that process being concluded, how was that issue going to be addressed, as well as the processes needed to be taken to recover that money? NSFAS would have indicated to the Committee that due to capacity issues internally, it would have sourced an external person to provide this service. What was the issue now?

Members were continually receiving queries from students that on the system they were funded, but the university stated otherwise. The problem may not be on the NSFAS side, but the institutions'. It would not be addressed, because the close-out project had not been completed. He appealed to NSFAS to move with speed to conclude this project.

The last time the Committee engaged with NSFAS, he had raised an issue of performance, and the CEO had responded in an irritated manner. He was pleased that his presentation today had touched on performance. The Committee should be worried about performance because Members did not see it happening.

The AG had raised concern that NSFAS disbursed tuition fees and allowances to institutions above the maximum amounts stipulated in written agreements with students. The AG had also asserted that in some cases, this was due to written agreements that were incorrectly generated with erroneous amounts. These over-disbursements had commenced before the current administration stint but had also continued into the current administration’s time. The AG had said that NSFAS needed effective internal controls, which were not in place to prevent these over-disbursements. One would expect a clear update on the status of how this matter was being addressed and the consequence management implemented against the officials who were responsible for this.

The AG had also said that the standard operating procedures and policies should be designed to contain processes to record information and store supporting evidence for measuring the planned indicators. How far was NSFAS on this?

He commended the Services SETA for a clear presentation on how it was addressing the matters that had been raised by the AG, the plans to address those issues, and the consequence management implemented where necessary.

The financial statements had not been prepared according to the prescribed financial reporting framework -- how far was it in ensuring these financial statements were prepared appropriately? How far was the entity on resolving the material misstatements over the contract amount, and in the collection of money owed by institutions?

The AG had said that non-compliance was likely to result in a material financial loss for the entity, and the cumulative amount of undeclared credit was about R2.4 billion as of last year. How far was the entity in collecting this money from the institutions, and which institutions owed money to NSFAS? Was NSFAS also charging interest on money that was not being paid? Was it working with the Department to recoup this money?

The CEO had said that NSFAS was experiencing budget constraints for the procurement of the ICT systems and that it had engaged National Treasury and the Department on this. Had NSFAS costed the required ICT system? Since Members arrived here in 2019, at every Committee meeting they had attended, NSFAS would have indicated that their problems were systematic and ICT-related. Three years later, its problems were still ICT-related. The Committee needed to be assured of when this ICT issue was going to be addressed. Students were frustrated with NSFAS. How much would be deemed enough to resolve the ICT issues at NSFAS? The Department had already indicated that it had given NSFAS R65 million to assist in the procurement of the ICT system. It was said that the R65 million was not enough, but how much was enough?

He asked where the R65 million had come from in the DHET. He also asked the Department to respond to the issue raised by NSFAS, that R3.2 billion of the 2021 budget shortfall had not been received from the NSF. Why was this money not yet transferred to NSFAS?

The Chairperson asked NSFAS to provide in writing the documentation that outlined what informed the thinking around the student accommodation portal that it was working on. What had informed this creation, what was the possible success of its existence, and what were its weaknesses?

Responses  

National Skills Fund
Mr Mabusela said that by indicating the NSF was a schedule three entity that did not operate in that manner, it was simply to bring the "elephant in the room" to the attention of the Committee. He did not want to go into details, because that would have sounded disingenuous to the Committee. If one looked at the Director-General (DG) of the DHET, he was also the accounting authority of the NSF. In terms of establishing NSF as a schedule three entity, what should prevail was to establish separate organisational structures that communicated or articulated all the NSF's organisational functions. What happened was that the DG, as both the accounting authority and DG of the DHET, simply used the existing structures of the DHET to run the NSF, which created serious problems. It overloaded the DHET and rendered the NSF very "muddy and slow." Even the issue of post advertisements taking a year to conclude meant that the NSF was not treated as separate from the DHET when it came to advertising posts or vacancies. It followed all the queues that were in the Department, and this created serious problems with the turnaround times for the NSF to fill these posts. This also created serious problems in other functions, such as supply chain management (SCM), ICT and other important functions, such as risk management. They were dependent on the organisational functions of the Department, and this was something that should be reconsidered. Even if the DG remained the AA of the NSF, there must be separate organisational structures and functions that would service the NSF in all its requirements. This was why he had alluded to the fact that the NSF did not function as a schedule three entity.

Regarding the policies in the entity, the policies existed but they needed to be reviewed. The new policies would unlock several proposals that were coming from the public.

The issue with the internal audit was that it was focusing only on issues of determination without assisting the organisation continuously with the audit and timeously alerting management to respond to some of the existing weaknesses. They had extended the function of the internal audit to cover that.

The risk register was there, but the service provider being there to assist the staff was related to the risk register. This was something that would be managed internally, not externally.

Accruals occurred because when the NSF disbursed funds, it did so based on the reports that it received. That was why this disbursement process was in tranches. If it got reports that were not favourable, it did not disburse, and if it did not get reports at all, it did not disburse the next tranche. This had the effect of accumulating accruals. It was now continuously getting the reports to finalise and reduce these accruals.

On the action plans, he acknowledged the directive given by Members that in future, the NSF would restructure the audit action plan report to be specific to the findings, the status of addressing these findings, and the timeframes.

Concerning ICT, he agreed that the IT systems were weak, and they had alerted the staff members to say that systems alone did not make the organisation effective and efficient -- the human capital element was also necessary to ensure there was productivity. Therefore, the question of capacity was related to both IT and human capital capacity.

Ten projects were being investigated and these would be reported on.

All NSF organisation systems were in essence those of the DHET, and they had produced a very slow response and inactive approach to some of the rapid developments in the NSF. The systems were the ones that must be removed from the Department and established independently in the NSF.

On the R3.2 billion question, this process had been completed, and the NSF was at the stage where it had engaged in contractual processes with NSFAS, as well as the transfer of those funds. The problem encountered was that it did not transfer huge amounts of funds -- it did so in tranches as a measure of checks and balances. It had received a request that as the tranche methodology did not assist NSFAS, it should transfer the entire R3.2 billion. It was engaging with the Public Investment Corporation (PIC) regarding this huge transfer. All approvals and contractual engagements were on board, but only the transactional requirements were now outstanding.

He said the NSF would relook at amending the structure of the presentation to precisely cover what needed to be presented. As for the five posts that had been recommended, this information would be provided to the Committee in writing.

National Student Financial Aid Scheme

Mr Nongogo responded that management had indicated that the NSFAS administration budget was not adequate. The current amount allocated to NSFAS to run its affairs was R302 million, but the amount that administered for student funding was over R43 billion. This was 0.9% that the entity was allocated to run the fund. If they were running an R43 billion administration, there were too many systems and processes needed in place to safeguard those funds and smooth processes for allocation and making sure that the correct people were paid and paid on time. 62% of the R302 million went towards salaries, about 20% went to overhead expenses, and only R16 million was available to make any improvements in the organisation. What was needed for these systems was adequate funding and money.

The R65 million was the allocation that NSFAS had received from the Department. This amount was quantified last year around June/July, requesting this funding. The estimate at the time was R200 million to improve its systems, but what could be funded was R65 million, hence it was not sufficient. When one made an estimate, the true test was when one was getting responses from the market and about how much one would need to pay.

Not all the interventions that the new management had planned had been implemented. This was because of the constraints relating to funding. In an ideal world, NSFAS could procure a full-on system and it could do so only if it got the funding. The improvements it had started were on the disbursement module, which allowed NSFAS to pay institutions’ allowances fairly on time. The next one was the application portal because it was able to make real-time funding decisions from that portal. There was a module called the student calculator. This module processes registration information from institutions and once done, NSFAS could calculate the money and allowances due to each student. This was the one that would be rolled out in March. The first roll-out was that of the registration processing module, on 15 March, and the second was the calculator. This would solve the timely payments of allowances to students. The new system that was looking for improvement was the application portal, which would allow students to appeal and upload all the documents required for the funding. That portal would then be linked to the registration portal, where institutions would be able to submit registration information. This would work perfectly if there was direct integration with systems, but as there was a functionality to upload information, that information could still be manipulated and corrupted. This was a reason for many of the issues it faced.

As requested, NSFAS could provide that journey map, but at the risk of not sounding like it was directing the Committee, he would like to invite the Committee for a working session with NSFAS and its management. Engaging with the Committee on this platform was subject to time constraints, which did not do justice to discussing the work that had been done so far. Therefore, it would sound like rhetoric when the team complained about the systems. NSFAS knew what to do, but it did not have the means to do it. However, it had looked at innovative ways to get service providers to develop systems at risk, to pay for the service on a piecemeal basis. It had approached banks, donors and sourced funding to assist it in funding this system. It was counterproductive for NSFAS to have R43 billion in funds to administer, but insufficient funds to administer that fund. Part of the organisational structure review looks at the value-added services NSFAS could sell to increase the budget to implement the improvements needed. It was engaging with the DHET for assistance, but it was also limited.

Regarding appeals at an institutional level, the policy brief that the Board had made to the Minister had recommended that an independent tribunal needed to be established to consider appeals, to ensure there was fairness and transparency. This had been approved, and it was in the process of implementing that tribunal.

A feasibility study on the decentralisation of NSFAS had been conducted, and the conclusion had been that they needed a hybrid approach. Without adequate systems, there would be frustrations in that decentralised format. It was also working closely with institutions, students and student representative councils (SRCs) to understand its processes. It needed to be aligned in terms of processes. This meant that NSFAS was dependent on students to provide the necessary information, as well as the institutions for submitting information. Once it had the session, it would have enough time to separate the issues that were coming from NSFAS and those that were coming from other institutions.

Concerning the implementation of the audit recommendations, NSFAS had a detailed audit action plan. The team had taken a high-level view to present, but this would be submitted to the Committee by Monday. The matters that were in progress meant they had been processed and could be corrected only when it was compiling the financial statements. However, it was confident that these matters would be addressed. These were the matters that had the potential to affect the opinion of the entity.

The historic debt process was linked to the close-out project debt. In the past, NSFAS had allowed institutions to submit claims for historic debt, but this was suspended because institutions were not submitting the correct information. They were claiming for people who were not qualifying. This was what it was rectifying through the close-out project.

The issue of the close-out emanated from the NSFAS records and the institutions’ list, which highlights the students who ought to be funded by NSFAS. It looks at the amounts that were paid, but there was a reconciliation process between NSFAS and the institutions. The reason why this project was delayed was that it had been difficult for NSFAS to construct its data, but the data had then been reconstructed to show what the NSFAS records reflected between institutions and NSFAS. This process would highlight how much the institutions owed NSFAS, or what it owed the institutions. The institutions must come and present their records, and it would then reconcile these records, and balances had been determined in terms of what it owed and what was owed to NSFAS.

As for the nine colleges that were not responding, NSFAS would conclude the project without their records. The downside was not only about money owing but also unblocking students that may have been stuck in the system who deserved to be funded. This process of determining the balance should be concluded by 31 March, because it must reflect in the financial statements of the entity.

NSFAS did have an ICT panel made up of local companies. It now followed a core-sourcing model of ICT. When it talked about new developments or advancements, these had been assigned to external service providers to assist, whereas the internal team was focused on stabilising the current systems. This was why it could produce some of the modules.

All the appeals would be processed by the end of March, as the necessary documents come in from the institutions.

There were no technical issues with the close-out project. In the past, the issue was around constructing the data, and that data had been constructed, NSFAS was now in a position to indicate what its files or records say, and those of the institutions. Many of the issues affecting the students were indeed those that were related to the objective of the close-out.

The Chairperson interjected and asked the office of the CEO to provide the remaining information in writing.

Services SETA

Mr Fakude asked if the SETA could compile a report on its beneficiaries, and send it to the Committee in writing.

Regarding consequence management, the PFMA was clear on what needed to be done about fruitless and wasteful expenditure and irregular expenditure. After compiling the balances, management had started a process to probe those cases. Management was on the verge of submitting this information to the governance structures, and the outcome would be submitted to the Committee, particularly on fruitless and wasteful expenditure.

On the pace of the SETA in responding to audit findings, the process followed required that issues were also sent to the internal audit function to assist in verification and whether the issues had been adequately addressed. There were a lot of significant issues on commitments, and they had made an arrangement with the AG to assist in the work that had been done in the previous three years. They were now waiting for the AG’s report to inform them whether they had done enough to address those issues.

On the organisation structure, the new management was going to deal with it. It was primarily funded out of project support. It was going to be a long process which they planned to conclude in the next financial year.

Auditor-General South Africa

Mr Kabelo Makitla, Stakeholder Manager, AGSA, said he had noted all the issues about the AG and would be submitted them to the relevant auditors for responses.

Chairperson's summation

The Chairperson said the Committee would need the AG’s reflections to continue guiding its work. Where there were concerns related to the DHET, the Committee would communicate with the Department on where it needed to assist through its recommendations and account for some of the matters that had been raised that particularly referred to the Department.

Some of the key issues that had come up were that it was important to have an audit action plan to strengthen the entities' capacity to execute its core mandate. Previous engagements with the AG were around the fact that the Department needed to get the institutions at a level where they operated to their maximum ability and fulfilled their mandates without being blocked by these governance and administrative issues.

The Committee remained concerned about the lack of consequence management and implored the NSF and the Department to ensure that there was consequence management at the NSF, where employees were responsible for the current situation. Secondly, the filling of vacancies remained a concern, and the Department or the DG’s office needed to ensure that these vacancies were filled. Thirdly, she implored the NSF to have proper systems in place to monitor and reconcile spending on various skills development projects. The Committee had indicated that it would like to conduct oversight at the colleges that had infrastructure projects funded by the NSF.

The Committee also recommended that the audit action plans must have clear timeframes of when the recommendations would be implemented. It would continue to work every quarter with the entities, either in a meeting or through correspondence. She emphasised that the recommendations that had come out of the inputs of the Members needed to find themselves in the current audit action plans. Hopefully, it could have these more comprehensive reports from the entities every quarter.

The Committee also noted the concerns of the DG about the forensic investigation report about the NSF, and how it could have been of great assistance to this meeting. The report ought to be submitted to the Committee as soon as it was released. The Committee also implored the NSF to balance its ICT capacity with its human resources capacity, strengthen its internal controls and submit to the Committee the organogram of the entity and job descriptions of its senior managers. The structure of the NSF was not a new matter, so it would be important for the Committee to identify or elevate this matter as a stand-alone item that it must attend to.

As for NSFAS, perhaps the Committee could be assisted with the details that it needs. It was concerned about the human resources of the institution and needed to get to a point where it finalised the challenges around the ICT systems. It could go further into the funding of the entity, which the entity had indicated to be inadequate. This could perhaps be a matter that could also be dealt with as a stand-alone issue. Clear timeframes must also be submitted on when these challenges would be addressed.

The Committee also noted with concern the colleges which had been non-compliant in sending information to NSFAS for the close-out project. She asked the Department to work with NSFAS to ensure that these colleges submitted the relevant data.  The Committee would continue to work with NSFAS every quarter on its audit action plan to ensure better audit outcomes. It would also need a breakdown of consequence management cases involving its employees. Further conversations about the inadequate funding of the institution were needed, as well as about the sustainability of the entity to implement fee-free higher education overall, noting some of the challenges and the anxiety in the sector at the beginning of this academic year. NSFAS must also submit its newly approved organisational structure to the Committee.

There was a need to strive for a "day zero" for the finalisation of the close-out project at NSFAS. The previous date set was June 2022. This must not become a moving target. It must be concluded. NSFAS must also indicate how much funding it would need to have an ICT system that would be stable and enable the mandate of the entity to be implemented.

The Committee would continue working closely and every quarter with the Services SETA on the implementation of its audit action plan. The consequence management breakdown of the entity must also be furnished to the Committee. It applauded the commitment of the SETA to address the audit findings.

Overall, the Committee continued to be concerned by the state of these entities, but it would also commit itself to ensuring that it provided all the necessary support for them to fulfil their mandates. The Committee would continue monitoring the progress of the entities as they addressed their audit findings.

The revisions to the audit action plans must be indicated and sent to the Committee within the next 14 days.

The meeting was adjourned.

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