ATC191205: Report of the Portfolio Committee on Higher Education, Science and Technology on the National Student Financial Aid Scheme (NSFAS) 2018/19 Financial and Service Delivery Performance, dated 3 December 2019

Higher Education, Science and Technology




The Portfolio Committee on Higher Education, Science and Technology (hereinafter referred to as the Committee), having considered the 2018/19 Annual Report of the National Student Financial Aid Scheme (NSFAS) on 13 November 2019, reports as follows:


1.1. Purpose of the Report

The purpose of this report is to account in accordance with Rule 339 of the Rules of the National Assembly for the work done by the Committee in considering the 2018/19 Annual Report of the NSFAS, which were tabled in accordance with Section 40 (1) of the Public Finance Management Act, 1999 (Act 1 of 1999); and as referred in terms of National Assembly Rule 338 by the Speaker of the National Assembly to the Committee for consideration and reporting in terms of Rules 339 and 340 respectively.

1.2. Mandate of Committee

Section 55(2) of the Constitution of the Republic of South Africa stipulates that “the National Assembly (NA) must provide for mechanisms (a) to ensure that all executive organs of state in the national sphere of government are accountable to it; and (b) to maintain oversight of (i) national executive authority, including the implementation of the legislation; and (ii) any organ of state”. Rule 227 of the Rules of the National Assembly (9th edition) provides for mechanisms contemplated in section 55(2) of the Constitution.

The Committee oversees the implementation of the following Acts, as amended:

Higher Education Act, 1997 (Act No.101 of 1997), National Student Financial Aid Scheme Act, 1999 (Act No. 56 of 1999), Continuing Education and Training Act, 2006 (Act No. 16 of 2006), National Qualifications Framework Act, 2008 (Act No. 67 of 2008), Skills Development Act, 1998 (Act No. 97 of 1998), Skills Development Levies Act, 1999 (Act No. 9 of 1999) and General and Further Education and Training Quality Assurance Act, 2001 (Act No. 58 of 2001). The Department of Higher Education and Training oversees the SETAs and the National Skills Fund in terms of the Skills Development Act and the Skills Levies Act.

1.3. National Student Financial Aid Scheme (NSFAS) Mandate

The National Student Financial Aid Scheme was established in terms of the National Student Financial Aid Scheme Act, 1999 (Act No. 56 of 1999). Its main mandate is to provide loans and bursaries to eligible students, developing criteria and conditions for the granting of loans and bursaries to eligible students in consultation with the Minister of Higher Education and Training. The entity’s mandate is also to raise funds, recover loans, maintain and analyse its database, undertake research for the better utilisation of financial resources and to advise the Minister on matters relating to financial aid for students.

1.4. Method

The NSFAS’s 2018/19 Annual Report was considered by the Committee against the background of key government policy documents relevant to the work of the Department, including, among others: the Medium Term Strategic Framework (MTSF) 2014 – 2019 and the 2018 State of the Nation Address. The Committee had briefing sessions with the Auditor-General of South Africa (AGSA) on the 2018/19 audit outcomes of the NSFAS.



2.1. Relevant Government policy documents

2.1.1. The National Development Plan (NDP), Vision 2030 and the 2014 – 2019 Medium Term Strategic Framework (MTSF)

The 2014-2019 MTSF, which is a five-year strategic plan of government, forms the first five-year implementation phase of the NDP. The aim of the Framework is to ensure policy coherence, alignment and coordination across government plans as well as alignment with the budgeting process. The Department is responsible for Outcome 5: “A skilled and capable workforce to support an inclusive growth path”.

The NDP commits NSFAS to support an increase in participation rates at Technical and Vocational Education and Training (TVET) Colleges and higher education institutions. It states that all students who qualify for the National Student Financial Aid Scheme should be provided with access to full funding through loans and bursaries to cover the costs of tuition, accommodation and other living expenses. 

2.1.2. 2018 State of the Nation Address (SONA)

During the 2018 State of the Nation Address, Hon C Ramaphosa reaffirmed the fee-free education policy for children of the poor and working class. President Ramaphosa reaffirmed the government’s position that fee-free higher education and training will be available to first-year students from households with a gross combined annual income of up to R350 000 per annum in 2018, and would be phased in over a period of five years.



During 2018/19, the NSFAS’s total revenue amounted to R23.087 billion. The bulk of the revenue amounting to R21.387 billion was grants received for student awards, which represented 92.6 percent of the total revenue for the year under review.

 Expenditure at the end of the financial year amounted to R26.058 billion, with an overall deficit amounting to R5.045 billion. The deficit was attributed to payment of R1.358 billion in bursaries for the 2017 and 2018 academic years close out, R1.065 billion irrecoverable debts, R533 million social benefit component on student loans issued, R1.379 billion: actuarial model adjustments and R163 million: residual valuation adjustments).

In terms of expenditure, R24.592 billion was for bursaries (R20.814 billion for universities and R3.779 billion for TVET colleges). Spending on bursaries, especially for universities increased significantly from R5.6 billion in 2017/18 to R20.8 billion in 2018/19 and this attributed to the implementation of the fee free education policy. Expenditure on personnel costs amounted to R193.5 million and R128.4 million was for general expenses, R47.4 million for consultants and professional fees and R10.6 million in audit fees.

3.1. Irregular expenditure

For the year under review, the NSFAS incurred a cumulative irregular expenditure amounting to R7.6 billion. This included an opening balance amounting to R3.3 billion and R4.3 billion for the current year under review. The R4.3 billion irregular expenditure incurred during the current year was due to: payments in excess of contract amounts: R1 billion; disbursements with respect to Non-Compliance to Laws and Regulations (NOCLAR): R2.6 billion; shifting of earmarked funds not approved by National Treasury R580.1 million; variation not approved by the NSFAS Accounting Authority R971 000; and asset management fees R5.3 million.


It was reported that during the current financial year, in an attempt to rectify the irregular expenditure relating to disbursements in excess of contractual amounts, certain contracts were regenerated. The irregular expenditure, relating to regenerated contracts (LAFSOPs) and contracts signed on behalf of students by the NSFAS, is still in the determination phase and therefore does not need to be disclosed as an amount in the current year. The progress being made to determine the quantum of the amount is as follows:

  • Identification of the affected accounts;
  • Quantification of the related Irregular expenditure (in progress).



4.1. Audit opinion

For the 2018/19 financial year, the NSFAS obtained a qualified audit opinion with findings for the second consecutive year. The Auditor-General of South Africa reported more areas of qualifications compared to the previous financial year, 2017/18.

4.2. AGSA findings

(i) Amounts due to institution: The AG was unable to confirm that the amounts due to the institution’s balance was valued appropriately in accordance with GRAP 104 (Financial instruments). The AG was unable to confirm the correctness of transactions by alternative means. Consequently, the AG was unable to determine whether any adjustments were necessary to amounts due to institutions, stated at R1.3 billion.

(ii) Bursary expenditure: The AG was unable to obtain sufficient appropriate audit evidence for the completeness and the occurrence of bursary expenditure paid outside of the entity's normal disbursement process because the status of supporting documents did not enable the required audit confirmation. The AG was unable to confirm the occurrence and completeness of transactions by alternative means. Consequently, The AG was unable to determine whether any adjustments were necessary to bursary expenditure, stated at R24.6 billion.

(iii) Cash flows statement: The calculation of the net cash outflow from operating activities, cash flow from investing activities and cash flow from financing activities for the current and previous period did not appropriately account for cash and non-cash items, as required by GRAP 2 (Cash flow statements).

(iv) Contingent liabilities: The public entity did not reliably estimate the possible obligation to fund students in the future with the available information at their disposal, in accordance with GRAP 19 (Provisions, contingent liabilities and contingent assets). The entity underestimated the number of years of its funding commitment to students. Consequently, contingent liabilities were understated by R6.3 billion.

(v) Significant uncertainty: The NSFAS has entered into contractual commitments to fund students for the duration of their qualification as part of the student-centred model. These commitments resulted in a contingent liability of R29.3 billion at 31 March 2019 (2018: R34.7 billion) being disclosed in the financial statements as the entity would need to fund the students for the duration of their studies, subject to them meeting the promotion requirements.

(vi) Material fair value and impairment adjustment: The entity had student loan receivables with a nominal value of R36 billion as at 31 March 2019 (2017/18: R35.6 billion), which are reflected in the financial statements as R9.3 billion (2017/18: R10.3 billion) after cumulative fair value and impairment adjustments of R26.8 billion (2016/17: R25.3 billion).

(vii) Restatement of corresponding figures: The corresponding figures (R443.5 million) for 31 March 2018 have been restated as a result of an error in the financial statements of the public entity at, and for the year ended, 31 March 2019.

(viii) Material findings in respect of the usefulness and reliability of the selected programmes are as follows:

  • Programme 2 – Student centred financial aid
    • Management erroneously included, in the schedule used to calculate the numerator and denominator, students who do not sign the loan agreement form and schedule of particulars (LAF/SOPs) as per the key performance indicator (KPI) definition of KPIs 4.1 (percentage of students for, which the first instalment of amounts due to the institution is paid within 30 days from loan agreement forms and schedule of particulars (LAF/SOPs) acceptance date) and 4.3. (percentage of amounts due to institutions in respect of LAFSOP acceptance by 30 November which are paid to institutions by 31 December each year). The schedule further included duplicate student identity number entries. In addition, an incorrect date of first payment was included for first-time students who signed LAF/ SOPs in respect of KPI 4.1.
    • Management was unable to provide verifiable information to confirm validity, accuracy and completeness for reported achievements.
    • The KPI definitions of KPIs 4.1 and 4.3 did not reflect its purpose of measuring and reporting on both returning and new students, as management intended. The LAFSOP acceptance date means that only new students should be added; however, management is of the view that subsequent registration also serves as LAFSOP acceptance, which suggest that the words are open to interpretation.

(ix) Expenditure management: Effective and appropriate steps were not taken to prevent irregular expenditure, as required by section 51(1) (b)(ii) of the PFMA. The value as disclosed is not complete as management was still in the process of quantifying the full extent of the irregular expenditure. The majority of the irregular expenditure disclosed in the financial statements was caused by non-compliance with section 19(1) of the National Student Financial Aid Scheme Act (Act 56 of 1999).

(x) Financial statements: The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework and supported by full and proper records, as required by section 55(1)(a) and (b) of the PFMA. Material misstatements identified by the auditors in the submitted financial statements were not adequately corrected, which resulted in the financial statements receiving a qualified opinion.

(xi) Internal control deficiencies:

  • Leadership: The NSFAS’s board was dissolved and the entity was placed under administration during August 2018. The administrator was appointed with clear terms of reference that included a focus on key operational deliverables and bringing the NSFAS to a state of stabilisation. During the initial stages of the administration, it came to the attention of the administrator that the inherited audit action plans were not well defined, key responsibilities for resolutions were vague and little effort had been directed at driving the resolutions of the previous year’s findings. Concerted efforts were therefore directed at enhancing the audit action plan. The improved action plan did not address all the repeat findings due to the timing of its implementation and, although the extent of the findings has reduced, material new findings on financial reporting surfaced during the year under review.
  • Financial and performance management: The entity been placed under administration had an impact on the credibility of financial and performance reports. Material amounts recorded as bursary expenditure and amounts due to institutions could not be substantiated due to the status of supporting information for manual payment, system deficiencies and challenges with system integration. The estimate of future funding commitments to students is not reliable and the cash flow statement contains material misstatements. This resulted in a qualified audit opinion on the financial statements.



For the 2018/19 financial year, the entity had a total of 16 key performance indicators, with 16 predetermined targets spread across its two budget programmes, Administration and Student-Centred Financial Aid. Of the 16 predetermined targets, two (12.5 per cent) were achieved and 14 (87.5 per cent) were not achieved. The NSFAS performance increased slightly by 2.5 per cent from 10 per cent achieved in 2017/18.

4.1. Programme 1: Administration

The aim of this programme is to conduct the overall management, administration and governance of the entity and to provide efficient and effective support services to sustain the new student-centred operating model. The programme had four predetermined targets, of which one target (25 per cent) was achieved and three (75 per cent) were not achieved.  The entity completed the 360-degree assessment for 70 per cent of employees.

The following targets were not achieved as planned: the NSFAS obtained a qualified audit opinion with findings against the target of a clean audit and the Corporate Governance of Information and Communication Technology Assessment Standards (CGICTAS) Level 2 was not achieved. The target to an employee engagement index of 80 per cent was also not achieved. The entity achieved 13 per cent and it was reported that this was due to changes in leadership during the year, which was exacerbated by the NSFAS been placed under administration.

4.2. Student-Centred Financial Aid

The aim of this programme is to improve the provision of financial aid to an increasing number of eligible students by implementing a new student centred operating model and enhancing the financial aid environment with policy recommendations for new financial aid programmes.

For the year under review, the programme had 12 predetermined targets, of which one (8.3 per cent) was achieved and 11 (91.7 per cent) were not achieved. The entity designed and implemented the process to record the date on which registration data is received from institutions and it continued to run during the 2019 academic cycle.

Summary of the targets that were not achieved included:

  • The target to raise R11 million from new funders was not achieved. This was attributed the signed Memorandum of Understanding (MoU) signed with the Insurance Sector Education and Training Authority (INSETA) not translating in the transfer of R4.598 million to the NSFAS.
  • The target to increase the amount of money recovered (Rand value) from the NSFAS debtors to R641 million was not achieved (actual achievement was R628 million with a deviation of 2.0 per cent). This was attributed to high consumer spending in December which resulted in a high number of unpaid debit orders in January 2019.
  • 80 per cent of all applications received by 30 November, where provisional funding decisions are communicated to applicants by 31 January each year. The NSFAS cited fraudulent SMS messages being sent to its beneficiaries and the decision to terminate the SMS services as causes for not achieving the target.
  • The targets to have 24 institutions where the NSFAS disburses allowances, directly to students was partially achieved. This was due to a decision taken by the executive to reconsider the payment mechanism by off boarding universities and on board TVET colleges which were not able to disburse allowance on their own.
  • 80 percent of students for which the first instalment of amounts due to the institution is paid within 30 days from loan agreement forms and schedule of particulars (LAF/SOPs) acceptance date. The achievement was 67 per cent. The underperformance was due to compromised data integrity due to manual payments which impacted reconciliation and disbursements.
  • 98 percent of the amounts due to institutions in respect on LAFSOP accepted by 30 November which are paid to institutions by 31 December each year. The actual achievement was 2.2 per cent below that target and this was attributed to compromised data integrity due to manual payments which impacted reconciliation and disbursements.








The following formed part of the observations and key findings:


5.1.       The National Student Financial Aid Scheme obtained a qualified audit opinion from the AG for the 2018/19 financial year. This is a second qualified audit opinion in two consecutive years. Of great concern is that areas of qualifications increased compared to the 2017/18.

5.2.       Irregular expenditure incurred by the entity increased significantly from R284 million identified in 2017/18 to R7.6 billion in 2018/19., mainly due to disbursements with respect to non-compliance to laws and regulations. Students were funded for courses that NSFAS does not fund and disbursements were processed against the incorrect funder. It is also concerning that the amount of irregular expenditure may increase as the processes of reconciliation are underway. It was also reported by the Auditor-General the entity did not investigate irregular expenditure in the past two financial years to identify those who are responsible for the irregularity and to implement consequence management.

5.3.       The financial loss amounting to R5.372 million in asset management fees due to the entity investing in institutions that are not approved by National Treasury was concerning.

5.4.       The disbandment of the audit committee delays by the Administrator in appointing the new committee was noted with concern, given that the entity required capacity to address the prior year audit findings and to strengthen internal controls of the entity.

5.5.       The lack of capacity by the majority of TVET colleges to administer disbursements of allowances to the NSFAS beneficiaries was concerning. Equally, the utilisation of funds meant for student allowances by college management for operations was of grave concern.

5.6.       Notwithstanding the progress made by the Administrator in stabilizing the entity, the Committee is concerned that there were still some challenges with students that were still not paid their allowances and students were left with less than a month to finish their exams. The non-payment of allowance may adversely impact on student performance.

5.7.       The Committee was seriously concerned about the utilization of book allowances for other things and the impact of this on student success rate.

5.8.       The current business model of the NSFAS is not adequately serving the needs of the beneficiaries.

5.9.       The poor performance of 12.5 per cent on predetermined targets for the 2018/19 was noted with serious concern. Similarly, the entity achieved 9 percent performance against its performance indicators in 2017/18. The NSFAS indicated that the causal factor for the underperformance was that the performance indicators were not developed in line with the AGSA’s specific, measurable, achievable, realistic and timely (SMART) principles, and plans were underway to correct this anomaly. Poor systems integration between the NSFAS and institutions which result in incorrect student enrolment data submitted to the NSFAS was noted as a concern.

5.10.     Concerns were raised with respect to the ICT system and its appropriateness to deliver on the NSFAS legislated mandate. The current ICT systems capabilities of the NSFAS were not reliable and sustainable to meet the entity’s legislated mandated. There were 510 instances of alleged fraud with respect to the NSFAS mobile wallet be handed over to commercial crime. The system is susceptible to fraud and corruption due to poor systems design.

5.11.     The entity experienced major problems with respect to human resource capacity constraints. The high staff turnover, especially at senior management level was noted as a serious concern, and the entity did not provide clear timeframes for the appointment of senior managers into permanent positions.



Section 29(1) (a)(b) of the South African Constitution guarantees everyone the right to basic education, including adult basic education; and the right to further education, which the state, through reasonable measures, must make progressively available and accessible. The NSFAS is one of the mechanism that the South African government has ensured that the right to further education is realized, by expanding access to education and training for student coming from poor and working class families. For the year under review, the entity had a total revenue amounting to R23.087 billion and the expenditure at the end of the financial year amounted to R26.058 billion. The recorded a deficit amounting to R5.045 billion. 


During the year under review, the entity received a qualified audit opinion with more areas of qualification, compared to the previous financial year, 2017/18. Cumulated irregular expenditure amounted to R7.6 billion. In terms of service delivery performance for the year under review, the NSFAS achieved two out of 16 predetermined targets. This represents an increase of 2.5 percent compared to 10 per cent achieved in 2017/19. Despite the challenges experienced in 2018/19, a significant progress has been made to stabilize the entity in ensuring that it executes its mandate effectively and efficiently.


The Committee expressed its support to the Administrator in his effort to stabilize NSFAS and undertook to continuously engage with the entity with a view of improving its performance. The Committee was concerned that almost every day fraudulent activities are being uncovered at the entity and it appears that the extent of fraudulent activities is unknown.



The Committee recommends that the Minister of Higher Education, Science and Technology consider the following:

7.1.       The National Student Financial Aid Scheme should develop an action plan to address the internal control deficiencies identified by the AG. Furthermore, the NSFAS should investigate the irregular expenditure and implement consequence management as per the PFMA requirements. The entity should report quarterly to the Committee on progress made in the implementation of the action plan.

7.2.       The NSFAS should update the Committee on new irregular expenditure identified during the reconciliation process.

7.3.       The NSFAS Administrator should expedite the establishment of a new audit committee and fast track the approval of policies and procedural documents in key areas of the NSFAS’ internal business processes and broader value chain.

 7.4.      The NSFAS and the TVET college management should address capacity challenges with regard to disbursement of student allowances by TVET colleges financial aid offices during 2020. The Department of Higher Education and Training and the NSFAS should ensure funding transferred to TVET colleges for student allowances is disbursed to student timeously and not utilized for college operations. Consequence management should be implemented against colleges that transgress the NSFAS rules and guidelines. 

7.5.       The Minister should expedite the process towards the establishment of a Ministerial Task Team to review the business processes of the Entity, which will make long term recommendations on the future models, structures, systems and business processes necessary for an effective NSFAS.

7.6.       The NSFAS should put mechanisms in place to address the causes of poor performance in both the programmes: Administration and Student-Centred Financial Aid.

7.7.       The ICT systems challenges should be given high priority, especially the weaknesses of cyber security systems and lack of integration between the NSFAS systems and that of universities and TVET colleges. In addition, the NSFAS should look into the possibilities of partnering with the Department of Science and Innovation (DSI) and the banking sector to develop a good data system.

7.8.       The Department in collaboration with the NSFAS should train the student representative council (SRC) leaders about the systems and operations of the NSFAS so that they will be better equipped to intervene when students need help.


Report to be considered.




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