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By Thapelo Molefe
The Auditor-General of South Africa has delivered a damning report on the state of the National Student Financial Aid Scheme (NSFAS), revealing staggering levels of irregular expenditure and governance lapses for the 2022/23 financial year.
Briefing the Portfolio Committee on Higher Education in Parliament this week, the AG’s Thomas Mamogwe, highlighted deep rooted issues in financial management, compliance and performance reporting, casting a shadow over the institution’s ability to fulfil its mandate of funding South African students.
Irregular expenditure has been a recurring problem for NSFAS, with the AG reporting a cumulative amount of R84 billion. The actual figure may be even higher due to incomplete disclosures.
“The R84 billion reported is not the full picture,” explained Mamogwe, who is the deputy business unit leader for the AG is the Western Cape.
“We identified significant gaps in the completeness of this amount, which means there could be more irregularities that have yet to be accounted for.”
Over the years, significant irregularities have been recorded, including R25 billion incurred in 2019/20 and R32 billion in 2020/21.
However, the 2022/23 financial year saw a reduction to R136 million, indicating some progress in addressing these issues.
Among the most significant findings were irregularities linked to two tenders – one for direct payments and the other for an office lease tender. Both are riddled with governance and compliance violations.
“In one instance, the bid adjudication committee was not properly constituted, which directly contravenes procurement regulations,” Mamogwe said.
The AG issued an adverse audit opinion on NSFAS’s financial statements, citing major discrepancies. Among these were R10 billion in amounts owed to institutions and R11 billion in amounts owed by institutions.
These discrepancies stemmed from the close-out project, a process designed to reconcile payments and allocations dating back to 2017.
“The close-out project is crucial for NSFAS to account for its spending accurately,” Mamogwe explained.
“While some progress has been made, the project remains incomplete, and this has led to significant qualifications in our audit findings.”
In addition to financial mismanagement, the AG identified serious issues with NSFAS’s performance reporting and compliance. Material findings included unsupported claims about key performance indicators and a lack of explanations for discrepancies between targets and outcomes.
“The institution would report certain achievements, but when we asked for supporting evidence, it was either inadequate or missing entirely,” said Mamogwe.
“This lack of transparency undermines NSFAS’s credibility.”
Compliance issues extended to the late submission of financial statements and ineffective revenue collection. Supply chain management violations were another area of concern.
“Contracts were awarded based on criteria not stipulated in the original tender documents, which is a clear breach of procurement rules,” Mamogwe explained.
AGSA attributed many of NSFAS’s challenges to systemic weaknesses, including outdated manual systems, insufficient IT infrastructure, and a lack of skilled personnel.
“The scheme has grown significantly over the years, but its systems and capacity have not evolved to meet the increased demand,” Mamogwe said.
He also criticised the institution’s leadership for inadequate oversight.
“There was a failure to properly monitor and address these issues at a governance level, which has compounded the problems.”
NSFAS remains under investigation by the Special Investigating Unit as part of Proclamation R88 of 2022. The SIU is tasked with probing allegations of irregularities, including those related to direct payment service providers.
“This investigation is ongoing, and its findings will be critical in addressing the root causes of these issues,” Mamogwe remarked.
Despite the grim findings, the AG’s office has acknowledged some progress in NSFAS’s efforts to improve governance and transparency.
“We have seen some improvements, particularly in addressing manual payments and implementing credibility checks,” Mamogwe noted.
“However, there is still a long way to go.”
Committee chairperson Tebogo Letsie said the adverse findings were scary to say the least.
“It cannot get lower than this. The financial statements are bad. We now understand why the 2022/2023 report was late. It does not look good,” Letsie said
NSFAS administrator Sithembiso Freeman Nomvalo updated MPs on efforts to improve operations, including establishing a disbursements unit and appointing a manager to oversee annual internal reconciliations.
“We’ve added capacity for data validation and are institutionalising periodic reconciliations to reduce reliance on external service providers,” said Nomvalo.
He also highlighted the development of a real-time dashboard to track disbursements, which was currently in testing, and plans to withhold payments to institutions when necessary.
Addressing audit concerns, Nomvalo noted improved contract management and significant progress in the NSFAS’s digital transformation, with 62% of its ICT strategy implemented.
“Continuous improvements remain a priority,” he added.
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