NSFAS Under Scrutiny After Receiving Adverse Audit Report

The National Student Financial Aid Scheme (NSFAS) in South Africa has been hit with an adverse audit outcome for the 2021/22 financial year, as revealed by the Auditor-General Tsakani Maluleke. The negative report is yet another setback for NSFAS, an entity already in turmoil due to internal management issues and controversies surrounding student funding.

Auditor-General Maluleke detailed the NSFAS's failure to present its assets and liabilities accurately, connected with higher education institutions, as per the Generally Recognised Accounting Practice (GRAP). This misrepresentation significantly impacts the transparency and reliability of financial statements required under GRAP and the Public Finance Management Act (PFMA).

The audit report exposed the inability of NSFAS to provide sufficient evidence for the validation of costs related to various institutions' study programs, leaving the entity unable to confirm whether additional adjustments to the amounts owed or due to institutions were necessary. Amounts owing by institutions were stated at R8 837.8 million for 2022, up significantly from R5 435.3 million in 2021, indicating a concerning increase in financial uncertainty.

Another area of concern highlighted by the Auditor-General is the inadequate accounting for unfunded students. NSFAS's records did not align with GRAP 104 financial instruments, resulting in an overstatement of receivables from non-exchange transactions and an understatement of impairment for both the current and previous years.

Moreover, NSFAS failed to properly disclose its commitments to funding eligible returning students in the coming years, contrary to GRAP requirements. The inability to validate all irregular expenditure due to absent evidence of contracts between NSFAS and the students further added to the questionable state of the financial records, with irregular expenditure reported at R84 392.1 million for 2022, a marginal increase from R82 397.2 million in 2021.

The Auditor-General attributed the dismal state of NSFAS's finances to ineffective preventive measures against irregular expenditure, resulting in an unclear full extent of the financial irregularities.

In response to the audit findings, NSFAS board chairperson Ernest Khosa emphasized the board's commitment to address the wide range of governance, ethical, and resource allocation issues. Despite challenges inherited from a previous period of administrative control, efforts to improve governance and enhance stability within the organization have been reported.

Former NSFAS CEO, Andile Nongogo, had focused on maintaining stability and bettering the control environment. The scheme had reaffirmed its operational model—the Student Centred Model—and revised its strategic plan, aiming to holistically consider the well-being of funded students.

The NSFAS board and management's initiatives reflect a commitment to rectifying the current issues. As NSFAS works through internal restructuring and attempts to rebuild trust in its processes, the Auditor-General's findings necessitate swift and decisive action to ensure the integrity and sustainability of student funding in South Africa.