Auditor-General Tsakani Maluleke has laid bare the messy state of affairs of the beleaguered National Student Financial Aid Scheme’s (NSFAS) finances, which obtained an adverse audit opinion for 2021/22.
Her audit outcome deals another blow to the entity, which was forced to review the controversial direct payment of student allowances, suspend its chief executive Andile Nongogo and the resignation of senior staff including HR and IT heads.
Maluleke said NSFAS did not reliably present assets and liabilities, linked to higher education institutions, in accordance with Generally Recognised Accounting Practice (GRAP).
“The financial statements do not present fairly, in all material respects, the financial position of the NSFAS as at March 31, 2022, and its financial performance and cash flows for the year then ended in accordance with the Standards of Generally Recognised Accounting Practice (GRAP) and the requirements of the Public Finance Management Act (PFMA),” Maluleke said in her report.
She was unable to obtain sufficient appropriate audit evidence for all institutions’ cost-of-study records due to the records not being validated.
“I could not confirm this by alternative means.
“Consequently, I was unable to determine whether any further adjustments were necessary to amounts owing by institutions, stated at R8 837.8 million (2021: R5 435.3m) or amounts due to institutions, stated at R7 477.2 million (2021: R7 728.4m) in the financial statements.”
Maluleke was also unable to obtain sufficient appropriate audit evidence that unfunded students for the current and previous year had been properly accounted for due to the status of the accounting records.
She could not assess at the end of the reporting period, as well as for the prior year, whether there was objective evidence that unfunded students were impaired in accordance with GRAP 104 financial instruments.
“The entity did not consider the historic loss experience for assets with credit risk profile similar to those of unfunded students to impair the unfunded student balance.
“Consequently, receivables from non-exchange transactions are overstated and impairment understated for the current as well as the prior year. I could not determine the value of the misstatement.”
NSFAS did not disclose its commitment to fund eligible returning students in future years, as required by GRAP.
Maluleke said she was unable to confirm all irregular expenditure as sufficient appropriate audit evidence was not provided to confirm signed contracts existed between NSFAS and students for all payments made to students.
“I was unable to confirm this by alternative means. Consequently, I was unable to determine whether any further adjustments were necessary to the irregular expenditure stated at R84 392.1 million (2021: R82 397.2 million) in the financial statements.”
Maluleke put the blame of NSFAS’ sad state of finances on effective and appropriate steps not being taken to prevent irregular expenditure.
“As reported in the basis for adverse opinion, the value disclosed in the financial statements does not reflect the full extent of the irregular expenditure incurred. Most of the irregular expenditure disclosed in the financial statements was caused by the entity’s failure to sufficiently adhere to student funding conditions or stipulated criteria.”
The NSFAS board placed emphasis on arresting a wide spectrum of governance, ethical, resource allocation and optimisation lapses at NSFAS, according to board chairperson Ernest Khosa.
“While the entity was still plagued by some challenges arising from its period of being under administration, the Board has made many inroads in improving governance and stability within the entity,” Khosa said.
Nongogo had said the scheme’s focus was on maintaining stability and improving the control environment.
“In the year under review, the scheme reaffirmed its operational model – the Student Centred Model.
“Additionally, NSFAS revised its strategic plan to signal to provide value to its beneficiaries by considering the well-being of students holistically.”