Picture: Motshwari Mofokeng

Cape Town - The Auditor-General Kimi Makwetu has found that the National Student Financial Aid Scheme (NSFAS) did not take effective steps to prevent irregular expenditure as required by the Public Finance Management Act.

This happened as NSFAS made overpayments totalling R503.34 million to students above the amounts stipulated in the loan agreements.

In an annual report tabled to Parliament last week, NSFAS disclosed R303.547m in irregular expenditure in the 2017-18 financial year.

The excess payments and irregular payments were made when Sizwe Nxasana, who resigned in August, was the chairperson of the board.

Nxasana was brought onto the board in August 2015 as the student scheme battled for three financial years to meet its own target of an unqualified audit opinion with findings.

In the year under review, NSFAS obtained a qualified audit opinion with findings - regressing from the unqualified audit opinion of the prior year.

Makwetu said he was unable to obtain sufficient, appropriate audit evidence to determine the correct carrying value of R10.31 billion student loan book.

"Consequently, I was also unable to determine the impact of the actuarial valuation on the social benefit component, impairment adjustments and carrying value of the student loan book," he said.

Makwetu also said effective steps were not taken to prevent irregular expenditure as required by the Public Finance Management Act.

"The full extent of the irregular expenditure could not be confirmed as indicated in the basis for qualification paragraph."

He found that the leadership at NSFAS did not exercise sufficient oversight responsibility regarding financial reporting and compliance as well as internal controls through ensuring disbursements of loans were not made above the loan and bursary agreement amounts.

"Effective systems of internal control and monitoring thereof were not properly implemented for the administration of student loans and bursaries, which led to overspending on loan and bursary agreements in non-compliance with the NSFAS Act."

Makwetu also said management did not prepare regular, accurate and complete performance reports that were supported by reliable schedules and source documentation.

Suspended chief executive Steven Zwane confirmed in the annual report that payments in excess of contract amounts were made resulting in irregular expenditure.

"The external auditors were unable to verify the extent of payments made in excess of contract amounts resulting in a qualification of the audit opinion."

Zwane said NSFAS disbursed the correct amount claimed by universities per the registration templates for 2017 academic year but did not update contracts to reflect the revised funding.

"NSFAS should have and will issue addendums to the contracts for the affected students to reflect the correct funding required."

In its annual report, NSFAS explained that students apply for funding once.

"When funding is approved, NSFAS estimates the total funding required for the duration of study using data submitted by institutions. Students are required to sign a contract which indicates the total amount awarded for the duration of study."

It said it transferred funds to institutions using registration data that indicated required funding.

However, when the student-centred model was introduced, students previously not on the model were required to sign contract with the scheme for first time.

"During the process contract amount for several students were incorrectly generated," the annual report said.

"In other instances, the original estimate, based on information available to NSFAS at the time, turned out to be lower than the total disbursement required to meet the obligation of respective students."

Zwane, however, insisted that they implemented supply chain management processes and systems, treasury regulations and tender policies.

"The entity is pleased to report that there were no audit matters relating to supply chain management in the current year and the prior year," Zwane said.

Political Bureau