South Africa

As NSFAS finally submits its 2022/23 annual report, AG flags R60bn in irregular spending over four years

Minister of Higher Education and Training Dr Nobuhle Nkabane. (Photo: Fani Mahuntsi / Gallo Images)

4 Dec 2024

NSFAS finally presented its 2022/23 annual report to Parliament on Wednesday — a year late. The Auditor-General highlighted almost R60-billion in irregular expenditure incurred between 2019/20 and 2022/23.

The National Student Financial Aid Scheme (NSFAS) incurred almost R60-billion in irregular expenditure between 2019/20 and 2022/23, according to the Auditor-General of South Africa (AGSA).

Speaking in Parliament on Wednesday, 4 December, the AGSA’s Western Cape deputy business unit leader, Thomas Mamogwe, said most of the irregular expenditure incurred was related to disbursements made to students and NSFAS’s direct payments tender.

He was speaking in the Portfolio Committee on Higher Education and Training during NSFAS’s presentation of its 2022/23 annual report, which was submitted a year late.

NSFAS failed to timeously table its last two annual reports in Parliament and hasn’t yet submitted its 2023/24 financials. In November, Auditor-General Tsakani Maluleke noted that NSFAS, the South African Post Office and a number of other entities had not submitted their latest annual reports.

Read more: Auditor-General Maluleke welcomes uptick in audit outcomes, but cautions on culture of unaccountability

NSFAS irregular expenditure

NSFAS administrator Freeman Nomvalo was appointed in 2024 after the NSFAS board was dissolved. (Photo: OJ Koloti / Gallo Images)

During the last meeting of the year for the Portfolio Committee on Higher Education and Training on Wednesday, the AGSA revealed that between 2019/20 and 2022/23, NSFAS racked up almost R60-billion in irregular expenditure.

In the 2019/20 financial year, NFSAS had irregular expenditure of more than R25-billion. In 2020/21, irregular expenditure totalled more than R32-billion, in the following year it was close to R2-billion and in the long-awaited annual report of 2022/23, irregular expenditure of R136-million was noted.

Explaining what led to these irregularities, Mamogwe said: “[In 2019/20] that was when the eligibility criteria, in terms of who’s supposed to set the eligibility criteria was not clarified.

“That’s when the journey progressed in terms of setting that eligibility criteria… Therefore amounts that were not paid. [So] the whole budget became irregular because there was no clarity in terms of the prescription of the legislation,” Mamogwe said.

Financial eligibility criteria are used to assess prospective students applying for funding for the first time as well as continuing and returning students. Firstly, students must meet financial eligibility criteria, with a family income of no more than R350,000 a year.

The threshold was increased from around R120,000 in 2018 following former president Jacob Zuma’s unexpected announcement on free higher education for poor and working-class students on the eve of the ANC’s elective conference in December 2017.

NSFAS reportedly did not consult then-higher education minister, Blade Nzimande, when developing the new criteria and conditions for granting loans and bursaries to eligible students. It also failed to publish the revised criteria and conditions in the Government Gazette, resulting in irregular expenditure.

Regarding the R136-million irregular expenditure in 2022/23, Mamogwe said it partly related to the failure to properly constitute a bid adjudication committee regarding NSFAS’s controversial direct payment system.

He also noted NSFAS’s expensive rental of its Cape Town head office.

“There is an office lease tender where we found irregularities around the criteria that was set and was around R71-million. The R71-million is included in the balance that is reflected in the financial statement currently as the entity chose not to disclose it,” Mamogwe said.

He added that the Special Investigating Unit is currently investigating a number of issues at NSFAS.

Administrative problems

Minister of Higher Education and Training Dr Nobuhle Nkabane. (Photo: Fani Mahuntsi / Gallo Images)

Higher Education and Training Minister Nobuhle Nkabane said the late submission of the 2022/23 annual report was due to the delays caused by the dissolution of the NSFAS board and the appointment of the administrator early this year.

“The board was dissolved on account of its inability to submit a corrected annual report to Parliament, inability to address very serious and varying capacity deficiencies within the organisation and also inability to respond to those vulnerable people, the learners on their period, timely and efficiently,” said Nkabane.

Nkabane also highlighted issues with NSFAS’s ICT system, which has been a problem for the past year, despite the department setting aside R160-million for NFSAS to upgrade its system in 2021/22.

“I don’t know what is happening because when you look at the report; it is flagging these issues as one of the hindrances in us performing well,” Nkabane said.

NSFAS administrator Freeman Nomvalo said the organisation was struggling because of a lack of administrative resources.

“The insufficient allocation of resources and staffing is an issue on the administration side. NSFAS uses about 0.7% of the overall budget on administration and other institutions are using much higher than that amount. We do need to consider the possibility of that adjustment to enable some of this capacity that is essential,” Nomvalo said.

“I agree fully with the minister, R160-million is not a small change to have been invested and the impact of that investment not being realised in the ICT systems.”

NSFAS’s presentation said: “The existing IT infrastructure is inefficient and outdated, struggling to handle the volume of applications and transactions. This has led to inaccurate and incomplete data, causing delays and errors in verifying student information and funding disbursements.”

Appeals and staff shortages

AGSA senior manager Ignatius Fourie revealed to the committee that for the 2023 academic year, there were 195,487 NSFAS funding appeals.

“This is quite a number of appeals when you have a capacity and skills issue to deal with. There is duplication of appeals. A student can continue to lodge appeals even if they’ve got open appeals.

“At one stage, one student had 70 appeals, and there were 26,000 duplicate appeals. We also found that multiple workers are assigned to appeals, so on average appeals are dealt with by three to four workers,” Fourie said.

He added: “On average appeals remain open for 205 days, with the longest one being 464 days, which is more than a year. This means this was a student that was possibly waiting for funds.”

Read more: Student organisation calls on NSFAS to solve problems to ensure peaceful start to academic year

NSFAS board

NSFAS has been without a board since it was dissolved early this year. Nkabane assured the committee that the appointment of the NSFAS board is in its final stages.

Nkabane said: “We received 270 nominations for the appointment that I need to make. We have a master’s degree as a minimum requirement… We received over 55 nominations and PhD scholars across disciplines that are of interest in governance.

“We are now in the final stages of the appointment process because we want to make sure that we are compliant with the legislation.” DM

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Administrative problems