NSFAS faces severe financial turmoil as Auditor-General issues critical disclaimer
The National Student Finance Aid Scheme, which has been placed under administration, has received a disclaimer of audit opinion for the 2024/25 financial year.
Image: Ayanda Ndamane / Independent Newspapers
The embattled National Student Financial Aid Scheme (NSFAS) has obtained a disclaimer of audit opinion for the 2024/25 financial year from Auditor-General Tsakani Maluleke.
In the report, which was tabled in Parliament this week, Maluleke did not express an opinion on the financial statements of the public entity.
“Because of the significance of the matters described in the basis for the disclaimer of opinion section of this auditor’s report, I was unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements,” she said.
The audit report was tabled days after NSFAS was placed under administration after some board members resigned amid reports of a fallout over the filling of the CEO post, and the entity is under investigation by the Special Investigating Unit.
Speaking on the disclaimer audit outcome, Higher Education Minister Buti Manamela said the road ahead for the entity remains challenging.
“The matters raised through the audit process require the entity to implement robust and targeted corrective actions that will drive improvements in accountability, as well as the accurate and reliable recording of information,” Manamela said.
He said the strengthening of the entity’s governance foundations was essential to restoring confidence in NSFAS and ensuring that it fulfilled its mandate effectively.
In her report, Maluleke could not determine the extent of the misstatement of bursary expenditure recorded at R45 billion.
NSFAS had recognised expenditure for students who were incorrectly funded and ineligible against the approved criteria, as required by the NSFAS Act for the year under review and the previous year. This prevented Maluleke from obtaining sufficient appropriate audit evidence for bursary expenditure.
The 2023/24 audit had not obtained sufficient audit evidence regarding payments to students by third-party service providers due to the litigation process.
“Consequently, I was unable to determine whether any further adjustments were necessary to the corresponding figure of bursary expenditure – universities and TVET, stated at R34,063 million and R6.213 million, respectively, disclosed in the financial statements.”
Maluleke could also not obtain sufficient audit evidence for student loans for 2024/25 and prior years.
The Auditor-General blamed the state of finances at NSFAS on the institution’s leadership and governance structures, including internal audit and the audit committee, which failed to ensure the entity maintained a responsive system of internal controls.
“The administrator and executive leadership did not enforce proper oversight over financial management, procurement, and contract administration.
“Persistent audit findings indicate a pattern of disregard for governance responsibilities, with management repeatedly failing to implement corrective actions from prior audits.”
Acting CEO Waseem Carrim blamed the situation on the deep-rooted challenges within their financial reporting processes, internal control environment, and data governance capabilities.
“NSFAS is implementing enhanced financial management measures, including the introduction of stronger internal controls, improved oversight mechanisms, and more frequent financial reviews and audits.
“In addition, the compliance function will be strengthened to ensure consistent adherence to financial policies, improve transparency, and reinforce accountability across the organisation,” said Carrim.
In her report, Maluleke also found that not all irregular expenditure was included in the financial statements as required by the Public Finance Management Act (PFMA).
“I was unable to determine the full extent of the irregular expenditure that occurred during the financial year and prior year, as it was impractical to do so,” she said.
NSFAS had recorded R405m in irregular expenditure.
Maluleke added that effective steps were not taken to prevent R37.8m in fruitless and wasteful expenditure.
“The majority of fruitless and wasteful expenditure was due to inadequate laptop asset management. Prepayments were made before services were received, in contravention of Treasury regulation,” she said.
The A-G stated that some goods and services were procured without obtaining at least three written price quotations in accordance with Treasury Regulation and supply chain management instructions.
“Goods and services of a transaction value above R1,000,000 were procured without inviting competitive bids and deviations were approved by the accounting officer, but it was practical to invite competitive bids.”
Carrim has outlined some of the interventions NSFAS will undertake to improve its audit performance.
“NSFAS intensified efforts to address governance and control weaknesses identified in prior periods, including those relating to systems, contract management, and consequence management.”