Auditor-General Tsakani Maluleke has revealed the dire financial state of the embattled National Student Financial Aid Scheme (NSFAS), as it received an adverse audit opinion for the fiscal year 2021/22.
An adverse audit opinion means that NSFAS' financial statements contain material misstatements that are not confined to specific amounts, or the misstatements represent a substantial portion of the financial statements.
Maluleke's findings dealt another blow to the organisation, prompting a review of its controversial direct payment of student allowances, the suspension of CEO Andile Nongogo, and the resignation of senior staff, including heads of HR and IT.
They highlighted that NSFAS failed to reliably present assets and liabilities associated with higher education institutions. This is in violation of the Generally Recognised Accounting Practice (GRAP) standards.
The financial statements do not present fairly, in all material respects, the financial position of the NSFAS.
The auditor was unable to validate cost-of-study records for all institutions, leading to uncertainties about the accuracy of amounts owed by and to institutions.
Furthermore, Maluleke expressed concern about the lack of appropriate audit evidence regarding the accounting for unfunded students and the impairment of their balances.
The entity did not consider the historic loss experience for assets with a credit risk profile similar to those of unfunded students.
Maluleke pointed out that NSFAS did not disclose its commitment to funding eligible returning students in future years, as required by GRAP.
Irregular expenditure also came under scrutiny, with the auditor unable to confirm signed contracts between NSFAS and students for payments made, leading to uncertainty about the accuracy of the reported irregular expenditure.
Maluleke attributed NSFAS's financial woes to a failure to take effective and appropriate steps to prevent irregular expenditure.
The value disclosed in the financial statements does not reflect the full extent of the irregular expenditure incurred.
The NSFAS board chairperson Ernest Khosa acknowledged governance, ethical, and resource allocation lapses within the organisation.
Khosa defended the board's efforts to address challenges stemming from NSFAS's period under administration, stating, "The Board has made many inroads in improving governance and stability within the entity."
NSFAS said significant delays were experienced in concluding the compilation of Annual Financial Statements (AFS) and the audit for the 2021/22 financial period.
The main reason for the delay was to allow NSFAS to complete the financial close-out process for the academic years 2017 to 2021. They explain that it related to the reconciliation process between NSFAS and institutions and was done at a detailed level.
The audit was, however, concluded on 31 July 2023. The 2021/22 Annual Report was presented to the Board and approved during the meetings scheduled in October 2023.
NSFAS said the 2022/23 audit is yet to commence in 2024. As a result of the delay in concluding the 2021/22 audit and the impact on the opening (roll forward) balances of 2022/23, NSFAS requested that the AFS submission be delayed to allow sufficient time to include remediations for findings identified.
The 2022/23 AFS is to be submitted to the AGSA in January 2024, after which the audit will commence. The Annual report for the 2022/23 financial year is therefore expected to be concluded by 31 July 2024
