The National Student Financial Aid Scheme (NSFAS) has once again come under scrutiny as the Auditor-General's (AG’s) office delivers a damning verdict on its 2021/2022 financial report.
The findings were disclosed during a briefing to the higher education portfolio committee on Wednesday, shedding light on NSFAS's financial state, funding disbursements for the 2024 academic year, and updates regarding the ongoing investigation into alleged corruption outlined in the Werkmans report.
The AG's report reveals a regression in NSFAS's audit outcomes compared to previous years, with the organisation receiving an adverse opinion, coupled with significant material findings on compliance with laws, regulations, and predetermined objectives.
One of the primary root causes identified is NSFAS's inadequate organisational capacity and systems to manage and sustain its exponential growth since 2018.
NSFAS has experienced a substantial increase in size and complexity between 2017 and 2022 which has resulted in a surge in funded students, revenue, and transactions and year-end reconciliation complexity.
The AG said despite recurrent internal control deficiencies over the years, NSFAS's functions continued to expand without addressing underlying weaknesses in systems, controls, and human resources adequately.
The adverse opinion on NSFAS's 2021/22 financial statements was attributed to material and pervasive misstatements, grouped into three categories: those impacted by the Collection of Provisions (COP), incorrect application of Generally Recognized Accounting Practices (GRAP) standards, and presentation errors.
The AG’s Ignatius Fourie emphasised the adverse audit's basis on unreliable financial statements provided by NSFAS, attributing this to poor systems and a lack of capacity within the scheme.
What an adverse audit means is that there were a number of material misstatements in the financial statements and the figures in the financial statements are not reliable. They are not fairly stated, and that’s the conclusion we reached, in terms of the financial statements
They explained that the absence of accurate measurement definitions and processes hindered the reliability testing of performance information. This led to the conclusion that the financial figures presented were not fairly stated.
The persistence of material findings underscores the urgency for NSFAS to address its systemic deficiencies promptly.
The AG's office has provided detailed recommendations to NSFAS management, the accounting authority, and the minister, categorised into short, medium, and long-term actions. These recommendations aim to assist NSFAS in structuring its audit action plan effectively.
The Short-term recommendation to NSFAS is to focus on internal root causes, conduct comprehensive reviews of financial statements, strengthen relationships with institutions and ensure full implementation of management intervention recommendations.
Medium-term recommendations include Revising and improving systems and processes, aligning NSFAS's mandate with existing regulations, developing and implementing Standard Operating Procedures (SOPs), and enhancing the capacity of the finance and ICT departments.
