national government of south africa - annual report 2018/2019 · 2019. 12. 6. · 4 2. demographics...

National Student Financial Aid Scheme

ANNUAL REPORT2018/2019

Section 17(A)-(D) Intervention:The public entity under Administration

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Who applied for NSFAS?(for the 2018/19 financial year)

NSFAS has shown considerable improvements since the appointment of the Administrator. Stakeholders expressed gratitude:

• Motion to congratulate the Administrator was tabled in the NCOP• Message of appreciation was received from University Vice-Chancellors

Northern Cape 2%

Western Cape 8%

Eastern Cape 12%

KwaZulu Natal 24%

Mpumalanga 8%

Free State 6%

North West 5% Gauteng 22%

Limpopo 13%

1. Applications

Disproportioned uptake of NSFAS across the country with variations in the demographics.

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2. Demographics

African

Coloured

White

Indian/Asian

95.1%

84.2%

3.8%

8.2%

0.7%

5.4%

0.4%

2.2%

In 2018 a total of 604 114 students met both the academic and financial eligibility criteria to benefit from the DHET Bursary Scheme, administered by NSFAS.

The proportion of African students is 14% higher than the proportion of Africans in South African society. Coloured, White and Indian students are all underrepresented, compared to society by, 5%, 7.3% and 2.6%, respectively. The overwhelming majority of 2018 NSFAS funded students are under the age of 35 (95%), with a small proportion being over the age of 35 (5%).

61.4% 372 617 were female

234 512 were male38.6%

NSFAS Funded 15 - 34 demographic cohort

FY 2018FY 2017

R9,9bn

R1,0bn

R0,8bn

R0,8bn

R12,5bn

R9,8bn

R1,1bn

R0,4bn

R0,2bn

R14,9bn

R1,1bn

R0,2bn

R0,2bn

DHET

DBE

NSF

Other

R11,5bn

R16,4bn

FY 2019

3. Grants Received

37,7% The univerisities grants for student financial aid allocation increased by 37,7% in the 2018/19 financial year from R9.8 billion in the 2017/18 financial year.

R4.6 billionincrease in the DHET universities allocation from the prior year.

DBE is the second largest contributor to student funding followed by NSF. DBE funding has remained at about the same levels over the last three years whilst funding for NSF has decreased by R0.2 billion (50%). Other funding includes contributions from SETAs, other South African Government departments and Universities.

The TVET grants for student financial aid allocation increased by 111,8% in the 2018/19 financial year from R2.4billion in the 2017/18 financial year.

Part One

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TABLE OF CONTENTS

PART 1: GENERAL INFORMATION i. General Information 10ii. Abbreviations 11iii. Statement by the Executive Authority 14iv. Foreword by the Accounting Authority 18 1. About NSFAS 202. Mandate 213. Strategic Framework 224. NSFAS Mandate Within Key Current Policy Frameworks 225. Legislative and Other Mandates 236. Organisational Structure 26

PART 2: REPORT OF THE ADMINISTRATOR 1. Introduction 342. Performance against Terms of Reference of the Administrator 353. De-Risking NSFAS 404. Restoring Public Trust and Confidence 425. Areas of Focus for the Next Term of Administration 43

PART 3: PERFORMANCE INFORMATION Statement of Responsibility for Performance Information 47 1. Service Delivery Environment 482. Key Policy Development and Legislative Changes 513. Strategic Outcome Oriented Goals 534. Performance Information by Programme 565. Strategies to Overcome Areas of Under-performance 686. Linking Performance with Budgets 717, Revenue Collection 71

PART 4: GOVERNANCE 1. Introduction 74 2. Committees of Parliament 753. Executive Authority 754. The Board 755. Governance Structures for the Period Under Administration 806. Report on Audit and Risk Matters 82

PART 5: HUMAN RESOURCE MANAGEMENT 1. Introduction 882. Achievements and Challenges 893. Human Resource Oversight Statistics 934. The Year Ahead 95

PART 6: FINANCIAL INFORMATION Accounting Authority Statement of Responsibility and Approval 98 Report of the Auditor-General 100Report of the Accounting Authority 106Statement of Financial Position 116 Statement of Changes in Net Assets 118Cash Flows Statement 119Statements of Comparison of Budget and Actual Amounts 120Accounting Policies 123Notes to the Annual Financial Statements 141Supplementary Information 174

In this section

In this section

PART 1: GENERAL INFORMATION

i. General Information 10ii. Abbreviations 11iii. Statement by the Executive Authority 14iv. Foreword by the Accounting Authority 18 1. About NSFAS 202. Mandate 213. Strategic Framework 224. NSFAS Mandate Within Key Current Policy Frameworks 225. Legislative and Other Mandates 236. Organisational Structure 26

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Country of incorporationand domicile

Nature of business andprincipal activities

Registered office

Business address

Postal address

Bankers

Auditors

Website Address

Republic of South Africa

The nature of the activities of the entity is to provide financial assistance in the form of loans or bursaries to eligible students at public higher education institutions and Technical and Vocational Education and Training (TVET) colleges, to administer such loans and bursaries, and to recover the loans from the students once they are employed and earning in excess of R30,000 per annum. Following the announcement of the new bursary funding programme by the former President of South Africa in December 2017, financial assistance to all eligible students is now in the form of bursaries from the 2018 academic year.

18 - 20 Court RoadWynbergCape Town7800

2nd Floor House VincentWynberg Mews10 Brodie RoadCape Town7800

Private Bag X1PlumsteadCape Town7801

FNB Corporate Bank (Cape Town) a division of FirstRand Bank LimitedStandard Bank of South Africa LimitedAbsa Bank Limited a subsidiary of Barclays Africa Group Limited

Auditor-General of South Africa

www.nsfas.org.za

General Information

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AFS Annual Financial StatementsAGSA Auditor - General of South AfricaAIP Audit Improvement PlanAOPO Audit of Predetermined ObjectivesAPP Annual Performance PlanASB Accounting Standards BoardASISA Association for Savings and Investment South AfricaBBBEE Broad-Based Black Economic EmpowermentCAMS Corporate Access Management ServicesCACH Central Application Clearing HouseCFO Chief Financial OfficerCGICTAS Corporate Governance of Information and Communications Technology Assessment StandardsCIO Chief Information OfficerCOO Chief Operating OfficerCRO Chief Risk OfficerCSIR Council for Scientific and Industrial ResearchDBE Department of Basic EducationDHET Department of Higher Education and TrainingDMV Department of Military VeteransDSU Disability Support UnitECPG Eastern Cape Provincial GovernmentEEA Employment Equity ActEES Employment Engagement SurveyEME Exempted Micro EnterprisesEO Executive OfficerESS Employee Self-ServiceETDP Education, Training and Development PracticesEXCO Executive Committee EXMA Executive ManagementFRM Funder Relationship ManagementFTENs First Time Entering StudentsGIP Graduate Internship ProgrammeGM General ManagerGRAP General Recognised Accounting PracticesHE Higher EducationHR Human ResourcesICT Information and Communication TechnologyIT Information TechnologyKPI Key Performance Indicator

Abbreviations

LRA Labour Relations ActMEC Member of the Executive CouncilMOU Memorandum of UnderstandingMTEF Medium-Term Expenditure FrameworkMTSF Medium-Term Strategic Framework NBA NSFAS Bursary AgreementNCA National Credit ActNCOP National Council of ProvincesNCR National Credit RegulatorNCV National Certificate (Vocational)NDP National Development PlanNOCLAR Non-Compliance to Laws and Regulations NSDS National Skills Development StrategyNSF National Skills FundNSFAS National Student Financial Aid SchemeOHSA Occupational Health and Safety ActPACS Payment and Collection ServicesPAIA Promotion of Access to Information ActPAJA Promotion of Administrative Justice ActPCHET Portfolio Committee on Higher Education and TrainingPFMA Public Finance Management ActPIC Public Investment CorporationPPPFA Preferential Procurement Policy Framework ActPSET Post School Education and TrainingQSE Qualifying Small Enterprises RMA Rand Mutual AssuranceSAICA South African Institute of Chartered AccountantsSAMSA South African Maritime Safety AuthoritySAQA South African Qualifications Authority SARS South Africa Revenue ServiceSCER The Select Committee on Education and RecreationSCM Supply Chain ManagementSCOPA Standing Committee on Public AccountsSETA Sector Education and Training AuthoritySIEM Security Event and Incident MonitoringSOP Standard Operating ProceduresSRC Student Representative CouncilTEFSA Tertiary Education Fund of South AfricaToR Terms of ReferenceTR Treasury RegulationsTVET Technical and Vocational Education and TrainingUIF Unemployment Insurance Fund

NATIONAL STUDENT FINANCIAL AID SCHEME ACT (ACT 56 OF 1999 AS AMENDED)

THE APPOINTMENT OF AN ADMINISTRATOR FOR THE NATIONAL STUDENT FINANCIAL AID SCHEME

I, Ms Naledi Pandor, MP, Minister of Higher Education and Training, in terms of Sections 17A to 17D of the National Student Financial Aid Scheme Act (Act 56

of 1999, as amended) hereby appoint Dr Randall Carolissen as an Administrator for the National

Student Financial Aid Scheme (NSFAS) for the period 21 August 2018 to 20 August 2019. The terms of

reference for the Administration are attached hereto.

GOVERNMENT GAZETTE (No 41851 Vol. 638), 21 AUGUST 2018

Mrs GMN Pandor, MPMinister of Higher Education and Training

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Another milestone was the change from a combination of loans and bursaries, to a phased-in fully-subsidised DHET bursary going forward.

These changes required substantial changes in NSFAS operations and systems. The pronouncement also made provision for continuing students who are funded by NSFAS and initially registered before 2018 to have their loans converted into bursaries from 2018 onward. These changes were also linked to a government commitment to increasing spending on universities at a percentage of the Gross Domestic Product (GDP) from 0.68 to 1% over the following five years.

Section 17A - D intervention

I would like to acknowledge the good work done by my predecessor, Dr Naledi Pandor, former Minister of Higher Education and Training, who worked with the NSFAS Board and convened special Board meetings to look at interventions to address the urgent matters facing NSFAS post the 2017 policy shift.

As a public entity under the Department of Higher Education and Training, NSFAS is managed, governed and administered by the NSFAS board, with the Minister as the Executive Authority. The Minister is responsible to provide for the establishment and governance of NSFAS, as well as to exercise oversight in terms of the PFMA. The performance of the entity under the new policy shift forced the Board of NSFAS, under section 17A (1) (c) of the NSFAS Act (Act 56 of 1999), to request the Minister of Higher Education and Training to place the public entity under administration. This followed close engagement by the Minister and the Department who had raised serious concerns about the performance of NSFAS over several years.

The concerns included the weak integration of NSFAS systems with universities and colleges and the limited mitigating strategies at both NSFAS and institutions. There were also problems with the high number of students who could not sign their new bursary agreements.

The Department of Higher Education and Training, led by the Director-General, worked with the NSFAS Board to engage with the management of the universities and TVET colleges where there seem to be challenges delaying the implementation of the new policy.

Statement by the Executive Authority

Government’s higher education intervention

The 2018/19 financial year marks the second year since the introduction of fully subsidised higher education and training for young people from poor and working class backgrounds . It is the South African government’s second year of implementing the five-year plan of phasing in the new DHET bursary scheme, through the National Student Financial Aid Scheme (NSFAS).

The fully subsidised education and training for the poor is a flagship higher education intervention of the South African government. Over the next few years, the government will spend billions of rands to ensure that all deserving students from poor and working-class families are able to access higher education and training and obtain their qualifications at universities and TVET colleges.

It is my pleasure to report to Parliament the progress made by NSFAS, which is a public entity reporting to the Department of Higher Education and Training in the implementation of the government bursary scheme. The decision made by the government in December 2017 has resulted in a significant policy shift and has meant various changes within the South African post-school education and training sector. One of the key achievements of government was to increase the threshold from R122 000 to R350 000 per household income for recipients of NSFAS entrants from 2018 onwards.

Part One

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The internal audit assessment of the controls within and around the disbursement process were noted with many significant and serious control weaknesses that amounted to an inadequate state of control. These weaknesses were severe, given that controls could be bypassed, unauthorised or erroneous payments were possible, and fraudulent activity could remain unnoticed.

The qualified Report of the Auditor-General of South Africa (AGSA) on the annual financial statements, and the Non-Compliance to Laws and Regulations (NOCLAR) Report of the internal auditors issued in July 2018, highlighted material non-compliance to S51 of the PFMA.

To address some of these challenges, there was enough evidence that there was an urgent need to reform the entity and place the care of its day to day running under the leadership of an Administrator. The findings from various engagements indicated a collapse in governance and a high risk of fraud in the NSFAS environment. For the first time, there was a clear indication that the Scheme was under extreme strain to deliver on its mandate.

The resignation of the Board Chairperson, Mr Sizwe Nxasana, and Board member, Professor Themba Mosia was a further indication that something had to be done to relook into the future of the entity, for it to operate optimally. After careful consideration, the Minister acceded to place NSFAS under administration and Dr Randall Carolissen was appointed as Administrator for the period 21 August 2018 to 20 August 2019. In August 2019, after consultation with stakeholders, I decided to reappoint Dr Randall Carolissen for a second term as NSFAS Administrator from 21 August 2019 to 20 August 2020. Amongst other things that were considered for the reappointment of Dr Carolissen, were the need for stability at NSFAS during this period of focus on delivering on NSFAS’ core mandate and the success of the Administration team in addressing the core problems at NSFAS. Notably was the requirement to pay students correctly and on time, and building strong relationships with institutions. His leadership and management experience as well as high level technical skills and his understanding of the South African higher education.

I will be establishing a Ministerial task team to review the core business processes and systems of NSFAS, with a view to informing the work of the entity into the future.

The team will take into account work that has already taken place during the period of Administration since August 2018.

The Ministry conveys sincere gratitude to Dr Randall Carolissen, his team of experts, and NSFAS staff, for the great amount of work put in, to ensure stability and continuity to access higher education through provision of bursaries.

I would like to thank the Administrator and his team for agreeing to continue with the second phase of Administration, and the staff at NSFAS who have kept the focus on the core mandate of the entity. I also extend my gratitude to former Minister Dr Naledi Pandor for her stewardship of the entity at a difficult time, the Deputy Minister Buti Manamela and the Director-General of the Department of Higher Education and Training, and his team for the support to the Ministry and the NSFAS.

Let us all work together to ensure that the government’s flagship higher education intervention becomes a success.

Dr Blade NzimandeMinister of Higher Education, Science and Technology

Part One

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NATIONAL STUDENT FINANCIAL AID SCHEME ACT (ACT 56 OF 1999 AS AMENDED)

THE APPOINTMENT OF AN ADMINISTRATOR FOR THE NATIONAL STUDENT FINANCIAL AID SCHEME

I, Dr Bonginkosi Emmanuel Nzimande, Minister of Higher Education, Science and Technology, in terms

of Sections 17A to 17D of the National Student Financial Aid Scheme Act (Act 56 of 1999, as

amended) hereby appoint Dr Randall Carolissen as an Administrator for the National Student Financial Aid Scheme (NSFAS) for the period 21 August 2019 to 20 August 2020. The terms of reference for the

Administration are attached hereto.

GOVERNMENT GAZETTE, 22 AUGUST 2019

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At the time of the appointment of the Administrator, nobody had anticipated the degree of dysfunctionality of NSFAS or the pervasiveness of maladministration and the great rot that ensconced itself in the system. Short-term objectives: Clearing historic administrative backlogs, specifically focussing on debilitating and destabilising issues at campuses throughout the higher education sector pertaining to the 2017 and 2018 academic year; Medium-term objectives: Stabilising the operations of NSFAS for successful execution of 2019/20 and 2020/21 financial years; Long-term objectives: Establish an inter-ministerial task team to develop a new governance framework and operating model for NSFAS, review all systems to improve articulation and integration with the post-school education and training system and establish research capacity to leverage NSFAS intellectual capital to more effectively shape policy in the higher education sector.

A strategic risk assessment surfaced the burning platform issues and with the formulation of the key strategic projects, key technical skills had to be recruited on a contract basis within a reprioritised budget. ICT systems were stable, improved controls were embedded in business processes, key policies, procedures and system access reviewed in a bid to de-risk the environment. Key financial and operational oversight was implemented, including the introduction of a reconciliations team. Data management processes were improved, together with enhanced data integration capabilities for data exchange with institutions.

In 2017 NSFAS commissioned an investigation into the sustainability to the Information, Communications and Technology (ICT) system and its appropriateness to deliver on the NSFAS legislated mandate. Price Waterhouse Coopers (PwC) were requested to deliver an IT Capability Assessment in order to assist the NSFAS Executive team in understanding whether the ICT function was equipped with the right capabilities to support the NSFAS organisation into the future. The engagement was initiated by defining the IT Mandate and IT Strategic Objectives. These were developed by referencing PwC best practice, reviewing various materials (e.g. NSFAS value chain, 2018 Applications Plan, etc.), forming an understanding of the organisation's strategic intent and workshopping the topic with the NSFAS Executive team.

Having an understanding of the IT Mandate, Strategic Objectives and the recommended IT Delivery Programme, PwC developed a recommended Target Operating Model (TOM) and set of capabilities for NSFAS ICT. The TOM represents the structure and capabilities required for NSFAS ICT to meet their mandate and deliver on the defined strategic objectives. Limited recommendations were implemented and hence the identified vulnerabilities remain. This report had been analysed and will be used to inform the work of the contemplated Ministerial Committee that will review all systems of NSFAS.

Foreword by the Accounting Authority

In August 2018, NSFAS was in a chronic state of maladministration with extremely poor achievements against legislated mandate and key performance indicators. In 2018 the majority of students went unfunded for periods of up to eight months, causing considerable hardship and disruption in the higher education sector. Critical governance processes failed, a climate of non- compliance to statutory reporting was prevalent, decentralised and disaggregated decision-making prevailed, an unfavourable organisational climate, and culture of entitlement stymied service delivery. ICT systems failed on a spurious basis and the overall systems hardware was (and remain) not fit-for-purpose, business process workarounds for ICT automation failures and system errors were to a great extent, the order of the day. Relevant process documentation did not exist for core business processes.

The irregular expenditure disclosed in this annual report as it pertains to 2017 and 2018, exceeds R7 billion. This extremely large error rate in student accounts and the funding of ineligible courses which were prevalent in the prior two years have been arrested in 2019 through the implementation of controls in the now automated exchange of registration data with institutions.

The agenda of the Administrator was shaped by the Terms of Reference of the Administrator as gazetted August 21, 2018.

Dr Randall CarolissenNSFAS Administrator

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These interventions eventuated in a relatively stable conclusion of the 2018 financial year with more than 600 000 students having received their funding. In the process NSFAS finalised more than 100 000 unsigned student contracts, releasing outstanding disbursements to this cohort. A further 150 000 students previously unaccounted for, were traced through NSFAS reconciliations of accounts at campus level. More than R21billion of the R22billion budgeted for the 2018 funding cycle, was released by NSFAS to students and institutions. Concurrent with the clearance of 2017 and 2018 administrative backlog, preparations for the 2019 application cycle proceeded in the final quarter of 2018. Several innovations and enhancements in administrative efficiencies were introduced which include: • The early release of the funding rules and guidelines

which brought policy certainty to the sector and the unburdening of commercial interests from the disbursement process. The introduction of cash payments to students with the scrapping of the voucher systems initially caused some alarm in the sector concerning the maturity of students to manage their own financial affairs.

• Significant progress towards the standardisation of allowance and improving equity between TVET and Universities;

• Real time exchange of NSFAS and registration data from institutions with considerably faster turnaround times;

• Timeous rollout to and training of officials and student leadership across the Higher Education sector on the protocol applicable to the 2019 academic year;

• Extensive outreach and marketing campaign; • A massive drive to online applications and web-based

portals for student accounts; • Introduction of toll-free call centre access;

This is reflected in the much-improved statistics for the 2019 application cycle: • Record amount of first-time applications for NSFAS

funding of up to 450 000 was achieved by the close of the application window on 30 November 2018;

• A further 160 000 TVET walk-in applications in January 2019 was processed in real time;

• Processing of all submitted applications by January 2019 and a review of 100 000 applications initially rejected by the system assisted institutions to enrol NSFAS eligible students without having to charge registration fees;

• Processing and awarding of NSFAS funding to social grant beneficiaries which has increased from 48 000 in 2018 to 69 000 in 2019;

• Disbursements to 450 000 students upon registration data received, prior to the end of March 2019. This is the first time in the history of NSFAS that payments were processed in the first quarter of the academic year.

Despite the achievement of the relative stability within NSFAS, pressing challenges remain: • The administrative capacity of TVET colleges, coupled

with the neglect of this sector within NSFAS, compelled the introduction of a cellphone activated NSFAS Wallet. Initially this measure was aimed at only 6 colleges but quickly ballooned to 26 colleges, significantly increasing costs to NSFAS. Sufficient progress had been achieved to move the entire TVET student allowances, to direct payments into bank accounts by the commencement of the 2020 academic year.

• The intensity and range of forensic investigations that became necessary, placed a huge burden on the administrator and his team and caused organisational distress. Further uncertainty is inevitable as accountability is established.

• The exiting of the executive leadership drew the administrator and his team into operational management and a key challenge would be to appoint a new executive team and ensure an effective transfer of authority and governance.

• Reconciliation and auditing of accounts at institutional level remain onerous and additional capacity at NSFAS is an imperative. Issuance of student account statements on a monthly basis would be the desirable end state to ensure predictability and cashflow planning is achieved throughout.

• Notwithstanding the fact that the ICT systems and data management achieved some stability and reliability, a complete re-architecture is necessary to ensure ongoing administrative sustainability.

• An internal audit report accurately portrays the Human Resources Department as dysfunctional and this stymies efforts to stabilise employee relations. A poorly negotiated pension fund, incomplete remuneration frameworks and other benefit structures, continue to spark labour unrest and a culture of entitlement.

• The organisation is top heavy which leaves limited budget to enter into long-term contracting with technical staff.

• Although public trust in NSFAS had been restored to a reasonable extent it remains fragile and this mitigates against attracting talent.

While much has been achieved, it is recognised that the issues that NSFAS faces are systemic and deep-rooted, with irregular and wasteful expenditure continuing to emerge as accounts are reconciled. A new term of Administration has been gazetted, effective 21 August 2019 in order to advance efforts undertaken to date, build sustainability and determine the longer-term strategic view of NSFAS.

Dr Randall CarolissenNSFAS Administrator

Part One

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The National Student Financial Aid Scheme (NSFAS) was established in terms of the National Student Financial Aid Scheme Act (Act 56 of 1999)

It is responsible for providing loans and bursaries to eligible students at all public universities, Technical and Vocational Education and Training (TVET) colleges throughout the country. Further mandates of the entity include the recovery of past student loans and raising funds for student bursaries. In addition to managing funds granted by the Department of Higher Education and Training (DHET), NSFAS administers funding on behalf of the Department of Basic Education and the Department of Social Development amongst others. With the new policy on student funding in higher education introduced in December 2017, NSFAS has a mandate of implementing the new DHET Bursary Scheme that is being phased in over a period of five years by government for the provision of subsidised higher education.

1. About NSFAS

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2. Mandate

Part One

NSFAS is responsible for:

• providing loans and bursaries to eligible students;• developing criteria and conditions for the granting of bursaries to eligible students

in consultation with the Minister of Higher Education and Training;• raising funds;• recovering past loans;• maintaining and analysing a database and undertaking research for the better

utilisation of financial resources;• advising the Minister on matters relating to student financial aid; and• undertaking other functions assigned to it by the NSFAS Act or by the Minister.

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3. Strategic Framework

3.2 MISSION

3.1 VISION

A model public entity that provides financial aid to all eligible public university and Technical and Vocational Education and Training (TVET) college students from poor and working-class families.

To transform NSFAS into an efficient and effective provider of financial aid to students from poor and working-class families in a sustainable manner that promotes access to, and success in, higher and further education and training, in pursuit of South Africa’s national and human resource development goals.

The mission statement is made up of three distinct elements, which describe why NSFAS exists and the impact on the constituency:

1. NSFAS exists to provide financial aid to eligible students at public TVET colleges and public universities;2. NSFAS identifies eligible students, provides bursaries and collects past student loan repayments to

replenish the funds available for future generations of students; and,3. NSFAS supports access to, and success in, higher education and training for students from poor and

working-class families who would otherwise not be able to afford to study.

3.3 NSFAS VALUES

ACCESSIBILITYNSFAS will create an environment that allows efficient, effective and direct access to funding for eligible students.

TRANSPARENCYNSFAS will be open and honest with all students and stakeholders.

INTEGRITYNSFAS will act with integrity towards all stakeholders.

ACCOUNTABILITYNSFAS will take responsibility for our actions.

RESPECT NSFAS will treat our staff members, institutions and all stakeholders with respect and fairness.

4. NSFAS Mandate Within Key Current Policy Frameworks

The Medium-Term Strategic Framework (MTSF 2014-19) which is a five-year strategic plan of government forms the five-year implementation phase of the National Development Plan. The aim of the framework is to ensure policy coherence, alignment and coordination across government plans as well as alignment with budget processes. The National Development Plan (NDP) provides the policy framework within which NSFAS developed its strategic plan, with the understanding that in the expansion of the enrolment in post-school institutions, NSFAS will continue to ensure that all students who qualify for funding will access the required financial support for tuition, accommodation, books and other related costs.

Part One

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As the Department of Higher Education and Training (DHET) finalises the review of their policy framework for NSFAS within higher education, in alignment with both the Education White Paper 3 and the White Paper on Post-School Education and Training, this may necessitate a re-alignment in these goals. The gazzetting of additional functions to be assigned to NSFAS through the NSFAS Act, the need to assess and review how NSFAS executes its responsibility may be required. These additional functions provide opportunities for NSFAS to partner with a broader range of stakeholders for functions and services required by students, across the student lifecycle.

The NDP is further realised through the commitments made by government in respect to the Medium Term Strategic Framework for 2014 – 2019. The Medium Term Strategic Framework (MTSF) sets targets on the achievement of the NDP goals over its 5-year period for each of the 14 priority outcomes. The Department is responsible for Outcome 5: “A skilled and capable workforce to support an inclusive growth path”. In terms of the implementation of Outcome 5, the following MTSF sub-outcomes have been identified:

• A credible institutional mechanism for labour market and skills planning; • Increased access and success in programmes leading to intermediate and high-level learning; • Increased access to and efficiency of high-level occupationally directed programmes in needed areas; and • Increased access to occupationally directed programmes in needed areas and thereby expanding the

availability of intermediate level skills with a special focus on artisan skills.

5. Legislative and Other Mandates

5.1 CONSTITUTIONAL MANDATES

The Bill of Rights of the Constitution of the Republic of South Africa Act (108 Of 1996), states in Section 29 (1) (a): “Everyone has the right to a basic education, including adult basic education; and to further education, which the state, through reasonable measures, must make progressively available and accessible”.

The core objectives of the National Student Financial Aid Scheme are based on the following constitutional mandates:

(I) NSFAS was established according to the National Student Financial Aid Scheme Act (Act 56 of 1999 as amended) and incorporated TEFSA (Tertiary Education Fund of South Africa) from 1993 to 2000, TEFSA was the primary non-profit company in terms of Section 21 of the Companies Act and ceased to operate in July 2000. All existing loans on the TEFSA books were transferred to NSFAS. The Constitution of the Republic of South Africa, (Act 108 of 1996) also establishes two key bodies that play an oversight role over NSFAS. The Portfolio Committee on Higher Education and Training is established by the rules of the National Assembly as enshrined in Section 57(2) (a). The Committee is therefore an extension of the National Assembly and derives its mandate from Parliament. The Select Committee on Education and Recreation is a Committee of the National Council of Provinces (NCOP). Functions of this committee amongst others are to monitor the financial and non-financial performance of government departments and their entities to ensure that national objectives are met.

(II) NSFAS Act 56 of 1999 as amended; is established to provide the following;

• Provide loans and bursaries to eligible students;• Develop criteria and conditions for the granting of loans and bursaries to eligible students in consultation

with the Minister of Higher Education and Training;• Raise funds;• Recover loans;• Maintain and analyse a database and undertake research for the better utilisation of financial resources;• Advising the minister on matters relating to financial aid for students• Undertaking other functions assigned to it by the NSFAS act 56 of 1999 as amended or by the Minister.

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(i) The Republic of South Africa (1997) Higher Education Act, No. 101 of 1997 aims to: • Regulate higher education • Provide for the establishment, composition and functions of a Council on Higher Education; • Provide for the establishment, governance and funding of public higher education institutions; • Provide for the appointment and functions of an independent assessor; • Provide for the registration of private higher education institutions; • Provide for quality assurance and quality promotion in higher education; • Provide for transitional arrangements and the repeal of certain laws; and to provide for matters

connected therewith.

(II) Public Finance Management Act

As a public entity, NSFAS is also subject to the Public Finance Management Act (PFMA), Act 1 of 1999 as amended, in terms of which NSFAS is listed as a Schedule 3A entity.The NSFAS Act specifies that the board must manage, govern and administer NSFAS. The Act requires the board to establish a five-member board executive committee and a board finance committee.NSFAS is listed as a Schedule 3A national public entity in terms of the PFMA. These entities are extensions of a department with the mandate to fulfil a specific economic or social responsibility of government. Boards of public entities have considerable fiduciary responsibility including the “reasonable protection of the assets and records of the public entity” and prevention of “any prejudice to the financial interests of the state”.

(III) Public Audit Act, 2004 (Act 25 of 2004)

This Act assigns the supreme auditing function to the Auditor-General, which includes the auditing of the administrations of public entities. Audit reports on all entities are tabled in parliament.

(IV) National Credit Act

NSFAS is subject to the National Credit Act (NCA) (Act 34 of 2005), which requires all credit providers to register with the National Credit Regulator (NCR). The NCA prevails over all other legislation dealing with the provision of credit. NSFAS is registered as a credit provider under registration number NCRP 2655.

(III) Following various Ministerial reports and task teams over the past few years, the need for the NSFAS Act to be reviewed has been recognised by the DHET. Through a process initiated by the DHET, a task team has been put into place to consider the critical changes to the Act that need to be made. These changes will be in line with key recommendations from the MTT report and the current NSFAS practices, evolved over time and in response to changing needs within the sector and codified through rules that have been produced by NSFAS.

Following the fee-free education announcement, the Minister of Higher Education and Training has published regulations (Government Gazette Vol. 631, No. 41390 ) to the NSFAS Act for public comment which confirms the NSFAS' mandate, in consultation with the Minister (Government Gazette Vol. 634, No. 41554 ) in that it may determine and revise:

• criteria for eligibility for financial aid; and• set different eligibility criteria for different forms of financial aid. • The regulations also expand the NSFAS' mandate to include:• Entering into Public Private Partnerships (PPPs) to enable NSFAS to extend, and/or administer, and/or

recover loans granted for financial aid• Making payment of such amount of the loan or bursary as is not payable to the institution, to the borrower or

bursar or to the approved service provider for payment to the borrower or bursar.

5.2 LEGISLATIVE MANDATES

Part One

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(V) Government Gazette Vol 638 No 41851 dated 21 August 2018

The Administrator will take over the Governance, Management and Administration of NSFAS for a period of one year from the date of this Gazette. The general and specific terms of the Administrator during this period will be to:

• Ensure the effective close out of the 2017 and 2018 student funding cycles. This involves resolving data integration challenges as a matter of urgency, finalising all necessary funding decisions, ensuring reconciliation of funding data between agreements are in place and that students are accurately funded and recorded, and making sure that all NSFAS qualifying students receive funding.

• Oversee the opening of the 2019 online applications process, ensure that all necessary partnerships for managing the applications process are in place and can be effectively monitored, and develop and manage a communications plan for the application period.

• Develop, in consultation with the Department, universities and TVET colleges, an effective and realistic plan for the 2019 funding cycle and ensure that all parties understand all the roles and responsibilities, and any necessary implementation support is made available as needed.

• Ensure that the entity pays adequate attention to both TVET colleges and universities in all aspects of its core business processes.

• Put in place the necessary management and governance controls to ensure that all risks of the 2019 student funding cycle are appropriately managed, with the support of the Department and institutions as necessary.

• Ensure that adequate plans are in place to make funding decisions at the earliest possible time of the year as close to the period of registration as possible.

• To manage the day -to -day work of the entity, and steer NSFAS to address its operational challenges fully. This will include the strengthening of structures, systems and policies that will ensure good governance and effective management of the core operational mandate of NSFAS.

• To oversee all necessary forensic and other investigations necessary for the effective operation and management of the entity.

• To work closely with the Ministerial Committee of Inquiry appointed by the Minister to review the business processes of the entity and make long -term recommendations on the future models, structures, systems and business processes necessary for an effective NSFAS.

• To maintain a close and productive working relationship between NSFAS and the universities and TVET colleges, with a view to re- establishing a NSFAS presence on campuses from 2018 onwards.

• The Administrator will report to the Minister of Higher Education and Training or her delegated officials.

5.3 POLICY MANDATES

a) The National Skills Development Strategy III The key driver of this strategy is improving the effectiveness and efficiency of the skills development

system. This strategy represents an explicit commitment to encouraging the linking of skills development to career paths, career development and promoting sustainable employment as well as in-work progression.

b) National Development Plan - 2030 The National Development Plan (NDP) - 2030 provides the policy framework within which NSFAS has

developed its strategic plan. It details the challenges that the country is facing as well as the strategic choices that must be made to create a better life for all South Africans.

26

6. Organisational Structure

Executive Authority The Minister

Chief Financial

Officer

Chief Operations

Officer

Chief Information

Officer

Human Resource Executive

Chief Risk & Governance

Officer

Accounting AuthorityThe Board

PRE-ADMINISTRATION (APRIL 2018 - AUGUST 2018)

Office of the EOGeneral Manager: Corporate

Services

Executive OfficeExecutive Officer

Part One

27

Executive Authority The Minister

Advisor:Risk & Finance

Advisor: 2019 Programme

Advisor: ICT

Special Advisor Advisor:

HR & OD

Advisor:Business Process

Chief Operations

Officer(Acting)

Chief Information

Officer(Acting)

General Manager:CorporateServices

Human Resource Executive

Chief Risk & Governance

Officer

Accounting AuthorityThe Administrator

DURING ADMINISTRATION (AUGUST 2018 - MARCH 2019)

During the Administration, there were 4 vacancies of top management. The team of Advisors fullfilled the role of top mangement and constituted the Executive Mangament Committee.

Chief Financial

Officer (Acting)

Notes: • The Chief Executive Officer resigned on October 02, 2018. The position was left vacant for the duration of the

Administration.

• The Chief Information Officer resigned on October 19, 2018. The position was left vacant for the duration of the Administration.

• The Chief Financial Officer resigned on July 31, 2018. The position was filled in the acting capacity during the Administration.

• See page 82 (5.1) Technical Team appointed to support the Administrator.

In this section

PART 2: REPORT OF THE ADMINISTRATOR

1. Introduction 342. Performance against Terms of Reference of the Administrator 353. De-Risking NSFAS 404. Restoring Public Trust and Confidence 425. Areas of Focus for the Next Term of Administration 43

Increase in number of bursary agreements signed

97.3% = 369 770

100% = R74 million1,997

R629 millionRepaymentsLoan recoveries in the financial year increased with R121 miilion from prior finanicial year

Progress has been made in the management and processing of prefunded students for 2019, except Funza Lushaka, which remains a manual claims process for 2019 at the request of the funder. NSFAS is now able to regularise the processing of prefunded students through its systems.

The DHET Disability Fund is aimed at providing financial support for students with disabilities who are financially needy and academically able.

R74million

In addition to paying for the students’ full cost of study, the bursary also provides students with as-sistive devices such as wheelchairs, hearing aids, adapted laptops and human support such as car-ers, guide dogs, scribes, sign language interpret-ers at a capped amount that is reviewed annually by NSFAS.

Since the inception of the Disability Fund over ten years ago, NSFAS managed to spend over 100% of the allocated budget.

spent on addressing the needs of students with disabilities to date.

Disability Funding

Summary of Achievements(for the 2018/19 financial year)

contracts signed

Total amount allocated to students with disabilities

30

1. Operational Highlights

Part Two

Resolved Oct 2018 - Mar 2019Existing errors

43 974

2017

2017 - 2019 Data errors

97 952

71 525

2018

196 026

23 2092019

The Administration team conducted a risk assessment that formed the basis upon which a tactical and emergent strategic approach was adopted. Several multi-disciplinary task teams were assembled. Eight projects were embarked upon and daily planning stand-ups became the order of the day. The deficiencies in ICT systems were identified as having the highest levels of risk and the risk register included, inter alia, challenges with data integrity, data exchange between institutions and NSFAS, systems stability and disaster recovery. Our assessments have shown that the poor quality of prevalent systems and data has its genesis in a poorly constructed specification for a new NSFAS system in 2012. The database design does not conform to basic relational database standards.

NSFAS has been unable to close out the 2017 and 2018 academic years with institutions. The 2017/2018 Close-Out project was embarked upon as one of 8 priority projects at the start of the administration in October 2018. The following issues were identified as the major reasons for not being able to close out, viz:

1. Applications not fully imported into the NSFAS database for various reasons2. NBA’s not generating3. Returning students not migrated4. Pre-funder SOP agreements not generated and signed5. Duplicate funding records6. Phoenix accounts not created7. Category 2 students not correctly processed.

Up until March 2019, NSFAS resolved errors in 240,000 records relating to 2017/2018.

Part Two

31

2. ICT Highlights

Cyber security remains an area of concern. A significant contributing factor to this is the lack of security in core operational systems as well as the distinct lack of audit trails that are available to monitor exceptions. A special Cybersecurity Steerco has now been launched to track implementation progress and collaboration with the CSIR sought in order to provide additional assistance. Over and above the risk themes noted above, the Administrator also noted a general collapse in governance within NSFAS. This was signified through the lack of up to date and relevant policies, a lack of clear Delegations of Authority, non-compliance to policies that existed, and a clear lack of accountability and consequence management.

Governance measures introduced include, but are not limited to:

• Improving accountability and oversight by strengthening the tone at the top• Developing strategic risk register that prioritised improvement focus areas• Developing and implementing a Delegation of Authority that was actively maintained

throughout the period• Development of a policy framework and establishing a program of ongoing policy renewal

and implementation• Reducing error rates (and thus irregular expenditure) by embedding business and funding

rules in automated processes• Re-drafting of all institutional MOU’s and finalisation thereof, improving governance between

NSFAS and institutions

32

REPORT OF THE ADMINISTRATORIm

prov

ed g

over

nanc

e an

d de

-ris

king

Data Integrity

Data Exchange

System Stability

Cyber Security

Disaster Recovery

Disbursements

Funding policy

Institutional Capacity

Culture

2018 Residual Risk 2019

High. Moderate. Low. Critical.

3. Risk Management Highlights

1.2% to R36.1 billion

The total student funding for Universities has increased by 37.7% from R12.1 billion in the 2017/18 financial year to R16.7 billion in the 2018/19 financial year. However, the Student loans at the nominal value of the outstanding balance has increase by

from R35.6 billion. Bursaries increased significantly, by 233% from R7.3 billion for the year ended 31 March 2018 to R24.6 billion for the year ended 31 March 2019.

4. Loans and Bursaries

2017/182018/19

36 083 265 050

24 592 990 927

35 643 761 858

7 388 040 084

Loans

Bursaries

35 000 000 000

30 000 000 000

25 000 000 000

20 000 000 000

15 000 000 000

10 000 000 000

5 000 000 000

0

Part Two

33

1. Introduction

Governance – NSFAS received a qualified opinion from the Auditor General of South Africa (AGSA) for the 2018 financial year end. In July 2018, the Internal Auditors issued NSFAS with a NOCLAR (Non-Compliance to Laws and Regulations), citing material non-compliance to s51 of the Public Finance Management Act (PFMA), as there were inadequate controls around the disbursement process, signalling critical lapses in governance. There was a low maturity and culture towards risk management and governance generally, resulting in the general lack of oversight, the prevalence of key-person dependencies, and general non-compliance to policies and procedures. The policy environment had not been maintained. Policies and procedures were either not in place or out of date and there were no Delegations of Authority that guided decision-making.

Finance – Inappropriate systems that are not fit for purpose, with ill-defined processes, continue to be part of the key strategic risks that impact daily operations in NSFAS, which ultimately result in the transactions that are processed and accounted for in the accounting system and ultimately in the annual financial statements. Financial statements, many reconciliations and postings / journal entries are only prepared and effected at the end of the financial year.

Implementation of the Remittances Team saw improvement in the allocation of funds at institutions. A reconciliation accounting capability has been introduced to ensure that payments are made to the correct institutions / students and has yet to be appropriately capacitated. This is also impacted by the inappropriate systems that are not fit for purpose, with ill-defined processes. Quality assurance “upstream” of data accuracy and validity in Operations has to be strengthened to ensure that what is authorised for payments to be made are accurate and for the intended institutions / students.

ICT and data – The core operational systems were, and remain, not fit-for-purpose and currently requires extensive manual intervention to ensure integrity of exchange of data between systems. There remains a disproportionately high dependency on ICT personnel for business processes to be executed. This is due to the lack of user interfaces for business users to start and manage business processes. Instead, business processes are often run by ICT staff, compromising the ability to embed sustainable business processes and controls that can be managed by operational staff. Poor ICT governance manifested itself, in the poor distinction between production and development platforms, disbursements from unencrypted computers, no logging of changes and unauthorised access to core systems. The system stability was unpredictable, down time statistics were unacceptably high with zero Disaster Recovery arrangements in place. The poor systems architecture resulted in poor integration with institutions and thus poor-quality data being ingested, this contributed to the delays in funding for 2018. Poor data management protocols meant data integrity were questionable, compromising operational processes and resulting in severe disbursement backlogs and an inability to close the 2017 and 2018 academic years. This in turn eventuated in the poor reporting against both statutory and strategic requirements.

Human resource management and organisational culture –There was an extremely poor organisational climate and, together with unfavourable labour relations bred by nepotism, abuse of positional power and a culture of entitlement, precipitated the collapse of the Human Resources and Employee Relations functions within NSFAS. There was no clearly defined operating model, a general lack of role clarity, top heavy management structures and a poor investment in technical human capital. As would be expected in an organisation of this stature there was no talent management, career pathing and upskilling programs. This led to dysfunctional behaviour across the business and confusion with respect to the application of business rules.

34

REPORT OF THE ADMINISTRATOR

ToR1 Ensure the Effective Close Out of the 2017 and 2018 Student Funding Cycles:

The immediate steps initiated by the Administrator included a high-level data clean up and validation, development of a system of remittance, instituting controls in the disbursement process and stabilising the ICT systems. These improvements resulted in a reduction of student account errors emanating from 2017 and 2018 from about 220 000 to less than 30 000 by March 2019. It is estimated that the 220 000 irregular student records could account for as much as R4.5billion in irregular expenditure as defined by the PFMA. The controls instituted by NSFAS reduced the number of irregular records to below 10 000 in 2019 thus far. NSFAS finalised more than 100 000 unsigned student contracts triggering outstanding disbursements to this cohort. Within three months of commencement of administration a further 150 000 students, previously unaccounted for, were traced through NSFAS reconciliations of accounts at institutions. These interventions enabled NSFAS to disburse funding to almost 650 000 students. More than R21billion of the R22billion budgeted for the 2018 funding cycle was released by NSFAS, most of it in the final quarter of 2018 post the commencement of Administration.

Core operational processes – In addition to operational processes being inordinately manually driven, the NSFAS operations operated void of policies, procedures and documented processes. Process documentation that existed did not reflect the actual processes in operation. There was a high single person dependency, who operated without any supervision or management oversight. Key controls were generally lacking or observed on an ad hoc basis. Process understanding was significantly inconsistent, with all staff working in silos. Resolving anomalies in student data was thus not an easy task and was a significant contributing factor to process inefficiencies and poor service delivery in general.

Sector relationships and credibility – The multiplicity of internal problems within NSFAS eroded trust and credibility amongst all stakeholders. NSFAS generally suffered from poor public reputation and credibility, and the lack of trust eventuated in multiple and unauthorised workarounds at institutional level.

Part Two

35

2. Performance against Terms of Reference of the Administrator

ToR2 Oversee the Opening of the 2019 Online Application Process:

Leveraging the lessons learnt from clearing the historical backlogs, together with extensive consultations with stakeholders, the preparations for the 2019 academic year in the latter half of 2018 yielded the following; 1. Clear and improved rules and guidelines for disbursements were developed in

October 2018 which emanated in improved equity between TVET colleges and Universities with greater student allowance standardisation. Non-standardised allowances across institutions caused severe conflict and confusion and detracted from the efficiencies of administration of loans and bursaries.

2. The timeous rollout and training of officials across the Higher Education Sector on the revised protocols and controls implemented by NSFAS for the 2019 academic year, improved the general understanding of these processes and enabled NSFAS to discharge its mandate in line with the approved DHET Rules and Guidelines;

3. Up to 450 000 first time applicants for NSFAS funding were recorded by the close of the application window;

4. All applications were processed by January 2019. This facilitated applicants declared as eligible for NSFAS funding to register without having to pay a registration fee, easing the student registration processing;

5. The real time processing of 160 000 TVET walk-in applications in January 2019, a perennial problem of late application at TVET colleges which also was a source of major instability in the past;

6. On-line validation, processing and awarding of NSFAS funding to social grant beneficiaries which has increased from 48 000 in 2018 to 69 000 in 2019:

7. Disbursements to 450 000 students by end March 2019, the first time in the history of NSFAS that payments were processed in the first quarter of the academic year;

8. The extremely large error rate in student accounts and the funding of ineligible courses which was prevalent in the prior two years, has been arrested in 2019.

ToR3 Develop, in Consultation with the Department, Universities and TVET Colleges, an Effective and Realistic Plan for the 2019 Funding Cycle:

Immediate focus on improving the 2019 cycle yielded the following results;1. Through extensive engagements with the Higher Education Sector, Memorandum

of Understanding (MOU) governing the NSFAS and institutional relationships were developed and signed. This is a requirement of the NSFAS Act that was not consistently applied.

2. A number of system enhancements were implemented in order to ensure that the right student was funded, with the right amount and on time;

• The funder set-up was optimised and the results for 2019 show significant improvement in allocations of funding consistent with bursary guidelines.

• The qualification data of students were quality controlled to ensure that only students in funded programmes received funding, and that the programmes were SAQA and DHET approved.

• System set up ensured that funding allocated met the funding rules according to the capped and full cost funding model as per the DHET Rules and Guidelines.

3. The system was also optimised to process higher volumes per day. As an example, only 10 000 to 15 000 student accounts could previously be created in a day, this has improved from 60 000 to 70 000 accounts on a concurrent basis.

36


ToR4 Ensure that the Entity Pays Adequate Attention to Both TVET Colleges and Universities in All Aspects of its Core Business:

In partnership with DHET, allowances were standardised with improved equity between TVET colleges and universities. New rules and guidelines were updated, canvassed and communicated. A dedicated TVET Administrative Unit was established, which is currently staffed with secondees. All universities and TVET colleges were trained, and additional on-campus support provided.

Across both sub-systems data integration improvements have been implemented, increasing processing capacity and data validations. Institutions were also assessed for their ability to distribute allowances and special measures have been introduced for those at risk. Lastly, the ‘pocket’ voucher system of disbursements was discontinued, and commercial interests removed from the NSFAS value chain. NSFAS invested in, and has established, a dedicated NSFAS TVET administration human capacity that will develop the necessary processes, policies and standard operating procedures (SOP) appropriate for the TVET environment. The NSFAS Wallet was introduced to TVET colleges that identified as being unable to manage the payment of student allowances themselves. Initially only 6 colleges were identified for the NSFAS Wallet system. This has now grown to 26 colleges in total. Whilst not an ideal solution, the use of the NSFAS Wallet in these instances brought stability to these colleges, as evidenced by recent feedback received. An alternative solution to pay students their allowances directly into their bank accounts is at an advanced stage.

ToR5 Put in Place the Necessary Management and Governance Controls to Ensure that All Risks of the 2019 Funding Cycle are Appropriately Managed:

Critical areas were addressed to restore discipline and accountability. By the end of the first Administration cycle, significant strides have been made in de-risking the organisation. Key areas of focus in the first phase of Administration towards improving governance included: 1. Strengthening accountability and executive oversight assisted by a review of

job descriptions of executives and the introduction of a Delegation of Authority Framework;

2. Development of strategic risk registers that prioritised improvement of key focus areas;

3. Development of a policy framework and performed a policy gap analysis to determine the extent of outdated and/ or absent policies. A program of ongoing policy renewal and implementation was then established;

4. Reducing error rates (and thus irregular expenditure) by embedding business and funding rules in automated processes;

5. Implementing recommendation to improve hitherto absent cybersecurity maturity, 6. Re-drafting of all institutional MOU’s to guide disbursement protocols and

exchange of data and operationalisation thereof.

Part Two

37

ToR6 Ensure that Adequate Plans are in Place to Make Funding Decisions at the Earliest Possible:ime of the Year: More than 93% of NSFAS applicants for the 2019 academic year had a funding decision by the end of January 2019 in time for the 2019 registration process. Although limited statistics are available for 2018, indications are that funding decisions were made well after academic registration commenced at institutions. Due to an earlier start in the application evaluation and selection process, 81% of the applicants were declared successful subject to registering for an approved programme by the end of the application season, with only 7% without a funding decision (due to incomplete applications). A further 100 000 rejections were reviewed in early January 2019 which enabled funding decisions for this category prior to registration. Funding decisions for continuing students based on receipt of academic results was concluded by 15 January 2019. Students with deferred and or supplementary exams were concluded as the final academic results were received from universities and or DHET. As a result, the higher education sector had enough information available for eligible students to commence the registration process. Institutions had access to download funded lists on demand for the first time. Finally, there was a comprehensive programme to immediately onboard and assess the large number (exceeding 150 000) of TVET college walk-ins during January 2019.

ToR7 To Manage the Day to Day Work of the Entity, and Steer NSFAS to Address Operational Challenges:F The establishment of the NSFAS EXCO regularised decision-making and alignment of strategic and operational planning. The recording of minutes and implementing a decision register further provides for the required governance, oversight and accountability. To a large extent, improved operational planning and delivery is dependent on this level of rigour. These gains were further entrenched by:

• Adopting a risk-based approach to identify key remediation projects;• Reprioritising of the 2018/19 Administrative budget, to enable the sourcing of

critical technical resources to execute key projects; • Daily Management Stand-up meetings and alignment of priorities; • Introduction of a Rapid Response Team to monitor registration and the adequacy

of data from institutions; • The establishment of a Reconciliation Unit in the Finance division to ensure

reconciliation of disbursements to student and institutional level;• Remittance Unit to ensure timeous release of student remittances with payment

made to institutions;• Developing a comprehensive plan to address the Auditor General audit findings

and implement NOCLAR recommendations to de-risk the organisation.

ToR8 To Oversee all Necessary Forensics and other Investigations Necessary for the Effective Operation and Management of the Entity:

Prima facie evidence of abuse of the voucher system was identified by our internal audit team. This severely disadvantaged students and compromised the overall administration of NSFAS. A forensic investigation was launched and currently underway at NSFAS. For 2019, with the approval of the Ministry, NSFAS discontinued all voucher payments and further removed all commercial interests from the disbursement value chain.

38


ToR9 To Work Closely with the Ministerial Committee of Inquiry Appointed by the Minister to Review the Business Processes of the Entity and Make Long-Term Recommendation on Future Models, Structures, Systems and Business Processes for an Effective NSFAS: The ToR for the Ministerial Committee of Inquiry contemplated in the assignment of the Administrator, has been established and discussions are underway with DHET as to the size and shape thereof as well as the positioning with respect to the functions of the Administrator. Notwithstanding, the Administration established a policy and research division to leverage the considerable data and intelligence in NSFAS to improve the policy infrastructure of the Post School Education and Training (PSET) system in South Africa. The Administration has further initiated mapping of core processes and the documentation of intellectual capital through a policy and Standard Operating Procedures (SOP) regime.

ToR10 To Maintain a Close and Productive Working Relationship Between NSFAS and the Universities and TVET Colleges, with a View to Re-establishing a NSFAS Presence on Campuses from 2018 Onwards:

Closer university engagement and monitoring has been crucial to strengthening productive working relationships. In this regard, regular stakeholder engagements were undertaken from mid-September 2018 and are ongoing. In addition, the receipt of 2019 data is monitored daily, to highlight institutions that are falling behind targets. These include deployment of staff to assist where required. The deployment of NSFAS officials at institutions, alongside the extended outreach and strategic partnerships have contributed immensely to maintain a close and working relationship with institutions and to extend our reach to vulnerable social groups.

Part Two

39

a) Ecosystem stability At the time the Administrator was appointed, there were delays in the disbursements to students of up to 8 months. This, in conjunction with disbursements delays experienced in the prior year, triggered student protests on a national scale. In addition, the administration noted low applications from the TVET sector during the application window and predicted high TVET walk-ins during January 2019, a process that NSFAS managed sub-optimally in previous years.

b) Poor data integrity The quality of key data elements that drove the operational processes were extremely poor. This was largely due to the extensive manual interventions required, poor data validation rules, absence of data warehousing protocols and controls, poor master data set up processes, extensive access rights together with an absence of audit trails and change logs.

c) Inadequate data exchange capability NSFAS is required to receive large volumes of data from institutions. Data errors arose as a result of the varied and inconsistent data exchange mechanism and protocols in place.

d) System stability The NSFAS core operational systems are underpinned by poorly designed database architectures and systems that are not integrated nor implemented for optimal performance.

RISK: RESPONSE:

The Administrator deployed NSFAS officials to institutions across the country in order to resolve student funding queries. Significant issues that were blocking disbursements we identified with clear resolution paths defined. This led to the establishment of the Close Out Project: Phase I. In order to address the high expected TVET walk-in rate in January 2019, the TVET Walk-In Project was launched. This project outlined the processes and controls for the TVET walk-in in order to minimise delays in student funding. This project yielded very positive results and enabled NSFAS to disburse allowances to TVET students as early as February 2019.

Two projects relating to master data was established, viz. Master Data Configuration (Funders) and Master Data Configuration (Qualifications). This was to address key master data set up issues as well ensure that the quality of critical data elements was improved ahead of the 2019 funding cycle. An overall data quality project (Data Integrity Improvement) was also launched to improve the general data quality within key operational systems. Additional restrictions have been implemented to lower the risk of unauthorised manual intervention and provide traceability of such activity.Audit trails have also been implemented on key data tables to trace unauthorised changes.

The Data Integration Project was launched in response to this matter. The data exchange capability was improved to:• Handle larger data sets from institutions• Enforce data validations and data rules• Prevent the ingestion of invalid data• Limit access to load registration data• To enable access to institutional reports• Stabilise the ICT integration

Whilst system design and implementation issues remain, the systems were significantly stabilised through ICT Stabilisation Project, improving system availability to acceptable levels.

40


3. De-Risking NSFASA strategic risk assessment completed at the commencement of the Administration determined the key strategic projects and interventions required to lower the risk profile of NSFAS

RISK: RESPONSE:

e) Cybersecurity below target state Cybersecurity below zero level and well below target level 4 out of 5.

f) Risks associated with the disbursement process Internal Audit issued NSFAS with a NOCLAR (Non-Compliance to Laws and Regulations) for the absence of controls within and around the disbursement process, citing failure to comply with s51 of the PFMA. The errors as a result of the lack of these controls have been declared as irregular expenditure in the annual financial statements.

g) Disaster recovery NSFAS did not have a disaster recovery site.

h) Funding policy uncertainty Much policy uncertainty existed due to the lack of comprehensive guidelines. This caused confusion across the sector, including institutions and students alike. In addition, institutions had discretion with respect to allowances to students, particularly in the TVET sector.

i) Organisational culture and environment The NSFAS culture was characterised by the following: • Culture of entitlement• Non-compliance with policies• Prevalence of sexual harassment• Lack of respect among staff• Intolerance of diversity• Workplace bullying• Lack of confidentialityThe Human Resource function was found to be dysfunctional and the organisation structure geared towards generalists in senior positions rather than specialist roles required to execute technical processes.

A general clean-up of user access was performed and general system hardening progressed. Critical ICT policies were reviewed, updated and adopted.NSFAS has also since implemented a SIEM (Security Event and Incident Monitoring) Solution to assist with detecting and thwarting external cyber-attacks.

Two projects were launched to mitigate this risk:• A NOCLAR Project, aimed at achieving immediate

de-risking of the disbursement process.• A Disbursement Project aimed at re-considering

the disbursement process.Improved controls have been implemented to reduce the disbursement error rate. Current statistics indicate that the total error rate to have dropped from 37% from 2017 and 2018 funding years to less than 2% for 2019

A disaster recovery site has been established and tested.

Guidelines for the DHET bursary scheme was generated and communicated. Specific guidance on allowance standardisation was developed in order to reduce discretion and improve consistency.

The transformation of the Human Resource function as well as the overall culture of NSFAS is underpinned by:• Revised HR policies and procedures in order

to improve accountability and consequence management.

• The onboarding of technical skills to address the shortfall of technical specialists.

Part Two

41

42


4. Restoring Public Trust and Confidence

Significant effort has been directed at maintaining sector stability, rebuilding relationships across the sector, and rebuilding public trust in NSFAS. At the onset of Administration, when the 2018 backlog was at its peak, NSFAS significantly increased visibility and provided hands-on support at institutions across the country to expedite the resolution of data queries that were halting the flow of student funding. Maintaining the NSFAS presence by officials on the ground has been critical in maintaining a sense of relative stability in the sector since the Administration commenced. Additional key noteworthy achievements are;

• The co-development of clear rules and guidelines on the disbursement of funding with DHET and other stakeholders, which contributed immensely to increased policy certainty and stability within the sector;

• NSFAS undertook extensive training across the sector to clarify the DHET Rules and Guidelines;

• The Administrator established a productive partnership with student leadership which assisted in resolution of numerous issues on campuses;

• The Administrator has had numerous meetings with university management and TVET college principals in which proactive and collaborative planning led to improved administration;

• The Administrator regularly engages the Portfolio Committee on Higher Education and Training (PCHET), the Minister and DHET on progress and to discuss developments and planning;

• Several media interviews provided the general public with a degree of confidence that NSFAS has begun turning the corner.

Part Two

43

5. Areas of Focus for the Next Term of Administration While there is general consensus that the first phase of Administration has made considerable improvements, both within the organisation, and in terms of the impact on the wider PSET system, critical work is still needed in order to avoid the possible resurgence of instability in the sector. It is thus recognised that a second phase of Administration would be required to build sustainability and ensure an effective transition. This transition would ensure that a new executive management team and board would be appointed and the review of NSFAS business processes could be completed to advise the Minister on the future development of NSFAS.

A Ministerial Task Team will soon be appointed to review the business processes and functionality of NSFAS in order to ensure that the bursary scheme functions optimally for the long-term future. The areas of focus for this second year of Administration includes:

• The conclusion of the forensic investigations;• Review of governance and assessment of appropriateness thereof to execute the

mandate;• Appointment of a new executive team;• Rebalancing management and technical human capital;• Review of all systems as well as the NSFAS operating and disbursement model;• Entrenchment of quality management and governance;• Re-architecture of data systems;• Further improvement in the integration of systems with institutions and re-

evaluating roles of institutions and stakeholders in the NSFAS value chain;• Transfer of skills from consultants and advisors to permanent staff and• Introduction of performance management and an accountability framework.

In this section

PART 3: PERFORMANCE INFORMATION

Statement of Responsibility for Performance Information 47 1. Service Delivery Environment 482. Key Policy Development and Legislative Changes 513. Strategic Outcome Oriented Goals 534. Performance Information by Programme 565. Strategies to Overcome Areas of Under-performance 686. Linking Performance with Budgets 71

7. Revenue Collection 71

03

46

PERFORMANCE INFORMATION

03Statement of Responsibility

47

To the best of our knowledge and belief, I confirm the following:

All information and amounts disclosed in this annual report are consistent with the annual financial statements audited by the Auditor-

General of South Africa. The annual report is complete, accurate, and free from any omissions. The annual report has been prepared in accordance

with guidelines of annual reports as issued by National Treasury. The accounting authority is responsible for the preparation of the annual

performance report and the judgements made in this information. The accounting authority is responsible for establishing, and implementing

a system of internal controls, which has been designed to provide reasonable assurance on the integrity and reliability of the performance information, and the human resources information. In my opinion, the annual report fairly reflects accurate facts on operations, performance information, human resource information, governance and the financial

affairs of NSFAS for the financial year under review.

Yours faithfully,

Dr Randall CarolissenAdministrator

Statement of responsibility for performance information

48


1 Service Delivery Environment

1.1 PERFORMANCE OVERVIEWThe annual performance report is based on the strategic objectives and the key performance indicators as set out in the 2015/16 to 2019/20 Strategic Plan and the 2018/19 Annual Performance Plan.

The Strategic Plan and the Annual Performance Plan outlines the eight (8) strategic objectives and sixteen (16) key performance indicators of the entity.

Improve the efficiency of the application, evaluation and funding of students. Under this strategic objective there are five key performance indicators (KPIs) however; two of these indicators will be measured in 2019/20 financial year as the entity was gathering baselines. The entity achieved one indicator from the target set, namely; design and implement processes to record the date on which registration data is received from institutions. The process of recording data received from institutions was designed, tested and implemented during the 2018 and 2019 academic cycle.

Strive for an improved organisational culture of high performance and high productivity by improving employee engagement. The entity achieved one out of two KPIs, namely; leadership behaviour 360-degree survey. Seventy percent of employees between level 2 to 10 completed a 360-degree assessment on how they perceive their superiors’ behaviours.

While the entity has achieved some of the performance targets set for the year, this means there is still more work that is required to be done in order to improve the overall performance of the organisation.

The overall performance of the entity is summarised in the graph below:

The entity achieved the performance target for 2 out of 16 key performance indicators (12.5%), which is a slight improvement for the year under review. This has been a slight improvement during the 2018/19 financial year as the entity recorded 12.5% achievement as compared to 9% during the 2017/18 financial year.

The entity partially achieved performance targets for the following strategic objectives:

Objectives

2017/18

Key Performance indicators

2018/19 2017/18

• Achieved

• Not achieved

2018/19

08

17

214

110

0

8

1

7

2

14

1

10

Strategic Objective 3 –


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Increase in funding (Rand value) raised for financial aid for qualifying students. The non-achievement in funding raised in respect of new funders was due to internal and external factors such as poor working relations with our stakeholders and system failures. NSFAS was put under administration due to poor governance and administration challenges. The Administrator has been steering NSFAS towards improved governance by strengthening relations with Funders.

Increase the amount of money recovered (Rand value) from NSFAS debtors. In the current year, the entity missed its collections target by 2% whereas in the prior year the collections target recorded an under-performance of 19.3%. Collections from the public sector, which were the key driver of performance in this area, stagnated despite a number of efforts made to increase collections. In January 2019, the entity recorded a high number of unpaid debit orders. This appears to be a norm due to high consumer expenditure during the December holiday. It should also be noted that the announcement of the historic debt settlement contributed to unpaid debit orders as NSFAS debtors were under the impression that their debts will be written off.

Improve the efficiency of the application, evaluation and funding of students. Under this strategic objective, there are three key performance indicators that the entity is measured against. The entity recorded under-performance on two key performance indicators. Issues were identified in terms of system to system integration with Universities and Colleges. Registration data had to be uploaded manually which resulted into a lengthy process. Furthermore, the entity was notified of fraudulent SMSes sent to applicants which led to NSFAS changing its communication strategy. This had a negative impact in terms of reaching our potential applicants as alternative platforms were used in overcoming the challenge, but it yielded negative results.

Improve the efficiency of payments of tuition, residence fees and allowances to NSFAS students and institutions. The institution did not meet the target set due to a combination of internal and external factors. Internal factors include technological challenges, data integrity and integration between disparate ICT systems (primarily Phoenix and Cordys). The fully subsidised education pronouncement by the former President of South Africa in December 2017, impacted negatively on institutions due to a high volume of applications received. This has resulted in delays in the finalisation of funding decisions as the entity needed to reconfigure processes and the funding criteria to align with the presidential pronouncement. The entity is currently operating two processes namely a loan and a bursary.

Improve service level to customers and stakeholders through monitoring customer satisfaction and taking corrective action where necessary. The entity did not achieve the targets that were set for the year under review. Benchmarks and baselines for contact centre performance were not determined due to internal factors which affected the process moving forward. Additionally, these internal factors also affected the development of the criteria to measure the quality of service levels to customers and stakeholders.

Undertake research for the better utilisation of financial resources. The entity did not meet the target during 2018/19 financial year.

The following are the under-performance areas for the year under review:







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The following points is a comparative analysis of the year-to-year performance of the entity:

• The entity did not raise funds for the year under review (Strategic Objective1), which is R56.6million less than the previous year.

• The entity collected R628million from debtors (Strategic Objective 2), which is a 22% increase from the prior year.

• Percentage of all applications were received by 30 November (Strategic Objective 3); however, the entity communicated to 18% of the applicants compared to 62% of the previous year which resulted to 44% regression.

• The first instalment of allowances due to the students that was paid to the students within 10 days of LAFSOP acceptance date (Strategic Objective 4) amounted to 47% compared to 71% of the previous year.

Over the past financial year, NSFAS has been on a journey of highs and lows embedded by significant challenges. Fully subsidised education as per the Presidential pronouncement which came into effect from January 2018, has impacted on the rules upon which eligibility for funding would be assessed and how the organisation would disburse funding. In addition, government committed itself to increasing spending on universities at a percentage of the Gross Domestic Product (GDP) from 0.68 percent to 1 percent over the next five years.

The change in the funding model has resulted into the influx of applications from the higher education sector. Capacity and systems were negatively impacted as they were not capacitated to deal with huge application numbers. This contributed to the significant regression in the NSFAS financials and compromised the service delivery performance. The entity received a qualified audit opinion from the Auditor General of South Africa. Furthermore, NSFAS has been put under administration in order to steer good governance, administration and improvement on stakeholder relations.

At a functional level, technical and operational focus in the 2018/19 financial year was on ensuring the wrap-up and conclusion of the 2018 academic year, backlogs, preparation and execution of the funding cycle for the 2019 academic year. This has been further burdened by the failure of various technical systems in the 2017/2018 financial year, which resulted in data, system and process deficiencies being carried forward to the 2018/2019 financial year.

To mitigate many of these challenges, NSFAS has worked closely with the DHET and its funder community, the university sector through Universities South Africa (USAf), the TVET college sector through the South African College Principals Organisation (SACPO) and Student Movements such as South African Union of students (SAUS) and South African Further Education and Training Students Association (SAFETSA). This initiative was to ensure common understanding of the key issues, alignment on strategies to monitor, implement and communicate our responsiveness. It must be noted though that despite these various challenges, NSFAS is committed in serving the students and the institutions, through manual work-around while trying to build systems on the go.

1.2 ORGANISATIONAL ENVIRONMENT

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2. Key Policy Development and Legislative Changes

Revision of Legislative and other Mandates

2.1 FULLY SUBSIDISED EDUCATION PRONOUNCEMENT

The introduction of the fully subsidised education for the poor and marginalised youth in the South African post-school education and training sector and NSFAS in particular, has resulted in the policy shift and various changes. The Presidential pronouncement of December 2017, in which the President responded to the report of the Heher Commission of Inquiry into Higher Education and Training, mandated significant changes to the disbursement of funding. The limit on household income for recipients of NSFAS support was increased to R350,000 for entrants from 2018 onwards and the former loan/bursary scheme was converted to a pure bursary scheme.

The pronouncement also made provision for continuing students who are funded by NSFAS and initially registered before 2018 to have their loans converted into bursaries from 2018 onward. These changes resulted in a government commitment to increasing spending on universities at a percentage of the Gross Domestic Product (GDP) from 0.68 percent to 1 percent over the following five years. These changes required substantial changes in NSFAS operations and systems.

• Recurring IT system inefficiencies• Stagnation with respect to loan recoveries from former beneficiaries• Difficulties related to the roll-out of the student-centred model• Delays by students in signing the LAF/SOPs• The transfer of NSFAS funds to institutions without remittances• Poor TVET College capacity to administer NSFAS funding• Data exchange between NSFAS and institutions

This complexity has increased the administrative requirements, the reporting requirements and the volume of applications and funding decisions required. All these requirements had to be implemented within less than one month to accommodate the 2018 academic year. As such, these changes will continue to impact on NSFAS’s operations until such time as the system and the sector have stabilised and the processes optimised so that students are funded on time. This has immensely contributed to the significant regression in NSFAS financial and service delivery performance to such an extent that the organisation was put under administration for a period of one year.

The Portfolio Committee on Higher Education and Training report dated (15 November 2018) summarised the main issues facing NSFAS as:

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2.2 ADMINISTRATOR’S TERMS OF REFERENCE

THE APPOINTMENT OF THE ADMINISTRATOR IN TERMS OF SECTIONS 17A TO 17D OF THE NATIONAL STUDENT FINANCIAL AID SCHEME ACT (ACT 56 OF 1999, AS AMENDED)

The Administrator was appointed to take over the Governance, Management and Administration of NSFAS for a period of one year from the date of the Government Gazette Vol 638 No 41851 published on 21 August 2018. The general and specific terms of the Administrator during this period was gazetted as follows:

• Ensure the effective close out of the 2017 and 2018 student funding cycles. This involves resolving data integration challenges as a matter of urgency, finalising all necessary funding decisions, ensuring reconciliations of funding data between agreements are in place and that students are accurately funded and recorded, and making sure that all NSFAS qualifying students receive funding.

• Oversee the opening of the 2019 online applications process, ensure that all necessary partnerships for managing the applications process are in place and can be effectively monitored, and develop and manage a communications plan for the application period.

• Develop, in consultation with the Department, universities and TVET colleges, an effective and realistic plan for the 2019 funding cycle and ensure that all parties understand all their roles and responsibilities, and any necessary implementation support is made available as needed

• Ensure that the entity pays adequate attention to both TVET colleges and universities in all aspects of its core business processes.

• Put in place the necessary management and governance controls to ensure that all risks of the 2019 student funding cycle are appropriately managed, with the support of the Department and institutions as necessary.

• Ensure that adequate plans are in place to make funding decisions at the earliest possible time of the year as close to the period of registration as possible.

• To manage the day-to-day work of the entity, and steer NSFAS to address its operational challenges fully. This will include the strengthening of structures, systems and policies that will ensure good governance and effective management of the core operational mandate of NSFAS.

• To oversee all necessary forensic and other investigations necessary for the effective operation and management of the entity.

• To work closely with the Ministerial Committee of Inquiry appointed by the Minister to review the business processes of the entity and make long -term recommendations on the future models, structures, systems and business processes necessary for an effective NSFAS.

• To maintain a close and productive working relationship between NSFAS and the universities and TVET colleges, with a view to re- establishing a NSFAS presence on campuses from 2018 onwards.

• The Administrator will report to the Minister of Higher Education and Training or her delegated officials.

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3. Strategic Outcome Oriented Goals

STRATEGIC OUTCOMEORIENTED GOALS

Programme 1 - Goal 1 Programme 2 - Goal 2

An efficient and effective public entity in providing student financial aid

Access to higher education and improved student financial aid environment

Goal Statement To implement effective and effi-cient processes and operations to ensure stakeholder objectives are achieved

To Increase access to funding for eligible students by raising funds, maximising loan recoveries and creating a student-centred loans and bursaries model through improved com-munication support for students and a central application process

Outcomes • Robust systems, processes and controls

• Effective and efficient governance structures

• Productive and engaged employees

• Improved recoveries • Financial support extended to more

students• Improved stakeholder communications

and relations• Improved service levels to customers and

stakeholders

Strategic objectives 7. Improve and maintain finan-cial performance manage-ment, IT governance and audit outcomes.

8. Strive for an improved organisational culture of high performance and high productivity by improving employee engagement

1. Increase in funding (Rand value) raised for financial aid for qualifying students

2. Increase the amount of money recovered (Rand value) from NSFAS debtors

3. Improve the efficiency of the application, evaluation and funding of students

4. Improve the efficiency of payments of tuition, residence fees and allowances to NSFAS students and institutions

5. Improve service level to customers and stakeholders through monitoring customer satisfaction and taking corrective action where necessary.

6. Undertake research for the better utilisation of financial resources

Performance Indicator

NSFAS receives a clean audit report annuallyStatus level for Corporate Governance of ICT achieved

Increased total number of student loans and bursariesAugmented capital available for disbursement

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In 2017/18 financial year, the entity achieved a qualified opinion with findings on compliance with laws and regulations and performance information. In the 2016/17 financial year the entity achieved an unqualified audit opinion with findings. In 2017/18 the opinion regressed to a qualified audit opinion with findings due to payments made to students in excess of contracts amounts which resulted in the entity incurring irregular expenditure that could not be accurately quantified by financial year-end.

In 2015/16 and 2016/17 financial years, the entity was on a level 3 and 4 in terms of the status level of corporate governance of ICT. This level was downscaled to a level 1 during the previous financial year due to non-compliance of corporate governance. Despite the entity having drafted policies related to ICT, however the third-party assurance to confirm the status level has not been obtained.

The organisational culture of high performance and high productivity yielded negative results due to low staff morale, governance and administration challenges as reflected on employee engagement index. These challenges were attributed to governance, leadership and administration challenges in the entity. The entity is currently under administration to strengthen the governance, administration and the sustainability of NSFAS.

The entity achieved one performance indicator out of 12 indicators measuring this programme. The Key Performance Indicator was achieved under Strategic Objective 3:- Improve the efficiency of the application, evaluation and funding of students.

Programme/Goal 1: Administration

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Programme/Goal 2:Student-Centred

Financial Aid

Strategic Objective 2 – Increase the amount of money recovered (Rand value) from NSFAS debtors. The fully subsidised education, reversal of debit orders by NSFAS debtors and the announcement with regards to the cancellation of historic debt impacted negatively on recoveries. NSFAS debtors were under the impression that their debts will be converted into bursaries or written off.

The entity experienced significant challenges pertaining to the processing of registration data and the integration of its IT system with institutions due to the migration of all institutions to the student-centred model. Data integrity issues, misalignment between our internal systems, cash flow shortages for upfront payments has prolonged the disbursement process. Disbursements were done systematically and manually in order to fast-track the disbursement process. This has resulted in the long reconciliation process, duplication and a number of defects, as a result the entity did not meet its performance target for Strategic Objective 4 - Improve the efficiency of payments of tuition, residence fees and allowances to NSFAS students and institutions.

Actual collections (Strategic Objective 2) fell short of target by 2% during the year under review which is an improvement compared to the previous year. It should be noted that recovered funds have increased by 22% compared to the prior year.

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4. Performance Information by Programme

4.1 PROGRAMME 2: STUDENT- CENTRED FINANCIAL AIDKey performance indicators, planned targets and actual achievements

OBJECTIVE 1: INCREASE IN FUNDING (RAND VALUE) RAISED FOR FINANCIAL AID FOR QUALIFYING STUDENTS


Actual Achievement 2015/16



Planned Target 2018/19


Deviation from planned target to Actual Achievement for 2018/2019

Comment on deviations

1.1 Amount of funds (Rand value) raised from new funders.

R18.6m R104.0m R56.6m R11m R0.00

(100.0%) • The signed MOU, dated 07 June 2018 reflecting an amount of R4.598m from INSETA did not translate into actual transfer of cash to NSFAS.

OBJECTIVE 2: INCREASE THE AMOUNT OF MONEY RECOVERED (RAND VALUE) FROM NSFAS DEBTORS

Performance IndicatorActual Achievement 2015/16







2.1 Amount of money recovered (Rand value) from NSFAS debtors.

R227.8m R392.4m 30.7% growth on 2016/17 actual performance (R392.4m).

R512.8m was recovered from debtors.

R641m R628m (2,0%) • The entity did not meet the recoveries target.

• January 2019 recorded a high number of unpaid debit orders. This appears to be a norm due to high consumer expenditure during the December holiday.

• The announcement about the settlement of historic debt also contributed to unpaid debit orders as NSFAS debtors were under the impression that their debts will be written off.

• Achieved • Achieved • Achieved

• Not achieved

• Not achieved • Achieved

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• Not achieved

• Not achieved

OBJECTIVE 1: INCREASE IN FUNDING (RAND VALUE) RAISED FOR FINANCIAL AID FOR QUALIFYING STUDENTS









1.1 Amount of funds (Rand value) raised from new funders.

R18.6m R104.0m R56.6m R11m R0.00

(100.0%) • The signed MOU, dated 07 June 2018 reflecting an amount of R4.598m from INSETA did not translate into actual transfer of cash to NSFAS.

OBJECTIVE 2: INCREASE THE AMOUNT OF MONEY RECOVERED (RAND VALUE) FROM NSFAS DEBTORS








2.1 Amount of money recovered (Rand value) from NSFAS debtors.

R227.8m R392.4m 30.7% growth on 2016/17 actual performance (R392.4m).

R512.8m was recovered from debtors.

R641m R628m (2,0%) • The entity did not meet the recoveries target.

• January 2019 recorded a high number of unpaid debit orders. This appears to be a norm due to high consumer expenditure during the December holiday.

• The announcement about the settlement of historic debt also contributed to unpaid debit orders as NSFAS debtors were under the impression that their debts will be written off.

1 No historical information available for these new indicators58


OBJECTIVE 3: IMPROVE THE EFFICIENCY OF THE APPLICATION, EVALUATION AND FUNDING OF STUDENTS









3.1 Percentage of all applications received by 30 November, where provisional funding

decisions are communicated to applicants by 31 January each year.

New indicator

New indicator

62.0% 80% 18% (78.0%) • In January 2019, the entity was alerted to a number of fraudulent sms messages being sent to its beneficiaries.

• An Executive decision was taken to stop all sms communications to applicants.

• The social media and myNSFAS portal was used to communicate funding status.

• The alternative communication methods resulted in a smaller population being tested for the KPI.

• A smaller number of communications went through the planned channels where achievement is recorded from.

3.2 Design and implement processes to record the date on which registration data is received

from institutions.

New indicator

New indicator

New indicator

Process designed and implementedby 31 December 2018

The system automatically implementing the process of recording data from institutions was implemented during the 2018 academic year and continued to run during the 2019 academic cycle

(0,0%) • The system is designed tested and implemented.

3.3 Percentage of first-time entry students where LAFSOPs are generated within 30 days of

receipt of registration data from institutions.

New indicator

New indicator

New indicator

-1 Not applicable New • Performance will be measured in 2019/20 financial year

3.4 Percentage of returning students where the funding process is completed within 30 days of receipt of

registration data

-1 -1 -1 New indicator

Not applicable

New • Performance will be measured in 2019/20 financial year

3.5 Number of institutions where NSFAS disburses allowances directly to students

-1 -1 -1 24 23 (4.0%) • An executive decision was taken to reconsider payment mechanism for TVET colleges. Universities were off boarded from this solution and more TVET’s were onboarded. This was to enable all TVET colleges to provide an allowance payment mechanism especially those who were unable to do so effectively.

• Not achieved

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OBJECTIVE 3: IMPROVE THE EFFICIENCY OF THE APPLICATION, EVALUATION AND FUNDING OF STUDENTS









3.1 Percentage of all applications received by 30 November, where provisional funding

decisions are communicated to applicants by 31 January each year.

New indicator

New indicator

62.0% 80% 18% (78.0%) • In January 2019, the entity was alerted to a number of fraudulent sms messages being sent to its beneficiaries.

• An Executive decision was taken to stop all sms communications to applicants.

• The social media and myNSFAS portal was used to communicate funding status.

• The alternative communication methods resulted in a smaller population being tested for the KPI.

• A smaller number of communications went through the planned channels where achievement is recorded from.

3.2 Design and implement processes to record the date on which registration data is received

from institutions.

New indicator

New indicator

New indicator

Process designed and implementedby 31 December 2018

The system automatically implementing the process of recording data from institutions was implemented during the 2018 academic year and continued to run during the 2019 academic cycle

(0,0%) • The system is designed tested and implemented.

3.3 Percentage of first-time entry students where LAFSOPs are generated within 30 days of

receipt of registration data from institutions.

New indicator

New indicator

New indicator

-1 Not applicable New • Performance will be measured in 2019/20 financial year

3.4 Percentage of returning students where the funding process is completed within 30 days of receipt of

registration data

-1 -1 -1 New indicator

Not applicable

New • Performance will be measured in 2019/20 financial year


-1 -1 -1 24 23 (4.0%) • An executive decision was taken to reconsider payment mechanism for TVET colleges. Universities were off boarded from this solution and more TVET’s were onboarded. This was to enable all TVET colleges to provide an allowance payment mechanism especially those who were unable to do so effectively.

• Achieved

• Not achieved

• Not achieved

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OBJECTIVE 4: IMPROVE THE EFFICIENCY OF PAYMENTS OF TUITION, RESIDENCE FEES AND ALLOWANCES TO NSFAS STUDENTS AND INSTITUTIONS









4.1 Percentage of students for which the first instalment of amounts due to the institution is paid to the institution within 30 days from

LAFSOP acceptance date.

98.5%

99.4% 73.0%• 80% 67% (16.0%) • Manual payments compromised the

data integrity and negatively impacted reconciliation and disbursements.

4.2 Percentage of students for which the first instalment of allowances due to students

(where NSFAS disburses directly to students) is paid to the student within 10 days of LAFSOP

acceptance date.

94.2% 40.8% 71.0% 90% 47% (48.0%) • There were duplications on disbursements because they were done manually and systematically.

• This process delayed the release of system disbursements for those students who had received manual payments. Any remaining balance of payment due to students could only be released once the manual payments that have been processed in Phoenix were in alignment.

4.3 Percentage of amounts due to institutions in respect of LAFSOP accepted by 30 November

which are paid to institutions by 31 December each year.

New indicator

New indicator

97.0% 98% 95.8% (2.0%) • Manual payments compromised the data integrity and negatively impacted reconciliation and disbursements.

4.4 Percentage of allowances due to students in respect of LAFSOPs accepted by 30 November

(where NSFAS disburses directly to students) which are paid to students by 31 December each

year.

New indicator

New indicator

92.0% 98% 95% (3.0%) • Outstanding payments were due to student cell phone number issues. Invalid cell phone numbers were a contributing factor to under performance

• Achieved • Not achieved• Achieved

• Achieved • Not achieved • Not achieved

• Not achieved

• Not achieved

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OBJECTIVE 4: IMPROVE THE EFFICIENCY OF PAYMENTS OF TUITION, RESIDENCE FEES AND ALLOWANCES TO NSFAS STUDENTS AND INSTITUTIONS









4.1 Percentage of students for which the first instalment of amounts due to the institution is paid to the institution within 30 days from

LAFSOP acceptance date.

98.5%

99.4% 73.0%• 80% 67% (16.0%) • Manual payments compromised the

data integrity and negatively impacted reconciliation and disbursements.

4.2 Percentage of students for which the first instalment of allowances due to students

(where NSFAS disburses directly to students) is paid to the student within 10 days of LAFSOP

acceptance date.

94.2% 40.8% 71.0% 90% 47% (48.0%) • There were duplications on disbursements because they were done manually and systematically.

• This process delayed the release of system disbursements for those students who had received manual payments. Any remaining balance of payment due to students could only be released once the manual payments that have been processed in Phoenix were in alignment.

4.3 Percentage of amounts due to institutions in respect of LAFSOP accepted by 30 November

which are paid to institutions by 31 December each year.

New indicator

New indicator

97.0% 98% 95.8% (2.0%) • Manual payments compromised the data integrity and negatively impacted reconciliation and disbursements.

4.4 Percentage of allowances due to students in respect of LAFSOPs accepted by 30 November

(where NSFAS disburses directly to students) which are paid to students by 31 December each

year.

New indicator

New indicator

92.0% 98% 95% (3.0%) • Outstanding payments were due to student cell phone number issues. Invalid cell phone numbers were a contributing factor to under performance

• Not achieved

• Not achieved

• Not achieved

• Not achieved

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OBJECTIVE 5: IMPROVE SERVICE LEVEL TO CUSTOMERS AND STAKEHOLDERS THROUGH MONITORING CUSTOMER SATISFACTION AND TAKING CORRECTIVE ACTION WHERE NECESSARY








5.1 A framework for the measurement of customer (student) and stakeholder

satisfaction

* -1 -1 Framework is developed and approved

Framework is developed with no criteria to measure the quality of service levels to customers and stakeholders.

(100.0%) • Framework was developed with no criteria to measure the quality of service levels to customers and stakeholders.

5.2 Benchmarks /baseline for contact centre performance

-1 -1 -1 Benchmarks and baseline for contact centre performance determined

Benchmarks and baseline for contact centre performance not determined

(100.0%) • Benchmarks and baseline for contact centre performance not determined. Only historical data was gathered.

* No historical information is available for these new indicators

OBJECTIVE 6: UNDERTAKE RESEARCH FOR THE BETTER UTILISATION OF FINANCIAL RESOURCES








6.1 Number of research reports produced each year.

5 research reports produced


There were four research reports produced but were not approved by EXCO within the 2017/18 financial year.

4 research re-ports produced

4 research briefs produced for the financial year under review• Labour Market Absorption

Research Report• Sector Profile Research

Report• Student Allowance• Research Report• Beneficiary Profile

(100.0%) • 4 research briefs produced for the financial year under review.

• The research briefs were supposed to emanate from the standard required research reports; therefore, the organisation could not account for the target as this was not a requirement as per the annual performance plan.

• Not achieved

• Achieved• Achieved

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OBJECTIVE 5: IMPROVE SERVICE LEVEL TO CUSTOMERS AND STAKEHOLDERS THROUGH MONITORING CUSTOMER SATISFACTION AND TAKING CORRECTIVE ACTION WHERE NECESSARY








5.1 A framework for the measurement of customer (student) and stakeholder

satisfaction

* -1 -1 Framework is developed and approved

Framework is developed with no criteria to measure the quality of service levels to customers and stakeholders.

(100.0%) • Framework was developed with no criteria to measure the quality of service levels to customers and stakeholders.


-1 -1 -1 Benchmarks and baseline for contact centre performance determined

Benchmarks and baseline for contact centre performance not determined

(100.0%) • Benchmarks and baseline for contact centre performance not determined. Only historical data was gathered.

OBJECTIVE 6: UNDERTAKE RESEARCH FOR THE BETTER UTILISATION OF FINANCIAL RESOURCES








6.1 Number of research reports produced each year.



There were four research reports produced but were not approved by EXCO within the 2017/18 financial year.

4 research re-ports produced

4 research briefs produced for the financial year under review• Labour Market Absorption

Research Report• Sector Profile Research

Report• Student Allowance• Research Report• Beneficiary Profile

(100.0%) • 4 research briefs produced for the financial year under review.

• The research briefs were supposed to emanate from the standard required research reports; therefore, the organisation could not account for the target as this was not a requirement as per the annual performance plan.

• Not achieved

• Not achieved

• Not achieved

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4.2 PROGRAMME 1: ADMINISTRATION

OBJECTIVE 7: IMPROVE AND MAINTAIN FINANCIAL, PERFORMANCE MANAGEMENT AND IT GOVERNANCE AND AUDIT OUTCOMES


Actual Achieve-ment 2015/16







7.1 Audit Opinion of the AGSA. Unqualified auditwith findings

Unqualified auditwith findings

Qualified audit with findings

Clean Audit Qualified audit with findings

(100.0%) • NSFAS received a qualified audit opinion from AGSA due to irregular expenditure.

• As disclosed in note 36 to the financial statements, the entity made payments to students in excess of contract amounts which resulted in the entity incurring irregular expenditure.

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

• NSFAS challenges have resulted to the entity being put under administration in order to strengthen governance, sustainability and to regain its credibility.

7.2 Status level for CGICTAS achieved. Achieved CGICTA S LEVEL 3 – Full compliance

CGICTAS LEVEL 3 and LEVEL 4 Achieved

CGICTAS LEVEL 1 Achieved

Third party assur-ance that CGICTAS level 2 is achieved.

• CGICT gap analysis was conducted and documented.

• CGICT high level Implementation project plan, including time-lines developed.

• High priority ICT policies reviewed and signed off.

• Phase 1 Stan-dard Operation Procedures drafted.

(100.0%) • Policies have not been approved by the third-party assurance during the current year under review.

• The organisation is currently on level 1 compliance.

• Not achieved

• Achieved

• Not achieved • Not achieved

• Achieved • Not achieved

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OBJECTIVE 7: IMPROVE AND MAINTAIN FINANCIAL, PERFORMANCE MANAGEMENT AND IT GOVERNANCE AND AUDIT OUTCOMES









7.1 Audit Opinion of the AGSA. Unqualified auditwith findings

Unqualified auditwith findings

Qualified audit with findings

Clean Audit Qualified audit with findings

(100.0%) • NSFAS received a qualified audit opinion from AGSA due to irregular expenditure.

• As disclosed in note 36 to the financial statements, the entity made payments to students in excess of contract amounts which resulted in the entity incurring irregular expenditure.

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

• NSFAS challenges have resulted to the entity being put under administration in order to strengthen governance, sustainability and to regain its credibility.

7.2 Status level for CGICTAS achieved. Achieved CGICTA S LEVEL 3 – Full compliance

CGICTAS LEVEL 3 and LEVEL 4 Achieved

CGICTAS LEVEL 1 Achieved

Third party assur-ance that CGICTAS level 2 is achieved.

• CGICT gap analysis was conducted and documented.

• CGICT high level Implementation project plan, including time-lines developed.

• High priority ICT policies reviewed and signed off.

• Phase 1 Stan-dard Operation Procedures drafted.

(100.0%) • Policies have not been approved by the third-party assurance during the current year under review.

• The organisation is currently on level 1 compliance.

• Not achieved

• Not achieved

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OBJECTIVE 8: STRIVE FOR AN IMPROVED ORGANISATIONAL CULTURE OF HIGH PERFORMANCE AND HIGH PRODUCTIVITY BY IMPROVING EMPLOYEE ENGAGEMENT









8.1 Leadership behaviour 360 degree survey

_1 _1 _1 Complete LBC 360 degree assessment for 70% of employees in level 11 and above.

360 degree assess-ment for 70% of em-ployees complete

None • 360 degree assessment for 70% of employees complete

8.2 Percentage Employee engagement index

Employee engagement index of 71%




70% Employee engagement index

(13.0%) • The under-performance was due to changes in leadership during the year which was exacerbated by NSFAS being placed under administration.

• The new leadership prioritised on stabilising NSFAS governance and administration. • Achieved • Achieved • Not achieved

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OBJECTIVE 8: STRIVE FOR AN IMPROVED ORGANISATIONAL CULTURE OF HIGH PERFORMANCE AND HIGH PRODUCTIVITY BY IMPROVING EMPLOYEE ENGAGEMENT









8.1 Leadership behaviour 360 degree survey

_1 _1 _1 Complete LBC 360 degree assessment for 70% of employees in level 11 and above.

360 degree assess-ment for 70% of em-ployees complete

None • 360 degree assessment for 70% of employees complete

8.2 Percentage Employee engagement index





70% Employee engagement index

(13.0%) • The under-performance was due to changes in leadership during the year which was exacerbated by NSFAS being placed under administration.

• The new leadership prioritised on stabilising NSFAS governance and administration.

• Achieved

• Not achieved

68


The appointment of the Administrator has made progress towards strengthening good governance, financial controls, administration and good relations with stakeholders including the funder community. This initiative will attract potential funders and expand contributions to student funding. This initiative will further assist in settling student loan debts.

The appointment of External Debt Collectors to service the public sector was finalised in January 2018. The entity has seen increased collections during the year under review as compared to the prior year. However, the increased collections were not sufficient to offset the underperformance in collections throughout the year. The entity started the year in a very strong footing. The entity is confident that the target of increasing collections by 10% in 2019/20 will be met.

Various interventions were made in order to improve the efficiency of the application, evaluation and funding of students. The entity deployed additional human resources, continuous improvement of ICT systems in order to assist in the efficiency of disbursement process. The entity is exploring and evaluating various communication channels in order to improve the level of communication for efficiency.

Management acknowledges that the 2018 academic year has not been an easy year for institutions and our students due to the challenges that the entity experienced in disbursing funds. Measures have been put in place to improve the efficiency of payments, systems and capacity. NSFAS is embarking on a process of recruiting right skills and expertise in the IT and finance space with an effort of improving data integrity and reconciliation of payments.

NSFAS is in a process of finalising a framework to measure the quality of service to customers and stakeholders. This will equip the entity in measuring the impact of services to customers and stakeholders. Historical statistics has been gathered to assist the entity in developing the benchmarks and baselines for quality service of the contact centre This will assist the entity in developing benchmarks and baselines to improve the contact centre performance. The organisation is in the process of reviewing the current contact centre model through the optimisation project. The project will review the internal processes, technology system enhancement, ensuring fit for purpose human capital. The budget has been approved in terms of the implementation of the project.

The measures are put in place to address the areas of under-performance of the entity include:



5. Strategies to Overcome Areas of Under-performance




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The unit has been capacitated with additional staff members to conduct research which will impact positively in the higher education sector. To ensure that targets are met in accordance to the Annual performance plan and the approved research plan. The following corrective measures have and/or are being implemented to improve the performance of the entity going forward:

• A disbursement improvement project was initiated to fix defects and improve the overall performance functionality of disbursement systems.

• Workshops and training have been conducted with institutions to improve the efficiency of data exchange and stakeholder relations between institutions and NSFAS.

• The campaign of encouraging students to sign LAFSOPs and NBAs has yielded positive results and is ongoing. This initiative is also addressing prior audit findings. The new threshold has been implemented using a phased in approach for First Time Entrants as from 2018 academic year. National allowance will reduce the dependency on institutions to submit registration costs before disbursement can be processed.

• Human resource capacity and outsourcing of skills has been put in place in the Operations team.

An audit improvement plan was prepared following the finalisation of the 2017/18 audit and the implementation of the corrective action plan has been monitored throughout the year. The corrective action implemented, included performing additional reconciliations on material account balances and signing of contracts by the students. Service providers were engaged in an effort to assist with the financial statement close process. Corporate governance of ICT (CGICTAS) - policies have been drafted and approved by EXCO. The entity is in a process of approaching the third-party assurance to obtain and confirm the status level.

Executive management has planned several workshops and engagement sessions with staff to review the results of the survey and confirm remedial action to improve employee engagement. In addition to this, leadership development programmes (technical and soft skills) will be implemented in the new financial year. An organisational culture improvement programme will be implemented to strive for a NSFAS culture of high performance, continuous improvement and innovation.




70


5.1 PERFORMANCE OBJECTIVES AND KEY PERFORMANCE INDICATORS ADDED

Strategic objective Key performance Indicator Motivation for

amendment

1. Improve the efficiency of the application,

evaluation and funding of students (new Strategic

Objective)

The following key performance indicators were drafted for the Strategic Objective 3 (new) “Improve the efficiency of the application, evaluation and funding of students”

3.2 Design and implement processes to record the date on which registration data is received from institutions.

3.3 Percentage of first-time entry students where LAFSOPs are generated within 30 days of receipt of registration data from institutions.

3.4 Percentage of returning students where the funding process is completed within 30 days of receipt of registration data


Align the annual performance plan with the business model

2. Improve service level to customers and

stakeholders through monitoring customer

satisfaction and taking corrective action where

necessary

5.1 Framework for the customer (student) and stakeholder satisfaction


Address prior year audit findings. Align the annual performance plan with the mandate.

3. Strive for an improved organizational culture

of high performance and high productivity

by improving employee engagement

8.1 Leadership behaviour 360 degree survey Address prior year audit findings

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6. Linking Performance with Budgets

2017/18 2018/19

ProgrammeBudget

ActualExpenditure

(Over)/UnderExpenditure

BudgetActualExpenditure

(Over)/Under Expenditure

R’000 R’000 R’000 R’000 R’000 R’000

Administration 291,862 275,069 16,793 369,742 385,355 (15, 613)

Student Centred Financial Aid

10,107,636 7,388,040 2,719,596 24,138,214 24,592,991 (454,777)

AFS reconciling items

Depreciation and Amortisation and write offs

15,545 92,436 (76,891) 16,431 1,080,549 (1,064,118)

Capex 8,855 6,800 2,055 10,404 5,827 4,577

Total 10,423,898 7,762,345 2,661,553 24,534,791 26,064,722 (1,529,931)

Note 1 - These items include debt write off expenses which are not part of the administration budget as well as adjustments related to the accounting treatment of student loans in terms of GRAP 23.

7. Revenue Collection

2017/18 2018/19

Recoveries monies

EstimateActualAmount Collected

Over/ (Under) Collection

EstimateActualAmount Collected

Over/ (Under) Collection

R’m R’m R’m R’m R’m R’m

Recoveries monies 588.5 512.8 (75.7) 640.9 628.6 (12.3)

Total 588.5 512.8 (75.7) 640.9 628.6 (12.3)

Refer to strategic objective 2

In this section

PART 04: GOVERNANCE

1. Introduction 74 2. Committees of Parliament 753. Executive Authority 754. The Board 755. Governance Structures for the Period Under Administration 806. Report on Audit and Risk Matters 82

04

74

1. IntroductionCorporate governance is applied through legislative prescripts in the NSFAS Act (Act 56 of 1999) and the Public Finance Management Act (PFMA) (Act 1 of 1999), and incorporates the principles contained in the King Code of Governance Principles of South Africa, 2016.

In terms of the section 17A of the NSFAS Act, NSFAS was placed under Administration as of 21 August 2018. The governance mechanisms in effect for the year under review is thus reflective of the entity being placed under Administration.

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2. Committees of ParliamentParliament exercises its role through evaluating the performance of the public entity by interrogating the annual financial statements and other relevant documents that are tabled from time to time. The Committees of Parliament exercises oversight over service delivery performance of the entity and, as such, reviews the non-financial information contained in the annual report. The following are the committess NSFAS account to:

• The Portfolio Committee on Higher Education and Training (PCHET) in the National Assembly• The Select Committee on Education and Recreation (SCER), in the National Council of

Provinces (NCOP)• The Standing Committee on Public Accounts (SCOPA) in the National

Assembly

3. Executive Authority

The Executive Authority’s responsibility is to provide for the establishment, governance and funding of public higher education institutions, as well as exercising oversight in terms of the PFMA. Regular reports pertaining to NSFAS operations were issued to the Executive Authority throughout the year. For the period of Administration, reports were submitted to the Executive Authority on a weekly basis.

4 .The BoardThe Board has the absolute responsibility for the performance of the public entity and is fully accountable to the public entity for such performance. The Board was effective from 1 April 2018 to 20 August 2018, at which point NSFAS was placed under Administration. In terms of the NSFAS Act, once the entity is placed under Administration, the Board is dissolved, and the Administrator assumes its role.

4.1 THE BOARD AND ITS SUB-COMMITTEES

The composition of the Board, in terms of NSFAS Act Section 5(1) subject to subsection (4), constitutes 13 members appointed by the Minister of whom:

• One member must be employed by the Department of Higher Education and Training;• One member must be nominated by the Minister of Finance;• One member must be designated by the Minister as Chairperson of the Board; and• Three members must be nominated by national organisations representing students; Not more than four members may be co-opted by the Board. The Executive Officer, contemplated in section 9(1) of the NSFAS Act, also serves as the Board Secretary.The NSFAS Act requires the Board to establish a minimum of two Board Committees, namely the Executive Committee and the Finance Committee. In order to attend to its duties effectively, the Board established three other committees: The Audit and Risk Committee, Human Resources and Remuneration Committee and the Information and Communications Technology Committee.

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GOVERNANCE

4.2.1 BOARD MEETING ATTENDANCE

NO NAME 29 May 23 Jul 26 Jul 30 Jul

1 Sizwe Nxasana, Mr (Chairperson)

2 Andre Zeeman, Mr (member)

3 Julia De Bruyn, Mr (member)

4 Lumko Mtimde, Mr (member) Apology

5 Mary Bomela, Ms (member) Apology

6 Nafisa Mayat, Ms (member) Apology

7 Neil Garrod, Prof (member) Apology

8 Rose Keanly, Ms (member)

9 Sibongile Masinga, Ms (member)

10 Thabo Moloja, Mr (member) Apology

11 Thandi Lewin, Ms (member)

12 Themba Mosia, Prof (member)

13 Yershen Pillay, Mr (member) Apology Apology

14 Yonke Twani, Mr (member)

15 Zirk Joubert, Mr (member)

16 Steven Zwane, Mr (Executive Officer)

17 Nathan Johnstone, Mr (ARC Chair, by invitation)

NOTES:a. Mr Sizwe Nxasana resigned, on 09 August 2018, as a member of the Board.b. Mr Andre Zeeman resigned, on 10 August 2018, as a member of the Board.c. Prof Themba Mosia resigned, on 10 August 2018, as a member of the Board.d. Prof Neil Garrod was appointed as Board Chairperson with effect from 10 August 2018. e. Dr Randall Carolissen was appointed, by the Minister of Higher Education and Training, as NSFAS Executive Administrator,

with effect from 21 August 2018, as published in Notice 41851 in Government Gazette 866.f. Mr Steven Zwane left the employment as Executive Officer on 02 October 2018.g. The NSFAS Board was dissolved on 21 August 2018, with the appointment of the Executive Administrator

4..2 MEETING ATTENDANCEAttendance at Board meetings and sub-committees of the Board prior to Administration are noted as follows:

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4.2.2 EXECUTIVE COMMITTEE MEETINGS ATTENDANCE

NO NAME 20 April 16 May 30 July

1 Sizwe Nxasana, Mr (Chairperson)

2 Sibongile Masinga, Ms (member)

3 Julia De Bruyn, Ms (member)


5 Thabo Moloja, Mr (member)

6 Mary Bomela, Ms (ICT Comm Chair, by invitation) Apology Apology


8 Rose Keanly, Ms (Board member, by invitation) n/a n/a

9 Yonke Twani, Mr (Board member, by invitation) n/a n/a

10 Zirk Joubert, Mr (Board member, by invitation) n/a

11 Neil Garrod, Prof (Board member, by invitation) n/a n/a

4.2.3 FINANCE COMMITTEE MEETINGS ATTENDANCE

NO NAME 20 April 23 July 30 July

1 Julia De Bruyn, Ms (Chairperson)

2 Neil Garrod, Prof (member) Apology


4 Sizwe Nxasana, Mr (member)

5 Zirk Joubert, Mr (member) Apology

6 Thabo Moloja, Mr (member)


8 Rose Keanly, Ms (Board member, by invitation) n/a

9 Sibongile Masinga, Ms (HRRemCo Chair, by invitation)

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GOVERNANCE

4.2.4 AUDIT AND RISK COMMITTEE MEETINGS ATTENDANCE

NO NAME 24 Apr 26 Jul 31 Jul 06 Aug 21 Aug

1 Nathan Johnstone, Mr (Chairperson)

2 Andre Zeeman, Mr (member)

3 Rob Dorrington, Prof (member)

4 Rose Keanly, Ms (member)

5 Shai Makgoba, Mr (member)

6 Theuns Tredoux (member) Apology

7 Zirk Joubert, Mr (member) Apology Apology Apology Apology

8 Sizwe Nxasana, Mr (Board Chair, by invitation)

Apology Apology

NOTES:

a. *The Audit & Risk Committee was reconstituted by the Executive Administrator on 27 August 2018. b. The following members were appointed to the reconstituted Audit & Risk Committee: Mr Nathan Johnstone (Chairman),

Prof Neil Garrod, Mrs Rose Keanly, Mr Shai Makgoba, Mr Theuns Tredoux, and Mr Zirk Joubert.

4.2.5 JOINT MEETINGS OF THE AUDIT AND RISK, AND FINANCE COMMITTEES MEETINGS ATTENDANCE

NO NAME 21 May 26 Jul

1 Nathan Johnstone, Mr (ARC Chairperson)

2 Julia De Bruyn, Ms (FinCom Chairperson)

3 Andre Zeeman, Mr (ARC member)

4 Neil Garrod, Prof (FinCom member) Apology

5 Rob Dorrington, Prof (ARC member)

6 Rose Keanly, Ms (ARC member)

7 Sizwe Nxasana, Mr (FinCom member)

8 Shai Makgoba, Mr (ARC member) Apology

9 Thabo Moloja, Mr (FinCom member)

10 Thandi Lewin, Ms (FinCom member)

11 Theuns Tredoux (ARC member) Apology

12 Zirk Joubert, Mr (ARC and FinCom member) Apology Apology

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4.2.6 HUMAN RESOURCES AND REMUNERATION COMMITTEE MEETINGS ATTENDANCE

NO NAME 19 Apr 11 May

1 Sibongile Masinga, Ms (Chairperson)

2 Amanda Glaeser, Ms

3 Nafisa Mayat, Ms

4 Lumko Mtimde, Mr Apology

5 Yershen Pillay, Mr Apology

6 Yonke Twani, Mr

4.2.7 INFORMATION AND COMMUNICATIONS TECHNOLOGY COMMITTEE MEETINGS ATTENDANCE

NO NAME 21 May 17 Aug

1 Mary Bomela, Ms (Chairperson)

2 Gwen Baumgart, Ms (member)

3 Lessing Labuschagne, Prof (member)

4 Lumko Mtimde, Mr (member)

5 Rose Keanly, Ms (member) Apology

6 Sibongile Masinga, Ms (member) Apology

7 Themba Mosia, Prof (member) n/a

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GOVERNANCE

The Administrator reconstituted the ARC in order to facilitate continuity and formal handover of governance, risk and audit related matters.

5.2 RECONSTITUTED AUDIT AND RISK COMMITTEE MEETINGS ATTENDANCE

NR NAME *27 Aug 05 Sep 17 Sep 28 Sep 11 Oct

1 Randall Carolissen, Dr (Executive Administrator)

Apology

2 Prakash Mangrey, Mr (Risk and Finance Advisor)

n/a n/a n/a n/a

3 Nathan Johnstone, Mr (Chairperson)

4 Neil Garrod, Prof (member) Apology Apology Apology

5 Rose Keanly, Ms (member) Apology

6 Shai Makgoba, Mr (member) Apology

7 Theuns Tredoux, Mr (member)

8 Zirk Joubert, Mr (member) Apology Apology Apology

Dr Randall Carolissen was appointed, by the Minister of Higher Education and Training, as NSFAS Executive Administrator, with effect from 21 August 2018, as published in Notice 41851 in Government Gazette 866. In terms of the NSFAS Act, the Board was dissolved when the Administrator was appointed. The Administrator assumed the role of the Board as well as that of executive management. In terms of s17 of the NSFAS Act, the Administrator may appoint other persons with the suitable knowledge and experience in order to assist him in carrying out his duties.

ADVISOR PORTFOLIO START DATE

Colin Fourie ICT Advisor to the Administrator 08-Oct-18

Mukhtar Mohamed Security and business continuity Advisor 01-Apr-19

Bebe Oyengun-Adeoye Advisor to the Administrator 29-Oct-18

Stalin Links Lead Process specialist 11-Sep-18

Professor Neil Garrod Special Advisor to the Executive Administrator 21-Aug-18

Peter Grant 2019 Program Advisor 18-Sep-18

Prakash Mangrey Risk & Finance Advisor to the Executive Administrator 01-Oct-18

5. Governance Structures for the Period Under Administration

5.1 TECHNICAL TEAM APPOINTED TO SUPPORT THE ADMINISTRATOR

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This Audit & Risk Committee was dissolved by the Executive Administrator on 19 October 2018. The Executive Committee, on 06 November 2018, resolved that an Audit & Risk Advisory Committee be established to focus on audit and risk related matters;1. The first meeting of the Audit & Risk Advisory Committee was held on 10 December 2018; and2. Only two meetings of the Committee were held during the period under review (2018/2019: 10 December

2018 and 19 March 2019).

5.3 RISK ADVISORY COMMITTEE MEETINGS ATTENDANCE

NAME 10 December 2018 19 March 2019

Randall Carolissen, Dr (Executive Administrator / Chairperson)

Colin Fourie, Mr

Neil Garrod, Prof

Peter Grant, Mr Apology

Prakash Mangrey, Mr

Stalin Links, Mr

Tasneem Salasa, Ms

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GOVERNANCE

6. Report on Audit and Risk Matters

6.1 FINANCIAL STATEMENTS AND ACCOUNTING POLICIES AND PRACTICES Given that the Administrator replaces the Board, the Administrator also assumed the responsibilities of oversight with respect to audit and risk related matters. In terms of this responsibility, the Administrator asserts that:• The Financial Statements of the entity complied with the effective Standards

of Generally Recognised Accounting Practice (GRAP). No concerns or complaints in relation to the reporting practices of the entity were reported to the Administrator.

• He discussed the Audited Financial Statements, to be included in the Annual Report, with the Auditor-General and Executive Management; reviewed the Auditor-General’s Management Report and management’s responses thereto; noted changes in accounting practices and policies where applicable; considered the entity’s compliance with legal and regulatory provisions; and noted significant adjustments resulting from the external audit.

• He concurs with and accepts the Auditor-General’s report on the Annual Financial Statements and is of the opinion that the audited Annual Financial Statements should be accepted and read together with the Management Report of the Auditor-General.

6.2 EXTERNAL AUDITOR In terms of the PFMA, the external auditor is the Auditor-General. The Administrator, in consultation with Executive Management, agreed to the Audit Strategy and Plan, and the budgeted audit fees for the 2018/19 financial year. The Auditor-General was not asked to provide any non-audit services.

(FOR THE YEAR ENDED 31 MARCH 2019)

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6.3 INTERNAL CONTROL The Administrator oversaw the process by which Internal Audit reviewed and assessed the adequacy and effectiveness of the entity’s system of internal control. Internal Audit has reported material deficiencies in the system of internal control, in particular with regard to the disbursement process. On 11 July 2018, Internal Audit issued management with a letter of notification of material non-compliance to laws and regulations (NOCLAR), in particular Section 51 of the PFMA.

NOCLAR sets out a framework to guide auditors and other professional accountants in what actions to take in the public’s interest when they become aware of a non-compliance with laws and regulations or NOCLAR, committed by a client or employer. The standard applies to all professional accountants, including auditors, other professional accountants in public practice, and professional accountants in organisations, including those in businesses, government, education, and the not-for-profit sector.

The Administrator agrees with the Internal Audit findings and recommendations. The remediation to NOCLAR and other internal audit findings, as well as the re-establishment of governance processes within NSFAS has, and continues to be, an integral focus of the Administrator. In preparing the 2018/19 annual financial statements, the disbursement anomalies that have resulted from inadequate controls have been quantified and disclosed as irregular expenditure.

6.4 RISK MANAGEMENT, INCLUDING INFORMATION TECHNOLOGY

The entity's strategic risks were identified at the outset of the Administrator’s term. These strategic risks set the foundation for the priority areas of focus for the Administrator and determine the key strategic projects to be undertaken.

6.5 INTERNAL AUDIT

Ernst & Young Advisory Services (Pty) Ltd was appointed to provide internal audit services for a three-year term commencing on 1 September 2017. The Administrator approved the Internal Audit plan.The Administrator ensured that the internal audit function was independent and had the necessary resources, standing and authority to enable it to discharge its duties. The internal audit team reported to the Administrator. The head of the internal audit team attended all Committee meetings. Although the Administrator recognises the skills and capacity provided by an outsourced internal audit function, this function will be insourced in the new financial year in order to increase risk coverage and build institutional knowledge. The administrator believes that this will significantly contribute to the improvement and sustainability of both overall governance and the strengthening of the internal control environment over time.

6.6 FRAUD

NSFAS has continuous campaigns to educate students on ways to prevent fraud in their funding processes. NSFAS has a Vuvuzela fraud hotline that has been created for students and members of the public to report fraudulent and unethical activities that may be seen taking place in the NSFAS funding system. The fraud hotline was operational for the full financial year.

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GOVERNANCE

6.7 COMPLIANCE WITH LAWS AND REGULATION

NSFAS is required to comply with the following laws and regulations:

• Public Finance Management Act (Act 1 of 1999)• NSFAS Act (Act 56 of 1999)• National Credit Act (Act 34 of 2005)• Treasury regulations for departments, trading entities, constitutional institutions

and public entities

6.8 MINIMISING CONFLICT OF INTEREST

No cases of conflict of interest were reported during the year under review.

6.9 CODE OF CONDUCT

NSFAS developed a Code of Conduct and enforced it in the previous financial year. The Code provides details of the processes to follow after breach of the Code. During the year under review, there was a total of 7 cases where the code of conduct was breached and these led to disciplinary actions; one written warning, four final written warning and two dismissals.

NATURE OF DISCIPLINARY ACTION NUMBER

Verbal warnings 0

Written warnings 1

Final written warnings 4

Dismissal 2

Total 7

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6.10 HEALTH AND SAFETY

Office space refurbishment

• The main building has been renovated to improve general health and safety in the entire workspace:

• The building is now equipped with fresh air conditioning infrastructure to improve the general ventilation in the building

• Clear walkways with visible signage were installed to assist and guide employees in easily identifying fire escape pathways during building evacuations

• All newly installed furniture in the building takes into consideration office ergonomics and is practical to the requirements needed by each employee to complete their roles

• Toilet facilities have been upgraded in the main building to cater for staff members with disabilities.

A new Occupational Health and Safety Committee

• A new Occupational Health and Safety Committee has been formed to accommodate all the office changes and increasing number of employees

• Additional First Aiders and Fire Marshals have also been appointed to manage all occupational health and safety related incidents and building evacuations.

Hygiene equipment

• The entire office space is equipped with waterless hygiene equipment to service staff members in a bid to adhere to the call of water conservation by municipalities in the Western Cape

• Water storage tanks have also been installed in the main building to service the toilet infrastructures during water shortages.

Incidents and Accident

There were no major incidents or injuries on duty reported during this financial year.

Health and Safety meetings

Formal health and safety committee meetings are held once per quarter or as and when the need arises to address health.

In this section

PART 05: HUMAN RESOURCE MANAGEMENT

1. Introduction 882. Achievements and Challenges 893. Human Resource Oversight Statistics 934. The Year Ahead 95

05

88

1. IntroductionThe 2018/19 financial year was a singularly challenging time for Human Resource (HR) Practice within NSFAS. Not only was the Board dissolved and the entity placed under Administration, it also saw the organisation deal with significant system, operational and labour challenges.

While these challenges manifested across the organisation, there was a particular need to improve the manner in which the organisation managed its Employee Relations. This resulted in the appointment of an incumbent in December 2018. The HR department also experienced significant challenges in its document management processes and information management technology as highlighted in the Auditor-General’s report for the previous financial year. Furthermore, the unit was also not immune to the key person dependencies that continue to be symptomatic throughout the organisation and manifested through a variety of inefficiencies, delays and inaccuracies which have compromised the integrity of HR data.

Prior to Administration, there was a collapse of the HR department. Irregular appointments resulted in a top-heavy management structure. This depleted the operating budget to the extent that technical capacity was eroded. Executive management was absent as most executives were exited within the first 2 months of Administration. There was distrust between organised labour and management, low staff morale, a climate of fear and harassment and an organisational culture of grievances and entitlement.

Currently the Administrator and his team act as the executive management of NSFAS. This over reliance on essentially external expertise poses a major risk to the future sustainability of NSFAS. An urgent program of senior management development is also an imperative.

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2. Achievements and Challenges

NSFAS is top heavy in management with poor resourcing in technical skills. In order to stem the decline of the organisation, a risk assessment conducted at the commencement of Administration, necessitated the onboarding of technical personnel, albeit on a contract basis. To this end, 30 data scientists, systems engineers, project managers and accountants were appointed to support the Administration. Furthermore, in order to deliver against the Administrator’s Terms of Reference (ToR) and key deliverables (for eg. to clear the backlog of payments to students), senior managers were deployed to institutions to expedite reconciliation of accounts and elimination of errors in student accounts. In essence, bringing NSFAS staff closer to the Universities, TVET’s and the student communities they serve. The deployment of employees also facilitated improved management of relationships with our key stakeholders and outreach initiatives.

During this period of Administration, NSFAS also spearheaded an initiative which provided an opportunity to bring unemployed, recently graduated youth on board, providing them with invaluable work experience. This initiative was conceptualised and implemented in partnership with the Unemployment Insurance Fund (UIF) and has given the Scheme a valuable opportunity to make a further contribution to the development of skilled youth in our country.

Staffing the Organisation:

2.1 ACHIEVEMENTS AND CHALLENGES

Specific training interventions were implemented, which included both technical and soft skills training, as well as encouraging employees to improve their tertiary education. The NSFAS Graduate Internship Programme (GIP), provides opportunities to improve the employability of graduates and in this way also contributes to ‘growing our own timber’ in select instances was initiated. To date, 38 graduates have successfully moved through the programme with seven being absorbed into full-time roles within the organisation.

Learning andDevelopment:

Number of interventions by equity and occupational level

Number of interventions by occupational level

90

The training undertaken was aligned to the BankSeta Critical Skills List, the NSFAS Strategic Objectives and the fy2018/19 Annual Performance Plan (APP). Approximately R1, 6m was spent on these training initiatives. The demographics thereof are presented in the tables below.

9

596

91

37

38Afric

an

0

9

0

0

5Indi

an

1

221

69

48

38Colo

ured

0

16

0

7

6Whi

te

Unskilled and defined decision making

Semi-skilled & discretionary decision making

SkillTech, Jnr Management, Supervisor, Forman/Superintendant

Mid-Mangement, Pro Qualified & Expert Specialists

Senior management

Top management

Senior management

Mid-management, Pro Qualified & Expert Specialists


Semi-skilled & discretionary decision making

Unskilled and defined decision making

0

87

92

160

842

10

Percentage of male vs female intervention by occupational level

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Senior management 61% 39%

60% 40%

32% 68%

21% 79%

10% 90%Unskilled and defined decision making

Semi-skilled & discretionary deci-sion making


Mid-management, Pro Qualified & Expert Specialists

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HUMAN RESOURCES & ADMINISTRATION

A key aspect in the organisation is the employee relations and NSFAS’ interaction and relationship with a workforce where more than 50% of employees belong to the recognised trade union NEHAWU. During the period under review, NSFAS and Labour representatives revised their relationship agreement and signed an Agency Shop Agreement, together with the Constitution for the National Bargaining and Consultative Forum. These highlights paved the way for NSFAS and labour to address and seek resolution on issues of mutual interest at organisational level. The relationship-building and pursuit of objectives that will facilitate to the success of NSFAS continues to be work in progress.

An initiative undertaken for the period under review, was the roll out of a qualifications audit which identified employees who were not optimally positioned in the organisation. This audit and the related assessments will continue into the new financial year.

During the year under review, NSFAS embarked upon a Culture Improvement initiative which was a continuation of the Employee Engagement initiatives undertaken previously. In the year ahead further efforts to entrench the defined culture and its descriptors will continue. Most important will be its manifestation in Leadership Assessment:

NSFAS developed a 360-Degree Leadership Assessment tool to assess the degree to which employees in senior and leadership positions in the organisation are living the NSFAS values. The results of this survey will be used to inform the proposed Leadership Development Programme and establish a competent and empowered leadership.

The year under review marked the second year of establishing a new Performance Management System and process in the organisation. Extensive group and individual training and coaching on performance contracting was rolled out during the bulk of the period. The year ahead will present NSFAS with an opportunity to embed the behaviours and an organisation-wide reflection on the organisational values.

During the period under review, NSFAS embarked on various Affirmative Action measures, as per the approved NSFAS Employment Equity Plan. Numerical targets were met in the Professionally Qualified and Skilled technical Occupational levels. However, targets were not met for People with Disabilities and males in the Semi-skilled group. The table below provides a perspective of the organisation’s Employment Equity position.

Employee Relations:

Organisational Development:

Employee Engagement:

Performance Management:

Employment Equity:

EMPLOYMENT EQUITY REPORT AS AT 31 MARCH 2019

MALE FEMALE

African Coloured Indian White African Coloured Indian White Total

National EAP 42.7% 5.2% 1.7% 5.1% 35.8% 4.4% 1.1% 4.9% 4.0%

Provincial EAP 20.9% 24.2% 0.8% 8.8% 16.8% 20.8% 0.4% 7.0% 7.3%

NSFAS Target 38.3% 18.7% 0.2% 2.7% 26.9% 9.0% 0.7% 0.0% 3.0%

NSFAS Actual 20.0% 7.8% 1.2% 1.8% 46.5% 20.2% 0.2% 1.0% 1.6%

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3. Human Resource Oversight Statistics

3.1 ORGANISATIONAL GROWTH IN NUMBERS

The following tables provide a view of staffing in the organisation.

EMPLOYMENT EQUITY REPORT AS AT 31 MARCH 2019

Occupational level 2017/18No. of employees

2018/19No. of employees

Top management 1 15

Senior management 33 26

Professional/middle management 40 44

Skilled 61 75

Semi-skilled 250 268

Unskilled 7 8

Total 396 436

Programme

Total Expenditure for entity (R 000)

Personnel expenditure

Personnel expenditure as % of total

No. of employees

Average personnel cost per employee

Administration 400, 119, 000 193, 538, 000 48.4% 436 443, 895

3.2 EMPLOYEE COSTS FOR THE ORGANISATIONThe NSFAS organisation has experienced 10.9% growth, as detailed in the table above.The costs of this resource base amounted to 48.4% of the total operational budget and are detailed in the tables below:

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3.3 EMPLOYEE COSTS PER OCCUPATIONAL LEVEL

LevelPersonnel Expenditure(R 000)

% of total personnel expenditure

No. of employees

Average personnel cost per employee (R 000)

Top Management 29,376,123, 87 15.2% 15 1,958,408

Senior Management 28,138,231 14.5% 26 1,082, 240

Professional/middle management 33,163,933 17.1% 44 753,726

Skilled 40, 465, 195 20.9% 75 539, 536

Semi-skilled 59,901,429 31% 268 223,513

Unskilled 1,103,262 0.6% 8 137,908

Other 1, 389, 826,13 0,7%

Total 193,538,000 100.00% 436 443, 895

3.4 EMPLOYEE TURNOVER

During the year under review, 36 employees were terminated from the organisation. The table below details the reasons for termination of employment:

Reason Number% OfTotal number of staff leaving

Dismissed 2 0.46%

Resigned 23 5.28%

Contract Expired 5 1.15%

Illness / Medical Boarding 1 0.23%

Absconded 2 0.46%

Deceased 1 0.23%

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4. The Year Ahead

The Administration recognises that:

• Technological and process remediation alone are insufficient to ensure NSFAS success.

• Human Capital is a key determinant of organisational stability, growth and sustainability.

• Learning and development alone is insufficient to optimise organisational Human Capital capacitation.

• Investing in Human Capital capacitation is part of an overall strategy to achieve long-term organisational success and sustainability.

The area of HR thus remains a key inhibitor of improved organisational performance. The organisation continues to have major Human Capital capacity constraints, which are manifested in a plethora of organisational challenges, including: low employee productivity, high absenteeism rate, poor customer service, diminished employee engagement, unhealthy organisational culture, increased healthcare costs, and escalation of labour tensions.

In this context various Human Capital capacitation programmes will continue to be initiated and Human Capital capacitation interventions will be reviewed, amended as required and aligned to national and international best practice. The key focus areas of the NSFAS Human Capital capacitation initiatives are:

• Improving organisational communication• Enhancing individual competencies• Developing organisational competencies• Strengthening employee wellness• Increasing individual employability• Creating opportunities for career mobility• Reversing organisational culture

The areas of focus for the coming year include:

• Appointment of a new executive team • Rebalancing management and technical human capital• Transfer of skills from consultants and advisors to permanent staff and• Introduction of performance management and accountability framework

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In this section

PART 6: FINANCIAL INFORMATION

Accounting Authority Statement of Responsibility and Approval 98 Report of the Auditor-General 100Report of the Accounting Authority 106Statement of Financial Position 116Statement of Changes in Net Assets 118Cash Flows Statement 119Statements of Comparison of Budget and Actual Amounts 120Accounting Policies 123Notes to the Annual Financial Statements 141Supplementary Information 174

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Accounting Authority Statement of Responsibility and Approval

The Accounting Authority is required by the National Student Financial Aid Scheme Act (Act 56 of 1999) as amended and the Public Finance Management Act (Act 1 of 1999) (PFMA) as amended, to maintain adequate accounting records and is responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is the responsibility of the Accounting Authority to ensure that the annual financial statements fairly present the state of affairs of the entity as at the end of the financial year and the results of its operations and cash flows for the period. The Auditor-General of South Africa was engaged to express an independent opinion on the annual financial statements and was given unrestricted access to all financial records and related data.

Following a qualified report by the Auditor-General of South Africa (AGSA) on the annual financial statements at 31 March 2018, and the issuance of a Non-Compliance to Laws and Regulations (NOCLAR) report by the internal auditors in July 2018 (which highlighted material non-compliance to S51 of the PFMA and indicated a high risk of fraud in the NSFAS environment) the Board of NSFAS, under section 17A (1) (c) of the NSFAS Act (Act 56 of 1999), requested the Minister of Higher Education and Training to place NSFAS under administration. The Minister approved this request and Dr Randall Carolissen was appointed as Administrator for the period 21 August 2018 to 21 August 2019. The terms of reference of the Administrator are published in the Government Gazette dated 20 August 2018, Volume. 638 No. 41851. Dr Randall Carolissen was reappointed as NSFAS Administrator as published in the Government Gazette dated 22 August 2019, Volume 650, No. 42662.

At the commencement of his tenure the Administrator, as Accounting Authority, identified the deficiencies of the NSFAS financial management system and instituted controls to ensure the integrity of the disbursement process. These included a high-level data clean up and validation, development of a system of remittance, instituting controls in the disbursement process and stabilising supporting IT systems. Execution of disbursement from unencrypted computers off-site and after hours was stopped. Increased controls were implemented specifically in relation to student mobile number changes. The Administrator scrapped all voucher systems and removed all commercial interests from the disbursement value chain.

Due to the chronic system instability and lack of data integrity noted by internal audit, a derisking program and where required, forensic investigation was initiated.

This set of annual financial statements also includes the period 1 April 2018 to 21 August 2018 when administration commenced. Poor financial and operational controls have led to massive misallocations in prior years, resulting in large scale maladministration in the disbursement process. Every effort has been made to quantify the extent of the impact for inclusion in this year’s financial statements. Irregular expenditure for the period increased from R3.3 billion in the 2017/18 financial year (figures restated) to R7.6 billion in the 2018/19 financial year. These significant amounts and the increase therein is primarily due to disbursement errors relating to non-compliance with section 51 of the PFMA. Matters that have been quantified include:• Students who have been funded for courses specifically excluded from NSFAS funding• Disbursements in excess of the loan or bursary award• Disbursements processed against the incorrect funder• Disbursements for students where there is an unsigned bursary or loan agreement• Disbursements processed to the incorrect student• Disbursements paid to a student in terms of multiple awards.

Forensic accountants have been appointed to validate the analysis of the Administrator.

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To enable the NSFAS to meet its mandated responsibilities as it relates to the 2019 academic year and beyond, internal control mechanisms were developed to reduce the risk of error or losses to the fiscus. This includes identification, assessment, management and monitoring both strategic and operation risks across the entity. Innovations introduced resulted in a significant shift to on-line application, development of student portals and effective exchange of information with institutions.

The entity is in the process of minimising any residual risks by implementing and embedding appropriate controls and enforce ethical behavior. NSFAS could therefore disburse directly to student bank accounts as early as February 2019; the earliest yet in its history.

Prior to administration there was no evidence of systematic reconciliation of student and institutional accounts. Ad hoc reconciliations were carried out only upon account queries. With the introduction of a reconciliation unit within the finance division this function will be developed within the NSFAS. Forensic investigations and financial reconciliations performed down to the student level have highlighted the fundamental and terminal challenges with current systems. This means that, in the longer term, a complete redesign of processes, systems and operations, as well as human and technical re-capacitation, is required if NSFAS is to become sustainable. The insourcing of the internal audit team will also allow NSFAS to extend scope to institutions so as to ensure that irregular expenditure is minimised.

On the basis of the information and explanations provided by management and all other relevant stakeholders, the Accounting Authority is of the opinion that the entity’s system of internal controls are being strengthened on an ongoing basis to provide a reasonable platform for the preparation of reliable financial statements.

The annual financial statements have been prepared in accordance with Standards of Generally Recognised Accounting Practice (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board.

The annual financial statements are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates.

The Accounting Authority has reviewed the entity’s cash flow forecast for the year to March 31, 2020 and, in the light of this review and the current financial position, he is satisfied that the entity has, or has access to, adequate resources to continue in operational existence for the foreseeable future.

The entity is dependent on the Department of Higher Education and Training (DHET) for continued funding of operations. The annual financial statements are prepared on the basis that the entity is a going concern and that the DHET has neither the intention nor the need to liquidate or curtail materially the scale of the entity.

Although the Accounting Authority is primarily responsible for the financial affairs of the entity, it is supported by the entity's internal audit function in assessing the adequacy of controls.

The Auditor-General of South Africa is responsible for independently auditing and reporting on the entity's annual financial statements.

The annual financial statements set out on pages 116 to 173, which have been prepared on the going concern basis, were approved by the Accounting Authority on 31 May 2019 for submission to the Auditor-General of South Africa and were signed on its behalf by:

Dr Randall Carolissen NSFAS Administrator

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FINANCIAL INFORMATION

Report of the Auditor-General

Qualified opinion

1. I have audited the financial statements of the NSFAS set out on pages 116 - 173, which comprise the statement of financial position as at 31 March 2019, the statement of financial performance, statement of changes in net assets, statement of cash flows and statement of comparison of budget information with actual information for the year then ended, as well as the notes to the financial statements, including a summary of significant accounting policies.

2. In my opinion, except for the effects of the matters described in the basis for qualified opinion section of this report, the financial statements present fairly, in all material respects, the financial position of the NSFAS as at 31 March 2019, and its financial performance and cash flows for the year then ended in accordance with the South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and the requirements of the Public Finance Management Act of South Africa, 1999 (Act no. 1 of 1999) (PFMA).

Basis for qualified opinion

Amounts due to institution (non-exchange)

3. I was unable to confirm that the amounts due to institutions balance was valued appropriately in accordance with GRAP 104, Financial instruments. I was unable to confirm the correctness of transactions by alternative means. Consequently, I was unable to determine whether any adjustments were necessary to amounts due to institutions, stated at R1 251 953 000.

Bursary expenditure

4. I was unable to obtain sufficient appropriate audit evidence for the completeness and occurrence of bursary expenditure paid outside of the entity's normal disbursement process because the status of supporting documents did not enable the required audit confirmation. I was unable to confirm the occurrence and completeness of transactions by alternative means. Consequently, I was unable to determine whether any adjustments were necessary to bursary expenditure, stated at R24 592 991 000.

Cash flows statement

5. The calculation of the net cash outflow from operating activities, cash flow from investing activities and cash flow from financing activities for the current and previous period did not appropriately account for cash and non-cash items, as required by GRAP 2, Cash flow statements.

Contingent liabilities

6. The public entity did not reliably estimate the possible obligation to fund students in future with the available information at their disposal, in accordance with GRAP 19, Provisions, contingent liabilities and contingent assets. The entity underestimated the number of years of its funding commitment to students. Consequently, contingent liabilities was understated by R6 338 182 999,56.

Context for the opinion

7. I conducted my audit in accordance with the International Standards on Auditing (ISAs). My responsibilities under those standards are further described in the auditor-general’s responsibilities for the audit of the financial statements section of this auditor’s report.

8. I am independent of the public entity in accordance with sections 290 and 291 of the International Ethics Standards Board for Accountants’ Code of ethics for professional accountants and parts 1 and 3 of the International Ethics Standards Board for Accountants’ International code of ethics for professional accountants (including International Independence Standards) (IESBA codes), and the ethical requirements that are relevant to my audit in South Africa. I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA codes.requirements and the IESBA codes.

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9. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my qualified opinion.

Emphasis of matters

10. I draw attention to the matters below. My opinion is not modified in respect of these matters.

Significant uncertainty

11. With reference to note 25 to the financial statements, the public entity has entered into contractual commitments to fund students for the duration of their qualification as part of the student-centred model. These commitments resulted in a contingent liability of R29,3 billion at 31 March 2019 (2018: R34,67 billion) being disclosed in the financial statements as the entity would need to fund the students for the duration of their studies, subject to them meeting the promotion requirements.

Material fair value and impairment adjustment

12. As disclosed in note 5 to the financial statements, the public entity had student loan receivables with a nominal value of R36,08 billion as at 31 March 2019 (2018: R35,64 billion), which are reflected in the financial statements as R9,33 billion (2018: R10,25 billion) after cumulative fair value and impairment adjustments of R26,75 billion (2017: R25,39 billion).

Restatement of corresponding figures

13. As disclosed in note 29 to the financial statements, the corresponding figures for 31 March 2018 have been restated as a result of an error in the financial statements of the public entity at,

and for the year ended, 31 March 2019.

Other matter

14. I draw attention to the matter below. My opinion is not modified in respect of this matter.

Unaudited supplementary schedules

15. The supplementary information set out on pages 174 to 175 does not form part of the financial statements and is presented as additional information. I have not audited these schedules and, accordingly, I do not express an opinion thereon.

Responsibilities of the administrator for the financial statements

16. The administrator is responsible for the preparation and fair presentation of the financial statements in accordance with the SA Standards of GRAP and the requirements of the PFMA, and for such internal control as the accounting authority determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

17. In preparing the financial statements, the administrator is responsible for assessing the NSFAS’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the appropriate governance structure either intends to liquidate the public entity or to cease operations, or has no realistic alternative but to do so.

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Auditor-general’s responsibilities for the audit of the financial statements

18. My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

19.A further description of my responsibilities for the audit of the financial statements is included in the annexure to this auditor’s report.

Report on the audit of the annual performance report

Introduction and scope

20. In accordance with the Public Audit Act of South Africa, 2004 (Act no. 25 of 2004) (PAA) and the general notice issued in terms thereof, I have a responsibility to report material findings on the reported performance information against predetermined objectives for selected programmes presented in the annual performance report. I performed procedures to identify findings but not to gather evidence to express assurance.

21. My procedures address the reported performance information, which must be based on the approved performance planning documents of the public entity. I have not evaluated the completeness and appropriateness of the performance indicators included in the planning documents. My procedures also did not extend to any disclosures or assertions relating to planned performance strategies and information in respect of future periods that may be included as part of the reported performance information. Accordingly, my findings do not extend to these matters.

22. I evaluated the usefulness and reliability of the reported performance information in accordance with the criteria developed from the performance management and reporting framework, as defined in the general notice, for the following selected programme presented in the annual performance report of the public entity for the year ended 31 March 2019:

Programme Pages in the annual performance reportProgramme 2 – Student-centred financial aid 56-63

23. I performed procedures to determine whether the reported performance information was properly presented and whether performance was consistent with the approved performance planning documents. I performed further procedures to determine whether the indicators and related targets were measurable and relevant, and assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete.

24. The material findings in respect of the usefulness and reliability of the selected programmes are as follows:

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Programme 2 – Student centred financial aid

25. Management erroneously included, in the schedule used to calculate the numerator and denominator, students who do not sign the loan agreement form and schedule of particulars (LAF/SOPs) as per the key performance indicator (KPI) definition of KPIs 4.1 and 4.3. The schedule further included duplicate student ID entries. In addition, an incorrect date of first payment was included for first-time students who signed LAF/SOPs in respect of KPI 4.1.

26. Management was unable to provide verifiable information to confirm validity, accuracy and completeness for reported achievements.

27. The KPI definitions of KPIs 4.1 and 4.3 did not reflect its purpose of measuring and reporting on both returning and new students, as management intended. The LAFSOP acceptance date means that only new students should be added; however, management is of the view that subsequent registration also serves as LAFSOP acceptance, which suggest that the words are open to interpretation.

Other matters

28. I draw attention to the matters below.

Achievement of planned targets

29. Refer to the annual performance report on pages 48 to 71 for information on the achievement of planned targets for the year and explanations provided for the underachievement of a significant number of targets. This information should be considered in the context of the qualified opinion expressed on the usefulness and reliability of the reported performance information in paragraph 25 of this report.

Adjustment of material misstatements

30. I identified material misstatements in the annual performance report submitted for auditing. These material misstatements were on the reported performance information of programme 2 – student-centred financial aid. As management subsequently corrected only some of the misstatements, I raised material findings on the reliability of the reported performance information. Those that were not corrected are reported above.

Report on the audit of compliance with legislation

Introduction and scope

31. In accordance with the PAA and the general notice issued in terms thereof, I have a responsibility to report material findings on the compliance of the public entity with specific matters in key legislation. I performed procedures to identify findings but not to gather evidence to express assurance.

32. The material findings on compliance with specific matters in key legislations are as follows:

Expenditure management

33. Effective and appropriate steps were not taken to prevent irregular expenditure, as required by section 51(1)(b)(ii) of the PFMA. The value as disclosed in note 30, is not complete as management was still in the process of quantifying the full extent of the irregular expenditure. The majority of the irregular expenditure disclosed in the financial statements was caused by non-compliance with section 19(1) of the National Student Financial Aid Scheme Act (Act 56 of 1999).

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Financial statements

34. The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework and supported by full and proper records, as required by section 55(1)(a) and (b) of the PFMA. Material misstatements identified by the auditors in the submitted financial statements were not adequately corrected, which resulted in the financial statements receiving a qualified opinion.

Other Information

35. The administrator is responsible for the other information. The other information comprises the information included in the annual report, which includes the administrators report. The other information does not include the financial statements, the auditor’s report and the selected programme presented in the annual performance report that has been specifically reported in this auditor’s report.

36. My opinion on the financial statements and findings on the reported performance information and compliance with legislation do not cover the other information and I do not express an audit opinion or any form of assurance conclusion thereon.

37. In connection with my audit, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements and the selected programme presented in the annual performance report, or my knowledge obtained in the audit, or otherwise appears to be materially misstated.

Internal control deficiencies

38. I considered internal control relevant to my audit of the financial statements, reported performance information and compliance with applicable legislation; however, my objective was not to express any form of assurance on it. The matters reported below are limited to the significant internal control deficiencies that resulted in the basis for the qualified opinion, the findings on the performance report and the findings on compliance with legislation included in this report.

Leadership

39. The NSFAS’s board was dissolved and the entity placed under administration during August 2018. The administrator was appointed with clear terms of reference that included a focus on key operational deliverables and bringing the NSFAS to a state of stabilisation. During the initial stages of the administration, it came to the attention of the administrator that the inherited audit action plans were not well defined, key responsibilities for resolutions were vague and little effort had been directed at driving the resolutions of the previous year’s findings. Concerted efforts were therefore directed at enhancing the audit action plan. The

improved action plan did not address all the repeat findings due to the timing of its implementation and, although the extent of findings has reduced, material new findings on financial reporting surfaced during the year under review.

Financial and performance management

40. The entity being placed under administration had an impact on the credibility of financial and performance reports. Material amounts recorded as bursary expenditure and amounts due to institutions could not be substantiated due to the status of supporting information for manual payment, system deficiencies and challenges with system integration. The estimate of future funding commitments to students is not reliable and the cash flow statement contains material misstatements. This resulted in a qualified audit opinion on the financial statements.

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Annexure – Auditor-general’s responsibility for the audit

1. As part of an audit in accordance with the ISAs, I exercise professional judgement and maintain professional scepticism throughout my audit of the financial statements, and the procedures performed on reported performance information for selected programme and on the public entity’s compliance with respect to the selected subject matters.

Financial statements

2. In addition to my responsibility for the audit of the financial statements as described in this auditor’s report, I also:

• identify and assess the risks of material misstatement of the financial statements whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control

• obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the public entity’s internal control

• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the administrator

• conclude on the appropriateness of the administrator’s use of the going concern basis of accounting in the preparation of the financial statements. I also conclude, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the NSFAS ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial statements about the material uncertainty or, if such disclosures are inadequate, to modify the opinion on the financial statements. My conclusions are based on the information available to me at the date of this auditor’s report. However, future events or conditions may cause a public entity to cease continuing as a going concern

• evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation

Communication with those charged with governance

3. I communicate with the administrator regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

4. I also confirm to the administrator that I have complied with relevant ethical requirements regarding independence, and communicate all relationships and other matters that may reasonably be thought to have a bearing on my independence and, where applicable, related safeguards.

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The Accounting Authority hereby submits his report for the year ended March 31, 2019.

1. GENERAL REVIEW

Main business and operations

The National Student Financial Aid Scheme is a statutory entity established in terms of the National Student Financial Aid Scheme Act (Act 56 of 1999) as amended.

Performance highlights (Figures in Rm)

• Students assisted at the 50 TVET Colleges amounted to 247,769 in the 2018 academic year and 200,339 in the 2017 academic year.

• Students assisted at the 26 public universities amounted to 393,781 in the 2018 academic year and 260,002 in the 2017 academic year.

• For the 2018/19 financial year a total of R24.7bn was disbursed as compared to 2017/18 where a total of R14.1bn was disbursed. This includes:

• R3.8bn (2018: R2.0bn) to TVET colleges (100% bursaries).• R20.8bn (2018: R12.1bn) to universities.

- R20.8bn (2018: R5.4bn) 100% bursaries. - R66m (2018:R10m) in convertible loans and R16m (2018: R3.4bn) converted to bursaries based on student performance.

• An amount of R532m was recognised as the social benefit component after bursary conversion in the current financial year as compared to R3.8bn in the prior year.

• Total disbursements since inception amounts to R107,441m in the current financial year.• Nominal value of loan balances: R36.1bn (2018: R35.6bn).• Carrying value of loan balances: R9.3bn (2018: R10.2bn).• Loan recoveries in the current financial year amounts to R629m. This is an increase of R121m from the prior

financial year.

The activities of the entity for the accounting period under review are clearly reflected in the annual financial statements. The results are summarised below:

Results (Figures in Rands) 2019 2018New grants for student loans and bursaries (I) 21,387,350,000 15,345,106,000Total loans and bursaries awarded (II) 25,276,185,000 13,174,992,645Operational expenses (III) (400,119,000) (289,881,000)Operational expenses to awards ratio (%) 1.53 2.12University bursaries (IV) 20,814,059,000 5,375,932,000TVET Colleges 100% bursaries (V) 3,778,932,000 2,012,108,000

Report of the Accounting Authority

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I. During the period under review grants were received from the South African Government via the Department of Higher Education and Training (DHET), the Department of Basic Education, the Department of Agriculture, Forestry and Fisheries, the Department of Defence and Military Veterans, the National Skills Fund, the Department of Justice and Constitutional Development, the Department of Social Development, KwaZulu-Natal Premier's Office, Gauteng Gambling Board, Agriculture SETA, Bank SETA, Chemical Industries and Training Authority, Fibre Processing and Manufacturing SETA, Food and Beverage SETA, Health and Welfare SETA, Manufacturing Engineering and Related Services SETA, Safety and Security SETA, Services SETA, Transport Education Training Authority, Wholesale and Retail SETA and various other donors.

II Total loans and bursaries awarded in the current year exceeds the new grants for student loans and bursaries. This excess is funded from student loan recovery and interest received, as well as prior year unutilised grants. Loans and bursaries awarded in the current year span across more than one loan year whereas the new grants received are for the 2018 loan year only.

III Operational expenses comprise of personnel cost, asset management fees, consulting and professional fees, audit fees and general expenses.

IV Final year programme loans are converted to a 100% bursary if the student meets the academic requirements for graduation. Up to 40% of all other loans may be converted to a bursary based on academic performance. Certain funding categories provide 100% bursaries for university students. The significant movement in university bursaries is the consequence of the presidential announcement on 16 December 2017.

V Bursaries awarded to TVET College students less credit balances due to NSFAS.

2. GOING CONCERN

The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.

3. SUBSEQUENT EVENTS

After the reporting period, but before signature of the Annual Financial Statements and completion of the 2018/19 external audit, the President of the Republic of South Africa announced the combining of portfolios. On 30 May 2019 the portfolios of Higher Education and Training and Science and Technology were combined.

President Ramaphosa also appointed a new Minister, Dr Bonginkosi Emmanual Nzimande, to head the portfolio from this date.


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4. ACCOUNTING AUTHORITY

The Minister of Higher Education and Training ordered the dissolution of the Board on 21 August 2018 in terms of section 17A (3) (a) of the National Student Financial Aid Scheme (NSFAS) Act (Act 56 of 1999), as amended, Dr Randall Carolissen was appointed by the Minister in terms of section 17A to 17D of the NSFAS act as Administrator effective from the day that the Board was dissolved. The members who served the entity during the year are as follows:

Dr Randall Carolissen (Administrator) Appointed 21 August 2018, reappointed 22 August 2019

Following a qualified report by the Auditor-General of South Africa (AGSA) on the annual financial statements at 31 March 2018, and the issuance of a Non-Compliance to Laws and Regulations (NOCLAR) report by the internal auditors in July 2018 (which highlighted material non-compliance to S51 of the PFMA and indicated a high risk of fraud in the NSFAS environment) the Board of NSFAS, under section 17A (1) (c) of the NSFAS Act (Act 56 of 1999), requested the Minister of Higher Education and Training to place NSFAS under administration. The Minister approved this request and Dr Randall Carolissen was appointed as Administrator for the period 21 August 2018 to 21 August 2019. The terms of reference of the Administrator are published in the Government Gazette dated 20 August 2018, Volume. 638 No. 41851. Sizwe Nxasana (Chairperson) Appointed 1 August 2015 to 3 August 2018Prof. Neil Garrod (Chairperson) Appointed 10 August 2018 to 21 August 2018 Steven Zwane (Executive Officer) Appointed 1 September 2017 to 2 October 2018Mary Bomela Co-opted 29 July 2016 to 21 August 2018Julia De Bruyn Appointed 1 August 2013 to 31 July 2017, re-appointed 17 August 2017 to 21 August 2018 Prof. Neil Garrod Appointed 24 June 2013 to 9 August 2018Zirk Joubert Appointed 17 August 2017 to 21 August 2018Rose Keanly Co-opted 29 July 2016 to 21 August 2018Thandi Lewin Appointed 1 February 2016 to 21 August 2018Sibongile Masinga Appointed 24 June 2011 to 21 August 2018Nafisa Mayat Appointed 24 June 2015 to 21 August 2018Thabo Moloja Appointed 29 April 2013 to 17 April 2017, re-appointed 17 August 2017 to 21 August 2018Prof. Themba Mosia Appointed 24 June 2011 to 10 August 2018Lumko Mtimde Appointed 24 June 2015 to 21 August 2018Yershen Pillay Appointed 29 April 2013 to 17 April 2017, re-appointed 17 August 2017 to 21 August 2018Yonke Twani Appointed 17 August 2017 to 21 August 2018Andre Zeeman Co-opted 31 May 2016 to 10 August 2018

5. CORPORATE GOVERNANCE

The Accounting Authority exercises effective control over the entity, its plans and strategy and acknowledges its responsibilities as to strategy, compliance with internal policies, external laws and regulations, effective risk management and performance measurement, transparency and effective communication both internally and externally by the entity in accordance with the NSFAS Act, as amended.

In order to ensure the effective exercise of its functions in terms of the Act, the previous Board established committees comprising Board members as well as co-opted experts who were not members of the Board, where it was required. The Executive Committee and Finance Committee were established in terms of the NSFAS Act, as amended.

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The Audit and Risk Committee was established in terms of the Public Finance Management Act, as amended. The Board also established the Human Resources and Remuneration Committee and the Information and Communication Technology Committees. Meetings of Board committees were held in accordance with approved terms of reference.

The various Board committees were dissolved after the dissolution of the Board. The Administrator subsequently re-established the following committees: Executive Committee (EXCO), ICT Committee and the Audit and Risk Committee.

6. BOARD/ADMINISTRATOR EXPENSES, EXECUTIVE AND SENIOR MANAGERS' EMOLUMENTS

Figures in Rand thousand

Fees Retirement Fund contributions

Medical contributions

Expenses Total package 2019

Total package 2018

Board expensesMeeting fees 1,138 - - - 1,138 822Travel and accommodation - - - 353 353 1,223

1,138 - - 353 1,491 2,045

Board meeting fees per board member 2019 Fees

2019Expenses

2019Total

Dr Randall Carolissen (Administrator) - 44 44Sizwe Nxasana (Chairperson) - 6 6Mary Bomela 33 4 37Julia De Bruyn - 4 4Prof. Neil Garrod 116 71 187Zirk Joubert - 3 3Rose Keanly 136 2 138Sibongile Masinga 127 12 139Nafisa Mayat 24 16 40Thabo Moloja 203 83 286Prof. Themba Mosia 24 10 34Lumko Mtimde 34 25 59Yershen Pillay 14 1 15Yonke Twani 38 26 64Andre Zeeman 49 - 49Nathan Johnstone 99 41 140Shai Makgoba 64 1 65Amanda Glaesar 9 2 11Prof. Lessing Labuschagne 15 2 17Prof. Rob Dorrington 34 - 34Gwen Baumgart 114 - 114 1,133 353 1,486


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Salary Retirement Fund contibutions

Medicalcontributions

Other Total package 2019

Total package 2018

Executive ManagersExecutive Officer - - - - - 833(Acting) - aExecutive Officer - b 1,550 111 62 - 1,723 2,125Chief Financial Officer - 1,008 - 11 14 1,033 1,110cChief Financial Officer 1,792 - 128 163 2,083 1,454(Acting) - dChief Financial Officer 575 - - - 575 -(Acting) - eChief Information Officer - - - - - 489- fChief Information Officer 1,458 - - 24 1,482 896- gHuman Resources 2,297 - - 39 2,336 705Executive - hChief Operations Officer- iChief Information Officer

1,087

792

-

-

-

14

1,087

986

-

-

(Acting) - j

10,559 111 201 254 11,305 6,811

Key Managers -Advisors to theAdministratorAdministrator - k 1,914 - - 391 2,305 203Special Advisor - I 952 - 20 7 979 -Risk & Finance Advisor 575 - - 1 576 -- mHR & OD Advisor - n 771 - - 103 874 -2019 Program Manager 780 - - 29 809 -- oLead Process Specialist 863 - - 15 878 -- p

5,855 - 20 546 6,421 -

-

Board Expenses, Executive and Senior Managers' Emoluments (continued)

a Lerato Nage - Executive Officer (Acting): 16 February 2017 to 31 August 2017.b Steven Zwane - Executive Officer: 1 September 2017 to 2 October 2018.c Lerato Nage - Chief Financial Officer: Resigned 31 July 2018.d Morgan Nhiwatiwa - Chief Financial Officer (Acting): 1 March 2017 to 31 August 2017, 1 May 2018 to 31 December 2018.e Prakash Mangrey - Chief Financial Officer (Acting): Appointed on 1 January 2019. No acting allowance was paid.f Richard Mackinnon-Little - Chief Information Officer: Resigned 30 June 2017.g Ashveer Rajcoomar - Chief Information Officer: Appointed 1 November 2017 to 19 October 2018.h Vuyokazi Dwane - HR Executive: appointed 1 December 2017.i Tasneem Salasa - Chief Operations Officer: Appointed 23 August 2018j Colin Fourie - ITC Advisor to the Administrator and Chief Information Officer (Acting): Appointed on 20 October 2018.k Dr Randall Carolissen – Administrator: Appointed as Administrator by the Minister of Higher Educations and Training in terms of

section 17 A (1) (c) of the NSFAS Act for the period 21 August 2018 to 20 August 2019.l Prof. Neil Garrod – Special Advisor to the Administrator: Appointed on 2 August 2018.m Prakash Mangrey – Risk and Finance Advisor to the Administrator: Appointed on 1 October 2018.n E. Bebe Oyegun-Adeoye – HR & OD Advisor to the Administrator: Appointed on 29 October 2018.o Peter Grant – 2019 Program Manager: Appointed on 18 September 2018.p Stalin Links – Lead Process Specialist: Appointed on 11 September 2018.

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7. EFFECTIVENESS OF INTERNAL CONTROLS

Following a qualified report by the Auditor-General of South Africa (AGSA) on the annual financial statements at 31 March 2018, and the issuance of a Non-Compliance to Laws and Regulations (NOCLAR) report by the internal auditors in July 2018 (which highlighted material non-compliance to S51 of the PFMA and indicated a high risk of fraud and significant deficiencies in internal control in the NSFAS environment) the Board of NSFAS, under section 17A (1) (c) of the NSFAS Act (Act 56 of 1999), requested the Minister of Higher Education and Training to place NSFAS under administration. The Minister approved this request and Dr Randall Carolissen was appointed as Administrator for the period 21 August 2018 to 20 August 2019.

On the basis of the information and explanations provided by management and all other relevant stakeholders, the Accounting Authority is of the opinion that the entity’s system of internal controls is being strengthened on an ongoing basis to provide a reasonable platform for the preparation of reliable financial statements.

8. NATURE OF ACTIVITIES

NSFAS is mandated to provide financial assistance in the form of loans and bursaries to eligible students at public higher education institutions. NSFAS also disburses bursaries to students at Technical and Vocational Education and Training (TVET) colleges.

The activities include administration of student loans and bursaries and the recovery of loans from students once they are employed and earning in excess of R30,000 per annum. Up to 40% of a student loan awarded in a particular year can be converted into a bursary dependent upon the number of courses a student passes in that year. From the 2011 to the 2017 academic year, students who qualify for DHET funding have 100% of their loan converted to a bursary where the requirements for graduation have been met.

Following the pronouncement of the bursary funding programme by the former President of South Africa in December 2017, financial assistance from the Department of Higher Education and Training (and certain funders) to all eligible students is now in the form of bursaries from the 2018 academic year.

Repayment of student loans

Prior to the 2018 academic year, full bursaries were earmarked for, amongst others, scarce skills and carried conditions specified by individual donors, mainly national government departments. Some of these bursaries may become repayable if the conditions are not fulfilled by the beneficiaries. Following the presidential pronouncement on 16 December 2017, all financial assistance offered by DHET and administered by NSFAS to qualifying students is now in the form of bursaries from the 2018 academic year onwards.

Bursary programme

On 16 December 2017, the former President Jacob Zuma pronouncement a bursary funding programme for students from poor and working-class families whose gross combined family household income is up to a maximum of R350,000 per annum from the 2018 academic year studying at public higher education institutions. This programme would be phased in over a period of five (5) years. Prior to the new bursary programme announcement, the financial criteria to receive bursary funding from NSFAS, for both first-time entrant (FTE) and continuing students, was a gross household annual income of up to R122,000. Under the new programme, the criterion was amended to a gross annual household income of up to R350,000 in order to give effect to the President’s pronouncement.

112



9. ASSUMPTION SET USED IN THE LOAN VALUATION MODEL

NSFAS is required, by the Standards of Generally Recognised Accounting Practice (GRAP), to determine the fair value of student loans at the initial recognition and subsequent amortised cost for financial reporting purposes. The assumptions used in the valuation model are based on an analysis of the NSFAS loan book history data and other relevant sources of information.

The primary assumptions in the valuation of the loan book that are not directly driven by market variables and where judgement is required reflect the progression of the student from receiving a loan, to exiting the university to commencing payment and then the pattern of payment once payment has commenced. The assumptions are set with reference to the actual experience of the entity over time.

Assumption setting history:

31 March 2018: The model assumptions were reassessed for the 2018 valuation exercise to take into account the experience up to 28 February 2018 in respect of the progress of debtors to exit from studies and thereafter to commencing repayment of loans. The improved collection levels have improved the outlook in respect of early loans but have not yet impacted later loans and this experience is reflected in the valuation results.

31 March 2019: The assumptions used in the prior year did not change when considered in the valuation, however, based on the implementation of the post presidential pronouncement on 16 December 2017, as well as feedback on recoveries. The sensitivity of a student's transition from exiting the tertiary education system to commencing payment was decreased by 10% to allow for the deterioration in the collection experience.

10. CONTINGENT LIABILITY FOR STUDENT LOANS AND BURSARIES

The student-centered model allows students registered at both universities and TVET colleges to apply directly to NSFAS for loans and bursaries rather than through the respective institutions. Students who are eligible by being registered at an institution have loans and bursaries approved for the duration of their studies, subject to their meeting the promotion requirements and NSFAS continuing to receive funding from the government. This contractual commitment by NSFAS to fund students for the duration of their studies has resulted in a contingent liability of R29,302,108,005 (2018: R34,669,486,741) being disclosed in note 25 to the financial statements as the future obligation in respect of these students.

11. IRREGULAR EXPENDITURE

In the prior financial year, the auditors noted amounts disbursed in terms of registration data received from institutions, but in excess of contractual amounts. This was classified as irregular expenditure. Refer to note 31.

During the current financial year, the entity identified additional irregular expenditure. Further detail is provided in note 31.

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12. SUPPLY CHAIN MANAGEMENT

During the 2018/19 financial year, the National Treasury approved the condonation of irregular expenditure incurred by the entity during the 2012/13 financial year amounting to R133,787. The irregular expenditure was condoned by National Treasury on 21 May 2018 in accordance with paragraph 29 of the previous National Treasury Irregular Expenditure Guidelines. Further information in relation to this can be found in note 31 to the financial statements

The entity incurred irregular expenditure of R971,223 during the 2018/19 financial year as a result of a payment to a service provider for document management services without the approval of the contract extension by the delegated authority. An investigation into the matter was concluded prior to the financial year end which revealed that value for money was received and no official was found liable in law. The irregular expenditure will be considered for condonation in the 2019/20 financial year.

The following actions were implemented by the entity to prevent the re-occurrence of irregular expenditure:

• Training of all Supply Chain Management (SCM) staff and related role players on a regular basis on legislative requirements and updates.

• Re-assessment of the delegation of authority framework.• Review and update of the SCM policy.• Design of SCM process flows, standard operating procedures and related evaluation checklists in accordance

with key legislative prescripts and related requirements.• Strict control over deviations from procurement processes.• Ensuring that the composition of the bid committees (evaluation and adjudication) is sufficient and

appropriate.


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13. STUDENT AWARDS AND REPAYMENTS

Academic years

2018 2017 To date

Rand value Number ofstudents^ Rand value

Number ofstudents (I) Rand value Number of

students^Students awarded by institution category

Universities 18,373,238,547 346,966 12,106,308,036 260,002 90,559,961,802 1,690,178TVET colleges 2,742,606,899 239,797 2,012,107,916 200,339 16,740,199,388 1,320,848Other institution (I) - - - - 141,611,314 1,986

21,115,845,446 586,763 14,118,415,952 460,341 107,441,772,504 3,013,012

^ The difference between the number of student awards by institution category and by funder is due to students being funded from more than one funder category.

Since its inception in 1991, the entity has awarded to students approximately R107,441,772,504 (2018: R86,325,927,059) in loans and bursaries. For the year under review, the entity assisted 604,114 students with 667,210 awards.

Financial years

Repayments 2019 2018 1992 - 2018

Loans recovered 1,113,762,787 721,717,825 7,579,306,396Less Credit balances (II) (485,126,217) (213,329,732) (1,708,337,470)Net recoveries received (III) 628,636,570 508,388,093 5,870,968,926

Loan repayments, excluding donor settlements and credit balances on fee accounts, were at a monthly average of R52.4million (2018: R42.7 million).(I) These are awards designated by certain funders for students/learners at specific agricultural colleges and/or schools, the National Institute for Higher Education, and other colleges.(II) Credit balances on student fee accounts returned by institutions are applied to reduce the original loan capital.(III) The net amount recovered from debtors of R628,636,570 was 2% below collections target of R640,955,904.

Academic years

2018 2017

Rand Value Number of students ^ Rand value Number of

Students^

Department of Higher Education and TrainingGeneral / returning student allocation 10,589,089,772 240,393 9,669,105,151 224,491

First time entrants 5,890,211,248 129,608 - -Final year programme and Teacher allocation - - 42,221,080 916Students with disabilities 77,639,538 1,501 37,999,515 765Historic debt 8,381,104 192 157,333,623 6,311National Skills Fund 486,241,775 9,194 576,679,358 11,639SAICA partnership - Thuthuka Fund 30,265,047 446 21,820,656 443TVET Bursaries 2,732,672,101 263,629 2,012,107,916 200,339

Department of Basic Education:Funza Lushaka Teacher Bursaries 1,000,630,398 14,787 1,091,737,945 14,899Sector Education and Training Authorities 25,061,919 374 52,485,734 1,108Other funding categories (I) 275,652,544 7,086 456,924,974 11,797

21,115,845,446 667,210 14,118,415,952 472,708

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^ The difference between the number of students awards by institution category and by funder is due to students being funded from more than one funder category.

(I) Other funding categories include funds from government entities, private donors and institution recovered monies.

14. CHANGE IN STUDENT ALLOWANCE PAYMENT MECHANISM

During the current financial year, for the 2019 academic year, the entity has restructured and rebranded its allowance payment mechanism from sBux to NSFAS Wallet. Allowances were previously disbursed to students in segmented specific allowances, e.g. books etc. These pockets had specific uses which limited students in terms of where these could be spent. For the 2019 academic year, the NSFAS Wallet allowances are now all grouped into a single "wallet" which allows students to access their allowances directly and spend in the merchants of their choice.

For the purposes of this set of Annual Financial Statements, all references are still made to sBux as opposed to the NSFAS Wallet (effective academic year 2019). This will be changed in the 2019/20 Annual Financial Statements.

116


Statement of Financial Position

Figures in Rand thousand Note(s) 2019 2018Restated

AssetsCurrent AssetsTrade and other receivables (non-exchange) 8 7,200 5,163Prepayments to institutions 4 3,532,337 3,559,187Student loans 5 804,494 754,656Amounts owing by institutions (exchange) 6 24,782 456,968Cash and cash equivalents 9 3,886,556 3,671,932Amounts owing by other funders 7 82,686 82,274

8,338,055 8,530,180

Non-Current AssetsProperty, plant and equipment 2 13,918 15,427Intangible assets 3 17,737 25,165Student loans (exchange) - long term 5 8,533,812 9,490,906Amounts owing by institutions (exchange) - long term 6 20,457 20,927Amounts owing by other funders 7 - 5,234

8,585,924 9,557,659Total Assets 16,923,979 18,087,839

Liabilities

Current LiabilitiesProvisions 10 26,667 27,235Amounts due to institutions (non-exchange) 11 1,251,943 162,463Deferred income 12 4,246,347 1,840,790Trade and other payables (exchange) 13 575,429 187,806

6,100,386 2,218,294Total Liabilities 6,100,386 2,218,294Net Assets 10,823,593 15,869,545

Net AssetsCapital fund 10,823,593 15,869,545Total Net Assets 10,823,593 15,869,545

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Statement of Financial Performance

Figures in Rand thousand Note(s) 2019 2018

Revenue

Revenue from exchange transactionsAdministration fees (exchange) 14 47,847 25,209Administration grants (non-exchange) 14 269,120 225,974Grants received for student awards (non-exchange) 15 21,387,350 15,345,106Interest revenue (exchange) 34 1,367,335 1,470,790Commission revenue - sBux (exchange) 35 8,144 3,803Unallocated debtors receipts (non-exchange) 33 1,539 2,427Other income (exchange) 39 5,865 4,868Total revenue from exchange transactions 23,087,200 17,078,177

Expenditure

Personnel costs 16 (193,538) (149,111)Asset management fees 17 (5,372) (270)Depreciation and amortisation 2 & 3 (14,764) (14,812)Irrecoverable debts written-off 18 (1,065,785) (77,624)Bursaries - Universities (20,814,059) (5,375,932)Bursaries - TVET Colleges (3,778,932) (2,012,108)General expenses (128,439) (92,313)Consulting and professional fees (47,426) (26,731)Audit fees 19 (10,580) (6,644)Total Operational expenditure (26,058,895) (7,755,545)Operating surplus/(deficit) for the year (2,971,695) 9,322,632Impairment loss - Amounts owing by other funders 38 - (17,062)Social benefit component on student loans issued 5 (532,627) (3,752,515)Model adjustments 36 (1,378,891) (1,114,848)Residual valuation adjustments 5 (162,739) (84,113)Other losses (2,074,257) (4,968,538)Surplus/(deficit) for the year (5,045,952) 4,354,094

118


Statement of Changes in Net Assets

Figures in Rand thousand Capital fund Total reserves

Accumulated surplus/(deficit)

Total net assets

Prior period reclassification correction (refer note 29) 442,862 442,862 (442,862) -

Balance at 1 April 2017 (restated) 11,515,452 11,515,452 - 11,515,452

Surplus for the year - - 4,354,094 4,354,094Transfer to capital fund 4,354,094 4,354,094 (4,354,094) -Opening balance as previously reported 14,575,996 14,575,996 1,293,549 15,869,545AdjustmentsPrior period error (refer note 29) 1,293,549 1,293,549 (1,293,549) -Balance at 1 April 2018 (restated) 15,869,545 15,869,545 - 15,869,545

Deficit for the year - - (5,045,952) (5,045,952)Funded by capital fund (5,045,952) (5,045,952) 5,045,952 -Balance at March 31, 2019 10,823,593 10,823,593 - 10,823,593

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Cash Flows Statement

Figures in Rand thousand Note(s) 2019 2018

Cash flows from operating activities

InflowsGrants for student awards administration costs 24,111,411 13,870,964Student loan repayments - capital 628,637 512,764Amounts due to institutions 1,089,480 -Amounts by from institutions 459,037 -

26,288,565 14,383,728

OutflowsFor student awards (26,179,563) (14,497,420)To employees and suppliers (382,510) (275,068)Amounts owing by other funders (412) (60,797)Amounts owing by institutions - (297,144)

(26,562,485) (15,130,429)

Net cash (outflow)/ inflow from operating activities 22 (273,920) (746,701)

Cash flows from investing activities

Purchase of property, plant and equipment 2 (5,827) (6,800)

Interest income 494,371 528,148

Net cash flows from investing activities 488,544 521,348

Net (decrease)/ increase in cash and cash equivalents 214,624 (225,353)Cash and cash equivalents at the beginning of the year 3,671,932 3,897,285

Cash and cash equivalents at the end of the year 9 3,886,556 3,671,932

120


Statements of Comparison of Budget and Actual Amounts

Budget on Accrual Basis

Figures in Rand thousand Approved budget Adjustments Final Budget

Actual amounts on comparable

basis

Difference between final

budget and actual

Reference

Statement of Financial Performance Revenue

Administration fees (exchange) 23,944 29,000 52,944 47,847 (5,097) 32.2Administration grants (non- 269,120 59,010 328,130 269,120 (59,010) 32.2exchange)Grants received for student 22,891,570 519,628 23,411,198 21,387,350 (2,023,848) 32.2awards (non-exchange)Interest revenue (exchange) 1,533,743 - 1,533,743 1,367,335 (166,408) 32.3Commission Revenue - sBux - - - 8,144 8,144 32.1(exchange)Unallocated debtors receipts - - - 1,539 1,539 32.1(non-exchange)Other income (exchange) - - - 5,865 5,865 32.1/30.2Total revenue 24,718,377 607,638 25,326,015 23,087,200 (2,238,815)

Expenditure

Personnel costs (187,801) (2,000) (189,801) (193,538) (3,737) 32.2 / 30.4

Asset management fees - - - (5,372) (5,372) 32.1Depreciation and amortisation (16,431) - (16,431) (14,764) 1,667 32.5Irrecoverable debts written off - - - (1,065,785) (1,065,785) 32.1Bursaries - Universities (17,727,568) (1,246,644) (18,974,212) (20,814,059) (1,839,847) 32.2 / 30.6Bursaries - TVET Colleges (5,164,002) - (5,164,002) (3,778,932) 1,385,070 32.7General expenses (68,434) (55,241) (123,675) (128,439) (4,764) 32.2Consulting and professional fees (21,574) (27,732) (49,306) (47,426) 1,880 32.2Audit fees (4,851) (2,109) (6,960) (10,580) (3,620) 32.2Total expenditure (23,190,661) (1,333,726) (24,524,387) (26,058,895) (1,534,508)Surplus 1,527,716 (726,088) 801,628 (2,971,695) (3,773,323)Social benefit component on - - - (532,627) (532,627) 32.1student loans issuedModel adjustments (321,029) (670,024) (991,053) (1,378,891) (387,838) 32.2 / 30.8Valuation adjustment - - - (162,739) (162,739)Other losses (321,029) (670,024) (991,053) (2,074,257) (1,083,204)Surplus / (deficit) for the year 1,206,687 (1,396,112) (189,425) (5,045,952) (4,856,527)

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basis


budget and actual

Reference

Statement of Financial Performance Assets

Current Assets

Trade and other receivables 13,466 (8,045) 5,421 7,200 1,779 32.9(non-exchange)Prepayments to institutions - 6,840,562 6,840,562 3,532,337 (3,308,225) 32.10Student loans 757,143 - 757,143 804,494 47,351 32.11Amounts owing by institutions 2,053,896 (1,487,692) 566,204 24,782 (541,422) 32.12(exchange)Amounts owing by other funders - - - 82,686 82,686 32.15Cash and cash equivalents 4,715,714 (422,358) 4,293,356 3,886,556 (406,800) 32.13

7,540,219 4,922,467 12,462,686 8,338,055 (4,124,631)

Non-Current Assets

Property, plant and equipment 14,820 221 15,041 13,918 (1,123)Intangible assets 9,560 14,976 24,536 17,737 (6,799) 32.14Student loans (exchange) - long termAmounts owing by institutions

11,055,196

64,175

(1,262,281)

(42,829)

9,792,915

21,346

8,533,809

20,457

(1,259,106)

(889)32.11

(exchange) - long termAmounts owing by other funders - 4,972 4,972 - (4,972) 32.15

11,143,751 (1,284,941) 9,858,810 8,585,921 (1,272,889)Total Assets 18,683,970 3,637,526 22,321,496 16,923,976 (5,397,520)

Liabilities

Current LiabilitiesTrade and other payables 558,959 (375,851) 183,108 575,428 392,320 32.16(exchange)Provisions 28,807 (2,934) 25,873 26,667 794 32Amounts due to institutions (non- - 158,403 158,403 1,251,942 1,093,539 32.17exchange) Deferred income 4,684,094 (11,264) 4,672,830 4,246,346 (426,484) 32.18

5,271,860 (231,646) 5,040,214 6,100,383 1,060,169Total Liabilities 5,271,860 (231,646) 5,040,214 6,100,383 1,060,169Net Assets 13,412,110 3,869,172 17,281,282 10,823,593 (6,457,689)

Net Assets

ReservesCapital fund 13,412,110 3,869,172 17,281,282 10,823,593 (6,457,689) 32

122






basis


budget and actual

Reference

Cash Flow Statement


InflowsGrants for student awards and administration costs

22,853,629 2,531,212 25,384,841 24,111,411 (1,273,430) 32.19

Student loan repayment - capital

588,602 62,851 651,453 628,637 (22,816) 32

Amounts due to institutions (92,712) 171,777 79,065 1,089,480 1,010,415Amount owing by other funders - - - 459,037 459,037 32.20

23,349,519 2,765,840 26,115,359 26,288,565 173,206

OutflowsFor student awards (22,339,785) (4,418,721) (26,758,506) (26,179,563) 578,943 32To employees and suppliers (284,465) (24,797) (309,262) (382,510) (73,248) 32Amounts owing by other funders - - - (412) (412)

(22,624,250) (4,443,518) (27,067,768) (26,562,485) 505,283Net cash flows from operating activities 725,269 (1,677,678) (952,409) (273,920) 678,489

Cash flows from investing activitiesPurchase of property, plant and

(4,794)

(804)

(5,598)

(5,828)

(230)

32.21

equipment - Normal OperationsPurchase of other intangible (3,802) (1,004) (4,806) - 4,806 32.22assets - Normal Ope-ationsInterest income 565,719 (7,098) 558,621 494,371 (64,250) 32.23

Net cash flows from investing activities 557,123 (8,906) 548,217 488,543 (59,674)

Net increase/(decrease) in cash 1,282,392 (1,686,584) (404,192) 214,623 618,815 32and cash equivalentsCash and cash equivalents at 3,874,773 - 3,874,773 3,671,923 (202,850) 32the beginning of the year

Cash and cash at the end of the year

5,157,165 (1,686,584) 3,470,581 3,886,556 415,965

Operations

equivalents

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123




basis


budget and actual

Reference

Cash Flow Statement


InflowsGrants for student awards and administration costs

22,853,629 2,531,212 25,384,841 24,111,411 (1,273,430) 32.19

Student loan repayment - capital

588,602 62,851 651,453 628,637 (22,816) 32

Amounts due to institutions (92,712) 171,777 79,065 1,089,480 1,010,415Amount owing by other funders - - - 459,037 459,037 32.20

23,349,519 2,765,840 26,115,359 26,288,565 173,206

OutflowsFor student awards (22,339,785) (4,418,721) (26,758,506) (26,179,563) 578,943 32To employees and suppliers (284,465) (24,797) (309,262) (382,510) (73,248) 32Amounts owing by other funders - - - (412) (412)

(22,624,250) (4,443,518) (27,067,768) (26,562,485) 505,283Net cash flows from operating activities 725,269 (1,677,678) (952,409) (273,920) 678,489

Cash flows from investing activitiesPurchase of property, plant and

(4,794)

(804)

(5,598)

(5,828)

(230)

32.21

equipment - Normal OperationsPurchase of other intangible (3,802) (1,004) (4,806) - 4,806 32.22assets - Normal Ope-ationsInterest income 565,719 (7,098) 558,621 494,371 (64,250) 32.23

Net cash flows from investing activities 557,123 (8,906) 548,217 488,543 (59,674)

Net increase/(decrease) in cash 1,282,392 (1,686,584) (404,192) 214,623 618,815 32and cash equivalentsCash and cash equivalents at 3,874,773 - 3,874,773 3,671,923 (202,850) 32the beginning of the year

Cash and cash at the end of the year

5,157,165 (1,686,584) 3,470,581 3,886,556 415,965

Accounting Policies

1. PRESENTATION OF ANNUAL FINANCIAL STATEMENTS

The National Student Financial Aid Scheme is a statutory body established by the National Student Financial Aid Scheme Act (Act 56 of 1999) as amended and is a Schedule 3A public entity in terms of the Public Finance Management Act (Act 1 of 1999) as amended.

1.1 BASIS OF ACCOUNTING

Basis of preparation

The annual financial statements have been prepared in accordance with the Standards of Generally Recognised Accounting Practice (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board.

IGRAPs are interpretations of the standards of GRAP and are defined as a written explanation of the meaning of a specific provision of a standard or guideline. It provides further clarity or guidance on complex principles or requirements contained in the standards.

The annual financial statements have been prepared on an accrual basis of accounting and are in accordance with historical cost convention except for financial instruments measured at fair value unless specified otherwise. They are presented in South African Rand, which is the functional currency of the entity, and prepared on a going concern basis.

All financial information presented in Rand are rounded to the nearest thousand (R'000), except in the narrative information or where specially stated otherwise.

A summary of the significant accounting policies, which have been consistently applied, are disclosed below.

Assets, liabilities, revenues and expenses have not been offset except when offsetting is required or permitted by a Standard of GRAP.

The accounting policies applied are consistent with those used to present the previous year’s financial statements, unless explicitly stated. The details of any changes in accounting policies are explained in the relevant policy.

The statement of cash flows has been prepared in accordance with the direct method. The amount and nature of any restrictions on cash balances are disclosed.

Comparative information

When the presentation or classification of items in the annual financial statements is amended, prior period comparative amounts are restated. The nature and reason for the reclassification is disclosed. Where accounting errors have been identified in the current year, the correction is made retrospectively as far as is practicable, and the prior year comparatives are restated accordingly. Where there has been a change in accounting policy in the current year, the adjustment is made retrospectively as far as is practicable, and the prior year comparatives are restated accordingly.

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Standards and Interpretations issued but not yet effective

The following GRAP Standards have been issued but are not yet effective and have not been early adopted by the entity:

GRAP 6 (as revised 2010) Consolidated and Separate Financial Statements

The objective of this Standard is to prescribe the circumstances in which consolidated and separate financial statements are to be prepared and the information to be included in those financial statements so that the consolidated financial statements reflect the financial performance, financial position and cash flows of an economic entity as a single entity. No impact is expected as the entity does not have controlled entities, joint ventures and/or associates.

GRAP 7 (as revised 2010) Investments in Associates

This Standard prescribes the accounting treatment for investments in associates where the investment in the associate leads to the holding of an ownership interest in the form of a shareholding or other form of interest in the net assets. No impact is expected as the entity does not have investments in associates.

GRAP 8 (as revised 2010) Interests in Joint Ventures

The objective of this Standard is to prescribe the accounting treatment of jointly controlled operations, jointly controlled assets and jointly controlled entities and to provide alternatives for the recognition of interests in jointly controlled entities. It also sets out the disclosure requirements of interests in jointly controlled entities. No impact is expected as the entity does not have interests in joint ventures.

GRAP 32 Service Concession Arrangements: Grantor

The objective of this Standard is to prescribe the accounting for service concession arrangements by the grantor, a public sector entity. No significant impact is expected as the entity does not participate in such business transactions.

GRAP 34 Separate Financial Statements

The objective of this Standard is to prescribe the accounting and disclosure requirements for investments in controlled entities, joint ventures and associates when an entity prepares separate financial statements. No impact is expected as the entity does not have controlled entities, joint ventures or associates.

GRAP 35 Consolidated Financial Statements

The objective of this Standard is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. No impact is expected as the entity does not control any other entities.

GRAP 36 Investments in Associates and Joint Ventures

The objective of this Standard is to prescribe the accounting for investments in associates and joint ventures and to set out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. No impact is expected as the entity does not have investments in associates or joint ventures.

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GRAP 37 Joint Arrangements

The objective of this Standard is to establish principles for financial reporting by entities that have an interest in arrangements that are controlled jointly (i.e. joint arrangements). No impact is expected as the entity does not have joint arrangements.

GRAP 38 Disclosure of Interests in Other Entities

The objective of this Standard is to require an entity to disclose information that enables users of its financial statements to evaluate the nature of, and risks associated with, its interests in controlled entities, unconsolidated controlled entities, joint arrangements and associates, and structured entities that are not consolidated; and the effects of those interests on its financial position, financial performance and cash flows. No impact is expected as the entity does not have interests in other entities.

GRAP 108 Statutory Receivables

The objective of this Standard is to prescribe accounting requirements for the recognition, measurement, presentation and disclosure of statutory receivables. Preliminary investigations indicate that the impact on the financial statements will be minimal.

GRAP 109 Accounting by Principals and Agents

The objective of this Standard is to outline principles to be used by an entity to assess whether it is party to a principal-agent arrangement, and whether it is a principal or an agent in undertaking transactions in terms of such an arrangement. No significant impact is expected as the entity does not participate in such business transactions.

GRAP 110 (as amended 2016) Living and Non-Living Resources

The objective of this Standard is to prescribe the recognition, measurement, presentation and disclosure requirements for living resources; and disclosure requirements for non-living resources. No impact is expected as the entity does not own such resources.

IGRAP 11 Consolidation – Special Purpose Entities (SPEs)

This Interpretation deals with the circumstances under which an entity should consolidate SPEs.

IGRAP 12 Jointly Controlled Entities

This Interpretation deals with the venturer’s accounting for non-monetary contributions to a JCE in exchange for an interest in the net assets in the JCE that is accounted for using either the equity method or proportionate consolidation. No significant impact is expected.

IGRAP 17 Service Concession Arrangements where a Grantor Controls a Significant Residual Interest in an Asset

This Interpretation provides guidance to the grantor where it has entered into a service concession arrangement, but only controls, through ownership, beneficial entitlement or otherwise, a significant residual interest in a service concession asset at the end of the arrangement, where the arrangement does not constitute a lease. No significant impact is expected as the entity does not participate in such business transactions.

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IGRAP 18 Interpretation of the Standard of GRAP on Recognition and Derecognition of Land

This Interpretation applies to the initial recognition and derecognition of land in an entity’s financial statements. It also considers joint control of land by more than one entity.

IGRAP 19 Liabilities to Pay Levies

This Interpretation provides guidance on the accounting for levies in the financial statements of the entity that is paying the levy. No significant impact is expected as the entity does not participate in such business transactions.

Standards and interpretations effective and adopted in the current year

Adoption of new and revised standards and interpretations

In the current year the entity has adopted all new and revised standards and interpretations issued by the Accounting Standards Board (ASB) that are relevant to its operations, and effective.The adoption of these new and revised standards and interpretations has resulted in changes to the accounting policies.

GRAP 12 (as amended 2016) Inventories

Amendments to the Standard of GRAP on Inventories resulted from inconsistencies in measurement requirements in GRAP 23 and other asset-related Standards of GRAP in relation to the treatment of transaction costs. Other changes resulted from changes made to IPSAS 12 on Inventories (IPSAS 12) as a result of the IPSASB’s Improvements to IPSASs 2015issued in March 2016. The impact of the amendment is not material.

GRAP 16 (as amended 2016) Investment Property

Amendments to the Standard of GRAP on Investment Property resulted from editorial changes to the original text and inconsistencies in measurement requirements in GRAP 23 and other asset-related Standards of GRAP in relation to the treatment of transaction costs. Other changes resulted from changes made to IAS 40 on Investment Property (IAS 40) as a result of the IASB’s amendments on Annual Improvements to IFRSs 2011 – 2013 Cycle issued in December 2013.Other changes resulted from changes made to IAS 40 on Investment Property (IAS 40) as a result of the IASB’s amendments on Annual Improvements to IFRSs 2011 – 2013 Cycle issued in December 2013. The impact of the amendment is not material. The impact of the amendment is not material since the entity does not have investment property.

GRAP 17 (as amended 2016) Property, Plant and Equipment

Amendments to the Standard of GRAP on Property, Plant and Equipment resulted from editorial changes to the original text and inconsistencies in measurement requirements in GRAP 23 and other asset-related Standards of GRAP in relation to the treatment of transaction costs. Other changes resulted from changes made to IPSAS 17 on Property, Plant and Equipment (IPSAS 17) as a result of the IPSASB’s Improvements to IPSASs 2014 issued in January 2015 and Improvements to IPSASs 2015 issued in March 2016. The impact of the amendment is not material.

GRAP 18 (as amended 2016) Segment Reporting

The subsequent amendments to the Standard of GRAP on Segment Reporting resulted from editorial and other changes made to the original text to ensure consistency with other Standards of GRAP. An appendix with illustrative segment disclosures has been deleted from the Standard as the National Treasury has issued complete examples as part of its implementation guidance. The impact of the amendment is not material since the entity does not have reportable segments.

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GRAP 21 (as amended 2016) Impairment of Non-cash-generating Assets

Amendments to the Standard of GRAP on Impairment of Non-cash-generating Assets resulted from changes made to IPSAS 21 on Impairment of Non-cash-generating Assets (IPSAS 21) as a result of the IPSASB’s Impairment of Revalued Assets issued in March 2016. The impact of the amendment is not material.

GRAP 26 (as amended 2016) Impairment of Cash-generating Assets

Amendments Changes to the Standard of GRAP on Impairment of Cash-generating Assets resulted from changes made to IPSAS 26 on Impairment of Cash-generating Assets (IPSAS 26) as a result of the IPSASB’s Impairment of Revalued Assets issued in March 2016. The impact of the amendment is not material.

GRAP 27 (as amended 2016) Agriculture

Amendments to the Standard of GRAP on Agriculture resulted from changes made to IPSAS 27 on Agriculture (IPSAS 27) as a result of the IPSASB’s Improvements to IPSASs 2015 issued in March 2016. Bearer plants is now included within the scope of GRAP 17 on Property, Plant and Equipment. The impact of the amendment is not material.

GRAP 31 (as amended 2016) Intangible Assets

Amendments to the Standard of GRAP on Intangible Assets resulted from inconsistencies in measurement requirements in GRAP 23 and other asset-related Standards of GRAP in relation to the treatment of transaction costs. Other changes resulted from changes made to IPSAS 31 on Intangible Assets (IPSAS 31) as a result of the IPSASB’s Improvements to IPSASs 2014 issued in January 2015. The impact of the amendment is not material.

GRAP 103 (as amended 2016) Heritage Assets

Amendments to the Standard of GRAP on Heritage Assets resulted from inconsistencies in measurement requirements in GRAP 23 and other asset-related Standards of GRAP in relation to the treatment of transaction costs. Other changes resulted from editorial changes to the original text. The impact of the amendment is not material since the entity does not own heritage assets.

GRAP 106 (as amended 2016) Transfers of Functions Between Entities not Under Common Control

The subsequent amendments to the Standard of GRAP on Transfer of Functions Between Entities not under Common Control resulted from changes made to IFRS 3 on Business Combinations (IFRS 3) as a result of the IASB’s amendments on Annual Improvements to IFRSs 2010 – 2012 Cycle issued in December 2013. The impact of the amendment is not material since the entity does not participate in such business transactions.

Directive 12 The Selection of an Appropriate Reporting Framework by Public Entities

The purpose of this Directive is to prescribe the criteria to be applied by public entities in selecting and applying an appropriate reporting framework. There is no impact for the entity.

1.2 SIGNIFICANT JUDGEMENTS AND SOURCES OF ESTIMATION UNCERTAINTY

In preparing the annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the annual financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the annual financial statements.

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Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Information about assumptions and estimation uncertainties that may have a significant risk of resulting in a material adjustment within the next financial year includes:

Initial recognition of Student loans at fair value

Student loans are recognised initially at fair value plus any directly attributable transaction costs.

Market and client specific actuarial assumptions are used in the estimate of the fair value of the student loans at initial recognition.

Subsequent to initial recognition, student loans are measured at amortised cost using the effective interest method, less any impairment allowances.

NSFAS has been granting loans since 1991 and therefore has a detailed repayment profile for its debtor database in terms of historic loss experience.

NSFAS loans have no fixed repayment terms and the debt is only due and payable one year after exit from the higher education system and, if the student has become employed and is earning more than R30,000 per annum.

The following parameters have been applied effective 1999: • Transition from being a registered student to graduation or exit does not exceed 10 years• Period to first repayment is based on a 15-year analysis of commencement of repayment by students.• Graduates and students who exited for other reasons are assessed independently.• The cash flow or repayment profile is calculated as a percentage of the outstanding balance at each month.• The interest rate used to discount the projected cash flows is referenced to long term government bond

yields as a proxy for the risk free rate.• The mortality of borrowers has been included in forecasting the cash-flow profile of the loans.• Assumptions regarding future mortality experience in South Africa are set, based on published South African

actuarial information.• Although the entity does write-off loans in the event of permanent disability and death, this has not been

included in the valuation model as the impact is not considered material.• The contingency relating to the awarding of the student loans for a full qualification of study rather than on

an academic year basis.

Deferred Income

The entity has a number of fund administration agreements with donors. The entity believes that the transferor could enforce a requirement to return the asset or unspent monies in the event that the funds are not used for the intended purposes. The entity also believes that the transferor would enforce the stipulation in the agreements in the event of a breach. The stipulations in the agreement therefore meet the definition of a condition.

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Contingent Liabilities

The entity has a number of fund administration agreements with donors which include the under mentioned clause:

"The entity will retain all funds recovered from all institution borrowers from time to time, in order to re-lend these funds to further institution borrowers selected by the institution from time to time in the manner contemplated in the agreement, or to refund the funds to the institution at the request of the institution." The entity believes that the recovered funds should as a result of the above clause be treated as a contingent liability for funding.

The student centred operating model makes it possible for students, who previously had to apply at institutions, to apply directly to NSFAS for loans and bursaries. Students who are eligible have loans and bursaries approved for the duration of their studies, subject to their meeting the promotion requirements (and continued funding from DHET), rather than being required to reapply for funding for each subsequent academic year.

The entity believes that the contractual commitment due to fund students for the duration of their studies should be treated as a contingent liability.

Budget Information

Variances of 15% or more between budget and actual amounts are regarded as material. All material differences are explained in the notes to the annual financial statements.

Student loans impairment

The student loans offered by the entity are impaired on the basis of mortality, actual transition from student state and changes in payment experience. Mortality is assessed on an annual basis on those deaths assumed to have occurred, but not yet recognised and is included in impairment.

The entity writes-off a student loan and any related allowances for impairment losses, when the entity determines that the loan is uncollectable. This determination is made after notification of the death or permanent disability of the borrower. A list of identity numbers is verified against the Department of Home Affairs database on an annual basis for verification of borrowers that are deceased. For disability, medical certification is required. The individual loans are then written off on approval by the Accounting Authority.

The entity considers evidence of impairment for loans and receivables at both a specific asset and collective level. All individually significant loans and receivables are assessed for specific impairment. All individually significant loans and receivables found not to be specifically impaired are then collectively assessed for any impairment that may have been incurred but not yet identified. Loans and receivables, such as the student loans offered by the entity that are not individually significant are collectively assessed for impairment by grouping together loans and receivables with similar risk characteristics.

Depreciation

Property, plant and equipment, except for land, is depreciated on the straight line basis over their expected useful lives to their estimated residual value.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where appropriate, the term of the relevant lease, and are recognised in the Statement of Financial Position.

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Amortisation

Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values

Bursaries and Credits

Student loans offered by the entity are reduced by credit balances returned by institutions and a bursary conversion based on the rules applicable to that loan. In instances where Institutions have not confirmed the credits due to NSFAS, an estimate is made of the credit amount based on historical information using the total historical credit as a percentage of the total loan amount. In instances where Institutions have not confirmed the subjects enrolled and subjects passed in order for a bursary conversion to be done, an estimate of the bursary amount has been calculated based on historical pass rates.

Impact of the new Bursary Funding Programme on the valuation of the Loan Book

On 16 December 2017, former President Zuma announced a new bursary funding programme for students from poor and working-class families whose gross combined family household income is up to a maximum of R350,000 per annum from the 2018 academic year studying at public higher education institutions.

The pronouncement was silent regarding the current debt owed to NSFAS. The DHET subsequently clarified that the issue of NSFAS previous debt will be dealt with after a due diligence exercise has been completed by the DHET in consultation with the Department of Planning, Monitoring and Evaluation and the National Treasury.

Government has not pronounced on whether the student debt will be written off. Recoveries of loans provided to students pre the 2017 announcement will remain a critical component of the overall NSFAS strategy.

The Department of Higher Education and Training, in collaboration with National Treasury and the DPME, undertook a due diligence exercise to quantify the historic debt of NSFAS qualifying senior students (who qualified on the R122,000 family income threshold per annum) who were registered in the 2018 academic year. These are known as "capped" students. The due diligence exercise quantified the debt that NSFAS-supported students, registered in 2018 and who had received insufficient funding in prior years of study, owe to universities. The funds allocated to NSFAS in March 2019 will be utilised to settle historic debt for students that were funded under the NSFAS cap funding in 2018 and 2019, to effectively deal with student debt going forward and allow the group of students who qualify (as described above) to graduate debt-free.

As disclosed in the accounting policies, the fair value of student loans on initial recognition is estimated by using an actuarial discounted cash flow model.

Management determined that it would be appropriate to value the entire loan book assuming collections will continue into the future based on the following:

• All debt remains payable per current terms (loan agreement forms) and NSFAS Act (Act 56 of 1999).• In the interest of prudence, the current year assumptions (relating to collections estimations) were reversed.

1.3 PROPERTY, PLANT AND EQUIPMENT

Initial Recognition

Property, plant and equipment are tangible non-current assets that are held for use in the production or supply of goods or services, or for administrative purposes, and are expected to be used during more than one period.

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The cost of an item of property, plant and equipment is recognised as an asset when:

• it is probable that future economic benefits or service potential associated with the item will flow to the entity; and

• the cost or fair value of the item can be measured reliably.

When significant components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Initial Measurement

Property, plant and equipment is initially measured at cost at the acquisition date.

The cost of an item of property, plant and equipment is the purchase price and other costs attributable to bring the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Trade discounts and rebates are deducted in arriving at the cost. The cost also includes the necessary costs of dismantling and removing the asset and restoring the site on which it is located.

Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is de-recognised.

Where an asset is acquired through a non-exchange transaction, its cost is its fair value as at date of acquisition.

Where an item of property, plant and equipment is acquired in exchange for a non-monetary asset or monetary assets, or a combination of monetary and non-monetary assets, the asset acquired is initially measured at fair value (the cost). If the acquired item's fair value was not determinable, its deemed cost is the carrying amount of the asset(s) given up.

Subsequent Measurement – Cost Model

Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses. The depreciation charge for each period is recognised in surplus or deficit unless it is included in the carrying amount of another asset.

Depreciation

Property, plant and equipment, except for land, is depreciated on the straight line basis over their expected useful lives to their estimated residual value.

The useful lives of items of property, plant and equipment have been assessed as follows:

Item Average useful lifeLand IndefiniteBuildings 50 yearsFurniture and equipment 5 yearsMotor vehicles 5 yearsIT equipment 3 years

The residual value, the useful life of an asset and the depreciation method are reviewed annually and any changes are recognised as a change in accounting estimate in the Statement of Financial Performance.

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All NSFAS’s items of property, plant and equipment are considered to be non-cash generating assets as no commercial return is generated from these assets.

The carrying amounts of assets are reviewed at each reporting date to determine whether there is an indication of impairment. If there is an indication that an asset may be impaired, its recoverable service amount is estimated. The estimated recoverable service amount is the higher of the asset's fair value less cost to sell and its value in use. When the recoverable service amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable service amount. The reduction is an impairment loss.

The value in use is determined through depreciated replacement cost, restoration cost approach or service units approach. The decision to the approach to use is dependent on the nature of the identified impairment.

The impairment loss is recognised immediately in the Statement of Financial Performance. After the recognition of an impairment loss, the depreciation charge for the asset is adjusted in future periods to allocate the asset's revised carrying amount, less its residual value if any, on a systematic basis over its remaining useful life.

An impairment loss recognised in prior periods for an asset is reversed if there has been a change in the estimates used to determine the asset's recoverable service amount since the last impairment loss was recognised. If this is the case, the carrying amount of the asset is increased to its recoverable service amount. The increase is a reversal of an impairment loss and is recognised in the Statement of Financial Performance. The increased carrying amount attributable to a reversal of an impairment loss shall not exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised in the prior periods.

De-recognition

Items of property, plant and equipment are de-recognised when the asset is disposed of or when there are no further economic benefits or service potential expected from the use of the asset.

The gain or loss arising from the de-recognition of an item of property, plant and equipment is included in surplus or deficit when the item is de-recognised. The gain or loss arising from the de-recognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

1.4 INTANGIBLE ASSETS Initial Recognition

An asset is identifiable if it either:• is separable, i.e. is capable of being separated or divided from the entity and sold, transferred, licensed,

rented or exchanged, either individually or together with a related contract, identifiable assets or liability, regardless of whether the entity intends to do so; or

• arises from binding arrangements (including rights from contracts), regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

An intangible asset is recognised when:• it is probable that the expected future economic benefits or service potential that are attributable to the asset

will flow to the entity; and• the cost or fair value of the asset can be measured reliably.

Intangible assets are initially recognised at cost.

Where an intangible asset is acquired through a non-exchange transaction, the cost shall be its fair value as at the date of acquisition.

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Subsequent Measurement

Intangible assets are carried at cost less any accumulated amortisation and any impairment losses.

Amortisation

Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows:

Item Useful lifeComputer software 3 yearsComputer software, other 3 - 8 years

Intangible assets are considered to have finite useful lives. The depreciable amount of an intangible asset with a finite useful life is allocated on a systematic basis over its useful life. Amortisation begins when the asset is available for use and ceases at the earlier of the date on which the asset is classified as held for sale, or included in a disposal group that is classified as held for sale, and the date on which the asset is de-recognised.

Computer software

Expenditure on internally developed software is recognised as an asset when the entity is able to demonstrate its intention and ability to complete the development and use the software in a manner that will generate future economic benefits, and can reliably measure the costs to complete the development. The capitalised costs of internally developed software include all costs directly attributable to developing the software and capitalised borrowing costs, and are amortised over its useful life.

Internally developed software is stated at capitalised cost less accumulated amortisation and impairment. Subsequent expenditure on software assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

Amortisation is recognised in the Statement of Financial Performance on a straight line basis over the estimated useful life of the software, from the date that it is available for use since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.

Amortisation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate and any changes are recognised as a change in accounting estimate in the Statement of Financial Performance.

Impairment

The Phoenix loan and bursaries management system is considered to be a cash generating asset as a commercial return is expected from the use thereof. All other items of intangible assets are considered to be non-cash generating assets as no commercial return is expected from these.

The entity tests intangible assets with finite useful lives for impairment where there is an indication that an asset may be impaired. An assessment of whether there is an indication of possible impairment is performed at each reporting date. Where the carrying amount of an item of an intangible asset is greater than the estimated recoverable service amount, it is written down immediately to its recoverable service amount and an impairment loss is charged to the Statement of Financial Performance.

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De-recognition

Intangible assets are de-recognised when the asset is disposed of or when there are no further economic benefits or service potential expected from the use of the asset. The gain or loss arising on the disposal or retirement of an intangible asset is determined as the difference between the sales proceeds and the carrying value and is recognised in the Statement of Financial Performance.

1.5 FINANCIAL INSTRUMENTS Classification

The entity classifies financial assets and financial liabilities into the following categories:• Financial assets measured at amortised cost• Fair value financial assets• Financial liabilities measured at amortised cost

Classification depends on the purpose for which the financial instruments were obtained/incurred and takes place at initial recognition.

(i) Non-derivative financial assets

The entity initially recognises financial assets on the trade date, which is the date on which the entity becomes a party to the contractual provisions of the instrument.

The entity de-recognises financial assets using trade date accounting. The entity de-recognises a financial asset when the contractual rights to the cash flows from the asset expire, are settled or waived, or it transfers to another party substantially all of the risks and rewards of ownership of the financial asset; or the entity, despite having retained significant risks and rewards of ownership of the financial asset has transferred control of the asset to another party and the other party has the practical ability to sell the asset in its entirety to an unrelated third party, and is able to exercise that ability unilaterally and without needing to impose additional restrictions on transfer. Newly created rights and obligations shall be measured at their fair values at the date of de-recognition.

On de-recognition of a financial asset, the difference between the carrying amount of the asset and the consideration received, including any new asset obtained less any new liability assumed, is recognised in the surplus or deficit.

Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the entity has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Financial assets measured at amortised cost

Financial assets comprise cash and cash equivalents, trade and other receivables, amounts owing by institutions and student loans.

Cash and cash equivalents comprise cash balances, call deposits with original maturities of three months or less.

Financial assets are non-derivative financial assets with fixed or determinable payments, excluding those that the entity designates at fair value on initial recognition, or are held for trading that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition financial assets are measured at amortised cost using the effective interest rate method, less any impairment.

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Cash and cash equivalents comprise cash on hand and demand deposits and other short term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially measured at fair value plus any directly attributable transaction costs and subsequently measured at amortised cost. Fixed deposits that mature within three months after reporting date are recognised as cash equivalents.

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes.

(ii) Non-derivative financial liabilities

Financial liabilities are recognised initially on the trade date at which the entity becomes a party to the contractual provisions of the instrument.

The entity de-recognises a financial liability when its contractual obligations are discharged or cancelled or expire or waived. The difference between the carrying amount of a financial liability (or part of a financial liability) extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, shall be recognised in surplus or deficit.

Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the entity has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Fair value, which is determined, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

Trade and other payables

Financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest rate method.

Impairment of financial assets

At each reporting date the entity assesses whether there is objective evidence that financial assets not carried at fair value are impaired. A financial asset or a group of financial assets is/are impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset(s), and that the loss event has an impact on the future cash flows of the asset(s) that can be estimated reliably.

Objective evidence that financial assets are impaired can include significant financial difficulty of the borrower or issuer, default or delinquency by a borrower, restructuring of a loan or advance by the entity on terms that the entity would not otherwise consider, indications that a borrower or issuer will enter bankruptcy or other observable data relating to an entity or assets such as adverse changes in the payment status of borrowers or issuers in the entity, or economic conditions that correlate with defaults in the entity.

The student loans offered by the entity are impaired on the basis of mortality, actual transition from student state and changes in payment experience. Mortality is assessed on an annual basis on those deaths assumed to have occurred, but not yet recognised and is included in impairment.

The entity writes-off certain loans when they are deemed to be uncollectable.

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Accounting Policies

The entity writes-off a student loan and any related allowances for impairment losses, when the entity determines that the loan is uncollectable. This determination is made after notification of the death or permanent disability of the borrower. A list of identity numbers is sent to the Department of Home Affairs on an annual basis for verification of borrowers that are deceased. For disability, medical certification is required. The individual loans are then written off on approval by the Accounting Authority.

The entity considers evidence of impairment for loans and receivables at both a specific asset and collective level. All individually significant loans and receivables are assessed for specific impairment. All individually significant loans and receivables found not to be specifically impaired are then collectively assessed for any impairment that may have been incurred but not yet identified. Loans and receivables, such as the student loans offered by the entity that are not individually significant are collectively assessed for impairment by grouping together loans and receivables with similar risk characteristics.

Impairment losses on assets carried at amortised cost are measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the asset's original effective interest rate. Impairment losses are recognised in the Statement of Financial Performance and reflected in an allowance account against loans and advances. Interest on impaired assets continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed in the Statement of Financial Performance.

The reversal shall not result in a carrying amount of the financial asset that exceeds what the amortised cost would have been had the impairment not been recognised at the date that the impairment is reversed.

Student loans

The student loans offered by the entity are unique within the market. The primary focus of these loans is not profit generation, but rather to provide affordable financing for university students from low income households. The loans have no fixed repayment terms and the debt is only due and payable one year after exit from the TVET college or university and if the student has become employed, and earning more than R30,000 per annum. Repayments are calculated on a sliding scale based on the debtor's annual salary.

In prior years, a student could apply for a new loan for each year of study which, if granted, resulted in the student having multiple loans payable. From the 2017 academic year, students who qualify for funding will have funding approved for the entire qualification. Funding for subsequent years is dependent on students meeting progression requirements.

Student loans are recognised initially at fair value at inception. The fair value of the loans on initial recognition is estimated by using an actuarial discounted cash flow model which includes assumptions that are supported by observable market inputs and others that are based on historical loan repayment data. The subsequent value is calculated based on amortised cost using the original effective yield of the loans, adjusted for impairment.

A valuation model has been developed for, and in consultation with, the entity by actuaries. The model estimates the fair value at initial recognition as well as the ongoing amortised cost by estimating a cash flow profile for broadly homogenous groups of loans. The student loans are separated into smaller groups with similar characteristics such as age of loan, loan number and the gender and age of the borrower. The fair value of these homogenous groups is calculated individually and then combined to calculate the aggregated value of the portfolio.

The key assumption parameters used in the discounting model are listed in the use of estimates and judgement note 1.2 above.

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Accounting Policies

Social benefit component of student loans

A concessionary loan is a loan granted to or received by an entity on terms that are not market related. The primary focus of student loans is not profit generation, but rather to provide affordable financing for students from low income households studying in institutions of higher learning. As a result, these loans are granted on terms that are not market related. On initial recognition, the entity analyses these loans into their component parts and accounts for each component separately. The entity accounts for the component that is a social benefit in surplus or deficit. The component of the loan that is a social benefit is determined as the difference between the fair value of the loan and the expected loan proceeds to be paid. Subsequent to initial recognition, the entity measures the loan component at amortised cost using the effective interest rate method less impairment losses.

1.6 LEASES

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

Operating leases - lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset or liability.

1.7 EMPLOYEE BENEFITS

Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

An accrual is recognised for the amount expected to be paid under short-term cash benefits if the entity has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. The cost of all short term employee benefits is recognised during the period in which the employee renders the related service.

The liability for employee entitlements to wages, salaries and annual leave represents the amount which the entity has a present obligation to pay as a result of employees' services provided to the Statement of Financial Position date. The liability has been calculated at undiscounted amounts based on current wage and salary rates.

Defined contribution plans

Payments to defined contribution retirement benefit plans are charged as an expense as they fall due.

1.8 PROVISIONS AND CONTINGENCIES

Provisions are recognised when:• the entity has a present obligation as a result of a past event;• it is probable that an outflow of resources embodying economic benefits or service potential will be required

to settle the obligation; and• a reliable estimate can be made of the obligation.

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Accounting Policies

The amount of a provision is the best estimate of the expenditure expected to be required to settle the present obligation at the reporting date.

Where the effect of time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation.

The discount rate is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Provisions are reversed if it is no longer probable that an outflow of resources embodying economic benefits or service potential will be required, to settle the obligation.

Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 25.

1.9 REVENUE FROM EXCHANGE TRANSACTIONS

Exchange transactions are defined as transactions where the entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value to the other entity in exchange. Interest on student loans and interest on investments, administration fees, other income and commission revenue are classified as revenue from exchange transactions.

Measurement

Revenue is measured at the fair value of the consideration received or receivable.

Interest revenue

Finance income comprises interest on funds invested and interest income on student loans.

Finance income is recognised using the effective interest method over the estimated life of the financial asset.

Irrecoverable debts recovered

Amounts received after student loans have been written-off as irrecoverable debts are recorded as other income.

Administration fees and sBux commission revenue

Revenue is recognised on the accrual basis in accordance with the substance of the relevant agreements and measured at fair value of the consideration receivable.

1.10 REVENUE FROM NON-EXCHANGE TRANSACTIONS

Non-exchange transactions are defined as transactions where the entity receives value from another entity without directly giving approximately equal value in exchange. Revenue from non-exchange transactions is generally recognised to the extent that the related receipt or receivable qualifies for recognition as an asset and there is no liability to repay the amount.Administration grants and Grants received for student loans and bursaries are considered to be revenue from non-exchange transactions.

Measurement

Revenue is measured at the fair value of the consideration received or receivable.

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Accounting Policies

Services in kind

Services in kind and the related revenue are recognised when:• the fair value of the assets can be measured reliably;• it is probable that the economic benefits or service potential will flow to the entity;• the services in kind are significant to the operations and/or service delivery objectives.

If the services in-kind are not significant to the entity’s operations and/or service delivery objectives and/or do not satisfy the criteria for recognition, the entity discloses the nature and type of services in-kind received during the reporting period..

Unconditional grants, transfers and donations received

Unconditional grants, transfers and donations received or receivable are recognised when the resources that have been transferred meet the criteria for recognition as an asset.

Conditional grants

Conditional grants are classified as deferred income until such time as the conditions attached to the grant are met. Once the conditions have been met the liability is transferred to revenue. The liability is transferred to revenue as and when the conditions attached to the grant are met. Grants without any conditions attached are recognised as revenue when the asset is recognised.

1.11 TRANSLATION OF FOREIGN CURRENCIES Foreign currency transactions

A foreign currency transaction is recorded, on initial recognition in Rands, by applying the foreign currency amount to the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.

At each reporting date:• foreign currency monetary items are translated using the closing rate; and• non-monetary items that are measured in terms of historical cost in a foreign currency are translated using

the exchange rate at the date of the transaction.

1.12 PREPAYMENTS

Payments are made to institutions during January, February and March of each year for initial student registration fees.

The academic year for institutions runs from 1 January to 31 December and is therefore different to the NSFAS financial reporting year which runs from 1 April to 31 March. Amounts paid to institutions by NSFAS during the period, 1 January to 31 March 2019 in respect of the 2019 academic year are classified as prepayments as they relate to the 2019/2020 financial year.

Prepayments are initially measured at the value of funds disbursed to institutions and subsequently measured at the same value.

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Accounting Policies

1.13 BUDGET INFORMATION

The annual budget figures have been prepared in accordance with the applicable GRAP standards, and are consistent with the accounting policies adopted by the Accounting Authority for the preparation of these financial statements. The amounts are presented as a separate additional financial statement, named the Statement of Comparison of Budget and Actual amounts.Explanatory comments are provided in the notes to the Annual Financial Statements, firstly stating reasons for overall growth or decline in the budget, and, secondly, motivating overspending or under spending on line items. The annual budget figures included in the financial statements are for the entity. These figures are those approved by the Accounting Authority both at the beginning and during the year.

The budget period covers the period from 1 April 2018 to 31 March 2019.

1.14 RELATED PARTIES

The entity operates in an economic sector currently dominated by entities directly or indirectly owned by the South African government. As a consequence of the constitutional independence of the three spheres of government in South Africa, only entities within the national sphere of government are considered to be related parties. Management are those persons responsible for planning, directing and controlling the activities of the entity, including those charged with the governance of the entity in accordance with legislation, in instances where they are required to perform such functions.

Close members of the family of a person in key management are considered to be those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity.

Only transactions with related parties not at arm’s length or not in the ordinary course of business are disclosed.

1.15 RESERVES

Capital fund reserve

The reserve comprises accumulated surpluses

The Statement of Financial Performance shows a surplus arising from how NSFAS accounts for its revenue in terms of GRAP23 and the related expense. While NSFAS accounts for the total transfers received as revenue, only portion of the disbursements (100% conversion bursaries and valuation adjustments) is recognised as expenses. The surplus in the Statement of Financial Performance is not represented by cash and is not available for normal operations. A transfer is therefore made from the accumulated surplus to the capital fund each year.

1.16 IRREGULAR EXPENDITURE

Irregular expenditure is expenditure that is contrary to the Legislative prescripts. Irregular expenditure excludes unauthorised expenditure. Irregular expenditure is accounted for as expenditure in the Statement of Financial Performance and where recovered, it is subsequently accounted for as revenue in the Statement of Financial Performance.

1.17 FRUITLESS AND WASTEFUL EXPENDITURE

Fruitless and wasteful expenditure means expenditure which was made in vain and would have been avoided had reasonable care been exercised. All expenditure relating to fruitless and wasteful expenditure is recognised as an expense in the Statement of Financial Performance in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and where recovered, it is subsequently accounted for as revenue in the Statement of Financial Performance.

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Notes to the Annual Financial Statements


2. Property, plant and equipment

2019 2018

Cost / Valuation

Accumulateddepreciatio andaccumulatedimpairment

Carrying value

Cost /Valuation

Accumulateddepreciation andaccumulatedimpairment

Carrying value

Land* 770 - 770 770 - 770Buildings 4,047 (1,225) 2,822 4,047 (1,144) 2,903Furniture and fixtures 8,754 (5,704) 3,050 7,508 (4,917) 2,591Motor vehicles 294 (223) 71 294 (188) 106IT equipment 43,873 (36,668) 7,205 39,587 (30,530) 9,057Total 57,738 (43,820) 13,918 52,206 (36,779) 15,427

Reconciliation of property, plant and equipment - 2019Opening balance Additions Depreciation Total

Land* 770 - - 770Buildings 2,903 - (81) 2,822Furniture and fixtures 2,591 1,247 (788) 3,050Motor vehicles 106 - (35) 71IT equipment 9,057 4,580 (6,432) 7,205

15,427 5,827 (7,336) 13,918

Reconciliation of property, plant and equipment - 2018

Openingbalance Additions Disposals Depreciation Total

Land* 770 - - - 770Buildings 2,984 - - (81) 2,903Furniture and fixtures 1,295 1,889 (2) (591) 2,591Motor vehicles 141 - - (35) 106IT equipment 10,637 4,911 - (6,491) 9,057

15,827 6,800 (2) (7,198) 15,427

* Land and buildings comprise erf numbers 66447, 66458, 66459, 66460 and 66461 in Wynberg, Cape Town.

Pledged as security

As at the reporting date, NSFAS had no property, plant and equipment pledged as security.

Other informationProperty, plant and equipment fully depreciated and still in use (Gross carrying amount)

Furniture and fixtures

4,117

3,707IT equipment 35,023 18,705Motor vehicles 119 119

39,259 22,531

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3. Intangible assets

2019 2018

Cost / Valuation

Accumulated amortisation

and accumulated impairment

Carrying value

Cost / Valuation

Accumulated amortisation

and accmlated impairment

Carrying value

Computer software 81,989 (64,252) 17,737 81,695 (56,530) 25,165

Reconciliation of intangible assets - 2019

Computer software

Opening balance

25,165

Amortisation

(7,428)

Total

17,737

Reconciliation of intangible assets - 2018

Computer software

Opening balance

32,779

Amortisation

(7,614)

Total

25,165

Intangible assets fully amortised and still in use (Cost)Computer software 15,291 23,513

4. Prepayments to institutionsPrepayments to institutions for initial student registration fees 3,532,337 3,559,187

5. Student loans (exchange) - long term

Student Loan Nominal ValueThe nominal balance is the total obligations that borrowers have including loan principal and interest. The change in nominal value from year to year reflects the net growth of the portfolio through new lending less repayments, bursary conversions and other adjustments such as irrecoverable debt written-off due to death and permanent disability. The nominal balance is the basis for the calculation of the ‘Student loan Carrying Value’ as reflected in the Statement of Financial Position.

Carrying value reconciliation: 2019 2018

Opening balance 10,247,208 9,368,497New loans 760,728 5,316,197Social benefit component (532,627) (3,752,516)Interest 870,117 942,642Repayments (I) (628,637) (512,764)Valuation and impairment adjustments (1,378,102) (1,114,848)

9,338,687 10,247,208Unallocated debtor receipts (381) (1,647)Carrying value 9,338,306 10,245,561

Short term (II) 804,494 754,656

Long term 8,533,812 9,490,905

9,338,306 10,245,561

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Figures in Rand thousand 2018

2019 2018

5. Student loans (exchange) - long term (continued)

The relationship between the Nominal Value and the Carrying Value is as follows:Nominal value 36,083,265 35,643,762Less accumulated valuation and impairment adjustments (26,744,959) (25,398,201)Carrying value 9,338,306 10,245,561

I The short term portion of the student loan is measured as the expected cash flows for the next twelve months based on the amortised cost calculation.II The collections for the year have continued to show an upward trend but in aggregate below the projections suggested by the model. Collections post the new bursary programme education announcement have also continued to increase.The impact on the loan book valuation of the current year collection experience was as follows:. There was very little impact on the transition from student to exit.. There was a significant impact on the transition from exit to paying.

Due to the manual processing of the loan book transactions, NSFAS has recognised a Residual valuation adjustment todecrease the value of the loan book in line with the actuarial valuation. The Residual valuation adjustments recognised in thecurrent year amounts to R162,739,484 (2018: R 84,112,798).

6. Amounts owing by institutions (exchange)

Credit balances on student fee accounts due by institutions.

Amounts owing by institutions - Short term (I) 24,782 456,968Amounts owing by institutions - Long term (II) 20,457 20,927 45,239 477,895

I Amounts outstanding for less than 12 months, due and not impaired.II Amounts outstanding for more than 12 months, overdue and not impaired.

7. Amounts owing by other funders

Amounts owing by other funders - Current (I) 82,686 82,274Amounts owing by other funders - Non-Current (II)

- 5,234

82,686 87,508

Amounts owing by other funders relates to various funders who owe NSFAS for payments made on their behalf and amounts due for memorandum of agreements signed.

I Amounts outstanding for less than 12 months, due and not impaired.II Amounts outstanding for more than 12 months, overdue but not impaired.

8. Trade and other receivables (non-exchange)

sBux - Commission receivable (I) (348) 8Prepayments for goods and services 4,514 5,155Other debtors 5 -PAYE receivable 3,029 -

7,200 5,163

I sBux - Commission receivable relates to commission earned on transactions for the sBux voucher system used to disburse allowances to students funded by NSFAS through the implementation of the student centred model.

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Figures in Rand thousand 2019 2018

9. Cash and cash equivalents

Cash and cash equivalents consist of:

Bank balances 906 2,325Call accounts 3,885,037 2,297,795Short term - Investments (Money market accounts) (I) 613 1,371,812

3,886,556 3,671,932

I During the period under review the entity invested part of the available cash balances in domestic highly liquid fixedincome instruments per NSFAS's investment policy. Interest earned on call accounts ranged from 6.00% to 6.25%, while interest earned on short term investments ranged from 7.025% to 7.10%.

Restrictions on the use of cash balancesCash and cash equivalents include R80,120,441 (2018: R112,512,331) recovered funds that NSFAS holds for re-injection into student loans. A further R3,431,882,705 is held by NSFAS on behalf of funders for allocation by the entity on instruction by the funder and represents unspent grants and interest thereon. A further amount of R288,045,511 is committed for the redemption of sBux vouchers. The balance of R10,614,873, comprises operational funds attributed to administration grants and fees.

10. Provisions

Provision for credit balances to be refunded (I) 26,667 27,235

Opening balance 27,235 31,919Amount paid as refunds (II) (12) (61)Deceased refund debtors (III) (78) -Reversal of provisions (IV) (478) (4,623)Closing balance (IV) 26,667 27,235

Provision for credit balances to be refunded comprises:Credit balances still owing from original 2011 credit provision (I) 8,567 9,130

Credit balances from normal operations 18,100 18,105Total 26,667 27,235

I During the 2010 Ministerial Review it was discovered that the NSFAS Loan and Bursaries Management System had not applied the legal principle of in duplum to accrue interest on student loans in compliance with the National Credit Act (Act 34 of 2005). As a result, some loan accounts have been overpaid and therefore effectively have credit balances. It was also discovered during the 2010 audit that the loan management system had since inception been applying repayments incorrectly against student debt, by applying the student repayments against the outstanding capital balance first, rather than accrued interest. The Accounting Authority resolved that where students have been advantaged, NSFAS will not attempt to recover the additional interest, as this was an error on NSFAS's part. However, where students have been charged interest in excess of in duplum, every attempt should be made to trace the respective account holders and to refund the credit balances.II This amount represents refunds paid in the current (and prior) periods in respect of historical debtors (as above).III List of refund debtors was compared to the Department of Home Affairs database and showed a match of 42 deceased debtors. This amount has been recognised as income.IV The balance of R26,667,000 has been matched and refunds to the debtors will be processed in the next financial year. An amount of R478,000 could not be matched and has therefore been reversed to income.

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11. Amounts due to institutions (non-exchange)

Payments due to institutions for student loans and bursaries awarded.

Amounts due to institutions (I) 1,251,943 162,463

I This comprises disbursements approved, but not yet paid at the end of the financial year.

12. Deferred income

Unspent portions of conditional grants including interest received, which represents a liability.

These amounts are held in segregated investment accounts until utilised.Grants received in advance 1,782,761 121,952Deferred income 2,463,586 1,718,838

4,246,347 1,840,790

13. Trade and other payables (exchange)

Trade payables 35,871 31,689Accruals 16,516 9,270Accrued leave pay due to employees 6,013 5,289Accrued bonuses due to employees 1,933 2,493sBux - Merchant payables (I) 221,813 27,391Operating lease liability 632 632sBux - Expenses payable 4,707 129Unallocated receipts (II) 287,944 110,913

575,429 187,806

I Amounts payables on receipts of claims from merchants for sBux vouchers issued to students.II Unallocated receipts relates to amounts refunded by institutions to NSFAS when students cancel registration and the student detail has not been submitted to NSFAS.

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14. Administration fees and grants

Administration fees (exchange)Administration Fees - Sector Education and Training Authorities 3,133 5,079Administration Fees - National Institute for Humanities and Social Sciences - 1,289Administration Fees - Department of Agriculture, Forestry and Fisheries 998 943Administration Fees - National Skills Fund 11,457 13,811Administration Fees - Department of Defence and Military Veterans - 1,000Administration Fees - Department of Social Development 3,155 3,087Administration Fees - Rand Mutual Assurance 120 -Administration Fees - Funza Lushaka 28,984 -

47,847 25,209

Administration grants (non-exchange)Administration Grant: Department of Higher Education and Training 269,120 225,974

15. Grants received from student awards (non-exchange)

Department of Higher Education and Training (I) 20,065,271 11,786,913National Skills Fund 176,726 426,310Department of Basic Education 1,120,702 1,067,688Other South African government departments 203,404 165,278Universities 78,557 120,968SETA funding 27,271 111,036Deferred income movement (297,830) 1,666,761Private funders 13,249 152

21,387,350 15,345,106

I Includes grants to provide for loans and bursaries for students studying at Technical and Vocational Education Training Colleges and Universities, received from the Department of Higher Education and Training.

16. Personnel costs

Salaries 1 19,952 94,164Movement in leave accrual 724 (183)Employee benefits - other 72,862 55,130

193,538 149,111

Other employee benefits include Medical and Pension Fund contributions, Disability and all other costs.The entity operates a defined contribution retirement plan for all employees.

17. Asset management fees

Asset management fee 5,37 270

Fees relating to services provided by asset managers for the period, NSFAS disinvested all the investments with assetmanagers within the financial year.

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18. Irrecoverable debts written-off

Debt write-off - Student Loans 1,065,785 77,624

Reconciliation of debtors write-off balancesLess than R50 debtor balance write-off 54 36Deceased debtors write-off (I) 73,796 77,533Disabled debtors (II) 87 55Irrecoverable debt (III) 991,848 -Total 1,065,785 77,624

I NSFAS policy states that once a debtor has been confirmed as deceased by the Department of Home Affairs, the outstanding debt will be written off. During the current year, the loan book was matched to the Department of Home Affairs database and 2,405 (2018: 2,470) debtors were confirmed as deceased and outstanding balances to the value of R73,795,635 (2018: R77,533,025) were written off.II Debt attributable to disabled debtors are written off once NSFAS receives proof from a medical practitioner that the debtor has a permanent disability.III Loans are regarded as irrecoverable to the extent that they are disclosed as irregular expenditure.

19. Audit fees

Audit fees 10,580 6,644

External audit fees:Fees for 2016/17 audit 3 3,628

Fees for 2017/18 audit 5,233 1,035Fees for 2018/19 audit 1,001 -Total 6,237 4,663

Internal audit fees and other servicesFees for 2016/17 internal audit - 421

Fees for 2017/18 internal audit - 1,560Fees for 2018/19 internal audit 4,343 -

4,343 1,981

20. Operating lease liabilities

Operating lease payments represent rental payable for the leasing of office space in Wynberg Mews. Below are the terms of the new lease agreement:• A new lease agreement for the 1st and 2nd Floor, Wynberg Mews was entered into for the period 1 March 2017 until

28 February 2022.• No contingent rent is payable on both rental agreements.• A new lease agreement for printers was entered into for the period 1 April 2018 until 31 March 2021, with an extension

clause for up to 24 months. This agreement replaced the previous lease agreement for the printers which came to an end 31 March 2018.

21. Taxation The entity has obtained income tax exemption from the Commissioner for the South African Revenue Services under Section 10(1)(cA)(i) of the Income Tax Act, 1962 as amended. This exemption is applicable from the date on which the entity was established.

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22. Cash generated (utilised) from operations(Deficit) / surplus (5,045,952) 4,354,094Adjustments for:Depreciation and amortisation 14,764 14,812Model adjustments 1,378,891 1,198,961Impairment loss - 17,062Social benefit component on student loans (I) 532,627 3,752,515Net interest income (1,364,487) (1,470,790)Residual valuation adjustments 162,739 -Movements in provisions (568) (4,684)Irrecoverable debt written off 1,065,785 77,624Commission revenue - sBux (exchange) (8,144) (3,803)Other income (5,865) (4,868)Other non-cash items 4,455,097 253,314Changes in working capital:Trade and other receivables (non-exchange) (2,037) 7,051Student loan receipts 628,637 512,764Prepayments to institutions 26,850 (2,156,216)Student loans (749,665) (5,316,197)Amounts owing by institutions (exchange) (432,187) 18,768Trade and other payables (exchange) 387,623 91,012Unallocated debtor receipts written back (1,539) (2,427)Amounts owing by other funders (412) (60,798)Amounts due to institutions (non-exchange) 1,089,480 (297,143)Deferred income (2,405,557) (1,727,752)

(273,920) (746,701)

I Refer to note 5.

23. Financial assets by category

2017The accounting policies for financial instruments have been applied to the line items below:

Trade and other receivables (non-exchange)

At amortised cost

7,200

Total

7,200Cash and cash equivalents 3,885,941 3,885,941Student loans (exchange) 9,338,302 9,338,302Amounts owing by institutions (exchange) 45,239 45,239Amounts owing by other funders 82,686 82,686

13,359,368 13,359,368

Financial liabilities

Amounts due to institutions (exchange)

At amortised cost

1,251,943

Total

1,251,943Trade and other payables (exchange) 575,427 575,427

1,827,370 1,827,370

2018

Trade and other receivables (non-exchange)

At amortised cost

5,163

Total

5,163

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23. Financial assets by category (continued)Cash and cash equivalents 3,671,317 3,671,317Student loans (exchange) 10,245,563 10,245,563Amounts owing by other institutions (exchange) 477,895 477,895Amounts owing by other funders 87,508 87,508

14,487,446 14,487,446

Financial liabilities

Amounts due to institutions (exchange)At amortised cost

162,463Total

162,463 Trade and other payables (exchange) 187,806 187,806

350,269 350,269

24. Commitments A thorised expenditureThe entity had commitments for the following items as at 31 March 2019:

IT equipment 23,589 18,891Consulting and other services (I) 73,364 59,942

96,953 78,833

I The increase from the prior period is due to multi-year contracts awarded during the period.

Operating leases - as lessee (expense)

Minimum lease payments due (I)

- within one year 6,108 3,915- in second to fifth year inclusive 12,292 12,966

18,400 16,881

Refer to note 20.I The minimum lease payments comprise of three (3) lease agreements for office space and printers.

25. Contingencies

Contingent assets: Amounts due by institutionsNSFAS disburses funds to institutions to settle eligible students tuition and allowances liability. Any unused portion of the tuition paid to institutions is to be returned to NSFAS once these are confirmed to be unutilised. NSFAS has therefore disclosed a contingent asset to the extent that the unutilised funds has been estimated using the actual historical trend analysis. The contingent asset is estimated at R562,692,441 (2018: Rnil) in the form of unutilised funds to be confirmed by the institutions.

Contingent liabilities: Financial StructureNSFAS holds a Corporate Access Management Services/ Payment and Collections Services agreement (CAMS/PACS) with the corporate bankers that facilitates electronic payments and debit order processing. The Payments and Collections Services agreement that facilitates debit order deductions from debtors requires a settlement facility of R8,000,000 (2018: R8,000,000). A 10% notional risk is effected on the debtors facility in the event of unpaid collections.

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NSFAS has entered into agreements with various donors and educational institutions to fund students. The arrangement is that institutions will advance loans to students on NSFAS loan agreement forms. NSFAS then accounts for these loans as part of the NSFAS loan book. These arrangements do not include any transfer of cash between NSFAS and the universities. Any recoveries against this portion of the book are then re-injected to fund future generations of students. This arrangement is in line with the NSFAS mandate of increasing the pool of funds available to students. The total amount of institution recoveries that is available to fund future students as at the reporting date is R107,954,857 (2018: R101,644,186). As a result, there is a possibility that in future more universities might request to be paid back money from the recoveries.

Student funding

The student centred model makes it possible for students registered at both the Universities and TVET colleges to apply directly to NSFAS for loans and bursaries rather than through their respective institutions. Students who are eligible have loans and bursaries approved for the duration of their studies, subject to their meeting the promotion requirements, rather than being required to reapply for funding for each subsequent academic year. This possible contractual commitment by the entity to fund students for the duration of their studies, if they meet the promotion requirements, has resulted in an estimated contingent liability of R29,302,108,005 (2018: R34,669,486,741). In the current year, the estimate has been refined to use actual student data from the first year of the implementation of the December 2017 Presidential pronouncement.

26. Related parties

RelationshipsBoard Members Refer to the Report of the Board members Executive Authority Dr Bonginkosi Emmanual Nzimande: 30 May 2019 (Minister of Higher Education, Science Dr Grace Naledi Mandisa Pandor: 26 February 2018 to 29 May and and Technology) 2019

Controlling Entity Department of Higher Education and Training

Other Government Departments Department of Agriculture, Forestry and Fisheries (National) Department of Labour Department of Social Development Department of Basic Education Department of Defence and Military Veterans Department of Justice and Constitutional Development

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Public Entities Agricultural Sector Education and Training Authority (that transacted with NSFAS Bank Sector Education and Training Authority during the reporting period Chemical Industries Education and Training Authority and had balances) Construction Education and Training Authority Culture Art Tourism Hospitality Sport Sector Education and Training Authority Education Training and Development Practices Sector Education Training Authority Fiber Processing and Manufacturing Sector Education and Training Authority Financial and Accounting Services Sector Education and Training Authority Food and Beverage Sector Education and Training Authority Health and Welfare Sector Education and Training Authority Local Government Education and Training Authority Manufacturing Engineering and Related Services Sector Education and Training Authority Mining Qualifications Authority Media Information and Communication Technologies Sector Education and Training Authority National Skills Fund National Institute for Humanities and Social Sciences Safety and Security Sector Education and Training Authority Services Sector Education and Training Authority Energy and Water Sector Education and Training Authority Transport Education and Training Authority Wholesale and Retail Sector Education and Training Authority

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TVET Colleges Boland College Buffalo City College Capricorn College for TVET Central Johannesburg College Coastal KZN TVET College College of Cape Town for TVET East Cape Midlands Ehlanzeni TVET College Ekurhuleni East College for TVET Ekurhuleni West College for TVET Elangeni College for TVET Esayidi TVET College False Bay College for TVET Flavius Mareka TVET College Gert Sibande TVET College Goldfields TVET College Ikhala Public Further Education and Training College Ingwe Public TVET College King Hintsa Public TVET College King Sabata Dalindyebo TVET College Lephalale TVET College Letaba TVET College Lovedale Public TVET College Majuba College for TVET Maluti TVET College Mnambithi TVET College Mopani South East TVET College Motheo TVET College Mthashana TVET College Nkangala TVET College Northern Cape Rural TVET College Northern Cape Urban TVET College Northlink College Orbit TVET College Port Elizabeth College Sedibeng College for TVET Sekhukhune TVET College South Cape College South West Gauteng College Taletso TVET College Thekwini TVET College Tshwane North College for TVET Tshwane South College for TVET Umfolozi College for TVET Umgungundlovu TVET College Vhembe TVET College Vuselela TVET College Waterberg TVET College West Coast College Western College for TVET

Transactions between NSFAS and the listed entities are consistent with a normal operating relationship and arm’s length transaction have been omitted from presentation. This is a result of early adoption of GRAP 20 Related Party Disclosures as noted in the accounting policy.

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27. Board members' and key management emolumentsKey management 2019

Basic salaryEmployer

contributions Other Total

Executive Officer (Acting) - a - - - -Executive Officer - b 1,550 173 - 1,723Chief Operations Officers (Acting) - c 1,087 - - 1,087Chief Financial Officers - d 1,008 11 14 1,033Chief Financial Officers (Acting) - e 1,792 128 163 2,083Chief Financial Officer (Acting) - f 575 - - 575Chief Information Officer - g 1,458 - 24 1,482Chief Information Officer (Acting) - h 1,089 - 14 1,103Human Resources Executive - i 2,297 - 39 2,336

10,856 312 254 11,422

Advisors to the AdministratorAdministrator - l 1,914 - 391 2,305

Special Advisor - m 952 20 7 979Risk & Finance Advisor - n 575 - 1 576HR & OD Advisor - o 771 - 103 8742019 Program Manager - p 780 - 29 809Lead Process specialist - q 863 - 15 878

5,855 20 546 6,421

2018

Basic salary Employer contributions Other Total

Executive Officer (Acting) - a 816 8 9 833Executive Officer - b 1,519 121 485 2,125Chief Financial Officer - d 1,086 12 12 1,110Chief Information Officer - g 351 40 98 489Chief Information Officer - j 741 - 155 896Chief Financial Officer (Acting) - e 616 30 7 653Human Resources Executive - i 560 - 145 705Senior Managers - k 3,157 196 105 3,458

8,846 407 1,016 10,269

a Lerato Nage - Executive Officer (Acting): 16 February 2017 to 31 August 2017.b Steven Zwane - Executive Officer: 1 September 2017 to 2 October 2018.c Tasneem Salasa - Chief Operational Officer: appointed 23 August 2018.d Lerato Nage - Chief Financial Officer: Resigned 31 July 2018.e Morgan Nhiwatiwa - Chief Financial Officer (Acting): 1 March 2017 to 31 August 2017, 1 May 2018 to 31 December 2018.f Prakash Mangrey - Chief Financial Officer (Acting): Appointed on 1 January 2019.g Ashveer Rajcoomar - Chief Information Officer: appointed 1 November 2017 to 19 October 2018.h Colin Fourie - ICT Advisor to the Administrator and Chief Information Officer (Acting): Appointed on 20 October 2018.i Vuyokazi Dwane - HR Executive: appointed 1 December 2017.

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j Richard Mackinnon-Little - Chief Information Officer: resigned 30 June 2017.k Includes the following Senior Managers (who report directly to the Executive Officer). Communication Business Enablement Planning and Performancel Dr Randall Carolissen – Administrator: Appointed as Administrator by the Minister of Higher Educations and Training in terms of section 17 A (1) (c) of the NSFAS Act for the period 21 August 2018 to 20 August 2019.m Prof. Neil Garrod – Special Advisor to the Administrator: Appointed on 2 August 2018.n Prakash Mangrey – Risk and Finance Advisor to the Administrator: Appointed on 1 October 2018.o E. Bebe Oyegun-Adeoye – HR & OD Advisor to the Administrator: Appointed on 29 October 2018.p Peter Grant – 2019 Program Manager: Appointed on 18 September 2018.q Stalin Links – Lead Process Specialist: Appointed on 11 September 2018.

Board members emoluments

2019

Emoluments TotalTravel costs 353 353Board meeting fees 1,138 1,138

1,491 1,491

2018

Emoluments TotalTravel costs 1,223 1,223Board meeting fees 822 822

2,045 2,045

Board meeting fees per board member 2019Fees

2019Expenses

Dr Randall Carolissen (Administrator) - 44Sizwe Nxasana (Chairperson) - 6Mary Bomela 33 4Julia De Bruyn - 4Prof. Neil Garrod 116 71Nathan Johnston - -Zirk Joubert - 3Rose Keanley 136 2Sibongile Masinga 127 12Nafisa Mayat 24 16Thabo Moloja 203 83Prof. Themba Mosia 24 10Lumko Mtimde 34 25Yershen Pillay 14 1Yonke Twani 38 26

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27. Board members' and key management emoluments (continued)

Jaco Van Schoor - -Andre Zeeman 49 -Nathan Johnstone 99 41Shai Makgoba 64 1Amanda Glaesar 9 2Prof. Lessing Labuschagne 15 2Prof. Rob Dorrington 34 -Gwen Baumgart 114 -

1,133 353

28. Change in estimate

Amounts owing by institutionsIn the prior period NSFAS estimated the amounts owing by institutions based on the actual historical trend analysis. This was disclosed as an asset (Amounts owing by institution). In the current year, NSFAS determined that this should be disclosed as a contingent asset rather than be recognised as an asset. NSFAS has therefore disclosed a contingent asset to the extent that the unutilised funds has been estimated using the actual historical trend analysis. The contingent asset is estimated at R562,692,441 (2018: Rnil) in the form of unutilised funds to be confirmed by the institutions.The impact on the Statement of Financial Position is a decrease in Assets (Amounts owing by institutions) of R562,692,441.

29. Prior period errors

Presented below are those items contained in the statement of financial position, statement of financial performance and cash flow statement that have been affected by prior-year adjustments:

Statement of financial position2018

As previously reported

Correction of error

Restated

Trade and other receivables (non-exchange) 5,163 5,163Prepayments to institutions 3,559,187 - 3,559,187Student loans (exchange) - Short term 754,248 408 754,656Amounts owing by institutions (exchange) - Short term 456,968 - 456,968Cash and cash equivalents 3,671,318 (613) 3,670,705Amounts owing by other funders 82,274 - 82,274Property, plant and equipment 15,427 - 15,427Intangible assets 25,165 - 25,165Student loans (exchange) - long term 9,554,063 (63,156) 9,490,907Amounts owing by institutions (exchange) - long term 20,927 - 20,927Amounts owing by other funders 5,234 - 5,234Provisions (27,235) - (27,235)Amounts due to institutions (non-exchange) (162,463) - (162,463)Deferred income (3,639,337) 1,355,684 (2,283,653)Trade and other payables (exchange) (187,805) - (187,805)Capital fund (11,072,590) (442,862) (11,515,452)Surplus/(deficit) for the year (3,060,544) (1,292,936) (4,353,479)

- (443,475) (443,474)

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Statement of financial performance2018

As previously reported

Correction of error

Restated

Administration fees (exchange) 25,209 - 25,209Administration grants (non-exchange) 225,974 - 225,974Grants received for student awards (non-exchange) 13,989,421 1,355,684 15,345,106Interest revenue (exchange) 1,475,784 (4,994) 1,470,790Commission revenue - sBux (exchange) 3,803 - 3,803Unallocated debtors receipts (non-exchange) 2,427 - 2,427Other income (exchange) 4,868 - 4,868Personnel costs (149,111) - (149,111)Asset management fees (270) - (270)Depreciation and amortisation (14,812) - (14,812)Irrecoverable debts written-off (77,624) - (77,624)Bursaries - Universities (5,375,932) - (5,375,932)Bursaries - TVET Colleges (2,012,108) - (2,012,108)General expenses (92,313) - (92,313)Consulting and professional fees (26,731) - (26,731)Audit fees (6,644) - (6,644)Impairment loss - Amounts owing by other funders (17,062) - (17,062)Social benefit component on student loans issued (3,903,282) (59,998) (3,963,280)Model adjustments (991,053) 2,857 (988,196)Surplus for the year 3,060,544 1,293,549 4,354,094

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ErrorsThe following prior period errors adjustments occurred:

Payments made in excess of contract amounts

In the student centered model, students only need to apply for funding once. When funding is approved, NSFAS estimates the total funding required for the duration of study using the data submitted by the institutions. Students are required to sign a contract which indicates the total amount awarded for the duration of the study.

Every year, NSFAS receives registration data from institutions which indicates the funding required for that academic year. NSFAS will then transfer funds to institutions in line with what is claimed by each institution for that academic year.

In the 2017 academic year (prior financial year), NSFAS migrated all institutions to the student centered model. This meant that those students previously not on the student centered model were required to sign contracts for funding with NSFAS for the first time. During this process, contract amounts for several students were incorrectly generated.

In some instances, NSFAS has identified that the estimated contracted amount was inherently incorrect, resulting in the total disbursements to the respective institutions being significantly higher than the stipulated contract amount. 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 the respective student in terms of their actual registration. The amount paid to the student is aligned to the approved award and therefore is correct.

Due to the impact of this administrative error, in the prior financial year (2017/18), the entity disclosed irregular expenditure to the extent of the amount disbursed in excess of contractual amount at management's best estimate of R284,705,536.This has been corrected in the current year and restated at R210,808,070. Refer to note 31. This impact of this on the student loans has been calculated and is disclosed below:

Recognition of Grants received for student awards (non-exchange)

During the prior period, NSFAS erroneously recognised Grants received for student awards for prefunders where the associated disbursements constituted Irregular expenditure. To the extent that NSFAS disclosed Irregular expenditure for other funders, NSFAS did not meet all the conditions imposed by the funders. This was therefore recognised in error. The adjustment was processed and the prior year comparatives has been restated.

In prior periods, NSFAS has accounted for the DHET grants received as a conditional grant, whereby unutilised grants at the end of each reporting period was disclosed as Deferred Income. This was clarified and corrected in the current financial year. The DHET grants are not conditional to the extent that they are not specifically and exclusively appropriated in terms of the Appropriation Bill.

Statement of Financial PositionStudent loans (exchange) - Long term (63,156)Student loans (exchange) - Short term 408Deferred income 1,355,684

1,292,936

Statement of Financial PerformanceInterest revenue 5,607

Social benefit component 59,998Model Adjustments (2,857)Grants received for student awards (non-exchange) (1,355,684)

(1,292,936)

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30. Risk management Financial risk management

The entity manages its net assets to ensure that it will be able to continue as a going concern, while meeting its overall objectives. The strategy was consistent with that applied in prior years. Funding is obtained primarily from grants received for student awards.

The entity has exposure to the following risks from its use of financial instruments:- Credit risk- Liquidity risk- Market risk.

This note presents information about the entity’s exposure to each of the above risks. Further quantitative disclosures are included throughout these financial statements.

The Accounting Authority has overall responsibility for the establishment and oversight of the entity’s risk management framework. The Accounting Officer has established the Audit and Risk Committee, which is responsible for developing and monitoring the entity’s risk management policies.

The entity’s risk management policies are established to identify and analyse the risks faced by the entity, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the entity’s activities. The entity, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The entity’s Audit and Risk Committee oversees how management monitors compliance with the entity’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the entity. The entity’s Audit and Risk Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit and Risk Committee.

There are no externally imposed capital requirements.

There have been no changes to what the entity manages as capital, the strategy for capital maintenance or externally imposed capital requirements from the previous year. The entity has invested all recovered surplus funds with the Corporation for Public Deposits of the South African Reserve Bank. The other surplus funds were invested with fixed income managers.

Liquidity risk

Liquidity risk is the risk that the entity will encounter difficulty in meeting obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.

Liquidity risk is considered medium due to the entity's conservative funding structure and its own cash generation. Management monitors rolling forecasts of the entity's cash and cash equivalents on the basis of the expected cash flow. NSFAS engages with the Department of Higher Education and Training on a continuous basis to ensure that it has the cash flows to meet the expected payments to universities as they fall due.

Fair value

The carrying value of financial instruments approximates fair value, due to the short term nature of the receivables and payables.

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Maturity analysis of financial liabilities

At 31 March 2019 Less than 1 month

1 to 3 months

3 months to 1year Total

Accounts payable (I) 567,483 - - 567,483Amounts due to institutions 1,251,943 - - 1,251,943

1,819,426 - - 1,819,426

At 31 March 2018 Less than 1month

1 to 3 months

3 months to

1 yearTotal

Accounts payable (I) 180,023 - - 180,023Amounts due to institutions 162,465 - - 162,465

342,488 - - 342,488

Market risk

Market risk is the risk that changes in market prices, such as interest rates, will affect the entity's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. The entity is exposed to one primary type of market risk, namely interest rate risk.

Interest rate risk

Interest rate risk refers to the impact on future cash flows from student loans. Interest rate risk on other financial assets is not significant as the investment profile is conservative in nature. Interest rate risk on student loans is managed principally through linking interest charged on outstanding student loans to the Repurchase rate, as determined by the South African Reserve Bank from time to time.

Interest rate risk profileAt the reporting date the interest rate profile of the entity's interest-bearing financial instruments was:

Variable rate instrumentsStudent loans 9,338,306 10,308,311Other variable rate instruments 3,886,556 3,671,932

13,224,862 13,980,243

Valuation sensitivity analysis for variable rate interest instrumentsA change of 100 basis points in interest rates at the reporting date would have (increased)/decreased deficit or surplus byR38,859,530 (2018: R36,713,207). This analysis assumes that all other variables remain constant.

Valuation sensitivity analysis for student loansA change of 100 basis points in interest rates at the reporting date would have increased/(decreased) surplus or deficit by the amounts shown below. This analysis assumes that all other variables remain constant.

I These balances exclude accrued leave pay and accrued bonuses due to employees as these are not financial liabilities.

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2019Student loans

100 basis points increase 21,313 0.23%100 basis points decrease (21,313) -0.23%

2018Student loans

100 basis points increase

20,856 0.20%

100 basis points decrease (30,838) -0.30%

Credit risk

Credit risk is the risk of financial loss to the entity if a counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the entity’s receivables from student loans. This risk is mitigated by the loan terms which make the loans due and payable only in the event of a borrower becoming employed and having an income above a predetermined threshold level. Fair value financial assets, loans and receivables and cash and cash equivalents are exposed to credit risk. The initial day-one loss adjustment is therefore not considered to be a reflection of credit risk, but actually represents the social benefit element of the loans.

The maximum credit risk exposure is: R13,359,368,000 (2018: R14,487,447,000), which is the total of all assets excluding prepayments, property, plant and equipment and intangible assets. The entity limits its exposure to credit risk on loans ad-vanced as a result of implementing legislative policy. The granting of student loans is governed by well-established criteria, including a national means test. Internal systems are regularly enhanced to ensure constant improvement in the entity’s loan recovery strategy.

Allowances for impairment

The entity establishes an allowance for impairment that represents its estimate of incurred losses in respect of its assets. A collective loss is established for groups of similar assets in respect of losses that may have been incurred but not yet iden-tified, on an individual basis. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets and in the case of the student loan portfolio based on the mortality over the following year.The impairment is calculated as the difference between the expected cash flow profile and the experienced payment, tran-sitions from the student state and mortality.

Credit quality of student loans

GRAP 104 - Financial instruments requires the disclosure of:

- Credit quality of financial assets that are neither past due nor impaired.- Credit quality of financial assets that are past due but not impaired.

All student loans are collectively impaired on the basis of mortality, actual transition from student state and changes in pay-ment. Accordingly no additional disclosures are required in respect of the credit quality of student loans.

Write-off policy

The entity writes off a student loan and any related allowances for impairment losses, when the entity determines that the loan is uncollectable. This determination is made after verification of the notification of the death or permanent disability of the debtor. A list of identity numbers is verified against the Department of Home Affairs database on a quarterly basis for verification of deceased debtors while medical certification of permanent disability is required. The specific loans are then written off on approval by the Accounting Authority.

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During the financial year under review the entity wrote off debts amounting to R73,937,000 (2018: R77,624,145) after verification of deceased and permanently disabled debtors in respect of whom the required notification had been received.

A further write-off of R991 848 000 (2018: Rnil) was processed due to the impact of recognising irregular expenditure. This represents the portion of the loans that are regarded as being irrecoverable.

Loans and other receivables and Cash and cash equivalents

The entity only deposits cash with major banks with high quality credit standing (P-2 short term local currency credit rating) and limits exposure to any one counter party. Consequently, the entity does not consider there to be any significant exposure to credit risk.

Portfolio status

The entity's exposure to credit risk is influenced mainly by the number of loans issued to the borrowers. The fifth loan to a single borrower is considered more risky than their first loan as the previous loans need to be repaid before the first payment occurs on the fifth loan. As a result the loan payments are expected to be received later and there is also a greater chance of the borrower passing away before completing the repayment of the loan. The demographics of the NSFAS’s student base is also considered as this has an influence on credit risk, that is age and gender are factors that influence the expected mortality of the borrowers. There is no significant exposure to a single student. Geographically there is no concentration of credit risk. The portfolio has been segregated in the table below to indicate the composition of the portfolio by loan number. The repayment experience is higher on the initial loans than on the later loans.

Loan number

Number of loans Transaction values Percentage

of total value

1 776,982 13,953,736 39%2 517,366 10,575,223 29%3 324,623 6,805,610 19%4 162,065 3,263,212 9%5+ 81,898 1,485,483 4%

1,862,934 36,083,264 100%

The portfolio has been segregated to indicate the number of loans that were settled over the last year as well as the number of loans that are currently being paid and the ones not being paid. Where the loans are not being paid this is not due to a credit event but due to the loans not being due and payable as a result of the borrower being unemployed or earning below the repayment threshold.

Loans in force Currently payingNot currently

paying

Student 764,723 - 764,723Drop-out 436,925 53,744 383,181Graduate 661,287 112,804 548,483

1,862,935 166,548 1,696,387

Price risk

The entity's other financial assets are low risk investments. Therefore, fair value or future cash flows as a result of market price changes is immaterial.The fair value movements would increase/decrease as a result of gains or losses on securities designated at fair value. All financial instruments are classified at amortised cost except for investments designated at fair value.

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31. Irregular expenditure

Opening balance 3,319,001 1,383,168Add: Irregular expenditure - current year 4,264,161 1,991,462Sub Total: 7,583,162 3,374,630Other areas of non-compliance - -Payments in excess of contract amounts 1,025,209 210,808Disbursements with respect to NOCLAR 2,652,072 1,707,713Shifting of earmarked funds not approved by National Treasury 580,537 72,671Variation not approved by NSFAS Accounting Authority 971 -Asset management fees 5,372 270Subtotal other areas non-compliance 4,264,161 1,991,462Less: Amounts condoned by National Treasury (134) -Less: Amounts written off by Accounting Authority - (55,629)Closing balance 7,583,028 3,319,001

Payments made in excess of contract amounts:

In the student centred model, students only need to apply for funding once. When funding is approved, NSFAS estimates the total funding required for the duration of study using the data submitted by the institutions. Students are required to sign a contract which indicates the total amount awarded for the duration of the study.

Every year, NSFAS receives registration data from institutions which indicates the funding required for that academic year. NSFAS will then transfer funds to institutions in line with what is claimed by each institution for that academic year.

In the 2017 academic year, NSFAS migrated all institutions to the student centred model. This meant that those students previously not on the student centred model were required to sign contracts for funding with NSFAS for the first time. During this process, contract amounts for several students were incorrectly generated.

In some instances, NSFAS has identified that the estimated contracted amount was inherently incorrect, resulting in the total disbursements to the respective Institutions being significantly higher than the stipulated contract amount. 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 the respective student in terms of their actual registration. The amount paid to the student is aligned to the approved award.

Management's calculation of the extent of the payments in excess of contract amounts for both loans and bursaries is R1,025,209,408 (2018 R210,808,126). The prior year payments in excess of contract amounts has been restated from R284,705,536 to R210,808,126.

During the current financial year, in an attempt to rectify the Irregular expenditure relating to disbursements in excess of contractual amounts, certain contracts were regenerated. The irregular expenditure, relating to regenerated contracts (LAFSOPs) and contracts signed on behalf of students by NSFAS, is still in the determination phase and therefore does notneed to be disclosed as an amount in the current year. The progress being made to determine the quantum of the amount is as follows:- Identification of the affected accounts- Quantification of the related Irregular expenditure (in progress).

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Shifting of earmarked funds not approved by National Treasury:

During the 2016/17 financial year, the Accounting Authority approved the shifting of funds received from National Treasury that had been earmarked for historic debt funding, to general student funding. At the time, the Accounting Authority did not obtain the approval from National Treasury as it was the view that the approval was conducted in accordance with the NSFAS Act. The shifting of funds was necessary at the time due to the slow nature of the historic debt claims received from the institutions.

Subsequently, an audit finding was raised by the Auditor-General of South Africa in this regard during the 2017/18 audit, which led to NSFAS requesting ex post-facto approval by National Treasury.

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National Treasury subsequently responded to NSFAS on 16 May 2019 and indicated that the ex post facto approval was denied and the action performed by the Accounting Authority to approve the shifting of the respective earmarked funds was irregular.

The irregular expenditure would pertain to the actual utilisation of funds from the Historic Debt account to the general student funding accounts, which occurs in the 2016/17 to 2018/19 financial years.

The impact on the 2016/17 financial year is R1,308,697,556, which results in a restatement of the prior year irregular expenditure opening balance.

The impact on the 2017/18 financial year is R72,671,127, which results in a restatement of the current year irregular opening balance.

Variation not approved by the Accounting Authority:

During the 2018/19 financial year, a variation request for the extension of the document storage and scanning contract held with Document Warehouse was submitted to the NSFAS Board for approval. The variation request was not approved by the NSFAS Board due to it being submitted after the expiry date of the contract being 30 April 2018.

A payment was subsequently made to Document Warehouse on 16 August 2018 amounting to R971,223 in relation to the contract extension, thereby resulting in the incurrence of irregular expenditure.

An investigation into the above matter was finalised on 28 November 2018. The investigation found no official liable in law and it was recommended for write off by the Executive Administrator in accordance with the updated National Treasury Irregular Expenditure Framework. As at financial year end, the irregular expenditure is awaiting the write-off.

Amounts condoned by National Treasury:

During the 2018/19 financial year, the National Treasury approved the condonation of irregular expenditure incurred by the entity during the 2012/13 financial year amounting to R133,787. The irregular expenditure pertained to valid tax clearance certificates not being obtained from the appointed service provides at the time of award.

As the valid tax clearance certificates were subsequently obtained from the appointed service providers, National Treasury approved the condonation of the irregular expenditure on 21 May 2018 in accordance with paragraph 29 of the previous National Treasury Irregular Expenditure Guidelines.

Disbursements with respect to Non-Compliance to Laws and Regulations (NOCLAR):

In July 2018, internal audit issued NSFAS with a Non-Compliance to Laws and Regulations (NOCLAR) notification. This notification indicated that NSFAS was materially non-compliant with S51 of the PFMA with respect to the disbursement process. S51 requires that the entity has and maintains effective, efficient and transparent systems of financial and risk management and internal control.

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NSFAS has quantified the impact of disbursement errors relating to non-compliance to S51. Matters that have been quantified include, but are not limited to:• Students who have been funded for courses that NSFAS does not fund• Disbursements in excess of the loan or bursary award• Disbursements processed against the incorrect funder• Disbursements for students (including returning students) where there is an unsigned bursary or loan

agreement. Many of these relate to signatures that have been brought into question due to design flaws in the system.

• Disbursement processed to the incorrect student• Disbursements paid to a student in terms of multiple awards

In their supporting report on disbursements, the internal auditors noted that the root cause of this non-compliance can be traced back to the implementation of the new systems in 2013. Since this systems implementation, the internal auditors have noted a steady decline in the governance and control environment with respect to the disbursement process, together with increased manual interventions and heightened dependency on key individuals who processed disbursements, with little to no oversight. Since receiving the NOCLAR notification, NSFAS has, and continues to, implement controls to prevent the re- occurrence of these erroneous disbursements. In addition, forensic investigators have been appointed to determine whether any of these transactions were fraudulent in nature. These investigations are ongoing.

Amounts disclosed as Irregular Expenditure are also recorded in the Statement of Financial Performance as Grants received for student awards (non-exchange) and Bursaries (Universities and TVET Colleges)

Irregular expenditure relating to prior years, not disclosed above:

In the current year, subsequent to the current reporting period, NSFAS has been made aware of a forensic report dated March 2018 commissioned by the Department of Higher Education and Training. This forensic report is the conclusion of investigations into a sample of 10 institutions across the 2012 to 2014 academic years and highlighted instances of irregular expenditure to the value of R47 566 337. The report is not clear as to whether or not this amount is the quantification of the full extent of the 10 institutions or the 10% sample referred to.

Irregular expenditure relating to student loans has only been quantified in the current year for amounts relating to the 2017 and 2018 academic years. NSFAS has assessed the extent to which irregular expenditure for years relating to academic years 2016 and prior and concluded this to be impractical for the following reasons:

• Prior to 2017, the operating model in effect at the time was decentralised to each institution. This meant that all funding decisions and funding rules were applied at each institution rather than centrally at NSFAS. As a result, NSFAS does not have all relevant and accurate data in order to assess irregular expenditure for these years accurately.

• In order to assess irregular expenditure for 2017 and 2018 academic years, external reference data was used to the extent that it was readily available and could be verified. This reference data would be different for each academic year and thus reconstructing the applicable reference data for each year, including verifying the data for accuracy, proved not to be possible.

In order to assess the irregular expenditure reliably for any years prior to the 2017 academic year, detailed audits would be required at each institution country wide. As a result, NSFAS has concluded that it would be impractical (as defined by the National Treasury Framework on Irregular Expenditure) to quantify and disclose.

Asset management fees

In terms of Treasury Regulation 31.3.3 Public Entities listed in Schedule 3(a) of the Public Finance Management Act must, unless exempted, invest surplus funds with the Corporation of Public Deposits. The entity invested funds with asset managers for the period under review and incurred asset management fees amounting to R5,372,199 (2018: 269,595) before it disinvested all the investments with these asset managers within the financial year.

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32. Budget information

The Board approved the initial budget and the Minister approved the revised budget on 27 March 2019. The variances arose due to refinements performed by NSFAS on the initial approved budget. All changes to the initial approved budget were approved by the Accounting Authority.

Note 32.1: The following are not budgeted for:

Commission revenue - sBux Unallocated debtors receipts Asset management fees Other incomeIrrecoverable debts written offImpairment loss - Amounts owing by institutions (exchange) - long term Social benefit component on student loans issuedImpairment loss - Amounts owing by other funders Amounts owing by other fundersAmounts due to institutions paid Movement in financial assets

Note 32.2: Adjustments

Statement of Financial Performance:

Administration fees - The entity obtained approval for the utilisation of administration fees received from the Department of Basic Education during the year for its administration budget.

Administration grants - The entity obtained approval to retain the surplus and unspent committed budget from the 2017/18 financial year. The surplus and unspent committed budget was added to the administration grant.

Grants received for student awards - A budget adjustment is based on the audited outcome of the prior financial year.

Other income - The entity obtained approval for the use of recoveries income to be re-injected into student funding for the standardisation of meal allowances between returning students and first time entrants and for use in the administration budget to fund debt collection commission expenditure.

Personnel costs - Additional budget allocations were made available from the re-prioritisation of budget initially allocated to debt collection commission prior to the Minister's approval for the utilisation of recoveries income for the expenditure.

Bursaries - Other funding sources - A budget adjustment based on the re-injection of recoveries income into the student funding allocation.

General expenses - Additional budget allocations were made available from the approved retained surplus from the 2017/18 financial year and the Department of Basic Education administration fees.

Consulting and professional fees - Additional budget allocations were made available from the approved retained surplus from the 2017/18 financial year and the Department of Basic Education administration fees.

Audit fees - Additional budget allocations were made available from the Department of Basic Education administration fees.

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Statement of Financial Position:

There was a budget adjustment based on the audited outcome of the prior financial year which applies to the following line items in the Statement of Financial Position:

- Trade and other receivables- Student loans (short term)- Amounts owing by institutions (exchange) short-term- Cash and cash equivalents- Property, plant and equipment- Intangible assets- Student loans (exchange) - long term- Amounts owing by institutions (exchange) - long term- Amounts owing by other funders- Trade and other payables- Provisions- Amounts due to institutions- Deferred income

Prepayments to institutions - A budget adjustment based on the audited outcome of the prior financial year and taking into account the growth rate of organisational capacity.

Cash Flow statement:

Grants for capital fund and administration costs - An adjustment based on a revised allocation from DHET.

Statement of Financial Performance:

Note 32.3: Interest revenue (exchange)

Interest revenue relates to interest earned on funds invested and interest on outstanding student loans. Interest on funds invested was lower than budget due to a delay in receiving student grant funding from DHET.

Note 32.4: Personnel costs

The expenditure of R194.9 million is R5.2 million greater than budget arising from the engagement of Advisors to assist the Administrator in the execution of his Terms of Reference and the employment of additional seasonal Contact centre staff over the 2019 applications period.

Note 32.5: Depreciation and amortisation

The actual expenditure is below budget on depreciation due to a lower investment in computer software as alternative solutions were sought to resolve ICT related issues.

Note 32.6: Bursaries - Other funding sources

Bursaries from other funding sources consist mainly of DHET University funding and funding from all other donors. The bursary disbursement of R21.2 billion was over budget by R2.2 billion due to outstanding 2017 academic years claims which were paid in the current financial period.

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Note 32.7: Bursaries - DHET TVET Colleges funding source

The bursaries to TVET colleges of R3.9 billion was below budget of R5.2 billion by R1.3 billion because of under-utilisation of the 2018 funding allocation by TVETs Colleges. TVET colleges during the academic year experienced issues with the submission and processing of their registration data . This resulted in the overall underspending of the TVET allocation.

Note 32.8: Model adjustments

It is not possible to provide an accurate estimate of the model adjustment and the social benefit of student loans issued . Actual results will differ due to recoveries achieved and other adjustments that needs to be made to the model at financial year end.

Statement of Financial Position:

Note 32.9: Trade and other receivables (non-exchange)

Trade and other receivables was higher than expected due to an increase in PAYE receivable to SARS of R3 million that was not budgeted for.

Note 32.10: Prepayments to institutions (exchange)

The adjusted budget was based on payment of 30% of 2019 allocation. No funding was made from DHET and internal reserves were reprioritsied to make 15% upfront payment to Universities and 20% upfront payment to TVET colleges. Further outstanding unutilised 2017 still owing by institutions was deducted from the final upfront calculated figure reducing the total amount eventually paid to institutions.

Note 32.11: Student loans (exchange) - long term and short term

Student loans were lower than budget due to actual disbursements to students were lower than budget and the recoveries for the year were lower than budget.

Note 32.12: Amounts owing by institutions (exchange) - short term

Estimates of amounts due to institutions were reassessed based on the actual experience. This has resulted in amounts accrued during the current year being lower compared to budget.

Note 32.13: Cash and cash equivalents

There was significant progress made in disbursing outstanding payments after the appointment of the Administrator since the second quarter of the year. This resulted in the cash balances being lower than the revised budget amount.

Note 32.14: Intangible assets

Intangible assets was lower than budget due to Items budgeted for as software which were actually expensed.

Note 32.15: Amounts owing by other funders (long-term)

The variance is due to high level of disbursement than anticipated towards the end of the financial years reduced the unspent cash balance.

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Note 32.16: Trade and other payables (exchange transactions)

The variance is mainly due to the impact of credit balances reclassified from receivables to payables.

Note 32.17: Amounts due to institutions (non-exchange)

The amount due to institutions was above budget because internal reserves described in 31.10 above were used to pay unfront payment. No funding was made from DHET and the consequence of that resulted in disbursement files approved to be hold.

Note 32.18: Deferred income

The variance is due to higher cash utilisation towards the end of the financial year which reduced our unspent obligation to donors should they enforce the requirement to return the assets.

Cash Flow Statement

Note 32.19: Grants for capital fund and administration cost

The variance is due to decreased funding allocations received from National Skills Fund, other South African government departments and universities.

Note 32.20: Amounts due to institutions paid

There was a substantial increase in allocations following the fee-free education announcement. This resulted in a significant increase in the upfront payments which is based on a percentage of allocations each year.

Note 32.21: Purchase of property, plant and equipment

The purchase of equipment was higher than expected due to additional hardware requirements based on organisational capacity growth.

Note 32.22: Purchase of other intangible assets

The purchase of intangible assets was lower than expected due to planned acquisitions not being on schedule.

Note 32.23: Interest income

Interest on funds invested was higher than expected due to the increase in recovered funds and interest on donor funds was higher than expected due to a decrease in the funds expected to be disbursed.

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33. Unallocated debtors receipts (non-exchange)



Unallocated debtor receipts (historical) 1,539 2,427

Amounts received by the entity without a valid reference to loan accounts or not yet allocated at year end to individual loan accounts, are recorded in the annual financial statements against student loans. Every attempt is made to establish the identity of the depositor with the relevant bank. When these unidentified amounts have been outstanding for more than five (5) years, they are written-off to income. In the event that debtors subsequently claim and prove amounts, which had previously been deposited by them, the amounts will at that stage be set-off against the students' loan accounts as payments and reflected as an expense in the financial statements. The amount written back to income is R1,539,060 (2018: R2,426,848).

34. Interest revenue (exchange)

Interest on student loans 870,116 942,642

Interest on funds invested* 497,219 528,1481,367,335 1,470,790

Interest on funds invested relates to the following categories:

By funding source:Administration grants and fees

126,631 15,293

Donor funds 286,808 428,449Recovered funds 80,932 83,793

494,371 527,535

By investment type:Call accounts 323,646 410,993Asset managers 34,033 76,350Corporation for Public Deposits 136,692 40,192

494,371 527,535

35. Commission Revenue - sBux (exchange)

Commission revenue - sBux (I) 8,144 3,803

I The entity implemented a mobile payment solution (sBux) for the disbursement of allowances to students registered at institutions included in the first phase of the student centred operating model. Commission is payable by accredited merchants for student transactions on their food and learning materials allowances at no cost to the students. The commission is shared equally between NSFAS and the provider of the mobile payments platform. The commission disclosed is the amount payable to NSFAS.

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36. Debtors loan book movements (non-exchange)

Assumption set used in the loan valuation model:For the 31 March 2018 valuation it was considered appropriate to update the valuation assumptions with data up to the 31December 2018 in order to recognise the development of the book and the impact of management actions over time. Model Adjustments

The model adjustment in the current year assumptions has been updated and adjusted to take into account:- reassessment of the assumptions based on data up to 31 March 2019; and- truncation of payments after 300 months.

As a result of the impact of changes in assumptions, model adjustments, change in the repo rate and experience adjustments, a net difference in value of the student portfolio of R1,378,102,282 (2018: R1,114,838,817) was recorded. The table below shows the impact of the change in assumptions and model adjustments per loan year of issue:

Year of issue of student loan

1991 - 2002 (22,267) (22,460)2003 - 2008 (164,357) (141,013)2009 (63,309) (50,664)2010 (74,185) (61,623)2011 (96,001) (79,230)2012 (121,887) (98,187)2013 (146,340) (108,888)2014 (131,612) (109,373)2015 (130,241) (119,118)2016 (177,860) (144,673)2017 (249,014) (179,610)2018 (1,027) -

(1,378,100) (1,114,839)

In order to enable the user of the financial statements to have a sense of the potential impact of changes to certainassumptions in the model, the following sensitivity analysis has been performed:

Sensitivity to change in transition from Exit to Payer

The assumption for the transition from debtor to payer is key to the determination of the value of the loans. The table below considers the impact of a level change in the transition from exit to paying percentages by 10% at each duration since exit.

2019 Carrying value +10% change Impact -10% change ImpactStudent 5,224,305 522,431 10.0% (522,431) -10.0%Non-payer 3,091,725 432,664 14.0% (399,397) -12.92%Payer 1,022,652 - 0.0% - 0.0%

9,338,682 955,095 10.23% (921,828) -9.87%

2018 Carrying value +10% change Impact -10% change ImpactStudent 5,857,885 6,443,673 10.0% 5,272,096 -10%Non-payer 3,613,112 4,135,704 14.46% 3,136,935 -13.18%Payer 838,960 838,960 0.0% 838,960 0.0%

10,309,957 11,418,337 -10.61% 9,247,991 11.14%

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36. Debtors loan book movements (non-exchange) (continued)

Sensitivity to change in the payment profileThe payment profile reflects an average expected level of recovery at each month since payment commenced. Since there is no clear contractual relationship between the loan value and the payment amount, the history of aggregate experience of payments as a percentage of outstanding value has been used to set these assumptions.

The table below shows the impact of a 10% reduction in the payment profiles.

2019 Carrying value -10% change ImpactStudent 5,224,305 (140,401) -2.69%Non-payers 3,091,725 (67,039) -2.17%Payers 1,022,652 (50,992) -4.99%

9,338,682 (258,432) -2.77%

2018 Carrying value -10% change ImpactStudent 5,857,885 5,703,142 -2.64%Non-payers 3,613,112 3,533,507 -2.20%Payers 838,960 798,163 -4.86%

10,309,957 10,034,812 -2.49%

Impairment loss

The expected future cash flows anticipated to arise from the loan book are reassessed each year. They take into account the status of the individual loans in the loan book and the adjusted assumptions based on an analysis of the historic experience of the loans. As the data related to the loan book changes with the passage of time, the value of the loan book will be reassessed, and the cumulative impairment adjusted accordingly.

37. Analysis of surplus/(deficit)

OperationalAdministration grants 269,120 225,974Administration fees 47,847 25,209Interest received 1,367,335 1,470,790Other income 5,865 4,868sBux - Commission revenue 8,144 3,803Unallocated debtors receipts 1,539 2,427Less: Administration and investment costs (400,119) (289,881)Sub-Total 1,299,731 1,443,190

CapitalGrants received for student awards 21,387,350 15,345,106Bursaries - Universities (20,814,059) (5,375,932)Bursaries - TVET Colleges (3,778,932) (2,012,108)Irrecoverable debts (1,065,785) (77,624)Valuation adjustments (162,739) (84,113)Social benefit component on student loans (532,627) (3,752,515)Model adjustments (1,378,891) (1,114,848)Impairment - Amounts owing by other funders - (17,062)Sub-Total (6,345,683) 2,910,904Total (5,045,952) 4,354,094

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37. Analysis of surplus/(deficit)

OperationalAdministration grants 269,120 225,974Administration fees 47,847 25,209Interest received 1,367,335 1,470,790Other income 5,865 4,868sBux - Commission revenue 8,144 3,803Unallocated debtors receipts 1,539 2,427Less: Administration and investment costs (400,119) (289,881)Sub-Total 1,299,731 1,443,190

CapitalGrants received for student awards 21,387,350 15,345,106Bursaries - Universities (20,814,059) (5,375,932)Bursaries - TVET Colleges (3,778,932) (2,012,108)Irrecoverable debts (1,065,785) (77,624)Valuation adjustments (162,739) (84,113)Social benefit component on student loans (532,627) (3,752,515)Model adjustments (1,378,891) (1,114,848)Impairment - Amounts owing by other funders - (17,062)Sub-Total (6,345,683) 2,910,904Total (5,045,952) 4,354,094



38. Impairment loss - Amounts owing by other funder - non-current

Impairment loss - Amounts owing by other funder - non-current - (17,060)

During the period amounts owing by other funders were impaired with an amount of Rnil (2018: R17,060,000) due to these amounts being long outstanding with no expected recovery from the funders.

39. Other income (exchange)

Reversal of provision (I) 556 4,623Bank SETA money recovered 5,309 -Recovered funds - 245

5,865 4,868

I Refer to note 10

40. Service in kind revenue (non-exchange)

NSFAS received seconded employees from various banks at no cost to NSFAS during the year. The positions that were filled with seconded resources were as follows: Chief Risk Officer, Chief Operation Officer and Recoveries Specialist.

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Supplementary Information


1. Grants received for student awards (rounded to the nearest thousand R'000)

Grants received for student awardsChemical Industries and Training Authority 3,610 4,275Department of Agriculture, Forestry and Fisheries 19,955 18,862Department of Basic Education - Funza Lushaka Teacher Bursaries 1,120,702 1,067,688Department of Defence and Military Veterans 97,997 33,325Department of Higher Education and Training 14,901,269 9,349,293Department of Higher Education and Training - TVET Colleges 5,164,002 2,437,620Department of Social Development 123,045 120,402KwaZulu-Natal Provincial Government - 8,000Gauteng Gambling Board 989 500National Skills Fund 176,726 426,310Agriculture SETA - 1,425Bank SETA 1,440 4,937Fibre Processing and Manufacturing SETA 7,435 19,000Fibre Processing and Manufacturing SETA discretionary - 7,000Food and Beverage SETA - 3,529Health and Welfare SETA 15,569 74,322Manufacturing, Engineering and Related Services SETA - 1,900Safety and Security SETA 1,125 1,250Services SETA - 19,419Transport Education Training Authority - 4,213Wholesale and Retail SETA - 2,000Private funders 13,249 152

21,647,113 13,605,422

Capital grants from universities

University of Cape Town 53,055 60,026University of the Free State 1,745 5,454University of Johannesburg 3,338 -Nelson Mandela University 10,000 12,257University of Pretoria 240 18,371Rhodes University - 25,543University of South Africa 5,527 5,089

73,905 126,740

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Supplementary Information


The supplementary information presented does not form part of the annual financial statements and is unaudited

2. Consulting and professional fees, audit fees and general expenses (rounded to the nearest thousand R'000)

Advertising 1,332 2,793Assessment rates and municipal charges 429 557Audit fees - external 10,580 6,644Media costs 250 218Bank charges 1,087 584Business development services 11,979 3,758Cleaning 442 324Collection costs 24,863 11,615Commission paid 3,905 5,192Compliance - National Credit Regulator 331 330Computer expenses 4,655 2,952Computer services 28,240 8,943Consulting and professional fees 1,816 3,478Electricity 1,016 1,134Insurance 660 452Lease rentals on operating lease 5,710 5,631Legal expenses 833 1,090Management consultants 32,798 18,405Motor vehicle expenses 18 15Office expenses 703 474Placement fees 1,358 1,846Printing and stationery 384 389Promotions 2,242 2,004Renovation costs 637 3,097Repairs and maintenance 3,343 1,997Security services 1,213 810Storage and scanning (outsourced) 369 3,223Subscriptions and membership fees 492 111Telephone and fax 6,853 6,219Training 2,365 1,976Travel and subsistence 35,543 29,428

186,446 125,689

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Notes

2.1 Introduction 272.2 Performance against Terms of Reference of the Administrator 282.3 De-risking NSFAS 342.4 Restoring Public Trust and Confidence 372.5 Areas of Focus for the Next Term of Administration 37

National Student Financial Aid Scheme

Toll Free: 08000 67327 | [email protected] | www.nsfas.org.za

Postal Address: Private Bag X1, Plumstead 7801, South AfricaPhysical Address: 10 Brodie Road, House Vincent 2nd Floor, Wynberg, Cape Town 7700

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