CPUT & UniZulu latest developments; R14 million erroneous payment into student account: Walter Sisulu University, Intellimali, NSFAS & Department briefing

Meeting report

The Chairperson asked for the Committee's permission to allow the Cape Peninsula University of Technology’s (CPUT) to make its presentation before engaging on the University of Zululand presentation. She said the CPUT presentation was crucial in a sense that the university has been facing numerous challenges in the past week; which requires the Acting Vice Chancellor to go back and attend to those matters. The Director-General has also requested the Deputy Director-General to assist the Acting Vice Chancellor in this matter.

Briefing by the Cape Peninsula University of Technology (CPUT)
Dr Chris Nhlapo, Acting Vice Chancellor, CPUT, said the university takes the employment equity plan very seriously. The plan involves numerous partners and stakeholders, including the Employment Equity Unit, Training and Development, Recruitment and Selection and Line Managers. One of the objective of the EE policy is to promote a diverse workforce that is in compliance with the Employment Equity Act (EEA) – as such, all positions are advertised externally and internally. Internal applicants, offered for support posts, may be given preference if the post represents a promotion; equity targets are the final consideration if there are 2 appointable candidates. In the case of having to fill critical or scarce skills posts, the institution can consider concessions in order to attract candidates; these include: waiving the equity requirements on critical or scarce skills posts (posts that are difficult to fill) in cases where the required equity candidates cannot be attracted or sourced, and subject to approval, the hiring managers can be allowed to proceed with interviewing candidates that are not contributing to the institution’s equity but meeting or exceeding the required qualifications and experience.
The university currently accommodates only 25% of its total population of 35 000 students in 33 of its owned and leased residences. There are 8 campuses; namely, Worcester, Wellington, Tygerberg, Mowbray, George, Cape Town main campus, Bellville and Athlone.

Mr Nikile Ntsababa, Registrar, CPUT, said the Vice Chancellor disciplinary matter is being dealt with by the Council. In October 2016 the university conducted a disciplinary hearing, which meant that the Vice-Chancellor had to be put on leave. At the end of August 2017 the Vice-Chancellor, as well as the university had presented their arguments to the Council. The university is awaiting the outcome from the chairperson of the disciplinary committee – the Council is expected to receive the committees report at the end of 29 September 2017.

Mr M Mbatha (EFF) asked the university to speak on the current unrest that is taking place at the institution.

The Chairperson said the university has fairly responded to the matters concerned, however it had not spoken about its employment policy and the reasons for the current unrest at CPUT and the resolutions.

Dr Nhlapo replied that during the Fees Must Fall movement the university had decided to insource at least 900 security guards, cleaners and maintenance employees. The decision to insource the workers was done in accordance with Section 197 of the Labour Relations Act. During the same time the workers and students decided to form an alliance, and as a result a number of the insourced employees joined the student protest, which left the university without security and in a vulnerable position. The security guards have also refused to engage in negotiations with management. Owing to this the university decided to employ a private security firm. The university has since suspended and laid criminal charges against students who were involved in arson activities and those who were threatening other students and lecturers. The student movements are requesting that the university drop the criminal charges and allow the students who were suspended back into the university; to which the university has declined.

A CPUT Executive Director replied saying the university’s employment policy consists of the equity policy and the recruitment policy. The recruitment policy refers briefly to the processes involved when recruiting and selecting an employee, taking into consideration the equity of the university. It further explains the steps involved when the university recruits for staff and how equity should be applied. The policy also explains the concessions in cases where the university is looking for an employee with critical or scarce skills.
Dr Nhlapo added that one of the students who has been causing trouble has not passed a single module, yet this individual continued to enter the university’s premises to threaten other students. Also, many of these students were on the university’s vendor list, and he has requested that they be removed from the list and the university should never engage in any business agreement with them.

Dr Diane Parker, Deputy Director-General: University Education, DHET, said there had been a number of discussions between the Department and CPUT. In 2015 there were a number of protests and violence, which lead to the destruction of property. The Council at the time made some decisions, which have proven to not have been the best. This included writing off a large student debt when there was going to be a process where NSFAS was to assist many of the students. In March 2016 the students wanted the Vice-Chancellor removed – the matter was taken to the Council and it had not found any wrong-doing against the Vice-Chancellor. A second General Assembly was held on 20 October 2016. This was followed by a Council meeting on 22 October 2016 and a further stakeholder meeting on 23 October 2016. Following these meetings, the Vice Chancellor was suspended, and the exact reasons for his suspension have not been provided to the Department. Professor John Volmink, a Ministerial appointee to the Council, was appointed as Acting Vice-Chancellor. The Minister wrote to the Deputy Chairperson of Council raising governance concerns related to the position of Professor Volmink as a member of Council acting as Vice Chancellor. The Council was requested to furnish the Minister with a report regarding the suspension of the Vice Chancellor and the current situation. The Council wrote to the Minister indicating that it had appointed Dr Chris Nhlapo, Deputy Vice Chancellor: Research, Technology Innovation and Partnerships, as Vice Chancellor for a period of two months with effect from 1 August 2017 pending the conclusion of the disciplinary case against the suspended Vice Chancellor. However, the Council did not furnish the Minister with full information regarding the suspension of the Vice Chancellor. Last month, protests flared up at the institution, linked to issues relating to insourcing and student accommodation. The Department has requested a report from the university on the issues and challenges facing the institution, but has not yet received such a report. In addition, the university is responsible for developing its human resource and employment policies and the filling of vacancies in line with its policies. The Department is not involved in the appointment of staff.

Discussion
Mr A van der Westhuizen (DA) asked if students were unhappy about the maintenance of the accommodations, the lack of available accommodation or the application process involved in respect of accommodation.

Mr E Siwela (ANC) said students are accepted into university to study, therefore under what circumstances were the students allowed to do business with the university.

Mr Mbatha asked what percentage of students did the university grant the debt write-off to at the beginning of 2016. The executive management has to find some way to work with the student leadership organisations, especially with the current political leadership that won the SRC election. He further asked when the relationship between the student leaders and management started to break down.

Mr N Khubisa (NFP) asked how individuals who were not registered students managed to enter the university’s premises without student cards; why the Cape Town campus has more violent protests than the Bellville campus and why some NSFAS recipients only receive their funds towards the end of the year.

Ms J Kilian (ANC) said it was good to see that there are executive managers who are adamant about restoring the learning environment at the different campus sites. Unfortunately, it seems that universities are often used as green-shoots for development for political parties and that is creating chaos in the universities. Labour relations cannot be conducted through student protests. Also, the role of the Council and executive management should be clear and separated and there should also be consequence management so that the university does not find itself in a negative spiral.
Ms S Mchunu (ANC) said there have been three different Vice Chancellors since August 2016 and this has interfered with the stability of the university. She asked if the student protests have affected the academic year and exams.

The Chairperson asked if the instillation of a member of Parliament and member of a political party as Chancellor will not cause further tension at the university. The Committee has received complaints from the university’s staff indicating that the institution appoints foreign lecturers, while the South African lecturers have the necessary skills. The employment policy should speak to the filling of vacancies, and how the university intends on dealing with an under-staffed department, without neglecting those who have already been appointed. She requested that the university puts some of its answers in writing and should only reply to the critical questions pertaining to the unrest at the university and why the appointment of a Vice Chancellor has been prolonged.

Dr Nhlapo replied that the university can only accommodate 25% of its students, and priority is given to students that reside outside the Western Cape and those that live outside the 60km radius. The students had approached the executive management with a service provider that would help the university lease a property to be used as a student accommodation. The university had explained to the students that there is a procurement process that needs to be followed, and the service provider should follow that process. The university was under the impression that the matter regarding the Vice Chancellor would have been resolved, either that the university parts ways with him or he returns to his position. Besides the lack of available accommodation, there is also the issue regarding the maintenance and backlog of premises and maintenance. The Cape Town campus is an open campus, meaning that it is not secured with fences and security gates like the Bellville campus.

The Chairperson asked that the university responds to the Committee in writing.

Questions to the University of Zululand
Mr Mbatha said that there are a number of internal problems within the university because many of the complaints were made by the staff members. The university has not presented its findings on the rape case of a student, which was also witnessed by a lecturer; neither has it reported to the Committee why its forensic investigation costs has increased to R7 million. The university claims that most of the cases have been handed over to the Hawks, yet the forensic expenditure has increased R7 million – this did not make sense. Also, some R11.5 million was reported to have gone missing at the university on a Saturday; what steps has the university taken thus far, have any arrests been made and what are the outcomes pertaining the case.

Ms Mchunu said she would have liked for the Vice Chancellor to have attended the meeting, and hopes that she is not trying to avoid the Committee. She congratulated the university on the positive progress it made regarding student affairs. There were claims that the university had appointed two new white directors without advertising the position – she asked if this claim was true and whether the university recognises affirmative action. She advised the university to strengthen its relations with NEHAWU and make them a part of the negotiation processes in order to fast track the negotiation processes. Also, reports in the media claimed that the university had personally hand-picked the staff that were to be interviewed by the Council on Higher Education (CHE) in order to receive a positive report. She asked if these claims were true and where they stem from.

Dr B Bozzoli (DA) said the university has presented itself as the victims, however the scale and nature of allegations that are made against the university should be taken seriously. She credited the university with taking the cases to the Hawks, but was however not impressed that the university failed to consider the 11 recommendations that were made by Professor De Beer. The appointment of the Vice Chancellor raises some concerns because she sat on the selection committee and rejected most of the candidates that applied for the position of Vice Chancellor that she was eventually appointed to. In addition, there is also a staff member who has laid a corruption charge against the Vice Chancellor. She was disappointed that both the Vice Chancellor and the chairperson of the Council did not attend the meeting, yet they are responsible for directing the university. The university has also failed to address the Nehawu vote of no confidence in the Vice Chancellor; there is no SRC structure to represent the students. She advised that the Minister should consider appointing an Assessor.

Mrs Kilian said the CHE report is vital as it would help the Committee understand what are the critical problems faced by the university. The university’s presentation is filled with contrasting reports, as such it makes it difficult to believe that the media reports are merely just speculation. It is understood that the Department had extended a hand to the university, however the university had declined the help, and when it was approached to appoint an Assessor, it asked for an extension. If the university was serious about solving its issues it would have accepted the help offered to it by the department. She added that the university’s vacancy rate of 24.5% is damaging to the functioning of the institution.

Mr Khubisa said the Department has continuously offered the university assistance and the university has refused on all occasions. The university has also refused to implement the administrators’ recommendations. It seems that there is no collaboration between the university and Nehawu; he suggested that both parties, including the Council; host a capacity building session to try and resolve their issues and for the sake of harmony within the university. He asked how the illegal occupants managed to get inside the university’s on-location residence.

Prof T Msimang (IFP) said it was unacceptable that the Vice Chancellor, chairperson of Council and SRC members had not attended the meeting. Most matters concerning compliance issues can only be answered by the chairperson of the Council, yet the chairperson has not attended the meeting. The allegations against the Vice Chancellor are too serious to ignore, and it seems that the Vice Chancellor is at the centre of all the problems at the university. The university has also ignored the fact that one of its directors has been charged with corruption and maladministration and the Vice Chancellor was part of the committee tasked to appoint a Vice Chancellor, but ended up appointing herself. The current Vice Chancellor of the Durban University of Technology (DUT) was amongst the candidates that applied at UniZulu for the Vice Chancellor position – he was told that he did not possess the right skills and experience for appointment, yet he was formerly the Rector of the University of the Free State (UFS).

Mr C Kekana (ANC) asked about the SRC elections and when they would be held.

Mr Siwela asked why the chairperson of the Council and Vice Chancellor were part of the committee responsible for appointing a Vice Chancellor. He said the Council refuses to recognise Nehawu, as such a number of Nehawu members were victimised by the staff of the university. He suggested to the Chairperson that the Vice Chancellor responds to questions once she has recovered.

A member of the Portfolio Committee on Basic Education said a number of the media reports against the university are true. After some three years the member met with Prof Msimang to discuss the contents of a report, which claimed that almost 60% of the members of the Tender Committee of the university were fired by the Rector because they did not support the views of the Rector. The Rector and Vice Chancellor have been colluding; anyone that disagrees with the Rector is either suspended or fired, even after they have appealed a suspension.

A delegate from the university replied that the university has taken note of the comments made by the Committee. The university has dealt with most of the reports raised in the media, and management is awaiting an audit report relating to the concerns. The Registrar could not attend the meeting as he is responsible for overseeing the election process which are taking place in the same week. The university is committed to working with Nehawu and building better relations, and the university has no intention of representing itself as a victim. Also, the CHE is dealing with the supposed suspicious appointment of Professor Mtose as the Vice Chancellor, and the university will be provided with a comprehensive report. The missing R11.5 million is a matter which occurred during the previous management of the university, nonetheless this has been handed over to the Hawks for investigation. The CHE audit was not concocted and the university did not personally hand pick the individuals to be part of the CHE report – the CHE alone was responsible for choosing the individuals. Compliance with policy is an important matter to the university as it is unable to function without the policies. Both the Vice Chancellor and chairperson of Council has serious health problems and could not attend the meeting. When the R11 million embezzlement was reported, investigations were instituted and the bulk of the sum had been recovered. The loss to the institution was only half a million. Control deficiencies were identified and had been addressed.

The Chairperson sought clarity on whether the individuals involved had been identified. It was well understood that the money had been recovered but Members were interested in consequence management and accountability.

Mr Mbatha felt the university representative was being dicey. Who took the money? Had criminal charges been laid?

The University representative replied that the university could not actually identify the individuals due to the complexity of the cases- it still remained a mystery but the matter had been referred to the Hawks. The institution was ensuring that fraud prevention mechanisms are intact going forward. The university was not hiding anything and financial statements that could be availed to the Committee were audited by independent auditors. Information was available.

Dr Parker indicated that the Department was very much concerned about the irregularities and a report was shared with the Minister. The Minister had indicated that he would apply his mind after the CHE report is finalised. It was clearly a problematic situation. On the R11 million, the Department was aware of the ‘weekend special’ as it was bought up by the previous council. The Department was informed that the funds were recovered but it was not indicated whether there had been any consequence management.

The Chairperson stated that the Committee would dig deeper into the UniZulu matter. Members were not satisfied and there still remained a whole range of issues that had to be dealt with. The university had to demonstrate that it is prepared to deal with the challenges decisively and be above reproach.

Mr Mbatha sought clarity on allegations that a lecturer had recently sexually assaulted a student and a witness to the matter purportedly lost her job. He asked for a written response.

Ms Kilian suggested that the Committee wait for the finalisation of the CHE report so as to get to the bottom of all allegations and challenges. The Committee would want to make recommendations thereafter.

The Chairperson urged all processes to be finalised expeditiously. During the University’s next appearance, a fair representation of the council and management had to be available.

Deliberations on R14 million erroneous payment into student account
The Chairperson asked the Walter Sisulu University (WSU), the National Student Financial Aid Scheme (NSFAS) and Intellimali payment administration solutions to take the Committee through presentations on the R14 million erroneous payment into student account.

Walter Sisulu University Presentation
Prof Rob Midgley, WSU Vice Chancellor, was honest that the experience was a "massive wake-up call" and that it had caused immense reputational damage to all involved. Bilateral engagements had taken place and Intellimali had commissioned an independent forensic investigation into the irregular payment. WSU was not instituting any separate investigation, preferring instead to support the investigations that are currently being undertaken. Contrary to reports, WSU officials discovered the irregular transactions on the student’s account during its reconciliation process and they alerted IntelliMali on 12 August 2017. WSU has centralised its monitoring processes and will in future conduct its reconciliations weekly instead of monthly. Irregular transactions should therefore be picked up sooner than in the past. While WSU accepted that the two investigations currently underway were likely to uncover additional information, on the facts currently available, WSU was satisfied that the integrity of its systems was not breached and there was no indication of a breach of a duty on the part of any of its employees. He emphasised that under no circumstances does WSU condone the behaviour of the student in question. The incident was a clear indictment of university and societal values.

The contractual relationship between the University and IntelliMali started in June 2010, and it was specifically that of principal and agent, in terms of which IntelliMali administers NSFAS allowances to students on the University’s behalf. The reason for employing a service provider was WSU’s inability to administer a large number of allocations to students and monitor their transactions. The employment of a specialised service provider was intended to minimise a major institutional risk. intelliMali’s services come at no cost to NSFAS, WSU or individual students. The company’s income is generated through vendors paying IntelliMali a commission.

He emphasised that no action would be taken against the student until after the forensic probe was completed, and there should not be further victimisation of her.

National Student Financial Aid Scheme presentation
Mr Steven Zwane, NSFAS CEO, gave an update on the investigations into the irregular payment of R14 Million into a student account. He reiterated that the incident had brought NSFAS into disrepute as most of the media reports flighted its logo. The student violated the contract she had with NSFAS.

Following media reports regarding the payment of R14 million, NSFAS resolved to approach the incident as follows: a letter was written to the University requesting an explanation as NSFAS was deeply disturbed by the incident; NSFAS engaged the University service provider, Intellimali, to obtain an understanding of the incident in detail; and arranged a meeting with both Intellimali and the University to gain further context to the incident and agree on the approach going forward. A forensic investigation had been instituted by Intellimali and NSFAS will implement the outcome of the forensic investigation. Following preliminary assessments, he confirmed that no NSFAS or WSU employee had been found to have been involved in the crediting of the R14.1 million into the student’s account.
Further, no public funds have been lost as Intellimali had reimbursed WSU the full amount misappropriated by the student. No other student had been affected by this error, and all remaining students will continue to receive allowances. NSFAS will conduct continuous reviews on its payment systems and processes in an effort to fast track the implementation on the Student Centred model with special focus on disbursement solutions.

He outlined commitments NSFAS had made to ensure the incident never happened again as follows:
NSFAS will increase the frequency of reporting by institutions beyond the final reporting reconciliation process that was already in place; and implement the outcome of the forensic investigation. As part of the Student Centred Model implementation, NSFAS had at this stage rolled out the sBux model to five Universities and 13 TVET’s colleges. More institutions will be added in line with the readiness assessment plan which has indicated that WSU, Fort Hare and TUT should be prioritised. Known challenges with NSFAS allowance payments systems included: challenges with Input processes; cell phone number dependency and the frequency of cell phone number changes by students; students manipulating the voucher system-exchanging vouchers for cash; and late submission of registration information which caused delays for payments of vouchers, affecting students allowances and private accommodation. Therefore, NSFAS had started a work stream with institutions to address the known challenges and established a payment task team to ensure that it tightens up the processes. The unfortunate incident had pointed out the need to fasttrack its payment model.

IntelliMali presentation
Mr Michael Ansell, CEO IntelliMali, outlined how the IntelliMali payment system works. He pointed out that the firm gets a file from the university and does its appropriations via the information given to it from WSU. ‘No one was pressing zeros, or typing numbers- all firm reports showed that the loading process was correct.’ He, therefore, could not account for how Mani received such a large figure, and said the forensic investigation they have ordered will see if anyone "has wronged" them. Should it determine that it had been a victim of foul play, the firm will inform all the relevant stakeholders. The investigation, which included the South African Police Services, was ongoing and he would not be able to divulge sensitive information as it could jeopardize the case.

The over allocation incident began with the upload of the allowance file. The findings are: there were 3 735 WSU students in the particular batch; the file was processed correctly; there was no error flagged in the Upload file; and the “Result File” report indicated that the upload was also correct. In simple terms, there was no oversight, error or negligence by a member of the Intellimali team in processing of the upload file. The system feedback confirmed that the student in question received the correct allocation of R1,400.
The behavior of the student after receiving the sum did not demonstrate a concerned individual who required time to ‘sleep on it’ or ‘consider the matter’ but rather demonstrated a person who appeared, without guilt, to set about very quickly spending as much as she could. It was interesting to note the amounts spent outside of the East London area where she is studying and further investigation into why amounts were accessed in George, Queenstown and Centurion should shed further light on her conduct.

During the period April to July 2017, Intellimali had a number of positive engagements with WSU administrators. They included: incidents of book merchants providing cash instead of books; students trying to collude with merchants; and merchants reporting students trying to get other shoppers to use their card in exchange for cash. IntelliMali has been working in collaboration with WSU management to manage inappropriate student and merchant conduct.

On measures to reduce leakages, IntelliMali requests a control list from each institution or funder of registered, fee-paying students and then cross reference against the list. This allows the firm to determine ‘double’ allocations to the same student and ‘ghost’ students who might receive funds. Intellicard terminals/machines have a maximum transaction value programmed, hence students may not make more than four transactions on an allowance per day. The firm has an additional functionality in place to measure and report of student conduct.

Discussion
Mr van der Westhuizen expressed concern that NSFAS money was being abused by students in collusion with merchants. He asked what measures had been put in place to prevent ‘double-dipping’. Why was the erroneous transaction never picked up by the Financial Intelligence Centre (FIC)? What support was being given to the student and what measures had been put in place to prevent such incidents from happening in future?

Ms Kilian asked if WSU was able to detect the incident before it appeared on social media. The incident was a serious concern. She asked how the student was able to make more than four purchases per day in shops outside the campus approved merchants.

Mr Mbatha wanted to know how the student received the money, as she could not "just get it from Jesus". He also said that NSFAS should have laid charges, not IntelliMali, as the student had not committed theft. The IntelliMali spreadsheet was the bone of contention. He found it strange that IntelliMali went all out for criminal prosecution before first having a thorough internal environment investigation.

Ms Mchunu said it was not explained how IntelliMali was first notified of the erroneous payment. Members needed to know how the money was transferred to the student in the first place. She felt the weakness was on IntelliMali’s side. Also, how quick were universities able to report to NSFAS that a student had dropped out and therefore no longer eligible to funding?

Mr Siwela said it was clear that the student did not flout the system. The funds were deposited into her account. IntelliMali systems had to be monitored more frequently. Why was the anomaly not noticed within a short space of time? Was NSFAS effectively monitoring institutions not using its sBux payment system to ensure that they had strong internal controls?

The Chairperson said the Committee understood there were now probes underway, but from its point of view, the student herself had said there were others involved, and they await the outcome of the probe. The forensic report had to cover a wide range of issues and concerns. She asked if vendors get blacklisted if found to be allowing students to purchase prohibited goods. She urged stakeholders to be guided by the Public Finance Management Act in dealing with the misappropriated funds. Also, WSU, NSFAS and IntelliMali must take full responsibility for the incident. Their systems had to be spruced up.

Dr Parker said the Department will also wait for the forensic report, but found it peculiar that while the student had acted unethically, she did not steal the money, but rather received it. The NSFAS sBux system had to be rolled out expeditiously as it could reduce incidents of third party leakages. It was possible that numerous individuals were involved in the R14 million erroneous payment. It was important that all of them are identified. It cannot be that only the student is held accountable.

Mr Ansell, in response, expressed confidence that the probe will get to the bottom of the issues. IntelliMali will not stand in the way of the third party hired- it had already given it full access to all its files. At this stage, no one at IntelliMali was under investigation for misconduct or fraud. If the forensic report identified any employees, IntelliMali would take action. An internal review had been conducted, and the need to engage an external party to exonerate or institute legal action was well understood. Consequently, an independent highly specialised party had been roped in. He pointed out that IntelliMali’s decision to reimburse WSU was not an admission of guilt but was to take responsibility that the incident happened on its watch. Also, two merchants had been deactivated after the incident. On the basis of legal advice, IntelliMali had lodged a case of theft against the student. On why FIC could not flag the transaction, the student’s spending happened in a closed loop system and thus could not be detected by FIC.

Mr Zwane, in response, said NSFAS remained committed to meeting targets on ensuring the financial aid payment system is robust, as outlined in a previous engagement. NSFAS was in the process of leveraging internal control capacity to ensure the payment model is failsafe. On why FIC could not detect the transaction, NSFAS has not declared itself as a financial services institution and therefore drawing the line in terms of compliance and monitoring by the FIC was problematic. NSFAS would need to consider that moving forward. Addressing disbursement pressure was also a challenge that needed to be dealt with.

Prof Midgley reiterated the need to be cautious and to take calm decisions on the matter. The student had to be viewed as innocent until proven guilty. Counselling services had been made available to the student in terms of how to deal with media pressures and all. Also, the risk of students continuing to use NSFAS funds after dropping out was present, especially in cases where students do not notify the University of their Intention to discontinue studies.

Mr Temba Zakuza, WSU Committee Chair: Risk, Audit and Compliance, said the incident was very serious, from the University’s perspective. In the long term, WSU would seek to address issues around ethical conduct and leadership. Workshops and other student engagements forums were on the cards.

The Chairperson appreciated the engagements. Stakeholder anxieties on the erroneous payment were well understood and hence the need for well-considered measures.

The meeting was adjourned.