National Student Financial Aid Scheme & Centre on Higher Education 2008/09 Annual Reports briefing

Meeting report

Briefing by NSFAS
Mr Ahmed Essop, Chief Executive Officer, briefed the Committee on the National Student Financial Aid Scheme’s (NSFAS) new board. Five were previous board members and eight were new members. He stated that there was growth in funding but not in resources. NSFAS received R2.4 billion in funds, which included an additional R39 million allocated by the Minister during the year to assist students who received an award smaller than what was required to meet their needs. NSFAS received funding from various institutions such as the Department of Higher Education and Training (DoHET), the Department of Agriculture (DoA) and the Department of Social Development (DoSD). 54% of the loan recipients were female.

In terms of recovered funds, the amounts collected increased. R555.7 million was collected in 2008/09, which was a 16% increase from the previous year. NSFAS stated that the full utilisation of funds for students remained a challenge. Regarding funds that were not used, R37 million received from the Department of Education, R11 million allocated to students with disabilities, R17.7 million of the additional funds received from the Minister and R22.7 million from scarce skills Higher Education Institutions (HEI) bursaries were not allocated to students. The unutilised funds were not taken away from students; they were redistributed to institutions for 2009/10. NSFAS introduced additional HEI reporting requirements during 2008/09, which aimed at allowing for reallocation of funds amongst institutions. NSFAS also wanted to involve Vice-Chancellors more regularly in reporting on the utilisation of funds.

The organisational structure, systems and processes were not adjusted to reflect growth in funding and the expanded mandate of NSFAS, which led to a strain on resources. It also led to shortcomings related to control procedures and processes, as well as monitoring mechanisms. NSFAS also experienced problems with capacity, systems and processes. NSFAS' management and information systems had become inappropriate in to deal with their expanded mandate. The automation and integration of systems was underway, introducing an Electronic Loan Agreement system and augmented staff capacity. This would ensure a single audit trail between loan applications and loan payments to HEI’s.

Auditor-General’s Findings:
NSFAS received an unqualified audit opinion from the Auditor-General (A-G); however, the A-G found that there was irregular spending amounting to R1 185 600, incurred as a result of a regulatory breach in terms of the appointment of a consultant. NSFAS Internal Audit alerted the NSFAS board in late 2008 to the possible breach and they appointed Pricewaterhouse Coopers (PwC) to investigate the possible breach. The investigation showed that procurement policy was not consistently applied, the relevant documents were not in place and the procurement policy was not fully aligned with National Treasury guidelines. The A-G’s report confirmed these findings and added that appropriate policies and procedures were not in place. The NSFAS board has undertaken further inquiry to determine appropriate disciplinary action. Audit findings also showed a contingent liability; however, approval from National Treasury was received to retain the accumulated surplus. Management responded to the findings by centralising the Chief Financial Officer’s office in terms of the procurement function related to purchases requiring Procurement Committee approval. Staffing related to the procurement function was being looked at and formal Procurement Committee meetings were now being held.

Discussion
The Chairperson took great exception to the fact that people were using the excuse that there was a scarcity of skilled professionals in maths and science. He was convinced that there were programmes that looked for people with scarce skills such as second-year dropouts and other people who did not know about some NSFAS bursaries. There were some people who had the ability to enter tertiary institutions; however, they did not have access to NSFAS loans and bursaries. Although scarce skills were a real problem, the NSFAS should use the opportunity to find people.

Mr Essop stated that NSFAS, in conjunction with the DoHET, needed to analyse what was happening in the education system. It appeared as if the institutions did not know enough about the students. There was an issue with communication, in terms of whether people were aware of the different service the NSFAS offered, in particular the scarce skills bursaries. This was something NSFAS was working on. They were going on radio talk shows to tell people about the loans and bursaries, specifically the disability bursaries. There was a range of factors that determined how funding was provided.

Mr W James (DA) noted that the report did not contain information about what action management would take to resolve the problems identified by the A-G.

Mr Essop stated that some of the problems that were found related to procurement of funds, fraud policy and business plans. Solutions to problems were currently underway. The NSFAS set up an audit committee in the past week and were identifying problems and priorities that the NSFAS had to focus on.

Ms M Kubayi (ANC) noted that the A-G had found a lack of effective, efficient and transparent systems and internal controls within NSFAS. She asked if all the management personnel had signed performance agreements and if all of them had reached their targets in terms of delivery. If not, what did NSFAS do about it? She stated that she knew there was a board; however, the Committee did not know whether the board met regularly. This would guide the Committee's thinking as to how the NSFAS was being monitored. She noted that NSFAS wanted to visit three rural schools. This was a concern, as there were so many rural schools in the country. NSFAS had to ensure that more children attended tertiary institutions.

Mr Essop stated that performance agreements were due to be signed by 1 August 2009; however, there were not any performance management systems in place prior to this. Unfortunately, by the first of August, the performance agreements were not signed. There were draft agreements in place but the NSFAS found that there were quite a few overlaps in responsibilities. Performance agreements had to be signed from April 2010 in line with the system in place and processes that were underway. He stated that there were many issues around the NSFAS strategic goals and objectives, as well as with general targets. This needed to be looked at more carefully.  He remarked that Annual Report showed information for the sub-committee, not the board. He would get this information for the Committee.

Ms Kubayi asked the NSFAS to include this information in the Annual Report in the future.

Mr Essop stated that NSFS had identified other service providers that were working with a range of schools. Going forward, there would be a lot more communication with these institutions.

Mr S Makhubele (ANC) noted that the institutions lacked the ability to manage NSFAS funding. He asked how the NSFAS' processes would be aligned with institutions to prevent under-utilisation of funds. This was a serious and costly administrative burden. The NSFAS spoke about challenges; however, there was no risk analysis done in terms of what could happen regarding financial issues.

Mr Essop stated that institutional costs were an issue for the Minister of Higher Education and Training - the NSFAS did not deal with this. He thought there were processes in place in the Department; however, the NSFAS was not directly involved in them. This problem was beginning to be addressed. NSFAS also had training for Higher Education financial aid offices. The problem seemed to be inefficiency in financial aid offices. The NSFAS only interacted at the level of these offices and the problems were not looked at more systemically by vice-chancellors of universities. Going forward, NSFAS needed to engage more at the senior management level. This was a priority.

Mr Makhubele expressed concern that NSFAS might have given more funding to programmes that did not have people that could benefit from those funds.

Mr Essop stated that his view was that NSFAS had not done enough analysis on the funding that was available such as funding for disabled persons. There was really no rigorous analysis on funding that was allocated. The NSFAS could not do this by itself; it had to do it in conjunction with other educational institutions.

The Chairperson stated that the problem had to do with lack of support mechanisms. However, he believed that with the right strategy and intervention mechanisms, NSFAS could do better. This was a discussion that the Committee and the NSFAS needed to have.

Mr G Boinamo (DA) stated that South Africa was, for a very long time, an international pariah because of its racial classification. The country was now in a new era as it had outgrown classification by race. It was unacceptable that South Africans were still referred to as “coloured, black and white” instead of fellow South Africans. This was an element that contributed to the division of the nation and influenced the way bursaries were allocated. This system had to be outgrown.

Mr A Mpontshane (IFP) asked how many students’ applications were rejected and what the main reasons were for the rejections. He noted that an additional R39 million was allocated by the Minister to assist students that had received loans and bursaries that were smaller than the students required. He wanted to know if the institution decided which students would receive more or if the students had to apply for extra funds.

Mr Essop stated that it was an anomaly, but the NSFAS did not know how many students applied for NSFAS loans and how many did not qualify for the loans. In the past, NSFAS tried to get this information from institutions; however, the information was not accurate.

Mr G Radebe (ANC) addressed the electronic loan agreement and asked if it was user-friendly for students. If this system was going to reduce the administrative burden, he hoped it did not mean that people were going to be retrenched. This would be a problem. He noted that the NSFAS now had an audit committee and wondered why the NSFAS had so much trouble following certain systems and processes if the audit committee was there to provide the institution with advice and recommendations.

Mr Essop stated that the electronic loan agreement was not a system where the student would go and fill out an application electronically. The system was about capturing students' information electronically. He could not comment whether it would lead to retrenchments or not. He added that the audit committee had been very active and helpful. There was an agreement that the chairperson of the audit committee and the CEO as well as senior management would meet monthly to discuss problems within the organisation.

Ms N Gina (ANC) stated that there were institutions that were not good at reporting on the utilisation of funds given by the NSFAS. Some universities did not even report on it at all. She asked what NSFAS did about this, as better utilisation of funds was needed. The Committee wanted a list of institutions that received the most funds but had the highest amount of under-utilised funds.

Mr Essop replied that the NSFAS was engaging with vice-chancellors currently and there had been great collaboration between the NSFAS and institutions. Twenty of the twenty-three institutions submitted their reports. His view was that NSFAS needed to put in measures telling institutions that if they did not get their act together; their funding allocation would be cut. He hoped to have all institutions spending all their funding allocations.

Ms W Nelson (ANC) stated that she was not happy with bursaries regarding scarce skills. She asked what the NSFAS was doing to ensure that bursaries were utilised. She queried the extent of resources and technology being used for the fully automated systems’ processes.

Mr Essop addressed the issue of resources. He stated that NSFAS piloted a project with institutions this year. They were now going to assess the information that came from the institutions in terms of what the key problems were and what needed to be resolved. One problem was identified. NSFAS, in introducing the electronic loan system, did not have a plan in place for how the system would be rolled out over the next two or three years. NSFAS needed to develop a project plan that would look at the roll out as well as the cost implications of the project. 

The Chairperson stated that this would not be the last time the Committee would engage with NSFAS. The institution still had to show the Committee its communication plan for making the NSFAS known at the level of schools in poor communities. He was concerned that they were in discussions but were not getting anywhere. He suggested that NSFAS meet with the Minister to discuss their current situation. It was important that NSFAS provided more support to schools in rural areas. He wanted to see more meetings taking place between NSFAS, rectors and vice-chancellors. The Committee would not be talking about the problem of scarce skills anymore; they would be talking about solutions to the problem.

Briefing by CHE
Ms Cheryl de la Rey, Chief Executive Officer, briefed the Committee on the Centre on Higher Education’s (CHE’s) mandate areas, which consisted of advising the Minister, monitoring the state of the higher education (HE) system, quality assurance and quality promotion, contributing to the development of higher education and functioning as the Quality Council for Higher Education.

CHE’s main responsibility was the accreditation of new HE programmes. 130 new HE programmes were submitted and assessed by CHE. The success rate was 93% for programmes submitted by public providers and 58% for programmes submitted by private providers. All programmes subject to conditions were followed up. CHE experienced its fifth year of successful implementation of the first cycle of Higher Education Quality Committee (HEQC) audits and five audits were conducted at HEI’s.

During 2008/09 CHE conducted a baseline study to examine the nature, extent and quality of student participation in quality assurance at the HEI sector. Two Quality Assurance Forums were held and an engagement was held with various statutory bodies/professional councils on the coordination of quality assurance in HE.

Dr Jan Beukes, Chief Financial Officer, briefed the Committee on CHE’s financial performance. Total net assets and liabilities amounted to R30 309 947 for the year ended 31 March 2009. Revenue amounted to R33 271 237, which consisted of a DoE government grant, donations, private accreditation cost recovery and interest received. Operating expenses amounted to R32 291 499, which consisted of expenses such as administration costs, auditors' remuneration, consulting fees, employee costs and project expenditure. CHE received an unqualified audit opinion from the A-G.

In terms of Human Resources (HR), the majority of the staff were women.

Discussion
The Chairperson stated that the Committee had to give CHE a hand as they had complied with all of the A-G's rules. The Committee had seen the Annual Report and the A-G's comments and was convinced that the institution was in good hands. There were certain documents that the Committee needed from CHE such as the study on Distance Education Policy in Higher Education, the Rural-Based Higher Education report and the Institutional Autonomy and Academic Freedom report. The Committee raised an issue with the South African Qualifications Authority (SAQA) about private providers; the lack of proper accreditation and that people were walking around with qualifications that were not necessarily accredited.

Mr James urged CHE to launch a project evaluating the quality of university residences; focusing specifically on the physical infrastructure as well as social architecture. An assessment was desperately needed, as some residences were “slums”. He asked if CHE was happy with the element of their mandate that said they had to advise the Minister. He asked how their advisory role worked.

Ms de la Rey stated that CHE could take up the proposed project looking at the quality of residences. She added that CHE met with the Minister four times since May, which was quite frequent. The Minister asked CHE questions and based on the information they had they provided answers or indicated that they would provide the information in the future. In providing advice, they consulted the sector where appropriate.

Mr Radebe asked if CHE conducted studies in rural areas in order to advise the Minister as to how many FET schools were needed in those areas. He noted that the institution spent a lot of money on consultant fees. He asked if this was necessary.

Ms de la Rey stated that CHE had not conducted a survey looking at how many FET colleges were needed in rural areas. CHE had not done any work on the FET sector, as it was not in their mandate. This was a topic that the CHE was discussing and debating. CHE was willing to take on additional work.

Ms de la Rey stated that the institution had reduced the number of projects where consultants were used by implementing an advice and monitoring directorate. Two posts were created for researchers; however, the consultant fees would remain the same because quality assurance relied on CHE's expert peers. They were recorded as consultants in the financial statements.

Ms Gina stated that she was worried about conditional accreditation that CHE had given some institutions. She asked them to expand on these conditions.

Ms de la Rey stated that in many cases re-accreditation pointed to outcomes as to whether programmes should be continued. However, there were always students in these particular streams and programmes. The institutions then should focus on improving the quality of the stream or programme for their students; however, they would not be able to continue the programme. The reason for conditional accreditation varied per institution and per programme. She did not have the information with her, but she would forward the information to the Committee.

Ms Nelson addressed the publicising of accredited institutions. Some kids were enrolled at “fly by night” institutions and only found out later that the institution was not accredited. She wondered what institutions were doing to be become publicised.

Ms de la Rey stated that the regulatory system that was in place in South Africa was a very good one; however, some people blatantly ignored the system and the punitive measures that could be taken against them. CHE did not accredit the institutions themselves; the DoHET did this. What CHE did was to accredit the programme. CHE was working in partnership with SAQA, Umalusi and the Quality Council for Trades and Occupations on the National Qualifications Framework Advocacy Campaign. The campaign was to make the public and potential students aware of what accreditation meant.

Mr Makhubele noted that there were members who were appointed as non-voting members on the council. He asked whether representatives from the institutions such as DoHET and SAQA were there as ex-officio members or as non-voting members appointed in their own rights.

Ms de la Rey stated that the Act specified they were appointed by the Minister in their ex-officio capacities and they attended all meetings; however, should it come down to voting on matters, they did not have a right to vote. This assured a fair degree of coordination of work with the areas of responsibility of both bodies represented on the council.

Mr Makhubele noted that the council consisted of a chairperson and they could nominate and appointed up to thirteen members. There were also three co-opted members and four ex-officio members. This meant there were twenty-one council members.  The Minister could also appoint six non-voting members. He asked for clarity as to why the full complement of council members regarding the council had not been filled.

Ms de la Rey stated that there were vacancies in the council in the year under review. Some members terms had expired, some were not available anymore, and some had already served two terms. Now all the vacancies had been filled. The next report would show a full complement.

The Chairperson asked if CHE was involved in the draft policy framework for the new department.

Ms de la Rey stated that she was invited to one of the strategy sessions and the questions that were raised were questions that were discussed in CHE's consultative conference. The report CHE was submitting to the Department should act as input in to the process.

The Chairperson thanked CHE and hoped to continue having good discussions with the institutions.

Adoption of Minutes
The Committee adopted the minutes for the 2^nd, 9^th and 16^th September 2009. No substantial amendments were made.

The meeting was adjourned.