annual report 2019/2020 - national government

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National Student Financial Aid Scheme

PART A - GENERAL INFORMATION

ANNUAL REPORT2019/2020

Section 17(A)-(D) Intervention:

The Public Entity Under Administration

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Annual Report 2019/2020 Financial Year

Part C: GOVERNANCE10. Introduction .....................................................................................................................................................................7211. Portfolio Committees ......................................................................................................................................................7312. Executive Authority ..........................................................................................................................................................7313. The Administrator ............................................................................................................................................................7414. Committees ......................................................................................................................................................................7415. Risk Management ............................................................................................................................................................7416. Internal Control Unit ........................................................................................................................................................8017. Internal Audit and Audit Committees .............................................................................................................................8018. Compliance with Laws and Regulations .......................................................................................................................8219. Fraud and Corruption ......................................................................................................................................................8220. Minimising Conflict of Interest .......................................................................................................................................8321. Code of Conduct .............................................................................................................................................................8322. Health, Safety and Environmental Issues ......................................................................................................................8323. Company Secretary ........................................................................................................................................................8424. Social Responsibility ......................................................................................................................................................8425. Audit and Risk Committee Report ..................................................................................................................................8426. B-BBEE Compliance Performance Information ...........................................................................................................86

Part A: GENERAL INFORMATIONi. General Information………… ............................................................................................................................................6ii. List of Abbreviations/Acronyms...................................................................................................................................7iii. Foreword by the Executive Authority ...........................................................................................................................10iv. Foreword by the Accounting Authority ........................................................................................................................12v. Statement by the Accounting Authority ......................................................................................................................14vi. Strategic Overview .......................................................................................................................................................15vii. Legislative and Other Mandates...................................................................................................................................17viii. Organisational Structure ..............................................................................................................................................191. Executive Summary ......................................................................................................................................................202. NSFAS Administrator’s Report ....................................................................................................................................242.1 Performance against the TOR of the Administrator (2019) .......................................................................................26

Part B: ANNUAL PERFORMANCE REPORT3. Situational Analysis ......................................................................................................................................................484. Key legislative and mandatory changes ......................................................................................................................505. Strategic Outcome Oriented Goals ...............................................................................................................................516. Performance information by programme/ activity/ objective ....................................................................................527. Strategies to overcome areas of under-performance .................................................................................................648. Changes to planned targets ..........................................................................................................................................649. Linking performance with budgets ...............................................................................................................................66

TABLE OF CONTENTS

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Part D: HUMAN RESOURCE MANAGEMENT27. Overview ...........................................................................................................................................................................9028. Achievements and challenges ........................................................................................................................................9029. Employee Relations .........................................................................................................................................................9130. Employment Equity...........................................................................................................................................................9231. Policy Review ...................................................................................................................................................................9432. In-service Program ..........................................................................................................................................................9433. Youth Employment Program ...........................................................................................................................................9434. Job Creation .....................................................................................................................................................................9435. Internship Program ..........................................................................................................................................................9436. Organisational Structure .................................................................................................................................................9437. Human Resources Oversight Statistics...........................................................................................................................9438. Deliverables for the Next Period ......................................................................................................................................99

Part E: FINANCIAL INFORMATIONAccounting Authority Statement of Responsibility and Approval.......................................................................................104Report on the Audit of the Financial Statements ................................................................................................................106Report of the Accounting Authority.......................................................................................................................................112Statement of Financial Position............................................................................................................................................119Statement of Financial Performance....................................................................................................................................120Statement of Changes in Net Assets....................................................................................................................................120Cash Flows Statement...........................................................................................................................................................121Statements of Comparison of Budget and Actual Amounts................................................................................................122Accounting Policies................................................................................................................................................................125Notes to the Annual Financial Statements...........................................................................................................................142

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iCountry of incorporation

and 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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ii. Abbreviations/ AcronymsAFS Annual Financial Statements AGSA Auditor - General of South AfricaAIP Audit Improvement PlanAOPO Audit of Predetermined ObjectivesAP Annual PerformanceAPP Annual Performance PlanAR Annual ReportARC Audit And Risk Committee ASB Accounting Standards BoardASISA Association for Savings and Investment South AfricaB-BBEE Broad-Based Black Economic EmpowermentCAMS Corporate Access Management ServicesCACH Central Application Clearing HouseCCSO Chief Corporate Services OfficerCEO Chief Executive OfficerCFO Chief Financial OfficerCGICTAS Corporate Governance of Information and Communications Technology Assessment StandardsCIO Chief Information OfficerCOO Chief Operations OfficerCRO Chief Risk OfficerCSIR Council for Scientific and Industrial ResearchDBE Department of Basic EducationDHET Department of Higher Education and TrainingDMV Department of Military VeteransDOH Department of Home AffairsDOL Department of LabourDSD Department of Social DevelopmentDSU Disability Support UnitECPG Eastern Cape Provincial GovernmentEE Employment Equity EEA 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 StudentsGDP Gross Domestic ProductGIP Graduate Internship ProgrammeGM General ManagerGRAP General Recognised Accounting PracticesHE Higher EducationHR Human ResourcesHRMS Human Resources Management SystemICT Information and Communication TechnologyISO9000 International Standards on Quality Management

IT Information TechnologyKPI Key Performance IndicatorLRA Labour Relations ActMEC Member of the Executive CouncilMoA Memorandum of AgreementMoU Memorandum of UnderstandingMTEF Medium-Term Expenditure FrameworkMTSF Medium-Term Strategic Framework MTT Ministerial Task TeamNBA 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 TechnologyPFMA Public Finance Management ActPIC Public Investment CorporationPPP Public Private PartnershipsPPPFA Preferential Procurement Policy Framework ActPWD Persons with DisabilitiesPSET Post School Education and TrainingQMS Quality Management SystemQSE Qualifying Small Enterprises RMA Rand Mutual AssuranceSAICA South African Institute of Chartered AccountantsSAMSA South African Maritime Safety AuthoritySAQA South African Qualifications Authority SARS South African Revenue ServiceSCER Select Committee on Education and RecreationSCM Supply Chain ManagementSCOPA Standing Committee on Public AccountsSETA Sector Education and Training AuthoritySIEM Security Information and Event ManagementSOP 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

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In this section

PART A: GENERAL INFORMATION

iii. Foreword by the Executive Authority ...........................................................................................................................10iv. Foreword by the Accounting Authority ........................................................................................................................12v. Statement by the Accounting Authority ......................................................................................................................14vi. Strategic Overview .......................................................................................................................................................15vii. Legislative and Other Mandates...................................................................................................................................17viii. Organisational Structure ..............................................................................................................................................191. Executive Summary ......................................................................................................................................................202. NSFAS Administrator’s Report ....................................................................................................................................242.1 Performance against the TOR of the Administrator (2019) .......................................................................................26

In this section

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The Qualified Report of the Auditor-General of South Africa (AGSA) on the Annual Financial Statements (AFS), and the Non-Compliance to Laws and Regulations (NOCLAR) report of the internal auditors issued in July 2018, highlighted material non-compliance to Section 51 of the Public Finance Management Act (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 increasing audit evidence of maladministration, as well as delays of up to eight months in funding of the majority of students; prompted my predecessor Minister Naledi Pandor to place NSFAS under administration in August 2018.

It is my pleasure to report to Parliament the significant progress made by the Administrator in stabilising NSFAS, and in turn the Post School Education and Training (PSET) sector. It should be noted that, in 2019 NSFAS disbursed R28 billion of its DHET bursary grant to 720,000 students, comprising some 42% of all university and 70% of all Technical and Vocational Education and Training (TVET) college students. The establishment of a capable administration was a prerequisite for the effective functioning of the bursary scheme that replaced the loan scheme in December 2017.

The new bursary scheme introduced a new set of criteria to expand the reach of NSFAS funding as well as promote throughput of students. The household income threshold was raised from R122 000 to R350 000 per annum for First-Time Entering Students (FTENs) in 2018 onwards, and a new qualification criterion of R600 000 per annum household income threshold for students with a disability was introduced. The window for funding was reduced from N+2 to N+1, where “N” is the regulation time for the completion of a qualification.

These changes required substantial changes in the 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.

After careful consideration, the former minister acceded to place NSFAS under administration and Dr. Randall Carolissen was appointed as Administrator for the period August 21, 2018 to August 20, 2019.

iii Foreword by the Executive Authority

As a public entity under the Department of Higher Education and Training (DHET), 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 the National Student Financial Aid Scheme (NSFAS), as well as to exercise oversight in terms of the Public Finance Management Act (PFMA).

The 2018/19 financial year marks the second year of South African Government’s commitment to implement the DHET fully funded bursary scheme to ensure universal access to higher education and training for young people from poor and vulnerable households.

This game-changing policy of progressive fee-free higher education for the poor, is the most effective and self-sustaining response to address the lingering and intractable socioeconomic scourge of unemployment, poverty and inequality. Over the Medium-Term Expenditure Framework (MTEF), the government committed to spend R85 billion to ensure sustainability of NSFAS; giving effect to governments commitment to increasing spending on post school education at a percentage of the Gross Domestic Product (GDP) from 0.68 to 1% over five years.

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In August 2019, after consultation with stakeholders, I decided to reappoint Dr.Randall Carolissen for a second term as NSFAS Administrator from August 21, 2019 to August 20, 2020.

Under the term of the Administrator, internal audit assessment of the controls within and around the disbursement process; has noted significant and serious control improvements. The improvement in data management and internal audit capacity identified irregular expenditure of R7.5 billion for the periods 2017 and 2018; necessitating the restating of the R350 million in irregular expenditure highlighted in the 2018 Annual Report. The overall re-capacitation of critical functions within NSFAS established financial and other system controls to arrest and contain unauthorised or erroneous payments. The completion of the forensic audits highlighted serious flouting of governance in the Human Resources (HR) Department, which led to unauthorised expenditure, as well as large scale irregular appointments of senior executives.

Evidence of syndicated fraud and corruption led to “ghost students” being funded, students entering the system without eligibility checks with the improved validation using South African Revenue Service (SARS) data, identification of students from high income families receiving NSFAS bursaries. This evidence was handed over to the law enforcement agencies, and some of the NSFAS staff members were arrested. I have also established a Ministerial Task Team (MTT) to assist in the review of the core business processes and systems of NSFAS, with a view to informing the work of the entity into the future. The MTT is working closely with the Administrator and his team; considering the work that has been done 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 enormous amount of work put in, to ensure stability and continuity of access to post-school education through the provision of bursaries.

I would like to thank the Administrator and his team for agreeing to continue with the second term 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 the Deputy Minister Buti Manamela, the Director-General of the DHET, and his team for the support provided to the ministry and NSFAS.

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.

Working together, we can do more!

Dr. Blade Nzimande, MPMinister of Higher Education, Science and Innovation

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In 2019, NSFAS in the fee-free regime supported over 720 000 students constituting 42% of university and 70% of Technical and Vocational Education and Training (TVET) college registrations. Cohort studies commissioned by the Department of Higher Education and Training (DHET) suggest that this investment is providing good returns. Higher levels of throughput (10% higher) and lower levels of first year drop-out rates (10% lower) of the National Student Financial Aid Scheme (NSFAS) beneficiaries in comparison to the national cohort have been achieved.

The difficulties faced by the organisation had been highlighted in several damning audit reports, erratic funding of students in 2017 and 2018 and widespread public discontent. In 2018, the Board requested Minister Naledi Pandor to place NSFAS under administration. Acceding to this request, the minister appointed Dr. Randall Carolissen as Administrator commencing August 21, 2018. The terms of reference (ToR) of the Administrator recognised that imperative sustainable outcomes can only be achieved provided the contradictions, misalignment and inefficiencies in the higher education sector are remediated in a concurrent fashion.

The first phase required stabilisation of the National Student Financial Aid Scheme (NSFAS), and very urgent actions to address this burning platform. Root cause analysis that eventuated in a prioritised risk register showed that NSFAS faced catastrophic institutional collapse with the majority of the more than 600 000 students that remained unfunded eight months into the academic year, whilst preparations for the start of the 2019 academic year became pressing. Despite unreliable and poorly designed systems, NSFAS achieved the requisite stability to ensure predictable and timeous disbursement cycles during 2019. Irregular expenditure amounting to R7.5 billion for the period prior to administration was quantified which required that the 2018 report be materially restated. Hitherto 40% of the 440 000 irregular records had been remediated with corrective actions on the financial statement instituted.

Forensic investigations identified several facets of maladministration ranging from abuse of Human Resource processes to fraud and corruption. Irregular appointments of senior executives and unauthorised upgrading of posts remains some of the challenges that had to be addressed. Criminal syndicates, extending over the Higher Education (HE) sector, had been revealed by our hotline and whistle-blowers. Staff members had been dismissed and criminal charges handed over to specialised prosecutions agencies. Honourable Nchabeleng, chairperson of the Parliamentary Select Committee on Education, Technology, Sports, Arts and Culture stated, “NSFAS is now an entity which prioritised consequence management. Certain criminal syndicates operating within NSFAS had been reported to law enforcement agencies.”

iv Foreword by the Accounting Authority

At the commencement of the Administrators first term on August 21, 2018 the immediate task at hand was to rescue the institution from institutional implosion. This was compounded by the fact that the scope and value of allocations had increased significantly with no corresponding increase in resources and systems. Therefore, the first term was devoted to gear up, what is now being universally accepted and confirmed by the ministerial task team. Systems that are not fit for purpose and extreme poor data integration exchange protocol between NSFAS, the Department of Higher Education and Training (DHET) and institutions. In the case of TVET college data, which became corrupted as it traversed from colleges through to DHET and then finally to NSFAS, resulting in data deficiencies and irregular records occupying most of the operational attention. Certainly, large amounts of capital injections will be required to bring the systems and data architecture to the correct level of maturity and accuracy as would be required for an organisation of this complexity and scope. This was anticipated to be dealt with within the realm of the Ministerial Task Team which has now assumed duty and is working closely with the executive management of NSFAS.

Access to education provides a gateway out of poverty and builds the foundation for an inclusive economy. The South African Government’s investment over the Medium-Term Expenditure Framework (MTEF) is aimed at narrowing the intractable economic divide, by increasing access to higher education for individuals from poor and vulnerable households.

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The next and overlapping phase was to move NSFAS towards sustainability. A quality management framework was absent, and the few policies and Standard Operating Procedures (SOP) that existed were outdated. NSFAS can now report that the ISO 9000 framework has been initiated to ensure that all critical processes are mapped, and policies and Standard Operating Procedures (SOPs) is developed within an ISO9000 framework.Strengthened financial controls now offer reconciliation of accounts to student level. This compelled institutions to maintain discipline in accounting and enforced accountability. NSFAS’ reconfigured data architecture, improved Information and Communications Technology (ICT) governance and disintermediation of third parties minimised data corruption and improved data exchange protocol and cybersecurity.

A top-heavy management crowded out technical human capital and thus all vacancies were frozen. This provided the budget space to, in a short space of time, onboard consultants in ICT, Governance, Risk and Financial management. In 2019, this rebalancing in favour of specialists proceeded with appointments of more than forty permanent technical experts.

Commercial interests that eroded value from the disbursement chain have been removed. The ill-advisedvoucher system which directed purchases to preferred vendors, in defiance of anti-competitive legislation, were scrapped and replaced with cash disbursements. This evoked controversy, with allegations that students were too immature to manage cash with media showing students drinking and feasting upon receipt of allowances. This patronisation of poor students had been put to bed.

The COVID-19 pandemic has been traumatic but also presented a time for introspection and the opportunity to repurpose organisations. COVID-19 presented the Post School Education and Training (PSET) system with opportunities to challenge long held paradigms, expedite innovation and overcome ennui. In collaboration with Sector Education and Training Authority (SETAs), improved targeting of missing middle and postgraduate students, and closer matching of the allowance structure, eventuated. Improved structured referral systems will contribute greatly to specialised skills output from PSET. Discussions have been initiated on how to better tailor the NSFAS allowance structure to bring greater equity between TVET college and university students, leverage technology to extend the learning experience beyond the classroom and better match curricula to the requirements of a modern economy.

During the COVID-19 lockdown, NSFAS maintained remarkable business continuity, adopting a virtual operating model. Parliament’s Select Committee on Education, Technology, Sports, Arts and Culture said,“We are satisfied with the efficiency with which the NSFAS Administrator had run the entity, even during the COVID-19 pandemic. Commendable work to stabilise the student financial aid scheme is being realised and that has been demonstrated by how allowances are being distributed to students.”

The NSFAS administration period compelled contemplation of the future direction of the HE sector, expedited innovation, forced confrontation with the fourth industrial revolution and further fast-tracked institutional alignment.

Dr. Randall CarolissenNSFAS Executive Administrator

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v Statement by the Accounting Authority

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

In my opinion, the Annual Report fairly reflects the operations, the performance information, the HR information

Yours faithfully

___________________________________________Executive Administrator

• All information and amounts disclosed in the Annual Report is consistent with the Annual Financial Statements (AFS) audited by the Auditor General.• The Annual Report is complete, accurate and is free from any omissions.• The Annual Report has been prepared in accordance with the guidelines on the annual report as issued by National Treasury.• The AFS (Part E) have been prepared in accordance with the Generally Recognised Accounting Practice (GRAP) standard as applicable to the public entity.• The Accounting Authority is responsible for the preparation of the AFS and for the judgements made in this information.• The Accounting Authority is responsible for establishing and implementing a system of internal control that has been designed to provide reasonable assurance as to the integrity and reliability of the performance information, the HR information and the AFS.• The external auditors are engaged to express an independent opinion on the AFS.

and the financial affairs of the entity for the financial year ended March 31, 2020.

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vi Strategic Overview

VISION

MISSION

• NSFAS exists to provide financial aid to eligible students at public TVET colleges and public universities;

VALUES

VALUE BEHAVIOUR

Accessibility We create an environment that allows efficient, effective and direct access to NSFAS and the funding it provides to eligible students.

Transparency We are open and honest.

Stewardship Displaying ethical behaviour and having the courage to do the right thing.

Accountability We take responsibility for our actions that drive performance management.

Respect Collegiality, professionalism, work ethic and tolerance for diversity.

Innovation Anticipating change and being a learning organisation.

A model public entity that provides financial aid to all eligible public university and Technical 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, what we do, and the impact on our constituency:

• NSFAS identifies eligible students, provides loans and bursaries and collects students loan repayment to replenish the funds avaliable for future generations of students; and;• 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.

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NSFAS administers funding for further and higher education on behalf of government and non-governmental funders. To deliver on its mandate, NSFAS has established its value chain as follows:

NSFAS Value Chain

The NSFAS Value Chain recognises that the application cycle (1-Prepare for Cycle) requires gearing up of operations and the cultivation of relationships with prospective beneficiaries and stakeholders (2 – Manage Applications).

Determining financial eligibility for new applicants and academic eligibility for continuing students requires efficient mechanisms to communicate funding decisions to applicants and continuing students timeously (3-Determine Eligibility). NSFAS must confirm eligibility decisions to students before registration commences. Receipt of registration is confirmation that an eligible student is actually present at the institution to study. On this basis, NSFAS confirms funding for such a student (4 – Confirm Funding).

The next important step in the value chain is where all students with confirmed funding expect NSFAS to honour its commitment and pay allowances (5 – Make payment). Even though NSFAS is primarily a bursary scheme, the organisation still manages its loan book and is expected to recover loans in accordance with its mandate, and thus recovery still forms part of its value chain (6 – Recover Loans).

NSFAS VALUE PROPOSITION

NSFAS is a provider of financial aid to the poor and working-class that ensures all services delivered will be:

• Accessible to students.

• Paid for the agreed service.

• Paid the correct amount.

• Paid at the right time.

• Paid to the right person.

Product and Services

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vii Legislative and Other Mandates

The Constitution of the Republic of South Africa, 1996

The Bill of Rights of the Constitution of the Republic of South Africa Act (108 of 1996, as amended) 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.”

NSFAS contributes to the attainment of the rights described in section 29 by providing financial aid to students from poor and working-class families. NSFAS enables these students to access post-school education, thereby redressing the results of past racially discriminatory laws and practices. The mandate includes the recovery of student loans and raising funds for student loans and bursaries.

NSFAS Act (Act 56 of 1999 as amended)

NSFAS was established according to the NSFAS Act (Act 56 of 1999 as amended) and incorporated Tertiary Education Fund of South Africa (TEFSA ) 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, as amended) also establishes two key bodies that play an oversight role over NSFAS. The Portfolio Committee on Higher Education and Technology (PCHET) 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 (SCER) 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.

LEGISLATIVE MANDATES

The NSFAS Act

NSFAS was established in terms of the NSFAS Act 56 of 1999 as amended and is a Schedule 3A national public entity in terms of the Public Finance Management Act (PFMA), Act No. 1 of 1999 as amended.

In terms of the NSFAS Act, NSFAS is established to provide the following;

1.5.1 CONSTITUTIONAL MANDATES

(i) Provide loans and bursaries to eligible students;(ii) Develop criteria and conditions for the granting of loans and bursaries to eligible students in consultation with the Minister of Higher Education and Training;(iii) Raise funds;(iv) Recover loans;(v) Maintain and analyse a database and undertake research for the better utilisation of financial resources;(vi) Advising the minister on matters relating to financial aid for students; and(vii) Undertaking other functions assigned to it by the NSFAS Act 56 of 1999 as amended or by the minister.

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The Minister of Higher Education and Training has published regulations (Government Gazette Vol. 631, No. 413901) to the NSFAS Act for public comment which confirms NSFAS’ mandate, in consultation with the minister (Government Gazette Vol. 634, No. 415542) in that it may determine and revise:

The regulations also expand NSFAS’ mandate to include:

Public Finance Management Act (PFMA)

The National Credit Act (NCA)

The National Skills Development Strategy (NSDS)

Government Gazette Vol 638 No 41851 dated August 21, 2018 and Government Gazette Vol 650 No 42662 dated August 22, 2019

NSFAS was placed under administration on August 16, 2018 effective August 21,2018 and Dr. Randall Carolissen was appointed as the Executive Administrator. The Minister of Higher Education, Science and Technology appointed Dr. Carolissen on August 20, 2019 for a second term of administration effective August 21, 2019 until August 20, 2020.

As a public entity, NSFAS is also subject to the PFMA Act 1 of 1999 as amended, in terms of which NSFAS is listed as a Schedule 3A national public entity.

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”.

Other legislation that impacts on NSFAS operations is the National Credit Act (Act 34 of 2005). NSFAS is subject to the 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.

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.

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.

National Development Plan – 2030 (NDP)

(i) Criteria for eligibility for financial aid; and(ii) Set different eligibility criteria for different forms of financial aid.

(i) Entering into Public Private Partnerships (PPPs) to enable NSFAS to extend, and/or administer, and/or recover loans granted for financial aid(ii) 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.

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viii Organisational Structure

The organisational structure as at March 31, 2020 is shown below:

* For the purposes of administration, the Executive Administrator assumed the role of the Board and the Chief Executive Officer

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1. Executive Summary Context

In 2018, growing evidence of severe maladministration at NSFAS led to damning audit findings and instability in the Higher Education (HE) sector. Compounding this administrative instability, was the announcement by the president during December 2017, changing the scheme from providing loans and bursaries to a full bursary scheme for first-time beneficiaries from 2018 onwards. NSFAS, suffering from ill designed ICT infrastructure, poor governance and low technical capacity; was unable to deal with this level of complexity.

The minister acceded to a request from the NSFAS Board to intervene, and Dr. Randall Carolissen was appointed as Administrator with terms of reference of the Administrator published in the Government Gazette dated August 21, 2018, Volume. 638 No. 41851. Dr. Carolissen was reappointed for an additional year in terms of Section 17A to 17D of the NSFAS Act (Act 56 of 1999 as amended), effective from August 21, 2019 to August 20, 2020 (as per Government Gazette Vol.650 No. 42662).

The Administrator developed a risk-based strategy informed by detailed root cause analysis. The risk register and mitigation proposals were placed on a timeline prioritising stabilisation of operations. The first phase of administration was to sufficiently de-risk the organisation to arrest the burning platform and anxiety across the sector. Unreliable ICT systems and poorly designed data architecture had to be addressed in the first month of administration to release funds trapped in the system to ease the plight of hundreds of thousands of students. Whilst attempting to rescue the 2018 academic year, preparations for the 2019 application intake had to commence. To this end specialists were recruited on fixed-term contracts to supplement the low technical skills base.

The second and overlapping phase was to stabilise the organisation. NSFAS had no clearly defined operating model, a general lack of role clarity, with top-heavy management structures and a poor investment in technical human capital. This contributed to dysfunctional behaviour across the business and confusion with respect to the application of business rules. The identification and quantification of irregular records from 2017 and 2018, became imperative as it affected students still in the system at that stage. An unexpectedly large number of irregular records of over 440,000 were uncovered amounting to irregular expenditure of R7,5 billion. This required that the 2018 Annual Report be restated. Remediation of records and corrective actions is underway in collaboration with all institutions in the HE sector.

Measures to achieve long-term sustainability were introduced in the third phase. Fixed-term contracts were by large phased out, and permanent appointments of specialists were made possible through freezing of the hiring of managers. Introducing financial controls, improvement in governance, development and enforcement of a policy and Standard Operating Procedure (SOP) framework and clamping down on fraud and corruption meant NSFAS provided the space for more strategic interventions. The contemplated Ministerial Task Team (MTT) will move NSFAS further to sustainability. The MTT mandate will include the review of ineffective and non-integrated ICT systems, mapping of NSFAS business processes, establishment of a policy system guided by a quality management system, the technical capacitation of NSFAS and the reconfiguration of data exchange protocol and security throughout the Post School Education and Training (PSET) system.

Progress is reflected in the improvement in the Annual Performance (AP) score from 12.5% in 2018 to over 80% in 2019. To ensure an effective transition and normalisation of governance and Executive Management (EXMA) the Board and other governance oversight functions will be reinstituted, and a new executive team is being recruited.

Restoring Governance

NSFAS received a qualified audit opinion from the AGSA for the financial year that ended on March 31, 2018. In July 2018, the Internal Auditors issued NSFAS with a NOCLAR report, citing material non-compliance to s51 of the PFMA as there were inadequate controls around the disbursement process, signalling mission critical lapses in governance.

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NSFAS engaged the Council for Scientific and Industrial Research (CSIR) to assist with the resolution of the cyber security finding for vulnerabilities identified and a critical component of this will be a risk resilience test. NSFAS aims to increase the security base level to level 3 within the next year.

Within the Risk and Governance division, NSFAS insourced the internal audit function. The team is fully operational and has assisted in identifying and determining the underlying root cause issues of several operational matters. Development of an ISO9000 compliant quality management framework (QMF), regularising the adherence to recognised standards in day to day operations, has been prioritised. Strengthened collaboration with other funders, will improve targeting and assistance to previously excluded groups. An important development is the establishment of an independent Audit and Risk Committee (ARC) to strengthen oversight and improve accountability of the executive.

Not fit for purpose ICT systems

Stakeholders are ad idem that existing ICT infrastructure is not fit for purpose, non-integrated and prone to failure. Installed in 2013, most of the technology infrastructure components had reached their end-of-life and with increasing reliance on a foreign based servicing company. The physical infrastructure consists of two systems which necessitates extensive articulation software development and quality checks. More than 95% of storage capacity was used up in the production environment with no viable option for upscaling. Data had to continually be moved into different backup environments to make space for data processing transactions. Software systems were experiencing high levels of instability that resulted from information system design flaws, infrastructure configuration as well as one of our core databases failing as a result of a structural deficiency.

As a priority, was to ensure that critical IT systems are available for operations at least 98% of the time, which in August 2018 was crashing daily. The core disbursement systems (Phoenix) availability has also been successfully improved and is now consistently running at 99% uptime.

NSFAS commissioned an independent study to explore options of embarking on a journey towards integrating private and public cloud architectural environments. The “Cloud Readiness Assessment” project comprised a methodology of combining industry standards. The security firewalls were upgraded, and the load balancing software and Web Applications Firewall now resides in the Microsoft Azure Cloud environment. The monitoring and alerting technologies that cover 98% of the NSFAS network and security devices has also been improved. NSFAS upgraded its network infrastructure providing improved transfer speeds from 100MB per second to 1GB per second. The Disaster Recovery solution was also refreshed and replicates data into the cloud environment on a continual basis within 15-minute intervals. From a cybersecurity perspective, networks have been split using Virtual Local Area Network (VLAN) segregation, thereby creating secure, independent environments for various scenarios.

ICT system capacity improvements have enabled stable high-volume processing to regularise payments to students and institutions, improving oversight and control and enabling predictability in allowance and other payments. In 2019, NSFAS processed 250,000 more applications during the September 01 to November 30 applications window, than in 2018. In 2019, the integration engine was improved exponentially increasing upload speeds from 100 to 28,000 records per minute. More than 90% of applications are online with a trackable application status, bringing transparency, reliability and rigour to the application process. Live exchange of NSFAS eligible students and registration data with most institutions have been achieved, expediting the assessment and disbursement process. Reconciliation of accounts now occurs, to student and institutional level, creating greater levels of accountability and transparency in payments.

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Improving Business Efficiency NSFAS achieved significant improvements in the processing of student records throughout the business value chain. The Applications Processing System was completely re-written, using newer software development technologies as well as modern programming patterns and practices to provide for several additional business requirements, and enhancements for the 2020 academic year. All online applications (250,000 more than that in 2018) captured by students were processed by December 27, 2019, and funding statuses were made available to students on January 6, 2020. This was the first time that NSFAS was able to provide the status of student applications prior to students registering at institutions this early in the year.

Timeous receipt of accurate registration data from institutions is vital for organisational planning, as financially eligible students only become funded by NSFAS once registered at a public institution for an approved course. Disbursements from the time of the receipt of registration data is thus an important efficiency measure. In 2020, NSFAS disbursed to 90% of students after 10 days of having received valid registration data; and 99% within 30 days. This represents a significant improvement compared to the same statistics for 2017, which was 37% and 57% respectively. Reading these statistics in conjunction with the improvements in the registration performance data, highlights that a predictable and stable state of student disbursement processing has been achieved at NSFAS in 2020.

NSFAS has established a dedicated administration capacity for TVET colleges. This was previously absent, and now brings stability and improvements in the processing of applications, funding decisions and data integration between colleges and NSFAS. From April 01, 2021, students at TVET colleges will receive their allowances directly into their personal bank accounts, and thereby removing all intermediaries. This journey started with the scrapping by the Administrator of the ill-conceived voucher system and will remove all third parties, with all the attendant inefficiencies and opportunities for fraudulent diversion of funds, from the disbursement value chain.

Addressing Fraud and Corruption

A necessary but rather distracting feature of the term of the Administrator, was the expansiveness of the forensic investigations required and the time consumed effecting the recommendations. Forensic investigations specified in the ToRs of the Administrator have been completed, and NSFAS has taken the necessary precautionary and decisive actions including, invoking disciplinary and criminal investigations.

The HR forensic investigations revealed large scale abuse of remunerations, irregular appointments of senior executives, and the absence of governance in general. Investigations on the voucher system, that existed as a form of disbursement to students, uncovered a system fraught with fraud and corruption and criminal prosecutions were initiated. Evidence of syndication extending into the higher education sector has been handed over to the specialised police departments. The negative impact on staff morale mitigate somewhat against the organisational development initiatives, as affected parties sought to continuously discredit NSFAS and the team of the Administrator.

Leveraging Stakeholder Engagement

NSFAS is positioned to verify the accuracy of applicant and parent details with the Department of Home Affairs (DOH), as well as the validation of social welfare beneficiaries and differently abled students with the Department of Social Development (DSD). In the case of SASSA, almost half of the more than 600,000 first time applicants for 2020 came from the South African Social Security Agency (SASSA) households, doubling from the prior year. This information is pre-populated onto application forms limiting opportunity for fraudulent applications, but also improves the efficiency and ease with which applicants are assessed for funding. NSFAS has a Memorandum of Understanding (MOU) with the South African Revenue Service (SARS) which will improve the validation and accuracy of the household income assessment.

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NSFAS has formalised an MOU with the Department of Basic Education (DBE) to incorporate NSFAS application content into the high school guidance curriculum. Limited success had been achieved in 2019 and both parties committed to strengthen this very important initiative in 2020. This will assist students to timeously submit documents that meet the requirements of NSFAS but moreover ensure that applications to institutions, often a prohibitive hurdle to funding, is also completed. These enhancements made it much easier for students from poor backgrounds to transact with NSFAS and more particularly assist with issues that the poor struggle with. An example being that applicants from rural areas have to spend a large amount of their income travelling to town to certify and register documents. These innovations resulted in a growth of 20% of NSFAS beneficiaries funded at universities.

Organisational Development and Corporate Culture

The legacy of an extremely poor organisational climate together with toxic labour relations bred by nepotism, abuse of positional powers and a culture of entitlement impacted the effective functioning of the HR Department and hampered the delivery of the HR offerings at NSFAS.

Rebalancing the management and specialist ratio was extremely important as at the start of administration, NSFAS was management top-heavy, crowding out budget for technical capacitation. As management posts became vacant recruitment favouring technical capacitation was undertaken during administration. All senior staff that exited the organisation were replaced with specialists or subject matter experts resulting in a net gain of forty-one in the NSFAS technical human capital. HR interventions include the development of key policies; continuation of the HR forensics investigation; transitioning to an alternative retirement fund dispensation and undertaking the appointment of members of the new executive team. A skills audit revealed well qualified young people, mostly from designated groups, trapped at low job levels. Career laddering is being developed to allow for upward progression of this group and several opportunities have been made available for in-service exposure to vacancies aligned with academic qualifications. In partnership with the Unemployment Insurance Fund (UIF), NSFAS onboarded 50 interns to work under the mentorship of NSFAS specialists.

Restoring Public Trust and Credibility

NSFAS penetration to reach the target group of the poor and vulnerable and higher levels of public awareness and confidence, is evidenced by the significantly increasing applications, expansion of the NSFAS rural footprint and reach and accessibility to government partnerships. Feedback from the minister and parliamentary oversight committees indicates, while much remain to be done, NSFAS made significant strides in achieving stabilisation.

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2. NSFAS Administrator’s ReportBackground

In 2018 growing evidence of large-scale maladministration at NSFAS, characterised by delays in disbursements to students of up to eight months, triggered student protests on a national scale. This ensuing anarchy on campuses and public discontent not only jeopardised the successful completion of the 2018 academic year but provided incendiary material to debates on the adequacy of coverage and sustainability of the current fee-free education model.

The non-delivery of NSFAS service against its mandate was further compounded by the unanticipated announcement by the president during December 2017 introducing a full bursary scheme for first time beneficiaries from 2018 onwards. NSFAS, already plagued by poor ICT infrastructure and technical capacity, was neither able to implement the bursary scheme nor capable of managing a dual system with the requisite governance.

The issuance of a damning NOCLAR audit report by the Internal Auditors as well as a qualified audit report by the AGSA on the Annual Financial Statements (AFS) of NSFAS as at March 31, 2018, amplified that NSFAS was an organisation on the verge of catastrophic collapse. The Board of NSFAS then, under section 17A 1c of the NSFAS Act (Act 56 of 1999), requested the Minister of Higher Education and Training to place NSFAS under administration. The minister conceded and Dr. Randall Carolissen was appointed as Administrator with terms of reference of the Administrator published in the Government Gazette dated August 21, 2018, Volume. 638 No. 41851. The minister at the time, impressed on the Administrator that fixing NSFAS will not produce sustainable outcomes unless the contradictions, misalignment and inefficiencies in the higher education ecosystem are remediated concurrently.

There is consensus amongst all stakeholders that during the first phase of the Administrator’s tenure, stabilisation of NSFAS was achieved. It was however recognised that these gains must be consolidated and sustainability of NSFAS entrenched. This eventuated in the minister appointing Dr. Randall Carolissen for a second term, in terms of Section 17A to 17D of the NSFAS Act (Act 56 of 1999 as amended), effective from August 21, 2019 to August 20, 2020 (as per Government Gazette No. 42662). The impact of the stabilisation in the first term and the continued enhancements in the second term is reflected in the improvement from 7.1% in 2017 to over 80% in the Annual Performance score detailed in this annual report. The second phase of administration was therefore envisaged to ensure an effective transition and normalisation of governance and the Executive Management (EXMA), including supporting the MTT whose mandate is to review NSFAS in its entirety.

This includes the review of ineffective and non-integrated ICT systems, mapping of NSFAS business processes, establishment of a policy system guided by a quality management system, the technical capacitation of NSFAS and the reconfiguration of data exchange protocol and security throughout the PSET system.

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The rebalancing of the technical human capital had been achieved in the main. All posts vacated by senior managers were filled by either subject matter experts or specialists during the period of administration. This had been and remains a crucial step towards the achievement of long-term sustainability of NSFAS.

Post Level 9 and above

When assuming duty in August 2018, the immediate priority of the Administrator was to de-risk NSFAS, prioritising mitigation of mission critical fault lines. The progress against the risk register developed in October 2018 is depicted in the following graphic.

Department August 2018 Staff Exits March 31, 2020 New Appointments

Risk4 0 15 11

ICT 16 10 23 17

Finance 13 2 17 6

Operations 28 6 29 7

Totals 61 18 84 41

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2.1 Performance against the ToR of the Administrator (2019)In this section, the performance against the ToR of the Administrator for his second term starting August 21, 2019 is discussed.

ToR1 Finalise the close-out of the 2017 and 2018 student funding cycle, including the finalisation of all data exchange and final payments:

The closing-out of the 2017 and 2018 academic years with institutions proved to be an extremely complex and arduous exercise. More than 430,000 records containing data and processing errors that amounted to R7,5 billion in irregular expenditure for that period, were identified for remediation. This necessitated that the irregular expenditure quoted in the 2018 annual report be restated significantly. The root causes of the errors included:

1. Poor or non-existent ICT governance, with no distinction between development and production platforms. This means that coding in most cases were done in a live environment.

2. Poor database and systems design that include, data redundancy, orphan tables, non-normalised databases, and poor primary key definition resulted in data duplication and inadequate data quality checks at the point of data upload resulted in the ingestion of poor quality data and non-adherence to NSFAS funding rules.

3. Many business rules validations were not built into the system or were applied incorrectly.

4. Poor system integration between external and internal systems also contributed to the ingestion of poor data quality and funding delays.

5. Back-end scripts that were written by end users were used to update the database without the necessary controls in place to prevent data corruption. These scripts were written to compensate for system gaps in functionality, but many of these scripts caused numerous data errors because of the incorrect application thereof, bugs in the code and a lack of in-depth knowledge of the database structures.

NSFAS has recommissioned the 2017/18 Close-Out as a project to complete all outstanding work relating to funding and disbursement of allowances for the financial years 2017/2018 and 2018/2019, thereby addressing the 2017 and 2018 academic years. A team of technical resources from a recognised specialised software and business solutions company, has been contracted to assist NSFAS with data remediation and reconciliation of outstanding student and institutional accounts for the 2017 and 2018 academic years.

Specific project objectives include:

• Ensuring that all students (new, continuing and returning) that applied for NSFAS funding during 2017 and 2018 were assessed correctly as per DHET rules and guidelines.• Ensuring that all institutions submitted registration records for eligible students to NSFAS and that these registration records are processed correctly for funding and disbursements.• Ensuring that all eligible students that were registered at institutions completed contracting with NSFAS, which is a requirement for funding and payments.• Ensuring that all students that have completed contracting are paid correctly, with regards to allowances and tuition, as per registration data received from institutions.

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• Documenting and performing data reconciliation between NSFAS and institutions to formally close-off the 2017 and 2018 academic years and ensure the generation of final reports to institutions.

The graph below provides the movement in the number of errors between 2017 – 2020 and clearly demonstrates data integrity improvement undertaken during administration.

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Data Error N+ Exceeded Not Eligible forFunding

Unfunded Course UnsignedAgreement /

Incorrect Amount

Num

ber o

f Err

ors

Universities - Errors by Category

2017 2018 2019 2020

Data Errors Business Rule Errors

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TVETs - Errors by Category

Data Errors90,00080,00070,00060,00050,00040,00030,00020,00010,000

Business Rule Errors

Data Error

2017 2018 2019 2020

Not Eligible for Funding Incorrect Amount

Num

ber o

f Err

ors

Unsigned Agreement/

120,000

100,000

80,000

60,000

40,000

20,000

2017 2018 2019 2020

1%, 1,388

15%, 32,794

36%, 81,286

49%, 109,793

-

Errors by Year

Data errors constitute cases where misalignments in data result from the incorrect processing of student-level data from one processing stage to the next i.e. from establishing funding eligibility through to payment.

Progress with regards to the close-out of 2017, 2018 and 2019 academic years is also evidenced in the concomitant reduction of irregular expenditure as data records are remediated. This error-reduction by year is depicted in the graph below

Figure 2: Improvement in data errors between 2017 and March 2020

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Note:• 2019 data errors exclude TVET colleges• Irregular amounts disbursed have been quantified and is subject to the 2019/ 2020 AGSA audit

ToR2 Ensure the effective close-out of the 2019 funding cycle and provision of accurate data to the DHET:

Upon receipt of registration data for 2019, NSFAS confirmed funding for 740,037 students, this is made up of 393,767 university and 346,270 TVET college students, with 99% of bursary agreements generated accepted or signed by students. This represents a significant improvement and prevented legacy issues being carried over to the 2020 cycle. Unsigned NSFAS Bursary Agreements (NBAs) contributed significantly to NSFAS’ inability to disburse to students in prior years. In the TVET college system, 56,512 exceptions remain, which relate to TVET college students that have prior year errors that prevented migration to the 2019 academic year. Similar, but much lower exceptions (850 students), were also found in the university system.

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Table 2: 2019 NBA/SOP Summary Report

Table 3: 2019 Disbursements Summary

Institution Type Funded Students

NBA/SOP Generated

NBA/SOP Accepted

Not Accepted Exceptions

TVET college 337 276 280 764 280 764 - 56 512

University 387 080 386 230 381 860 4 370 850

Grand Total 724 356 666 994 662 624 4 370 57 362

In the 2019/20 financial year, the disbursement process was reviewed and improved to ensure that NSFAS pays the right amount, to the right student and or institution, at the right time. Process mapping and documentation of policies and SOP’s further triggered introduction of robust internal controls.

The table below shows that, to date, the organisation has disbursed 98% of the signed bursary contracts value, consisting of 101% to TVET colleges and 97% to universities. The payments over 100% in TVET colleges relate to upfront student allowances paid that is still to be knocked-off. Outstanding payments are attributed to decreased disbursement runs and student contracts that were signed late in the last quarter.

Institution Type NBA Signed Amount Amount Disbursed

% Disbursed

Outstanding Disbursements

% Outstanding

TVET college 5,195,211,696 5,250,285,461 101% -55,073,765 -

University 22,052,766,839 21,470,902,106 97% 581,864,733 3%

Grand Total 27,247,978,535 26,721,187,567 98% 526,790,968 2%

ToR3 Ensure effective preparation for, and implementation of, the 2020 student funding cycle in consultation with the DHET:

In 2019 for the academic year 2020, NSFAS received 694,338 first time applications, which is an increase of 14% compared to the same period for 2019. The application pool consists of 484,021 applicants for university funding and 210,317 indicating TVET colleges. Out of these applications 537,383 met the NSFAS funding criteria and were declared eligible for funding.

Funding is only confirmed once NSFAS receives registration data from institutions. To date, NSFAS has confirmed funding for 670,192 students, consisting of 441,634 and 228,558 students registered at universities and TVET colleges respectively. This is a 12% increase compared to funded numbers at the same time in 2019.

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Table 4: 2020 Funded Students

The difference in registrations received and that disbursed of about 12,383 (of which 10,308 are at university) is due to multiple registrations at universities, registration for ineligible courses and outstanding documentation.

Students that are assessed as being ineligible may appeal the funding decision by providing additional information to substantiate their appeal. More than 16,000 university student appeals were approved and over 2,000 TVET college student appeals approved for the 2020 cycle. Furthermore, an appeals review, especially with regards to students who were initially rejected on the N+2 rule was reassessed, in line with the minister’s directive that refined the N+2 definition. Final year students and N+2 students, who have psychosocial and medical considerations were reviewed. The facility to submit appeals was closed by the end of June 2020.

The NSFAS campaign to move away from manual applications, with all the attended inefficiencies, is also bearing fruit. Most students are submitting applications and supporting documents through the NSFAS portals, showing improvements year on year.

Institution Type Students Declared Eligible for Funding

Registration Received from the Institutions

Student Accounts Disbursed

Total Paid to Date

University 512 979 447 354 437 046 11,964,520,810

TVET College 261 008 232 671 230 913 2,577,787,710

TOTALS DHET 773 987 680 342 667 959 13,942,707,993

Online Applications Received From 1 Sept - 30 Nov600000

500000

400000

300000

200000

100000

0

2017

11-3

011

-27

11-2

411

-21

11-1

811

-15

11-1

211

-09

11-0

611

-03

10-3

110

-28

10-2

510

-22

10-1

910

-16

10-1

310

-10

10-0

710

-04

10-0

109

-28

09-2

509

-22

09-1

909

-16

09-1

309

-10

09-0

709

-04

09-0

1

2018

2019

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In the 2019/2020 financial year, NSFAS had over 150 media engagements being much more proactive in media engagements to ensure transparency, availability of information, and providing engaging content. These engagements were instrumental in the dissemination of strategic policy and developments to empower all stakeholders and especially students to contribute to ongoing public debates.

Some key indicators of the 2020 applications cycle show clear improvements in NSFAS efficiency and reach, supported by much more substantial outreach and media campaign activity during administration:

• NSFAS is providing support to the most vulnerable and disadvantaged in society: The majority of students approved for funding in 2020 are FTEN, African and female. It is also notable that just under half of 2020 applicants are SASSA beneficiaries, with the majority having been approved for funding. A massive improvement from 2019, when 145,000 SASSA recipients were funded.• There is significant dispersion in geographic reach, with the biggest proportion of 2020 students approved for funding coming from KwaZulu-Natal. Persons with Disabilities (PWD) constitute 0.3% of applicants, with almost 80% of these being approved for funding.• In 2020 bursaries to university students have increased fourfold, while bursaries to TVET college students almost doubling since 2017.• NSFAS students constitute a substantial proportion of enrolment in the entire PSET system, constituting roughly 42% of university enrolments and 70% of overall TVET college registration.• NSFAS students also constitute a substantial proportion of graduates (26% of university graduates in 2016).• NSFAS also contributes to the development of Science, Engineering and Technology (SET) skills output, which is critical skills for the country’s development. Most NSFAS funded students are funded for qualifications from the broad field of SET (37%), with a sizeable proportion also graduating from these fields (24%).• NSFAS research also shows that the majority of NSFAS funded graduates find employment.

ToR4 Ensure that the entity pays adequate attention to both TVET colleges and universities in all aspects of its core business processes:

To bring equity to process and service, NSFAS planned and instituted dedicated TVET college and university teams within its Operations Unit.

The dedicated TVET college team is headed by a General Manager (GM) who is supported by staff with technical data analysis, programme management and financial skills. A TVET college Advisor was also appointed during this period to strengthen the relationship between NSFAS and the college sector. These appointments have brought much-needed stability in the TVET college sector as well as noticeable improvements in the processing of TVET college applications, funding decisions and data integration between colleges and NSFAS.

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ToR5 Maintain a close and productive working relationship between NSFAS and the universities and TVET colleges:

Many of the improvements alluded to earlier, were achieved through much closer collaboration between NSFAS, DHET and institutions. At the commencement of administration, data specialists were deployed throughout the sector to assist institutions to unlock upfront payments as a result of NSFAS not being able to provide remittances to identify payments due to students. This was probably the most important intervention that saved the 2018 academic year and much progress has been achieved to regularise the remittance and financial reconciliations processes.

Another benefit of improved collaboration is that of the lag in results submitted by the department for TVET college students. To mitigate this challenge the DHET authorised NSFAS to obtain academic results directly from institutions for the 2019 academic year. The importance of resolving such issues as early as possible is illustrated in the fact that the inconsistencies emanating from the receipt of inaccurate academic results data, affected returning students funding decisions and often resulted in delays that impact on payments to students.

Close working relationships also contributed to system and data quality control improvements. As an example, the collaboration with Universities South Africa (USAf) resulted in an improved rate of unsigned contracts from 3% and above of unsigned contracts in 2018, to less than 1% in 2019. The university team worked with Financial Aid Officers and Student Representative Council (SRCs) to mobilise students to sign their agreements. In addition, the Marketing and Communications team was also involved in running social media campaigns to encourage students to sign their contracts.

Students who register in TVET colleges continue to prefer the walk-in application platform compared to the online medium. In 2020, over 86% of the applications, as well as an additional 50,000 walk-in applications above the prior year, was received post the primary online application window, creating a strain on NSFAS administration. NSFAS received a total of 130,724 TVET college walk-in applications during the 2020 academic year, of which 117,938 were confirmed to be eligible for NSFAS bursaries. NSFAS has to provide support to the institutions during the application season as this process is mainly manual.

Standardised allowances were introduced in the TVET college sector and this assisted the disbursement model ensuring that colleges were paid on a monthly basis, accommodating the uniqueness of its academic cycles. By the end of the financial year, 35 of the 50 colleges were onboarded onto the NSFAS Wallet platform, enabling NSFAS to pay students their allowances directly. Although designed as an interim solution to assist three struggling colleges initially, this solution proved to be much more effective than having colleges as payment intermediaries. The start of the 2021 academic year will signal a further eradication of commercial interests and intermediaries from the TVET college disbursement value chain when TVET college students allowances will be directly deposited into their bank accounts.

NSFAS has also increased influence in the PSET system. During COVID-19, the organisation encouraged universities to procure devices in lieu of the re-imbursement that NSFAS could facilitate through the learning materials allowances and further DHET funds. This pro-active engagement has resulted in the introduction of a similar allowance in the TVET college system and bringing TVET college students on par with the university students in this respect.

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There has also been significant improvement in the data exchange processes between NSFAS and TVET colleges. The total number of students declared by TVET colleges to be considered for funding for National Certificate Vocational (NCV), Trimester 1, Trimester 2, Semester 1, Semester 2 and Trimester 3 students by end of March 2020 totalled 337,276, with a total claim for tuition and allowance to the value of R6,005,124,754.

The improvement in the contracting between students and NSFAS ensured that funding decisions and disbursements were expedited. Due to this process, the number of students who contracted with NSFAS increased to 280,764 during the 2019 academic year and this meant that NSFAS could disburse an amount of R5,195,211,696 towards tuition and allowances.

Due to capacity issues at TVET colleges, manual data exchange techniques are used to expedite processes that would otherwise delay disbursements of tuition and allowances. This, however, also means that NSFAS must ensure that the data is validated and uploaded as per the NSFAS value chain requirements. Currently the ICT and TVET college support teams are to ensure that the data exchanged manually with TVET colleges is captured and reconciled on the NSFAS system. As at July 31, 2020,

ToR6 Put in place the necessary management and governance controls to ensure that all risks of the 2020 student funding cycle are appropriately managed, with the support of DHET and institutions as necessary:

In preparation for the 2020 academic cycle, NSFAS was more pro-active in engaging DHET on policy matters impacting the 2020 cycle. Business rules were further refined and tightened in order to comply with funding guidelines and eliminate potential irregular funding decisions and disbursements. Additional quality assurance processes were performed on the funding value chain in order to ensure that this process maintained its integrity.

In addition, as issues arose in the sector, these were dealt with immediately. For example, the policy directive by the minister relating to the N+2 rule was facilitated through NSFAS engagement with DHET. Particularly, certain concessions were made in order to address potential injustices in the application of the rule. This will contribute immensely to the resolution of issues that are hampering close-out. In the TVET space, the application of the N+1 rule is also being considered pro-actively.

NSFAS Operations is significantly supported by ICT. As such, the stability and governance within ICT plays an important role in the overall management of the 2020 cycle. Critical ICT improvements were required to bring the overall control environment to acceptable levels.

• Efforts continue to improve ICT governance in terms of the Corporate Governance of Information Communication Technology Assessment Standard (CGICTAS) in order to lift the current maturity level.• Investment has been made in additional support that is critical for the data close-out (2017/2018/2019) and Historic Debt Projects.• The onboarding of an independent service provider to assist with the ICT maturity level assessment.

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• The implementation of processes and procedures together with tactical ICT organisational changes will assist with the ICT governance maturity level and quality of services that ICT will be able to provide to the business and any other stakeholder.• The creation of a support team that will assist with all data related issues between NSFAS and institutions for quick resolution to improve service delivery to the institutions and other external stakeholders.

In a bid to address AGSA findings and further improve the general control environment, an enhanced audit improvement plan was prepared following the finalisation of the 2018/19 audit. The implementation of the corrective action plans has been monitored. The status of the audit improvement plans, and particularly the areas of qualification, has been closely monitored by the Governance Risk and Compliance unit and progress reported to the Executive Committee (EXCO) and DHET.

ToR7 Manage the day-to-day work of the entity, and steer NSFAS to address its operational challenges fully. This will include continuation of the strengthening of structures, systems and policies that will ensure good governance and effective management of the core operational mandate of NSFAS:

Effective day-to-day operations of NSFAS is dependent on system stability, ICT service standards and data processing capabilities. The current system availability for the myNSFAS portal is 96.3%. The core disbursement system (Phoenix) availability has also been successfully upgraded and has been running for many months at 99%. These statistics represent a significant improvement away from the dysfunctionality experienced in August 2018.

There has also been significant improvement in real time exchange of data eliminating spreadsheets and manual exchanges. Furthermore, IT system capacity improvements have assisted in enabling stable high-volume processing to regularise payments to students and institutions. Disbursements have also been shifted from a daily run to monthly, improving oversight and control and enabling predictability in allowance and other payments contracts.

Figure 3: Managing day-to-day more efficiently through improved systems

Bulk processingImproved ScalabilityImproved RobustnessImproved Error LoggingStoring Raw Data for improvedProblem Analysis

CACHE Database

Web Services

NSFAS Portal

Institutions

Service Providers

SSL

SSL 2018 2019

Portal Submission100/ Minute / Click

Web Service Submission100/ Minute / Click

Improved Error-Loggingand feedback

Limited Validation Rules

No Validation Rules New Validation Rules

Cache Refresh - 4hrsCache Sync’d - 4hrs

Cache Refresh - 1 hourCache Sync’d - too Long

Cache Refresh - 1hrsCache Sync’d - 1hrs

Cache Refresh - 5minCache Sync’d - 10,000 /hr

Strengthened ValidationRules

Web Service - Single Batch /30,000/ Minute

Portal Submission - SingleBatch / 28,000 / minute

* Secure Socket Layer (SSL)

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The graph below provides the cumulative number of registrations received for the 4 years from 2017 to 2020 demonstrating improvement in the performance of the systems and the processing of institutional data.

The 2018 curve indicates erratic receipt of registration data of annual students throughout the year. Due to system integration deficiencies, institutions were only able to upload 100 records at a time after which the user needed to click a button to process the next 100.

In 2019, the integration engine was significantly enhanced, increasing upload speeds to 28,000 records per minute. The introduction of web service functionality for data exchange as an alternative to the file upload facility provided for an elegant and secure way of data exchange. As in the case of the applications process, upfront validation rules were strengthened at a student record and field level and the addressing of error trapping at the root became a primary driver of ensuring data integrity across the system.

In 2020, more than 80% of registrations were received by the end of March. The 2020 registration process leveraged off the work done in 2019, and many more institutions are now using Web Services for integration rather than utilising the older file upload facility. NSFAS also channelled the file upload process through to the Web Service to ensure that validation occurs through a single validation rules engine that ultimately pushes accurate data through to the NSFAS database.

The early receipt of accurate data from institutions is absolutely vital for organisational planning and will greatly facilitate the ultimate goal of accurately and consistently paying directly into students’ banking accounts on a monthly basis from the final validation point of eligibility to receive funding through to the final payment.

The rate of disbursements from the time of the receipt of registration to the time that disbursements and payments are made is an important efficiency measure. Of course, processing accuracy is also a critical measure, and our accomplishments in this regard is reported in a later section of this document.

Annual Registrations 2017-2019

Data Received

300,000

250,000

200,000

150,000

100,000

50,000

0

450,000

500,000

400,000

350,000

2017

09-2

809

-19

09-1

009

-01

08-2

308

-14

08-0

507

-27

07-1

8

12-1

812

-27

12-0

911

-30

11-2

111

-12

11-0

310

-25

10-1

610

-07

07-0

906

-30

06-2

106

-12

06-0

305

-25

05-1

605

-07

04-2

804

-19

04-1

004

-10

03-2

303

-14

03-0

502

-24

02-1

502

-06

01-2

801

-19

01-1

001

-01

2018

2019

2020

Num

ber o

f Reg

istr

atio

ns

96%95%

93%

85%

64%

80%

91%

100%

100%

52% 100%

79%

61%

33%

30%

10%

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The graph shows significant and consistent performance improvements in the processing time from the receipt of registration data to the first disbursement to institutions and students for the years 2017 – 2020. This is also illustrated in the table below that provides examples of the cumulative percentage of accounts disbursed from registration received to the first disbursement within the number of days specified.

When one reads these statistics in conjunction with the significant improvements in the registration performance data, the results show that a predictable, stable state of student disbursement processing has been achieved.

Payments are processed immediately after disbursements have been made within the system and, in 2019 and 2020, NSFAS has consistently paid allowances to students and institutions on a monthly basis before the end of the month.

Cumulative % of Students processed from Registration to First Disbursement within the number of days for 2017-2020

Number of Days

0%

20%

40%

60%

80%

100%

120%

0 10 30 50 70 90 110 130 150 170 190 210 230 250 270 290 310 330 350 370

2017 2018 2019 2020

% of

Rec

ords

Pro

cess

ed

100%

52%

100%

30,99%

30,83%140,95%

140,95%

30,60%

10,37%

10,92%

Number of Days 2017 2018 2019 2020

10 37% 40% 66% 92%

20 48% 48% 76% 97%

30 57% 60% 83% 99%

40 63% 69% 85% 99%

The graph below provides a comparative view of the number days between the date of registration received from institutions and the date that the disbursement is processed for payment for the years 2017 - 2020.

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NSFAS has also been strengthening collaboration with other funders to improve access for postgraduate and missing middle students excluded by the NSFAS criteria.

• The Bachelor of Medicine and Bachelor of Surgery (MBCHB): NSFAS-Health and Welfare Sector Education (HWSETA) collaboration: NSFAS is collaborating with HWSETA to fund NSFAS students who have completed entry qualifications and then enrolled for MBCHB. Already 70 MBCHB students at Walter Sisulu had been funded as a result of this relationship.

• SAICA THUTHUKA – NSFAS Funding collaboration: The Thuthuka programme is a 4-year programme that is co-funded by the South African Institute of Chartered Accountants (SAICA) and NSFAS, 3 years at undergraduate level and 1 year at honours level. Graduates who were funded by NSFAS for their undergraduate studies need funding and academic support in order to complete CTA (Certificate in Theory of Accounting), CTA is a compulsory leg of their studies towards becoming a fully qualified CA (SA).

• Postgrad NSFAS- National Research Foundation (NRF) Collaboration: NSFAS developed a mechanism to identify NSFAS funded students for post-graduate funding through the NRF.

• Missing middle: Unsuccessful students: NSFAS is to onboard a flagging mechanism to have data indicating students applications are unsuccessful due to the household income being assessed as between R350k and R600k.

Strengthening of particularly processes around disability funding remain very important. In the 2019 academic year, there has been a 19% increase in the number of funded students with disabilities from 1,756 in 2018 to 2,080 in 2019. During administration, the NSFAS Disability Support Unit (DSU) was re-established. Extensive effort was directed towards raising awareness of the DHET Disability Fund with institutions and the process for claims, as well as encouraging institutions to re-submit claims from previous years that were never processed, or not processed

ToR8 Oversee the process of appointing new Executive staff at NSFAS, in terms of the process agreed with the DHET:

Considerable progress has been made in terms of the appointment of an executive team. An inclusive process was undertaken with the DHET and the Office of the Ministry and in consultation with the Administrator to confirm the structure of the NSFAS executive team. This formed the basis from which the recruitment process was initiated.

The recruitment and selection panel’s composition comprised of representatives from various NSFAS external stakeholders, including the Ministry; the DHET; universities; TVET colleges and National Treasury and chaired by the Administrator. The process of recruitment for Chief Executive Officer (CEO); Chief Financial Officer (CFO); Chief Information Officer (CIO); Chief Operations Officer (COO) and Chief Corporate Services Officer (CCSO) were initiated during the last quarter of the 2019 calendar year and the formal recruitment activities commenced in the first quarter of the 2020 calendar year. Despite the advent of the COVID-19 pandemic and the subsequent national lockdown the various recruitment and selection panels continued to function.

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The details with regard to the recruitment process related to each executive is summarised below:

• CEO: The recruitment and selection panel concluded its work for this role during June 2020. The process did not yield the desired outcome and the recruitment for the CEO will be undertaken again.

• CIO: The recruitment and selection panel concluded its work for this role during March 2020. The process which included interviews, verification checks and psychometric assessments did not yield the desired outcome. In the interim the Administrator’s advisor has been appointed to act in the role.

• COO: The recruitment and selection panel concluded its work for this role during February 2020. The process which included interviews, verification checks and psychometric assessments resulted in the appointment of a suitable candidate who assumed duties in March 2020.

• CFO: The recruitment and selection for this role is still in progress. The panel will be convening early in July to conclude the interview process for the shortlisted candidates. In the interim an incumbent has been appointed to act in the role.

• CCSO: The recruitment and selection panel concluded its work for this role during May 2020. The process which included interviews, verification checks and psychometric assessments resulted in the appointment of a suitable candidate who assumed duties in June 2020.

The Chief Governance Risk and Compliance Officer was recruited in early 2019, and the successful candidate assumed duties in June 2019.

Key to the future sustainability of NSFAS is to capacitate the Operations and ICT environment with specified technical skills; to revise operating processes and to apply the appropriate risk management and mitigation protocols. The recruitment of key technical skills has been managed under the umbrella of the critical skills vacancy list and has resulted in the successful recruitment of various key positions.

These appointments considerably strengthened the NSFAS diversity profile and are role models and mentors for younger people within NSFAS

ToR9 Ensure a smooth transition between the administration team and the new Executive staff:

The Administrator established various governance committees to ensure that the organisation is empowered to make decisions within a delegated framework whilst upholding good governance. This includes the formalisation of an EXCO, the ICT Steering Committee; the Disbursement and Cash Flow Committee; Projects Steering Committee and the HR subcommittee.

The resolution of outstanding grievances to facilitate improvement in employee morale and culture, resolution of unhealthy team dynamics to facilitate employee collaboration and teamwork within departments, and the mentoring of identified employees to improve capability and thought leadership - all of this contributes to creating a harmonious workplace to enhance productivity and support the new executive team in fulfilling their roles.

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The required handover protocols and related documentation is currently being prepared by the administration team and will provide the incoming executives with appropriate input to facilitate continued delivery of the NSFAS mandate. Constant engagement with the minister is important in this regard. In effect, the more comprehensive documentation of policy and procedures is critical and facilitates the operation of the organisation, regardless of an executive team at the helm.

ToR10 Oversee all forensic and other investigations necessary for the effective operation and management of the entity and any follow up required:

The NSFAS forensic investigations has four primary themes:1. Irregular expenditure2. Special investigations into the HR unit after the AGSA and internal audit highlighted irregularities in that unit.3. Internal investigations as a result of suspected misconduct4. Investigations into reported cases arising from the Vuvuzela Fraud hotline and whistle-blower reports.

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Category A:This was a case of erroneous approval. No investigative work is required.

Category B:This irregular expenditure relates to erroneous disbursements due to inadequate controls in place, and thus in non-compliance to S51 of the Public Finance Management Act (PFMA).

There are 26 sub-categories within the irregular expenditure relating to NOCLAR. R442m relates to over-disbursements on what was known as the sBux allowance disbursement channel. The remainder relates to a series of issues, including, but not limited to, master data set up, a lack of data management standards and processes, lack of access control, and the lack of, or incorrect, loans and bursary rules being implemented and enforced.

The investigation into the sBux channel has been completed and disciplinary action initiated. The investigation into the remaining irregular expenditure remains ongoing. NSFAS has also requested the support of the Special Investigations Unit, the approval of this is pending the President’s signature.

The following interventions have been initiated in order to prevent further irregular expenditure:

• The DHET rules as they pertain to progression, N+ and course codes have been clarified. Improved processes and automated processes have been implemented in order to reduce the erroneous funding of students in violation of these rules. This has been key in lowering disbursements to incorrect students.• Automated validations have been developed and implemented at different data points from the point of receiving registration data from institutions to the disbursement process. This has reduced the data anomalies in NSFAS systems.• The disbursement process has been mapped and documented and the process and authorisation controls strengthened in order to reduce the likelihood of error.

Irregular Expenditure Category

2018/19 R’m 2017/18 R’m Prior Total

A. Shifting of earmarked funds (Historic debt)

581 73 1 309 1 963

B. Disbursements with respect to NOCLAR

2 652 1 707 - 4 359

C. Other 6 - - 6

Total 4 264 1 991 1 309 7 583

Table 7: Irregular expenditure summary

The investigations are at various stages of completion and where NSFAS has received draft or final forensic reports, it has taken the necessary precautionary and decisive action to respond to the recommendations. In summary, the irregular expenditure incurred falls into the following broad categories:

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• The NSFAS Wallet processes have been automated and manual intervention in this process reduced. The ability to change cellphone numbers have been restricted, as have other sensitive functions, and added control procedures implemented to strengthen controls and reduce student accounts being compromised.• Master data set up processes have been formalised, requiring documented authorisation and review.• The ability to make data changes has been formalised and restricted and audit logs implemented on certain databases in order to detect unauthorised changes.• A project that is aimed at shifting using mobile technology as a direct allowance payment mechanism to one that makes use of a banking solution. This will allow NSFAS to link a student ID to the bank account in a verifiable manner – a control that is not available in the current NSFAS Wallet solution.• Two fraud hotlines are now active, one independent and one manned by a specialist team of contact centre agents. Processes have been implemented to deal with student complaints as they arise each day.

Category CThis arose as a result of:• The system generating loan agreements at an incorrect (lower) value. The disbursements to these students were in terms of their NSFAS loan awards. The over-disbursements are thus technical contract issue and requires that the contracts be rectified. The National Credit Act (NCA) requires that these amended contracts are signed physically. These over-disbursements thus continue due to historic contract issues.• Where the disbursements were in excess of the NSFAS award value and the contract value, this was due to a lack of adequate controls in place when processes, such as what is known as “top-up” disbursements are effected. This process has since been strengthened to prevent similar over-disbursements in the future.

Category D:The investigation into the investment in non-approved investment facilities has been finalised. Findings indicate no fraudulent activity. An application to have this condoned will be made.

Investigation into the HR unit:All of the investigations, including all the HR related ones, that were undertaken in 2019 were performed by external, independent third parties and have been completed. NSFAS is now in the process of actioning the recommendations in terms of these reports.

Internal investigations as a result of suspected misconductThese investigations are managed in conjunction with Labour Relations. As these investigations complete, the necessary disciplinary processes are initiated, where this is required.

The Fraud HotlineIn April 2019 four officials from the NSFAS contact centre were seconded to the Governance Risk and Compliance (GRC) team as an interim measure to assist the GRC team. The secondees were tasked with attending to complaints received via referrals directed from the NSFAS contact centre. This measure helped significantly to address and resolve the backlog of complaints reported since 2018 and the large volume of complaints received via the Vuvuzela hotline are now actively managed and each complaint is followed up with the student and resolved on an ongoing basis as they are reported.

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In 2019, an influx of fraud complaints were received from students alleging that their cellphone numbers were hijacked by unknown 3rd parties who identified themselves as being NSFAS employees to access their NSFAS Wallets. This was then immediately followed by fraudulent cash withdrawals and purchases in different provinces which left the students NSFAS Wallet accounts on a nil balance. The weaknesses in the system which allowed for this to occur were identified and preventative measures were put in place to prevent this.

The function to change a student’s cellphone number was centralised and this responsibility now rests with a single NSFAS Employee. Furthermore, when a student requires a cellphone number change, the student must complete and submit certain supporting documents to their Financial Aid Officer at the institution. The Financial Aid Officer in turn must then forward the documents to the designated NSFAS official for scrutiny and interrogation before the change is authorised.

Since the implementation of the new procedures and fraud preventative measures, not one matter was reported of a student’s cellphone number being fraudulently changed. However, despite several campaigns and notifications to students to educate them on the dangers of volunteering their personal information (i.e. usernames and login passwords to fraudsters/ unauthorised 3rd parties including family members and friends), the hijacking of student accounts persists.

ToR11 Provide support to the Ministerial Task Team (MTT) appointed by the Minister to review the business processes of the entity which will make long-term recommendations on the future models, structures, systems and business processes necessary for an effective NSFAS:

Many of the problems and additional concerns have been unearthed during the period of administration thus far. Although the 2019 student funding cycle was much better managed and there is evidence of significant improvements, some of the core problems remain. The minister has appointed a Ministerial Committee of Inquiry (also known as the Ministerial Task Team) to conduct an independent inquiry into the root causes of the systems, process, policy and capacity challenges and to make recommendations about the short and long -term changes necessary for an effective student financial aid system at NSFAS. The Ministerial Committee of Inquiry has been appointed, as per the Government Gazette dated 21 May 2020 Vol 659 No.4335. Its ToR are set out the investigation must include:

• An assessment of the approved enterprise architecture and business processes of the student-centred model approved by the NSFAS Board in 2012-2013. This must include a full examination of the role and responsibilities of all role players (i.e. NSFAS, universities, TVET colleges, the Department) in the model.

• A full review of the IT systems that support the NSFAS student centred model, and the interface between the NSFAS IT system and the IT systems at universities and colleges. This review must identify the critical issues that have led to the failure of the integration of data between NSFAS and institutions and make recommendations on the possibility of adaptation to automatically support data transfer. It must decide on the extent to which the architecture of the NSFAS model is aligned with university and TVET college processes and IT systems, and what the gaps/ challenges with the model may be.

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• A review of the findings and determination of the progress on recommendations of all reports that have been undertaken between 2014 and 2020 to address systems and capacity deficiencies of the NSFAS funding model. This includes the full student funding cycle from application to evaluation and funding decisions made, to the integration of institutional data and engagement with institutions to confirm funding for students, to the disbursement and payment systems.

• A review of the system performance of NSFAS in relation to the 2018, 2019 and 2020 application processes for TVET college and university students, in lieu of the implementation of the new DHET Bursary Scheme including the assistance provided by the National Youth Development Agency (NYDA) and other partners.

• A review of the approved processes set up for the NSFAS financial eligibility means test evaluation process in lieu of the new DHET Bursary Scheme for the 2018 -2020 application process and the implementation thereof.

• A review of the suitability of all disbursement systems, including related business processes and internal controls relating to this.

• An investigation into the policies, controls and agreements in place at NSFAS to administer the full scope of the system, identifying weaknesses and challenges in all these areas. This should include all departments within the entity - finance, HR, ICT, operations etc.

• A review of the organogram, current job descriptions, and skills requirements to administer a future financial aid system.

• A review of the governance processes and models in place to ensure effective oversight of management of the entity.

• An assessment of the roles and responsibilities and relationships between NSFAS and universities and TVET colleges and proposals for any necessary changes in this area.

The Administrator and his team will play a key role in framing the inquiry and focus of the work of the Committee, as well as ensuring adequate support is provided to conclude their work efficiently and timeously. The NSFAS management and administration team will be expected to work closely with the Committee of Inquiry and provide all relevant reports, reviews and investigations undertaken by the NSFAS to the investigation team. The investigation should not repeat recent review and investigative work already done, but rather take this into consideration in its investigation. It must also ensure alignment with any related work being undertaken at NSFAS

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TRANSITIONING FROM ADMINISTRATION (STATUS AS AT THE DATE OF THE DRAFTING OF THIS REPORT)

The MTT has been appointed, to review ICT systems, the NSFAS operating model and develop the measures required to achieve long term sustainability. The administration team, alongside the full executive provide support to the MTT in terms of guidance and documentation. While much has been achieved, issues NSFAS face are systemic and deep-rooted and stability in key areas is critical for transition:

• The minister issued a call for nominations to the Board of NSFAS as per Government Gazette No. 43525, Vol. 766, 15 July 2020.

• With the exception of CEO and CFO, the latter recruitment being in progress, all senior executive positions have been capacitated. Handover protocols and related documentation are being prepared by the administration team.

• The TVET college division had been established and most positions filled. Full incorporation of TVET college administration into ICT and financial systems are underway.

• A Risk and Governance division had been established including a quality management function to develop, document and implement policies and procedures as well as an internal forensic unit.

• Majority of forensic investigations have been completed and recommendations implemented, including the securing of law enforcement cooperation.

• NSFAS developed partnership with the CSIR to review ICT infrastructure and urgently address cybersecurity vulnerabilities which is critical to reach stable and secure ICT platform.

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47


In this section

PART B: ANNUAL PERFORMANCE REPORT

3. Situational Analysis ......................................................................................................................................................484. Key legislative and mandatory changes ......................................................................................................................505. Strategic Outcome Oriented Goals ...............................................................................................................................516. Performance information by programme/ activity/ objective ....................................................................................527. Strategies to overcome areas of under-performance .................................................................................................648. Changes to planned targets ..........................................................................................................................................649. Linking performance with budgets ...............................................................................................................................66

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PART B - ANNUAL PERFORMANCE REPORT


3. Situational analysis

3.1. SERVICE DELIVERY ENVIRONMENT The annual performance report is based on the strategic objectives and the key performance indicators (KPIs) as set out in the 2015/16 to 2019/20 Strategic Plan and the 2019/20 Annual Performance Plan (APP). The Strategic Plan and the APP outlines the eight (8) strategic objectives and seventeen (17) KPIs of the entity.

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

The entity achieved the performance target for 13 out of 17 KPIs (76%), which is a significant increase compared to the previous financial year. This has been a significant improvement for the financial year under review as the entity recorded an achievement of 7.1% in the 2017/18 financial year and 12.5% in 2018/19 financial year.

Objectives Key Performanceindicators

2019/20 2018/19 2019/20 2018/19Achieved 6 2 13 2Not achieved 2 6 4 14

6

2

13

22

6

4

14

02468

10121416

Achieved Not achieved

Graph 1: Performance Summary

Strive for an improved organisational culture of high performance and high productivity by improving employee engagement. This strategic objective consists of four KPIs and they were all achieved.

Increase in funding (Rand value) raised for financial aid to qualifying students. The entity raised R39.9 million from new funders for the year under review. This was due to the entity’s fund-raising strategy and its efforts in strengthening relations with funders.

Improve the efficiency of the application, evaluation and funding of students. This objective consists of five KPIs and they were all achieved.

Improve the efficiency of payments of tuition, residence fees and allowances to NSFAS students and institutions. The entity has overperformed in this strategic objective.

Improve service level to customers and stakeholders through monitoring customer satisfaction and taking corrective action where necessary. The entity achieved one of the two KPIs namely Number of Social Media and General Campaigns Conducted.

Undertake research for the better utilisation of financial resources. The entity managed

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

Strategic Objective 8 –





Strategic Objective 5–

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Increase the amount of money recovered (Rand value) from NSFAS debtors. In the current year, the entity missed its collections target by 20% whereas in the prior year the collections target recorded an under-performance of 2%.

A slowdown in the economy and rising unemployment had a negative impact on household income and affected servicing of debt in general. The growth in Gross Domestic Product (GDP) fell by 2% in Quarter 1 2020. This was followed by two consecutive drops in Quarter 3 and Quarter 4 2019 of -0.8% and -1.4%, respectively. NSFAS has activated a project to improve on debtor collections.

Improve and maintain financial, performance management and IT governance and audit outcomes. The entity received a qualified audit opinion in the 2018/ 2019 financial year. The CGICTAS remains at level 1 in terms of the Department of Public Service and Administration (DPSA) framework as the issuance of the third-party assurance

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



3.2 ORGANISATIONAL ENVIRONMENT

During the 2019/2020 financial year, NSFAS found itself in a more stable situation compared to the period of implementing of the new DHET bursary scheme in 2018. In addition, government committed itself to increase spending on universities at a percentage of the GDP from 0.68 percent to 1 percent over the next five years.

Key issues that remain a challenge to the entity is the reliance on institutions for accurate and complete data in order to allocate and process disbursement of funds, as well as ICT systems that are not fit-for-purpose and requires customisation to ensure effective transfers of information across the value chain. Extensive quality assurance is required to mitigate risks inherent in human intervention.

Financial controls, quality management and governance had to be introduced to ensure delivery of the mandate in 2019/20 financial year. Significant work continues to improve data exchange protocols, cybersecurity and integrity of data systems. These interventions are being embedded to ensure long term sustainability.

Fractious labour relationships, a poor organisational climate and generally low staff morale resulted in low productivity, entitlement and an extraordinary volume of labour disputes, requiring ongoing attention and establishment of an enabling operating model that will promote delivery. Prima facie evidence of syndicated fraud and corruption consumed much of the administration’s time and created an aura of suspicion stymying rebuilding of organisational culture.

The payment of allowances through intermediaries caused additional process delays and inefficiencies. NSFAS onboarded 35 of 50 TVET colleges onto the NSFAS Wallet system (a cellphone based mechanism to pay allowances to students directly) as an interim measure whilst processes are underway to shift to a banking system for direct payments to students.

The introduction of the DHET bursary scheme led debtors to believe that the repayment of loans was no longer required.

A special allocation of just under R1bn was made available to assist students that incurred debt as a result of capped funding applicable to the loan scheme in place for students prior to 2018.

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ADMINISTRATOR’S TOR

Government Gazette Vol 650 No 42662 dated August 21, 2019

The Administrator took over the governance, management and administration of NSFAS for an initial period of one year. The first phase of the administration was completed successfully with significant improvements noted at NSFAS. However, a second phase of administration was critical to consolidate the work done at the entity and to ensure that effective transition could be put in place towards a new EXMA team and Board. The following ToR was applicable to the period of administration from August 21, 2019 to August 20, 2020:

4. Key legislative and mandatory changes

• Finalise the close-out of the 2017 and 2018 student funding cycle, including finalisation of all data exchange and final payments.

• Ensure the effective close-out of the 2019 funding cycle and provision of accurate data to the DHET.

• Ensure effective preparation for, and implementation of, the 2020 student funding cycle in consultation with DHET.

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

• Maintain a close and productive working relationship between NSFAS and the universities and TVET colleges.

• Put in place the necessary management and governance controls to ensure that all risks of the 2020 student funding cycle are appropriately managed with the support of the DHET and institution as necessary.

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

• Oversee the process of appointing new executive staff and NSFAS, in terms of the process agreed with the DHET.

• Ensure a smooth transition between the administration team and the new executive staff.

• Oversee all forensic and other investigations necessary for the effective operation and management of the entity and any follow up required.

• Provide support to the MTT appointed by the minister to review the business processes of the entity which will make long-term recommendations on the future models, structures, systems and business processes necessary for an effective NSFAS.

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5. Strategic outcome oriented goals

Strategic outcome oriented 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 efficient 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 model through improved communication 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 financial performance management, 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

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Programme/Goal 1: Administration

Purpose: To implement effective and efficient processes and operations to ensure stakeholder objectives are achieved.

In the 2018/19 financial year, the entity has received a qualified audit opinion from the AGSA. The areas of qualification related to:

• Misstatement of the cash flow: The root cause of this issue has been identified – the worksheets used to determine the cashflow was flawed. This has since been corrected and NSFAS does not expect this matter to arise again.

• Amounts due to institutions (non-exchange): The root cause of this issue relates to the lack of transaction traceability in the system. This was the first year that the AGSA performed this audit procedure. NSFAS has successfully been able to reconcile and trace all transactions for both the 2018/ 2019 and 2019/ 2020 financial years and has requested that the AGSA to re-audit these so that the qualification can be cleared.

• Bursary expenditure: This matter related to the AGSA’s inability to trace supporting evidence for the manual payment processes adopted with respect to the one of the funders. The action plan to address this matter is twofold:

o A project to automate the processes for the Pre-Funded portfolio has been approved as part of the 2020/2021 project cycle for implementation in the 2021 academic year.

o The process for manual payments has now been documented, and roles and responsibilities have been clarified and communicated. Additional control procedures have been implemented in order to avoid a similar qualification in the 2019/2020 financial year.

The CGICTAS remains at level 1 in terms of the DPSA framework as the issuance of the third-party assurance certificate has been delayed. The target was thus not achieved in the year under review.

6. Performance information by programme/activity/objective

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PROGRAMME/ GOAL 2: STUDENT-CENTRED FINANCIAL AID

PURPOSE: TO INCREASE ACCESS OF FUNDING FOR ELIGIBLE STUDENTS BY RAISING FUNDS, MAXIMISING LOAN RECOVERIES AND CREATING A STUDENT-CENTRED LOANS AND BURSARIES MODEL THROUGH IMPROVED COMMUNICATION SUPPORT FOR STUDENTS AND CENTRAL APPLICATION PROCESS

THE ENTITY ACHIEVED 10 KPI’s OUT OF 11 INDICATORS MEASURING THIS PROGRAMME.

PROGRAMME 2: STUDENT-CENTRED FINANCIAL AID

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

Performance Indicator Actual Achievement 2016/17

Actual Achievement 2017/18


Planned Target 2019/20


Deviation from planned target to Actual Achievement for 2019/2020

Comment on deviations

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

R104.0m R56.6m R0.00 R12.1m R39.9m R21,1m The entity has overachieved the funds raised from new funders by R28.8m

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

Performance Indicator








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

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

R512.8m was recovered from debtors.

R628.6m 10% increase on the 2018/19 actual collections (R691.5m)

R551.3m R140.2m Slowdown in economy and rising unemployment had a negative impact on household income and affecting servicing of debt in general. The growth in GDP fell by 2% in Q1 2020. This was followed by two consecutive drops in Q3 and Q4 2019 of -0.8% and -1.4%. NSFAS has activated a project to improve on collections.

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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.

R104.0m R56.6m R0.00 R12.1m R39.9m R21,1m The entity has overachieved the funds raised from new funders by R28.8m

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









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

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

R512.8m was recovered from debtors.

R628.6m 10% increase on the 2018/19 actual collections (R691.5m)

R551.3m R140.2m Slowdown in economy and rising unemployment had a negative impact on household income and affecting servicing of debt in general. The growth in GDP fell by 2% in Q1 2020. This was followed by two consecutive drops in Q3 and Q4 2019 of -0.8% and -1.4%. NSFAS has activated a project to improve on collections.

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









3.1 Reduced administrative backlog

New indicator New indicator New indicator 80% of 2019 applications to have final decision by July 31, 2019

95% 15% The overachievement is due to improved systems and financial eligibility validation controls. Further assistance from the partnership with Department of Social Development (DSD) for automated validation of SASSA households.

3.2 Efficient disbursement to students

New indicator New indicator New indicator 80% of 2020 funded students to receive allowances by March 01, 2020.

98% 18% Overachievement is due to efficient disbursement processes. Multiple disbursements were made to accommodate high registration volumes. Approximately 31,000 registration records were received and linked post the schedule disbursement run in February 2019 which were paid in the subsequent disbursement

3.3 Payments and remittances reconciled across institutions

New indicator New indicator New indicator 80% of all remittances reconciled with registration data by May 01, 2019

85% 5% Overachievement due to improved disbursement processes. Payments were on an alternative platform which was quicker.

3.4 Efficient disbursement to institutions

New indicator New indicator New indicator 40% of institutions provisional allocation paid by July 31, 2019

43% 3% None

3.5 Level of outstanding payments

New indicator New indicator New indicator All payments for all years up to and including 2018 made by August 31, 2019

AchievedPayments to clear the backlog with respect to the 2017 and 2018 academic years amounted to R7,3bn.

None This amount excludes remittances released to institutions which would have allowed institutions to release allowances to students for payments processed prior to administration.Outstanding payments in relation to the 2017/2018 and 2018/2019 years has been calculated at R1,8bn, as determined by the Close-Out Project in terms of the administrator’s TOR, for which a cash reserve of R1,6bn is currently held.

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









3.1 Reduced administrative backlog

New indicator New indicator New indicator 80% of 2019 applications to have final decision by July 31, 2019

95% 15% The overachievement is due to improved systems and financial eligibility validation controls. Further assistance from the partnership with Department of Social Development (DSD) for automated validation of SASSA households.

3.2 Efficient disbursement to students

New indicator New indicator New indicator 80% of 2020 funded students to receive allowances by March 01, 2020.

98% 18% Overachievement is due to efficient disbursement processes. Multiple disbursements were made to accommodate high registration volumes. Approximately 31,000 registration records were received and linked post the schedule disbursement run in February 2019 which were paid in the subsequent disbursement

3.3 Payments and remittances reconciled across institutions

New indicator New indicator New indicator 80% of all remittances reconciled with registration data by May 01, 2019

85% 5% Overachievement due to improved disbursement processes. Payments were on an alternative platform which was quicker.

3.4 Efficient disbursement to institutions

New indicator New indicator New indicator 40% of institutions provisional allocation paid by July 31, 2019

43% 3% None

3.5 Level of outstanding payments

New indicator New indicator New indicator All payments for all years up to and including 2018 made by August 31, 2019

AchievedPayments to clear the backlog with respect to the 2017 and 2018 academic years amounted to R7,3bn.

None This amount excludes remittances released to institutions which would have allowed institutions to release allowances to students for payments processed prior to administration.Outstanding payments in relation to the 2017/2018 and 2018/2019 years has been calculated at R1,8bn, as determined by the Close-Out Project in terms of the administrator’s TOR, for which a cash reserve of R1,6bn is currently held.

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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 funding decisions of valid applicants received by November 30 processed before registration

New indicator New indicator New indicator Funding decisions for 60% of all applications received by November 30 completed by December 31

75% 15% The overachievement is due to improved processes that make it easier to process bulk funding decisions.Reliable third-party validation that increased the efficiency in the process and additional resources that resolved exceptions speedily

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








5.1 Number of Social Media and general media campaigns conducted

New Indicator New Indicator New indicator 20% increase on number of 2017/18 Campaigns

71 campaigns 1083% The planned target is measured in percentage whilst the KPI was measured in numbers.It created inconsistency in the calculation of the evidence which was in numbers. In 2017/18, there were 6 campaigns

5.2 Increase capacity for TVET colleges support

New Indicator New Indicator New indicator Establish Team to focus on TVET colleges specific issues by April 30, 2019

0 1 No one was appointed during this reporting period. Appointments will be taking place in the new financial year.

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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 funding decisions of valid applicants received by November 30 processed before registration

New indicator New indicator New indicator Funding decisions for 60% of all applications received by November 30 completed by December 31

75% 15% The overachievement is due to improved processes that make it easier to process bulk funding decisions.Reliable third-party validation that increased the efficiency in the process and additional resources that resolved exceptions speedily

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








5.1 Number of Social Media and general media campaigns conducted

New Indicator New Indicator New indicator 20% increase on number of 2017/18 Campaigns

71 campaigns 1083% The planned target is measured in percentage whilst the KPI was measured in numbers.It created inconsistency in the calculation of the evidence which was in numbers. In 2017/18, there were 6 campaigns

5.2 Increase capacity for TVET colleges support

New Indicator New Indicator New indicator Establish Team to focus on TVET colleges specific issues by April 30, 2019

0 1 No one was appointed during this reporting period. Appointments will be taking place in the new financial year.

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Objective: 6. Undertake research for the better utilisation of financial resources

Performance indicator Actual achievement 2016/2017

Actual achievement 2017/2018

Actual achievement2018/2019

Planned target2019/2020


Deviation from planned target to actual achievement for 2019/2020


6.1 Number of research outputs produced in financial year

4 research reports produced

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

4 research briefs produced for the financial year under review

4 research outputs produced

8 research outputs produced during the year under review:

- 4 Research reports - 4 Advisory briefs

4 Research outputs additional to target

Strengthened the research unit capacity

Objective: 7. Improve and maintain financial, performance management and IT governance and audit outcomes.








7.1 Audit Opinion of the AGSA

Unqualified audit with findings

Unqualified audit opinion with materialfindings

Qualified audit opinion

Unqualified audit Qualified audit opinion (100.00%) NSFAS received a qualified audit opinion in relation to:

• Misstatement of the cashflow• Amounts due to institutions(non-exchange)• Bursary expenditure

7.2 Status level for Corporate Governance Information and Communications Technology Assessment standard (CGICTAS) achieved.

CGICTAS level 3 CGICTAS level 3 CGICTAS level 1 CGICTAS level 3 CGICTAS level 1 (100.00%) The third-party assurance certificate was delayed, and the target was thus not achieved in the year under review.

PROGRAMME 1: Administration

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Objective: 6. Undertake research for the better utilisation of financial resources








6.1 Number of research outputs produced in financial year

4 research reports produced

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

4 research briefs produced for the financial year under review

4 research outputs produced

8 research outputs produced during the year under review:

- 4 Research reports - 4 Advisory briefs

4 Research outputs additional to target

Strengthened the research unit capacity

Objective: 7. Improve and maintain financial, performance management and IT governance and audit outcomes.








7.1 Audit Opinion of the AGSA

Unqualified audit with findings

Unqualified audit opinion with materialfindings

Qualified audit opinion

Unqualified audit Qualified audit opinion (100.00%) NSFAS received a qualified audit opinion in relation to:

• Misstatement of the cashflow• Amounts due to institutions(non-exchange)• Bursary expenditure

7.2 Status level for Corporate Governance Information and Communications Technology Assessment standard (CGICTAS) achieved.

CGICTAS level 3 CGICTAS level 3 CGICTAS level 1 CGICTAS level 3 CGICTAS level 1 (100.00%) The third-party assurance certificate was delayed, and the target was thus not achieved in the year under review.

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








8.1 Number of policies and procedures reviewed and approved

New indicator New indicator New indicator All policies to be reviewed by June 2019 and policy gaps identified

All policies reviewedand gaps identified. Mission critical policies and SOPs in operations, ICT and HR were developed and approved by the Administrator

None None

8.2 To define and design the appropriate organisational structure

New indicator New indicator New indicator Revised organisational structure to be approved by December 31, 2019

Revised Organisational Structure approved by December 31, 2019

None Interim organisational structure developed by business units and approved by the Administrator. The mandate of the anticipated MTT will be to review the entire operating model of NSFAS in 2020

8.3 Implement an approved Performance Management System

New indicator New indicator New indicator Fully Implement Individual Performance Contracts by April 30,2019

IPCs framework approved and implemented

None All staff have been issued with IPCs with approximately 95% having signed these. The residual is due to employee on leave.

8.4 Address issues of culture, leadership behaviour, staff morale and engagement

New indicator New indicator New indicator Complete ManagerEssentials trainingfor 50% of employees in levels 13-8

More than 80% 30% To over performance is due to requirement for management to understand the implications of NOCLAR and adherence to PFMA. Given the toxicity of the corporate culture, diversity training was prioritised.

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








8.1 Number of policies and procedures reviewed and approved

New indicator New indicator New indicator All policies to be reviewed by June 2019 and policy gaps identified

All policies reviewedand gaps identified. Mission critical policies and SOPs in operations, ICT and HR were developed and approved by the Administrator

None None

8.2 To define and design the appropriate organisational structure

New indicator New indicator New indicator Revised organisational structure to be approved by December 31, 2019

Revised Organisational Structure approved by December 31, 2019

None Interim organisational structure developed by business units and approved by the Administrator. The mandate of the anticipated MTT will be to review the entire operating model of NSFAS in 2020

8.3 Implement an approved Performance Management System

New indicator New indicator New indicator Fully Implement Individual Performance Contracts by April 30,2019

IPCs framework approved and implemented

None All staff have been issued with IPCs with approximately 95% having signed these. The residual is due to employee on leave.

8.4 Address issues of culture, leadership behaviour, staff morale and engagement

New indicator New indicator New indicator Complete ManagerEssentials trainingfor 50% of employees in levels 13-8

More than 80% 30% To over performance is due to requirement for management to understand the implications of NOCLAR and adherence to PFMA. Given the toxicity of the corporate culture, diversity training was prioritised.

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7. STRATEGIES TO OVERCOME AREAS OF UNDER-PERFORMANCE The measures are put in place to address the areas of under- performance of the entity and include:

Strategic Objective 2- A slowdown in the economy and rising unemployment had a negative impact on household income and affected servicing of debt in general. The growth in GDP fell by 2% in Q1 2020. This followed two consecutive drops in Q3 and Q4 2019 of -0.8% and -1.4%. The current micro-economic environment that NSFAS is currently operating in, makes it very difficult to achieve good debtor collection rates.

NSFAS has activated a project to allow debtors to set up debit orders in real time to improve the collection rates. The recoveries strategy was revised to enforce collections where debtors have been refusing to pay. Currently, the Supply Chain Management (SCM) process is underway to renew and extend the external debt collection contract by another 3 years. Debtors statements are currently being sent every second month to keep debtors informed of their outstanding balances, and this also assists in activating new repayments.

A close collaboration has been forged with South African Revenue Service (SARS) in order to match the NSFAS loan book with SARS data every second quarter. This allows NSFAS to identify new debtors.

Strategic Objective 7 – An enhanced audit improvement plan was prepared following the finalisation of the 2018/19 audit and the implementation of the corrective action plans has been monitored. The status of the audit improvement plans, and particularly the areas of qualification, has been closely monitored by the Governance Risk and Compliance unit and reported to EXCO and DHET.

The entity continues to direct effort at improving its ICT governance. A third-party assurance service provider is currently in the process of evaluating the ICT governance maturity, but this was not finalised at the end of the financial year.

8. Changes to planned targets There were no in-year changes to the KPIs and targets for the year under review

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2018/19 2019/20

Programme Budget Actual expenditure (Over)/ under expenditure Budget Actual expenditure (Over)/under expenditure

R’000 R’000 R’000 R’000 R’000 R’000

Administration 369,742 385,355 (15,613) 294,145 293,749 396

Student-Centred Financial Aid

24,138,214 24,592,991 (454,777) 32,664,526 28,061,836 4,602,690

AFS reconciling items

Depreciation and amortisation and write offs

16,431 1,080,549 (1,064,118) 14,788 99,611 (84,823)

CAPEX 10,404 5,827 4,577 4,744 1,523 3,221

Total 24,534,791 26,064,722 (1,529,931) 32,978,203 28,456,717 4,521,484

9. LINKING PERFORMANCE WITH BUDGETS

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2018/19 2019/20

Programme Budget Actual expenditure (Over)/ under expenditure Budget Actual expenditure (Over)/under expenditure

R’000 R’000 R’000 R’000 R’000 R’000

Administration 369,742 385,355 (15,613) 294,145 293,749 396

Student-Centred Financial Aid

24,138,214 24,592,991 (454,777) 32,664,526 28,061,836 4,602,690

AFS reconciling items

Depreciation and amortisation and write offs

16,431 1,080,549 (1,064,118) 14,788 99,611 (84,823)

CAPEX 10,404 5,827 4,577 4,744 1,523 3,221

Total 24,534,791 26,064,722 (1,529,931) 32,978,203 28,456,717 4,521,484

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2018/19 2019/20

Recoveries monies Estimate Actual amount collected

Over/(Under) collection Estimate Actual amount collected Over/(Under) collection

R’m R’m R’m R’m R’m R’m

Recoveries monies 640.9 628.6 (12.3) 691.5 551.3 (140.2)

Total 640.9 628.6 (12.3) 691.5 551.3 (140.2)

Revenue Collection

Refer to strategic objective 2

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2018/19 2019/20

Recoveries monies Estimate Actual amount collected

Over/(Under) collection Estimate Actual amount collected Over/(Under) collection

R’m R’m R’m R’m R’m R’m

Recoveries monies 640.9 628.6 (12.3) 691.5 551.3 (140.2)

Total 640.9 628.6 (12.3) 691.5 551.3 (140.2)

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In this section

Part C: GOVERNANCE

10. Introduction .....................................................................................................................................................................7211. Portfolio Committees ......................................................................................................................................................7312. Executive Authority ..........................................................................................................................................................7313. The Administrator ............................................................................................................................................................7414. Committees ......................................................................................................................................................................7415. Risk Management ............................................................................................................................................................7416. Internal Control Unit ........................................................................................................................................................8017. Internal Audit and Audit Committees .............................................................................................................................8018. Compliance with Laws and Regulations .......................................................................................................................8219. Fraud and Corruption ......................................................................................................................................................8220. Minimising Conflict of Interest .......................................................................................................................................8321. Code of Conduct .............................................................................................................................................................8322. Health, Safety and Environmental Issues ......................................................................................................................8323. Company Secretary ........................................................................................................................................................8424. Social Responsibility ......................................................................................................................................................8425. Audit and Risk Committee Report ..................................................................................................................................8426. B-BBEE Compliance Performance Information ...........................................................................................................86

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

The governance mechanisms in effect for the year under review is the reflection of the entity being placed under administration, as is shown below:

10. INTRODUCTION

Governance mechanism

Purpose Period effective

Committees of Parliament

Parliament exercises its role through evaluating the performance of the public entity by interrogating the AFS 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 PCHET in the National Assembly

Oversight Effective throughout the year

SCER, in the NCOP Oversight Effective throughout the year

The Standing Committee on Public Accounts (SCOPA) in the National Assembly

Oversight Effective throughout the year

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.

Effective throughout the year

Administrator The Administrator assumed the role of both the Board and EXMA

Effective from August 21, 2019 to August 20, 2020.In terms of the NSFAS Act, the Administrator assumes the role of the Board.

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Parliament evaluates the performance of the scheduled 3A entity by interrogating AFS and prescribed documents which have to be tabled, as well as other documents tabled from time to time.The SCOPA reviews the AFS and the audit reports of the external auditor.

The Portfolio Committee exercises oversight over the service delivery performance of public entity and, as such, reviews the non-financial information contained in the annual reports of public entity and is concerned with service delivery and enhancing economic growth.

11. Portfolio Committees

Date Topic

November 06, 2019 Colloquium on funding of the PSET sector.

November 13, 2019 Presentation of Annual Report.

February 04, 2020. Briefing by NSFAS on the state of readiness for the 2020 academic year and rules and regulations for 2020 funding

February 06, 2020 Tshwane University of Technology Oversight visit.

February 07, 2020 Vaal University of Technology Oversight visit

March 03, 2020 NSFAS disbursement of funding and allowances to students at the University of KwaZulu-Natal, University of the Western Cape and the University of Fort Hare

March 11, 2020 NSFAS allocation of funding and allowances to Gert Sibande, Central Johannesburg and Tshwane North TVET College

March 17, 2020 NSFAS to provide an update on the disbursement of allowances to students at Cape Peninsula University of Technology.

The Administrator provided reports to the minister on the progress made during administration. He also met with the minister on a regular basis through the period of administration. The submission dates of the reports are:

• September 13, 2019• September 30, 2019• October 14, 2019• October 29, 2019• November 08, 2019• November 25, 2019• December 06, 2019• January 15, 2020• January 31, 2020

12. Executive Authority

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NSFAS was placed under administration on August 16, 2018, and Dr. Randall Carolissen was appointed as the Administrator. The Minister of Higher Education, Science and Innovation appointed Dr. Carolissen for a second term of administration effective August 21, 2019 until August 20, 2020. The Administrator serves as both the Board and EXMA. The ToR of the Administrator is set in the Administrator’s report.

When it became evident that the forensic investigations may result in some members becoming conflicted, the Audit and Risk Committee was dissolved by the Executive Administrator on October 19, 2018. The process for re-establishing an Audit and Risk Committee commenced in October 2019 with the adoption of a process guide for the establishment of an independent Audit and Risk Committee. Members were appointed in terms of this guide and approved by the Administrator, with the concurrence of the Minister of Higher Education Science and Innovation. The committee took effect after year end. Members consist of a representative from the DHET, a representative from National Treasury and four independent members.

The Administrator, Advisors, and Executive members conducted an organisation strategic session in October 2019. The purpose of the strategy session also included the alignment of the Administrator 2019 ToR with the organisation’s strategic risks identified. The strategic risks highlighted critical areas of focus and enforced accountability of the Advisors and the executive members.

The NSFAS Enterprise Risk Management Framework has been developed and approved and guided the enterprise-wide risk management approach, adopting a top-down, bottom-up risk management approach. The NSFAS strategic risks are managed by applying the Top-Down approach to shape the organisation’s performance guided by the organisation’s strategic objectives in support of risk-informed decisions at the EXMA level.

The strategic risks identified are mitigated and monitored through various project management programs streaming across the value chain of the organisation.

13. The Administrator

14. Committees

15. Risk Management

Top-downExecutive Administrator and the Executive Management - Strategic Risk

Bottom-upBusiness Units all operational function - Operational Risk

Enterprise Wide risk register

Enhanced Risk Strategy

Optimise risk management Functions

Improve control and processes

Coordinate multiple risk functions through Risk representative acrossthe organization.

Enhance business level performance. Enable the organisation to differentially manage key risks with optimized processes and controls at the business level

Strengthen risk governance and oversight. Define risk strategy and oversight with accountability for risk management at the Administrator and Executive levels.

Embedded RiskManagement

Integrate risk and performance management. Embed an enterprise approach to risk assessment and monitoring.

Risk Management Approach

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The following table below outlines the top 10 key strategic risk profile for financial year-end FY 2018/2019, following the Administrator and the Executive members’ strategic session held in October 2019. The strategic risk is continuously monitored and assessed for residual risk exposures. The objective of the risk assessment process is to:

• Ensure all material and emerging risks with the potential to negatively impact NSFAS strategy are identified, assessed and recorded; and

• To provide assurance to the Administrator that adequate and effective risk mitigation strategies are implemented across the organisation.

Following this process, it is concluded that the key strategic risk profile for FY2018/2019 is a complete and accurate representation of strategic risks concerning NSFAS strategic objectives.

Strategic Risk Mapping:

5Almost certain>90%

4Likely

51-70%

3Possible31-50%

2Unlikely11-30%

1Rare

IMPACT1

Insightificant

High (5A) High (10A) Critical (10A) Critical (10A) Critical (10A)

Medium (4A) High (8A) High(12A) Critical (10A) Critical (10A)

Medium (3A) Medium (6A) High(9) Critical (12B) Critical (15B)

Low (2A) Medium (4B) Medium (6B) High (8B) High (10B)

Low (1A) Low (2B) Medium (3B) Medium (4C) High (5B)

2Minor

3Moderate

4Major

5Catastropic/Significant

2. system are not fit forpurposes

9. Key persondependency

4. Fraud

6.Organisations design, capacity, and skills

10. Policies and procedures

5. cybersecurity

Institutional dependency -+TVET

2. Poor dataarchitecture design

9. Key persondependency

LIKELIHOOD

3. Budget Strain6. Policies and procedures

7. Disbursement andforecasting

RISK TRENDS

Residual risk exposure is increasing

↔ Residual risk exposure is stable

Residual risk exposure is decreasing

↑ ↓

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TOP 10 STRATEGIC RISKS – MARCH 2020

# RISK NAME RISK DESCRIPTION CURRENT MITIGATIONS

ICT systems are not fit for purpose

The core operational systems are not fit for purpose due to poor design and may result in material errors as well as inefficient and ineffective fund administration

NSFAS ICT team continues to execute tactical action plans in order to maintain system stability. The MTT has been appointed by the minister to evaluate the longer-term viability of the current systems.

Poor data architecture design

The continued poor data architectures resulted in poor student and fund management, material disbursement errors and ineffective fund administration and generally contributed to the large irregular expenditure of 2017 and 2018

Data remediation is currently underway in order to address immediate issues pertaining to the root cause of the irregular expenditure. Additional business rules and validations have been developed and implemented in order to enhance and maintain sound data quality principles.

Budget constrains There is an inadequate budget to establish and maintain functional and fit for purpose ICT infrastructure and organisational structure.

Critical ICT resources have been identified and appointed. Strategic objectives are executed through business-critical projects.

Fraud Funds may be lost due to fraud, including syndicated fraud

Business projects are underway to mitigate fraud risk exposures. An internal forensic team has been appointed to address current fraud reports and proactive fraud identification. A fraud hotline is in effect and fully operational.

Cybersecurity Data and information confidentiality and integrity may be compromised due to poor cybersecurity maturity

The cybersecurity project is underway. NSFAS is currently working with the CSIR as part of its strategy to improve the cybersecurity maturity.

2

3

4

5

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TOP 10 STRATEGIC RISKS – MARCH 2020 (Continues)

# RISK NAME RISK DESCRIPTION CURRENT MITIGATIONS

Organisational design, capacity, and skills

Lack of appropriate skills, appropriate capacity and an organisational design that is not aligned to the business requirements

The Administrator has appointed a number of executives in order to facilitate a sustainable leadership as part of the transition away from administration. In addition, NSFAS has invested in deep technical skills in order to enhance capacity and improve alignment to business requirements. A critical vacancy list is maintained, and all recruitment is done in accordance with this critical vacancy list.

Disbursement and forecasting

Inability to pay students timeously and to project disbursement cashflows accurately due to the dependency on the submission of complete and accurate data that is submitted timeously by institutions

Cash flows are analysed and projected on an ongoing basis. Continuous improvement to business intelligence reporting and forecasting is implemented in order to improve forecasting accuracy. Registration data received from institutions are validated using automated validation controls to improve accuracy of registration data and it is uploaded into the NSFAS system.

Institutional dependency – TVET college

NSFAS is highly dependent on institutions for several processes, including the submission of data and the disbursement of allowances and which may not be done accurately or timeously or may be subjected to fraud, leading to the NSFAS brand being affected negatively. Specifically, this relates to accuracy of TVET college results data in order to determine student progression.

NSFAS petitioned to DHET and has been granted permission to receive results data directly from colleges in order to improve data quality and reduce incorrect funding decisions.

Key person dependency

The continued dependency on key persons may hamper the efficient and effective fund administration, create employee empires and contribute to a dysfunctional culture

NSFAS has invested in deep technical skills in order to enhance capacity and reduce dependency on key individuals. A critical vacancy list is maintained, and all recruitment is done in accordance with this critical vacancy list. In addition, a project to document all processes according to the ISO 9000 standard has been initiated. This will reduce the risk of institutional residing in certain staff members.

Policies and procedures

Lack of policies and procedures, as well as up to date process documentation lead to poor institutional knowledge, non-compliance, material processing errors, and poor service delivery.

NSFAS has initiated a policy development and renewal project. The purpose of this project is to renew existing policies that are out of date and introduce additional policies to close policy gaps within the entity.

1

8

9

6

7

10

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In facilitating the risk discussions across the organisation with the EXMA and the Operation Lead streams, consideration was given to both strategy and operational potential events that may negatively impact the achievement of the NSFAS strategic objectives. The strategic and operational emerging risks arising from external and internal drivers as follows:

RISK OUT-LOOK POST ADMINISTRATION

EMERGING RISKS

# Risk description Areas of concern Responses underway that will need to continue

1 External factors • Retraction in GDP growth causing job losses will increase demand for NSFAS funding resulting in NSFAS budget being oversubscribed.

• The impact of COVID-19 nationwide lockdown on the higher education sector may result in increased distance learning, requiring adjusted funding and support models for the poor and working class.

• There is increasing evidence of syndicated activity operating across the higher education sector defrauding NSFAS beneficiaries.

• This will require policy changes in higher education and the NSFAS funding model. Engagement on these matters have been initiated with the DHET and will need to continue to arrive and solutions that are workable within the sector.

• State investigation authorities have been approached in order to assist with the matters relating to syndicate fraud.

2 Governance • Board succession obtains the right skill, ethical behaviour, and competency of the Board.

• Leadership handover from the current administration to the newly appointed Executives.

• Work is underway to ensure a smooth transition from administration to the newly establish NSFAS Board. The process for the establishment of the Board is handled through a public participation process, with oversight from the DHET.

• The transition plan includes a smooth hand over to EXMA.

3 People • Identification, retention, and succession for key roles across the organisation.

• ICT skills shortages in the market.

• Attraction and retention of talent.

• Addressing the issue of organisation culture and team integration.

• A continued and increased focus will be required on talent management, further enhancing the investment in technical skills to drive operational efficiency.

• Continued focus will be required in order to shift the organisational culture to that of its defined values.

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# Risk description Areas of concern Responses underway that will need to continue

4 Process • Continuously improving on operational efficiencies and process disciplines.

• Embedding and enforcing process and system controls to avoid failures of the past

• Addressing remaining issues of non-compliance to legislation.

A project to document all processes according to the ISO 9000 standard has been initiated. All lines of defence have been strengthened under administration. Further investment will be required in order to sustain and improve this further.Areas of significant non-compliance have been escalated to the DHET and integrated NSFAS/DHET teams mobilised to address these where required.

5 Systems • Adequacy and effectiveness of monitoring, prevention, and early detection of security threats.

• The availability of sufficient ICT infrastructure and ICT capability to support the business strategy.

• Data integrity and protection. • Business Intelligence.

Implementation of the ICT governance framework and strategy will need to continue.Deliver scalable digital solutions that can focus on the core operational needs.Investments in technology platforms and systems that are fit for purpose will be required.Implementation of enhanced Business Intelligence reporting is needed.

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16. INTERNAL CONTROL UNIT

NSFAS does not have an internal control unit.

17. INTERNAL AUDIT AND AUDIT COMMITTEES

Ernst & Young Advisory Services (Pty) Ltd provided outsourced internal audit services until August 2019. A NSFAS internal audit in-house function was established in October 2019 and became fully operational in January 2020. The newly formed 3-year strategic internal audit plan 2020 – 2022 was approved by the Administrator.

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 functionally to the Governance, Risk and Compliance Executive. The internal audit in-house function was established 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.

THE OBJECTIVES OF INTERNAL AUDIT ARE:

• To assist the NSFAS Board and EXMA to protect the reputation, the sustainability and assets of NSFAS;• To provide independent, reliable, valued, insightful and timely assurance to the NSFAS Board and EXMA over the effectiveness of governance, risk management and control over current, systematic and evolving risks in the context of the current and expected business environment; • To own and drive the combined assurance model within NSFAS that includes predominantly: internal audit, risk management, quality assurers, environmental and occupational health and safety, external audit, other external assurance providers and management, in doing so supporting the achievement of NSFAS’ business objectives.

INTERNAL AUDIT’S KEY ACTIVITIES:

• Assessing the organisation’s risk management and internal control systems as included in the annual internal audit plan;• Furnishing members of the executive team with reports that identify control problems, and make practical, cost-effective recommendations with a view to their improvement;• Assessing whether key risks to the organisation have been identified and assess how effectively these are being managed;• Evaluating plans and actions taken to correct reported conditions;• Confirming that corrective actions are taken in response to reported weaknesses and evaluating whether they effectively eliminate the problems;• Performing specific investigations at the request of the Audit & Risk Committee, the CEO, the Board and Executive members.

It also includes the following, as may become necessary during the execution of an internal audit project:

• Ensuring that significant financial, managerial and operational information is accurate, reliable and timely;• Evaluating whether employees’ actions are in compliance with policies, standard procedures, applicable laws and regulations and the organisation’s code of conduct;

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• Evaluating whether resources are acquired economically, used efficiently and are adequately protected;• Ensuring quality and continuous improvement, are fostered in NSFAS’ organisational control processes;• Ensuring significant legislative or regulatory issues affecting the organisation are recognised and addressed appropriately;• Ensuring that interaction with the various governance groups within NSFAS occurs as appropriate; and• Evaluating whether the organisation’s plans and objectives are achieved.

Internal audit also has within its scope a requirement to provide assurance on:

• The risk and control culture of the organisation including assessing whether processes, actions and “tone from the top” and “tone in the middle” are in line with the values, ethics, risk appetite and policies of the organisation;• Management’s control awareness (approach taken by all levels of management) and internal control, including management’s approach to addressing known issues.

Summary of internal audit work completed

During the period April 2019 – September 2019, NSFAS internal audit was outsourced to Ernst & Young as the outsourced internal auditors and performed the following audit work in providing assurance regarding:

• Institutions’ (universities & TVET colleges) adherence to the rules and guidelines governing the DHET bursary scheme for students at public universities and colleges for 2017, 2018 ad 2019. The audit also assessed whether allowances for students paid by the institutions on behalf of NSFAS were in accordance with DHET rules and guidelines;• Implementation of agreed management action plans to address risks raised via audit issues raised by AGSA, including the audit issues raised relating to the NOCLAR issues raised by Ernst & Young Internal Audit;• SCM, specifically focusing on contract management, deviations from contracts and emergency procurement, as well as the management of evergreen contracts;• Recruitment practices followed including the creation and approval of positions within NSFAS, advertisement and final appointments made;• Close-out project relating to the 2017 and 2018 academic years and data anomalies and exceptions, identified during the close-out project by NSFAS management giving rise to NSFAS being able to complete its final reporting process at the time of review;• The clearance of the backlog for the 2017 and 2018 academic years focusing on the appropriateness of manual and governance processes in place to assist with the clearing of the backlog.

The NSFAS Internal Audit in-house function was established in October 2019 and operated for a period of six months (October 2019 - March 2020). The NSFAS internal audit methodology was established and approved focusing on a risk-based internal audit methodology and audit plan to ensure adequate coverage of high risks and for the Administrator to be provided with assurance that the key controls within the organisation are operating as intended.

The in-house function completed the following audit work as at year end:

• A review of the recruitment process and the adequacy of controls implemented in the recruitment and selection process followed with regards to a specific appointment in 2016 which stemmed from a whistle blowing hotline incident;

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18. COMPLIANCE WITH LAWS AND REGULATIONS

NSFAS is committed to and conducts the organisation lawfully, in a manner that is aligned with laws, regulations, best practices, and financial standards. Compliance is the outcome of NSFAS meeting its compliance obligations and should not be seen as a stand-alone activity, as it is aligned with NSFAS overall strategic objectives and more closely with the NSFAS Enterprise Risk Management Framework.A NSFAS compliance universe is in place to highlight overarching principles and commitment to action for the organisation concerning achieving compliance.

NSFAS identified high priority laws and regulations to comply with as follows:• PFMA (Act 1 of 1999)• NSFAS Act (Act 56 of 1999)• NCA (Act 34 of 2005)• Treasury regulations (TR) for departments, trading entities, constitutional institutions, and public entities.

19. FRAUD AND CORRUPTION

A necessary but rather distracting feature of the term of the Administrator was the expansiveness of the forensic investigations that were required and the time consumed effecting the recommendations. The HR forensic investigations revealed large scale abuse of remuneration, irregular appointments of senior executives, and the absence of governance in general. Investigations on the voucher system that existed as a form of disbursement to students were fraught with fraud and corruption and several arrests eventuated already.

Evidence of syndication extending into the higher education sector had been handed over to the specialised police departments.

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 to be taking place in the NSFAS funding system. The fraud hotline was operational for the full financial year.

• A review of controls that failed resulting in student applications that were initially rejected (6 845) due to failing the 3-point (ID, Name & Surname) validation where their statuses have subsequently changed to either “Funded” or “Application Validated”; and• A review regarding the reliability, accuracy and completeness of data provided to the COO with regards to providing 2019 funding to applicants with disabilities based on their funding eligibility.

An Audit and Risk Committee, established in terms of the PFMA, was not in operation during the period. The process for establishing such a committee commenced in October 2019 with the adoption of a process guide for the establishment of an independent Audit and Risk Committee. Members were appointed in terms of this guide and approved by the Administrator, with the concurrence of the Minister of Higher Education Science and Innovation. The committee took effect after year end. Members consist of a representative from the DHET, a representative from National Treasury and four independent members.

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20. MINIMISING CONFLICT OF INTEREST

At the commencement of the financial year, each SCM official signs a code of conduct which includes amongst other details, a declaration of interest. In addition to this, as part of the procurement evaluation process, prior to the awarding of a procurement transaction below R500,000 (VAT included), the SCM officials declares any interest in relation to the recommended service provider and its directors. Should a potential conflict of interest be identified, the respective SCM official will be removed from the evaluation and award approval process, following which the procurement award will be approved by the Chief Financial Officer (CFO).

For procurement transactions that exceed R500,000 (VAT included) each NSFAS bid committee member representing the bid specification committee, bid evaluation committee and bid adjudication signs the declaration of interest register which would note any potential conflict of interest. Should a potential conflict of interest be identified, the bid committee member will be asked to be recused from the respective meeting.

For the 2019-2020 financial year, no conflicts of interest were identified.

21. Code of Conduct

NSFAS has a Code of Conduct which is enforced. The code provides details of the processes to follow after a breach of the code. During the year under review, there was a total of 14 cases where the code of conduct was breached and these led to 0 verbal warnings, 1 written warning, 4 final written warnings and 9 dismissals.

22. Health, Safety and Environmental Issues

NSFAS is committed to providing a safe working environment for staff in compliance with Occupational Health and Safety (OHS) and related legislation.

The COVID-19 pandemic presented itself at the end of the financial year and whilst the organisational response has been pro-active and robust, the frequently updated regulations require a very agile response to ensure service delivery is not compromised during a time when the majority of staff are working remotely.The OHS Committee is operational and the required training of Health and Safety role-players (H & S Reps, First Aiders, Fire Marshals) has been completed and where required, refresher training is provided.

A challenge experienced is the general lack of understanding and awareness to health and safety matters. Ongoing interventions and communication are undertaken to mitigate this challenge. The recruitment for a skilled, experienced and qualified OHS Officer has been initiated and will be concluded in the new financial year.

An external OHS audit was commissioned and it was confirmed that although the environment was deemed safe, specified corrective actions were required. These are currently in various stages of completion. Funding has also been provided for the NSFAS owned premises on Court Road to be refurbished to ensure full compliance to OHS requirements.

Forensic Case Study

Since January 2020, NSFAS has established an in-house forensic capability for the first time. Currently, 49 cases have been registered on the forensic case register and have the following statuses:

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23. Company Secretary

In terms of the NSFAS Act s5(1) ©, the Executive Officer (EO) serves as the entity’s secretary to the Board. NSFAS has appointed a Committee Secretariat to assist with this function. NSFAS does not require a Company Secretary.

24. Social Responsibility

The following was the NSFAS social responsibility contribution:

• In celebration of Mandela Month, the NSFAS Contact Centre team members visited the Tomla Children’s Home in Gugulethu where groceries, toiletries, clothes, and toys were handed to the children.. • The NSFAS DSU visited Boland TVET College Worcester Campus in the Western Cape Province to assist with the on-boarding of fourteen blind and four visually impaired students from across the country. • Through a partnership with the Unemployment Insurance Fund (UIF), 50 unemployed NSFAS funded graduates from the Western Cape were placed at NSFAS offices to gain work experience in their respectful field.• The Zanokhanyo Children’s Safety Home was visited on Mandela Day where a number of NSFAS staff members spent their 67 minutes donating clothes, groceries, and toiletries to the children.• In support of the fight against Gender-Based Violence (GBV), NSFAS employees gathered to condemn these crimes by holding an organisational wide prayer. On this day NSFAS stood with South Africa to mourn these tragedies and to remember all the victims of gender-based violence. The assembly of staff and the proceedings of the day was published on social media to communicate the stance that enough is enough.• The NSFAS 2020 application campaign centred around the Make a Difference theme, evoked the calling for staff to travel across the country and help South Africans apply for NSFAS funding. During this application drive many staff members and management would be seen in rural communities, taxi ranks, shopping malls, schools, and community centres spreading the NSFAS message. The application season is a time of humanity, giving and an opportunity for staff members to make a difference. To close off the theme, staff members donated non-perishable food items to The Haven Night Shelter in Wynberg.

25. Audit and Risk Committee Report

We present our report for the financial year ending 31 March 2020

Audit and Risk Committee Responsibility

The Audit and Risk Committee members were appointed in June 2020 and the committee had its first meeting on July 30, 2020. The meeting considered the draft Annual Financial Statements, Annual Report and the Annual Performance Plan for the year ending March 31, 2020 to be submitted to the office of the Auditor-General of South Africa (AGSA) for audit.

As a consequence of the timing of our appointment, we were not in a position to fulfil the majority of our responsibilities arising from Section 51 (1)(a)(ii) of the Public Finance Management Act, Treasury Regulation 27.1, and the approved Audit and Risk Committee Charter for the financial year ending March 31, 2020.

The Audit and Risk Committee adopted appropriate formal terms of reference as its Audit and Risk Committee Charter during the meeting held on July 30, 2020.

The Effectiveness of Internal Control

The timing of our appointment did not allow us to review the findings of the Internal Audit work for the period under review, nor to determine if the work was based on the risk assessments conducted. We were also, unable to review compliance and fraud risk management for the year ending March 31, 2020.

Based on the discussion with the Head of Internal Audit, there were seven standard audits and four ‘other’ audits performed by an outsourced internal audit function for the period up to September 2019. In five of the seven standard audits performed, material control weaknesses were identified.

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25. Audit and Risk Committee Report (Continued)

The in-house internal audit unit started operating from October 2019. The Internal Audit methodology was finalised mid-December 2019, and by March 31, 2020 the unit had performed three limited scope reviews, and all three areas were assessed to be poorly managed. The Audit and Risk Committee approved the Internal Audit Charter at the meeting of July 30, 2020.

We have noted several material internal control deficiencies as highlighted in the 2020 Management Report of the Auditor-General and we conclude that the internal controls are generally inadequate and/or ineffective to mitigate business, financial and strategic risks. This can be largely attributed to the lack of an integrated business solution that is supported by standardised business processes and a capacitated organisational structure. The terms of reference of the Ministerial Committee of Inquiry (also known as the MTT) appointed by the Executive Authority refers to the fact that the information technology architecture is inadequate, and system and business processes are not fit for purpose and were designed without adequate consultation with and consideration of institutional systems. On the positive side, management had demonstrated its commitment to consequence management and a zero tolerance for fraud and non-compliance by initiating a number of investigations of financial misconduct.

The current vacancies at the executive level is an additional area of concern for the Audit and Risk Committee, and it is a matter that needs to be addressed urgently.

In-Year Management and Quarterly Report

As confirmed by the Auditor-General the public entity reported quarterly to National Treasury as is required by the PFMA. The findings of the Auditor-General regarding the performance and financial information points to deficiencies which indicate that the reports submitted to Treasury were not always accurate and complete.

Evaluation of Financial Statements

The Audit and Risk Committee has reviewed and discussed the audited annual financial statements to be included in the annual report with the Auditor-General and the Administrator. We have also reviewed the Auditor-General’s Management Report and management’s responses thereto.

Auditor’s Report

The timing of the appointment of the Audit and Risk Committee did not allow for the review of the entity’s implementation plan for all the audit issues raised in the prior year. We have noted the Auditor-General’s assertion that management did not timeously put in place a credible action plan to address the findings.

The Audit and Risk Committee accepts the audit opinion of the Auditor-General on the annual financial statements. The committee notes that at the date of this report there are significant disagreements between the Auditor-General and management regarding the interpretation of some legislative provisions that have an impact on NSFAS’ operations. The Auditor-General has indicated that the resolution of these disagreements would not change the audit opinion on the annual financial statements. The Audit and Risk Committee is of the considered opinion that the audited annual financial statements be accepted and read together with the report of the Auditor-General.

__________________________________________________Bulelani MahlanguChairperson of the Audit CommitteeNSFAS26 November 2020

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26. B-BBEE compliance performance information

The entity engaged a B-BBEE accredited rating agency to conduct the certification process for NSFAS for the 2019-2020 financial year. The outcome thereon revealed that NSFAS scored 15.31 points out of a maximum of 100 points which resulted in NSFAS receiving a non-compliant B-BBEE rating.

The reason thereto is attributable to NSFAS scoring zero points for the following rating categories:• Management control• Skills development• Enterprise development• Socio economic responsibility

The points scored by NSFAS related to procurement only. NSFAS had subsequently engaged the B-BBEE commission post financial year end whereby the areas and process for improvement were highlighted.

The relevant NSFAS officials will attend the B-BBEE training workshop hosted by the B-BBEE commission in the 2020-2021 financial year for further assistance thereon in order to facilitate an improved B-BBEE rating.

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In this section

PART D: HUMAN RESOURCE MANAGEMENT

27. Overview ...........................................................................................................................................................................9028. Achievements and challenges ........................................................................................................................................9029. Employee Relations .........................................................................................................................................................9130. Employment Equity...........................................................................................................................................................9231. Policy Review ...................................................................................................................................................................9432. In-service Program ..........................................................................................................................................................9433. Youth Employment Program ...........................................................................................................................................9434. Job Creation .....................................................................................................................................................................9435. Internship Program ..........................................................................................................................................................9436. Organisational Structure .................................................................................................................................................9437. Human Resources Oversight Statistics...........................................................................................................................9438. Deliverables for the Next Period ......................................................................................................................................99

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27. OVERVIEW

In anticipation of the conclusion of the term of the Administrator 2019/2020 was a year of consolidation to embed the gains realised and develop the foundation for systemic improvements as contemplated by the appointment of the MTT.

The confirmation of the second term of administration provided the platform for HR interventions including the development of key policies; continuation of the HR forensics investigation; capacitation of the technical human capital, design and implementation of a HR management system, transitioning of staff members to the Government Employees Pension Fund (GEPF) retirement fund dispensation and recruitment of members of the new executive team.

Furthermore, the process to rebalance management and technical skills was accelerated and resulted in key specialist resources being appointed within the Operations and ICT Departments. The management structures for all departments were reviewed and interim revised structures have since been approved by the Administrator. Within the context of the structure review and taking into consideration the outcome of the HR forensic investigation, disciplinary cases have been initiated. Recruitment for key skills is continuing, guided by the critical vacancy list and a key aspect of the employee value proposition is to ensure that NSFAS attracts new talent and retains its key talents.

The organisational climate has evolved from a very toxic culture of entitlement to a transforming productive workforce. The relative successful disbursement, employing a virtual operating model, that NSFAS was able to maintain during the COVID-19 nationwide lockdown affirmed this improved work ethic. The performance management processes are beginning to get the required traction to support ongoing productivity and efficiency improvements.

Intensive effort has been directed at normalising trade union relationships, for example, the establishment of the bargaining council, development of recognition agreements, etc. Relations with the trade unions still require further engagement and the presence of an additional trade union in the workplace is a contributory factor to this. Ongoing engagement is undertaken with all stakeholders to create and sustain workplace stability.

For the majority of the year under review the Administrator and his team continued to act as the EXMA of NSFAS. However, the appointment of key individuals has created the platform for skills transfer to permanent staff.

28. ACHIEVEMENTS AND CHALLENGES

Achievements

An inclusive process was undertaken in conjunction with the DHET and the Office of the Ministry to realise the recruitment of senior executives. The process commenced during the second quarter of the year and with the exception of the CEO and CFO, all other senior executive positions have been filled including that of an acting CIO. The CFO recruitment is currently in progress. The new team will ensure the continued delivery of the NSFAS mandate.

The capacitation and recruitment for Operations and ICT with specified technical skills which was managed under the umbrella of the critical skills vacancy list and resulted in the successful recruitment of various key positions. The appointments included the Senior Manager: Infrastructure and Networks Lead Enterprise Architect, Application Development Lead, General Manager: TVET, and General Manager: Data and Analysis.

The forensic investigation concluded by an external and independent agency provided startling insights on the job evaluation discrepancies, the HR administration gaps related to leave-management and the ineffectiveness of the defined contribution retirement fund. Specified employees have been subsequently charged based on the recommendations emanating from this investigation.

The retirement funding regime has undergone a review and NSFAS has been admitted as a participating member of the Government Employees Pension Fund (GEPF). All new employees will be defaulted to this fund. All other employees will have the option to join the GEPF, remain in the existing fund or a NSFAS appointed alternative defined contribution fund.

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The workplace skills plan and annual training report submission to the Bank SETA resulted in NSFAS being confirmed as compliant. Furthermore, the entity conducted various compliance related initiatives as required by legislation as well as values driven training interventions, including training on Gender Sensitivity, Occupational Health and Safety, Performance Management, Manager Essentials, Data Modelling and HR standards.

Collaboration with the Department of Labour (DOL) led to the implementation of the UIF graduate programme. A total of 50 UIF graduates were offered a 1-year contract with NSFAS in order to provide the graduates with workplace-based experience and to improve their employability. The graduates were also placed on a structured learning programme on work readiness with an external service provider and completed the programme successfully during the year.

The organisation has successfully navigated around the onerous constraints of the COVID-19 pandemic and employees and management have developed effective and efficient work processes to ensure that the service delivery to students continue to be delivered accurately and timeously.

CHALLENGES

The consolidation and effective functioning of the HR department continues to be a limiter in delivering the HR offerings. Various mitigation interventions are being undertaken, including a revised inclusive process for recruitment; development of enabling policies; enhancing governance protocols and concluding all grievances and disciplinary hearings.

The stabilising of relations with all stakeholders including the trade unions, resolving long outstanding legacy issues, and ongoing consultations and engagement on people related matters, will facilitate the engendering of harmonious relations.

The lack of an effective Human Resources Management System (HRMS) and the current arrangement of utilising various stand-alone systems does not facilitate effective administration and reporting. The sourcing for the new HRMS has been initiated and is planned for completion during the new financial year.

The budgetary limitations for hiring essential technical skills on a permanent basis due to the top-heavy organisation structure. In this regard the interim executive and management structures have been revised and this will facilitate the alleviation of the current funding gap to acquire specified technical skills.

The gaps in policies and procedures within HR contribute to inconsistencies in application which has resulted in dissent and challenges from employees. Various policies are being updated and new policies and procedures are being developed to mitigate this.

The legacy historic challenges regarding the implementation of the NSFAS performance management system continues to hamper the transitioning to a performance driven culture. Ongoing training interventions and communication drives are undertaken to enhance awareness and conformance.

29. Employee Relations

All negotiations and related activities are conducted under the auspices of the National Bargaining Forum (NBF).

Salary negotiations for the year were successfully concluded within the budget limits. Management also signed a recognition agreement with the Public Servants Association of South Africa (PSA) trade union based on its membership at NSFAS. This has increased the number of recognised unions at NSFAS to two, however only the National Education, Health and Allied Workers’ Union (NEHAWU) has bargaining rights. The organisation experienced one strike which lasted for four (4) days and which did not adversely affect the business of the organisation. The parties resolved the issues amicably.

Various disciplinary matters were also dealt with and included matters that emanated from the HR forensic report as well as non-compliance to organisational policies and regulations.

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30. EMPLOYMENT EQUITY (EE)

The EE plan and the term of the EE Committee expired during the financial year. A new EE committee has been nominated and subsequently appointed. The EE plan for the next three years is currently being developed. The basis of the new plan will take into consideration the provincial economically active population whilst the previous plan was based on the national economically active population. All recruitment undertaken considers compliance to the targets specified in the EE plan.

The tables below reflect the organisation’s compliance to the current EE plan.

Equity target and EE status

A: Male

Levels MALE

African Coloured Indian White

Current Target Current Target Current Target Current Target

Top management 0 1 2 0 2 0 0 0

Senior management 10 1 4 1 2 0 2 0

Professional qualified 13 16 13 6 5 1 4 2

Skilled 14 22 1 0 0 2 1 2

Semi-skilled 46 68 15 18 0 1 0 8

Unskilled 2 2 0 1 0 0 0 0

TOTAL 85 110 35 31 9 4 7 12

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Levels FEMALE

African Coloured Indian White

Current Target Current Target Current Target Current Target

Top management 4 0 1 0 0 0 0 0

Senior management 7 2 5 1 1 0 0 0

Professional qualified 11 14 7 6 0 1 3 3

Skilled 38 28 18 13 0 1 1 3

Semi-skilled 132 101 48 45 0 0 3 6

Unskilled 3 2 3 4 0 0 0 0

TOTAL 195 147 82 69 1 2 7 12

B: Female

C: Staff members with disability

Levels STAFF MEMBERS WITH DISABILITY

Male

Female

Current Target Current Target

Top management 0 1 0 0

Senior management 0 1 0 1

Professional qualified 0 1 0 1

Skilled 0 1 1 1

Semi-skilled 1 2 2 1

Unskilled 0 0 0 0

TOTAL 1 6 3 4

The current NSFAS EE plan was developed almost four years back and the targets used were National Economic Active Population (EAP) instead of provincial EAP. This is posing a challenge because as much as NSFAS is a national organisation, it operates provincially, with offices only in Cape Town. The EAP that ought to have been adopted are provincial EAP as it attracts most of its employees provincially. These variances are mainly caused by this challenge.

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31. Policy Review

The project initiated to develop, and review HR policies had resulted in various policies being developed and subsequently implemented. All stakeholders are consulted prior to the formal adoption of the policies. It is anticipated that the policy project will be concluded during the course of the next financial year.

32. In-service Program

To provide learning and development opportunities for employees, an in-service program was introduced that facilitated the upskilling of employees by exposing them to work activities aligned to their fields of study. A total of 29 employees participated in the program. This has further led to these employees being ready to assume responsibilities in higher positions.

33. Youth Employment Program

NSFAS in partnership with the DoL created an opportunity for fifty (50) young graduates to be provided with work exposure in functions related to their fields of study and to improve their employability .The graduates were also placed on a structured learning programme on work readiness with an external service provider and all completed the programme successfully during their tenure. This has resulted in some being placed successfully in the formal sector. The NSFAS is considering continuing the program in the future.

34. Job Creation

To facilitate the application cycle for students, NSFAS appointed seasonal workers to assist with this process. For this financial year, in excess of 50% of the first intake of seasonal workers were absorbed into permanent roles.

35. Internship Program

NSFAS, from time to time, advertises the graduate internship program that is meant to provide young graduates with the skills they require for employment readiness. For the year under review, seven graduates participated in the program and six were subsequently absorbed into permanent roles at the end of the internship program.

36. Organisational Structure

An initiative was undertaken to review and revise the management structure for all departments taking into consideration the work processes within the organisation. This revised structure, which has been approved by the Administrator, would be leveraged to appropriately place managers in roles more aligned to their skills and capability. Due to the COVID-19 outbreak, the process has been temporarily placed on hold. It is anticipated that this interim revised structure will form part of the review to be undertaken by the MTT.

37. Human Resources Oversight Statistics

The following are the salient details related to personnel expenditure.

Programme/ activity/ objective

TotalExpenditure for the entity (R’000)

PersonnelExpenditure (R’000)

Personnel exp. as a % of total exp. (R’000)

No. of employees

Average personnel cost per employee (R’000)

Administration 389,467,000

223,478,864 57,3% 491

455,005

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The table below provides personnel expenditure by employment level.

Personnel cost by salary band

Level Personnel Expenditure

% of personnel exp.to total personnel cost

No. of employees paid during the financial year

Average personnel cost per employee

Top management 19,204,378 8,6% 9 2,133,820

Senior management 43,668,231 19,5%35 1,247,664

Professional qualified 42,614,656 19,1% 58 734,735

Skilled 35,481,298 15,1% 63 563,195

Semi-skilled 80,853,801 36,2% 318 254,257

Unskilled 1,585,000 0,7% 8 198,125

TOTAL 223,478,864 100% 491* 455,005

*The total number of employees who received remuneration during the year including the individuals who were remunerated in terms of the NSFAS; NYDA and DoL partnership which provided unemployed youths with work opportunities. As at March 31, 2020 the NYDA complement and various other individuals who had received remuneration are no longer in the organisation. The year-end actual headcount is 425 employees.

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Performance RewardsFor this financial cycle no performance reward payments were made


Performance rewards Personnel Expenditure (R’000)

% of performance rewards to total personnel cost (R’000)

Top management 0 0 0

Senior management 0 0 0

Professional qualified 0 0 0

Skilled 0 0 0

Semi-skilled 0 0 0

Unskilled 0 0 0

TOTAL 0 0 0

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Training CostsTabled below are the training costs incurred for the financial period


Total Expenditure for the entity

Personnel Expenditure

Personnel exp. as a % of total exp.

No. of employees

Average personnel cost per employee

Gender sensitivity workshop

R216 000 R216 000 19% 254 R850.39

Balance scorecard certification

R48 300.00 R48 300.00 4% 01 R48 300.00

SABPP HR standards workshop

R127 362.50 R116 000.00 11% 18 R7075.69

Information & Data Modelling

R20 697.70 R20 697.70 2% 02 R10 348.85

Sparks EA Tool & Modelling

R112 125.00 R112 125.00 10% 15 R7475.00

ITIL 4 Foundation Training

R46 712.50 R46 712.50 4% 05 R9342.50

Initiating a disciplinary enquiry & rules of evidence

R21 893.00 R21 893.00 2% 16 R1368.31

Train the trainer training

R41 917.50 R41 917.50 4% 09 R4657.50

Skills development facilitator training

R6 957.50 R6 957.50 1% 01 R6957.50

Spark enterprise architect for business analyst training

R117 131.53 R117 131.53 10% 07 R16 733.07

Prosci change management certification course

R30 360.00 R30 360.00 3% 01 R30 360.00

UIF graduate training intervention

R342 694.83 R342 694.83 30% 50 R6853.89

Total R1 132 152.06 100% 379 R150 322.70

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Employment and vacancies

Employment changes

Programme/activity/objective

2018/2019No. of Employees

2019/2020 Approved Posts

2019/2020No. of Employees

2019/2020 Vacancies

% of vacancies

Top management 15 13 9 4 21%

Senior management 26 37 31 6 32%

Professional qualified 44 64 56 8 42%

Skilled 75 75 74 1 5%

Semi-skilled 268 247 247 0 0%

Unskilled 8 8 8 0 0%

TOTAL 436 444 425 19 100%

*Positions were advertised both internally and externally. The required governance was complied with for the appointment of all candidates. For positions where the employer could not find suitable candidates, other forms of recruitment as per the recruitment policy were undertaken including headhunting.

Salary Band Employment at beginning of period

Appointments Terminations Employment at end of the period

Top management 15 5 11 9

Senior management 26 9 4 31

Professional qualified 44 19 7 56

Skilled 75 0 1 74

Semi-skilled 268 56 77 247

Unskilled 8 0 0 8

Total 436 89 100 425

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Reasons for staff leaving

For the period, 100 individuals exited the organisation. The table below provides the reasons for termination of employment:

Labour Relations: Misconduct and disciplinary action

The following are the details related to misconduct and disciplinary action:

NSFAS has been under administration for two consecutive years. This has required revision of the business processes which created staff anxiety and uncertainty and contributed to some employees seeking alternativeemployment.

To mitigate this, management developed a communication strategy which included regular staff briefings by the Administrator. Various interventions have also been undertaken to manage change and to assist employees to embrace change.

38. Deliverables for the Next Period (career laddering to provide pathing for qualified junior personnel)

The term for administration will end during August 2020. It is recognised that specific enabling interventions will be required to ensure that the gains achieved during administration are consolidated to ensure the sustainability of the NSFAS brand.

It is acknowledged that capacitating the organisation with the right skills remains a key determinant of organisational stability , growth and sustainability ; that skills transfer from the current administration team to the broader NSFAS management team will serve as an enabler to support sustainability and the required interventions, governance and controls are in place to facilitate a smooth transitioning from administration.

Reason Number % of total no. of staff leaving

Death 0 0%

Resignation 40 40%

Dismissal 9 9%

Retirement 2 2%

Ill health 1 1%

Expiry of contract 50 50%

Other 0 0%

Total 100 100%

Nature of disciplinary Action Number

Verbal Warning 0

Written Warning 1

Final Written warning 4

Dismissal 9

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From a human capital and development perspective the following will be the key focus areas for the coming period:

• Finalisation of the remaining executive positions, i.e. CEO and CFO

• Capacitation of the organisation with the required technical skills

• Talent development including career laddering

• Transfer of skills from consultants to permanent staff

• Performance management

• Employee wellness and change management taking into consideration the advent of the COVID-19 pandemic

• Consolidation of the new retirement funding regime

• Implementation of a fit for purpose HRMS

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102



103



In this section

Part E: FINANCIAL INFORMATION

Accounting Authority Statement of Responsibility and Approval.......................................................................................104Report on the Audit of the Financial Statements ................................................................................................................106Report of the Accounting Authority.......................................................................................................................................112Statement of Financial Position............................................................................................................................................119Statement of Financial Performance....................................................................................................................................120Statement of Changes in Net Assets....................................................................................................................................120Cash Flows Statement...........................................................................................................................................................121Statements of Comparison of Budget and Actual Amounts................................................................................................122Accounting Policies................................................................................................................................................................125Notes to the Annual Financial Statements...........................................................................................................................142

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PART E - FINANCIAL INFORMATION


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 (AFS) 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 financial year. 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 March 31, 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 August 21, 2018 to August 21, 2019. The terms of reference of the Administrator are published in the Government Gazette dated 20 August 2018, Volume. 638 No. 41851.

There is consensus amongst all stakeholders that during the first phase, the Administrator stabilised NSFAS. It was however recognised that gains achieved must be consolidated and the sustainability of NSFAS entrenched. This eventuated in the Minister of Higher Education, Science and Innovation appointing Dr. Randall Carolissen for a second term, in terms of Section 17A to 17D of the NSFAS Act (Act 56 of 1999 as amended), effective from August 21, 2019 to August 20, 2020 as per Government Gazette No. 42662. The second phase of Administration was therefore envisaged to ensure an effective transition to a new executive management team and Board.

Despite unreliable and poorly designed ICT systems, NSFAS achieved the requisite stability to ensure predictable and timeous disbursement cycles during 2019 and even as lockdown commenced in March 2020. In the 2019 NSFAS Annual Report, the Administrator restated the irregular expenditure of R300 million published in the prior year Annual Report to R7.5billion. This was triggered by the uncovering of more than 440 000 irregular records accumulated prior to the commencement of administration and hitherto 40% of the 440 000 records had been remediated. This maladministration had been arrested in 2019 and irregular records of less than 10,000 had been detected and rectified.

At the start of administration, NSFAS was bereft of financial and ICT controls consistent with the fiscal scope, mandate and fiduciary responsibility of an organisation responsible for tens of billions of Rand. During administration, critical processes were mapped and optimised and policies and Standard Operating Procedures (SOPs) developed. A top-heavy management structure crowding out technical human capital required the freezing of all vacancies and funds were ring-fenced for technical capacitation in Information and Communications Technology (ICT) as well as Governance, Risk and Financial management.

Strengthened financial controls now offer reconciliation of accounts to student level. This compelled institutions to maintain discipline in accounting and enforced accountability. NSFAS’ reconfigured data architecture, much improved ICT governance, huge advances in increasing cybersecurity in partnership with the Council for Scientific and Industrial Research CSIR, and disintermediation of third parties minimised data corruption and improved data exchange protocol.

Commercial interests that eroded value from the disbursement chain have thus been removed. The ill-advised voucher system which directed purchases to preferred vendors, in defiance of anti-competitive legislation, was scrapped and replaced with cash disbursements. The entity is in the process of minimising any residual risks by implementing and embedding appropriate controls and enforcing ethical behaviour.

The insourcing of the internal audit team in the current year, will also allow NSFAS to embed institutional knowledge within the internal audit function, and extend the audit scope and depth where appropriate.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 control is being strengthened on an ongoing basis to provide a reasonable platform for the preparation of reliable financial statements.

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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 until July 31, 2021 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. Forecast has been assessed to July 31, 2021 due to reporting date amended from May 31, 2020 to July 31, 2020, this was published by the Minister of Finance through a Government Gazette, exempting from relating PFMA requirements.

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. It is significant that NSFAS has successfully established an in house internal audit function for the first time. The team is fully operational and has assisted in identifying and determining the underlying root causes of many matters to date. The entity has also established an in-house forensic function in January 2020 for the first time. Forensic investigations, as considered appropriate, are also underway and at various stages of completion. NSFAS has taken the necessary precautionary and decisive action to respond to recommendations contained in draft and final forensic sauts. Irregular expenditure incurred falls into the following broad categories:

a) Shifting of earmarked funds (Historic Debt), b) Disbursements with respect to NOCLAR, c) other

A project is currently underway to resolve irregular expenditure relating to the NOCLAR findings and formally reconcile data between NSFAS and the institutions to close off these academic years . Specialised software and business solutions skills have been onboarded to assist with this initiative. Specific project objectives include:

o Ensuring all students (new, returning and continuing) who applied for NSFAS funding during these years were assessed correctly as per DHET guidelines and rules.o Ensuring that all institutions (universities and TVETs colleges) have submitted registration records for eligible students to NSFAS, and that these registration records are processed correctly for funding and disbursements to students and institutions.o Ensuring that all eligible students who were registered at institutions completed contracting with NSFAS, which is a requirement for funding and payments.o Ensuring that all students that have completed contracting are paid correctly, with regards to allowances and tuition, as per registration data received from institutions.o Documenting and performing data reconciliation between NSFAS and institutions to formally close off the 2017 and 2018 academic years and ensure creation of final reports to institutions.

Progress with regards to the close-out of 2017/18 and 2018/19 is evidenced in the reduction of irregular expenditure during administration, as will be illustrated in the reporting thereof.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 12 to 66, which have been prepared on the going concern basis, were approved by the Accounting Authority on July 31, 2020 for submission to the Auditor General of South Africa and were signed on its behalf by:

Dr Randall Carolissen Administrator

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Report on the audit of the financial statements

Qualified opinion

1. I have audited the financial statements of the National Student Financial Aid Scheme (NSFAS) set out on pages 119 to 175, which comprise the statement of financial position as at 31 March 2020, statement of financial performance, statement of changes in net assets, cash flow statement and statements of comparison of budget and actual amounts 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 possible effects of the matters described in the basis for qualified opinion section of this auditor’s report, the financial statements present fairly, in all material respects, the financial position of the NSFAS as at March 31, 2020, and the 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 of opinion

Contingent liabilities: student funding

3. I was unable to obtain sufficient appropriate audit evidence that contingent liabilities: student funding had been properly disclosed, due to the status of the data supporting management’s estimate. I was unable to determine an estimate of the contingent liability by alternative means. Consequently, I was unable to determine whether any adjustment was necessary to the contingent liability: student funding disclosure stated at R79 467 782 607 (2019: R38 889 319 416) in note 25 to the financial statements.

Irregular expenditure

4. The entity did not include the required information on irregular expenditure in the notes to the financial statements, as required by section 55(2)(b)(i) of the PFMA. The entity did not consult with the minister of Higher Education and Training when developing criteria and conditions for granting loans and bursaries to eligible students, and did not publish the revised criteria and conditions in the Government gazette. This resulted in irregular expenditure of R50 151 347 903. As the public entity did not quantify the full extent of the irregular expenditure, it was impracticable to determine the full understatement of irregular expenditure of R6 869 310 000 (2019: R6 347 011 000) as disclosed in note 30 to the financial statements.

Prior period error

5. The public entity did not disclose previous period errors in note 28 to the financial statements, as required by GRAP 3, Accounting policies, estimates and errors. The note states that the public entity will no longer be disclosing disbursements in excess of contract amount as irregular expenditure. I was unable to obtain sufficient appropriate audit evidence to substantiate the disclosure.

Amounts owing by institutions (exchange)

6. I was unable to obtain sufficient appropriate audit evidence for the amounts owing by institutions due to a lack of reconciliation between the financial records of the NSFAS and those of institutions of higher learning. I was unable to confirm the receivable balance by alternative means. Consequently, I was unable to determine whether any adjustment was necessary to amounts owing by institutions (exchange), stated at R62 309 000 (current) (2019: R184 197 000) and R72 423 000 (non-current) (2019: R20 457 000), bursaries – TVET colleges stated at R5 998 587 000 (2019: R3 778 932 000) and impairment loss - amounts owing by institutions (exchange), stated at R115 050 000 (2019: R0) in the financial statements.

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Prepayments to institutions

7. I was unable to obtain sufficient appropriate audit evidence that prepayments made to institutions had been properly accounted for, due to the status of the accounting records. I was unable to confirm the prepayments to institutions balance by alternative means. Consequently, I was unable to determine whether any adjustments were necessary to prepayments to institutions, stated at R7 565 665 000 (2019: R3 532 337 000) and amounts due to institutions (non-exchange), stated at R602 622 000 (2019: R1 251 943 000) in the financial statements.

Interest revenue (exchange)

8. I was unable to obtain sufficient appropriate audit evidence that interest revenue earned on student loans had been properly accounted for, due to the status of the data in support of management’s calculation. I was unable to confirm the interest revenue amount by alternative means. Consequently, I was unable to determine whether any adjustment was necessary to interest revenue, stated at R1 643 833 000 (2019: R1 367 335 000), student loans, stated at R503 811 000 (2019: R804 494 000), social benefit component on student loans issued, stated at R15 617 000 (2019: R532 627 000) and model adjustments, stated at R3 174 545 000 (2019: R1 378 891 000) in the financial statements. This also has an impact on the surplus for the period and on the capital fund.

Bursaries - Universities

9. I was unable to obtain sufficient appropriate audit evidence that bursary expenditure disbursed to universities for the previous year had been properly accounted for, due to the status of the accounting records. I was unable to confirm the expenditure by alternative means. Consequently, I was unable to determine whether any adjustment was necessary to bursaries – universities, stated at R20 814 059 000 in the financial statements.

Context for the opinion

10. 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.

11. I am independent of the public entity in accordance with sections 290 and 291 of the Code of ethics for professional accountants and parts 1 and 3 of the International code of ethics for professional accountants (including International Independence Standards) of the International Ethics Standards Board for Accountants (IESBA codes), as well as 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.

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

Emphasis of matters

13. I draw attention to the matters below. My opinion is not modified in respect of these matters. Material fair value and impairments adjustments

14. As disclosed in note 5 to the financial statements the public entity had student loan receivables with a nominal value of R36 billion as at March 31, 2020 (2019: R36 billion), which are reflected in the financial statements as R6 billion (2019: R9 billion), after cumulative fair value and impairment adjustments of R29 billion (2019: R26 billion).

Restatement of corresponding figures

15. As disclosed in note 28 to the financial statements, the corresponding figures for March 31, 2019 have been restated as a result of errors in the financial statements of the public entity at, and for the year ended, March 31, 2020.

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Other matter

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

Unaudited supplementary schedules

17. The supplementary information set out on pages 69 to 70 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

18. 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 administrator determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

19. In preparing the financial statements, the administrator is responsible for assessing the public entity’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.

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

20. 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.

21. 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

22. 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 on the usefulness and reliability of the reported performance information against predetermined objectives for selected programmes presented in the annual performance report. I performed procedures to identify material findings but not to gather evidence to express assurance.

23. My procedures address the usefulness and reliability of 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 / measures included in the planning documents. My procedures do not examine whether the actions taken by the entity enabled service delivery. My procedures also do 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.

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24. 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 programmes presented in the annual report of the public entity for the year ended March 31, 2020:

25. 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.

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

Programme 2 – student-centred financial aid

27. I was unable to obtain sufficient appropriate audit evidence for the reported achievements in the annual performance report of the indicators listed below. This was due to a lack of technical indicator descriptions, proper performance management systems and processes with formal standard operating procedures that predetermined how the achievement would be measured, monitored and reported. I was unable to confirm that the reported achievements of these indicators were reliable by alternative means. Consequently, I was unable to determine whether any adjustments were required to the reported achievements.

Other matters

28.I draw attention to the matters below.

Achievement of planned targets

29. Refer to the annual performance report on pages 46 to 47 for information on the achievement ofplanned targets for the year and explanations provided for the overachievement of a significantnumber of targets. This information should be considered in the context of the material findingson the usefulness and reliability of the reported performance information in paragraph 21 ofthis report.


4

[Programmes/ objectives/ development priorities] Pages in the AnnualReport

Programme 2 – student-centred financial aid 54 – 60

Indicator number

Indicator description APR reported performance

KPI 3.1 Reduced administrative backlog 95%

KPI 3.2 Efficient disbursement to students 98%

KPI 3.3 Payments and remittances reconciled across institutions 85%

KPI 3.4 Efficient disbursement to institutions 43%

KPI 3.5 Level of outstanding payments Achieved payments to clear the backlog R7,3 bn

KPI 4.1 Percentage of funding decisions of valid applicants received by 30 November processed before registration.

75%

KPI 5.2 Increase capacity for TVET support Team established

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Adjustment of material misstatements

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

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 public entity’s compliance 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 legislation are as follows: Strategic planning and performance management

Strategic planning and performance management

33. Procedures for the facilitation of effective performance monitoring, evaluation and corrective action through quarterly reports were not established, as required by treasury regulation 30.2.1.

Expenditure management

34. 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, 1999 (Act No. 56 of 1999).

Financial statements

35.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.

36. Material misstatements identified by the auditors in the submitted financial statements were not adequately corrected and the supporting records could not be provided subsequently, which resulted in the financial statements receiving a qualified opinion.

Other information

37. The administrator is responsible for the other information. The other information comprises the information included in the annual report. The other information does not include the financial statements, the auditor’s report and those selected programmes presented in the annual performance report that have been specifically reported in this auditor’s report.

38. 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.

39. 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 programmes presented in the annual performance report, or my knowledge obtained in the audit, or otherwise appears to be materially misstated.

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40. I did not receive the other information prior to the date of this auditor’s report. When I do receive and read this information, if I conclude that there is a material misstatement therein, I am required to communicate the matter to those charged with governance and request that the other information be corrected. If the other information is not corrected, I may have to retract this auditor’s report and re-issue an amended report as appropriate. However, if it is corrected this will not be necessary.

Internal control deficiencies

41. 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 annual performance report and the findings on compliance with legislation included in this report.

Leadership

42. A credible action plan was not devised to address the root causes of the findings identified, which resulted in repeat findings on the financial statements and findings on the performance report as well as continued material non-compliance with applicable laws and regulations. The entity continues to incur significant amounts of irregular expenditure.

Financial and performance management

43. A lack of credible source information produced by a reliable system and adequate reviews of underlying source information in support of the financial and performance reports has resulted in a number of material misstatements. The chief financial officer and general manager: finance positions were not permanently filled, which also contributed to the slow response by senior management to improve the audit outcome. The audit outcome remained qualified on the financial statements, with a regression in the credibility of performance information reported in the annual performance report.

Material irregularities

44. In accordance with the PAA and the Material Irregularity Regulations, I have a responsibility to report on material irregularities identified during the audit.

Material irregularities in progress

45. I identified other material irregularities during the audit and notified the administrator thereof as required by material irregularity regulation 3(2). By the date of this auditor’s report, the responses of the administrator were not yet due for some material irregularities and for the remainder, I had not yet completed the process of evaluating the responses from the administrator. These material irregularities will be included in the next year’s auditor’s report.

Cape Town

30 November 2020

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Report of the Accounting Authority

The Accounting Authority hereby submits his report for the year ended March 31, 2020.

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- 346,270 students were assisted at the 50 TVET colleges in the 2019 academic year and 247,769 in the 2018 academic year.- 393,767 students were assisted at the 26 public universities in the 2019 academic year and 393,781 in the 2018 academic year.- For the 2019/20 financial year a total of R28.1bn was disbursed as compared to 2018/19 where a total of R24.7bn was disbursed. This includes:

- R6.0bn (2019: R3.8bn) to TVET colleges (100% bursaries).- R21.7bn (2019: R20.8bn) to universities.- R21.6bn (2019: R20.8bn) 100% bursaries.- R35m (2019: R66m) in convertible loans and R10m (2019: R16m) converted to bursaries based on student performance.

• An amount of R16m was recognised as the social benefit component after bursary conversion in the current financial year as compared to R532m in the prior year.

• Total disbursements since inception amounts to R135.2bn in the current financial year.• Nominal value of loan balances: R36.4bn (2019: R36.1bn).• Carrying value of loan balances: R6.4bn (2019: R9.3bn).• Loan recoveries in the current financial year amounts to R551m. This is a decrease of R77m from the

prior financial year recoveries of R628m.

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) 2020 2019New grants for student loans and bursaries (I) 33,584,801,000 21,387,350,000Total loans and bursaries awarded (II) 27,928,613,000 25,276,185,000Operational expenses (III) (441,456,000) (400,119,000)Operational expenses to awards ratio (%) 1.58 1.53University bursaries (IV) 21,930,026,000 20,814,059,000TVET colleges 100% bursaries (V) 5,998,587,000 3,778,932,000

i. During the period under review, grants were received from the South African Government via the Department of Higher Education and Training, 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, Chemical Industries and Training Authority, Fibre Processing and Manufacturing SETA, Food and Beverage SETA, Health and Welfare SETA, Insurance Sector Education and Training Authority, Safety and Security SETA, Services SETA, Wholesale and Retail SETA and various other donors.

ii. Total loans and bursaries awarded in the prior 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’s 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 2019 academic year only.

iii. Operational expenses comprise personnel costs, asset management fees, consulting and professional fees, audit fees and general expenses.

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iv. Historical 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 December 16, 2017.

V 100% bursaries (bursaries awarded to TVET college students) less credit balances due to NSFAS by institutions.

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. An assessment due to COVID-19 does not impact the entities going concern assumptions.

3. ACCOUNTING AUTHORITY

The Minister of Higher Education and Training ordered the dissolution of the Board on August 21, 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. Dr. Randall Carolissen was appointed as Administrator, for a second term effective from August 21, 2019 to August 2020.

The member who served the entity during the year is as follows:

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

Following a qualified report by the Auditor-General of South Africa (AGSA) on the annual financial statements at March 31, 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.

4. CORPORATE GOVERNANCE

The Accounting Authority exercises effective control over the entity, its plans and strategy and acknowledges itsresponsibilities 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.

An Audit and Risk Committee, established in terms of the PFMA, was not in operation during the year. The process for establishing such a committee commenced in October 2019 with the adoption of a process guide for the establishment of an independent Audit and Risk Committee. Members were appointed in terms of this guide and approved by the Administrator, with the concurrence of the Minister of Higher Education Science and Innovation. The committee took effect after year end. Members consist of a representative from the Department of Higher Education and Training, a representative from National Treasury and four independent members.

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Figures in Rand thousand

Fees Retirement Fund

contributions

Medical contributions

Expenses Total package 2020

Total package 2019

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

- - - - - 1,491

Salary Retirement Fund

contributions

Medical contributions

Other Total package 2020

Total package 2019

- - - - - 1,723- - - - - 1,033

- - - - - 2,083

1,768 - - 86 1,854 575

495 - - - 495 -

- - - - - 1,482

1,741 - - 48 1,789 2,336

384 - - - 384 -

1,553 - - - 1,553 1,087

397 - - - 397 -

1,392 - - 88 1,480 1,103

167 - - 4 171 -

Executive Managers Executive Officer - a Chief Financial Officers - b

Chief Financial Officer - c

Chief Financial Officer (Acting) - d

Chief Financial Officer (Acting) - e

Chief Information Officer - f

Human Resources Executive - g

Human Resources Executive (acting) - h

Chief Operations Officer - i

Chief Operations officer (Acting) - j

Chief Operations officer (Acting) - k

Chief Operations officer (Acting) - l

Governance Risk andComplianceExecutive - m

1,225 - 60 13 1,298 -

9,122 - 60 239 9,421 11,422

5. BOARD/ADMINISTRATOR EXPENSES, EXECUTIVE AND SENIOR MANAGERS’ EMOLUMENTS


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Key Managers - Advisors to the Administrator

Salary Medical contributions

Other Total package 2020

Total package 2019

Administrator - n 2,823 258 43 129 3,252 2,305 Special Advisor - o 632 - 17 80 730 979 Risk & Finance Advisor - d

589 - - 29 618 576

HR & OD Advisor - p 900 - - 145 1,045 874 2019 Program Manager - q

720 - - 62 782 809

Lead Process Specialist - r

649 - - 20 670 878

ICT Advisor - k 278 - - 18 296 - Data Advisor - l 167 - - 4 171 - TVET Advisor - s 365 - - 11 376 - Stakeholder Advisor - t 632 - - 7 639 - OHSA (Security and Business Continuity Advisor) - u

1,845 - - 105 1,950 -

9,600 258 60 610 10,529 6,421

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

a. Steven Zwane (Executive Officer) appointed September 1, 2017 to October 2, 2018.b. Lerato Nage Chief Financial Officer. Resigned July 31, 2018c. Morgan Nhiwatiwa Chief Financial Officer (Acting) March 1, 2017 to August 31, 2017 and May 1, 2018 to December 31, 2018d. Prakash Mangrey : Appointed October 1, 2018 as Risk and Finance Advisor and was Chief Financial Officer (Acting) from January 1, 2019 to December 8, 2019. No acting allowance was paid.e . Itayi Daringo : Chief Financial Officer (Acting) from December 9, 2019.f . Ashveer Rajcoomar: Chief Information Officer appointed November 1, 2017 to October 19, 2018.g. Vuyokazi Dwane (HR Executive) appointed December 1, 2017.h. Lungisa Mtumtum (Acting) HR Executive appointed February 1, 2019 to June 30, 2019.i. Tasneem Salasa Chief Operations Officer: Appointed August 23, 2018 to December 31, 2019j. Nthuseng Maphahlele Chief Operations Officer (Acting): Appointed January 01, 2020 to March 31, 2020.k. Colin Fourie ICT Advisor to the Administrator and Chief Information Officer (Acting): Appointed on October 20, 2018.l. Dr Sibongiseni Thotsejane Data Advisor to the Administrator and Chief Information Officer (Acting): Appointed on February 1, 2020.m. Thaaniya Isaacs Governance Risk and Compliance Executive: Appointed June 17, 2019n. Dr Randall Carolissen Administrator: Appointed as Administrator by the Minister of Higher Education and Training in terms of section 17 A (1) ( c ) of the NSFAS Act for the period August 21, 2018 to 20 August 2019. The second term effective from August 21, 2019 to August 20, 2020 (as per Government Gazette No. 42662).o. Prof. Niel Garrod Special Advisors to the Administrator: Appointed October 1, 2018 to August 31, 2019p. E. Bebe Oyegun Adeoye HR & OD Advisor to the Administrator: Appointed October 29, 2018 to September 30, 2019.q. Peter Grant 2019 Program Manager: Appointed September 18, 2018 to September 30, 2019.r . Stalin Links Lead Process Specialist: Appointed September 11, 2018 to August 31, 2019.s. Samuel Zungu TVET Advisor to the Administrator: Appointed January 1, 2020t. Sibongile Mncwabe Stakeholder Advisor to the Administrator: Appointed September 20, 2019u. Mukhtar Mohamed OHSA (Security and Business Continuity Advisor): Appointed April 1, 2019

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6. EFFECTIVENESS OF INTERNAL CONTROLSFollowing a qualified report by the Auditor General of South Africa (AGSA) on the annual financial statements at March 31, 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 August 21, 2018 to August 20, 2019 and for a second term effective from August 21, 2019 to August 20, 2020, as per Government Gazette No. 42662.

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 control is being strengthened on an ongoing basis to provide a reasonable platform for the preparation of reliable financial statements.

7. NATURE OF ACTIVITIESNSFAS is mandated to provide financial assistance in the form of loans and bursaries to eligible students at public universities. 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 qualified 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 loansPrior 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 December 16, 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 programmeOn December 16, 2017, the former President Jacob Zuma pronounced a bursary funding programme for students from poor and working class families whose gross combined family household income does not exceed 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.

8. ASSUMPTION SET USED IN THE LOAN VALUATION MODELNSFAS 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 historical 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.


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Assumption setting history:

March 31, 2019: The assumptions used in the 2017/18 financial year did not change significantly when considered in the valuation, however, based on the implementation of the December 2017 Presidential pronouncement, as well as feedback on recoveries collected, the modelled cash flows used in 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.

March 31, 2020: The model assumptions used in the prior year were reassessed in the current year valuation. Although the assumptions did not change, after the sensitivity of a student’s transition from exiting the tertiary education system to commencing payment was decreased by 10% in the prior year, due to the current COVID-19 pandemic and its associated negative impact on the macro economic environment, this was reduced by a further 20% (decreased to 70% of the projected cash flows). This was done after considering the GDP and unemployment figures as published by Statistics South Africa and the impact this would have on the NSFAS debtors. Consideration was also given to the actual collections experience during the first quarter of the 2020/2021 financial year.

At the conclusion of the valuation, entries are passed to adjust the student loans (exchange) and bring it in line with the valuation result. These entries include fair value adjustments, in respect of the social benefit component, Interest adjustment, Model and other Residual Valuation adjustments.

9. CONTINGENT LIABILITY FOR STUDENT LOANS AND BURSARIESThe Student-Centred Model allows students who are registered at both universities and TVET colleges to apply directly to NSFAS for loans and bursaries rather than through their 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 them 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 R79,467,782,607 (2019: R38,889,319,416 Restated) disclosed in note 25 to the financial statements as the future obligation in respect of these students.

10. 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 30.

During the current financial year, the entity identified additional irregular expenditure. Further detail is provided in note 30.

11. SUPPLY CHAIN MANAGEMENTThe entity identified irregular expenditure of R219,316 during the 2019/20 financial year as a result of a payment made to a service provider in the 2018/19 financial year for a contract variation for an Employee Self Service leave module which was not in compliance with National Treasury Instruction Note 3 of 2016/17. The determination and assessment was conducted in accordance with the National Treasury Irregular Expenditure Framework which indicated that no official was liable in law. The irregular expenditure will be considered for condonation in the 2020/21 financial year.

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

• Regular training of all Supply Chain Management (SCM) staff and related role players on legislative requirements and updates.

• Re-assessment of the delegation of authority framework.• Strict control over contract variations and deviations from procurement processes. • Ensuring that the composition of the bid committees (evaluation and adjudication) is sufficient and

appropriate.


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12. STUDENT AWARDS AND REPAYMENTS

* 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.

Since its inception in 1991, the entity has awarded approximately R135,200,720,889 (2019: R107,441,772,504) in loans andbursaries to students, with a total of 3,753,050 students assisted (2,083,946 university students; 1,667,118 TVET students and 1,986 other institution students). For the year under review, the entity assisted 740,037 students with 740,245 awards.

Loan repayments, excluding donor settlements and credit balances on fee accounts, were at a monthly average of R45.9 million (2019: R52.4 million).

(I) Credit balances on student fee accounts returned by institutions are applied to reduce the original loan capital.

(II) The net amount recovered from debtors of R551,278,234 was 20.3% below the collections target of R691,500,227.

12. STUDENT AWARDS AND REPAYMENTS

Academic years

2019 2018

Student awards by institution categoryRand value Number of

students*Rand value Number of

students (I)Universities 22,657,509,399 393,767 18,373,238,547 346,966TVET colleges 5,101,438,986 346,270 2,742,606,899 239,797

27,758,948,385 740,037 21,115,845,446 586,763

Financial years

Repayments

2020 2019

Loans recovered 1,439,524,305 1,113,762,787 Less Credit balances (I) (888,246,071) (485,126,217) Net recoveries received (II) 551,278,234 628,636,570

* 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 funds recovered from institutions.

Academic years

2019 2018

Rand Value Number ofstudents*

Rand value Number ofstudents

Department of Higher Education and TrainingGeneral / returning student allocation 9,026,930,640 158,591 10,589,089,772 240,393First time entrants 11,991,551,102 214,113 5,890,211,248 129,608Students with disabilities 80,108,776 1,921 77,639,538 1,501Historic debt - - 8,381,104 192National Skills Fund 455,351,012 6,881 486,241,775 9,194SAICA partnership - Thuthuka Fund 33,252,058 492 30,265,047 446TVET Bursaries 5,088,959,320 345,545 2,732,672,101 263,629

Department of Basic Education:Funza Lushaka Teacher Bursaries 942,164,773 10,469 1,000,630,398 14,787Sector Education and Training Authorities 32,746,427 513 25,061,919 374Other funding categories (I) 107,884,277 1,720 275,652,544 7,086

27,758,948,385 740,245 21,115,845,446 667,210

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Statement of Financial PositionFigures in Rand thousand Note(s) 2020 2019

Assets

Current AssetsTrade and other receivables (non-exchange) 8 14,283 7,200Prepayments to institutions 4 7,565,665 3,532,337Student loans 5 503,811 804,494Amounts owing by institutions (exchange) 6 62,309 184,197Cash and cash equivalents 9 5,854,028 3,886,556Amounts owing by other funders 7 - 82,686

14,000,096 8,497,470

Non-Current AssetsProperty, plant and equipment 2 11,388 13,918Intangible assets 3 10,534 17,737Student loans (exchange) - long term 5 5,902,366 8,533,812Amounts owing by institutions (exchange) - long term 6 72,423 20,457

5,996,711 8,585,924Total Assets 19,996,807 17,083,394

Liabilities

Current LiabilitiesProvisions 10 26,375 26,667Amounts due to institutions (non-exchange) 11 602,622 1,251,943Deferred income 12 3,037,457 4,246,347Trade and other payables (exchange) 13 1,028,105 734,844

4,694,559 6,259,801Total Liabilities 4,694,559 6,259,801Net Assets 15,302,248 10,823,593

Net AssetsCapital fund 15,302,248 10,823,593Total Net Assets 15,302,248 10,823,593

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Figures in Rand thousand Note(s) 2020 2019

Revenue

Revenue from exchange transactions Administration fees (exchange)

14

44,644

47,847

Administration grants (non-exchange) 14 306,888 269,120 Grants received for student awards (non-exchange) 15 33,584,801 21,387,350 Interest revenue (exchange) 33 1,643,833 1,367,335 Commission revenue - sBux (exchange) 34 163 8,144 Unallocated debtors receipts (non-exchange) 32 1,165 1,539 Other income (exchange) 38 880 5,865 Total revenue from exchange transactions 35,582,374 23,087,200

Expenditure Personnel costs

16

(223,478)

(193,538) Asset management fees 17 - (5,372) Depreciation and amortisation 2 & 3 (12,963) (14,764) Irrecoverable debts written-off 18 (86,648) (1,065,785) Bursaries - Universities (21,930,026) (20,814,059) Bursaries - TVET Colleges (5,998,587) (3,778,932) General expenses (143,921) (128,439) Consulting and professional fees (45,272) (47,426) Audit fees 19 (15,822) (10,580) Total Operational expenditure (28,456,717) (26,058,895) Operating surplus/(deficit) for the year 7,125,657 (2,971,695) Impairment loss - Amounts owing by other funders 37 (82,686) - Social benefit component on student loans issued 5 (15,617) (532,627) Model adjustments 35 (3,174,545) (1,378,891) Residual valuation adjustments 5 740,896 (162,739) Impairment loss - Amounts owing by institutions (exchange) - long term (115,050) - Other losses (2,647,002) (2,074,257) Surplus/(Deficit) for the year 4,478,655 (5,045,952)

Statement of Financial Performance


Capital fund Total reserves Accumulated surplus/(deficit)

Total net assets

Opening balance as previously reported 14,575,996 14,575,996 - 14,575,996 Prior period error 1,293,549 1,293,549 - 1,293,549 Balance at 01 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 April 01, 2019 10,823,593 10,823,593 - 10,823,593

Surplus for the year - - 4,478,655 4,478,655 Transfer to capital fund 4,478,655 4,478,655 (4,478,655) - Balance at March 31, 2020 15,302,248 15,302,248 - 15,302,248

Statement of Financial Performance Statement of Financial Performance

Statement of Changes in Net Assets

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Cash Flows Statement

Figures in Rand thousand Note(s) 2020 2019 Restated

Cash flows from operating activities

Inflows

Grants for student awards administration costs 32,645,799 24,123,882 Student loan repayments - capital 637,755 628,122 33,283,554 24,752,004

Outflows

For student awards (31,760,710) (24,652,616) To employees and suppliers (404,958) (376,156) (32,165,668) (25,028,772)

Net cash outflow from operating activities 22 1,117,886 (276,768) Cash flows from investing activities

Purchase of property, plant and equipment 2 (3,144) (5,827) Purchase of other intangible assets 3 (86) - Interest income 852,816 497,219

Net cash flows from investing activities 849,586 491,392

Net increase in cash and cash equivalents

1,967,472

214,624

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

Cash and cash equivalents at the end of the year 9 5,854,028 3,886,556

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Budget on Accrual BasisApproved

budgetAdjustments Actual amounts

on comparable basis

Difference between final budget and

actual

Reference

Figures in Rand thousand Statement of Financial Performance

Revenue

RevenueAdministration fees (exchange) 53,736 (10,717) 43,019 44,644 1,625 31.2Administration of grants (non- 280,588 26,300 306,888 306,888 - 31.2exchange)Grants received for student 32,561,170 - 32,561,170 33,584,801 1,023,631awards (non-exchange)Interest revenue (exchange) 1,687,117 - 1,687,117 1,643,833 (43,284)Commission Revenue - sBux - - - 163 163 31.1(exchange)Unallocated debtors receipts - - - 1,165 1,165 31.1(non-exchange)Other income (exchange) 28,843 - 28,843 880 (27,963) 31.3Total revenue 34,611,454 15,583 34,627,037 35,582,374 955,337Total revenue 34,611,454 15,583 34,627,037 35,582,374 955,337

(237,981) 15,218 (222,763) (223,478) (715) 31.2(14,788) - (14,788) (12,963) 1,825 31

- - - (86,648) (86,648) 31.1(6,517,926) - (6,517,926) (5,998,587) 519,339

(26,043,244) - (26,043,244) (21,930,026) 4,113,218 31.4(11,237) (3,366) (14,603) (15,822) (1,219) 31.2(29,411) (12,814) (42,225) (45,272) (3,047) 31.2

Expenditure Personnel costs Depreciation and amortisation Irrecoverable debts written offBursaries - TVET collegesBursaries - Universities Audit fees Consulting and professional fees General Expenses (106,094) (11,789) (117,883) (143,921) (26,038) 31.2 / 31.5Total expenditure (32,960,681) (12,751) (32,973,432) (28,456,717) 4,516,715Surplus 1,650,773 2,832 1,653,605 7,125,657 5,472,052Impairment loss - Amounts - - - (82,686) (82,686) 31.1owing by other funders non-currentSocial benefit component on - - - (15,617) (15,617) 31.1student loans issuedModel adjustments (991,053) (639,203) (1,630,256) (3,174,545) (1,544,289) 31.2 / 31.6Valuation adjustment - - - 740,896 740,896 31.1Impairment loss - Amounts - - - (115,050) (115,050)owing by institutions (exchange)- long termOther losses (991,053) (639,203) (1,630,256) (2,647,002) (1,016,746)Surplus / (deficit) for the year 659,720 (636,371) 23,349 4,478,655 4,455,306

BudgetFinal

Statements of Comparison of Budget and Actual Amounts

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Budget on Accrual Basis


Approved budget

Adjustments Final Budget Actual amounts on comparable

basis

Difference between final budget and

actual

Reference

Statement of Financial Position

Assets

Current Assets Trade and other receivables

5,692

2,228

7,920

14,283

6,363

31.2

(non-exchange) Prepayments to institutions

3,924,004

-

3,924,004

7,565,665

3,641,661

31.7

Student loans 795,000 29,606 824,606 503,811 (320,795) 31.2/31.8 Amounts owing by institutions 503,807 (477,786) 26,021 62,309 36,288 31.2/31.9 (exchange) Cash and cash equivalents

3,886,020

194,863

4,080,883

5,854,028

1,773,145

31.2/31.10

Amounts owing by other funders 90,707 (3,886) 86,821 - (86,821) 31.2/31.11 9,205,230 (254,975) 8,950,255 14,000,096 5,049,841

Non-Current Assets Property, plant and equipment

14,665

(1,095)

13,570

11,388

(2,182)

31.2/31.12 Intangible assets 23,922 (9,733) 14,189 10,534 (3,655) 31.2/31.13 Student loans (exchange) - long term Amounts owing by institutions

8,997,914

21,666

(1,288,709)

-

7,709,205

21,666

5,902,366

72,423

(1,806,839)

50,757

31.2/31.8

(exchange) - long term Amounts owing by other funders

4,599

-

4,599

-

(4,599)

31.14

9,062,766 (1,299,537) 7,763,229 5,996,711 (1,766,518)

Total Assets 18,267,996 (1,554,512) 16,713,484 19,996,807 3,283,323

Liabilities

Current Liabilities Provisions

24,580

-

24,580

26,375

1,795

Amounts due to institutions (non- 150,483 1,164,057 1,314,540 602,623 (711,917) 31.2/31.16 exchange) Deferred income

3,821,822

318,367

4,140,189

3,037,457

(1,102,732)

31.2/31.17

Trade and other payables (exchange)

173,953 459,019 632,972 1,028,105 395,133 31.2/31.15

4,170,838 1,941,443 6,112,281 4,694,560 (1,417,721)

Total Liabilities 4,170,838 1,941,443 6,112,281 4,694,560 (1,417,721)

Net Assets 14,097,158 (3,495,955) 10,601,203 15,302,247 4,701,044

Net Assets

Reserves Capital fund

14,097,158

(3,495,955)

10,601,203

15,302,247

4,701,044

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Budget on Accrual Basis


Approvedbudget

Adjustments Final Budget Actual amountson comparable

basis

Differencebetween finalbudget and

actual

Reference

Cash Flow Statement

Cash flows from operating activities

Inflows

Grants for student awards andadministration costs

33,397,442 (451,487) 32,945,955 32,645,799 (300,156) 31.2

Student loan repayment - capital 801,194 (125,775) 675,419 555,071 (37,664) 31.2/31.1834,198,636 (577,262) 33,621,374 33,200,870 (337,820)

Outflows

For student awards (32,927,599) 366,429 (32,561,170) (31,678,026) 800,460 31.2To employees and suppliers (350,555) (70,268) (420,823) (404,958) 15,865 31.2

(33,278,154) 296,161 (32,981,993) (32,082,984) 816,325

Net cash flows from operatingactivities

920,482 (281,101) 639,381 1,117,886 478,505

Cash flows from investing activities

Purchase of property, plant andequipment - Normal Operations

(6,312) 1,637 (4,675) (3,144) 1,531 31.2/31.20

Purchase of other intangibleassets - Normal Operations

(5,506) 5,438 (68) (86) (18) 31.2/31.21

Interest income 594,005 (37,449) 556,556 852,816 296,260 31.2/31.22Net cash flows from investingactivities

582,187 (30,374) 551,813 849,586 297,773

Net increase/(decrease) in cashand cash equivalents

1,502,669 (311,475) 1,191,194 1,967,472 776,278 31.2

Cash and cash equivalents atthe beginning of the year

3,886,556 - 3,886,556 3,886,556 - 31

Cash and cash equivalents atthe end of the year

5,389,225 (311,475) 5,077,750 5,854,028 776,278

18


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Accounting Policies1. 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 preparationThe Annual Financial Statements (AFS) have been prepared in accordance with the Standards of Generally Recognised Accounting Practice (GRAP) including any interpretations (IGRAP), 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.

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 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.

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1.1 Basis of accounting (Continued)

GRAP 104 (as amended 2020): Financial Instruments

The objective of this Standard is to establish principles for recognising, measuring, presenting and disclosing financial instruments. The initial assessment of the amendment is not anticipated to result in material changes.

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 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. The impact of the amendment is not material since the entity does not participate in such business transactions.

GRAP 108 Statutory Receivables

The objective of this Standard is to prescribe accounting requirements for the recognition, measurement, presentation and disclosure of statutory receivables. The impact of the amendment is not material since the entity does not participate in such business transactions.

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. The impact of the amendment is not material since the entity does not participate in such business transactions.

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. The impact of the interpretation is not material since the entity does not participate in such business transactions.

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. The impact of the interpretation is not material since the entity does not participate in such business transactions.

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. The impact of the interpretation is not material since the entity does not participate in such business transactions.

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. 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.

127



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.

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, 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.

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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.

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.

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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.

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.

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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.

Impairment

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.

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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 shall be measured initially 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.

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.

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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.

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 from the derecognition of an intangible asset shall be included in surplus or deficit when the asset is de-recognised.

Classification

The entity classifies financial assets and financial liabilities into the following categories:• Financial assets measured at amortised cost• 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.

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Subsequent to initial recognition financial assets are measured at amortised cost using the effective interest rate method, less any impairment.

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.

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.

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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 tertiary institution 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.

Residual valuation adjustments may be necessary due to the manually processed loans and bursaries. These are effectively timing differences recognized at the reporting date. Any residual valuation adjustments passed to bring the student loan book in line with the valuation is disclosed as Other losses in the Statement of Financial Performance.

Social benefit component of student loans

A concessionary loan, in the NSFAS context, is a loan granted to or received by students 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.

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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.

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.

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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.

Revenue arising from the use by others of entity assets yielding interest, royalties and dividends or similar distributions shall be recognised using the accounting treatments when:

(a) it is probable that the economic benefits or service potential associated with the transaction will flow to the entity; and(b) the amount of the revenue can be measured reliably

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.

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..

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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.

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous annual financial statements are recognised in surplus or deficit in the period in which they arise.

When a gain or loss on a non-monetary item is recognised directly in net assets, any exchange component of that gain or loss is recognised directly in net assets. When a gain or loss on a non-monetary item is recognised in surplus or deficit, any exchange component of that gain or loss is recognised in surplus or deficit.

Cash flows arising from transactions in a foreign currency are recorded in Rands by applying to the foreign currency amount the exchange rate between the Rand and the foreign currency at the date of the cash flow.

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 2020 in respect of the 2020 academic year are classified as prepayments as they relate to the 2020/2021 financial year.

Prepayments are initially measured at the value of funds disbursed to institutions and subsequently measured at the same value.

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 2019 to 31 March 2020.

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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.

1.18 Student loans and Bursary Accounting policy

In terms of s4(a) of the NSFAS Act (Act 56 of 1999), NSFAS is mandated to “allocate funds for loans and bursaries to eligible students;”.

Prior to the introduction of the NSFAS bursary funding programme after the December 2017 Presidential pronouncement, NSFAS disbursed funds as either loans or bursaries. Loans issues were further segmented, and sub classified as one of the following:• 100% loan• Convertible loans• Final year loans.

Convertible and final year loans have a convertible bursary element based on the student’s academic performance where the loan was fully or partially converted to a bursary (expensed). (Refer to the bursary policy below).

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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 Presidential pronouncement was silent regarding the current debt owed to NSFAS. The Department of Higher Education and Training (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 (DPME) 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 DHET, 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.

Student Loans/Credits

After passing eligibility criteria, loans were awarded to eligible students. Historically the value of these loans were capped with the maximum thresholds determined annually. Maximum caps were determined based on the funder. Where the registration information reflected amounts less than the maximum cap, these students received full funding.

The loan value included in the Statement of Financial Position is recorded at the loan value granted to the student, net of any credits returned by the institution as a result of unutilised funds at the end of the academic year. A portion of these loans have been convertible (into a bursary), with the value of the bursary conversion dependent on the student results. (Refer to the bursary policy below).

Recognition of student loan

Student loans are 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.

Initial measurement

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 fact that all debt remains payable per current terms (loan agreement forms) and NSFAS Act (Act 56 of 1999).

Subsequent measurement

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, and changes to these estimates, if necessary, are processed prospectively. This is done on an annual basis and to the extent that this does not meet the Asset definition in terms of GRAP 1, this is disclosed as a contingent asset. Refer note 25: Contingencies.

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Impact of the new Bursary Funding Programme on the valuation of the Loan Book

After the change to a predominantly bursary administering entity from a loan administering entity, our major funder DHET no longer provides funding in the form of loans and consequently, the relative value of the student loan book has decreased over the past two reporting periods.

Derecognition

Student loans (financial asset) are derecognised to the extent that they are partially converted to a bursary, settled or written off as irrecoverable. Any gains or losses are recognised in the statement of Financial Performance.

Bursaries

After passing eligibility criteria, funded students who have secured registration at a public tertiary institution are offered bursaries. Bursaries are offered at a value equal to that provided in the registration data received from the public institution, or the amounts capped depending on the bursary funder, whichever is less.

Prior to the introduction of the NSFAS bursary funding programme, NSFAS disbursed funds as either loans or bursaries.

Based on the categories of loans in the background information, convertible and final year loans have a convertible bursary element based on the student’s academic performance where the loan was fully or partially converted to a bursary (expensed).

In accordance with the December 2017 Presidential pronouncement, the updated NSFAS Bursary funding programme provides financial support for students from poor and working-class families studying at a public higher education institution. This could include either Universities or TVET colleges. Funds are awarded to eligible students in the form of bursaries.

Bursary expenditure (attributable to Universities or TVET colleges) comprises of tuition and allowances. Tuition is paid over to the respective institutions where the eligible students are registered. These institutions then credit the eligible student fee account. Allowances are either paid over to the institutions, in which case the institutions disburse those allowances to the eligible students, or are disbursed to the students directly via the NSFAS wallet.

Bursaries are either processed systematically (by the NSFAS loan and bursary system) through the NSFAS disbursement process, or by manual claims process where these are not able to follow the standard disbursement process.

Bursary expenditure: Universities and TVET Colleges

Expenses are defined as decreases in economic benefits or service potential during the reporting period in the form of outflows or consumption of assets or incurrences of liabilities that result in decreases in net assets, other than those relating to distributions to owners.

Recognition

Bursaries are recognised either on processing or on payment as detailed below.

Bursary expenditure (both University and TVET) with reference to bursaries both pre and post December 2017 Presidential pronouncement are further subdivided into the following categories and the associated expenditure is recognised as follows:• 100% bursaries (tuition and allowances paid to the respective institutions): Recognised once these funds

have been processed and disbursed by the NSFAS loan and bursary management system.• Loan conversion bursaries: Recognised once the student academic results are received and the applicable

conversion is processed.• Allowances paid directly to students via the NSFAS wallet: Recognised once the cash vouchers are created

and NSFAS is liable to settle potential merchant claims after the voucher utilisation.• Manual claims: Recognised on payment to the respective institution or eligible student. This includes

funders other than DHET.

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Even though NSFAS disburses funds to eligible students for specific academic years, NSFAS recognises bursary expenditure in the financial year incurred and this is recognised net of any credits in respect of unutilised funds declared by the respective institutions

Measurement

Bursary expenditure is measured at the fair value of the consideration paid or exchanged, net of credits returned by institutions. Credits may be returned by institutions for unutilized funds at the end of the academic year.

To the extent that credits have not yet been declared by the respective institutions, and where reliable information exists to estimate the applicable credits, these credits are estimated and the associated expenditure reduced. To the extent that this does not meet the Asset definition in terms of GRAP 1, this is disclosed as a contingent asset. Refer to note 25: Contingencies

In instances where Institutions have not confirmed the subjects enrolled and subjects passed in order for a bursary conversion to be done by the end of the financial year, an estimate of the bursary amount is calculated based on the most representative data. This may include average pass rates per institution received for the current or prior financial year. Where these estimates require a revision, due to updated results being received, this is accounted for as a change in estimate with adjustments being made prospectively.

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Figures in Rand thousand 2020 2019

2. Property, plant and equipment

2019Cost / Accumulated Carrying value Cost / Accumulated Carrying value

Valuation depreciation and

accumulated impairment

Valuation depreciation and

accumulated impairment

Land* 770 - 770 770 - 770Buildings 4,047 (1,306) 2,741 4,047 (1,225) 2,822Furniture and fixtures 8,754 (6,590) 2,164 8,754 (5,704) 3,050Motor vehicles 294 (258) 36 294 (223) 71IT equipment 47,018 (41,341) 5,677 43,873 (36,668) 7,205Total 60,883 (49,495) 11,388 57,738 (43,820) 13,918

Reconciliation of property, plant and equipment - 2020

Land*

Opening balance

770

Additions

-

Depreciation

-

Total

770Buildings 2,822 - (81) 2,741Furniture and fixtures 3,050 - (886) 2,164Motor vehicles 71 - (35) 36IT equipment 7,205 3,144 (4,672) 5,677

13,918 3,144 (5,674) 11,388

Reconciliation of property, plant and equipment - 2019

Land*

Opening balance

770

Additions

-

Depreciation

-

Total

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

* 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 information

Property, plant and equipment fully depreciated and still in use (Gross carrying amount)Furniture and fixtures 5,257 4,117IT equipment 37,667 35,023Motor vehicles 119 119

43,043 39,259

Notes to the Annual Financial Statements

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3. Intangible assets

2020 2019 Cost /

Valuation Accumulated Carrying value amortisation

and accumulated impairment

Cost / Valuation

Accumulated Carrying value amortisation

and accumulated impairment

Computer software 82,075 (71,541) 10,534 81,989 (64,252) 17,737 Reconciliation of intangible assets - 2020

Computer software

Opening balance

17,737

Additions

86

Amortisation

(7,289)

Total

10,534 Reconciliation of intangible assets - 2019

Computer software

Opening balance

25,165

Amortisation

(7,428)

Total

17,737 Intangible assets fully amortised and still in use (Cost)

Computer software 17,595 15,291

4. Prepayments

Prepayments by category DHET University

6,122,595

2,775,124

DHET TVET 532,115 614,199 Other funders 324,965 143,014 2017 - 2018 Historic debt 756,933 - Prepayments to institutions for initial student registration fees 7,565,665 3,532,337

Upfront payments are made to institutions during January and March each year. Advance payments made in subsequent months where deemd appropriate by the Executive Administrator to ensure the uninterrupted funding of eligible students.

Upfront balances are the amounts for which disbursments have not yet been processed.

During the year under review, Historic Debt payments were treated as prepayments due to further eligibility clarification obtained from the DHET.


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5. Student loans (exchange) - long term Student Loan Nominal Value

The 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 (or decline) 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: Opening balance

9,338,683

10,247,208

New loans 20,920 760,728 Social benefit component (15,617) (532,627) Interest 791,021 870,117 Repayments (I) (551,279) (628,637) Valuation and impairment adjustments (3,174,545) (1,378,102) 6,409,183 9,338,687 Unallocated debtor receipts (3,006) (381) Carrying value 6,406,177 9,338,306 Short term (II)

503,811

804,494

Long term 5,902,366 8,533,812 6,406,177 9,338,306 The relationship between the Nominal Value and the Carrying Value is as follows: Nominal value

36,372,405

36,083,265

Less accumulated valuation and impairment adjustments (29,966,228) (26,744,959) Carrying value 6,406,177 9,338,306

I After experiencing good growth in collections in the prior year, the collections for the year have decreased mainly due to

the tough economic climate.

II 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.

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 commencing payment after the cash flow projections were

reduced by a further 20% in the current year, after the initial 10% in the prior year. This was done after considering the impact of the current COVID-19 pandemic and the associated impact on the macro economic conditions.

Due to the manual processing of the loan book transactions, NSFAS has recognised a Residual valuation adjustment to increase the value of the loan book in line with the actuarial valuation. The Residual valuation adjustments recognised in the current year amounts to R(740,895,758) (2019: R162,739,484).

6. Amounts owing by institutions (exchange)

Credit balances on student fee accounts due by institutions.

Amounts owing by institutions - Short term (I)

62,309

184,197 Amounts owing by institutions - Long term (II) 72,423 20,457 134,732 204,654 I Amounts outstanding which is expected to be realised within 12 months from the end of the

financial year.


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10. Provisions

Provision for credit balances to be refunded (I) 26,375 26,667

Opening balance

26,667

27,235

Amount paid as refunds (II) (1) (12) Deceased refund debtors (III) (228) (78) Reversal of provisions (IV) (63) (478) Closing balance (IV) 26,375 26,667 Provision for credit balances to be refunded comprises: Credit balances still owing from original 2011 credit provision (I)

8,275

8,567 Credit balances from normal operations 18,100 18,100 Total 26,375 26,667

I During the 2010 Ministerial Review it was discovered that the NSFAS Loan and BursariesManagement 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 had been overpaid and 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 had 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 The list of refund debtors was compared to the Department of Home Affairs database and showed a match of 18 deceased debtors. This amount has been recognised as income.

IV The balance of R26,375,000 has been matched to the governments payroll (PERSAL) and

refunds to the debtors are planned to be processed in the next financial year. An amount of R63,000 (2019: R478,000) could not be matched and has therefore been reversed to income.

11. Amounts due to institutions (non-exchange)

Payments due to institutions for student loans and bursaries awarded.

Amounts due to institutions (I) 602,622 1,251,943 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 27,858 1,782,761 Deferred income 3,009,599 2,463,586 3,037,457 4,246,347


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13. Trade and other payables (exchange)

Trade payables 60,153 35,871 Accruals 14,736 16,516 Accrued leave pay due to employees 7,388 6,013 Accrued bonuses due to employees 1,088 1,933 sBux - Merchant payables (I) 516,912 221,813 Operating lease (asset) / liability (342) 632 sBux - Expenses payable - 4,707 Unallocated receipts (II) 427,619 447,359 Other Creditors 551 - 1,028,105 734,844

I Amounts payable on receipts of claims from merchants for sBux vouchers issued to students.

II Unallocated receipts relate to amounts refunded by institutions to NSFAS when students cancel registration and the student detail has not been submitted to NSFAS.

14. Administration fees and grants

Administration fees (exchange) Administration Fees - Sector Education and Training Authorities

1,874

3,133

Administration Fees - Department of Agriculture, Forestry and Fisheries 1,031 998 Administration Fees - National Skills Fund 8,058 11,457 Administration Fees - Department of Defence and Military Veterans 2,039 - Administration Fees - Department of Social Development 1,035 3,155 Administration Fees - Rand Mutual Assurance - 120 Administration Fees - Funza Lushaka 30,607 28,984 44,644 47,847 Administration grants (non-exchange) Administration Grant: Department of Higher Education and Training

306,888

269,120 15. Grants received for student awards (non-exchange)

Department of Higher Education and Training (I) 32,303,516 20,065,271 National Skills Fund 402,923 176,726 Department of Basic Education 1,193,664 1,120,702 Other South African government departments 143,877 203,404 Universities 15,420 78,557 SETA funding 67,906 27,271 Deferred income movement (546,012) (297,830) Private funders 3,507 13,249 33,584,801 21,387,350

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.


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16. Personnel costs

Salaries 138,099 119,952 Movement in leave accrual 1,375 724 Employee benefits - other 84,004 72,862

223,478 193,538 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 - 5,372

Fees relating to services provided by asset managers for the prior period, NSFAS disinvested all the investments with asset managers during the prior financial year.

18. Irrecoverable debts written-off

Debt write-off - Student Loans 86,648 1,065,785

Reconciliation of debtors write-off balances Less than R50 debtor balance write-off

9

54 Deceased debtors write-off (I) 81,257 73,796 Disabled debtors (II) - 87 Irrecoverable debt (III) 5,382 991,848 Total 86,648 1,065,785

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 2,438 (2019: 2,405) debtors were confirmed as deceased and outstanding balances to the value of R81,257,718 (2019: R73,795,635) 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 that are regarded as irrecoverable due to them being disbursed in excess of contractual amount etc. have been written off and are also disclosed as irregular expenditure.

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19. Audit fees

Audit fees 15,822 10,580

External audit fees: Fees for 2016/17 audit

-

3 Fees for 2017/18 audit - 5,233 Fees for 2018/19 audit 7,812 1,001 Fees for 2019/20 audit 2,153 - Total 9,965 6,237 Internal audit fees and other services Fees for 2018/19 internal audit

-

4,343 Fees for 2019/20 internal audit 5,827 - 5,827 4,343 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 Service 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 4,478,655 (5,045,952) Adjustments for: Depreciation and amortisation

12,963

14,764

Model adjustments 3,174,546 1,378,102 Social benefit component on student loans (I) 15,620 532,627 Net interest income (1,643,833) (1,367,335) Movements in provisions (292) (568) Unallocated debtor receipts 2,625 (1,266) Changes in working capital: Trade and other receivables (non-exchange)

(7,083)

(2,037)

Student loan receipts 551,279 628,638 Prepayments to institutions (4,033,329) 26,850 Student loans (20,920) (760,728) Amounts owing by institutions (exchange) 69,921 432,656 Trade and other payables (exchange) 293,261 387,622 Amounts owing by other funders 82,686 4,822 Amounts due to institutions (non-exchange) (649,323) 1,089,480 Deferred income (1,208,890) 2,405,557 1,117,886 (276,768) I Refer to note 5.

23. Financial assets by category

2020

The accounting policies for financial instruments have been applied to the line items below:

Trade and other receivables (non-exchange)

At amortised cost

14,283

Total

14,283 Cash and cash equivalents 5,854,028 5,854,028 Student loans (exchange) 6,406,177 6,406,177 Amounts owing by other institutions (exchange) 134,732 134,732 12,409,220 12,409,220 Financial liabilities

Amounts due to institutions (non-exchange)

At amortised cost 602,622

Total

602,622 Trade and other payables (exchange) 1,028,105 1,028,105 1,630,727 1,630,727

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23. Financial assets by category (continued)

2019

Trade and other receivables (non-exchange)

At amortised cost

5,163

Total

5,163 Cash and cash equivalents 3,886,556 3,886,556 Student loans (exchange) 9,338,306 9,338,306 Amounts owing by other institutions (exchange) 477,895 477,895 Amounts owing by other funders 87,508 87,508 13,795,428 13,795,428 Financial liabilities

Amounts due to institutions (exchange)

At amortised cost 1,251,943

Total

1,251,943 Trade and other payables (exchange) 734,844 734,844 1,986,787 1,986,787 24. Commitments

Authorised expenditure

The entity had commitments for the following items as at 31 March 2020:

IT equipment 7,352 23,589 Consulting and other services (I) 38,720 73,364 46,072 96,953 I The decrease from the prior year is due to multi-year contracts obligations reducing during the current year. Operating leases - as lessee (expense)

Minimum lease payments due (I) - within one year

6,656

6,108

- in second to fifth year inclusive 5,831 12,292 12,487 18,400 Refer to note 20.

I The minimum lease payments comprise three (3) lease agreements for office space and printers.

25. Contingencies

Contingent assets: Amounts due by institutions

NSFAS disburses funds to institutions to settle eligible students tuition and allowances liabilities. Any unused portion of the tuition paid to institutions is to be returned to NSFAS once these are confirmed to be unutilised. Confirmation in the normal course of business happens on an annual basis at the beginning of the subsequent academic year.


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25. Contingencies (continued)

NSFAS has in the prior year disclosed an estimate of the contingency of R562,692,441 (2018: nil). This was based on 2016 andprior academic year credits when the close out processes were last finalised in 2017. In the current year, in the absence of updatedreliable data this data was assessed as being outdated and no longer reliable. At the conclusion of the current close out processesfor academic year 2017 to 2019, these amounts will be recognised as assets.

As a result of delays in these processes in the past two financial years, the estimate of the financial affect is no longer practicable and no amount will be disclosed for the current year.

Contingent liabilities: Financial Structure

NSFAS 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 R20,000,000 (2019: R8,000,000).A 10% notional risk is effected on the debtors facility in the event of unpaid collections.

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 theNSFAS 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 theNSFAS mandate of increasing the pool of funds available to students. The total amount of institution recoveries that are available to fund future students as at the reporting date is R111,847,684 (2019: R107,954,857). 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 Universities or 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 beingrequired to reapply for funding for each subsequent academic year. The fact that students' contract with NSFAS for the durationof their course creates a possible obligation under this contractual commitment. The obligation is only confirmed once thestudent registers at a public institution.

This possible contractual commitment by the entity to fund students for the duration of their studies, if they meet the promotionrequirements, has resulted in an estimated contingent liability of R79,467,782,607 (2019: R38,889,319,416 - Restated). The estimate uses actual student data from internal and external sources and parameters including course duration, the N+ rules as well as the amounts to be fundered. Remaining course duration per student is estimated and the contingencyis then calculated on a compound basis.

26. Related parties`

RelationshipsBoard MembersExecutive Authority (Minister of Higher Education, Science and Technology)

Controlling EntityOther Government Departments (National)

NSFAS has been under AdministrationDr Bonginkosi Emmanuel Nzimande

Department of Higher Education and Training

Department of Agriculture, Forestry and FisheriesDepartment of Labour Department of Social DevelopmentDepartment of Basic EducationDepartment of Defence and Military VeteransDepartment of Justice and Constitutional Development


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26. Related parties (continued)

Public Entities (that transacted with NSFAS during the reporting periodand had balances)

Agricultural Sector Education and Training Authority Bank Sector Education and Training Authority Chemical Industries Education and Training Authority Construction Education and Training Authority Culture Art Tourism Hospitality Sport Sector Education and Training AuthorityEducation Training and Development Practices Sector Education Training AuthorityFibre Processing and Manufacturing Sector Education and Training AuthorityFinancial and Accounting Services Sector Education and Training AuthorityFood and Beverage Sector Education and Training AuthorityHealth and Welfare Sector Education and Training AuthorityInsurance Services Sector Education and Training AuthorityLocal Government Education and Training Authority Manufacturing Engineering and Related Services Sector Education and Training AuthorityMining Qualifications AuthorityMedia Information and Communication Technologies Sector Education and Training AuthorityNational Skills FundNational Institute for Humanities and Social Sciences Safety and Security Sector Education and Training AuthorityServices Sector Education and Training Authority Energy and Water Sector Education and Training AuthorityTransport Education and Training Authority Wholesale and Retail Sector Education and Training Authority

46


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Notes to the Annual Financial StatementsFigures in Rand thousand 2020 2019

26. Related parties (continued)

TVET Colleges Boland CollegeBuffalo City CollegeCapricorn College for TVETCentral Johannesburg CollegeCoastal KZN TVET CollegeCollege of Cape Town for TVETEast Cape MidlandsEhlanzeni TVET CollegeEkurhuleni East College for TVETEkurhuleni West College for TVETElangeni College for TVETEsayidi TVET CollegeFalse Bay College for TVETFlavius Mareka TVET CollegeGert Sibande TVET CollegeGoldfields TVET CollegeIkhala Public Further Education and Training CollegeIngwe Public TVET CollegeKing Hintsa Public TVET CollegeKing Sabata Dalindyebo TVET CollegeLephalale TVET CollegeLetaba TVET CollegeLovedale Public TVET CollegeMajuba College for TVETMaluti TVET CollegeMnambithi TVET CollegeMopani South East TVET CollegeMotheo TVET CollegeMthashana TVET CollegeNkangala TVET CollegeNorthern Cape Rural TVET CollegeNorthern Cape Urban TVET CollegeNorthlink CollegeOrbit TVET CollegePort Elizabeth CollegeSedibeng College for TVETSekhukhune TVET CollegeSouth Cape CollegeSouth West Gauteng CollegeTaletso TVET CollegeThekwini TVET CollegeTshwane North College for TVETTshwane South College for TVETUmfolozi College for TVETUmgungundlovu TVET CollegeVhembe TVET CollegeVuselela TVET CollegeWaterberg TVET CollegeWest Coast CollegeWestern College for TVET

Transactions between NSFAS and the listed entities are consistent with a normal operating relationship; arm’s lengthtransactions have been omitted from presentation. This is a result of the early adoption of GRAP 20 Related Party Disclosuresas noted in the accounting policy.

47

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27. Administrator and key management emoluments

Key management

2020

Basic salary Employercontributions

Other Total

Chief Financial Officers (Acting) - d 1,768 - 86 1,854Chief Financial Officers (Acting) - e 495 - - 495Human Resources Executive - g 1,741 - 48 1,789Human Resources Executive (Acting) - h 384 - - 384Chief Operations Officer - i 1,553 - - 1,553Chief Operations officer (Acting) - j 397 - - 397Chief Operations officer (Acting) - k 1,392 - 88 1,480Chief Operations officer (Acting) - l 167 - 4 171Governance Risk and Compliance Executive - m 1,225 60 13 1,298

9,122 60 239 9,421

Advisors to the AdministratorAdministrator - n 2,823 301 129 3,253Special Advisor - o 632 17 80 729Risk & Finance Advisor - d 589 - 29 618HR & OD Advisor - p 900 - 145 1,0452019 Program Manager - q 720 - 62 782Lead Process Specialist - r 649 - 20 669ICT Advisor - k 278 - 18 296Data Advisor - l 167 - 4 171TVET Advisor - s 365 - 11 376Stakeholder Advisor - t 632 - 7 639OHSA (Security andBusiness ContinuityAdvisor) - u

1,845 - 105 1,950

9,600 318 610 10,528

2019

Basic salary Employercontributions

Other Total

Executive Officer - a 1,550 173 - 1,723Chief Financial Officers - b 1,008 11 14 1,033Chief Financial Officers (Acting) - c 1,792 128 163 2,083Chief Financial Officers (Acting) - d 575 - - 575Chief Information Officer - f 1,458 - 24 1,482Chief Information Officer (Acting) - k 1,089 - 14 1,103Chief Information Officer - i 1,087 - - 1,087Human Resources Executive - f 2,297 - 39 2,336

10,856 312 254 11,422

Advisors to the AdministratorAdministrator - n 1,914 - 391 2,305Special Advisor - o 952 20 7 979Risk & Finance Advisor - d 575 - 1 576HR & OD Advisor - p 771 - 103 8742019 Program Manager - q 780 - 29 809Lead Process specialist - r 863 - 15 878

5,855 20 546 6,421

48


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27. Administrator and key management emoluments (continued)

a Steven Zwane (Executive Officer) appointed 1 September 2017 to 2 October 2018.b Lerato Nage Chief Financial Officer. Resigned 31 July 2018c Morgan Nhiwatiwa Chief Financial Officer (Acting) 1 March 2017-31 August 2017 and 1 May 2018 to 31 December

2018d Prakash Mangrey : Appointed 1 October 2018 as Risk and Finance Advisor and was Chief Financial Officer (Acting)

from 1 January 2019 to 8 December 2019. No acting allowance was paid.e Itayi Daringo : Chief Financial Officer (Acting) from 9 December 2019.f Ashveer Rajcoomar: Chief Information Officer appointed 1 November 2017 to 19 October 2018.g Vuyokazi Dwane (HR Executive) appointed 1 December 2017.h Lungisa Mtumtum (Acting HR Executive) appointed 1 February 2019 to 30 June 2019.i Tasneem Salasa- Chief Operations Officer: Appointed 23 August 2018 to 31 December 2019j Nthuseng Mphahlele- Chief Operations Officer (Acting): Appointed 01 January 2020 to 31 March 2020.k Colin Fourie-ICT Advisor to the Administrator and Chief Information Officer (Acting): Appointed on 20 October 2018.l Dr Sibongiseni Thotsejane-Data Advisor to the Administrator and Chief Information Officer (Acting): Appointed on

1 February 2020.m Thaaniya Isaacs- Governance Risk and Compliance Executive: Appointed 17 June 2019n Dr Randall Carolissen-Administrator: Appointed as Administrator by the Minister of Higher Education and Training

in terms of section 17 A (1) ( c ) of the NSFAS Act for the period 21 August 2018 to 20 August 2019. The secondterm of commenced effective from August 21, 2019 to August 20, 2020 (as per Government Gazette No. 42662).

o Prof. Niel Garrod-Special Advisors to the Administrator: Appointed 1 October 2018 to 31 August 2019d Prakash Mangrey-Risk and Finance Advisor to the Administrator: Appointed 1 October 2018p E. Bebe Oyegun-Adeoye - HR & OD Advisor to the Administrator: Appointed 29 October 2018 to 30 September 2019.q Peter Grant- 2019 Program Manager: Appointed 18 Septeber 2018 to 30 September 2019.r Stalin Links-Lead Process Specialist: Appointed 11 September 2018 to 31 August 2019.s Samuel Zungu -TVET Advisor to the Administrator: Appointed 1 January 2020t Sibongile Mncwabe -Stakeholder Advisor to the Administrator: Appointed 20 September 2019u Mukhtar Mohamed-OHSA (Security and Business Continuity Advisor): Appointed 1 April 2019

Board members emoluments

2020

Emoluments TotalTravel costs - -Board meeting fees - -

- -

2019

Emoluments TotalTravel costs 353 353Board meeting fees 1,138 1,138

1,491 1,491

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28. Prior period errors

Presented below are those items contained in the cash flow statement that have been affected by prior-year adjustments:

Cash flow statement

2019

As previouslyreported

Correction oferror

Restated

Cash flow from operating activities

InflowsGrants for student awards administration costs 24,111,411 12,471 24,123,882Student loan repayments - capital 628,637 (515) 628,122Amounts due to institutions 1,089,480 (1,089,480) -Amounts due from institutions 459,037 (459,037) -

OutflowsFor student awards (26,179,563) 1,526,947 (24,652,616)To employees and suppliers (382,510) 6,354 (376,156)Amounts owing by other funders (412) 412 -Net cash outflow from operating activities (273,920) (2,848) (276,768)

Cash flow from investing activitiesInterest income 494,371 2,847 497,218

Reason for restatement:

Cash flow statement

The cash flow statement as presented in the 2018-19 annual financial statements was materially misstated. Following the re-assessment of the mapping of the accounts to the correct cash flow categories in accordance with GRAP 2 Cash flow statement, the misstatements were corrected and the 2018-19 cash flow figures were restated.


2019

Contingent Liabilities: Student funding

The Contingent Liability as presented in the 2018-19 annual financial statements were materially misstated. Following the re-assessment of the contingency to take into account the N+ rules, inflation and students registered in subsequent periods, this amount was restated for the 2018-19 financial year as R38,899,319,416 from the figure reported previously of R29,302,108,005. Refer note 25: Contingencies.

Irregular expenditure

During the prior year NSFAS disclosed irregular expenditure for various categories. This was reviewed in the current year after external legal advice and opinions were sought. The outcome of these opinions indicated that certain areas disclosed do not amount to irregular expenditure. NSFAS is currently in the process of seeking declaratory application so that the courts may provide the necessary clarity. Payments in excess of contract amounts that were previously disclosed as Irregular expenditure are considered to be in assessment until this matter is concluded.

The irregular expenditure disclosed in the 2018/19 financial year for the above category amounts to R1,025,209,048. The Cumulative irregular expenditure disclosed for the above category up to 31 March 2019 amounted to R1,236,017,175. Refer note 30: Irregular expenditure.

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29. 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 Authority has established the Audit and Risk Committee, which is responsible for oversight and monitoring compliance of the entity’s risk management policies.

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.

Maturity analysis of financial liabilities

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29. Risk management (continued)

As at 31 March 2020 Less than 1month

1 to 3 months 3 months to 1year

Total

Accounts payable (I) 1,019,629 - - 1,019,629Amounts due to institutions 602,622 - - 602,622

1,622,251 - - 1,622,251

As at 31 March 2019 Less than 1month

1 to 3 months 3 months to 1year

Total

Accounts payable(I) 726,898 - - 726,898Amounts due to institutions 1,251,943 - - 1,251,943

1,978,841 - - 1,978,841

(I) These balances exclude accrued leave pay and accrued bonuses due to employees as these are not financialliabilities.

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 itsholdings of financial instruments. The objective of market risk management is to manage and control market risk exposureswithin acceptable parameters, while optimising the return. The entity is exposed to one primary type of market risk, namelyinterest rate risk.

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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 notsignificant as the investment profile is conservative in nature. Interest rate risk on student loans is managed principally throughlinking interest charged on outstanding student loans to the Repurchase rate, as determined by the South African ReserveBank from time to time.

Interest rate risk profile

At the reporting date the interest rate profile of the entity's interest-bearing financial instruments was:

Variable rate instrumentsStudent loans 6,406,177 9,338,306Other variable rate instruments 5,854,028 3,886,556

12,260,205 13,224,862

Valuation sensitivity analysis for variable rate interest instrumentsA change of 200 basis points in interest rates at the reporting date would have (increased)/decreased deficit or surplus byR117,080,569 (2019: R38,859,530). This analysis assumes that all other variables remain constant.

Valuation sensitivity analysis for student loansA change of 200 basis points in interest rates at the reporting date would have increased/(decreased) surplus or deficit by theamounts shown below. This analysis assumes that all other variables remain constant.

2020Student loans200 basis points increase 52,277 0.82%200 basis points decrease (50,003) -0.78%

2019Student loans100 basis points increase 21,313 0.23%100 basis points decrease (21,313) -0.23%

Credit risk

Credit risk is the risk of financial loss to the entity if a counterparty to a financial instrument fails to meet its contractualobligations, and arises principally from the entity’s receivables from student loans. This risk is mitigated by the loan terms whichmake the loans due and payable only in the event of a borrower becoming employed and having an income above a pre-determined threshold level. Fair value financial assets, loans and receivables and cash and cash equivalents are exposed tocredit risk. The initial day-one loss adjustment is therefore not considered to be a reflection of credit risk, but actuallyrepresents the social benefit element of the loans.

The maximum credit risk exposure is: R 12,409,220 ,000 (2019: R13,519,402 ,000), which is the total of all assets excludingprepayments, property, plant and equipment and intangible assets.

The entity limits its exposure to credit risk on loans advanced as a result of implementing legislative policy. The granting ofstudent loans is governed by well-established criteria, including a national means test. Internal systems are regularly enhancedto ensure constant improvement in the entity’s loan recovery strategy.


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Allowances for impairment

The entity establishes an allowance for impairment that represents its estimate of incurred losses in respect of its assets. Acollective loss is established for groups of similar assets in respect of losses that may have been incurred but not yet identified,on an individual basis. The collective loss allowance is determined based on historical data of payment statistics for similarfinancial 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,transitions 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 inpayment. 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 loanis uncollectable. This determination is made after verification of the notification of the death or permanent disability of thedebtor.

A list of identity numbers is verified against the Department of Home Affairs database on a quarterly basis for verification ofdeceased debtors while medical certification of permanent disability is required. The specific loans are then written off onapproval by the Accounting Authority.

During the financial year under review the entity wrote off debts amounting to R 86,648,000 (2019: R73,937,000) afterverification of deceased and permanently disabled debtors in respect of whom the required notification had been received.

A further write-off of R5,382,000 (2019: R991,848,000) 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-3 short term local currency credit rating) andlimits exposure to any one counter party. Consequently, the entity does not consider there to be any significant exposure tocredit 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 asingle borrower is considered riskier than their first loan as the previous loans need to be repaid before the first payment occurson the fifth loan. As a result, the loan payments are expected to be received later and there is also a greater chance of theborrower passing away before completing the repayment of the loan. The demographics of the NSFAS’s student base are alsoconsidered as these have an influence on credit risk, that is age and gender are factors that influence the expected mortality ofthe 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. Therepayment experience is higher on the initial loans than on subsequent loans.

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Loan number Number ofloans

Transactionvalue (Figures in

Rands)

Percentage oftotal value

1 760,287 14,007,067 39%2 508,188 10,652,881 29%3 320,068 6,908,372 19%4 158,966 3,297,014 9%5+ 80,582 1,507,071 4%

1,828,091 36,372,405 100%

The portfolio has been segregated to indicate the number of loans that were settled over the last year as well as the number ofloans that are currently being paid and the ones not being paid. Where the loans are not being paid this is not due to a creditevent but due to the loans not being due and payable as a result of the borrower being unemployed or earning below therepayment threshold.

Loans in force Currently paying Not currentlypaying

Student 603,220 - 603,220Drop-out 455,899 55,192 400,707Graduate 768,972 116,028 652,944

1,828,091 171,220 1,656,871

Price risk

The entity's other financial assets are low risk investments. Therefore, fair value or future cash flows as a result of market pricechanges is immaterial.

The fair value movements would increase/decrease as a result of gains or losses on securities designated at fair value. Allfinancial instruments are classified at amortised cost except for investments designated at fair value.

30. Irregular expenditure

Opening balance 6,347,011 3,108,193Add: Irregular Expenditure - current year 522,299 3,238,952Sub Total: 6,869,310 6,347,145Other areas of non-compliance - -Disbursements with respect to NOCLAR 522,080 2,652,072Shifting of earmarked funds not approved by National Treasury - 580,537Invalid variation 219 -Variation not approved by NSFAS Accounting Authority - 971Asset management fees - 5,372Subtotal other areas non-compliance 522,299 3,238,952Less: Amounts condoned by National Treasury - (134)Closing balance 6,869,310 6,347,011

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30. Irregular expenditure (continued)

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 thathad 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 approvalwas conducted in accordance with the NSFAS Act. The shifting of funds was necessary at the time due to the slow nature ofthe historic debt claims received from the institutions and the need to fund eligible first time entering students.

Subsequently, an audit finding was raised by the Auditor-General of South Africa in this regard during the 2017/18 audit, whichled to NSFAS requesting ex post-facto approval by National Treasury.

National Treasury subsequently responded to NSFAS on 16 May 2019 and indicated that the ex post facto approval wasdenied and the action performed by the Accounting Authority to approve the shifting of the respective earmarked funds wasirregular.

The irregular expenditure pertains to the actual utilisation of funds from the Historic Debt account to the general student fundingaccounts, which occurred in the 2016/17 to 2018/19 financial year.

The impact on the 2016/17 financial year is R1,308,697,556, which results in a restatement of the prior year irregularexpenditure opening balance.

The impact on the 2017/18 financial year is R72,671,127, which results in a restatement of the current year irregular openingbalance.

Subsequent to the year under review, after National Treasury rejected the request for condonation of the irregular expenditure,the Administrator as the Accounting Authority approved the irregular expenditure write off of R1,961,906,029 as permissible bythe PFMA and Treasury Regulations. This write off will reflect in the 2020/21 financial year.

Invalid variation:

The entity identified irregular expenditure of R219,316 during the 2020/21 financial year as a result of a payment made to aservice provider in the 2018/19 financial year for a contract variation for an Employee Self Service leave module which was notin compliance with National Treasury Instruction Note 3 of 2016/17. The determination and assessment was conducted inaccordance with the National Treasury Irregular Expenditure Framework which indicated that no official was liable in law. Theirregular expenditure will be considered for condonation in the 2020/21 financial year.

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 heldwith Document Warehouse was submitted to the NSFAS Board for approval. The variation request was not approved by theNSFAS 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 thecontract extension, thereby resulting in the incurrence of irregular expenditure.

The determination and assessment of the above matter was finalised on 28 November 2018. The outcome of the assessmentfound no official liable in law and it was recommended that the irregular expenditure be submitted to National Treasury forcondonation in accordance with the National Treasury Irregular Expenditure Framework. As at financial year end, the irregularexpenditure is awaiting the condonation from National Treasury.

Amounts condoned by National Treasury:

During the 2018/19 financial year, the National Treasury approved the condonation of irregular expenditure incurred by theentity during the 2012/13 financial year amounting to R133,787. The irregular expenditure pertained to valid tax clearancecertificates 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 Treasuryapproved the condonation of the irregular expenditure on 21 May 2018 in accordance with paragraph 29 of the previousNational Treasury Irregular Expenditure Guidelines.

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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. Thisnotification indicated that NSFAS was materially non-compliant with S51 of the PFMA with respect to the disbursementprocess. S51 requires that the entity has and maintains effective, efficient and transparent systems of financial and riskmanagement and internal control.

NSFAS has quantified the impact of disbursement errors relating to non-compliance to S51. Matters that have been quantifiedinclude, 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 could betraced back to the implementation of the new systems in 2013. Since this systems implementation, the internal auditors havenoted a steady decline in the governance and control environment with respect to the disbursement process, together withincreased manual interventions and heightened dependency on key individuals who processed disbursements, with little to nooversight. 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 whetherany 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 receivedfor student awards (non-exchange) and Bursaries (Universities and TVET Colleges)

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Irregular expenditure relating to prior years, not disclosed above:

In the prior year, NSFAS was made aware of a forensic report dated March 2018 commissioned by the Department of HigherEducation and Training. This forensic report is the conclusion of investigations into a sample of 10 institutions across the 2012to 2014 academic years and highlighted instances of irregular expenditure to the value of R47 566 337. The report is not clearas 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 and2018 academic years. NSFAS has assessed the extent to which irregular expenditure for years relating to academic years2016 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 fundingdecisions and funding rules were applied at each institution rather than centrally at NSFAS. As a result, NSFAS doesnot 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 theextent that it was readily available and could be verified. This reference data would be different for each academic yearand thus reconstructing the applicable reference data for each year, including verifying the data for accuracy, provednot to be possible.

In order to assess the irregular expenditure reliably for any years prior to the 2017 academic year, detailed audits would berequired at each institution country wide. As a result, NSFAS has concluded that it would be impractical (as defined by theNational 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 managersfor the period under review and incurred asset management fees amounting to R5,372,199 before it disinvested all theinvestments with these asset managers during the previous financial year.

NSFAS has fully investigated the matter, and subsequent to year end had written to National Treasury for the condonement ofthe asset management fees.

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Irregular expenditure relating to prior years, not disclosed above:

In the prior year, NSFAS was made aware of a forensic report dated March 2018 commissioned by the Department of HigherEducation and Training. This forensic report is the conclusion of investigations into a sample of 10 institutions across the 2012to 2014 academic years and highlighted instances of irregular expenditure to the value of R47 566 337. The report is not clearas 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 and2018 academic years. NSFAS has assessed the extent to which irregular expenditure for years relating to academic years2016 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 fundingdecisions and funding rules were applied at each institution rather than centrally at NSFAS. As a result, NSFAS doesnot 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 theextent that it was readily available and could be verified. This reference data would be different for each academic yearand thus reconstructing the applicable reference data for each year, including verifying the data for accuracy, provednot to be possible.

In order to assess the irregular expenditure reliably for any years prior to the 2017 academic year, detailed audits would berequired at each institution country wide. As a result, NSFAS has concluded that it would be impractical (as defined by theNational 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 managersfor the period under review and incurred asset management fees amounting to R5,372,199 before it disinvested all theinvestments with these asset managers during the previous financial year.

NSFAS has fully investigated the matter, and subsequent to year end had written to National Treasury for the condonement ofthe asset management fees.

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Possible irregular expenditure considered to be in assessment in terms of the Irregular Expenditure Framework by the National Treasury:

In the prior financial years, NSFAS disclosed certain categories of Irregular Expenditure. These included amounts disbursed in excess of contractual amounts. Due to the fact that the funds associated with this category of irregular expenditure were paid to eligible students who were being paid the correct amount, NSFAS undertook to review this disclosure in the current year. NSFAS sought independent legal advice and opinions on classifying these and other items as Irregular Expenditure, as recognised and disclosed in terms of the Irregular Expenditure Framework by the National Treasury.

The outcome of these processes suggested that these disbursements did not amount to irregular expenditure. NSFAS is currently in the process of seeking declaratory application so that the courts may provide the necessary clarity. NSFAS therefore regards this as alleged irregular expenditure and has not disclosed this as irregular expenditure in the current year. The assessment has to be made and then the determination, in terms of the National Treasury framework.

In addition to this, the auditors identified additional alleged irregular expenditure in the current year. These were also subjected to the legal review. The outcome again suggested that these transactions do not amount to irregular expenditure in terms of the National Treasury framework on irregular expenditure.

The following categories were noted in the current year:

- Loan conversion application- Conditions criteria not gazetted-Written agreements not generated- No academic record for funded TVET students

It should be noted that for all matters raised by the AGSA in the current year, NSFAS has sought independent legal opinions. NSFAS has therefore disclosed the irregular expenditure to the extent that the legal opinions confirm the views of the auditor and expects to conclude on whether or not the alleged irregular expenditure is irregular as part of the legal declaratory application process, after which any confirmed irregular expenditure will be disclosed, where necessary. Categories disclosed as irregular expenditure in the prior years will also be disclosed in the prior period error note. Refer note 28.

All returning TVET students are currently being investigated to determine if any students who did not meet the financial eligibility criteria were erroneously funded. Any disbursements to identified ineligible students identified will be disclosed as Irregular expenditure.

31. Budget information

The Administrator approved the initial budget and the Minister approved the revised budget on March 27, 2020. 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 31.1: The following are not budgeted for:

Commission revenue - sBuxUnallocated debtors receiptsAsset management feesIrrecoverable debts written offSocial benefit component on student loans issuedImpairment loss - Amounts owing by other fundersResidual valuation adjustments

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31. Budget information (continued)

Note 31.2: Adjustments

Statement of Financial Performance:

Administration fees - The entity received reduced funding from certain other government departments as well as certain sectoreducation and training authorities. The revised funding allocations have had an impact on the receipt of related administrationfees.

Administration grants - The entity obtained additional funding re-prioritised by its Executive Authority from the National SkillsFund which was added to the administration grant.

Personnel costs - Budget saving on personnel costs accumulated during the financial year due to delays in filling specialistvacancies had been re-prioritised to fund the extension of audit work, the temporary appointment of consultants for thespecialist vacancies and other initiatives related to the TVET applications cycle.

General expenses - The entity obtained approval for the use of recoveries income in the administration budget to fund debtcollection commission expenditure. A budget adjustment was required as expenditure exceeded the original estimatedinjection. Additional budget re-prioritisation was for other initiatives related to the TVET applications cycle.

Consulting and professional fees - Budget saving on vacancies not yet filled had been re-prioritised to fund the use of forensicconsultant services, as part of the terms and reference of the Administrator which led to the need for additional legal serviceswhich could not have been anticipated and to employ Java developers on a temporary basis due to the delays in recruitmentefforts.

Audit fees - Audit extension work was required to finalise the 2018/19 audit work which was by mutual agreement betweenNSFAS, AGSA, DHET and National Treasury. This was concluded by 31 October 2019.

Model adjustments - A budget adjustment was made based on the audited outcome of the prior financial year.

Statement of Financial Position:

There was a budget adjustment based on the audited outcome of the prior financial year which applies to the following lineitems 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 other funders- Trade and other payables- Amounts due to institutions- Deferred income

Prepayments to institutions - A budget adjustment based on the audited outcome of the prior financial year and taking intoaccount the growth rate of organisational capacity.

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Cash Flow statement:

Grants for capital fund and administration costs - The entity received reduced funding from certain other government departments as well as certain sector education and training authorities.

Student loan repayments - capital - A budget adjustment was made based on the audited outcome of the prior financial year.

For student awards - A budget adjustment was made based on the budget adjustment made to amounts due to institutions as at year end.

To employees and suppliers - This budget adjustment takes into account the additional grant received from DHET, the additional recoveries injection and the approved utilisation of interest earned on administration funding.

Purchase of property, plant and equipment - A budget adjustment was made based on the audited outcome of the prior financial year in line with the final budget.

Purchase of other intangible assets - A budget adjustment was made based on the audited outcome of the prior financial year in line with the final budget.

Interest income - A budget adjustment was made based on the audited outcome of the prior financial year.

Net increase/(decrease) in cash and cash equivalents - Combined outcome of all other budget adjustments.

Statement of Financial Performance:

Note 31.3: Other Income (exchange)

Other income budgeted for relates to the movement of recoveries funding to fund the Debt Collection Commission expenditure. Other income actually received relates to the re-imbursive portion of skills development levies received from the Bank SETA.

Note 31.4: Bursaries - Other funding sources

Bursaries from other funding sources consist mainly of DHET University funding and funding from all other donors. The variance is due to outstanding 2018 and 2019 academic year claims which have not yet been paid in this current financial period.

Note 31.5: General Expenses

An variance is related to the outsourced work performed for the 2020 TVET applications drive.

Note 31.6: 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 31.7: Prepayments to institutions (exchange)

The adjusted budget was based on a payment of 15% of the 2020 allocation. Additional upfront payments were made to institutions that experienced financial strain due to the increased student enrolment.

Note 31.8: Student loans (exchange) - long term and short term

Short-term and long-term student loans were lower than budget as a result of the increase in loan book write downs due to the current macro-economic conditions and debtors' inability to settle their debts. This includes the considerations relating to the impact of the current COVID-19 pandemic.

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Note 31.9: Amounts owing by institutions (exchange) - short term

Estimates of amounts due by institutions were reassessed based on prior year actual outcomes. This has resulted in amountsaccrued during the current year being higher than the revised budget.

Note 31.10: Cash and cash equivalents

The variance is due to outstanding 2018 and 2019 academic year claims which have not been paid in the current financialyear. This resulted in the cash balances being higher than the revised budget amount.

Note 31.11: Amounts owing by other funders

The entity received reduced funding from certain government departments as well as certain sector education and trainingauthorities.

Note 31.12: Property, plant and equipment

The capitalisation threshold for new purchases has been aligned to the limit prescribed by the National Treasury. The varianceis as a result thereof.

Note 31.13: Intangible assets

Intangible assets were lower than budget due to a reduction in the purchase of intangible assets during the financial year.

Note 31.14: Amounts owing by other funders (long-term)

The variance is due to the entity receiving reduced funding from certain funders including university funding.

Note 31.15: Trade and other payables (exchange transactions)

The variance is due to a higher than anticipated increase in claims from merchants for sBux vouchers issued to students. Thisis also linked to the increase in prepayments to institutions.

Note 31.16: Amounts due to institutions (non-exchange)

The amount due to institutions was below budget as there was sufficient reserves to pay for the majority of disbursement filesapproved.

Note 31.17: Deferred income

The variance is due to lower cash utilisation towards the end of the financial year which increased our unspent obligation todonors should they enforce the requirement to return the cash.

Cash Flow Statement

Note 31.18: Student loan repayments - capital

The variance is due to reversals on debit orders during the December holidays and slow payment pace from NSFAS debtorswhich had a negative impact on recoveries.

Note 31.19: Amounts due to institutions paid

The variance is due to a significant increase in the upfront payments which is based on a percentage of allocations each year.

Note 31.20: Purchase of property, plant and equipment

The purchase of equipment was lower than expected due to a delay and saving in the finalization of the infrastructurereplacement tender and a lower than anticipated need for the replacement of unsafe and deteriorated furniture items.

Note 31.21: Purchase of other intangible assets

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The Information Security unit required a software license for Web Application security testing which was not initially budgetedfor.

Note 31.22: Interest income

Interest on donor funds was higher than expected due to timing differences in the funds expected to be disbursed throughoutthe year.

32. Unallocated debtors receipts (non-exchange)

Unallocated debtor receipts (historical) 1,165 1,539

Amounts received by the entity without a valid reference to loan accounts or not yet allocated at year end to individual loanaccounts, are recorded in the annual financial statements against student loans. Every attempt is made to establish the identityof 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 beendeposited by them, the amounts will at that stage be set-off against the students' loan accounts as payments and reflected asan expense in the financial statements. The amount written back to income is R1,165,045 (2019: R1,539,060).

33. Interest revenue (exchange)

Interest on student loans 791,022 870,116Interest on funds invested* 852,811 497,219

1,643,833 1,367,335

*Interest on funds invested relates to the following categories:

By funding source:Administration grants and fees 5,009 126,631Donor funds 720,332 286,808Recovered funds 127,470 80,932

852,811 494,371

By investment type:Call accounts 684,896 323,646Asset managers - 34,033Corporation for Public Deposits 167,915 136,692

852,811 494,371

34. Commission Revenue - sBux (exchange)

Commission revenue - sBux (I) 163 8,144

I The entity implemented a mobile payment solution (sBux) for the disbursement of allowances to students registered atinstitutions included in the first phase of the student-centred operating model. Commission is payable by accreditedmerchants for student transactions on their food and learning materials allowances at no cost to the students. Thecommission is shared equally between NSFAS and the provider of the mobile payments platform. The commissiondisclosed is the amount payable to NSFAS.

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35. 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 2020; 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 R3,174,544 ,984 (2019: R1,378,102,282) 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 loan1991 - 2002 (44,077) (22,267)2003 - 2008 (251,311) (164,357)2009 (105,882) (63,309)2010 (139,352) (74,185)2011 (196,677) (96,001)2012 (258,651) (121,887)2013 (328,899) (146,340)2014 (327,114) (131,612)2015 (343,776) (130,241)2016 (496,480) (177,860)2017 (673,974) (249,014)2018 (6,941) (1,027)2019 (1,411) -

(3,174,545) (1,378,100)

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 belowconsiders the impact of a level change in the transition from exit to paying percentages by 10% at each duration since exit.

2020 Carrying value +10% change Impact -10% change ImpactStudent 2,732,538 273,254 10.0% (273,254) -10%Non-payer 2,739,790 335,926 12.26% (321,316) -11.73%Payer 936,855 - 0.0% - 0.0%

6,409,183 609,180 9.50% (594,570) -9.28%

2019 Carrying value +10% change Impact -10% change ImpactStudent 5,224,307 522,431 10.0% (522,431) -10%Non-payer 3,091,727 432,664 14.0% (399,397) -12.92%Payer 1,022,653 - 0.0% - 0.0%

9,338,687 955,095 10.23% (921,828) -9.87%

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35. Debtors loan book movements (non-exchange) (continued)

Sensitivity to change in the payment profile

The payment profile reflects an average expected level of recovery at each month since payment commenced. Since there isno clear contractual relationship between the loan value and the payment amount, the history of aggregate experience ofpayments 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.

2020 Carrying value -10% change ImpactStudent 2,732,537 (118,702) -4.34%Non-payers 2,739,790 (104,843) -3.83%Payers 936,855 (58,135) -6.21%

6,409,182 (281,680) -4.39%

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%

Impairment loss

The expected future cash flows anticipated to arise from the loan book are reassessed each year. They take into account thestatus of the individual loans in the loan book and the adjusted assumptions based on an analysis of the historic experience ofthe 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.

36. Analysis of surplus/(deficit)

OperationalAdministration grants 306,888 269,120Administration fees 44,644 47,847Interest received 1,643,833 1,367,335Other income 880 5,865sBux - Commission revenue 163 8,144Unallocated debtors receipts 1,165 1,539Less: Administration and investment costs (441,456) (400,119)Sub-Total 1,556,117 1,299,731

CapitalGrants received for student awards 33,584,801 21,387,350Bursaries - Universities (21,930,026) (20,814,059)Bursaries - TVET Colleges (5,998,587) (3,778,932)Irrecoverable debts (86,648) (1,065,785)Valuation adjustments 740,896 (162,739)Social benefit component on student loans (15,617) (532,627)Model adjustments (3,174,545) (1,378,891)Impairment - Amounts owing by other funders (82,686) -Impairment loss - Amounts owing by institutions (exchange) - long term (115,050) -Sub-Total 2,922,538 (6,345,683)

Total 4,478,655 (5,045,952)

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37. Impairment loss - Amounts owing by other funder

Impairment loss - Amounts owing by other funder (82,686) -

During the period amounts owing by other funders were impaired with an amount of R77,937,183 (2019: Rnil) due to theseamounts being long outstanding with no expected recovery from the funders.

38. Other income (exchange)

Reversal of provision (I) 291 556Bank SETA money recovered 589 5,309

880 5,865

I Refer to note 10

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annual report 2019/2020 - national government

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