Student aid scheme in bid to claw back R1bn

Money was mistakenly paid out, while R26m must be returned to overcharged graduates

SA’s key agency for providing financial support to students is trying to claw back more than R1bn it has mistakenly paid out and needs to refund R26m to graduates who have been overcharged on their loans.

The figures, contained in the National Student Financial Aid Scheme’s (NSFAS’s) 2018/2019 annual report tabled in parliament this week, lay bare the organisation’s disarray when it was placed under administration in August 2018.

NSFAS’s long-running problems deepened late in 2017 when then president Jacob Zuma suddenly announced free higher education for qualifying students from poor and working-class families, leaving the organisation scrambling to deal with a surge in applications without additional resources.

NSFAS is the government’s conduit for providing financial support to eligible students at universities and technical and vocational education training (TVET) colleges.

In 2019, it received grant funding of R16.4bn, according to the report, and approved loans and bursaries to more than 442,000 students, according to documents previously presented to parliament.

NSFAS administrator Randall Carolissen, who was appointed for a second term in August, said on Tuesday that when he took the helm midway through the 2018/2019 financial year, he found a dysfunctional organisation that lacked proper systems for reconciling financial records and verifying the funds disbursed to students.

“When I arrived in August [2018], there was a total absence of proper financial management and governance and an abandonment of policies and procedures. There was gross negligence and severe maladministration. That is as far as I can go

right now because a forensic investigation is under way. There was definitely some form of syndicated fraud,” he said.

Carolissen said NSFAS’s IT systems were not fit for purpose, and required manual intervention between assessing applications and the disbursement of funds, a process that increased the risk of mistakes and fraud.

Disbursements were made from unencrypted computers, changes were not logged, and unauthorised personnel accessed core systems.

NSFAS received a qualified audit opinion for the 2018/2019 financial year from auditorgeneral Kimi Makwetu, who sketched a picture of an organisation unable to provide a document trail for its money flows.

He was unable to obtain the necessary records to verify NSFAS’s stated R24bn bursary expenditure, and the amounts NSFAS owed to institutions. It had also materially underestimated its funding commitments to students, and understated its contingent liabilities by R6.3bn.

NSFAS’s annual report shows it incurred irregular expenditure of R7.53bn during 2017 and 2018, including R1.025bn paid out “in excess of contract amounts” for loans and bursaries. These errors arose when it changed its disbursement system in 2017, and began funding students directly instead of channelling money via universities and TVET colleges. When it switched to a “studentcentred model”, it asked beneficiaries to sign new contracts.

“A large number of records showed either the wrong amount, or the wrong student, or something wrong with the payment,” Carolissen said.

The report also reveals that NSFAS made mistakes when it calculated the interest on loans owed by students who had graduated. Some students were charged too little, while others were charged too much. NSFAS said it owed R26m to students who overpaid their loan accounts, which it would refund. It would not seek to recover funds from students who had accidentally benefited from its loan calculation errors and paid too little, it said.

Carolissen said NSFAS had already begun recovering money that it had overpaid to universities, but getting students to pay back the money is “going to be very tough”.

Work is under way to improve the systems and governance at NSFAS, and in 2019 all student disbursements were completed within the first quarter, he said.