Nzimande blames auditing ‘dispute’ for R500m NSFAS irregular expenditure

Higher Education Minister Blade Nzimande says the R500 million in irregular expenditure at the National Student Financial Aid Scheme (NSFAS) was due to a gazette requirement sought by the Auditor-General (AG).

According to the AG, irregular expenditure was materially understated due to NSFAS failing to consult with Nzimande when setting conditions and criteria for eligible students in relation to bursary awards and failing to gazette those conditions and criteria.

For the 2019-20 financial year, NSFAS incurred R500 million in irregular expenditure.

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This was a massive drop from the R3.2 billion incurred in the 2018-19 financial year.

Despite the lower recorded irregular expenditure, Nzimande said there exists, whether declared or not, a dispute between his department and the AG.

Nzimande briefed Parliament’s higher education committee on NSFAS’ audit outcomes earlier this week.

“The AG brought to my attention that they are going to make a finding of irregular expenditure against NSFAS based on the fact that, for the past three years, NSFAS has not been gazetting the bursary scheme that was introduced in 2018. The AG’s office had told me because there was no gazetting, this was considered irregular expenditure,” he said.

Nzimande said he had approached the department’s director-general about the matter.

“The department’s legal advice was that there was no need for gazetting. They have stood by this view. That is the situation,” he said.

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Presenting the agency’s audit outcomes to MPs, the AG’s Luthando Mehlomakulu said most of the irregular expenditure was caused as a result of disbursements made to students contrary to NSFAS funding policies, eligibility criteria and funder requirements.

“R50 billion additional irregular expenditure should have been disclosed as a result of disbursements made against eligibility criteria and conditions that were set without consultations with the minister or eligibility criteria and conditions not gazetted,” Mehlomakulu told MPs.

The AG also highlighted the poor collection of debt because of an increase in impairment of debtors in the current financial year, due to the economic climate.

“Cash reserves have slightly increased to R5,854,028,000 (in 2018, it was R3,886,556,000), which is favourable to the financial well-being of the entity in order to cover any unforeseen expenditure,” Mehlomakulu said.

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He said the audit outcome had stagnated, and some qualified areas reported on in the prior year audit were not addressed and it re-occurred.

“Action plans were not implemented in a timely manner to address significant internal control deficiencies identified. The entity is yet to reconcile records with tertiary institutions, dating back to 2017.

“The delay in finalising these reconciliations is resulting in institutions owing material balances of unutilised cash to NSFAS, which has not been recorded and collected,” Mehlomakulu said.

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