The National Student Financial Aid Scheme’s (NSFAS’s) failure to design and implement adequate controls led to irregular payments to unqualified students.
This is according to the Special Investigating Unit (SIU), which looks to recoup over R112 million from 421 students that didn’t qualify for financial aid assistance from NSFAS.
The students – from across five universities and four Technical Vocational Education and Training (TVET) colleges – have signed acknowledgement of debt agreements to pay back the money that was irregularly paid to them.
The investigating unit has been probing allegations of corruption and maladministration in the affairs of NSFAS, as instructed by president Cyril Ramaphosa, focusing on incorrectly-funded students.
Unallocated funds
According to the SIU, its investigation revealed NSFAS did not have the controls to ensure there is an annual reconciliation between the funds disbursed to the institutions and the allocation of those funds to the students.
“These control weaknesses have led to overpayments and underpayments of funds to the different institutions over the period 2017, to date. NSFAS has appointed a service provider to assist them in performing this reconciliation via a ‘close-out reporting’ process. The reconciliation process is still ongoing,” notes the SIU.
“The SIU is pleased with the co-operative attitude of parents and unqualified NSFAS beneficiaries who have agreed to repay the money over some time. The SIU is urging unqualified NSFAS beneficiaries who have not been in contact with the unit to come forward and arrange for repayment.”
Further to the acknowledgement of debt agreements, the investigating arm says it has made progress in recovering unallocated funds, with the University of Fort Hare being the latest university to pay back unallocated funds of R277 666 450.
This brings the total of recoveries to R1.2 billion, having recovered funds from both TVET colleges and universities.
Higher education and training deputy minister Dr Mimmy Gondwe has commended the SIU’s efforts to recover R112 million in irregular payments from NSFAS to undeserving recipients.
In a statement, Gondwe says the R112 million paid out to undeserving recipients potentially robbed 1 700 deserving students who could have been funded for at least one academic year.
“In a sense, there are many victims who may have dropped out or deferred their studies because they could not afford to pay the requisite academic fees. Every rand that is spent on an undeserving beneficiary robs a deserving one.”
Tale as old as time
NSFAS has, over the years, faced systemic governance issues, including IT system failures and mismanagement within the scheme.
In 2022, a group of tertiary students, named “Youthful Hope”, threatened a nationwide academic shutdown, as a result of frustrations with the scheme’s IT system and mismanagement.
The students claimed they had been excluded from NSFAS funding due to the online system miscalculating the number of years they had been funded by the financial aid scheme.
Meanwhile, in 2020, science and innovation minister professor Blade Nzimande said a ministerial committee of inquiry had been appointed to investigate business processes, including an “inadequate” R100 million IT system at NSFAS.
The investigation came after NSFAS introduced a new student funding system that would result in direct payments to students for their studies instead of the funds being managed by individual institutions.
The scheme subsequently brought on fintech partners – Coinvest, eZaga Holdings, Tenet Technology and Noracco Corporation– to manage the direct payments to students.
The four fintech firms were awarded the NSFAS direct payments contract, to the value of R47 billion, over a period of five years. However, that relationship turned awry, amid allegations of undue influence in their appointment.
Two of the firms – eZaga and Tenet Technology – have continually denied the allegations of corruption levelled against them in the awarding of the NSFAS contract.
While there has been a legal tussle between NSFAS and its fintech partners, last week the Western Cape High Court ruled direct payment service providers can continue making payments directly to students.
NSFAS was interdicted from terminating their contract and ordered not to allow higher learning institutions to pay allowances directly into students’ accounts.
Welcoming the High Court’s decision, Tenet Technology CEO Ryan Passmore indicated NSFAS’s direct payments programme was introduced in response to a high-profile incident in which a student in the Eastern Cape was erroneously credited R14 million due to maladministration and improper governance and controls.
“The SIU has been working tirelessly to investigate NSFAS, and we have been proud to support their efforts. The SIU has recovered more than R700 million in 2023, highlighting the need for the direct payments programme.”
According to Passmore, Tenet Technology was contracted in 2022 to disburse student allowances, implementing strict and compliant know-your-customer processes on the direct payments programme.
“Currently, NSFAS has reverted to utilising a payment method with historical bad governance and malpractice, and Tenetech is deeply concerned about the growing number of students who are now struggling to survive due to non-payment of their allowances. Some students have even taken the desperate measure of submitting affidavits in court.
“We await direction from the ongoing legal proceedings and remain committed to doing what is best for the students. We understand the difficulties the students are facing, and we want to assure them we are doing everything in our power to support them.”
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