annual report 2011 – presentation to scer, 29 feb 2012 national student financial aid scheme
Post on 27-Dec-2015
215 Views
Preview:
TRANSCRIPT
ANNUAL REPORT 2011 – PRESENTATION TO SCER, 29 FEB 2012
National Student Financial Aid Scheme
Overview
NSFAS Annual Report 2011
Chairperson’s Report
Board Report
Board Committee Reports
Annual Financial Statements
Annual Performance Report
Way forward - 2012
2011
Chairperson’s report
2010 was a challenging year for NSFAS
• Auditor-General issued Disclaimer of Opinion• Board members resigned• New members were appointed with a mandate
to:
– Develop and implement a turnaround strategy
– Maintain NSFAS functions while implementing turnaround
– Address 2010 Disclaimer of Opinion by the Auditor-General• Achieved an unqualified audit in 2011
2011
Board Report - background & governance
NSFAS is a public entity which has 7 functions:
• to develop criteria and conditions for the granting of loans and bursaries to eligible students in consultation with the Minister
• to raise funds • to allocate funds for loans and bursaries to eligible
students• to recover loans• to maintain and analyse a database and undertake
research for the better utilisation of financial resources
• to advise the Minister on matters relating to student financial aid
• to perform other functions assigned to it by the NSFAS Act (56 0f 1999) or by the Minister
2011
Board – composition & committeesBoard - 13 appointed members, 4 co-
opted• Executive, Finance Committees
October 2010 - Minister assessed board performance and identified challenges
December 2010 – 5 resigned, 6 remained, 3 co-opted
2011 – DHET completed process to fill 8 vacancies
2011
Board Report – management
• Chief Executive Officer– Jan 2011 – probation extended– Feb 2011 – suspended – April 2011 – employment not confirmed
after probation, contract terminated
• Executive, senior management– Number of vacancies – being filled in
2011– Capacity challenges
2011
Executive Committee
Executive Committee (Exco)– Board chairperson - Zamayedwa
Sogayise – DHET representative - Shai Makgoba– 3 other members
Exco functions determined by the board in terms
of s10 of NSFAS Act:• To develop and implement a turnaround
strategy– conduct a due diligence of the entity, its risks,
commitments and resourcing needs
2011
Audit & Risk Committee
Chairperson – Stephen Smith
• Auditor-General Report (p45)– NSFAS moved from the Audit Disclaimer
of 2010 to an Unqualified Audit in 2011
• AG concurred on involvement of board in turnaround – “Although this might have increased the risk of loss
of independence of the Audit Committee, the interventions were sound…”
- AG Management Letter, 2011
2011
From disclaimer to unqualified audit - background
In 2010 the A-G disclaimed an opinion on 5
grounds:• NSFAS did not value the loan book at “Fair
value at initial recognition” in terms of IAS 39 • did not correctly account for interest over
the life of the loan in terms of GRAP 9; only started accruing for interest on repayment
• was unable to justify on verifiable scientific grounds how we impaired the debtors. In addition, NSFAS wrote off R589m of interest and could not properly justify this
2011
From disclaimer to unqualified audit – background (cont)
• Interest was incorrectly calculated on the system by R181m due to adjustments made without proper control
• There was a reconciling difference of R42m which could not be explained
For these reasons the auditors had doubts about the accuracy of student loan balances in LMS. They had sufficient doubt about the valuation of the loan book for them to disclaim an audit opinion.
2011
2011 year end interventions
To address the 2010 audit disclaimer, a number of key interventions wereimplemented:
• Reconstituted Board, Executive Committee• Changing gear from 3 year to 1 year
compliance• CEO contract terminated• Secondment of resources to Finance
Department• Actuarial valuation of loan book• Completion of loan book amortisation• Independent data verification of loan book• Procurement review
2011
Actuarial valuation of loan book
• We ran every transaction in the loan book to properly allocate all repayments, taking into account the in duplum rule – this was the first time NSFAS had ever
had accurate data at an individual loan level;
– Involved:• over 180 million lines of transactions• approximately 810 000 debtors and • 1,6 million loans
– The model took 5 days to run;
2011
Actuarial valuation (cont)
• Actuaries ran the data through a model which accounted for all the reasons for differences in loan values
• Throughout the process we ensured that our auditors and their own actuaries were part of the process
• Credit balances totalling R77,8m came to light for the first time ever – Refunding 34 000 students who overpaid– Full provision made for this in 2011
2011
Audit findings
• Board did not exercise adequate oversight– Appointment of service providers too late– Technical aspects not started timeously,
resulted in actuarial errors that needed to be corrected (misstatements)
– SCM failure resulting in irregular expenditure• Management
– Accounting Officer did not take steps to address irregular expenditure
– No proper guidance, training to staff on SCM– Human resource vacancies (15% to 18%)
2011
Irregular expenditure – R25,6m in 2010
• Opening balance R25 348• SABC 6 083• Vincent House Lease 1 296• Systems Link Cape (Pty) Ltd 2 726• Business Connexion (Pty) Ltd 2 101• *Lithotec Afric Mail Cape (Pty) Ltd 1 664• *Metrofile (Pty) Ltd 982• *Rennies Travel (Pty) Ltd 1 791• *SA Post Office 3 163• Other irregular expenditure 7 019• Less: amounts condoned ( 1 186)• Total 50 987
* Suppliers not rotated
2011
Irregular expenditure - remedial procedures
• Disciplinary hearings of all management involved in procurement process underway
• Independent adjudication • Appointment of SCM officer• Automation of purchase order system• Condonation of valid expenditure• Audit of potential fruitless and wasteful
expenditure
2011
Information technology
• No Chief Information Officer• No formal IT governance• No formal IT project or risk management
framework• No formally approved Disaster Recovery and
Business Continuity Planning
• Remedial action - policies, plans, resourcing as part of turnaround
2011
Investigations
• Forensic audit completed into conduct of one employee– Misrepresentation to third parties– Employee suspended– Disciplinary hearing 19,20 October 2011
No financial harm to NSFAS
2011
Annual Financial Statements
The Annual Financial Statements (p45) show in detail
what NSFAS does and how it fulfils its mandate
Some highlights are:
• In 2010, NSFAS distributed financial aid of R3.7 billion to 210 576 students - 17% more than 2009
• Since NSFAS started, R19 bn disbursed - in 2011, R5,5 bn will be distributed in loans and bursaries
• Students who pass get 40% of loan converted to bursary - cost R1.85 bn last year, 15% of loan book
2011
AFS -Balance Sheet (p60)
• Investments and bank R791 m (Inv R541m, Cash R213m, Inv current R37m)
• Prepayments R298 m• Student loans R5,03 bn (Current R421m, Non
current R4614m) - (LMS R12,2bn)• Fixed assets R12.8 m (PPE R8,6m;
Intangibles R4,2m)• Payables R53,2 m• Credit balances due to debtors R77,8m
2011
Expenditure
• Operational expenses were R57 million• Salaries R23.8 m – 41,5%• Audit = R6.3 m – 11%• Communications = R6,4 m• Rent = R930k• Metrofile = R952 k• Recruitment = R1,7 m• Postage = R2,8 m• Stationery = R1,7 m• Phone = R1 m
2011
AFS – Why doesn’t NSFAS recover what it lends?
• Monthly statement run is around R12,2 bn• This balance sheet reflects R5,2 bn• From books to balance sheet there is a difference
of R7bn– In 2011, for the first time ever, NSFAS can
substantiate this figure to A-G’s satisfaction
• NSFAS is good at administering outstanding loans – charged R536 m in interest last year
• But is not good at recovering loans – LMS R12,2 bn but only recovered R638 m –
5%
2011
Reasons for loan decreases
1 We don’t know IF the debtor will pay• Over 20 years there is a pattern of how
many do start paying – below earnings threshold, we don’t find them, informal employment
2 We don’t know WHEN the debtor will pay• It depends on when they exit, if they find
employment, what their level of earnings is and whether we can keep track of them
3 Time Value of Money• If we loan R10 000 now and only receive it
back in 3 years’ time, the real value in today’s terms is not R10 000
2011
Reasons for loan decreases (cont)
2011
4 Differential interest rates• We only charge 80% of repo as interest
(currently 4.4%) but discount to present value at 8.5%. The difference between these two interest rates reduces the value if the loan; also limited by “in duplum” rule
5 Death and disability• We factor in actuarial estimates re death
and disability6 Bursary conversion
• We write off of up to 40% depending on student’s academic success
7 The cut off point is 10 years • If debtors haven’t started paying within
10 years we fully impair the loan
Finance Committee
Finance Committee Chairperson – Nathan Johnstone
Functions • Advises the board on the financial management
of NSFAS, including:– Raising funds– Loan recovery– Investment of repayments
• Monitors and reports on performance quarterly, annually
2011
Annual Performance Report (p23)
Strategic Goals 1 Expanding the pool of funds available for
disbursement as student loans and bursaries
2 Effectively managing the institutional utilisation of funds administered
3 Strengthening internal efficiencies in the processing of student awards/claims to ensure that funding reaches target population
2011
Strategic Goals (cont)
4 Strengthening the quality of internal management and operations inline with changing funding patterns
5 Effectively communicating the relationship with all NSFAS stakeholder groups and targeted audiences
6 Undertaking research that informs the effective
utilisation of available funds and serves to advise the Minister of matters related to student financial aid
2011
Way forward
• Comprehensive policies and plans are being developed to improve operational efficiency and lay the foundation for a smooth transition to new, student-centred systems: – IT infrastructure, systems and operations,
including acquisition and implementation of a new Loan Management System
– Loans and bursaries administration– Finance– Credit Management, including debt recovery– Audit and risk management– HR management– Communications
2011
top related