The Annual Report hereby submitted includes:

•A strong balance sheet incorporating a conservative impairment and provision for doubtful debts incorporated into the student loans outstanding.

•The Impairment is an element of financial reporting required to adjust the value of loans reflected in the loan book as the recoverable value of the loan is affected by various factors.

• The financial performance includes continued strong growth in bursary awards made over the reporting period.

31st March 2010 Financial Year End Results

31st March 2010 Financial Year End Audit outcome

The Auditor-General SA has issued a disclaimer for the past financial year largely as a result of a technical Accounting reporting nature.

The factors contributing to the AG SA Disclaimer of Audit Opinion includes:• Technical Financial Reporting Requirements• Limitations in the Debtor Management systems and

processes• Limited financial skills and capacity within the organization.

The Board together with the Management has taken this audit outcome very seriously and therefore adopted an Audit improvement plan.

31st March 2010 Financial Year End Audit outcome

Technical financial reporting Requirements:• Prior to the commencement of the past annual audit the NSFAS proactively

retained the services of a service provider to undertake a technical financial reporting review that revealed a number of new technical financial reporting standards which became effective and applicable to the NSFAS for the first time in the past financial year such as the recognition and measurement of financial instruments per IAS39, GRAP 9 revenue from exchange transactions;

• Compliance to IAS 39 require the determination of fair value recognition and measurement of the student loans using a valuation technique such as a discounted cash flow comparative calculation using both the subsidised interest rate and a market rate. The challenge with this method for the NSFAS is that there is no readily available/observable comparative market rate for similar type of instruments and given the loans are income contingent with no discernable amortising profile. The management recommendation of transaction/face value as appropriate financial instrument fair value financial reporting and disclosure therefore resulted in a disagreement with the AGSA.

31st March 2010 Financial Year End Audit outcome

Technical financial reporting Requirements (cont):• The NSFAS has historically always recognised accrued interest on

student loans in the annual financial statements only from the point onwards when the student exits and repayments commenced. This represents a departure from GRAP 9 as it impact on existing student loan agreements. The original intention was not to capitalise interest on student loans whilst the students are still studying.

• The current interest accrual policy is under review and this would also consider the impact on this technical requirement and inform the management response.

• The impairment and provision for doubtful debts was undertaken by management for the purposes of financial reporting only and within the operational systems limitations. The NSFAS remains committed to the recovery of all loan funding outstanding.

31st March 2010 Financial Year End Audit outcome

Limitations in the Debtor Management systems and processes•Historically the NSFAS has always applied repayments to the overall outstanding balance without a split between capital and interest within the repayments. This has valuation implications and will be changed in the current financial year.•As part of a loan book review undertaken by management that informed the impairment and provision for doubtful debts for financial reporting purposes certain assumptions and management estimates were made. Given that this is the first such review undertaken by the NSFAS it has revealed the absence of meaningful historical data that supports the assumptions and estimates used namely data on default and delinquency rates, loss given default, etc. amongst others.

Limited financial skills and capacity within the organization.• Annual awards Allocations budget has doubled in the past 4 yrs

whilst the skills level, staffing and systems and resources have not changed meaningfully over the same period.

•The NSFAS staff complement does not have all the required skills and proficiencies for the sound management of the current

level of funds under management especially the finance function.• Regular and periodic financial reporting reconciliations have not

be undertaken diligently during the period under review leading to significant unreconciled items at financial year end.

31st March 2010 Financial Year End Audit outcome

The NSFAS Audit Improvement response plan which incorporates both immediate actions as well as medium to long term actions includes the following key items;

• An re-organization of the finance function as part of the overall organization wide re-organization to optimally structure the division inclusive of consultations with staff and skills audit.• The appointment of a number of key staff in addition to other proficient skills within the finance area:

– Chief Financial Officer CA(SA)– Chief Audit Executive CA(SA)– Legal Advisor and Company Secretary–Special Projects Executive–Chief Information Officer

• A data analysis and verification project has been initiated to both validate the completeness and accuracy of the debtors database as well as all the transaction calculations.• ICT interventions which includes business systems and software renewal project to replace current legacy systems and automate monthly reporting

31st March 2010 Financial Year End Audit outcome

The NSFAS Audit Improvement response plan which incorporates both immediate actions as well as medium to long term actions includes the following key items (cont);

• Various policy interventions which includes a comprehensive debtor management policy, Institutional Escalation Protocols, institutional management policy, amongst others to inform operational procedures and management methodologies;• Engagement with the Office of the Accountant General, the Accounting Standards Board and the Auditor General in respect of the technical reporting requirements and the applicability to the NSFAS income contingent loan scheme debtors.• Wholesale review of the awards administration processes operationally and with the Institutions and Colleges with a view to increase the operational efficiencies for processing of awards to be finalised earlier in in the academic year. In addition the awards administration manual that the NSFAS makes available and provides training to institutions is expected to be revised and substantially updated to improve delivery from HEI and FET Colleges

31st March 2010 Financial Year End Audit outcome

31st March 2010 Financial Year End Audit outcome

The NSFAS Audit Improvement response plan which incorporates both immediate actions as well as medium to long term actions includes the following key items (cont);• New Automated Integrated System – intended to replace the current Legacy database platform (LMS) with automated document handling functionality and a suitable debtors management module all involving new IT architecture;•Automated Systematic Validations – Including direct validation of various data inputs such as SARS data, Home Affairs data, HEMIS amongst others particularly at the origination of applications;• Institutional Support Team – intended to provided limited interventions at HEI’s and FET Colleges.• Graduate Development Program – including a focused annual 12 month program for recent NSFAS staff and NSFAS unemployed graduates and offer placement to certain graduates according to both performance and operational requirements.• International Benchmarking – including an international study tour to understand best practices in student financial aid models in developing and developed economies

Significant improvement in utilisation of funds available for student financial aid

-Main pool of funds for loans – Dept of Education General – R10 m unused vs R37 m in previous year-Funds for students with disabilities – R25 m disbursed vs only R7 m disbursed in previous year-FET College bursary funds – less than R1 m unutilised vs R12 m unutilised in previous year

Total unutilised across all categories of funds = 2% of available funds

Reflects progress in initiatives implemented for monitoring and management of unutilised funds

31st March 2010 Financial Year Utilisation of Funds Performance

31st March 2010 Financial Year Utilization of Funds Performance

Improvement in the receipting and processing of loan agreement forms and bursary schedules: 90% received to date (in 2009, at 67% at same point in time)86% processed to date (in 2009, at 65% at same point in time)

Revised work-flow which has improved the turn-around time for processing.

Weekly monitoring of performance against pre-defined targets for the processing of forms – from point of receipt to point of payment to institution.

Strict monitoring of institution claim patterns towards close on the 15th December 2010 (one-and-a-half months earlier than 2009 close)

More regular communication through official NSFAS circulars to the Financial Aid Offices.

31st March 2010 Financial Year Utilization of Funds Performance

Disability FundingConsistent R-value spend in the region of R25m to R30m since 2005 (see chart below):

New initiatives between NSFAS, DHET and HEDSA to determine how better to identify and channel students with disabilities into the bursary programme.

Improvements in the disability guidelines to facilitate an easier, more efficient process within institutions.

Growth in the NSFAS loan book 2006 to 2009

Source 2009/10 2008/09

Allocated Paid Unspent Unspent%

Unspent%

DE (inc recoveries)

R1 885 978 841 R1 876 450 737 R9 528 105 1% 2%

DET (ring-fenched)

R84 833 697 R80 048 395 R4 785 301 6% 1%

SAICA R22 008 221 R22 008 221 R0 0% 0%

TOTAL R1 992 820 759 R1 978 507 353 R14 313 406

31st March 2010 Financial Year Utilization of Funds

Performance

Source 2009/10 2008/09

Allocated Paid Unspent Unspent%

Unspent%

DE (Disability) R29 559 737 R25 680 382 R3 879 354 13% 61%

Funza Lushaka R401 690 256 R380 645 814 R21 044 441 5% 5%

FET Colleges R299 979 311 R299 846 138 R133 173 0% 5%

TOTAL R731 229 304 R706 172 334 R25 056 968 6% 11%

31st March 2010 Financial Year Utilization of Funds

Performance

OTHER IMPORTANT INFORMATION FOR THE PAST YEARDemographic information - NSFAS staff

OTHER IMPORTANT INFORMATION FOR THE PAST YEARDemographic information - NSFAS staff

OTHER IMPORTANT INFORMATION FOR THE PAST YEAR

OTHER IMPORTANT INFORMATION FOR THE PAST YEARDemographic information – Awards by province, race and gender

OTHER IMPORTANT INFORMATION FOR THE PAST YEAR

Questions?