Investigation reveals ghost beds and funding risks in NSFAS system

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JEREMY MAGGS: A new report by the Organisation Undoing Tax Abuse (Outa) is raising serious questions about how billions of rands in student housing funding is being managed.

It warns of dangerous gaps in the NSFAS (National Student Financial Aid Scheme) accommodation system.

After a two-year investigation, the watchdog says weak oversight, conflicts of interest and a complex web of intermediaries have created a system vulnerable to corruption, with evidence that tens of thousands of beds may have been paid for despite not being properly accredited.

So my question is how did a system meant to support vulnerable students become so exposed? Who is ultimately responsible?

Rudie Heyneke is with me, senior project manager at Outa. Rudie, let’s start simply then, and welcome, how broken is the system in your opinion?

RUDIE HEYNEKE: Our investigation found that there are really big gaps in the system. There are currently four solution providers managing a student accommodation portal, where each and every student accommodation provider must register their [available] beds.

Students can go on to the portal and book some of these beds, for them to stay at, and these beds are supposed to be inspected and accredited by NSFAS inspectors.

That is the first flaw that we found: these inspectors, some of the data that we received from NSFAS after prior application, indicated that in some instances, you will find a normal three-bedroom house and they will certify that there are over 200 beds available at that property. It just couldn’t be.

We sent out people to go and verify it manually and visit the premises. We found that indeed, it was just a normal house, but on the system, like I said, [showed] lots of beds.

This creates a problem, that creates a situation and a gap where so-called ghost students can be accommodated and paid for, and this is not acceptable.

JEREMY MAGGS: Your interpretation, I imagine, would be corruption more than inefficiency within the system.

RUDIE HEYNEKE: I think it is definitely a bit of both. We have seen these fraudulent numbers [come up] and we haven’t seen any consequences, inspections or audits done from the scheme’s side. Then the system, I think, is also ineffective.

This is not a system that is new to the environment. There are universities using similar systems very effectively. I don’t think NSFAS applied its mind when appointing these solution partners, and there’s no real control over these solution providers.

JEREMY MAGGS: In any situation like this, Rudie, it’s always about following the money. So who in your opinion is actually controlling the flow of funds? Is it NSFAS or the intermediaries that you’ve identified?

RUDIE HEYNEKE: At this stage, it seems like the intermediaries issue NSFAS with certain invoices, and without really verifying them – and that’s our opinion – [the scheme] pays them, and they are paying the accommodation providers.

What is interesting is that there is a very funny contract between the solution partners and NSFAS, stating that 5% of the total amount that must be paid to an accommodation provider will automatically be held back, and that is the remuneration for the solution partners.

But very interestingly enough, the contract also states that 1% of that money must be paid back to NSFAS. Now that is a strange clause in the contract to say that I will give you money, but you must give me 1% back.

We believe that that is a back door that was left open years ago when these service level agreements were signed, for money to disappear.

JEREMY MAGGS: And when you raise this issue with NSFAS, what do they tell you?

RUDIE HEYNEKE: Well, in the past, I think we must just go a few steps back, under the previous regime, Mr Ernest Khosa and Mr Andile Nongogo, the doors were closed in our faces. We never could communicate with them. When the new board was appointed under Dr Karen Stander and the acting CEO, Mr Waseem Carrim, it went much better.

So much so that we could obtain this information that we based our report on, through (4:49 …) without any problems. We are very grateful to NSFAS for giving us all this information so that we could compile the report and compare the numbers.

We’ve also been invited to a meeting with [the scheme], its lawyers and the SIU (Special Investigating Unit) early in April, where we will discuss the report and the findings, and obviously look into the SIU’s investigation into NSFAS’s affairs.

JEREMY MAGGS: While you’re waiting for that meeting to happen, NSFAS says reforms are underway. From what you’ve seen or from what you’ve been told, is that credible or is it too little, too late?

RUDIE HEYNEKE: Well, at this stage we cannot say, for the problems that we pointed out in the report, we haven’t seen much action on that. Hopefully there will be after this meeting, and that they know where to look for the problems.

But I must say, Jeremy, a disclaimer: not everything is bad with regard to student accommodation at NSFAS. I think that 80%, 85% of all the accommodation is up to standard. You’ve got really good quality accommodation.

But one thing that we want to put on record is that we do not believe, as it is told by the scheme and the Department of Higher Education, that there is a shortage of student accommodation. Maybe in the rural areas, where Tvet (Technical and Vocational Education and Training) colleges are in small towns and so on.

But overall, I think that there is enough student accommodation and it also shows in our report, with the figures that NSFAS has provided to us, that there are more accredited beds available than what they are paying for currently.

I do think that at this stage the scheme should do an overhaul of the system, a thorough audit on the beds, or the quality of the accommodation. Hopefully from next year, as soon as next year, these problems will be sorted out.

JEREMY MAGGS: Rudie Heyneke, thank you very much indeed, senior project manager at the Organisation Undoing Tax Abuse.