PORTFOLIO COMMITTEE MEETING Presentation of CHE Annual Report for the year 2015-16 26 October 2016

Outline Section 1: Introduction and scene setting Legislative mandate and context Audit process and outcome Reflections Challenges Section 2: Performance highlights Key outputs Targets not achieved Reflection and emerging issues Section 3: Financial performance Financial statements AGSA report

Section 1 Introduction and Scene Setting Chairperson of Council Prof N. Themba Mosia Represented by Prof John Mubangizi – Chair of HEQC

Legislative mandate Higher Education Act 101 of 1997 (as amended) established CHE as a juristic body & spelt out its mandate. National Qualifications Act 67 of 2008 declared CHE the Quality Council for Higher Education & outlined its functions in this regard. Public Finance Management Act 1 of 1999 (as amended) lists CHE as a Schedule 3A public entity: bound to comply with provisions in Chapter 6 of the Act.

Context Conditions of austerity have impacted on range and number of initiatives Upheaval at universities due to fees protests have led to the postponement of several interventions due to access challenges and re-prioritisation by institutions Proliferation of programmes from private providers Budgetary pressures impel levying fees on publics for accreditation processes

Audit Process & Outcome Conducted by auditors from the AG’s Office Scope of the audit: financial statements reported performance information compliance with specific requirements of key applicable legislation Process engagement letter: scope, roles & responsibilities requested information provided information tested by auditors

Audit Process & Outcome (Continued) Process (continued) on-site verification undertaken by auditors explanations provided to auditors, where required provisional findings prepared & discussed with management final management report issued to Council Outcome of 2015/2016 audit → Unqualified audit report received

Reflection on Past Year: Governance The evaluation found that there was: regular attendance of meetings robust engagements in meetings quality advice to the Minister meaningful engagement with the higher education sector Evaluation of CHE Consultant’s, research and key findings

Reflection on Past Year: Strategic Matters Strategic review and restructuring Council presided over organisational restructuring process to improve operational effectiveness & efficiency. Merging of National Reviews & Standards Development Directorates.

Challenges Operational capacity. Legal challenges to CHE/ HEQC decisions and litigation. Staff turnover at 20% Attraction & retention of competent staff.

Performance Highlights Chief Executive Officer Section 2 Performance Highlights Chief Executive Officer Prof. N Baijnath

Key Outputs: Monitoring & Evaluation VitalStats 2013 (the fourth in the annual series) Publications SA higher education reviewed: 20 years of democracy Reflections Kagisano No 10 Key Outputs: HEQSF-Alignment Project completed – one year ahead of schedule

Key Outputs: Standards development and National Reviews National Reviews Framework revised and approved by Council. Framework for qualification standards in HE − publication Five standards statements completed: Bachelor of Social Work Master of Business Administration (MBA) Bachelor of Laws (LLB) Bachelor of Engineering Diploma in Engineering LLB review reference group → Review manual & SER template

Key Outputs: Database of Learner Achievements HEQIS had data from 95% of private HEIs in 2015/16. Key Outputs: HEQSF-Alignment Project completed – one year ahead of schedule

Key Outputs: Institutional Audits Audit of one institution terminated. Content Analysis of the Baseline Institutional. Submissions for Phase 1 of the QEP: a report was published. Three QEP institutional workshops were organised. QEP student workshop. Three DCV Forum meetings. Workshops - PHEIs

Key Outputs: Promotion & Capacity Development Two QA fora were organised and one workshop for professional councils. National Excellence in Teaching Awards were organised jointly with HELTASA. Two CHE Electronic Newsletters. Policies on RPL, CAT and Assessment. Hosted three African delegations. Southern African regional QA network: participated in the events & initiatives.

Key Outputs: Accreditation Record numbers of new applications for accreditation were processed → A total of 292 (from 483 submissions) new programmes were accredited. Majority of applications at NQF levels 7 & 8. Majority of applications in business, commerce and management sciences & health professions/related clinical sciences. 13 existing programmes were re-accredited. 67 site visits completed. 101 programmes deferred pending improvement plans and site visits.

Targets not achieved Submission of institutional reports – QEP. Finalisation of National Report on the Review of the Bachelor of Social Work programme. LLB review – site visits and self-evaluation reports. Advice on own initiative on relevant issues. National reviews – training of evaluators.

Reflection on Performance Projects are not completed within planned time frames, which impacts negatively on achievement of annual performance targets: Lack of sufficient capacity in some directorates Some projects heavily rely on peer experts from the sector who deliver at their own pace CHE APPs are normally scoped to cover all areas of the legislated mandate, but not in relation to capacity & resources available: mismatch between performance requirements & capacity/resources. Increasing deficit.

Reflection on Performance Audits and QEP – distinction Institutional audits back on the agenda

Emerging Issues − Operational Capacity/resource considerations are necessary in scoping APP & setting performance targets. Identifying priority areas from the ever-increasing demands on CHE would be essential in developing APPs for subsequent years. Relook at the CHE’s business model. Resourcing for Optimal Organisation Performance. Develop a case for increasing level of government funding commensurate with the growing demands on the CHE. Explore other sources of funding to supplement government funding.

Emerging issues − Contextual Current crisis - CHE view – how are we providing advice? Future research agenda?

Financial performance Chief Financial Officer Section 3 Financial performance Chief Financial Officer Mr Thulaganyo Mothusi

Statement of Financial Position as at 31st March 2016 Figures in Rand Note(s) 2016   2015 Restated* Assets Current Assets Cash and cash equivalents 3 14 804 887 19 102 406 Receivables from exchange transactions 2 351 151 143 745 Prepayments 4 269 100 290 122 15 425 138 19 536 273 Non-Current Assets Property, plant and equipment 5 31 911 380 32 813 443 Intangible assets 6 3 156 530 3 506 611 35 067 910 36 320 054 Total Assets 50 493 048 55 856 327 Liabilities Current Liabilities Payables from exchange transactions 7 8 717 143 6 189 948 Provisions 9 999 751 762 351 9 716 894 6 952 299 Non-Current Liabilities Unspent conditional grants and receipts 10 774 163 3 992 329 Total Liabilities 10 491 057 10 944 628 Net Assets 40 001 991 44 911 699 Reserves Revaluation reserve 4 914 475 Accumulated surplus 35 087 516 39 997 224 Total Net Assets

Statement of financial Performance for the Year Ended 31st March 2016 Figures in Rand Note(s) 2016 2015 Restated*   Revenue Exchange revenue 4 207 811 3 548 825 Interest received - investment 11 1 297 485 1 263 195 Non exchange revenue 12 44 037 166 43 928 110 Total revenue 49 542 462 48 740 130 Expenditure Personnel 13 (28 360 890) (25 035 961) Depreciation and amortisation (2 323 754) (2 262 814) Interest paid - (990) Bad debts written off (7 000) Repairs and maintenance (1 090 646) (1 037 162) Loss on disposal of assets (250 854) General expenses 14 (22 426 026) (21 445 720) Total expenditure (54 452 170) (49 789 647) Deficit for the year (4 909 708) (1 049 517)

Reasons for variances on the budget and actual expenditure Revenue from exchange transactions was higher than budget due to more applications for accreditation being received from private institutions as well as more interest received than anticipated on invested amount. Revenue from non-exchange transaction is higher than the budget due to a merger between the Programme Standards Developments and National Reviews and now operating at full capacity and also approved surplus from the prior year by National Treasury. Employee costs under spent due to vacancies and there were some unforeseen delays to fill them during the year under review. General expenses under spent as a result of late approval of roll over of surplus funds and these funds were therefore not fully utilised by the end of the last quarter.

Top ten cost drivers and their percentage contributions of the general expenses Peer academics contribute 17%. Legal fees contribute 14%. Travel costs local contribute 12%. Printing and Stationery contributes 8%. Outsourced services include SAQA HEQCIS online system, governance committees minutes taking and payroll services contributes 7%. Auditors remuneration contribute 6%. IT expenses include licence fees, computer consumables, contract on support for HEQC online system, contract on support maintenance, contract on system development and contract on website and communication contribute 6%. Remuneration of Council and Committee members, Recruitment costs and venue and catering contribute 4%.

Report of the Auditor General Of South Africa (AGSA) Unqualified audit report received. Matters affecting the auditor’s report Performance targets not specific and measurable. Performance indicator not time bound. Performance indicators not verifiable and well defined. No assessment of useful life and residual values of assets. Overstatement of commitments. Other important matters General expense not paid within 30 days of receipt of invoice. Quarterly reports not reviewed. Baseline numbers not set for performance targets expressed as percentage; User account management process inadequately implemented for Pastel Evolution and HEQC systems. Functionality included as an assessment criterion.

Report of the Auditor General South Africa (AGSA) cont. Administrative matters Inconsistency between the planned and reported indicators; and Performance target not measurable. A strategic audit action has been developed to address all audit findings identified by the AG and progress is monitored by the Audit and Risk Committee.

Recommendation Portfolio Committee Members to note the Annual Report and its Annual Financial Statements for the year 2015/2016.