THE COMMUNITY SCHEMES OMBUD SERVICE
PRESENTATION OF THE ANNUAL REPORT AND THE ANNUAL
FINANCIAL STATEMENTS 2013/2014
ON 15 OCTOBER 2014 AT 16H00
CSOS PRESENTATION
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1. INTRODUCTION
The Community Schemes Ombud Service Act (Act No 9 OF 2011) [CSOS ACT] was
promulgated on the 11 June 2011 and provides for the establishment of the
Community Schemes Ombud Service (CSOS) as a Public Entity. The CSOS has
been classified as a Schedule 3A Public Entity in terms of the Public Finance
Management Act (Act No 1 of 1999) [PFMA].
2. MANDATE & MAIN FUNCTIONS OF THE CSOS
a)
b)
c)
d)
e)
To develop and provide a dispute resolution service in terms of the Act.
Provide training for Conciliators, Adjudicators and other Employees of the
Service.
Regulate, Monitor and control the quality of all Sectional Title Schemes
governance documentation and such other scheme governance documentation
as may be determined by the Minister
Take custody of, preserve and provide access electronically or by other means
to Sectional Title Schemes governance documentation and such other Scheme
governance documents as may be determined by the Minister.
Manage the Sectional Titles Management Act as provided by the relevant Act.
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3. KEY PRIORITIES
a)
Establish world-class dispute resolution service within community
schemes characterized by organizational excellence and a conducive
organizational culture;
b)
Promote good governance of community schemes by developing and
implementing
appropriate
guidelines
to
enhance
stability
and
harmonious relations amongst the parties;
c)
Roll-out massive educational campaigns to educate and train
stakeholders within community schemes and the public at large;
d)
Enhance community schemes tenure alternative tenure option; and
e)
Appropriate organizational systems, controls and measures to enhance
financial, economic and organizational efficiency.
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4. STRATEGIC OVERVIEW
a.
Vision:
To establish a
within community
world-class
dispute
resolution
service
b.
Mission:
To facilitate and maintain a world-class dispute resolution
service to promote good governance of community
schemes by providing education and training to all
relevant stakeholders.
c.
Values:
i) Service Excellence: The CSOS will provide best dispute
resolution services to its clients in a timely and responsive
manner.
ii) Independence: The CSOS will act independently and
objectively in the undertaking of its activities.
iii) Transparency: The CSOS will execute its functions in an
open and transparent manner and ensures that it is
easily accessible to its clients.
iv) Integrity: The CSOS will strive to execute its functions in
an honest, ethical, transparent and reliable manner.
v) Innovation: The CSOS will strive to apply innovative
capabilities to improve its service delivery.
vi) Fairness: The CSOS will make decisions in a fair and
impartial manner.
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5. LEGISLATIVE MANDATES
a)
Constitution of the Republic of South Africa (Act 108 of 1996)
b)
Public Finance Management Act (Act No. 1 of 1999)
c)
CSOS Schemes Ombud Services Act (Act No 9 OF 2011)
d)
Sectional Titles Act of 1986
e)
Housing Act (Act No. 107 of 1997)
f)
Sectional Titles Management Act (Act No 11 of 2011)
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6. ORGANIZATIONAL STRUCTURE
EXECUTIVE MANAGEMENT COMMITTEE
(EXCO)
Company Secretary
(Vacant)
Chief Ombud
(Appointed)
Mr T Mthethwa
Adjudicator General
(Vacant)
Chief Financial Officer
(Appointed)
Mr T D Mabuya
Corporate Affairs Executive
Manager
(Vacant)
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7.
PERFORMANCE INFORMATION
a)
Predetermined Objectives


b)
(Continued)
Reference is made on AG’s report par. 10
No audit conducted on predetermined objectives as the entity received
funding on the last day of the financial year i.e. 31st March 2014
Service Delivery

Year under review was marked by active participation of
appointed Board Members:

Induction and strategic workshops were held

Board meetings and attendance of public launch held

Operational policies, annual performance plan and 5-year
strategic plan were developed and approved

Organizational structure was developed and approved

Both the Chief Ombud and Chief Financial officer have since
been appointed in the current financial year
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
No operational activities due to non-appointment of skilled human
resources as a result of financial constraints.

The following strategic outcome-oriented goals were not achieved
due to non-operational activities:

Resolved Community Disputes;

Custody and Control of Schemes Governance Documentation;

Financial Accounting, budgeting and Supply Chain Management;
and

Corporate Affairs, Governance and Information Systems.

The following strategic objectives were not achieved due to nonoperational activities:

Objective 1: Provide Community Scheme Disputes Resolution
Services

Objective 2: Taking Custody and Control of Schemes Governance
Documentations

Objective 3: Operationalize an effective Records Management
System

Objective 4: Proper Financial Accounting, budgeting and SCM

Objective 5: Best practices in Corporate Affairs, Governance and
Information System
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8.
GOVERNANCE
a)
b)
(Continued)
Statement on governance

CSOS remains strongly committed and dedicated to ensuring strict
compliance with, amongst others, Public Finance Management Act,
No1 of 1999, the Financial Intelligence Centre Act, Treasury
Regulations, the CSOS Act and the principles of sound corporate
governance.

CSOS has consistently sought to fulfil its statutory regulatory mandate
by having due regard to the precepts of responsible decision making,
fairness, transparency, accountability and effective leadership.
Board Sub-Committees

Remuneration, Human Resources and Finance Committee

The committee ensures the facilitation of the development
and implementation of best human resource practices,
employment equity, skills development and employee
relations to ensure efficient and effective delivery of
services.

The committee is also responsible for the determination of
remuneration policy in accordance with job grading and job
evaluation system.
9
(Continued)

Audit, risk and compliance Committee

Its role is to create a conducive working environment for the
undertaking of audit function and manage and mitigate the risk by
facilitating the development and implementation of appropriate
systems and control.

The audit committee is also ensures the organizational
compliance with applicable laws and regulatory framework and
monitors the implementation of audit plan, risk management plan
and fraud and prevention plans.

Adjudication and Governance Committee

The committee overseas the registrations, investigations and
adjudications of governance and information systems

Levies, Regulation and Registration Committee

The Committee oversees the establishment of a system for the
development, assessment, implementation and review of the
framework for the governance schemes levies.
10
(Continued)
c)
Accounting Authority

The Board consisted of seven (7) non-executive and independent
members from different professional and academic disciplines plus
two (2) executive members i.e. Chief Ombud and Chief Financial
Officer.

The Board is responsible for providing overall guidance on the
strategy, business plan and related affairs of the CSOS. Its roles
and responsibilities are further delineated in a Board Charter and
Shareholder’s compact which is to be completed and signed shortly.

The Board is obliged to meet at least four (4) times per financial
year. In consideration of the date of the establishment during the
year under review, three (3) meetings had taken place.

An annual Board workshop was convened for the purpose of
reviewing the strategic and business plans, the budget and the risk
profile of the CSOS.

The quorum for the meeting of the Board is four (4) members.

The rates for remuneration of Board Members are determined by
the Minister of Human Settlements in consultation with the Minister
of Finance as required in terms of Section 7(7)(d) of CSOS Act (No.
9 of 2011). These rates are applied according to the category in
which CSOS is classified which is B1 (Part-time members)
11
(Continued)
d)
Risk Management

In respect of overall CSOS programme delivery, the specific risks and
mitigations identified are set out in this section as an analysis of the
potential risks that CSOS might face as well as the proposed
mitigation.

The risks identified have been classified as follow:




CSOS Policy and guideline risks – The risk could occur when
CSOS fails to perform its functions in line with its mandate. The
risks will require sound governance structures and accountability
CSOS Operating and Governance-related risks – These risks
include governance failure, system risk and operational capacity
risks.
Funding risks – The risks pertain to the limited availability of
funding from National Government; These risks largely affect the
entity operations.
Sector risks – The risks could emanate from lack of demand for
resolutions of disputes and lack of appropriate professional
service providers.
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e)
Relationships with Stakeholders and Partners
Name of Entity
Area of interaction/Relationship
i.
National Home Builders Registration
Council (NHBRC)
Construction related disputes.
ii.
Estate Agency Affairs Board (EAAB)
Community schemes related disputes
iii. District and Local Municipalities
Identification of database of Community
Schemes
iv. Provincial Departments of Human
Settlements
Referral of disputes to CSOS
v.
Transfer of Schemes
Governance Documentation
Department of Rural Development and
Land Reform (DRDLR)
vi. Department of Justice and Constitutional
Development (DJCD)
Compliance Issues/Applicable acts,
vii. National Treasury (NT)
CSOS funding
viii. Department of Social Development (DSD)
& Department of Human Settlements
(DoHS)
Identification of Retirement Housing
Schemes
ix. Department of Trade and Industry (DTI)
Disputes affecting mixed-used
Developments
x.
Disputes affecting owners/occupiers
and determination of levies payable
Social Housing Regulatory Authority
(SHRA)
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9. HUMAN RESOURCE MANAGEMENT
a)
Integrated Human Capital Management Report

Due to challenges of capacity and financial resources as
mentioned above, CSOS was unable to capacitate itself.
However, the objective of human capital has been carried over to
2014/2015 wherein the entity will be fully operational.

Human Resource policies were approved and will be reviewed in
the current financial year.
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10. AUDIT COMMITTEE REPORT
(Continued)

In meeting its responsibilities arising from Section 76(4)(d) of the Public
Finance Management Act and Treasury Regulation 3.1.13 and in executing
its duties, the Audit Committee is required to consider the adequacy and
effectiveness of the entity's internal controls and the quality of its financial
information.

In order to discharge its responsibilities, the Committee has to review, on a
regular basis, the risk areas of the entity's operations to be covered in the
scope of internal audits, activities of the internal audit function to determine
the effectiveness thereof, internal audit reports, including the response of
management issues raised therein, the external audit scope to ensure that
the critical areas of the business are being addressed, the external auditors'
report and management letter, the operational effectiveness of the entity’s
policies, systems and procedures, the effectiveness of the system for
monitoring compliance with laws and regulations, and the annual financial
statements.

The Audit Committee reports that it has complied with its responsibilities
arising from Section 76(4)(d) of the Public Finance Management Act and
Treasury Regulation 3.1.13. The Audit Committee also reports that it has
adopted appropriate formal terms of reference as its Audit Committee
Charter, has regulated its affairs in compliance with this charter and has
discharged all its responsibilities as contained therein.
15
(Continued)

Members of the Audit Committee


The members of the Audit Committee are all independent nonexecutive directors of the entity and are as follows:
i.
Ms Tinyiko Mhlari (CA) – Appointed on 01/01/2013
ii.
Adv Derick Block
– Appointed on 01/01/2013
iii.
Mr Trevor Bailey
– Appointed on 01/01/2013
Meetings held by the Audit Committee

No meetings were held during the year under review as the entity
was not operational, however matters requiring Audit Committee
attention were addressed and dealt by the Board.
16
(Continued)

External auditor


The Committee satisfied itself that the external auditors are
independent as prescribed by and as per the standards stipulated by
the auditing profession. Requisite assurance was sought and provided
by the auditors in terms of the requirements that the internal
governance processes within the Auditor General of South Africa
support and demonstrate the claim to independence.
Internal control and risk management



Internal Audit Unit has been budgeted for but not yet capacitated as
mentioned previously that the entity was not operational during the
year under review.
It is envisaged that the Unit will be established in the current financial
year.
The Audit Committee did not specifically meet, however the following
policies and audits were reviewed and approved by the Board relating
to Internal Controls and Risk Management:
i.
ii.
iii.
iv.
CSOS Policy and Guidelines risks
CSOS Operating and Governance related risk
CSOS Funding Risks; and
CSOS Sector Risks
17
(Continued)

Going Concern


The Audit Committee is satisfied that the going concern of the
entity is not under threat, and that the entity will continue to
operate in the foreseeable future (Refer to note 3 of the financial
statements).
Evaluation of Financial Statements

Following the review of the financial statements the Audit
Committee recommended Board approval thereof.
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11. REPORT OF THE AUDITOR-GENERAL
(Continued)

The AFS were audited by the Auditor-General and comprised of a statement
of financial position as at 31 March 2014, statement of financial performance,
statement of changes in net assets, statement of cash flows and the
statement of comparison of budget and actual amounts for the year ended as
well as notes, which include a summary of significant accounting policies and
other explanatory information to the financial statements.

The opinion expressed by the Auditor-General is that the financial statements
present fairly, in all material respects, the financial position of CSOS as at 31
March 2014 and its financial performance and cash flows for the year ended,
in accordance wit SA Standards of GRAP and the requirements of the PFMA.

Significant uncertainties have been raised with reference to the disclosure
note in the financial statements whereby R17m was disclosed as contingent
liability. This related to the surplus amount which was retained by CSOS
without approval from National Treasury. The uncertainty emanated from the
ultimate outcome of the matter which cannot be determined and no provision
for any liability that may result has been made in the annual financial
statements.
19

The performance against predetermined objectives were not audited as
CSOS received funding on the last day of the financial year.

Procedures were performed to obtain evidence that CSOS has complied with
applicable legislation regarding financial matters, financial management and
other related matters. The audit did not reflect instances of material noncompliance with specific matters in key legislation as set out in the General
Notice issued in terms of the Public Audit Act (PAA)

The audit process did not identify significant deficiencies on internal control.
20
(Continued)
12. FINANCIAL STATEMENTS FOR THE YEAR ENDED 31
MARCH 2014

The Annual Financial Statements have been prepared in accordance
with SA Standards GRAP issued by the Accounting Standard Board.

The following underlying assumptions have been applied in the
preparation of these statements:
i.
Basis for the preparation is on an accrual basis of accounting.
Under this basis, the effects of transactions and other events are
recognized when they occur, and recorded in the accounting
records and reported in the financial statements.
ii.
The financial statements are prepared on the assumption that
CSOS is a going concern, and will continue in operation for the
foreseeable future.
iii.
The financial statements are in accordance with historical cost
conversion as the basis of measurement.
21
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014

Components of Annual Financial Statements
1.
2.
3.
4.
5.
6.
7.
Statement of Financial Position
Statement of Financial Performance
Statement of Changes in Net Assets
Statement of Cash Flow
Statement of Comparison of Budget and Actual
Accounting Policies
Notes to the Annual Financial Statements
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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014
1.
Statement of Financial Position




2.
The statement reflects total assets, net funds and liabilities
Total assets (Cash and cash equivalents) = R17m
Total surplus (Administrative Reserves) = R16.8m
Total liabilities (Account Payable: Honorarium Fees) = R145k
Statement of Financial Performance

The statement reflects totals of revenues, expenses and surplus or
deficit

Total revenue of R17 002m comprised of:

Government Grant R17m

Investment Income (interest received) = R2k

Total expenses = R145k made up of honorarium fees paid to Board
Members of the board for meetings and workshops

Total surplus = R16,8m (difference between total revenue and total
expense)
23
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014
3.
Statement of Changes in Net Assets



4.
The statement reflects total surplus for the period which is R16,8m
There were no changes in the entity’s net assets between two
reporting dates
There were no beginning balances of accumulated surplus or deficit
Cash Flow Statement

The statement provides cash flow information or movements which
assesses the ability of CSOS to generate cash and cash equivalents
and the needs of the entity to utilize these cash flows.

CSOS’s cash flow statement reflects the following components:
a.
Cash flows from operating activities:

Cash receipts = R17m

Cash Paid = R145k

Cash from investment income = R2k

Cash generated from operations = R16,8m
24
(Continued)
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014
b.
c.
5.
Statement of Comparison of Budget vs Actual amounts



6.
No cash flow from investing activities
Cash flow from financing activities = R145k
Budgeted income = R20m, Received into the account = R17m
Unbudgeted investment income = R0 , Income received = R2k
Budgeted board expense = R1,4m , Expenses incurred = R145k
Accounting Policies

Basis of preparation is on an accrual basis of accounting

Cash and cash equivalents are measured on fair value

Reserves are classified in the statement of financial position

Related Parties :
a.
None for Executives
b.
7 Board Members as Non-Executives
c.
Stakeholders with interests in CSOS and vice versa as
listed on slide 13
25
FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 MARCH 2014



Contingencies have been disclosed in notes
Revenue from non-exchange transactions is the government grant
Tax expense – CSOS is a Schedule 3A public entity and is exempt from VAT
and income tax
END
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