ANNUAL REPORT 2016/2017 - National Government · 2018-02-21 · Community Schemes Ombud Services Annual Financial Statements for the year ended 31 March 2017 3 Contents STRATEGIC

ANNUAL REPORT 2016/2017

Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017

1


GENERAL ENTITY INFORMATION

Official Name Community Schemes Ombud Service (“CSOS”)

Nature of Business The CSOS was established in terms of the Community Schemes Ombud Service Act, 2011 (Act 9 of 2011) toregulatetheconductofpartiesincommunity schemes and to ensure their good governance.

Physical Address 63 Wierda Road East Wierda Valley Sandton, Johannesburg 2196

Postal Address Postnet Suite 163 Private Bag X9924 Sandton 2196

Contact Numbers Telephone 010 593 0533 Facsimile 010 590 6154 www.csos.org.za Executive Authority TheHonourableMinisterofHumanSettlements Auditors Auditor General of South Africa (AGSA)

RP222/2017ISBN: 978-0-621-45668-4


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LIST OF ABBREVIATIONS

CO Chief OmbudsCFO ChiefFinancialOfficerCoGTA CooperativeGovernanceandTraditionalAffairsCOM CommitteesCPI Consumer Price IndexCSOS Community Schemes Ombud ServiceCSOS Act Community Schemes Ombud Service Act, 2011 (Act 9 of 2011)Dev DevelopmentDG Director GeneralDPSA DepartmentofPublicServiceandAdministrationDRDLR Department of Rural Development and Land ReformDRO DisputeResolutionOfficerEXCO ExecutiveCommitteeGP Gauteng ProvinceHOA HomeOwnersAssociationHR Human ResourcesHRD Human Resources DevelopmentHRM Human Resources ManagementIT InformationTechnologyKPA Key Performance AreaKPI Key Performance IndicatorKZN KwaZulu-NatalM&E MonitoringandEvaluationMoHS MinisterforHumanSettlementsMP Member of ParliamentMTEF Medium Term Expenditure FrameworkMTSF Medium Term Strategic FrameworkNDHS NationalDepartmentofHumanSettlementsNT NationalTreasuryPFMA Public Finance Management Act, 1999 (Act 1 of 1999)SALGA South African Local Government SCM Supply Chain ManagementSTA SectionalTitlesAct,1986(Act95of1986)STSMA SectionalTitlesSchemesManagementAct,2011(Act8of2011)SLA Service Level Agreement


3Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017

Contents

STRATEGIC OVERVIEW

BOARD CHAIRPERSON’s REPORT

CHIEF OMBUD REPORT

CORPORATE GOVERNANCE

NON-FINANCIAL PERFORMANCE INFORMATION

FINANCIAL INFORMATION

• BOARD REPORT

• AUDIT AND RISK COMMITTEE REPORT

• REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT

• STATEMENT OF FINANCIAL POSITION

• STATEMENT OF FINANCIAL PERFORMANCE

• STATEMENT OF CHANGES IN NET ASSETS

• STATEMENT OF CASH FLOWS

• STATEMENT OF COMPARISON OF BUDGET AND

ACTUAL AMOUNTS

• ACCOUNTING POLICIES

• NOTES TO THE ANNUAL FINANCIAL STATEMENTS

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ThereportsandstatementssetoutbelowcompriseoftheannualfinancialstatementspresentedtotheNationalDepartmentofHumanSettlements:


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STRATEGIC OVERVIEW

VISIONToestablishaworldclassdisputeresolutionservicewithincommunityschemes.

MISSION Tofacilitateandmaintainaworld-classdisputeresolutionserviceandtopromotegoodgovernanceofcommunityschemesbyprovidingeducationandtrainingtoallrelevantstakeholders.

OBJECTIVES

Strategic Objective 1:

Provide a dispute resolutionservicetoCommunity schemes

in South Africa


Take custody and control of Community Schemes’ governance

documentation


Ensure that CSOS is an efficient,effectiveand

sustainable organisation


Promote good governance in

SectionalTitlesandother Community

Schemes


Provide stakeholder training, consumer educationandpublic

outreach programmes on Community

Schemes in South Africa


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1. BOARD CHAIRPERSON’s REPORT

On behalf of the Board of the Community Schemes Ombud Service (CSOS), it is my privilege to present the organ-isation’sAnnualReportforthefinancialperiodending31March2017.ThisreportispresentedinlinewiththeguidelinesissuedbytheNationalTreasuryandItrustthatitprovidesaholisticviewoftheorganisation’sroleandperformanceintermsofitsoperationsandfinancialsustainability.

2016/17wasahallmarkyearfortheCSOS.ThepromulgationoftheCommunitySchemesServiceAct,2011(Act9of2011)andSectionalTitlesSchemesManagementAct,2011(Act8of2011)onthe7thofOctober2016meantthattheorganisationcouldofficiallyproceedwithitsregulatoryanddisputeresolutionfunctions.OnbehalfoftheBoard,IwouldliketoextendourheartfeltgratitudetotheMinisterofHumanSettlements,theHon.LindiweSisuluandtheDepartmentofHumanSettlementsfortheirsupportandinlaunchingtheorganisationtomedia,industry and key stakeholders.

Today,theCSOSstandsatthethresholdofanewchaptertodeliveronitsmandatewhichis:

• ToprovideadisputeresolutionservicetoCommunityschemesinSouthAfrica;• TotakecustodyandcontrolofCommunitySchemes’governancedocumentation;• ToensurethattheCSOSisanefficient,effectiveandsustainableorganisation;• TopromotegoodgovernanceinSectionalTitlesandotherCommunitySchemes;• Providestakeholdertraining,consumereducationandpublicoutreachprogrammesonCommunitySchemes

in South Africa.

Theperiodunderreviewhasbeenaproductiveonewithitsshareofsuccessandchallenges.TheBoardexerciseditsbroadoversightfunction,itmonitoredtheorganisation’sinternalcontrolsystemsandhadtobalancecompet-ingneedsandfinancialchallenges.TheBoardalsoensuredthereviewanddevelopmentofpoliciesthatgoverntheexecutionoftheCSOSservice.

Bydesign,theCSOSwascreatedtobeaself-sustainingorganisation.Iamproudtoreportthatintheperiodunderreview,theCSOScommencedwiththeregistrationofcommunityschemes,theadjudicationofmatterspending,aswellasthecollectionoffeesandlevies.

BeingpartofthisandtheinauguralBoardhasbeenanhonourforme.Lookingback,ourvisionwastobringjus-ticeandtransformationtoallcommunityschemes.Iamconfidentthatafirmfoundationhasbeenlaidandthattheorganisation,anditsemployees,willrealisethatdream.

Rev Dr. Vukile Mehana


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MEMBERS OF BOARD

Rev Dr Vukile MehanaChairperson

B.Theology;AMP;TopManagement Program on PublicEnterprises;MBA;D.Phil

Ms Thandile SunduzaNon-Executive

BTECH Sports ManagementSportsAdministrationandMarketingDiploma*Appointed in 01 February 2017

Adv Nomazotsho MemaniNon-Executive

BA;LLB;CertificateinLegalWriting;CertificateinNumeracy Skills

Mr Bhekumusa DlaminiNon-Executive

B.Proc(AdmittedAttorney)

Ms Marina ConstasNon-Executive

BA(Law);LLB;MediationCertificate

Mr Taurean Holmes Non-Executive

CA (SA)

Mr Rajesh JockNon-Executive

B.Com;PostgraduateDiplomainMarketing;Postgraduate Diploma CompanyLaw;NationalDiplomaintechnology;Master of Philosophy

Mrs Nomhle DambuzaNon-Executive

DiplomainMidwifery;Diploma in General Nursing;CertificateinEconomicPolicy;AdvancedDiploma in Economic Policy*Resigned 31 October 2016


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MEMBERS OF BOARD

REPORTING STRUCTURE OF THE CSOS

Mr Themba MthethwaExecutive

B.Proc;LLB;PostgraduateDiploma in Industrial Relations;MBA;Attorneyin the High Court of South Africa

Mr Themba Mabuya Executive

B.Com;B.Admin(Hons)

Minister of Human Settlements

Remunerations and Human Resources

Committee

Audit, Risk and Ethics Committee Finance Committee

Legislation and Governance Committee

CSOS BOARD


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CHIEF OMBUD REPORT

ThehistoryoftheCSOSgoesbackto2004whenCabinetconsideredtheissueoftheregulationofcommunityschemes,theresolutionofresolvingdisputesanddecidedthatGovernmentmustintervenetoaddressthesitua-tion,intheinterestsofallhousingconsumersandpropertyowners.On07October2016,theProclamationoftheSectionalTitlesSchemesManagementAct,2011(Act8of2011)andtheCommunitySchemesOmbdsServiceAct,2011 (Act 9 of 2011), marked the beginning of a new regulatory regime for all community schemes in South Africa andofficiallyestablishedtheserviceoftheCSOS.

On10November2016,theMinisterofHumanSettlements,MsLindiweSisuluofficiallylaunchedtheCSOS.Itwasaproudmomentforme,theexecutiveteamandCSOSemployees.IwouldliketoextendmygratitudetotheBoardfortheirstewardshipandsupportofoureffortstoensuretheorganisation’soperationalreadiness.

TheCSOShasthreeregionalofficesinGauteng,WesternCapeandKwaZulu-Natal.Ofthe1282newapplicationsreceivedfordisputeresolution,Gautengreceived28%,theWesternCape29%andKwaZulu-Natal28%.ThetrendwearestartingtoseeisthatGautengiswherewewillhavetomakemoremeasuredcapacityconsiderations.Theregistrationofcommunityschemesbeganinearnestafter7October2016;thoughbytheendoftheperiodunderreviewwedidnotmeetourtargetstoregister50000communityschemes,theregistrationofschemesremainsa focal area.

Regrettably,theCSOShadanumberofresignationsatexecutiveandmanagement level. Notably,we losttheInternalAuditManager, theAdjudicatorGeneral and theExecutiveCorporateServices to theoutsidemarket.Budgetconstraintscouldnotallowustofillthesepositionsimmediately.NowthattheCSOShasstartedtocollectitsleviesandfees,fillingthesepositionswillbeapriorityin2017.

Fortheperiodunderreview,theCSOScollectedR30,3minlevyincome.Imuststressthatthisfinancialyearwasayearofextremefinancialandresourcechallenges.Muchoftheprojectswehadendeavouredtoembarkon,includingconsumerawareness,wasplacedonholdsimplybecausetherewasnobudgettospend.Iamconfidentthat this will not be the case going forward, especially in light of the fact that the CSOS has started the process of engagingotherpublicentitiesonpotentialsystemstoimprovetherevenuecollection.

I am encouraged by the amount of support we have received from the sector, in terms of the numberofregistrationsandthewillingnessbypartiestorespecttheCSOSdisputeresolutionprocess.TheCSOSheldanumberofstakeholderengagementswithkeyindustryplayersincludingsectorinfluencers,mediaandotherregulatorybodies. Engagement with regulatory bodies was found to be necessary for the purpose of benchmarking and the conclusion of necessary mem-orandum of understandings were common ground was established.

In conclusion, I want to thank the Board, my colleagues, the Depart-mentofHumanSettlementsandtheMinistryastheShareholder.Looking back, we could not have envisioned that the Service would beoperationalatthistime.EverypersonwhohascontributedtotheestablishmentoftheCSOSispartofalegacytobringafforda-ble,reliablejusticetoallcommunityschemes.

Themba MthethwaChief Ombud


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MEMBERS OF THE EXECUTIVE

Mr Themba MthethaChief Ombud

B.Proc;LLB;PostgraduateDiploma in Industrial Relations;MBA;Attorneyin the High Court of South Africa

Ms Laurie LessExecutive Manager Corporate Services

BA(PsychologyandPoliticalScience);MastersinPublicAdministrationResigned 31 August 2016

Mr Risenga MarumaBoard Secretary

BA, BA Hons(PublicManagement);LLB;PostgraduateDiploma;Corporate Law

Mr Themba MabuyaChief Financial Officer

B.Com;B.Admin(Hons)

Ms Dinkie DubeAdjudicator General BA(Law);LLB;LLMResigned 30 September 2016


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THE CSOS BOARDThis is the second Board to be appointed by the Minister since theinceptionofCSOS.ThisBoardwasappointedwitheffectfrom 01 January 2016 for a three year period. The CSOS Act empowerstheMinistertoappointsevennon-executivedirec-tors as members of the Board. The Chief Ombud and the Chief FinancialOfficerareexecutivemembersoftheBoardbyoper-ationoftheAct.TheCSOSBoardthereforehasninemembersof the Board.

Mandate of the BoardTheBoardistheAccountingAuthorityoftheServiceanden-sures that theorganisationhasandmaintainseffective,effi-cient and transparent systemsoffinancial and riskmanage-ment and internal control. Thus the mandate of the Board includesbutnotlimitedtothefollowing:

• ImplementationoftheStrategicPlanoftheServiceinor-dertoachievetheobjectivesoftheService.

• Making decisions on behalf of the Service and ensure that these decisions are carried out by Management.

• Providing guidance to the Chief Ombud in the perfor-manceofhisorherfunctionsintermsoftheCSOSAct.

• Maintaining a system of internal audit under the control anddirectionofanauditcommitteecomplyingwithandoperatinginaccordancewiththeRegulations.

• Maintaining an appropriate procurement and provision-ingsystemwhichisfair,equitable,transparent,competi-tiveandcost-effective.

NB.Twoofthemeetingswerea2daypolicyworkshop6and7April2016,and1dayBoardInductionon29April2016. MsSunduza joinedCSOSwitheffectfrom01February2017,replacingMrsDambuzawholefton31October2016

BOARD MEETINGS

Member Name Total Number of Scheduled Meetings Total Meetings Attended

Rev Dr Mehana 13 10Adv N Memani 13 11Mr T Holmes 13 8Mr B Dlamini 13 11Mr R Jock 13 11Mrs N Dambuza 13 8Ms M Constas 13 7Ms T Sunduza 13 2


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• Oversight of financial management and reporting pro-cesses,auditprocessesandsystemsofinternalcontrol;

• Riskevaluationandriskmanagement;• The operation of adequate financial and administration

systemsincludinginternalcontrol;• Accuratereportingtoshareholdersandotherstakehold-

ers and provision of financial statements in compliance

with all applicable legal requirements and accountingstandards;and

• Compliance with relevant laws, regulations and proce-dures.

• Thesafeguardingofassets;• InformationTechnologygovernance;and• Values and ethics.

AUDIT, RISK AND ETHICS COMMITTEE

Joint Committees: Audit, Risk and Ethics Committee and Finance Committee meetings

TheCommitteesoftheServiceareestablishedintermsofsection12oftheCSOSAct,areasfollows:

Audit, Risk and Ethics Committee (ARECo)

ThepurposeoftheCommitteeistoassisttheBoardindischargingitsdutiesrelatingto:


Mr T Holmes 4 4Mr R Jock 4 4Mr B Dlamini 4 4Ms M Constas 4 3Mrs N Dambuza 4 3


Mr T Holmes 3 2Mr R Jock 3 2Mr B Dlamini 3 2Ms M Constas 3 2Mrs N Dambuza 3 2Adv N Memani 3 3


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The Committee assists the Board with its governance andoversightresponsibilitiesinaccordancewiththerelevantleg-islationgoverningremunerationsandhumanresourcesman-agement, by providing prompt and constructive advice andrecommendationstotheBoardasfollows:

• Monitoring the human resources indicators and compli-ancewithstrategichumanresourcesplanning;

• Overseeing and recommending employment equity strat-egies;

• Reviewing and recommendingemployee relations strat-egies;

• Considering and reviewing organisational structure toachieve the strategy

• Guidingtheplanningandimplementationoftheorganisa-tionaldevelopment.

ThisCommitteeassiststheBoardinrelationtothefollowing:

• Providingoversightoverfinancialmanagement,budget-ing and investment management.

• Theoperationsofadequateandprudentfinancialandad-ministration systems, effective andefficient InformationTechnology systems and sound investment decisions and processes.

• Reviewingandrecommendingfinancial,InformationandCommunicationTechnology, and investmentpolicies foradoption.

• OverseeingCSOSstrategicassetsallocationplanagainstthe medium term expenditure framework.

• Ensuresufficientfinancialandhumanresourcestoman-agethefinancialITriskprofilesofCSOS.

HR REMCO

Remunerations and Human Resources Committee

Finance Committee


Mrs N Dambuza 8 6Mr R Jock 8 8Ms M Constas 8 4Adv N Memani 8 6Ms T Sunduza 8 1


Mr B Dlamini 5 3Adv N Memani 5 5Mr R Jock 5 4Mr T Holmes 5 5Mrs N Dambuza 5 2


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Thepurposeof theCommittee is to assist theBoard indis-chargingitsdutiesrelatingto:

• Providing oversight over the core regulatory, dispute reso-lution,governance,andresearchandknowledgemanage-ment streams of CSOS.

• Overseeing the development, review, implementation

andmonitoringofCommunitySchemeRegulations.• Developmentandimplementationofaframeworkforthe

registrationofcommunityschemesandmanagementofschemegovernancedocumentation

• Overseethedevelopmentandimplementationofguide-linesforthepromotionofgoodgovernanceofcommunityschemes.

Legislation and Governance Committee


Mr T Holmes 4 1Adv N Memani 4 3Mr B Dlamini 4 3Ms M Constas 4 3

BoardandStaff


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RISK MANAGEMENT REPORT

Introduction The management of risk is the process by which the CSOS will pro-actively,purposefullyandregularly,butatleastannually,identifyanddefinecurrentaswell asemergingbusiness,fi-nancial and operational risks and identify appropriate, busi-nessandcosteffectivemethodsofmanagingtheseriskswith-in CSOS as well as the risk to the stakeholders.

Risk Management Framework and Policy CSOSoperatedandmanage its riskprofilewithin theambitof the approved Risk Management Framework and Policy. TherehasbeendrasticmovementontheriskregisterwhichwascausedbytheProclamationoftheCSOSActandtheSTS-MA.CSOSoperationandStrategicimperativewasdependentonthecoming intoeffectoftheaforementionedActs.How-ever,theProclamationoftheActgaverisetonewemergingrisks,whicharelinkedtothecollectionoflevies.Thisresultedin CSOS having to consider new measures for the control and proper use of funds collected and measure to avoid or prevent anyfraudulentactivitiesrelatedtothecollectionoflevies.

Internal Audit Activity ThroughtheAudit,RiskandEthicsCommittee,InternalAudithas developed, implemented, and reported on a 3 year rolling Internal Audit Strategy and Annual Plan, Internal Audit reports werefinalizedandreportedtotheAudit,RiskandEthicCom-mittee,andsubsequentlytotheboardoftheCSOS.

Compliance Management ToCSOS,ComplianceentailsthatCSOSmeetsitsobligationinadhering to the requirements of relevant legislation, stand-ards, codes of good practice, CSOS policies and procedure.The approved Compliance Framework provide principles and guidanceforCSOSManagementandstaffinthedevelopment,implementation,maintenanceandimprovementofaneffec-tivecomplianceprogramwithintheorganisation.Theframe-work will work as a mechanism through which CSOS can mon-itor,reviewandcomplywithlegislation,regulations,statutes,codes, standards, policies and procedures. The Compliance Framework has been designed to foster a strong compliance culture in CSOS in order to provide assurances to the Board that the risks posed by non-compliancewith legislative andregulatoryobligationsarebeingaddressed.


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NON-FINANCIALPERFORMANCE INFORMATION


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Thetotalnumberofpositionsapprovedonthecurrentorganisationalstructurewas112.Allpositions initiallybudgetedfor in2015/16and2016/17couldnotbeimplementedasthelevyincomeprojectedforcollection,forthe2016/17financialyearhadnot been realised.

• DuetotheCSOS’financialconstraints,adecisionwasmadetoputtherecruitmentofallpositionsonholduntilthefinancialsituationimproves.Nonewpositionswerethereforefilledwithinthisfinancialyear.

• Therewerefive(5)resignations,representingastaffturnoverrateof12%duringtheyear.• Thestaffcomplementattheendofthefinancialyearwasthirty-three(33)permanentandone(1)temporaryemployee.• Budgetspermitting,thehighvacancyrateriskwillbeovercomebyafocussedprocessofresourcing,specificallytargetingthe

highimpactandcriticalareasoftheoperations.

HUMAN RESOURCES

The Provincial Ombuds:

CORPORATE SERVICES

Western Cape, Eastern Cape and Northern Cape

Ms. Maletsatsi Wotini

Company Group Image

Kwazulu-Natal, Mpumalanga and Free State

Mr. Lucky Rabotapi

Gauteng, Limpopo andNorth West

Mr. Abraham Masilo


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Thebreakdownat31March2017wasasfollows:

ThetablebelowindicateswheretheCSOSneedstobetobealignedwiththenationaldemographicprofile.

The CSOS has an Employment Equity Plan that will assist CSOS in reaching its employment equity (EE) targets. The EE Plan serves asaguidelineinthetalentacquisitionprocessandmaybechangeddependingontherequirementsandavailabilityofscarceandcriticalskills.

All staff, as at 31 March 2017 (including temps)

EMPLOYMENT EQUITY – ACTUAL AND TARGETS

10.00

0.00 0.00 1.00

19.00

1.00 2.00 1.000.00

5.00

10.00

15.00

20.00

A C I W A C I W

Male Female

CSOS EE statistics

Statistics SA Demographic of SA population vs CSOS actuals CSOS proposed EE targets against plan

Male CSOS actual Female CSOS actual SA Total CSOS total TargetAfrican 80.6% 11(32%) 80.4% 19(51%) 80.5% 33(85%) African 80%Coloured 8.7% 0(0%) 8.9% 1(5%) 8.8% 1(5%) Coloured 9%Indian 2.6% 0(0%) 2.4% 2(5%) 2.5% 2(5%) Indian 3%White 8.2% 1(3%) 8.3% 1(3%) 8.3% 2(5%) White 8%Disabled 0(0%) 0(0%) 2% 0 Disabled 2%(not

implemented)


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TheprimaryfocusfortheyearwascontributingtowardstheorganisationsStrategicObjective3ofeffectivenessandefficiencybyensuring the ICT deploys the approved ICT Strategy ensuring a stable and business enabling environment. The ERP deployment projectwasconcludedwhichcatersforinternaloperationssystemsandICTsupportwasboostedbythedeploymentofacentralhelpdesksystem.Thesearetheprojectsdeployedintheyear:

• DeploymentofNationalHostedPABXsystemcateringforallCSOSoffices;• MigrationfromPOPtoanenterpriseExchangeemailenvironment;• ERPdeploymentcompletionofthefollowingmodules: o RecordsManagement; o Employeeself-service; o VIPPayrollupgradeandalignmenttoapprovedpolicies;and o Advanced procurement• Deploymentofacentralnationalbackupsolutionthatreplicatestoacloudenvironment;• Continuedorganisationalsupportandnetworkstabilitymaintenance;and• FibredeploymentfortheDurbanandCapeTownofficeslinkingintotheMPLS.

Theenvironmenthasremainedstablewitha99.9%uptimethroughoutallsystemsandapplicationswithICTassetsandcontractsalsocloselymonitoredandmaintainedrespectively.CentraltoICTsupportwastheeffectivemanagementifICTrelatedRisksandthereviewoftheICTstrategygiventheorganisationsgrowthprojection.

ThereismuchworkstilltobedoneregardingthemajorprojectofthedeploymentofasystemforCSOScoreoperationsbeingplannedforasthebudgetwouldallowintheupcomingyear.AnICTtrainingdriveisalsooverdueandweareoptimisticwecandeliveronallourobjectivesfortheupcomingyear.

IT


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MARKETING & COMMUNICATIONInanticipationoftheapprovaloftheRegulationsandtheconcomitantlaunch,theCSOSembarkedonseveralstakeholderengage-ments.Thenatureoftheseengagementscentredaroundtheclarificationoftheorganisation’sstateofreadiness.

Key stakeholder engagements:

• NationalAssociationofManagingAgents(NAMA)• AssociationofResidentialCommunites(ARC)• SouthAfricanCooperativesAssociation• NationalCreditRegulator• PropertyLawAssociation• Trafalgar• Centre for Legal Compliance• DepartmentofHumanSettlements

Media:TheCSOSparticipatedin16mediaopportunitiesinbothbroadcastandprintmedia,themajorityofwhichcoveredtheofficialCSOSlaunch.TheChiefOmbud,ThembaMthethwa,wasabletoclarifytheroleofmanagingagentsintheadministrationoftheCSOS levy.

The CSOS Launch, 10 November 2016

Exhibitions:

- Gauteng Property Week- GCIS Open Day

Chief Ombud Themba Mthethwa

Chairpersons toNAMA & ARC

CSOSStaff

Marina Constas (CSOS Board Member), MbuleloTshangana(HumanSettlementsDG) , Adv. Seeng Letele (Chief Director DHS Legal Servies)

Guests


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PERFORMANCE INFORMATION

Strategic Objective 1: Dispute Resolution

REVIEW OF THE CSOS PERFORMANCE

DuringthereportingperiodunderreviewtheProclamationsof the CSOS Act and STSM Act were signed by the President oftheRepublicofSouthAfricaandbothActsbecameeffec-tiveon07October2016.ThepublicationoftheProclamationandtheRegulationsunderbothCSOSActandSTSMActintheGovernmentGazettemeant thatCSOSbecameofficiallyandlegallyoperational.NotallprovisionsintheCSOSRegulationsbecameeffectiveasatpublicationdate.Thefollowingtransi-tionsarrangementwasimplemented:

• RegistrationofSchemes-30daysfromdateofpublication• Filing of Community Schemes Governance Documenta-

tion–90daysfromdateofpublication• PaymentofLeviesandFees–90daysfromdateofpub-

lication

Evenwithtransitionalperiod(October2016)inplace,CSOSre-ceivedatotalnumberof1345ofregistrationfromCommunitySchemes.ThefirstapplicationwasfromWaltdorfBodyCorpo-rate from Kwa-Zulu- Natal Province. This showed eagerness on part of the Industry to comply.

In terms of CSOS Act and the Regulations, all communityschemes must pay CSOS on a quarterly basis a levy collect-ed from unit owners as prescribed. The payment of Levies by Schemesonly commencedduring the last quarter of the fi-nancial year.

TheproclamationofCSOSActenabledCSOStocommencewithConciliationandAdjudicationofdisputes.Duringtheyearunderreview,CSOSreceivedatotalnumberof1282newapplicationsfordisputeresolution.Atotalof56applicationswerecarriedoverfromthepreviousfinancialyear.Thegraphbelowsetsoutthemonthlybreakdownofnewapplications.

Figure 1

54 65 59 54 51 42

104

245

99141

193175

0

50

100

150

200

250

300

April May June July August Sept Oct Nov Dec Jan Feb March

NO R

ECEI

VED

MONTH RECEIVED

New Applications Received 2016/2017


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PROVINCIAL COVERAGETheGautengProvincialOfficereceived550newapplicationsfordisputeresolutionduringtheperiodunderreview,followedbyWesternCapeProvincialOffice(376)andtheKwa-ZuluNatalProvincialOffice(356).ItisworthnotingthattheGautengprovincialofficewasthefirsttobeestablished,followedbytheWesternCapeandlastlytheKZNoffice.TheGautengProvincialofficealsodealswithmattersfromNorthWestandLimpopo,theKZNofficealsoattendstomattersintheFreeStateandMpumalangawhilsttheWesternCapeofficedealwithmattersfromalltheCapes.

Figure 2


Western Cape

KZN

Gauteng

Not Specified

376

356

550

0

No of applications per Province

prov

ince

PROVINCIAL COVERAGE


22


Withdrawn Settled bythe Parties Rejections Referrals No further

Particulars

ResolvedThrough

Conciliation

Referred toAdjudicatio

n

Adjudication Order

Applications 91 12 242 45 95 285 141 1

0

50

100

150

200

250

300

NO

Finalised Applications

FINALISED APPLICATIONS

MODE OF CONTACT

Figure 3

Figure 4

The applications for dispute resolution reach CSOS through designated Provincial Office emails and centralised e-mail ([email protected]),CSOSinformatione-mail,Websiteandothersarelodgedbyhand.Outofthe1282newappli-cations that CSOS received in the period under review, 1110 applications were lodged via the dedicated email addresses. Only172werereceivedthroughWalk-insandothermeans.SeeBelow:


1110 E-mails

172 Walk-ins and other

Mode of Contact

Via email Walk Ins and other

Duringtheperiodunderreview,atotalof285applicationsfordisputeresolutionwereresolvedthroughConciliations.Thesein-cludeapplicationsfordisputeresolutionthatwerereceivedinthepreviousyear.Mosttheapplicationsfinalisedduringthefinan-cialyearwerefinalisedatConciliationstage.Therewasonly1AdjudicationOrderissued.


23


GENDER PROFILE

Strategic Objective 2: Taking Custody and Control of Schemes Governance Documentation (Inc. Document Management Systems)

Strategic Objective 4: Promote Good Governance in Sectional Titles and other Community Schemes.

Fromthe1282applicationsfordisputeresolutionlodgedwiththeCSOSduringtheperiodunderreview,515applicantsarefemale,664aremale.SeeBelow:

Figure 5

ItwasanticipatedthattheMOUbetweentheDepartmentofRuralDevelopmentandLandReformandHumanSettlementswouldhavebeensigned.ThesigningoftheMOUwassuper-sededbytheproclamationoftheCSOSAct.TheActgaveCSOS

statutory powers to take custody of Schemes governance doc-umentationwithoutpre-requisiteforanMOU.Theactualmi-grationprojectforthecollectionofthedocumentationfromDeedsofficeswasputonholdduetofinancialconstraints.

CSOShasanobligationtoensurethatthereisprocessinplacefortheregistrationofSchemes,controlandqualityassuranceofSchemesGovernanceDocumentation.Aframeworksettingoutregistrationofprocessfortheschemesandqualityassur-ance and approval of Schemes Governance Documentationwas developed and approved by the CSOS Board.

TheregistrationofSchemescommencedaftertheproclama-tionoftheActandasatendMarch2017,approximately25000registrationapplicationswerereceivedfromCommunitySchemes.Atotalnumberof7434CommunitySchemeswere

issuedwithregistrationnumbersduringtheperiodunderre-view.ItworthnotingthattheissuingofregistrationnumberscommencedduringJanuary2017.

In ensuring governance within Community Schemes, CSOS conduct quality assurance on Schemes Governance Documen-tation.Asatendoffinancialyear,atotalnumberof208cer-tificateswere issuedbytheChiefOmbudapprovingSchemeGovernance Documentation. Provision of quality assuranceonlycommencedfrom07October2016.


0200400600800

Female Male Not Specified

515664

103

NO O

F APP

LICA

TION

S

GENDER

Gender Profile


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Performance Information for the 2016-2017 Financial Year

STRATEGIC OBJECTIVE 1: Provide a Dispute Resolution service for Community Schemes in South Africa

Key Performance Indicators

Baseline (Actual)2015/16

Target2016/17

Actual2016/17

Variance Comment on variance

Number of Disputes resolved within specifiedservicelevels as per the approved Dispute Resolution(DR)model

646 Disputes resolved within specifiedservicelevels as per the approved Dispute Resolution(DR)model

600 Disputes resolved, through Conciliation,with-inspecifiedservicelevels as per DR model

Target Not achieved

285 Disputes resolved, through Conciliation,with-inspecifiedservicelevels as per DR model

315 disputes not resolved within specifiedservicelevels as per the approved Dispute Resolution(DR)model

The current disputeresolutionworkforce were unable to manage thedrasticin-crease of the new applicationsfordisputeresolution.

New Indicator 80%disputesresolved within 40 days

Target not achieved

36% Conciliations werefinalisedwithin 40 days.

64% conciliations were not resolved within 40 days.

There were complex concil-iationmattersthat could not be finalisedwithinstipulatedtime-lines.resolution.

Strategic Objective 2: Take custody and control of Community Schemes’ governance documentation



Target2016/17

Actual2016/17


MoUcompletion,DocumentationMigration,dataclean-up, and storage

MoUbetweenMinistries (DRDLR) / Department of Human Set-tlements (DHS) finalised

MoUbetweenentities(CSOS/DRDLR) is signed

Target not achieved

TheMoUwasnotsigned

The signing of theMoUwassuperseded by the proclamationofthe CSOS Act.

Activitynotyetcommenced

100 000 Schemes Governance Documents are migrated to CSOS storage (Locate and Migrate)

Target not achieved

100 000 Schemes Governance Docu-ments

Lack of funds to implement the migrationproject.

Activitynotyetcommenced

Cleaning of data (quality assurance) commenced, kept available for access

Target not achieved

No data quality assured.

There was no data to quality assure astheprojectwasput on hold.


25



Strategic Objective 3: Ensure that CSOS is an efficient effective and sustainable organisation



Target2016/17

Actual2016/17


Numberoffunctionalfacilitiesavailableandaccessible to the mem-bers of the public, to deliver the CSOS service, at a high level ofeffectiveness

3Regionalofficesestablished (Gaut-eng, Kwa-Zulu Natal and Western Cape)ashuboffic-es for all provinces

Review the adequacy of the existingoperatingmodel (Policies, processes and procedures)

Target achieved.

CSOS Business Modeldrafted,developed and approved.

None. None.

Developed and approved Revenue Management model

New indicator Development of the CSOS funding model (Includ-ing the Dispute ResolutionLevy,DocumentationFee structure and Service Fee)

Target achieved.

CSOS funding model is being implemented for leviescollectionsand service fees.

None. None.

Strategic Objective 4: Promote good governance in Sectional Titles and other Community Schemes



Target2016/17

Actual2016/17


Schemes govern-ance documenta-tionframeworksdeveloped

New indicator Develop and review strategy/framework for Community Schemes govern-ance documenta-tion

Target Achieved

Approved schemes governance strate-gy / frameworks

None. None.

Schemes govern-ance documenta-tioncomplianceinspection

New indicator Sample test schemes govern-anceframework•250SectionalTitlesSchemes documen-tation•150OtherCom-munity Schemes

Target not achieved.

A total number of 208 Schemes Governance Doc-umentationforthenewSectionalTitles were been approved.

192 Schemes Govern-ance Documenta-tioncomplianceonly commenced aftertheproc-lamationoftheCSOS Act and the STSM Act.

Established data-base of commu-nity schemes, and their Manage-ment Agencie

Developed forms, templates records management frame-work to register and maintain records of Community Schemes and their manage-ment agents

50 000 community schemes and their managing agents registered in the database

Target Not achieved.

The total schemes and managing agents registered amountedto7434.

42 566 commu-nity schemes and their managing agents were not registered.

The capturing of data of all com-munity schemes only commenced aftertheproc-lamationoftheCSOS Act.


26


Strategic Objective 5: Provide stakeholder training consumer education and public outreach programmes on Community Schemes in South Africa



Target2016/17

Actual2016/17


Number of Con-sumer Awareness campaigns

New indicator 2 consumer aware-ness campaigns

Target achieved None None



27


FINANCIAL PERFORMANCE


28


Board’s Responsibilities and Approval

TheBoardisrequiredbytheCompaniesAct,71of2008ofSouthAfricaandthePublicFinanceManagementAct,1of1999andrelatedTreasuryRegulationstomaintainadequateaccountingrecordsandareresponsiblefortheconductandintegrityoftheannualfinancialstatementsandrelatedfinancialinformationincludedinthisreport.Itistheirresponsibilitytoensurethattheannualfinancialstatementsfairlypresentthestateofaffairsoftheentityasattheendofthefinancialyearandtheresultsofitsoperationsandcashflowsfortheperiodthenended,inconformitywithSouthAfricanStatementsofGenerallyRecognisedAccountingPractice(GRAP) and in the manner required by the Public Finance Management Act and the Companies Act of South Africa.

Theannualfinancialstatementsarebaseduponappropriateaccountingpoliciesconsistentlyappliedandsup-portedbyreasonableandprudentjudgementsandestimates.

TheBoardacknowledgesthatitisultimatelyresponsibleforthesystemofinternalfinancialcontrolestablishedbytheentityandplaceconsiderableimportanceonmaintainingastrongcontrolenvironment.Inordertoen-abletheBoardtomeettheseresponsibilities,theBoardsetsstandardsforinternalcontrolaimedatreducingtheriskoferrororlossinacosteffectivemanner.

TheBoardisoftheopinion,basedontheinformationandexplanationsgivenbymanagementthatthesystemofinternalcontrolprovidesreasonableassurancethatthefinancialrecordsmaybereliedonfortheprepa-rationoftheannualfinancialstatements.However,anysystemofinternalfinancialcontrolcanprovideonlyreasonable, and not absolute, assurance against material misstatement or loss.

TheBoardhasassessedtheentity’sabilitytocontinueasagoingconcernandhavenoreasontobelievethattheentitywillnotcontinuetooperateintheforeseeablefuture.

Theauditedannualfinancialstatementssetoutonpages38to68,whichhavebeenpreparedonthegoingconcernbasis,wereapprovedbytheBoardon31August2017andweresignedonitsbehalfby:

Rev. Dr. V. MehanaChairperson of the board


29


Board’s Report

TheBoardsubmititsreportfortheyearended31March2017.

1. Review of activities

Main business and operationsThe Community Schemes Ombud Service (CSOS) was established in terms of the Community Schemes Ombud Service Act, 2011, Act9of2011(CSOSAct),toregulatetheconductofpartieswithincommunityschemesandtoensuregoodgovernance.Inordertodeliveronitsmandate,keyamongsttheprioritiesoftheorganizationduringthedurationoftheStrategicPlanare:

• Toestablishaworldclassdisputeresolutionservicewithincommunityschemescharacterizedbyorganizationalexcellenceandaconduciveorganizationalculture;

• Topromotegoodgovernanceofcommunityschemesbydevelopingandimplementingappropriateguidelinestoenhancestabilityandharmoniousrelationsamongsttheparties;

• Torolloutmassiveeducationalcampaignstoeducateandtrainstakeholderswithincommunityschemesandthepublicatlarge;

• Toenhancecommunityschemestenureasalternativetenureoption;and• Todevelopandimplementappropriateorganizationalsystems,controlsandmeasurestoenhancefinancial,economicand

organizationalefficiency.

ThemainfocusontheperiodunderreviewisonthefullestablishmentoftheCSOSandimplementationoftheoperationalstrat-egies.

ThedraftingoftheCSOSregulations,disputeresolutionandfundingmodelthroughlevywerefinalizedandapprovedbytheBoard.

CSOShasstrivedtoensurefullcompliancewithalllegislativerequirements.Statutoryreportinghasbeenexpeditiouslyexecutedintermsoflegislations.Allothercodesrelatingtogoodgovernancei.e.PFMA,CompaniesAct,CSOSAct,havebeenlargelyprac-ticedandadheredtobytheBoardandtheExecutive.

2. Board

Thedirectorsoftheentityduringtheyearandtothedateofthisreportareasfollows: Name ChangesRev. Dr. V. Mehana (Chairperson)* Re appointed 01 January 2016 Adv. N. Memani* Re appointed 01 January 2016 Ms. B. Dambuza* Resigned 31 October 2016 Mr. T. Holmes* Mr. R. Jock* Mr. B. Dlamini* Ms. M. Constas* Ms.T.Sunduza* Appointed01January2017Mr.T.Mthethwa(ChiefOmbud)** Resigned31March2017Mr.T.Mabuya(ChiefFinancialOfficer)** Adv.S.Letele(ActingChiefOmbud)* Appointed01April2017

*Nonexecutive**Executive


30


3. Secretary

ThesecretaryoftheentityisMr.R.Marumaof: Business address 63 Wierda Road East Wierda Valley Sandton 2196

4. Going concern

Theannualfinancialstatementshavebeenpreparedonthebasisofaccountingpoliciesapplicabletoagoingconcern.Thisbasispresumesthatfundswillbeavailabletofinancefutureoperationsandthattherealisationofassetsandsettlementofliabilities,contingentobligationsandcommitmentswilloccurintheordinarycourseofbusiness.

ThegovernmentgrantforthecurrentyearisR30,02million.TheRegulationswereapprovedbytheMinister.CSOSActandSec-tionalTitlesSchemesManagementActwereproclaimedbythePresidenton07October2016.

5. Irregular, fruitless and wasteful expenditure

Irregular,fruitlessandwastefulexpenditurefortheperiodunderreviewaredisclosedinnotes26and27oftheannualfinancialstatements.

Board’s Report (Continued)


31


Audit and Risk Committee Report

Intheperiodunderreview,theCommunitySchemesOmbudServicehashadaconstitutedAuditandRiskcommitteewhichcomprisedoffivenon-executivemembersandthechiefombudasanexecutiveandex-officiomember(twomembersi.e.anon–executiveandanexecutivehadsinceresigned).

CommitteemeetingsamongstmembersandinteractivemeetingsbetweentheChairpersonandmanagement,internalauditandthe Auditor General of South Africa, had been consistently held.

Thefollowingtablereflectsthenumberofmeetingsattendedbythecommitteemembers:

Audit committee responsibility TheAuditandRiskcommitteehadadoptedappropriateformalteamsofreferenceintermsofitsapprovedcharter,whichregu-latestheaffairsofthecommitteeduringtheyearincludingthedischargingofitsresponsibilitiesinlinewiththesaidcharter.

The effectiveness of internal controlThesystemofinternalcontrolsisdesignatedtoprovidecost-effectiveassurancethatassetsaresafeguardedandthatliabilitiesandworkingcapitalareeffectivelyandefficientlymanaged.Thesystemofinternalcontrolisatitsdevelopmentalphaseastheorganisationhasjustbecomefullyoperationalandthereareareasofconcernsthatneedmanagement’sattention,namely:

• Financialsustainabilityoftheorganisationintheshortterm.• Compliancetolawsandregulationswiththeprocurementprocesses.• Finalisationoftheorganisationalpoliciesandprocedurestoimprovethecontrolsystem.• Planningandmanagementoforganisationalperformanceinformation

* Resigned on 31 October 2016** Appointedon01February2017

Name Position Number of meetings attendedAudit and Risk Committee Members

Mr T Holmes ChairpersonoftheCommittee 4Ms N Dambuza CommitteeMember 3*

Mr R Jock CommitteeMember 4Mr B G Dlamini CommitteeMember 4Ms T Sunduza CommitteeMember Nil**Ms M Constas CommitteeMember 3


32


Audit and Risk Committee Report

The quality on in-year management reportsTheCommitteeisgenerallysatisfiedwiththecontentandqualityofmonthlyandquarterlyreportsthatwerepreparedandissued by the management during the year under review. There is, however, room for improvements in respect of quarterly financialstatementsandorganisationalperformanceInformationreporting.

Evaluation of annual financial statementsTheCommitteehas:

• Reviewed and discussed the audited Annual Financial Statements to be included in the Annual Report with the Auditor-Gen-eralofSouthAfricaandtheAccountingAuthority;

• ReviewedtheAuditor-GeneralofSouthAfrica’sauditandmanagementreportsthereto;• ReviewedtheCSOS’scompliancewithlegalandregulatoryprovisions;• Reviewedsignificantadjustmentresultingfromtheaudit;and• Reviewedtheinformationonpredeterminedobjectivestobeincludedintheannualreport

Internal audit• TheCommitteeisalsosatisfiedthattheinternalauditfunctionisoperatingeffectivelyand,infuture,thecapacityoftheunit

will be improved.

Auditor-general of South Africa• TheCommitteemetwiththeAuditor-GeneralofSouthAfricatoensurethattherearenounresolved

issues.

Mr Taurean D. HolmesChairpersonoftheAudit,RiskansEthicsCommittee


33


Report on the audit of the financial statementsQualified opinion1. IhaveauditedthefinancialstatementsoftheCommunitySchemesOmbudServicessetoutonpages41to68,whichcomprise

statementoffinancialpositionasat31March2017,andthestatementoffinancialperformance,statementofchangesinnetassets,cashflowstatementandthestatementofcomparisonofbudgetinformationwithactualinformationfortheyearthenended,aswellasthenotestothefinancialstatements,includingasummaryofsignificantaccountingpolicies.

2. Inmyopinion,exceptforthepossibleeffectsofthematterdescribedinthebasisforqualifiedopinionsectionofmyreport,the

financialstatementspresentfairly,inallmaterialrespects,thefinancialpositionoftheCommunitySchemesOmbudServicesasat31March2017,anditsfinancialperformanceandcashflowsfortheyearthenendedinaccordancewithStandardsofGener-allyRecognisedAccountingPractice(GRAP)andtherequirementsofthePublicFinanceManagementActofSouthAfrica,1999(Act No. 1 of 1999) (PFMA).

Basis for qualified opinion Non-exchange revenue and non-exchange receivables from levies3. Iwasunabletoobtainsufficientappropriateauditevidencefornon-exchangerevenuerelatingtoleviesfortheyearunderre-

view,assufficientinternalcontrolshadnotbeenestablishedfortheidentification,processingandcollectionofleviesbeforetheirinitialentryinthefinancialrecords.Iwasunabletoconfirmthenon-exchangerevenuerelatingtoleviesbyalternativemeans.Consequently,Iwasunabletodeterminewhetheranyadjustmentwasnecessarytonon-exchangerevenuefromleviesstatedatR30392000andtradeandotherreceivablesfromnon-exchangetransactionsstatedatR14137000inthefinancialstatements.

Contingent Liabilities4. ThepublicentitydidnotdisclosethecontingentliabilityrelatedtosurplusfundsasrequiredbyGRAP19,Provisions,contingent

liabilitiesandcontingentassets.ThesesurplusfundscanonlyberetainedbasedonapprovalfromtheNationalTreasuryandthepublicentityhasnotdisclosedassuch.AsaresultcontingentliabilitiesareunderstatedbyR22671831.

5. IconductedmyauditinaccordancewiththeInternationalStandardsonAuditing(ISAs).Myresponsibilitiesunderthosestand-ardsarefurtherdescribedintheauditor-general’sresponsibilitiesfortheauditofthefinancialstatementssectionofmyreport.

6. IamindependentofthepublicentityinaccordancewiththeInternationalEthicsStandardsBoardforAccountants’Codeofethics for professional accountants (IESBA code) together with the ethical requirements that are relevant to my audit in South Africa.IhavefulfilledmyotherethicalresponsibilitiesinaccordancewiththeserequirementsandtheIESBAcode.

7. IbelievethattheauditevidenceIhaveobtainedissufficientandappropriatetoprovideabasisformyqualifiedopinion.

Emphasis of matters 8. Idrawattentiontothemattersbelow.Myopinionisnotmodifiedinrespectofthesematters.

Restatement of corresponding figures9. Asdisclosedinnote33tothefinancialstatements,thecorrespondingfiguresfor31March2016havebeenrestatedasaresultof

anerrorinthefinancialstatementsofthepublicentityat,andfortheyearended,31March2017.

Irregular expenditure10. Asdisclosedinnote26tothefinancialstatements,irregularexpendituretotheamountofR9144030wasincurred,astheentity

exceededtheapprovedbudgetandduetoanunjustifieddeviationfromtheprocurementprocess.

Responsibilities of the accounting authority for the financial statements 11. Theboardofdirectors,whichconstitutestheaccountingauthority,isresponsibleforthepreparationandfairpresentationofthe

financialstatementsinaccordancewithGRAPandtherequirementsofthePFMAandforsuchinternalcontrolastheaccountingauthoritydeterminesisnecessarytoenablethepreparationoffinancialstatementsthatarefreefrommaterialmisstatement,whether due to fraud or error.

Report of the auditor-general to Parliament on the Community Schemes Ombud Services


34


12. Inpreparingthefinancialstatements, theaccountingauthority isresponsibleforassessingtheCommunitySchemesOmbudService’sabilitytocontinueasagoingconcern,disclosing,asapplicable,mattersrelatingtogoingconcernandusingthegoingconcernbasisofaccountingunlessthereisanintentioneithertoliquidatethepublicentityortoceaseoperations,orthereisnorealisticalternativebuttodoso.

Auditor-general’s responsibilities for the audit of the financial statements 13. Myobjectivesaretoobtainreasonableassuranceaboutwhetherthefinancialstatementsasawholearefreefrommaterial

misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,theycouldreasonablybeexpectedtoinfluencetheeconomicdecisionsofuserstakenonthebasisofthesefinancialstatements.

14. Afurtherdescriptionofmyresponsibilitiesfortheauditofthefinancialstatementsisincludedintheannexuretotheauditor’sreport.

Report on the audit of the annual performance reportIntroduction and scope 15. InaccordancewiththePublicAuditActofSouthAfrica,2004(ActNo.25of2004)(PAA)andthegeneralnoticeissuedinterms

thereofIhavearesponsibilitytoreportmaterialfindingsonthereportedperformanceinformationagainstpredeterminedobjec-tivesforselectedobjectivespresentedintheannualperformancereport.Iperformedprocedurestoidentifyfindingsbutnottogather evidence to express assurance.

16. Myproceduresaddressthereportedperformanceinformation,whichmustbebasedontheapprovedperformanceplanningdocumentsofthepublicentity.Ihavenotevaluatedthecompletenessandappropriatenessoftheperformanceindicatorsin-cludedintheplanningdocuments.Myproceduresalsodidnotextendtoanydisclosuresorassertionsrelatingtoplannedper-formancestrategiesand information inrespectof futureperiodsthatmaybe includedaspartof thereportedperformanceinformation.Accordingly,myfindingsdonotextendtothesematters.

17. Ievaluatedtheusefulnessandreliabilityofthereportedperformanceinformationinaccordancewiththecriteriadevelopedfromtheperformancemanagementandreportingframework,asdefinedinthegeneralnotice,forthefollowingselectedobjectivespresentedintheannualperformancereportofthepublicentityfortheyearended31March2017:

Objectives Pages in the annual performance report

Objective1–ProvideadisputeresolutionserviceforcommunityschemesinSouthAfrica 24Objective2–Takecustodyandcontrolofcommunityschemes’governancedocumentation 24Objective4–Promotegoodgovernanceinsectionaltitlesandothercommunityschemes 25 - 26

18. Iperformedprocedures todeterminewhether the reportedperformance informationwasproperlypresentedandwhetherperformance was consistent with the approved performance planning documents. I performed further procedures to determine whether the indicators and related targets were measurable and relevant, and assessed the reliability of the reported perfor-manceinformationtodeterminewhetheritwasvalid,accurateandcomplete.

19. Ididnotidentifyanymaterialfindingsontheusefulnessandreliabilityofthereportedperformanceinformationfortheselectedobjectives.



35



Other matters20. Idrawattentiontothemattersbelow.

Achievement of planned targets21. Refertotheannualperformancereportonpages24to26forinformationontheachievementofplannedtargetsfortheyearand

explanationsprovidedfortheunderachievementofanumberoftargets.

Adjustment of material misstatements22. Iidentifiedmaterialmisstatementsintheannualperformancereportsubmittedforauditing.Thesematerialmisstatementswere

onthereportedperformanceinformationofObjective 1 - Provide a dispute resolution service for community schemes in South Africa, Objective 2 - Take custody and control of community schemes governance documentation and Objective 4 - Promote good governance in sectional titles and other community schemes. As management subsequently corrected the misstatements, I did notraiseanymaterialfindingsontheusefulnessandreliabilityofthereportedperformanceinformation.

Report on audit of compliance with legislationIntroduction and scope23. InaccordancewiththePAAandthegeneralnoticeissuedintermsthereofIhavearesponsibilitytoreportmaterialfindingson

thecomplianceofthepublicentitywithspecificmattersinkeylegislation.Iperformedprocedurestoidentifyfindingsbutnottogather evidence to express assurance.

24. Thematerialfindingsinrespectofthecompliancecriteriafortheapplicablesubjectmattersareasfollows:

Annual financial statements, performance and annual reports25. Thefinancialstatementssubmittedforauditingwerenotpreparedinaccordancewiththeprescribedfinancialreportingframe-

workandsupportedbyfullandproperrecords,asrequiredbysection55(1)(a)and(b)ofthePFMA.Materialmisstatementsofliabilities,disclosureitemsandthestatementofcomparisonofbudgetandactualamountsidentifiedbytheauditorsinthesubmittedfinancialstatementswerecorrectedandthesupportingrecordswereprovidedsubsequently,buttheuncorrectedma-terialmisstatementsandsupportingrecordsthatcouldnotbeprovidedresultedinthefinancialstatementsreceivingaqualifiedopinion.

Expenditure management26. EffectivestepswerenottakentopreventfruitlessandwastefulexpenditureamountingtoR20854,asdisclosedinnote27tothe

annualfinancialstatements,incontraventionofsection51(1)(b)(ii)ofthePFMA.

27. EffectivestepswerenottakentopreventirregularexpenditureamountingtoR9144030asdisclosedinnote26totheannualfinancialstatements,asrequiredbysection51(1)(b)(ii)ofthePFMA.

Revenue management 28. Effectiveandappropriatestepswerenottakentocollectallmoneydue,asrequiredbysection51(1)(b)(i)ofthePFMAandtreas-

uryregulation31.1.2(a)and(e).

Other information29. TheCommunitySchemesOmbudService’saccountingauthorityisresponsiblefortheotherinformation.Theotherinformation

comprisestheinformationincludedintheannualreportwhichincludestheauditcommittee’sreport.Theotherinformationdoesnotincludethefinancialstatements,theauditor’sreportthereonandthoseselectedobjectivespresentedintheannualperformancereportthathavebeenspecificallyreportedonintheauditor’sreport.

30. MyopiniononthefinancialstatementsandfindingsonthereportedperformanceinformationandcompliancewithlegislationdonotcovertheotherinformationandIdonotexpressanauditopinionoranyformofassuranceconclusionthereon.


36


Report of the auditor-general to Parliament on the Community Schemes Ombud Services31. Inconnectionwithmyaudit,myresponsibility istoreadtheotherinformationand,indoingso,considerwhethertheother

informationismateriallyinconsistentwiththefinancialstatementsandtheselectedobjectivespresentedintheannualperfor-mance report, or my knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work I haveperformedontheotherinformationobtainedpriortothedateofthisauditor’sreport,Iconcludethatthereisamaterialmisstatementofthisotherinformation,Iamrequiredtoreportthatfact.Ihavenothingtoreportinthisregard.

Internal control deficiencies 32. Iconsideredinternalcontrolrelevanttomyauditofthefinancialstatements,reportedperformanceinformationandcompliance

withapplicablelegislation;however,myobjectivewasnottoexpressanyformofassurancethereon.Themattersreportedbe-lowarelimitedtothesignificantinternalcontroldeficienciesthatresultedinthebasisforqualifiedopinionandthefindingsoncompliancewithlegislationincludedinthisreport.

Leadership33. Theaccountingauthoritydidnotexerciseoversightresponsibilitytoensurethefairpresentationofrevenuegeneratedfromlev-

iesassystemsandprocesseshadnotbeenestablishedtoidentify,processandrecordthisrevenue.Furthermoreadequateover-sightwasnotexercisedtoensurethecontingentliabilityemanatingfromthesurpluswasdisclosedinthefinancialstatements.

34. Theaccountingauthoritydidnotimplementeffectivehumanresourcemanagementtoensurethatadequateandsufficientlyskilled resources were in place.

35. Therewasinadequatereviewofthefinancialstatementsandtheannualperformancereportpriortosubmittingthemforaudit-ing,asevidencedbythematerialmisstatementsidentifiedinboththefinancialstatementsandannualperformancereportwhichwere corrected due to the audit process.

Financial and performance management36. Thefinancialstatementscontainednumerousmisstatementsthatwerecorrected.Thiswasmainlyduetostaffnotfullyunder-

standingtherequirementsofthefinancialreportingframework.37. Managementdidnotadequatelyreviewandmonitorcompliancewithlegislation.

Other reports 38. Idrawattentiontothefollowingengagementthatwillbeconductedthatcouldhaveanimpactonthemattersreportedinthe

publicentity’sfinancialstatements,reportedperformanceinformation,compliancewithapplicablelegislationandotherrelatedmatters.Theanticipatedreportdidnotformpartofmyopiniononthefinancialstatementsormyfindingsonthereportedper-formanceinformationorcompliancewithlegislation.

39. TheAuditor-GeneralSouthAfricawillconductaninvestigationatthepublicentitybasedonallegationsofpossibletenderirregu-laritiesandirregularappointments.Theoutcomeoftheinvestigationisexpectedby30November2017.

Pretoria31 August 2017


37


Annexure – Auditor-general’s responsibility for the audit

1. As part of an audit in accordance with the ISAs, I exercise professional judgement and maintain professional scepticism throughout my audit of the financial statements, and the procedures performed on reported performance information for selected objectives and on the public entity’s compliance with respect to the selected subject matters.

Financial statements2. In addition to my responsibility for the audit of the financial statements as described in the auditor’s report, I also:

• identify and assess the risks of material misstatement of the financial statements whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal con-trol.

• obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the public entity’s internal control.

• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclo-sures made by the board of directors, which constitutes the accounting authority.

• conclude on the appropriateness of the board of directors, which constitutes the accounting authority’s use of the going concern basis of accounting in the preparation of the financial statements. I also conclude, based on the audit evidence ob-tained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Community Schemes Ombud Services ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial statements about the material uncertainty or, if such disclosures are inadequate, to modify the opinion on the financial statements. My conclusions are based on the information available to me at the date of the auditor’s report. However, future events or conditions may cause a public entity to cease to continue as a going concern.

• evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Communication with those charged with governance3. I communicate with the accounting authority regarding, among other matters, the planned scope and timing of the audit and

significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

4. I also confirm to the accounting authority that I have complied with relevant ethical requirements regarding independence, and communicate all relationships and other matters that may reasonably be thought to have a bearing on my independence and here applicable, related safeguards.


38


Statement of Financial Position as at 31 March 2017

Notes2017

R ‘0002016

R ‘000

AssetsCurrent Assets

Cash and cash equivalents 3 16,890 10,399Receivablesfromexchangetransactions 4 - 331Receivablesfromnonexchangetransactions 5 14,137 -Prepayments 6 112 189

31,139 10,919

Non Current AssetsOther receivables - deposit 7 452 452Intangible assets 8 122 1,281Property, plant and equipment 9 4,520 7,380

5,094 9,113

Total Assets 36,233 20,032

LiabilitiesCurrent LiabilitiesPayablesfromexchangetransactions 10 2,677 2,454Provisions 11 1,140 929Operatingleaseliability 12 770 888

4,587 4,271

Non Current Liabilities Payablesfromexchangetransactions 10 80 -

Total Liabilities 4,667 4,271Net Assets 31,566 15,761Accumulated surplus 31,566 15,761


39


Statement of Financial Performance

Notes2017

R ‘0002016

R ‘000

RevenueRevenue from exchange transactions

Interest received 13 537 1,141Other income 14 28 173

Total revenue from exchange transactions 565 1,314

Revenue from non-exchange transactions Other income (Non exchange)Donationsreceived 15 9 -Transfer revenueGovernment grants & subsidies 16 30,020 39,521Levies 17 30,392 -

Total revenue from non-exchange transactions 60,421 39,521Total revenue 60,986 40,835

ExpenditureEmployee related costs 18 (28,624) (30,464)Depreciationandamortisation 19 (4,326) (3,418)Debt Impairment - (24)General Expenses 20 (12,216) (21,196)

Total expenditure (45,166) (55,102)Profit/(loss)ondisposalofassets (15) (67)(Deficit) / surplus for the period 15,805 (14,334)


40


Statement of Changes in Net Assets

Notes2017

Accumulated SurplusR ‘000

2016Total Net Assets

R ‘000

Opening balance as previously reported 30,244 30,244AdjustmentsPrioryearadjustments (150) (150)

Balance at 01 April 2015 as restated* 30,094 30,094Changes in net assetsDeficitfortheyearaspreviouslyreported (14,131) (14,131)

Total changes (14,131) (14,131)

Opening balance as previously reported 15,963 15,963AdjustmentsPrioryearadjustments (202) (202)

Balance at 01 April 2016 as restated* 15,761 15,761Changes in net assetsSurplus for the year 15,805 15,805

Total changes 15,805 15,805

Balance at 31 March 2017 31,566 31,566


41


Cash Flow Statement

Notes2017

R ‘0002016

R ‘000

Cash flows from operating activities

ReceiptsLevies 16,586 -Grants 30,020 39,521Interest income 537 1,141Other receipts 28 173

47,171 40,835

PaymentsEmployee costs (28,413) (29,844)Suppliers (11,953) (19,477)

(40,366) (49,321)

Net cash flows from operating activities 22 6,805 (8,486)

Cash flows from investing activities

Purchase of property, plant and equipment 9 (314) (7,669)Proceeds / (loss) from sale of property, plant and equipment 9 - (6)Purchase of other intangible assets 8 - (2,175)(Increase)/Decrease in other receivables - deposit - (203)

Net cash flows from investing activities (314) (10,053)


42


Cash Flow Statement (Continued)

Notes2017

R ‘0002016

R ‘000

Cash flows from financing activities

Movement in short term borrowings - (55)

Net increase/(decrease) in cash and cash equivalents 6,491 (18,594)Cash and cash equivalents at the beginning of the year 10,399 28,993

Cash and cash equivalents at the end of the year 3 16,890 10,399


43


Statement of Comparison of Budget and Actual Amounts

Budget on Accrual Basis Approved budget

Adjustments Final Budget Actual amounts on comparable

basis

Differencebetween

finalbudgetand actual

Reference

R '000 R '000 R '000 R '000 R '000

Statement of Financial Performance RevenueRevenue from exchange transactions

Other income - - - 28 28 29.1

Interest received - investment 837 - 837 537 (300) 29.2

Total revenue from exchange transactions 837 - 837 565 (272)

Revenue from non-exchange transactionsTaxation revenue

Donationsreceived - - - 9 9

Transfer revenue

Government grants & subsidies 23,920 6100 30,020 30,020 -Levies - - - 30,392 30,392 29.3

Total revenue from non-exchange transactions 23,920 6,100 30,020 60,421 30,401

Total revenue 24,757 6,100 30,857 60,986 30,129


44


Statement of Comparison of Budget and Actual Amounts (Continued)

Budget on Accrual Basis Approved budget

Adjustments Final Budget Actual amounts on comparable

basis

Differencebetween

finalbudgetand actual

Reference

R '000 R '000 R '000 R '000 R '000

Expenditure

Personnel (20,525) (6,100) (26,625) (28,624) (1,999) 29.4Depreciationandamortisation (5,228) - (5,228) (4,326) 902 29.5

General Expenses (4,232) - (4,232) (12,216) (7,984) 29.6

Total expenditure (29,985) (6,100) (36,085) (45,166) (9,081)

Operating surplus (5,228) - (5,228) 15,820 21,048

Profit/(loss)ondisposalofassets - - - (15) (15)

Surplus before taxation (5,228) - (5,228) 15,805 21,033

Actual Amount on Comparable Basis as Presented in the Budget and Actual Comparative Statement (5,228) - (5,228) 15,805 21,033


45


Accounting Policies

1. Basis of presentation

CSOS is established in terms Community Schemes Ombud ServiceAct9of2011,andisclassifiedasSchedule3AofthePublic Finance Management Act (Act 1 of 1999). The annual financialstatementshavebeenpreparedinaccordancewiththe Standards of Generally Recognised Accounting Practice(GRAP)includinganyinterpretations,issuedbytheAc-count-ingStandardsBoard inaccordancewithSection91(1)ofthePublic Finance Management Act (Act 1 of 1999).

Thesefinancialstatementshavebeenpreparedonanaccrualbasisofaccountingandareinaccordancewithhistoricalcostconventionasthebasisofmeasurement,unlessspecifiedoth-erwise. They are presented in South African Rand.

1.1 Revenue recognition

Revenue from non-exchange transactionsNonexchange transactionsare transactions thatarenotex-changetransactions.Inanonexchangetransaction,anentityeitherreceivesvaluefromanotherentitywithoutdirectlygiv-ing approximately equal value in exchange, or gives value to anotherentitywithoutdirectlyreceivingapproximatelyequalvalue exchange.

RecognitionAninflowofresourcesfromanonexchangetransactionrec-ognised as an asset is recognised as revenue, except to the extent that a liability is also recognised in respect of the same inflow.

AsCSOSsatisfiesapresentobligationrecognisedasa liabili-ty inrespectofan inflowofresources fromanonexchangetransaction recognised as an asset, it reduces the carryingamount of the liability recognised and recognises an amount ofrevenueequaltothatreduction. MeasurementRevenuefromanonexchangetransactionismeasuredattheamount of the increase in net assets recognised by CSOS.

When, as a result of anonexchange transaction,CSOS rec-ognises an asset, it also recognises revenue equivalent to the amount of the asset measured at its fair value as at the date oftheacquisition,unlessitisalsorequiredtorecognisealia-bility. Where a liability is required to be recognised it will be measuredasthebestestimateoftheamountrequiredtoset-

tletheobligationatthereportingdate,andtheamountoftheincrease in net assets, if any, recognised as revenue. When a liability is subsequently reduced, because the taxable event occursoraconditionissatisfied,theamountofthereductionin the liability is recognised as revenue.

Revenue from recovery of expenditure, irregular, fruitless and wasteful expenditure is based on legislated procedures, in-cluding those set out in the Public Finance Management Act (Act No. 1 of 1999) and is recognised when the recovery there-offromtheresponsibleBoardmembersorofficialsisvirtuallycertain.

Government grants and subsidiesCSOS Government grants and subsidies revenue is derived in termsof Section22ofCommunitySchemesOmbudServiceAct9of2011asapprovedbytheMinisterofHumanSettle-ment.

Revenue from exchange transactionsExchangetransactionsaretransactionsinwhichoneentityre-ceives assets or services, or has liabilities extinguished, anddirectly gives approximately equal value (primarily in the form ofcash,goods,services,oruseofassets)toanotherentityinexchange.

RecognitionAn inflowof resources fromanexchange transaction recog-nised as an asset is recognised as revenue, except to the ex-tent that a liability is also recognised in respect of the same inflow.

AsCSOSsatisfiesapresentobligationrecognisedasaliabilityinrespectofaninflowofresourcesfromanexchangetransac-tionrecognisedasanasset,itreducesthecarryingamountofthe liability recognised and recognises an amount of revenue equaltothatreduction.

MeasurementRevenue from an exchange transaction is measured at theamount of the increase in net assets recognised by CSOS.

When,asaresultofanexchangetransaction,CSOSrecognisesan asset, it also recognises revenue equivalent to the amount of the asset measured at its fair value as at the date of the acquisition, unless it is also required to recognise a liability.Where a liability is required to be recognised it will be meas-ured as the best estimate of the amount required to settle


46


Accounting Policies (Continued)theobligationat the reportingdate,and theamountof theincrease in net assets, if any, recognised as revenue. When a liability is subsequently reduced, because the taxable event occursoraconditionissatisfied,theamountofthereductionin the liability is recognised as revenue.

Revenue from recovery of unauthorised expenditure, irregu-lar, fruitless and wasteful expenditure is based on legislated procedures, including those set out in the Public Finance Man-agement Act (Act No. 29 of 1999) and is recognised when the recoverythereoffromtheresponsibleboardmembersoroffi-cials is virtually certain.

1.2 Investment incomeInvestment income is recognised as revenue on receipts of the interest from the bank.

1.3 Other incomeOtherincomeincludesdisputeresolution,donationsreceivedandanominalfeeforadministrationoftenders.

1.4 Property, plant and equipmentProperty, plant and equipment are tangible non current assets thatareheldforuseintheproductionorsupplyofgoodsorservicesandforadministrativepurposes,andareexpectedtobe used for more than one period.

The cost of an item of property, plant and equipment is recog-nisedasanassetwhen:• itisprobablethatfutureeconomicbenefitsorservicepo-

tentialassociatedwiththeitemwillflowtotheentity;and• the cost of the item can be measured reliably.

Property,plantandequipmentisinitiallymeasuredatcost.

The cost of an item of property, plant and equipment is the purchasepriceandothercostsattributabletobringtheassettothelocationandconditionnecessaryforittobecapableofoperatinginthemannerintendedbymanagement.Tradedis-counts and rebates are deducted in arriving at the cost.

Where an asset is acquired through a non exchange transac-tion,itscostisitsfairvalueasatdateofacquisition.

Where an item of property, plant and equipment is acquired in exchange for a non monetary asset or monetary assets, or acombinationofmonetaryandnonmonetaryassets,theas-

setacquiredisinitiallymeasuredatfairvalue(thecost).Iftheacquired item’s fair value was not determinable, it’s deemed cost is the carrying amount of the asset(s) given up.

When significant components of an item of property, plantandequipmenthavedifferentusefullives,theyareaccountedforasseparate items(majorcomponents)ofproperty,plantand equipment.

Costsincludecostsincurredinitiallytoacquireorconstructanitem of property, plant and equipment and costs incurred sub-sequently to add to, replace part of, or service it. If a replace-ment cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised.

Theinitialestimateofthecostsofdismantlingandremovingthe item and restoring the site on which it is located is also included in the cost of property, plant and equipment, where theentity isobligatedto incursuchexpenditure,andwheretheobligationarisesasaresultofacquiringtheassetorusingitforpurposesotherthantheproductionofinventories.

Recognitionofcostsinthecarryingamountofanitemofprop-erty, plant and equipment ceases when the item is in the loca-tionandconditionnecessaryforittobecapableofoperatingin the manner intended by management.

Majorsparepartsandstandbyequipmentwhichareexpectedto be used for more than one period are included in proper-ty,plantandequipment.Inaddition,sparepartsandstandbyequipmentwhichcanonlybeusedinconnectionwithanitemof property, plant and equipment are accounted for as proper-ty, plant and equipment. Majorinspectioncostswhichareaconditionofcontinuinguseof an item of property, plant and equipment and which meet therecognitioncriteriaaboveareincludedasareplacementin the cost of the item of property, plant and equipment. Any remaining inspectioncosts from theprevious inspectionarederecognised.

Property, plant and equipment are depreciated on the straight linebasisover theirexpecteduseful lives to theirestimatedresidual value.

Property, plant and equipment is carried at cost less accumu-lateddepreciationandanyimpairmentlosses.


47


Accounting Policies (Continued)

Theresidualvalue,andtheusefullifeanddepreciationmeth-odofeachassetarereviewedattheendofeachreportingdate.Iftheexpectationsdifferfrompreviousestimates,thechangeisaccountedforasachangeinaccountingestimate.

Reviewing the useful life of an asset on an annual basis does notrequiretheentitytoamendthepreviousestimateunlessexpectationsdifferfromthepreviousestimate.

Each part of an item of property, plant and equipment with a costthatissignificantinrelationtothetotalcostoftheitemis depreciated separately.

Thedepreciationchargeforeachperiodisrecognisedinsur-plusordeficitunlessitisincludedinthecarryingamountofanother asset.

Items of property, plant and equipment are derecognised when the asset is disposed of or when there are no further economic benefits or service potential expected from theuse of the asset.

The gain or loss arising from the derecognition of an itemof property, plant and equipment is included in surplus or deficitwhentheitemisderecognised.Thegainorlossaris-ingfromthederecognitionofanitemofproperty,plantandequipmentisdeterminedasthedifferencebetweenthenetdisposal proceeds, if any, and the carrying amount of the item.

Theusefullivesofitemsofproperty,plantandequipmenthavebeenassessedasfollows:

Item Depreciation method Average useful life

Furnitureandfittings Straight line 6 yearsOfficemachineryandequipment Straight line 6 yearsComputer equipment Straight line 3 yearsLeasehold improvements Straight line Based on the lesser of lease

period and useful life of the asset


48


Accounting Policies (Continued)1.5 Intangible assetsAnassetisidentifiableifiteither:• is separable, i.e. is capable of being separated or divided

fromanentityandsold,transferred, licensed,rentedorexchanged, either individually or together with a relat-ed contract, identifiable assets or liability, regardless ofwhethertheentityintendstodoso;or

• arises from binding arrangements (including rights from contracts), regardless of whether those rights are trans-ferableorseparablefromtheentityorfromotherrightsandobligations.

A binding arrangement describes an arrangement that confers similarrightsandobligationsonthepartiestoitasifitwereinthe form of a contract.

Anintangibleassetisrecognisedwhen:• itisprobablethattheexpectedfutureeconomicbenefits

orservicepotentialthatareattributabletotheassetwillflowtotheentity;and

• the cost or fair value of the asset can be measured relia-bly.

Theeconomicentityassessestheprobabilityofexpectedfu-tureeconomicbenefitsorservicepotentialusingreasonableand supportable assumptions that representmanagement’sbestestimateofthesetofeconomicconditionsthatwillexistover the useful life of the asset. Where an intangible asset is acquired through a non exchange transaction,its initialcostatthedateofacquisitionismeas-ured at its fair value as at that date.

Expenditure on research (or on the research phase of an in-ternalproject)isrecognisedasanexpensewhenitisincurred.

Intangible assets are carried at cost less any accumulated am-ortisationandanyimpairmentlosses.

Theamortisationperiodandtheamortisationmethodforin-tangibleassetsarereviewedateachreportingdate.

Reassessingtheusefullifeofanintangibleassetwithafiniteuseful life after itwas classified as indefinite is an indicatorthat the asset may be impaired. As a result the asset is tested for impairment and the remaining carrying amount is amor-tisedoveritsusefullife.

Internallygeneratedbrands,mastheads,publishingtitles,cus-tomer lists and items similar in substance are not recognised as intangible assets.

Internally generated goodwill is not recognised as an intangi-ble asset.

Amortisationisprovidedtowritedowntheintangibleassets,onastraightlinebasis,totheirresidualvaluesasfollows:

Item Useful lifeComputersoftware 2years

1.6 TaxTax expensesCommunity Schemes Ombud Service is a Schedule 3A Public Entityandistherefore,exemptfromVATandIncometax.TheCSOS thus pays all tax invoices to supplies at total value, and has no recourse to claim any input tax related thereto.

1.7 LeasesAlease isclassifiedasafinance lease if it transferssubstan-tialA lease is classified as a finance lease if it transfers sub-stantiallyalltherisksandrewardsincidentaltoownership.Aleaseisclassifiedasanoperatingleaseifitdoesnottransfersubstantiallyalltherisksandrewardsincidentaltoownership.

When a lease includes both land and buildings elements, the entityassessestheclassificationofeachelementseparately.

Operating leases - lesseeOperatingleasepaymentsarerecognisedasanexpenseonastraightlinebasisovertheleaseterm.Thedifferencebetweenthe amounts recognised as an expense and the contractual payments are recognised as an operating lease asset or lia-bility.

1.8 Employee benefitsShort term employee benefitsThe cost of short term employee benefits, (those payablewithin12monthsaftertheservice isrendered,suchaspaidvacation leave and sick leave, bonuses, and non monetarybenefitssuchasmedicalcare),arerecognisedintheperiodinwhich the service is rendered and are not discounted.

The expected cost of compensated absences is recognised as an expense as the employees render services that increase theirentitlementor,inthecaseofnonaccumulatingabsenc-es, when the absence occurs.


49


Accounting Policies (Continued)The expected bonus payments are recognised as an expense whenthereisalegalorconstructiveobligationtomakesuchpayments as a result of past performance.

Defined benefit plansCSOS is a member of the Government Employee pension fund andmakescontributionsonbehalfofitsstafftothedefinedbenefitscheme.

1.9 Provisions and contingenciesProvisionsarerecognisedwhen:• theentityhasapresentobligationas a resultof apast

event;• it is probable that an outflow of resources embodying

economicbenefitsorservicepotentialwillberequiredtosettletheobligation;and

• areliableestimatecanbemadeoftheobligation.

Theamountofaprovisionisthebestestimateoftheexpend-itureexpectedtoberequiredtosettlethepresentobligationatthereportingdate.

Where the effect of time value of money is material, theamount of a provision is the present value of the expenditures expectedtoberequiredtosettletheobligation.

Thediscountrateisapretaxratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecificto the liability.

Provisionsarereviewedateachreportingdateandadjustedtoreflectthecurrentbestestimate.Provisionsarereversedifnolongerprobablethatanoutflowofresourcesembodyingeco-nomicbenefitsorservicepotentialwillberequired,tosettletheobligation.

Wherediscountingisused,thecarryingamountofaprovisionincreases ineachperiod to reflect thepassageoftime.Thisincrease is recognised as an interest expense.

A provision is used only for expenditures for which the provi-sion was originally recognised.

Provisionsarenotrecognisedforfutureoperatingdeficits.

Provision for leave pay is determined by dividing the employ-eesannualsalariesby21,67andmultiplyingbythenumberofdaysaccruingtotheemployeesatthereportingdate.

1.10 Fruitless and wasteful expenditureFruitless and wasteful expenditure means expenditure which was made in vain and would have been avoided had reasona-ble care been exercised.

Allexpenditurerelatingtofruitlessandwastefulexpenditureisrecognisedasanexpenseinthestatementoffinancialper-formance in the year that the expenditure was incurred. The expenditureisclassifiedinaccordancewiththenatureoftheexpense, and where recovered, it is subsequently accounted forasotherincomeinthestatementoffinancialperformance.

1.11 Irregular expenditureIrregularexpenditureasdefined insection1of thePFMA isexpenditure other than unauthorised expenditure, incurred in contraventionoforthat isnot inaccordancewitharequire-mentofanyapplicablelegislation,including (a)PublicFinanceFinanceManagement;or (b)theStateTenderBoardAct,1968(ActNo.86of 1968),oranyregulationsmadeintermsoftheAct;or

Irregularexpenditurethatwasincurredandidentifiedduringthecurrentfinancialandwhichwascondonedbeforeyearendand/or before finalisation of the financial statements mustalso be recorded appropriately in the irregular expenditure register.Insuchaninstance,nofurtheractionisalsorequiredwiththeexceptionofupdatingthenotetothefinancialstate-ments.

Irregularexpenditurethatwasincurredandidentifiedduringthecurrentfinancialyearandforwhichcondonementisbeingawaited at year end must be recorded in the irregular expend-itureregister.Nofurtheractionisrequiredwiththeexceptionofupdatingthenotetotheannualfinancialstatements.

Whereirregularexpenditurewas incurredinthepreviousfi-nancial year and is only condoned in the followingfinancialyear,theregisterandthedisclosurenotetothefinancialstate-ments must be updated with the amount condoned. IrregularexpenditurethatwasincurredandidentifiedduringthecurrentfinancialyearandwhichwasnotcondonedbytheNationalTreasuryortherelevantauthoritymustberecordedappropriately in the irregular expenditure register. If liability for the irregular expenditure can be attributed to a person,a debt account must be created if such a person is liable in law.Immediatestepsmustthereafterbetakentorecovertheamount from the person concerned. If recovery is not pos-sible, theaccountingauthoritymaywriteoff theamountasdebt impairment and disclose such in the relevant note to the annualfinancialstatements.Theirregularexpenditureregistermust also be updated accordingly. If the irregular expenditure has not been condoned and no person is liable in law, the ex-penditure related thereto must remain against the relevant programme/expenditure item, be disclosed as such in the note to thefinancial statementsandupdatedaccordingly inthe irregular expenditure register.


50


Accounting Policies (Continued)1.12 Budget informationEconomicentityaretypicallysubjecttobudgetarylimitsintheformof appropriations or budget authorisations (or equiva-lent),whichisgiveneffectthroughauthorisinglegislation,ap-propriationorsimilar.

Generalpurposefinancialreportingbyentityshallprovidein-formationonwhether resourceswereobtainedandused inaccordance with the legally adopted budget.

The approved budget is prepared on a accrual basis and pre-sentedbyprogrammeslinkedtoperformanceoutcomeobjec-tives.

Theapprovedbudgetcoversthefiscalperiodfrom2016/04/01to2017/03/31.

Thebudget for the economic entity includes all the entitiesapproved budgets under its control.

The annual financial statements and the budget are on thesame basis of accounting therefore a comparison with thebudgeted amounts for the reporting period have been in-cluded in the Statement of comparison of budget and actual amounts.

1.13 Financial instrumentsClassificationTheentityclassifiesfinancialassetsandfinancialliabilitiesintothefollowingcategories:• Financial instruments at fair value• Financial instruments at cost• Financialinstrumentatamortisedcost

Classificationdependsonthepurposeforwhichthefinancialinstrumentswereobtained/incurredandtakesplaceatinitialrecognition.Classification is re assessedonanannual basis,exceptforderivativesandfinancialassetsdesignatedasatfairvaluethroughsurplusordeficit,whichshallnotbeclassifiedoutofthefairvaluethroughsurplusordeficitcategory.

Initial recognition and measurementFinancialinstrumentsarerecognisedinitiallywhentheentitybecomes a party to the contractual provisions of the instru-ments.

Theentityclassifiesfinancialinstruments,ortheircomponentparts, on initial recognition as a financial asset, a financialliability or an equity instrument in accordance with the sub-stance of the contractual arrangement.

Financial instrumentsaremeasured initiallyatfairvalue,ex-cept for equity investments for which a fair value is not de-

terminable,whicharemeasuredatcostandareclassifiedasavailableforsalefinancialassets.

Forfinancial instrumentswhicharenotatfairvaluethroughsurplusordeficit,transactioncostsareincludedintheinitialmeasurement of the instrument.

Transactioncostsonfinancialinstrumentsatfairvaluethroughsurplusordeficitarerecognisedinsurplusordeficit.

Regularwaypurchasesoffinancialassetsareaccountedforatsettlementdate. Subsequent measurementFinancial instruments at fair value are subsequently measured atfairvaluebasedonthequotedpricesinanactivemarket,unless themarket forafinancial instrument isnotactive, inwhichcasetheentityestablishesafairvalueusingavaluationtechnique.

Financialliabilitiesatamortisedcostaresubsequentlymeas-uredatamortisedcost,usingtheeffectiveinterestmethod.

Financial instruments at cost are subsequently measured at cost.

Fair value determinationThe fair values of quoted investments are based on current bid prices.Ifthemarketforafinancialassetisnotactive(andforunlistedsecurities), theentityestablishes fairvaluebyusingvaluation techniques. These include theuseof recent arm’slength transactions, reference toother instruments that aresubstantially the same, discounted cash flow analysis, andoptionpricingmodelsmakingmaximumuseofmarketinputsandrelyingaslittleaspossibleonentityspecificinputs.

Impairment of financial assetsAteachendofthereportingperiodtheentityassessesallfi-nancial assets, other than those at fair value through surplus ordeficit, todeterminewhether there isobjectiveevidencethatafinancialassetorgroupoffinancialassetshasbeenim-paired.

Foramountsduetotheentity,significantfinancialdifficultiesof the debtor, probability that the debtor will enter into bank-ruptcy and default of payments are all considered indicators of impairment.

Inthecaseofequitysecuritiesclassifiedasavailableforsale,asignificantorprolongeddeclineinthefairvalueofthesecuritybelow its cost is considered an indicator of impairment. If any suchevidenceexistsforavailableforsalefinancialassets,thecumulativelossmeasuredasthedifferencebetweentheac-


51


Accounting Policies (Continued)quisitioncostandcurrentfairvalue,lessanyimpairmentlossonthatfinancialassetpreviouslyrecognisedinsurplusordefi-cit is removed fromequityasa reclassificationadjustmentandrecognisedinsurplusordeficit.

Impairmentlossesarerecognisedinsurplusordeficit.

Impairmentlossesarereversedwhenanincreaseinthefinan-cialasset’srecoverableamountcanberelatedobjectivelytoaneventoccurringaftertheimpairmentwasrecognised,sub-jecttotherestrictionthatthecarryingamountofthefinan-cial asset at the date that the impairment is reversed shall not exceed what the carrying amount would have been had the impairment not been recognised.

Reversals of impairment losses are recognised in surplus or deficitexceptforequityinvestmentsclassifiedasavailableforsale.

Impairment losses are also not subsequently reversed for available for sale equity investments which are held at cost because fair value was not determinable.

Wherefinancialassetsareimpairedthroughuseofanallow-ance account, the amount of the loss is recognised in surplus or deficit within operating expenses.When such assets arewrittenoff, thewriteoff ismadeagainst therelevantallow-ance account. Subsequent recoveries of amounts previously writtenoffarecreditedagainstoperatingexpenses.

Receivables from exchange transactionsTrade receivables aremeasured at initial recognition at fairvalue,andaresubsequentlymeasuredatamortisedcostus-ingtheeffectiveinterestratemethod.Appropriateallowancesforestimatedirrecoverableamountsarerecognisedinsurplusordeficitwhen there isobjectiveevidence that theasset isimpaired.Significantfinancialdifficultiesofthedebtor,prob-abilitythatthedebtorwillenterintobankruptcyorfinancialreorganisation,anddefaultordelinquencyinpayments(morethan 30 days overdue) are considered indicators that the trade receivable is impaired. The allowance recognised is measured asthedifferencebetweentheasset’scarryingamountandthepresentvalueofestimatedfuturecashflowsdiscountedattheeffectiveinterestratecomputedatinitialrecognition. The carrying amount of the asset is reduced through the use ofanallowanceaccount,andtheamountofthedeficitisrec-ognisedinsurplusordeficitwithinoperatingexpenses.When

atradereceivableisuncollectible,itiswrittenoffagainsttheallowance account for trade receivables. Subsequent recover-iesofamountspreviouslywrittenoffarecreditedagainstop-eratingexpensesinsurplusordeficit.

Tradeandotherreceivablesareclassifiedasloansandreceiv-ables.

Receivables from non exchange transactionsLevyreceivablesaremeasuredatinitialrecognitionatfairval-ue,andare subsequentlymeasuredatamortisedcostusingtheeffectiveinterestratemethod.Appropriateallowancesforestimatedirrecoverableamountsarerecognisedinsurplusordeficitwhenthereisobjectiveevidencethatthereceivableisimpaired.

Theallowance recognised ismeasuredas thedifferencebe-tween the asset’s carrying amount and the present value of estimatedfuturecashflowsdiscountedattheeffectiveinter-estratecomputedatinitialrecognition.Thecarryingamountof the asset is reduced through the use of an allowance ac-count,andtheamountofthedeficitisrecognisedinsurplusordeficitwithinoperatingexpenses.Whenthelevyreceivableisuncollectible,itiswrittenoffagainsttheallowanceaccountfor levy receivables.

Levyreceivablesareclassifiedasloansandreceivables.

Payables from exchange transactionsTrade payables are initially measured at fair value, and aresubsequentlymeasuredatamortisedcost,usingtheeffectiveinterest rate method.

Cash and cash equivalentsCash and cash equivalents comprise cash held at the bank and is subject toan insignificant riskof changes in value.This isinitiallyandsubsequentlyrecordedatfairvalue.

1.14 PrepaymentsTheentityrecognisesaprepaymentasanassetwhen• itisprobablethatfutureeconomicbenefitsorservicepo-

tential associatedwith the prepaymentwill flow to theentity;or

• the prepayment will lead to a reduction in future pay-mentsoracashrefund;and

• the cost of the prepayment can be measured reliably.


52


Accounting Policies (Continued)1.15 Use of estimatesThe preparation of the entity’s financial statements in con-formity with Generally Recognised Accounting Practice re-quirestheuseofcertaincriticalaccountingestimates.Italsorequiresmanagementtoexerciseitsjudgementintheprocessofapplyingtheentity’saccountingpolicies.

Theareasinvolvingahigherdegreeofjudgementorcomplex-ity,orareaswhereassumptionsandestimatesaresignificanttothefinancialstatementsaredisclosedintherelevantsec-tions of the financial statements. Although these estimatesare based on the management’s best knowledge of the cur-renteventsandactionstheymayundertakeinthefuture,ac-tualresultsultimatelymaydifferfromthoseestimates.

1.16 Significant judgements, estimates and assumptionsThe key assumptions concerning the future and other keysourcesofestimationatthebalancesheetdate,thathaveasignificantriskofcausingamaterialadjustmenttothecarry-ingamountsofassetsandliabilitieswithinthenextfinancialyeararediscussedbelow:

Impairment of non financial assetsThe entity assesseswhether there are any indicators of im-pairment for all nonfinancial assets at each reportingdate.Indefinite life intangiblesaretestedfor impairmentannually

andothertimeswhensuchindicatorsexist.Othernonfinan-cial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable.

Whenvalueinusecalculationsareundertaken,managementestimates the expected future cash flows from the asset orcashgeneratingunitandchooseasuitablediscountrateinor-dertocalculatethepresentvalueofthosecashflows.

Useful lives and residual valuesThe useful lives and residual values of property, plant and equipment are reviewed at each balance sheet date. These usefullivesandresidualvaluesareestimatedbymanagementbasedonhistoricanalysisandotheravailableinformationandanychangesnotedareaccountedforaschangesinaccountingestimates.

1.17 Related partiesCSOS operates in an economic sector currently dominated by theentitiesdirectlyorindirectlyownedbytheSouthAfricanGovernment. As a consequence of the constitutional inde-pendence of the three spheres of Government in South Africa, onlyentitieswithin thenational sphere forGovernmentareconsideredtoberelatedparties.


53


Notes to the Annual Financial Statements

2017R ‘000

2016R ‘000

3. Cash and cash equivalentsCashandcashequivalentsconsistof:Bank balances 16,890 10,399

4. Receivables from exchange transactionsTrade debtorsProvisionfordoubtfuldebts - 355

- (24)- 331

5. Receivables from non-exchange transactionsLevies 14,137 -

6. PrepaymentsPrepaid expenses 112 189

Standard/ Interpretation: Effective date:Years beginning on or after

Expected impact:

• GRAP20:Relatedparties 01April2017 The impact of the amendment is not material.

2. New standards and interpretations2.1 Standards and interpretations effective and adopted in the current yearInthecurrentyear,therewerenostandardsandinterpretationsthatareeffectiveforthecurrentfinancialyearandthatarerelevanttoitsoperations:

2.2 Standards and Interpretations early adoptedTheentityhaschosentoearlyadoptthefollowingstandardsandinterpretations:

The fair value of trade and other receivables approximates the carrying amount.

Thefairvalueofreceivablesfromnon-exchangetransactionsapproximatesthecarryingamount.


54


Notes to the Annual Financial Statements (Continued)

2017R ‘000

2016R ‘000

8. Intangible assets 2017 2016Cost Accumulated

amortisationandaccumulated impairment

Carrying value

Cost Accumulated amortisationand

accumulated impairment

Carrying value

Computersoftware(finite) 2,372 (2,250) 122 2,372 (1,091) 1,281

Reconciliation of intangible assets - 2017Opening balance

Amortisation Total

Computersoftware(finite) 1,281 (1,159) 122

Reconciliation of intangible assets - 2016Opening balance

Additions Amortisation Total

Computersoftware 170 2,175 (1,064) 1,281

7. Other receivables depositRental deposits Headoffice 249 249KwaZuluNataloffice 203 203

452 452

Non-current deposits 0 - 30 days - -31 - 60 Days - -61 - 90 Days - -91 - 120 Days - -121 + Days 452 452

Theentityhasitemsofintangibleassetsthatarecarriedatnilvalues.


55



2017R ‘000

2016R ‘000

9. Property, plant and equipment 2017 2016Cost Accumulated

depreciationandaccumulated impairment

Carrying value

Cost Accumulated depreciationand

accumulated impairment

Carrying value

Computersoftware(finite) 903 (267) 636 581 (124) 457425 (139) 286 436 (71) 365

4,253 (2,570) 1,683 4,273 (1,164) 3,1094,603 (2,688) 1,915 4,603 (1,154) 3,449

10,184 (5,664) 4,520 9,893 (2,513) 7,380

Reconciliation of property, plant and equipment - 2017

Opening balance

Additions Disposals Assets donated

Depreciation Total

Furnitureandfittings 457 314 - 9 (144) 636Plant, machinery & equipment 365 - (9) - (70) 286Computer equipment 3,109 - (6) - (1,420) 1,683

Leasehold improvements 3,449 - - - (1,534) 1,9157,380 314 (15) 9 (3,168) 4,520

Reconciliation of property, plant and equipment - 2016

Opening balance

Additions Disposals Depreciation Total

Furnitureandfittings 554 - - (97) 457Plant, machinery & equipment 246 182 - (63) 365Computer equipment 894 3,342 (61) (1,066) 3,109

Leasehold improvements 433 4,145 - (1,129) 3,4492,127 7,669 (61) (2,355) 7,380


56



2017R ‘000

2016R ‘000

10. Payables from exchange transactions

CurrentTrade payables 2,562 2,283PAYE Withholding tax 18 28Staffsavings/13thcheques 97 143

2,677 2,454

Non currentTrade payables 80 -

2,757 2,454

The fair value of trade and other payables approximates the carrying amount.

11. Provisions

Reconciliation of provisions - 2017

Opening balance

Additions Utilisedduringtheyear

Total

Provision for leave pay 929 2,552 (2,341) 1,140

Reconciliation of provisions - 2016Opening balance

Additions Utilisedduringtheyear

Total

Provision for leave pay 309 1,287 (667) 929


57



2017R ‘000

2016R ‘000

12. Operating lease liabilityOperatingleaseliability 770 888

Thecommitmentsunderthenoncancellableoperatingleasesaredisclosedinnote28Commitments.

13. Investment revenue

Interest revenue Bank 537 1,141

14. Other income

Bid document fees - 9AdvertisingPublicregulations - 164

Disputeresolution 28 -

28 173

15. Donations received

Donated assets 9 -

16. Government grants and subsidies

Operating grants

DepartmentofHumanSettlements 30,020 39,521

17. Levies

Community Scheme Levy Income 30,392 -

18. Employee related costs

Salaries Employees 27,321 29,793

Accountingauthorityexpenses(RefertoNote24) 1,303 671

28,624 30,464

19. Depreciation and amortisation

Property, plant and equipment 3,167 2,354

Intangible assets 1,159 1,064

4,326 3,418


58



2017R ‘000

2016R ‘000

20. General expensesAdvertising 225 652

Admin expenses 3,158 2,559Auditorsremuneration 993 557

Bank charges 24 28

Conferences and seminars 52 377

Consultingandprofessionalfees 649 1,218

Enterprise resource 326 1,794

Equipment rental 292 793

Rentals of buildings 3,272 2,757

Insurance(WCA–IOD) 36 -

Legal expenses 96 -

Licences 30 229

Marketing 24 657

Postage and courier 13 19

Printingandstationery 331 529

Repairs and maintenance 3 27

Staffwelfare - 116

Subscriptionsandpublication 12 18

Travel and subsistence local 1,135 2,318

Travel and subsistence overseas - 1,414

Telephone cost 1,268 1,281

Training - 3,390

Transport and freight - 33

Water and electricity 277 430

12,216 21,196


59



2017R ‘000

2016R ‘000

21. Net surplusRevenue

Government grant 30,020 39,521Levies 30,392 -

Interest earned 537 1,141

Otherincomefromexchangetransactions 28 173

Otherincomefromnonexchangetransactions 9 -

Total Revenue 60,986 40,835

Expenses

Expenses (45,181) (55,169)

Netsurplus/(deficit) 15,805 (14,334)

22. Cash flows from operating activitiesSurplus(deficit) 15,805 (14,334)

Adjustments for:Depreciationandamortisation 4,326 3,418

Loss on scrapping of assets 15 67

Debt impairment - 24

Movementsinoperatingleaseassetsandaccruals (118) 269

Movements in provisions 211 620

Assets donated (9) -

Changes in working capital:

Inventories - 196

Receivablesfromexchangetransactions 331 (330)

Otherreceivablesfromnonexchangetransactions (14,137) -

Prepayments 77 (189)

Payablesfromexchangetransactions 304 1,773

6,805 (8,486)


60



2017R ‘000

2016R ‘000

23. ContingenciesContingent liabilitiesAccumulated surplus* - -

*AccumulatedSurplusissubjecttoNationalTreasuryapprovalinresponsetotheCSOSappropriateapplicationforsuchfundretention.TheaccumulatedsurplusamountisdeterminedintermsofParagraph3.2oftheNationalTreasuryInstructionNo6of2017/2018.

24. Members’ emolumentsExecutive2017

Basic salary Other benefits* TotalMr. T. Mthethwa 1,647 360 2,007Mr. T. Mabuya 1,460 120 1,580Ms. L. Less** 754 50 804Mr. R. Maruma 1,086 72 1,158Ms. D. Dube*** 601 60 661

5,548 662 6,210** Resigned on 31 August 2016.*** Resigned on 30 September 2016.

2016Basic salary Other benefits* Total

Mr. T. Mthethwa 1,647 360 2,007Mr. T. Mabuya 1,460 120 1,580Ms. L. Less 1,565 120 1,685Mr. R. Maruma 1,086 72 1,158Ms. D. Dube 1,144 120 1,264

6,902 792 7,694*Otherbenefitscomprisetravelallowanceandmedicalbenefits


61



Non-executive2017

Number of board

meetings

Board meetings

R’000

Number of committee meetings

Committees and other meetings

R’000

Travel claims

R’000

Total

R’000

Rev. Dr. V. Mehana 9 53 5 76 2 131Adv. N. Memani 8 32 21 162 9 203Ms. B. Dambuza* 8 18 18 118 154 290Mr. T. Holmes 7 23 15 128 16 167Mr. R. Jock 9 28 23 193 13 234Mr. B. Dlamini 9 32 15 131 15 178Ms. M. Constas 5 28 12 50 3 81Ms T. Sunduza*** 2 9 1 10 - 19

223 868 212 1,303* Resigned 31 October 2016***Startedon01January2017.

2016Number of

board meetings

Board meetings

R’000

Number of committee meetings

Committees and other meetings

R’000

Travel claims

R’000

Total

R’000Rev. Dr. V. Mehana 5 67 5 40 6 113Adv. B. Block** 1 9 1 1 1 11Adv. N. Memani 5 72 18 57 12 141Ms. T. Mhlari** 4 61 8 26 4 91Mr. T. Bailey** 4 53 8 26 3 82Mr. M. Shozi** 5 68 10 34 9 111Ms. B. Dambuza*** 1 8 7 24 19 51Mr. T. Holmes*** 1 13 3 11 2 26Mr. R. Jock*** 1 6 3 10 2 18Mr. B. Dlamini*** 1 13 3 9 5 27Ms. M. Constas**** - - - -

370 238 63 671** Term ended on 31 December 2015*** Started on 01 January 2016**** Started on 01 March 2016


62



25. Related partiesRelationshipsControllingentity NationalDepartmentofHumanSettlementsEntityundercommoncontrol EstateAgencyAffairsBoard

Related party balances

Year end balances arising from services provided to related parties EstateAgencyAffairsBoard 2,038 220

CommitmentsEstateAgencyAffairsBoard 1,681 -

Related party transactions

Grants received from related partiesNationalDepartmentofHumanSettlements 30,020 39,251

Rent paid to related party EstateAgencyAffairsBoard (378) (2,234)

26. Irregular expenditureOpening balance 8,363 -Add:IrregularExpenditurecurrentyear 9,144 8,363Less:Amountscondoned (8,363) -

9,144 8,363

Details of irregular expenditure - current yearThetotalbudgetedexpenditureforthe2016/17financialyearwasR36,085,000madeupofpersonnelcosts,depreciationandgeneralexpenditure.ThetotalactualexpenditureincurredwasR45,166,000.Thedifference,R9,081,000,wasaresultofunderfundingfromthebudgetallocation.TheBoardisinvestigatingtheoverexpenditure.

R63,030wasincurredasaresultofthepurchaseofmarketingmaterialsforthestakeholdersduringthelaunchofCSOSwith-outfollowingtheSCMprocesses.TheBoardisinvestigatingnoncompliancewiththeSCMprocesses.

2017R ‘000

2016R ‘000


63



27. Fruitless and wasteful expenditureOpening balance 12 -Add:Fruitlessandwastefulexpenditure-currentyear 20 12

32 12

Duringtheyear,cancellationfeeswereincurredinrespectofcancelledbookings.TheSupplyChainunithasstartedwiththereviewoftransactionstoprovideareportwithrecommendations.

Details of irregular expenditure condonedCondonedbyAccountingAuthority

Rennies Travel SCM procurement process not followed Expenditure condoned by the Board 3,196AMP Design SCM procurement process not followed Expenditure condoned by the Board 2,832Various suppliers SCM procurement process not followed Expenditure condoned by the Board 2,335

8,363

2017R ‘000

2016R ‘000


64


28. CommitmentsAuthorised capital expenditure

Within 1 year Already contracted for but not provided for • CT Infrastructure 3,699 265• Offsiterecordstorage - 30,054

3,699 30,319

Authorised operational expenditure

Already contracted for but not provided for • TrainingDisputeresolution 7,335 7,335• Enterprise resouce planning 649 975• Operatingleases 160 -

8,144 8,310

In second to fifth year inclusive

Minimum lease payments due - ICT infrastructure - 6,276-Offsiterecordstorage 30,054 -

30,054 6,276

Operating leases - as lessee (expense)

Minimum lease payments due - within one year 3,222 3,418-insecondtofifthyearinclusive 3,831 6,880

7,053 10,298

Notes to the Annual Financial Statements (Continued)2017

R ‘0002016

R ‘000


65


Statement of financial positionPrepayments 189Receivablesfromexchangetransactions (189)

Effect on the statement of financial position -

Statement of cash flows Increase in prepayments (189)Decreaseinreceivablesfromexchangetransactions 189

Effect on the statement of cash flows -


29. Budget differences

Material differences between budget and actual amounts

30. Comparative figures

Certaincomparativefigureshavebeenreclassified.Theentity’smanagementisoftheopinionthattheprepaidexpensesarematerialandthereforeshouldbeseparatelydisclosedinthecurrentannualfinancialstatements.Theseprepaidexpenseswerepreviouslydisclosedunderreceivablesfromexchangetransactionsinthepreviousfinancialyear.

Theeffectsofthereclassificationareasfollows:

Theentityreceiveddisputeresolutionincomeinthecurrentfinancialyear.However,theentitydidnotbudgetforthisincome,hencethepositivevariance.

The budgeted investment revenue exceeds the actual investment revenue amount. This is due to less cash being invested ascashwasutilisedtocoveroperationalcosts.

TheRegulationsfortheCommunitySchemesLevyincomewereapprovedinOctober2016.Theentityhadnotincludedthelevyincomeinthebudgetforthe2017financialyear,hencethepositivevariance.

Theactualemployeecostincurredwasmorethanthebudgetedamount.Thisisduetosomepermanentpositionsthatwerefilledintheprioryearforregionalandheadoffices.Thisresultedinanegativevariance.

Budgeteddepreciationamountexceededtheactualamount.Thisisduetolessassetsbeingacquiredduringtheyear.

Generalexpensesincreasedduetoregionalofficesbeingestablished.Operationalcoststhereforeincreased.Thisresultedintheactualoperationalexpensesexceedingthebudgetedamount.

29.1

29.2

29.3

29.4

29.5

29.6


66


Trade and other payables 2,642 2,283Operatingleases 770 888

3,412 3,171

Financial instrument 2017 2016Trade receivables - 329Prepayments 112 189Other receivables 452 452

At 31 March 2017 Less than 1 year Between 1 and 2 years

Between 2 and 5 years

Over 5 years

Trade and other payables 2,562 80 - -Operatingleases 770 - - -

At 31 March 2016 Less than 1 year Between 1 and 2 years

Between 2 and 5 years

Over 5 years

Trade and other payables 2,283 - - -Operatingleases 888 - - -

31. Risk management

Financial risk management

Theentity’sactivitiesexposeittoavarietyoffinancialrisks:interestraterisk,creditriskandliquidityrisk.

Liquidity risk

Liquidityriskistheriskthattheorganisationmaynotbeabletomeetitsfinancialobligationsastheyfalldue.Thisriskisregard-edaslowconsideringtheentity’scurrentfundingstructuresandmanagementofavailablecashresources.TheCSOSmonitorsitscashflowrequirementswhichincludeitsabilitytomeetfinancialobligations.TheCSOSalsoanalysesitsfinancialliabilitiesbasedontheremainingperiodtocontractualmaturity.Liabilitiesfalldueafter30days.

Credit risk

Creditriskconsistsmainlyofcashdeposits,cashequivalents,andtradedebtors.Theentityonlydepositscashwithmajorbankswith high quality credit standing and limits exposure to any one counter party. Trade and other receivables comprise of rental deposits and prepayments. Management evaluates credit risk on an ongoing basis.

Financialassetsexposedtocreditriskatyearendwereasfollows:



67


Financial instrument Interest rate Due in less than a year

Due in one to two years

Due in two to three years

Due in three to four years

Dueafterfiveyears

Cash and cash equivalents Variable 16,890 - - - -

Market risk

Interest rate risk

Theentityisexposedtocashflowinterestrateriskarisingfromcashonhandatcommercialbanks,whichearnsinterestatfloat-ingratesbasedondailybankdepositrates.Intheperiodunderreviewtheentityheldnofinanceleasecontracts.

The Community Schemes Ombud services exposure to market risk (in the form of interest rates risk) arises as a result of the following:

a) Possible interest on late payment by the CSOS.b)interestonaccountsheldatbankinginstitutions.

Theentity’sfinancialassetsandfinancialliabilitiesaremanagedinsuchawaythatthefluctuationsinvariableratesdonothavematerialimpactonthesurplus/(deficit)astheCSOSsettlesitsoutstandingobligationwithin30days.

Cash flow interest rate risk

32. Going concern

Theannualfinancialstatementshavebeenpreparedonthebasisofaccountingpoliciesapplicabletoagoingconcern.Thisbasispresumesthatfundswillbeavailabletofinancefutureoperationsandthattherealisationofassetsandsettlementofliabilities,contingentobligationsandcommitmentswilloccurintheordinarycourseofbusiness.

ThegovernmentgrantforthecurrentyearisR30,02million.TheRegulationswereapprovedbytheMinister.CSOSActandSec-tionalTitlesSchemesManagementActwereproclaimedbythePresidenton07October2016.Theentityhascommencedwiththecollectionofleviesinthecurrentfinancialyear.

33. Prior period errors

Inthepreviousfinancialyear,websitecostsandlicenceexpenditurewereerroneouslycapitalised.Theerrorwascorrectedretro-spectively.

Thecorrectionoftheerrorresultsinadjustmentsasfollows:



68


33. Prior period errors

Inthepreviousfinancialyear,websitecostsandlicenceexpenditurewereerroneouslycapitalised.Theerrorwascorrectedretro-spectively.

Thecorrectionoftheerrorresultsinadjustmentsasfollows:


StatementoffinancialpositionDecrease in intangible assets Cost (246)DecreaseinintangibleassetsAccumulatedamortisation 44

Effectonaccumulatedsurplus(deficit) (202)

Statement of Financial Performance Increase in computer expenses 19Increase in licences 227Decreaseinamortisationexpense (44)

Effect on surplus (deficit) 202

Cash flow statementCash flow from operating activitiesIncrease in suppliers 246

Effect on cash flow from operating activities 246

Cash flow from investing activities Decrease in purchase of other intangible assets (246)

Effect on cash flow from investing activities 246

Inthepreviousfinancialyear,commitmentswerenoteaccuratelydisclosed.Theerrorwascorrectedretrospectivelyasfol-lows:CommitmentsWithin 1 yearAuthorised operational expenditureTrainingdisputeresolution 7,335


69


NOTES


70


NOTES


71


NOTES


72


NOTES

Community Schemes Ombud Service (“CSOS”) 63 Wierda Road East Wierda Valley Sandton, Johannesburg2196

Contact Numbers: 010 593 0533Facsimile: 010 590 6154Web address: www.csos.org.zaEmail: [email protected]