1. Portfolio Committee on Human Settlements
Annual Report 2015/16
Portfolio Committee on Human Settlements
25 October 2016

2. Presentation contents
1. Opening Remarks, Highlights and Overview : Rev. Dr. V. Mehana (Board Chair)
2. Divisional Highlights : Mr. Themba Mthethwa (Chief Ombud)
2.1 Adjudication and Governance
2.2 Corporate Services
2.3 Company Secretariat
2.4 Internal Audit
Risk Management
Performance Information
2.6 Chief Financial Officer : Mr. Themba Mabuya (CFO)
3. Future Operational Outlook : Mr. Themba Mthethwa (Chief Ombud)
4. Closing Remarks : Rev. Dr. V. Mehana (Board Chair) 02

3. 1. Opening Remarks, Highlights and Overview
Rev. Dr. V. Mehana
Board Chairperson 03

4. Highlights for the year
CSOS Operationalisation Plan: CSOS and STSMS Regulations and Acts:
National Assembly adopted the CSOS Regulations on the 25th May 2015
The minister signs off the draft Regulations, permitting for publication thereof
Draft regulations published in Government Gazette and public consultation drive conducted in all nine (9) provinces
Task team responds to submissions from public consultation process
CSOS Board approves some amendments to the Regulations, In particular, the levy model is revised in line with the written submissions received
The Minister approves the tabling of Regulations before Parliament to take place on 19 April 2016
Dispute Resolution model amended and approved by the Board
Key operating policies, processes and procedures developed and approved by the Board
CSOS legislative mandate explored, elaborated and concretised
Unqualified Audit opinion on Annual Report 04

5. A year of Design, Planning and Operationalising – A complex environment
CSOS mandate new and unprecedented in SA- no operational baselines to work with
New Service – potential demand could hopelessly overwhelm planned capacity - Budget issue for staffing and client facilities arises
Mandate overlaps with other departments Department of Rural Development and Land Reform has custody of the governance documentation for example – inter-departmental MoU drafted and pending signatures of Ministers
CSOS mandated to be self-funding, means there will be levies to the community schemes – Sustainability and cross-subsidisation (poor subsidising the rich)
No database of community schemes and their valuation in SA. Database needs to be created from scratch – Planning issue and IT systems issue
A new CSOS Board was appointed with effect from 1st January 2016 05

6. 2. Operational Highlights:
Mr. T. Mthethwa
Chief Ombud 06

7. Annual Report Format: based on the CSOS Divisional structure – All page numbers refer to CSOS Annual Report 2015/16
Adjudication and Governance (pp. 27 – 31)
Adjudication (end-to-end Dispute Resolution processes)
Includes Regional Ombuds’ offices
Corporate Legal Services (incl. contracts drafting)
Research (knowledge development)
Corporate Services (pp. 31 – 33)
Facilities Management
Information Technology
Marketing and Communications (incl. Stakeholder Relations)
Human Capital Management (pp.44 – 47)
Chief Financial Officer (pp.58 – 89)
Company Secretariat (pp )
Internal Audit (pp. 51 – 52)
Chief Ombud’s office
Risk Management (p. 22)
Strategic Planning and Reporting (pp.4 – 6)
Performance Information (pp. 35 – 40) 07

8. 2.1 Adjudication and Governance (p. 27 – 31)
The dispute resolution model was finalized and used for new applications
The CSOS started with is dispute resolution processes but was not able to adjudicate yet pending the proclamation of the CSOS and STSM Acts.
The developed and approved dispute resolution model was used to settle cases at the conciliation stage.
Intensive work was done on developing the CSOS funding model, which was subsequently approved during the current financial year.
A larger number of applications for dispute where received by the CSOS in comparison to the previous year, even though the Service is not formally open. Dispute resolution activity at Conciliation level was conducted (see performance stats on pages 27 – 29)
Regulations were published in the Government Gazette on 02 October 2015 followed by a nationwide public consultation process.
In March 2016, the minister approved the tabling of the Regulations before parliament. 08

9. 2.2 Corporate Services (p.31 – 33)
Facilities Management
Three regional offices were secured, and staffed (GP, KZN and WC)
Refurbishment and fittings were organised and installed as appropriate
IT Management
The key ERP modules were implemented and went live (Finance, SCM, Payroll and HR)
The scoping of the other modules, which includes, CRM, Case Management and Records Management modules progressed
Marketing and Communications
A number of media touchpoints and industry stakeholders were engaged during the period (see page 32), resulting in raised awareness of the CSOS, and triggering an interest in the Service
A huge public consultation process regarding the regulations was also conducted
Human Capital Management
Recruitment to fill the approved positions continued in the year resulting in 40 employees recruited by the end of the year of the 66 approved positions for the same year (only 3 terminations in the year)
There was a focus on training and development of the employees in the year (see page 46)
There was also an increased 63% female representation in the staff makeup at year end
Subsequent recruitment of the approved organogram has been slowed down and re-prioritised during the current financial year due to budget constraints 09

10. 2.3 Company Secretariat (p.14 – 21)
In addition to 2 Executive Directors, the Board was constituted of 7 Non Executive Directors, incl. the Chairperson
A new board was appointed by the minister and assumed duties January 2016 with the outgoing board’s term ending in 31 December 2015
The Board operated through 4 sub-committees during the year as shown in the report (p )
The Board met 6 times during the year (incl. special meetings), and there were 22 sub-committees meetings
Board attendance and sub-committee attendance was sufficient to form a quorum in all meetings
One member resigned from the board in the outgoing board and was not replaced pending the appointment of a new board. 10

11. 2.4 Internal Audit (p.51 – 52)
Audit, Risk and Finance Committee (ARCO) exercised oversight over all audit matters
ARCO operated as a full sub-committee with a Charter, reporting to the Board
ARCO was generally satisfied with the quality of performance information and quarterly financial statements reporting, but noted room for improvement, which is being attended to
ARCO reviewed and subsequently approved the 2015/16 annual financial statements (AFS) for submission to the Auditor General. ARCO also approved the audited AFS
The committee was also satisfied by the duties executed by the Internal Audit function but noted that the need for improvement to the capacity of this function in future 11

12. 2.5.1 Chief Ombud’s Office – Risk Management (p.22)
Approved Risk Management Framework was being implemented
Strategic risk profile developed and confirmed by management
CSOS is still operating in a high risk environment as its still a young organisation
Internal Audit established in April 2015
Fraud prevention strategy was developed . No fraud cases were identified
Compliance Framework and Compliance Universe approved by the Board paving the way for the implementation of the Compliance Management
Audit and Risk Committee exercised keen oversight over the entity Risk areas identified in the APP during the year
Risk management initiatives are being implemented throughout the CSOS during the current financial year 12

13. 2.5.2 Chief Ombud’s Office – Performance Information (p.35 - 40)
SO 1: RESOLVED COMMUNITY SCHEMES DISPUTES
Number of Targets 4
Targets achieved
1 (25%)
Targets not achieved 3
Reason for non- achievement of targets
Budget Constraints & Time lags due to process issues
Mitigation Required
Targets have subsequently been achieved during 2016/17
SO 2: TAKE CUSTODY AND CONTROL OF COMMUNITY SCHEMES GOVERNANCE DOCUMENTATION
Number of Targets 4
Targets achieved
2 (50%)
Targets not achieved 2
Reason for non- achievement of targets
Time lags due to process issues
Mitigation Required
1 targets subsequently achieved in 2015/16. One still outstanding due to process issues with the Deeds Registry, but on track for delivery during this year
SO 3: ENSURE THAT CSOS IS MANAGED IN AND EFFICIENT AND EFFECTIVE MANNER
Number of Targets 21
Targets achieved
16 (76%)
Targets not achieved 5
Reason for non- achievement of targets
Time lags due to process issues
Mitigation Required
1 targets subsequently achieved in 2015/16, 4 cannot be implemented because of budget constraints 13

14. 2.5.2 Performance Information…Continued (p.40)
SO 4: MANAGE THE SECTIONAL TITLE MANAGEMETN SCHEMES ACT
Number of Targets 3
Targets achieved
0 (0%)
Targets not achieved
Reason for non- achievement of targets
Time lags due to process issues policies still under development
Mitigation Required
Targets have subsequently been achieved during 2016/17
Overall Achievement is 59% 13

15. 2.6 Chief Financial Officer14

16. Annual Financial Statements
2.6.1 Statement of Financial Position (Balance Sheet) – (p.58)
Cash and Cash equivalents (Current Assets) at year end R10.3 million, matched by accumulated surplus (Liabilities) of R4,2 million
Other smaller items of note are the PPE (Assets) amount of R9.3 million, being the assets acquired to set up the offices. These are matched the amounts owed to suppliers, at yearend amounting to R???
There were no other major assets or debts accumulated, hence the majority of assets remained in Cash and Cash equivalents at year end 15

17. Annual Financial Statements (continued)
2.6.2 Statement of Financial Performance (Income Statement) – (p.59)
This statement again shows the source of the CSOS funding as almost exclusively the Government Grant of R39.5 million
A small amount of interest was earned on Cash Balances in the bank during the year (R1.1 million)
Some Ups and Downs on Working Capital items netted an outflow of R937,000
Most of the money was used to recruit and pay staff, followed by the payment of other operational Goods and Services
There was an amount of R17, 3 million that was uncommitted in the prior year, and had to be returned to National Treasury. That transfer back to National Treasury was done during the year
The acquisition of office furniture, equipment, and to refurbish and fit the office spaces procured during the year cost R1,832,000 in cash payments
The cost of IT software licenses and IT modules amounted R197,000 in cash at year end
All in all, there was a Cash and Cash Equivalents of Million at year end 16

18. Annual Financial Statements (continued)
2.6.3 Statement of Cash Flows – (p.61)
The CSOS was funded exclusively by a Government Grant of R39.5 million during this year
This money was used to continue the recruitment of staff (R29.8 Million), and to defray other operational expenses (R19.2 million)
A small amount of interest was earned on Cash Balances in the bank during the year (R1.1 million)
A large portion of the money was also used to setup the 3 regional office together with services relating to that setup
There was an amount of R30,2 million that was reported as a surplus at year end 17

19. Annual Financial Statements (continued)
2.6.4 Statement of Changes in Net Assets – (p. 60)
This statement shows that the only item of movement in reserves was the uncommitted surplus funds of R16, 9 million and R30,2 million in 2013/14 and 2014/15 respectively
The uncommitted surplus in 2013/14 was transferred back to National Treasury during the year as shown
2.6.5 Statement of comparison of Budget and Actual Costs – (p. 62)
This statement shows that the Government Grant of R39.5 million was budgeted and received, indicating good alignment between the entity and Department
It also shows that all that was budgeted for was well spent including the money carried over as a surplus from the previous financial year which was utilised in the implementation of projects (????)
It does however also show that the CSOS was expecting the collections of the CSOS levy to have commenced which did not materialize leading to some budget constraints in the year. 18

20. 3. Future Operational Outlook
Mr. Themba Mthethwa
Chief Ombud 19

21. Future Operational Outlook and MTSF contribution
2014/15 was a year of Design, Planning, and Capacity building
Head Office and 2 Regional Offices established, 3rd Regional Office achieved after year end
Initial staff recruited
Budget constraints became a reality due to delays in Regulations and thus Income generation
2015/16
Capacity building continues, and operational set up ongoing
Low level operations commenced (Conciliation only)
Income generation still not going to be realised, budgetary constraints are still a reality
Legislative groundwork continuing regarding the approval of Acts and Regulations
2016/17
Income generation to commence by the 2nd half
Increased operational experience will be accumulated
Further expansion into other Regions where need is determined
Commencement of Education and Training rollouts
Commencement of adjudication services in addition to already operational conciliation service
2017 – 2019
Expansion of the operations into more Regions and Provinces, based on demand
Increasing income generation capabilities allow for improved scale and profile of the CSOS
Extensive Education and Training programmes in Community Schemes, and in the public domain
MTSF OUTCOME 8: Sustainable Human Settlements and Improved Quality of Household Life
The CSOS education campaigns and Dispute Resolution service will radically reduce the negative perceptions of communal living, and will promote Community Schemes as a viable tenure option in South Africa 20

22. 4. Closing Remarks Rev. Dr. V. Mehana
Board Chairperson 21

23. Thank you