1. ESTATE AGENCY AFFAIRS BOARD
Portfolio Committee
Human Settlements
20 February 2019
ESTATE AGENCY AFFAIRS BOARD
ANNUAL REPORT 2017/2018
PRESENTATION

2. PRESENTATION STRUCTURE
OPENING REMARKS HIGHLIGHTS AND OVERVIEW
OPERATIONAL AND PERFORMANCE REVIEW
FINANCIAL PERFORMANCE
AUDITORS OPINION
The EAAB & its Controlled Entity – Consolidated Annual Financial Statements
Estate Agents Fidelity Fund – Annual Financial Statement
5. CLOSING REMARKS

3. OPENING Remarks INTRODUCTION OF BOARD ATTEENDEES
INTRODUCTION OF BOARD EXECUTIVE ATTENDEES
BOARD’S ACCOUNTING RESPONSIBILITY, INTENT AND THE 2017/18 AFS
PREVIOUS INTERACTIONS WITH THE PPC
31 October Parliament
29 January EAAB Offices (Jhb)
Top priorities then:
– Financial turnaround of R56 million deficit of 2016/17
– Stabilize entity
– Re-engineer and proritize transformation

4. HIGHLIGHTS & Overview FINANCIAL TURNAROUND Positives Challenges
– Significant progress towards financial turnaround in 2017/18
– Group achieved a R 69 million turnaround.
– Deficit of (R56 million) was eradicated.
– Surplus of R 13 million.
– Accounting changes which will improve proficiency in revenue recognition the benefits of which should further come through in 2018/2019.
Challenges
– Regression due to archaic performance indicators.
– Next focus are is on the improvement the revenue recognition and “smartening” of performance indicators in line with new auditing requirements.

5. HIGHLIGHTS & Overview 2. STABILIZE ENTITY ACTION TARGET DATE STATUS
Appointment of Independent ARC Members
Ms. Sedzani Mudau (Chair)
Mr. Roy Mnisi
Mr. Stanley Ngobeni
January 2018
Completed
Appointment of Internal Auditors
Nexia- SAB&T
March 2018
Appointment of External Auditors
Auditor-General South Africa
December 2018
Appointment of Chief
Executive Officer
Ms. Mamodupi Mohlala - Mulaudzi
January 2019
Appointment of Senior Executives
Chief Financial Officer
Chief Information Officer
Re-appointment Company Secretary
Executive Head Transformation
By June 2019
Underway
Overhaul of IT System
External Service Provider
April

6. HIGHLIGHTS & Overview 2 RE-ENGINEER AND PRIORITIZE TRANSFORMATION.
ACTION
TARGET AREA
BENEFICIARIES
STATUS
Internal Transformation
Employment Equity
Target HDI Human Capital
Ongoing
SCM (Preferential Procurement)
Target Empowered Service Provider
External Transformation
One Learner One Estate Agency Youth Brigade
Leaners and Interns
Rehabilitation & Regularization Program
Participating Non- Compliant Practitioners (Agents and Agencies) with an emphasis on BEE.
Board
Principalization & Incubation Program
Incubates and assist with business flow in conjunction with partners in government.

7. OPERATIONAL AND
PERFORMANCE OVERVIEW

8. ANNUAL PERFORMANCE REPORT
PROGRAMME
No. of KEY PERFORMANCE INDICATORS
No. of KEY PERFORMANCE INDICATORS ACHIEVED
No. KEY PERFORMANCE INDICATORS
UNDER ACHIEVED
Compliance 5 2 3
Education and Training 7 6 1
Fidelity Fund
Corporate Services
Consumer Education and Transformation 13 8
TOTAL 34 15 19

9. REGISTRATION OF ESTATE AGENTS

10. REGISTRATIONS DEPARTMENTS
The EAAB is responsible for the registration of Estate Agents and Agencies;
The EAAB is also responsible to amendments and renewals of agents profiles;
Applications now take place on line as from 01 July 2016;
Applicants on MYEAAB AGENTS PORTAL apply through a three-step process and, on payment of fees and meeting all compliance requirements, are issued with a Fidelity Fund Certificate (uploaded and printed)

17. Fidelity Fund Certificates issued per GENDER
Intern Registrations and Renewals
Fidelity Fund Certificates issued per GENDER
The numbers relating to the FFCs issued to intern estate agents for the 2017/2018 financial year are particularised in comparison to the numbers in the prior year.
31 March 2018
31 March 2017
African - Females
2 038
1 959
African - Males
1 872
1 672
Coloured - Females
771
674
Coloured - Males
479
411
Indian - Females
726
691
Indian - Males
485
395
White - Females
9 263
8 923
White - Males
6 443
5 276
TOTAL
22 077
20 001

18. Fidelity Fund Certificates issued to Intern estate agents per RACE
31 March 2018
31 March 2017
African
3 855
3 614
Coloured
1 240
1 107
Indian
1 199
1 111
White
15 783
14 169
TOTAL
22 077
20 001

20. EDUCATION AND TRAINING

21. EDUCATION AND TRAINING
This division is tasked with professionalization and transformation of estate agency sector.
The programs that they undertake are the following:
Education and training interventions for agents;
Professional body of the sector – SAQA accredited;
Conduct Professional Development Education (PDE) for qualifying agents;
Conduct Continuing Professional Development (CPD);

22. Education and Training
Assess applications for exemptions;
Establishment of knowledge center and research unit

30. INVESTIGATION OF COMPLIANTESTATE AGENTS
LEGAL COMPLIANCE
INVESTIGATION OF COMPLIANTESTATE AGENTS

31. Complaints
The EAAB PRIMARY MANDATE IS TO MAINTAIN AND PROMOTE THE STANDARD OF CONDUCT OF ESTATE AGENTS IN THE INTERESTS OF THE PUBLIC;
IN PURSUIT OF THIS MANDATE DEAL WITH COMPLIANTS FROM THE PUBLIC ABOUT MISCONDUCT.
THE EAAB’S SECONDARY MANDATE IS TO ENSURE COMPLIANCE WITH THE FINANCIAL INTELLGENCE CENTER ACT

36. AUDIT COMPLIANCE

37. Audit compliance
Estate agents are compelled by law to submit audit reports annually.
They are to be submitted four months after year end;
These are to be audited financial statements of the estate agents trust account;
The interest from the trust account is paid into the Fidelity Fund.

42. CLAIMS

43. Claims
The EAAB is statutorily obliged to protect the interests of the public from theft of trust money by Estate Agents;
Members of the public that fall victim to theft of trust money by estate agents may lodge a claim with the EAAB;
The EAAB will investigate each claim brought and make a determination through the claims committee (sub – committee of the Board) who make a recommendation to the Board, as to whether or not to pay out the claim from the Fidelity Fund

44. Claims Processed F/YR 2017/18 - Rand Value
Claims Statistics (Rand)
31 Mar 2018
31 Mar 2017
31-Mar-16
31-Mar-15
31-Mar-14
Value of claims lodged
25 
24 
20 
5 947 783
Value of claims approved 7  7 
3 516 964
Value of claims rejected 4 
2 151 043
Value of claims pending
36 
23 
13 
870 728 2 

45. New claims received
The increase in claims, particularly from the ranks of illegal agents, is directly due to the loss of section 32A powers of inspection previously held by the Board and this will not be remedied until the new Property Practitioners’ Bill is passed into law and these powers are restored.
STATISTICS OF NEW CLAIMS AGAINST THE FUND
2018
2017
2016
2015
2014
Number of claims received
125
169
282 53 60

47. Section 27 Applications
The Estate Agency Affairs Act under section 27 specifies instances which an agent is disqualified from having a Fidelity Fund Certificate;
However the Board has a discretion to issue a fidelity fund certificate to an estate agent subject to certain stipulated conditions, it deems necessary in the interests of Justice.
Therefore estate agents requiring a discretionary issuance of a fidelity fund certificate make applications in terms of section 27 of the Act.

50. FINANCIAL
PERFORMANCE OVERVIEW

53. Statement of Financial Position
There was an increase in the Total Assets during the 2017/18 financial year mainly due to the 5% increase in Investments of the Fidelity Fund compared to the prior year.
The Net Assets increased during the current year as a result of profit realised in both the EAAB and EAFF.

54. Estate Agency Affairs Board Annual Financial Statements

55. Statement of Financial Performance
A surplus of R13.5 million was realised as a result of the reduction in operating expenses and employee related costs.

56. Auditor Tenure
In terms of the IRBA rule published in Government Gazette Number dated 4 December 2015, we report that Ngubane & Co (JHB) Inc. has been the auditor for the Estate Agency Affairs Board of South Africa and its controlled entity for five years.

57. Audit Opinion
In the 2017/2018 financial year the EAAB received a qualified audit opinion from its auditors Ngubane and company :
The reasons for the qualified opinion are as follows:
Revenue – FFC revenue and late payment interest;
Revenue – CPD revenue;
Trade and other payables – unallocated funds;
Commitments and lease comparable amount;
Employee costs;
Receivables from exchange transactions.
The was also a finding of emphasis of matter with respect to the following :
Conversion of employee from defined benefit category to defined contribution;
Acting positions of senior officials;
Resignation of risk and audit committee members;
Responsibility of accounting authority for financial statements;

58. Audit Opinion (Qualification)
Audit Finding
Remedial Steps taken to correct/ Turn Around
Revenue – FFC revenue and Late Payment interest
No longer overriding - November 2018;
Invoicing upfront ;
Audit of issued FFC’s before year end.
Revenue – CPD Revenue
No longer on cash basis and now invoicing on accrual;
Policy on invoicing periods and timelines within the three year training cycle
Trade and other payables – unallocated funds (suspense account);
Have engaged with the Bank to provide full details of the depositors n order to allocate amounts into debtors accounts
Commitments and lease comparable amount;
Contract register created on EXCEL
To keep proper records of commitments either on EXCEL or obtain SAAP contract management software
Employee costs;
Reconciliation of all salaries accounts to the NOVA reports.
A temp was hired to undertake the exercise last years
Receivables from exchange transactions.
The Financials will be prepared according GRAP;
With assistance of skilled employees and external service provider who is qualified, financials will be done according GRAP by the Service provider.

59. Audit Report (Matter of Emphasis)
Audit Finding
Remedial Steps taken to correct/ Turn Around
Conversion of employee from defined benefit category to defined contribution;
Alexandra Forbes has made a determination as to the extent of liability by year end;
An actuarial valuation of the liability is to obtained before year end;
There will be a full disclosure in the financials.
Acting positions of senior officials;
There is a strategy in place to fill all senior positions by June 2019;
Advertisement for the CFO and company secretary positon to be published on 24 February 2019 in the mainstream media;
All acting appointments are now restricted to three months only and on renewal informed that it should not create an expectation.

60. Audit Finding
Remedial Steps taken to correct/ Turn Around
Resignation of risk and audit committee members;
This has been resolved as there are three external members of the Audit Committee.
Responsibility of accounting authority for financial statements;
The external financial consultant has been appointed and they have the competency to produce financial statements according to Generally Recognized Accounting Practices

61. Audit Report (Program 1) Compliance
Audit Finding
Remedial Steps taken to correct/ Turn Around
Compliance Percentage of certificates issued (FFC) to new registered and compliant estate agents within 21 days
This will be addressed by the introduction of a new Information Communications Technology system - ERP tender – in the course of being evaluated and to be awarded .
Expedite process for issuing FFC’s;
Address number sequencing.
Percentage renewal certificates (FFC)issued to current registered and compliant estate agencies issued within 5 days

62. Audit Report (Program 2) Education and Training
Audit Finding
Remedial Steps taken to correct/ Turn Around
Percentage of NQF level 4 & 5 candidates wrote the
PDE and received results
Proper records of examine candidates;
Electronic records of all exam candidates and direct verification of exam candidates identity.
Number of estate agents exempted from professional qualification
Audit of all records to ensure against duplications and exclusions on records of exempt agents.
Number of registered intern estate agents who have
submitted internal logbooks
Log books are submitted physically and electronically;
Physical log books have been sorted and catalogued.
Records of assessed log books a physically verifiable
Number of CPD participants who have met the requirements
The technical indicator has been amended to properly measure details of CPD partcipants.

63. Audit Report (Program 3) Fidelity Fund
Audit Finding
Remedial Steps taken to correct/ Turn Around
Percentage increase in interest from estate agency trust
accounts collected within 30 days of due dates
The technical indicator description has been amended to indicate adequately the target and to confirm calculation of the achievement.

64. Audit Report (Program 5) Contribution to the MTSF
Audit Funding
Remedial Steps taken to correct/ Turn Around
Number of consumers reached through radio – national
The technical indicator description has been amended to indicate adequately the target and to confirm calculation of the achievement.
Number of consumers reached through radio – community
Print media – Awareness
Records of readership numbers and distribution channels of all print media that is used for awareness, are maintained and will be available.

65. Audit Report (Program 5) Contribution to the MTSF
Audit Finding
Remedial Steps taken to correct/ Turn Around
Number of interns placed with Principal Estate Agents
The technical indicator description has been amended to indicate adequately the target and to confirm calculation of the achievement.
Number of Bill Boards Set Up
Numbers committed to for the set up of billboards will be met prior to the financial year end.

66. Audit Report –Other Matters
Audit Finding
Remedial Steps taken to correct/ Turn Around
Achievement of planned targets
We are ensuring that the information to be provided n the next audit is reliable.
The intention is to ensure that in the next audit all information is correct and reliable.
Adjustment of material misstatements

67. Audit Report – Report on the Audit Compliance with Legislation
Audit Finding
Remedial Steps taken to correct/ Turn Around
Revenue Management
Improve efficiency of revenue collection systems;
Improved ICT systems to improve revenue collection;
Improved capacitation from a human resource perspective Finance, Registry and education and training.
Procurement
Formulation of procurement strategy;
Add supply chain and contract management competency in SAP package.

68. Audit Report- Annual Financial Statements, Performance Report and Annual Report
Audit Finding
Remedial Steps taken to correct/ Turn Around
Financial Statements
Not supported by full and proper records;
Not prepared in terms of section 55 of the PFMA;
Not submitted within the five months of the financial year end
The Financials will be prepared according GRAP;
With assistance of skilled employees and external service provider who is qualified, financials will be done according GRAP by the Service provider.
Internal audit
An internal auditor has been appointed and is in place
Audit Committee terms of reference
The Audit Committee terms of Reference have been reviewed, approved and signed.
Expenditure
Additional capacity has been procured in order to ensure timeous processing and therefore facilitate payment of creditors within 30 days.

69. Audit Report- Annual Financial Statements, Performance Report and Annual Report
Audit Finding
Remedial Steps taken to correct/ Turn Around
Leadership
The CEO and other executives will be personally involved in ensuring financial compliance and internal controls
Investigations (forensic)
The CEO on the instruction of the Social and Ethics Committee of the Board, is in the process of identifying a Human Resource consultant to implement the recommendations of the Grant Thornton Forensic Report.

70. Estate Agency Fidelity Fund Annual Financial Statements

71. REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Qualified Opinion
We have audited the financial statements of the Estate Agents Fidelity Fund of South Africa (EAFF) set out on pages 152 to 171, which comprise the statement of financial position as at 31 March 2018, statement of financial performance, statement of changes in net assets and statement of cash flows and statement of comparison of budget information with actual information for the year then ended, as well as the notes to the financial statements, including a summary of significant accounting policies and other explanatory information.
In our opinion, except for the possible effects of the matters described in the basis for qualified opinion section of our report, the financial statements present fairly, in all material respects, the financial position of the Estate Agents Fidelity Fund of South Africa as at 31 March 2018, and the financial performance and cash flows for the year then ended in accordance with Generally Recognized Accounting Practices and the requirements of the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999) {PFMA).

72. EAAB TURN AROUND STRATEGY
INTERVENTIONS IMMEDIATELY

73. Finance-Overall Intervention/Turn Around
Over All Interventions to Turn Around Finance Department
Importantly move from a deficit to a surplus;
Appointment of external qualified Financial Consultant;
Proper alignment of staff functions with what they are qualified to do in finance;
Employment of additional capacity to address allocations in the suspense account, debtors accounts with credit balances and FFC renewals ;
Direct on going close monitoring and supervision of activity compliance in the finance department.

74. Finance-Overall Intervention/Turn Around (contin..)
FINANCE – CONTROLS AND GOVERNANCE
CAPACITATION – HUMAN RESOURCE
JOB DESCRPTIONS
SECGREGATION OF DUTIES
DAILY POSTINGS
REVENUE
CLEAR SUSPENSE ACCOUNT
CLEAR DEBTORS WITH CREDIT BALANCES
CLEAR THE ACCOUNT BETWEEN FIDELITY FUND AND ACCOUNT OF THE BOARD
CHANGE OF CULTURE OF DEFEATIST APPROACH

75. Human Resources-Overall Intervention/Turn Around
HUMAN RESOURCES – IMPLEMENTED PRIOR TO YEAR END
PERFORMANCE MANAGEMENT SYSTEM REVIEW
REVIEW AND WORKSHOP OF ALL POLICES
IDENTIFY KEY VACANCIES
EXECUTIVE MANAGEMENT
CHIEF FINANCIAL OFFICER – ADVERTISED - CLOSING FOURTEEN DAYS
CHIEF INFORMATION OFFICER – MOOTED FOR NEW STRUCTURE
EXECUTIVE EDUCATION AND TRAINING - RETIRNG
EXECUTIVE CORPORATE AFFAIRS
MANAGER HUMAN RESOURCES
COMPANY SECRETARTY
T0 BE FILLED BY MAY 2019
IMPROVE STAFF MORAL AND CREATE A UNITED TEAM

76. Transformation-Overall Intervention/Turn Around
ROAD SHOWS – TWO PHASES COUNTRYWIDE
RING FENCED FUND FROM THE FIDELITY FUND
BUSINESS PLAN
INCUBATION
SYNERGY WITH OTHER ENTITES IN HUMAN SETTLEMENTS - INCORPORATED INTO MAJOR PROJECTS
EQUITY
JOB CREATION - INCREASED NUMBER OF AGENTS
ENTERPRISE DEVELOPMENT

77. Fidelity Fund Certificates -Overall Intervention/Turn Around
IMPROVED INDUSTRY CONFIDENCE- BUSINESS SYSTEMS
FEDELITY FUND CERTIFICATES
CLEAR BACKLOG OF NEW APPLICATIONS
CLEAR BACKLOG OF RENEWALS
CLEAR BACKLOG OF AMENDEMENTS
ADHERE TO TURN AROUND TIME OF FIVE DAYS FOR RENEWALS
ADHERE TO TURN AROUND TIME OF TWENTY FIVE DAYS FOR NEW APPLICATIONS
ADHERE TO TURN AROUND TIME OF TWENTY FIVE DAYS FOR AMENDMENTS

78. THANK YOU