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ANNUAL REPORT 2016/2017
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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:
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
STRATEGIC OVERVIEW
VISIONToestablishaworldclassdisputeresolutionservicewithincommunityschemes.
MISSION Tofacilitateandmaintainaworld-classdisputeresolutionserviceandtopromotegoodgovernanceofcommunityschemesbyprovidingeducationandtrainingtoallrelevantstakeholders.
OBJECTIVES
Strategic Objective 1:
Provide a dispute resolutionservicetoCommunity schemes
in South Africa
Strategic Objective 2:
Take custody and control of Community Schemes’ governance
documentation
Strategic Objective 3:
Ensure that CSOS is an efficient,effectiveand
sustainable organisation
Strategic Objective 4:
Promote good governance in
SectionalTitlesandother Community
Schemes
Strategic Objective 5:
Provide stakeholder training, consumer educationandpublic
outreach programmes on Community
Schemes in South Africa
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
CORPORATE GOVERNANCE
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
CORPORATE GOVERNANCE
• 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:
Member Name Total Number of Scheduled Meetings Total Meetings Attended
Mr T Holmes 4 4Mr R Jock 4 4Mr B Dlamini 4 4Ms M Constas 4 3Mrs N Dambuza 4 3
Member Name Total Number of Scheduled Meetings Total Meetings Attended
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
CORPORATE GOVERNANCE
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
Member Name Total Number of Scheduled Meetings Total Meetings Attended
Mrs N Dambuza 8 6Mr R Jock 8 8Ms M Constas 8 4Adv N Memani 8 6Ms T Sunduza 8 1
Member Name Total Number of Scheduled Meetings Total Meetings Attended
Mr B Dlamini 5 3Adv N Memani 5 5Mr R Jock 5 4Mr T Holmes 5 5Mrs N Dambuza 5 2
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
CORPORATE GOVERNANCE
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
Member Name Total Number of Scheduled Meetings Total Meetings Attended
Mr T Holmes 4 1Adv N Memani 4 3Mr B Dlamini 4 3Ms M Constas 4 3
BoardandStaff
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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.
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
NON-FINANCIALPERFORMANCE INFORMATION
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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)
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
PROVINCIAL COVERAGETheGautengProvincialOfficereceived550newapplicationsfordisputeresolutionduringtheperiodunderreview,followedbyWesternCapeProvincialOffice(376)andtheKwa-ZuluNatalProvincialOffice(356).ItisworthnotingthattheGautengprovincialofficewasthefirsttobeestablished,followedbytheWesternCapeandlastlytheKZNoffice.TheGautengProvincialofficealsodealswithmattersfromNorthWestandLimpopo,theKZNofficealsoattendstomattersintheFreeStateandMpumalangawhilsttheWesternCapeofficedealwithmattersfromalltheCapes.
Figure 2
PERFORMANCE INFORMATION
Western Cape
KZN
Gauteng
Not Specified
376
356
550
0
No of applications per Province
prov
ince
PROVINCIAL COVERAGE
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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 (complaints@csos.org.za),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:
PERFORMANCE INFORMATION
1110 E-mails
172 Walk-ins and other
Mode of Contact
Via email Walk Ins and other
Duringtheperiodunderreview,atotalof285applicationsfordisputeresolutionwereresolvedthroughConciliations.Thesein-cludeapplicationsfordisputeresolutionthatwerereceivedinthepreviousyear.Mosttheapplicationsfinalisedduringthefinan-cialyearwerefinalisedatConciliationstage.Therewasonly1AdjudicationOrderissued.
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
23
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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.
PERFORMANCE INFORMATION
0200400600800
Female Male Not Specified
515664
103
NO O
F APP
LICA
TION
S
GENDER
Gender Profile
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
24
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Key Performance Indicators
Baseline (Actual)2015/16
Target2016/17
Actual2016/17
Variance Comment on variance
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.
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
25
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
Performance Information for the 2016-2017 Financial Year
Strategic Objective 3: Ensure that CSOS is an efficient effective and sustainable organisation
Key Performance Indicators
Baseline (Actual)2015/16
Target2016/17
Actual2016/17
Variance Comment on variance
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
Key Performance Indicators
Baseline (Actual)2015/16
Target2016/17
Actual2016/17
Variance Comment on variance
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.
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
26
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
Strategic Objective 5: Provide stakeholder training consumer education and public outreach programmes on Community Schemes in South Africa
Key Performance Indicators
Baseline (Actual)2015/16
Target2016/17
Actual2016/17
Variance Comment on variance
Number of Con-sumer Awareness campaigns
New indicator 2 consumer aware-ness campaigns
Target achieved None None
Performance Information for the 2016-2017 Financial Year
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
27
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
FINANCIAL PERFORMANCE
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
28
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
30
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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)
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
33
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
34
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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.
Report of the auditor-general to Parliament on the Community Schemes Ombud Services
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
35
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
Report of the auditor-general to Parliament on the Community Schemes Ombud Services
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.
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
36
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
37
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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.
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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)
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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)
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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.
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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.
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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.
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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-
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Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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.
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
52
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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.
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
53
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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.
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
54
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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.
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
55
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
Notes to the Annual Financial Statements (Continued)
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
56
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
Notes to the Annual Financial Statements (Continued)
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
57
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
Notes to the Annual Financial Statements (Continued)
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
58
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
Notes to the Annual Financial Statements (Continued)
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
59
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
Notes to the Annual Financial Statements (Continued)
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)
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
60
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
Notes to the Annual Financial Statements (Continued)
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
61
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
Notes to the Annual Financial Statements (Continued)
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
62
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
Notes to the Annual Financial Statements (Continued)
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
63
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
Notes to the Annual Financial Statements (Continued)
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
64
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
65
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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 -
Notes to the Annual Financial Statements (Continued)
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
66
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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:
Notes to the Annual Financial Statements (Continued)
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
67
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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:
Notes to the Annual Financial Statements (Continued)
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
68
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
33. Prior period errors
Inthepreviousfinancialyear,websitecostsandlicenceexpenditurewereerroneouslycapitalised.Theerrorwascorrectedretro-spectively.
Thecorrectionoftheerrorresultsinadjustmentsasfollows:
Notes to the Annual Financial Statements (Continued)
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
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
69
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
NOTES
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
70
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
NOTES
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
71
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
NOTES
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
72
Community Schemes Ombud ServicesAnnual Financial Statements for the year ended 31 March 2017
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: info@csos.org.za
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