DHS must help CSOS and EAAB ‘finish and klaar’

Oct 11, 2018 | Features

DHS Deputy Minister Zou Kota-Fredericks responding on the CSOS report during the briefing session. On her left is COO Sindisiwe Nxongo and CO: Entities oversignt, Tsepiso Moroi. Listening in the back is acting CFO Nathi Dube and acting head ombud Ndivhuo Rabuli.

“What it tells us is that there is a breakdown of management at CSOS”

The Community Scheme Ombud Service (CSOS) has been placed under the administration of their government department, the Department of Human Settlements (DHS) and the same should happen with the Estate Agency Affairs Board (EAAB) says the DHS parliamentary Portfolio Committee.

The portfolio committee chairperson Nocawe Mafu and the committee’s assigned MP’s expressed grave concerns about the CSOS and EAAB – two government-instituted regulating bodies that answer to the DHS. Both were supposed to present their annual and financial year-end reports for 2017/18 to the portfolio committee during a public briefing session for all DHS entities on Wednesday 10 October at the City Lodge Hotel in Cape Town. The CSOS showed up, but the EAAB wasn’t there.

During the morning session CSOS’s acting chief financial officer (CFO) Nathi Dube shocked MP’s by revealing that additional internal investigations are ongoing with relation to financial management issues at the entity. This is besides the external investigation, also relating to financial matters, ordered less than two weeks ago by national DHS minister Nomaindia Mfeketo.

Mfeketo had given Grant Thornton Forensic Investigators 8 weeks beginning 1 October to investigate allegations of financial misconduct and corruption at CSOS. This followed the suspension of the previous chief ombud Advocate Seeng Letele and the previous CFO Themba Mabuya in August by the CSOS Board pending an investigation into allegations of gross negligence, dishonesty and dereliction of duty relating to an R80 million investment on behalf of CSOS in scandal-hit VBS Mutual Bank (under curatorship since March 2018).

This week a report was released revealing wide-scale looting at VBS Mutual Bank. Read more here

The CSOS is a relatively new entity. They came into operation in 2016 as the regulating authority for all community schemes, including all sectional title developments, to ensure among others their good governance. CSOS funding comes among others from levies charged to these housing developments.

Acting head ombud Ndivhuo Rabuli said CSOS exceeded their set target for fees collected from levy income for 2017/18 by more than R80 million despite a drastic decline in the number of sectional title schemes registered with CSOS (only 27.7% or 20 969 of the 76 677 schemes registered with the Deeds Office). She mentioned that after meeting with among others the National Association of Managing Agents (NAMA) they noticed that registrations picked up.

Mafu said the committee is shocked to learn that there are now three investigations ongoing.

“What it tells us is that there is a breakdown of management at CSOS,” she said. However, she added she thought it unfair to expect Rabuli and Dube to answer all the questions of the committee. “They are not the people responsible. They are acting,” Mafu said. She said DHS should accept full responsibility as CSOS is their entity, adding they are giving the department 6 weeks to return with a turnaround strategy and 6 months to report back on progress made in this regard.

DHS Deputy Minister Zou Kota-Fredericks said she sees the reasons why the committee is saying that CSOS must be under administration and that she agrees with the recommendation.

After lunch committee members were dismayed to learn that the other regulating body, the EAAB, wasn’t present. Mafu read a letter from DHS Minister Mfeketo addressed to the Speaker of Parliament stating that the EAAB’s annual report had not been signed off by auditors owing to late submission. In short that left the committee without an annual performance report by the EAAB. DHS COO Sindisiwe Nxongo then explained that the EAAB had failed to meet the deadline to table their 2017/18 year-end report to parliament at the end of September and it would therefore “not be proper to present the report today” she said.

Not impressed MP Mbulelo Bara said the EAAB should be put under administration “finish and klaar”. His request was echoed by MP Matthews Wolmarans who said they had heard the property industry’s complaints about the EAAB during the committee’s road shows on the Property Practitioners Bill.

“The EAAB has been on a downward slope,” commented Mafu adding she agrees with Wolmarans about the complaints. “When doing the hearings and stakeholder engagements it was painful to hear what estate agents had to say about the EAAB,” she said.

Mafu continued that the committee were “very angry” with the EAAB last year for having an adverse finding on their financial outcome while in previous years their financial performance had been exemplary.

She recommended that the department assist the EAAB. “They are under administration finish and klaar to repeat honorable member Bara,” said Mafu.

On the brighter side

It was not all doom and gloom though at the briefing session. Other entities such as the National Housing Finance Corporation could report that in 2017/18 millions of rands in housing loans were approved as well as channeled to B-BBEE contractors, thousands of homes built and thousands of jobs created. The corporation’s update on progress towards the establishment of the Human Settlement Development Bank was received with joy although they showed that there is still a number of hoops to jump through before the bank will realize. Lastly, the Rural Housing Loan Fund (RHLF) once again presented a clean financial audit (the second year in a row) – an achievement they were congratulated on by the committee.

What do you think about the portfolio committee’s recommendations that the CSOS and EAAB be placed under administration? Email your comments to editor@propertyprofessional.co.za.