/ 31 August 2018

Minister intervenes in community schemes shambles

Human Settlements Minister Nomaindia Mfeketo
Human Settlements Minister Nomaindia Mfeketo (David Harrison)

Human Settlements Minister Nomaindia Mfeketo has ordered the appointment of an independent investigator to look into the affairs of the beleaguered Community Schemes Ombudsman Services (CSOS), the body that regulates shared living property arrangements such as body corporates and homeowner associations.

The Mail & Guardian understands that Mfeketo is unhappy with a report from the CSOS board about recent controversies,including a dodgy investment of R100-million and the board’s response to the minister on how to handle the matter.

Her decision was made despite the board’s resolution last week to institute a forensic investigation into the investment of the funds, which mainly came from levies paid by community schemes and the CSOS’s annual appropriation from Parliament.

Two weeks ago the M&G reported how R80-million of the money —which was invested with the embattled VBS Mutual Bank that is under curatorship, without the necessary treasury approvals and outside of the organisation’s investment policy —was written off by the CSOS board. This led to the organisation’s first adverse audit outcome. The board then sought legal advice.

READ MORE: Housing schemes regulator goes from bad to worse

“[Mfeketo] is unhappy and disappointed that the board went for a legal opinion instead of suspending officials who had been caught lying to her and the board,” said an official close to the discussions, who did not want to be named.

Mfeketo had earlier threatened to strip the board of its powers and install an administrator, in line with the CSOS Act, after it dragged its feet on her instruction to act against CSOS chief ombud advocate Seeng Letele and chief financial officer Themba Mabuya.

READ MORE: Senior CSOS staffers suspended for VBS deposit

Mfeketo wanted the two to be held responsible for the investment and for attempting to get the investment officially condoned without board knowledge and approval.

The M&G has seen an email,sent by CSOS company secretary Risenga Maruma on March 23, that reveals the organisation misled Mfeketo by supplying a doctored investment policy document in an attempt to justify the VBS investment.

In the email Maruma highlighted two significant discrepancies between the investment policy supplied to the minister and the one approved by the board. The changes in the doctored version allowed for the investment with VBS because the bank is registered with the Reserve Bank of South Africa.

“Any insertion post the approved policy should be an amendment that should still come through normal governance structures up to the board. I am therefore unable to regard this signed version as the official record of the board,” he said in the letter.

Maruma’s email came more than a week after the doctored document had been sent to Mfeketo. He addressed his email to Mabuya, Letele, CSOS chair Reverend Vukile Mehana and finance committee chairperson advocate Nomazotsho Memani.

Mfeketo’s spokesperson, Xolani Xundu, confirmed that Mfeketo was made aware of the unlawful amendment to the policy but would not comment on what action Mfeketo would take. “The matter …is expected to form part of a broader investigation into the CSOS. The minister will be making announcements in this regard in due course,” he said.

The M&G has previously reported that after receiving legal advice on the matter, CSOS last week issued a media statement confirming its board had asked Letele and Mabuya to make representations within 24 hours on why they should not be suspended.

The pair have been accused of being grossly negligent, dishonest and in dereliction of duty in their investment of surplus funds into VBS Bank, and for failing to provide information relevant to other investments.

The board was meant to meet on Thursday to consider the representations. The CSOS and Letele did not respond to media inquiries sent to them on Wednesday.