1KEY MOMENTS IN THE HISTORY OF THE NHBRC

AN OVERVIEW OF THE HIGHLIGHTS OF THE PAST THREE YEARS OF THE NHBRC

2007/08 LaunchofEricMolobiHousingInnovationHubinSoshanguve,Pretoria. Inviewofincreasingaccessibilitytoourcustomersandhomebuilders, NHBRCestablishedsatelliteofficesinKwaZulu-Natal (NewcastleandPortShepstone),GeorgeandKlerksdorp. EstablishedsatelliteofficesinNewcastleandPortShepstoneforincreased visibility. Increasedthenumberofinspectorsfrom92to230nationwide(non-subsidy).

2008/09 Developedbreakingnewgroundhousingtypologies,approvedbyMINMEC. EstablishedsatelliteofficesinGauteng(Tshwane),FreeState(Bloemfontein andBethlehem). Collapsedthreestagesofsubsidyenrolmentsintotwo,improvingservice delivery. Enrolledhomes(unitenrolment)inthesubsidysectorforthefirsttime. Heldbriefingsessionswithprovincialhousingdepartmentsonthelegislative review. Heldworkshopsonhomebuildergradingandthecodeofconductwith selectedstakeholders.

2009/10 LaunchedtheInternationalHousingandSustainableEnergyEfficiency Competition(DrakensteinMunicipality,CapeTown). FinalisationoftheEricMolobiTestingCentre. EstablishedtheGautengprovincialcustomercarecentre(officesrelocatedto Woodmead).

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GLOSSARY OF ACRONYMS & ABBREVIATIONS

ACRONYMS GLOSSARY OF TERMS

AMCHUD AfricanMinisterialConferenceonHousing&UrbanDevelopment

ARMC AuditandRiskManagementCommittee

ASGISA AcceleratedSharedGrowthInitiativeofSouthAfrica

BBBEEA BroadBasedBlackEconomicEmpowermentAct

BCC BlackConstructionCouncil

BEE BlackEconomicEmpowerment

BIS Businessintelligencesystem

BNG BreakingNewGround

CEO ChiefExecutiveOfficer

CETA Construction,EducationSectorTrainingAuthority

CIDB ConstructionIndustryDevelopmentBoard

COC CodeofConduct

CPI ConsumerPriceIndex

CSI CorporateSocialInvestment

EE EmploymentEquity

EEA EmploymentEquityAct

GDP GrossDomesticProduct

GIS GeographicalInformationSystems

HCPMA HousingConsumersProtectionMeasuresAct

HDI HistoricallyDisadvantagedIndividuals

IDP IntegratedDevelopmentPlans

IFRS InternationalFinancialReportingStandards

ISO InternationalOrganizationforStandardization

LGA LocalGovernmentAuthorities

LRA LabourRelationsAct

MEC MemberofExecutiveCouncil

MINMEC MinistersandMembersoftheExecutiveCommittee

NEPAD NewPartnershipforAfricaDevelopment

NHBRC NationalHomeBuildersRegistrationCouncil

NSDS NationalSpatialDevelopmentSystem

NT NationalTreasury

OCP OutstandingClaimsProvision

OHSA OccupationalHealthandSafetyAct

PFMA PublicFinanceManagementAct

PHD ProvincialHousingDepartments

QMS QualityManagementSystems

SCM SupplyChainManagement

SCOPA StandingCommitteeonPublicAccounts

SDA SkillsDevelopmentAct

SDL SkillsDevelopmentLevy

UPP UnearnedPremiumProvision

3VISIONTobeaworld-classorganisationthatprotectsconsumersofthebuiltenvironmentandregulatesthebuiltindustry.

MISSIONWeshall: Provideexcellentcustomercareandsupportservice. Provideexcellentconsumerservices. Provideandsustainawarrantyfundthatprotectsconsumers. Provideanewrangeofcutting-edgeservicesandproductsinthebuilt environment. Empowertheyouth,women,unemployed,peoplewithdisabilitiesand emergingbuildersthrougheducation,traininganddevelopment. Partnerstrategicallywithstakeholders. Promotequalityandinnovativebuildingproductsandprocesses. Educateconsumersabouttheirrights,dutiesandobligations. Promoteandmaintainethicalstandardsinthebuiltenvironment. Promoteandsupportsustainablehumansettlementpoliciesandinitiatives. Promotetechnicalexcellenceinthebuiltindustrythroughresearchand development.

MOTTOQualityisourpriority.

VALUE STATEMENTS Customerserviceexcellence Goodcorporategovernance Researchandinnovation Learningandcaringorganisation Commitmentandmoralintegrity Promotingtechnicalexcellence

STRATEGY Toimprovevisibilityandaccessibilityinthemarketwhileenhancing interactionwithourstakeholders. TopositiontheNHBRCasaleaderinknowledgecreation,technicaland technologicalbuildingsolutionsthroughstrategicpartnerships. Toprovidediversifiedservicesandproductsinlinewithchangingbuilding requirementsandneeds.

OUR COMMITMENTServingyouisourbusiness.

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CONTENTS

Message from the Minister 5

Chief Executive Officers Report 6

Members of Council 10

Executive Committee 12

Financial Performance Review 14

Corporate Governance 20

Non-financial Performance Information Report 30

Annual Financial Statements 46

Performance against Strategic Objectives 93

5Thisyear,26Junemarks the55thanniversaryof theadoptionof theFreedomCharter,akeyfoundingdocumentofSouthAfricasdemocraticconstitution.Weapproachthishistoricoccasion understanding that the charter remains relevant to the vision of a new SouthAfrica.Itshousingclausestateswithoutanyequivocation:Thereshallbehouses,securityandcomfortforall.Allpeopleshallhavetherighttolivewheretheychoose,tobedecentlyhoused,andtobringuptheirfamiliesincomfortandsecurity.Slumsshallbedemolishedandnewsuburbsbuiltwhereallshallhavetransport,roads,lighting,playingfields,crchesandsocialcentres.Thereinliesthefoundingphilosophy,strategy,visionandpracticalityofhumansettlements.

Ourcountrysconstitutionresonateswiththecharteronthequestionofhousingandhumansettlements:Everyonehastherighttohaveaccesstoadequatehousingandthestatemusttakereasonablelegislativeandothermeasures,withinitsavailableresources,toachievetheprogressiverealisationofthisright.

Thefirstministerofhousing,comradeJoeSlovo,ralliedlargeandsmallcontractors,labourunions,communityorganisationsandfinancialinstitutionsin1994,resultinginthelandmarkBotshabeloAccord,whichstated:Governmentstrivesfortheestablishmentofviable,sociallyandeconomically integratedcommunitieswhicharesituated inareasallowingconvenientaccesstoeconomicopportunities,health,educationalandsocialamenitiesandwithinwhichSouthAfricas peoplewill have access on a progressive basis to a permanent residentialstructurewith secure tenure, ensuring privacy and providing adequate protection againsttheelements,andpotablewater,adequatesanitaryfacilitiesincludingwastedisposal,anddomesticelectricitysupply.

MESSAGE FROM THE MINISTER OF HUMAN SETTLEMENTS, MR TOKYO SEXWALE

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TheNationalHomeBuildersRegistrationCouncilhas,overthepastthreeyears,experiencedacontinuousdeclineintheperformanceofsomeofthevaluablefinalproducts.Duringthe2007/8and2008/09financialyears,theNHBRCenrolled80,239and42,228homesrespectively.TheperformanceoftheNHBRC,intermsofenrolmentsofhomes,wasnotspurredbythepresentglobaleconomicsituationanditsnegativeimpact,whichsawperformancedeclineby36%,withonly26,903homesbeingenrolledforthefinancialyear.

The NHBRC has remained alert of the priorities of the national Department of HumanSettlementsinstrivingfortheestablishmentofviable,sociallyandeconomicallyintegratedcommunitieswhicharesituatedinareasallowingconvenientaccesstoeconomicopportunities,health,educationalandsocialamenities.Tothisend,oneoftheNHBRCsstrategicobjectivesis tocontribute to thecreationofsustainablehumansettlements throughthedeliveryofqualityhomes,whichthecouncilwilldobypromotingbreakingnewgroundarchitecturaldesigns.

OneofthemandatesoftheNHBRCistorepresenttheinterestsofhousingconsumersbyprovidingwarrantyprotectionagainstdefineddefectsinnewhomes.TheNHBRCdoesthatpartlybyregisteringhomebuilderssothattheymaybuildaccordingtothesetstandardsinthehomebuildingmanual.EachandeverypersonengagedinhomeconstructionshouldberegisteredwiththeNHBRC.Thecouncilrealisedadecreaseof4.5%ofbuildersregisteredwithitforthe2009/10financialyearanindicationthathomebuildingactivitieshavebeenimpacteduponbytheslowdownintheindustry.

Due to the nature of theNHBRCs business, theCouncil has approved an organisationalredesignprocesswhichaimstoimprovethewaytheNHBRCconductsbusiness.TheNHBRCis looking at creating regional reporting systems,whichwould improve visibility wherebyprovinces would systematically report to the regions. In areas with limited accessibility,mobileofficeswouldbemadeavailable,ensuringthatalltheservicesrenderedbyafullofficewouldnowalsobeavailabletothoselivinginremoteareas.

TURNAROUND STRATEGY

ThecurrentCouncilwasappointedinMay2009andfoundafinanciallysoundorganisation.However,incomewasthreatenedbyinsufficientnewenrolmentstocoverrequiredcashflowfromtimetotime.Thatsnormalinbusinessaslongastheressufficientcashflowtocovertheidentifiedlimitations/shortfalls.Theorganisationhaditsownchallengesasexperiencedinthe2009/10financialyear.Theseincluded:

Overstaffedorganisationinnon-income-generatingareas; Ratioofcorestafftosupportwasthreetimes; Customerinterfacingactivitieswereinsufficientandreactionary; Typicalhomeaffairsbehaviourincertainareas; Silomentality; Non-workingsystemswithunreliabledata; Poorimplementationofinformationtechnologysystem; Centralofficewastoodominantandoperatingasapowerhouse;and About200casesofunrectifiedunitsrangingfromthreetofouryears.

CHIEF EXECUTIVE OFFICERS REPORT

7CUSTOMER CENTRICITY

TheNationalHomeBuildersRegistrationCouncilmustfocusandanchoritsbusinessaroundcustomersatisfaction;itcurrentlyoveremphasisesitsregulatoryframeworkatthedetrimentof the housing consumer. TheNHBRCwill bemeeting home builders and home ownerswithin14daysofthehomebeingenrolled.TheNHBRCwillalsoberollingoutthefollowingstrategies: Educate/createawarenessaboutthestructuralwarrantyscheme; Arrangethatthehomeowner/consumermeetswiththeinspectorandthehome builder. (Thehomebuilderwillknowthatthehomeownerisawareoftheirrightsandthat theycancallonthehousingprotectoratanytimetohelpwithuncertainissues.); Ensurethattheconsumersignsahappyletterbeforeoccupationtakesplace;and Aproactiveapproachtosolvingconsumerproblemsthroughinspections.

Togetherwith our actuarial services,we are investigating the cost of improvingwarrantyproductsfromfiveto10years.Inthereviewofthelegislationwewanttoincludeothernewproducts,suchas: Ownerbuilderwarranty Homeadditionsandextensions Extensionofthehousecoveredbycurrentwarranty Acousticservices:pre-completionairtesting Airleakagetesting:airtightnessofhomes Energyratings:verifyingenergyefficiency Landqualityservices:checklevelsofcarbonemissions Road,stormwaterandseweragewarranty Siteappraisalreport Buildingcontrolandinspectionsformunicipality Homeinformationbrochures

FINANCIAL PERFORMANCE

The financialperformanceof theNHBRC for the2009/10 financial year indicates that thegross insurance premium revenue written decreased by R7 million as compared to thepreviousfinancialyear.TheoperatingexpenditurefortheyearatR111.4million(2009:R118.4million),decreasedbyR7.0million,comparedtothepreviousfinancialyear.ThecurrentyearwarrantyclaimssettledamountedtoR14.1million(2009:R6.9million).

SOLVENCY OF THE NHBRC WARRANTY FUND

Thesolvencyandfinancialpositionofthewarrantyfundisassessedannuallybyindependentactuaries.Thecurrentyearassessmentofthesolvencyofthewarrantyfund,performedbyMatlotloGroup(Pty)Ltd,isasfollows:bestpracticeactuarialmethodswereappliedintheactuarialassessment.MatlotloperformedtheactuarialvaluationofallrelevantprovisionsneededtoenabletheNHBRCtoreportonthebasisrequiredbyAC141andIFRS4.Everyeffortwasmade to achieve this, butwas limited by the quality of the data provided. Thevaluationoftheliabilityisperformedonarun-offbasis,andsplitintotheunearnedpremiumprovision,theoutstandingclaimsprovisionandtheadditionalunexpiredriskprovision.

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Theoutstandingclaimsprovision (OCP) isaprovisionrequiredwithrespect tocomplaintsthatwillresultinremedialworkclaims,butarestillunderconciliationornotfullysettled.RemedialclaimspaymentsdatafromMarch2006toMarch2010weregroupedinarun-offtrianglepercomplaintperiodagainstdevelopmentperiodofpayment.Theinflation-adjustedBornhuetterFergusonmethod(BF)wasthemostappropriatemethodforthetriangulationofremedialworkpayments.

Theunearnedpremiumprovision (UPP) is theportionof receivedenrolments that isheldto meet future complaint and conciliation expenses, overheads, remedial work claimsand surplus for unexpired years of cover. An assumption is required about the portion ofpremium that is allocated to initial expenses. Actual expenses for 2009/10 were used toestimateexpensesasaratioofwrittenpremiums.Thesecalculationsshowedthat103%oftheenrolmentfeeisrequiredtocoverinitialexpensesfornon-subsidyhousingand57%forsubsidyhousing(March2009valuationassumed102%forsubsidyhousesand47%fornon-subsidyhouses.)

Theresultsof theactuarialvaluation indicate that theNHBRCasawhole, includingbothsubsidyandnon-subsidyhouses,issolventandisinasoundfinancialpositionasat31March2010when valued on a run-off basis. The actuarial liabilities are 357% funded.However,for future business, the enrolment fees currently charged are inadequate to cover futureexpensesandliabilitiesforbothsubsidyandnon-subsidyhomes.

9Asanationalhomebuilding regulator, theNHBRCs valuable finalproductshaveagreatinfluenceon,andcontributionto,theSouthAfricaneconomy.Thecontinualimprovementandmaintenanceofhighqualityserviceinoperationsisthereforeapriority.

Althoughthehomebuildingindustrysloweddownduringthe2008/9and2009/10financialyears,thedemandforqualityandsustainableaccommodationremainedhigher.TheNHBRCis therefore committed to supporting government programmesandprojects co-ordinatedby theminister of humansettlements. It acknowledges that housing contributes towardsimprovingthequalityoflifeforpoorcommunitiesandtotheeconomyatlarge.

Strategicfocusistomaintainstrongandcapableresources,andensuretheestablishmentofstrategicpartnershipswithrelevantroleplayerstoenhanceandenforcehighqualityservicesandproductsinthehomebuildingindustrythroughongoingandproactivecommunication,empowermentandinteraction.

CONCLUSION

Inconclusion,thereremainmanychallengestoprovidebetterqualityhomesforallcitizensandIamcommittedtoensuringthattheNHBRCwillcontinueasamajorroleplayerintheupliftmentofqualityhomes.

APPRECIATION

Themajor achievements reported would not have been possible without the unreservedsupport of the minister of human settlements, the director-general, the Council of theNHBRC,andmanagementandstaffoftheNHBRC.Iwouldliketoexpressmygratitudetoyouall.

MrSiphoMashininiChiefExecutiveOfficerJuly2010

STRATEGIC INTENT

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MEMBERS OF COUNCIL

MsGrannySeapeChairpersonofCouncilB.Sc(Economics)(Univ.ofZambia);Dip.Marketing,PublicRelationsandSales(LondonChamberofCommerce);andDip.ProjectManagement(NewportUniversity)NHBRCCouncilmemberasfrom2009todate

DrAdamGoligerMemberofCouncilB.ScandMScinCivilEngineering(WarsawTech.University);andPhDinCivilEngineering(Univ.ofStellenbosch)NHBRCCouncilmemberasfrom2006todate

MsSibongileNeneMemberofCouncilBA(SocialScience)(Unisa);BA(HonsSociology)(Unisa);MA(Sociology)(Univ.ofZululand)NHBRCCouncilmemberasfrom2001todate

MrBangisoMhlabeniMemberofCouncilBachelorofSocialScience(UniversityofCapeTown),LLB(Honours)(UniversityofCapeTown)andPostGraduateDiplomainAfricanStudies(UniversityofCapeTown)

MsSharonDeGoisMemberofCouncilB.Soc.Sc;HonsB.Soc.Sc;MasterofTownandRegionalPlanning;Dip.ProjectManagement(FreeStateUniversity)andDip.Strat.Plan(WitwatersrandUniversity)DipProjectManagement(ExecutiveEducationaccreditedbyNewportUniversity)NHBRCCouncilmemberasfrom2006todate

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RevVukileMehanaMemberofCouncilB.Theo(Rhodes);AdvanceManagementProgram(INSEADBus.School,France);TopManagementProgramforPublicEnterprises(Nat.Univ.ofSingapore);andMBA(DeMontfortUniversity,UK)NHBRCCouncilmemberasfrom2009todate

MrPaulHlahaneMemberofCouncilB.IurisandLLB(Hons)(Univ.ofNorth-West);LLM(Univ.ofPretoria);andAdv.Dip.LabourLaw(Univ.ofJohannesburg)NHBRCCouncilmemberasfrom2009todate

MrMthembeniMkhizeMemberofCouncilDip.ArchTech(Wits);B.Arch(Natal);M.ScArch(planningandhousing)(Natal);andM.ScInformationTechnology(Pretoria)NHBRCCouncilmemberasfrom2009todate

MsDinaMajaMemberofCouncilB.IurisandLLB(Hons)(Univ.ofLimpopo)NHBRCCouncilmemberasfrom2009todate

MrNarainKuljeethMemberofCouncilB.ProcandLLB(Hons)(Univ.ofDurban-Westville)NHBRCCouncilmemberasfrom2009todate

MsThandiweSilindaMemberofCouncilB.Admin(Univ.ofLimpopo)NHBRCCouncilmemberasfrom2009todate

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EXECUTIVE COMMITTEE

MrSiphoMashininiChiefExecutiveOfficer,NHBRCMasterofBusinessAdministration(ThamesValleyUniversity,UK),SmallBusinessDevelopmentAdvancement(CranfieldSchoolofManagement,UK),ExecutiveDevelopmentProgramme(LondonBusinessSchool),ManagementAdvancementProgramme(Wits)JoinedNHBRCasfrom01April2010

MsThitintiMoshoeuExecutiveManager:CustomerCareMasterofScienceBusinessStudies(UniversityofFalford,Manchester,UK)JoinedNHBRCasfrom01August2005

MsLaureneLessExecutiveManager:CorporateServicesMasterofPublicAdministration(UniversityofWesternCape)JoinedNHBRCasfrom15January2008

DrJeffryMahachiExecutiveManager:TechnicalandInformationTechnologyPhD:CivilEngineering(WitsUniversity)JoinedNHBRCasfrom05January2001

MrCourteneyThorpExecutiveManager:Finance,FundandSupplyChainCharteredAccountant(SouthAfrica)JoinedNHBRCasfrom01February2003

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MrJacobMakgolaneCompanySecretaryB.Iuris,LLB(Hons)(UniversityofLimpopo)JoinedNHBRCasfrom01April2009

MrGodfreyChookaManager:RiskB.Accounting(UniversityofZambia),MBA(DeMontfortUniversity,UK)JoinedNHBRCasfrom01May2009

MrPaulThabetheManager:InternalAuditB.Com(UniversityofSwaziland),CIA,CCSA(InstituteofInternalAuditors)NHBRCCouncilasfrom15January2007

MsBeatriceMotsisiManager:MarketingandPublicRelationsBACommunications(UniversityoftheNorth-West)NHBRCCouncilasfrom15January2007

DrAwelaniMaladaManager:ResearchandStrategicPlanningPhD:IndustrialandSystemsEngineering(UniversityofPretoria)JoinedNHBRCasfrom01October2006

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FINANCIAL PERFORMANCE REVIEW

OVERVIEWTherealvalueofplansapprovedfornewresidentialbuildinginthecurrentyearhadreducedby13.3%comparedtolastyear.Inrealvalueofresidentialbuildingsconstructedwasdownby40.5%comparedtothefirsttwomonthsofthepreviousfinancialyear.(StatisticsSA).Theeffectonpremiumincomewritten,bytheNHBRC,inthenonsubsidymarket,declinedby24%(R75.4million)andincreasedinthesubsidymarketby100%(R60.8million)comparedtothepreviousfinancialyear.Indications are that the housing outlook for the construction of new homes for the nextfinancialyearisprojectedtoremainflatdespitethedeclineininterestratesandtheeconomyemergingfromtherecession.Therecovery in theresidentialbuildingmarketremainsunderpressureaspurchasinganexistinghomeis18.3%cheaperthanbuildinganewhome.(AbsaProperty).

RESULTS FOR THE YEAR

RevenueNetincomefortheyeardeclinedbyR100.4million(12%)comparedtothatofthepreviousfinancialyear.

InsurancepremiumsrevenuedeclinedbyR129.7million,afterthechangeinIFRS4changeinthereductionintheunearnedpremiumprovision(R202million)andtheincreaseintheunexpiredriskprovisions(R171million).Theeffectoftheactuarialadjustmentresulted inadditionalrevenueofR31million(2009:R146million)

FeerevenuedecreasedbyR7.1million(10%)asaresultofaprioryearrestatementofsubsidyprojectenrolmentfeesamountingtoR46.0million.

IncomefrominvestmentsatR240milliondecreasedbyR2millioncomparedtothepreviousfinancialyear.(2009:R241.9million36.4%).ThelowerreturnoninvestmentsisafunctionofthelowerinterestratesandtheutilizationofR105milliontofundworkingcapitalrequirements.Thereductionof theworkingcapitalreserve isdue to theextendedcredit termstakenbyprovincialhumansettlementdepartments.

Profitonsaleof investmentsduringtheyearamountedtoR9.7million(2009:R0.0millionloss).

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Source of revenue

TheeffectoftheunearnedpremiumandtheunexpiredriskprovisionsintermsofIFRS4,onthepremiumwrittenandpremiumearnedisasfollows:

Expenditure

Expenditure is categorised into riskmitigation (operating expenditure) and business support(administrativeexpenditure).Riskexpenditureisincurredtomitigateanyrisktothewarrantyfundbyenforcinglegislatedbuildingregulations.Riskexpenditurecomprisesinspectionfeesincurredduringtheconstructionofhomesandtheaccreditationofhomebuildersonanannualbasis.

BusinesssupportexpenditureconsistsoffixedcoststomaintaintheNHBRCoperationsandservicetocustomers.

TheoperatingexpenditureofR111.4million(2009:R118.4million)decreasedbyR7.0million,comparedtothepreviousfinancialyear.Thesavingsaremainlyattributabletothereducednumberofinspectionsperformedduetothelowernumberofhomesenrolled(R4.5million).

Annual fees Enrolment fees Late enrolment fees Registration fees

Subsidy project fees Investment Technical Other income

36%

7% 0.% 1%

46%

1%2%8%

Premium income

Earned premium

(Deferred) /Realised

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305

336

31

2007/08

597

546

-51

2008/09

319

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TechnicalservicesexpenditureofR30.6millionwasincurredfortherectificationprogrammeonsubsidyhomesintheEasternCapeandKwaZulu-Natal.ThisexpenditureisrecoveredbyincomegeneratedbytheTechnicaldepartmentofR59.7million.

The administrative expenditure of R322.1 million (2009: R258.9 million), an increase ofR63.2million, is incurred to service business growth and improve service delivery to allstakeholders. The increases compared to the prior year, other than for general inflation,is due to the increase in information technology (R13.6million), Legal fees (R6.8million)Consulting(R7.9million)andtrainingofemergingcontractors(R19.1million).Theadditionalexpenditure on information technology was incurred to stabilise the Oracle ERP system.Legal fees aremainly due to settlements of outstanding caseswhichwere only finalisedin the current financial year.Consultingexpenditure increasewas to addressgovernanceby increasing internalauditswhichwereoutsourceddueto in-housecapacityconstraints.Theincreaseinemergingcontractorsisgovernedbysection10(1)oftheHousingConsumerProtectionMeasuresAct,1998(ActNo.95of1998).

TheassetmanagementservicefeesofR9.4million(2009:R6.8million)arepaidtoInvestmentmanagerswhoadministertheinvestmentsonbehalfoftheNHBRC.Managementfeesarechargedonaslidingscalebasedonthemarketvalueof investmentsundermanagement.TheNHBRCwillinthenextfinancialyearreviewallcontractswithinvestmentmanagersandre-negotiatethecurrentfeestructures.

Insurance claims and loss adjustment expenditure

Currentyearclaimsrepresenttheactualclaimsandrelatedamountspaidoutofthewarrantyfundduringthefinancialyear.Thecurrentyearclaims(R14.1million)andlossadjustmentexpenses(R4.9million)whichdecreasedbyR8.2millioncomparedtothepreviousfinancialyear.Inorderfor theCouncil to fulfil itsobligationsunder thewarrantyscheme, theCouncil is required toprovideforfuturecomplaintsandconciliationservicetohousingconsumers.Theremedialworkclaimscomponentincludesboththereportableoutstandingclaimsprovisionandtheincurredbutnotreportableclaimsprovision.TheprovisionincreasedbyR4.9milliontoR72.6million.ThetotalunearnedpremiumprovisiondecreasedfromR632.4milliontoR430.5million.

Net surplus for the year

ThenetsurplusfortheyearatR263.5million(2009R414.0million)isR150.5million(36.3%)lower than the previous financial year. The effect of the economic downturn in the homebuildingindustry,whichreducedpremiumincomegeneratedinthenonsubsidysectorwasthemain contributor to the lower net surplus. The decreasewas partlymitigated by thereversaloftechnicalliabilitiesofR25.9million.

Revenue and Operating Expenditure (Excluding non cash flow items)

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2008/092007/08 2009/10

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Investments

TheNHBRCisregulatedintermsoftheHousingConsumersProtectionMeasuresAct,1998(Actof1998)toestablishafundforthepurposesofprovidingassistancetohousingconsumersundercircumstanceswherethehomebuilderfailstomeettheirobligationsundersection13(e)(b)(i)oftheAct.TheinvestmentmandateconcentratesonthepreservationofcapitalsoastoensurethattheNHBRCremainsfinanciallysoundtomeethousingconsumerclaimsastheyarise.

Investmentsareheldineitherthefixedinterestportfoliooranabsolutereturnfundportfolio.ThetwoinvestmentportfoliosaremanagedonbehalfoftheNHBRCbyfivefundmanagers,and returns are managed against predetermined benchmarks. The total investment, atmarketvalue, increasedfromR2.8billiontoR2.9billionduringthefinancialyear.ThefairvalueadjustmentintermsofIAS39,atyearend,decreasedbyR1.1milliontoR65.7million(2009increaseofR66.8million).Theinvestmentreturnsoutperformedthebenchmarkoverthepast12monthswithanannualisedreturnoninvestmentsof8.7%(2009:7.8%).

Investment Maturity Profile

Technical Liabilities

The technical liabilities are actuarially determined annually as part of the actuarialassessment.ThetechnicalliabilitiesconsistofOutstandingclaims,UnearnedpremiumandUnexpiredriskprovisionswhicharedefined innote1,summaryofsignificantaccountingpolicies,intheAnnualFinancialStatements.

TheresultsoftheactuarialvaluationindicatedthattheCouncilasawholeissolvent,andabletofunditsliabilitieswhenvaluedonarun-offbasis.Theactuarialliabilitiesare357%(2009:327%)funded.

TheOutstandingClaimsprovisionisdeterminedata99.5%sufficiencylevel.ThisisconsistentwiththeFinancialServicesBoardsdraftguidelinesonFinancialConditionReporting(FCR).Thesestandardsrequireshortterminsurerstoholdliabilitiesata75%sufficiencylevel,andcapitalata99.5%sufficiencylevel.

1,400

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Investments

2007/08 2008/09 2009/10

Cash Bonds > 12Years

Bonds < 7Years

Bonds 7 - 12Years

Equity

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TheUnexpiredRiskprovisionforSubsidyHousingincreasedfromR148.8milliontoR319.9million.Thisprovisionisrequiredforsubsidyhousingtobeindependentlysolventintermsoftheinsurancerisktakenonforsuchhouses.TheprovisionforunearnedpremiumdecreasedfromR632.5milliontoR430.5millionwhichresulted inadditionalpremiumincomebeingreleasedfromprioryearamountingtoR202million(2009:R238million).

Technical Liabilities

Cash Flow

ThenegativecashflowgeneratedfromoperatingactivitiesatR78.9millionwasasaresultofthedeclineinenrolmentincome.TheshortfallwasfinancedbywithdrawingR105millionfromtheworkingcapitalreserve.CashflowfrominvestingactivitiesincreasedbyR135millioncomparedtothepreviousyear.

TheorganizationnetinflowoffundsfortheyearR3.6million(2009outflowR45.7million).

Reserves

TheCouncilincreasedtheEmergingContractorreservebyR35.9million(2009:R17.4million)of which R32.8million (2009: R13.7million) was utilized during the year. The reserve isestablishedintermsofSection15(5)(d)ofTheAct.

ThenondistributablereserverepresentsthefairvalueadjustmentofinvestmentstomarketvalueanddecreasedfromR66.8milliontoR65.8million.

TheaccumulatedsurplusincreasedfromR1.8billiontoR2.1billionduringthecurrentyear.

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Unearned Premium Unexpired risks Outstanding claims

2008/092007/08 2009/10

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Reserves

Long-term Sustainability and Efficiency

Thelong-termfinancialsustainabilityof theNHBRCcanonlybeachievedbycontinuouslymanagingtheexpensetoincomeratio,whichwillbyimplicationgrowinvestmentreserves.TheenrolmentadequacyoftheNHBRCisbasedontheapportionmentofthe2010/11budgetfor expenditure and the predicted volume of enrolments. Based on the projected incomeandexpenditurethecurrentenrolmentfeeschargedwillnotbeadequateforexpensesandclaimsinboththenon-subsidyandsubsidymarkets.Managementiscommittedtomaintainacost-effectiveoperationinordertoaddresstheshortfall.

TheresultsoftheactuarialvaluationindicatetheCouncilasawholeissolventandabletofunditsliabilitieswhenvaluedonarun-offbasis.

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Accumulated Surplus Emerging Contractor Non Distributable

2008/092007/08 2009/10

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L R

EPO

RT

2010

CORPORATE GOVERNANCE

COMPOSITION OF THE COUNCIL

TheCouncilshallconsistofaminimumofsevenandamaximumof15membersappointedby theminister of human settlements, in terms of Section 4 of the Housing ConsumersProtectionMeasuresAct,1998 (ActNo.95of1998)hereinafterreferredtoastheact.Theminister appointed 13 members of Council, including the chairperson and the deputychairperson.TheDeputychairperson,MrSiphoMashinini,resignedon20August2009andCouncilmember,MrCKadwa,resignedon21September2009.ThetotalnumberofCouncilmembersisnowstandingateleven(11).

ThecompositionoftheCouncilisasfollows: MsGrannySeape:chairperson MsSharonDeGois DrAdamGoliger MsSibongileNene MrBangisoMhlabeni RevVukileMehana MsThandiweSilinda MrPaulHlahane MrMthembeniMkhize MsDinaMaja MrNarainKuljeeth

21

THE NHBRC COUNCIL

MANDATE OF THE COUNCIL

TheNHBRCderives itsmandatethroughtheenactmentof theact.Thebroadmandate isoutlinedunderSection3,asstatedbelow:

Torepresenttheinterestsofhousingconsumersbyprovidingwarrantyprotection againstdefineddefectsinnewhomes. Toregulatethehomebuildingindustry. Toprovideprotectiontohousingconsumersinrespectofthefailureofhomebuildersto complywiththeirobligationsintermsofthisact. Toestablishandpromoteethicalandtechnicalstandardsinthehomebuilding industry. Toimprovestructuralqualityintheinterestsofhousingconsumersandthehome buildingindustry. Topromotehousingconsumerrightsandtoprovidehousingconsumerinformation. Tocommunicatewithandtoassisthomebuilderstoregisterintermsofthisact. Toassisthomebuilders,throughtrainingandinspection,toachieveandtomaintain satisfactorytechnicalstandardsofhomebuilding. Toregulateinsurerscontemplatedinsection23(9)(a);and Inparticular,toachievethestatedobjectsofthissectioninthesubsidyhousing sector.

Composition of the Council and the attendance of council meetingsTheCouncilshallconsistofaminimumofseven(7)andamaximumoffifteen(15)membersappointedbytheministeroftheDepartmentofHumanSettlements,intermsofSection4oftheact.Theministerappointed13membersofCouncilincludingthechairpersonandthedeputychairperson.

InlinewithgoodgovernanceprinciplesasespousedbytheKingIIReportofgoodcorporategovernance,theCouncilisrequiredtoholdatleastfour(4)formalmeetingsperannum.

The table overleaf reflects the members of Council and their attendance of meetingsscheduledfortheyearunderreview:

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2010

MemberName CapacityCouncilmeetings Totals

permember

12 May2009

28 May2010

10 Jun2009

21 Jul2009

20 Aug2009

21 Sep 2009

29 Oct2010

30 Nov2009

29 Jan2010

25 Mar2010

MsGrannySeape

Chairperson 10

MrSiphoMashinini

Deputychairperson

Re-

signed 3

DrAdamGoliger

Member 8

RevVukileMehana

Member 9

MrCassimKadwa

Member Re-signed 2

MrBangisoMhlabeni

Member 9

MrMthembeniMkhize

Member 8

MrPaulHlahane

Member 10

MrNarainKuljeeth

Member 6

MsSharonDeGois

Member 2

MsSibongileNene

Member 10

MsDinaMaja

Member 10

MsThandiweSilinda

Member 9

13Total

members12 11 12 10 8 9 7 8 10 9

23

COUNCIL COMMITTEES

Fund Advisory and Finance Committee The fund advisory and finance committee is responsible for advising the Council on theprudentmanagementofitsfunds.ThecommitteemakesrecommendationstotheCouncilregardingthesettingoffees,proceduresandpoliciesforapprovalbytheCouncil,aswellasonallmattersrelatingtothemanagementofrisk,andtheadministrationofitsfundoranyotherCouncilfund.Thecommitteeregularlyreviewsthefinancialreportsofmanagement,approvesthebudgetandadvisesCouncilonallfinancialmatters.

Registration Committee Theregistrationcommitteeisresponsibleformonitoringtheregistrationandderegistrationofhomebuilders, andalso recommendsappropriatepoliciesandprocedures toCouncil.It evaluatesowner-builder applications received, anddetermineswhetherhomebuildersqualifyintermsoftheactforexemptionfromenrolmentoftheirownhomes.

Audit and Risk Management Committee The audit and risk management committee is responsible for assisting the Council byreviewingtheeffectivenessofitssystemsofinternalcontrolsandriskmanagementmitigationstrategies;reviewing its financialpoliciesandprocedures;reviewing financial informationreported to itsstakeholders;andassessing theeffectivenessof the internalandexternalaudit functions.Thecommitteealsoensures themaintenanceandmonitoringof theriskmanagementframework.Thecommitteefurtherreviewstheriskregisterandassessmentreports,toensureefficiencyandeffectivenessoftheriskmanagementstrategyandplans.

Technical Advisory and Claims CommitteeThetechnicaladvisoryandclaimscommittee isresponsible forevaluatingremedialworkclaimssubmittedbyprovincialofficesandmakingrecommendationstotheCouncilontheappropriatemanner of dealingwith such claims. In addition, the committee advises theNHBRCtechnicalsectionwithregardstoalltechnicalaspectsofconstructionandinnovation(bothprofessionalandtechnical),whichmayimpactontheNHBRCsriskmanagementprocess.

Disciplinary Hearings Committee (Ad Hoc Sittings)Thecommitteeisresponsibleforadjudicatingallegedbreachesoftheactbyhomebuildersand imposing disciplinary sanctions where home builders are found guilty of breach orcontraventionoftheact.

Human Capital and Remuneration CommitteeThehumancapitalandremunerationcommitteeadvisesCouncilonemployeesremunerationpolicies.ThiscommitteealsomaintainsacorporateoverviewoftheCouncilshumancapitalpoliciessuchasemployeesourcing,development,relationsandrewards.

Industry Advisory CommitteeThe industry advisory committee is responsible for giving advice to the Council on allmattersrelatingtotheoperationsofthehomebuildingindustry,inadditiontoactingasacommunicationchannelbetweentheindustryandtheCouncil.

Tender Committee Thetendercommitteereceives,evaluates,adjudicatesandawardstendersinlinewiththeNHBRCprocurementpolicyandrelevant legislation,e.g.PreferentialProcurementPolicyFrameworkAct,2000(ActNo.5of2000)anditsrelatedregulations,andBroadBasedBlackEconomicEmpowermentAct,2003(ActNo.53of2003),amongothers.

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2010

Disciplinary Steering CommitteeThe disciplinary steering committee is responsible for approving disciplinary policies,proceduresandguidelinestomanagetheprocessofdiscipliningdefaultinghomebuilders.The committee assesses and approves the charges that will be preferred against homebuilders who have allegedly breached the Housing Consumers ProtectionMeasures Act,1998(ActNo.95of1998)(asamended)andrecommendsdisciplinaryactiontothedisciplinarycommittee.

25

RISK MANAGEMENT

IntroductionNHBRCthroughitsvariousbusinessactivitiesengagesinanumberofoperations,mostofwhichinvolvetheprovisionofawiderangeofvaluablefinalproductstoprotecttheinterestsof housing consumers and to regulate the homebuilding industry. By their nature, suchservices/productspresentasubstantialleveloffinancialandoperationalrisk,whichmustbemitigatedonacontinuousbasisiftheoverallsustainabilityandprosperityoftheorganizationistobeassured.

TheNHBRCriskpolicyprovidesthebroadframeworkfordealingwithriskintheorganizationsbusinesses.Inprioritizingtheorganizationsapproachtoriskmanagement,it isaprimaryobjectivetomanageeachspecificrisksoastoneutralizeitsimpactontheorganization.

Risk Policy FrameworkThemethodology set out in global riskmanagement standards incorporating the King IIandKingIII, InstituteofRiskManagementSouthAfrica (IRMSA),COSO(theCommitteeofSponsoringOrganizations of the TreadwellCommission), andPFMA, amongst others hasbeen used as a benchmark in developing policy, and has been used in monitoring andimplementingriskmanagementmeasures.

ThekeyelementsofNHBRCsriskmanagementsystemare:adefinedriskpolicyframework,riskidentification,riskanalysis,riskevaluation,riskremedies,monitoringandreview,andcommunicationandawareness.

Oversight of Risk Management Policy Framework TheCouncilisultimatelyresponsibleforensuringthattheorganizationsriskmanagementpracticesaresufficienttomitigatetothemostcost-effectiveextentpossibletheriskspresentintheorganizationsvariousbusinesses.TheCouncildelegatesaportionofthisresponsibilityto itsAuditandRiskManagementCommittee.Management ismandatedandempoweredby the Council to implement riskmanagement strategies in cooperation with it and thecommittee,reporttotheCouncilandcommitteeondevelopmentsrelatedtorisk,andsuggesttotheCouncilnewandrevisedstrategiesmitigatingrisk.

Exco,throughtheRiskManager,implementsariskcontrolsystemtoenablemanagementto respond appropriately to significant risks that could impact negatively or positively onbusinessstrategicobjectives.

Riskreviewsareconductedonceperannumwiththeintentionofconductingthembi-annuallynextfinancialyear.Risksidentifiedarerankedandclassifiedintocategories,reviewed,andthenassessedbyExco,theAuditandRiskManagementCommitteeandCounciltodeterminethesignificantoperational,strategic,andbusinesscontinuityrisks.Theratingsarefinalizedafterconsideringthemitigationplansandexecutiveaccountabilityisassignedforeachoftheriskcategories.

Emerging Risks and Risk Management StrategyTheNHBRC issubject toanumberof typesof risks thatcanbeexpected tobeenduringelementsofitsbusinesses.TheCouncilandmanagementseektoidentify,analyze,evaluateand remedy the following risks: strategic risks, operational risks, information technologyrisks,marketstructureandregulationrisks,compliancerisks,humanresourcerisks,capitaladequacyrisks,businesscontinuityrisks,economicrisks,reputationrisk,accountingandfinancialcontrolrisk.

NH

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NN

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2010

The Council, directly and via the Audit and Risk Management Committee, work withmanagementonanongoingbasiswithintheriskpolicyframeworkoutlinedabovetomitigatetheriskstotheorganizationsbusinessesastheymayevolveovertime.NHBRCreportsonstrategic,businessandprocessrisksaspartoftheriskprofile.Theriskdashboardreflectsthelikelihoodandimpactofeachoftherisksfacingtheentity.

Outsourcedinspectoratecontractualrisks,sustainableinspectionmodel,Oracle/Seibelnotfully operational, performance management system, stakeholders confidence, decliningrevenue, above inflation increase in operational expenses, and operational expensesnot variably responding to declining business volumes, are key risk areas ofCouncil andManagementfocus.

ThelevelofcommitmentbymanagementandemployeesofNHBRConriskmanagementprinciples,standardsandregulatoryrequirementisslowlyimprovingandthereforerequiresaboosttoachieveahighlyintegrated,effectiveandefficiententerprise-wideriskmanagementprogrammecontributingtowardsachievingofamorestableinternalcontrolenvironmentofallidentifiableriskstowhichtheorganizationisexposed.

TheRiskManagementSectionthereforeaimstoensurethatdivisionsandsectionsintegratetheriskmanagementandcomplianceprocessesintheirdivisional,sectionalandindividualscorecards,therebyensuringthatallemployeesarecommitted,participateandcontributetowardstheriskmanagementprocessintheirday-to-dayactivities.

Adoption of risk methodology, Business Continuity Management (BCM) Impact and RiskAssessmentreport,BCMstrategy,BusinessContinuityPlans,riskawareness,standardizedcurariskreports,completionsofallstrategicandoperationalriskassessmentacrosstheorganization,integrationofthecompliancefunctionwithinriskmanagement,weresomeofthekeyachievementsintheyearunderreview.

Health and SafetyTheNHBRC respects the rights of employees and stakeholders to work in a clean, safeandhealthyenvironmentand tookallnecessarymeasures toensure theirprotectionandcomfort.

27

OutsourcedInspectorate

contractualrisks

Oracle/Siebelnotfullyfunctional

LowstaffmoraleFailuretoproducefinancialstatements

Non-compliancetolegislation,acts,policiesandprocedures

PoorcustomercareNonsustainable

inspectionpaymentmodel

Duplicatepaymentsoninspections

Fraud,corruption,

theft

Declineinenrolmentand

registrationrevenue

Ineffectiveimplementationof

theOracleandSiebelInformationSystem

BusinessInformationreportsnotavailableon

Oracle

LackofInformationSecurity

Ineffectivestakeholderrelations

ICTServiceProviderinadequacy

Capitalprojectsdelivery

Economicrecessionand

financialsustainabilityand

insolvency

Internalauditfunctioninadequate

andineffective

Sustainabilityofthewarrantyfund

Potentialforfraudintheawardingoftrainingtenders

Lackofsuccessionplanning

Leadershipandaccountability

Lackofmarketingstrategyandplan

Auditplannotfullyexecuted

Ineffectiveperformance

managementsystem

Poorcorporateculture

InadequatetalentManagement

Qualityassessmentoftrainingproviders

andfraudulenttrainingclaims

IneffectiveCorporateStrategydevelopmentandimplementation

Poorqualitymanagement

Non-compliancetocorporategovernanceguidelines

Non-alignmentbetweenstrategicobjectivesand

balancescorecards

Enrolledhousesnotinspectedtimeously

Payrollandemployeebenefitfraud

LackofBusinessContinuityPlanning

DataIntegrity,ITinfrastructureandIT

innovation

Fixedassetsontheassetregister,butnotphysically

identifiedorlocated

Enrolmentofhousesnotmeetingminimumtechnical

requirements

NHBRC MEDIUM RISkS

NHBRC LOW RISkS

NHBRC HIGH RISkS

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2010

INTERNAL AUDIT

The NHBRC has established an internal audit function in compliance with the TreasuryRegulationsofthePublicFinanceManagementAct,1999(ActNo.1of1999).Thepurposeof the internal audit function is to continuouslyprovide independent, objectiveassuranceandconsultingservicestoalldivisionsandsectionsoftheCouncil,toensureadequateandeffectivesystems,corporategovernance,riskmanagementandinternalcontrol.

Thefunctionreportsdirectlytothechiefexecutiveofficerandhasdirectaccesstotheauditcommittee,itschairpersonandtheCouncil.

The internal audit function is guided by a rolling three-year strategic audit plan in itsoperations. The strategic plan focuses on the high-risk areas of the organisation and isreviewedregularlytoensurerelevanceintermsoffocus.

Internalauditsresponsibilitiesincludeevaluatingcontrolstodeterminetheireffectivenessandefficiencyinordertoprovidemanagementwiththeassurancethatinternalcontrolsarefunctioning as intended. Furthermore, the internal audit function evaluates financial andoperationalperformance information inabid toassistmanagement inensuring that thestrategicandoperationalobjectivesoftheCouncilareachieved.Throughtheperformanceauditsanygapsthatmayexistareidentifiedearlyandremedialactiontakentoensuretheattainmentofstrategicandoperationalobjectives.

In its contribution to the strategic focus of the organisation, the internal audit functionalso assists management by evaluating the process through which strategic objectivesare established and communicated; the accomplishment of objectives is monitored;accountabilityisensured;andcorporatevaluesarepreserved.

ImprovementsinthegovernanceofallareasoftheNHBRChavecomeaboutduetoongoingperiodicauditreviewsandrisk,controlsandgovernancecampaignsconductedbytheinternalauditfunctionaswellasmanagementeffortsandcommitment.

29

THE NHBRC MANAGEMENT STRUCTURE

NB: THE STRUCTURE WAS APPROVED BY COUNCIL ON 29 JANUARY 2010.

Res

earc

h &

Su

bsi

dy

Man

ager

CH

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Man

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Trai

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Offi

ce

Eas

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Reg

ion

alO

ffice

Free

Sta

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egio

nal

Offi

ce

Hu

man

Cap

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Man

ager

Wes

t C

ape

Reg

ion

alO

ffice

Info

rmat

ion

Tech

no

logy

Man

ager

Faci

litie

sM

anag

er

Pro

cure

-m

ent

Man

ager

Fin

ance

Man

ager

Au

dit

Man

ager

Lega

lM

anag

erR

isk

Man

ager

Exe

cuti

veM

anag

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ust

om

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are

Exe

cuti

veM

anag

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chn

ical

Exe

cuti

veM

anag

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orp

ora

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ces

Exe

cuti

veM

anag

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nan

ce

Mar

keti

ng

Man

ager

Co

mp

any

Sec

reta

ry

Str

ateg

ic

Pla

nn

ing

an

d

Info

rmat

ion

Rep

ort

ing

Man

ager

Ch

ief A

ud

itE

xecu

tive

CE

O

CO

UN

CIL

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2010

NON-FINANCIAL PERFORMANCE INFORMATION REPORT

New registration and renewal of registration for home builders (non-subsidy and subsidy) IntermsofSection10(1)oftheact,anypersoninthebusinessofhomebuildingmustregisterwiththeNHBRC.Evaluationofregistration isbasedontechnicalandconstructioncapabilities,andthefinancialandcreditworthinessoftheapplicant.AnonrefundableregistrationfeeofR750ispayabletoNHBRCbeforeregistration.

Duringthe2009/10financialyear,3,616newhomebuilderswereregisteredand10,366homebuildersrenewedtheirregistration.Thisrepresents5%performancedeclineinregistrationsand8%declineinrenewalsascomparedtothe2008/09financialyear.Homebuilderscontinuetoregisterandrenewtheirmembershiponanannualbasisinordertocomplywiththeact.TheperformanceoftheNHBRConnewhomebuilderregistrationsandhomebuilderrenewalsforthefinancialyear2009/10isshowninthefigurebelow.

Chart for the registration and renewals of registration

Enrolment and late enrolment of homes (non-subsidy)Section14oftheactrequiresthatallnewhomesmustbeenrolledwiththeNHBRC15dayspriortoconstruction.ForhomesunderR500,000,theenrolmentfeeiscalculatedas1.3%ofthevalueofthepropertyincludingland.ForhousesaboveR500,000,aslidingscaleisusedtocalculatetheenrolmentfee. The NHBRC has enrolled 26,903 new homes. This represents 36% reduction in householdincome and stringent lending requirements used by banks especially for first time homeowners.Eskompaidwiththe2008/09financialyear.Theeconomicmeltdownhascontributedtothedeclineofenrolments.

Thehousehold sector continued to experiencea fair amount of financial pressureon thebackofmajorjoblossesoverawidefront,decliningrealdisposableincomeandrelativelyhighdebt.

TheNHBRCcatersforlateenrolmentwherehomebuildersstartconstructionwithoutpriorenrollingsuchhomes.TheNHBRChas2,130homesthatwereenrolledlateforthe2009/10financialyear.

14, 000

12, 000

10, 000

8, 000

6, 000

4, 000

2, 000

0

Registration Renewal of registration

2007/08

3, 628

12, 390

2008/09

3, 788

11, 326

2009/10

3, 616

10, 366

31

Chart for the enrolment and late enrolment of homes

Applications for enrolment exclusions: mixed-use developmentsIntermsoftheprovisionsofsubregulation2(a)ofGNR1406inGG20658of1December1999,ahomedoesnotincludeboardinghouses;hostels;institutionalfacilitiessuchashospitals,prisons,orphanagesandotherwelfareaccommodation;timeshareaccommodation;hotelsoranyresidentialstructurewhichisconstructedwithlessthan75%ofthefloordesignedforresidentialpurposes.

Duringtheperiodunderreview,fourapplicationsforexclusionsfromenrolmentwerereceivedfromtheWesternCapeprovincialcustomercarecentre.Threeapplicationswereapprovedandonewasrejected.

Complaints (non-subsidy and subsidy)The housing consumer is entitled to lodge a complaint where the home builder is incontraventionofSection13oftheactforfailingtorespondtolegitimatecomplaintsbythehousingconsumer.TheNHBRChasindicatedthatdecreasedlateenrolmentswouldresultinreducednumbersofcomplaints.Ifabuilderenrolsbeforeconstruction,thataffordstheNHBRCanopportunitytoinspectthehouse,thuslimitingfuturecomplaintsfromthehomeowner.Complaintsusually arisewhenhomebuildersdeviate from the sethomebuildingstandardsbytheNHBRC.Thesearecomplaintslodgedbyhousingconsumersaftertheytookoccupationoftheirhomes.

Ahousingconsumercanlodgeacomplaintagainstahomebuilderwhereahomehasbeenconstructedandoccupiedand isstillunder the fiveyearwarrantyperiod.A totalof1,186complaintswerereceivedduring2009/10.Ofthese,1,168wereclosedand18wereescalatedandsubjectedtoremedialworksprocess.

Enrolment Late Enrolment

90, 000

80, 000

70, 000

60, 000

50, 000

40, 000

30, 000

20, 000

10, 000

0

2007/08

80, 239

4, 132

2008/09

42, 228

3, 085

2009/10

26, 903

2, 130

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2010

Chart for the complaints lodged with the NHBRC

Conciliations (non-subsidy and subsidy)Duringthe2009/10financialyear,374conciliationswerereceivedand193werefinalisedandclosed.Therearehowever,181fileswherefurthermediationbetweenthehomebuilderandhousingconsumerisinprogress.

Filesaccruedovertheyears193intotalarecurrentlysubjecttoaremedialworkprocessthroughtheNHBRChomewarrantyfund.Thesearefileswherehomebuildersareunwillingor unable to rectify defects. The delay in approving remedial works is due to prolongedmediationwherehomebuildersandhousingconsumersarenotagreeingonanumberofthingssuchascontractualobligations.

Chart for conciliations handled by the NHBRC

3, 000

2, 500

2, 000

1, 500

1, 000

500

02009/102008/09

1, 239 1, 186

2007/08

2, 607

900

800

700

600

500

400

300

200

100

02007/08

883

2008/09

424

2009/10

374

33

Remedial work completed by the NHBRC (subsidy and non-subsidy)Wherehomebuildersareunableorunwillingtotakeliabilityformajorstructuraldefectsasreportedbyhousingconsumers,theNHBRCundertakesremedialworkinaccordancewiththeact.TheNHBRChasspentR14.1milliononremedialworksinthefinancialyear2009/10.This represents a 104% increase as compared to remedial work costs in 2008/09. TheNHBRChas,however,spentmorethanR72millioninmitigationofrisksthroughinspectionsconductedduringtheperiodunderreview.Thisrepresentsa13%reductionininspectionfeesascomparedto2008/09.

Chart for the remedial works settled by the NHBRC

Intermsoftheact,everynewhouseenrolledandunderconstructionmustbeinspected.Ifthehouseisenrolledpriortoconstruction,thefirstinspectionincludesthefoundation.Thenumberofinspectionsconductedperhouseisafunctionofthesizeandthecomplexityofthedesignofthehouse.Aspartofitsriskmanagementstrategy,theNHBRCstargetistohaveaminimumoffourinspectionsperhouse.Thechartonthenextpageindicatesthenumberofinspectionscompletedfortheyear.

A total of 237,400 inspectionswere conducted on 76,337houses during 2009/10 financialyear. For the financial year ending 2008/09, 547,960 inspections were conducted on158,680houses.Thedeclineinthenumberofinspectionsconductedwas26%and57%forthe2007/08to2008/09,andforthe2008/09to2009/10,financialyearsrespectively.Thereductionisduetoadeclineinhomebuildingactivitiesfortheyearunderreview.Thedeclineisalsoinlinewiththedecreasednumberofapprovedhouseplansinmajorcities.Theinspectionratioincreasedfrom3.1in2008/9financialyearto3.6in2009/10financialyear.

2008/09

6, 884, 517

2009/10

14, 100, 000

2007/08

4, 522, 327

Remedial work Rm

Inspections (subsidy and non-subsidy)

16, 000, 000

14, 000, 000

12, 000, 000

10, 000, 000

8, 000, 000

6, 000, 000

4, 000, 000

2, 000, 000

0

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2010

Chart for inspection carried out by the NHBRC

Suspensions, deregistration and withdrawals (subsidy and non-subsidy)Ifahomebuilderisderegisteredorwithdrawsfromthehomebuildingindustry,thisposesahugerisktotheNHBRCbecause,intheeventthattherearestructuraldefects,recoursetothehomebuilderwouldbedifficult.Ahomebuilderissuspendedforanumberofreasons,oneofwhichisnon-compliancewiththeNHBRCstechnicalrequirements,asstipulatedinthehomebuildingmanual.

Inthe2009/10financialyear,therewasnovoluntaryderegistrationofhomebuilders.Atotalof452homebuildersweresuspended.Thisrepresentsan increaseof136homebuilderssuspended as compared to 2008/09. The increase in number of suspensions is due tothe inabilityofhomebuilders tomeet theirobligations in termsofSection13of theact.Suspensionsarealsoa functionofcomplaints lodgedbyhousingconsumers.With fewercomplaints,fewersuspensionswererealisedduringtheyear.Thechartbelowindicatesthenumberofhomebuilderssuspendedinthepastthreefinancialyears.

Chart of suspended home builders

800, 000

700, 000

600, 000

500, 000

400, 000

300, 000

200, 000

100, 000

02007/08

738, 001

2008/09

547, 960

2009/10

237, 400

700

600

500

400

300

200

100

02007/08

645

2008/09

316

2009/10

452

35

SUBSIDY SECTOR

Since31March2006,subsidyprojectsaresubjecttoatwo-phaseenrolmentprocessinorderfortheNHBRCtoachievetherequiredriskmanagementbeforeahomeenrolmentcertificateisissued.Thesephasesincludeprojectenrolmentandhomeenrolment.IntermsoftheactandPart3,Chapter3oftheHousingCode,developersofsubsidyprojectsarerequiredtoregisterandenrolallprojectswiththeNHBRC.

Project enrolment phaseDuringtheprojectenrolmentphase,NHBRCassessesthesubmittedprojectswithparticularemphasisonthephaseonegeotechnicalinvestigationreport.Inthisfinancialyear,NHBRCreceivedseventyfour(74)projectswithacombinedtotalof29,846housingunitsfortheprojectenrolmentphase.Fortythree(43)projectswithatotalof24,564housingunitswereapproved.Belowisachartshowingtheperformanceforthepastthreeyears.

Chart of project enrolment for Phase 1

Also, it shouldbenoted thatmostof theprojectssubmitted forprojectenrolment in thisfinancialyearwillonlycommenceconstructioninthenextfinancialyear.TheprojectenrolmentnumbersarelowinprovinceslikeKwaZulu-Natal,EasternCapeandNorthWestbecausetheprovincesareenrollingruralprojects.Ruralprojectsareonlyassessedforhomeenrolmentstatusbecauseinmostcasestherearenoservicestobeinstalledandthereforethephasetwogeotechnicalreportisnotrequired.Theprovincialdepartmentsofhumansettlementsenrolforprojectsonce-offandtheroll-outforconstructionovertwofinancialyears.

90, 000

80, 000

70, 000

60, 000

50, 000

40, 000

30, 000

20, 000

10, 000

0

2008/092007/08 2009/10

63, 848

Project received Project approved

89, 997

75, 633

67, 706

29, 846

24, 564

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NN

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2010

Home enrolment phasePriortotheconstructionofhomes,thedeveloperorhomebuilderpreparescomprehensivedesignsbasedoneacherfsoilclassdesignation,certifiedbyacompetentpersonfor thedifferenttypologiesinaccordancewiththeprovisionsoftheNHBRChomebuildingmanuals.Thisyear,onehundredandfifteen(115)projectsweresubmittedforthehomeenrolmentphasewithacombinedtotalof69,456units.Outofthe115projects,78projectswith41,616housingunitswereapprovedaspresentedinchartbelow.

Chart of home enrolment for Phase 2

NoprojectswerereceivedforhomeenrolmentfromLimpopoduringtheperiodofreview.However,indicationsfromtheprovincewerethatsubmissionswouldbemadebeginningthenextfinancialyear.

The implication of non-enrolment is that none of the projects under construction areinspectedbytheNHBRCandthereforenotcoveredbythewarrantyscheme.TheNHBRCis,however,engagingtheprovincialhumansettlementsdepartmentsandassistingthemingettingprojectsenrolledandinspected.Theprovincialdepartmentsofhumansettlementsenrolforprojectsonce-offandroll-outforconstructionovertwofinancialyears

80, 000

70, 000

60, 000

50, 000

40, 000

30, 000

20, 000

10, 000

0

2008/092007/08 2009/10

30, 678

72, 929 70, 087

55, 755

69, 456

41, 616

Project received Project approved

37

TECHNICAL AND INFORMATION TECHNOLOGY DIVISION

THE COUNCIL IS EMPOWERED BY SECTION 5 OF THE ACT TO:

engageinundertakingstopromoteimprovedstructuralqualityofhomesconstructed intheRepublic; engageinundertakingstoimproveethicalandtechnicalstandardsinthehomebuilding industry;and generallydoallthingsnecessaryorexpedienttoachieveitsobjectsandtheobjectives ofthisact.

Basedontheaboveobjects,thestrategyofNHBRCtechnicaldivisionis: topositiontheNHBRCasaleaderinknowledgecreation,technicalandtechnological buildingsolutionsthroughstrategicpartnerships;and toprovidediversifiedservicesandproductsinlinewithchangingbuildingrequirements andsustainablehumansettlements.

The following summary highlights the major activities and achievements of the divisionduringthecurrentfinancialyear.

CENTRE FOR HOUSING PERFORMANCE ExCELLENCE SECTION

Finalisation of Eric Molobi Housing Innovation HubNotwithstanding the dire need for speedier and heightened delivery, all housing projectsoughttobegearedtowardsmeetingNHBRCtechnicalrequirementsandNationalBuildingRegulations. This, however, should not detract from exploring the use of alternativeinnovativebuildingmaterialsandmethodswhetherforcosteffectiveness,energyefficiency,environmentallyfriendlyreasonsorsustainablehumansettlements.ThisisprincipallywhyNHBRC and the nationalDepartment ofHumanSettlements established the EricMolobiHousingInnovationHubinSoshanguve,Pretoria.

Theinnovationhubhasthefollowinginplace: ashowvillageofinnovativehousingsystems; atrainingandconferencecentre;and amaterialstestingcentre.

Inthecurrentfinancialyear,allnecessarytestingequipmentswereprocuredandinstalled,and thematerials testingcentrewascommissioned inMay2010. It is envisaged that thematerialstestingcentrewillfacilitatetestingandevaluationofcomplianceofmaterialsandproductswiththeacceptablebuildingstandards,therebyensuringthatqualityandfunctionalhousingproductsaredelivered.Thetestinginfrastructurewillalsoassistotherorganisations,suchasAgrmentBoardofSouthAfrica,intheapprovalofinnovativehousingsystems.

Assistance to the provincial human settlements departments in geotechnical investigationsAspartofitsstrategicobjective,NHBRCsupportsthegovernmentsinitiativeandstrategyofsustainablehumansettlementsbyassistingtheprovincialhumansettlementdepartmentsand local authorities during all stages of housing developments and implementation ofsubsidyprojects.Oneof themajor initiativesofNHBRCwas toassist thedepartments intheappointmentandprojectmanagementof geotechnical investigations. This resulted inan improved turnaround time forapprovalof subsidyenrolments.TheNHBRCperformedgeotechnical investigations in the followingprovinces:EasternCape (7,819),Mpumalanga(11,702),NorthernCape(3,162)andFreeState(4,600).

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International Innovative Housing and Sustainable Energy Efficiency CompetitionTheInternationalInnovativeHousingandSustainableEnergyEfficiencyCompetition2009/10is collaboration betweenNHBRC, AbsaBank, theNationalHousing FinanceCorporation(NHFC), Agrment Board of S.A., Agence Francaise De Development, DrakensteinMunicipality,DepartmentofHumanSettlements,SwissDevelopmentCorporationandtheUniversityofPretoria.

The competition kicked off in Wellington (Drakenstein Municipality), Western Cape, on5March 2009. Eighteen local and international finalists from Kuwait, Australia, Canada,CzechRepublic,NetherlandsandNamibiaconstructedgreenbuildingsystems thatwereenergyefficient.

ThejudgingandsocialacceptancesurveywereconductedinJanuary2010andasymbolicceremonytohandoverthehousestoanumberofbeneficiariestookplaceinFebruary2010.Themostinnovativedesignsinthecategorieslowcost(subsidy)andaffordablehousingwereawardedprizemoneyofR250000forfirstplace,R100,000forsecondplaceandR75,000forthirdplace,sponsoredbyAbsa,inMay2010.

39

INFORMATION TECHNOLOGY

Inthecurrentfinancialyear,theITsectionengagedOracleSAtoassistinde-buggingtheproblemswithOraclefinanceandothermodules.Themobilesolutionfortheinspectionshasalsobeenupgraded.

Sincethe interventionofOracleSA, the followingachievementsweremade in thecurrentfinancialyear:1. UpgradeofOraclefromversion12.01to12.06,whichresultedinresolvinganumberof financialproblems;2. Set-updeficienciesintheOraclefinancialmoduleshavebeenaddressed,andanumber offinancialcontrolshavebeenputinplace;and3. TheSiebelsystemhasbeenstabilised.

Thefollowingisstilloutstanding,andimplementationwillbecompleteinthenextfinancialyear: disasterrecovery enterpriseserviceframework electronic-VFP geographicinformationsystem

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MARKETING AND PUBLIC RELATIONS

Thepurposeofthemarketingandpublicrelationssectionistoinformhousingconsumersandhomebuildersabouttheirrights,obligationsandresponsibilitiesintermsoftheHCPMA,aswellastopromotetheNHBRCwarrantyschemestoallcustomersandstakeholders.

Amulti-lingualnationalawarenessroadshowwasundertakeninAprilandMay2009toensurehousingconsumersandhomebuilderswere informedof their rightsandresponsibilitieswithregardstotheact.Itwasagrassrootsapproach,targetingcommunityvenues.

Participation in provincial consumer exhibitions increased this financial year, the largestexhibition being that at theRandShow. This ensured the awareness roadshowwas alsotakentothepublic.Thesectionsupportedyouthtrainingprojects,mediaandcelebritybuildsinconjunctionwiththenationalDepartmentofHumanSettlements.

AnadditionalInternationalHousingInnovationHubCompetitionwasinitiatedinthe2009/10financial year. Competition winners will be awarded in the next financial year. The firstHousingInnovationHubwaslaunchedin2007inSoshanguve.

41

STRATEGIC PLANNING AND RESEARCH

The strategic planning and research section has a duty to conduct the performanceinformationassessment for the level1scorecard; the level2scorecard,whichcovers theprovincialcustomercarecentres;andalltheheadofficesections.ThenationalDepartmentofHumanSettlementshasemphasisedthat,onaquarterlybasis,itneedsareportfromtheNHBRContheperformanceinformationagainstthesetstrategicobjectives.Theperformanceinformationassessmentisaccompaniedbytheportfolioofevidencewhichservesasproofthatthesettargethasindeedbeencarriedout.

Thestrategicplanningandresearchsectionhasconductedworkshopsfortheassessmentofthelevel1scorecardforall thequartersofthe2009/10financialyear.WorkshopswerealsoconductedforpurposesofcarryingouttheassessmentfortheprovincialcustomercarecentresandallthesectionsatheadofficeinBryanston.Alltheassessmentswerelinkedtotheinternalauditplantimeframes.

Thesectionhasbeenconducting researchaswell; two fact sheetswereproduced in the2009/10financialyear.Thefactsheetswereproducedforthetwosemestersoftheyear.ThesectionhasadutytodrawcomparisonsbetweenthenumberofbuildingplansapprovedandthenumberofhomesenrolledwiththeNHBRC.ItalsocompareslateenrolmentwiththeeffectthishasontheamountofmoneytheNHBRCspendsonremedialworks.Thestrategicplanning and research section is responsible for the compilation of the organisationalstrategic corporate plan, and ensuring that such is submitted to the executive authoritywithinthestipulatedduedates.

Thesectionisalsoresponsibleforthepromotionofaccesstoinformationinthesensethatallexternalinformationqueriesarechannelledthroughit.Thesectionhashandledanumberofqueriesfromoutsidecompanies,whichsoughtdataneededtoissuetheirpublications.

The strategic planningand research section is also responsible for theproductionof thequarterlyreportsthataresenttotheexecutiveauthorityonaquarterlybasis.Thequarterlyreportscomprisetheperformanceofthevaluablefinalproduct;performanceofthesubsidysector; a report from human capital, training and legal services; the governance report;financeperformance;andtheperformanceassessmentoftheNHBRCintermsofthesetstrategicobjectives.

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CORPORATE SERVICES DIVISION

Theoverarchingvisionofthecorporateservicesdivisionistoprovideexcellentend-to-endsupportservicestotheemployeesoftheNHBRCthroughthegrowthanddevelopmentofitspeople.

Corporate services comprises the legal; human capital and education; and training anddevelopmentsections.Thecorporateservicesdivisionensuresthathumancapitalisusedwiselyandmanaged,andthattheNHBRCmeetsthemandateoftheHousingConsumersProtectionMeasuresAct,1998(ActNo.95of1998)throughtheprovisionoflegalservices.

43

NEW BEGINNINGS

Amajorprojectfortheyearunderreviewwastheorganisationalredesignproject.ItsgoalwastorealigntheorganisationaldesigntothecorebusinessneedsoftheNHBRC.WiththeincomingCouncil,afocusedeffortwasplacedoncompletingtheprojectandcommunicatingtheNHBRCsnewvisionandstrategytoallemployees.ThiswasdonethroughroadshowstoeachandeveryNHBRCoffice.

Majorachievementsinthedivisionhavebeen: Completionoftheorganisationredesignproject; Reviewofallhumancapitalpolicies; Exceedingtrainingofemerginghomebuildertargets; CETAaccreditationprocessfast-tracked; Inspectortrainingmoduledevelopment; FixingoftheOracleleavemodule;and Anumberofwell-managedemployeewellnessprogrammes.

Following the introduction of Oracle, payroll has run smoothly during this period but aconstant need remains to monitor all Oracle-related payroll matters as troubleshootingrevealsincidentalproblemsrelatingtoleaveandotherminorissues.

Employee turnover for theperiod is25personsor6.9%whichshowsminimalmovementcomparedtothe2008/9financialyear,whereweexperienced6.86%turnoverofemployees.

TRAINING

Emerging home builder trainingAtotalof7,555emerginghomebuildersweretrainednationallyduringthe2009/10financialyear,whichis16%abovethetrainingtargetof6,500whichwassetforthefinancialyear.Ayear-on-yearcomparisonmadewiththe2008/9period,when5,676learnersweretrained,showsa33%increase.TheNHBRCtrained2,287femalesand5,268malesinthe2009/10financialyear.Thechartbelowindicatestheperformanceforthepastthreeyears.

Chart of home builders trained for the three years

Training

8, 000

6, 000

4, 000

2, 000

0

Training

2008/092007/08 2009/10

4, 512

5, 676

7, 555

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Special ministerial projects TheNHBRCconductsthefollowingspecialMinisterialProjects: Youth-in-HumanSettlements(YiHS)TrainingProgramme CommunityDevelopmentProgrammes

EMPLOYMENT EQUITY

TheNHBRCemployeecomplementasattheendof31March2010is354.Thenumberofpostsontheneworganogramis391.Thenewvacancyrateistherefore7.9%.Thenationaldistributionofracecategoriesispresentedbelow.TheNHBRChasexceededitsoverallracetargetsbutananalysisofthedatapresentsthefollowing:

Toofewdisabledemployees; Toofewwomeninmanagementposts; Toolargefemaleskewintheorganisation;and 93.5%blackgenerici.e.African,colouredandIndian.

The2009employmentequityreportandplanwassubmittedontimetotheDepartmentofLabour.

Employment equity report by gender:

Theabovetableindicatesthat146malesand208femalesareemployedbytheNHBRC.Thetotalnumberofemployeesasindicatedinthetablestandsat354.

Employee equity report by race

Thetableaboveindicatesthatofthe354employeesoftheNHBRC,298areAfrican,24arecoloured,10areIndianand24arewhite.

STAFF MOVEMENT

Atotalof17newappointmentsweremadebytheNHBRCforthe2009/10financialyear.Atotalof29employeesterminatedtheirserviceswiththeNHBRC;employeesequalling29resignedfromtheemployoftheNHBRC,onestaffmemberretiredandfivestaffmembersweredismissed.

Male Female Total

Seniormanagement 3 2 5

Managementandqualifiedstaff 141 186 327

Semi-skilledsupportstaff 2 20 22

TOTAL 146 208 354

African Coloured Indian White Total

Seniormanagement 3 1 0 1 5

Managementandqualifiedstaff 271 23 10 23 327

Semi-skilledsupportstaff 22 0 0 0 22

TOTAL 298 24 10 24 354

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LEGAL SERVICES

AMENDMENTS TO THE ACT

Thelegislativereviewprocessrelatingtotheacthascommenced.Duringthefourthquarterofthe2009/10financialyear,twolegislativetaskteammeetingswereheldandameetingwiththenationalDepartmentofHumanSettlementslegislativedrafterswasheld.Thetermsof referencewereapprovedbyCouncil toappointanexternalserviceprovider throughanopentenderprocess.

LITIGATION AND INTERDICTS

One of the inherent objectives of the legal services section is the duty to maintain acomprehensive litigationmanagement programme, in order to reduce litigation, litigationcosts,negligenceandactsoromissionsbystaffemployedbytheNHBRCwithoutsacrificingacaseorlitigationresults.Thesectiondealtwithfournewlitigationmatters,bringingthetotalto19matters.

As litigation is ongoingand it is often impossible topredict theperiodwithinwhich suchmatterswillbefinallyadjudicateduponbycourtsoflaw,thesectionstillhasonrecordcivilactionsthatwereinstitutedsincethe2005/06financialyear.Thetablehereundershowsthenumberofpendingmattersthatwereinstitutedduringthecalendaryears2005until2010.Fulldetailsrelatingtoallmattersareavailableonrequest.

Table indicating litigation matters

Overall,notexcludingmattersthatarefinalised,thecausesofactioninrespectofalllitigationfortheperiod20052010rangefrombankfinancialguarantees,tenderawards,defamation,breachofcontract,non-compliancewiththeprovisionsofSection3(8)oftheact,contractualclaims relating to rectification and suspensions of home builders.More than 50%of sub judicemattersarefortheperiodpriortothe2009calendaryearandconcertedeffortshavebeenmadetoensurethattheyarefinalisedduringthe2010/11financialyear.

TheNHBRChashadtopaysubstantialamountsinrespectoftwomatters,i.e.theKenosimatter, which related to tender procurement processes and awards, and the Eezybuiltmatter,whicharoseasaresultofbreachofcontractoccasionedbyfailuretoprovidespecificcontractualobligationsintermsofcertainprovisionsinthesignedcontract.ThesettlementsamountedtoapproximatelyR5.7millionpaidbytheNHBRC.

Calendaryear Numberofsubjudicematters

Percentageofcurrentmatters

2005 4 21%

2006 2 10.5%

2007 2 10.5%

2008 2 10.5%

2009 5 26%

2010 4 21%

TOTAL 19 100%

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ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2010

Report of the Auditor-General 47

Accounting Authoritys report 51

Statement of Responsibility 55

Statement of financial position 56

Statement of financial performance 57

Statement of changes in net assets 58

Cash flow statement 59

Notes to the annual financial statements 60

Report of the Audit and Risk Committee 90

47

REPORT ON THE FINANCIAL STATEMENTS

Introduction

I have audited the accompanying financial statements of the National Home BuildersRegistrationCouncil,whichcomprisethestatementoffinancialpositionasat31March2010,andthestatementof financialperformance,statementofchanges innetassetsandcashflowstatement for theyear thenended,asummaryofsignificantaccountingpoliciesandotherexplanatoryinformation,assetoutonpages56to89.

Accounting Authoritys responsibility for the financial statements

The accounting authority is responsible for the preparation and fair presentation of thefinancialstatements inaccordancewithSouthAfricanStandardsofGenerallyRecognisedAccountingPractice(SAStandardsofGRAP)andinthemannerrequiredbythePublicFinanceManagementActofSouthAfrica,1999(ActNo.1of1999)(PFMA).Thisresponsibilityincludes:designing, implementingandmaintaining internal control relevant to thepreparationandfairpresentationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherdueto fraudorerror;selectingandapplyingappropriateaccountingpolicies;andmakingaccountingestimatesthatarereasonableinthecircumstances.

Auditor-Generals responsibility

Asrequiredbysection188oftheConstitutionofSouthAfrica,section4ofthePublicAuditActofSouthAfrica2004(ActNo.25of2004)(PAA)andsection15(6)(c)oftheHousingConsumerProtectionMeasuresAct(ActNo.95of1998),myresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonmyaudit.

I conducted my audit in accordance with International Standards on Auditing andGeneral Notice 1570 of 2009issuedinGovernment Gazette 32758 of 27 November 2009.ThosestandardsrequirethatIcomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreefrommaterialmisstatement.

Anaudit involvesperformingprocedures to obtain audit evidenceabout theamounts anddisclosures in the financial statements. Theprocedures selecteddependon the auditorsjudgement,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror. Inmakingthoseriskassessments,theauditorconsiders internal control relevant to the entitys preparation and fair presentation ofthe financial statements in order to design audit procedures that are appropriate in thecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentitysinternalcontrol.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.

REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON THE FINANCIAL STATEMENTS OF THE NATIONAL HOME BUILDERS REGISTRATION COUNCIL FOR THE YEAR ENDED 31 MARCH 2010

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IbelievethattheauditevidenceIhaveobtainedissufficientandappropriatetoprovideabasisformyauditopinion.

Opinion

Inmyopinion,thefinancialstatementspresentfairly,inallmaterialrespects,thefinancialpositionof theNationalHomeBuildersRegistrationCouncilasat31March2010,and itsfinancialperformanceanditscashflowsfortheyearthenendedinaccordancewithSAStandardsofGRAPandinthemannerrequiredbythePFMA.

Emphasis of matter

I draw attention to the matters below. My opinion is not modified in respect of thesematters:

Restatement of corresponding figures

Asdisclosedinnote28tothefinancialstatements,thecorrespondingfiguresfor31March2009 have been restated as a result of an error discovered during 2010 in the financialstatementsoftheNationalHomeBuildersRegistrationCouncilat,andfortheyearended31March2010.

Fruitless and wasteful as well as irregular expenditure

Asdisclosedinnote23tothefinancialstatements,fruitlessandwastefulexpendituretotheamountofR8879510wasincurredduetointerestpaymentstosuppliers,penaltypaymentstotheSouthAfricanRevenueServiceandoutofcourtsettlements.

Asdisclosedinnote23tothefinancialstatements,irregularexpendituretotheamountofR397893wasincurredasapropertenderprocesshadnotbeenfollowed.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

IntermsofthePAAandGeneral notice 1570 of 2009,issuedinGovernment Gazette No. 32758 of 27 November 2009,Iincludebelowmyfindingsonthereportonpredeterminedobjectives,compliancewiththePFMAandfinancialmanagement(internalcontrol).

49

Findings

Predetermined objectives

Non-compliancewithregulatoryandreportingrequirements

Public Finance Management Act (PFMA)

Submission of strategic plan

TheaccountingauthorityoftheNationalHomeBuildersRegistrationCouncildidnotsubmittheproposedstrategicplanatleastsixmonthsbeforethestartofthefinancialyearofthedesignateddepartment,oranothertimeperiodasagreedtobetweentheexecutiveauthorityandthepublicentity,asrequiredbyTreasuryRegulation30.1.1.

Inadequate quarterly reporting on performance information

TheformatandcontentofthequarterlyreportsoftheNationalHomeBuildersRegistrationCouncilwerenotconsistentwiththeperformanceobjectives,measuresandtargetsasperthestrategicplanoftheentity.

Compliance with laws and regulations

Value-AddedTax(VAT)ActNo.89of1991(asamended)

Non-adherence

The amount declared to the South African Revenue Service for output and input VAT was in contravention of section 28 of the act, due to an inaccurate VAT report beingusedtocalculateamountsdisclosedontheVATreturns.

HousingConsumerProtectionMeasuresAct(No.95of1998)

Non-adherence

Contrary to the requirements of section 16(7) of the Housing Consumer Protection Measures Act, the National Home Builders Registration Council invested in equity instruments.ConcurrencefromtheMinisterhasbeenrequestedbuttodatehasnot beenobtained.

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INTERNAL CONTROL

IconsideredinternalcontrolrelevanttomyauditofthefinancialstatementsandthereportonpredeterminedobjectivesandcompliancewiththePFMAandsection15(6)(c)oftheHousingConsumerProtectionMeasuresAct,butnotforthepurposesofexpressinganopinionontheeffectivenessofinternalcontrol.Themattersreportedbelowarelimitedtothedeficienciesidentifiedduringtheaudit.

Leadership

The accounting authority exercised inadequate monitoring of controls to ensure adherencetotheinternalpoliciesandprocedureswhichinturnwouldhaveensured thattherewasadequatecompliancewithspecificlawsandregulationsandonreporting onpredeterminedobjectives.

Pretoria

31July2010

51

TheappointmentofthecurrentCouncilbytheformerMinisterofHousing,(Hon.Dr.LindiweSisulu),onemonthintothe2009/2010financialyearcameatacriticaltimefortheNHBRC.Itisregrettablethattheonsetofthe2009/10financialyearboretestimonytotheeconomicmeltdownwhosedebilitatingeffectswasexperiencedbyvariousindustriesacrosstheglobalspectrum. The growth of the residential property market was not spared the onslaughtbroughtaboutbythestringentlendingmethodsandthehighpricesofbuildingmaterials.Itisthuswithasenseofgratificationthatthisreportoftheorganisationispresented.

Theroleandresponsibilitiesthatareentrustedonpublicinstitutionslikeoursweredischargedwithahighsenseofethicalandlegalcommitment.AthoroughunderstandingandconstantapplicationoforganisationalsuccessfundamentalshadtobeappliedbytheCouncilinordertoachieveconsistentresults,consistentwiththemandateoftheNHBRCwhichistoensuretheprotectionoftherights,amongstothers,ofthosewholackthepowersandtheinfluencetobringaboutmeaningfulchangeintheirownlives.Council,togetherwiththeshareholderandtheexecutiveteamembarkedonandadoptedpoliciesthatwillensurethatthevisionoftheNHBRCcontinuestoberelevant.

ThesubsequentchangesinthepoliticalauthorityandthenameoftheNationalDepartmentofHousingtoNationalDepartmentofHumanSettlementsalsocontributedtothistotalreviewofthestrategicdirectionoftheorganisationtofitintothestrategicintentofgovernmentinthecreationofsustainablehumansettlements.TheNHBRCrespondedpositivelytotheideaofhumansettlementsasintroducedbygovernmentbydevelopingaStrategicCorporatePlanwithoneoftheobjectivesthereofbeingthatofcontributingtothecreationofsustainablehumansettlementsbyensuringthedeliveryofqualityhomestothehousingconsumers.

TheroleofthedepartmentinitscapacityastheexecutiveauthorityandshareholderremainedcriticalthroughoutthisfirstfinancialyearoftheCouncilstermofoffice.

MANAGEMENT OF NHBRC

TheCouncil inherited an organisationwithout aChiefExecutiveOfficer (CEO), a situationwhichalsopresenteditselfasahugechallengefortheCouncil.TheCouncilwas,however,abletoputinplaceanInterimCEO(Mr.SiphoMashinini)whowasappointedfromamongsttheCouncilmembers,whilsttheCouncilproceededwithrigorousandtransparentrecruitmentprocesstoemployanewCEO.

IampleasedtomentionthatCouncilwasabletofind,afterthesecondroundofinterviews,asuitablecandidateforthispositionandappointedMr.SiphoMashininiasthenewCEOoftheorganisationeffectivefromthestartofthenewfinancialyear(2010/2011).

CouncilalsoinheritedtwoinvestigativereportswhichemanatedfromtheworkofthepreviousCouncilandthethenNationalDepartmentofHousing,whichreportsplayedanimportantpartinthedevelopmentofastrategyfortheorganisation.ThesereportsrelatedtotheorganisationalredesignandhealthcheckoftheorganisationrespectivelyandassuchassistedtheCouncilinthedevelopmentofaworkingstrategyfortheorganisation.TherecommendationsofthesaidreportsarebeingimplementedandphasedintothestrategyoftheNHBRC.

ACCOUNTING AUTHORITYS REPORTfor the year ended 31 march 2010

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CORPORATE GOVERNANCE

One of the main objectives of the Council when it first met was to ensure that it putsgovernancestructuresinplace,whichwillassistinthegovernanceoftheorganisation.TheCouncilisempoweredintermsoftheHousingConsumersProtectionMeasuresAct(Act95of1998)asamended(theAct)toestablishanumberofCommitteeswhichassistandadviseCouncil on the appropriate functioning of the organisation to ensure full discharge of itsmandate.Letmetakethisopportunitytothankmembersofthevariouscommitteesfortheirvisionandselflessdedication inensuringthat justoneyear intooffice,numerouspoliciesweredevelopedandadopted.

The NHBRC regards the principles of sound corporate governance as an imperative inobtainingandretainingthetrustofstakeholders,andtheoverarchingobjectiveofperformancewithintegrity.Theseprinciplesarealsovitalinsecuringrespectfromotherkeystakeholders,includingcustomers,suppliers,government,employeesandthehomeowners.

TheNHBRCCouncilplacedagreatdealofimportanceongoodcorporategovernanceandremainscommittedtoupholdingthehigheststandardsofbusinessintegrityandtransparencyinallaspectsofgovernanceoftheorganisation.TheNHBRCendorsesthetenetsoftheKingIIandKingIIIReports,PublicFinanceManagementAct(PFMA)andprotocolonCorporateGovernance in the Public Sector. These tools have been adopted and integrated into theNHBRCsmanagementphilosophyandpractices.TheCouncilhasalsoadoptedthesetools,whichhavebeenincorporatedintotheShareholderCompact with the Executive Authority and into theNHBRCCouncil Charter. The CharterwasdevelopedinlinewiththeHumanSettlementsPublicEntitiesCharterFrameworkforBoardDevelopmentaspublishedbytheMinistryofHumanSettlements,anddealswithallgovernanceissues.TheseincludemanagementofdisclosuresofconflictsofinterestsintheCouncilasdisclosedunderthenote(22)dealingwithrelatedpartiestransactions inthefinancialstatements,andthesubsequentreportingofsuchdisclosurestotheMinister,astheauthorityvestedwiththepowerofappointmentandremovalofCouncilMembers.

WARRANTY PROTECTION

TheNHBRCsobligationtorepresenttheinterestofhousingconsumersbyprovidingwarrantyprotectionagainstdefectsinnewhomesremainedoneofourstrategicfocalpoints.

CouncilputstrategiesinplaceforthepreservationofcapitalsoastoensurethattheNHBRCremained financially solvent tomeet remedial claims against thewarranty fund, with norecourse to the Honorable Minister of Human Settlements for additional funds. Councilconsideredtherecommendationsarisingfromtheannualactuarialassessmentanditfurtherreviewed its investments policy and strategy to ensure that the warranty fund remainedsustainableandabletomeethousingconsumersclaims.

WearegratefultomentionthattheWarrantyFundremainssolventandtheenrolmentfeeschargedbytheNHBRCarecurrentlysufficienttoprovidewarrantycover,withnon-subsidyenrolmentssubsidisingthesubsidysector. CouncilhadproposedamendmentstotheActwhichwillensurethatenrolmentfeesinthefuturecontinuetobesufficient.

ACCOUNTING AUTHORITYS REPORTfor the year ended 31 March 2010

53

REGULATION OF THE HOME BUILDING INDUSTRY

WhilethetrainingofhomebuildersremainedoneoftheNHBRCsstatutoryobligations, itbecameclearthatthecompellingnegativeeconomicrealityrequiredfortifiedallianceswithstrategicpartners.InthisregardtheNHBRCcontinuedtosupporttheNationalDepartmentofHumanSettlementsasaServiceProviderOrganisationinordertorollouttheYouth-In-HousingTrainingProjectanddeliverhousingconstructiontrainingtoyouthsnationally.Wecontinuedtopartneralsowithotherindustryplayersinrespectoftrainingoftheyouthandwomen.TheNHBRCEducation,TrainingandDevelopmentprogrammeswereput inplaceforthepurposeofbenefitingthehomebuilderswithspecialemphasisonempoweringandbuildingcapacityamongtheunemployed,women,peoplewithdisabilitiesandtheyouth.

Thechallengethatfacestheresidentialpropertyindustryremainsoneofensuringthatthereisnomassexodusofhomebuildersnecessitatedbythestrictlendingratesthatconstrictsthegrowthofnewresidentialproperties.Whileitisevidentthatthedemandfornewhousesremains,thestarkrealityremainstobethelackofsupplythereof,whichinevitablyleadstoliquidationofbusinessesofhomebuildersandtherefore,non-renewaloftheirregistrationwithNHBRC.Itremainsourdutytoensurethatstrategicpartnershipswithotherroleplayersare fosteredwhichwill ensure viability, sustainability and an integrated regulation of thehomebuildingindustry.

Internationalstrategicpartnershipshavecemented theparticipationof theNHBRC in theInternationalHousingandHomeWarrantyConferencewhichisaglobalplatformforregulatorybodiesinthehomebuildingindustriestodiscussissuesrelatingto,amongstothers,warrantyfundmodels,inspections,theeffectoftheglobaleconomicfactorsontheresidentialindustryandlicensingofhomebuilders.OurparticipationinthisconferenceenablestheNHBRCtocontinuetomonitoritsriskappetitebymonitoringandbeinginformedoftheinternationalstandards,normsandpracticesrelatingtoregulationofahomebuildingindustry.

ItwasindeedanhonourwhenthenewCouncilwasinformedthattheNHBRCwillhostthe11thInternationalHousingandHomeWarrantyConferencein2011.Inthisregard,Councilhasduring this financial yearestablished further strategicpartnershipswithNHBC (UK),AssociationofEuropeanHomeWarrantyOrganisationandNationalDepartmentofHumanSettlements(co-host)inpreparationforthe2011conference,andweareconfidentthatSouthAfricawillsuccessfullyhostaremarkableconferencein2011.

LEGISLATION

The current year haswitnessed significant legislative changes being proposed as part ofrealigningthestrategic intentof theNHBRCtothenewstrategyofgovernmenttodeliversustainable human settlements. These proposed changes have received the support oftheNationalDepartmentofHumanSettlementswhichhasundertakentoensurethat theamendmentstotheActareprocessedtobereadyfortheParliamentaryProgrammeinthecomingyear.Weareconfident that theproposedamendments,oncepassed into law,willstrengthen the operations of the organisation and provide housing consumerswithmoreprotection.

ACCOUNTING AUTHORITYS REPORTfor the year ended 31 March 2010

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CONCLUSION

The vibrant nature of the home building has afforded theNHBRCwith an opportunity ofidentifyingkeyindustrystakeholderstobeengagedinthedischargeofthemandateoftheorganisationtoensuretheirfullparticipationandtransparencyinhowtheCouncildischargesitsmandate.

WhilemanagementoftheNHBRC,likeanyotherorganisation,facesthetaskofremainingrelevantandresponsivetoitskeystakeholders,Councilhasconfidencethatitisadutythatwillsurelybedischargedthroughenduringleadership.

OnbehalfofCouncil,IthankthesupportoftheMinistryofHumanSettlements,theindustryplayersandthemanagementandstaffof theNHBRCduringthischallengingfirstyearofCouncilstermofoffice.SpecialthankstotheParliamentaryPortf