What to expect from a B-BBEE Professional

By: Prebashini Govender

The purpose of B-BBEE verification is to issue an accurate B-BBEE certificate and score for an organisation, based on credible evidence provided by an organisation.
All B-BBEE measurements calculated for the purpose of issuing certificates must be done by a South African National Accreditation System (SANAS) accredited B-BBEE verification agency, or individual verification practitioner (B-BBEE Professional).

By doing this, an organisation will have peace of mind that the score they attain on their certificate is based on a credible verification measurement, which is valid, accurate and complete, and has been verified as such. A B-BBEE Professional is defined in the verification manual as a "person who performs any work in connection with rating the status of enterprises in terms of Broad-Based Economic Empowerment compliance, on the authority of, or for a rating agency accredited by, a B-BBEE Professional regulator."

In practice, the mission of the regulator SANAS, is "to create an impartial and transparent mechanism for organisations to independently demonstrate their competence." As per the requirements of the Act, a B-BBEE Professional, is obligated
to be accredited by SANAS. The verification manual forms the basis according to which B-BBEE professionals should verify and organisation, or measured entity to obtain their score. The manual is made up of a set of guidelines outlining minimum requirements that are prescribed for B-BBEE professionals by the Department of Trade and Industry (DTI).

These guidelines must be adhered to when conducting verifications, assessments and/or evaluations. Not adhering to these prescribed minimum guidelines will result in a non-conformance status issued to a B-BBEE Professional by SANAS., who conduct annual audits of those operating within the B-BBEE field. Non- conformance results in the withdrawal of the B-BBEE Professional's accreditation by SANAS.

The verification manual is structured as follows:

  • Guidelines for general principles to be followed by verification agents/auditors

  • Guidelines for the methodology to be followed when conducting a verification

  • Samples of B-BBEE Certificates

  • Minimum verification procedures per element

A verification is based on evidence presented to a B-BBEE Professional, and is defined in the manual as follows: "all the information used to establish a fact in issue, including information supplied by an organisation or measured entity and used by the B-BBEE Professional in determining the scores allocated to individual B-BBEE scorecard elements and B-BBEE status for the measured entity. Evidence includes the information contained in the accounting records underlying the financial statements and other information relating to the measured entity's B-BBEE scorecard elements obtained through inquiry, inspection of records or documents or written confirmations, recalculation and analytical procedures."

When performing a verification, the information and transactions relevant to a scorecard are verified on a sample basis. The method used to select the sample can statistical or non-statistical. This means that the verification procedures stated in the manual are applied to only a percentage of the total or otherwise technically referred to as the population. This will enable a B-BBEE Professional to collate information that is sufficient and appropriate, to form a conclusion of the relevant population from which the sample is extracted.

In applying the guidelines stated in the verification manual, the B-BBEE Professional must apply his/her professional judgement. For example, they would need to follow a questioning approach, coupled with a critical assessment of the information. When assessing the evidence provided, a B-BBEE Professional will have to consider the following factors:

1.Sufficiency of the evidence; factors that affect the sufficiency are the quality and quantity of evidence.

2.The quantity of evidence required is affected by the risk of misstatement. The greater the risk, the more evidence is likely to be required. The lower the risk, the less evidence is likely to be required.

3. The quality of evidence required is affected by the risk of misstatement. The higher the quality, the less evidence is likely to be 
required. The lower the quality, the more evidence is likely to be required.

Consequently, the accuracy of evidence is vital for a realistic and credible verification outcome. The level of accuracy determines whether an absolute adjustment or extrapolation adjustment is applied to the population, from which the sample is extracted. If an error identified is an isolated one, the level of accuracy is high, which would require an absolute adjustment be applied. For example, only the sample with the errors is adjusted. However, if the errors identified are common errors or pervasive in nature, then the sample accuracy is low, which would require an extrapolation adjustment to be applied. This means that the entire population value will be adjusted based on the accuracy of the sample.

Objectives of the verification manual

The verification manual:

  • Sets the standards of ethical conduct and responsibilities of B-BBEE Professionals

  • Outlines the responsibilities of a B-BBEE Professional to entities measured

  • Sets the key measurement principles and calculations for each element of the scorecard

  • Provides explanations and procedures to follow for providing assurance that the Amended Codes requirements have been met.

In conclusion, it is important to keep in mind that the verification manual is more than just a guideline for B-BBEE Professionals. It is mandatory for all verifications. Any organisation or measured entity should familiarise themselves with the guidelines and content in the manual. This will provide assurance when organisations - or measured entities - draft and/or implement their B-BBEE strategies, policies and procedures, that their set objectives meet the requirements set out in the manual. This, in the long run, will prevent any discrepancies resulting in B-BBEE initiatives not being recognised, and as such resulting in a less favourable score on a B-BBEE scorecard.

Content verified by: Eric Ackroyd,

Verification Director,

EmpowerLogic

#TFM - This article was published in issue 9 of TFM Magazine - www.tfmmagazine.co.za

SP REVIEW ENQUIRY
*
*
*
*
*
*
*
*
*
*
*
ENQUIRE NOW