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Broad-Based Black Economic Empowerment Act, 2003 (Act No. 53 of 2003)

Verification Manual

10. Guidelines for Performing Verification8



10.1 Verification  methodology


10.1.1 The Verification Agency shall verify, validate and evaluate all  information concerning measured entities based on the principles set out in the B-BBEE Act and Codes of Good Practice and this document and shall include all relevant elements of the Broad- Based BEE scorecard. All verifications are to be based on information that has been verified by an on-site visit to the measured entity. No score can be given without an on-site assessment of the entity.


10.1.2 The Verification Agency shall verify the information provided in order to verify the B-BBEE status of a measured entity. Simple telephonic enquiries do not constitute verification.


10.1.3 In order to determine if the measured entity is classified correctly the Verification Agency shall obtain the audited financial statements and agree the amount recognised as revenue to the thresholds set by the Codes. When the measured entity is  not audited the Verification Agency shall perform some or all of the following procedures as a minimum to verify  the accuracy, completeness, occurrence and cut-off of revenue as shown in the financial statements: Extract a schedule of monthly revenue and compare with prior years and budgets. Calculate and analyse the gross profit percentage and obtain explanations from management for unusual fluctuations from previous years or from budgets. Obtain a list of numerical sales invoices and inspect the list for missing numbers. Follow missing numbers through to the physical invoice per invoice book and investigate the reason for omissions (or valid cancellation of the invoice). Agree the total sales as per the general ledger with the totals as per the sales journal. Agree the sales income for the year per the general ledger with the total sales income per the trial balance and the financial statements. Select sales income transactions from invoices and:
a. Confirm   that  prices  are  obtained  from   price  lists  or   are  authorised   by management.
b. Confirm that calculations and additions on the invoice are correct.
c. Confirm  that  the  invoices  were  posted  to  the  correct  general  ledger  and control accounts.
d. Re-perform the castings and calculations of the sales journal  (or in respect of cash sales, the sales column in the cash book and general ledger accounts).
e. Agree the  postings from the sales journal  (or in respect  of cash sales from the cashbook) to the general ledger account.
f. Select  invoices  before and  after  year  end  and  confirm  that the  revenue  is accounted for in the correct accounti ng period.
g. Inspect the  monthly revenue declared  on the VAT 201 returns to  determine  the reasonableness of the amount of revenue.
h. Inspect the measured entity1s income tax return to determine the amount of revenue declared.
i. Obtain management representation that the amount declared is accurate and complete.
j. In case of start up enterprises, obtain registration documents and review them to ensure that the entity has been in operation for less than 12 months.


10.2 Planning Verification Process


10.2.1 The Verification Agency shall ensure that a verification plan is established for each verification engagement to provide the specific terms and conditions of the agreement dealing with conducting and scheduling of the verification activities.


10.2.2 The Verification Agency shall determine, in accordance with documented procedures, the time needed to accomplish a complete and effective verification of the enterprise. The time determined by the Verification Agency, and the justification for the determination, shall be recorded.


10.2.3 In the determination of the verification programme and any subsequent adjustments, the size of the measured entity, and the scope and complexity of its structure, products and processes shall be considered, as well as its demonstrated level of commitment to B-BBEE and the results of any previous verification.


10.2.4 Where multi-site sampling is utilised for the verification of a measured entity, covering the same  activity in various locations, the Verification Agency  shall develop a sampling programme to ensure  proper verification of the whole enterprise. The rationale for the sampling plan shall be documented for each measured  entity.


10.2.5 The tasks given to the verification team shall be clearly defined and made known to the measured entity, and shall require the verification team: to examine the structure, policies, processes, procedures and related documents and records of the client enterprise which are relevant to the B-BBEE requirements, and to  determine  that  these  contain  sufficient  evidence  to  support  the  BEE verification.


10.2.6 The Verification Agency shall provide the name of, and make available background information on, each member of the verification team, giving sufficient time for the measured entity to object to the appointment of any particular analyst or expert and for the Verification Agency to reconstitute the team in response to any valid objection.


10.2.7 A Verification Plan shall be communicated and the dates of the verification shall be agreed upon, in advance, with the measured entity.


10.2.8 The Verification Agency shall have a process for conducting on-site verifications.9


10.2.9 At its first meeting with the proposed Measured Entity the Verification Agency shall require an authorised representative of the measured entity requiring verification to provide the necessary information to enable it to establish: the  general  features  of the  measured  entity,  including  its  name  and  the address(es) of its physical location(s) general  information such as its activities,  human and other  resources,  and its functions and relationships within a larger corporation, if any, and information concerning the enterprise's use of consultancy relating to BEE.


10.2.10 Before proceeding with the verification, the Verification Agency shall conduct a review of the request for verification to ensure that: the information is sufficient for the conduct of the review; the requirements for verification are clearly defined, documented and have been provided to the measured entity; any  known difference in understanding between the Verification Agency and the measured entity has been resolved; the Verification Agency has the competence and ability to perform the service. The location and number of the applicant's operations, the time required to complete verifications, and any other points influencing activities or the verification process shall be considered (language, safety conditions, threats to impartiality, etc.). Based on this review, the Agency shall determine the competences it needs to include in its verification team; and it records of the justification for the decision will be maintained.
10.2.11 Where a Verification Agency will be taking account of verification or other evaluations already granted to the measured entity, it shall collect sufficient evidence to justify and record any adjustments to the verification programme.


10.2.12 The verification team shall  be appointed and composed of verification analysts (and any  other experts as necessary) who, between them,  have the totality of the competences identified by the Verification Agency as being needed for the verification of the enterprise. The selection of the team shall be performed with reference to the designations of competence of verification  analysts and experts and may include the use of both internal and external human resources.


10.3 Criteria to be used for Verification Engagement


10.3.1 The Verification Agency shall use the following as the criteria to evaluate the measured entity: Broad-Based Black Economic Empowerment. Generic and QSE scorecards of the Codes of Good Practice on Broad-Based Black Economic Empowerment. Criteria for Exempted Micro Enterprises of the Codes of Good Practice on B-BBEE. Sector Codes gazetted in terms of section 9 of the B-BBEE Act. Broad-Based Black Economic Empowerment Act - The Code of Good Practice-Interpretative Guide June 2007.


10.3.2 Any other applicable guidelines issued by the Department of Trade and Industry.


10.3.3 Any other legislation or regulation, as provided for in the Codes including but not limited to: Employment Equity Act 55 of 1998 Skills Development Act 97 of 1998 Skills Development Levies Act 9 of 1999 Skills Development Amendment Act 31 of 2003


10.4 Conducting the Verification Process


10.4.1 Verifications shall be done according to a Verification Plan.


10.4.2 The verifications  shall take place at the site(s) of the measured entity. The purpose of the evaluation is to measure the B-BBEE progress or status.


10.4.3 The verification  team  shall conduct the evaluation to gather evidence to verify the measured entity in terms of B-BBEE.


10.4.4 The verification team shall sample a sufficient number of examples of the activities of the measured entity in relation to the B-BBEE criteria to arrive at a sound appraisal of the measured entity's B-BBEE status.


10.4.5 As part of the verification process, the verification team shall interview a sample of sufficient number of the staff, including top  management  and operational  personnel of the measured entity, to provide assurance that the information gathered  is sound.


10.4.6 The verification team shall analyse all the information and verification evidence gathered to determine the B-BBEE status of the measured entity.


10.4.7 The Verification Agency shall ensure that a detailed, written Verification Report is promptly provided to the verified measured entity.


10.4.8 Ownership of the Verification Report shall be retained by the Verification Agency.


10.4.9 B-BBEE verification decision The information provided by the verification team to the Verification Agency for the decision shall as a minimum include: the information and verification evidence gathered to determine the B-BBEE status of the measured entity, and the verification recommendation from the verification team. The individual or group that makes the decision shall include a level of knowledge and experience sufficient to evaluate the verification processes, results and recommendations of the verification team. The Verification Agency shall make the decision on the basis of an evaluation of the verification results and any other relevant information. The Verification Agency shall ensure that the person(s) or committees that participate in the decisions are different from those who carried out the verification. The Verification Agency shall confirm, prior to making a decision, that the information provided by the verification team is sufficient with respect to the verification  requirements.


10.5 Special evaluations


10.5.1 It may be necessary for the Verification Agency to conduct evaluations of measured entities at short notice in order to investigate complaints or in response to changes.


In such cases the verification agency shall: describe and make known in advance to the measured entity the conditions under which these short-notice visits are to be conducted, and exercise additional care in the assignment of the verification team because of the lack of opportunity for the measured entity to object to the verification team members.


10.6 Appeals10


10.6.1 The Verification Agency shall have a documented  process  for  receiving, evaluating and making decisions on appeals.


10.6.2 A description of the process for handling appeals shall be made publicly available.


10.6.3 The Verification  Agency  shall  be responsible for all decisions at all levels of the appeals-handling process.


10.6.4 Investigation of and decisions on appeals shall not result in any discriminatory actions against the appellant.


10.6.5 The appeals-handling process shall include at least the following elements and methods: an outline of the process for receiving, validating and investigating the appeal, and for deciding what actions are to be taken in response to it, and a procedure for tracking and recording appeals, including the actions undertaken to resolve them.


10.6.6 The Verification Agency shall acknowledge receipt of the appeal and provide the appellant with progress reports and the outcome.


10.6.7 The decisions to be communicated to the appellant shall be made by, or reviewed by, individual(s) not involved in the matter that is the subject of the appeal.


10.6.8 The Verification Agency  shall give the appellant formal  notice of the  end of the appeals-handling process.


10.6.9 All appeals shall be resolved in a timely manner by the Verification Agency.


10.6.10 As a guide, an appeal shall be resolved within a maximum of 30 days of the initial lodging of the appeal.11


10.7 Classification of Measured Entities


10.7.1 The Verification Agency shall ascertain the classification of the measured entity to determine which Codes of Good Practice for B-BBEE apply to the verification engagement. Such classification may be one of the following: An Exempted Micro-Enterprise; A Qualifying Small Enterprise to which the QSE Scorecard applies; Enterprises to which the Generic Scorecard applies; Enterprises to which the Sector Codes apply; and Start up enterprises which will  be treated  as EMEs for transactions  under or equal to R 5 million; Specialised Enterprises to which the Adjusted Generic Scorecard applies; Specialised Enterprises to which the Adjusted QSE Scorecard applies.



8 [missing text from Government Gazette 31255]

9 See SANAS R47-02 Clauses 18.2.3-10

10 See SANAS R47-02 Clause 19

11 See SANAS 47-02 Clauses 18.3-20