Concourt sets timeline to determine if CPS received R800m profit in unlawful social grants contract
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The SA Social Security Agency (Sassa) has been ordered to appoint a suitably qualified firm to properly determine the profit made by Cash Paymaster Services (CPS) in the multibillion-rand social grants distribution contract.
On Friday, in a unanimous judgment written by Justice Mbuyiseli Madlanga, the Constitutional Court ruled that Sassa was responsible for paying for the work to be done by Rain Chartered Accountants, a firm of auditors that was appointed by the agency to verify CPS’s audited financial statements.
Sassa had previously refused to pay Rain Chartered Accountants, claiming it was not liable to pay its fees forcing the company to seek declaratory order that the agency is liable for any disbursements including legal fees reasonably incurred to enable it (Rain Chartered Accountants) to comply with the April 1, 2021 order.
On April Fool’s Day, the apex court gave Rain Chartered Accountants 10 days to submit to CPS, its independent auditors KPMG Services and Mazars Inc the list of all outstanding documents relevant to the audit verification undertaken by Rain Chartered Accountants under its March 2017 order.
In March 2017, the Constitutional Court gave CPS a 12-month extension of its five-year contract to provide services for the payment of social grants despite declaring it constitutionally invalid.
Additionally, the country’s highest court also ordered that CPS must within 30 days of the completion of the 12-month period of the contract to file an audited statement of the expenses incurred, the income received and the net profit earned under the contract.
Sassa was then ordered to obtain an independent audited verification of the details provided by CPS.
However, after being served the documents by CPS, one of the parties in the long-running legal battle, Freedom Under Law, complained that the company had not fully complied with the court order.
Freedom Under Law approached the apex court again, pointing out that Rain Chartered Accountants was denied access to some financial information by CPS.
It told the Constitutional Court that the verification report showed that CPS had under-declared its profits by about R800 million even though the controversial company failed to co-operate.
In its April 1 order, the court ordered CPS, KPMG Services and Mazars Inc to furnish Rain Chartered Accountants with the listed documents in their possession within 15 days from the date of receipt of the list of outstanding documents.
Rain Chartered Accountants would then within 30 days of receipt of the outstanding documents submit to the National Treasury, the updated verification report including all issues previously raised by the National Treasury in November 2019 and all issues arising from the outstanding documents.
On Friday, Justice Madlanga said he was not convinced that Rain Chartered Accountants was entitled to an order to recover disbursements including legal fees reasonably incurred from Sassa.
The Constitutional Court ordered that Sassa is responsible for paying reasonable fees for work which will be done by Rain Chartered Accountants to comply with the April 1 order.
SA Institute of Chartered Accountants chief executive Freeman Nomvalo or a chartered accountant nominated by him will determine the fees payable to Rain Chartered Accountants if no agreement is reached between Sassa and the company within four calendar days.
Sassa chief executive Busisiwe Memela has been ordered to take all necessary steps within her powers and functions to ensure that the deviation process on the appointment of Rain Chartered Accountants is finalised within 10 calendar days of agreement.
Should Sassa not appoint Rain Chartered Accountants it must consider whether it is open to it to appoint another suitably qualified service provider in accordance with the deviation process within 14 calendar days from Friday.
Rain Chartered Accountants or any alternative company appointed by Sassa must also inform CPS, KPMG Services and Mazars Inc must within 10 calendar days submit the list of all outstanding documents relevant to the audit verification ordered by the Constitutional Court in March 2017.
CPS, KPMG Services and Mazars Inc will then have to furnish Rain Chartered Accountants or any alternative company with the listed documents in their possession within 15 calendar days from the date of receipt of the list of outstanding documents.
Rain Chartered Accountants or any alternative company will then have to submit to the National Treasury, the updated verification report and Treasury will allow Sassa and CPS to make representations on the updated verification report, if they so wish.
Treasury will then have 40 calendar days of receipt of the updated verification report to consider and approve the updated verification report and file its approval together with the updated verification report with the registrar of the apex court.
The Constitutional Court has told the National Treasury that if it is unable to approve the updated verification report it must file an affidavit setting out its reasons for not approving the updated verification report and its own determination of the profit made by CPS from the unlawful contract that was declared invalid.
Alternatively, Treasury must indicate what it requires to properly determine the CPS’s profit in the event that it is unable to make the determination.