The A To Z Guide Of The BEE Audit Journey

The process is challenging as it is not easy to manage the audit remotely, and as a result, the final certificate might not reflect the time and resources spent to achieve the desired BEE outcome through your BEE strategy.  

Companies that have participated in the Youth Employment Service or YES program have experienced additional challenges as a result of the pandemic with some requirements not being met.    

The above can be because of several factors but not limited to the below: 

• Not understanding the BEE audit process. 
• Inability to provide the required supporting BEE documentation to the verification agent. 
• Not meeting the BEE audit timelines of a particular verification agent. 
• Not reviewing the draft audit results against the company forecast and liaising with the verification agent. 
• Not meeting the YES requirements and therefore affecting the level enhancement 

Before starting your BEE Audit verification, it is important that: 

• The correct supporting documentation for all your BEE claims is in place. 
• Interpretative stances on legislation are understood and signed off by your verification agent. 
• An independent/in-house BEE score is calculated pre-audit for you to better address any variances during an audit. 
• Changes to legislation are understood as well as assessed for impact on your scorecard. 
• Chat to your BEE consultant to double-check your: score; interpretations, supporting documentation, and process.

As per SANAS R47-03 Accreditation of B-BBEE Rating Agencies document states the following:  

1. The B-BBEE Rating Agency shall ensure that all dealings are direct with the Measured Entity and not a third party.

Transcend Corporate Advisors is your trusted advisor that can assist you with your BEE Audit journey by helping you understand the verification process resulting in an efficient and accurate verification. We will need a power of attorney signed prior to the audit so that we can engage directly with the verification agency.  

The benefits of preparing for your BEE audit and consulting with a BEE consultant are as follows:

Our BEE Audit assistance service offerings include the following: 

• Pre-verification and file review 
• Verification phase and onsite assistance 
• Post-verification and wrap assistance
  Where necessary, this includes application to the DTI for dispensation for YES if there are requirements not met as listed on the YES practice note. 

Required supporting documentation required for verification:

1. Financials and general documents:

• Company registration documents
• Memorandum of incorporation
• Valid Tax Clearance Certificate 
• Blank Company Letterhead
• Copy of previous BEE Certificate
• Last 5-year Annual Financial Statements 
• Proof of financials: based on the measurement period / financial year

2. Ownership

• Copy of latest share certificates 
• Latest share register 
• Copy of shareholders agreements  
• Confirmation of Voting rights if not stated in the Shareholders Agreement 
• Copy of the Trust deed of any trust that holds equity in the business 
• Copy of sale of shares agreement/subscription agreement, depending on the nature of the acquisition of the shares 
• A written record of the names of beneficiaries, in the case of a trusted shareholder 
• Copies of all Shareholders ID's 
• Statement per Black New Entrant confirming his/her status as such 
• Net Value: A valuation of the company at the date of the last financial year or latest 
• Net Value: Proof of payment for any liabilities owed by Black shareholders for the financing of their share purchase (Loans) 
• Sale of Assets: Valuation of the company, the assets sold, and any outstanding acquisition debt 

3. Management control  

Statutory documents: 

• Latest EEA2 and EEA 4 form (Employment Equity Report Submissions) 
• Proof of the above submission 
• Current dated COR39/full disclosure certificate reflecting the registered company directors 
• Company organogram 
• Memorandum of Incorporation 
• Management representation letter confirming voting rights of directors, executive and other executive management  
• Latest Payroll report 
• Latest Minutes of Board of Directors and EXCO meetings 
• Non-executive director declarations (in respect of non-executive board members) 

For each sampled employee: 

• Latest payslips and employment contracts 
• Certified ID copies 
• EEA1 forms (in respect of employees living with disabilities) 
• Doctor’s note / medical certificate (in respect of employees living with disabilities) 
• Need to be interviewed by the verification agency 

4. Skills development 

Statutory documents: 

• EMP201s for the financial period (to validate SDL and the payroll) 
• EMPSA for the financial period 
• Copy of the (WSP) Workplace Skills Plan (WSP) 
• Proof of the WSP submission to the relevant SETA – 2020 deadline extended to 31 May 
• Proof of SETA Approval of the above WSP 
• Management Rep Letter confirming that Mandatory Skills Spend was not claimed 
• Management Representation letter confirming the % time of employees dedicated to training 
• 12-month payroll report to confirm CTC of Training Managers / SDF for the year 
• Additional during Covid: Proof financial statements (in the case of the 4-month SDL holiday during Lockdown) 

For each sampled training: 

• Certified ID copies of all trainees 
• Invoices and proof of payments relating to the sampled skills pend 
• Proof of attendance (either attendance registers or certificates) 
• Copies of bursary contracts/agreements 
• EEA1 and Dr’s disability confirmation letter for the disabled employees/learners 
• Learners’ payroll report 
• Learnership agreements 
• Fixed-term contracts 
• Confirmation that the learnership agreements are registered with SETA 
• Learners payslips or payroll
• Learnership Tracking Tool 
• Proof of absorption (Permanent Employment contract)  

5. Preferential procurement

For each sampled local supplier: 

• Supplier spend report as printed from the system 
• Valid BEE Certificates/Affidavits for each sampled supplier 
• Detailed Supplier ledgers for each sample 
• 3 to 5 invoices per sampled supplier 
• Proof of payment (depending on verification agency) 

For each sampled foreign supplier/import: 

• Detailed Supplier ledgers for each sample 
• 3 to 5 invoices per sampled supplier 
• Proofs of payment (depending on verification agency) 
• Proofs of currency conversion (if invoice is in foreign currency) 
• Management Rep Letter confirming reasons for exclusion 
• ESD Plan for imported goods and services that are being claimed as an exclusion (not applicable to  capital goods)   

Statutory documents: 

• Import certificate (to validate imports) 
• Additional supporting documents for foreign suppliers 
• TMPS Calculation 

6. Enterprise and supplier development

Statutory documents: 

• Valid EME or QSE Affidavit of beneficiary, confirming revenue bracket and black ownership (if any) of the beneficiary 
• Company profile/website (beneficiary)
• Enterprise Development Agreement or Supplier Development Agreement
• Acknowledgement / confirmation letter from the ED / SD beneficiary  
• Supplier Development: supporting ledgers and invoices to prove that they are a supplier  

To prove the support given: 

• Grant: proof of payment 
• Loan: proof of payment; loan agreement; loan ledger 
• Discounts: proof discounts; comparative invoices, etc 
• Direct costs incurred: invoices for costs; proofs of payment 
• Overheads: invoices and proofs of payment for the overheads 
• Time of employees: timesheets; payroll reports to prove salaries 
• Early payments: invoices and payments paid early 

Bonus points: 

• Job creation: proof of jobs created – IDs, payslips, employment contracts 
• Graduation of an enterprise from Enterprise Development to Supplier Development level: Proof of support given prior to becoming a supplier, proof of support post becoming a supplier 

6. Socio-Economic Development

Statutory documents: 

• Acknowledgement letter from the beneficiary, indicating the:
  Value of contributions received 
  The percentage of black people who benefitted from the contribution  

• Independent competent person’s report confirming the % of black people who benefitted from the contribution 
• Company profile/website (beneficiary)

To prove the support given: 

• Grant: proof of payment 
• Discounts: proof discounts; comparative invoices, etc 
• Direct costs incurred: invoices for costs; proofs of payment 
• Overheads: invoices and proofs of payment for the overheads 
• Time of employees: timesheets; payroll reports to prove salaries 

7. YES Programme

Statutory documents:

• YES Registration Certificate
• Proof of payment for the YES registration / invoice
• CEO Pledge
• Confirmation of Registration and Placement start date with the YES Non-Profit Company
• Previous BEE Certificate and Report (Where applicable)
• Proof of non-displacement of current B-BBEE Initiatives and maintenance of B-BBEE Status Levels
• Signed Annual / Audited Financial Statements for the last 3 Years to calculate the NPAT Targets
• EEA2 Report and EEA4 Report Proof of submission of EEA2 & EEA4 Report to Department of Labour (where applicable)
• Employee list as at Measurement Date - To Calculate Headcount Targets
• Payroll report closest to Measurement Date - To Calculate Headcount Targets
• DTI dispensation approval (if required)

To prove the support given:

• Certified copies of IDs of Black Youth
• Samples of Signed Employee / Workplace contracts
• Samples of Payslips
• Unemployment declarations
• Interview of sampled youth

Common interpretative queries per element:

Contact Transcend Corporate Advisors to ensure your BEE plan and audit are on track to achieve optimal results. 

 
Please ensure you book a slot for audit assistance as soon as possible as this is our busiest time.