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Send  Share  RSS  Twitter  23 Sep 2010

BEE: ABVA Objects to DTI Approach


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ABVA would like to respond to the recent press release by the Department of Trade and Industry (the dti) about the approval of the IRBA and SAIPA to approve there members in relation to BEE Verification.

ABVA has followed the developments with regard to this issue closely. ABVA has, at every interaction with the dti, expressed its concerns with the dti’s proposal to incorporate Public Auditors and Accountants who are not Chartered Accountants, into the B-BBEE Verification Industry. The dti has not engaged ABVA on any issues of substance in advancing this process and continues to present issues as fait accompli.

ABVA would like to place on record that while ABVA encourages Auditors and Accountants, it has always done, to enter into the Verification Industry. However, when they attempt to do so, ABVA believe it serves the BEE program best when they do it via the front door and not the back.

The dti’s proposal for incorporating these constituents will result in:

• Three different bodies approving/accrediting Verification Agencies against
• Three different sets of criteria (accreditation standards), only one of which is designed for the B-BBEE Verification Industry specifically;
• SAIPA members performing verification procedures when they have no assurance/audit training, capacity, function, systems nor standing; and
• Three mutually exclusive review processes. The review processes to which ABVA Members are subjected, which are focused on B-BBEE verification, are fundamentally different to that of the IRBA. SAIPA has completely different focus areas and processes altogether;
• Three different regulators;
• Three different interpretations of the Codes;
• Forum shopping at a scale unseen to thus far;
• Contravention of the Competitions Act in creating an unequel dispensation amongst the three tiers proposed to conduct verification;
• Unfair barriers to entry into the Verification Industry by constituents other than the Public Auditors and Accountants;
• Divesting control of the industry to constituents who, in general, never intended to be performing verification to begin with;
Some of ABVA’s concerns have been echoed by some IRBA representatives. We would also point out that the dti agreed with the merit of an overarching regulator proposed by ABVA as an alternative to the ‘three-tiered approach’ as described above. In spite of this ABVA was recently informed, as envisaged by the dti’s press release, that the dti intends to proceed, in the short term, with the approval of the IRBA and SAIPA to approve their members as Verification Agencies as a draft framework submitted to ABVA, irrespective of the concerns ABVA raised.

ABVA hereby formally places on record its objection to the proposed ‘three-tiered approach’ the dti has embarked upon. ABVA believes that the dti’s approach is short-sighted and will cause unfathomable damage to the BEE program of government and the integrity of the BEE Verification Industry. It will be naive of the dti to think that it will be able to bring the Verification Industry, at some future point, into a more regulated environment in the ‘long term’, if it permits a loose arrangement whereby the IRBA and SAIPA members are sanctioned to provide B-BBEE verification services in the short term.

It is further inconceivable how the dti can treat the IRBA and SAIPA in the same manner. The former, being a statutory regulator and the latter a membership body of Accountants who have not achieved the status of Chartered Accountant. SAIPA does not have the compliance, review, nor accreditation requirements the IRBA and ABVA has. Yet, they will have the same powers as the IRBA which will far exceed that of ABVA’s, whose members will still have to be externally accredited by SANAS. There is absolutely no parity what so ever in this ‘three-tiered approach’. Further to this – if SAIPA is a membership body – why not SAICA? The approach of the dti appears to be unfounded and indicative of the lack of understanding of the professional, regulatory and member bodies they are dealing with.

ABVA proposes a single overarching regulator of the entire industry, with one accreditation standard, one accreditation authority and a single review process with powers to set interpretation standards and discipline and regulate all Verification Agencies. ABVA has proposed timelines of 6 months, including a public commentary process, to achieve this. This is not an unreasonable delay in relation to the gazetting of the Preferential Procurement Policy Framework Act (which appears to be the reason for the dti’s haste), particularly as this Act has not been aligned for 3 and a half years with the Codes. This will assist in ensuring a solid framework for incorporation of Auditors and Accountants in the Verification Industry and should not threaten the credibility of the entire BEE program.

ABVA is aware that the ‘draft framework’ put forward by the dti suggests its gazetting in terms of Section 14 of the Act, which empowers the Minister to issue regulations from time to time to give effect to the Act. Any proposed move towards gazetting this framework will however have to be done in terms of Section 9 of the BEE Act, as it will amount to an amendment of the Codes of Good Practice, which currently only caters for one industry, accreditation standard and accreditation authority. Section 9(5) requires gazetting for public comment before amending in terms of Section 9(1). Any attempted gazetting in terms of Section 14 will be regarded as an attempt by the Minister to circumvent public scrutiny of this ‘three-tiered approach’

ABVA would like to confirm its commitment to the BEE program of government and towards an open dialogue with the dti.

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