BBBEE certificate fraud is increasingly rearing its ugly head, as companies and individuals take short cuts and falsify certification.
Over the years, BDO Verification Services have come across a number of instances of this type of fraud. In some cases, the company has knowingly falsified their own certificate. In others, an individual at a company has committed this fraud and hidden it from their employers.
More recently, we have come across a BEE consultant who has apparently over-promised on the score they could deliver, and provided a false certificate to their client, based on the template of a valid certificate.
It is important to remember that forging a BEE certificate constitutes fraud and carries a sentence of up to 10 years for anyone found guilty of such a crime.
In addition, any tenders or work won on the basis of such fraud would be subject to being cancelled, and the guilty could find themselves on the wrong side of a law suit from competitors who lost out, from government and from the entity that awarded the tender.
The purpose of introducing verified certificates is to provide confidence in an assessment of an organisation’s B-BBEE progress, against the Department of Trade and Industry’s (dti) codes of good practice scorecard. The certificate is used to verify an entity’s contribution to transformation and therefore, having genuine, verified BEE suppliers is an important aspect of B-BBEE compliance for companies.
The introduction of affidavits as a form of proof of an entity’s BEE status, has now made it even easier for businesses to create fraudulent certificates.
The rules allow companies with a turnover of less than R10 million, as well as those with a turnover of less than R50-million and Black ownership of at least 51%, to use an affidavit to confirm their BEE status. These rules were originally designed to alleviate the burden and cost of compliance on small and medium businesses. In some cases, however, it has led to unscrupulous business owners taking advantage of the affidavits and making false claims in order to qualify as exempt from verification.
There is the view among some that it is the responsibility of companies relying on suppliers’ BEE certificates for their B-BBEE scorecard, to check the information provided to them in their bids and tenders.
This is particularly relevant when vetting potential enterprise or supplier development beneficiaries, who only need an affidavit to prove BEE status.
If a company uses a supplier or contributes to a beneficiary whose certificate is a fake, there is a risk that the company’s own scorecard can be declared invalid, or spend with that entity excluded from the final score.
Companies are therefore well within their rights to request that suppliers or beneficiaries provide supporting information in order to verify that the affidavit is reliable, as part of their procurement approval process. Examples of these include share registers and certificates and independent confirmation of turnover.
If you suspect a certificate to be fake, or if you want to confirm its authenticity, email it to the issuing agency and ask them to confirm that it is as they issued.
If an agency discovers any fraud committed in their name, they are obliged to report it to SAPS and the BBBEE Commission for further investigation.
Read more BDO Insights