Monday, January 24

CPS has not yet disclosed how much benefit it made from the social grants contract


Cash Paymaster Services has not yet provided the auditors with the documents necessary to determine the benefits it obtained from its illegal welfare payment contract, more than seven months after a Constitutional Court order to do it.

Instead, the provisional liquidators The firm have started new legal proceedings, trying to vary the order, saying that they do not have the necessary powers to comply with it and that it should be suspended until permanent liquidators are appointed.

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They also say that most of the documentation that would shed light on CPS ‘profit from the contract is stored at Metrofile, which is “unwilling or unwilling” to hand it over because CPS owes around R1.8 million in storage costs.

In addition to this, it has emerged in court documents that SARS, in what it says is a “final audit” for the 2014 to 2018 tax periods, is claiming just over R1.1 billion (including penalties) because CPS was unable to provide documentary evidence of the expenses it would have claimed during those years, to offset its tax obligations.

The company’s multi-million dollar contract with the South African Social Security Agency (SASSA), which was first entered into in 2012, was deemed illegal by the Constitutional Court in 2014 because proper hiring policies were not followed.

It was extended until 2017 to avoid chaos in the distribution of social grants and, at the 11 hour, the then minister of social development, Bathabile Dlamini, approached the court to have the contract extended again.

At the time, the court warned that CPS would not be allowed to make a profit from the illegal contract and ordered CPS to submit an audited statement of expenses incurred, income received, and net profits made under the contract. The court also ordered SASSA to appoint an independent auditing firm to verify this.

SASSA appointed Rain as public accountants. Earlier this year, Freedom Under Law (FUL) approached the court claiming that Rain had not been served all the required documents and that it appeared that CPS had under-declared your earnings for more than 800 million rand.

On April 1 of this year, the Constitutional Court again ordered CPS, which was put into liquidation in October 2020 at the behest of SASSA, to deliver all the documents within a specified period of time.

But interim liquidator Puleng Bodibe says in a recent affidavit filed with the court that only a final liquidator has the powers to comply with the order, and there has been a delay in permanent appointment due to the Covid-19 pandemic.

While Rain’s required collection of documents had begun, it was a “daunting task,” he said.

And one of the challenges was that Metrofile withheld the documents, although, he said, “after several compromises it seems that we have reached an agreement … and we trust that the documentation will be released before the final appointment of the liquidators.”

In her affidavit, Freedom Under Law Executive Director Nicole Fritz said that while the organization would abide by any court decision, the request must be viewed in context.

“The purpose of the order was to ensure due compliance with the previous court orders. All of them are related to ensuring the proper verification of the gains obtained under the illegal contract ”.

He noted that previous orders had been placed before the company was put into liquidation and the interim liquidators had not objected to FUL’s request in April.

It also said that the Captain had extended the powers of the provisional liquidators in February of this year, “expressly allowing them” to initiate litigation.

“There is no indication when the final liquidators will be named. They (the provisional liquidators) do not point out any specific powers that they are lacking. Instead, they say they have already started collecting the documents requested by Rain. ”

“The real problem is that they apparently find the obligation daunting (which is frankly surprising) and time consuming.”

“They are constitutionally bound to prioritize the provision of documents requested by Rain.”

The Constitutional Court has not yet issued instructions on whether it will listen to the liquidators’ request.

Meanwhile, the tax issue is the subject of separate litigation in the Pretoria High Court, where provisional liquidators dispute the results of the audit and SARS insists that it is a properly performed “final audit”.

© 2021 GroundUp. This article was published for the first time here.


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