Sassa debacle: FUL heads to court over CPS profits

2020-04-15 18:53
Freedom Under Law has asked the Constitutional Court to order Cash Paymaster Services to provide additional information on profits made from its contract with Sassa. (Barbara Maregele, GroundUp)

Freedom Under Law has asked the Constitutional Court to order Cash Paymaster Services to provide additional information on profits made from its contract with Sassa. (Barbara Maregele, GroundUp)

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Civil society organisation Freedom Under Law (FUL) has entered the dispute over the repayment, to the SA Social Security Agency (Sassa), of hundreds of millions of rand in profits made by Cash Paymaster Services (CPS), the company formerly contracted by Sassa to pay social grants.

In an application to the Constitutional Court, FUL has asked the court to order CPS to provide Sassa's auditors with all the documents necessary to verify how much profit CPS made from contracts with Sassa, according to GroundUp.

The court ruled in 2014, and again in 2017 and 2018, after the CPS contract had been extended twice, that CPS had no right to benefit from an "unlawful" contract.

The judges ordered the company to file audited statements of expenses, income and net profit to Sassa for each period of the contract. Sassa was ordered to get an "independent audited verification" of the CPS statements and file this with the court.

On behalf of CPS, accounting firms KPMG and Mazars prepared a report for Sassa which concluded that CPS made profits of about R252 million in the period April 2012 to September 2018.

But in their own detailed, 162-page report, the accountants Sassa consulted, RAiN, argued that CPS had bulked up its expenses and, therefore, understated its profits by a massive R843 million for the period.

RAiN estimated that CPS actually made profits of R1 095 billion — not R252 million — over that time.

READ | ConCourt orders CPS to pay back R316m to Sassa

RAiN also noted that large sums of money had been transferred by CPS to its parent company, Net1, pointing out that "an isolated scrutiny of CPS' finances will not provide a true reflection of the profits accruing to the group arising from the Sassa contract".

FUL has now asked that CPS be instructed to provide RAiN with all the necessary information, and once this has been done, and a new report has been approved by the National Treasury, that CPS be ordered to pay back all the profits made from the contracts.

FUL CEO Nicole Fritz said in an affidavit to the Constitutional Court that RAiN needed full and unfettered access to CPS' financial statements and its auditors' working papers to determine how much profit CPS made.

Fritz said it would be a "very serious state of affairs" if CPS and its auditors filed a misleading report, and it was in the best interests of all parties, including CPS and its auditors, that the discrepancy in the profit calculations be clarified.

Herman Kotze, CEO of Net1, said CPS had co-operated fully with RAiN.

"We were given the opportunity to review the draft report and disagreed with much of the content. We provided comprehensive comments to RAiN on the many inaccuracies and incorrect conclusions reached, but were informed that the report would not be amended,” he told GroundUp on 9 March.

Kotze said then that CPS believed that the process followed by KPMG and Mazars was "robust, comprehensive, followed the requirements of appropriate auditing standards and was in strict compliance with the ruling of and timelines set by the Constitutional Court".


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