Michele du Plessis
On July 14th, 2017, Council took the decision to initiate a forensic investigation into Thaba Chweu Local Municipality (TCLM) after recommendations from the MPAC (Municipal Public Accounts Committee).
A service provider called ARMS (Audit and Risk Management Solutions) commenced with their task on August 1st, 2017. Based on the Scope of the Investigation, the Forensic Audit has produced 11 reports and a summarised version of the presentation was tabled to Council by on February 28th, 2018.
The Forensic Report on the state of Thaba Chweu Local Municipality and the subsequent refusal of the municipality to make the report public created havoc. The citizens of TCLM felt it was their constitutional right that the report is made public, but so far, the report has been kept undisclosed.
During the Budget Speech delivered by the Executive Mayor of TCLM on the 2018/19 Budget and IDP, during the Ordinary Council Sitting, Municipal Chamber, Lydenburg, Mashego-Sekgobela stated the following:
“Madam Speaker, we will not rest until the municipality realised a sound financial viability and our commitment to tackling fraud and corruption is one of our key priorities. In a bid to ensure the effective use of public funds and enhance accountability, we must deter the mismanagement of public funds at all costs; we will strengthen the political oversight and guidance over the financial affairs of the Municipality.
Madam Speaker, the forensic investigation recommendations are currently implemented which addresses the Auditor General findings over the past years and council will continuously be favoured with progress report thereon.
We appreciate the national treasury intervention in respect of municipal financial improvement program wherein the technical advisor Mr Thabo Modisane has been seconded to the municipality for a period of two years i.e. May 2018- March 2020.”
The Forensic Investigation Report Implementation Plan 2017/2018, of which GPS News received a copy, includes various findings per area and in the following articles, all content is quoted directly from the report, but all names and company names were excluded.
Completeness and reliability of the Asset Register:
Council has not approved the Asset Management Policy and there is no Asset Management Plan in place for TCLM for proper management of current assets. Totals did not tie up to Annual Financial statements indicating that the registers are not accurate and could not be cross-referenced to Valuation Role.
An Accounting firm was appointed in 2015 for a three year period to perform the Asset Management functions. The register totals for the period 2015 to 2017 did not tie up to the Annual Financial statements, indicating that the registers are not accurate the Asset Register provided by the appointed firm could not be cross-referenced to the Valuation roll when trying to identify municipal land.
The recommendation, in this case, states that the “payments made to said firm be recovered as they were made even though proper service was rendered. Disciplinary action should be considered against the individuals for acting in a grossly negligent manner in that they accepted the work presented by the firm even though it was inadequate.”
According to the Valuation Roll, 96 stands have been transferred into private ownership and there is no evidence that money due from the sale of these ervens was paid to the municipality. There are a further 54 ervens remaining on the Valuation Roll in the name of TCLM and it was confirmed through the developer that there is an amount of R6 000 000-00 due.
The allocation of Curio stalls in Graskop was done in an irregular manner wherein no due process was followed in the selection of beneficiaries with clear criteria. This resulted in benefiting two municipal employees. “It was observed that one of the TCLM employees worked at her stall during municipal working hours in September 2017.” The recommendation is that “disciplinary action be considered against the two individuals for breaching the Code of Conduct for Municipal Officials.”
The Municipality owes MBB a total of R1 022 354-36 as at July 9th, 2015 to date and that instead of revenue generation the Lydenburg Hydro Power Station Agreement is resulting in an unmanageable liability to the municipality.
Housing and Human Settlement
Michele du Plessis
There is currently minimal filling of posts in the Sub Directorate: Properties and Human Settlement Division. The current vacancy rate is 44% with critical positions at the service delivery level being vacant and unfunded. 6 of the 15 posts are filled.
Pertaining to the National Policy on Housing: There are instances where beneficiaries complain that their applications were not submitted as was the case in Lydenburg, Extension 7, called Dunusa.
Furthermore, TCLM has embarked on an aborted sale of land for R143 640-00 that was in demand because it was priced at R120 000-00 in the Asset Register. Allegedly the land sold for R1-00.
Pertaining to Graskop, Extension 7: The housing project was invaded and occupied. “We were able to identify beneficiaries illegally occupying houses in one project and their houses being in another project.”
Pertaining to the Chinese Housing Project houses in Graskop: It was found that 17 Council Officials and/or their relatives are in illegal occupation of the Chinese Project Houses. The recommendation in the Report: “Depending on the co-operation of the implicated officials, criminal cases should be opened and the matter be handed over to the Special Investigating Unit.” The Implementation Plan also recommends disciplinary measures to be considered against the implicated Councillors.
The report states: “There was a court action to evict the occupants of the Chinese Housing Project; however the action was opposed by a committee. The report alleges that R300 per month from the occupants to fund the lawyers.
“Recommendation 37.15 should also apply: That the list of occupants be submitted to the Provincial Housing and Human Settlement Department for evaluation and identification of those who qualify for housing subsidy (excluding the Children of the Municipal Officials).
Furthermore – 37.18: “That a proper valuation of the houses in the Chinese Project be conducted to determine the current market values of these houses for public records. 37.19: That all those that do not qualify for a housing subsidy should be given the right of first refusal to purchase the properties at current Market values.”
Human Resources Management
“That the payroll records provided to us are incomplete and the information is unreliable as it contained the following: two different ID numbers and two different Employee numbers for one person; employees resigned before their appointment date. “We were informed that the current staff complement at TCLM is 486 employees; however, 267 employees completed the Employees Verification Forms that we distributed. We could not verify whether 219 employees are still working for the municipality.”
“The managers could not account for their subordinates due to the movement of the employees from time to time that is done at the instigation of Senior Managers without accountability. “
“A former MM entered into an agreement with SAMWU to confirm employees in acting positions in those positions on a substantive basis. We found that this was a follow up to the verbal appointment of workers to act in different positions since 2013 without the proper process being followed.
A Retainer Contract with a legal firm was valid from February 20th, 2015 to August 20th, 2015 for a monthly fee of R120 000-00. As payments were not made, it became necessary for TCLM to engage other legal representation for new cases. Payments amounting to R3 523 390-14 for the period during the retainer period was paid to said representation, thus incurring wasteful expenditure.
“We found TCLM allocated different ligation cases to different attorneys to act as legal representatives for TCLM when necessary.” (A note written in the Report stated that an alleged R29 501 430-12 can’t be recovered.)
“We could not access the records of the work performed on behalf of the municipality as the files were in the custody of the practitioners; many of them are still owed by the Municipality and were not willing to make the available.”
Managers Back Pay
Michele du Plessis
“The Acting Policy at TCLM also gave guidance as to the manner in which acting allowance will be paid: although it contains conflicting provisions.” The recommendation states: “That the MM reviews the Acting Policy to update the provisions to be in line with the Regulations and Notices for the “Local Government: Regulations on appointment and condition of employment for senior managers”.
The following amounts were paid to (Acting) Senior Managers as a result of approval: R45 898-00, R56 097-00, R25 499-00, R30 599-00, R267 074-00 and R190 684-00 respectively amounting to R615 851-00. “We concluded that the payment of the adjustment and back-pay was grossly irregular as it was not authorised by Council.” The recommendation: 34.3: “That the amount paid to each of the (Acting) Senior Managers be recovered from them as the beneficiaries to the irregular payments that they recommended in terms of section 32 of the Municipal Finance Management Act No. 56 of 2003.”
Also, other payments to persons were made amounting to R1 080 635-00. These irregular payments are seen as fraudulent and resulted in the amount being loss. The recommendation: “That criminal action be instituted for fraudulently inducing the Municipality into making irregular payments that were not legally due by using the Council Resolution A5/2017 as if it authorised such payments that resulted in a loss of R1 080 635.05.”
Municipal Infrastructure Grant:
It was found that 35 MIG Projects which had variations as per the variation orders submitted by TCLM Management. 16 Projects had cost variations which exceeded 20% or 20 million of the initial cost in contravention of the National Treasury Instruction.
“We found that there were 21 Turnkey Projects identified from 2014/2015 to 2016/2017. The Project Management Unit Manager informed us that the Turnkey Projects were a result of the Municipality receiving more funding after having completed the allocated projects.”
“Furthermore, the Turnkey Methodology assisted with cash flow when the municipality was utilizing MIG funds for salaries.”
Two such Turnkey Projects are the refurbishment of the 1.1km Moremela road (R8 537 018-30 paid to the contractor) and the refurbishment of the Viljoen and Kerk street roads in Lydenburg (R5 710 411-17 paid to the contractor). It was found that both roads were not satisfactory and of a substandard nature, thus identified as fruitless expenditure.
Supply Chain Management
“We concluded that the municipality has no system in place to monitor contracts in place.”
Work that was not verified as having been done that could have been paid if it was not stopped was reported as gross negligence. It was recommended that disciplinary actions be instituted. It was concluded that the municipality has no systems in place to monitor contracts in place.
Purchase orders were issued for the maintenance of the mini substations in Lydenburg and a certificate of payment signed for the amount of R 47, 030-70. In a memorandum dated November 9th, 2017, it was confirmed that no work was done for the maintenance of the mini substations in Lydenburg.
Unauthorised, Irregular, Fruitless and Wasteful Expenditure
“We concluded that the CFO failed to properly discharge his responsibilities in ensuring that transactions are properly recorded at TCLM since his appointment as the CFO from February 2015 as required from him.” The recommendation: “That disciplinary action be instituted against the CFO for his negligent conduct in his failure to ensure that the financial transactions of the municipality are properly recorded as part of his responsibilities.”
“We found that there were no policies and procedures to deal with Unauthorised, Irregular, Fruitless and Wasteful (UIFW) expenditure at TCLM as recommended by the National Treasury.” The recommendation in the Forensic Investigation Report Implementation Plan (FIRIP) states that the Municipal Manager develops a policy and procedure to deal with UIFW expenditure.
The following amounts are noted in the Report:
Supply Chain Management: The irregular expenditure of R176 185 915-91 of which there is invoices, delivery notes and payment vouchers only to the value of R223 566-75. “We found that an amount of R95 090 687-34 which was 54% of the irregular expenditure examined did not have any documentation including the payments reports. The amounts only existed in the irregular register.”
“We found that there were payments amounting to R1 145 722-00 which made to suppliers which were not authorised by delegated officials. We found three instances where the official requesting the payment was the same official authorising the payment.” The recommendation in the FIRIP states that the three amounts be recovered from the individuals as the irregular expenditure was conducted in a willful and malicious manner in that the individuals requested and approved the payments.
An amount of R7 794 355-26 was not examined as the vouchers are examined by Auditor-General of South Africa.
Payments to Security Companies: one payment of R631 079-76 (2011/2012) to a security company was classified as irregular. “We concluded that R42 236 565-11 of irregular expenditure is attributed to security companies appointed irregularly without valid reasons.”
“Fruitless and wasteful accounted to R104 823 755-70 for the financial years from 2013 to 2017. Fruitless and wasteful expenditure incurred was due to Eskom’s overdue account, with interest amounting to R97 926 287-85. Other fruitless and wasteful expenditures incurred on overdue accounts amount to R6 897 467-91.”