Forensic Investigation Findings in Mpumalanga Local Municipalities: briefing by Mpumalanga Provincial Department of Cooperative and Traditional Affairs

NCOP Cooperative Governance & Traditional Affairs, Water and Sanitation and Human Settlements

28 October 2014
Chairperson: Mr G Thobejane (ANC, Limpopo) (Acting)
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Meeting Summary

The Select Committee on Cooperative Governance and Traditional Affairs met to be briefed on the findings of the forensic investigation into Mpumalanga municipalities, in terms of Section 106 of the Municipal Systems Act, 2000. The report by the Mpumalanga Provincial Department of Cooperative and Traditional Affairs (COGTA) covered allegations of transgressions at nine local and district municipalities, and gave details of the recommendations and subsequent action taken.

The Department described a wide range of allegations. These included the irregular appointment of service providers and members of staff, fraudulent transfers of money, non-compliance with policies, fruitless and wasteful expenditure, supply chain management processes not being followed, abuse of municipal credit cards and fuel cards, irregularities in the allocation of RDP houses, abuse of authority, irregular payment for overseas trips by councillors and officials, and irregular overtime payments.

In most cases, misappropriated funds had been recovered, or action was still in progress to recoup the missing money. Some of the officials implicated had been dismissed, but many had resigned or retired before they could be brought to book. Others had been suspended, but had been reinstated after being cleared at the disciplinary hearings.

Members asked whether there were any plans by the Department to see to it that employees who were guilty of fraud and resigned from municipalities, were not employed at other municipalities or government departments in Mpumalanga. There was a tendency by officials to resign from one municipality and go to work at another. Did the Department know of any officials that were working at other municipalities, but had committed fraud in their previous municipality, in order to take them out of government employment? In the case of a municipality which did not implement the recommendations, what recourse did the Provincial Department have? Why it was taking so long to finalise one disciplinary case where around R1 million was involved? Were the officials that were implicated and had resigned going to be prosecuted?

A Member said that the deployment of incompetent officials was the root cause of the current increase in service delivery protests, and this was also evident from the presenter’s report. He asked what actions had been put in place to ensure that the discredited officials were not employed in other spheres of Government. Did the province have a “blacklist” of the officials involved? Most importantly, the Minister of Cooperative Governance had recently indicated that 170 out of 278 CFOs in the country were unqualified. How many CFOs in Mpumalanga Province possessed the proper qualifications?

 

Meeting report

Election of Acting Chairperson
Ms G Manopole (ANC; Northern Cape) nominated Mr Godfrey Thobejane to be the Acting Chairperson of the meeting.

Mr D Ximbi (ANC, Western Cape) seconded the nomination.

Mr Thobejane was elected as the Acting Chairperson.

Findings of Forensic Investigation: Briefing
Mr Cain Chunda, Head of Department: Mpumalanga Provincial Department of Cooperative and Traditional Affairs (COGTA), said that the purpose of their presentation was to brief the Committee on the findings of the forensic investigation in terms of Section 106 of the Municipal Systems Act (Act 32 of 2000).

In terms of Section 106(1) (b) of the Municipal Systems Act, the Member of the Executive Council (MEC) must, if the MEC considers it necessary, designate a person or persons to investigate allegations of maladministration, fraud, corruption or any other serious malpractices, when it occurs or was occurring in a municipality. Attention was drawn to the fact that this report did not cover the written notices issued in terms of section 106(1) (a) of the Local Government: Municipal Systems Act, 2000 (Act No. 32 of 2000).
These investigations were instituted by the MEC in terms of section 106(1) (b), and conducted during the period of April 2009 to date. The Mpumalanga COGTA had initiated the investigations.

Mr Chunda said that at Thaba Chweu Local Municipality, there were allegations of irregular appointment of service providers; fraudulent transfers of money; and allegations of non-compliance with policies. The findings were that disciplinary action must be taken against implicated officials, including the Municipal Manager and the Chief Financial Officer, and the municipality must obtain legal opinion on the possible termination of certain contracts. The current status was that the recommendations had been implemented. Both the Municipal Manager and Chief Financial Officer had resigned before the conclusion of the disciplinary hearing, and certain contracts were terminated.

Mr Chunda said that on allegations of fruitless and wasteful expenditure; supply chain procedures not followed; abuse of the municipal credit card; irregular appointments of staff; misuse of municipal funds; and allegations of irregularities with the allocation of RDP houses at Mkhondo Local Municipality, the findings or recommendations were that action must be taken against the implicated officials for, inter alia, abuse of position of authority; and /or fruitless and wasteful expenditure; and / or fraud; and / or theft. The status of these cases was that the the Municipal Manager, Chief Financial Officer and Head of Co-operate Services resigned as a result of the investigation. Ten other officials were found guilty during the hearings, and the process was concluded, and two councillors were recalled as result of findings related to RDP houses.

The other findings on these cases noted that at Emalahleni Local Municipality, the Municipal Manager must implement stricter measures to ensure accountability at directorate level for over-expenditure at a line item basis. Such measures could include disciplinary action where considered appropriate. The Municipal Manager must put greater pressure on Directors to ensure compliance with virements on a main expenditure line item basis, to prevent over-expenditure at this level. This should in turn prevent over-expenditure on a vote and sub-vote basis, as well as instances of unauthorised expenditure. Disciplinary action should be considered against certain officials for financial misconduct in terms of section 171(3) of the Municipal Finance Management Act, 2003. Measures should be introduced to ensure effective and timeous compliance with the Supply Chain Management process, to expedite the appointment of consultants and contractors, and the commencement with capital projects. Staff shortages, high staff turnover and a lack of required skills in senior level positions had resulted in poor decisions being made in the areas of budgeting, actual expenditure and strategic guidance of the various directorates. The issue of non-compliance with the Basic Conditions of Employment Act, 1997, and the policy in respect of overtime payments, had historically been problematic in the Municipality.

Mr Chunda said that with regard to the alleged fraudulent cheque of R 596 856.44 that had gone through the Chief Albert Luthuli local municipality’s bank account on 26 April 2008 disciplinary action should be taken against the implicated officials; the municipality must improve on its internal controls; it should sign the insurance release form to recover the amount of R141 120.00; and it was recommended that the current limit of indemnity under both the Money and Fidelity Sections of the insurance policy should be reviewed. The status at Chief Albert Luthuli local municipality was that it had implemented the recommendations as per the report, and one implicated official had been dismissed subsequent to the disciplinary processes. However, the criminal case against the recipient of the fraudulent cheque was never concluded.

Mr Chunda said that at Ehlanzeni District Municipality one of the major allegations investigated was irregular payment regarding an overseas trip undertaken by both councillors and officials. The recommendation was that the implicated councillors and officials to pay back the money used during the overseas trip and the Municipal Manager to be charged for such irregular payment. The municipality deducted the money on a monthly basis from all the implicated councillors and officials. However, not all councillors were honoring their debts due to them and had not returned as councillors after the 2011 local government elections.

At Govan Mbeki Municipality there were allegations of fraudulent transactions amounting to R40 million being transferred from the Municipality’s bank account. The findings were that an amount of R39 million, which was about to be transferred, had been stopped by the bank, the Hawks, SAPS and the Municipality. Of the other R2.7 million stolen, R2.2 million was recovered. An IT fraud prevention strategy had to be implemented, and one municipal official and his accomplices were arrested by Hawks. The current status was that the Hawks investigation was on-going, and internal controls had been tightened around the IT environment. The draft IT fraud prevention strategy had been compiled.

Mr Chunda said that at Nkangala District Municipality, there had been allegations of maladministration, possible abuse of power, and irregularities involving the appointment of staff members. The Executive Mayor and the Municipal Manager had to be held accountable for irregularities and maladministration that occurred within the Municipality. The Municipal Council must take disciplinary action against the Municipal Manager and any other officials implicated in this investigation, and Human Resources and related policies were to be reviewed and implemented. The MEC had still to table the findings to the Council.

At Gert Sibande District Municipality there were allegations of fraudulent transactions amounting to R9.7m transferred from the Municipality’s bank account. The Municipality had not suffered any loss, as the transactions were discovered promptly enough for the bank to reverse the transactions. The municipal staff, including the Chief Financial Officer and the Deputy Chief Financial Officer, had been charged for failing to ensure that effective control measures and segregation of duties were in place. The recommendations had been implemented and the Chief Financial Officer and the Deputy Chief Financial Officer had been suspended and later reinstated. A police investigation was still to be finalised.

In terms of municipal-requested investigations at Thaba Chweu local municipality, there were allegations of fraudulent transactions amounting to R3.2 million transferred from the municipality’s bank account. The money was recovered. The bank accounts to which the money was transferred were frozen, and the money was later transferred back to the municipality’s bank account. The Chief Financial Officer was charged for sharing passwords and was found not guilty, but later resigned. All the officials who shared passwords were arrested by the HAWKS, but the charges were later withdrawn, due to lack of evidence.

At Dr Pixley ka Seme local municipality there were allegations of irregular appointments of staff and fuel card irregularities. The recommendations were that the municipal manager be charged for an irregular staff promotion, and two officials should be charged for fuel card fraud. A case was opened with the SAPS. The current status was that the municipal manager had gone on early retirement, and the two officials had resigned before they could be charged. Five petrol attendants at the fuel station had been dismissed, and the SAPS case had been closed due to lack of evidence.

At Thaba Chweu local municipality there were further allegations of irregular appointment of officials and payments to service providers who failed to perform. The findings were that disciplinary action should be taken against the short listing panels for short listing candidates who did not meet the minimum requirements; and the Acting Municipal Manager should be charged for fruitless and wasteful expenditure, and the money recovered from him. The status was that the short listing panels were not charged, and the Acting Municipal Manager who had given instructions on who to appoint had resigned before the disciplinary processes were concluded;

Mr Chunda said that at Mkhondo local municipality, there were allegations that total daily takings, or part of the daily takings, for a specific cashier at the licensing offices, had not been banked. The findings were that the initial investigation showed shortages of R915 000, involving four cashiers. The helpdesk files went missing when new cashiers took over, and therefore the investigation was not properly concluded. The status was that all four implicated cashiers were later suspended, and the disciplinary processes were still pending.

At Emalahleni local municipality, there were allegations of irregular overtime payments. The recommendations were that the irregular payment of overtime would be stopped with immediate effect. Officials who approved the payment of irregular overtime should be charged, and the irregular overtime payments be recovered in accordance with the Municipal Finance Management Act, 2003.

Discussion
Mr J Julius (DA, Gauteng) asked whether there were any plans by the Department to see to it that employees who were guilty of fraud and resigned from municipalities, were not employed at other municipalities or government departments in Mpumalanga. There was a tendency by officials to resign from one municipality and go to work at another. Did the Department know of any officials that were working at other municipalities, but had committed fraud in their previous municipality, in order to take them out of government employment? In the case of Emalahleni Local Municipality, which had not implemented the recommendations, what recourse did the Provincial Department have in that regard?

Ms Manopole asked why it was taking so long to finalise the disciplinary case against the four cashiers in Mkondo local municipality, taking into consideration that there was around R1 million involved.

Mr Ximbi asked whether the officials that were implicated and had resigned were going to be prosecuted, even though they were outside the municipality. Was there a plan to charge them?

Mr M Chetty (DA, KwaZulu-Natal) said that the deployment of incompetent officials was the root cause of the current increase in service delivery protests, and this was also evident from the presenter’s report. He asked what actions had been put in place to ensure that the discredited officials were not employed in other spheres Government. Did the province have a “blacklist” of the officials involved? Most importantly, the Minister of Cooperative Governance had recently indicated that 170 out of 278 CFOs in the country were unqualified. He asked how many CFOs in Mpumalanga Province possessed the proper qualifications. He asked about the status of the recommendations related to the charges made, but not implemented, at eMalahleni local municipality. With regard to Gert Sibande district municipality, where the CFO and the deputy CFO were suspended and later reinstated, he asked why they were reinstated -- in terms of the findings they were found guilty, but in the report it was stated they had been suspended and reinstated.

Mr Chetty noted that in Pixley ka Seme local municipality, the Municipal Manager had gone on early retirement and two officials had resigned before charges could be brought against them. Immediately after that, five petrol attendants had been dismissed. Surely, this was not what the case, because it meant those at the lowest income levels had been dismissed, while those were at the upper levels had got away scot-free. This was not the message they should be sending as COOGTA. It was sad that petrol attendants, as bread winners, could be dismissed and yet senior officials were not, but rather deployed to other municipalities.

Ms Refilwe Mtsweni, MEC: Cooperative Governance and Traditional Affairs, thanked the Committee for the questions, and said that although there were still outstanding issues, this did not mean they would be neglected. The challenges were understood and monitoring would be strictly applied to those areas. He assured the Committee that those employees who had resigned or been dismissed as a result of misconduct had been blacklisted in the province, and their names had been highlighted nationally.

With regard to overtime management at eMalahleni Local Municipality, it should be recalled that this municipality had been subject to intervention in terms of section 139 (1) (b). Amongst other issues, it was overtime management which had brought a lot of instability within the municipality between the labour forum and the administration. That situation had since stabilised and now there were no problems with the labour forum. The overtime was being properly managed and had been slightly reduced

On the issue of qualifications, it should be remembered that the Minister had promulgated the regulation in January 2014, which determined the skills and experience and competencies required for municipal managers. What normally happened was that whenever a post needed to be filled, particularly section 56 and 57 managers, the municipality forwarded recommendations to the MEC to concur with the appointment. However, before they could do that they relied mostly on the Minimum Competency Framework that had been promulgated by the Minister, to say whether the applicant met all the requirements before they could make that concurrence. They were very strict, and managed this requirement accordingly. However, it could not be said that mistakes did not happen, because there were people there that did not have the Certificate Programme in Management Development (CPMD) for municipal finance, and if one did not have that, one was not employable. Some of the municipal managers who were currently employed did have the CPMD, and were encouraging those who did not have, to register at the university and equip themselves with the relevant qualification.

Where the report indicated that the disciplinary hearings at Gert Sibande district municipality were still under way, and later on employees had been reinstated, this had indeed been the situation. However, subsequent to that, investigations had been conducted, based on which employees had been cleared of all wrong doing by the disciplinary process. After this, some of the employees had to be reinstated into the system.

On the issue of Mkhondo local municipality, the Department would follow up on the finalisation of matters that had been raised by the Members.

The Chairperson said the question needed to be asked as to whether these suspensions, expulsions and resignations were having an impact on service delivery. He asked what systems had been put in place to ensure service delivery was not affected indirectly when officials did not execute their particular duties.
Members of the Committee should applaud and appreciate the initiatives that had been undertaken by the MEC. This type of investigation should be encouraged across the country and should not be left half done, but rather seen to its conclusion.

The Chairperson thanked the MEC and her delegation for the presentation and responses.

The meeting was adjourned.
 

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