MPAC writes off R93m irregular expenditure

KNYSNA NEWS - The Knysna Ratepayers Association (KRA) has slammed the decision made on 29 October by council to write off R93-million, declared by the Auditor-General as irregular spending, following a recommendation by the Knysna Municipal Public Accounts Committee (MPAC).

In a statement, the KRA said this was a sign that there was a lack of accountability in Knysna’s local government.

The controversy started on 28 May this year when council initially wrote off the amount, which included R41-million spent on a tender for prepaid water meters. The money was written off by Council despite a recommendation from the disciplinary board that a forensic investigation into the conduct of the chief financial officer in connection with the water meters contract be conducted.

Forensic investigator
On 11 June council resolved that a forensic investigator be appointed to look into the matter. On 16 August the KRA requested council to rescind the decision to write off the expenditure associated with piggy-back contracts. Such contracts deviate from a competitive bidding process and rely on a tender process from another municipality.

On 27 August 2020, council set aside its former decision and referred the irregular expenditure to the MPAC for an investigation.

Last week the KRA said that, despite this, it had remained "confident" that Councillor Ian Uys, who was the MPAC chairman at the time, would conduct a thorough investigation and provide them with an opportunity to address MPAC about the expenditure.

Uys however resigned in early October citing lack of cooperation and obstruction by the DA in this and other issues.

The DA’s Michelle Wasserman was appointed as MPAC chair after the resignation of Uys. "In stark contrast to the difficulties experienced by Uys,” the KRA said, "Wasserman managed to have a meeting scheduled soon after her appointment. No notice was given to the public and KRA found out that the meeting was in progress when it was broadcast on YouTube.’’

The KRA said that its chairman and legal advisor, Susan Campbell, sent an urgent e-mail and WhatsApp message to Wasserman, requesting an opportunity to address MPAC. The item pertaining to irregular expenditure was postponed to an undetermined date for a presentation by Provincial Treasury.

According to the KRA, Campbell again wrote to Wasserman requesting an opportunity to address MPAC. "Wasserman sent a response, half-an-hour before the meeting, denying Campbell the opportunity to address MPAC as no provision was made for the public to address MPAC.

"The reason was at best disingenuous, as Campbell had addressed MPAC on several occasions since 2014,’’ the KRA said.

Request to address council
The KRA said it had then written to the Speaker and asked for an opportunity to address council. "We were permitted to address council, but our chair and legal advisor was denied the opportunity because she had addressed MPAC in the past and because she is a candidate in the Ward 10 by-election. Although we found the reasons advanced ludicrous, we asked for the matter to be postponed until after the election,” the KRA said.

"We did not receive a response and on 29 October, Council accepted the recommendation from the MPAC and wrote off the irregular expenditure, despite the fact that an investigation into the water meters contract was still pending. The DA and ANC unanimously supported the illegal write-off of a whopping R93-million,’’ the KRA said.

“It is becoming apparent that there is no political will to investigate the conduct of the CFO,”’ the KRA continued. "We fully expect, now that the CFO has resigned, the DA and ANC will allow the R41-million investigation to die a quiet death, or pull the plug on it behind closed doors. And so the lack of accountability in Knysna continues.”

Wasserman responded to the KRA statement by arguing that Section 32 of Supply Chain Management Regulations made provision for a municipality to piggy-back on the tender of another municipality. She said the water meter tender was a piggy-back on City of Cape Town's tender process and that the appointment of consulting engineers was a piggy-back on Mossel Bay Municipality's tender process.

"These tenders were entered into three years ago. Knysna Municipality paid exactly the same amount for these services as City of Cape Town and Mossel Bay,” Wasserman said.

She added that when the Auditor-General did the audit last year, they retrospectively changed their interpretation of Section 32.

“The new interpretation resulted in all but two municipalities in the Western Cape receiving an irregular expenditure finding. The AG's view on the treatment of Supply Chain Management regulations is an interpretation issue and is therefore a technical matter, not one of fraud or corruption or gross negligence resulting in a financial loss.”

'MPAC was satisfied'
Wasserman said the AG did a presentation to MPAC and Provincial Treasury gave input. “MPAC was satisfied that nothing was amiss with the expenditure which was only deemed to be irregular due to a change in accounting reporting by the Auditor-General.”

In response to this, the KRA stated: "Wasserman keeps saying that the R93-million being declared irregular expenditure by the Auditor General is a mere technicality brought about by the AG’s retrospective interpretation of Section 32 – but that is not the crux of the matter.”

“Firstly, the AG declared the expenditure illegal because there was no cost-saving analysis done before entering into the piggy-backing process. That is an important point being omitted from her narrative. Secondly, a council-ordered forensic investigation into the R41-million water meters contract has not been concluded. It constitutes a large part of the R93-million irregular expenditure,” the KRA said.

“It is beyond belief that Wasserman and the rest of council wrote off R93-million – because the municipality had purportedly received value and suffered no loss – when no cost benefit assessment had been done before the piggy-back contracts, and the forensic investigation meant to determine if the money was properly spent is still pending.”

By the time of going to print, Wasserman had not responded to this KRA comment.

Knysna Municipality was asked to comment on the latest developments, but municipal spokesperson Christopher Bezuidenhout said the municipality stood by its statement on 1 September in which it shared Wasserman’s sentiments about the piggy-back tenders.

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