Municipality to revisit R93m write-off 'in due course'

KNYSNA NEWS - Knysna Municipality has announced that it will submit a report and recommendations for consideration by Council "in due course" regarding its decision to write off R93-million of irregular expenditure.

This follows a statement issued by the Knysna Ratepayers Association (KRA) last week calling on the municipal council to recall the decision. The controversial decision was made following a recommendation to Council by former Acting Municipal Manager Dr Michele Gratz.

Why does the KRA believe the irregular expenditure should not have been deemed irreplaceable?

The municipality disclosed the expenditures as irregular. Once this happens, it has to be dealt with as Section 32(2) of the Municipal Finance Management Act requires. This legislation mandates that irregular expenditure may only be written off after an investigation by the Municipal Public Accounts Committee (MPAC). By deeming the irregular expenditure irreplaceable (or, in layman's terms, "writing it off ") without preceding MPAC investigations, the KRA stated that the municipality failed to follow due process.

The municipality responded thus: "The office of the acting municipal manager takes note of the contentions of the KRA that council's condonation of the expenditure deemed to be irregular by the Auditor-General was illegal. The acting municipal manager is studying all documentation relating to the aforesaid matter and will submit a report and recommendations for consideration by Council in due course, whereafter we will be able to comment."

Which body declared the R93-million expenditures irregular?

The Auditor-General came to this conclusion in the 2018/2019 financial-year audit. The AG labelled some so-called "piggy-back" contracts irregular. "Piggy-back contracts" refer to agreements where goods or services are procured for a municipality under a contract secured by another state organ. This may only be done if certain requirements are met. If the requirements - set out in regulation 32 of the Municipal Supply Chain Management Regulations - are not met, the expenditures incurred in terms thereof may be declared irregular.

The Knysna Municipality, in its annual financial statements, also disclosed the expenditure as irregular.

Comment from Gratz's attorney

In Gratz's response, her legal counsel Richard Sohn said there was "nothing unlawful about the decision taken", that his client had not done anything unlawful and that the decision to deem the R93-million as irredeemable was that of the Knysna Municipal Council, and not that of Gratz personally.