R3m Council fraud fear
2007-02-22
Anne Kruger
POSSIBLE fraud totalling R3 million is being investigated against two employees of Drakenstein Municipality.
It is suspected that two senior workshop employees colluded with service providers to have the Municipality pay for services which were never rendered.
On 17 November the Municipality applied successfully for an ex parte court order to seize the documents and copy the computer hard drives of the service providers.
They also applied successfully for permission to have the sherriff, a supervising attorney and forensic auditors enter the premises of vehicle repair and auto electrical businesses in Huguenot and Dal Josaphat, to obtain the information on their computers, and to search the premises for any relevant documents.
The documents required included job cards, service history of vehicles, invoices, order and requisition forms, delivery notes, credit notes, stock records, bank statements, wage records and accounting records.
The investigation was initiated by the municipal manager, Dr Sidima Kabanyane, in response to concerns raised during a compliance audit on procurement practices.
Concerns were also raised by the municipal finance department regarding possibly inflated costs for goods and service by the repair companies.
During a preliminary investigation of the financial records of the Municipality, forensic auditors found various anomalies regarding repeated servicing and repairs of vehicles for the same fault by a series of suppliers, as well as double invoicing for the same service.
Allegations of conflict of interest as well as corruptive practices were also made. Controls to verify repairs and ensure warranties were allegedly not always enforced.
A considerable amount of irregular wasteful expenditure was found after only a small sample of transactions were investigated.
It is also suspected that work had not been equally distributed according to municipal supply chain management policy, but that certain suppliers had been favoured.
The daughter of the most senior municipal workshop employee is a previous shareholder of one of the suspect suppliers.
Her company had received work to the value of about R1,2 million from the Municipality in one year.
Other allegations are that some of the companies are fronting for one another (they share a same address and contact details and have the same directors).
Kickbacks received allegedly included cash and repair of vehicles for family and friends free of charge while the actual costs were invoiced to the Municipality.
The companies where evidence was seized are Millennium Repairs, Mag Pty Ltd, Mag Bulk Handling, Mag Auto Electrical (trading as Paarl Auto Electrical) and Wynland Brake and Clutch.
It is stated in court papers that the respondent companies are not necessarily involved in malpractices, but that evidence was seized at their premises as a strategic move to preserve evidence in the most effective manner.
These documents and other evidence will now be handed over to the forensic auditors to compile a final report in order to quantify the final amount involved and to verify and identify the individuals and other entities involved in fraudulent transactions.
The only respondent who did not indicate that they would co-operate with the Municipality in the investigation, was Millennium Repairs.
The other respondents indicated that they would co-operate with the auditors to compile their final report.
Should the final forensic report reveal evidence of criminal offences, charges will be laid with the police.
In court papers Dr Kabanyane said: “The Municipality is committed to the procedurally correct conduct of allocation of services tnd also that it is honest, fair and transparent.
“Once there are indications that the procedures are not followed or that there has been dishonesty, the Municipality is committed to holding the parties responsible to account.”
Legal action may also be taken which could involve applications for sequestration or liquidation of individuals and businesses, to recover any money owing to the municipality.
Uys van der Hoven of Van der Spuy and Partners acted on behalf of the Municipality.
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