Probe reveals damning evidence

2010-07-07 00:00

DAMNING evidence about the manipulation of car allowances, false and misleading financial information, and an inappropriate relationship between staff and municipal tender holders emerged yesterday at the commission of inquiry into uMngeni Municipality.

Forensic investigator advocate Andre Bouwer presented a timeline of awarded tenders and the benefits to certain staffers at the municipality. The timeline showed that between July 2004 and June 2007, DDT Civils were awarded tenders for 11 projects valued at over R39 million.

Bouwer said that the timeline showed that there is a reasonable suspicion of corruption and that criminal charges have been institu­ted with the commercial crimes unit by the KZN Local Government Department.

He said he has been appointed to assist with the criminal matter.

A large part of the proceedings was spent unravelling the remune­ration packages of senior staffers.

Bouwer said he found no evidence that a car allowance policy had been passed by council and tthe policy was allegedly manipulated to inflate the allowance received by senior staffers.

Bouwer described an instance where three new senior managers were not getting the same amount as managers appointed earlier.

The managers had complained and chief financial officer Bertus van der Merwe’s solution was to increase the fixed kilometres allowed to them and paid them accordingly.

Bouwer quoted from his transcripts where he asked Van der Merwe: “Travel allowances: is that a right or a privilege?

Van der Merwe: “My personal view is that it’s a right.”

Other transcripts indicated that senior managers admitted that fixed kilometres were not monitored, with log-sheets to record the official kilometres travelled not filled in and not retained for tax purposes.

Bouwer added that the effect of the inflation of annual remuneration packages by increasing the travel allowances cost the municipality well over R1 million a year. The investigator also showed instances where the municipality paid no taxes to the Receiver of Revenue for perfor­mance bonuses awarded in June 2006 for certain employees.

Proceedings were adjourned in the late afternoon while Bouwer was giving evidence on the performance of Van Der Merwe. He said there was evidence indicating the CFO allegedly presented false and incorrect information to the council.

The closing cash balance at June 30, 2007, showed the municipality had a cash flow projection of over R29 million. This did not match the investigator’s calculations.

When the miscalculation was pointed out to Van Der Merwe, he allegedly said that it was an error in his Excel spreadsheet. Bouwer added that if indeed this was an error, it was negligence that should have been put right.

An error in the cash flow projections was also picked up at a council meeting in April 2007. Documents showed a positive cash balance of R4 401 250, whereas there was in fact an overdraft of over R19 million.

“This was not, however , the version that was re-submitted by Mr van der Merwe to Exco. The revised spreadsheet that was submitted now included an additional line item ‘investments realised’ [an amount of R23,8 million],” said Bouwer.

When the CFO was asked what this money was and where it came from, he allegedly explained that this was future investment that would be realised from investing R1 million in rates income every month. “This means that for investing R12 million he expects a return of R23,8 million; this is highly improbable unless the money is inves­ted in a risky venture,” Bouwer added.

He said the effect of adding this amount was that “the closing cash balance at the end of June 2008 was reflected as R4 401 248, almost exactly the same closing balance as per the original incorrect projection”.

Evidence was also presented of the municipality taking out a R20 million loan from Absa for capital projects. However, R14 million of this money was put in different 32- and 60-day investment accounts and the remaining R6 million was used for operational costs.

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