City probes ‘R32?mln fraud’

2014-10-06 00:00

THE eThekwini Municipality is to ask the SAPS to investigate a city employee who may have swindled the council out of over R30 million in tenders.

The request is the result of a nearly three-year investigation by the city’s Integrity and Investigations Unit into allegations that an employee had conducted business with the municipality and was awarded the work through the controversial Section 36 regulation, which allows all municipalities to circumvent regular tender processes if it is deemed “impractical to follow normal procurement processes”.

The charges include the company’s irregular appointment, services not rendered and tax evasion.

The alleged fraud, connected to the 2010 Fifa World Cup and apparently linked to the supply of taxi services, saw the employee, whose business partner was also a provincial government employee, awarded five separate contracts to the value of R32,5 million.

The Municipal Public Accounts Committee made the investigation public last week at a full council meeting.

Ironically, just days earlier the public protector confirmed it was launching an investigation into the city’s tender process — specifically section 36 — with the scope of the probe ranging from 2004 until present.

MPAC chairperson Sipho Kaunda confirmed to The Witness that the alleged irregularities “were around the period of the World Cup”.

He said, “Details of the suspects will only be made public once the investigation has been concluded.”

A report obtained by The Witness said the employee’s company also “appears to have committed fraud” by double invoicing the municipality, which “incurred financial prejudice to the amount of R138 000” and used state resources.

“The company had uncompensated usage of council vehicles to provide a service and also used council funds to train its staff to provide the service,” said the report.

The report also stated that the company had circumvented paying the appropriate tax, no records on whether the actual service “had been rendered” could be obtained, the investigators could not establish whether the contracts were authorised by the city manager and that they currently had no proof of whether the awards had been reported to council and “declared in the annual financial statements”.

DA councillor Tex Collins said changes in procurement and supply chain management regulations in 2005 created the space for such irregularities to have occurred.

“Political oversight was removed. We would, if we knew, never have allowed an employee-led company to secure contracts like this,” said Collins.

The city’s investigation is to be handed over to the police and SARS.

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