According to a report by a chartered accounting company, Thapvic Financial Services, hired by the municipal manager (MM) after the 2014/15 and 2015/16 Auditor-General report calling for consequence management, it is alleged that some ANC and DA councillors and officials were involved in alleged irregular expenditure of R70 million and R57 million which were incurred for the financial years 2014/15 and 2015/16 respectively. This practice is considered unethical and prohibited according to the MFMA (Municipal Finance Management Act) section 44, which states that awards to companies with which employees or councillors have direct interests, is not allowed.

This comes after the Auditor-General released a report last year about the municipality incurring unauthorised, irregular, fruitless and wasteful expenditure for 2014/15 and 2015/16. The irregular expenditure by the municipality totalled R520 million, for which the Auditor-General called a consequence management. After this report of the Auditor-General, the DA councillors held a mass meeting earlier this year calling for Municipal Manager Dr Nomathemba Blaai-Mokgethi to resign.

The mayoral spokesperson, Victor Boqo says ‘Council took a decision for the MM to further investigate the report of the Auditor-General and a company was hired to verify what the Auditor-General found out and also do a thorough investigation. After the company’s findings, the MM took the report to MPAC (Municipal Public Accounts Committee), which then handed it back to council. Its recommendation was that the MM must take disciplinary action against the councillors and officials,’ said Boqo.

Boqo added that the speaker will institute a committee to take disciplinary action against those found guilty of this misconduct. ‘They will have an opportunity to appear before the committee and answer to the findings.’

The report in question was tabled in a closed session at the last NW405 municipality special council meeting on 30 May 2017. At the special council meeting in closed session, the ANC voted with the DA to rather note the report and not adopt it.

The report highlighted employees who, according to the chartered accounting company, have private business interests, whose spouses conducted business with the municipality. It also implicated councillors who allegedly have entered into business transactions with the Tlokwe City Council, and suppliers and members who did not declare the relationship. Moreover, the company also verified that there were suppliers who were awarded the tenders even though they did not disclose that one of their members is employed by the state institution.

In reaction to the allegations, the DA is suing the chartered accounting company hired by the MM for R3 million for what they say is a false report.

The DA denied that their members implicated in the report conducted business with the municipality and did not have any business interests in companies that were listed.

According to Hans-Jurie Moolman, DA Caucus leader, ‘we have initiated litigation to claim for defamation for the false and defamatory findings in the “damning” report.’

‘The DA councillors did not break any laws. In fact, the report has been compiled by a company that never consulted us during their investigation and the first time we received notice of the findings against us was when the report was distributed to councillors before the first meeting it was tabled.

‘Our response was to digest the information and lodge our own investigation, as the information of interest holders in these registered business entities is kept with the registrar of companies,’ he said.

‘This will mean that the councillors are either, shareholders/directors of a company, members of a closed corporation or beneficiaries of a trust. This report does not state any of these capacities held by our councillors and they did not appear in the companies as directors, members or shareholders.

‘If our members held an interest in these entities, they would have been required to sign their annual financial statements. Their signature will appear on those statements,’ he said.

Moolman added that none exists and ‘neither have they signed any financial statements of these business entities in whatever capacity. The business entities to which reference is made are well-known businesses in Potchefstroom.’

‘My office made enquiries with The South African Institute of Chartered Accountants (SAICA) and the Financial Services Board (FSB) about the registration of the company that compiled the report as chartered accountants or as financial service providers as proclaimed on their website and the responses were in the negative.

‘It is categorically denied that any of our members made themselves guilty of contravening any law or misconduct and we will be looking into the who instructed this company to conduct this investigation and to what extent public funds have been utilised to fabricate this false report to bring councillors into disrepute. This is totally unacceptable and we ask that anyone with information on the background of this report bring same to our attention,’ said Moolman.

The same Herald media enquiry was sent to the ANC chief whip in NW405, Mpho Matsapola to shed light on the implicated ANC councillors on the report. However, she said she cannot comment on matters that are in committee or closed session. ‘These issues are not for the public. The council has not resolved on those matters,’ she said.

Boqo says the DA can sue the company. ‘It is in their rights to do so. The independent company that conducted the investigation only confirmed what the Auditor-General stated. As a municipality, we want a clean audit and therefore there will be a consequence management,’ he said.

Thapelo Mosome a shareholder at Thapvic Financial Services, a chartered accounting company hired by the MM to conduct investigations, says the report is not false. ‘For the 2017 financial year, the information comes from The Companies and Intellectual Property Commission (CIPC). The Auditor-General (AG) is a supreme audit institution in terms of chapter 9 of the Constitution and their findings are final. So we did not have any reason to believe otherwise and validate their report. We merely highlighted that AG raised these issues previously. We also recommended that Council should consult the implicated officials and obtain necessary forms showing approval, so in essence you cannot conclude that officials are liable before this process is completed,’ said Mosome.

He says Thapvic has not received any summons of the R3 million DA lawsuit.

He confirmed that it is correct that Thapvic is not registered with FSB (Financial Services Board). ‘Thapvic is not required to be registered and nowhere did we say we are registered with FSB’, he said. He says that ‘Thapvic has not paid the annual SAICA membership fees and as such SAICA would not confirm membership. Thapvic will pay the fees to ensure that membership is active,’ he said.

In light of the DA members claiming that they were wrongfully implicated, Mosome explained how a chartered accounting company determines if an individual or in this case public official has interests in companies. ‘The Companies and Intellectual Property Commission (CIPC) has a real-time online function where an identity document of an individual is simply captured to reveal the details of companies where the official has interests.

‘Therefore, Thapvic simply captured identity numbers of all employees and councillors including spouses and presented the results for the 2017 financial year. Because the system is real-time, previous years disclosures were simply extracted from the Auditor-General (AG) report and Thapvic stated this fact in the final report. Thapvic merely recommended that action should be instituted after requesting implicated officials to respond and produce evidence of declaration or approval. This was the same recommendation by AG,’ said Mosome.

Mosome says the company has a track record in terms of conducting such financial investigations. ‘Thapvic’s shareholders are members of SAICA and who in their own capacity have experience of over 10 years and have been conducting these investigations. As a company, Thapvic was subcontracted by Ramabulana Management Services to help various municipalities and departments in North West to assist with irregular expenditure investigations and condonation process. The contract was awarded by a North West department in 2013,’ said Mosome.

*This is a developing story.