CFO EXITS KM.
KRA takes note of the resignation of Mr. Memani, the Knysna CFO, who reportedly spent his last day at work on 16 October, although he officially leaves the employ of the municipality at the end of the month.
The ANC and the Mayor, Councillor van Aswegen, agreed to Mr. Memani’s request to work his last day on 16 October. KRA is however perplexed by the DA’s position that Mr. Memani should stay on until the end of November because his expertise is required in dealing with the Adjustment Budget and the Auditor General.
It is no secret that Mr. Memani is the subject of an investigation, following a complaint by the KRA relating to the omission of contingent assets to the value of R60 million from the financial statements of the municipality. Our complaint includes the allegation that the Auditor General was misled by the CFO about the reason for the omission of the assets.
We are therefore relieved that the DA’s irrational position did not carry the day.
We trust that the forensic investigation against Mr. Memani will continue,so that Mr. Memani’s name can be cleared if he is not culpable, or to ensure that if he is guilty, a precedent is set that Knysna officials cannot simply escape the consequences of their wrongful actions by resigning. ...
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COMMENT ON KNYSNA MUNICIPALITY’S PRESS RELEASE ON IRREGULAR EXPENDITURE
The press release of Dr. Scheepers, the Acting Municipal Manager (“AMM”), relating to the piggy back tenders, is both misleading and deeply troubling.
From the outset, the heading prejudges the outcome of the pending MPAC investigation and Dr. Scheepers misleadingly refers to “alleged irregular expenditure”, whereas it is not in dispute that Knysna Municipality incurred irregular expenditure of more than R93 million in connection with Regulation 32 or “piggy back” tenders and that the Municipality unlawfully wrote off the expenditure in May 2020, following the recommendation from the former Acting MM, Dr. Gratz.
Acting in response to a written request from the Knysna Ratepayers Association (“KRA”), on the 27th of August 2020 the municipality reversed its unlawful decision to write off that expenditure.
When Dr. Gratz recommended to Council in May that the R93 million in irregular expenditure be certified as irrecoverable and written off, her recommendation was motivated by a report from the CFO. The CFO, Mr. Memani, has a glaring conflict of interest, as he himself is the subject of a forensic investigation in respect of a R43 million piggy back contract for water meters. Mr. Memani is also the official most likely to be deemed responsible for the irregular expenditure. The report from the CFO relied upon by Dr. Gratz contained the same motivation that had been rejected by the Auditor General (the “AG”).
In his report to Council, Dr. Scheepers again inexplicably relied on the same information and motivation that had been provided by the compromised CFO and rejected by the AG.
Although Dr. Scheepers conceded that the municipality could not lawfully write off the irregular expenditure prior to an investigation by MPAC, he prejudged the outcome of the investigation when he concluded that:
“i) no political office bearer, the accounting officer or another official knowingly, deliberately or negligently incurred the irregular expenditure; and
ii) the Municipality received value for money, even though the expenditure was irregular.”
It is highly inappropriate for Dr. Scheepers to prejudge the forensic investigation as well as the MPAC investigation, especially considering that he is fully aware of the Council’s resolution that a forensic investigator must investigate the CFO in connection with the water meter contracts.
In relying on the fact that almost all the municipalities in the Western Cape incurred irregular expenditure in connection with piggy back contracts, the AMM forgets that two wrongs have never made a right.
Until the Auditor General intervened, following two high court decisions from KZN and the Eastern Cape, piggy-back contracts, which deviate from a competitive bidding process and rely on a tender process from another municipality, had been widely abused nationwide. Knysna is no exception.
Dr. Scheepers and the Western Cape Provincial Treasury disagreed with the AG that the two high court judgments from other provinces were binding in the Western Cape Province and the rest of South Africa.
South Africa is a unitary state and a constitutional democracy in which the rule of law prevails. This implies inter alia that everyone, including organs of state, is subject to the same laws and to the jurisdiction of the courts. As we do not have a codified legal system, our law has more than one source, and includes legislation, case law, which is derived from decisions of our courts, the common law etc.
Courts apply the law and in so doing take into account previous judgments in similar cases. Previous judicial decisions therefore constitute law, which is authoritative and binding on everyone, including organs of state. The reason for this lies in the system of judicial precedent, also called the doctrine of stare decisis.
At present the two high court cases from KZN and the Eastern Cape are the only cases that have ruled on the interpretation of Regulation 32. Until such time as there is a conflicting judgment in the Western Cape, or the cases are overruled by a higher court, each and every municipality is bound to follow the precedents laid down in those two cases.
From the foregoing, it is therefore clear that the AG is correct in considering that the two cases have force of law and that Knysna Municipality and the Provincial Treasury have erred.
National Treasury, which issued guidelines following the high court cases in MFMA Circular No 96, also considers the two judgments binding.
Moreover, the AMM omitted vital information about the audit finding from his report to Council and from the press statement.
In addition to its incorrect interpretation of the regulations, the AG found that the municipality failed to comply with regulation 32(1)(c), in that there was no form of analysis to determine the cost-savings benefits or discounts that will be achieved following the piggy back process.
The expenditure would therefore have been irregular in any event, regardless of the two high court cases.
The AG has recommended an investigation by management into all contracts where prescribed requirements were not met. Provincial Treasury has agreed with this recommendation.
No such investigation has been conducted. KRA will request MPAC to investigate all these contracts.
Nothing more, and nothing less. ...
COUNCIL REVERSES ILLEGAL DECISION TO WRITE OFF R93 MILLION
KRA TO CONTINUE BATTLE FOR ACCOUNTABILITY BEFORE MPAC
On the 16th of August KRA requested the Knysna Municipal Council to rescind its illegal decision to write off irregular expenditure of R93 Million.
This expenditure was associated with piggy-back contracts. These contracts deviate from a competitive bidding process and rely on a tender process from another municipality.
Until the Auditor General intervened following two high court decisions, piggy-back contracts had been widely abused nationwide.
A piggy-back contract that involved a multi-million rand asbestos contract and the Free State Provincial Government featured prominently before the Zondo Commission this week.
On Thursday the 27th of August 2020, the Knysna Municipal Council unanimously set aside its illegal decision and referred the irregular expenditure to the Municipal Public Accounts Committee (“MPAC”).
Whereas the decision is a victory for accountability and the rule of law, the report by Acting Municipal Manager Dr. Louis Scheepers gave the impression that the failure to first refer the expenditure to MPAC was merely a technicality.
Dr. Scheepers advised Council that, whereas it may be argued that an investigation by a committee of Council into whether any political office bearer, accounting officer or official knowingly, deliberately or negligently incurred the irregular expenditure is not required, Council must comply with the legislative provisions that a committee of Council conduct an investigation, even if the circumstances dictate or warrant otherwise.
Dr. Scheepers said that the municipality will not be able to recover any monies from any political office bearer, the accounting officer or any other official, but that, in order to comply with the prescripts of the MFMA, Council must refer the matter to MPAC, and only after it has received the recommendation from MPAC can Council decide to write off the expenditure.
That statement appears to prejudge the outcome of the MPAC investigation.
DA councillors Tyokolo and Wasserman even referred to the MPAC referral as a “box-ticking” exercise. Fortunately, Executive Mayor Ricky van Aswegen corrected them, stressing the important role that MPAC plays in ensuring good governance.
KRA strongly disagrees with any suggestion that failure to refer the matter to MPAC was merely a technicality.
We shall request an opportunity to address MPAC to ensure that MPAC is apprised of all the facts and that the investigation is not treated as a minor compliance exercise; and we will ask MPAC to await the outcome of the financial misconduct investigation into the CFO before it makes a recommendation to Council.
KRA will continue to do whatever we can to ensure that the matter is dealt with according to the law of the land and that there is accountability, once and for all. ...
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