Report finds city wasted millions in financial misconduct, flawed HR processes

In its bid to promote clean governance and consequence management within its ranks, the eThekwini Municipality is investigating more than 300 staff, including senior managers, for various acts of misconduct.

The allegations include negligence related to the wrongful hiring of staff and financial misconduct. This has cost the city hundreds of millions of rand in unauthorised and irregular expenditure. Last week in his State of the Province address, Premier Sihle Zikalala said that consequence management against errant staff would be a top priority.

The damning allegations against the municipality’s staff are contained in a forensic report leaked to The Mercury. The report, which was verified by three independent sources, is expected to be tabled before exco this week. According to the sources, some managers are believed to be considering counter charges.

The sources said the latest probe had revived earlier investigations, some dating back to 2003, which had included recommendations by forensic investigators to charge staff with financial misconduct and negligence. The investigation has culminated in the production of the report recommending “consequence management” to deal with staff in disciplinary hearings that could lead to some being criminally charged if found guilty.

A recent Auditor-General’s (A-G) report highlighted R2.34billion worth of unauthorised, irregular, fruitless and wasteful expenditure during the financial year ending June 2019, and noted that no action had been taken against staff. The report revealed that investigators had alleged that a senior manager, whose name is known to The Mercury, was negligent in his involvement in hiring a manager “who did not meet the post’s requirements”, in contravention of the city’s standard operating procedures and human resources policy.

It also recommended that another senior manager be charged with financial misconduct related to a tender exceeding R400million and a further contract for R2m. According to the report, consequence management was being pursued against more than 50 employees, most of whom were senior managers. However, sources close to the investigation said about 300 staff were being investigated.

Ten percent of the cases related to charges of financial misconduct linked to unauthorised and irregular expenditure, and the balance to instances of fruitless and wasteful expenditure such as late payments that led to interest charges. Investigators also recommended that the senior officials face charges of financial misconduct for allegedly contravening supply chain management policies, the Municipal Finance Management Act (MFMA) and treasury regulations regarding a R405m contract that ballooned to R505m before the first invoice could be paid.

The report’s recommendation follows a 2015 investigation that found that the appointment of a construction company, also known to The Mercury, was “inherently flawed” and “not in line” with supply chain management regulations and the MFMA. Before the letter of award was approved, the construction firm had allegedly submitted an invoice for R30.5m and the project had already exceeded budget by R99.4m. “The payments to the construction company were irregular and unauthorised from the onset,” the report read.

One of the senior officials is also facing a charge of financial misconduct relating to the irregular expenditure of R2.5m incurred when a service provider exceeded its scope of work without authorisation. When approached for comment, both senior officials said they were not aware of the charges. City manager Sipho Nzuza confirmed that more than 300 staff were facing disciplinary hearings, some of which involved minor cases relating to processes not being followed.

He said cases dated back to 2003 and had resulted in A-G reports that the city was “very slack when it comes to consequence management”. “It doesn’t mean that the municipality is corrupt or the municipality is falling down. We charge them with the aim that people will get what they are supposed to be getting as punishment, and in other cases we look at where people need to be trained. We want to make sure people do the right thing,” Nzuza said.

He said charges had been issued and the city would appoint prosecutors and commissioners to hear cases. Nzuza said officials found guilty of financial misconduct could face criminal charges, and steps would be taken to recoup the funds. IFP councillor Mdu Nkosi said he had been calling for action to be taken against staff implicated in the reports, which had been “gathering dust”. “I heard that there will be counter charges by managers, which means the city manager mandated a company to charge the officials and the officials are now starting to do a similar thing.

“The city is in a shambles because where is service delivery if 300 officials are being charged?” Nkosi said. He said the IFP would follow each case closely as those found guilty should be held accountable. DA councillor Nicole Graham said “a huge” number of councillors had been “dealing in tenders” and had not been held accountable.

She said officials found guilty of financial misconduct should be forced to pay back the money to the city.