Knysna officials and office bearers not paying back the money

FOLLOWING allegations of Irregular Expenditure levelled against Knysna Municipality by the town’s Ratepayers Association, acting municipal manager Dr Louis Scheepers submitted a detailed report addressing this issue during a council meeting of August 27.
Scheepers said it was important to note that the findings of the Auditor General (AG) in relation to the interpretation of the implementation of Regulation 32 were not peculiar to Knysna Municipality, and that save for two in the Western Cape, all other municipalities in the province - even those who received so-called clean audits - had similar findings resulting from the the AG’s interpretation of these regulations.
This alleged irregular expenditure was identified during an audit of the financial year ending on June 30, 2019: Regulation 32 Piggy-Backing Contracts. In the report, the acting MM stated 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 necessitated.
During a council meeting on May 28, Dr Scheepers explained that the council dealt with unauthorised, irregular, or fruitless and wasteful expenditure by using Section 32 of the Local Government Municipal Financial Management Act (MFMA).
He added that this relevant statutory provision stated, among others, that a municipality must recover unauthorised, irregular or fruitless and wasteful expenditure from the person liable for that expenditure.
“It is important to understand that this expenditure is deemed irregular and not illegal,” he said.
“Regulation 32 of the Supply Chain Management (SCM) regulations provides that a SCM Policy may allow the accounting officer to procure goods or services for the municipality under a contract secured by another organ of state, but only if the contract has been secured by that organ of state by means of a competitive bidding process applicable to that organ of state.
“The municipality or entity must have no reason to believe that such contract was not validly procured; there must be demonstrable discounts or benefits for the municipality or entity to do so; and the other organ of state and the provider should have consented to such procurement in writing.”
According to Dr Scheepers, the AG based findings with regards to Regulation 32 piggy-back contracts on their interpretation of two prior court rulings.
“Despite the submissions by Knysna Municipality in its management report, the AG maintained that these finding were based solely on its interpretation of the two court judgements relied upon,” he explained.
According to the Provincial Treasury’s (PT) written response pertaining to the findings of the AG during its annual audit of compliance with the legislation for the year ended June 2019, it is clear that the PT is not in agreement with the findings of the AG.
“From the content of the written submissions by the PT it is clear that the PT is not in agreement with the finding of the AG insofar as it relates to the legal force of one of the Blue Nightingale and Kwaduzuka judgements - two judgements the AG relies upon in its findings.”
Dr Scheepers continued: “In stark contrast, PT in their written responses to the AG correctly holds the view that the court decisions which form the basis of the its findings, do not have ‘force of law’ in the Western Cape, having been made by High Courts outside the jurisdiction of the Western Cape, namely the Kwa-Zulu Natal and Eastern Cape Divisions of the High Court respectively.
“They merely hold persuasive value in the event that courts in the Western Cape hear a similar matter. The Western Cape High Courts have yet to deal with such a matter, and this issue has also not been adjudicated by a court with national jurisdiction, either the Supreme Court of Appeal or the Constitutional Court.
“PT further in their written responses to the AG categorically stated that there has been a lack of regulations or further directives from National Treasury on how Regulation 32 must be applied in practice, leaving municipalities to their own devices on how this must be applied.
“Having considered all the issues, it could very well be argued that taking into account the written representations of PT, 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 necessary.”
Dr Scheepers conceded that Knysna Council had to comply with the legislative provisions that a committee of council investigated, even if the circumstances dictated or warranted otherwise.
“In this case, the committee can only come to the conclusion that, firstly, no political office bearer, the accounting officer, or another official knowingly, deliberately or negligently incurred the irregular expenditure. Secondly, the municipality received value for money even though the expenditure was irregular.”
In conclusion, he added: “The municipality will therefore not be able to recover any monies from any political office bearer, the accounting officer or any other official.
“However, to comply with the prescripts of the Municipal Financial Management Act MPAC, council must refer the matter to the Municipal Public Accounts Committee and only after receiving a recommendation from this committee can council decide to write off the expenditure.”
Knysna Council resolved that a workshop had to be held with the AG and PT before the matter could be referred to MPAC, since the parties have opposing views, and the councillors require clarity on this matter so extremely technical in nature.
It was finally noted that the term ‘write-off’ was an accounting term and did not mean the council was losing or had lost money.