Investigate, suspend and charge, say auditors

Published Feb 18, 2011

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WENDY JASSON DA COSTA

THE FIXING of old council houses in Chatsworth and how contractors were appointed to do the work are at the core of an explosive report by Durban auditing firm Ngubane and Co.

The report calls for criminal charges or disciplinary proceedings to be brought against city manager Mike Sutcliffe, Derek Naidoo, the deputy city manager: procurement and infrastructure, housing head Cogi Pather and procurement head Themba Shezi.

It has also been recommended that four service providers used in the Chatsworth project be suspended until a full investigation is completed.

They are Vaughan Charles and Associates, RGZ Project, Uhlanga Trading Enterprise and Doctor Khumalo Construction.

The Ngubane report also recommends that all bid adjudication committee members be charged with misconduct.

In 2009, the municipality’s internal audit unit tasked Ngubane and Co with investigating whether procurement procedures had been followed in the rehabilitation of council homes in Westcliffe, Bayview and Crossmoor.

The council wanted to spruce up its old rental stock before selling it.

The report on the investigation alleges top city officials overstepped their mandates or ignored procedures in awarding contracts for the project, the cost of which was initially estimated at R30.8 million.

It also says witnesses are afraid to speak because they fear for their lives.

Ngubane and Co had a wide-ranging mandate that included:

l Performing a value-for-money audit of goods and services bought.

l Establishing if there had been any irregularities in procurement.

l establishing if the alleged irregularities entailed financial misconduct, non-compliance and or criminal conduct.

In the event of irregularities being found, the company was to establish who had been responsible for these and the prejudice the municipality suffered. It was also required to provide evidence that could be presented at criminal, disciplinary and civil proceedings.

In its report the company said it had had to deal with several limitations.

These included the safety of individuals.

“Employees who formed part of the investigation at all levels of the organisation are fearful to co-operate with the investigation team, for fear of reprisal.”

Witnesses apparently also claimed that Sutcliffe and Naidoo were allegedly responsible for serious violations of the supply chain management regulations, but they were afraid to reveal their identities and would co-operate further only if they were protected.

The report says external individuals were also prepared to co-operate, but they also required protection.

Ngubane claimed that supply chain management staff had repeatedly avoided the investigation team and that Pather had not given his full co-operation to the team.

The Ngubane investigation also found that the directors of Inyanga Trading 377, the preferred supplier of paint for the Chatsworth project, were the wives of two senior managers in the municipal housing department.

Magandran “Magan” Naidoo and Thavandran “Devan” Govender are in charge of the rental housing stock. They are married to the company’s directors, Ronnika Naidoo and Jannika Govender. All four work for the council.

Among the alleged irregularities found by Ngubane and Co were:

l Circumventing the outcome of tender processes in favour of certain companies.

l The awarding of contracts to employees and councillors of the eThekwini municipality.

l The suspected irregular awarding of R3.5 billion in contracts since 2000 in ways that deviated from the city’s supply chain management policies.

l Intentional exclusion of the supply chain management component from the housing unit’s procurement processes and restricting procurement functions to key officials.

l Lack of segregation of duties.

l Fruitless and wasteful expenditure in acquisition processes of the housing unit.

l Overexpenditure on housing projects and poor management of finances and projects.

l Failure to keep a proper record and registry of documents for audit purposes.

l Inciting subordinates to unprocedural and irregular conduct.

l Failure to take remedial action in cases of serious and substantial contravention of statutes, regulations and policies of the municipality and local government.

The Ngubane and Co team says that in interviews with municipal officials and other witnesses, it received information relating to further irregular conduct of senior officials at eThekwini.

In addition to its recommendations on the Chatsworth project, it calls for further deep investigation into the following projects:

l The South Central and Northern regions rehabilitation project.

l The R293 Rehabilitation Project.

l The Lamontville Rehabilitation Project.

See accompanying table for city management’s response to the Ngubane report

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