Govan Mbeki Municipality: Forensic Investigation Uncovers R23 Million in Unauthorised Consolidations, Sparking Demands for Police Action and Accountability Amidst Prolonged Fraud

A comprehensive investigation report into deeply troubling financial irregularities within the Govan Mbeki Municipality’s credit suspense accounts was tabled to council on Thursday, 4 Dec 2025, spanning from 2022 to 2025. The inquiry was initiated following a complaint from Sasol regarding discrepancies in their credit account balances, highlighting a systemic issue of unauthorised consolidations that had been ongoing for a significant period.

Core of the Problem: Unauthorised Consolidations Over Time. The investigation by Peyper Attorneys Inc. revealed a pervasive practice of “incorrect consolidations,” which fundamentally differs from legitimate consolidations.

• Correct Consolidation: Involves combining balances from one account to another, typically for accounts on the same property (ERF number), often with an owner’s request and supporting documentation.
• Incorrect Consolidation: Characterised by combining balances between accounts not associated with the same ERF number and lacking proper supporting documentation. This typically involved transferring a credit balance from one customer’s account (Customer A) to another (Customer B), where the properties were unrelated. The intent appeared to be to use these unauthorised transfers to offset outstanding debts owed to the municipality, thereby disadvantaging both legitimate clients and the municipality itself.

Investigation Details and Scope: Peyper Attorneys Inc. was tasked with a forensic investigation into the Finance Department’s credit suspense account to identify irregularities, determine accountability, identify beneficiaries and losses, and pinpoint preventative control failures. The investigation uncovered that these alleged consolidations and reversals were conducted using the municipal financial system, Munsoft, which manages financial operations, billing, and metering. These actions were found to transgress several municipal policies, including those on Unclaimed Deposits, Cash Receipts and Banking, and Circular 15 of the mSCOA, as well as broader laws and regulations.

The following Acts and Policies were transgressed:

1. Local Government: Municipal System Act, Act 32 of 2000, as amended.
2. Local Government: Municipal Finance Management Act, Act 56 of 2003.
3. Supply Chain Management Policy.
4. Cash Receipts & Banking Policy.
5. Unclaimed Deposits Policy.

Key Preliminary Findings & Financial Impact: The scale of the problem is substantial:

• The fraud had been committed over a prolonged period, stretching back as far as eight years prior to the investigation. This deliberate backdating of transactions was clearly an attempt to disguise the fraudulent activities.
• Initially, 21,352 transactions involving 12 employees/operators were identified, amounting to R30,420,514.93.
• After filtering out legitimate consolidations (e.g., those between accounts with shared details like ID numbers or physical addresses), 16,044 transactions remained flagged as unauthorised, resulting in a direct financial loss of R23,227,963.31 to the municipality.
• These unauthorised transfers were conducted across various service charges, including payments, water, rates, electricity, sewerage, and refuse.
• Six employees were initially suspected of involvement, with three resigning during the investigation stage.

Impact on Accounts: The investigation categorised affected accounts into three groups:

• Benefited Accounts: 340 municipal accounts received credit transfers through consolidations, totalling R25,168,327.88.
• Disadvantaged Accounts: 4,683 accounts were negatively impacted by consolidations, totalling R23,378,097.85.
• Neutral Accounts: 88 accounts experienced both unauthorised consolidations and subsequent reversals, meaning they neither benefited nor were disadvantaged.

Digital Forensics and Operator Involvement: Digital forensic analysis of computers revealed instances where municipal employees extracted reports containing credit balances, which were then emailed. Subsequently, unauthorised consolidations for the same amounts often occurred on the same day the emails were sent, involving unrelated accounts. Specific examples included workbooks titled “Book3” and “Book4” being used to facilitate consolidations amounting to tens of thousands of Rands. The report highlights that certain individuals, through due diligence, were identified as having benefited significantly, including at least one municipal employee who benefited R122,006.64 from combined consolidations and transfers.

Recommendations to the Council: The report puts forth several critical recommendations to the Council:

1. Acknowledge and Address: Recognise the appointment of Peyper Attorneys Inc. and the severity of the 16,044 unauthorised transactions totalling R23,227,963.31, implicating six employees (three of whom resigned).
2. Stakeholder Engagement: Convene a meeting with relevant stakeholders to determine the immediate course of action.
3. Communication with Beneficiaries: Issue formal letters to all account holders identified as having benefited from unauthorised consolidations. These letters will require them to provide written explanations and supporting documentation for the credits received within 14 days.
4. Transaction Reversal: Based on the review of submissions, if no valid justification or evidence is provided, the Municipality should proceed to reverse the unauthorised consolidations and adjust the affected accounts accordingly.
5. Formal Criminal Proceedings: Crucially, the report strongly recommends engaging with the Municipality’s legal department to open a formal case with the South African Police Service (SAPS) and the Directorate for Priority Crime Investigation (DPCI). This step is paramount for pursuing criminal accountability for the alleged fraud and corruption. The urgency of this recommendation has been amplified by external scrutiny, with the Democratic Alliance (DA), through Cllr Portia Mpatlanyana, questioning the apparent lack of action and asking directly why no police cases have been opened. This concern is particularly salient given the observed trend of employees resigning during investigations, a tactic often employed to circumvent accountability, operating under the assumption that many municipalities, and in particular Govan Mbeki Municipality (GMM), may not pursue prosecution once the individuals are no longer in their service. Addressing this widespread perception requires immediate and decisive legal action, irrespective of employment status.

1. Further Investigation & Conclusion: Continue investigating all remaining red-flagged transfers and conclude the comprehensive digital forensics investigation to capture all findings in the final report.

The presentation of this draft report to the Council underscores the gravity of the financial malfeasance and the prolonged period over which it occurred. The calls from the DA for immediate police involvement highlight a critical demand for decisive action to address the significant losses, hold perpetrators accountable regardless of their employment status, and restore public trust in the municipality’s financial integrity. The council is expected to address why formal criminal cases have not yet been opened despite the extensive evidence and clear recommendations.