Twenty-eight female guards were unfairly dismissed by a security company because the client‚ Metrora.
The embattled Mnquma council is probing R6million it claims was taken from municipal coffers by the previous council.
Mbulelo Ntenjwa, the speaker of Mnquma, Eastern Cape, said there was concrete evidence that the previous council had approved irregular payments after awarding tenders to certain companies.
Ntenjwa said the tenders were issued to the companies in February this year, a month before the new council - in which he serves - took the rei ns.
"These tenders were hastily awarded before this council came to power on March 1," he said.
"We know they [the previous council] are part of the deal because they quickly issued tenders to the companies."
Ntenjwa claimed that before payments, the companies had allegedly submitted false invoices to the Mnquma municipality for nonexistent works projects.
The council decided to appoint an independent engineer to visit the works sites and conduct an inspection of the projects.
But the engineer could not find any project that these companies claimed to have completed.
"The council issued tenders, but these companies never did any work," said Ntenjwa.
All the resolutions of the previous council from July last year were being investigated.
He said that the council had brought the matter to the attention of law enforcement agencies.
Ntenjwa said the new council decided to investigate the tender process because it became suspicious of irregularities.
He said that it was difficult at this stage to disclose more information about the companies.
Mnquma, consisting of Butterworth, Centane and Nqamakwe, is a cash-strapped municipality with a history of political instability.
Rival councillors squabbled in chambers and senior managers were suspended or fired.
More often than not municipal employees had resorted to protracted strike actions by staging sit-ins in municipal offices, taking senior managers hostage and dumping rubbish in the streets.