The letter, dated September 1 and from IPID's national investigations head to acting national police commissioner Lieutenant-General Lesetja Mothiba, also says that counter-intelligence investigators have had problems trying to get members working with the secret account to co-operate with them.
This has resulted in a docket in the matter apparently being shelved.
IPID, in its letter, has therefore asked that Major-General Obed Nemutanzhela, who heads the slush fund, be suspended as he is seen to be hampering an investigation into the possible theft of state funds.
This investigation includes looking into allegedly grossly inflated quotes for blinds for safe houses and the dubious spending of slush fund money.
On Wednesday, IPID spokesperson Moses Dlamini told News24: "We can confirm that we have asked for the said suspension, however, we cannot go into the details of the investigation.
"The investigation is a result of the MOU [memorandum of understanding] concluded by the IPID and the Inspector-General of Intelligence."
National police spokesperson Sally de Beer confirmed it was aware of the IPID's request.
"The SAPS is aware of the recommendation by IPID and... the matter will be dealt with in terms of internal processes," she said.
The country's crime intelligence unit has been repeatedly rocked by scandals over the years.
In one of the latest blows, its acting head Major-General Pat Mokushane was fired in August. He had lacked security clearance.
Last week, it had emerged, via another IPID letter, that it had picked up other problems relating to the police.
This all comes as bitter infighting within the police and the crime intelligence unit is surfacing.
A number of police officers, as well as those with links to crime intelligence, have previously spoken to News24, saying they fear high-level probes are being intentionally derailed by colleagues.
'Theft of state funds'
The latest IPID letter says that it is currently conducting an investigation into an allegation of fraud and the theft of state funds. These allegations were against Nemutanzhela.
"It is alleged that on or about January 2013, and February of the same year, two requests for procurement of blinds and curtains were submitted and authorised respectively," the letter says.
The first request was for R478 900 for a Waterkloof Heights safe house. This request was allegedly sourced from the company Umvuzo Wethu Productions.
A second quotation of R84 105, allegedly sourced from Siboniseng Construction, was made for the Brooklyn safe house.
"The investigation uncovered that neither Umvuzo Wethu Promotions nor Siboniseng Construction installed the blinds and curtains as per their approved quotations," the IPID letter reads.
It turned out that Industrial Corporation CC, trading as Panda Blinds, had actually carried out the job.
"It was also uncovered that the company that was awarded R478 900 for the installation of blinds does not exist," the letter says.
It went on to say that the actual costs of blinds for the Waterkloof Heights safe house was R63 057.97, and not the R478 900 that was quoted.
And the cost for the Brooklyn safe house was R15 705.64, and not R84 105.
"The total amount claimed from the secret service account funds was R563 005, whereas the actual cost for the service rendered was R78 763.60," the letter says.
It said Nemutanzhela had approved the standing advance of R563 005 to be paid in cash.
"The... funds were arranged even before the procurement process was properly followed and that the procurement process was arranged after the funds were already paid."
Evidence supported a prima facie case of corruption and contravening the Public Finance Management Act.
"[Nemutanzhela] is the subject of this investigation and he is the component head of [the account] crime intelligence where the alleged offence took place," the letter reads.
'Nothing was done'
"It is also reported that the initial investigators from Counter Intelligent [sic], experienced difficulties to obtain cooperation from members attached to the Secret Service Account, in obtaining documentation relevant to witness statements, and that the docket was removed from them because of the interference and nothing was done after the docket was removed."
The letter said it was IPID's view that Nemutanzhela's "continued presence" as component head of the SSA during the departmental and criminal investigation would hamper the probe.
"In the premise, it is our view that cooperation of witnesses in the investigation will be impeded with the continued presence of Major General MO Nemutanzhela in the environment," it said.
IPID, therefore, recommended that he be suspended, pending the finalisation of the criminal and departmental investigation.
IPID on NPA 'stifled' probes
In a previous letter, dated August 11, IPID head Robert McBride accused National Prosecuting Authority (NPA) director Shaun Abrahams of picking and choosing which cases to act on.
McBride outlined investigations he felt the NPA was dragging its feet on - this included a probe into former acting national police commissioner Lieutenant General Khomotso Phahlane, who IPID previously alleged had used his position to illegally obtain documents related to their investigation against him.
But the NPA said it had nothing to defend and pointed out several aspects which McBride referred to and which it disagreed with.