National Treasury: Nelson Mandela Bay R23bn Write-Off Unlawful

• The National Treasury has declared Nelson Mandela Bay's proposed R23 billion write-off of unauthorised, irregular, fruitless, and wasteful expenditure (UIFWE) unlawful.
• This decision stems from the Municipal Public Accounts Committee's failure to conduct a required item-by-item investigation into the expenditure.
• An affidavit prepared by acting city manager Lonwabo Ngoqo, intended to support the write-off, was also found to be legally defective.
• The Municipal Finance Management Act (MFMA) explicitly mandates an item-by-item investigation for such write-offs.
• Municipal officials may be required to provide comprehensive evidence of proper processes by October 31 if the council proceeds without rectifying these deficiencies.

The National Treasury has issued a definitive ruling, declaring Nelson Mandela Bay's proposed write-off of R23 billion in unauthorised, irregular, fruitless, and wasteful expenditure (UIFWE) to be unlawful.

The National Treasury has issued a definitive ruling, declaring Nelson Mandela Bay's proposed write-off of R23 billion in unauthorised, irregular, fruitless, and wasteful expenditure (UIFWE) to be unlawful. This significant pronouncement underscores the central government's unwavering commitment to upholding strict financial governance within local municipalities. The Treasury's position, communicated in response to media inquiries, makes it unequivocally clear that the metro's current approach to addressing these substantial financial liabilities falls short of legal requirements.

A primary reason cited for the unlawfulness is the failure of the Municipal Public Accounts Committee (MPAC) to conduct a mandatory item-by-item investigation into the expenditure. This specific procedural requirement is a cornerstone of the Municipal Finance Management Act (MFMA), which governs the financial affairs of local government entities. Without this detailed and prescribed scrutiny, the proposed NMB R23bn irregular expenditure write-off lacks the necessary legal foundation and cannot be sanctioned.

Further complicating Nelson Mandela Bay's efforts, the National Treasury also identified a critical deficiency in an affidavit prepared by acting city manager, Lonwabo Ngoqo. This document, intended to support the write-off process, has been formally deemed legally defective, adding another layer of non-compliance to the municipality's actions. The combined impact of the MPAC's oversight and the flawed Lonwabo Ngoqo affidavit defective highlights significant procedural breaches in the municipality's attempt to reconcile its financial records.

The MPAC's recommendation to write off the R23 billion in UIFWE, which was made earlier this month, proceeded without undertaking the essential item-by-item investigation explicitly mandated by the Municipal Finance Management Act NMB. This omission represents a direct contravention of established guidelines for managing and resolving such expenditures. The National Treasury has explicitly stated that should the Nelson Mandela Bay council proceed with approving the write-off without rectifying these fundamental procedural deficiencies, municipal officials will be compelled to provide comprehensive evidence of the processes undertaken by a firm deadline of October 31.

The National Treasury's forceful intervention serves as a critical reminder of the stringent financial accountability standards expected from all municipalities operating under the Municipal Finance Management Act. The declaration that the National Treasury Nelson Mandela Bay R23bn write-off unlawful highlights the central government's unwavering commitment to ensuring that public funds are managed with utmost transparency and strict adherence to legal frameworks. This development reinforces the fundamental principle that even substantial amounts of Nelson Mandela Bay unauthorised expenditure cannot be simply written off without meticulous, legally compliant processes being followed.

This situation carries significant implications for municipal governance across the country, emphasizing that the National Treasury municipal write-off guidelines are not merely advisory but constitute legally binding requirements. The insistence on an item-by-item investigation for such a large sum underscores the depth of scrutiny required for financial adjustments of this magnitude. The explicit warning that officials may be required to provide evidence by October 31 further illustrates the serious repercussions for non-compliance, reinforcing the imperative for rigorous procedural diligence in all financial matters within local government to prevent similar declarations of unlawfulness.

This development underscores the National Treasury's strict enforcement of the Municipal Finance Management Act (MFMA) regarding the write-off of irregular expenditure. Lawyers advising municipalities or public entities must ensure meticulous adherence to prescribed procedures, including item-by-item investigations, to prevent declarations of unlawfulness and potential legal repercussions for officials.

Source: Original reporting via Daily Maverick