NMB coalition pushes to write off R23bn irregular spending, while bypassing legal requisites

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The Democratic Alliance (DA) in Nelson Mandela Bay has requested urgent intervention from the National Treasury and Auditor-General after the metroâs Municipal Public Accounts Committee (MPAC) voted to write off R23-billion in irregular expenditure without investigating potential recoveries or enforcing accountability.

This follows growing pressure from the National Treasury for the City to curb its escalating unauthorised, irregular, fruitless, and wasteful expenditure (UIFWE), which has already led to grant funding being withheld.

The proposed write-off triggered a heated debate among MPAC members, with DA and ACDP councillors arguing that the process was unlawful.

The recommendation was carried after ANC and EFF councillors, who hold a majority on the committee, voted in favour. The matter must still go to the council for final approval.

Section 32 of the Municipal Finance Management Act (MFMA) requires a municipality to recover unauthorised, irregular, fruitless and wasteful expenditure from the person liable for it, unless a council committee has investigated the expenditure, found it to be irrecoverable and recommended that it be written off.

The section further states that the writing off of the UIFWE as irrecoverable is no excuse in criminal or disciplinary proceedings against a person charged with an offence or breach of the MFMA relating to such expenditure.

The metro's R23-billion irregular expenditure bill accumulated between 2009 and 2021, prompting the then acting city manager, Mandla George, to appoint the law firm Joubert Galpin Searle to advise the municipality on how to deal with the outstanding expenditure.

A legal opinion from the firm holds that all UIFWE items must be investigated individually and, where possible, processes to recover the funds and consequence management must be implemented.

âIt is thus clear that the recovery of UIFWE from municipal officials and political office-bearers occurs in terms of section 32 of the MFMA. It goes without saying that a recovery of UIFWE is only possible if the UIFWE is recoverable. If UIFWE is written off as irrecoverable by the council, the municipality remains obligated to pursue consequence management in the form of criminal or disciplinary proceedings against both municipal officials and political office-bearers in terms of section 32(5) of the MFMA,â the opinion stated.

The legal opinion further stated that, even where expenditure is declared irrecoverable, the municipality must consider whether any resulting loss or damage can be recovered from municipal officials or political office-bearers under section 176(2) of the MFMA.

âThis avenue may be available to the municipality if municipal officials or political office-bearers have deliberately or negligently failed to discharge their recovery obligations in terms of section 32 of the MFMA because of which the UIFWE has become irrecoverable. In summary, the municipality is obliged to recover UIFWE where fault and causation are established and recovery remains legally and factually possible.

âWhether any item is irrecoverable by reason of prescription must be determined through an item-by-item assessment for the years after 2021, followed by the required MPAC investigation and council resolution in terms of section 32 (2) of the MFMA.

âWe accordingly recommend that the municipality urgently complete an item-by-item prescription and liability assessment for the years after 2021, prepare the necessary reports and register extracts for MPAC and council, refer matters to SAPS where the facts indicate a criminal offence, theft or fraud, and consider targeted disciplinary processes and any additional civil remedies where appropriate.â

Obliged to investigate

Joubert Galpin Searle lawyer Warren Parker told MPAC on 6 August that the committee was obliged to investigate the expenditure, even though he argued that the R23-billion dating from 2009 to 2021 was too old to recover because the claims had prescribed.

âWe have not been mandated to take over the authority of MPAC; the committee still has the investigation and recommendation power. Recovery is a default position and the write-off is an exception that must be classified.â

Parker said the council must be satisfied that:

The expenditure falls within the UIFWE category;

The municipality has considered whether recovery is impossible;

The matter has been fully investigated and;

Reasonable recommendations have been made.

He said any write-off must be confined to expenditure that is irrecoverable, with consequence management still to be implemented where appropriate.

âItâs important to know that âconfinedâ in this instance means the write-off is restricted only in irrecoverable items, while actions such as consequence management can continue.

âUnder the Prescription Act a debt of this nature generally prescribes three years after the claim for it is due, where recovery is not instituted within that period, it can no longer be invoiced. In plain terms, the claim has become too old and the amount is irrecoverable. Write-off on this basis does not stop consequence management and disciplinary action,â he added.

When the acting city manager, Lonwabo Ngoqo, was questioned about investigating the UIFWE items individually to determine whether consequence management was warranted, he said this would duplicate the process he was preparing to initiate with the police.

Ngoqo had prepared an affidavit for the police, which was circulated to councillors, but the supporting documents, said to run to about 500 pages, were not available to members at the meeting.

At the start of the meeting, councillors questioned whether it was valid to proceed because the agenda had been distributed late, rather than the required five days in advance, leaving them little time to review the documents and prepare to make an informed decision.

When councillors could not reach agreement on the write-off, ANC councillor Luzuko Peter proposed putting the matter to a vote.

âWhatever the result is, it will be a decision of the MPAC and not certain parties, as majority rules.â

DA councillor Werner Senekal said he would not participate in what he regarded as an illegal decision pushed through by a majority vote and walked out. His fellow DA councillor Gert Engelbrecht said the proposed write-off had been added as a late item to the agenda.

âMembers were only afforded 30 minutes to consider the documentation regarding this massive write-off. A supporting affidavit exceeding 500 pages was not even presented.

âThe failed ANC/EFF coalition wants to write off more than a decade of accumulated UIFWE in one bulk amount. Why is it refusing to first investigate each case and apply the required reporting, accountability, consequence management and preventative measures? â

Engelbrecht stated that the most problematic issue was that the committee did not receive the legally required Section 32 reports so the UIFWE could be investigated.

âWithout these reports, the committee cannot see what the money was spent on or hold anyone to account. The DA requested that the matter be deferred to allow MPAC members sufficient time to properly examine the documentation, establish where the money was spent and determine who should be held accountable. The request was rejected and the matter was subsequently put to a vote and referred to council.â

âIllegal itemâ

ACDP councillor Lance Grootboom said instead of holding people accountable for how public money was spent, the coalition government used its majority numbers to force the âillegal itemâ through the committee.

âThey want to cancel this massive debt without doing the proper, item-by-item investigations required by law. This is a clear attempt to protect negligent officials and politicians from taking responsibility. The coalition now plans to take this illegal item to the upcoming council meeting on 25 August to get it officially approved.â

A council meeting has been called for Monday, 17 August, with Grootboom stating that with the agenda not distributed, he suspects that it will be convened to push through the write-off.

âI will write to the National Treasury and the national Department of Cooperative Governance and Traditional Affairs on Monday morning to stop them,â said Grootboom.

EFF councillor Siyabulela Mosi said Parker's presentation made it clear that the expenditure could be written off, but acknowledged that MPACâs decision was not final and still had to be approved by the council.

âThe acting city manager says he will open a case with the police, so letâs allow for all these processes to unfold in our quest to write off the amount,â said Mosi. DM

Reporting originally appeared via Daily Maverick. Read the full source for additional context.