GQEBERHA – National Treasury has rejected a proposed blanket write-off of R23 billion in unauthorised, irregular, fruitless and wasteful expenditure at Nelson Mandela Bay Municipality.

Treasury says each transaction must first be examined to determine what the money was spent on, who may be liable, whether it can still be recovered and whether the claim has prescribed.

In a 19 August letter to Nelson Mandela Bay Acting City Manager, Advocate Lonwabo Ngoqo, National Treasury Deputy Director-General for Intergovernmental Relations, Ogalaletseng Anastasia Gaarekwe, outlined concerns about the proposed write-off.

Ngoqo had submitted an unsigned affidavit to Treasury, received via email on 14 August.

It proposed that UIFWE recorded on the municipality’s register up to 30 June 2021 be written off as irrecoverable because of prescription. The amount was R23,085,242,601.33.

Each transaction must be assessed

Under Section 32 of the Municipal Finance Management Act, Gaarekwe said recovery from the persons liable for the expenditure is the starting point unless the legal requirements for a write-off have been met.

“A write-off occurs only after a proper investigation establishes that recovery is no longer legally possible,” she wrote.

Treasury rejected the blanket approach to the expenditure. “The National Treasury cannot support a blanket conclusion or recommendation that all UIFWE up to 30 June 2021 has prescribed.”

An item-by-item assessment means examining each invoice, payment, transaction, purchase order or other discrete item of expenditure.

Gaarekwe said the assessment must take place “at the level at which the UIFWE was actually incurred”, rather than treating an entire financial year, directorate, contract or aggregated register balance as one item.

The age of the expenditure alone does not establish prescription. Treasury also questioned the affidavit’s interpretation of MFMA Circular 68. Its administrative timeframes may assist in determining whether the municipality acted with reasonable care, Gaarekwe wrote, but they “cannot automatically determine when a debt became due for prescription purposes.”

Treasury intervention welcomed

Another concern was the affidavit’s different treatment of expenditure from various periods.

While it called for individual assessments for UIFWE from the 2022 and 2023 financial years, it proposed a broader approach for earlier expenditure.

“The same legal test should apply to each claim,” Gaarekwe wrote.

Treasury consequently found the unsigned affidavit “legally defective” because it sought the R23 billion write-off without first completing the required individual assessment.

Gaarekwe warned: “Any decision by MPAC or Council based on this defective process will be unlawful and expose responsible officials and councillors to misconduct proceedings.”

Treasury required confirmation by 20 August that the affidavit had been withdrawn and that its concerns had been reported to the Municipal Public Accounts Committee (MPAC) and Council.

A report submitted to those bodies must assess each UIFWE item, including the amount, nature of the irregularity, potentially liable people, evidence of fault, relevant dates, recovery steps, prescription position and consequence-management status.

DA raises concerns over proposed write-off

The Democratic Alliance (DA) had called for Treasury and the Auditor-General to intervene following the 13 August MPAC meeting.

In a 14 August statement, DA Nelson Mandela Bay MPAC spokesperson, Gert Engelbrecht, said the proposed write-off had been presented as a late item, and members were given 30 minutes to consider the documentation.

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

The DA said its request to defer the matter was rejected, after which the proposal was put to a vote and referred to council.

Following Treasury’s response, the DA welcomed the intervention in a 24 August statement, saying its concerns had been addressed.

The party said Treasury had confirmed that “every individual transaction must be assessed before any write-off can be considered.”

Any amount proposed for certification as irrecoverable or for write-off under Section 32 of the Municipal Finance Management Act must therefore first undergo the required individual assessment.

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