The management of unauthorised, irregular, fruitless and wasteful expenditure (UIFW expenditure) remains a central component of municipal financial governance in South Africa. MFMA Circular 68, issued by National Treasury, provides guidance on the identification, investigation, recovery, and reporting of UIFW expenditure. A critical question arising from the Circular is whether a Municipal Manager (acting as Accounting Officer) or a Chief Financial Officer (CFO) may themselves incur liability where they fail to act against officials responsible for financial transgressions. This article examines the legal position under the Municipal Finance Management Act 56 of 2003 (MFMA), MFMA Circular 68 and the Municipal Regulations on Financial Misconduct Procedures and Criminal Proceedings, 2014.

The Accountability Framework under MFMA Circular 68
MFMA Circular 68 emphasises that all instances of unauthorised, irregular, fruitless and wasteful expenditure must be investigated and subjected to consequence management. The Circular requires municipalities to determine whether the conduct of officials constitutes financial misconduct and to institute disciplinary processes where appropriate. It further provides that all financial losses resulting from unauthorised or irregular expenditure must be recovered from the liable official or political office-bearer unless the expenditure is certified as irrecoverable by the municipal council following an investigation.

The Circular therefore creates a direct link between financial loss, accountability, and consequence management. It does not limit liability to the official who physically incurred the expenditure but extends accountability to those responsible for permitting, authorising, or failing to prevent the expenditure.

Duties of the Municipal Manager and Chief Financial Officer
The Municipal Manager is the Accounting Officer of a municipality in terms of section 60 of the MFMA and bears overall responsibility for the financial administration of the municipality. The CFO is responsible for assisting the Accounting Officer in the administration of the municipality’s financial affairs and performs duties delegated under sections 79 and 81 of the MFMA.

Section 171 of the MFMA specifically provides that an Accounting Officer commits financial misconduct if he or she deliberately or negligently:

• Contravenes a provision of the MFMA;
• Fails to comply with a duty imposed by the MFMA; or
• Makes, permits, or instructs another official to make unauthorised, irregular, or fruitless and wasteful expenditure.

Similarly, a CFO commits financial misconduct if he or she deliberately or negligently fails to perform delegated duties, contravenes delegation conditions, or makes or permits unauthorised, irregular, or fruitless and wasteful expenditure.

The phrase “makes or permits” is significant because it extends liability beyond active participation and includes circumstances where an official knowingly allows unlawful expenditure to occur or fails to intervene when intervention is required.

Failure to Act Against a Transgressor
MFMA Circular 68 requires that allegations of irregular expenditure be referred for investigation and that municipalities determine whether financial misconduct has occurred. Where a Municipal Manager or CFO becomes aware of irregular, unauthorised, fruitless, or wasteful expenditure and fails to initiate investigations, disciplinary proceedings or recovery processes, such omission may constitute a failure to comply with duties imposed by the MFMA.

In these circumstances, the Municipal Manager or CFO may themselves become the subject of financial misconduct proceedings. The liability arises not merely because the expenditure occurred, but because the responsible official failed to discharge statutory duties designed to prevent, investigate, and address the transgression.

Therefore, where a Municipal Manager or CFO intentionally ignores, conceals, or negligently fails to act upon known financial transgressions, they may be regarded as having permitted the expenditure or failed to comply with statutory obligations.

Recovery of Expenditure from the Municipal Manager or CFO
Section 32 of the MFMA and MFMA Circular 68 provide that financial losses resulting from unauthorised or irregular expenditure must be recovered from the liable official or political office-bearer unless certified as irrecoverable.

Whether recovery may be affected against the Municipal Manager or CFO depends on the facts of each case. If an investigation establishes that their failure to act directly contributed to the loss or allowed the loss to continue, they may be regarded as liable officials. In such circumstances, the municipality may seek recovery from them either wholly or jointly with the original transgressor.

The determination of liability must follow a proper investigation establishing causation, negligence, or intentional misconduct. Recovery is therefore not automatic but is legally permissible where responsibility can be demonstrated.

Applicability of the Municipal Regulations on Financial Misconduct Procedures and Criminal Proceedings, 2014
The Municipal Regulations on Financial Misconduct Procedures and Criminal Proceedings, 2014 apply whenever there are allegations of financial misconduct by municipal officials. Since section 171 of the MFMA expressly includes failures by Accounting Officers and CFOs to fulfil statutory duties, the Regulations apply equally to them.

Consequently, if a Municipal Manager or CFO fails to act against a transgressor, and such failure amounts to deliberate or negligent non-compliance with the MFMA, disciplinary proceedings may be instituted in terms of the Regulations. Depending on the seriousness of the conduct, criminal proceedings may also be considered where the facts justify such action.

MFMA Circular 68, read together with sections 32 and 171 of the MFMA and the Municipal Regulations on Financial Misconduct Procedures and Criminal Proceedings, establishes that Municipal Managers and Chief Financial Officers are not insulated from liability where they fail to act against officials responsible for UIFW expenditure. Where such failure constitutes negligence, deliberate non-compliance, or permission of unlawful expenditure, they may themselves be found guilty of financial misconduct. Furthermore, where their omission contributes to a financial loss suffered by the municipality, recovery of expenditure may be pursued against them following a proper investigation. The legislative framework therefore places a positive obligation on senior municipal officials not only to prevent financial transgressions but also to ensure that effective consequence management is implemented whenever such transgressions occur.

References

• National Treasury. 2021. MFMA Circular 68: Unauthorised, Irregular, Fruitless and Wasteful Expenditure (Updated October 2021). Pretoria: National Treasury.
• South Africa. 2003. Local Government: Municipal Finance Management Act 56 of 2003. Pretoria: Government Printer.
• South Africa. 2014. Municipal Regulations on Financial Misconduct Procedures and Criminal Proceedings. Pretoria: Government Printer.
• South Africa. 2000. Local Government: Municipal Systems Act 32 of 2000. Pretoria: Government Printer.