5th Annual Local Government Conversations - Webinar 7 of 8 in 2026

From UIFWe to Clean Governance: A Practical Approach to Reducing and Managing UIFWe Balances

Hosted by: Future Cities Africa and The Municipal Edge

Date: 21 October 2026

Platinum sponsor: Business Engineering

Gold sponsor: Ntiyiso

Topics: UIFWe Reduction - Consequence Management - Prevention and Internal Controls - MPAC Effectiveness - Disciplinary Boards - Budget Credibility - MFMA Amendment Bill

This webinar brought together National Treasury, a metropolitan CFO and a provincial COGTA finance specialist to move the UIFWe conversation from diagnosis to action. With total UIFWe across South African municipalities standing at R287 billion as at June 2025 - and National Treasury having withheld equitable share from nearly 70 municipalities in July 2026 - the question is no longer whether consequences must follow. It is whether municipalities have the controls, governance structures and institutional culture to prevent UIFWe from accumulating in the first place.

The reform moment

The webinar coincided with a significant day in South African local government reform. The Minister of Finance tabled the Medium-Term Budget Policy Statement that afternoon - and alongside it, National Treasury published the MFMA Amendment Bill for public comment. The following day, the Minister of COGTA launched the revised White Paper on Local Government. Both documents carry direct implications for UIFWe: the Amendment Bill proposes a new model for managing UIFWe that moves away from the current architecture, and the White Paper sets the broader policy direction within which financial management reform will be implemented. Panelists and practitioners were called to engage, engage and engage again - through written comment and the provincial roadshows Treasury is conducting from the following week.

Speaker contributions

Mr Wayne McComans - Chief Director: MFMA Unit, National Treasury

Wayne set the scene with National Treasury's assessment of where UIFWe stands, what Treasury has done over the past eleven years, and what it will do differently going forward. The headline number - R287 billion in total UIFWe as at June 2025 - is the product of a trajectory that has been moving in the wrong direction since 2016. Treasury's response has shifted from guidance and support to deliberate enforcement.

• Treasury issued Circular 68 in 2013 to guide municipalities on UIFWe processing. That circular has since been revised four times, with the latest version released in April 2026. The most recent revision places a heavy emphasis on prevention, detection and process - not only write-off and recovery.
• In 2021, Treasury issued Circular 111, establishing the UIFWe reduction strategy. For five years, Treasury, COGTA and SALGA worked to help municipalities operationalise that strategy. In 2024, Treasury asked itself whether persistence with that model was justified - and concluded that a change in posture was needed.
• That change in posture produced Section 216(2) withholding. In December 2025 and again in July 2026, Treasury withheld equitable share from municipalities that had shown no appetite to reduce UIFWe and no appetite to implement consequence management. Approximately 70 municipalities were affected in July 2026. Treasury has made clear that this will be sustained for as long as necessary.
• Treasury acknowledges the organisational unfairness of punishing a municipality - and by extension its citizens - for the wrongs of individuals. The focus is therefore shifting to dealing directly with accounting officers and delegatees who fail to prevent UIFWe or implement consequence management, rather than withholding funding from the institution as the first response.
• The legal framework is clear. The accounting officer must prevent UIFWe - and prevention is a mandatory compliance requirement, not an aspiration. Tight internal controls are the primary defence. Controls must also detect non-compliance timeously, so that municipalities do not rely on the external audit to find what their own systems should have caught first.
• Reporting UIFWe without delay to MPAC and council is critical. Too many accounting officers have allowed months or years to pass before initiating an MPAC investigation. That must stop.
• The MPAC is the central player in UIFWe reduction. Where MPACs are dysfunctional, UIFWe accumulates. The administration must support the MPAC - and the revised Circular 68 includes a template report (Annexure E) that the administration submits to MPAC to facilitate its oversight work.
• There is an important distinction between the MPAC process and the disciplinary board process. MPAC assesses recoverability - was there a financial loss? The disciplinary board assesses financial misconduct - was there a breach of Sections 171 or 172 of the MFMA? The two processes are independent and must run simultaneously. Using one as a prerequisite for the other is not consistent with the legal framework.
• Recovery is the first step, not write-off. The Supreme Court of Appeal judgment in Mbamnisa v Nelson Mandela Bay confirmed this principle. Write-off can only follow once the process demonstrates that prospects of recovery are negligible.
• Political interference in MPAC processes - including MPAC reports being blocked by speakers - is a governance failure that COGTA must address through the legislative instruments available to it. Treasury is engaging COGTA directly to align enforcement approaches across the two departments.
• From 2027, Treasury intends to apply the prevention compliance requirement in the MFMA with full force. Accounting officers who fail to put in place controls to prevent UIFWe will be held directly accountable.

"In eighteen years at National Treasury, there has not been a single year where the non-compliance finding under the MFMA was below ninety percent in the AG's general report. That is the attitude that exists towards the Municipal Finance Management Act. It is our duty as custodians of the legislation to set a tone."

Ms Zuziwe Thekisho - Chief Financial Officer, Mangaung Metropolitan Municipality

Zuziwe spoke from 23 years of local government experience - 16 of them as a CFO - and gave the practitioner's view from inside a municipality that carries R13 billion in total UIFWe and has itself been subject to equitable share withholding. Her contribution was frank, detailed and grounded in what has actually worked in Mangaung to reduce UIFWe balances.

• Mangaung's R13 billion UIFWe breaks into components that must be addressed in a strategic sequence, not all at once. Unauthorised non-cash items - depreciation, provision for bad debts, provision for asset impairment - account for R5 billion and can be dealt with relatively quickly by MPAC and the Financial Disciplinary Board (FDB). Writing off these items alone would reduce the total from R13 billion to R8 billion.
• Unauthorised cash items (R3 billion) include bulk purchases that exceed budget due to increased water losses and tariff increases, contracted services overruns and ill-discipline in commitments. These require investigation, but the causes are often demonstrable rather than nefarious - and the law provides mechanisms, including adjustment budgets and the Section 29 unavoidable expenditure process, to deal with them.
• Fruitless and wasteful expenditure in Mangaung is driven primarily by liquidity problems - the municipality has accumulated four years of arrears on its bulk water account. The strategy is negotiated payment arrangements, strict adherence to those arrangements, and subsequent negotiation of interest write-offs. Mangaung secured a full write-off of interest billed for one year on its bulk water account by adhering to payment terms.
• Irregular expenditure is the most complex category and must be categorised: minor SCM procedural non-compliances that can be ratified under Regulation 36(1), contract management issues that can be addressed through MFMA Section 116, and overpayments that require reconciliation and dispute resolution.
• Budget credibility is central to the UIFWe problem. The budget is the total available - and CFOs must preach that reality to user directorates. Unauthorised expenditure arising from budget flaws - where past performance shows that a line item is chronically under-budgeted - is different from deliberate overspending, but both require action. Non-cash items create unauthorised expenditure automatically from the budget process, and the adjustment budget mechanisms in Regulation 23 and the annual report process provide opportunities to deal with these lawfully.
• Contract management failures are a significant driver of irregular expenditure in Mangaung. Mangaung has established SOPs governing extension of time approvals and variation orders, with clear reference to MFMA Section 116. Engineers and project managers must understand that the budget is a contract with the community - and that capital project virements are restricted to protect that commitment.
• Payment processing procedures must be split between user directorates (15 days to verify accuracy and measurement) and finance (15 days to assess supporting documentation). This prevents the payment delays that generate fruitless and wasteful expenditure through interest penalties.
• An e-document management system has been implemented to ensure that all UIFWe-related documents are captured and preserved, preventing the loss of evidence during investigations.
• Checklists are both educational and preventative. With relatively new executives who are unfamiliar with MFMA terminology, Mangaung has used procurement checklists as a training tool. The result has been a reduction in unauthorised expenditure from 1.3 billion per year (10 to 15% of the approved budget) to approximately 300 million.
• The CFO's role is to hold regular meetings with HODs, work through the Section 71 reports, identify UIFWe risks early, and build a shared understanding that the city can no longer tolerate UIFWe in any form. Any UIFWe - however small - is financial misconduct and must be investigated.

"The budget is the maximum that council could allocate to that function, and you need to plan your spending and learn to prioritise what can be done practically and what can be planned over time. There is no such thing as an insufficient budget."

Mr Skhumbuzo Mgobhozi - Municipal Finance, KZN COGTA

Skhumbuzo reflected on the systemic and institutional issues that continue to frustrate UIFWe reduction - including the role of politics in governance processes, the limits of current training approaches and the critical distinction between internal audit and internal control. His contributions were practical, occasionally blunt, and grounded in direct engagement with municipalities across KwaZulu-Natal.

• Once a matter has been referred to SAPS for criminal investigation, MPAC cannot simultaneously conduct its own investigation. Section 32(6) is clear: referral to SAPS is itself a consequence management action - and the municipality must record it as such. The municipality cannot be blamed for inaction if it has referred the matter to law enforcement.
• The distinction between political and governance functions in council needs to be clarified. Council is a governance and oversight structure - but it is constituted by politicians whose careers and loyalties influence decisions. The proposals in the MFMA Amendment Bill to remove UIFWe decisions from the political realm are a necessary and welcome response to what has been observed in practice.
• The definition of irregular expenditure requires attention. The perception that irregular expenditure signals fraud or corruption distorts the response when the underlying cause is a minor procedural breach. The MFMA Amendment Bill's proposed changes to the definition are a positive development.
• Council training must change. Isolating MPAC training from the rest of council produces MPAC members who understand their role but return to institutions where no one else does. Training must include the full council and senior management together - creating shared understanding rather than isolated pockets of knowledge.
• Prevention remains the weakest part of the response. UIFWe write-offs are happening - but new UIFWe is being incurred at a similar or greater rate. The battle on prevention has not been won at provincial or national level.
• Internal audit and internal control are different instruments and must not be conflated. Internal audit is reactive and governed by its charter - it cannot be involved in the day-to-day decision-making it will later be asked to audit. Internal control, by contrast, is part of management and can assess transactions before they are committed. Municipalities should consider strengthening their internal control function rather than placing investigation and prevention expectations on internal audit.
• SCM audits conducted in the third or fourth quarter of a financial year are too late to prevent irregular expenditure incurred in the first quarter. Municipalities with UIFWe on their books should require quarterly SCM audits from internal audit - not annual ones that arrive after the damage is done.
• Disciplinary board composition requires reform. Boards should consist entirely of external members with investigative skills and relevant expertise. Boards populated primarily with chartered accountants, PMS specialists or heads of internal audit who were directed onto the board by the municipal manager are not fit for purpose. Boards that do not have investigative skills and experience cannot function as intended.

"We write off twenty billion, but we incur fifteen billion. There's a hole there. We haven't done very well in terms of ensuring that there are systems in place geared towards prevention."

Key takeaways for practitioners

1. Engage with the MFMA Amendment Bill. It was published on 21 October 2026 for public comment, and National Treasury is conducting provincial roadshows from the following week. Practitioners who have lived with the consequences of the current UIFWe framework have the most relevant input to offer - and the Bill contains significant proposals, including a new model for managing UIFWe and a revised definition of irregular expenditure.
2. Categorise before you investigate. Mangaung's experience shows that strategic sequencing - starting with non-cash items, then fruitless and wasteful expenditure driven by demonstrable liquidity constraints, then irregular expenditure requiring detailed process review - makes the total UIFWe balance manageable. Over-investing time in complex investigations of items that can be dealt with quickly blocks progress on the whole register.
3. Prevention is the first obligation under the law - and Treasury will enforce it from 2027. Accounting officers must have controls in place that prevent UIFWe from occurring, and controls that detect it timeously when it does. Reliance on the external audit to find what internal systems should have caught first is no longer an acceptable approach.
4. MPAC and the disciplinary board must run simultaneously - not sequentially. MPAC assesses recoverability; the disciplinary board assesses financial misconduct. Neither process is a prerequisite for the other. Treating one as a gate for the other has produced dysfunctional outcomes and must stop.
5. Recovery before write-off - always. The Supreme Court of Appeal has confirmed the principle and the revised Circular 68 reinforces it. Write-off is only available after the recovery process has demonstrated that prospects of success are negligible.
6. Train the whole council, not only MPAC. MPAC members who understand their role but return to institutions where no one else does cannot exercise effective oversight. Training interventions that include the full council and senior management produce shared understanding - and shared accountability.
7. Internal control is not the same as internal audit. Municipalities that want to strengthen prevention should look at building internal control functions that are part of management - able to assess transactions before they are committed, advise the accounting officer, and intervene early - rather than placing those expectations on internal audit units that are governed by their charter and constrained from operational involvement.