The enforcement shift that changes everything for local government

R287 billion. Still growing. What every municipality needs to understand about UIFWe - and what changes now.

Total UIFWe across South African municipalities stood at R287 billion as at June 2025. That figure has been moving in the wrong direction for years, and the trajectory has not changed. National Treasury, which issued its first guidance circular on UIFWe in 2013 and spent over a decade working with municipalities to operationalise reduction strategies, reached a conclusion that persistence with the guidance-and-support model was no longer justified. The response was a deliberate change in posture - from support to enforcement.

That change became visible in late 2025, when Treasury invoked Section 216(2) of the Constitution and withheld equitable share from municipalities that had shown no appetite to reduce UIFWe and no appetite for consequence management. The measure was applied again in mid-2026 - this time affecting a significant number of municipalities. Treasury has made clear that the withholding will be sustained for as long as necessary. And from 2027, Treasury has stated that it will apply the prevention compliance requirement of the MFMA with full force - holding accounting officers who fail to put in place controls to prevent UIFWe directly and personally accountable.

Local government elections are days away and new councils will soon be sworn in across South Africa. They will inherit whatever UIFWe sits on the register of the municipality they now govern - and they will be held responsible for what accumulates from the moment they take office. The window to act is not next year. It is now.

The Incoming Council

A new mandate does not wipe the slate. New councils inherit the register - and personal accountability begins from day one.

Incoming councils often focus on programmes, priorities and delivery commitments. What they less frequently focus on - and what matters more than almost anything else in the first weeks of a new term - is the financial state they have inherited. Every rand of UIFWe on the register at the start of a new term represents an unresolved governance failure. Some of it will be recoverable. Some of it will require write-off processes that demand MPAC involvement, council resolutions and in some cases referral to law enforcement. None of it disappears because there has been an election.

For incoming mayors and speakers, the immediate governance obligation is to ensure that the MPAC is constituted correctly, trained adequately and empowered to function independently. MPAC members who are unfamiliar with their role cannot exercise effective oversight of UIFWe - and the consequences fall on the municipality as a whole, including the equitable share it depends on for basic functions. National Treasury has been explicit: where MPACs are dysfunctional, UIFWe accumulates.

“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.” Mr Skhumbuzo Mgobhozi, Municipal Finance, KZN COGTA

For incoming accounting officers, the message from Treasury is unambiguous: prevention is a legal obligation, not an aspiration, and the current financial year is the last opportunity to put controls in place before personal accountability is enforced. The MFMA Amendment Bill and revised White Paper on Local Government - both released in the same week - set the governance framework within which the incoming council will operate for its entire term.

Prevention First

Detection is not prevention. The law requires both - but the sequence matters more than most municipalities have realised.

The most persistent problem in the UIFWe landscape is not a lack of awareness - it is structural overreliance on detection rather than prevention. Municipalities depend on the external audit to find what their own internal systems should have caught first. Treasury’s Circular 68, revised for the fourth time in April 2026, is explicit: controls must prevent UIFWe from occurring, and detect non-compliance timeously when prevention fails. Reliance on the AG’s findings as the primary detection mechanism is not a control environment - it is the absence of one.

Internal audit and internal control are not the same thing - and conflating them is costly. Internal audit is reactive and charter-governed; it cannot be involved in the day-to-day decisions it will later be asked to audit. Internal control is part of management: it assesses transactions before they are committed and intervenes early. Placing prevention expectations on internal audit compromises the independence of the very instrument needed for oversight.

“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.” Mr Skhumbuzo Mgobhozi, Municipal Finance, KZN COGTA

The SCM audit cycle is a practical illustration of the problem. Municipalities that conduct SCM audits annually - typically in the third or fourth quarter - are identifying irregular expenditure incurred in the first quarter of the same year months after it happened. The corrective action arrives too late to prevent the liability. Quarterly SCM audits are not a luxury - they are the minimum frequency at which detection can meaningfully inform prevention.

Treasury has also been clear on the reporting obligation. Too many accounting officers have allowed months - sometimes years - to pass between identifying UIFWe and referring it to MPAC and council. The revised Circular 68 is explicit: UIFWe must be reported without delay. Late reporting makes the investigation harder, the evidence weaker and the accountability question more difficult to answer.

When the Register Is Large

Not all UIFWe is equal. The sequence in which you resolve it matters as much as the resolve itself.

For municipalities carrying large UIFWe registers, the answer practitioners have found is sequencing - breaking the register into components with very different resolution profiles and addressing the more tractable items first. This is not a shortcut. It is a strategic decision to demonstrate progress while building capacity for the more complex work.

A large register typically contains unauthorised non-cash items - depreciation, provision for bad debts, provision for asset impairment - that can be resolved relatively quickly through MPAC and the Financial Disciplinary Board. These items are non-cash in nature and do not represent funds that left the municipality under questionable circumstances. Addressing them first produces visible progress and creates space for the more intensive investigation that irregular and fruitless expenditure requires.

Budget credibility is central to prevention. The budget is the maximum that council could allocate to a function - not a starting point for negotiation. Unauthorised expenditure often arises not from deliberate overspending but from budgets that have historically been set below what a function actually costs. That pattern must be addressed in the budget process itself, not accepted as an annual feature of the UIFWe register.

Process controls - as simple as procurement checklists used consistently as both a training tool and a transaction gate - can produce significant movement in unauthorised expenditure without a full system overhaul. In Mangaung, this approach reduced unauthorised expenditure from approximately R1.3 billion per year - between 10 and 15 percent of the approved budget - to approximately R300 million. That reduction did not require a system overhaul. It required consistency, clear processes and management commitment to making the correct way the only acceptable way.

“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.” Ms Zuziwe Thekisho, CFO, Mangaung Metropolitan Municipality

MPAC and Consequence Management

Two processes. Both mandatory. Neither is a prerequisite for the other - and using one as a gate for the other is not lawful.

One of the most consequential misunderstandings in UIFWe management is the relationship between the MPAC process and the Financial Disciplinary Board. These are two independent processes that must run simultaneously. MPAC assesses recoverability - was there a financial loss and what is the prospect of recovery? The disciplinary board assesses financial misconduct - was there a breach of Sections 171 or 172 of the MFMA? Using the outcome of one as a prerequisite for the other has produced dysfunctional consequence management outcomes across the sector, and Treasury has been explicit that it must stop.

Recovery must always precede write-off. The Supreme Court of Appeal’s judgment in Mbamnisa v Nelson Mandela Bay confirmed this principle, and the revised Circular 68 reinforces it. Write-off is only available once recovery has demonstrated negligible prospects of success. Moving to write-off before that point is not only unlawful - it removes liabilities from the register that should remain there until the process is properly completed.

Political interference in MPAC processes - reports blocked, investigations delayed, consequence management undermined by loyalty to implicated officials - cannot be addressed through technical capacity-building alone. Treasury is engaging COGTA on enforcement instruments, and the MFMA Amendment Bill’s proposals to move UIFWe decisions away from political structures are a direct response to what has been observed. On disciplinary board composition: boards must consist of external members with investigative expertise. Boards populated with internal appointees directed onto the board by the municipal manager lack the independence and investigative capacity that consequence management demands.

The Reform Window

The MFMA Amendment Bill is open for comment now. Incoming councils cannot afford to leave this engagement to others.

On 21 October 2026, the Medium-Term Budget Policy Statement was tabled and National Treasury simultaneously published the MFMA Amendment Bill for public comment. The revised White Paper on Local Government was launched the following day, with President Cyril Ramaphosa delivering the address personally - a signal of the weight the Presidency is placing on local government reform. Both documents carry direct implications for every municipality in South Africa, and both are open for engagement right now.

The MFMA Amendment Bill contains significant proposals. It proposes a new model for managing UIFWe that moves decisions out of political structures - a direct response to the MPAC dysfunction that has frustrated consequence management for years. It also proposes a revised definition of irregular expenditure, addressing the widely-held concern that the current definition conflates minor procedural non-compliances with serious governance failures. The perception that any irregular expenditure signals fraud or corruption has distorted the response in many municipalities, producing over-investigation of minor breaches and under-focus on the substantive issues.

Engage Before the Window Closes

National Treasury is conducting provincial roadshows on the MFMA Amendment Bill. Practitioners, accounting officers and councillors who have lived with the consequences of the current UIFWe framework have the most relevant input to offer. The proposals in the Bill will shape the governance environment within which incoming councils operate for their entire term. Engagement through written comment and the roadshows is not an optional extra - it is how the sector shapes the legislation that governs it.

Forward View

Treasury's enforcement posture is shifting. Incoming councils cannot afford to wait.

Elections, an MFMA Amendment Bill, a revised White Paper on Local Government and a Treasury enforcement posture that is already changing land simultaneously. The governance framework is being rewritten while new political leadership is taking its seat. Incoming councils cannot wait for the first audit finding to engage with UIFWe. The practical priorities are immediate: constitute and train the MPAC alongside the full council and senior management; review the register from day one and understand what each category requires; strengthen the boundary between internal audit and internal control; and engage with the Amendment Bill before the comment window closes - because the legislation that emerges will govern the current council for its entire term.

The R287 billion did not accumulate overnight. It accumulated year by year in municipalities where prevention was an afterthought and consequence management was deferred until it became politically inconvenient. The councils that choose to approach this differently - from their first meeting, not their first audit finding - are the ones communities will be able to point to as proof that local government can change.