National Treasury warns Govan Mbeki Municipality over unfunded 2025/26 budget

National Treasury has formally warned the Govan Mbeki Municipality that it has adopted an unfunded budget for the 2025/26 financial year, in violation of Section 18 of the Municipal Finance Management Act (MFMA).

Acting Executive Mayor Thandi Ngxonono presented the letter to council during the meeting on October 29. An unfunded budget means the municipality approved a spending plan without realistic funding sources to cover all planned expenditures, representing a serious financial management breach.

Key legal provisions include:
• Section 18 of the MFMA – Requires municipalities to adopt funded budgets only, ensuring expenditure does not exceed realistically expected revenue.

• Section 216(2) of the Constitution – Allows National Treasury to stop funds to municipalities committing serious or persistent financial misconduct.

• Section 171 of the MFMA – Makes financial misconduct by officials a disciplinary and potentially criminal offence.

• Section 65(2)(e) of the MFMA – Requires municipalities to pay creditors within 30 days.

• Sections 54 and 55 of the MFMA – Oblige the mayor to identify and report financial problems to the MEC for Local Government.

Main findings:
• The 2025/26 Medium-Term Revenue and Expenditure Framework (MTREF) budget is unfunded.

• The municipality has adopted unfunded budgets in previous years despite instructions to correct this.

• The Budget Funding Plan (BFP), designed to show how the municipality will achieve a funded budget, is not being effectively implemented.

• There is unprocessed Unauthorised, Irregular, Fruitless and Wasteful (UIFW) expenditure, reflecting weak financial controls and lack of consequence management.

National Treasury’s instructions
Submit an updated and credible Budget Funding Plan (BFP) showing concrete measures to achieve a funded budget within three years (by 2027/28).

Include measurable targets such as improved revenue collection, reduced spending and debt repayment plans. Align spending with realistic revenue levels and work closely with the Provincial Treasury.

The municipality must also submit the following documents within 14 days:
• Council-approved Budget Funding Plan with resolution.

• MPAC reports and council resolutions on UIFW expenditure.

• Disciplinary Board reports with council resolutions on implementation.

• Monthly progress reports on BFP implementation, to be uploaded to the GoMuni Portal and monitored by Provincial Treasury.

Consequences of non-compliance
• National Treasury may invoke Section 216(2) of the Constitution, stopping equitable share and other national transfers.

• The municipal manager and CFO may face disciplinary or criminal charges under Section 171 of the MFMA.

• The mayor may also be in violation of the MFMA if financial problems are not reported to the MEC.

In summary
This notice serves as a final warning before National Treasury takes punitive action. Potential consequences include:

• Suspension of funding from the national fiscus.

• Disciplinary charges against senior officials.

• Possible escalation to provincial or national intervention.

• The municipality has 14 days to respond with proof of corrective action, or it risks constitutional sanctions and financial isolation.

ALSO CHECK: Security catches boys vandalising reservoir in eMbalenhle

ALSO CHECK: Govan Mbeki Municipality writes off millions in unauthorised and irregular expenditure