Administrative manoeuvre: Who condones irregular expenditures in the public sector?

August 1st, 2021

Picture source: Gallo Images/Getty

Central to this article is the concept of ‘relevant authority’ to condone ‘irregular expenditure’ and to determine who that relevant authority is in terms of legislation.

In terms of para 3 of the National Treasury Circular 2005 ‘Irregular Expenditure’ (, accessed 10-7-2021) condonation of irregular expenditure requires an ex post facto approval and such approval can only be given by the State Tender Board as the relevant authority.

Legislative prescripts

Section 1 of the Public Finance Management Act 1 of 1999 (PFMA) defines ‘irregular expenditure’ as expenditure incurred in contravention of any applicable legislation including the PFMA and any provincial legislation providing for government procurement procedures.

Regulation 9.1.5 of the Treasury Regulations for departments, trading entities, constitutional institutions and public entities 2005, states that amounts of irregular expenditure ‘must be disclosed as a note to the annual financial statements of the institution’ and be dealt with in terms of reg 12 of the Treasury Regulations. Regulation 12 among others, deals with the management of losses and claims including claims by the state against officials where the latter incurred among others irregular expenditure, as well as the condonation of that irregular expenditure if the amount is irrecoverable.

The PFMA lists the powers and functions of the National Treasury and provincial treasuries in ss 18 and 76 respectively.

Section 76(b) of the PFMA deals with ‘the recovery of losses and damages’, this power or function is explicitly missing under s 18 of the PFMA. Therefore, by inference the legislature never intended these powers and functions to be equally afforded to provincial treasuries in comparison to the National Treasury. For example, the National Treasury Guideline on Irregular Expenditure 2014 (, 10-7-2021) at para 39, issued by the Office of the Accountant-General, reflects that the sole power to condone expenditure in contravention of Treasury Regulation 16A6.1 is given to the National Treasury as the relevant authority.

Relevant authority in some government procurements will include the State Information Technology Agency (SITA), Construction Industry Development Board (CIDB) and other such like statutory bodies including, the Department of Public Service and Administration (DPSA) where human resource expenditure is concerned. Until that power of relevant authority to condone irregular expenditure is legally transferred from these institutions to the National Treasury the latter cannot usurp that power from them.

The National Treasury is established by s 5 of the PFMA as empowered by s 216 of the Constitution. The Minister of Finance is the head of the National Treasury and takes policy and other decisions of the National Treasury. In terms of s 55 of the Constitution the PFMA – as a piece of legislation – is enacted by the National Assembly therefore, any amendment to the PFMA or its Treasury regulations should be tabled in Parliament for the legislature to adopt or reject the proposed amendments. By implication, legislative amendments to the PFMA should be brought to the attention of the Minister as the head of National Treasury and be tabled by the Minister in the National Assembly for ratification.

Therefore, it is argued that the National Treasury Instruction no 2 of 2019/20 (, accessed 10-7-2021) devolving the condonation function and powers to provincial treasuries could be legally flawed because, as seen above, not all condonation powers belonged to the National Treasury as the relevant authority. Briefly, I submit that one cannot delegate or devolve legal powers and functions that one never had. This argument was solidified by the decision in Minister of Environmental Affairs and Tourism and Others v Pepper Bay Fishing (Pty) Ltd; Minister of Environmental Affairs and Tourism and Others v Smith 2004 (1) SA 308 (SCA) at para 31, when the court held that an ‘administrative authority has no inherent power to condone failure to comply with a peremptory requirement. It only has such power if it has been afforded the discretion to do so.’

I submit that the delegation of powers and functions also amends ss 18 and 76 of the PFMA, which action requires processes of the National Assembly related to amending legislation and not the ‘discretion’ of an administrative authority.

We must acknowledge herein, that there is indication, as from the time of the tender boards, that some condonation powers were delegated to provincial treasuries, however, the major power to condone irregular expenditure remained with the National Treasury as envisaged by s 76(b) of the PFMA, especially where the procurement breached supply chain management legislative prescripts. However, only the irregular expenditure condonation power, which was legislatively afforded to the National Treasury by s 76(b) (ie, procurement of goods and services excluding technology equipment, and procurement through CIDB), remained with the National Treasury as the relevant authority.

The Constitution and related case law

In terms of s 2 of the Constitution, the Constitution is the supreme law of South Africa and law or conduct inconsistent with it are invalid.

Instruction Notes issued in terms of the law by the National Treasury or provincial treasuries are legislative prescripts, hence they are subject to the provisions of the Constitution. Therefore, by inference, Instruction Note no 2 of 2019/20 must be consistent with the Constitution, which holds that Parliament makes, amends and repeals enacted legislation. I submit that this Instruction Note has the effect of amending the PFMA and should have been tabled and adopted by Parliament.

Administrative action

The court in Minister of Health and Another NO v New Clicks South Africa (Pty) Ltd and Others (Treatment Action Campaign and Another as Amici Curiae) 2006 (2) SA 311 (CC) at para 437 held that it is impermissible to rely directly on constitutional provisions when particular legislation has been enacted to give effect to the Constitution. In this case, I submit that the Promotion of Administrative Justice Act 3 of 2000 (PAJA) is the relevant legislation enacted to address the issue of administrative action. Section 1 of PAJA defines an ‘administrative action’ as any decision taken by an organ of state, when ‘exercising a public power or performing a public function in terms of any legislation’. Therefore, the decision of the accounting officer for the National Treasury to devolve the condonation function to provincial treasuries is an administrative action.

In the article below, I will dissect s 1 of PAJA as it defines an administrative action in relation to the relevant authority to condone irregular expenditure and the devolvement of the condonation powers to provincial treasuries:

  • A decision or failure to make a decision of an administrative nature

The court in Grey’s Marine Hout Bay (Pty) Ltd and Others v Minister of Public Works and Others 2005 (6) SA 313 (SCA) at paras 22 and 24 held that:

‘At the core of the definition of administrative action is the idea of action (a decision) “of an administrative nature” taken by a public body or functionary.

Whether particular conduct constitutes administrative action depends primarily on the nature of the power that is being exercised rather than upon the identity of the person who does so. Features of administrative action … that have emerged from the construction that has been placed on s 33 of the Constitution are that it … [is] the conduct of the bureaucracy … in carrying out the daily functions of the state, which necessarily involves the application of policy, usually after its translation into law, with direct and immediate consequences for individuals or groups of individuals.’

By implication, the decision of the accounting officer for the National Treasury to delegate the condonation function to provincial treasuries is an administrative action.

  • By an organ of state or a natural or juristic person

The court in AAA Investments (Pty) Ltd v Micro Finance Regulatory Council and Another 2007 (1) SA 343 (CC) at para 40 held that ‘[o]ur Constitution ensures … that government cannot be released from its … rule of law obligations simply because it employs the strategy of delegating its functions to another entity.’

The National Treasury is an organ of state and a functionary because it must ‘promote the national government’s fiscal policy framework and the co-ordination of macro-economic policy’.

  • Exercising a public power or performing a public function

The court in Calibre Clinical Consultants (Pty) Ltd and Another v National Bargaining Council for the Road Freight Industry and Another 2010 (5) SA 457 (SCA) at para 25 to 31 defined what constitutes exercising a public power and outlined the four factors in determining such account, which ‘include the extent to which in carrying out the relevant function the body is publicly funded, or is exercising statutory powers, or is taking the place of central government or local authorities, or is providing a public service.’

The National Treasury as a publicly funded national department is centrally controlled as it reports to the Minister of Finance. There is public interest in the condonation of irregular expenditure because its reduction reflects accountability and consequence management in the public sector.

Therefore, should the devolvement of condonation of irregular expenditure be found to be erroneous and illegal as argued in this article, that would be in contravention of s 33(3)(c) of the Constitution, which provides that national legislation must promote an efficient administration. Therefore, as provided by s 3(1) of PAJA this decision will adversely affect the reasonable expectations of the departments and the public because they will erroneously sit with the belief that the irregular expenditure is appropriately condoned by the relevant authority when the contrary is the reality, hence promoting an inefficient administration.

In the Calibre case at paras 54 to 60 in deciding if an administrative decision is an administrative action is just, the court will look at the –

  • lawfulness of that decision;
  • procedural fairness of that decision;
  • reasonableness of that action; and
  • reasons provided for that administrative action.

There are no reasons provided for Instruction Note no 2 of 2019/20 and the legality thereof is questionable, hence, the administrative action cannot be said to be fair or reasonable.

Findings and recommendations

It is found that Instruction Note no 2 of 2019/20 has the effect of amending the PFMA, hence I submit that it should have been tabled and adopted by Parliament.

This Instruction Note was issued by an administrative authority, and I submit that they acted ultra vires because they were not afforded the discretion to amend legislation outside Parliament.

Condonations that have been and will be issued by provincial treasuries when tested may be found to be illegal and a misrepresentation to the public and the departments because they were not approved by the relevant authority.

Instruction Note no 2 of 2019/20 illegally usurped and delegated condonation powers that National Treasury never had (SITA, DPSA and CIDB etcetera), hence it is recommended that it be reviewed and retracted.


It is concluded that the relevant authority to condone irregular expenditure remains the National Treasury, specifically where the contravention was against statutory procurement prescripts.

The court in Pharmaceutical Manufacturers Association of SA and Another: In Re Ex Parte President of the Republic of South Africa and Others 2000 (2) SA 674 (CC) at para 90 held that it is a requirement of the rule of law that the exercise of public power by the executive or functionaries should not be arbitrary. Therefore, the decisions must be rational to the purpose for which the power was given.

It is thus concluded that Instruction Note no 2 of 2019/20 does not pass the constitutional scrutiny, hence, I submit that it must be reviewed and reversed, and the delegation be done in accordance with the rule of law and constitutional guidance of amending the law.


Gaopalelwe Walter Molelekwa BIuris Financial Planning Law LLB LLM (UFS) BTech Cost and Management Accounting (UNISA) is a Director of Asset Management at the Northern Cape Treasury in Kimberley.

This article was first published in De Rebus in 2021 (Aug) DR 12.

De Rebus