The National Treasury will on Friday release the balance of R7.1bn that was still being withheld from 49 municipalities despite their continued failure to comply with aspects of the Municipal Finance Management Act, in order not to hurt service delivery, finance minister Enoch Godongwana said.The municipalities are among 69 that had the July tranche — R13.5bn — of the Treasury’s equitable share transfers to local governments held back over failure to pay service providers including water boards and power utility Eskom, as well as running unfunded budgets and unauthorised, irregular, fruitless and wasteful expenditure, among other breaches of the Act.“National Treasury has decided to release funding on Friday, 31st July because we have withheld it for close to 30 days, which ends on Monday, the 3rd of August, and to avoid having an adverse short to medium term effect on the delivery of basic municipal services,” Godongwana told a media briefing.“The release is … not based on a finding of compliance. The equitable share is an important source of funding for the basic services, particularly service provided for poor households. National Treasury must therefore balance its constitutional responsibility to enforce financial management requirements with the need to avoid communities carrying the immediate consequences of failure by municipality.”The Treasury had initially insisted holding back the money would not adversely affect service delivery as the funds were only a fraction of municipalities’ annual funding and they had other revenue streams to fall back on.It said years of persistent financial mismanagement, repeat audit failures and continued noncompliance with the MFMA for the move, one of its strongest interventions yet against failing local governments had prompted the corrective measure.In a legal opinion seen by Business Day last week, the Treasury’s senior legal adviser said the department complied with constitutional and legislative prescripts when it withheld the funding.This was after the Financial and Fiscal Commission — a constitutional advisory body that makes recommendations to parliament, provincial legislatures, local government and other organs of state on the equitable division of revenue among the three spheres of government — questioned the legality of the move.On Tuesday, Godongwana said 20 of the 69 municipalities had to date received their full equitable share, while 21 had received partial disbursements and would get the rest on Friday. Twenty-eight would receive their entire withheld support the same day.“They are not off the hook. They are going to be required to perform between now and the second tranche. Each municipality will receive a letter informing that municipality what are the conditions attached, what are the things it has got to do between now and the next tranche,” he said.The government will now adopt a similar approach with all national departments and provincial governments that owe billions of rands to municipalities, cooperative governance and traditional affairs minister Velenkosini Hlabisa told the same briefing.“We understand, in order [for municipalities] to be able to pay water boards, to pay Eskom, to pay medical and pension funds, they need to be paid also by the people they render services to,” Hlabisa said.“The similar stance that has been taken to our municipalities will have to be taken against the government departments and provincial governments who owe monies to our municipalities …because … we are at the tail end of the term of these councils, and we shouldn’t allow a situation that will collapse them before the fourth of November,” he said, referring to local government elections due later this year.