Councils trapped in Sh265bn lawsuits

Dar es Salaam. Local government authorities (LGAs) across the country are entangled in legal suits that could cost them close to Sh265 billion, the Controller and Auditor General (CAG) has revealed in his latest report.

According to the report tabled in Parliament last week, 115 LGAs are currently facing 1,206 lawsuits, and will have to settle claims totaling Sh264.92 billion in compensation should they lose against their complainants.

This could pose a serious financial challenge to the local government authorities, which have perennial financial struggles.

In the 2015/16 fiscal year, the annual CAG general report shows, cases against LGAs at various courts increased to 810, a significant increase by 396 suits in 12 months.

However, the latest report shows a drop by Sh57.85 billion in compensation claims compared to 2014/15. Previously, 108 LGAs faced Sh322.77 billion lawsuits.

Financial woes

In his report, the CAG, Prof Mussa Assad, expressed concerns that the several legal cases ensnaring local government authorities could escalate the financial woes that have perennially bedevilled councils, in the event that the courts ruled in the favour of complainants.

According to the report, 29 LGAs have categorised Sh111,63 billion in 390 cases as contingent liabilities. But Sh153.29 billion being claimed in 259 other cases in 86 LGAs was not disclosed as contingent liabilities in financial statements.

“Contingent liabilities may have a material effect on the financial resources of respective LGAs as there is a risk of paying substantial amounts in the future if those cases are decided in favour of the complainants,” reads part of the report.

Compounding local government authorities’ woes is the fact that they do not have adequate legal experts to professionally handle the lawsuits burden. This leads to poor representation in courts and raises the risk of losing the legal battle, the CAG notes.

“I also noted that many of these filed cases relate to the termination of contracts between LGAs and contractors; and land disputes,” the CAG noted in the report.

Kinondoni leads the pack with 171 cases in which a total of Sh31.56 billion is being claimed by the various complainants, followed by Ilala Municipality, which recorded 85 cases requiring Sh32.57 billion in compensation.

Tanga City Council has 56 cases (Sh22.77 billion) and Mbeya Council 53 cases (Sh13.54 billion).

Mafia has only five cases, but faces an exceptional burden to settle claims worth Sh50.16 billion should it lose the lawsuits. Mtwara Municipal Council has 13 cases (Sh17.47 billion) and Monduli District Council 17 cases worth Sh16.00 billion.

District councils with the lowest amounts being demanded in compensation include Bukoba Municipality (41 cases) worth Sh1.87 billion, Kondoa DC with eight cases worth Sh1.75 billion, Musoma Municipal with 42 cases, requiring Sh1.45 billion, and Kibaha District Council (18 cases) worth Sh1.41 billion.

In his recommendations, the CAG has told local government authorities to avoid new lawsuits, and stay out trouble by complying with rules and regulations governing their operations.

“They are also recommended to closely follow-up on the case proceedings and ensure outstanding issues are dealt with and finalised within a considerable period of time,” the CAG said.

He has also advised local government authorities to consider out-of-court settlements to avoid the risk of paying compensation, fines and or penalties in the event that that the courts fail to rule in their favour.

The CAG also suggested that local government authorities strengthen their legal departments and ensure that all legal issues are professionally addressed.