In briefing the Committee, the Administrator indicated that on 28 May 2008 the Free State Provincial Executive Committee decided to intervene at Xhariep District Municipality in terms of Section 139 (1) (b) of the Constitution. The rationale for the intervention in the municipality was lack of capacity to exercise powers and perform functions; inadequate budget to perform as a district municipality; possible unauthorized, irregular, fruitless and wasteful expenditure including possible fraud, corruption and nepotism. The Administrator further informed the Committee that since its establishment, the Xhariep District Municipality encountered acute financial constrains due to a limited levy base and for the past three years the District had passed budgets with deficits. The Provincial Department of Local Government provided the Xhariep District Municipality with technical support to achieve the development of budget, budget related policies, internal control manual, annual financial statements and financial management since the suspension of the Chief Financial Manager.