One has to be careful concerning 'negligence'. Conducting a negligent investigation does not necessarily make the DA liable. It's kind of complicated once you get into that aspect. A sham investigation, or one that displayed a deliberate indifference to the facts, does attach liability in most cases.
As for the expendature of government funds to defend nifong, it would likely be up to the state AG to make that decision. it is also possible that if the state AG claims Nifong was acting within his official capacity in good faith, the liability could be transferred to the state, and not the City of Durham.
Keep in mind that Nifong was appointed to a vacant position not too long ago, which may account for his utter stupidity about his potential liability. Unfortunately for him, stupidity is not a defense.
In the state o f Washington, there is a state SC ruling that says "every sane person is presumed to know the law." In Nifong's case, an insanity defense just might work.
They kept trying to pin it on the dean and department head but they had their CYA memos in place that proved they had been warning the University for a long time about the safety issues that started the fire.
So they made every prof. write a safety plan for the lab for which he/she was nominally responsible. I refused to do it because it was quite clear to me that they were trying to create documentation to nail someone's hide to the wall if it ever happened again.
I had no doubt that if little Johny was hurt in "my" lab the AG would find that I was negligent by not, in some way, identifying the hazard that hurt him. Then it would have all been on my head. Most of my colleagues were so naive that they thought it was a great idea for them to write their own safety plans because it kept the bureaucratic interference to a minimum. Fools!