Finance

Municipal finance administration continues to deteriorate

The Auditor-Common of South Africa (AGSA) tabled the 2020-21 native authorities basic report on 15 June. The overall report is important to the nation because it displays the present state of monetary administration of native authorities, which finally impacts service supply.

The AGSA has famous no enchancment within the standing of accountability, transparency, efficiency, and integrity in native authorities. Solely 25% of municipalities have been in a position to submit credible monetary statements, regardless of native authorities spending R10.41-billion on wage prices for departments and R1.26-billion on finance consultants respectively. 

Solely 41 municipalities acquired clear audits; many of the municipalities that acquired clear audits have been district municipalities. This can be a concern, as district municipalities obtain the smallest portion of the finances, and this reveals that cities, middleman cities, native municipalities and municipal entities that obtain many of the finances and are additionally answerable for most service supply wrestle to organize credible monetary statements.

It was additional famous that 25 municipalities acquired disclaimer opinions, which accounts for 10% of municipalities. Disclaimer opinions signifies that the municipality couldn’t present the AGSA with proof for many quantities and disclosures in its monetary assertion and subsequently the AGSA couldn’t specific an opinion on the credibility of these monetary statements, in addition to decide what had been carried out with the funds the municipality had acquired for the 12 months. It additional signifies that there isn’t a curiosity by management in these municipalities to drive accountability and transparency, and that residents residing in these municipal areas are robbed of service supply.

Issues on the monetary well being of municipalities have been additionally highlighted: 230 municipalities and 18 municipal entities confirmed rising indicators of a collapse in native authorities finance and continued deterioration based mostly on their monetary statements. Moreover, the monetary place of 28% of South Africa’s municipalities displays that there’s vital doubt about whether or not they’ll be capable of proceed working as a going concern within the close to future. 

Solely 36% of municipal income is estimated to be recoverable and it additional takes 213 days to gather quantities due by municipalities. In 2020-21, municipalities wrote off R41.28-billion in debt that was not paid to them. Regardless of municipalities experiencing money circulate challenges, municipalities proceed to prioritise the fee of salaries and councillor remuneration, which totalled R113.66-billion in 2021, which is 60% of the estimated recoverable personal income and equitable share allocation. Municipalities thereafter pay municipal suppliers together with Eskom, the water boards and the South African Income Companies (SARS) and Small Medium Micro Enterprises (SMMEs), and place pressure on money circulate inside authorities establishments and SMMEs. That is additional emphasised by municipalities taking over common 240 days to pay collectors.

By way of the Structure of South Africa, native authorities is, amongst others, accountable to make sure the supply of providers to communities in a sustainable method, promote social and financial improvement and promote a protected and wholesome setting for residents. Based mostly on the 2020-21 native audit outcomes, it seems that native authorities might wrestle to make sure that it is ready to execute its obligations when it comes to the Structure and emphasises the pressing want for accountability and assist by all stakeholders to enhance the present establishment of native authorities.

SAICA subsequently helps and emphasises the decision by the AGSA for accountability by all stakeholders within the accountability ecosystem to enhance municipal finance administration, which incorporates accounting authorities, municipal public accounts committees, nationwide and provincial authorities, portfolio committees, as effectively energetic citizenry. 

Natashia Soopal is  Government: Ethics and Public Sector at SAICA

About SAICA

The South African Institute of Chartered Accountants (SAICA), South Africa’s pre-eminent accountancy physique, is extensively recognised as one of many world’s main accounting institutes. The Institute offers a variety of assist providers to greater than 50 000 members and associates who’re chartered accountants (CAs[SA]), in addition to affiliate basic accountants (AGAs[SA]) and accounting technicians (ATs[SA]), who maintain positions as CEOs, MDs, board administrators, enterprise homeowners, chief monetary officers, auditors and leaders in each sphere of commerce and trade, and who play a major position within the nation’s extremely dynamic enterprise sector and financial improvement.

Chartered Accountants are extremely valued for his or her versatile ability set and artistic lateral pondering; that’s why the entire prime 100 International Manufacturers make use of Chartered Accountants.

For extra info, go to: https://www.saica.org.za/

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