Properly trained financial managers are key to municipal stability

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Municipalities in financial trouble

According to the Auditor-General SA (AGSA) report released on 1 June 2016, irregular expenditure has more than doubled since 2010-11 to R14,75 bn. Fruitless and wasteful expenditure in 2014-15 was more than R1bn higher than in 2010-11 at R1,34bn. Unauthorised expenditure also increased threefold from 2010-11 to R15,32bn. In 2014-15, the AGSA rated the financial health of 92% of the municipalities as either concerning or requiring intervention.

Appropriately qualified and protected public sector CFOs and financial managers and officers are a key ingredient in turning the fortunes of South African municipalities around.

“With 60% of the country’s key municipalities in financial trouble and South Africa’s credit rating being reviewed, the CFO community believes that an increased focus on financial sustainability within municipalities is a critical priority for all stakeholders,” says Nicolaas van Wyk, SA Institute for Business Accountants (SAIBA) CEO.

Recommendations need to be fast tracked

The auditor-general, Kimi Makwetu has noted the encouraging improvement in the audit results of municipalities as a result of political, municipal and provincial leadership delivering on commitments to fill key positions with competent people, stabilising the administration and adopting minimum competency requirements.

The public sector and municipal finance leaders need to fast track the recommendations made by the AGSA and provide additional independence and protection for public sector CFOs and municipal finance managers. The only way to ensure the financial sustainability of municipalities and achieve greater governance and efficiency, is to strengthen the role of the public sector CFO and municipal finance officers.

“Public sector CFOs and municipal finance managers are subjected to diverse demands from political party leaders, traditional leaders and the electorate. Their role needs to be strengthened through legislation to protect them from unwarranted influence and to allow them freedom of access and movement to make independent decisions,” comments Van Wyk.

Public sector leaders need to:

• Respond urgently to the AGSA’s consistent messages about addressing risks and improving internal controls.

• Fill vacancies and address instability in the key positions of municipal managers and chief financial officers as this affects the financial and performance management of municipalities and can have a direct effect on audit outcomes.

• Take appropriate action against any person responsible for the high levels of unauthorised, irregular as well as fruitless and wasteful expenditure.