Municipalities continue to struggle with appointing qualified CFOs

”The auditor general has over the years identified that one of the root causes for poor outcomes in both the Public Finance Management Act and Municipal Finance Management Act audits is key officials lacking appropriate competencies,” says Natashia Soopal, South African Institute of Chartered Accountants (Saica) project director: public sector.

“The Municipal Regulations on Minimum Competency Levels seeks to professionalise the local government sector and to make it a career choice for talented officials and to some extent mitigate some of the root causes of poor financial management and service delivery,” adds Soopal.

“The regulations address the minimum higher education qualifications, work-related experience and core managerial and occupational competencies that are required by financial and supply chain management officials. They state that the CFO of a municipality or municipal entity must generally have skills, experience and capacity to assume and fulfill their responsibilities and exercise the functions and powers assigned to them in terms of the MFMA.”

The minimum competency levels required for higher education qualifications and work-related experience for CFOs of municipalities and municipal entities are as follows:

• CFOs at all municipalities with annual budgets of a value below R500m, and all municipal entities of a parent municipality with an annual budget of a value below R500m must have at least a bachelor degree or a relevant qualification registered in the National Qualifications Framework at a NQF level 7 with a minimum of 360 credits and a minimum of five years at middle management level.
• CFOs at all municipalities with annual budgets of a value equal to or above R500m, and all municipal entities of a parent municipality with an annual budget of a value equal to or above R500m must have at least NQF level 7 in fields of accounting, finance or economics or be a chartered accountant (SA) with a minimum of seven years at senior and middle management levels, of which at least two years must be at senior management level.

All financial and supply chain management officials who did not meet the minimum competency levels at the effective date of the regulation had until 2 August 2018 to meet the minimum competency levels. A financial and supply chain management official who was appointed on or after the commencement of the regulation had to attain the minimum competency level within 18 months from the date of appointment.

A survey of the provinces shows:

• The vacancy rate for CFOs at municipalities was 15.2%; and
• Only 36.2% of CFOs appointed at municipalities met the minimum competency level.

Therefore 63.8% of municipalities who had CFOs appointed as at 30 August 2018 were not complying with section 83(1) of the MFMA in terms of the competency levels which has a potential negative impact on the effective financial management of municipalities.

In order to improve the effective financial management of municipalities, councilors are urged to appoint CFOs who meet the minimum competency levels. In instances where CFOs were appointed prior to the effective date of the Regulations, councilors should monitor the progress of the CFO in meeting the minimum competency levels.

Municipalities should also follow in the footsteps of cities of Tshwane and Johannesburg and register as training offices to develop their own calibre of chartered accountants, associate general accountants and accounting technicians,” Soopal concludes.