A view of the City of Tshwane, from Freedom Park. Picture: SUNDAY TIMES
A view of the City of Tshwane, from Freedom Park. Picture: SUNDAY TIMES

Finance minister Tito Mboweni has granted SA’s beleaguered municipalities and local government entities an exemption from legally prescribed deadlines to submit their financials for auditing, as a result of the national state of disaster and the coronavirus lockdown.

The exemption from certain requirements of the Municipal Finance Management Act (MFMA), gazetted on Wednesday, grants local governments a two-month delay to submit their annual financial statements, annual reports, audit opinions, and oversight reports to the auditor-general’s office. The reports would ordinarily have been due at the end of August.

Though the lockdown restrictions have eased over time, they remain in force, affecting the ability of municipalities and their entities to prepare and submit quality annual financial statements, the Treasury said in a statement on Friday.

The phased lockdown has also had a knock-on effect on the availability of municipal staff, said the Treasury. This has added to the delays in municipalities’ ability to prepare their annual financial statements and undertake procedures, including the physical verification of assets, meter-reading, revenue management, valuations and finalising supporting documentation, it said.

“There are similar negative impacts on quality assurance processes, annual reporting and oversight reports,” the Treasury said.

SA’s municipalities — many of which were already in a precarious financial state — have been hard hit by the pandemic and the lockdown, which is expected to push the economy into its worst recession since the Great Depression.

With many residents losing their jobs or seeing their income reduced during the lockdown, embattled local governments saw their revenues decline about 30% on average during the worst of the lockdown, according to the recent supplementary budget.

Though the lockdown has been a severe shock, the country’s local governments suffer from chronic mismanagement.

Outgoing auditor-general Kimi Makwetu outlined their debilitated state in his most recent report of municipalities’ audit outcomes under the MFMA.

His office found that the financial health of 79% of municipalities was “either concerning or requiring urgent intervention”, at the same time that there was a rise in both the levels of fruitless and wasteful, as well as unauthorised, expenditure.

He described most municipalities as “crippled by debt” and unable to pay for basic services such as water and electricity.

Makwetu said their accounts reflected “inaccurate and lacklustre revenue collection; expenditure that is unauthorised, irregular, fruitless and wasteful; and a high dependence on grants and assistance from national government”. 

In March, municipalities were granted other exemptions in terms of the MFMA, which allowed municipal councils to pass special adjustment budgets before the end of their financial year, which closed on June 30. This was to enable them to authorise all expenditure linked to the emergency to address the Covid-19 pandemic, the Treasury said.

Update: August 7 2020
This article has been updated with comment by the Treasury.

donnellyl@businesslive.co.za

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