Treasury stops transfers to municipalities

Salga asks for early warning systems

Early warning systems for municipalities could help improve audits for 2013
Audits for 2013

Nine municipalities in the Free State, Northern Cape, Western Cape and Limpopo will be affected by the Treasury’s decision to invoke section 216(2) of the Constitution against them.

Minister of Finance, Pravin Gordhan, has invoked section 216(2) of the Constitution against the municipalities between December 2012 and January 2013 for contravening section 126 of the Municipal Finance Management Act (MFMA). 

As the representative voice of local government, the South African Local Government Association (Salga) believes in the practice of exercising prudence in the management of public finances and has duly identified it as crucial to improve the audit outcomes for the local government sector.

Salga announced in a statement on its website that it supports measures that are within the legal framework and which are implemented with the objective of improving financial management practices and good governance.

This is in light of the fact that both the administrative and political leadership of municipalities are accountable for the funds entrusted to them and as such Salga acknowledges that National Treasury’s action to be in accordance with the provisions on the Constitution of the Republic.

“Salga has in the past acknowledged and identified challenges within the sector relating to the management of finances.

"In line with our role to support and advice municipalities, Salga duly engaged stakeholders in the government and in the private sector to play an active role in redressing the identified challenges within municipalities.

"Salga also provided a platform to municipalities to voice the challenges that they face on a day-to-day basis which contribute to non-compliance.

“With reference to the five municipalities in the Northern Cape that are affected by National Treasury; our engagement with these municipalities together with Provincial Treasury and the department of co-operative governance, the department of human settlements and traditional affairs resulted in tangible action plans being developed to assist them in precluding future non-compliance within the provisions of the MFMA wherein Salga will monitor the implementation of the action plans,” according to Salga.

"The same has been done with the municipalities in Western Cape (2), the Free State (1) and Limpopo (1). In terms of our long-term objective, Salga will continue to support and encourage local government to improve audit outcomes toward 2014 and beyond.

"This is in addition to the engagement that Salga held in collaboration with PricewaterhouseCoopers attended by mayors and municipal managers of 75 of the 100 municipalities that were identified in October 2012.

"At this engagement, the political leadership of these municipalities agreed and committed to a road map through which they would play an active role in improving the status of their audit outcomes by 2014,” says Salga.

Salga is, however, concerned about the dire impact that the cessation of funds by the National Treasury will have on municipal finances and service delivery.

“Our aim is to continuously engage on behalf of municipalities with the National Treasury, that a remedial programme be implemented and agreed to in the short- to medium term.

"Salga is more inclined toward such a measure in ensuring corrective action on the part of the municipalities to safeguard that service delivery is not negatively affected through the cessation of funds,” according to the statement.  

Salga calls on the leadership within municipalities to put in added efforts to improve financial management practices, noting that there is a serious need for early warning systems to be developed and put in place so that weaknesses in financial management systems and controls are detected and dealt with in advance to assist municipalities to implement corrective action decisively. 

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Issue 68