/ 29 June 2004

New Act to make municipal finances more transparent

The new Municipal Finance Management Act will boost transparency in the financial affairs of local authorities and improve service delivery, Minister of Finance Trevor Manuel said on Tuesday.

To date, local councils have tended to make their own rules and draw up indecipherable budgets, making municipal oversight very difficult, he told reporters in Pretoria.

Even the salaries of municipal executives are often not known, ”meaning that we don’t have a sense of what is consumed by municipalities on themselves as opposed to what is spent on the provision of services”, Manuel said.

Under the new Act, local councils will have to adhere to universal rules and standards, including minimum accounting principles.

The provisions of the Act will be phased in over a number of years — in line with different schedules depending on a municipality’s level of capability.

But 11 urgent priorities have been identified for all councils to put in place without delay. These include making the municipal manger the accounting officer responsible for all funds, establishing a top management team with a chief financial officer, monthly reporting on revenue and spending, and completing past financial statements.

Manuel officially launched the new legislation on Tuesday.

The ministry said in a statement the Act seeks to improve the way municipalities are governed and managed by modernising financial management practices.

It separates the policy-making role of mayors and councillors from that of officials.

”The Act enables managers to manage and be responsible for implementation, but also makes them more accountable for their performance and outputs,” the statement said.

It also aims to enhance cooperative governance between the three spheres of the government, strengthen the link between planning and budgeting, and outlines the process to be followed in a serious financial crisis.

The legislation seeks to change the current annual budgeting process of municipalities to a three-yearly one, in a bid to boost performance management.

Councils can adopt only credible budgets with realistic revenue and expenditure estimates. Deficit budgets are no longer permitted and councils can incur expenditure only in terms of an approved budget.

In the case of capital expenditure, councils have to approve each project.

”The budget may be funded only from reasonable estimates of revenue and cash-backed surplus funds form the previous year and borrowings,” explains a guide on the provisions of the Act.

Given their extended oversight role, councillors will no longer be allowed to serve on tender committees and boards of municipal entities.

Councils will have to submit monthly, quarterly, biannual and annual financial progress reports.

The Act stipulated controls for the management of bank accounts and withdrawals from accounts, and for incurring or providing security for debt.

Municipalities are required to have an internal audit unit and an audit committee.

Tshwane mayor and South African Local Government Association chairperson Father Smangaliso Mkhatshwa welcomed the Act as a way of ensuring sound municipal management and sustained service delivery.

”This is a solid foundation to improve the lives of all our people,” he said.

But Mkhatshwa stressed the need for support, training and capacity building to bring the intentions of the legislation to life.

Manuel said Treasury officials have conducted a series of workshops around the country, at which more than 2 000 municipal officials and councillors received training on the Act. — Sapa