Cape Town - The SA Local Government Association has warned against pushing through reforms to municipal accounting systems which Finance Minister Pravin Gordhan highlighted in his medium-term Budget policy speech as a major step towards improving transparency and oversight over local government finances.
Gordhan said in his speech last week that the Treasury was working to implement the new municipal standard chart of accounts in all 257 municipalities in July. But Salga executive director for municipal finance Simphiwe Dzengwa told Parliament this week most were not ready and would be “found seriously wanting”.
He said there were big differences in readiness between municipalities and provinces and there was a question mark over whether to introduce the reforms in “blanket” fashion or phase them in according to the ability of municipalities to implement them.
He warned there could be an impact on audit outcomes of municipalities if these concerns were not taken into account.
Addressing a joint meeting of Parliament’s standing and select committees on appropriations, Dzengwa also flagged instability in municipalities following the recent local government elections as a risk to continued progress in audit outcomes.
Salga had noted a recent Treasury report warning of instability in the six months before and up to 18 months after elections and there was evidence of this in the number of advertisements for new municipal managers and chief financial officers.
“That degree of turnover during this period is of concern to us and we’ve been urging municipalities to quickly fill those positions with capable and well qualified candidates,” Dzengwa said.
There had been a regression in municipal audit performance following the previous local government elections which he hoped would not be repeated this time.
Salga supported the cost containment measures announced in Gordhan’s speech, but Dzengwa said these should not be allowed to exacerbate the precarious financial position of many municipalities.
While the share of local government in the division of revenue was set to grow faster than other spheres, municipal finances were under pressure from higher than inflation increases in the costs of bulk purchases (such as water and electricity) and household growth.
Whereas previously many councils had battled with consumers of these services who refused to pay, they now also had to deal with households which simply couldn’t as a result of the poor state of the economy.
The auditor-general had previously warned of the dire financial health of municipalities, with 92Âpercent considered “concerning or requiring intervention” in his 2014/15 audit outcomes report and 26 percent facing material uncertainty as to their ability to continue operating in the foreseeable future.
Dzengwa said it hurt to read in newspapers of instances in which the sheriff had attached property of municipalities and the huge outstanding debts which stifled small businesses, in particular.
Municipalities needed to become engines for growth through better urban planning and making it easier to do business.
Dzengwa said even if cost containment measures yielded minimal savings, it was important for councils to be seen to be more efficient.
But MPs had strong words for Salga, with the ANC’s Sheila Shope-Sithole accusing it of being “invisible”.
She said it didn’t matter how much funding municipalities received from national government if they suffered from weak financial management.
She urged Salga to make sure audit committees of municipalities were in place and functional.
DA MP Alan Mcloughlin asked why municipalities were failing to collect money owed to them by residents when this was a requirement of the Municipal Finance Management Act.
“We have a legal system and part of that is the debt collection process, but municipalities don’t seem to use it,” Mcloughlin said.
This was part of the reason they were in so much trouble financially.