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It's costing government millions to deploy technical advisors to help build financial management capacity at municipalities, but at least there are improvements to sing about, according to the finance minister.
Finance Minister Tito Mboweni, in a written reply to a question from Freedom Front Plus MP Wouter Wessels, provided details on the progress made in improving financial management at municipalities, through the Municipal Finance Improvement Programme.
The programme involves providing technical assistance for local government financial management, particularly in supply chain management, revenue management and audit outcomes. Phase three of the programme commenced on April 1, 2017 and is set to end on March 31, 2020.
The programme involves placing technical advisors within the budget and treasury offices of municipalities as well as support units for municipalities at national and provincial treasuries.
According to Mboweni, 82 technical advisors were deployed as of August 30, 2019. However, they come at a cost.
Senior advisors are paid an average of R861.12 per hour, they are contracted for a maximum of 1 840 hours per annum. This means each advisor's cost per year can be as much as R1 584 460.80, excluding VAT.
Advisors and specialists are paid an average of R807.30 per hour. They are also contracted for a maximum of 1 840 hours per annum. The average annual cost for advisors and specialists is capped at R1 485 432, excluding VAT.
In his reply, Mboweni also unpacked the improvements in financial management as a result of the programme.
In the area of supply chain management, Mboweni said that municipal councilors have been capacitated to deal with unauthorised, irregular and fruitless and wasteful expenditure. Disciplinary boards have now been established at the municipalities to monitor implementation of reforms in supply chain management practices. The reforms ensure that the municipalities comply with legislation.
The technical advisors have also helped municipalities review and update their asset management policies of 59 municipalities.
Improved audit outcomes
"Most municipalities with Municipal Advisors improved or retained their previous audit opinions in the 2017/18 financial year," Mboweni said. Particularly, three out of 15 municipalities improved their audit outcomes while only one municipality regressed in its audit opinion.
Mboweni however highlighted that some provincial treasuries and municipalites are understaffed, negatively impacting efforts of the programme.
Other challenges persist as some councils do not take "decisive action" to deal with officials responsible for unauthorised, irregular and fruitless and wasteful expenditure, he highlighted.
"[Some] municipalities [are] adopting unfunded budgets, which generally leads to cash flow challenges during the financial year," Mboweni said. The cashflow challenges results in high levels of fruitless and wasteful expenditure in the form of interest payable on overdue accounts, particularly to Eskom and water boards.
There has also been poor revenue management, cash flow management and expenditure management resulting in liquidity risks. Mboweni added that municipalities also heavily on external service providers to compile their annual financial reports.
