By Thebe Mabanga
South Africa’s municipalities are struggling to comply with the Municipal Finance Management Act (MFMA), with vacancies in senior positions and failures to implement supply chain management policies remaining key challenges, while the balance of frittered public funds continues to rise as municipalities opt for write-offs instead of recoveries.
These are among the findings contained in the MFMA compliance report for the 2024/25 financial year, released by the National Treasury on Wednesday.
Treasury, together with provincial treasuries, is responsible for enforcing the Act.
The compliance report is based on information submitted by municipalities through Treasury’s electronic platform, Muni eMonitor, and the Audit Action Plan, and covers the period from July 1, 2024, to June 30, 2025.
Treasury said the submission rate from municipalities improved to a national average of 88%, although the quality and credibility of the data submitted remained a concern.
Treasury found that 127 municipalities, or 49%, had a System of Delegation (SOD) in place with both delegating and receiving signatories duly appointed.
This was slightly down from 130 municipalities in the previous financial year.
“SODs are crucial for maintaining good governance, financial accountability and effective service delivery,” Treasury said.
The report also found that 84% of critical senior management posts were filled, slightly up from 82% in the 2023/24 financial year, implying a vacancy rate of 16%.
“The highest number of vacancies nationally pertained to the positions of Chief Risk Officers, Chief Audit Executives and Chief Financial Officers,” Treasury said, warning that the trend posed a systemic risk.
A major concern identified in the report relates to failures by municipalities to comply with Supply Chain Management (SCM) policies.
“Municipalities either fail to update their SCM policies to ensure compliance with the latest regulations or have not developed them at all,” Treasury noted.
It added that although municipalities are required to review SCM processes and implement corrective measures to address issues identified by the Auditor-General of South Africa (AGSA), many fail to do so effectively.
Treasury said this has resulted in recurring irregularities, including irregular and wasteful expenditure.
The AGSA has repeatedly identified supply chain management as one of the biggest risks for fraud in government departments and public entities.
The report further showed that the national balance for unauthorised, irregular, fruitless and wasteful expenditure (UIFWE) increased from R264.10 billion in 2023/24 to R268.13 billion in 2024/25, driven by “systemic failures in internal controls and weak consequence management”.
Irregular expenditure remained the biggest contributor to UIFWE balances, reflecting widespread non-compliance with procurement and financial regulations.
Treasury also noted that irregular expenditure can also arise from inadequate documentation, even where spending itself may have been legitimate.
Treasury said municipalities achieved R5.06 billion in cost-containment savings during the period under review, with nearly half resulting from reduced spending on consultants.
Further savings were achieved through cuts to travel, catering, conferences and other consultant-related expenditure.
However, Treasury warned that municipalities continued to rely excessively on consultants despite having internal capacity.
It cited asset management units as an example, where the number relying on consultants increased from 90 to 101.
Overspending on overtime also remained a challenge, reaching R316 million during the reporting period, with the Eastern Cape and KwaZulu-Natal recording the highest levels, suggesting weak payroll controls and possible abuse.
A total of 178 municipalities had permanent disciplinary boards in place during the period under review.
However, the number of criminal referrals declined from 37 in 2023/24 to 20 in 2024/25.
“The regressions may be an indication of various negative factors including delays in instituting and/or proceeding with disciplinary cases, weak enforcement of policies within municipalities and possibly a lack of understanding of disciplinary processes by municipalities,” Treasury said.
The MFMA came into effect in July 2004 after being passed into law in 2003.
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