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Municipalities strangled by consumer debt: Salga calls for review of financial model

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Municipalities strangled by consumer debt: Salga calls for review of financial model

One of the good challenges confronting local govt is the magnitude of municipal consumer debt, the SA Local Executive Association (Salga) stated in its response to the auditor-total’s myth for the municipal audit outcomes for 2019/20 which used to be released on Wednesday.

The affiliation noted that on sensible nearly 63% of the income shown in the books of municipalities might well no longer ever be composed.

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This supposed that 49% of the 257 municipalities in the nation bear excellent collectors which might well also very effectively be bigger than available cash at year-terminate. This impacts municipal budgets and accounting processes and the flexibility of municipalities to render products and companies, the affiliation stated in a command.

It noted that essentially based entirely on the Nationwide Treasury, aggregate municipal consumer debt stood at R230bn at the terminate of December 2020. “Here’s the precarious financial ambiance whereby municipalities earn themselves [and] underscores the decision that Salga has been making in opposition to a review of the financing model for local govt.”

The affiliation expressed its deep peril regarding the pronounce of municipal budget, as reported by auditor-total Tsakani Maluleke. “The magnitude and severity of the predicament identified by the auditor-total calls for decisive circulation and methodology that we as Salga must repeatedly order on municipalities to implement administration and enforce accountability.”

In a command on municipal audit outcomes, Maluleke stated the financial build of correct bigger than a quarter of the municipalities used to be so dire “that there is well-known doubt that they shall be in a chain to continue meeting their responsibilities in the come future”.

It expressed disappointment at what it sees as deteriorating levels of accountability, and careworn the need for administration by the management of municipalities for any malfeasance.

The affiliation furthermore highlighted the “irritating and rising” pattern by municipalities to exercise consultants for financial reporting capabilities without there being the leisure to show camouflage for this expenditure in some of them.

The auditor-total’s myth noted that municipalities used consultants for financial reporting products and companies at a price of R1bn, but 59% (102) of the financial statements submitted for auditing included fabric misstatements.

“This methodology that even after they employed consultants these municipalities might well no longer finalise financial statements. This state of the exercise of consultants for financial reporting wants to be stopped, as it yields no outcomes and appears to be like for exercise by officials and consultants to siphon money out of the vault,” Salga stated.

“Where scandalous intentions are found out, other folks wants to be held to legend. Municipalities must title and disgrace these firms which might well also very effectively be found out to bear robbed municipalities, myth them to the professional bodies love Saica [the SA Institute of Chartered Accountants], blacklist them and ask refunds.”

Salga called for an overhaul of the local govt model.

“The sizzling model, which locations municipalities into six various classes on the premise of the inhabitants and the budget, is unsuitable. It favours the larger municipalities at the expense of the smaller ones. The municipalities in the low classes are mainly rural and miniature, and bear restricted budget to design and derive severe talents.

“A brand contemporary and various approach to incentivise municipal employees and councillors is at risk of be to hyperlink the performance of municipality and audit outcomes. This wants to be designed in this sort of mode that the performance and audit outcomes of the previous year determines the remuneration stage of the next year. Thus a municipality that will get a trim audit turns into the correct paying and vice versa.

“Not best would this offer an incentive for loyal governance, but [it] would furthermore be sure that councillors and employees dispose of collective responsibility for the performance and standing of their municipality.”

BusinessLIVE (TMG Digital)

BY LINDA ENSOR

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Municipalities strangled by consumer debt: Salga calls for review of financial model