The National Treasury’s latest financial management report for municipalities has revealed that non-compliance with Supply Chain Management (SCM) regulations remains a persistent challenge in local government.
According to the National Treasury, many municipalities are failing to update their SCM policies in line with the latest regulations, despite recommendations from the Auditor-General of South Africa (AGSA).
“Municipalities either fail to update their SCM policies to ensure compliance with the latest regulations or have not developed them at all,” National Treasury said on Wednesday.
National Treasury added that although municipalities are required to review their SCM processes and implement corrective measures to address issues identified by the AGSA during audits, many are not doing so effectively.
“This has resulted in recurring irregularities, including irregular and wasteful expenditure,” National Treasury said.
The national Unauthorised Irregular Fruitless and Wasteful Expenditure (UIFWE) balance increased from R264.10 billion in 2023/2024 to R268.13 billion in 2024/2025.
This was driven by systemic failures in internal controls and weak consequence management.
“Irregular expenditure remains the most significant contributor to the UIFWE balances, reflecting widespread non-compliance with procurement and financial regulations.
“Many municipalities lack robust systems to ensure the timely implementation of council resolutions on the recoverability or write-off of UIFWE,” National Treasury said.
The department has also observed high levels of write-offs rather than recoveries of the UIFWE across municipalities, which is indicative of the failure by municipalities to hold individuals accountable for financial misconduct.
These findings are contained in the Municipal Finance Management Act (MFMA) compliance report released by the National Treasury for the 2024/25 financial year.
“The number of municipalities across the country with established disciplinary boards increased to 178 municipalities in the 2024/2025 financial year, as required by the Municipal Regulations on Financial Misconduct Procedures and Criminal Proceedings.
“However, of concern is the decline in the reporting of financial misconduct allegations in municipalities, the number of financial misconduct cases investigated, and the number of officials against whom disciplinary actions were taken in relation to financial misconduct,” National Treasury said.
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.
The number of municipalities with updated cost containment policies increased from 161 municipalities in 2023/2024 to 170 municipalities in 2024/2025.
Municipalities collectively achieved R5.06 billion in cost containment savings during 2024/2025, primarily through reductions in consultancy and other related expenditure.
However, the National Treasury raised concerns that overspending on overtime poses a significant fiscal risk and highlights weaknesses in payroll management and internal controls.
“There are still a significant number of municipalities that are heavily reliant on consultants, particularly in the areas of asset management, annual financial statements (AFS) preparation, audit support and estimates of landfill site provisions,” National Treasury said.
A total of 127 municipalities (49%) have systems of delegations (SODs) in place in the 2024/2025 financial year, signed by both the delegator and delegate.
This is a decrease from 130 municipalities in 2023/2024.
SODs are crucial for maintaining good governance, financial accountability, and effective service delivery.
Approximately 84% (82% in 2023/2024) of the critical senior management positions were filled.
The highest number of vacancies nationally pertained to the positions of Chief Risk Officers, Chief Audit Executives and Chief Financial Officers. -SAnews.gov.za
