AG must report non-compliant municipalities to parliament & provincial legislatures

Section 133(2) of the Municipal Finance Management Act (MFMA) highlights the Auditor-General’s role in reporting municipalities or municipal entities that fail to submit their financial statements as required. This provision aims to promote transparency and accountability in municipal financial management. Below is a breakdown of its key elements:

Key Provisions of Section 133(2)

1. Mandatory Reporting by the Auditor-General:
   The Auditor-General is tasked with reporting municipalities or municipal entities that fail to submit their financial statements for auditing in compliance with Section 126 of the MFMA. 
2. Reporting Deadlines: 
   • Initial Report by October 31:
     By no later than October 31 each year, the Auditor-General must submit to Parliament and the provincial legislatures the names of municipalities or entities that have failed to submit their financial statements as required.
   • Quarterly Updates:
     The Auditor-General must continue submitting reports at quarterly intervals thereafter, identifying those whose financial statements remain outstanding at the end of each interval.

Purpose of Section 133(2)

This provision ensures that non-compliance with financial reporting obligations is:

• Monitored: By requiring the Auditor-General to track and report outstanding submissions, municipalities are kept under scrutiny.
• Addressed Publicly: Reporting to Parliament and provincial legislatures ensures that non-compliance is subject to public oversight, increasing pressure on municipalities to adhere to reporting timelines.
• Aligned with Governance Standards: The provision reinforces the importance of timely financial reporting as a cornerstone of accountability and sound financial management.

Implications for Municipalities

1. Accountability:
   Municipalities that fail to submit financial statements face public exposure, which may lead to reputational damage and increased scrutiny from stakeholders. 
2. Escalation of Non-Compliance:
   Persistent failure to submit financial statements could trigger further actions under other provisions of the MFMA, including interventions by the provincial executive or National Treasury. 
3. Oversight Pressure:
   Regular reporting to Parliament and provincial legislatures ensures that municipalities are under continuous oversight, which incentivizes compliance. 

Challenges in Implementation

1. Capacity Constraints:
   Some municipalities may struggle to meet reporting deadlines due to inadequate financial management capacity or resources. 
2. Delays in Escalation:
   While the provision mandates reporting, the effectiveness of subsequent actions depends on how swiftly provincial or national authorities respond to non-compliance. 

Conclusion

Section 133(2) of the MFMA plays a vital role in ensuring that municipalities adhere to financial reporting requirements. By mandating regular reporting of non-compliance by the Auditor-General to higher legislative bodies, the provision creates a transparent system of accountability. However, the effectiveness of this mechanism relies on strong oversight and timely action by all stakeholders involved.