Municipalities must table their audited Annual Financial Report in Council

Section 127 of the Municipal Finance Management Act (MFMA) is a critical provision that governs the submission, tabling, and publication of annual reports in municipalities. These reports are essential tools for ensuring accountability, transparency, and effective governance in municipal financial and performance management.

Purpose of Section 127

The primary purpose of Section 127 is to establish clear timelines and responsibilities for the preparation and presentation of a municipality’s annual report. The annual report serves to:

1. Provide an overview of the financial performance and service delivery achievements of the municipality for the financial year.
2. Promote accountability by disclosing how public funds were utilized.
3. Highlight areas of success and underperformance, allowing for corrective measures and improved governance.

Key Provisions of Section 127

1. Responsibility of the Mayor (Section 127(2))

• The mayor of a municipality is responsible for ensuring that the annual report for the financial year is tabled in the municipal council.

2. Timelines for Submission

• The annual report must be tabled:
  • No later than 7 months after the end of the financial year (by 31 January of the following year).
  • If the municipality is a parent municipality of a municipal entity, its consolidated annual report must also be tabled by the same deadline.

3. Reporting by Municipal Entities

• If a municipality has municipal entities, the accounting officer of each entity must:
  • Submit the entity’s annual report to the municipality’s accounting officer within 3 months after the end of the financial year (by 30 September).
  • This ensures timely consolidation into the municipality’s annual report.

4. Delays in Submission (Section 127(3))

• If the mayor is unable to table the annual report within the prescribed timeframe, they must:
  • Submit a written explanation to the municipal council outlining the reasons for the delay.
  • Submit the explanation to the Member of the Executive Council (MEC) for local government in the province, as well as to the National Treasury.

5. Public Accountability (Section 127(5))

• After tabling, the annual report must be made available to the public.
• Public participation is encouraged, allowing the community to review the municipality’s performance and provide input.

Importance of Section 127

1. Promotes Accountability and Transparency

• By requiring municipalities to disclose their financial and service delivery performance, Section 127 ensures that residents and stakeholders are informed about how public funds are spent and managed.

2. Provides a Mechanism for Oversight

• The municipal council, provincial treasury, National Treasury, and the public can use the annual report to evaluate whether the municipality has met its performance targets and managed its finances prudently.

3. Strengthens Financial Management

• Timely submission of annual reports ensures that financial statements and audit findings are addressed promptly, reducing risks of mismanagement and fostering fiscal discipline.

4. Encourages Public Participation

• Making the report publicly accessible ensures that citizens have a platform to engage with the municipality and hold it accountable for its actions.

Challenges and Compliance Issues

1. Delays in Submission

• Some municipalities struggle to meet the 31 January deadline due to challenges such as incomplete financial records, unresolved audit queries, or lack of capacity.

2. Quality of Reporting

• Poorly prepared annual reports undermine the effectiveness of Section 127 in promoting accountability and transparency.

3. Limited Public Engagement

• In some instances, annual reports are not adequately publicized, limiting opportunities for meaningful public input.

Conclusion

Section 127 of the MFMA plays a pivotal role in ensuring municipalities remain accountable and transparent in their operations. By mandating the timely preparation and tabling of annual reports, it provides a structured process for financial and performance oversight. Municipalities must comply fully with Section 127 to uphold the principles of good governance and foster trust with their communities.