Municipal Timeline

The New Municipal Financial Year Begins

Posted on by The CAN Team

Explainer: The Requirement for an Approved and Operational Municipal Budget and Integrated Development Plan (IDP) by 1 July

According to the Municipal Finance Management Act (MFMA), every municipality in South Africa is mandated to have an approved and operational budget and an Integrated Development Plan (IDP) in place by 1 July of each year. This ensures that municipalities are equipped to provide essential services, implement planned projects, and promote economic and social development in their communities from the start of the financial year.

Legislative Context

1. Municipal Budget Approval (MFMA Sections 16, 24, and 53)

  • Section 16:
    • The municipal council must approve the annual budget before the start of the financial year.
    • The mayor is required to table the draft budget for consideration at least 90 days before the budget year begins.
  • Section 24:
    • The municipal council must adopt the final annual budget at least 30 days before the start of the financial year (by 31 May). However, many municipalities only do this in the month of June, particularly those controlled by coalition governments. There is no penalty for only approving in June and therefore 30 June is often seen as the deadline date for approval.
    • The approved budget must include:
      • Revenue projections, expenditure allocations, and measurable performance objectives.
      • Tariffs, taxes, and any amendments to budget-related policies.
  • Section 53:
    • The mayor must ensure the budget is operational by approving the Service Delivery and Budget Implementation Plan (SDBIP) within 28 days of the budget’s adoption.
    • The SDBIP links the budget to specific service delivery targets and goals. The SDBIP is often only made public in the month of July.

2. Integrated Development Plan (IDP)

  • The IDP is a strategic document required under the Municipal Systems Act (Section 34) that aligns a municipality’s budget with its developmental priorities over a five-year period.
  • The IDP must be reviewed annually and approved alongside the budget to ensure the two are consistent and integrated.

Why must the budget and IDP be in place by 1 July?

1. Start of the Financial Year

  • The municipal financial year begins on 1 July and ends on 30 June. For effective governance, municipalities must have their budgets and plans operational at the start of the new financial year.

2. Service Delivery

  • Without an approved budget and IDP, municipalities cannot legally spend funds or implement projects, potentially delaying service delivery and negatively impacting communities.

3. Legal Compliance

  • The MFMA mandates strict adherence to budget timelines to ensure accountability and fiscal discipline. Non-compliance may result in interventions by provincial or national authorities.

4. Fiscal Responsibility

  • A functioning budget ensures that municipalities allocate resources effectively, meet their financial obligations, and avoid unauthorized, irregular, or wasteful expenditure.

Consequences of Non-Compliance

  1. Delayed Service Delivery:
    Essential services, such as water, electricity, waste management, and road maintenance, could be disrupted.
  2. Loss of Public Trust:
    Communities may lose confidence in the municipality’s ability to govern effectively.
  3. Administrative and Legal Interventions:
    • Provincial or national authorities may invoke Section 139 of the Constitution to take corrective action.
    • Financial penalties or disciplinary measures may be imposed on officials responsible for the delays.
  4. Auditor-General Findings:
    Late or non-compliance with the budget and IDP approval timelines may result in adverse findings by the Auditor-General, impacting the municipality’s reputation.

Key Actions to Ensure Compliance

  1. Timely Budget Preparation:
    • Municipalities must adhere to the budget preparation timetable outlined in Section 21 of the MFMA.
    • Draft budgets and IDP reviews should be completed well before the deadlines.
  2. Public Participation:
    • Engage communities to ensure the budget and IDP address local needs and priorities, as required by the MFMA and Municipal Systems Act.
  3. Capacity Building:
    • Strengthen internal processes and staff capabilities to manage budget and planning cycles effectively.

Conclusion

By ensuring that an approved and operational municipal budget and IDP are in place by 1 July, municipalities can fulfill their legislative responsibilities, maintain good governance, and deliver on their mandates to improve the lives of their residents. This alignment of financial planning and developmental priorities is foundational to building a sustainable and well-functioning local government.

The CAN Team