Pretoria: 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 South African Government News Agency, 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). National Treasury highlighted that municipalities either fail to update their SCM policies to ensure compliance with the latest regulations or have not developed them at all.
The report further stated 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. 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, driven by systemic failures in internal controls and weak consequence management.
National Treasury noted that 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. The department observed high levels of write-offs rather than recoveries of the UIFWE across municipalities, indicating a failure 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 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, 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 was noted as a concern.
The report suggests that regressions may be an indication of negative factors, including delays in instituting 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, achieving R5.06 billion in cost containment savings primarily through reductions in consultancy and related expenditure.
However, concerns about overspending on overtime were raised, as it poses a significant fiscal risk and highlights weaknesses in payroll management and internal controls. A significant number of municipalities remain heavily reliant on consultants, particularly in asset management, annual financial statements preparation, audit support, and estimates of landfill site provisions.
The report also observed a decrease in the number of municipalities with systems of delegations (SODs) in place, from 130 municipalities in 2023/2024 to 127 municipalities in 2024/2025. SODs are crucial for maintaining good governance, financial accountability, and effective service delivery. Approximately 84% of critical senior management positions were filled, with the highest number of vacancies in the positions of Chief Risk Officers, Chief Audit Executives, and Chief Financial Officers.
