Local Government: Getting Municipal Finances Right

Municipalities in South Africa have occasionally been faced with strategic financial management contests concerning budget deficits, financial distress, leading to unmaintained and stagnant infrastructure development. Financial management control facilitated by effective reporting, good governance, accountability and auditing must underpin municipal administration environment. Weak municipal governance, accountability and oversight compromise local government institutions' integrity and result in a potential loss to public's confidence. Municipal budget planning and implementation works well if it conforms to electorate's will and legislatures' authorizations. The financial health and position of municipalities' business model-wise represents assets, liabilities and equity which should be displayed at a specific time. The community and stakeholders use financial statements to determine the financial position of municipalities. The financial position determines how efficiently a municipal administration is expanding its resources, reserves and investments. The municipal tax base on the context of the economic environment must be an overriding equation in the planning functions.