An assessment of financial management in South African Local Government: A case study of the Emfuleni Local Municipality

Abstract

The study assesses financial management in Emfuleni Local Municipality (ELM). The primary aim is to analyse the effectiveness of ELM's financial management practices within the context of local government, focusing on ELM's financial performance from the financial year 2017-18 to 2020-21. By analysing the consolidated reports released by the South Africa Auditor General on Local Government, the study aims to assess ELM's compliance with the Municipal Financial Management Act (MFMA) and the impact it has on the municipality's financial health. The study adopted a qualitative research method and interpretivist paradigm to assess the extent to which ELM does not comply with the financial management practices and MFMA, in spending public funds beyond their budgetary imposed limitations. Furthermore, the study used document analysis in the reports to provide answers to the research objectives while content analysis was used to analyse data collected. From content analysis, the study revealed that financial management practices at ELM are ineffective in making sure that ELM complies with MFMA. The study further found that the municipal financial performance is below expected standards. Systemic deficiencies in internal control and inadequate mechanisms for communication have also been found within the municipality. These problems cause considerable challenges in the creation and dissemination of financial information. As a result, ELM is facing a financial performance dilemma, with its operating budget continually in deficit. The municipality's financial statistics show that it spends more than it earns in income, worsening the issue. Additionally, the audit found that ELM's management model is ineffective in ensuring compliance. The Municipality has been unable to avoid illegal expenditure, despite attempting to follow supply chain management laws. ELM's financial woes have exacerbated these issues, resulting in delayed invoice payments, and a wider gap between legal responsibilities and Municipality performance. Furthermore, this noncompliance has had a negative financial impact on ELM.