|
|
Abstract: The Auditor-General South Africa (AGSA) Report for the 2017/18 financial year-end indicates that 87 per cent of municipalities failed to achieve clean audits, quoting a lack of robust internal control and poor financial management, lack of accountability and consequences for non-compliance as causes. The report further highlighted the three statutory areas of poor financial management; irregular expenditure, wasteful and fruitless expenditure, and unauthorized expenditure. This paper intends to explore how the national government in South Africa allocates budgets to municipalities and aims to identify whether there is a consideration of municipality performance when allocating grants. A qualitative study was conducted, and there was a review of secondary data to explore the budget allocation and actual spending of municipalities. In addition to the secondary data review, the relationship between the municipal grants allocation and the three areas of poor financial management were analysed through correlation analysis as per data extracted from the South African National Treasury (NT) budget allocation, and the AGSA reports. The study identified municipalities which have been the top contributors in poor financial management for four (4) years between 2014/15 to 2017/18 financial years (FY). Furthermore, the study identified the type of audit opinions received by the respective municipalities. Lastly, the study identified whether there is a correlation between municipalities' previous year’s performance and future performance about the allocation of grants by the NT. The results of the study demonstrated that there is no significant relationship between national grant allocation and actual spending of municipalities. This indicates that the South African NT does not use performance-based budgeting when allocating grants to municipalities. The paper recommends the use of effective performance budgeting to promote accountability. The use of performance budgeting will improve transparency, effective mechanisms and good practices which might enhance the performance of municipalities and result in accountability and the possible achievement of clean audit reports. Keywords: Accountability, Audit Reports, Municipalities, Performance Budgeting, Poor Financial Management. |
