National Treasury publishes municipal cost containment regulations

© Gustavo Frazao – 123RF.com

Section 168(1)(b) and (p) of the Municipal Finance Management Act (MFMA) dictates that the Minister may regulate financial management and internal controls and any other matter that may facilitate the enforcement and administration of the Act.

“The regulations aim to promote better governance and management of finances by municipalities. This is in line with the spirit of the MFMA and other applicable regulations, which require that managers must manage and also be held accountable.

“A well-managed municipality or entity should already have in place a cost containment policy as part of their budget-related policies, approved by the municipal council for the municipality or in the case a municipal entity, by its board of directors.

“The regulations merely require those municipalities or entities that do not have such a policy in place to do so, as a minimal measure to ensure good governance,” National Treasury said in a statement issued on Tuesday.

The policy, read the statement, must provide for monitoring measures, procedures for review and consequence for non-adherence. These must be reviewed annually and communicated on the municipal website.

Cost containment measures for local government were first announced in 2016 by former Finance Minister Pravin Gordhan during that year’s Budget Speech.

The intervention, the department said, is in line with government’s policy to implement cost saving measures across all three spheres of government to assist in re-prioritising expenditure and free up resources that can be better targeted towards service delivery.

The draft regulations were first published for public comment on 16 February 2018.

“Twenty-eight written comments were received, including those from the Department of Cooperative Governance and Traditional Affairs, South African Local Government Association, municipalities and other stakeholders.

“After extensive consultation and consideration of all comments received, the final regulations were finalised and published on 7 June 2019 in the Government Gazette, with the effective date being 1 July 2019,” National Treasury said.

The cost containment measures are also intended to eliminate wastage of public resources on non-service delivery items.

“This will be undertaken through advocacy, strengthening the legal and policy prescripts and frameworks aimed at cost containment and ensuring the implementation thereof by municipalities and municipal entities,” Treasury said.

National Treasury said the wider implementation of the Local Government: Municipal Finance Management Act in all municipalities and entities is an important element in the roll out strategy to modernise and improve financial management in local government.

“Despite the provisions in the MFMA and the reforms developed over the last 16 years to support the implementation of the MFMA, municipalities and municipal entities continue to spend public funds and municipal resources on non-priority items.

“More often than not, this results in a diversion of public funds from core service delivery to other expenditures, resulting in dissatisfaction by communities and delays in service delivery,” said National Treasury.