Recent statements by the Auditor-General, Terrence Nombembe, confirm the critical role of good fiscal governance in supporting service delivery. Conversely, dysfunctional financial management practices undermine the capability of provincial departments and municipalities to fulfill their mandates. Rather than being purely a technical “back office” function, it is abundantly clear that budgeting and financial management play a critical strategic role in ensuring departments and municipalities achieve the objectives in their annual performance plans and IDPs respectively.

The malaise in financial management at local government level and within certain provincial and national departments is certainly nothing new. It is with depressing regularity over the last decade that the very same qualifications or emphasis of matter recur year after year, denoting very little concrete action in relation to the Auditor General’s findings. Unless the deep-seated problems relating to poor financial management in local government are addressed expeditiously, the continuing lack-lustre levels and quality of service delivery are likely to occasion a political backlash within communities whose legitimate aspirations to basic services continue to be denied.

What must be done differently? Nombembe himself hits the nail on the head. Not only must the technical and managerial challenges to financial management be addressed in municipalities and other public sector organisations, but adequate incentives need to be put in place to promote accountability, to foster good financial management and to discourage wasteful, corrupt and inefficient administration.

Within municipalities, the Service Delivery and Budget Implementation Plan (SDBIP) is a crucial instrument for aligning budgeting reform, financial management improvement, the service delivery objectives of the IDP and the monitoring and evaluation (M&E) dimensions of the performance management system. To make better use of the SDBIP as a fiscal governance tool in support of the IDP, many of the lower capacity municipalities may require practical hands-on training as well as technical support (such as offered by AFReC). Similarly, the emphasis on value-for-money requires an approach to M&E which links the financial and non-financial elements of performance in municipalities.

But ultimately, as the Auditor General observes, the key lies in whether there is the political will to hold accounting officers and their senior management teams accountable for poor management of public funds. The role of oversight bodies such as provincial legislatures and Parliament cannot be under-estimated. Within municipalities there have recently been attempts to institutionalize public accounts committees – and the contribution of these could be considerable. The financial turn-around strategy of the Department of Cooperative Governance and Traditional Affairs has also drawn attention to serial non-compliance with financial legislation at municipal level.

At the end of the day, however, drastic revitalization of public financial management can only occur if existing incumbents in financial management posts gradually acquire the skills demanded of them by the financial competency framework of the Municipal Finance Management Act of 2003, and if all new financial recruits also conform to these requirements. As yet, these competencies are reported on, but compliance with the competency framework has not been enforced sufficiently rigorously, despite looming deadlines for compliance by the 1st of January 2013.

Building financial management capacity is not merely a technical exercise. It demands the convergence of intangibles such as leadership, political will and institutional arrangements which promote accountability and create the right incentives, with the more mundane elements of training, skills transfer etc. Only by improving this mix can there be hope for reversing the secular decline in financial management effectiveness across municipalities and the other spheres of government.

Tania Ajam
AFReC's CEO & Director: Knowledge Centre