The impact of irregular expenditure and non-compliance on the financial sustainability of the eThekwini Municipality.

Abstract

Municipal Financial Management Act No.56 of 2003 (MFMA) was passed by the National Treasury to ensure the effective management of municipal finances. The Act requires that municipalities should have sound and sustainable management of their financial affairs and establish measures to prevent irregular expenditure. However, there have been persistent irregular expenditure reports every year, which is an indication of non – compliance. The study's main aim is to investigate the impact of irregular expenditure and non-compliance on the financial sustainability of the eThekwini Municipality. The research addresses the following questions: ⮚ What is irregular expenditure in the eThekwini municipality as described by Supply Chain Management (SCM) and Municipal Financial Management Act (MFMA)? ⮚ What is the implication of non-compliance with the Supply Chain Management (SCM) and Municipal Financial Management Act (MFMA)? ⮚ Why has eThekwini municipality not implemented measures to keep irregular expenditure as low as possible? ⮚ What actions have been taken to decrease the growing number of irregular expenditures and corruption? Despite the MFMA's being passed into law, research shows that several legislative Acts related to municipal finance management are in place to guarantee better municipal budgeting and effective procedures for controlling spending. The literature was made up of books, journal articles, laws, and government policy documents. A qualitative research strategy provided the most effective tools to investigate the study topic. Interviews with 20 top officials who are important figures in the Municipality were scheduled to gather data. These officials included members of the provincial and local governments, and the auditor general. Data was analyzed using content analysis. According to the report, the eThekwini Municipality has become unstable because of the improper hiring of officials and a high rate of senior and experienced personnel turnover. Other difficulties were the Internal Audit unit's insufficient capacity and the absence of an independent audit committee to ensure a functional and effective Internal Audit unit and compliance with supply chain management principles. The report suggests that a highly competent Chief Financial Officer (CFO), Deputy City Manager of Trading Services, Head of Expenditure, and Internal Audit unit be appointed to improve governance. It also advises that an independent Audit Committee be established.