Question NW2909 to the Minister of Finance
04 October 2023 - NW2909
Buthelezi, Mr EM to ask the Minister of Finance
How does the National Treasury ensure that municipalities comply and lock their adjusted budgets and/or financial systems at the end of each month to ensure prudent financial management?
Reply:
The Municipal Regulations on a Standard Chart of Accounts (mSCOA), Gazette No. 37577, 2014, was promulgated on 22 April 2014. All municipalities and municipal entities had to comply with the mSCOA Regulations by 01 July 2017. In terms of mSCOA, municipalities should budget, transact and report on all six (6) legislated mSCOA segments and submit the required data strings as per the legislated timeframes to the National Treasury’s Local Government Database and Reporting System (LGDRS). The budget and adjustments budgets adopted by Council must be locked on the core municipal financial system before submitting the data strings to the LGDRS. Most of the municipal financial systems have built-in controls that do not allow transacting if the budget or adjustments budget has not been locked. Also, Section 65(2)(j) of the MFMA requires that the accounting officer must take all reasonable steps to ensure that all financial accounts of the municipality are closed at month-end and reconciled with its records before submitting the monthly data string to the LGDRS.
As communicated in MFMA Budget Circular No. 123 dated 03 March 2023, the LGDRS is locked on the 10th working day of the month following the legislated deadline. The late submissions of data strings are not accepted by the LGDRS. The timeous submission of credible mSCOA data strings to the LGDRS has been included in the equitable share release criteria for 2023/24 that was communicated in MFMA Circular No. 122 (dated 09 December 2022).
Since the financial system must be locked at the end of the month to generate mSCOA data strings, municipalities may not open during closed periods to correct errors. Errors must be corrected in the next open period. Providers of municipal financial systems have also been instructed by the National Treasury in 2019 to ensure that the necessary internal controls are built into the financial system to prevent the opening during closed periods on the financial system and the bypassing of such controls.