We have been discussing two very important cornerstones on which local government is founded, namely development and participation.
Both these cornerstones are closely linked to proper financial management.
The better financial controls are, the better the municipality can function and build on the two cornerstones.
Financial management in municipalities is strictly controlled by legislation.
The municipal development function is dependent entirely on the availability of funds. In this context one must understand the sources of development funds.
A municipality has three main sources of funding, namely funds generated by its own sources such as property tax, the sale of services such as water, electricity and sanitation; state funding in the form of unconditional and conditional grants; and if it has investments, interest accrued from the investments.
In general all municipalities, large or small, are dependent on state funding.
It should be understood that the main purpose of state funding is to assist the municipality to render services to poor communities.
Unfortunately, many municipalities use that fund to balance their budgets. Municipalities are not allowed to budget for a deficit.
Municipalities have a capital and an operational budget.
The capital budget is based on their integrated development plans, which include development projects.
Public participation is imperative in the preparation of the budget, the reason being that the needs of the public should as far as possible be addressed.
Operational budgets are earmarked for functional expenditure.
Only the bigger municipalities have internal funds for capital projects such as the construction of roads, water supply systems and sanitation facilities.
Smaller municipalities are entirely dependent on state grants for those purposes.
This raises questions about the viability of some municipalities, especially where grant monies must be used to cover operational costs such as salaries.
After almost 20 years there are still too many non-viable municipalities with no prospects of becoming viable.
The time has come for the state to embark on a re-demarcation of municipal boundaries and to consolidate non-viable municipalities with proper functioning municipalities.
The time has also come for the government to re-evaluate the functions allocated to the two categories of municipalities, namely district and local municipalities.
The public mostly do not understand the division of functions and responsibilities between these two categories.
In a nutshell, in KwaZulu-Natal district municipalities’ functions entail overall integrated development planning for the district, water and sanitation services and tourism.
The rest of the municipal functions such as municipal roads, storm water management, maintenance of verges, waste disposal, town planning and the collection of property rates are local municipal functions.
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