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Municipalities continue to struggle with appointing qualified CFOs

Municipalities continue to struggle with appointing qualified CFOs

The Municipal Finance Management Act, No 56 of 2003 (MFMA) and the Public Finance Management Act, No 1 of 1999 (PFMA) require that the chief financial officer (CFO) be responsible for the effective financial management of the institution including the exercise of sound budgeting and budgetary control practices; the operation of internal controls and the timely production of financial reports.

”The Auditor General has over the years identified that one of the root causes for poor audit outcomes in both the PFMA and MFMA audits is key officials lacking appropriate competencies,” says Natashia Soopal, SAICA Project Director: Public Sector.

In an effort to address the lack of competency levels of officials responsible for financial and supply chain management at municipalities and municipal entities, the Minister of Finance issued the Municipal Regulations on Minimum Competence levels on 15 June 2007 which was later amended to 26 October 2018. Currently, there is no minimum competency levels for officials employed at public entities and departments.

“The Municipal Regulations on Minimum Competency Levels seeks to professionalise the local government sector and to make it a career choice for talented officials and to some extent mitigate some of the root causes of poor financial management and service delivery,” adds Soopal.

“The Regulations address the minimum higher education qualifications, work-related experience and core managerial and occupational competencies that are required by financial and supply chain management officials,” continues Soopal “The Regulations state that the CFO of a municipality or municipal entity must generally have skills, experience and capacity to assume and fulfill their responsibilities and exercise the functions and powers assigned to them in terms of the MFMA.”

The minimum competency levels required for higher education qualifications and work-related experience for CFOs of municipalities and municipal entities are as follows:

Description

a)     All municipalities with annual budgets of a value below R500 million, and

b)     All municipal entities of a parent municipality with an annual budget of a value below R500 million

a)     All municipalities with annual budgets of a value equal to or above R500 million, and

b)     All municipal entities of a parent municipality with an annual budget of a value equal to or above R500 million

Higher Education Qualification

At least a bachelor degree or a relevant qualification registered in the National Qualifications Framework at a NQF level 7 with a minimum of 360 credits.

At least NQF level 7 in fields of Accounting, Finance or Economics

or

Chartered Accountant (SA)

Work-related Experience Minimum of 5 years at middle management level Minimum of 7 years at senior and middle management levels, of which at least 2 years must be at senior management level

All financial and supply chain management officials who did not meet the minimum competency levels at the effective date of the Regulation had until 2 August 2018 to meet the minimum competency levels. A financial and supply chain management official who was appointed on or after the commencement of the Regulation had to attain the minimum competency level within 18 months from the date of appointment.

The status of the minimum competency levels for CFOs as at 30 August 2018 are as follows:

Province Number of Municipalities

Chief Financial Officers

(CFO)

No. of CFOs meeting minimum competency % of CFOs meeting minimum competency
Eastern Cape 39 26 11 42.3
Free State 23 25 13 52.0
Gauteng 11 25 3 12.0
KwaZulu-Natal 54 41 11 26.8
Limpopo 27 22 6 27.3
Mpumalanga 20 16 6 37.5
Northern Cape 22 27 7 25.9
North West 31 11 3 27.3
Western Cape 30 25 19 76
TOTAL 257 218 79 36.2

Source: National Treasury minimum competency levels database as discussed at Parliament on 18 September 2018.

“The above indicates that as at 30 August 2018:

  • The vacancy rate for CFOs at municipalities was 15.2%;
  • Only 36.2% of CFOs appointed at municipalities met the minimum competency level

Therefore 63.8% of municipalities who had CFOs appointed as at 30 August 2018 were not complying with section 83(1) of the MFMA in terms of the competency levels which has a potential negative impact on the effective financial management of municipalities.

In order to improve the effective financial management of municipalities, councilors are urged to appoint CFOs who meet the minimum competency levels. In instances where CFOs were appointed prior to the effective date of the Regulations, councilors should monitor the progress of the CFO in meeting the minimum competency levels.

Municipalities should also follow in the footsteps of Cities of Tshwane and Johannesburg and register as training offices to develop their own caliber of Chartered Accountants, Associate General Accountants and Accounting Technicians,” Soopal concludes.

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