FORMATIVE ASSESSMENT $1[100$ MARKS$]$

Read the case study below and answer ALL the questions that follow.

Municipal Financial Management

Financial management is a crucial element of municipal management. It enables the local government to plan, mobilize,

and use financial resources in an efficient and effective manner, as well as fulfill its obligation to be accountable to its

citizens. This study covers the basics of the municipal financial management process. It discusses the four fundamental

components of public sector financial management: budgeting, accounting, reporting, and auditing, and their applications in

local government.

The National Treasury of the Government of South Africa has played a pivotal role in the introduction of financial

management reforms across government since $1994$ and in local government since $1996.$ The reform initiative has been

implemented through the Municipal Finance Management Act No$.56$ of $2003($MFMA$),$ which is supported by the annual

Division of Revenue Act. These pieces of legislation have been aligned with other local government legislation, such as the

Structures Act, Systems Act, and Property Rates Act and their regulations, to form a coherent package.

The national treasury$$s primary objective was to secure sound and sustainable management of the financial affairs of

government $-$ national, provincial, and local. That includes regulatory interventions, manuals, guidance, circulars,

workshops, seminars, training, internship programs, and hands$-$on support to municipalities. The national treasury has

developed a phased implementation strategy of financial and technical support for local governments, based on the MFMA,

including conditional grants, subsidies, technical guidelines, policy advice, and the placement of international advisers with

some municipalities.

The strategy takes into account the differing capacities of municipalities to implement the reforms, as well as the need for

institutional strengthening, building municipal capacity, and improving municipal consultation, reporting, transparency, and

accountability.

The MFMA aims to modernize budget, accounting, and financial management practices, placing local government finances

on a sustainable footing to maximize the municipalities$$ capacity to deliver services. It also aims to put in place a sound

financial governance framework by clarifying and separating the roles and responsibilities of the council, mayor, and other

officials. The MFMA is required by the country$$s constitution, which obliges all three tiers of government to be transparent

about their financial affairs. It also forms an integral part of the broader reform package for local government outlined in the

$1998$ White Paper on Local Government.

Question $3(25$ marks$)$

Financial statements are

written records that

convey the financial

activities of a company.

Financial statements are

often audited by

government agencies

and accountants to

ensure accuracy and for

tax, financing, or

investing purposes.

Elaborate on your

understanding

of financial reporting

Financial Reporting

Explanation$/$introduction

Users of financial reporting

Characteristics of good financial reporting

Financial statements in action $$ policy

perspective

Municipal financial report format $($NB: students

can use the current format not as per the case

study. E$.$g$.$ Section $71$ reporting$)$

Performance reporting and financial reporting