Massive changes for how municipalities can spend your money – here’s what you need to know

The South African government has gazetted new cost containing measures for municipalities, which will curb what officials can blow taxpayer’s money on.

The new rules fall under the Municipal Cost Containment Regulations for 2019, which was gazetted in terms of the Municipal Finance Management Act.

National Treasury said that the objective of the new rules is to ensure that resources given to municipalities are used effectively, efficiently and economically by containing spending.

The rules apply to all municipal officials and political office bearers and entities in South Africa.

According to National Treasury, failure to abide by the rules – ie an officer incurs expenditure that is counter to the rules set out by the department – will result in the official being held liable for financial misconduct or a financial offence.

This could result in officials being reported to the police on fraud charges.

Municipalities will now have to include cost containment measures in its annual reporting, showing the aggregate amounts saved each quarter.

The most notable changes gazette include:


Consultants

The new rules limit the use of consultants in municipalities, and add restrictions to their contracts.

First, consultants can only be used after an assessment of needs and requirements confirms that the requisite skills are not available.

Remuneration for consultants must be negotiated and cannot exceed fees and rates determined by the auditor-general – and there is a specific clause that fees can be retained, or consultants can be penalised for poor performance.

Consultant contracts must also include caps or limits on all travel and subsistence benefits.


Car allowances

Car allowances have been cut, with prices not exceeding R700,000 or 70% of total annual remuneration.

Before cars can be bought, an accounting officer needs to be given information on the status of current vehicles, and affordability options (where the most affordable option must be taken).

As part of this process, the officers in question will also need to provide the extent of service delivery backlogs in the municipality, as well as a brief on the terrain and usage of the vehicle.

Regardless of the above, vehicles for official use by political office bearers may only be replaced after completion of 120,000 kilometres (unless there is some other severe technical fault).


Flights 

Municipal officers will also be limited in their travels.

Accounting officers can approve the purchase of economy class tickets for all officials, where the flying time is five hours or less. Business class tickets can only be bought when flight time is more than this limit.

Officials with disabilities may be given business class tickets irrespective of the limits.

International travel to meetings or events must be limited to only those that are considered critical – and the number of officials or political office bearers attending such meetings or events must be limited to those officials or political office bearers directly involved in the subject matter related to them.

Regarding accommodation, overnight stays can only be booked where return trips exceed 500km, and are capped at fees set by National Treasury at different times.


Credit cards

Municipal officers cannot use any credit card linked to a bank account of the municipality – this includes members of the board of directors or any municipal entities.

If officers incur costs on municipal business, they must use their personal accounts or cash and request a reimbursement that follows a written approval process.


Sponsorship, events and catering

Municipalities are not allowed to incur catering costs without approval. Approval can be given in this regard for conferences or meetings and the like, which exceed five hours.

Entertainment allowances are restricted to R2,000 per individual per financial year – and municipalities will not be paying for alcohol.

The new rules also say no to municipalities financing year-end parties and “team building” events, and no to merchandise and branded gear for personal use by officers.

The only leeway is given to small events, with limited budgets (petty cash usage) for team members who are leaving after 10 years of service, or due to illness.


The full set of rules are embedded below.

Municipal Cost Containment Rules by BusinessTech on Scribd


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Massive changes for how municipalities can spend your money – here’s what you need to know