The financial health of South Africa’s local government sphere has deteriorated further, according to the National Treasury, with the national Unauthorised, Irregular, Fruitless and Wasteful Expenditure (UIFWE) balance rising from R264.10-billion in 2023/24 to R268.13-billion in 2024/25.

The National Treasury officially released the Strengthening Municipal Financial Management, MFMA Compliance Report for the 2024/25 financial year, covering the period July 01, 2024 to June 30, 2025.

The report indicated that systemic failures in internal controls, failure to implement council resolutions, and weak consequence management continue to drive the decline.

Overall, the report revealed a mix of marginal improvements and persistent challenges, with irregular expenditure remaining the dominant contributor to the staggering R268.13-billion balance.

Non-compliance with supply chain management (SCM) and procurement regulations remains rampant, while municipalities are increasingly opting to "write off" massive sums rather than pursue recoveries or hold individuals accountable, indicating a lack of robust systems to process UIFWE.

Treasury said this trend highlighted a culture where financial misconduct was normalised, hindering the ability to hold officials accountable for financial misconduct, as noted in the UIFWE of various municipalities.

Frequent turnover in senior management positions also continued to affect governance and audit outcomes, it said.

Treasury announced that the infrastructure for accountability had grown, yet its effectiveness had diminished, noting that the number of municipalities with established disciplinary boards – a crucial element of the Municipal Regulations on Financial Misconduct Procedures – havd increased to 178 in 2024/2025.

However, National Treasury revealed declines in the reporting of financial misconduct allegations, the investigations of misconduct cases and disciplinary actions taken against officials.

“The regressions may be an indication of various negative factors including delays in instituting and or in proceeding with disciplinary cases, weak enforcement of policies within municipalities and possibly a lack of understanding of disciplinary processes by municipalities,” it said.

On a more positive note, 170 municipalities had updated cost containment policies in 2024/25, up from 161 in the previous year. Collectively, these efforts yielded R5.06-billion in savings, largely by curbing excessive consultancy fees.

However, these fiscal gains are threatened by substantial overspending on overtime.

Treasury explained that this persistent issue highlighted deeper, entrenched weaknesses in payroll management and internal controls that it warned continued to undermine municipal sustainability, as outlined in the 2025/26 Municipal Cost Containment Policy of some municipalities.

National Treasury said a critical aspect of governance and financial accountability was the implementation of authorised Systems of Delegations (SODs), noting that the report indicated a slight decline in this area, where 127 municipalities (49%) had SODs in place for the 2024/25 financial year.

This represents a decrease from the 130 municipalities reported in the 2023/24 financial year, with Treasury emphasising that signed SODs were crucial for effective service delivery and holding officials accountable.

National Treasury noted a slight improvement in the filling of critical leadership positions, which it said was essential for stable financial management, highlighting that 84% of critical senior management positions were filled, up from 82% in the 2023/24 cycle.

“Despite this improvement, vacancies remain a challenge, with the highest turnover appearing in roles such as Chief Risk Officers, Chief Audit Executives, and Chief Financial Officers,” it said.

Treasury highlighted that non-compliance with SCM regulations continued to be a major hurdle for municipal performance, saying many municipalities were failing to update their SCM policies to align with the latest regulations, or failing to develop them entirely.

A failure to effectively address issues identified by the Auditor-General of South Africa had led to recurring, irregular, and wasteful expenditure, it explained.

The report stressed the need for urgent corrective measures in SCM processes to ensure transparency and value for money.