Finance Minister Tito Mboweni has issued a Ministerial exemption of the Municipal Finance Management Act (MFMA), exempting municipalities and municipal entities from submitting their yearly financial statements and related reports for auditing at the end of August.

The exemption allows for a two-month extension in the submission of annual financial statements, annual reports, audit opinions and oversight reports.

The context of this exemption is Cooperative Governance and Traditional Affairs Minister Nkosana Dlamini-Zuma’s announcement of the national state of disaster in terms of the Disaster Management Act to enable government and the country at large to manage the spread of the Covid-19 virus.

Following the initial announcements of the national state of disaster, subsequent extensions and different levels have been communicated.

While the lockdown and restrictions have been eased over time, the regulations are still in force and in effect, with direct implications for municipalities and municipal entities, the National Treasury notes in a statement published on August 6.

It notes that the lockdown has impacted on the ability of municipalities and municipal entities to prepare and submit quality annual financial statements that meet the uniform norms and standards, as well as related reports and processes to discharge their accountability towards the public regarding the use of public funds.

The timing of the phased lockdown also had a knock-on effect on the availability of municipal staff, which impacted on operations and added to the delays in municipalities' ability to prepare the required financial statements and reports, undertake procedures such as the physical verification of assets, meter reading, revenue management, valuations, finalising supporting documentation and concluding reconciliations.

There are similar negative impacts on quality assurance processes, annual reporting and oversight reports, Treasury says.

The effects of an exemption will also assist in mitigating the anticipated widespread noncompliance with sections 126, 127, 129 and 133 of the MFMA owing to the national state of disaster and lockdown restrictions.

This extension will grant a further two-month period to municipalities and municipal entities to submit annual financial statements, annual reports and oversight reports, and also extend the period for the Office of the Auditor-General to submit the audit opinion and council committees to conclude their oversight processes.