A Guide for Councillors

The Role of Councillors in Municipal Finance Management

Part 1

There are other factors, the impact of which must be considered: the volume and type of traf fi c using the road

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proximity of the road to facilities such as businesses, shops and schools the landscape and climate of the area local economic development.

1.1 Financial management in local government In local government, fi nancial management has four basic purposes:

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Safeguarding : Municipalities need to ensure that there are proper controls to protect the revenue , assets and capital of the municipality against improper use, loss or theft. Budgeting: Municipalities must plan how they will use the funds available to them and how important projects and services will be paid for. Monitoring: Municipalities need to monitor that the services delivered are in line with what the municipality budgeted for and that they address the needs of the community. Accountability: Municipalities should report to the public on how public funds are used. Whether it is money paid by local people for services or rates, or money from national government, it is all public money and the public has a right to know how it is being used. The fi nancial records of a municipality must re fl ect all of these transactions in a manner that enables the council and the community to understand what is being done in the municipality at all times.

Revenue:

The money that the municipality gets in for services and rates, and from the treasury, is called revenue.

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Capital: The material wealth of the municipality used, or able to be used, in carrying out council’s operations is called capital. In other words, it is the remaining assets of a municipality after taking away all liabilities. Assets: The municipality may own property, equip- ment, money and other items of value. These are called assets.

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Understanding the Municipal Finance Management Act