Debt of local authorities in South Africa: Accounting realities leading to ethical, social and political predicaments
AbstractLocal authorities in South Africa face ethical, social and political dilemmas in dealing with the reality of the escalating outstanding debt payable to them. The culture of non-payment, and other reasons, have increased the outstanding debts of local authorities for services rendered by them to disturbing levels. However, the continued accounting recognition of further outstanding debt and revenue by local authorities is in reality in conflict with the relevant accounting principles. All stakeholders in the public sector will have to seriously consider whether the overstatement of outstanding debtors of local authorities does not constitute window dressing, unethical and negligent behaviour and in some instances even reckless conduct of affairs to such serious extent that it can no longer be tolerated.
Alfreds, L. (1998). 100 towns are facing bankruptcy and can’t pay staff. The Star 10 March:1.
Alfredson, K., Leo, K., Picker, R., Pacter, P., Radford, J. & wise, V. (2007). Applying International Financial Reporting Standards. Milton, Australia: wiley.
Accounting Standards Board (ASB). (2004a). Standards of Generally Accepted Municipal Accounting Practice. http://www.asb.co.za/backoffice/contentdocs/doc_ 552004113559_11.pdf (23 June 2005).
Accounting Standards Board (ASB). (2004b). Framework for the preparation and presentation of financial statements (GRAP 0). http://www.asb.co.za/backoffice/contentdocs/ doc_18200411856_11.pdf (23 June 2005).
Auditor-General (2004). General Report of the Auditor-General on the audit outcomes of local government for the financial year ended 30 June 2003. Pretoria: Government Printer.
Blaauw, D. (2004). Uitstaande munisipale skuld in VS meer as R3 miljard. Volksblad 29 October: 5.
Botha, E. (2007a). Act fast on mayor, MEC urged. Daily Dispatch. 29 January: 1.
Botha, E. (2007b). Mnquma residents in red to tune of R200m. Daily Dispatch. 29 March: 4.
￼Brenkert, G. (ed) 2004. Corporate integrity and accountability. Thousand Oakes, CA: Sage.
Carroll, A.B. & Buchholtz, A. K. (2006). Business & society: Ethics and stakeholder Management. Thomson South- western.
Citizen Reporter. (2000). MEC hit on Masakhane. The Citizen 15 May: 7.
DiPiazza, S.A. & Eccles, R.G. (2002). Building public trust: The future of corporate reporting. New York: wiley.
Department of Finance – Free State (Local Government Directorate). (2005). Monthly report on the state of local government finance and related matters pertaining to district & local municipalities in the Free State for the quarter ending at 31 March 2005: 74.
Dlamini, J. (1997). Local government debt climbs to R6,5bn. Business Day, (1997), 29 April:3.
Dlodlo, C. 2006. VS-departemente skuld miljoene. Volksblad 23 November: 2.
Dlodlo, C. (2007). Los amptenare om skuld in te vorder. Volksblad 5 March 2007: 4.
Du Toit, Z. B. (1998). Stadsrade stuur af op geldramp. Rapport, 3 May:2.
Ernst&Young. (2004). International GAAP 2005. London: LexisNexis.
Eybers, J. (1998). Dié gemeenskappe sal nie hul diensgeld betaal nie. Beeld, 20 November:11.
Fitzpatrick, M. (2007). waar daar nie ‘n wil is. Beeld, 9 Januarie: 11.
Hamlyn, Michael. (2007). Municipalities failing to pay R794m debt to water boards. Johannesburg Star, March 20:7
Institute of Directors (IOD). (2002). The King report on Corporate Governance. Johannesburg: IOD.
International Accounting Standards Board (IASB). (2006).
International Financial Reporting Standards (IFRSs) including International Accounting Standards (IASs) and Interpretations as at 30 November 2006. London: IASB.
Keasey, K., Thompson, S. & wright, M. (2005). Corporate governance – Accountability, enterprise and international comparisons. London: wiley.
Kroukamp, H. (1995). The culture of non-payment of services as a constraint in financial policy management for local authorities in South Africa. SAIPA, 30(3) 189- 202.
Kruger, E. (2005a). Munisipaliteit skuld glo R12m. vir water. Volksblad, 13 January: 1.
Kruger, E. (2005b). Kopanong-voorneme oor water lagwekkend – DA. Volksblad, 25 January: 4.
Kwon Hoo, S. (2005). New city manager sets his sights on debt collection. Diamond Fields Advertiser. 4 January: 4.
Lander, G.P. (2004). What is Sarbanes-Oxley? New York: McGraw-Hill.
Louw, R. (1995). Non-payment by township residents for municipal services is emerging as major local elections issues. South Africa Report, 13(41):1-3.
Lubbe, D.S. & Rossouw, C. (2005a). Accounting for a culture of non-payment. Accountancy SA, December 21-25.
Lubbe, D.S. & Rossouw, C. (2005b). The recognition of revenue and the escalating debtors of munisipalities in South Africa: Political and social dilemmas vs. Accounting realities. Journal of Public Administration, 40 (4): 780 – 795.
Lubbe, D.S. & Vorster, Q. (2000). Enkele gedagtes oor die uitstaande skulde van plaaslike owerhede. TCW, 36 (3 & 4) 101-113.
Malefane, M. (2005). Councillors owe nearly R1,4 in rates, charges. Johannesburg Star, 3 February 2005: 2.
Maqhina, M. (2005). Ratepayers owe close to R1bn to four councils. Daily Dispatch, 22 February: 3.
Maqhina, M. (2003). Govt debt to munisipalities slated. Daily Dispatch, 11 April : 7.
Maqhina, M & Carlisie, A. (2003). Bisho owes council R25m for rates, services. Daily Dispatch, 25 January: 1.
Motale, S. (2003). Govt to aid debt-hit councils. Citizen, 13 March: 8.
Mtshali Thokozani. (2007). Munisipalities hit by R28bn debt. Star. 5 March: 3.
Muller, H. (1997). Payment of services: revenue collection systems. Local Government Digest 16(12):30-31.
Naidoo, N. (2006). Cashing in on council debt. Witness, 13 September. 1.
Naki, E. (2005). Mayor calls for stern action against defaulters. Daily Dispatch, 28 February:5.
National Assembly. (2005). written reply to internal question number 648.
Ngwema, S. (1996). No consultation – no cash flow. Democracy in Action, 10(1):8-9.
Pelser, w. (2007). Skokkende skuld lei tot swak diens. Beeld, 5 March 2007:15.
Powell, A. (2007). Cutting off non-payers victimises the poor – ANC. Cape Time,. 16 March 2007.:7.
Political correspondent. (1998). New broom to boost the Masakhane campaign. Daily News, 5 February; 6.
Pretorius, D., Venter, E., Von well, R. & wingard, C. 2006. GAAP Handbook 2007. Durban: LexisNexis Butterworths.
Pretorius, L. (2004). Verbruikers in VS skuld miljarde – Munisipaliteite in rooi. Volksblad ,17 March: 6.
Raboroko, J. (1999). Local authorities to get tough on rent, service defaulters. Sowetan, 5 May:3.
Riahi-Belkaoui, A. (2000). Accounting theory. New York: Thompson Learning.
Ryan, C. (2004). Delinquent debt tops R40bn. Weekly Mail and Guardian, 13 May: 25.
Republic of South Africa. (2000). Local Government Municipal Systems Act (Act 32 of 2000).
Republic of South Africa. (1999). Public Finance Management Act (Act 1 of 1999)
Republic of South Africa. (2003). Municipal Finance Management Act (Act 56 of 2003).
Russel, C. (1998). End in sight for municipal debt. The Star, 2 July:2.
South African Local Government Association (SALGA)/ Institute of Municipal Finance Officers (IMFO). (2004a). Local Government Finance Best Practice Manual: Indigency illustrative policy. http://www.imfo.co.za/manual.htm (10 May 2005).
South African Local Government Association (SALGA)/ Institute of Municipal Finance Officers (IMFO). (2004b). Local Government Finance Best Practice Manual: Credit control. http://www.imfo.co.za/manual.htm (10 May 2005).
SAPA. (1997). Local government finances alarm Auditor- General. The Citizen, 27 March:4.
Schutte, H. (1997). Plaaslike owerhede se skuldlas groei. Die Burger, 14 November:16.
Sekano, P. (2003). Council takes legal action against owners of flats. City Press, 19 January: 10.
Sepotokele, T. (2004). Councils face different problems. Star, 12 November: 3.
Solomon, J. & Solomon, A. (2004). Corporate governance and accountability. west Sussex: wiley.
Sowden-Service, C. (2007). Gripping GAAP. Durban: LexisNexis Butterworths.
Van der Merwe, H. (2005). Veranderinge hier beloof. Volksblad, 4 January: 4.
Van Zyl, Roux, (2007). ECDC calls on outside help for R500m “bad debts”. Daily Dispatch, 2007, March 19: 1
Versluis, J. 2005. Munisipale finansies ‘benard’. Volksblad, 2 August:1.
Viljoen, B. 2006. Mpumalanga se DG skuld glo duidende. Beeld, 7 Desember: 4.
Vorster, Q., Koornhof, C., Oberholster, J., Koppeschaar, Z. & Venter, E. 2006. Descriptive accounting IFRS focus. Durban: LexisNexis Butterworths.
whittington, O.R. & Pany, K. 2004. Principles of auditing and other assurance services. New York: McGraw Hill Irwin.
Zuzile, M. 2003. Council cuts put legislature in dark. Daily Dispatch, 16 April: 1.
This journal is an open access journal, and the authors and journal should be properly acknowledged, when works are cited.
Authors may use the publisher's version for teaching purposes, in books, theses, dissertations, conferences and conference papers.
A copy of the authors’ publisher's version may also be hosted on the following websites:
- Non-commercial personal homepage or blog.
- Institutional webpage.
- Authors Institutional Repository.
The following notice should accompany such a posting on the website: “This is an electronic version of an article published in AJOBE, Volume XXX, number XXX, pages XXX–XXX”, DOI. Authors should also supply a hyperlink to the original paper or indicate where the original paper (http://ajobe.journals.ac.za/pub) may be found.
Authors publisher's version, affiliated with the Stellenbosch University will be automatically deposited in the University’s’ Institutional Repository SUNScholar.
The following license applies:
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.