Municipal Finance Management Research Articles

State and municipal finance management using artificial intelligence

The ways of application of artificial intelligence elements in the activity of state and municipal finance management are investigated. The article identifies approaches to the integration of artificial intelligence elements in the fulfillment of longterm budget planning tasks. Active support from the Government of the Russian Federation of the direction of artificial intelligence affects many spheres of life of citizens of the country. At the same time, state and municipal governments have their own peculiarities in the processes of implementing innovations.

Accountability, Estoppel and Bypassing of the Municipal Finance Management Act: A Note on Merifon (Pty) Ltd v Greater Letaba Municipality Trilogy

Accountability and transparency reinforce the constitutional principles of governance, which constitute equality before the law, separation of powers, legality and the rule of law, which are central to the conception of modern constitutional order. The trilogy of Merifon (Pty) Ltd v Greater Letaba Municipality Limpopo Division, Case No 01/2014 (18 July 2019), Merifon (Pty) Ltd v Greater Letaba Municipality [2021] ZASCA 50 and Merifon (Pty) Ltd v Greater Letaba Municipality [2022] ZACC 25 poses fundamental questions regarding the failure of a municipal manager and incompetent council to comply with statutory prescripts. Although the narrow issue for determination concerned the seller’s reliance on estoppel and the Turquand Rule to hold a municipality to the unlawful and inflated sale of land agreement, the Merifon litigation invites consideration of the practical reality of malfeasance in the local government sphere. In this note the litigation history and the analytical framework as well as the Municipal Finance Management Act 56 of 2003 (MFMA) are examined. The critical aspects of the three judgments regarding the problematic reliance on estoppel and the Turquand Rule in the face of peremptory prescripts of MFMA are subsequently examined.

When the legal pathways for sound financial management and spatial justice collide: The case of South African cities

This article probes one aspect of spatial (in)justice and slow spatial transformation in South Africa’s cities. The focus is not so much on case studies or an analysis of persisting spatial injustices. Instead, the article focuses on the legal premises and the apparently colliding legal pathways for sound municipal finance management and spatial justice. It specifically questions, through a mixed research method, the extent to which the co-existence of the Spatial Planning and Land Use Management Act 16 of 2013 (‘SPLUMA’) and the Local Government: Municipal Finance Management Act 56 of 2003 (‘MFMA’), as two Acts in the suite of post-apartheid South African local government legislation, runs the risk of thwarting local government efforts to transform social and physical space in the country’s cities. This question is considered through an exploratory review of the Acts, empirical findings, and a consideration of the limited theory on the interoperability of laws.

The Municipal Audit Committee Self-review Threat: The South African Dilemma

Context: Corporate governance in South African municipalities is severely lacking and retrograding. The audit committee should essentially be an oversight committee that acts on behalf of the municipal council to ensure that key controls are operating, ethical practices are reinforced, key accounting estimates and judgements are properly made, and that internal and external audits are effective. However, the Municipal Finance Management Act requires that the audit committee acts in an advisory capacity to among others, the municipal management. This statutory requirement is in contrast to international governance code best practice for audit committees. Purpose: The aim of this study was to establish how municipal audit committee members perceive their role and whether they realise the self-review threat brought about by the role conflict between legislation and internationally accepted best practice. Design: A web-based survey questionnaire was used to collect primary data from municipal audit committee members. Findings: The study found that municipal audit committee members seem to be unaware of the self-review threat their perspectives on their role hold. Practical implications: Results of the study may assist policy makers and other stakeholders in drafting regulations and legislation governing the functioning and establishment of independent municipal audit committees in South Africa. Originality: Although the conflicting roles of assurance (oversight) and consulting (advisory) have received attention in the disciplines of external auditing and internal auditing, similar attention is needed in the case of South African municipal audit committees.

State and municipal finance management bodies: functions, rights and responsibilities

State and municipal finance management bodies: functions, rights and responsibilities

СПЕЦИФІКА УПРАВЛІННЯ БЮДЖЕТНИМИ РИЗИКАМИ СТАЛОГО РОЗВИТКУ РЕГІОНУ

The article scientifically substantiates and develops the conceptual provisions of the theory and methodology of formation of budgetary and tax mechanisms, provides practical recommendations for the development of fiscal mechanisms of sustainable development of regions. The author has developed methodological tools for assessing the functioning of fiscal mechanisms at the regional level in terms of forward-looking indicators and risk-oriented indicators for assessing the functioning of fiscal mechanisms. It is proposed to create a classifier of budgetary risks of sustainable development of regions, which can be used in forecasting and analytical activities of financial and control bodies of the federal, regional and local levels. The author's approach to the management of budgetary risks of sustainable development of the region is substantiated. It is noted that modern methods of reducing budget risk are the introduction of software forms of budget expenditure planning, the method of risk diversification, the method of optimal management, synergetic method and the application of new principles of public and municipal finance management; the advantages of methods for assessing budgetary risks of sustainable development are outlined. The author outlines the scheme of budget risk management of sustainable development of the region, which includes: strategy of socio-economic development of the subject of Ukraine; forecast of socio-economic development of the region for a three-year period with the addition of variable indicators; forecast of the main parameters of the regional budget and budgeting taking into account priorities and constraints; approval of the budget of the subject of Ukraine, substantiation of methods of management of budgetary risks of sustainable development of the region; budget execution, budget risk management of sustainable development; control over the results of budget risk management. It is proved that high-quality and effective management of budget funds by participants in fiscal relations requires timely identification of possible budgetary risks and determining the correct way to assess them. Substantiated proposals for improving budget risk management, which will help improve the quality of budget risk assessment.

Key vectors for improving the activity of regional bodies of the Federal Treasury given the integrated management of public finance

Subject. The article focuses on a set of financial and budgetary relations existing in regional bodies of the federal treasury, inter alia, in public finance management. Objectives. We search for new tools and available methods to enhance the performance and efficiency of the Federal Treasury bodies, illustrating the operation of the Federal Treasury for the Nizhny Novgorod Oblast. Methods. The study is based in general methods (the analysis and synthesis, abstraction and generalization), specific research (special) methods (economic analysis, statistical-economic method). Results. We devised the methodological framework to pinpoint vectors to follow ensuring the development of treasury system. As part of the study, we discovered two main factors to improve the activity of the Department of the Federal Treasury for the Nizhny Novgorod Oblast, such as Factor 1 – The Automated Finance Management System, Factor 2 – Financial Forecast. Considering the impact of the factors, we can determine what can be done to strategically manage public and municipal finance. Based on the studies, we can recommend steps to enhance the performance of the treasury system. Conclusions and Relevance. To implement Factor 1, we suggest setting the single identification and authentication system, which will help outline the public and municipal finance management strategy during turbulent times. To implement Factor 2, we propose methodological principles for forecasting of public finance, which will be based on the time series analysis so as to evaluate patters and dependencies and subsequently make up a model for further trend forecast. The findings will be useful for executives of the Federal Treasury offices and professionals delegated to manage public finance. Furthermore, the findings can underlie further research on economics and finance.

State and municipal finance in conditions of economic transformations

Relevance of the research topic. In the current conditions of economic transformations, the issues of increasing the validity of the fiscal policy, strengthening the effectiveness of public and municipal finance management systems are relevant. An important task is to restore the budget balance, coordinate the actions of public authorities and local governments in the process of formation and implementation of fiscal policy. Formulation of the problem. Based on the transformation processes in the domestic system of public finance, the important tasks are to substantiate the directions of development of public and municipal finance systems, their components. At the same time, the choice of fiscal policy tools should be made taking into account the cyclical and dynamic economic processes. Analysis of recent research and publications. The issue of formation and implementation of fiscal policy for the development of public and municipal finance systems is quite common in research. These are the works of well-known domestic and foreign scientists: J. Keynes, P. Samuelson, V. Nordhaus, J. Stiglitz, V. Tanzi, T. Bogolib, I. Zapatrina, L. Lysyak, V. Oparin, M. Pasichnyy, V. Fedosov, I. Chugunov, and others. Highlighting unexplored parts of a common problem. These issues are relevant in connection with the intensification of globalization processes, unfavorable external and internal economic environment, which requires several specific tasks related to the fiscal policy development. Goal setting, research goals. The research goals are to reveal the essence and role of state and municipal finances in financial and economic regulation; to determine the priority tasks of fiscal policy in the conditions of economic transformations. The purpose of the study is to reveal the institutional principles and directions of development of public and municipal finance management systems. Research method or methodology. The set of methods of scientific research is applied in the article: a systematic approach, statistical analysis, structuring, analysis, synthesis, etc. Basic material presentation (results of work). The essence and role of state and municipal finances in financial and economic regulation of the administrative-territorial units development and the country are revealed. The priority tasks of fiscal policy in the conditions of economic transformations are defined. The analysis and assessment of budget indicators is carried out. Area of application of results. The results of the study can be used in the process of the formation and implementation of the fiscal policy of Ukraine, reforming the public finance system. Conclusions according to article. Measures for further improvement of state and municipal finance should aim at optimizing the functions of state and local governments and their efficient allocation among them. Strengthening decentralized processes in Ukraine aimed at creating a modern system of local governments, municipal finance development based on European values. Achieving concrete results, identified under the priorities of fiscal policy at the local level, implies clear coordination and increasing the level of responsibility of all participants in the budget process.

Совершенствование методики оценки качества управления муниципальными финансами

The problem of improving the quality of state and municipal finance management is very urgent at the present time. The purpose of the study is an attempt to substantiate the need to improve the methodology for assessing the quality of municipal finance management. One of the tasks is to test the hypothesis: municipalities with the population involved in the processes of initiative budgeting are most efficient in managing municipal finances. The object of the study is the municipalities of the Transbaikal region. In the course of the study, an analysis of the regional legal acts concerning the assessment of the quality of municipal finance management was carried out, as well as an analysis of this assessment in the context of some municipalities (urban districts) of the Transbaikal region. The analysis showed that the methodology for assessing the quality of municipal finance management in the constituent entities of the Russian Federation is based on indicators characterizing the state of municipal finance and does not fully cover indicators of the quality of local authorities’ management decisions. The analysis also revealed a correlation relationship between the financial management quality of the municipal entity of the Transbaikal region and the degree of population involvement in the budget process. The article concludes that it is necessary to improve the existing methodology for assessing the quality of municipal finance management. The method based on 3 groups of indicators - the state of municipal finances, the level of municipal programs (national projects) implementation, the quality of municipal finance management is proposed. In order to improve financial discipline and transparency of the budgetary process, the author proposes to introduce a pilot project to develop initiative budgeting in municipalities

The Audit Committee Anomaly in South African Local Governance

Stakeholders of organisations have to rely on the credibility and effectiveness of governance by management and oversight structures, such as the audit committee, to protect their interests. Drawing on the agency theory, the role of the audit committee is globally accepted to be one of oversight and monitoring. In contrast, the Municipal Finance Management Act requires South African municipal audit committees to be independent advisory functions, invoking the institutional theory in terms of symbolic display. In this article the research objective is to argue the anomaly in the Municipal Finance Management Act regarding audit committees' role, given that this deviates from the globally accepted norm. This conceptual article follows an interpretive approach, which includes a document analysis, firstly to establish the prevalence of the audit committee advisory expectation and, secondly, to argue from theoretical perspectives, whether the audit committee as an advisory function, has validity. The findings suggest that legislators should consider amending the Municipal Finance Management Act to reflect audit committee best practice or change the name of the municipal audit committee to that of an advisory committee to avoid misleading local communities in terms of what may be perceived as good governance practice. This article thus informs policymakers of an apparent governance anomaly in South African legislation.

Indicative Monitoring of Implementing Municipal Programs

The article analyses the relevance and necessity of developing a system of monitoring indicators of municipal programs by local self-government bodies in connection with adopting the Program of the Government of the Russian Federation concerning improving the efficiency of the public municipal finance management. Indicative monitoring of municipal programs is necessary for municipal authorities to adjust both individual indicators and programs in general in a timely manner. This provides an opportunity to manage the effectiveness of programs as well as to match the development goals of social and economic systems at different levels, including national goals. The basis of the indicative approach to the management of municipal programs is the existence of a long-term strategy for the social and economic development of the municipality, as well as a set of economic regulators. The basis of the monitoring is evaluating intermediate indicators of programs (reference points of implementation), monitoring the implementation of programs: final indicators, taking management decisions concerning the adjustment. The article proposes creating and applying a unified standard procedure for assessing the effectiveness of municipal programs, and gives recommendations to local selfgovernment bodies on the use of various methods of assessing the achievement of target indicators. As a result, municipalities will be able to control the use of resources and determine the strengths and weaknesses of their territory, which will allow taking timely and informed management decisions. The authors propose the method of monitoring the indicative indicators of programs. The unified methodology will allow comparing municipal entities of the Russian Federation according to the level of development, identifying and spreading successful practices of implementing municipal programs and their efficiency management. The paper presents the results of testing the methodology using the municipality of Volgograd as an example.

Fiscal Discipline and the Successful Completion of Municipal Projects: The Case of City of Tshwane

Kaiser, Crother, Kelly, Luiselli, O’Shea, Ota, Passos, Schleip and Wuster (2013) have shown the relationship between fiscal discipline and the successful completion of municipal projects in Sub-Saharan African countries. The study aims to assess and evaluate the degree of fiscal discipline exercised by employees of the City of Tshwane on municipal finance. Financial practitioners working in the City of Tshwane are required to comply with regulations and guidelines stipulated in the South African Municipal Finance Management Act (Act number 56 of 2003). Data was collected from a stratified random sample of 146 employees of the City of Tshwane who were responsible for providing financial services to customers. Data was collected by using a structured, pre-tested and validated questionnaire of study. Statistical methods such as frequency tables, cross-tab analyses and ordered probit regression were used for performing data analyses. Efficiency in financial management was assessed by assessing the degree of adherence of employees to the Municipal Finance Management Act (MFMA) based on a composite index defined by Kaiser, Crother, Kelly, Luiselli, O’Shea, Ota, Passos, Schleip & Wuster (2013). The study showed that 89% of the 146 employees who were selected for the study demonstrated adequate adherence to the Act, whereas 11% of employees failed to do so by the same standards. The study found that the degree of adherence of employees to the MFMA was significantly influenced by 3 factors. These 3 factors were degree of skills in financial accounting and auditing, duration of service, and degree of job satisfaction, in a decreasing order of strength. The results indicated a robust association between fiscal discipline and the successful completion of municipal projects.

Planning and Financing in the Social Development

Purpose: Determining the purpose, content, appropriation, features of the program-target and design-target methods of planning and financing in the social sphere and the ways of their further development. Design/Methodology /Approach: In modern conditions of economic and financial uncertainty in the social sphere, reform changes, aimed at improving the quality of public finance management are in progress. These transformations were launched by the Ministry of Finance of Russia in 2004, when the main directions of budget sector reform were identified, including the transition to new forms of financial support for the provision of state (municipal) services, the introduction of result-oriented budgeting methods. The presented article is devoted to the methods of a programmatic approach to planning and financing in the social sphere development. Findings: An integrated approach to the implementation of planning, financing and management of budgetary resources in the social sphere will make it possible to consider the program-target and project-target methods as the key tools for the distribution of labor, material and financial resources to achieve the goals and objectives, while the levels of goals achievement must have measurable indexes (indicators) that have the ability to influence the managed object. Practical implications: The results of the study can be applied in the management activities of the state and municipal authorities, social institutions with the aim of developing the program-targeted and design-targeted methods of planning and financing. Originality /value: The main idea of the modern stage in the development of program methods for planning and financing in the social sphere is that a new quality of public and municipal finance management, optimization of budget expenditures requires the inclusion in the state programs of measures aimed at achieving the goals stated in the relevant national and federal projects

Municipal Tender Awards and Internal Appeals by unsuccessful Bidders

In recent years, bidders aggrieved by municipal tender awards are increasingly resorting to Section 62 of the Local Government: Municipal Systems Act[1] for relief. The application of this provision to tender processes is however strictly confined, and in most instances bidders find that they have no option but to approach the courts for the judicial review of tender awards. In this article, the application of Section 62 to a municipality’s tender processes and decisions is critically analysed in the light of recent court judgments. Attention is also given to the relation between Section 62 and dispute resolution procedures in place under the Supply Chain Regulations,[2] enacted under the Local Government: Municipal Finance Management Act.[3] It is argued that at present, internal appeal and dispute resolution processes do not afford unsuccessful bidders adequate protection.

Оценка платежеспособности и качества управления финансами муниципальных образований как мера повышения эффективности управления общественными финансами (на примере Нижегородской области)

Оценка платежеспособности и качества управления финансами муниципальных образований как мера повышения эффективности управления общественными финансами (на примере Нижегородской области)

South African public sector procurement and corruption: Inseparable twins?

The article seeks to explore the relationship between procurement in the public sector and corruption. Corruption in the procurement process is one of the biggest challenges facing the South Africa government. Procurement in the South African public sector through the tendering process has been used with a particular aim of addressing the past discriminatory practices and policies by empowering the previously disadvantaged majority. It ought to operate within a certain legislative and regulatory framework. However, the article argues that in the process of implementing the good intentions of the government, corruption illegitimises the process. There are also challenges that are associated with public sector procurement, with corruption being the main protagonist. The article also seeks to suggest possible solutions that could be used to address the anomalies. The article further concludes that the main reason for the rife corruption in the public sector is that there is nonadherence to policy prescripts including the Public Finance Management Act, 1999 (Act 1 of 1999) and the Municipal Finance Management Act, 2003 (Act 56 of 2003). This enormous predicament may only be addressed if the government were to show will and commitment by punishing offenders who do not comply with the said legislative framework.

A Critical Analysis of Risk Management Knowledge within the Sedibeng District Municipality, South Africa

Since the introduction of the Public Finance Management Act (PFMA) in 1999, the Municipal Finance Management Act (MFMA) in 2003 and the Public Sector Risk Management Framework (PSRMF) in 2010, municipalities had to start focusing on more efficient risk management as part of operational activities. Information for the study was obtained from two groups of officials employed at the Sedibeng District Municipality in southern Gauteng, South Africa, by means of one-on-one interviews and questionnaires. Group 1 consisted of 14 officials, not in management positions, and Group 2 of 11 employees in senior management. The questionnaire comprised five sections aimed at determining the knowledge and attitude of the respondents regarding risk management. Responses clearly indicated that knowledge of risk management differed substantially between Group 1 and Group 2. The knowledge, monitoring, assessment, identification and response to risk management activities were minimal or unclear to those not in management positions. Participants in management positions, in contrast, were more aware of risk management responsibilities; although, they admitted that the responsibilities were not always fulfilled as required, and in many cases only to comply with regulations. This paper proposes various recommendations that could improve the overall management and sustainability of risk management within the Sedibeng municipality in particular and other municipalities in general. DOI: 10.5901/mjss.2014.v5n7p163

Crafting a strategy for improved communal waste management in mafikeng

The study investigated and evaluated the alternative methods for implementing proposed changes at communal waste collection points in Mafi keng (Mahikeng) city. In doing so, the study was cognisant of the constitutional requirement for municipalities to ensure the well-being of the citizenry by protecting the environment and was also cognisant of the fact that municipalities had to operate within the ambit of the law. It was established that the provisions in the Municipal Finance Management Act (Republic of South Africa) empowered and provided guidelines for the Mafi keng Local Municipality to implement the proposed changes. An analysis of the variables in the waste management system revealed that the best way forward was for the Mafi keng Local Municipality to implement the proposed changes is through a public‐private partnership with a reputable organisation from the formal private sector. Several recommendations, including the involvement of the public in the change process, were made for the success of the partnership.

Future skill needs in municipal engineering in Sri Lanka

This paper addresses the challenges faced in municipal engineering management for sustainable development in Sri Lanka and identifies the need for improving the quality of life of low-income urban populations with the participation of relevant stakeholders. The paper also identifies the training needs for managing the identified challenges and assesses the municipal engineering management segment of local government. In Sri Lanka, there has been a long-felt need for the training of technical personnel with a view to building their capacity to manage future needs and cater for current demands at local authority level. The research and training division of the municipal engineering management section has recently carried out a fact-finding exercise to determine the nature of technical personnel associated with local authorities. This project has recognised the fact that existing staff skills in urban local authorities need to be strengthened in order for them to fulfil their role in municipal engineering management and to assume greater responsibilities in the profession of urban services. The training programme will enhance this particular segment of local government employee skills in municipal finance management, municipal engineering and environmental management.

Municipal Tender Awards and Internal Appeals by unsuccessful Bidders

In recent years, bidders aggrieved by municipal tender awards are increasingly resorting to Section 62 of the Local Government: Municipal Systems Act1 for relief.The application of this provision to tender processes is however strictly confined, and in most instances bidders find that they have no option but to approach the courts for the judicial review of tender awards. In this article, the application of Section 62 to a municipality’s tender processes and decisions is critically analysed in the light of recent court judgments. Attention is also given to the relation between Section 62 and dispute resolution procedures in place under the Supply Chain Regulations,2 enacted under the Local Government: Municipal Finance Management Act.3 It is argued that at present, internal appeal and dispute resolution processes do not afford unsuccessful bidders adequate protection.Keywords: Appeals; bid committee system; competitive bidding; Constitution; dispute resolution; Local Government: Municipal Systems Act; procurement; South Africa; tender.