A Post-Mortem of Municipal Audit Action Plans Used to Resolve Financial Distress in South Africa

This study aims to improve the state of financial distress, which plagues 64% of South Africa’s municipalities. This fiscal crisis has constrained the quality of basic service delivery to local communities. Even though municipal financial distress dominates South African news headlines, there is a gap in the existing research literature on how to address municipal financial distress practically. This study identified effective turnaround strategies to alleviate financial distress by analyzing regulatory audit reports and audit action plans of municipalities officially classified as financially distressed in May 2018 and subsequently improved their financial affairs. Effective turnaround strategies empower financially distressed municipalities to improve their financial viability by promoting accountability and restoring local communities’ trust in their democratically elected municipal councils. Effective turnaround was achieved through the introduction of internal controls, strengthening governance and oversight, and the implementation of adequate records management practices. This study was conducted in the context of local democratic theory, as elected municipal officials are accountable to residents for the manner in which taxpayers’ money is spent. It aims to assist financially distressed municipalities in becoming financially sustainable and empower them to deliver essential services to local communities in accordance with the United Nations’ Sustainable Development Goals.