MFMA Compliance Requirements: What Every Municipality Must Know in 2026

In the 2022–23 municipal audit cycle, only 34 of 257 municipalities and municipal entities received a clean audit from the Auditor-General. That is 16%. The rest faced qualified opinions, disclaimers, or adverse findings. Section 139 interventions, where provincial government steps in to stabilise a failing municipality, remain a real consequence of sustained non-compliance. For municipal managers, CFOs, and finance staff, understanding and meeting MFMA compliance requirements is not optional — it is the foundation of financial governance and the difference between credible local government and intervention.

This guide sets out what the Municipal Finance Management Act requires, which obligations matter most in 2026, and how to avoid the compliance failures the Auditor-General sees year after year. Whether you are new to municipal finance or refreshing your knowledge, the aim is practical: know the rules, meet the deadlines, and build controls that support clean audits and sound service delivery.

What Is the MFMA?

The Municipal Finance Management Act (MFMA), Act 56 of 2003, is the main law governing how South African municipalities manage money. It came into effect in phases from 2004 and applies to all municipalities and municipal entities. Together with the Municipal Systems Act and regulations and circulars from National Treasury, the MFMA sets the framework for budgeting, revenue and expenditure, supply chain management, financial reporting, and accountability.

In plain language: the MFMA says who is responsible for what, how budgets must be prepared and approved, how spending and revenue must be controlled, and what must be reported and when. It also defines unauthorised, irregular, and fruitless and wasteful expenditure and requires municipalities to prevent and deal with them. Compliance is not only a legal duty; it is what enables councils, residents, and investors to trust that municipal finances are managed properly. For a structured view of how municipal accounting fits together, see our mSCOA chart of accounts guide.

Key MFMA Compliance Obligations

Financial Governance Roles

The MFMA assigns clear roles. Getting these right is the first step in MFMA compliance.

Municipal Manager — Accounting officer; ultimately responsible for financial management and compliance. Must ensure that the municipality has and maintains effective financial and risk management, internal audit, and internal control.
Chief Financial Officer (CFO) — Responsible for managing the budget, revenue, expenditure, assets, and liabilities; and for preparing financial statements and reports. The CFO must support the Municipal Manager and ensure that finance staff have the skills and systems to meet MFMA requirements.
Mayor — Political head; tables the annual budget and mid-year budget and performance assessment; may not interfere in the day-to-day administration of the administration or in the duties of the Municipal Manager or CFO.
Council — Adopts the budget, approves certain contracts and amendments, and oversees performance. Council must receive and consider the reports that the MFMA requires.

When roles are blurred or responsibilities are not documented and delegated properly, compliance breaks down. Clarify who prepares, who reviews, and who signs off on each key deliverable.

Budget Requirements (Sections 16–33)

The MFMA sets out how budgets must be prepared, tabled, and adopted.

Preparation — The Municipal Manager, supported by the CFO, must prepare an annual budget for the upcoming financial year (and a multi-year revenue and expenditure framework where required). The budget must be in the format prescribed by National Treasury and must be realistic and funded.
Tabling — The Mayor must table the budget in Council before the start of the financial year (by 31 March). Council may not adopt a budget that is not tabled in time unless the MEC approves a late tabling.
Adoption — Council must adopt the budget before 1 July. If it does not, the municipality may not spend except for certain emergency and statutory items, and the provincial executive may intervene.

Budget implementation is then governed by Sections 34–50: expenditure must be within the approved budget, and revenue and cash flow must be managed in line with the Act and Treasury regulations.

Revenue and Expenditure Management (Sections 34–50)

Municipalities must collect revenue effectively and spend only in line with the approved budget and MFMA rules.

Revenue — Billing, credit control, and indigent management must be in place. Revenue projections in the budget must be achievable; the Auditor-General repeatedly flags overstatement of revenue and poor collection as drivers of financial stress.
Expenditure — No spending may occur without an approved budget allocation. Commitments (e.g. orders and contracts) must be within the budget. Virement (shifting between votes) is allowed only within the framework set by the Act and Treasury regulations.
Cash management — The municipality must maintain sufficient liquidity to meet obligations. Treasury regulations and municipal budget and reporting regulations give detail on banking, investments, and cash flow reporting.

Failure to align revenue and expenditure with the budget, or to enforce credit control, is one of the most common sources of qualified audits and Section 139 interventions.

Supply Chain Management (Sections 111–119)

Supply chain management (SCM) must be fair, equitable, transparent, competitive, and cost-effective. The MFMA and the Municipal Supply Chain Management Regulations set out:

When competitive bidding is required and when other procurement processes (e.g. quotations, sole source) may be used.
How to establish and use bid committees and what delegations are allowed.
How to deal with deviations and emergency procurement.
Requirements for contract management and reporting.

Weak SCM — poor documentation, inadequate segregation of duties, deviations not properly motivated and approved — shows up in audit reports as irregular expenditure and control deficiencies. Strong SCM policies, trained staff, and clear audit trails are essential for MFMA compliance.

Financial Reporting Obligations

Reporting is where many municipalities run into trouble. Deadlines are strict and the content is prescribed.

Section 71: Monthly budget statements — The Municipal Manager must submit to the National Treasury, the relevant provincial treasury, and the Auditor-General a monthly statement of the municipality’s budget and actual revenue and expenditure. The statement must reach National Treasury within 10 working days after the end of the month. This is one of the most visible MFMA compliance requirements: late or inaccurate Section 71 submissions are tracked and reported publicly.
Section 72: Mid-year budget and performance assessment — The Mayor must table in Council a mid-year budget and performance assessment for the current financial year. It must be submitted by 25 January each year. The assessment must show progress against the budget and the municipality’s performance objectives and indicate any adjustments needed.
Section 126: Annual Financial Statements (AFS) — The Municipal Manager must prepare annual financial statements within two months of the end of the financial year (i.e. by 31 August for a 30 June year-end). The AFS must be in the format prescribed by National Treasury and must be submitted for audit. Our guide on how to achieve a clean municipal audit covers practical steps to get AFS and supporting records audit-ready.
Section 121: Annual Report — The Municipal Manager must prepare an annual report and submit it to the Council and the Auditor-General. The annual report must be submitted within seven months of the end of the financial year (i.e. by 31 January for a 30 June year-end). It includes the AFS, the audit report, and a report on performance and governance.

Detailed guidance on the content and format of monthly and mid-year reports is available in our Section 71 monthly report guide and Section 72 mid-year report guide.

Unauthorised, Irregular, and Fruitless and Wasteful Expenditure (Section 32)

Section 32 of the MFMA requires the Municipal Manager to take reasonable steps to prevent unauthorised, irregular, and fruitless and wasteful expenditure.

Unauthorised expenditure — Spending that was not in line with the approved budget or that exceeded a vote or allocation.
Irregular expenditure — Spending that violated a law or supply chain management policy (e.g. wrong process, no approval). It does not mean the money was necessarily lost, but the process was wrong.
Fruitless and wasteful expenditure — Spending that could have been avoided had reasonable care been taken (e.g. late payment penalties, unnecessary travel).

The Municipal Manager must investigate and report such expenditure, take disciplinary action where appropriate, and recover losses where possible. The Auditor-General reports on the extent of unauthorised, irregular, and fruitless and wasteful expenditure each year; reducing it is a core part of improving MFMA compliance and audit outcomes.

MFMA Compliance Calendar: Key Dates and Deadlines

Missing a deadline is an immediate compliance failure. Use this as a quick reference; confirm dates against the latest National Treasury circulars and your municipality’s year-end.

Deadline	Requirement
31 March	Mayor tables annual budget in Council
Before 1 July	Council adopts annual budget
10 working days after month-end	Section 71 monthly budget statement to National Treasury, provincial treasury, and AG
25 January	Section 72 mid-year budget and performance assessment tabled in Council
31 August (for 30 June year-end)	Annual Financial Statements prepared and submitted for audit (Section 126)
31 January (for 30 June year-end)	Annual Report submitted (Section 121)

Other dates (e.g. for tabling of adjustments budget, for audit committee and council meetings) are set in the MFMA, regulations, and your council’s calendar. Maintain an internal compliance calendar and assign owners for each deliverable.

Common MFMA Compliance Failures Identified by the Auditor-General

The Auditor-General’s reports consistently highlight the same types of failure. Addressing these will materially improve your MFMA compliance position.

Late or inaccurate Section 71 submissions — Submissions after the 10-working-day deadline or with material errors. This is often due to fragmented systems, manual re-keying, or lack of ownership. Automating data pull from the general ledger and budget to the Section 71 format reduces delay and error.
Poor quality of annual financial statements and supporting records — Missing or incomplete working papers, misclassification of items, and poor reconciliation of balances. Auditors then qualify on completeness, accuracy, or disclosure. Investing in mSCOA-aligned chart of accounts and consistent month-end processes improves AFS quality.
Weak supply chain management — Inadequate documentation of procurement processes, unjustified deviations, and poor contract management leading to irregular expenditure. Strengthen SCM policies, delegations, and training, and ensure every transaction has a clear audit trail.
Lack of consequences for transgressions — Failure to investigate and act on unauthorised, irregular, and fruitless and wasteful expenditure. The MFMA requires the Municipal Manager to act; consistent follow-up and discipline support a culture of compliance.
Unfilled or under-skilled key positions — Vacant or acting CFO or other critical finance roles. The MFMA assumes competent, stable leadership; high turnover or acting appointments increase the risk of missed deadlines and weak controls.
Overstated revenue and poor collection — Budgets built on unrealistic revenue assumptions and weak credit control. The result is cash shortfalls and inability to pay creditors or fund operations. Align revenue budgets with realistic collection rates and enforce credit control and indigent processes.

Targeting these areas — reporting discipline, AFS quality, SCM, consequences, capacity, and revenue realism — will address most of what the Auditor-General flags.

How to Improve MFMA Compliance: Practical Steps

Assign clear ownership — For each MFMA deliverable (Section 71, Section 72, AFS, annual report, SCM key controls), assign an owner and a reviewer. Document this in a compliance matrix or responsibility schedule.
Work to a compliance calendar — Maintain a calendar with all statutory dates and internal milestones (e.g. “draft Section 71 by day 7”). Review it monthly with the Municipal Manager and CFO.
Strengthen month-end and year-end processes — Standardise closing procedures, reconciliation checklists, and review steps. Complete reconciliations before submitting Section 71 so that the numbers you report are the same as those you will use in the AFS.
Invest in skills and capacity — Ensure finance and SCM staff are trained on the MFMA, Treasury regulations, and mSCOA. Use CIGFARO, IMFO, or National Treasury workshops where available. Plan for succession in key roles.
Tighten SCM — Review delegation of authority, deviation procedures, and contract register. Ensure every procurement decision is documented and that audit trails are complete.
Act on transgressions — Investigate all identified unauthorised, irregular, and fruitless and wasteful expenditure; report to Council and the AG; take disciplinary and recovery action where appropriate. This signals that compliance matters.
Use the audit report as an action list — Treat the previous year’s audit findings as a roadmap. Address repeat findings first; then tackle one-off issues. Track progress and report to the audit committee and Council.

For a structured approach to improving audit outcomes, see our guide on how to achieve a clean municipal audit.

How Technology Supports MFMA Compliance

Manual processes, spreadsheets, and legacy systems that do not talk to each other make it harder to meet MFMA compliance requirements on time and with accuracy. Technology cannot replace sound governance and skilled people, but it can reduce the burden and the risk of error.

Automated reporting — Systems that pull data from the general ledger and budget and generate Section 71 and Section 72 returns in the prescribed format cut down on re-keying and delay. Submissions can be prepared within the 10-working-day window instead of in a last-minute scramble.
Real-time dashboards — Visibility over budget vs actual revenue and expenditure, cash position, and key ratios helps the CFO and Municipal Manager spot variances early and correct course. It also supports more accurate and timely reporting to Council and Treasury.
Audit trails — A proper financial management system records who did what and when. That supports investigations into irregular or fruitless expenditure and satisfies auditors that controls are operating.
mSCOA alignment — Software that is built or configured for the municipal chart of accounts and reporting frameworks reduces misclassification and speeds up month-end and year-end closing. That directly supports better Section 71 and AFS quality.

Dolobha is municipal management software designed for South African local government, with support for mSCOA, Section 71 and Section 72 reporting, and the financial controls the MFMA expects. Evaluating whether your current systems meet your compliance workload is a practical step toward meeting MFMA compliance requirements in 2026 and beyond.

Resources and References

National Treasury — MFMA — mfma.treasury.gov.za — Regulations, circulars, frameworks, and guidance.
Municipal Finance Management Act, Act 56 of 2003 — The Act itself; read Sections 16–33 (budget), 34–50 (revenue and expenditure), 71–72 (reporting), 111–119 (SCM), 121 (annual report), 126 (AFS), and 32 (unauthorised/irregular/fruitless and wasteful expenditure).
Auditor-General South Africa — agsa.co.za — General reports on local government, audit outcomes, and methodology.
Municipal Budget and Reporting Regulations — Prescribe formats and deadlines for budgets and Section 71/Section 72.
Municipal Supply Chain Management Regulations — Detail on procurement processes and delegations.

Staying compliant with the MFMA is an ongoing discipline: right roles, clear processes, reliable reporting, and a culture that takes financial governance seriously. Use this guide as a checkpoint for your municipality’s MFMA compliance requirements in 2026, and prioritise the obligations and deadlines that have the biggest impact on your audit outcome and service delivery.