GRAP Standards for SA Municipalities: Practical Implementation Guide

In the 2022–23 municipal audit cycle, the Auditor-General reported that many South African municipalities still struggle with the correct application of Generally Recognised Accounting Practice (GRAP). Misstated assets, incomplete disclosures, and inconsistent accounting policies are among the recurring findings that lead to qualified or adverse opinions. For municipal CFOs and finance staff, GRAP standards are not optional: they are the reporting framework that the MFMA and National Treasury require for annual financial statements. This guide explains what GRAP is, why it matters for municipalities, which standards apply most often, how GRAP differs from IFRS, and how to implement and sustain GRAP compliance in practice — including how the right municipal finance software can support consistent application and fewer audit findings.

What Is GRAP and Why Does It Matter for Municipalities?

Generally Recognised Accounting Practice (GRAP) is the set of accounting standards that South African public-sector entities must use when preparing their annual financial statements. It is issued by the Accounting Standards Board (ASB), which operates under the Financial Reporting Standards Council. GRAP is the public-sector equivalent of IFRS (International Financial Reporting Standards) used in the private sector. Where IFRS is written for profit-oriented entities, GRAP is written for entities that do not have profit as their primary objective — including national and provincial departments, public entities, and municipalities and municipal entities.

For municipalities, GRAP matters for three main reasons.

Legal requirement. The Municipal Finance Management Act (MFMA) and the Municipal Budget and Reporting Regulations require that annual financial statements be prepared in accordance with the standards of generally recognised accounting practice. In practice, that means GRAP. Non-compliance is both a reporting failure and a compliance finding that the Auditor-General will raise.

Comparability and credibility. When every municipality applies the same accounting framework, financial statements can be compared across municipalities and aggregated at provincial and national level. Credible AFS support oversight by councils, National Treasury, and the public; they also support borrowing, grant applications, and long-term planning.

Audit outcomes. The AG tests whether the AFS are prepared in accordance with the applicable framework. Incorrect or incomplete application of GRAP leads to material misstatements, qualified or adverse opinions, and repeated findings. Getting GRAP right is therefore central to how to achieve a clean municipal audit.

In short: GRAP is the rulebook for how municipalities must recognise, measure, present, and disclose transactions and events in their financial statements. Understanding and applying it correctly is a core responsibility of the municipal finance function.

Key GRAP Standards Relevant to Municipalities

Municipalities are required to apply the full suite of GRAP standards that are relevant to their transactions and balances. The following are among the most frequently applied and the most often implicated in audit findings. They cover presentation, cash flows, policies, assets, liabilities, and disclosure.

GRAP 1 — Presentation of Financial Statements

GRAP 1 sets out the overall structure and content of the financial statements. It specifies what a complete set of AFS includes: statement of financial position, statement of financial performance, statement of changes in net assets, cash flow statement, and notes. It also prescribes minimum line items and disclosure requirements for each statement and requires that financial statements present fairly the financial position, financial performance, and cash flows of the entity. Municipalities that omit required statements, use incorrect formats, or fail to disclose required information are in breach of GRAP 1. This standard is the foundation: get the presentation wrong and the rest of the AFS is undermined.

GRAP 2 — Cash Flow Statements

GRAP 2 requires entities to present a cash flow statement classifying cash flows from operating, investing, and financing activities. For municipalities, this means all cash receipts and payments must be correctly categorised. Common errors include misclassifying grant receipts (operating vs financing), incorrectly splitting capital expenditure between investing and operating, and failing to reconcile the cash flow statement to the statement of financial position. The cash flow statement is often scrutinised by the AG because errors here can indicate deeper control or classification issues.

GRAP 3 — Accounting Policies, Changes in Accounting Estimates and Errors

GRAP 3 deals with the selection and application of accounting policies, changes in policies, changes in estimates, and correction of prior-period errors. Municipalities must adopt policies that result in relevant and reliable information and apply them consistently. When a policy is changed (only when required by a new standard or when it results in more reliable information), the change must be applied retrospectively and disclosed. Prior-period errors must be corrected retrospectively. In practice, many audit findings arise from inconsistent application of policies from year to year, or from ad hoc changes without proper disclosure or restatement.

GRAP 17 — Property, Plant and Equipment

GRAP 17 governs the recognition, measurement, and disclosure of property, plant and equipment (PPE). Municipalities hold large amounts of infrastructure and other PPE: roads, water and sewerage networks, buildings, vehicles, and equipment. Under GRAP 17, items of PPE are initially measured at cost and subsequently either at cost less accumulated depreciation and impairment or using the revaluation model. Depreciation must be systematic over useful life; useful lives and residual values must be reviewed periodically. Asset registers must be complete and reconciled to the AFS. Incomplete registers, wrong classification (e.g. infrastructure not separated where required), incorrect useful lives, and missing or incorrect depreciation are frequent causes of qualified opinions. GRAP 17 is one of the most material standards for municipalities because of the size of their PPE balances.

GRAP 102 — Intangible Assets

GRAP 102 applies to intangible assets such as software, licences, and other non-physical assets. Municipalities that capitalise software, GIS systems, or other intangibles must apply GRAP 102 for recognition, measurement (cost or revaluation), amortisation, and disclosure. Common issues include capitalising costs that should be expensed (e.g. certain development costs), incorrect amortisation periods, and failing to test intangibles for impairment when there are indicators. Getting the boundary between capital and expense right is important for both GRAP 102 and for mSCOA classification, which affects how expenditure appears in the AFS.

GRAP 21 — Impairment of Non-Cash-Generating Assets

Municipalities hold many non-cash-generating assets (e.g. roads, parks, administration buildings). GRAP 21 requires that such assets be tested for impairment when there is an indicator that the carrying amount may exceed the recoverable service amount. When impaired, the asset must be written down and the impairment loss recognised. Failure to perform impairment tests when indicators exist, or to recognise and disclose impairment losses, is a recurring AG finding. This standard is especially relevant after events that reduce the utility or service potential of assets (e.g. damage, obsolescence, or changes in use).

GRAP 104 — Financial Instruments

GRAP 104 covers the recognition, measurement, and disclosure of financial assets and financial liabilities. Municipalities hold cash, investments, receivables (including rates and service debtors), and payables; they may also have borrowings and guarantees. GRAP 104 requires classification into the correct categories, measurement at amortised cost or fair value as appropriate, and adequate disclosure of risk and fair values. Common errors include incorrect classification of financial assets, inadequate impairment of receivables (expected credit losses), and missing or incomplete disclosures. Given the significance of receivables and cash in municipal balance sheets, GRAP 104 is high-impact.

GRAP 25 — Employee Benefits

GRAP 25 deals with short-term benefits (e.g. salaries, leave), post-employment benefits (e.g. pension and medical aid), and other long-term benefits. Municipalities have substantial employee benefit obligations. Salaries and wages must be recognised when the service is rendered; leave must be accrued; and defined benefit plans (including pension funds and medical aid where the municipality bears risk) require actuarial valuations and recognition of the net defined benefit asset or liability. Understatement of leave provisions, incorrect pension fund accounting, and missing disclosures are common findings. GRAP 25 is particularly technical and often benefits from specialist input or systems that track leave and payroll accurately.

GRAP 19 — Provisions, Contingent Liabilities and Contingent Assets

GRAP 19 requires that provisions be recognised when there is a present obligation (legal or constructive), an outflow of resources is probable, and the amount can be estimated reliably. Municipalities may have provisions for litigation, environmental remediation, restructuring, or warranties. Contingent liabilities and contingent assets must be disclosed when the outflow or inflow is not probable or the amount cannot be measured reliably. Over-provisioning, under-provisioning, or failing to disclose contingent items can all lead to misstatement. Keeping a register of provisions and contingencies and reviewing it regularly helps ensure GRAP 19 compliance.

Reference Table: Important GRAP Standards for Municipalities

Standard	Title	Why It Matters for Municipalities
GRAP 1	Presentation of Financial Statements	Defines structure and content of AFS; foundation for all other disclosures
GRAP 2	Cash Flow Statements	Required classification of cash flows; often misapplied
GRAP 3	Accounting Policies, Changes in Estimates and Errors	Consistency, changes, and prior-period corrections
GRAP 17	Property, Plant and Equipment	Bulk of municipal balance sheet; depreciation, useful lives, asset register
GRAP 102	Intangible Assets	Software, licences; capital vs expense, amortisation
GRAP 21	Impairment of Non-Cash-Generating Assets	Write-downs when service potential is impaired
GRAP 104	Financial Instruments	Cash, investments, receivables, payables, borrowings; classification and disclosure
GRAP 25	Employee Benefits	Salaries, leave, pensions, medical aid; provisions and actuarial valuations
GRAP 19	Provisions, Contingent Liabilities and Contingent Assets	Litigation, environmental, restructuring; recognition and disclosure

Other GRAP standards may apply depending on the municipality’s transactions (e.g. GRAP 9 on revenue from exchange transactions, GRAP 23 on revenue from non-exchange transactions, GRAP 12 on inventories). The ASB and National Treasury publish the full list and application guidance; finance teams should maintain a mapping of which standards apply to their entity and ensure that all are applied correctly.

How GRAP Differs from IFRS

GRAP is based on the same conceptual framework as IFRS and many standards are closely aligned. However, there are important differences that matter for municipal finance staff who may have private-sector experience.

Sector-specific standards. GRAP includes standards that have no direct IFRS equivalent or that differ in scope. For example, GRAP 23 on revenue from non-exchange transactions (e.g. grants, subsidies, rates) is central to municipalities; IFRS 15 focuses on exchange revenue. GRAP 9 and GRAP 23 together govern municipal revenue recognition in a way that reflects the mix of exchange and non-exchange revenue that municipalities receive.

Terminology and structure. Some terms differ (e.g. “statement of financial performance” in GRAP vs “statement of profit or loss” in IFRS; “net assets” vs “equity”). The overall presentation and many recognition and measurement rules are similar, but the wording and some disclosure requirements are tailored to the public sector.

Non-cash-generating assets. GRAP 21 and related guidance address impairment of assets that do not generate cash flows. IFRS uses a different model (recoverable amount based on value in use or fair value less costs of disposal). Municipalities must apply the GRAP model for their infrastructure and other non-cash-generating assets.

Application. Municipalities must apply GRAP, not IFRS, for their AFS. Using IFRS where GRAP differs can lead to misstatement and non-compliance. When in doubt, refer to the ASB’s GRAP standards and implementation guidance, and to National Treasury’s circulars on municipal reporting.

Practical Implementation Steps for GRAP Compliance

Implementing and sustaining GRAP compliance requires a structured approach. The following steps give municipal CFOs and finance teams a practical roadmap.

1. Identify all applicable GRAP standards. List every GRAP standard that applies to your municipality’s transactions and balances. Use the reference table above as a starting point and add others (e.g. revenue, leases, related parties). Assign ownership for each standard — who is responsible for ensuring correct application and disclosure.

2. Document accounting policies. For each applicable standard, document the municipality’s accounting policies in writing. Policies must be consistent with GRAP and applied consistently from year to year. Update the policy document when standards change or when policies are deliberately changed (with proper disclosure under GRAP 3). The policy document should be approved by the CFO and audit committee and be readily available for preparers and auditors.

3. Align systems and processes. Ensure that your general ledger, asset register, and supporting systems capture the data needed for GRAP. For example, the asset register must support GRAP 17 (cost, useful life, depreciation method, accumulated depreciation); receivables and revenue systems must support GRAP 104 and revenue standards. Where the mSCOA chart of accounts is used, ensure that classification supports both mSCOA reporting and GRAP disclosure requirements. Consider municipal software that is designed for GRAP and mSCOA so that compliance is built into daily processes.

4. Train finance staff. Ensure that everyone involved in preparing the AFS understands the relevant GRAP standards and the municipality’s policies. Focus on the standards that have historically caused findings in your municipality or in the sector. Include year-end workshops that walk through each note and disclosure requirement.

5. Perform pre-year-end and year-end reviews. Before finalising the AFS, perform a checklist review against each applicable GRAP standard: have all required disclosures been made? Are recognition and measurement in line with policy? Are prior-period figures comparable? Reconcile key balances (e.g. PPE to asset register, provisions to supporting schedules) and resolve discrepancies. This discipline reduces the risk of material misstatement and supports clean audit outcomes.

6. Stay current with ASB and National Treasury. The ASB issues new and amended GRAP standards; National Treasury issues circulars on municipal reporting and deadlines. Subscribe to updates, assess the impact of new standards on your municipality, and plan implementation in good time. MFMA compliance requirements and reporting formats may also change; align GRAP application with the latest regulatory expectations.

Common GRAP Errors in Municipal AFS

The Auditor-General’s reports highlight recurring GRAP-related findings. Avoiding these patterns reduces the risk of qualified or adverse opinions.

• Incomplete or incorrect PPE disclosure (GRAP 17). Asset registers not reconciled to the AFS; missing or incorrect useful lives and depreciation; infrastructure not separately disclosed where required; revaluation not applied consistently or not disclosed. Fix: Maintain a complete, accurate asset register; reconcile to the general ledger and to the AFS note; review useful lives and residual values periodically.

• Misstated or missing provisions (GRAP 19, GRAP 25). Leave provisions understated; pension or medical aid obligations not correctly measured; contingent liabilities not disclosed. Fix: Maintain registers of provisions and contingencies; use actuarial or other expert input where required; disclose all material contingent items.

• Revenue recognition errors (GRAP 9, GRAP 23). Exchange and non-exchange revenue not correctly distinguished; grants recognised in the wrong period or incorrectly classified; rates revenue not aligned with GRAP 23. Fix: Document revenue recognition policies clearly; ensure systems support period-end cut-off and correct classification.

• Cash flow misclassification (GRAP 2). Operating, investing, and financing flows incorrectly classified; reconciliation to the statement of financial position not correct. Fix: Use a structured cash flow preparation process; reconcile each section to supporting records; review high-value and unusual items.

• Inconsistent accounting policies (GRAP 3). Policies applied inconsistently year on year; changes not disclosed or not applied retrospectively; prior-period errors not corrected. Fix: Document policies and apply them consistently; when changing a policy or correcting an error, follow GRAP 3 in full and disclose.

• Inadequate financial instrument disclosure (GRAP 104). Receivables impairment (expected credit losses) not calculated or disclosed; financial instrument categories and risks not fully disclosed. Fix: Implement expected credit loss calculations for receivables; complete all GRAP 104 disclosure checklists.

Addressing these areas systematically, with clear ownership and regular review, puts the municipality in a stronger position to meet GRAP requirements and improve audit outcomes.

How Technology Supports GRAP Compliance

Manual processes and spreadsheets increase the risk of GRAP errors: formulas break, prior-year logic is forgotten, and disclosures are missed. Technology can reduce that risk by embedding GRAP and related requirements into the finance function.

Chart of accounts and segment structure. Municipal software that is built for South African local government can pre-configure the chart of accounts to align with mSCOA and with the level of detail needed for GRAP disclosures. When transactions are captured with the correct segments and account codes, the general ledger already supports AFS preparation. There is less need for year-end reallocations or reclassification, which are a common source of error.

Asset register and depreciation. A dedicated asset register that applies GRAP 17 (cost, useful life, depreciation method, impairment) and links to the general ledger ensures that the PPE note can be generated from a single source of truth. Depreciation runs can be automated and reviewed; useful lives can be maintained in one place. That reduces the risk of incomplete registers and misstated depreciation.

Provisions and contingencies register. Systems that track provisions (leave, litigation, environmental, etc.) and contingent liabilities with supporting documentation and review dates help ensure that GRAP 19 and GRAP 25 disclosures are complete and accurate. Reminders for periodic reassessment reduce the risk of stale or missing provisions.

Reporting and disclosure checklists. Software that includes AFS templates and disclosure checklists aligned with GRAP can guide preparers through each required note and line item. When the same system holds the underlying data, numbers can be pulled through automatically, reducing keying errors and improving consistency between the primary statements and the notes.

Audit trail and version control. A clear audit trail of who captured or approved what, and when, supports both internal control and the AG’s testing. Version control for draft AFS and supporting schedules helps manage year-end workflow and ensures that the final version is complete and consistent.

Municipalities that combine strong GRAP knowledge with modern municipal finance systems are better placed to produce AFS that meet the standards of generally recognised accounting practice and to sustain clean or improved audit outcomes over time.

Conclusion

GRAP standards for municipalities in South Africa are the legal and technical foundation of credible municipal financial statements. Understanding what GRAP is, which standards apply, how they differ from IFRS, and how to implement them in practice is essential for municipal CFOs and finance staff. By documenting policies, aligning systems, training staff, and avoiding the most common errors, municipalities can improve the quality of their AFS and support better audit outcomes. Combining that discipline with technology designed for GRAP and mSCOA compliance reduces the risk of material misstatement and frees finance teams to focus on analysis and decision support rather than year-end firefighting. For more on the broader compliance and reporting framework, see our guides on the mSCOA chart of accounts, how to achieve a clean municipal audit, and MFMA compliance requirements for 2026.