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Local Government: Municipal Finance Management Act, 2003 (Act No. 56 of 2003)

Chapter 13 : Resolution of Financial Problems

Part 2 : Provincial interventions

138. Criteria for determining serious financial problems


When determining for the purposes of section 137 the seriousness of a financial problem, all relevant facts must be considered, and the following factors, singly or in combination, may indicate a serious financial problem:

(a) The municipality has failed to make payments as and when due;
(b) the municipality has defaulted on financial obligations for financial reasons;
(c) the actual current expenditure of the municipality has exceeded the sum of its actual current revenue plus available surpluses for at least two consecutive financial years;
(d) the municipality had an operating deficit in excess of five per cent of revenue in the most recent financial year for which financial information is available;
(e the municipality is more than 60 days late in submitting its annual financial statements to the Auditor-General in accordance with section 126;
(f) the Auditor-General has withheld an opinion or issued a disclaimer due to inadequacies in the financial statements or records of the municipality, or has issued an opinion which identifies a serious financial problem in the municipality;
(g) any of the above conditions exists in a municipal entity under the municipality's sole control, or in a municipal entity for whose debts the municipality may be responsible, and the municipality has failed to intervene effectively; or
(h) any other material condition exists which indicates that the municipality, or a municipal entity under the municipality's sole control, is likely to be unable for financial reasons to meet its obligations.