MFMA Section 72: Why South African Municipalities Are Still Compiling It Manually and What Changes That

MFMA Section 72 mid-year assessments are due to National Treasury and the relevant provincial treasury by 25 January each year, within 25 days of the 31 December mid-year. Most municipal finance teams spend between two and four weeks preparing the assessment manually, drawing on data from multiple systems that do not integrate with each other.

The Municipal Finance Management Act 56 of 2003 imposes a reporting obligation that National Treasury calls the mid-year budget and performance assessment. Most people in municipal finance know it simply as Section 72.

The assessment is due by 25 January every year. It must be submitted to the accounting officer, the mayor or executive committee, the relevant provincial treasury and National Treasury simultaneously. It must include a performance review of the municipality's actual performance against the budget for the first half of the financial year, a revised projection for the second half, an assessment of service delivery performance and remedial action plans for any material underspending or revenue shortfalls identified.

For a local municipality or district municipality with limited finance staff, multiple systems that do not talk to each other and data that requires manual extraction and reconciliation, the two weeks before 25 January are among the most pressured of the municipal finance calendar.

Why the manual preparation problem is structural

The root of the manual preparation problem is not a skills shortage. It is a data architecture problem. The data needed for a Section 72 assessment lives in multiple places: the municipal financial system (typically SAP Municipal, Accpac or a similar platform), the performance management system (where SDBIP targets and actuals are captured), the project management system (for capital expenditure tracking) and in some cases Excel-based subsidiary records that feed the primary system.

None of these systems, in most South African municipalities, was designed to produce a Section 72-format output automatically. The calculation requirements are not simple. The assessment requires actual versus budget comparisons at a granular level, by vote, by project, by service delivery indicator, year-end projections based on the actual burn rate to date and explanations for variances above a defined threshold. All of this, from raw system exports to formatted submission, is done manually in most municipalities.

What FiscalFocus addresses

FiscalFocus is Sourceworx's financial reporting tool for South African municipalities, built specifically around the MFMA reporting cycle. It addresses the Section 72 preparation problem by connecting to the municipal financial system, extracting the relevant data, applying the MFMA-required calculations and generating the assessment in the prescribed National Treasury format.

FiscalFocus does not ask staff to re-enter data. It reads the data from the system where it already exists, applies the Section 72 logic and produces the output. The finance team reviews and approves the output. They do not produce it.

This design means that the Section 72 assessment can be produced in hours rather than weeks, and the risk of manual error in the calculation is replaced by a documented, auditable automated process.

The AG finding connection

The AGSA's local government audit outcomes consistently identify material misstatements in financial statements as a leading cause of qualified and adverse audit opinions. A significant proportion of those misstatements originate in the manual compilation process: data that was correctly captured in the source system but was incorrectly extracted, reconciled or formatted in the preparation of the submission.

An automated, source-connected reporting process reduces this category of error. It does not eliminate all sources of financial reporting error: it does not correct errors in the underlying system data. But it eliminates a documented and consistent category of error. That is a meaningful contribution to a cleaner audit outcome.

Speak to our public sector team about FiscalFocus and the MFMA reporting automation it provides.