Abstract
The Auditor-General South Africa (AGSA) Report for the 2017/18 financial year-end indicates that 87 per cent of municipalities failed to achieve clean audits, quoting a lack of robust internal control and poor financial management, lack of accountability and consequences for non-compliance as causes. The report further highlighted the three statutory areas of poor financial management; irregular expenditure, wasteful and fruitless expenditure, and unauthorized expenditure. This paper intends to explore how the national government in South Africa allocates budgets to municipalities and aims to identify whether there is a consideration of municipality performance when allocating grants. A qualitative study was conducted, and there was a review of secondary data to explore the budget allocation and actual spending of municipalities. In addition to the secondary data review, the relationship between the municipal grants allocation and the three areas of poor financial management were analysed through correlation analysis as per data extracted from the South African National Treasury (NT) budget allocation, and the AGSA reports. The study identified municipalities which have been the top contributors in poor financial management for four (4) years between 2014/15 to 2017/18 financial years (FY)...