The National Treasury made these revelations on their latest report on the over and underspending of municipalities in the country.
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According to the Treasury’s municipal financial year ended 30 June 2014, the overall performance was far below the budget targets as at 30 June 2014.
The report added that the aggregated under collection of revenue against municipal budgets could primarily be attributed to overoptimistic and unrealistic revenue appropriations and weak management of the revenue value chain.
“In many cases this revenue appropriation is unrealistic and over stated and subsequently with the implementation of the budget they are forced to downscale on expenditures,” read the report.
“This position is clearly articulated by the 28 billion rand underperformance against the total adjusted revenue budget including the transfers and other revenue.”
Treasury said municipalities had their own revenue generating responsibility which was directly related to fiscal capacity versus fiscal effort.
The report also stated that spending against the capital budget was extreme.
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“The first aspect deals with the actual capacity of a municipality to bill consumers for services rendered. The second aspect is related to the actual effort exercised by municipalities in collecting the revenue billed,” added the report.
“Not only are municipalities over stating the revenue on the statement of financial performance (as explained in the above bullet) but where they do indeed bill for services rendered they do not necessarily collect the revenue.”