Die Erkenning van Inkomste in die Openbare Sektor in Suid-Afrika: Politieke en Sosiale Dilemmas versus Rekeningkundige Realiteite

Abstract

The outstanding debtors of local authorities in South Africa have been increasing at an alarming rate for several years. Together with this, many local authorities do not make sufficient provision for doubtful debts, and the “culture of non-payment” is jeopardising the sustainability of services that are provided (or should be provided) by local authorities. In the time during which the preceding took place, there were drastic changes and development of Generally Accepted Accounting Practice (GAAP). The primary purpose of this article is to try to answer the key question whether the current requirements of GAAP against a “culture of non-payment” do not create certain irreconcilable problems. The main focus in this article will be on one of these possible problems, namely the accounting principle of “recognition of income and debtors” in cases of a culture of non-payment for such services. For purposes of achieving the aim of this article, the focus will be on local authorities in South Africa. Other government and semi-government institutions such as water councils and institutions that provide electricity and other services, and that also experience the problem of misrepresentation of their services, may similarly experience the problem. In this article a brief overview is firstly given of the “culture of non-payment” for services provided by local authorities together with an overview of the worrying increase in outstanding debtors of local authorities in South Africa. Subsequently the principles of “recognition of income and debtors” and the present requirements in this regard from an accounting viewpoint are discussed, and it is also shown that the “culture of non-payment” and the accounting principles of “recognition of income and debtors” give rise to serious misrepresentations in the annual financial statements of local authorities. Finally a summary also provides an indication of the implications that this possible misrepresentation has for various role-players.