South African municipalities are facing a deepening financial quagmire, characterised by escalating irregular, fruitless, and wasteful expenditure, declining revenue bases, and mounting debt, which undermines their constitutional mandate to deliver basic services to communities. Guided by an integrated theoretical framework that combines perspectives on public financial management, governance, and institutional accountability, this study examines the financial and administrative dynamics that contribute to municipal financial distress, using Emfuleni Local Municipality and comparative national evidence as illustrative cases. The study adopts a qualitative, theory-building literature review methodology, synthesising peer-reviewed scholarship, audit reports, policy documents, and government publications sourced from databases including Google Scholar, JSTOR, and EBSCOhost, as well as institutional reports from the Auditor-General of South Africa, National Treasury, and the Department of Cooperative Governance and Traditional Affairs. The findings reveal that municipal financial collapse is driven by an interconnected cycle involving weak revenue collection, poor financial management, governance failures, irregular expenditure, and ineffective accountability mechanisms. These failures are further exacerbated by overreliance on external consultants, weak institutional capacity, and the absence of consequence management, which collectively entrench a culture of financial impunity and institutional dysfunction. The study concludes that municipal financial sustainability requires structural reforms to the municipal funding model, strengthening internal financial capacity, enhancing accountability and oversight mechanisms, and institutionalising consequence management. These interventions are essential to restoring financial stability, improving governance, and enhancing sustainable service delivery within South African local government.