Financial Management Grant

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Financial Management Grant

• Select Committee on Finance
• National Treasury
• TV Pillay

2
FMG

• The purpose of the FMG is to promote and support
  municipal financial management reforms and assist
  municipalities with the implementation of the
  MFMA
• 2001 pilot programme targeted at selected
  municipalities
• Cat A (Jhb/Tshwane), B (Msunduzi/Sol Plaatje),
• Cat C (OR Tambo, Amatole)
• 2003 phased implementation of the MFMA
• 2004 countrywide support for reforms
• 2005 Grant extended to 194 municipalities
• 2006 and medium term to all municipalities

3

• Background to the MFMA
• MFM reform commenced in 1998
• Testing with pilot municipalities commenced in
  2000
• MFMA took effect 1 July 2004, with some sections
  delayed or exempted for lower capacity
  municipalities
• Financial and technical assistance provided via
  FMG MFMTAP
• Prime responsibility for financial management
  rests with EACH municipality

4
FMG

• Aims
• Catalyst for MFMA implementation
• Strengthening of municipal financial management
  capacity
• Broaden skills base for financial management

5
FMG

• Conditions
• Appointment of an appropriately skilled municipal
  manager and CFO
• Appointment of at least two interns for purposes
  of building future financial management capacity
• Council Resolution committing council to reforms
• Submission of primary bank account details
• Development of an action plan for implementation
  
• Monthly reporting on performance

6
FMG

• Focus of reforms
• Build awareness and undertake training on MFMA
  reforms
• Create and implement credible multi-year budgets
• Linking plans and Budgets
• Improve consultation with communities
• In-year reports to council and external parties
• Prepare quality and timely AFS and Annual Reports
  
• Improve processes, procedures and quality of
  financial information
• Prepare and present SDBIPs

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FMG Allocations
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Restructuring Grant

• Aim
• Support large municipalities with restructuring
• Conditions
• Municipality develop own restructuring plans
• Contractual obligations on plans
• Adopt resolution committing to implementing plans
• Show progress in quarterly reports

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Restructuring Grant

• Some indicators
• Institutional
• Staffing and skills levels
• Structured meetings and frequency
• Alternative service delivery mechanism
• Service centre
• Economic Development
• Innovative programmes
• Job creation activities
• Financial
• Credit ratings
• Debt ratios
• Revenue collection ratios
• Infrastructure spending levels

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Restructuring Grant Allocations
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Conclusion
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• MFMA - Priorities
• Preparing an implementation plan
• Allocate responsibilities to AOMM
• Establish senior management team
• Bank account and cash controls
• Meeting financial commitments
• Budgets
• Supply Chain Management policy

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• MFMA - Priorities (cont.)
• Entities, PPPs, long term contracts and borrowing
  reforms
• Past financial statements
• Present financial statements and annual report
• Tender committees, boards, forbidden loans
• Compliance with Division of Revenue Act

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Internship Programme

• Commenced in 2004 - unemployed graduates in
  Public Finance, Economics, Accounting and
  Auditing from disadvantaged communities
• Programme supported by municipalities, with
  international and local mentors guided by NT
• 490 interns currently employed in municipalities
• Over 60 appointed permanently in municipalities,
  state and private institutions

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FMG Internship progress
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Achievements

• All 6 Cat A, 40 cat B, and 15 Cat C
  municipalities now produce multi-year budgets
• Most high capacity municipalities are producing
  in-year reports on financial and non financial
  performance
• All municipalities have developed implementation
  plans
• New loan arrangements undertaken by large
  municipalities
• Internal processes drastically improved
• All municipalities have community consultation
  meetings on budget preparation

17
Capacity Building

• 2002/03 hands-on technical assistance provided
  to 33 municipalities via international advisors
• 2004 - roving advisors appointed in 5 provinces
  (FS, Limp, NW, Mpum, EC)
• 2004 - workshops on phase-in of MFMA undertaken
  countrywide with over 2500 attendees
• 2005 - SAQA accredited qualification approved
  NQF level 5 and 6
• 2005 work plan part support for PC
• 2005 - technical sessions on budget reforms,
  in-year reporting, supply chain management
  undertaken with over 2100 attendees

18
Capacity Building medium term

• 2006 and beyond
• new councillor training programme commenced with
  guides and booklets issued to all (copies in
  pack)
• MFMIP workshops for mentorship and service
  providers on workplace programmes and development
  of training material
• Conference with 1200 delegates (trainers and
  officials) Comprehensive approach to MFM
  Capacity Building
• Further capacitation of Provincial Treasury staff
• Provincial legislature improved oversight over
  MFMA implementation
• Multimedia self testing training programme

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MFMA Credit Rating
Ratings are based on SA national scales. The
highest rating is zaAAA. Ratings scale down from
zaAAA to zaA-. Within each of the levels a ""
or "-" sign indicates relative strength. An A
indicates the relative strong and capacity to
repay liabilities. Example eThekwini has the
best long-term rating.
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• Progress in implementation for 2005/06 Budgets
• Survey of 35 municipalities with NT Advisors
• 23 tabled on time (1 April 2005)
• 11 tabled one week late
• 1 outstanding
• 35 to approve before 30 June 2005

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Budget Reforms

• Refer pack for detailed information on selected
  22 municipalities
• Progress in 2006/07 budgets
• Spread across the country (Cat A, B and C)
• Tabling within timelines February (9), March
  (12), April (1)
• Multi year format (22)
• IDP/Budget alignment - capital (20) and
  operations (17)
• Service Delivery Budget Implementation plan
  (10)
• Tabled budget on website (5)
• Other reforms
• Internal audit unit established (22)
• Audit committees established (22)
• Supply Chain Management Policy adopted (22)

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• National Treasury Support
• Implementation guidelines and manuals
• Pocket version of MFMA alignment with MSA
• Technical circulars, emails, F A Q
• Training seminars and workshops (budgets,
  internal audit, mentors, GRAP, DVD set)
• Validation Board to review materials established
• PPP desk established
• Website and MFMA help-line established
• Regular meetings with provincial officials
  instituted

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Conclusion
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• Primary bank account details
• Municipalities were requested to submit their
  original primary bank account details to the
  National Treasury
• Initial request till 100 submission 4 ½ months
• 34 submissions with errors, including
  non-compliant account names, etc

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• Regulations
• Investments (1 April 2005)
• Public Private Partnerships (1 April 2005)
• Supply Chain Management (1 July 2005)
• Budgets (schedule, format, resolution)
• Prescribed limits and frameworks in progress
• Competency levels
• General matters

32

• Other support initiatives
• Disposal of assets
• Entities guide and regulations
• Councillor guide and training with SALGA
• Cash Management
• Borrowing guide and regulations
• Internal Audit guide
• New format Grap Statements
• Asset Management guide
• Establishment of MFRS

33

• Provincial Support for MFMA
• PT to progressively assume MFMA delegation
• PT finalising support structures and strategies
• National MFMA Working Group established
• Regular meetings (SALGA, dplg, PT, PLG)
• Address resource and staff requirements
• Multi year allocations in Provincial budgets for
  all programmes to municipalities
• Alignment of Provincial and Municipal plans
• Further support and co-operative governance with
  other departments

34

• Thank You