Revised MFM Bill

1
Revised MFM Bill

• Portfolio and Select Committees of Finance
• 29 July 2002

2
Progress since Hearings

• Extensive revision of Bill, taking account of
  views of members at hearings
• Better consistency with constitution
• Massive undertaking and also complex
• Availability of legal drafter complicates
  re-drafting
• More consistency and references to Systems Act
• Chapters 1-8 completed with a legally refined
  draft
• Chapters 10, 12 and 13 available on Wed
• Difficult chapters Ch 9 on entities, Ch 11 on
  financial emergency (first drafts only)

3
Proposed Programme

• Focus on clause-by-clause wording this week
• Aim to finish wording of all chapters this week
• BUT ch 9 (entities) and 11 may need Aug 13
  meeting
• Formal consideration of Bill (cl-by-cl)
  thereafter
• Proposals for this week
• Do chapter 1(definitions) at the end
• Mon Ch 2 (NT), 3 (bank acts), 5 (debt), 8(tr
  office)
• Tues Ch 4 (budget), 4A (co-op gov in
  budgeting), ch 7 (Ac Of)
• Wed Ch 7 (cont), Ch 10 (fin reports), 12 (treas
  matters)
• Thursday Ch 11 on financial emergencies
• Friday Ch 9 on mun entities

4
Functions

• Municipality responsible to its community
• Council must oversee its exec and finances
• Plenary local muni can do so via DC
• Pleanary DC can do so via provincial legis
• Council to set up public accts committee
• BUT cannot be legislated
• Done thru guidelines issued by NT

5
Roles within Municipality

• Council
• Ordinary councillor attends meetings, votes to
  approve policy for the Council (IDP, Budget,
  tariffs)
• Meetings of Council 4-12 times a year
• Must play an oversight role over its Executive
• Meetings of Council committees (4-12 a year)
• Bigger role is a political role (with community)
• Speaker
• Presides over council meetings
• Ensures council committees meet and report to
  Council
• Enforces Code of Conduct
• Is not the head of municipality
• Does not normally report to provincial MEC or
  legislature

6
Roles within Municipality

• Mayor and Executive/Mayoral committee member
• Mayor is head of the municipality
• Responsible for proposing policy (IDP, budget,
  tariffs)
• Responsible for outcomes
• Responsible for guiding and supervising
  administration
• Must ensure municipal manager and top managers
  are employed, and have performance contracts
• Mayor is the link to the provincial sphere
• Reports to MEC when there is potential
  non-compliance anticipated, or has occurred
• Mayor may be called by provincial legislature
• Mun manager responsible for implementation and
  outputs

7
Role of Province

• Roles for legis, MEC for LG and Finance
• Often joint role for prov LG and treasury - one
  lead dept only in all cases
• MEC for LG
• Must ensure muni follows all processes
• IDP and its annual review
• Budget-related policy processes (rates, tariffs)
• Must ensure municipality meets deadlines
• Tabling and approval of budget
• Submission of financial statements on time

8
Role of Province

• MEC for LG
• Must ensure muni takes appropriate action
• Post-FY accountability (public accts comm in
  muni)
• Unauthorised expenditure etc
• Monitoring councillors and mayors
• Disciplinary code for councillors enforced
• Councillor remuneration within national framework
  (Goldstone Commission and Rem of PO Act)
• Imposition of section 139 and fin watch/emergency

9
Role of Province

• MEC for Finance
• Must assist and oversee budget proposals
  (credibility test, priority tests) before tabling
  and before approval
• Must assess capital budgets and plans
• Assist in facilitating co-ordination between
  national/provincial entities within municipality
• Enforcement of MFM Bill
• Monitoring wrt in-year budget reporting by
  province (but work with LG prov dept)

10
Province legislature

• Provincial legislature
• Only considers mun financial statements after the
  AG reports on how munis have dealt with the audit
  report
• May deal with plenary councils in more detail
• Public Accts or LG committee?
• Non-fin part of annual reports

11
Function of National

• S216 allows for an enforcement role for NT
• NT will delegate to provinces
• Budget assessment, Co-ord IDPs with other
  spheres capex, Compliance with MFM Bill to Prov
  Treasury
• Most other roles to MEC for local govt
• No other direct role for national govt
• Setting policy and frameworks
• Procurement, banking arrangements, investment,
  grants etc
• Possible role under fin emergency (MoF)

12
Chapter 2

• Clause 5(1)
• situates power of NT to ch 3, 13 and PFMA
• co-operative govt
• Clause 5(2) and (3)
• changes take acct of Constitution (eg capacity,
  power to stop funds)
• Clause 5A on capacity building (MUST)
• Delegations limited to NT as dept or provincial
  dept (P treasury or LG dept only)

13
Chapter 3 Mun Revenue

• Clauses 7 and 8
• primary accounts (rename accredited accts)
• less prescriptive approach
• Clause 9 Bank acct details to AG
• Better controls within muni (cl 8 and 10)
• clause 10 no change
• Clause 11 small tech changes only
• Cl 12 changes on info from banks and on
  investments
• Clause 13 Definition of municipal service
• Clause 14 Minority interest acquisitions (minor
  change to take account of no subsidiary approach)
• Issue of REDs

14
Cl 13 Defn of municipal service

• not currently defined in Constitution, Systems
  Act, or MFM Bill
• Difficult to define
• Impacts on what councils may do (leads to broader
  definition)
• Impacts on what councils must do (leads to
  narrower definition)
• May impact on division of revenue per section 214
  (2)(d)
• One proposed definition
• A service the municipality is actually providing,
  and which is included in Part B of Schedules 4 or
  5

15
Ch 13 Minimum essential municipal service

• What service is essential varies by community
• e.g. solid waste and storm drainage essential in
  urban areas, often not provided in rural areas
• What assets are needed varies with municipality
• E.g. even if electricity is a minimum essential
  service, a particular power plant may not be
• Because of these varying circumstances,
  determination of necessity is left to council

16
Ch 13 Minimum essential municipal service
(continued)

• If asset is necessary for minimum essential
  service
• Council may not dispose of asset
• Council may not pledge asset without indicating
  how the asset will be protected
• Creditor may not impede continued service
• May not be liquidated in terms of Chapter 11

17
Cl 13 Basic municipal service

• Defined in Municipal Systems Act
• Similar wording to minimum essential municipal
  service per MFM Bill, but used differently
• Aspirational IDP must seek to provide basic
  municipal services, see 26(b)
• MSA sometimes qualifies, e.g. section 73(1)(c)
  minimum level of basic municipal services
• MSA also uses other terms
• Basic services see 74(2)(c)
• Basic levels of service see 74(2)(c)(ii)
• Municipal services, see 4(d), (f) 5(1)(g)
  6(2)(e) 11(2)(f),(g) 16(1)(a)55(1)(o)Chapter
  8 95 103(a)

18
Ch 13 on municipal service

• Conclusions on definition of mun service
• Must always consider definition and context in
  which term is used in the Bill
• No one term works for all purposes
• There is intended to be a difference between
  basic municipal services, per MSA and minimum
  essential municipal services per MFM Bill

19
Chapter 8

• No change to budget and treasury office

20
Ch 4 Budget Process

• Major changes to original bill
• Attempts to co-ordinate various processes
• Annual review of IDP
• Budget-related policies
• Setting of rates and tariffs
• Clause 17(3)(e)-(f) and clause 21
• docs to be tabled with budget
• mayor must announce schedule for various
  processes 10 months before start of financial
  year
• All consult processes ito Ch 4 of Systems

21
Budget process (ch 4)

• Clause 15 and 16 are standard
• Clause 17 on contents and docs
• for annual budget
• with annual budget
• Clause 18 Funding of budget (standard)
• Clause 19 capex (new)
• Clause 20 on formats and other assumptions to be
  prescribed
• Clause 21 on budget process
• Consultations before and after tabling
• Before an internal process led by mayor
• After an external process led by Council
• Consultations ito Mun Systems Act (ch 4)

22
MFM Bill - Chapter 5

• Basic borrowing rules
• long term debt for plant, property, equipment
• short term debt for cash flow management
• no guarantees by national or provincial
• guarantees by municipal of entities treated as
  debt
• pledges of assets and revenues OK, but Council to
  apply its mind to whether assets are needed for
  minimum essential municipal services

23
MFM Bill - Chapter 5 (contd)

• Conditions for long term and short term split
  out per Committee request, see section 26
• Both LT and ST borrowing in rands only
• Short term borrowing within prudential limits or
  necessary for emergency
• Long term must be approved by council after
  notice to the community, disseminated per
  Municipal Systems Act requirements
• Security may be given, as per section 27
• Disclosure required per section 28 (regulations
  now being prepared)

24
Budget process

• Clauses 23A, 23 B passage or failure to pass a
  budget
• clause 23C adjustments budget
• Various clauses on unauthorised expenditure etc

25
Chapter 4A

• Co-operative governance and budgeting
• Address Division of Revenue issues
• Effective planning through timely notices of
  grants
• Stopping of funds sec 216(2)
• Co-ordination of regulatory tariff setting bodies
  and timely announcing
• May need to repeal tariff setting powers in other
  legislation
• Disputes resolution by mediation
• In assigning must reflect multi year implications
  including consultation with the FFC

26
Chapter 6

• After public comment and committee deliberations
  agreed to delete chapter on Councillor for
  Financial matters

27
Chapter 7

• Duties of MM
• MM is accountable and is the accounting officer
• Fiduciary responsibilities
• Co-operative governance and budgeting
• Division of Revenue
• Effective planning through timely notices of
  grants
• Stopping of funds sec 216(2)
• Co-ordination of regulatory tariff setting bodies
  and timely announcing
• Disputes resolution by mediation
• In assigning must reflect multi year implications
  including consultation with the FFC

28
Chapter 4A

• Co-operative governance and budgeting
• Division of Revenue
• Effective planning through timely notices of
  grants
• Stopping of funds sec 216(2)
• Co-ordination of regulatory tariff setting bodies
  and timely announcing
• Disputes resolution by mediation
• In assigning must reflect multi year implications
  including consultation with the FFC