Title: Municipal Budget
1Municipal Budget Reporting Regulations
- Presentation to the Select Committee on Finance,
NCOP - Chief Directorate Local Government Budget
AnalysisINTERGOVERNMENTAL RELATIONS
3 February 2009
2Problem Statement
- 283 different municipal budgets despite efforts
around Circular 28 - Makes aggregation of budget and other information
very difficult - Quality of municipal information is compromised
due to lack of uniform classifications for
revenue and expenditure items - Most municipal budgets do not contain narrative
information - Lack of consistency across the IDP, Budget,
SDBIP, IYM and AFS - Compromises monitoring and oversight
- Compromises governments ability to formulate
coherent policies - To compensate national departments send
supplementary requests for information - Financial Information - 15 400 questions
- Non-financial Information - 2 300 questions
- Lack of an overarching picture of spending on
infrastructure - Municipal Councils probably make uniformed
decisions in the absence of credible information
and poor advice from officials
3Underlying Principals
- Guided by the Constitution and the MFMA
- Promote transparency and accountability
- Strengthens the link between policy priorities,
planning, budgeting, implementation and
reporting - Forms the basis for the Medium Term Revenue and
Expenditure Framework for municipalities (MTREF) - Promote integrated planning of infrastructure,
maintenance and operational expenditure - Facilitates inter-local government comparability
(to demonstrate the effective use of resources
and to inform allocation decisions) - Consistent budget and reporting formats that will
support GFS
4Accountability Cycle
5Legal Framework
6Constitutional requirements
- Section 215 (1) of the Constitution states that
- national, provincial and municipal budgets and
budgetary processes must promote transparency,
accountability and effective financial management
of the economy, debt and the public sector. - Section 215 (2) of the Constitution states that
- National legislation must prescribe -
- (a) the form of national, provincial and
municipal budgets - (b) when national and provincial budgets must be
tabled and - (c) that budgets in each sphere of government
must show the sources of revenue and the way in
which proposed expenditure will comply with
national legislation.
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7Constitutional requirements
- Section 216(1) of the Constitution states that
- national legislation must establish a national
treasury and prescribe measures to ensure both
transparency and expenditure control in each
sphere of government, by introducing - - Generally recognised accounting practice
- (GAMAP/GRAP OAG)
- (b) Uniform expenditure classifications and
- (Standard Chart of Accounts / General
Leger) - (c) Uniform treasury norms and standards
- (MFMA, Regulations, Circulars and Guidelines)
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8Legislative requirements
- Section 17 of the MFMA
- An annual budget must be in a schedule in the
prescribed format - Sections 121, 122 and 125 of the MFMA
- Relate to municipal annual reports, preparation
of financial statements and compulsory
disclosures in financial statements each
section includes a power for the Minister of
Finance to prescribe the information required - Section 168 of the MFMA
- The Minister (of Finance), acting with the
concurrence of the Cabinet member responsible for
local government, may make regulations for, among
other things - - (a) any matter that may be prescribed
8
9Background to reform
10Early reform
- Advance pilot testing of budget formats
- Work began in 2000, and continued through to 2005
- Circular 28 released December 2005
- Gives further guidance on budget formats
- Municipalities encouraged to apply to the
2006/07, 2007/08 and 2008/09 budgets - Municipalities only have to comply if adopted by
Council - Circular 42 released March 2007
- Gives guidance on the funding of the budget
- Sets out the Funding Compliance Test
11Latest developments
- Budget and Reporting Regulations drafted and
consulted in 2007 - Technical reference group consultations
- MFMTAP advisors, selected municipal and entity
CFOs - Provincial Treasuries and Office of the
Accountant General - DPLG, SALGA, SARB, Stats SA, ASB and AG
- MFMA Joint Meetings (30 August 2007, 22 November
2007, 13 March 2008) - 3 workshops and several info sessions (27 written
submissions received) - Formats tested using four municipalities 2007/08
budget information - Formats piloted live by eThekwini Metro for the
2008/09 Budget - Formats released on Treasury website on 28 June
2008 - Some feedback received
- Minister approves the Municipal Budget and
Reporting Regulations for consultation on 5
December 2008 - Minister for Provincial and Local Government
gives concurrence for Regulations on 19 January
2009 - Regulations published for public comment on 23
January 2009 - MFMA Parliamentary process to comment on
regulations - Period for public comments closes on 5 March 2009
12Consultation Programmeso far
- Eastern Cape 14 January 2009
- Free State 19 January 2009
- Gauteng 22 January 2009
- KwaZulu-Natal 29 January 2009
- Limpopo - 20 January 2009
- Mpumalanga - 22 January 2009
- North West - 15 January 2009
- Northern Cape 05 February 2009
- Western Cape - 23 January 2009
- Munic Systems Vendors - 29 January 2009
- Select Committee, NCOP 03 February 2009
- 27 Munics Workshop 06 February 2009
- DPLG and Provincial Treasuries ongoing
13Scope of regulations
14Overview
- Consists of 6 chapters and 7 schedules
- Ch 1 Interpretation, object and application of
these regulations - Ch 2 Budget and budget related matters of
municipalities - Covering the requirements, process, content and
structure of budgets and reports of
municipalities - Ch 3 - Budget and budget related matters of
municipalities entities - Covering the requirements, process, content and
structure of budgets and reports of municipal
entities - Ch 4 Non compliance with time provisions for
budgets and reports - Ch 5 Framework for unforeseen and unavoidable
expenditure - Ch 6 Unauthorised, irregular or fruitless and
wasteful expenditure
15List of Schedules and Attachments
- Schedule A Annual Budget and Supporting
Documentation of Municipalities (plus First and
Second Attachments) - Schedule B Adjustments Budget and Supporting
Documentation of Municipalities (plus First and
Second Attachments) - Schedule C In-year Reports of Municipalities
(plus First and Second Attachments) - Schedule D Annual Budget and Supporting
Documentation of Municipal Entities (plus
Attachment) - Schedule E Adjustments Budget and Supporting
Documentation of Municipal Entities (plus
Attachment) - Schedule F In-year Reports of Municipal Entities
(plus Attachment) - Schedule G Extensions and Non-compliance with
Time Provisions
16Annual Budget Tables
- Table A1 Budget Summary
- Table A2 Budgeted Financial Performance (revenue
and expenditure by standard classification) - Table A3 Budgeted Financial Performance (revenue
and expenditure by municipal vote) - Table A4 Budgeted Financial Performance (revenue
and expenditure) - Table A5 Budgeted Capital Expenditure by vote,
standard classification and funding - Table A6 Budgeted Financial Position
- Table A7 Budgeted Cash Flows
- Table A8 Cash backed reserves/accumulated surplus
reconciliation - Table A9 Asset Management
- Table A10 Basic service delivery measurement
17Adjustments Budget Tables
- Table B1 Adjustments Budget Summary
- Table B2 Adjustments Budget Financial
Performance (revenue and expenditure by municipal
vote) - Table B3 Adjustments Budget Financial
Performance (standard classification) - Table B4 Adjustments Budget Financial
Performance (revenue and expenditure) - Table B5 Adjustments Capital Expenditure Budget
by vote and funding - Table B6 Adjustments Budget Financial Position
- Table B7 Adjustments Budget Cash Flows
- Table B8 Cash backed reserves/accumulated
surplus reconciliation - Table B9 Asset Management
- Table B10 Basic service delivery measurement
18In-year Reports
- Table C1 s71 Monthly Budget Statement Summary
- Table C2 Monthly Budget Statement - Financial
Performance (revenue and expenditure by municipal
vote) - Table C3 Monthly Budget Statement - Financial
Performance (standard classification) - Table C4 Monthly Budget Statement - Financial
Performance (revenue and expenditure) - Table C5 Monthly Budget Statement - Capital
Expenditure (municipal vote, standard
classification and funding) - Table C6 Monthly Budget Statement - Financial
Position - Table C7 Monthly Budget Statement - Cash Flow
19Structure and content of regulations
20Structure of Regulations
21Ch 2 Budgets and budget related matters of
municipalities (1)
- General provisions
- r.4 Budget steering committee
- Budget related policies of municipalities
- r.8 (1) Funding and reserves policy
- Annual budgets of municipalities Schedule A
- r.9 Format of annual budgets
- r.10 Funding of expenditure
- r.12 Funds created in terms of section 12 of
the Act - r.13 Approval of capital projects
- Adjustments budgets of municipalities Schedule
B - r.21 Format of adjustments budgets
- r.23 Timeframes for tabling of adjustments
budgets - In-year reports of municipalities Schedule C
- r.28 Formats of monthly budget statements
- r.31 Quarterly report on implementation of the
budget
22Ch 3 Budgets Budget related matters of
municipal entities
- General provisions
- Funding and reserves policies of municipal
entities - r.38 Funding and reserves policies
- Annual budgets of municipal entities Schedule D
- r.39 Format of annual budget
- r.40 Funding of expenditure
- r.42 Submission of information on capital
projects - Adjustments budgets of municipal entities
Schedule E - r.42 Formats of adjustments budgets
- r.49 Framework for adjustments budgets
- In-year reports of municipal entities Schedule
F - r.54 Formats of monthly budget statements
- r.56 Format of mid-year budget and performance
assessment
23Ch 4 Non compliance with time provisions
- Processes and formats for
- application or notification,
- consideration and responses
- Impending non-compliance by municipalities with
time lines and deadlines concerning annual
budgets - r.61 Framework for consideration of
applications - Actual non-compliance by municipalities with time
provisions concerning annual budgets and
adjustments budgets - r.64 Framework for consideration of
notifications - Non-compliance by municipalities with time
provisions concerning in-year reports - r.66 Framework for consideration of
notifications - Non-compliance by municipal entities with time
provisions - r.67 Monitoring compliance with time provisions
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24Ch 5 Framework for unforeseen unavoidable
expenditure
- Unforeseen and unavoidable expenditure by
municipalities - r.71 Authorisation of unforeseen and
unavoidable expenditure - r.72 Monetary limits on unforeseen and
unavoidable expenditure - Unforeseen and unavoidable expenditure by
municipal entities - r.73 Approval of unforeseen and unavoidable
expenditure
25Ch 6 Unauthorized, irregular or fruitless and
wasteful expenditure
- Unauthorized, irregular or fruitless and wasteful
expenditure by municipalities - r.74 Issues to be considered by council
committee - Irregular or fruitless and wasteful expenditure
by municipal entities - r.75 Recovery of irregular or fruitless and
wasteful expenditure - r.76 Board may not delegate authority to
certify expenditure as irrecoverable
26Strengthening oversight of infrastructure
- Direct oversight of asset management
- Table A9 - Council has to approve asset
management explicitly as part of budget - Table B9 - Council has to approve changes in the
funding of capital projects - Table C5 Municipality has to report on spending
on all capital projects - Supporting information on asset management to
give a holistic picture - SA6 Reconciliation of IDP strategic objectives
and budget (capital expenditure) - SA34 Capital expenditure by asset class
- SA35 Future financial implications of the capital
budget - SA36 Detailed capital budget
- SA37 Projects delayed from previous financial
year/s
27Strengthening conditional grant control
- SA18 Transfers and grant receipts
- Ensures all transfer receipts are disclosed
- SA 19 Expenditure on transfers and grants
programme - Monitor timing of expenditure on individual
grants - Encourages better on time spending
- SA 20 Reconciliation of transfers, grant receipts
and unspent funds - Unspent grants reconciled between balances
carried forward, amounts received and expenditure
as shown in the Budgeted Financial Position
28 Supporting the Municipal Property Rates Act
- SA11 Property rates summary
- Transparent reflection of tax increases, their
impact on revenue, valuation trends and the
treatment of reductions, rebates and exemptions - SA12-A13 Property rates by category
- Both the current year and the budget year data is
required to ensure that the budget clearly
illustrates trends and changes. - SA14 Household bills
- a comparison of various municipal bills,
indicating the cost implication on households of
proposed rates and tariff changes
29Technical aspects of document formats
30Overview
- The format and content of documentation as
described in the regulations and schedules must
be the same for - Tabling to council
- Submission to National Treasury and provincial
treasuries - Making public at municipal offices and on the
municipal website - Distribution to other stakeholders
- Council may distribute additional information in
other summary formats for enhanced consultation
including summaries in alternate languages - The annual budget documentation tabled to council
for consultation purposes must be in the same
format as the final approved budget. And must be
funded according to the requirements of the
regulations
31Annual budget documentation Part 1
- Schedule A can be viewed as two parts
- Part 1 covers
- Mayors report
- Resolutions
- Executive summary
- Annual budget tables (top level formats)
- Part 1 provides an overall summary of the affect
of the budget - The mayors report introduces the documentation
to council and is politically orientated - The executive summary covers the entire budget
and summarises the content of part 2 - The annual budget tables contain the amounts to
be approved by resolution
32Annual budget documentation Part 2
- Part 2 provides more detail and covers
- Overview of annual budget process
- Overview of alignment of annual budget with
Integrated Development Plan - Measurable performance objectives and indicators
- Overview of budget related policies
- Overview of budget Assumptions
- Overview of budget funding
- Expenditure on allocations and grant programmes
- Allocations and grants made by the municipality
- Councillor and board member allowances and
employee benefits - Monthly targets for revenue, expenditure and cash
flow - Annual budgets and SDBIPs internal departments
- Annual budgets and SDAs entities and external
mechanisms - Contracts having future budgetary implications
- Capital expenditure details
- Legislation compliance status
- Other supporting documentation
- Annual budgets of municipal entities attached
- Municipal managers quality certification
33Tables, charts and explanatory notes
- Key tables must be represented by charts for ease
of understanding of trends, anomalies and
components - Each table and chart must be accompanied by an
explanation of the trends and anomalies depicted - Formats for tables will be issued for strict
compliance - Formats for charts will be issued as guidance
- However, charts must demonstrate component
breakdown, total trend and trend of components
34ImplementationStrategy
35Promulgation and Implementation
- Gazetted for Public Comment on 23 January 2009
- Public consultation processes and the
Parliamentary scrutiny process will run
concurrently - Public comment period ends on 5 March 2009
- Following the conclusion of both these processes,
a final version of the Regulations and formats
will be prepared and submitted to the Minister
for final approval before promulgation towards
the end of March 2009 - Target dates for implementation
- 1 July 2009 (2009 Budget) for the 27
non-delegated municipalities (six metros and 21
secondary cities) and - 1 July 2010 (2010 Budget) for all other
municipalities. - Advanced implementation by all municipalities is
encouraged - Extensive support provided through training
- Message already communicated to all
municipalities on 27 June 2008
36Municipalities that must implement from 1 July
2009
37Thank You