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Municipal Budget

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Municipal Budget & Reporting Regulations Presentation to the Select Committee on Finance, NCOP Chief Directorate: Local Government Budget Analysis – PowerPoint PPT presentation

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Title: Municipal Budget


1
Municipal Budget Reporting Regulations
  • Presentation to the Select Committee on Finance,
    NCOP
  • Chief Directorate Local Government Budget
    AnalysisINTERGOVERNMENTAL RELATIONS

3 February 2009
2
Problem 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

3
Underlying 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

4
Accountability Cycle
5
Legal Framework
6
Constitutional 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.

6
7
Constitutional 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)

7
8
Legislative 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
9
Background to reform
10
Early 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

11
Latest 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

12
Consultation 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

13
Scope of regulations
14
Overview
  • 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

15
List 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

16
Annual 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

17
Adjustments 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

18
In-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

19
Structure and content of regulations
20
Structure of Regulations
21
Ch 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

22
Ch 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

23
Ch 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

23
24
Ch 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

25
Ch 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

26
Strengthening 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

27
Strengthening 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

29
Technical aspects of document formats
30
Overview
  • 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

31
Annual 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

32
Annual 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

33
Tables, 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

34
ImplementationStrategy
35
Promulgation 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

36
Municipalities that must implement from 1 July
2009
37
Thank You
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