FINANCE DIRECTORATE,
SHAREHOLDING MANAGEMENT DEPARTMENT
MUNICIPAL ENTITY
QUARTERLY NEWSLETTER
Analyst
2008/2009 Quarter 3: 1 January 2009 – 31 March 2009, ISSUE NO. 8
As parent municipality to the municipal entities we aim to keep our municipal entity boards of
directors and staff abreast of all current news, legislation and policies directly affecting the
municipal entities. This will enable directors to be continuously informed as well as ensuring that
we meet the legislative requirement as parent municipality to ensure that both the municipality and
the municipal entity comply with the Municipal Systems Act, the Local Government: Municipal
Finance Management Act and any other applicable legislation.
Contents
The newsletter’s intend to convey information relating to the Local Government: Municipal Finance
Management Act, Local Government: Systems Act, Companies Act, Corporate Governance and any
information relevant to municipal entities.
THE LOCAL GOVERNMENT LEGISLATION:
THE MUNICIPAL FINANCE MANAGEMENT ACT:
Budget Format Reform
The MFMA includes various requirements for the content and processes surrounding annual and
adjustment budgets, as well as in-year reports. Section 17 of the MFMA indicates that the annual
budget must be in the prescribed format. This is to ensure consistent practices by all municipalities
and municipal entities in the country. The idea is also that the budget document will be the starting
point culminating in informing the Annual Financial Statements with relevant information according
to the required accounting standards.
National Treasury has devised various formats for the budget documents which were subject to
public comment. The latest format was published in Government Gazette 31804 of 23 January
2009 and is applicable to the 2009/10 annual budget. From the public comment they realised that
not all municipal entities were rendering services that were regarded as traditional municipal
services such as water, electricity and refuse removal. The standard budget formats would
therefore not be suitable for those municipal entities rendering services other than traditional
municipal services. MFMA Circular 48 was released on 2/03/2009, where municipalities were given
the opportunity to apply for exemption from the new budget format for municipal entities not
providing traditional municipal services.
The City is in the process of applying for exemption for its municipal entities from the
requirements of the new budget formats. The result of the application and the final
budget and reporting format to be used, will be conveyed in due course.
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The full document may be viewed at:
http://www.treasury.gov.za/legislation/mfma/reg_gaz/Gazette%20No%2031804.aspx
New Accounting Standards
In terms of S 122(3) of the MFMA, annual financial statements must prepared in terms of the
accounting practices prescribed by the Public Finance Management Act. The Accounting Standards
Board has approved the following standards and requested the Minister to make it official in terms
of the requirements of the Public Finance Management Act:
GRAP 23 - Revenue from non-exchange transactions (Taxes and Transfers)
GRAP 24 - Presentation of Budget Information in Financial Statements
Although these accounting standards are not effective yet, it is expected that it would be applicable
to the 2009 financial year and would affect the preparation of your Annual Financial Statements.
Further information may be obtained from the Accounting Standards Board website at
www.asb.co.za.
GENERAL:
CORPORATE GOVERNANCE: KING III
The Institute of Directors have released the draft King III Code and Report on Corporate
Governance for comment. Written comments on the draft should be sent to the Institute by
25 April 2009 to the following e-mail address: kingIII@iodsa.co.za. Visit the Institute
website at www.iodsa.co.za to view or order a copy of the report.
The Report begins with the statement: “The third report on Governance in South Africa (King III)
became necessary because of the Companies Act and changes in international governance trends”.
Much has been written on King III. The following articles on the web provide insight into the draft:
https://www.saica.co.za/default.asp?redir=%2Fresources%2FShowItem%2Easp%3FIssu
eId%3D1157%26ContentPageID%3D330
http://www.moneyweb.co.za/mw/view/mw/en/page1743?oid=275325&sn=Detail
http://www.bdo.co.za/resources/ShowItem.asp?ResourceSectionId=3&ResourceSectio
nName=News&ResourceId=2&ResourceName=Industry%20News&IssueId=108
http://www.pwc.com/extweb/service.nsf/docid/A0298F1FDBE45E658025756300327E1C
Please contact Louise Muller (021 4003940) or Richard Wootton (021 4002701) if you have any
queries in respect of this newsletter.
Although every effort is made to check the accuracy and quality of the information supplied, The
City cannot be held responsible for any errors that may arise.
Copyright(c) City of Cape Town 2007. All rights reserved. No part of this newsletter may be reproduced or transmitted in any form
without written permission from the City of Cape Town, Finance Directorate, Shareholding Management Department.
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