Municipal Budget & Reporting
Regulations
Presentation to the
Select Committee on Finance, NCOP
3 February 2009
Chief Directorate: Local Government Budget Analysis
INTERGOVERNMENTAL RELATIONS
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 government’s 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
2
Underlying Principals
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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
3
Accountability Cycle
5 year Strategy
IDP
Three year Budget
Focus of MBRR
Budget
Annual Plan to Implement
SDBIP
Next Project
Focus of MBRR
In-year
Reporting
Monitoring
Annual
Financial
Statements
Oversight
Reports
Annual
Report
Standard Chart of Accounts (SCOA)
4
Legal Framework
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.
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Constitutional requirements
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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 (a) 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)
77
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
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Background to reform
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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
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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)
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Formats tested using four municipalities 2007/08 budget information
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Formats piloted live by eThekwini Metro for the 2008/09 Budget
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Formats released on Treasury website on 28 June 2008
– Some feedback received
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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
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Period for public comments closes on 5 March 2009
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Consultation Programme…so far
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Eastern Cape – 14 January 2009
Free State – 19 January 2009
Gauteng – 22 January 2009
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KwaZulu-Natal – 29 January 2009
Limpopo - 20 January 2009
Mpumalanga - 22 January 2009
North West - 15 January 2009
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Northern Cape – 05 February 2009
Western Cape - 23 January 2009
Munic Systems Vendors - 29 January 2009
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Select Committee, NCOP – 03 February 2009
27 Munics Workshop – 06 February 2009
DPLG and Provincial Treasuries – ongoing
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Scope of regulations
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
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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
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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
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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
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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
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Structure and content
of regulations
Structure of Regulations
Document
Municipal budgets
Regulation
Regulation 9
Municipal adjustments Regulation 21
budgets
Municipal in-year
reports
Regulation 28 – MBS
Regulation 31 – QRIB
Regulation 33 –MBPA
Regulations 60 – 66
Format
Schedule A
(p. 53)
Schedule B
(p. 68)
Schedule C
(p. 75)
Non-compliance with
Schedule G
(p. 106)
time provisions
Municipal entity
Regulation 39
Schedule D
(p. 83)
budgets
Municipal entity
Regulation 48
Schedule E
(p. 94)
adjustments budgets
Municipal entity inRegulation 54 – MBS Schedule F
year reports
Regulation 56 –MBPA (p. 100)
Non-compliance with Regulations 67 – 70
Schedule G
(p. 106)
time provisions
Framework for Unforeseeon and Unavoidable expenditure
Unauthorised, irregular and fruitless and wasteful
expenditure
Attachment
Schedule A
First Attachment (p.112)
Second Attachment (p. 123)
Schedule B
First Attachment (p.134)
Second Attachment (p. 145)
Schedule C
First Attachment (p. 156)
Second Attachment (p. 164)
Schedule D
Attachment (p. 172)
Schedule E
Attachment (p. 178)
Schedule F
Attachment (p. 182)
Chapter 5
Chapter 6
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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
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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
– r.33 – Format of mid-year budget and performance assessment
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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
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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
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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
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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
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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
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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
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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
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Technical aspects of
document formats
Overview
• The format and content of documentation as described
in the regulations and schedules must be the same for
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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
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Annual budget documentation – Part 1
• Schedule A can be viewed as two parts
• Part 1 covers
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Mayor’s report
Resolutions
Executive summary
Annual budget tables (top level formats)
• Part 1 provides an overall summary of the affect of the
budget
• The mayor’s 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
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Annual budget documentation – Part 2
• Part 2 provides more detail and covers
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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 manager’s quality certification
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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
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Implementation
Strategy
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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
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Municipalities
that must
implement from
1 July 2009
Metropolitan municipalities
Code
Name
WC000
City of Cape Town
GT001
City of Johannesburg
GT002
City of Tshwane
KZ000
eThekwini
GT000
Ekurhuleni
EC000
Nelson Mandela Bay
Secondary Cities
Code
Name
EC125
Buffalo City
FS172
Mangaung
FS184
Matjhabeng
GT421
Emfuleni
GT481
Mogale City
KZN225
Msunduzi
KZN252
Newcastle
KZN282
uMhlathuze
LIM354
Polokwane
MP312
Emalahleni (Mp)
MP307
Govan Mbeki
MP322
Mbombela
MP313
Steve Tshwete
NW403
City Of Matlosana
NW372
Madibeng
NW373
Rustenburg
NW402
Tlokwe
NC091
Sol Plaatje
WC023
Drakenstein
WC044
George
WC024
Stellenbosch
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Thank
You
37