FINANCIAL STATUS OF MUNICIPALITIES IN KWAZULU NATAL

Transcription

1 FINANCIAL STATUS OF MUNICIPALITIES IN KWAZULU NATAL KwaZulu-Natal Provincial Treasury Presentation to Select Committee on Finance - Parliament of the Republic of South Africa WEDNESDAY, 30 TH MAY /06/04 Be the Centre of Excellence in Fiscal and Financial Management in the Country

2 PURPOSE To provide a briefing on the budget processes of municipalities in KwaZulu Natal. To present to Parliament the financial status of municipalities in KwaZulu Natal; 2

3 The presentation will focus on: KwaZulu-Natal Provincial Treasury Background of Province Budget performance: 2006/07 Municipal 3 rd Quarterly Report; ethekwini Mid year Performance Review; Supply Chain Management Assessment and Report; Banking, Norms & Standards, Municipal Policies; Conditional Grants; Draft budget Evaluation: 2007/08 Provincial Departments Inter-Working Relationships Challenges Municipal Property Rates Treasury Interventions Annual Financial Statements 3

4 Background of Province 2007/06/04 Be the Centre of Excellence in Fiscal and Financial Management in the Country

5 Municipalities: KwaZulu Natal 61 municipalities in total 50 local municipalities 1 Metro 10 District Municipalities Amajuba Umzinyathi Zululand Umkhanyakude On 01 July 2007 NT will delegate a further six municipalities to PT (total will be 59 municipalities); Only ethekwini, Msunduzi, and umhlathuze will be retained by NT. Uthukela Sisonke Uthungulu Ilembe Umgungundlovu Ethekwini Ugu 5

6 POVERTY DENSITIES Poverty Densities: Poverty density measures the number of persons in a state of poverty within an area 4 The highest densities of poverty are located in ethekwini, Msunduzi Newcastle and Umhlatuze 3 Urbanised poverty is established and wont relocate back to rural areas. It needs to be addressed in parallel to rural poverty

7 Free Basic Services by Municipalities KwaZulu Natal has the third highest number of households (938,634) with access to free basic water but the lowest number of households (35,533) with access to free basic electricity. ethekwini Metropolitan has 536,623 households with access to free basic water, followed by uthungulu (113,691) and Ugu (89,588) districts. Umzinyathi (7753) has the lowest number of households with access to water. ethekwini Metropolitan also has the highest number of households with access to free basic electricity (8367) and Ugu district (290) has the lowest number of household with access to electricity. (Source: Statistics SA) Uthukela Umgungundlovu Sisonke Amajuba Umzinyathi Ilembe Ethekwini 7 Ugu Zululand Uthungulu Umkhanyakude

8 Number of households in each province receiving Free basic Services (Source: Statistics S A) Province Water Electricity Sewerage and Sanitation Solid waste management Western Cape Eastern Cape Northern Cape Free State KwaZulu-Natal North West Gauteng Mpumalanga Limpopo Total

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10 Comparison of 2005/06 & 2006/07 Budgets District Comparative Budgets 2005/06 and 2006/07 Capital Operating Budget Growth (%) 2005/ / / /07 Capital Operating Ethekwini 2,701,500 2,847,033 9,326,769 9,701, Ugu 129, , , , umgungundlovu 329, ,265 1,647,067 2,159, uthukela 158, , , , umzinyathi 113, , , , Amajuba 123,722 99, , , Zululand 262, , , , umkhanyakude 169, , , , uthungulu 429, ,311 1,046,109 1,162, ilembe 307, , , , Sisonke 151, , , , Total 4,875,996 5,814,877 15,244,754 16,705,281 Source: Local Govt Budget and Expenditure Review 2001/ /08 10

11 Municipal 3 rd Quarterly Report (Section 71- MFMA) (Budget Year 2006/07) 2007/06/04 Be the Centre of Excellence in Fiscal and Financial Management in the Country

12 Municipal 3 rd Quarterly Report Section 71 of MFMA - Provincial Treasuries must no later than 45 working days after the end of each quarter make public a consolidated statement on the state of municipalities budgets. The MEC for Finance to table this report in Legislature. PT has prepared a report centred on 40 municipalities who have reported either to PT or NT. The report includes delegated and non delegated municipalities. Currently PT is only required to report on 18 high and medium capacity municipalities. As from 01 July 2007, 59 delegated municipalities will be required to be reported on, by PT on a monthly basis; PT would like to commend the 22 low capacity municipalities (illustrated on the next slide) who have shown initiative and started reporting earlier than the legislative mandate. PT is concerned about some of these high and medium municipalities who have failed to report namely, Ugu, Ingwe and Umvoti. 12

13 Names of Low Capacity Reporting to Vulamehlo Big FiveFalse Bay PT Umlalazi uphongolo emadlangeni Impendle Nqutu Mandeni umuziwabantu Richmond Mthonjaneni Ndwedwe Dannhauser Mtubatuba umzinyathi Kwa Sani ubuhlebezwe Hlabisa Okhahlamba Greater Kokstad Jozini edumbe 13

14 Third Quarterly Report - Continued Capital - of a combined provincial capital budget of approximately R4.8 billion for both the delegated and non delegated municipalities, R2,2 billion or 46.1 percent was spent as at the 31 March 2007; Capital Expenditure for Reporting municipalities as at March 2007 (R'000) Total District Municipality Operating Budget % of Provincial Total Expenditur e YTD Expenditure as a % of Budget Metros KZ 2,847, ,585, Ugu 136, , umgungundlovu 330, , Uthukela 216, , Umzinyathi 377, , Amajuba 21, , Zululand 197, , Umkhanyakude 145, , uthungulu 31, , ilembe 450, , Sisonke 138, , PROVINCIAL TOTA 4,892, ,254,

15 Third Quarterly Report - Continued Operating - the total provincial operating budget for those municipalities that have reported during the period under review was R15,3 billion, while the total expenditure against the operating budget for this quarter amounted to R9,9 billion or 64,5 percent. Operating Expenditure ofor Reporting municipalities as at March 2007 (R'000) District Municipality Total Operating Budget % of Provincial Expenditure YTD Expenditure as a % of Budget Metros KZ 10,190, ,078, Ugu 401, , umgungundlovu 1,889, ,381, Uthukela 254, , Umzinyathi 92, , Amajuba 43, , Zululand 217, , Umkhanyakude 193, , uthungulu 1,318, , ilembe 574, , Sisonke 188, , PROVINCIAL TOTAL 15,363, ,911,

16 Debtors 3 rd Quarterly Report Debtors - The total debt for reporting municipalities (delegated and non-delegated) as at 31 March 2007 was R1,5 billion of which R1,1 billion was over 90 days. The status of debtors is illustrated below. 16% 5% 4% 75% 30 days 60 days 90 days over days 16

17 Debtors Age Analysis 3 rd Quarterly Report The accumulation of municipal debt is due to non-payment for services and it is one of the challenges facing municipalities. The pie chart provides vital information about the extent of municipal debt in the province of KwaZulu-Natal. The greatest proportion (75 percent or R1,1 billion) of the total debt of R1,5 billion for all the reporting municipalities has been outstanding for a period of more than 90 days. 17

18 Creditors 3 rd Quarterly Report Creditors - The total creditors outstanding totaled R1,2 billion and an amount of R19 million was outstanding over 30 days. 3% 1% 2% 94% 0-30 days days days over days 18

19 CAPITAL EXPENDITURE FOR REPORTING MUNICIPALITIES AS AT MARCH 2007 (R'000) District Municipality Total Capital Budget % of Provinci al Total Expenditure YTD Expenditure as a % of Budget Metro KZN 2,847, ,585, Ugu 136, , umgungundlovu 330, , Uthukela 216, , Umzinyathi 377, , Amajuba 21, , Zululand 197, , Umkhanyakude 145, , uthungulu 31, , ilembe 450, , Sisonke 138, , PROVINCIAL TOTAL 4,892, ,254,

20 OPERATING EXPENDITURE FOR REPORTING MUNICIPALITIES AS AT MARCH 2007 (R'000) District Municipality Total Operating Budget % of Provincial Total Expenditure YTD Expenditure as a % of Budget Metro KZN 10,190, ,078, Ugu 401, , umgungundlovu 1,889, ,381, Uthukela 254, , Umzinyathi 92, , Amajuba 43, , Zululand 217, , Umkhanyakude 193, , uthungulu 1,318, , ilembe 574, , Sisonke 188, , PROVINCIAL TOTAL 15,363, ,911,

21 Provincial Overview KwaZulu-Natal Provincial Treasury 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% % Spent on Operating budget % Spent on Capital budget 21

22 Ugu District KwaZulu-Natal Provincial Treasury 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Vulamehlo Umdoni Umzumbe umuziwabantu Ezingolweni Hibiscus Coast Ugu % Spent on Operating Budget % Spent on Capital Budget 22

23 umgungundlovu District KwaZulu-Natal Provincial Treasury 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% umshwa thi umngeni Mpofana Impendle Msunduzi Mkhambathini Richmond umgungundlovu % Spent on Operating Budget % Spent on Capital Budget 23

24 Uthukela District KwaZulu-Natal Provincial Treasury 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Emnambithi/Ladysmith Indaka Umtshezi Okhahlamba Imbabazane Uthukela % Spent on Operating Budget % Spent on Capital Budget 24

25 Umzinyathi District KwaZulu-Natal Provincial Treasury 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Endumeni Nquthu Msinga Umvoti Umzinyathi % Spent on Operating Budget % Spent on Capital Budget 25

26 Amajuba District KwaZulu-Natal Provincial Treasury 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Newcastle emadlangeni Dannhauser Amajuba % Spent on Operating Budget % Spent on Capital Budget 26

27 Zululand District KwaZulu-Natal Provincial Treasury 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% edumbe uphongolo Abaqulusi Nongoma Ulundi Zululand % Spent on Operating Budget % Spent on Capital Budget 27

28 Umkhanyakude District KwaZulu-Natal Provincial Treasury 250.0% 200.0% 150.0% 100.0% 50.0% 0.0% Umhlabuyalingana Jozini The Big Five False Bay Hlabisa Mtubatuba Umkhanyakude % Spent on Operating Budget % Spent on Capital Budget 28

29 Uthungulu District KwaZulu-Natal Provincial Treasury 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Mbonambi umhlathuze Ntambanana Umlalazi Mthonjaneni Nkandla uthungulu % Spent on Operating Budget % Spent on Capital Budget 29

30 Ilembe District KwaZulu-Natal Provincial Treasury 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Mandeni KwaDukuza Ndwedwe Maphumulo ilembe % Spent on Operating Budget % Spent on Capital Budget 30

31 Sisonke District KwaZulu-Natal Provincial Treasury 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Kw a Sani Greater Kokstad Ubuhlebezwe Umzimkhulu Sisonke % Spent on Operating Budget % Spent on Capital Budget 31

32 ethekwini Budget Performance 2006/07 32

33 ethekwini Budget Performance: April 2007 TOTAL CAPITAL BUDGET R M SPENT TO APRIL 2007 R M TO BE SPENT BY JUNE 2007 R M The current percentage spend is 58% The projected percentage spend by 30 June 2007 is 100% 33

34 ethekwini Budget Performance: April 2007 TOTAL OPERATING BUDGET R M SPENT TO APRIL 2007 R M TO BE SPENT BY JUNE 2007 R M The current percentage spend is 77%. The projected percentage spend by 30 June 2007 is 99.5% The collection rates of outstanding debt in all municipal functions (Rates, Electricity, and Water) are all greater than 90 %, with Rates collection equalling 100% as at March 2007; Employee Costs (as a percentage of Total Operating Expenditure) was just over 30% (the actual March 2007 figure being 32.7%). 34

35 ethekwini - UNFUNDED MANDATES FUNCTION ACTUALS APPROX EST 2004/ / /2007 R m R m R m Health Libraries Museums Metro Housing Hostels Formal Housing TOTAL

36 2007/06/04 Be the Centre of Excellence in Fiscal and Financial Management in the Country

37 Mid Year Budget Performance Review Budget Year 2006/ /06/04 Be the Centre of Excellence in Fiscal and Financial Management in the Country

38 Mid Year Budget performance Review No Municipality 1 Endumeni 2 Umvoti 3 Umtshezi 4 uphongolo 5 Abaqulusi 6 Zululand DC 7 Ndwedwe 8 Maphumulo 9 G Kokstad 10 Umzimkhulu 11 Umdoni 12 Hibiscus Coast 13 Ugu 14 Richmond 15 Dannhauser 16 Jozini 17 Mtubatuba 18 Umkhanyakude 19 Mbonambi 20 Mthonjaneni 21 Nkandla 22 Ingwe 23 Edumbe 24 Ulundi 25 Nquthu 26 Izingolweni 27 Msinga 28 Ubuhlebezwe 29 Uhlabuyalingana 30 Umzinyathi 31 Imbabazane 32 Mphofana 33 Umzumbe 34 Umshwathi 36 Uthukela 37 Hlabisa 38 Umgneni 39 Mandeni 40 Mkhambathini 41 Big Five False Bay 42 Umlalazi 43 Kwa Dukuza 44 Amajuba Negative Cashflow Non Submission 05/06 Operating Expend > Slow Revenue Collection closing balance AFS IYM Reports Submitted Unsatisfactory FMG Revenue Quarter 1 Quarter 2 Quarter 1 Quarter 2 Quarter 1 Quarter 2 Quarter 1 Quarter 2 Quarter 1 Quarter 2 Quarter 1 Quarter 2 Areas that Provincial Treasury views as concerns Municipalities that submitted IYM reports 38

39 Supply Chain Management (Assessment and Report) 2007/06/04 Be the Centre of Excellence in Fiscal and Financial Management in the Country

40 Implementation Criteria Adoption of SCM policy by Council Implementation of Organistional Structure Appointment of Bid Committees Implementation of Delegations Training Reporting KwaZulu-Natal Provincial Treasury Implementation Status: High Capacity 73.2% Medium Capacity 70.2% Low Capacity 52.8% 40

41 High Capacity KwaZulu-Natal Provincial Treasury THE PROGRESS STATUS FOR HIGH CAPACITY MUNICIPALITIES 100.0% 90.0% 80.0% 89.1% 81.6% 81.6% 81.6% 75.8% 75.8% 70.0% 60.0% 50.0% 40.0% 30.0% 63.3% 58.3% 51.7% PROGRESS (100%) 20.0% 10.0% EMNAMBITHI LADYSMITH MUNICIP ethekwini MUNICIPALITY HIBISCUS COAST MUNICIPALITY KWADUKUZA MUNICIPALITY NEWCASTLE MUNICIPALITY THE MSUNDUZI MUNICIPALITY UGU DISTRICT MUNICIPALITY UMHLATHUZE MUNICIPALITY UTHUNGULU MUNICIPALITY 0.0% MUNICIPALITY 41

42 Medium Capacity THE PROGRESS STATUS FOR MEDIUM CAPACITY MUNICIPALITIES 100.0% 90.0% 80.0% 95.0% 90.0% 90.0% 91.6% 90.0% 84.2% 81.6% 78.3% 78.3% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 67.5% 65.8% 60.0% 50.0% 50.8% 30.0% 20.0% PROGRESS (100%) 10.0% 0.0% ENDUMENI MUNICIPALITY INGWE MUNICIPALITY MAPHUMULO MUNICIPALITY MATATIELE MUNICIPALITY MBONAMBI MUNICIPALITY MKHAMBATHINI MUNICIPALITY NKANDLA MUNICIPALITY UMDONI MUNICIPALITY UMGUNGUNDLOVU MUNICIPALITY UMHLABUYALINGANA MUNICIP UMKHANYAKUDE MUNICIPALITY UMNGENI MUNICIPALITY UMTSHEZI MUNICIPALITY UMVOTI MUNICIPALITY UTHUKELA DISTRICT MUNICIPAL. ZULULAND DISTRICT MUNICIPALITY MUNICIPALITY 42

43 Low Capacity KwaZulu-Natal Provincial Treasury THE PROGRESS STATUS FOR LOW CAPACITY MUNICIPALITIES 120.0% 100.0% 93.3% 94.2% 99.1% 86.6% PROGRESS (100% 80.0% 67.5% 61.6% 60.0% 75.0% 71.7% 68.3% 66.7% 54.2% 42.5% 70.8% 46.7% 45.0% 75.8% 71.7% 60.0% 50.0% 60.0% 73.3% 68.3% 42.5% 40.0% 60.8% 44.2% 40.0% 35.0% 30.0% 30.0% 25.0% 25.0% 25.0% 20.0% 20.0% 10.0% 5.0% 5.0% 0.0% ABAQULUSI DANNHAUSER endondakusuka GREATER KOKSTAD ILEMBE IMPENDLE JOZINI MOOI MPOFANA MTHONJANENI NDWEDWE NQUTU OKHAHLAMBA SISONKE UBUHLEBEZWE UMLALAZI UMUZIWABANTU UMZUMBE UTRECHT UMZIMKHULU 0% MUNICIPALITY 43

44 SCM Challenges Adoption of the SCM policy SCM capacity requirements Human Resources Training Land Disposal Internal Control and Monitoring tools 44

45 Banking Issues KwaZulu-Natal Provincial Treasury In terms of Section 45(4) (a) of the Municipal Finance Management Act (MFMA) No.56 of 2003, municipalities must pay off short term within the financial year. Consequently, municipalities were requested to gradually reduce their bank overdraft facility with effect from 01 July 2004 by at least 25 percent per year. No municipality should have overdraft facility by 30 June In an attempt to monitor the progress, municipalities were requested to submit copies of the bank statements of their primary bank account, as at 30 June for the years 2004, 2005, and 2006 to Provincial Treasury. The bank statements revealed that the following municipalities were in overdraft:- 45

46 Banking Issues Cont. Uthukela District Municipality is still following the procedures that have been put in place to improve their cash flow by performing the cash flow projections on a daily basis, printing the bank statements on a daily basis via cash focus to confirm the bank balances and preparing the cheque schedules and releasing cheques only after the cash flow position has been taken into account. Mpofana Local Municipality has managed to turn over an overdraft bank balance as at 30 June 2004 to a positive bank balance as at the 30 June Unfortunately, due to cash flow problems experienced by the municipality the bank balance reflected an overdraft of R1,381 million at the end of December The primary bank account balance is monitored on a quarterly basis to ensure reduction in the unfavorable bank balance. Nquthu Local Municipality has managed to turn over an overdraft bank balance as at the 31 January The favorable bank balance as at the 31 January 2007 was R1,793 million. 46

47 Norms and Standards MUNICIPAL FINANCE POLICIES APPROVED IMPLEMENTED Yes No Yes No Credit Control and Debts Collection Policy Tariff Policy Rates Policy Investment Policy Risk Management Policy Indigent Support Policy Budget Policy Cash Management and Banking Policy Integrated Development Policy Fixed Assets and Accounting Policy Supply Chain Management Policy Property Rates Policy

48 ANALYSIS ON FINANCE-RELATED POLICIES APPROVED Yes APPROVED No IMPLEMENTED Yes IMPLEMENTED No 10 0 Credit Control and Debts Collection Polic Tariff Policy Rates Policy Investment Policy Risk Management Policy Indigent Support Policy Budget Policy Cash Management and Banking Polic Integrated Development Policy Fixed Assets and Accounting Polic Supply Chain Management Policy Property Rates Policy 48

49 MUNICIPAL IT POLICIES APPROVED IMPLEMENTED Yes No Yes No Data Backup Policy Data and Systems Security Policy Network Security Policy Computer and IT Use

50 SURVEY ON OTHER POLICIES APPROVED IMPLEMENTED Yes No Yes No Performance Management Policy Gamap/Grap Framework Policy Disaster Recovery Policy Disaster Recovery Plan Community Participation Policy Records Management Policy

51 Municipal Infrastructure Grant (MIG) MIG is intended to support municipal capital budgets; which entails upgrading, maintaining and building new infrastructure. In a letter dated 20 October 2006 to the P.T, the DPLG has advised that they have recommended to National Treasury to implement the provisions of Section 18 (1) of the Division of Revenue Act (DoRA) which would withhold MIG grant funding for municipalities that are under spending MIG allocations 51

52 MIG Withheld Periods KwaZulu-Natal Provincial Treasury Municipality Allocation (R'000) Transferred to date (R'000') % Transferred Actual Expenditure to date (R'000') % Expenditure Amount not yet spent (R'000) Period of Withholding (Days) Richmond % % Hlabisa % % Mthonjaneni % % Okhahlamba % % Indaka % % Abaqulusi % % Nquthu % % edumbe % % Msinga % % Umvoti % % Nongoma % % Jozini % % endondakusuka % % Ulundi % % Dannhauser % % Umzumbe % % umuziwabantu % % Ubuhlebezwe % % KwaDukuza % % Greater Kokstad % % Umhlabuyalingana % % Nkandla % % Ingwe % % Maphumulo % % Imbabazane % % umshwathi % % Umlalazi % % ilembe % % Ezinqolweni % % Zululand % % Vulamehlo % % Mbonambi % % Newcastle % % Emnambithi/Ladysmith % % Legend - Withholding for: 30 Days 60 Days 90 Days 52

53 MIG Spending 2006/07 Actual Expenditure against MIG Transfers (2006/07) Actual Expenditure to date % Expenditure of funds transferred % Expenditure of Total Allocation Province Allocations Transferred to Date Eastern Cape 1,288, , , Free State 563, , , Gauteng 898, , , KwaZulu-Natal 1,262, , , Limpopo 821, , , Mpumalanga 470, ,671 87, Northern Cape 130,922 53,727 42, North West 525, , , Western Cape 304, , , Total 6,265,300 3,116,157 2,310,

54 MIG Under Expenditure (less than 40 %) DORA Allocation MIG MANAGEMENT REPORT 2006/07 Expenditure Year to date % Municipality DORA Allocation Expenditure Year to date Ethekwini 304,939, ,939, % edumbe 2,887, ,887, % Vulamehlo 3,221, ,248, % uphongolo 4,622, ,622, % Umdoni 3,007, ,007, % Abaqulusi 6,415, ,415, % Umzumbe 7,993, ,806, % Nongoma 6,369, ,452, % umuziwabantu 3,908, ,966, % Ulundi 6,859, ,859, % Ezingolweni 2,191, ,914, % Zululand District Municipality 95,241, ,241, % Hibiscus Coast 8,304, ,669, % Umhlabuyalingana 5,795, ,795, % Ugu District Municipality 100,360, ,360, % Jozini 7,624, ,624, % umshwathi 3,926, ,314, % Big Five False Bay umgeni 3,144, ,144, % Hlabisa 4,990, ,335, % Mooi Mpofana Mtubatuba Impendle Umkhanyakude District Municipa81,074, ,074, % Msunduzi 51,646, ,273, % Mbonambi 3,628, ,628, % Mkhambathini umhlathuze 28,039, ,039, % Richmond 3,210, ,312, % Ntambanana umgungundlovu District Municipality 38,846, ,355, % Umlalazi 6,976, ,970, % < 40 percent No Allocations 54 %

55 Financial Management Grant (FMG) The role of the Finance Management Grant (FMG) is to enable municipalities to modernise their financial management processes and systems and to build financial management capacity through the appointment of interns. MUNICIPALITIES SPENDING ON FMG 10 Municipalities spent less than 25 % 16 Municipalities spent less than 50 % 22 Municipalities spent less than 75 % 13 Municipalities spent above 75 % The following slide indicates expenditure on FMG as at 31 March 2007; 55

56 FMG Grant Expenditure LESS THAN 25% LESS THAN 50% Impendle Ubuhlebezwe Jozini Uthukela Okhahlamba Hlabisa The Big Five False Bay Indaka Ingwe Umdoni Mtubatuba Dannhauser Abaqulusi Kwa Sani Ezingolweni Nkandla Richmond Ugu Ndwedwe Umzumbe Utrecht Ntambanana Mbonambi Nquthu uphongolo Mkhambathini 56

57 FMG Grant Expenditure MORE THAN 50% LESS THAN 75% MORE THAN 75% Vulamehlo Mooi Mphofana Umzimkhulu Imbabazane umhlathuze Maphumulo Umtshezi umshwathi Hibiscus Coast Umhlabuyalingana Newcastle endondakusuka uthungulu Umkhanyakude Ulundi Zululand Amajuba Umvoti ilembe Msunduzi ethekwini Umzinyathi umgungundlovu Msinga edumbe Greater Kokstad Umlalazi umuziwabantu umngeni Nongoma Mthonjaneni KwaDukuza Sisonke Emnambithi/Ladysmith Endumeni 57

58 SPENDING ON FMG GRANT AS AT 31 MARCH SPENDING LESS THAN 25% SPENDING LESS THAN 50% SPENDING LESS THAN 75% SPENDING ABOVE 75% 58

59 Draft Budgets 2007/ /06/04 Be the Centre of Excellence in Fiscal and Financial Management in the Country

60 Generic Municipal Budget Process Timetable (Key Milestones) Preparation Phase Mayor tables budget timetable Mayor reviews IDP & previous Annual Report Check National & Provincial Priorities Review financial policies eg rates, tariffs etc C F O issues budget guidelines Dept submit business plans Refine draft budget before adoption by Council July August Sept Oct Nov Dec Jan Feb March April May June Tabling of Draft Budget Council approve Opex and Capex draft budget Stakeholders consultation Process* Tabling of Final Budget Finalise and approve financial policies Approve business plans, prepare SDBIP and Performance Contracts Council approves final budget & IDP revisions Council publishes new tariff structures Final budget made public and posted on website Mayor approves SDBIP and performance agreements are concluded Reporting I D P report to MEC: Local Govt Submission of draft budget to Prov/Nat Treasury Submission of final budget to Prov/Nat Treasury * this includes community, other sphere of govt and interested and affected parties 60

61 Linking the IDP, Budget and PMS IDP What we need to do PMS How are we doing? Budget How do we resource? Implementation How & when do we implement? 61

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64 2007/08 Draft Budget - (Non Submission) KwaZulu-Natal Provincial Treasury Tabled Budget 2007/08 If Yes, date 2007/08 budget tabled KZN MUNICIPALITIES If No, planned date for tabling 2007/08 budget Proposed date for adoption of the 2007/08 budget Number adjustment budgets adopted for 2006/07 Date latest adjustment budget adopted for 2006/07 Municipality Vulamehlo Yes 7-Mar-07 x 07-Jun-07 0 x Ezinqoleni Yes 10-Apr-07 x 31-May-07 0 x Hibiscus Coast Yes 27-Mar-07 x 29-May Jan-07 Umshwathi Yes 28-Mar-07 x 30-May Feb-07 Impendle Yes 7-Mar-07 x 07-May-07 0 x Indaka Yes 30-Mar-07 x 30-May Feb-07 Okhahlamba Yes 29-Mar-07 x 15-Jun Mar-07 Imbabazane Yes 30-Mar-07 x 31-May Feb-07 Msinga Yes 30-Mar-07 x 16-May-07 0 x Umvoti Yes 30-Mar-07 x 25-May-07 0 x Edumbe Yes 29-Mar-07 x 31-May Feb-07 Uphongolo Yes 02-May-07 x 02-May Feb-07 Nongoma Yes 16-May-07 x 30-May-07 0 x Umhlabuyalingana Yes 15-Apr-07 x 30-May Mar-07 Hlabisa Yes 18-May-07 x 31-May-07 0 x Ingwe No 26-Apr-07 x 27-Jun-07 0 x Kwa Sani Yes 05-Apr-07 x 26-Apr-07 0 x Ubuhlebezwe Yes 29-Mar-07 x 31-May Feb-07 Msundusi Emnambithi Umhlathuze 3 non delegated have not submitted draft budgets 18 delegated draft budgets not received by PT 64

65 Draft Budget 2007/08 cont. KwaZulu-Natal Provincial Treasury Draft Budgets (2007/08) 39 of the 53 delegated municipalities tabled their draft budgets before 01 April 2007; P.T received 40 of the 53 draft budgets from municipalities; P.T evaluated the 40 draft budgets and recommendations were forwarded to municipalities to consider in their final budgets. MEC for Finance issued to all Mayors who contravened Section 16(2) of MFMA Areas of concern raised by P.T: Excessive budgeting on salaries, wages and allowances; Generally growth of both capital and operating budgets were in excess of 3 6 percent as prescribed in NT Circular 28; Some municipalities have not adequately budgeted for refuse removal; Approximately 15 of the 40 municipalities did not submit the supporting documents as required in the N.T circular 28; Inadequate provision for doubtful debts; High tariff increases in some cases. Generally growth in excess of 6 percent for Capital and Operating budgets 65

66 Challenges Municipal Property Rates 2007/06/04 Be the Centre of Excellence in Fiscal and Financial Management in the Country

67 Municipal Property Rates Act (No. 6 of 2004) KwaZulu-Natal Provincial Treasury The Ordinance required that properties were valued on land value only with improvements valued as depreciated replacement cost. The MPRA requires that properties are valued on their market value ie. Land & improvements The Ordinance required that urban areas only were rated The MPRA requires that all properties within a municipality are valued and rated with some exceptions. The MPRA requires that all rate payers are treated equitably throughout the country 67

68 Municipal Property Rates Act (MPRA) The implementation of the Act must positively contribute to the: Ensuring the affordability of rates to ratepayers Revenue needs of the municipality Local economic development Local social development Service delivery, by meeting priorities of the community as reflected in its IDP Management of rates shocks

69 Municipalities: KwaZulu Natal 61 municipalities in total 50 local municipalities 1 Metro 4 District Municipalities with District Management Areas 6 District Municipalities will not be rating 17 municipalities which have never previously rated 69

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73 When elephants fight the grass suffers, but when elephants make love the grass suffers even more 73

74 Property Information: Towards the Municipal Register of Properties KwaZulu-Natal Provincial Treasury Approved Cadastral layer Registered Cadastral layer Valuation Data Other Geographical Data Land Use Data, LUMS, imagery Property Information required towards the preparation of the Municipal Register of Properties 74

75 Each aspect of the MPRA has implementation challenges Municipal budget General valuation roll Rates policy 75

76 Municipalities implementing 1 st July 2007 umngeni umshwathi umlalazi Mbonambi Mthonjaneni Ntambanana Nkandla KwaDukuza 76

77 Implementation Challenges: State & State Trust Land KwaZulu-Natal Provincial Treasury Valuation challenges Identification of occupier parcels Lack of market information Diverse uses and physical characteristics of the land 77

78 Category Definition, as per Act What to value? State land State Trust Land, including Ingonyama Trust land State Trust Land: Communal Land (DLA) State Trust Land State Trust Land Govt owned land, national or provincial institution In trust for persons communally inhabiting the land in terms of a traditional system of tenure In trust for persons inhabiting the land in terms of a traditional system of tenure Land over which land tenure rights were granted/registered Which is earmarked for disposal through Restitution of Land Rights Act All property registered as State Land Multiple purpose category Multiple purpose category Multiple purpose category Multiple purpose category 78

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80 Different types of tenure and land use PTO PTO Permission to occupy Schools PTO PTO Commercial lease Dwellings Game reserves PTO Magistrates courts 80

81 Provincial Rates policy guidelines for State & State Trust Land including Ingonyama Trust Proposal accepted by the Ingonyama Trust Board: 1. Recommend that this category of property falls within a multiple purpose category. 2. Identify entities from which rates may be collected: 1. Commercial leases 2. Commercial PTO s 3. Institutional PTO s 3. Review rates policy annually and amend as more information becomes available. 81

82 Implementation Challenges: Rates policy Municipal rates policies are not detailed enough to give effect to relief measures. The macro-economic factors that must be taken into consideration in developing a rates policy in line with section 229(2)(a) of the Constitution are the following: Promotion of economic growth Effective coordination of economic policy across the 3 spheres of government Consistency with macro-economic priorities of maintaining low and stable inflation rates Section 20: Limits on annual increase in rates The Minister may set an upper limit on the percentage by which annual rates on properties or a rate on a specific category of property may be increased. Dplg has indicated that this section is not mandatory and at this stage no upper limit prescription is envisaged. 82

83 Implementation Challenges The need to support small business development and foster rapid job creation The need to attract and promote both national and foreign capital investment. Rates must be consistent with broad developmental priorities. Section 20: Limits on annual increase in rates The Minister may set an upper limit on the percentage by which annual rates on properties or a rate on a specific category of property may be increased. Dplg has indicated that this section is not mandatory and at this stage no upper limit prescription is envisaged. Rates shocks (significant increase in rates) A municipality which is rating and valuing for the first time must limit rates shocks to property owners. Newly incorporated properties will be subject to relief due to the compulsory phasing-in provisions in terms of Section 21 of the Act. 83

84 Management of Rates Shocks by Way of Phasing-in Market Values For Rating Purpose Valuation Cycle Value on a roll without phasing-in (in Rand) Rates payable assuming 1Cent/Rand Value for rating after phasing-in (in Rand), assuming 25% phasing in Rates payable assuming 1Cent/Rand Last Year of cycle st Year in new cycle nd Year in new cycle rd Year in new cycle th (last) Year in cycle

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86 Treasury Interventions KwaZulu-Natal Provincial Treasury INTERVENTION MEASURES COMMON ISSUES - Capital Expenditure declining - Escalating debt - Rates and service payment levels below 95% - Depletion of internal capital - External loans redemption - Ignorance of financial consequences in the municipality - Rates are collected annually - Conversion from IMFO to GAMAP/GRAP standards MONITORING/SUPPORT National Treasury Provincial Treasury LGTA CFO Forums Training RESOURCES MUNICIPALITY Municipal Staff Budget Office Councillors Ward Committees DESIRED OUTCOME - Financial stability by containing expenditure and increasing payment levels - Reduce reliance on external loans - Manage cash flow and reduce overdraft - Cash backed Reserves 3 5 YEAR OBJECTIVES - Increase level of payment to 97% p.a. - Reduce arrears (>60 days) by 5% p.a. - Improve credit rating to access external funding for capital expenditure. - Cash backed reserves - Settle overdraft by June Conversion to GAMAP/GRAP standards STRATEGIES - Council s to update Credit Control Policy, Indigent & Debt Collecting Policy, Financial Regulations and Delegations, Tariff Policy, Investment Policy, Fixed Asset Policy and Borrowing Policy - Monthly Cash Flow monitoring - Allocate resources for implementation of MFMA - Mayor to spearhead campaign for increased payments - Introduce monthly rating Municipal Property Rating Act (MPRA) - Set external loan limits gearing vs repayment ability - IY Monitoring and training - Implement annual credit rating - Implementation of Medium Term Revenue & Expenditure Framework (MTREF) - Adequate Provision for Bad debt in the budget - Hotline for municipal officials wanting clarity on financial management issues 86

87 Annual Financial Statements SELECT COMM ON FINANCE NATIONAL - STATUS OF MUNICIPALITIES.ppt 2007/06/04 Be the Centre of Excellence in Fiscal and Financial Management in the Country

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