MUNICIPAL FINANCE MANAGEMENT ACT (MFMA): BUDGET AND PERFORMANCE ASSESSMENT REPORT IN TERMS OF THE MFMA, SECTION

Transcription

1 16 JANUARY 2018 MUNICIPAL FINANCE MANAGEMENT ACT (MFMA): BUDGET AND PERFORMANCE ASSESSMENT REPORT IN TERMS OF THE MFMA, SECTION 72 (1) (a), FOR THE SIX (6) MONTHS ENDED 31 DECEMBER 2017 INDEX PAGE 1. Purpose 2 2. Strategic Objective 2 3. Background 2 4. Report for the quarter ended 31 December Statement of Financial Performance (Table C4) 4 Revenue & Expenditure by Municipal Vote (Table C3) 10 Capital Expenditure 12 Cash Flow Statement 16 Outstanding Debtors Report 17 Outstanding Creditors Report 19 Key Performance Indicators 20 Investment Portfolio Financial Implications Key December 2017 Performance (Financial) Indicators Interdepartmental and Cluster Impact Comments of the Head: Legal Services Implications Conclusion City Manager s Quality Certification 23 ANNEXURES Annexure A Explanation of Legal Requirements 23 Annexure B C Schedule Monthly Statements 25 Other Annexures: 1. Other Revenue Salaries and Allowances Staff Benefits Detailed Capital Expenditure 60

2 16 January 2018 THE CITY MANAGER THE EXECUTIVE MAYOR MUNICIPAL FINANCE MANAGEMENT ACT (MFMA): BUDGET AND PERFORMANCE ASSESSMENT REPORT IN TERMS OF THE MFMA, SECTION 72 (1) (a), FOR THE SIX (6) MONTHS ENDED 31 DECEMBER PURPOSE The purpose of this report is to inform Council of the municipality s midterm actual performance (2013/14 financial year) against the approved adjusted budget in compliance with Section 72 (1)(a) and 52 (d) of the MFMA and the requirements as promulgated in the Government Gazette No of 17 April 2009, by providing a statement on the implementation of the budget and financial state of affairs of the municipality to the Executive Mayor, as legislated. 2. STRATEGIC OBJECTIVE The strategic objective of this report is to ensure good governance, financial viability and optimal institutional transformation with capacity to execute its mandate. 3. BACKGROUND Section 72(1) of the MFMA and Section 28 of Government Gazette Notice dated 17 April 2009, regarding the Local Government: Municipal Finance Management Act of 2003 and Municipal and Reporting Regulations necessitates that specific financial particulars be reported on and in a prescribed format, hence this report to meet legislative compliance. In terms of Section 72 (1, 2 and 3) of the MFMA 1. The accounting officer of a municipality must by 25 January of each year (a) Assess the performance of the municipality during the first half of the financial year, taking into account : (i) The monthly statements referred to in section 71 for the first half of the financial year; (ii) The municipality s service delivery performance during the first half of the financial year, and the service delivery targets and performance identified in the annual report; and performance indicators set in the service delivery and budget implementation plan; (iii) The past year s annual report, and progress on resolving problems identified in the annual report; and (iv) The performance of every municipal entity under the sole or shared control of the municipality, taking into account reports in terms of section 88 from any such entities; and (b) Submit a report on such assessment to - (i) The mayor of the municipality; (ii) The National Treasury; and (iii) The relevant provincial treasury. 2. The statement referred to in section 71 (1) for the sixth month of a financial year may be incorporated into the report referred to in subsection (1) (b) of this section. 3. The accounting officer must, as part of the review - 2

3 (a) Make recommendations as to whether an adjustments budget is necessary; and (b) Recommend revised projections for revenue and expenditure to the extent that this may be necessary Furthermore the Municipal and Reporting Regulations section 28 stipulates that: The monthly budget statement of a municipality must be in a format specified in Schedule C and include all the required tables, charts and explanatory information, taking into account any guidelines issued by the Minister in terms Section 168(1) of the Act In addition Section 31(1) prescribes the following: The mayor s quarterly report on the implementation of the budget and financial state of affairs of the municipality as required by Section 52(d) of the Act must be (a) In the format specified in Schedule C and include all the required tables charts and explanatory information, taking into account any guidelines issued by the Minister in terms Section 168(1) if the Act; and (b) Consistent with the monthly budget statement for September, December, March and June as applicable: and (c) Submitted to the National Treasury and relevant Provincial Treasury within five (5) days of tabling of the report in the council. 4. REPORT FOR THE SIX MONTHS ENDED 31 DECEMBER 2017 This report is based upon financial information, as at 31 December and available at the time of preparation. All variances are calculated against the approved budget figures. The results for the quarter ended 31 December 2017 are summarised as follows: Statement of Financial Performance (SFP) (Annexure B Table C4) SFP shown in Annexure B is prepared on a similar basis to the prescribed budget format, detailing revenue by source. The total revenue excludes capital transfers and contributions, and expenditure is by type. The actual year to date revenue for the period of R million is higher than the year to date target of R million by 2% and the expenditure for the period is R million, which is 0% on the year to date target of R million respectively. The actual performance for the second quarter ended 31 December 2017 (excluding capital transfers and contributions) on the operating budget can be summarised as follows: December 2017 Year To Date Actual December 2017 Year To Date Variance R 000 R 000 R 000 Revenue by source Expenditure by type Surplus/(Deficit) The detailed cumulative year to date performance for the quarter ended 31 December 2017 is outlined below: 3

4 MAN Mangaung - Table C4 Monthly Statement - Financial Performance (revenue and expenditure) - M06 December 2016/17 Audited Outcome Original Adjusted Monthly actual YearTD actual YearTD budget variance R thousands % variance Full Year Revenue By Source Property rates 1,103,200 90, , ,600 36,098 7% 1,103,200 Service charges - electricity revenue 2,237, ,326 1,203,120 1,185,785 17,334 1% 2,237,879 Service charges - water revenue 945,264 55, , ,632 (121,251) -26% 945,264 Service charges - sanitation revenue 282,554 27, , ,277 8,608 6% 282,554 Service charges - refuse revenue 109,523 9,095 54,873 54, % 109,523 Serv ice charges - other Rental of facilities and equipment 35,111 2,133 14,559 17,555 (2,996) -17% 35,111 Interest earned - ex ternal inv estments 26,732 2,033 13,885 13, % 26,732 Interest earned - outstanding debtors 229,899 21, , ,950 30,408 26% 229,899 Div idends receiv ed Fines, penalties and forfeits 58, ,252 29,057 (19,806) -68% 58,115 Licences and permits (104) 121 (226) -186% 243 Agency serv ices Transfers and subsidies 1,040, , , , ,704 24% 1,040,688 Other revenue 205,636 11,481 83, ,818 (18,857) -18% 205,636 Gains on disposal of PPE Total Revenue (excluding capital transfers and contributions) 6,274, ,974 3,256,915 3,204,268 52,647 2% 6,274,843 Expenditure By Type Forecast Employee related costs 1,703, , , ,763 46,976 6% 1,703,525 Remuneration of councillors 58,011 4,887 28,623 29,006 (382) -1% 58,011 Debt impairment 421,634 17, , , % 421,634 Depreciation & asset impairment 628, , , ,333 (65,785) -21% 628,666 Finance charges 169,143 39, ,028 84,572 38,456 45% 169,143 Bulk purchases 1,891, , , ,517 23,133 2% 1,891,034 Other materials 94,679 4,370 34,640 47,339 (12,699) -27% 94,679 Contracted services 627,550 68, , ,775 33,314 11% 627,550 Transfers and subsidies 18, ,143 9, % 18,069 Other expenditure 534,787 20, , ,393 (64,432) -31% 534,787 Loss on disposal of PPE (215) (107) % (215) Total Expenditure 6,146, ,386 3,012,821 3,013,442 (621) 0% 6,146,884 Surplus/(Deficit) 127,959 (28,413) 244, ,826 53, ,959 Transfers and subsidies - capital (monetary allocations) (National / Prov incial and District) 940, ,059 (470,059) (0) 940,118 (National / Prov incial Departmental Agencies, Households, Non-profit Institutions, Priv ate Enterprises, Public Corporatons, Higher Educational Institutions) 26,762 13,381 (13,381) (0) 26,762 Transfers and subsidies - capital (in-kind - all) Surplus/(Deficit) after capital transfers & contributions Tax ation 1,094,838 (28,413) 244, ,265 1,094,838 Surplus/(Deficit) after taxation 1,094,838 (28,413) 244, ,265 1,094,838 Attributable to minorities Description Surplus/(Deficit) attributable to municipality 1,094,838 (28,413) 244, ,265 1,094,838 Share of surplus/ (deficit) of associate Ref Year 2017/18 Surplus/ (Deficit) for the year 1,094,838 (28,413) 244, ,265 1,094,838 The major revenue variances against the budget are: Property rates - Favourable variance of R million (7%) for the period due to more property rates billed for the business and commercial properties than budgeted; Electricity revenue Favourable variance of R million (1%) for the period as a results of higher recorded sales revenue than the approved budget. Water revenue - Favourable variance of R million (-26%) for the period due to lower actual billing for the period (levied at Level 1 rate ) and the impact on the revenue target based on the draught level 3 tariffs. The annual target is likely not to be realised. There is thus a need for a downward adjustment of the budgeted revenue. Services charges: Sanitation revenue- Favourable variance of R (6%) for the period. Performance is on target. Services charges: Refuse revenue Favourable variance of R (0%) and performance is on target. Rental of facilities and equipment Unfavourable variance of R million (-17%) for the period mainly due to lower demand for use of municipal facilities. 4

5 Interest earned External investments - Favourable variance of R (4%) for the period due to higher investment and cash balances than anticipated. Interest earned on Outstanding debtors - Favourable variance of R million (26%) for the period, due to higher interest levied for the period than budgeted. Fines - Unfavourable variance of R million (-68%) is due to the non-accrual of traffic fines, as a results of a lack of the traffic management system. The annual target is likely not to be realised, there is thus a need for a downward adjustment of the budgeted revenue for traffic fines. Government Grants and subsidies Operating: Favourable variance of R million for the period due to higher receipts than budget. Other revenue- Unfavourable variance of R million (-18%) for the period due to lower collection on various revenue items. Transfers recognised Capital: -R million unfavourable due to the non-recognition of capital grants, only recognised at year-end when finalising the annual financial statements. The major operating expenditure variances against the original budget are: Employee related costs Unfavourable variance of R million (6%) on the year to date target as a result of: unfilled vacancies of R 44,161 million, year-to-date overspending on overtime R 33,706 million, the year-to-date spend of R million paid as salary adjustments (R 2.500) and parity adjustment for Naledi and Soutpan employees R 1,467 million that were not provided for in the budget. a. Overtime per Vote The overtime spend to date constitutes 98.23% of the original budget. Management of overtime continues to be a risk for the municipality. Performance per vote on overtime spending is as outlined below. OVERTIME PER VOTE ORIGINAL BUDGET MOVEMENT BUDGET % OF BUDGET VARIANCE OFFICE OF THE CITY MANAGER 52, ,564 26, % (137,311) EXECUTIVE MAYOR 3,510,672 2,495,688 1,755, % (740,352) CORPORATE SERVICES 3,889,572 2,627,750 1,944, % (682,964) FINANCE 291,435 51, , % 93,973 SOCIAL SERVICES 19,770,318 11,762,413 9,885, % (1,877,254) FRESH PRODUCE MARKET 710, , , % (27,458) HUMAN SETTLEMENTS 338, , , % (134,172) ECONOMIC AND RURAL DEVELOPMENT 42, ,129 21, % (237,657) ENGINEERING SERVICES 13,235,132 14,232,966 6,617, % (7,615,400) WATER 9,887,683 9,365,901 4,943, % (4,422,059) WASTE AND FLEET MANAGEMENT 5,081,837 15,191,467 2,540, % (12,650,549) NALEDI 2,810, ,882 1,405, % 802,152 SOUTPAN 1,086, , , % 32,400 CENTLEC 9,182,670 10,700,562 4,591, % (6,109,227) TOTAL OVERTIME 69,890,759 68,651,258 34,945, % (33,705,879) 5

6 Millions Salary per Vote - December 2017 ORIGINAL BUDGET MOVEMENT BUDGET PROJECTED SALARIES For details of staff salaries and allowances see Annexure D Debt impairment Unfavourable variance of R 581,948 which is (0%), due to the year-to-date debt-write-off. Depreciation Variance of R 65,785 million (-21%) due to non-accrual of depreciation for the December month end. Finance charges Unfavourable variance of R 38,456 million which is (45%) mainly due to the nonaccrual of interest charges payable at half yearly intervals. Bulk purchases Unfavourable variance of R 23,133 million (2%), due to overspending on water as a result of high Bloemwater monthly bills. Other materials - Favourable variance of R 12,699 million (-27%), due to cost containment. Contracted services - Unfavourable variance of R 33,314 million (11%) due to over spending on security, Repairs And Maintenance and payment of Solid Waste s SMME s expenses due to encroachment of the 2016/17 outstanding commitments; Other expenditure - Favourable variance R 64,432 million (-31%) due to cost containment measures, GRAP and non-cash issues only accounted for at year-end when finalising the annual financial statements. CONTRACTED SERVICES PER VOTE ORIGINAL BUDGET MOVEMENT BUDGET VARIANCE PERC CITY MANAGER OPERATIONS 76,643,639 33,312,439 38,321,820 5,009, % EXECUTIVE MAYOR 22,808,411 6,036,090 11,404,206 5,368, % CORPORATE SERVICES 47,602,660 12,627,317 23,801,330 11,174, % FINANCE 80,627,051 39,918,946 40,313, , % SOCIAL SERVICES 81,391,367 48,784,131 40,695,684 (8,088,447) 59.94% PLANNING 27,456, ,934 13,728,279 13,211, % FRESH PRODUCE MARKET 6,251,569 30,500 3,125,785 3,095, % HUMAN SETTLEMENTS 59,470,461 31,158,436 29,735,231 (1,423,206) 52.39% ECONOMIC AND RURAL DEVELOPMENT 9,225,011 2,292,075 4,612,506 2,320, % ENGINEERING SERVICES 236,127,743 15,473, ,063, ,590, % WATER 65,126,571 19,696,751 32,563,286 12,866, % WASTE AND FLEET MANAGEMENT 55,481,103 41,595,321 27,740,552 (13,854,769) 74.97% MISCELLANEOUS SERVICES 15,812,598-7,906,299 7,906, % STRATEGIC PROJECTS 8,275,233 5,376,520 4,137,617 (1,238,904) 64.97% NALEDI 15,152,669 (283,937) 7,576,335 7,860, % SOUTPAN 751, , , , % CENTLEC 173,607,810 90,364,385 86,803,905 (3,560,480) 52.05% TOTAL 981,812, ,089, ,906, ,817, % 6

7 Year-to date under spending is at 29.30% (R 143,817 million) on the projected mid-term budget of R 490,906 million. The main under performance being at Engineering Services with only 6.55% (R 15,473 million) of their annual budget of R 236,127 million spent. It should however be noted that in terms of the mscoa project, spending on Contracted Services should be seen against the following expenditure classification: a. Outsourced Services The actual spend on outsourced services within the contracted services per vote are overspend by R million: OUTSOURCE SERVICES PER VOTE ORIGINAL BUDGET MOVEMENT BUDGET VARIANCE PERC CITY MANAGER OPERATIONS 18,723,961 61,904 9,361,981 9,300, % EXECUTIVE MAYOR 13,081,683 3,592,570 6,540,842 2,948, % CORPORATE SERVICES 11,172,027 3,747,962 5,586,014 1,838, % FINANCE 28,726,138 19,342,250 14,363,069 (4,979,181) 67.33% SOCIAL SERVICES 40,538,009 43,744,433 20,269,005 (23,475,429) % PLANNING 3,161,096 4,443 1,580,548 1,576, % FRESH PRODUCE MARKET 51,569-25,785 25, % HUMAN SETTLEMENTS 3,648,776 36,370 1,824,388 1,788, % ECONOMIC AND RURAL DEVELOPMENT 4,687,763 1,842,849 2,343, , % ENGINEERING SERVICES 15,081, ,821 7,540,854 7,009, % WATER 11,363,012 34,623 5,681,506 5,646, % WASTE AND FLEET MANAGEMENT 24,827,551 33,111,336 12,413,776 (20,697,560) % MISCELLANEOUS SERVICES 2,395,000-1,197,500 1,197, % STRATEGIC PROJECTS 168,802 3,739 84,401 80, % NALEDI 258, , , % SOUTPAN 251, , , % CENTLEC 17,077,335 6,667,489 8,538,668 1,871, % TOTAL 195,214, ,721,788 97,607,354 (15,114,434) 57.74% b. Consultant Services The actual spend on outsourced services within the contracted services per vote are showing a saving of R million: CONSULTANT SERVICES PER VOTE ORIGINAL BUDGET MOVEMENT BUDGET VARIANCE PERC CITY MANAGER OPERATIONS 56,092,341 33,121,418 28,046,171 (5,075,247) 59.05% EXECUTIVE MAYOR 1,498, , , % CORPORATE SERVICES 9,010,557 6,098,525 4,505,279 (1,593,247) 67.68% FINANCE 50,785,913 20,507,648 25,392,957 4,885, % SOCIAL SERVICES 1,495, , , % PLANNING 24,295, ,491 12,147,731 11,635, % FRESH PRODUCE MARKET 50,000 30,500 25,000 (5,500) 0.00% HUMAN SETTLEMENTS 4,746, ,660 2,373,230 2,209, % ECONOMIC AND RURAL DEVELOPMENT 1,080, , , , % ENGINEERING SERVICES 851, , , % WATER 238,317 6, , , % WASTE AND FLEET MANAGEMENT 448, , , % MISCELLANEOUS SERVICES 13,417,598-6,708,799 6,708, % STRATEGIC PROJECTS 8,106,431 5,372,782 4,053,216 (1,319,566) 0.00% NALEDI 7,722,035 (385,650) 3,861,018 4,246, % SOUTPAN 448, , ,314 34, % CENTLEC 58,521,613 26,474,089 29,260,807 2,786, % TOTAL 238,810,065 92,520, ,405,033 26,884, % 7

8 c. Contracted Services The actual spend on outsourced services within the contracted services per vote are under-spend by R million: CONTRACTED SERVICES PER VOTE ORIGINAL BUDGET MOVEMENT BUDGET VARIANCE PERC OFFICE OF THE CITY MANAGER 1,827, , , , % EXECUTIVE MAYOR 8,228,359 2,443,520 4,114,180 1,670, % CORPORATE SERVICES 27,420,076 2,780,830 13,710,038 10,929, % FINANCE 1,115,000 69, , , % SOCIAL SERVICES 39,357,746 5,039,698 19,678,873 14,639, % PLANNING % FRESH PRODUCE MARKET 6,150,000-3,075,000 3,075, % HUMAN SETTLEMENTS 51,075,226 30,958,406 25,537,613 (5,420,793) 60.61% ECONOMIC AND RURAL DEVELOPMENT 3,457,157 20,185 1,728,579 1,708, % ENGINEERING SERVICES 220,194,128 14,941, ,097,064 95,155, % WATER 53,525,242 19,655,527 26,762,621 7,107, % WASTE AND FLEET MANAGEMENT 30,204,820 8,483,985 15,102,410 6,618, % MISCELLANEOUS SERVICES % STRATEGIC PROJECTS % NALEDI 7,172, ,714 3,586,087 3,484, % SOUTPAN 51,401-25,701 25, % CENTLEC 98,008,862 57,222,807 49,004,431 (8,218,376) 58.39% TOTAL 547,787, ,846, ,893, ,047, % The following charts compare the actual revenue and expenditure against the approved budget; Gains Other revenue Transfers operational Transfers Capital Licences and permits Fines Interest debtors Interest Investments Rental Refuse Sanitation Water Electricity Property rates Millions Revenue by Source as at 31 December 2017 Actual 8

9 Operating Expenditure by Type as at 31 December 2017 Losses Other expenditure Transfers & grants Contracted services Other materials Bulk purchases Finance charges Depreciation Debt impairment Councillors Employee costs Millions Actual The table below indicates the revenue and expenditure by vote. MAN Mangaung - Table C3 Monthly Statement - Financial Performance (revenue and expenditure by municipal vote) - M06 December Vote Description 2016/17 Audited Outcome Original Adjusted Monthly actual YearTD actual YearTD budget variance R thousands % Revenue by Vote 1 variance Full Year Forecast Vote 1 - City Manager Vote 2 - Ex ecutiv e May or Vote 3 - Corporate Services 16, ,932 8,314 (4,382) -52.7% 16,627 Vote 4 - Finance 1,263, , , ,848 82, % 1,263,695 Vote 5 - Social Services 65, ,621 32,745 (28,124) -85.9% 65,491 Vote 6 - Planning 33, ,917 16,705 4, % 33,410 Vote 7 - Human Settlement and Housing 39,105 1,915 32,953 19,552 13, % 39,105 Vote 8 - Economic and Rural Development 7 7 #DIV/0! Vote 9 - Engineering Services 404,018 54, , ,009 26, % 404,018 Vote 10 - Water 1,295, , , ,929 (91,776) -14.2% 1,295,858 Vote 11 - Waste and Fleet Management 295,760 56, , ,880 33, % 295,760 Vote 12 - Miscellaneous Serv ices 1,480, , , ,256 (451,352) -61.0% 1,480,513 Vote 13 - Naledi/Soutpan Regional Management 10, ,245 (5,242) -99.9% 10,490 Vote 14 - Strategic Projects & Serv ice Delivery Regulation Vote 15 - Electricity - Centlec (Soc) Ltd 2,336, ,481 1,225,632 1,168,378 57, % 2,336,756 Total Revenue by Vote 2 7,241, ,974 3,256,915 3,620,861 (363,947) -10.1% 7,241,723 Expenditure by Vote 1 Ref Year 2017/18 Vote 1 - City Manager 131,334 9,210 57,249 65,667 (8,418) -12.8% 131,334 Vote 2 - Executive Mayor 212,020 16, , ,010 13, % 212,020 Vote 3 - Corporate Services 251,019 36, , ,510 5, % 251,019 Vote 4 - Finance 237,411 28, , ,705 8, % 237,411 Vote 5 - Social Services 437,994 48, , ,997 12, % 437,994 Vote 6 - Planning 136,053 23,773 47,338 68,027 (20,689) -30.4% 136,053 Vote 7 - Human Settlement and Housing 110,021 12,589 75,777 55,010 20, % 110,021 Vote 8 - Economic and Rural Development 34,244 2,446 12,433 17,122 (4,689) -27.4% 34,244 Vote 9 - Engineering Services 728, , , ,254 (80,838) -22.2% 728,508 Vote 10 - Water 982, , , ,301 8, % 982,602 Vote 11 - Waste and Fleet Management 281,201 42, , ,600 45, % 281,201 Vote 12 - Miscellaneous Serv ices 244,747 19,202 58, ,373 (64,237) -52.5% 244,747 Vote 13 - Naledi/Soutpan Regional Management 78,835 4,920 23,983 39,417 (15,435) -39.2% 78,835 Vote 14 - Strategic Projects & Serv ice Delivery Regulation 65,800 3,826 34,830 32,900 1, % 65,800 Vote 15 - Electricity - Centlec (Soc) Ltd 2,215, ,319 1,125,355 1,107,548 17, % 2,215,096 Total Expenditure by Vote 2 6,146, ,386 3,012,821 3,073,442 (60,621) -2.0% 6,146,884 Surplus/ (Deficit) for the year 2 1,094,838 (28,413) 244, ,419 (303,326) -55.4% 1,094,838 9

10 The following charts compare the actual revenue and expenditure per vote against the approved annual budget: Millions 2,800 2,700 2,600 2,500 2,400 2,300 2,200 2,100 2,000 1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1, Revenue per Vote as at 31 December 2017 Actual Millions 2,500 2,400 2,300 2,200 2,100 2,000 1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1, Operating Expenditure per Vote as at 31 December 2017 Actual 10

11 Capital expenditure report (Annexure B Table C5) The capital expenditure report shown in Annexure B has been prepared on the basis of the format required to be lodged electronically with National Treasury and is categorised into major output type. The actual spending for the year is 89.90% (R million) on the annual adjusted budgeted target of R million. On an annual basis we have thus spent only 33.56% (R million) of the year to date expenditure versus the approved budget of R million. The summary report indicates the following: Summary Statement of Capital Expenditure Financing (Year to Date Target vs Actual) Approved Target Actual Variance Description 2017/18 December 2017 December 2017 Fav/(Unfav) R 000 R 000 R 000 R 000 Capital Expenditure Capital Financing National Government Public Contributions Borrowing Internally Generated Funds Financing Total Approved December Percentage 2017 Description 2017/18 Actual Spent R 000 R 000 % Capital Expenditure % Capital Financing National Government % Public Contributions % Borrowing % Internally Generated Funds % Financing Total % GRANT EXPENDITURE DESCRIPTION Approved 2017/18 '000 Dec' 2017 Actual '000 Percentage Spent National Electrification Programme 20,000,000 4,195, % Neighbourhood Development Partnership Grant 15,000, % Public Transport Infrastructure & Systems Grant 231,637,000 66,437, % USDG Grant 739,807, ,069, % Integrated City Development Grant 8,224,000 7,913, % TOTAL FINANCING 1,014,668, ,615, % 11

12 The following chart indicates the capital expenditure financing. Millions Capital Expenditure Funding - 31 December 2017 Nat Govt Prov Govt Public contrib Borrowing Internal funds Actual The status of year-to-date capital expenditure, compared to the standard classification for the key infrastructure items as indicated in Annexure B Table C5 are: Governance and administration (R million less than budget target) Community and public safety (R million less than budget target) Economic and environmental services (R million less than budget target) Electricity (R million less than budget target) Water (R million more than budget target) Waste water management (R million more than budget target) Waste management (R million more than budget target) The following chart compares the year to date actual expenditure with the year to date budget. Millions Capital Expenditure Standard Classification - 31 December Actual 12

13 The following chart compares the year to date actual expenditure with the year to date annual budget (targets). Millions Capital Expenditure Actual vs ed Target 31 December ,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1, Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun YearTD actual The table below outlines the performance per vote status of the year-to-date capital expenditure. The low spending by the Directorates for the year ended 31 December 2017: Capital Expenditure per Vote Approved Actual Target Percentage on Original City Manager 155,086,617 30,864,809 57,893, % Corp Services 6,240, ,833 2,329, % Finance 2,039, , , % Social Services 14,481,610 4,181,481 5,405, % Planning 20,563,600 7,481,523 7,676, % Human Settlements 114,800,000 6,039,158 42,854, % Econ & Rural Dev 20,824,000 8,167,787 7,773, % Engineering 487,200, ,162, ,871, % Water Services 127,954,225 67,741,115 47,765, % Waste & Fleet 41,278,469 4,735,757 15,409, % Strategic Projects 17,500,000-5,599, % Naledi 15,000,000-6,532, % Centlec 116,468,682 37,217,152 43,477, % 1,139,436, ,396, ,351, % The following chart compares the year to date actual expenditure with the year to date budget target per vote (Directorate). 13

14 Millions Capital Expenditure per Vote as at 31 December 2017 Approved Actual Target The under expenditure on all services is due to the under spending of projects. Cash Flow Statement (CFS) (Annexure A Table C7) The CFS report for the period ending 31 December 2017 indicates a closing balance (cash and cash equivalents) of R million (November million) which comprises of the following: Bank balance and cash R million (Mangaung) Bank balance and cash R million (Centlec) Bank balance and cash R million (Market) Investment deposits R million (Mangaung) Investment deposits R million (Centlec) Cash flows from operating activities category: Property rates, penalties & collection charges reflect a year to date amount of - R million, resulting in an R million (64%) favourable variance, as compared to a year target of R million; Service charges reflect a year to date amount cash collection of R million, resulting in an R million (8%) favourable variance, as compared to a year target of R million. Other revenue reflects a year to date amount of R million, resulting in an R million favourable variance, as compared to a year target of R million. Operating grants and subsidies show a year to date receipted amount of R million compared to a year target of R million resulting in R million favourable variance.(variance due grant receipt apportionment quarterly vs monthly budget); Capital grants and subsidies show a year to date amount of R million compared to a year to date target of R million resulting in R million unfavourable variance due to less capital grants received for the period than budgeted; 14

15 Interest show a year to date amount of R million compared to a year target of R million, indicating R million unfavourable variance mainly due to low bank and investment balances; With regard to payments: Suppliers and employee payments indicate a year to date amount of R million (R million unfavourable variance) compared to a year to date target of - R million mainly due to accrued creditors at the end June 2017, paid in July; Capital payments indicate a year to date amount of R million (R million favourable variance) compared to a target of R million due to the slow uptake of capex projects during the first quarter of the year; Finance charges shows a year to date amount of R million compared to a year target of R million, resulting in a variance of R million. Transfers and grants indicate a year to date amount of R0 million (R million Unfavourable variance) compared to a target of R million and Repayment of borrowing indicates a year to date amount of R (R million unfavourable variance) compared to a target of R million due to the repayment of borrowings due. Outstanding Debtors Report (Annexure B Table SC3) The debtors report has been prepared on the basis of the format required to be lodged electronically with National Treasury. This format provides an extended aged analysis, as well as an aged analysis by debtor type. The debtors balance as at 31 December 2017 is R million (October 2017 R million), thus reflecting an increase of R million (4.81%) for the month. The following chart illustrates that the major debt is reflected in the over 1 year category. An amount of R million R million November 2017) is outstanding in this category (1 year and older), with R million attributable to households, an increase of R million (5.68%) from the balance of R million in November Millions Aged Consumer Debtors Analysis - 31 December ,600 4,400 4,200 4,000 3,800 3,600 3,400 3,200 3,000 2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1, Current 30+ days 60+ days 90 days days 150+ days 180+ days Over 1 Year Total Dec-17 Dec-16 15

16 The following chart indicates the oustanding debtors per customer group. Debtors by Customer Group - 31 December 2017 Business, 1,029,614,724, 24.52% Domestic, 2,459,502,254, 58.57% Govt, 709,854,455, 16.91% The following chart indicates the oustanding debtors by income source. Debtors by Income Source - 31 December 2017 Elec, 676,641,078, 16.11% Water, 1,448,014,511, 34.48% Rates, 864,387,686, 20.59% Other, 59,535,881, 1.42% Interest, 580,242,123, 13.82% Housing, 55,279,462, 1.32% Refuse, 160,431,415, 3.82% Sanitation, 354,439,277, 8.44% Outstanding Creditors Report (Annexure B Table SC4) The Creditors report has been prepared on the basis of the format required to be lodged electronically with National Treasury. This format provides an extended aged analysis, as well as an aged analysis by creditor type. The total creditors amounted to R million compared to an amount of R million in November The increase of R million is in the items as depicted below. 16

17 R'000 The total trade creditors comprises out of the following: November 2017 December 2017 R 000 R 000 Bulk electricity Trade creditors Centlec Bulk water Salaries/PAYE Trade creditors Mangaung Total * Included in the December trade creditors of R million is the current portion of R million that was not yet due at month end. The trade creditors of both Mangaung and Centlec represents invoices received and captured in the financial system only. The following chart compares this month s results with the previous financial year 250,000 Chart C5 Aged Creditors Analysis 200, , ,000 50,000 Bulk Electricity Bulk Water PAYE deductions VAT (output less input) Pensions / Retirement deductions Loan repayment s Trade Creditors Auditor General 2016/17 Year 2017/18 113, ,627 23,260 38,998 15,067 Other Key performance indicators (Annexure B Table SC2) The table refers to the agreed objectives as contained within the Restructuring Grant conditions and the actual percentages achieved. Investment Portfolio (Annexure B Table SC5) The table indicates the status of the investment portfolio and detail of the instruments of where the funds are invested, which amounts to R million as at 31 December 2017 against R million at 30 November

18 5. FINANCIAL IMPLICATIONS The report for the quarter ending 31 December 2017 indicates various financial risks which will also require monitoring in the rest of the financial year: 5.1 Achievement of the operating expenditure and revenue budget; As at the end of December 2017 the operating revenue (excluding capital grants) and expenditure actual represented 48.10% and 50.99% respectively of the approved budget. The outcome reflects a variance of 0.83% (unfavourable) and 0.01% (unfavourable) respectively, when compared to the average target of 48.93% and 50.98% (based on a pro-rata monthly basis 6 months of the financial year). However, considering the under collection of debtors, outstanding creditors, the under spending on capital projects and operating expenditure and the low cash and cash equivalents, expenditure has to be restrained in the new financial year, without neglecting service delivery, to ensure a positive cash flow. 5.2 Improvement of the capital expenditure budget The actual year to date capital expenditure until 31 December 2017 represents only 33.56% of the approved annual budget, when compared to a target of 50% (6 months), a variance of % for the year against the target. 5.3 The management of our cash flow on a daily basis. a. Unspent Grants vs Investments The coverage on unspent conditional grants for the quarter ending December 2017 can be observed from the table below. The shortfall in for the year is mainly due to the low investment levels as at 31 December The key management s priority is to improve on the shortfall on the unspent conditional grants, as measured against the ring fenced investment made for the said specific funds. September 2017 R 000 December 2017 R 000 UNSPENT GRANTS vs. INVESTMENTS Unspent conditional grants Total unspent grants Total investments at end of the period Available investments covered Shortfall/(Surplus) on investments ( ) b. Reserves and unspent grants vs. Investments and Cash The Council s cash flow situation has improved from a surplus of R million in the September 2017 to R million surpluses in December The municipality has thus a challenge of continuing to improve on the surplus on investments of reserve and grants funds. The table below outlines the extent of the surplus/ (shortfall) based on the cash backed reserves and unspent conditional grants as at the end of December INVESTMENT OF RESERVE FUNDS AND GRANTS Cash Backed Reserves September 2017 R 000 December 2017 R 000 Self-insurance reserve COID Reserve Unspent conditional grants Total reserves and unspent grants Total investments at end of period Current bank accounts Total bank and investments Shortfall/(Surplus) on investments ( ) ( ) 18

19 6. KEY DECEMBER 2017 PERFORMANCE (FINANCIAL) INDICATORS The result relating to the various source groups totalling revenue is having an impact on a number of indicators, which are based on total revenue. The under expenditure on the capital budget has also an additional influence on the indicators. The various Debtors ratios are also a cause for concern. See Table SC2 for full detail - Page INTERDEPARTMENTAL AND CLUSTER IMPACT This report is prepared to achieve MFMA compliance. 8. COMMENTS OF THE HEAD: LEGAL SERVICES The abovementioned report as such does not call for legal clarification. 9. IMPLICATIONS Human Resources Not applicable. Finances (budget and value for money) This report is an overview of the financial results for the six months period ended 31 December 2017, as well as any Operating and Capital variances. Constitution and legal factors The implication of approval of this report is compliance to legislative requirements (Section 72(1) (a) of the MFMA). Communication In compliance to legislative requirements (Section 72(1)(a) of the MFMA) this document is provided to all stakeholders by placing it on the Mangaung website. Previous Mayoral Committee Resolutions Not applicable. 10. CONCLUSION This report is in compliance of Section 72(1) (a) of the MFMA, by providing a statement to the Executive Mayor containing certain financial details. RECOMMENDATION That, in compliance with Section 72(1) (a) of the MFMA 1. The Accounting Officer submits to the Executive Mayor this statement reflecting the implementation of the budget and the financial state of affairs of the municipality for the first six (6) months of the year ended 31 December 2017, and 2. In order to comply with Section 71(4) of the MFMA, the Accounting Officer ensure that this statement be submitted to National Treasury and the Provincial Treasury, in both a signed document format and in electronic format

20 20

21 ANNEXURE A Explanation of legal requirements Section 71 of the MFMA requires that the monthly report should contain: (a) actual revenue, per revenue source; (b) actual borrowings; (c) actual expenditure, per vote; (d) actual capital expenditure, per vote; (e) the amount of any allocations received; (f) actual expenditure on those allocations, excluding expenditure on- (i) -its share of the local government equitable share; and (ii) -allocations exempted by the annual Division of Revenue Act from compliance with this paragraph; and (g) when necessary, an explanation of- (i) any material variances from the municipality's projected revenue by source, and from the municipality's expenditure projections per vote; (ii) any material variances from the service delivery and budget implementation plan; (iii) any remedial or corrective steps taken or to be taken to ensure that projected revenue and expenditure remain within the municipality's approved budget. The statement must also include: (a) a projection of the relevant municipality's revenue and expenditure for the rest of the financial year, and any revisions from initial projections; and (b) the prescribed information relating to the state of the budget of each municipal entity as provided to the municipality in terms of section 87(11). (c) The amounts reflected in the statement must in each case be compared with the corresponding amounts budgeted for in the municipality's approved budget. (d) The statement to the provincial treasury must be in the format of a signed document and in electronic format. Further, in terms of Government Notice dated 1 April 2005, regarding the Local Government: Municipal Finance Management Act 2003 Municipal Investment Regulations: the following is applicable: Reporting requirements: 9. (1) The accounting officer of a municipality or municipal entity must within 10 working days of the end of each month, as part of the section 71 report required by the Act, submit to the mayor of the municipality or the board of directors of the municipal entity a report describing in accordance with generally recognised accounting practice the investment portfolio of that municipality or municipal entity as at the end of the month. (2) The report referred to in sub regulation (1) must set out at least (a) (b) (c) (d) the market value of each investment as at the beginning of the reporting period; any changes to the investment portfolio during the reporting period; the market value of each investment as at the end of the reporting period; and fully accrued interest and yield for the reporting period. [Highlighted requirements are further explained below]. Certain prescribed municipalities are required to provide their financial reports to the National Treasury, in lieu of the Provincial Treasury, which includes Mangaung. National Treasury have indicated that they wish to continue to directly monitor municipalities that have a significant impact on the South African economy. For this purpose the required electronic reports were progressively lodged with the National Treasury and for March 2016 the reports were submitted on 14 April These reports are: Statement of Financial Performance (OSA) Capital expenditure report (CAA) Cash Flow Statement (CFA) Outstanding Debtors report (AD) Outstanding Creditors report (AC) Statement of Financial Position actual (BSAC) 21

22 The specific format for the report required to be submitted to the Executive Mayor, as referred to in section 71(1), has now been prescribed in terms of Government Gazette No of 17 April 2009 but the receipt of electronic submission have not been replaced. Therefore, this report is based upon the content and format of the monthly electronic reports provided to National Treasury. The information provided to National Treasury is published quarterly; therefore it is prudent that the Executive Mayor s report be prepared on a similar basis to ensure alignment. Section 71(1) (e) refers to a requirement to report on allocations received. The term, allocations refers to government grants received from other spheres of government. These are reported upon in the Statement of Financial Performance. National Treasury has determined the definition of a vote. Each municipality may determine the vote format for its expenditure, provided it also supplies Government Financial Statistical (GFS) analysis. Section 87 is a requirement to report on the performance of municipal entities. A report has been received on 11 April The market value of the investment portfolio is based on the contractual/ cost price of the investment portfolio. 22

23 ANNEXURE B MANGAUNG C SCHEDULE MONTHLY BUDGET STATEMENT General Information and Contact Information Main Tables Consolidated Monthly Statements Table C1-SUM Summary Table C2-FinPer SC Financial Performance (standard classification) Table C2C Financial Performance (standard classification) Table C3-Fin Per V Financial Performance (revenue and expenditure by municipal vote) Table C3C Financial Performance (revenue and expenditure by municipal vote) - A Table C4-FinPer RE Financial Performance (revenue and expenditure) Table C5-Capex Capital Expenditure (municipal vote, standard classification and funding) Table C5C Capital Expenditure (municipal vote, standard classification and funding) - A Table C6-FinPos Financial Position Table C7-Cflow Cash Flow Supporting Tables Table SC1 Table SC2 Table SC3 Table SC4 Table SC5 Table SC6 Table SC7 Table SC8 Table SC9 Table SC10 Table SC11 Table SC12 Table SC13a Table SC13b Table SC13c Material variance explanations Monthly Statement - Performance indicators Monthly Statement - Aged debtors Monthly Statement - aged creditors Monthly Statement - Investment portfolio Monthly Statement - Transfers and grant receipts Monthly Statement - Transfers and grant expenditure Monthly Statement - Councillor and staff benefits Monthly Statement - Actual and revised targets for cash receipts Monthly Statement - Parent Municipality Financial Performance (revenue and expenditure) Monthly Statement - Summary of municipal entities Consolidated Monthly Statement - Capital expenditure trend Consolidated Monthly Statement - Capital expenditure on new assets by asset class Consolidated Monthly Statement - Capital expenditure on renewal of existing assets by asset class Consolidated Monthly Statement - Expenditure on repairs and maintenance by asset class 23

24 MAN Mangaung - Contact Information A. GENERAL INFORMATION Municipality MAN Mangaung Set name on 'Instructions' sheet Grade 6 1 Grade in terms of the Remuneration of Public Office Bearers Act. Province Web Address Address B. CONTACT INFORMATION FS FREE STATE mangaung.co.za Postal address: P.O. Box P o Box 3704 City / Town Bloemfontein Postal Code 9300 Street address Building Bram Fischer Building Street No. & Name De Villiers Street City / Town Bloemfontein Postal Code 9301 General Contacts Telephone number Fax number C. POLITICAL LEADERSHIP Speaker: Secretary/PA to the Speaker: Name Mxolisi Ashford Siyonzana Name Xoliswa Lumata Telephone number Telephone number Cell number Cell number Fax number Fax number address Mxolisi.Siyonzana@mangaung.co.za address Xoliswa.Lumata@mangaung.co.za Mayor/Executive Mayor: Secretary/PA to the Mayor/Executive Mayor: Name Sarah Matawana Mlamlehi Name Lethokuhle Mathebula Telephone number Telephone number Cell number Cell number Fax number Fax number address address Deputy Mayor/Executive Mayor: Secretary/PA to the Deputy Mayor/Executive Mayor: Name Lebohang Masoetsa Name Malehlohonolo Tshosane Telephone number Telephone number Cell number Cell number Fax number Fax number address lebohang.masoetsa@mangaung.co.za address Malehlohonolo.Tshosane@mangaung.co.za D. MANAGEMENT LEADERSHIP Municipal Manager: Secretary/PA to the Municipal Manager: Name Mr Tankiso Mea Name Lethuole Monyeke Telephone number Telephone number Cell number Cell number Fax number Fax number address Tankiso.Mea@mangaung.co.za address Lethuole.Monyeke@mangaung.co.za Chief Financial Officer Secretary/PA to the Chief Financial Officer Name Mr E M Mohlahlo Name Me Petunia Ramagaga Telephone number Telephone number Cell number Cell number Fax number Fax number address ernest.mohlahlo@mangaung.co.za address Petunia.Ramagaga@mangaung.co.za Official responsible for submitting financial information Name Mr E M Mohlahlo Telephone number Cell number Fax number address ernest.mohlahlo@mangaung.co.za Official responsible for submitting financial information Name Mr Mosala Khunong Telephone number Cell number Fax number address Mosala.Khunong@mangaung.co.za Official responsible for submitting financial information Name Mr Arrie Bartnis Telephone number Cell number Fax number address arrie.bartnis@mangaung.co.za 24

25 MAN Mangaung - Table C1 Monthly Statement Summary - M06 December 2016/17 Audited Original Adjusted Monthly Outcome actual actual budget variance variance R thousands % Financial Performance YearTD YearTD Full Year Forecast Property rates 1,103,200 90, , ,600 36,098 7% 1,103,200 Service charges 3,575, ,745 1,759,259 1,854,456 (95,197) -5% 3,575,220 Inv estment rev enue 26,732 2,033 13,885 13, % 26,732 Transfers and subsidies 1,040, , , , ,704 24% 1,040,688 Other own revenue 529,004 36, , ,502 (11,476) -4% 529,004 Total Revenue (excluding capital transfers 6,274, ,974 3,256,915 3,204,268 52,647 2% 6,274,843 and contributions) Employee costs 1,703, , , ,763 46,976 6% 1,703,525 Remuneration of Councillors 58,011 4,887 28,623 29,006 (382) -1% 58,011 Depreciation & asset impairment 628, , , ,333 (65,785) -21% 628,666 Finance charges 169,143 39, ,028 84,572 38,456 45% 169,143 Materials and bulk purchases 1,985, ,565 1,003, ,856 10,434 1% 1,985,713 Transfers and subsidies 18, ,143 9, % 18,069 Other expenditure 1,583, , , ,878 (30,429) -4% 1,583,756 Total Expenditure 6,146, ,386 3,012,821 3,013,442 (621) -0% 6,146,884 Surplus/(Deficit) 127,959 (28,413) 244, ,826 53,268 28% 127,959 Transfers and subsidies - capital (monetary alloc 940, ,059 (470,059) -100% 940,118 Contributions & Contributed assets 26,762 13,381 (13,381) -100% 26,762 Surplus/(Deficit) after capital transfers & contributions 1,094,838 (28,413) 244, ,265 (430,172) -64% 1,094,838 Share of surplus/ (deficit) of associate Surplus/ (Deficit) for the year 1,094,838 (28,413) 244, ,265 (430,172) -64% 1,094,838 Capital expenditure & funds sources Capital expenditure 1,139, , , ,718 (187,322) -33% 1,139,436 Capital transfers recognised 940,118 85, , ,059 (144,016) -31% 940,118 Public contributions & donations 26, ,902 13,381 (10,478) -78% 26,762 Borrow ing 29, ,736 14,800 (10,064) -68% 29,599 Internally generated funds 142,958 26,189 48,715 71,479 (22,764) -32% 142,958 Total sources of capital funds 1,139, , , ,718 (187,322) -33% 1,139,436 Financial position Total current assets 3,923,464 3,085,269 3,923,464 Total non current assets 19,267,621 19,274,423 19,267,621 Total current liabilities 3,290,505 2,927,746 3,290,505 Total non current liabilities 3,157,271 3,278,967 3,157,271 Community wealth/equity 16,743,310 16,152,979 16,743,310 Cash flows Net cash from (used) operating 1,825,254 92, , , ,867 86% 1,825,254 Net cash from (used) inv esting (1,123,843) (112,798) (382,396) (561,922) (179,525) 32% (1,123,843) Net cash from (used) financing (171,246) (22,671) (65,431) (85,623) (20,191) 24% (171,246) Cash/cash equivalents at the month/year end 1,021, , , ,100 51% 1,225,660 Debtors & creditors analysis 0-30 Days Days Days Days Dys Dys Debtors Age Analysis Description 181 Dys- 1 Yr Over 1Yr Total By Income Source 326, , , , , , ,245 ####### 4,198,971 Creditors Age Analysis Year 2017/18 Total Creditors 237,770 54,619 34,058 67, ,365 Total 25