LOCAL GOVERNMENT FINANCE 2
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1 LOCBUS3 NOVEMBER 2013 EXAMINATION DATE: 7 NOVEMBER 2013 TIME: 14H00 17H00 TOTAL: 100 MARKS DURATION: 3 HOURS PASS MARK: 40% (KC-07) LOCAL GOVERNMENT FINANCE 2 THIS EXAMINATION PAPER CONSISTS OF 4 SECTIONS: SECTION A: CONSISTS OF: (i) 10 MULTIPLE-CHOICE QUESTIONS (10 MARKS) (ii) 5 TRUE OR FALSE QUESTIONS (10 MARKS) (iii) 10 MATCHING-STATEMENT QUESTIONS (10 MARKS) SECTION B: SECTION C: SECTION D: CONSISTS OF 3 SHORT QUESTIONS CONSISTS OF 5 LONG ANSWER QUESTIONS CONSISTS OF 3 INTERPRETATIVE QUESTIONS ANSWER ANY ONE OF THE QUESTIONS (10 MARKS) (40 MARKS) (20 MARKS) INSTRUCTIONS: 1. Read the following instructions carefully before answering the paper, as failure to act upon them will result in a loss of marks. 2. Write your answers in your answer book, which is provided in the exam. 3. Ensure that your name and student number are clearly indicated on your answer book. 4. Write your answers in either blue or black ink in your answer book. 5. Read each question very carefully before you answer it and number your answers exactly as the questions are numbered. 6. Begin with the question for which you think you will get the best marks. 7. Note the mark allocations for each question give enough facts to earn the marks allocated. Don't waste time by giving more information than required. 8. You are welcome to use diagrams to illustrate your answers. 9. Please write neatly we cannot mark illegible handwriting. 10. Any student caught cheating will have his or her examination paper and notes confiscated. The College will take disciplinary measures to protect the integrity of these examinations. 11. If there is something wrong with or missing from your exam paper or your answer book, please inform your invigilator immediately. If you do not inform your invigilator about a problem, the College will not be able to rectify it afterwards, and your marks cannot be adjusted to allow for the problem. 12. This paper may be removed from the examination hall after the examination has taken place. NOTE: YOU MAY USE A NON-PROGRAMMABLE CALCULATOR. DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 1 OF 7
2 SECTION A (30 MARKS) (i) MULTIPLE-CHOICE QUESTIONS Choose the correct option for each of the following. Write only the question number and your chosen answer. For instance, if you think that the correct answer for number 1 is, then write it as Formal written quotations apply to purchases valued between. R1 and R (VAT inclusive) R and R (VAT inclusive) R and R (VAT inclusive) R5 000 and R (VAT inclusive) 2. Petty cash purchases are for purchases up to. R500 R1 000 R2 000 R A risk management system lets us identify and avoid potential risks: in the election process. in the supply chain management system. in the purchase of official vehicles. of corruption. 4. Depreciate means to: increase in cost over a period of time. decrease the size of a building. reduce in value over a period of time. reduce the maintenance cost over period of time. 5. Heritage assets include: historical and modern buildings. only paintings by South African artists. any item older than 150 years. historical buildings, statues and works of art. 6. A municipality has only one internal fund that it can use to purchase PPE. We refer to this fund as the: Capital Replacement Reserve, or CRR. Pick and Pay Expenditure. Internal Capex Fund. Underexpenditure Surplus Fund. DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 2 OF 7
3 7. The diminishing-balance method implies that the asset depreciates by: a smaller amount during its economic lifespan. a smaller then a larger amount during its economic lifespan. an equal amount during each accounting period. the sum of all costs divided by six. 8. Maintenance costs are treated as: operating expenses. a source of income. depreciation. sundry expenditure. 9. A long-term contract means: a contract with a duration period exceeding six months. a contract with a duration period not exceeding one year. a contract with a duration period exceeding five years. a contract with a duration period exceeding one year. 10. Final award means the final decision: on which bid or quote not to accept. on the all in price to pay. on which bid or quote to accept. that a court will award as damages. [10] (ii) TRUE OR FALSE QUESTIONS Indicate whether the following statements are True or False. Motivate all your answers. 1. PPPFA is an abbreviation for the Preferential Pricing Policy Framework Act. 2. All municipalities must have a registered list of accredited suppliers. 3. PPE is an abbreviation for Property Purchased Expense. 4. In the straight line method the amount of depreciation each year is a diminishing amount. 5. The mayor is the most senior employee of any municipality. [5 2 = 10] DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 3 OF 7
4 (iii) MATCHING-STATEMENT QUESTIONS Match the statements in Column B to the terms in Column A. Write down the answers only, for example 1.. Column A Column B 1. procurement to state authoritatively how (an action or procedure) should be carried out 2. promulgate can be returned to the warehouse after use in their original form 3. prescribe a legal document that consists of property information of all properties within the boundaries of a municipality 4. procurement a written law passed by a legislative body 5. consumable goods (e) refers to acquiring or buying products or services 6. non-consumable goods (f) the price a willing seller will accept for the property, and a willing buyer will pay for the same 7. marginal cost (g) to put into effect by official proclamation 8. statute (h) change during the consumption process and no longer exist in their original form 9. fair value of property (i) the change in total cost as a result of increasing the output by one unit 10. valuation roll (j) the acquisition of goods and services other than the services of officials for the people and their administration by means of commercial transactions [10] [30] DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 4 OF 7
5 SECTION B: SHORT QUESTIONS (10 MARKS) QUESTION 1 Explain the difference between tariffs for trading and economic services. [2] QUESTION 2 Describe the four processes that the Supply Chain Management Regulations identify for procuring goods and services, based on the value of the order. [4] QUESTION 3 Name four duties that should be separated to ensure an efficient internal control system. [4] [10] DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 5 OF 7
6 SECTION C: LONG ANSWER QUESTIONS (40 MARKS) QUESTION 1 You have the following information about a municipality: The total number of properties is The rateable valuation of all properties is R The rates policy states that the rates for the first R5 000 of rateable valuation are R0. The total expenditure budget amounts to R The net shortfall to be funded from rates amounts to R You are required to: Calculate the rand rate to be used. Show your calculations. [7] QUESTION 2 List five of the fundamental principles that ensure a smooth flow of goods and services within supply chain management. [5] QUESTION 3 Any business process is dependent on the availability of five primary resources. Name and give a brief example or explanation of each of these resources. [5] QUESTION 4 Identify ten items of the minimum information that needs to go into the fixed asset register of a municipality. [10] QUESTION 5 Identify and briefly describe the elements that make up the internal control environment. [13] [40] DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 6 OF 7
7 SECTION D: INTERPRETATIVE QUESTIONS (20 MARKS) ANSWER ANY ONE OF THE QUESTIONS QUESTION 1 Explain to a group of suppliers the tender (competitive bidding) process in terms of regulations 20 to 29 of the Municipal Finance Management Act of [20] OR QUESTION 2 Outline the steps to be followed for the buying of PPE in the supply chain management process. (5 2 = 10) Outline the procedure by which a municipality must dispose of an item of PPE that has become obsolete. (10) [20] OR QUESTION 3 Calculate the total depreciation of a personal computer bought on 31 March 2010 for R The municipality uses the straight-line method of determining depreciation. Due to the rapid development of technology, the accounting policy provides for all electronic equipment to be depreciated over a period of three years. Use the following table headings: Period Purchase Price Carrying Value 1 July Depreciation Carrying Value 30 June Total Depreciation Rand Rand Rand Rand Rand [20] [20] Section A: 30 marks Section B: 10 marks Section C: 40 marks Section D: 20 marks TOTAL: 100 MARKS DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 7 OF 7
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