Financial Management Grant

1. Financial Management Grant Select Committee on Finance National Treasury TV Pillay

2. FMG • The purpose of the FMG is to promote and support municipal financial management reforms and assist municipalities with the implementation of the MFMA • 2001 : pilot programme targeted at selected municipalities – • Cat A (Jhb/Tshwane), B (Msunduzi/Sol Plaatje), • Cat C (OR Tambo, Amatole) • 2003 : phased implementation of the MFMA • 2004 : countrywide support for reforms • 2005 : Grant extended to 194 municipalities • 2006 and medium term to all municipalities

3. Background to the MFMA • MFM reform commenced in 1998 • Testing with pilot municipalities commenced in 2000 • MFMA took effect 1 July 2004, with some sections delayed or exempted for lower capacity municipalities • Financial and technical assistance provided via FMG & MFMTAP • Prime responsibility for financial management rests with EACH municipality

4. FMG Aims • Catalyst for MFMA implementation • Strengthening of municipal financial management capacity • Broaden skills base for financial management

5. FMG Conditions • Appointment of an appropriately skilled municipal manager and CFO • Appointment of at least two interns for purposes of building future financial management capacity • Council Resolution committing council to reforms • Submission of primary bank account details • Development of an action plan for implementation • Monthly reporting on performance

6. FMG Focus of reforms • Build awareness and undertake training on MFMA reforms • Create and implement credible multi-year budgets • Linking plans and Budgets • Improve consultation with communities • In-year reports to council and external parties • Prepare quality and timely AFS and Annual Reports • Improve processes, procedures and quality of financial information • Prepare and present SDBIP’s

7. FMG Allocations

8. Restructuring Grant Aim • Support large municipalities with restructuring Conditions • Municipality develop own restructuring plans • Contractual obligations on plans • Adopt resolution committing to implementing plans • Show progress in quarterly reports

9. Restructuring Grant Some indicators • Institutional • Staffing and skills levels • Structured meetings and frequency • Alternative service delivery mechanism • Service centre • Economic Development • Innovative programmes • Job creation activities • Financial • Credit ratings • Debt ratios • Revenue collection ratios • Infrastructure spending levels

10. Restructuring Grant Allocations

11. Conclusion

12. MFMA - Priorities • Preparing an implementation plan • Allocate responsibilities to AO=MM • Establish senior management team • Bank account and cash controls • Meeting financial commitments • Budgets • Supply Chain Management policy

13. MFMA - Priorities (cont.) • Entities, PPPs, long term contracts and borrowing reforms • Past financial statements • Present financial statements and annual report • Tender committees, boards, forbidden loans • Compliance with Division of Revenue Act

14. Internship Programme • Commenced in 2004 - unemployed graduates in Public Finance, Economics, Accounting and Auditing from disadvantaged communities • Programme supported by municipalities, with international and local mentors guided by NT • 490 interns currently employed in municipalities • Over 60 appointed permanently in municipalities, state and private institutions

15. FMG Internship progress

16. Achievements • All 6 Cat “A”, 40 cat “B”, and 15 Cat “C” municipalities now produce multi-year budgets • Most high capacity municipalities are producing in-year reports on financial and non financial performance • All municipalities have developed implementation plans • New loan arrangements undertaken by large municipalities • Internal processes drastically improved • All municipalities have community consultation meetings on budget preparation

17. CapacityBuilding • 2002/03 – hands-on technical assistance provided to 33 municipalities via international advisors • 2004 - roving advisors appointed in 5 provinces (FS, Limp, NW, Mpum, EC) • 2004 - workshops on phase-in of MFMA undertaken countrywide with over 2500 attendees • 2005 - SAQA accredited qualification approved : NQF level 5 and 6 • 2005 – work plan part support for PC • 2005 - technical sessions on budget reforms, in-year reporting, supply chain management undertaken with over 2100 attendees

18. CapacityBuilding – medium term • 2006 and beyond • new councillor training programme commenced with guides and booklets issued to all (copies in pack) • MFMIP workshops for mentorship and service providers on workplace programmes and development of training material • Conference with 1200 delegates (trainers and officials): Comprehensive approach to MFM Capacity Building • Further capacitation of Provincial Treasury staff • Provincial legislature improved oversight over MFMA implementation • Multimedia self testing training programme

19. MFMA Credit Rating Ratings are based on SA national scales. The highest rating is zaAAA. Ratings scale down from zaAAA to zaA-. Within each of the levels a "+" or "-" sign indicates relative strength. An A indicates the relative strong and capacity to repay liabilities. Example: eThekwini has the best long-term rating.

20. Progress in implementation for 2005/06 Budgets Survey of 35 municipalities with NT Advisors • 23 tabled on time (1 April 2005) • 11 tabled one week late • 1 outstanding • 35 to approve before 30 June 2005

22. Budget Reforms • Refer pack for detailed information on selected 22 municipalities • Progress in 2006/07 budgets • Spread across the country (Cat A, B and C) • Tabling within timelines –February (9), March (12), April (1) • Multi year format (22) • IDP/Budget alignment - capital (20) and operations (17) • Service Delivery & Budget Implementation plan (10) • Tabled budget on website (5) • Other reforms • Internal audit unit established (22) • Audit committees established (22) • Supply Chain Management Policy adopted (22)

23. National Treasury Support • Implementation guidelines and manuals • Pocket version of MFMA alignment with MSA • Technical circulars, emails, F A Q • Training seminars and workshops (budgets, internal audit, mentors, GRAP, DVD set) • Validation Board to review materials established • PPP desk established • Website and MFMA help-line established • Regular meetings with provincial officials instituted

28. Conclusion

29. Primary bank account details • Municipalities were requested to submit their original primary bank account details to the National Treasury • Initial request till 100% submission = 4 ½ months • 34 submissions with errors, including non-compliant account names, etc

31. Regulations • Investments (1 April 2005) • Public Private Partnerships (1 April 2005) • Supply Chain Management (1 July 2005) • Budgets (schedule, format, resolution) • Prescribed limits and frameworks in progress • Competency levels • General matters

32. Other support initiatives • Disposal of assets • Entities guide and regulations • Councillor guide and training with SALGA • Cash Management • Borrowing guide and regulations • Internal Audit guide • New format Grap Statements • Asset Management guide • Establishment of MFRS

33. Provincial Support for MFMA • PT to progressively assume MFMA delegation • PT finalising support structures and strategies • National MFMA Working Group established • Regular meetings (SALGA, dplg, PT, PLG) • Address resource and staff requirements • Multi year allocations in Provincial budgets for all programmes to municipalities • Alignment of Provincial and Municipal plans • Further support and co-operative governance with other departments

34. Thank You