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Devolution of Property Rates and Taxes Grant (FY 2009/10)

Devolution of Property Rates and Taxes Grant (FY 2009/10). PRESENTATION BY: EASTERN CAPE DEPARTMENT OF ROADS AND PUBLIC WORKS 07 MAY 2010. Overview. Introduction Factors Contributing to Under Spending Institutional capacity issues

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Devolution of Property Rates and Taxes Grant (FY 2009/10)

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  1. Devolution of Property Rates and Taxes Grant (FY 2009/10) PRESENTATION BY: EASTERN CAPE DEPARTMENT OF ROADS AND PUBLIC WORKS 07 MAY 2010

  2. Overview • Introduction • Factors Contributing to Under Spending • Institutional capacity issues • Discrepancies in Outstanding amounts between Municipalities and DPW • Impact of prior 1 July 2008 financial issues • Un- Invoiced Municipalities • Amounts due to Municipalities for 2008/09 and 2009/10 • Impact on the Conditional Grant Amounts • Actions taked to address the under-spending

  3. Introduction • List of properties devolved from NDPW was not audited or verified – Asset base for the payment of rates and taxes was therefore not complete and it has proven to be very difficult to determine the rates & taxes liability of the province absolutely for 2008/09 baseline. • The Rates & Taxes Project undertaken by the Department is proving that the liability for rates & taxes is increasing due to additional properties identified and increases in tariffs above the CPIX. • i

  4. Introduction

  5. Introduction • Rates & taxes are paid on properties; • owned and in the name of the Province (or the variations thereof) • In the name of any sphere of government where there is provincial usage • Unregistered land where there is provincial usage • Municipal land where there is provincial usage • Rates and Taxes are not paid on the following properties; • Unsurveyed land • Vested with National Government • Housing Board

  6. Introduction Conditional Grant Summary

  7. Factors Contributing to Under SpendingInstitutional Capacity Issues • Incorrect invoicing by municipalities (e.g. incorrect valuations used for the calculation of rates, invoices at incorrect tariffs) • Invoicing by municipalities on properties not owned by the province (the devolution took place based on an unaudited and unverified immovable asset base) • The municipal financial year differs from that of the province (i.e. 1 July to 30 June) • The late transfer of CG funds to the the Province. The first transfer of the Conditional Grant for financial year was only received in the last week of September and the last transfer in February.

  8. Factors Contributing to Under SpendingInstitutional Capacity Issues • The financial management capacity at the municipalities in the Eastern Cape remains a challenge • The Conditional Grant did not provide for operational /administrative costsand increased capacity to administer the grant. Capacity on the part of DPW presented a major problem • Confirmation of the roll-over approval and additional allocations per the adjustments budget process reached the Department very late in the financial year (Dec 09). The roll-over allowed for the application of the grant to operational/administrative costs.

  9. Factors Contributing to Under SpendingDiscrepancies in Amounts Outstanding between Municipalities & DPW • The amounts due by National Public Works has been brought forward as an opening balance on the provincial accounts • Payments made in the 2008 / 2009 have not been credited to DPW’s accounts • DPW is being invoiced on private property, property owned by National and property owned by the municipality itself. These errors are not being corrected in the municipality and continue to reflect as owing by DPW. • Differences between Schedules and actual invoices presented. Schedules from municipalities reflecting amounts owing to be R82,9m and invoices submitted amounted to R99,3m in 2008/09. Amount still outstanding amounts to R5,8m. Amount paid is R79,0m.

  10. Factors Contributing to Under SpendingDiscrepancies in Amounts Outstanding between Municipalities & DPW • DPW is being charged the municipal services of the tenants in the properties. These services are reflected on the rates and taxes invoices. Municipalities have still not rectified these errors. • Municipalities are charging rates and taxes on un-surveyed land. • Municipalities cannot provide supporting evidence for amounts reflected as outstanding but do not write off these amounts and then raise interest on the same amounts.

  11. Factors Contributing to Under SpendingPrior to 1 July 2008 • The Devolution of Property Rates and Taxes Grant became effective on the 1 April 2008 for rates and taxes charged in the municipal financial year 1 July 2008 to 30 June 2009. • This transition from national to provincial was not effectively managed by municipalities with invoices still being sent to national. • The outstanding balances due by National Public Works at 1 July 2008 were not transferred to a separate account by municipalities – these were charged to the province.

  12. Factors Contributing to Under SpendingPrior to 1 July 2008 • The province is being charged interest on the outstanding balances of National Public Works at 1 July 2008 • Municipalities cannot provide all the supporting documents for the outstanding amounts at 1 July 2008 • Reconciliations not implemented. The municipalities continue to reflect these amounts as due by the province.

  13. Factors Contributing to Under SpendingPrior to 1 July 2008 The amounts charged to the province as at 1 July 2008 – due by National Public Works is R12,906,175.07. On this amount interest of R252,288.68 has been charged to the province. These amounts have been excluded from the total outstanding by the province. See detailed table.

  14. Factors Contributing to Under SpendingPrior to 1 July 2008Amounts Due by National per Municipality

  15. Factors Contributing to Under SpendingMunicipalities – Uninvoiced2008/09 The following municipalities have not invoiced the department for the municipal year 2008 / 2009 – the exact amounts are not yet known but are estimated below • Amahlathi (Estimate R 1,212,272) • Gariep (Estimate R 2,958,900) • Great Kei (Estimate R 323,317) • Elundini (Estimate R 1,265,909 • Emalahleni (Estimate R294,572) • Mbizana (Estimate R 158,499) TOTAL ESTIMATE R 6,213,469

  16. Factors Contributing to Under SpendingFinancial Year 2008 / 2009Outstanding Amounts The total amounts potentially still due for this financial year is R5,871,395. This is subject to title deed verification and invoicing by municipalities. See detailed table. (This excludes the municipalities for which no invoices have been received)

  17. Factors Contributing to Under Spending Financial Year 2008 / 2009Amounts Outstanding per Municipality

  18. Conditional Grant SummaryImpact on Underspending2008/09 A further R12,084,864 from 2008 / 2009 can still be spent – reducing the figure below from R 39,700,410 to R 27,615,546 or 23% unspent.

  19. Factors Contributing to Under SpendingFinancial Year 2009 / 2010Outstanding Amounts The total amounts potentially still due for this financial year is R 32,014,451,47 plus R10,0million for operational costs. This is subject to title deed verification and invoicing by municipalities. See detailed table. (This excludes the municipalities for which no invoices have been received)

  20. Financial Year 2009 / 2010Amounts Outstanding per Municipality

  21. Conditional Grant SummaryImpact on Underspending2009/10 A further R32,014,512,47 and a further R10,0m on operational costs from 2009 / 2010 can still be spent – reducing the figure below from R116,650,655 to R 74,636,142 or 35,5% unspent.

  22. Conditional Grant SummaryImpact on Underspending2009/10 Impact of roll-over on % spend • % spend without the roll-over • 2008/09 : 50,1% • -2009/10 : 84,7% • % spend with roll-over • 2008/09 : 50.1% • 2009/10 : 54,0%

  23. The Interventions • The Rates and Taxes Project • Addressing the backlogs • The Municipal Finance Unit • Sustaining the intervention

  24. Rates & Taxes Project Overview To facilitate the payment of rates and taxes for 2008 / 2009 and 2009 / 2010 through: • Preparing invoices for payment • Assisting municipalities in the preparation of invoices and supporting valuation certificates where those municipalities are experiencing difficulty with resources • Clearing outstanding reconciling items between the department and the municipality concerned

  25. Rates & Taxes Project Overview To establish the substantiated value of the amounts outstanding prior to 1 July 2008. Supporting documentation for the value of the amount outstanding that relates to this period shall be obtained and verified and reconciled. Where the amounts are unsubstantiated agreement for write off must be reached.

  26. Rates & Taxes Project Overview To establish a new verified provincial immovable asset base line formunicipalities to charge rates and taxes. The impact to date is as follows:

  27. Rates & Taxes ProjectBenefit to Municipalities • Updated debtors information with the correct owner of the property • Paid valid outstanding debtors balances for the period 2008/09 and 2009/10 • Increased revenue base of municipalities with previously unknown provincial properties as per Publand data • Improved capacity at the municipality

  28. Rates & Taxes ProjectBenefit to Municipalities • Improved communication channels between municipality and Public Works • Corrected financial records that relate to rates and taxes of the provincial government • Transferring of knowledge and skill to municipal officials working with the project teams • Gaining of skills and experience by unemployed graduate working with consulting teams – making them employable by municipalities

  29. The Municipal Finance Unit • Adverts placed and recruitment of the Deputy Managers complete – managers to further staff the unit • Premises leased • Equipment in various stages of procurement • Automation of the reconciliation processes being investigated • Unit will be fully functional by the 30 Sept 2010.

  30. Conclusion • Underspending in context (cash & accrual dilema) • Spending trend over the MTEF • Cashflow

  31. Questions

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