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Portfolio Committee on Provincial and Local Government MFMA Implementation. National Treasury MFMA Implementation Unit 26 February 2008. Background. Development of the financial reforms commenced in 1998 to address fragmented approach
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Portfolio Committee on Provincial and Local GovernmentMFMA Implementation National Treasury MFMA Implementation Unit 26 February 2008
Background • Development of the financial reforms commenced in 1998 to address fragmented approach • Selected testing followed in municipalities during 2000 and legislated in 2003 • Package of support entailed financial and technical via FMG & MFMTAP • All municipalities receive some form of support from national and provincial departments
Implementation • MFMA took effect on 1 July 2004 • Phase-in approach • Capacity reviews guided phase-in • Certain sections delayed or exempted • Nominal compliance in first three years • Qualitative improvements visible and will take between 3 to 8 years
Implementation Municipal Capacity • Survey undertaken 03/04 • Three capacity levels • High 50 municipalities • Medium 106 municipalities • Low 128 municipalities • Depending on capacity, key provisions have different dates of effect (sec.177 Gazette notice)
Implementation • Establishment of the Internal Audit Unit • High capacity : 1 July 2005 • Medium capacity : 1 July 2006 • Low capacity : 1 July 2007 • Reporting : 2004/05 f/year • Budgets : 2005/06 budget • Financial problems: 1 July 2005 • Competency levels: 1 July 2006
Implementation Priorities at launch • Prepare - MFMA implementation plan • Appointment of - MM and CFO • Verify and address all cash management matters • Establish primary bank account • Establish top mgt team • Implement delegations • Produce monthly reporting from 2004/05
Implementation Priorities at launch • Identify - all municipal entities - establish status of PPP’s, long-term contracts, borrowing • Submit all old outstanding AFS for audit • by 30 April 04 • 2003/04 AFS by 30 Sept 04 • Review role and responsibility of councillors and officials • Full compliance with DoRA
Background • Phase-in of regulations • Investments : effect April 05 • Public-Private Partnership : effect April 05 • Supply Chain : effect 1 July 05 • (High: Oct 05, Med: Jan 06, Low: Jul 06) • GRAP phase - in : effect July 06 • (High: 07/08, Med: 07/08, Low: 08/09) • Debt Disclosures : effect July 07 • Minimum Competencies: effect July 07 • (5 years all officials Jan 2013) • Asset Transfers : effect July 08
Implementation Planning - 3 to 5 years • Asset management • Budget process, content and formats • In-year reporting (section 71 and 72) • Service delivery and budget implementation plan • Measurable performance indicators (financial and non-financial) • Publication of information on municipal, national treasury websites • Establishment of budget and treasury office • Annual report guidelines • GRAP implementation - annual financial statements • Internal audits, audit outcome, risk management • Costing services • Competency based training in financial management • Financial recovery service • Credit Ratings
CFOs 2006 Elections Municipal Managers
Where Technical Advisors have assisted municipalities with the implementation of the MFMA it has resulted in a more rapid implementation than the national average
MFRS • Established in NT to perform following functions: • Assist to identify causes of financial problems and provide potential solutions • Assist in preparation of financial recovery plans, undertake research and provide guidance • Review, monitor and support quality implementation of recovery plans for sustainable outcomes • Assist in co-ordinated actions to limit wastage of resources
MFRS • Research finalised on: • Interventions in municipalities from 2004/05 to 2006/07 • Legislative basis of intervention • Corrective actions including support rendered to resolve financial problems • Preparing technical material to assist and guide further interventions • Initial outcomes of research: • inappropriate follow through on implementation of plans, • need to improve co-ordination with officials (national and two provincial depts) to avoid duplication • Province to inform NT of all interventions (formal or informal) which is as a result of financial problems • Province to forward NT assessment report on the financial problems in the municipality prior the development of recovery plans
Training and development • Introduced in 2003 and funded by FMG; • Develop knowledge and skills of graduate interns in strategic management, budgeting and finance management; • MFMIP guidelines issued assist in criteria for selection, mentorship, progress reports and personal development plans; • Use of provincial and municipal advisors to fast-track skills transfer; • Two SAQA unit standard based programmes registered; • ND: Public Finance Management and Administration (NQF Lvl 5) June 2005 and Cert. in Municipal Finance Management (NQF Lvl 6) Sept 2007
Training and development • Development of training material - April/May 2008; • Currently programme offered by Wits, Afrec, Samdi • LGSETA accredited service providers to decentralise roll-out • Validation of material content by National Treasury encouraged to accredited service providers to ensure quality and value for money training for municipalities; • Support rendered to all municipalities to attend training and skills development; • Competency Regulations require reports on progress tabled in council, during January and July annually.
Programme of Reforms • Budget Regulations, Guides and new formats • Standard Chart of Accounts for municipalities • Asset Management Guides • Asset Transfer Guides • Training and Material development for officials • Financial Management Wall Calendar • Annual Report Guides • Cash Management & Investment Guides • Tariff, Revenue, Costing Guides • Credit Rating support • Technical support to Provincial Treasuries • MFRS Practical Guide to Interventions • Quarterly MFMA co-ordination meeting with NT/ PT/SALGA/DPLG and implementation of MOU in provinces • Publication of section 71 reports on Websites • Implement new FMG grant framework • Councillor training co-ordinated by SALGA and Issue guide for Prov Legislatures • Improvement on quality of information on database (financial and non-financial) in-year, annual reports and municipal websites
Conclusion Challenges • Implement the spirit of the MFMA and utilise grants to address objectives in DORA frameworks • Set key priority, ownership and implement timeously • Improve on employment practices, selection and appointment of suitable candidates • Continues learning, skills development and retention • Weaknesses in internal processes, execution of delegations, change mind-set and behavour patterns • Introduce and improve on rewards but link these to performance • Implement mechanisms to deal with failure to comply with the law, introduction of appropriate disciplinary measures, including withholding of funds
Conclusion • MFMA Implementation Unit established in National Treasury to assist municipalities in financial reforms Website: www.treasury.gov.za Email : mfma@treasury.gov.za Telephone : 012 315 5850 Fax : 012 315 5230