MFMA Implementation and Capacity Building for Municipalities

1. Portfolio Committee on Provincial and Local GovernmentMFMA Implementation National Treasury MFMA Implementation Unit 26 February 2008

2. 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

3. 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

4. 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)

5. 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

6. 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

7. 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

8. 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

9. 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

10. PROGRESS ON MFMA IMPLEMENTATION

12. CFOs 2006 Elections Municipal Managers

16. Where Technical Advisors have assisted municipalities with the implementation of the MFMA it has resulted in a more rapid implementation than the national average

17. BUDGETING

23. In Year and Annual Reporting

25. Municipalities LP,KZN,GT,NW,NC,MP,WC

28. Other Reforms

29. Internal Audit Units

30. Municipalities with Audit Committees - 2006/07

31. Municipalities with Websites 2006/07

32. Municipalities displaying all information on website s75

33. Municipal Entities by function Feb 2007

34. Supply Chain Management Implementation

35. Cash Management

36. Expenditure Controls

38. Municipal Financial Recovery Service (MFRS)

39. 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

40. 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

41. Financial Management Skills Training programme

42. 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

43. 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.

44. Internships in Municipalities

45. Internships

46. MFMA LearnersCompleted modules 1 to 6

47. 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

49. 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

50. 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