WESTERN CAPE PROVINCIAL GOVERNMENT

1. WESTERN CAPE PROVINCIAL GOVERNMENT STATUS OF MUNICIPAL BUDGET PROCESS 2007/08 MTREF MEDIUM TERM REVENUE & EXPENDITURE FRAMEWORK: LG MTEC

2. CONTENT Municipal Budgeting process 1 Consider A-G Findings (2005/6) 2 Way Forward 3

3. LGMTEC support process • The municipal budget process is monitored through by MFMA actions(incl. In-Year Monitoring) • The municipal budget process is assisted and monitored through the Local Government Medium Term Expenditure Committee (LGMTEC) process 2006/7(preparing 2007/8 municipal budget)

4. Budget process / LGMTEC (2006/7)

5. LGMTEC budget support process Preparation of Municipal 2007/8 budget ‘High level’ strategic alignment DoRA Alloc’s to Muns Draft Budget Assessment LG MTEC 1 1-on-1’s LG MTEC 2 1-on-1’s LG MTEC 3 JUL AUG SEP OCT JAN FEB MAR APR JUN NOV DEC MAY 2006 I 2007

6. LGMTEC 1: OCT/NOV 2006 • Purpose: • ‘identify the priorities per municipal area and ensure spatial alignment of provincial department priority resource allocations with municipal plans’ • Agenda: • the priority issues per municipal area • municipal and provincial budgetary allocations • Output • comprehensive summary report on issues raised • identification of issues per municipal area where integration and coordination between projects need to be managed closely by all government spheres. • on the priorities over the medium term and the next financial year.

7. LGMTEC 2: JAN 2007 • Allocations to municipalities over the MTREF: S36 of MFMA • Preliminary allocations per Department per Grant • Total preliminary allocations per Municipality (detail of each grant in allocation pack) • Clarification : Allocation Framework • Performance information ytd on transfer payments made by Departments (Apr-Dec 06) • Purpose, rationale and conditions of proposed transfers (DoTPW, Housing grants and DCAS) • Mid year performance: 2006/07 • Budget format and content • SDBIP • SEP-LG

8. ONE-ON-ONES: FEB 2007 • One-on-one engagements in February to support drafting of budgets/IDP’s and prepare for LGMTEC3 • Dates: 13 – 28 Feb 2007 • Agenda for one-on-one’s: • Integration of SEPLG findings into IDP • Steps to develop a credible IDP • Financial Health (Alignment of IDP to the budget) • Purpose is to improve the end product

9. LGMTEC 3: APR/MAY 2007 To assess municipal budget an effective implementation toolfor: • IDP • LED strategy • Spatial synergy • Service delivery

10. To be an effective implementation tool, the budget must be: LGMTEC 3: APR/MAY 2007 • Sustainable: Does the municipality have sufficient revenue and adequate financial stability to fund and deliver on its budget? • Credible: Can the municipality execute and deliver on this budget realistically? • Responsive: Is the budget appropriately responsive to economic growth objectives and socio-economic needs of the community, as measured inSEP-LG and prioritised in the IDP and LED?

11. LGMTEC 3 ASSESSMENT FRAMEWORK 1.SUSTAINABILITY OF THE BUDGET 1.1 Revenue (Operating and Capital) • Comprehensiveness and certainty of revenue sources • Guideline growth parameters (3 - 6%) with respect to tariff increases • Tariffs of bulk resources (National Energy Regulator of South Africa (NERSA) and Water Boards) • Effective revenue collection system – credit control and debt collection policy, collecting agent • Debtors (also a system of internal control in respect of debtors, trends, age analysis, per group) • Grants and subsidies - level of reliance on Govt Grants • New borrowings • Levied/accrual 1.2 Financial health • Cash management and liquidity • Issues raised by AG (qualifications and emphasis of matter)

12. 2. CREDIBILITY OF THE BUDGET 2.1 Capacity to spend the budget 2.1.1 Operating Budget (per vote/department/GFS) Salary, allowances and benefits (political office-bearers, municipal manager, CFO and senior managers) Repairs and maintenance General expenditure 2.1.2 Capital expenditure (per vote/department/GFS) Infrastructure and community Rate of capital spending, IYM – in year performance, projections and previous years actuals Human resource capacity Constraints, explanations 2.2 Institutional capacity: What are the inhibiting factors within the municipal institution capacity for delivery? How does the budget address them? Managers/vacancies/skill set Performance management system LGMTEC 3 ASSESSMENT FRAMEWORK (continued)

13. 3. RESPONSIVENESS OF THE BUDGET Incorporation of SEPLG findings into the budget: How well does the budget acknowledge and respond to the socio-economic needs detailed in the SEPLG findings? Spatial planning: How well did the municipality prioritize its spending geographical access of municipal area? Prioritisation of IDP in the budget: How does the budget specifically meets the needs required to implement the IDP? What are the IDP priorities? Quality of participation: ward-based prioritisation, input of business, labour & civil society Internal prioritisation process Budget as a tool for implementing the LED strategy: How is the budget buying economic infrastructure? How is the budget creating an enabling environment for economic activity (re: 1st and 2nd economy)? How have the budget and budget-related policies assisted in the implementation of the municipality’s local economic development plan? Alignment between local municipality and district municipality budgets with provincial and national priorities LGMTEC 3 ASSESSMENT FRAMEWORK (continued)

14. PREPARATION BY MUNICIPALITIES • Written response to Provincial assessment • Presentation during LGMTEC 3 responding to issues raised in framework • Outline of the presentation should address: “sustainability”, “credibility” and “responsiveness”. • Presentation forms basis for the engagements on municipal budget between Province and Local Government.

15. MEETING AGENDA • Welcome, introduction and objectives • Sustainability and Credibility of the Budget • Presentation from municipality or district (including response to points raised in written assessment) • Response from Province and general discussion • Responsiveness of the Budget • Presentation from municipality or district (including response to points raised in written assessment) • Response from Province and general discussion • Summing up of key points and conclusion

16. CONTENT Municipal Budgeting process 1 Consider A-G Findings (2005/6) 2 Way Forward 3

17. Trends in late submission:Financial Statements

18. Municipal Perf Mgnt Audit (2005-6)

19. ‘Qualified audit’ / ‘emphasis of matter’in WC Municipalities 2005/6 • Funds and reserves • Supply chain management • Non-compliance with laws and regulations • Internal control weaknesses • DORA issues • IT environment • Budget issues • Augmentation contributions • Issues unresolved from prior year audits • Unauthorised expenditure • Tax compliance • Subsequent events • Irregular payment • Forensic Investigation • Housing issues • Asset management • Financial statements issues • Leave administration • Provisions • Leases • Late submission of financial statements • Debtor control • Creditor control • Fruitless and wasteful expenditure • Long term liabilities • Trust funds • Limitation of scope • Going concern • Contingent liabilities • Staff matters • Councillors remuneration and other matters

20. MFMA Audits 2005-06

21. MFMA Audits 2005-06: Pointers to reasons

22. Note: Key trends in LGMTEC • Financial viability of specific municipalities • Majority of municipalities have infrastructure delivery strategy, but limited revenue to execute • Bulk Infrastructure pressures across province • Intensified social/health investment needed, including Safety/Drug Crime rise • Invest in economic strategy and lead interventions per metro/district • Deal with land availability issues (incl housing) • Environmental/Resource threats • Invest in municipal institutional capacity

23. CONTENT Municipal Budgeting process 1 Consider A-G Findings (2005/6) 2 Way Forward 3

24. WAY FORWARD • Province to conduct LGMTEC Debriefing on municipal budgets(8 June 2007 onwards) • Cabinet submission on municipal budget/financial performance • Implement Action/Remedial plan based on AG’s and LGMTEC findings

25. Thank YouEnkosiDankie