Municipal Finance Management Bill: deliberations

Meeting report

FINANCE PORTFOLIO COMMITTEE
3 June 2003
MUNICIPAL FINANCE MANAGEMENT BILL: DELIBERATIONS

Chairperson: Ms B Hogan (ANC)

Relevant documents
Municipal Finance Management Bill - 29 April 2003 Draft
Revised Chapter 12 of Municipal Finance Management Bill - 30 May 2003 Draft
Proposed Schedule for Introduction of Systems Amendment Bill (Appendix 1)
Proposed New Definitions to Municipal Finance Management Bill (Appendix 2)

SUMMARY
Following the request from the Democratic Alliance, the Committee will be visiting the relevant institutions for a comprehensive briefing on the reasons for the data errors in the Statistics South Africa figures.

The revised Chapters 1, 4, 12 and 16 of the Municipal Finance Management Bill were discussed. Clause 114 now contains separate provisions dealing with municipalities and municipal entities respectively, and the role of the Auditor-General in auditing the annual reports of these structures was considered. The wording of Clause 122 has been changed so that the municipal council is not compelled to adopt the annual report of the municipality. Treasury has to check whether the transitional arrangements in Clause 173 and the Schedule are in place, and the date of commencement of the Bill in Clause 174 will now be determined by the Minister of Finance. The efforts to discourage under-spending most of all under the new Clause 31 was discussed, whether lapsed funds can be re-appropriated as well as the extension of the roll-overs beyond capital expenditure.

MINUTES
DA Letter on Data Errors in Statistics South Africa Report
The Chair informed Members that she has received a letter from the DA requesting that this Committee convenes focused public hearings with all relevant interest groups on the reasons for the data errors in the Statistics South Africa Report and their implications. It states that Parliament has to be briefed on the current state of affairs. The Chair stated that she agrees with the proposal. It is a very important issue and it has had consequences for the economy, and for people that have entered into agreements premised on the notion of inflation.

The Chair stated that this can be taken further and proposed that this Committee actually visit the institutions concerned, and spend a day or two with them, to get a comprehensive briefing from them on this matter. This would allow a much more intensive investigation that just having public hearings in Parliament.

Ms R Taljaard (DA), Mr M Lekgoro (ANC) and Dr W Odendaal (NNP) stated that they agree with the Chair's proposal.

The Chair stated that the South African Reserve Bank (SARB) should also be requested to comment on the implementation of the revised inflation figures. This visit will be important for Members to get a sense of how the data is collected, and how these figures fell through the cracks.

Ms Taljaard asked whether this matter could be included in the upcoming Budget Vote debate.

The Chair stated that this would not be possible. Instead, a separate debate could be held on the implications of the revised figures alone, if this Committee is to submit a Report together with recommendations on this matter. The Chair noted that Members agreed with this course of action.

Municipal Finance Management Bill
Outstanding Issues
(i) "unauthorised expenditure"
The Chair stated that the Committee has to deal with the definition of "unauthorised expenditure", following the discussions with Parliament's Standing Committee on Public Accounts (SCOPA) and the Office of the Auditor-General (the AG). Has the AG agreed to these amendments?

Mr Ismael Momoniat, Treasury DDG: Intergovernmental Relations, replied in the affirmative, but he will double check.

(ii) Processing of Systems Bill
The Chair stated that the new draft timetable for the processing of the Local Government: Municipal Systems Amendment Bill (the Systems Bill) was handed out at the previous meeting (Appendix 1).

(iii) Revised legal opinion
The Chair noted that the revised legal opinion on the Bill will be considered in the week of 18 June 2003

(iv) Multi-Jurisdictional Service Districts and outstanding Systems Bill amendments
The Chair noted that this is also to be discussed from 18-20 June 2003.

Chapter 12: Financial Reporting and Auditing
Mr Momoniat stated that Treasury has not made any changes to provisions in this chapter. However, Adv G Grove, Legal Drafter: Treasury, had noted that the formulations of certain provisions created confusion as to which applied to municipalities and which provisions applied to municipal entities. There were some provisions that clearly did not apply to municipal entities. One such provision is the old Clause 114(2)(a) which provided for the "votes of the… municipal entity", when there is clearly no such thing for a municipal entity. Adv Grove has therefore merely corrected the language and separated out the provisions dealing with municipalities and those dealing with municipal entities.

Clause 114: Preparation and adoption of annual reports
Mr Momoniat stated that the big change has really been effected to this clause. Sub clause 1 is a standard provision.

Adv Grove stated that Sub clause 1 is a good example of the kind of clarificatory changes he has effected to this chapter. The old Sub clause 1 in the Bill is devoid of meaning, and the new formulation spells out the process. They are all technical changes.

The Chair noted that Members agreed to the amendments.

Mr Momoniat stated that the old Sub clause 2(a) is now the new Sub clause 2(b), and the reference to "votes" has been removed.

The Chair noted that Members agreed to the amendments.

Mr Momoniat stated that the old Sub clause 3 initially covered both the report of the municipality and the municipal entity. The municipality and municipal entities have now been separated out in the the revised formulation, with Sub clause 3 dealing with the municipality and a new Sub clause 4 dealing with municipal entities. The provisions are pretty straightforward, and there are no additions.

Adv Grove stated that the important change in the new Sub clause 3 is to make it clear that the financial statements of the municipality, that controls a municipal entity, must in addition include consolidated statements. Under the previous disposition it was unclear whether it is either consolidated or annual statements are required. But the new formulations makes it clear that the Annual Report must include both.

The Chair stated that the problem here is that it was not clear during the previous whether the AG would do the performance auditing in Sub clause 3(d). It was stated that this matter would be carried through the amendments to the Auditor-General Bill due before Parliament. The Chair stated that, during her discussions with the AG, there was a strong feeling that the AG should not be doing performance auditing per se. Instead, it should check the reliability of the management information systems that produce these results. This makes is a requirement for the municipality to measure, but the AG would then just check that the measuring systems are coherent.

Adv Grove replied that it is for this reason that the new Sub clause 3(d) tracks the current provisions of the Systems Act.

The Chair stated that Sub clause 3(d) has to be passed by the AG. It would appear that its contents would fly in the face of the amendments in Auditor-General's Bill.

Adv Grove proposed that the words "on the results of performance measurements referred to in section 41(1)(c) of that Act" be deleted. This would solve the problem.

The Chair agreed, although it does not change much. All it means is that only one Act would now have to be amended down the line. The Chair noted that Members agreed to the amendments.

Adv Grove stated that Sub clause 4(f) would now also have to be amended, because of the changes effected to Sub clause 3.

The Chair asked whether the revised Chapter 12 was passed by Mr Mervyn King. Is it not unusual for an audit committee report to be included in an annual statement?

Adv Grove replied that Mr King has not been consulted.

Mr Momoniat stated that it is now standard practice to include the reports of the external audit committee.

The Chair stated that she was not entirely certain whether government departments have external audit committees, but took Mr Momoniat's word on the matter. She did request Mr Momoniat to double check this, especially as this clause deals with a commercial company.

Adv Grove stated that the previous Sub clause 3 has now been deleted, because it is no longer catered for under the revised formulations.

Clause 115: Preparation of financial statements
Mr Momoniat stated that there has just been a language change to Sub clause 1. Sub clause 2 now merely clarifies that where a municipality controls a municipal entity, it would also have to prepare a consolidated annual financial statement. The old Sub clause 3 has been removed, because it has now been included in the new Sub clause 1(b). The old Sub clause 4 has also been deleted.

The Chair asked why the old Sub clause 4 has now been removed.

Adv Grove responded that it does not correctly reflect what is in the PFMA. It is not the Minister of Finance (the Minister) prescribing the practice or standards, taking into account the recommendations of the Accounting Standards Board (ASB). In fact, it is the ASB that sets those standards, and the Minister then has to publish them.

The Chair noted that Members agreed to the amendments.

Clause 116: Disclosure on intergovernmental grants
Mr Momoniat stated that the only real change to this clause is the replacement of "all" in Sub clause 1(b) with "any".

Adv Grove stated that it is not possible for national government to make any allocations outside Section 214 of the Constitution. He proposed that "allocations" in Sub clause 1(d)(ii) be qualified by inserting "other than national allocations" after "allocations".

The Chair noted that Members agreed with the amendment.

Mr Momoniat questioned whether this adequately covers the reporting of fiscal dumping.

Adv Grove replied that this concern would be sufficiently covered by Sub clause 1(a)(i), which provides that such amounts would have to be disclosed..

The Chair noted that Members agreed.

Clause 117: Disclosures concerning councilors, officials etc.
Mr Momoniat stated that the only amendment here has been to the title.

The Chair noted that Members agreed to the amendment.

Clause 118: Other compulsory disclosures in financial statements
Mr Momoniat stated that standard changes have been effected to this clause.

Mr Matthew Glasser, Consultant: Treasury, noted that the disclosure of guarantees made by a municipality for debts of its municipal entities, which is permitted, has not been included in this clause. The Committee had discussed putting this in the notes that would be included in the municipal financial statements, but this has not been done. This seems to have slipped through the cracks.

Adv Grove stated that this is covered by "contingent liabilities" in Sub clause 2(c).

Mr Glasser agreed.

Ms Taljaard stated that Sub clause 2(d)(i) deals with mandatory disclosure. Yet the matters listed could even be sub judice and it would then not be desirable for it to trigger a mandatory disclosure provision. Treasury has to give the assurance that the municipality or municipal entities is not unduly prejudiced.

Adv Grove stated that sub judice proceedings could be excluded here.

The Chair agreed.

Clauses 119-121
Mr Momoniat stated that not much has been done on these clauses.

The Chair noted that Members agreed to these clauses.

Clause 122: Adoption of annual report
Adv Grove stated that he has just made changes to the language in this clause.

The Chair sought clarity on the consequences if a municipal council not adopting the annual report within two months, as required in Sub clause 1. The problem here is that the municipal council cannot be forced to adopt the annual report.

Adv Grove agreed that it cannot be compelled to do so. He stated that he was under the impression that the municipal council adopts it, but could then issue a report stating its qualifications of the annual report. The wording in Sub clause 1 mirrors a current provision in the Systems Act which states that the municipality must adopt the annual report.

The Chair stated that the report from the AG on the annual financial statements cannot be amended by the municipal council. Yet the annual report can be, because it is compiled by council. The municipal council should then be able to forward these other matters to its oversight bodies for comment and recommendations on what arises out of those financial statements.

Adv Grove agreed.

Mayor Leeuw, from the South African Local Government Association (SALGA), stated that council can receive a revised annual report from the municipality or municipal entities.

The Chair agreed . She proposed that the word "adopt" in Sub clause 1 be replaced with "consider an annual report for decision", so that Parliament does not dictate to them. This allows the municipal council to adopt it with reservations, or request it to be revised before it is adopted. It does give the municipal council a wide range of responses. This would have to be clearly reflected in the guidelines. A provision should then also be included to make it clear that the municipal council cannot amend the AG's report.

The Chair noted that Members agreed to the amendment.

Adv Grove stated that he would finalise the wording to this effect.

Ms Taljaard stated that a similar amendment would have to be effected to Sub clause 4.

The Chair agreed.

Adv Grove stated that this will then have an impact on Clause 114. Perhaps a provision should be inserted into that clause to state that the municipal council must deal with it in terms of Clause 122.

The Chair agreed.

Ms Taljaard stated that the Legal Opinion on the Bill itself concluded that regulations are not mandatory, and Treasury would thus only be able to issue guidelines. She questioned the point of Treasury's power to issue guidelines if these are non-mandatory. Furthermore, if the municipal council ignores the guidelines, Treasury does not even have the right to intervene.

Mr Momoniat replied that Treasury viewed this option as the strongest way to signal the need for a Public Accounts-type arrangement, and the guidelines would deal with the kind of detail needed for this process.

The Chair stated that this framework at least forces the municipal council to apply its mind as to why it has rejected the guidelines, if it does. The citizens would then be able to request the municipal council to provide reasons for its refusal to accept the guidelines. This formulation is the most elegant manner to do this in view of South Africa's Constitutional dispensation. It does not allow Treasury to stipulate, but it allows it to set certain criteria for good governance that can be used very effectively by local citizens.

The Chair noted that Members agreed to this clause.

Clauses 123 and 124
Mr Momoniat stated that nothing much has changed in these clauses.

Clause 125: Submissions to provincial legislatures
The Chair stated that a consequential amendment would have to be made to Sub clause 1(b), by deleting reference to "has been adopted" at the end of the provision. .

Adv Grove stated that the reference to the "resolution" can be deleted.

The Chair agreed.

Clauses 126 and 127
The Chair noted that Members agreed to these clauses.

The Chair noted that Chapter 12 has thus been considered.

Chapter 16: Miscellaneous
Clauses 170: Liability of functionaries exercising powers and functions in terms of this Act
Mr Momoniat stated that the Committee has already dealt with these provisions.

Clause 171: Delays and exemptions
Ms Taljaard proposed that "practicalities" in Sub clause 1(b) are "as clear as mud" and need to be clarified, and the circumstances in which these could arise.

The Chair stated that this accommodates the practical reasons used for not doing certain things, such as entering into an agreement with a specific company for a period of a few months.

Adv Grove stated that he did not have a problem with the term "practicalities". Perhaps the factual situation should be considered to determine whether the case was one for exemption or not. The discretion of the Minister here should be wider rather than narrower. The word "prevent" is perhaps too strict, and "impede" or something similar might be more appropriate.

The Chair agreed, but suggested that its implementation would be difficult. She noted that Members agreed to the insertion of the word "impede"

Clause 172: Transitional provisions
Mr Momoniat proposed that Sub clause 2 should also include a reference to any other entity that is not a municipal entity.

The Chair agreed.

Clause 173 and Schedule
The Chair sought clarity on Section 17(D) of the Promotion of Local Government Affairs Act, as contained in the Schedule.

Dr Petra Bouwer, DPLG Director: Legal Services, informed Members that this provision allows municipalities to set up private companies. The Johannesburgh municipal entities have been set up in terms of this provision.

The Chair agreed that this has to be repealed. She asked whether the repeal of the Municipal Accountants Act has been passed by the relevant accountant bodies for local government.

Mr Momoniat stated that this Committee had dealt with it during its deliberations in December 2002. He stated that Ms Jackie Manche, DPLG DDG: Institutional Reform and Support, was even present at those meetings. Many of these issues have been settled by agreement.

Dr Bouwer stated he is not certain whether DPLG actually agreed to this. In fact, he had himself raised concerns with this repeal.

The Chair requested that Mr Momoniat secure written confirmation of this agreement.

Dr Bower stated that he has conferred with Ms Manche. The Municipal Accountants Act cannot be repealed without the introduction of comprehensive transitional arrangements.

Adv Grove said he was given the assurance that there were no implications to the staff or assets of that body. It has been indicated that there was an amount of about R40 000 in a bank account. But all the cash will be dealt with before that Act is repealed.

The Chair stated that a clause is then necessary to provide for the transitional arrangements. Mr Momoniat has to double check that this will be resolved before the Act is repealed.

Mr Momoniat stated that the proposed repeal of Section 10G of the Local Government Transition Act (LGTA) has to be read with Section 173(2). DPLG requested that the property tax provisions remain in force until the new Property Tax Bill comes into effect.

Clause 174: Short title and commencement
Mr Momoniat stated that the date in Sub clause 1 has to change, it is a bit optimistic. It should probably read 1 July 2004.

The Chair agreed. She asked how this new proposed date would affect financial years.

Mr Momoniat replied that the Act will take effect for the new 2004 financial year. This will mean that municipalities will not be forced to legally comply with the budget process next year. In fact, Treasury would prefer that they just do this on a voluntary basis in preparation for developing their capacity to implement the Act.

The Chair questioned how wise it would be to hold back the legislation for a whole year. This would allow people a window-period within which to circumvent the law. Would it not be prudent to grant exemptions for the implementation of certain aspects of this legislation instead?

Adv Grove proposed that the reference to the date be removed, and that the provision just read "on a date determined by the President".

The Chair agreed, and noted that Members have agreed to Chapter 16.

Chapter 4: Municipal Budgets
Clause 16: Annual budgets
Mr Momoniat referred Members to the insertion of the new Clause 16(3) contained in the "Proposed New MFMB Definitions" document (Appendix 2). It must be made clear that there will be three allocations, one for each of the three financial years. This will be done at national and provincial levels as well, and to provide more certainty and perhaps remove the excuse for underspending on capital projects.

There would still be an Annual Budget every year, and this would be use to revise previous capital appropriation made. It is thus not necessarily a once-off appropriation, but would provide for three-year budgeting. There might be a need to limit this to capital expenditure. The phrase "other prescribed budget items" has included should the decision be taken to allow for three-year appropriations for other items. The same should not be done on the same scale with the operational budget, as this should be kept on a one-year basis.

Clause 31: Contracts having budgetary implications
(i) Clause 31A
Mr Momoniat explained that this provision makes the point that the budget appropriation lapses for all items at the conclusion of the financial year, except for capital roll-overs or three-year capital appropriations.

The Chair asked whether committed funds could be rolled over.

Mr Momoniat responded that Treasury wants to discourage under-spending as the following year's budget would still be sufficient to deal with items of expenditure, particularly long term contacts. The word "committed" refers to delayed payments. Yet some regarded funds that have a vague link to an expenditure as being "committed" funds.

(ii) Clause 31B
Mr Momoniat expressed uncertainty as to whether this makes sense at local government level. At national and provincial level, however, it meant that spending would still be allowed for roll-over of capital not covered in the main budget. The reason is that, in effect, the funds had already been appropriated without waiting for the adjustments budget. Treasury has often found, especially with provincial budgets, that there would be a waiting period of seven to eight months with a great deal of uncertainty. It could be argued that municipal councils were more flexible and could vote earlier on roll-overs.

(iii) Clause 31C
Mr Momoniat said that this clause allows for some overspending on capital, as long as the funds are available. Overspending in the three-year appropriation would result in a deduction from the following year's budget. This can be done as long as the cash flow reasons allowed it, and if more funds are made available in years two and three. This would be the most effective route to take, given the problems encountered. If the funds match or exceed the cash available, then cash management tools would have to be used. The phrase "in terms of section 31D" in has to be ignored.

Ms Taljaard contended that Treasury is being too restrictive because it is attempting to prescribe only one category of exemptions for roll-overs. Although it is required for capital projects to proceed, it is unnatural that funds should lapse at the end of a financial year.

The Chair asked whether lapsed funds were to be re-appropriated once they are back in the municipal coffers.

Mr Momoniat replied that it was assumed that every appropriation act was a one-year appropriation, and that lapsed funds would be re-appropriated. If three-year appropriations for capital were allowed for capital, it should not be allowed to lapse. It would perhaps be preferable to have three-year appropriations for the entire budget. The budgetary process is the only area in which legislatures could exercise an annual oversight over the activities of departments, and it is therefore probably more desirable than any other system. Furthermore, changes in the amounts in years two and three of a three-year appropriation would indicate policy changes. It is understood that all appropriation acts would cease to function at the end of the financial year, and that an exception must be catered for.

Ms Taljaard asked why Treasury has decided to codify the existing provisions relating to unspent funds.

Mr Momoniat responded that the new provision is aimed at dealing with the fear of the current asymmetrical situation, because there is under-spending for the fear of over-spending on capital.
Accounting offices were argued that the reasons for under-spending stemmed from the fear of over-committing on capital. The practice is rather to under-spend than over-spend, because the latter is punishable. This would also provide accounting offices with some certainty. All that it required at national and provincial level is approval from Treasury, and there was no need to consult again with the legislature.

The Chair asked whether this concept relating to roll-overs could be extended beyond capital expenditure.

Mr Momoniat replied that the definition should be stricter The limit should only apply to capital expenditure because the funds that have been committed are quite measurable. The problem with going beyond capital expenditure is that there will be under-spending, and people will attempt to explain this away as committed funds.

The Chair said that Clause 16(3) has to remain because there must be an allowance for capital budgets exceeding three years. It is possible to speed up expenditure without there being over-spending on the budget, thus providing the opportunity for capital expenditure to be exceeded.

Mayor Leeuw stated that the situation is very difficult to deal with. Some of the capital funds are from national or provincial level, and the matter therefore depends on those levels. At a local level, only the funds spent are claimed. Therefore, if nothing had been done there would be no claim. Mayor Leeuw stated that he has not experienced any roll-overs in the last eighteen months. Matters are made particularly difficult if the province presents the money to be spent at a national level. Currently everything is always consumed in the local budget.

The Chair pointed out that Clause 31C(1)(a) allows for the allocated amount to not exceed 20% of the year's final allocation for that project.

Mr Momoniat stated that the Johannesburg Municipality had major capital under-spending. Its capital budget funds are tied to conditional grants which are causing a range of problems, but these are currently being dealt with. A three-year allocation would be a means to retain those funds.

Ms L Mabe (ANC) said that the section was relevant because municipalities differ because their financial capacities are not the same. The 20% would provide sufficient funding to complete those projects that would otherwise have been stalled, if funds were on the brink of being exceeded before the end of such a project.

The Chair agreed that this allowed for at least 20% extra could be spent without being accused of over-spending.

Mr A Lyle (ANC) stated that study tours to municipalities have shown that there is a high level of tension between the municipal manager and the municipal council in some municipalities. It would be better if there was compliance with Clauses 31A and 31B, then the manager's approval was absolutely necessary.

The Chair asked if this would mean that written confirmation from the municipal manager would be required to certify that cash is available, and the approval for expenditure must then be granted by the mayor.

Mr Momoniat answered in the affirmative.

Mayor Leeuw stated that this does create a better situation.

The Chair asked how often the municipality would implement an adjustments budget if the revenue flow did not meet requirements of the budget.

Mr Momoniat responded that the Act requires this step to be taken at least once, but that it could be done more often.

Chapter 1: Interpretation, Object, Application and Amendment of Act
Clause 1: Definitions
Mr Momoniat suggested that "irregular expenditure" and "unauthorised expenditure" definitions might have to be changed in view of the discussion on capital expenditure. Furthermore, the term "unauthorised expenditure" does not apply to municipal entities, as currently provided for in the PFMA. It only applies to municipalities and government departments. The term "irregular expenditure" will then apply to municipal entities.

"Irregular expenditure"
Mr Momoniat stated that the current definition of this term in the PFMA is too broad, and this makes it difficult to implement. The AG agrees with Treasury on this. For this reason Sub clause (a) of the new definition seeks to limit it to any contravention in terms of "this Act", as well as the condonation provision. Sub clause (c) should be deleted, because it casts the net too widely.

Mayor Leeuw asked whether this definition includes by-laws as well.

Adv Grove stated that it does not, and has to be included here.

Mr Momoniat disagreed. The practicalities involved would create too great an administrative burden for the AG.

The Chair agreed with Adv Grove.

Proposed Schedule for Introduction of Systems Amendment Bill
Mr Momoniat proposed that DPLG reduce this Schedule (Appendix 1) to writing.

The Chair stated that she will be consulting Mr Y Carrim, Chairperson of the Provincial and Local Government Portfolio Committee, on this.

The meeting was adjourned.

Appendix 1 : Proposed new definitions to Municipal Finance Management Bill

Proposed new MFMB definitions draft of 3 June 2003

Irregular Expenditure

1. New definition

"irregular expenditure" means expenditure other than unauthorised expenditure-

(a) incurred in contravention of or that is not in accordance with a requirement of this Act, and which has not been condoned in terms of section xx;
(b) incurred in contravention of or that is not in accordance with a requirement of the Municipal Systems Act, and which has not been condoned in terms of that Act; or
(c) incurred in contravention of any other Act of Parliament or provincial legislature, and which has not been condoned in terms of such Act.

Unauthorised Expenditure

New proposal

"unauthorised expenditure", in relation to a vote to a municipality, means an expenditure for which no provision is made in the budget of a municipality, and includes -

(a) overspending the total expenditure approved in the budget;
(b) overspending of a vote, subject to sections (on virement, rollovers and capital).
(c) expenditure not in accordance with the conditions of an allocation in terms of section 214 annual Division of Revenue Act or a provincial Appropriation Act;
(d) expenditure from a vote not in accordance with the purpose of that vote or, in the case of a main division, not in accordance with the purpose of the main division;
(e) transfers made by the municipality not in accordance with this Act; and
(f) expenditure unrelated to the department or functional areas of the municipality;

Only the definition of irregular expenditure applies to municipal entities

Use of unspent funds from preceding financial year

Add a new section 16(3):
"(3) Subsection (1) does not preclude the appropriation of money for capital projects or other prescribed budget items for a period not exceeding three financial years.

"Unspent funds

31A. The appropriation of funds in an annual or adjustments budget lapses to the extent that those funds are unspent at the end of the financial year to which the budget relates, except -
(a) as provided for in section 31B; or
(b) in the case of an appropriation for expenditure made for a period longer than that financial year in terms of section 16(3).

31 B. (1) If funds appropriated for capital in an annual or adjustments budget are unspent at the end of the financial year for which the appropriation was made, and certified by the chief financial officer as funds already committed towards a capital project, may authorise the use of those funds for expenditure in the following financial year.

Shifting of funds between multi-year appropriations

31C. (1) When funds for a capital project or other specific budget item are in terms of section 31D appropriated for more than one financial year, expenditure for that project or item during a financial year may exceed the amount of that year's allocation for that project or item provided that -
(a) the increase does not exceed 20 per cent of the current financial year's allocation for that project or item;
(b) the increase can be funded within the multi-year appropriation for that project or item; and
(c) prior written approval was obtained from the municipal manager for the increased expenditure.

Appendix 2 : Proposed Schedule for Municipal Finance Management Bill

ANNEXURE A

PROPOSED SCHEDULE FOR INTRODUCTION OF THE LOCAL GOVERNMENT: MUNICIPAL SYSTEMS AMENDMENT BILL, 2003

Legislation to be considered in 2003 must be submitted to Parliament by August 2003.

The following are applicable Cabinet dates:

GA committee: 3 June 2003
Cabinet: 11 June20O3
GA committee: 17 June 2003: reports on Cabinet Lekgotla preparations
Cabinet: 25 June 2003
GA committee: 15 July 2003
Cabinet: 23 July 2003: Lekgotla

LOCAL GOVERNMENT: MUNICIPAL SYSTEMS AMENDMENT BILL

This Bill will amend the Local Government: Municipal Systems Act resultant to the adoption of the Municipal Finance Management Act.

Draft Cabinet and Parliamentary Programme
(i) Publication for comments 6 June 2003
(ii) Distribution of documents for GA Committee meeting 12 June 2003
(iii) Submission to GA Cabinet Committee 17 June 2003
(iv) Submission to Cabinet 25 June 2003
(v) Submission to State Law Advisers July 2003
(vi) Publication of Rule 159 Notice July 2003
(vii) Introduction into Parliament August 2003