Province of the North West

Province of the North West

Die Provinsie van die Noord-Wes

Porofense ya Bokone Bophirima

DEPARTMENT OF FINANCE

___________________________________________________________________________________________________________________________

Private Bag X2060

MMABATHO

2735

REPORT ON THE 2007/08 FINAL BUDGET ANALYSIS FOR THE 21 DELEGATED MUNICIPALITIES IN THE NORTH WEST PROVINCE.

1. INTRODUCTION

In terms of the Delegated responsibilities by NT pertaining to Municipal Finance Management Act, chapter 4, Provincial Treasury must monitor the whole budget process and ensure that all requirements and procedures in terms of sec 17 and 18 of MFMA are followed by the municipalities. The Provincial treasury has executed the analysis of the 21 delegated Municipal Budgets Approved for the financial year 2007/08.

2. METHODOLOGY

The methodology used was to analyze the 2007/08 approved budgets for the 21 delegated municipalities using National Treasury budget analysis guide, MFMA Section 71 reports and other related documents (Appendix A, Budget Evaluation Checklist, budget document, reviewed IDP, Annual report 2005/06, MFMA Implementation Plan, DoRA, Provincial allocations and National Treasury tariff standards)

2.1 SCOPE

In a main there are three key concepts to be seriously considered when analyzing the budget:

The credibility of the budget

budget must be funded according to section 18(1) of the MFMA
the spending capacity of the municipality (spending trends and institutional capacity)
budget must be achievable

Sustainability of the municipality

· Revenue collection capabilities;

· Daily operations of the municipality

Responsiveness of the municipal budget to the IDP

Linkage of the budget to the IDP
Budget must take into consideration the priorities indicated in the IDP (community needs)
Powers and functions of the municipality

3. FINDINGS PER MUNICIPALITY: BOPHIRIMA DISTRICT

3.1. BOPHIRIMA DISTRICT MUNICIPALITIES

Please take note that:

The analysis of the municipality’s budget is performed based on the information made available to the Provincial Treasury by the Municipality at the time the analysis was made. The municipality has submitted the Appendix A, IDP, BEC and the Approved budget document, the SDBIP was not submitted. With the use of the available information, the following issues were picked-up:-

A. Credibility of the budget and income.

The operating income of the municipality has increased substantially from R168 531 281 in 2006/07 to R214 320 590 in 2007/08 financial year, which is R45 789 309 increase. The total revenue anticipated to be raised is more than the total expenditure for operating budget and there is a surplus of R93 857 707. The analysis has proven that there is a relative decrease in debtors from 11% (2006/07 financial year) to 3% in 2007/08 financial year. Debtors which are longer than 90 days has decrease from R18 465 to R4 000 which paints a positive picture in terms of revenue collection and financial viability and sustainability of the municipality.

There is no information provided on the Appendix A regarding the total capital Expected budget and it makes it difficult for the analyst to determine how much in terms of percentage is being rolled over to the next financial year. Municipality is encouraged to expedite all the processes involved in spending the capital budget to ensure effective and efficient service delivery in a sustainable manner to the community.

With regard to spending for the 2006/07 financial year the expenditure reported to PT indicated that 76% has been spent on Capital budget and 73% on Operating budget. This subsequently means that the municipality has under spent by 24% on Capital and 27% on Operating budget. The municipality is requested to submit the outstanding budget statement for June and review the MFMA implementation plan 2007/08 which will indicate the measures municipality has put in place to address this challenge of under spending and late submission of Sec 71 reports as well as the MFMA returns.

B. Sustainability of Capital Investment.

The capital budget has decreased from R108 020 967 in 2006/07 to R98 382 899 in 2007/08 financial year which is R9 638 068 decrease. The municipality is requested to furnish Provincial Treasury with the reason for the decrease as it was not mentioned in the budget. Capital budget forms 44% of the total budget and municipalities are expected to spend the better part of their budget in providing sustainable and better services to the community than on the operational matters.

Out of the total budget 56% forms part of the operating budget and 20% forms part of the repairs and maintenance. Repairs and maintenance has increased by 15% as compared to 2006/07 financial year. The salaries and related costs forms 28% of the Operating budget and it gives indication that the municipality did not exceed the National Treasury threshold of 35%.

C. External Borrowing and Investment.

The ratio of borrowings and investments (56%) shows a positive indication that the municipality is striving and considering its local community. Based on the information submitted, the municipality’s investments will be able to meet its capital spending which increased excessively as compared to the previous year.

The DBSA has granted the municipality a special interest rate of 5% on the loan amount of R13 242 836 for the Eradication of the Bucket System project in Mamusa and Lekwa Teemane.

D. Financial Viability.

The municipality has demonstrated strong and prudent financial management over the last five years. This is demonstrated by the Unqualified Audit Reports on the annual financial statements received from the Office of the Auditor-General for the last five years.

The municipality’s sole source of own revenue, RSC levies, have been scrapped as from 01 July 2006, and the shortfall provided for as an increase on the Equitable Share allocation:

- 2007/08 =R16 529 000.00

- 2008/09 =R18 596 000.00

- 2009/10 =R19 859 000.00

The analysis has also proven that there is 8% decrease in debtors as compared to 2006/07 financial year which subsequently means the municipal revenue has significantly improved and enhance the financial viability and sustainability of the municipality.

E. Adherence to National Standard

There is a clear good IDP and budget linkage depicted by the municipality in their budget and the municipality is highly commended on this issue.

To ensure integrated and focused service delivery between all spheres of government, the municipality deemed it fit to align its IDP priorities with that of National and Provincial government. The Bophirima Growth and Development Strategy followed the same approach as the National Spatial Development Perspective (NSDP) in determining the Economic Potential Ranking (EPR) and Economic Needs Ranking (ENR) of the various local municipalities in Bophirima.

The following key factors have been taken into consideration in the development of the 2006/07 MTREF:

(i) National government macroeconomic targets (NT’s growth of 3 to 6%)

(ii) General inflationary outlook as it will impact on Bophirima’s residents and businesses

(iii) Increase in price for bulk water by the two water services providers; Botshelo Water (6%) & Sedibeng (6%)

The increase in the cost of remuneration, including the councilors’ allowances also did not exceed the NT threshold.

With regard to the Government grants and subsidies, these allocations were verified on DORA and Provincial Gazette.

THE OVERALL BUDGET DOCUMENT

The Municipality’s draft was tabled before council on the 29 March 2007 and annual budget was tabled before council on the 24 May 2007 which means the municipality complied with the requirements of MFMA.

The proposed consultative process as detailed on the annual budget under “6.1 Budget Process Overview, (6.1.10) Process to record and integrate inputs from community in the final budget” appears to be a quality process.

The tabled and the approved budget is in a schedule of three year estimates of capital and operating revenue by source and expenditure by vote showing projections for current year and actual for preceding year.

The budget documentation provide evidence of long-term planning, and appropriate budget assumptions

A reconciliation of Budget with IDP and the Appendix A forms has been duly performed and included in the budget documentation.

In my opinion, the municipality has produced a good quality budget documentation which is in accordance with the prescripts and requirements as detailed on MFMA Circular 28; in overall it addresses all level and the requirements of MFMA.

The Provincial Treasury would like to commend and appreciate the utmost effort the municipality has put together to produce this distinctive budget document.

3.2 MOLOPO LOCAL MUNICIPALITY

Please take note that:

The analysis of the municipality’s budget is preformed based on the information made available to the Provincial Treasury by the Municipality at that point in time. The municipality has submitted the Appendix A, IDP and BEC and SDBIP were not submitted. With the use of the available information from the Appendix A, the following issues were picked-up:-

A. Credibility of the budget and income.

The operating income of the municipality has increased by 1.4% which is 4 768 042 as compared to 2006/07 income. The total operating revenue anticipated is more than the total operating expenditure, which means the municipality, will have a surplus of 3 827 337.

B. Sustainability of Capital Investment.

The capital budget 2007/08 has increased with 245.5% as compared to 2006/07 financial year. Capital budget forms 62.7% of the total budget which is a positive step forward because municipality are expected to spend substantially on their capital budget in providing sustainable and better services to the community than on the operational matters. The repairs and maintenance on assets constitute only 2.1% of the operating budgets and which is acceptable considering the Fact that this is a smaller municipality. The municipality’s budget is funded from government grants and subsidies because of its rural nature, it does not generate any income.

The municipality has acquired the external loan of 5 000 000 from the DBSA for construction of municipal offices as per the 2007/08 annual budget. The municipality did not comply with the prescripts of the MFMA by sourcing the views of the NT, PT and other stakeholders. Debt equity ratio could not be done as the supporting documents were not provided by the municipality.

In terms of sec 71, the municipality has submitted the report for only two first quarters of the financial year 2007/08. Reasons provided by the municipality for non-submission was that there is no enough staff to assist in compiling these sec 71 reports. The non-submission of these reports also negatively affects the budget analysis process.

C. Budget Impact on household.

There is no direct impact on household influenced by the budget as the municipality is a rural area and no services is being provided to communities by the municipality.

D. Financial Viability.

The budget document as presented shown that the municipality will be operating at a surplus of 3 827 337 on the operational budget. This municipality is a very small rural municipality which is not revenue based. The submission was made to the demarcation board in relation to combining the municipality with Kagisano Local Municipality, since they are in close vicinity to each other.

These two municipalities are 100% rural and do not have the revenue base and solely rely on grants from government. The finances of this municipality are managed from the district and there are no section 57 managers due to the nature of the locality. The audit opinion for the two previous financial years was an unqualified.

E. Adherence to National Standard

Even thought this is a small municipality about 50.1% of the operating budget goes to salaries and related cost and it is far above the NT threshold of 35% and this is clearly outside the government threshold. The implication is that the municipality is spending most of its operating expenditure on salaries rather than provision of basic services.

The municipality must provide clarity on the strategic issues of the municipality as they appear to be the same as the District one’s e.g Water and sanitation and Disaster management and fire fighting There is some kind of a link between IDP and Budget but Supporting table 1 – 3 on page 28 -31 does not reconcile to both the Capital and Operating budget.

THE OVERALL BUDGET PROCESS AND BUDGET DOCUMENT

The budget document as presented does provide the bigger picture of the entire municipal budget, it’s well detailed. There are budget related resolutions attached to the budget document submitted to the PT. Supporting documents are as well attached to the budget.

There is a breakdown of capital budget for MTREF period only the 2007/08, which makes it simple for the analyst to determine an increase or decrease in the capital budget. The linkage between IDP and budget was assessed because the detailed capital plan for the municipality was attached to the budget document, this plan was used to link the projects captured in the IDP as well as in the budget to ensure that the municipality only fund the projects that are contained in the IDP.

With regard to national and provincial allocations a verification has shown that the municipal budget reflects grants of R3 633 000 as capital funding and R5 457 000 as Operating fund from grants. Verification done on both DoRA and provincial allocations amount to 10 225 000.The is an amount of 9 090 000 reflected on schedule 1 of the budget as grants to be received on operating expenditure as opposed to 5 457 000. Municipality must re look in to Provincial & National and clarify the differences with PT.

3.3 NALEDI LOCAL MUNICIPALITY

Please take note that:

The analysis of the municipality’s budget is preformed based on the information made available to the Provincial Treasury by the Municipality at the time the analysis was made. The municipality has submitted the Appendix A and the budget document, but not according to circular 28, which does not provide a detailed picture of the budget. With the use of the available information from the Appendix A, the following issues were picked-up:-

Credibility of the budget and income.

The operating income of the municipality has increased by R9 472 417 (8.9%) as compared to 2006/07 operating income. The total operating revenue anticipated is more than the total operating expenditure, which means the municipality, will have a surplus of R725.

There is a relative decrease of R25 844 241 in debtors. Outstanding debtors constitute 45.4% on total operating expenditure. Debtors which are longer than 90 days decreased from R63 339 427 to R40 179 747 which paints a positive picture in terms of revenue collection and financial enhancement and financial viability of the municipality.

Sustainability of Capital Investment.

The capital budget if the municipality has decreased from 16 474 950 in 2006/07 to 6 191 620 in 2007/08 which is 38% difference as compared to 2006/07 financial year. Out of the total budget only 5.1% is contributed towards the Capital budget of the municipality which is a worrying factor because municipalities are expected to spend more money in developing and building the capital infrastructure of the municipality. It also raises a concern on municipality’s ability to carry out the capital projects.

There is small provision of 6.7% for the maintenance and repairs on assets which is worrying factor because municipality has previously acquired fixed assets and that needs to be maintained in order to provide sustainable and better services to the communities. The capital budget mainly consist of street lighting and libraries which constitute 3 266 620 of the total capital budget.

Debt service expenditure amount to 6.6% of the total operating expenditure and debt equity ratio could not be done as the AFS are not available. The municipality must indicate to PT the strategies used to enable municipality to repay the loans and also names of projects that will be funded by the external borrowings.

The municipality has not been submitting the MFMA sec 71 reports in the prescribed format for the past two (2) years and the reasons furnished to PT was lack of qualified staff and the financial system of the municipality was not interfaced with the reporting template. The municipality has no enough staff to assist in compiling these sec 71 reports, and it is fairly difficult to analyze the budget without monthly budget statement. The non submission of these reports also hampers on PT role to provide a clear detailed picture regarding the financial viability and sustainability of the municipality.

Budget Impact on household.

The tariff increase of the municipality amounts to 7.4% which is more than the National Treasury growth parameters because according to MFMA circular 41 the CPIX remains within 3-6 % target range and over the MTEF period (2007/08, 2008/09 2009/10) is expected to be 5.1% 4.3%, 4.5%, respectively. The municipality must also indicate if the tariff increase calculations were done on sample households at varying income levels to be able to know the impact of the increase on households as well as the public consultation based on this matter.

D. Financial Viability.

The budget document and Appendix A as presented show that the municipality will operate at a surplus of R725. The analysis has proven that there is a decrease in debtors and the total salary costs of the municipality constitutes 46.1% of the Operating budget this will subsequently affect the revenue collection of the municipality because most of the revenue collected goes in to operational cost than into capital infrastructure. Municipalities are advised to couple revenue enhancement measures with their expenditure trends because this adversely impact on the financial viability of the municipality. The audit opinion for the past three financial years was a disclaimer. The municipality has developed an action plan which intends to respond to the issues that were raised by the Auditor General and PT will monitor the implementation of this plan through the office of the MM.

The financial viability of the municipality could not be verified and analyzed further because there are no budget related policies attached to the budget document. The budget document does not even outline the budget process overview for analysts to be able to know the strategies the municipality will put in place to improve on revenue collection, Local Economic Development, other service delivery mechanisms and public consultation thereof.

E. Adherence to National Standard

The employee related costs constitute 46% of the total operating expenditure and this shows that the NT threshold were not adhere to. The tariff increase of the municipality is 7.4% which is more than the National Treasury growth parameters because according to MFMA circular 41 the CPIX remains within 3-6 % target.

Municipality did not comply with MFMA circular 28 and this limits the analyst to elaborate further on how the municipality adhered and linked its plan to National, Provincial and district programmes and plans.

THE OVERALL BUDGET DOCUMENT

The Municipality’s draft was tabled before council on the 16 May 2007 and annual budget was tabled before council on the 31 June 2007 which means the municipality did not comply fully with the requirements of MFMA. Given the above-mentioned dates it raises a question of whether the community was allocated enough time to engage the budget documentation, the effectiveness of their participation and incorporation of their comments and inputs not the budget before it gets approved.

The budget document as presented does not provide the bigger picture of the entire municipal budget. There are no budget related resolutions and supporting documents attached to the budget document submitted to the PT. The linkage between IDP and budget was not assessed because of the lack of the detailed capital plan from the municipality and was not attached to the budget document, this plan will be used to link the projects captured in the IDP as well as in the budget to ensure that the municipality only fund the projects that are contained in the IDP.

With regard to provincial and national allocations verification, the municipality’s budget shows that grants of 20 210 620 is budgeted for and the verification done on both DoRA and provincial allocations amount to 20 386 000.There is a difference of 175 380 that the municipality has to clarify with PT.

3.4 KAGISANO LOCAL MUNICIPALITY

NB: Please take note that:

The analysis of the municipality’s budget is preformed based on the information made available to the Provincial Treasury by the Municipality at the time the analysis was done. The municipality has submitted the Appendix A, IDP and the final budget document, SDBIP and BEC and other related information were not submitted. With the use of the available information the following issues were picked-up:-

Credibility of the budget and income.

The operating income of the municipality has decreased substantially from R32 983 000 in 2006/07 to R32 007 000 in 2007/08 financial year. The total Operating budget is more than the anticipated revenue to be raised which means the municipality will be operating at a deficit of R921 000. The municipality does not have revenue based measures, it entirely depends on government grants and subsides.

B. Sustainability of Capital Investment.

The Capital budget for 2007/08 has increased to R7 365 000 as compared to R2 158 000 in 2006/07 financial year. Capital budget constitutes 18.7% of the total budget which somehow raises a concern about the service delivery and capital developments of the municipality because the municipality is expected to spend substantially on their capital budget by providing sustainable and better services to the community than on the operational matters. The repairs and maintenance on assets constitute only 1.8% of the operating budgets, which is worrying factor because the municipality has allocated minimum resources to Capital and again a very low amount is allocated to maintaining the existing fixed assets.

The capital budget has decreased since 2006/07 financial year, the municipality is requested to furnish the Provincial Treasury with the reason for the decrease as it was not mentioned in the IDP and annual budget. There is a slight alignment between IDP and budget depicted by the municipality in their supporting documents and the municipality is highly commended on this issue.

Out of the total budget 81% forms part of the operating budget and the remaining 19% caters for capital budget, while repairs and maintenance only constitute 1.8% of the operating budget. The salaries and related costs forms 41% of the Operating budget and it gives indication that the municipality did exceed the National Treasury threshold of 35%.

Based on the information obtained from the municipal annual budget, the municipality is not anticipating any borrowings during the budget year 2007/08. The municipality’s external investments comprises mainly of call deposits to the value of R8 074 000.

C. Budget Impact on household.

There is no direct impact on household influenced by the budget as the municipality is a rural area and no services is being provided to communities by the municipality.

Financial Viability.

The budget document as presented shown that the municipality will be operating at a deficit of R921 000. The audit opinions for the two previous financial years were the disclaimers and no plan was provided on how to address these queries raised by the AG. Municipality must indicate to PT plan or measures put in place to address the matter.

With regard to spending for the 2006/07 financial year the expenditure reported to PT indicated that 35% has been on Capital budget and 53% on Operating budget. The municipality is requested to submit the outstanding budget statement for June and review the MFMA implementation plan 2007/08 which will indicate the measures municipality has in place to address the challenges of under spending and late submission of Sec 71 reports as well as the MFMA returns.

The municipality has been submitting the MFMA sec 71 reports in the prescribed format for the past two (2) years and the reports were not reliable due to the financial system of the municipality not interfaced with the reporting template. It is fairly difficult to analyse the budget without monthly budget statement. The late submission of these reports also hampers on PT role to provide a clear detailed picture regarding the financial viability and sustainability of the municipality.

Adherence to National Standard

The employee related costs amounts to 41% of the operating budget and this is clearly outside the government threshold. The implication is that the municipality is spending most of its operating expenditure on salaries rather than provision of basic services. To ensure integrated and focused service delivery between all spheres of government, the municipality should deem it fit to align its IDP priorities with that of National and Provincial government. Some of the figures in Appendix A does not reconcile with the ones in the budget document.

With regard to the Government grants and subsidies, these allocations were verified on DORA and Provincial Gazette.

THE OVERALL BUDGET DOCUMENT

The Municipality’s annual budget was tabled before council on the 30 days before the start of the financial year, which means the municipality complied with the requirements of MFMA.

The consultative process was followed as stated in the executive summary of the budget document. Processes relating to the recording and integrating the inputs from community in the final budget appears to be of good quality.

The budget documentation provide evidence of long-term planning, and appropriate budget assumptions

3.5 MAMUSA LOCAL MUNICIPALITY

Please take note that:

The analysis of the municipality’s budget is preformed based on the information made available to the Provincial Treasury by the Municipality at the time the analysis was made. The municipality has submitted the Appendix A, IDP and the Approved budget document, BEC, SDBIP and other related information were not submitted. With the use of the available information, the following issues were picked-up:-

Credibility of the budget and income.

The operating income of the municipality has increased by 11 432 000 as compared to 2006/07 income. The total revenue anticipated to be raised is equivalent the total expenditure for both capital and operating budget, which means the municipality, will not operating at a deficit nor surplus.

The decrease or increase in debtors could not be identified because the municipality could not include figures on either the detailed budget nor the Appendix A

Sustainability of Capital Investment.

The capital budget 2007/08 has increased with 5% as compared to 2006/07 financial year. Capital budget forms 40% of the total budget which is not bad because municipality are expected to spend the better part of their budget in providing sustainable and better services to the community than on the operational matters. There is small provision for the maintenance and repairs on assets which is not good because it is also imperative for municipalities to maintain the existing infrastructure. There is a decrease in the ratio for water reticulation and purification and this shows that the municipality is not responding positively to water shortage and this will positively affect the wellbeing of the farm dwellers which form the greater pat of the population in the Mamusa region.

There is no information with the regard to the External loans made on the previous financial nor the current year. Debt equity ratio could not be done as the AFS are not available. An amount of R858 000 is going to be used to fund capital from municipality’s own source of funding.

With regard to Sec 71 report the expenditure reported to date shows that the municipality has only spent 58% on the Operating budget and there is nothing reflected on the Capital expenditure. Municipality must indicate to PT reasons for late and inaccurate reporting, under spending as well as planned measures to address this situation.

Budget Impact on household.

Information related to the analysis of this part could not be done because information was not included on the Appendix.

Financial Viability.

The analysis could not prove as to whether the municipality’s debtors are increasing or decreasing which subsequently left PT with no room to express its opinion on the financial viability of the municipality. The audit opinion for the previous financial year was an Adverse. The municipality must ensure that the action plan which was developed to respond to the issues that were raised by the Auditor General is fully implemented.

Adherence to National Standard

The personnel remuneration / total operating expenditure are 43% and this shows that the municipality exceeded the NT threshold (the personnel cost must not be more than 35% - 39% of the operating budget).

The budget document of the municipality has indicated integration and alignment of National Provincial and District alignment of policies and Plans but that linkage could not verified in the budget document, most of the information is outstanding.

With regard to provincial allocations verification, the municipality’s budget indicate that there are differences identified from both Provincial and National allocations. Provincial allocations amounts to R2 050 000 and National allocations are R16 702 000 and together they add up to R18 752 000. The municipality’s budget reflects an amounting of R68 736 000 as provincial and National grants and subsidies.

THE OVERALL BUDGET DOCUMENT

The Municipality’s draft was tabled before council on the 28 May 2007 and annual budget was tabled before council on the 28 June 2007 which means the municipality did not comply fully with the requirements of MFMA. Given the above-mentioned dates it raises a question of whether the community was allocated enough time to engage the budget documentation, the effectiveness of their participation and incorporation of their comments and inputs not the budget before it gets approved.

The budget document as presented does not provide the complete picture of the entire municipal budget, most of the information is not reflected in the budget document (supporting documents).

There is a breakdown of capital budget for MTREF period only the 2007/08, which makes it simple for the analyst to determine an increase or decrease in the capital budget.

3.6 LEKWA TEEMANE LOCAL MUNICIPALITY

Please take note that:

The analysis of the municipality’s budget is preformed based on the information made available to the Provincial Treasury by the Municipality at that point in time. The municipality has submitted the Appendix A, IDP and the final budget document, SDBIP and BEC and other related information were not submitted. With the use of the available information the following issues were picked-up:-

Credibility of the budget and income.

The operating income of the municipality has increased by 46 900 448 as compared to 2006/07 income. The total revenue anticipated to be raised is more than the total expenditure for both capital and operating budget, which means the municipality, will have a surplus.(796 892)

Decrease or increase in debtors could not be identified because the municipality is still busy with Annual Financial Statements and they did not want to guess or differ with the figures on the financial statements. Mr.Snyman promised to furnish PT with figures upon completion of the AFS by the 31^st August 2007.

Sustainability of Capital Investment.

Capital budget for 2007/08 has increased with 72% as compared to 2006/07 financial year. Capital budget forms 37% of the total budget which is not sufficient looking at the outcomes (job creation, development of the municipal area and improved service delivery) that capital projects could bring to the community.

Municipal capital budget is mostly funded from government grants and only R887 000 is contributed from Own source of revenue to fund Capital.

It is also reflected on the budget that an amount of R8 169 720 from external loans will also be used to fund the Capital budget. The interest paid on loans made on the previous financial year is standing at 2.8% and is payable at the value of 2 331 890 per year.

Out of the total budget 63% forms part of the operating budget and out of the operating budget 5% forms part of the repairs and maintenance. The salaries and related costs forms 39% of the Operating budget and it gives indication that the municipality did exceed the National Treasury threshold of 35%.

The municipal expenditure reported to PT to date (as at May 2007) shows that the Capital expenditure reported is 42% and Operating expenditure is 73%. Municipality has under spent on both Capital and Operating, this raises a concern or a question of the ability of the municipality to spend their budget. The analysis has proven that the municipal Capital budget has increased with 72% and what measures has been put in place to ensure that the municipality will be able to spend the increased budget.

Budget Impact on household.

The tariff increase of the municipality amounts to 4.7% which is not more than the National Treasury growth parameters because according to MFMA circular 41 the CPIX remains within 3-6 % target range and over the MTEF period (2007/08, 2008/09 and 2009/10) is expected to be 5.1% 4.3%, 4.5%, respectively. The municipality must also indicate if the tariff increase calculations were done on sample households at varying income levels to be able to know the impact of the increase on households as well as the public consultation thereof.

Financial Viability.

The budget document as presented shown that the municipality will operate at a surplus. The analysis could not prove as to whether there is an increase or decrease in debtors. The situation subsequently left the analyst without the opportunity to express the opinion on revenue collection capacity of the municipality. The audit opinion for the previous financial year was a disclaimer. The municipality must ensure that the action plan which was developed to respond to the issues that were raised by the Auditor General is fully implemented.

Adherence to National Standard

The budget document submitted to PT did not include imperative information like Mayoral speech, Executive summary, budget process overview and alignment of budget with the IDP. This information is suppose to guide PT as well as other users to be able to get a clear picture about the responsiveness of the municipal budget to the community needs and key strategic focus areas of the municipality. The budget document did not make provision for PT to be able to assess how municipal budget and plans are linked and integrated to the National, Provincial and District plans and programmes.

THE OVERALL BUDGET PROCESS AND BUDGET DOCUMENT

The Municipality’s draft was tabled before council on the 07 May 2007 and annual budget was tabled before council on the 29 June 2007 which means the municipality did not comply with the requirements of MFMA. Given the above-mentioned dates it raises a question of whether the community was allocated enough time to engage the budget documentation, the effectiveness of their participation and incorporation of their comments and inputs not the budget before it gets approved.

The budget document as presented does not provide a bigger picture of the entire municipal budget. There are no budget related resolutions and other supporting documents attached to the budget document submitted to the PT.

The allocation of grants for both provincial and national government were verified and it was picked up that there is no reconciliation between amounts on DoRA plus provincial gazette against the municipality’s budget.

The total allocation according to the DoRA and Provincial Gazette amount to R17 785 000 but according to the municipal budget, R40 390 000 is reflected as government grants on the Capital budget and R7 713 148 000 on operating budget.

Bophirima District Municipality’s budget did not indicate any transfers to Lekwa Teemane but an amount of 34 835 000 is recorded as allocation from the District to the municipality.

3.7 GREATER TAUNG MUNICIPALITY

Please take note that:

The analysis of the municipality’s budget is preformed based on the information made available to the Provincial Treasury by the Municipality at the time the analysis was made. The municipality has submitted the Appendix A, IDP, final budget document and BEC, SDBIP and other related information were not submitted. With the use of the available information the following issues were picked-up:-

A. Credibility of the budget and income.

The operating income of the municipality has increased by 67 212 610 as compared to 2006/07 income. The total revenue anticipated to be raised is more than the total expenditure for both capital and operating budget, which means the municipality, will have a surplus.(358 859)

There is a high decrease in debtors of 94% which simply means that the municipality’s debt collection capacity will enhance cash flow and financial viability of the municipality. Total debtors has decrease from 10 688 731 to 665 799 for this financial year.

B. Sustainability of Capital Investment.

Capital budget for 2007/08 has increased with 7.16% as compared to 2006/07 financial year. Capital budget forms 21% of the total budget which is not sufficient looking at the outcomes (job creation, development of the local economy and sustainable service delivery) that capital projects could bring to the community as opposed to 79% balance budgeted for operating expenditure.

There is a small provision of 5.7% allocated to maintenance and repairs on assets which is completely not welcomed looking at the portion allocated at capital projects and still there is no money allocated for capital assets acquisition.

External Interests on loans made on the previous financial year is standing at 1.3% and is payable at the value of 704 068 per year. Debt equity ratio could not be done as the AFS copies presented to PT are summative and do not reflect the whole components of the Statement of Financial Performance and the Statement of the Financial Position. The municipality must indicate to PT the strategies used to enable municipality to repay the loans and also names of projects that will be funded by the external borrowings.

C. Budget Impact on household.

The impact on household could not be done because there is no information on appendix A that could be used to assess the situation.

D. Financial Viability.

The budget document as presented shown that the municipality will operate at a surplus. The audit opinion for the previous financial year was a disclaimer. On the annual report the municipality has already provided answers for the audit queries raised by the Auditor General. There is also an indication of increased revenue through the drastic decrease in debtors, which subsequently means that the municipality has revenue raising measures in place.

It has been highlighted in the executive summary that the municipality has failed to demonstrate strong and prudent financial viability over the past 3 years. This is demonstrated by the disclaimer audit report from the Auditor General and also lack of lack of right skill and human resource shortage which lead to lack of segregation of duties.

E. Adherence to National Standard

The personnel remuneration / total operating expenditure are 58% and this shows that the municipality extremely exceeded the NT threshold (the personnel cost must not be more than 35% - 39% of the operating budget).

There is a clear good IDP and budget linkage depicted by the municipality in their budget and the municipality is highly commended on this issue.

To ensure integrated and focused service delivery between all spheres of government, the municipality deemed it fit to align its IDP priorities with that of National and Provincial government.

The allocation of grants from both provincial and national government were verified and only to find that there is totally no reconciliation between amounts on DoRA as well as provincial gazette against the municipality’s budget.

On its budget disclosed that there total government grants amounts to R9 800 000 as capital funding source and R36 400 000 allocated for operating fund summating the total grant to R46 200 000. DoRA and provincial Gazettes provided the allocation amounts to R450 000. Budget for Bophirima District Municipality does not show any allocation to Greater Taung.

THE OVERALL BUDGET DOCUMENT

The Municipality’s draft was tabled before council on the 28 March 2007 and annual budget was tabled before council on the 30 May 2007 which means the municipality complied with the requirements of MFMA.

The proposed consultative process as detailed on the annual budget under “6.1 Budget Process Overview, (6.1.4) Process to record and integrate inputs from community in the final budget” appears to be a quality process.

The budget documentation provide evidence of long-term planning, and appropriate budget assumptions

There is a clear reconciliation of Budget with IDP but the Appendix A does not reconcile with some of the figures in the budget documents e.g. Operating expenditure and revenue. In my opinion, the municipality has produced a good budget documentation which is in accordance with the prescripts and requirements as detailed on MFMA Circular 28. The Provincial Treasury would like to commend effort the municipality has put together to produce this distinctive budget document.

4. FINDINGS ON BOJANALA DISTRICT

4.1 BOJANALA DISTRICT MUNICIPALITY

Please take note that:

The analysis of the municipality’s budget is performed based on the information made available to the Provincial Treasury by the Municipality at the time the analysis was made. The municipality has submitted the Appendix A, IDP and the Approved budget document BEC and the SDBIP was not submitted. With the use of the available information, the following issues were picked-up:-

Credibility of the budget and Income

The operating income of the municipality has increased from R146 172 907 in 2006/07 to R169 382 990 in 2007/08 financial year. The budget document has shown that the municipality will not operate at a surplus or deficit. No information on total debtors outstanding was provided.

Sustainability of Capital Investment.

The capital income has decreased from R25 544 484 in 2006/07 to R25 047 647 in 2007/08. The municipality is requested to furnish Provincial Treasury with the reason for the decrease as it was not mentioned in the budget. Capital budget forms 12.9% of the total budget which is not sufficient looking at the outcomes (job creation, development of the municipal area and improved service delivery) that capital projects could bring to the community. And municipality are expected to spend the better part of their budget in providing sustainable and better services to the community than on the operational matters.

Out of 87.1% of the operating budget only 0.9% of the budget is allocated to the repairs and maintenance which is not good and sufficient because it is also imperative for municipalities to maintain the existing infrastructure. Repairs and maintenance has decreased from R2 153 510 in 2006/07 to R1 550 780 in 2007/08. The salaries and related costs forms 39% of the Operating budget and municipality must ensure that they don’t exceed the National Treasury threshold of 35%-39%.

No information was provided for the external interest and investment for the financial year 2007/08. The municipality must clarify this matter with PT if in deed there are no borrowings and investments.

Financial Viability

The budget document as presented has shown that the municipality is not operating at a surplus or deficit. The municipality got unqualified audit opinion for 2005/06 financial year, furthermore there is no information on debtors and other related information for PT to sufficiently input or comment on the financial viability and sustainability of the municipality.

Municipality submitted the monthly expenditure report not in the prescribed format from National Treasury and it was very difficult to link the municipal report format to Sec71 format.

Adherence to National Standards

The personnel remuneration/ total expenditure is 39.8% and this shows that the municipality has exceed the NT threshold (the personnel cost must be more than 35%-39% of the operating budget)

The linkage between IDP and the budget could not be clearly assessed because the municipal budget did not include the IDP and budget reconciliation sheet/ column in the budget book. Looking at the two documents, IDP and budget linkage still remains a challenge to the municipality.

With regard to provincial and national allocations, the figures have been checked and verified. Some allocations were not disclosed as stated in the DORA e.g. Disaster Management of R1 000 000. Municipality should disclose all the necessary information needed to make possible for Provincial Treasury to perform a detailed and comprehensive budget analysis.

The overall budget document

The Municipality’s draft was tabled before council on the 29 March 2007 and annual budget was tabled before council on the 29 May 2007 which means the municipality complied with the requirements of MFMA.

The budge document does not indicate what processes where followed to ensure consultation process with communities on the budget (budget process overview and other related supporting documents as per MFMA Circular 28)

The budget document as presented does not provide the complete picture of the entire municipal budget, most of the information is not reflected in the budget document (All the supporting documents).

4.1 MOSES KOTANE LOCAL MUNICIPALITY

NB: Please take note that:

A. Credibility of the budget and Income

The operating income of the municipality has increased from R178 216 667 in 2006/07 to R203 421 609 in 2007/08 financial year. The total revenue anticipated to be raised is more than the total expenditure for both capital and operating budget, for operating income there is a surplus of R187 594. The analysis has proven that there is a slight increase of total debtors outstanding and provision for bad debt to be written off is 1 634 478. Municipality is expected to provide Provincial Treasury with the reasons for increase of debtors and also measures the municipality have put place to address this challenge of outstanding debtors.

B. Sustainability of Capital Investment.

The capital income has increased from R80 168 184 in 2006/07 to R224 659 896 in 2007/08 financial year. Capital budget forms 52.5% of the total budget whish is good because municipalities are encouraged to spend the better part of their budget in developing the local economy and also in providing sustainable and better services to the community than on the operational matters.

Out of 47.5% of the operating budget only 8.2% of the budget falls into the repairs and maintenance. The budget expenditure for repairs and maintenance has increased as compare to 2006/07 this is also good taking into cognizance the number of years of operation for the municipality.

An amount of R60 384 684 has been reflected as funds form external loans that will be used to fund the Capital budget of the municipality, the budget document (budget statement no 1) does not give a clear indication as to which projects will be funded by this loan. Municipality must provide PT with the projects that will be funded by this loan as well as the repayment interest rate. The capital budget is funded from provincial and national grants and in addition to that an amount of R3 286 000 will be sourced from municipality’s own source of fund to fund the capital budget. The municipality is encouraged to enhance their revenue raising measures and debt collection to ensure that more money is allocated to capital developments and local economic development in the coming financial year.

With regard to spending for the 2006/07 financial year the expenditure reported to PT indicated that 29.3% has been on Capital budget and 64.3% on Operating budget. This subsequently means that the municipality has under spent on both capital and operating expenditure. The municipality is requested to provide PT with reasons for under spending and corrective measures put in place by the municipality to address the under spending (MFMA implementation plan review and other related plans).

C. Budget Impact on household.

D. Financial Viability

The budget document as presented has shown that the municipality is operating at a surplus of R187 594. The municipality got unqualified audit opinion for 2005/06 financial year. The analysis has also proven that there is a slight increase in debtors as compared to 2006/07 financial year which subsequently means that the municipality should consider the review of revenue raising measures and it was picked up that the municipality has developed budget related policies which will also assist to address this challenge if fully and properly implemented. A comprehensive comment could not be done because the information on contingent liabilities was not yet submitted at the time the analysis was performed.

E. Adherence to National Standards

The personnel remuneration/ total expenditure is 32.9% and this shows that the municipality did not exceed the NT threshold (the personnel cost must be more than 35%-39% of the operating budget). The tariff increase of the municipality also complied with NT growth parameters for the MTEF as per MFMA circular 41 (CPIX remains within 3-6 % target).

The municipality has indicated on the budget statement no 1 that the IDP and budget are linked. The budget & IDP reconciliation schedule has been prepared by the municipality but the IDP and Capital budget does not reconcile. The PT would like to commend the municipality on this matter because it’s a good start for municipality to ensure that the budget is aligned to IDP, responsive to our community needs and local economic developments and also it’s achievable.

The overall budget document

The Municipality’s draft was tabled before council on the 30 March 2007 and annual budget was tabled before council on the 31 May 2007 which means the municipality did comply with the timelines of MFMA. The budget document as presented somehow comply with certain requirements of MFMA circular no 28.

There is a breakdown of capital budget for MTREF period only the 2007/08, which makes it simple for the analyst to determine an increase or decrease in the capital budget.

With regard to provincial and national allocations, the figures have been checked and verified. Some allocations were not captured and some not disclosed as stated in the DORA e.g. allocation from Department of Sports, arts and culture is R450 000 and National Electrification Grant is R2 156 000 were not disclosed.

Municipality should disclose all the necessary information needed to make possible for Provincial Treasury to analyze the budget document.

4.3 KGETLENGRIVIER LOCAL MUNICIPALITY

NB: Please take note that:

The analysis of the municipality’s budget is preformed based on the information made available to the Provincial Treasury by the Municipality at the time the analysis was done. The municipality has submitted the Appendix A, IDP, BEC and the final budget document, SDBIP and other related information were not submitted. With the use of the available information the following issues were picked-up:-

Credibility of the budget and Income

The operating income of the municipality has increased from R38 336 992 in 2006/07 to R53 341 957 in 2007/08 financial year. The analysis has proven that there is a relative increase of total debtors outstanding and the provision for bad debt to be written off is 15 000 000. Municipality is expected to provide Provincial Treasury with the reasons for increase of debtors and also measures the municipality have put place to address this challenge of outstanding debtors.

Sustainability of Capital Investment.

The capital budget has decreased from R31 964 000 in 2006/07 to R29 601 066 in 2007/08 financial year. There was no clear indication in the budget document as to what led to the decrease in the capital budget of the municipality. The Capital budget forms 35.7% of the total budget, municipality are advised to spend the better part of their budget on their capital budget by providing sustainable and better services to the community than on the operational matters. Out of 64.3% of the operating budget only 4.9% of the budget is allocated to the repairs and maintenance. The analysis has proved that there is a decrease in capital budget and looking at the percentage allocated to maintenance and repairs it raises a concern because municipality has previously acquired fixed assets and that needs to be maintained in order to provide sustainable and better services to the communities.

There is no information on the budget document regarding the borrowing, the only borrowing indicated is the loan from DBSA which will be used to fund the revenue enhancement of the municipality. The capital budget is mainly funded from Government grants. Municipality must briefly indicate to PT the effectiveness of the revenue raising measures and how are they going to effectively utilize these revenue raising measures in 2007/08 to be able to contribute own funds towards capital infrastructure and development.

The 2006/07 financial year expenditure reported to Provincial Treasury to date depicted that the municipality has spent 126.7% on Capital budget and 126.9% on operating budget, which means the municipality has overspent on both operating and capital budget. Municipalities provide PT with reasons for overspending as well as measures put in place to address this particular matter.

Budget Impact on household.

According to the formula used to calculate the tariff increase it was picked up that the tariff increase of the municipality did not exceed the National Treasury estimates. The municipality must also indicate if the tariff increase calculations were done on sample households at varying income levels to be able to know the impact of the increase on households.

Financial Viability

The budget document as presented has shown that the municipality is not operating at a surplus or deficit. The municipality got an adverse audit opinion for 2005/06 financial year. The analysis has also proven that there is an increase in debtors as compared to 2006/07 financial year which subsequently means that the municipality should improve their revenue collection strategy.

The municipality has been submitting the MFMA Sec 71 reports in the prescribed formats for 2006/07 financial year and some verification were done for credible/reliable information.

Adherence to National Standards

The personnel remuneration/ total expenditure is 33.4% and this shows that the municipality did not exceed the NT threshold (the personnel cost must be more than 35%-39% of the operating budget)As well the NT growth parameters for the MTEF as per MFMA circular 41 (CPIX remains within 3-6 % target).

Municipality did not comply fully with MFMA circular 28 and this limits the analyst to elaborate further on how the municipality adhered and linked its plan to National, Provincial and district programmes and plans (budget process overview).

The overall budget document

The Municipality’s draft was tabled before council on the 11 April 2007 and annual budget was tabled before council on the 31 May 2007 which means the municipality did not comply fully with the requirements of MFMA in terms of the draft. Municipality must indicate to PT what measures they’ve put in place to ensure that for 2008/09 budget they adhere to MFMA timelines to allow adequate time to communities to engage with the budget document and provide adequate written comments to the Municipality before it gets approved in May.

The municipality has performed IDP and Budget reconciliation sheet which is good start in addressing the challenges of IDP and Budget linkage and the responsiveness of municipal budget to the needs of the our community. PT would like to commend the municipality on this matter.

The budget document as presented has some tried to comply with the requirements of MFMA as well as Circular 28 but municipality must put all reasonable efforts to fully comply with the legislative requirements particularly all the supporting documents.

There is a breakdown of capital budget for MTREF period only the 2007/08, which makes it simple for the analyst to determine an increase or decrease in the capital budget.

With regard to provincial and national allocations, the figures have been checked and verified. Some allocations were not captured correctly and some not disclosed as stated in the DORA e.g. allocation from Department of Sports, arts and culture is R300 000 not R250 000.

Municipality should disclose all the necessary information needed to make possible for Provincial Treasury to analyze the budget document.

4.4 MORETELE LOCAL MUNICIPALITY

NB: Please take note that:

A. Credibility of the budget and Income

The operating income of the municipality has increased from R89 257 025 in 2006/07 to R111 033 (as per the approved budget) in 2007/08 financial year. These figure does not reconcile with the figures in the Appendix A because according to the Appendix A the municipality is going to run at a deficit of R10 746 574. No information on total debtors outstanding was provided on Appendix A form.

It was picked up from the budget documentation in the executive summary and supporting documents that Moretele LM is responsible for provision of services like water, sanitation, Electricity waste management and other services as stipulated in the Constitution of SA but there is no information provided in the Appendix A regarding debtors tariff and non financial data on free basic services. The municipality is requested to furnish PT with this information for comprehensive analysis.

B. Sustainability of Capital Investment.

The capital income has increased from R128 376 661 in 2006/07 to R165 981 162 in 2007/08 financial year. Capital budget forms 62.3% of the total budget which is a good practice because municipality are encouraged to spend the better part of their budget in providing sustainable and better services to the community than on the operational matters.

Out of 37.7% of the operating budget only 1.5% of the budget falls into the repairs and maintenance. The Capital budget is mainly funded from governments grants, allocations from the district and also an amount of R3 920 000 allocated towards capital from their own source of funding.

With regard to spending for the 2006/07 financial year the expenditure reported to PT indicated that 67.6% has been on Capital budget and 106.6% on Operating budget. This means that the municipality has under spent on the capital projects and overspent the operating budget. The municipality is requested to furnish PT with reasons for the above-mentioned spending, also taking into account the review of MFMA implementation plan for 2007/08 to overcome the challenges of under spending on capital projects for better service delivery

C. Budget Impact on household.

No information was provided on appendix A form F for household, and for operating income it shows that the municipality provides services to the community. Budget for Property rates and refuse removals has decreased and for water it has increased. The municipality must also indicate if the tariff increase/decrease calculations were done on sample household at varying income levels to be able to know the impact of the increase/decrease on household.

D. Financial Viability

The budget document as presented has shown that the municipality is operating at a deficit of 10 746 574. The deficit calls for a municipality to review and improve on it revenue collection strategy to overcome the deficit which is not really welcomed for efficient operations. For example the budget for Property rates and refuse removals has decreased instead of increasing; it shows that municipality should improve on their revenue collection. The municipality got an adverse audit opinion for 2005/06 financial year. The PT does not have efficient information to be able to conclude on the financial viability of the municipality.

E. Adherence to National Standards

The personnel remuneration/ total expenditure is 33.7% and this shows that the municipality did not exceed the NT threshold (the personnel cost must be more than 35%-39% of the operating budget)

To ensure integrated and focused service delivery between all spheres of government, the municipality should deem it fit to align its IDP priorities with that of National and Provincial government. Some of the figures in Appendix A does not reconcile with the ones in the budget document.

The relationship between IDP and budget could not be clearly picked up even though it has been mentioned in one of the supporting documents.

The overall budget document

The said budget and consultative process as detailed on the annual budget under Budget statement 1 page 08 appears to be a quality process.

The municipality has tried to comply with the requirements of circular 28 but not all the supporting tables were prepared (please refer to MFMA circular 12).

With regard to provincial and national allocations, the figures have been checked and verified. Some allocations were not captured correctly and some not disclosed as stated in the DORA. The municipality must review the provincial and national grants in consultation with Provincial Treasury to make sure that they are correctly captured in the budget document.

4.5 MADIBENG LOCAL MUNICIPALITY

Please take note that:

The analysis of the municipality’s budget is preformed based on the information made available to the Provincial Treasury by the Municipality at the time the analysis was made. The municipality has submitted the Appendix A and the budget document, BEC, SDBIP and other documents were not submitted. With the use of the available information, the following issues were picked-up:-

A. Credibility of the budget and income.

The Appendix A does not reconcile to the budget and the budget figures don’t reconcile (schedule 1a and 1b and schedule 2a and 2b).

The figures contained in 2006/07 column are the same figures contained in the 2007/08 columns (Budget Statement 2 page 2 & 3).

The analysis has proven that this budget document and the Appendix A are unreliable and non-credible.

Sustainability of Capital Investment.

There is too much inconsistency of figures in the budget document e.g. the Capital budget as per Appendix A is R123 945 685 and according to the Approved budget document (schedule 3a) is R71 183 224 and schedule 3 (b) is 85 638 631. This poses a serious challenge for the analyst to be able to comment on the budget of the municipality

The municipal expenditure report was not submitted for the whole of the 06/07 financial year, which paints a very bad picture of the municipalities in terms of expenditure on the budget as well as compliance with the MFMA. The municipality must provide a report in writing to PT indicating the reasons for the non-submission of Section 71 reports of the MFMA the letter must also state the measures put in place to address this matter.

Budget Impact on household.

According to the Executive Mayors Speech (page 10) the average tariff increase for the municipality is 8% which is more than the National Treasury growth parameters because according to MFMA circular 41 the CPIX remains within 3-6 % target range and over the MTEF period (2007/08, 2008/09 2009/10) is expected to be 5.1% 4.3%, 4.5%, respectively. The municipality must also indicate if the tariff increase calculations were done on sample households at varying income levels to be able to know the impact of the increase on households as well as the public consultation based on this matter.

THE OVERALL BUDGET DOCUMENT

The Municipality’s draft was tabled before council on the 27 March 2007 and annual budget was tabled before council on the 29 May 2007 which means the municipality did comply fully with the requirements of MFMA.

The budget document as presented does not provide the bigger picture of the entire municipal budget. There is no credibility and reliability on the submitted documents (Inconsistency on the schedule and tables in the Appendix A and Budget document). Not all the supporting documents were submitted as per MFMA circular 28. This poses a serious challenge to PT and it also raises a concern on the capacity of BTO of the municipality considering the fact that Madibeng is a high capacity municipality.

With regard to provincial and national allocations verification, all the DoRA allocations are wrongly captured in the budget. Provincial allocations from Sports, Arts and Culture amounting to R450 000 and R350 000 for fire fighting services from DDLG & H could not be picked up in the budget document.

5. FINDINGS IN THE SOUTTHERN DISTRICT

5.1 SOUTHERN DISTRICT MUNICIPALITY

Please take note that:

The analysis of the municipality’s budget is preformed based on the information made available to the Provincial Treasury by the Municipality at that point in time. The municipality has submitted the Appendix A and the final budget document, SDBIP, IDP, BEC and other related information were not submitted. With the use of the available information the following issues were picked-up:-

3. FINDINGS ON THE FINAL BUDGET ANALYSIS 2007/08

Credibility of the budget and Income

The budget document as presented shows that the operating expenditure is funded from revenue anticipated to be raised. Operating income of the municipality has increased by 4% as compared to 2006/07 income. The analysis has proven that there is a 68% increase of total debtors outstanding which paints a negative picture in terms of revenue collection and financial enhancement and financial viability of the municipality. The municipality must indicate to PT reasons for the serious increase in debtors as well as measures put in place to address this matter.

Sustainability of Capital Investment.

The capital budget has increased with 4% as compared to 2006/07 financial year. Capital budget forms 25% of the total budget which is not a good thing because municipality are expected to spend the better part of their budget in providing sustainable and better services to the community than on the operational matters.

Out of 75% of the operating budget only 0.4% of the budget goes into the repairs and maintenance and it’s very low. The budget expenditure for repairs and maintenance has increased as compare to 2006/07. It is imperative for the municipality to consider allocating more resources to repairs and maintenance because maintenance of the existing infrastructure improves the lifespan of these assets for effective provision of services.

The capital budget is funded from government grants and subsidies and also from own source of funding.

The municipal expenditure reported to PT to date (as at April 2007) shows that the percentage of 30% is spent on Capital budget and 22% on Operating budget. Municipality has under spent on Capital and Operating to date. They must provide a report in writing to PT indicating the reasons for the above-mentioned spending and measures put in place to address this matter.

Financial Viability

The analysis has proven that there is a serious increase in debtors which subsequently means the municipal revenue will drop and this will affect the revenue enhancement, the financial viability and sustainability of the municipality. The audit opinion for the previous financial year was a disclaimer. The municipality must ensure that the action plan which was developed to respond to the issues that were raised by the Auditor General is fully implemented.

Adherence to National Standards

The personnel remuneration/ total expenditure is 27% and this shows that the municipality did not exceed the NT threshold (the personnel cost must not be more than 35%-39% of the operating budget), tariff charges also did not exceed the NT growth parameters.

The alignment between IDP and the budget could not be clearly identified because the municipality did not prepare the supporting document to enable PT to seriously assess the linkage. To ensure integrated and focused service delivery between all spheres of government, the municipality should deem it fit to align its IDP priorities with that of National and Provincial government.

Municipality must also strive to make sure that their budget is aligned to the IDP to ensure that the budget is responsive to our community needs and effective service delivery.

The overall budget document

The Municipality’s draft was tabled before council on the 29 March 2007 and annual budget was tabled before council on the 31 May 2007 which means the municipality have comply fully with the timelines of MFMA.

The budget document did not fully comply with Circular 28 of MFMA most of the supporting documents (measurable performance objectives and others) were not prepared and attached to the budget document. This poses a serious challenge for the analyst to provide adequate inputs and comments on other issues.

With regard to provincial and national allocations, the figures have been checked and verified. The municipality should disclose all the necessary information needed in order for Provincial Treasury to be able to analyze the budget document.

5.2 MAQUASSI HILLS LOCAL MUNICIPALITY

Please take note that:

The analysis of the municipality’s budget is preformed based on the information made available to the Provincial Treasury by the Municipality at that point in time. The municipality has submitted the Appendix A, IDP and the final budget document, SDBIP and BEC and other related information were not submitted. With the use of the available information the following issues were picked-up:-

A. Credibility of the budget and income.

The operating income of the municipality has increased by 109 049 39 as compared to 2006/07 income. The total revenue anticipated to be raised is more than the total expenditure for both capital and operating budget, which means the municipality, will have a surplus.(16 477 871)

There is a relative increase in debtors because last financial year debtors decreased by 45% and currently debtors relatively increased by 20% (from 42 669 448 to 53 630 896). Debtors which are longer than 90 days decreased from 40 380 695 to 50 908 300 which paints a negative picture in terms of revenue collection and financial enhancement and financial viability of the municipality. The municipality must indicate to PT reasons for increase in debtors as well as measures put in place to address this matter.

Sustainability of Capital Investment.

The capital budget 2007/08 has increased with 8.7% as compared to 2006/07 financial year. Capital budget forms 32% of the total budget which is not much because municipalities are expected to spend the better part of their budget in providing sustainable and better services to the community than on the operational matters. There is also small provision for the maintenance and repairs on assets, municipality must consider allocating more resources to repairs and maintenance because maintenance of the existing infrastructure improves the lifespan of these assets for effective provision of services. There is a relative increase in the amount allocated for water reticulation and purification and this shows that the municipality is responding positively to water shortage and it has increased with 82% from last year’s provision.

The capital budget is funded from government grants and subsidies and external loans (R30 010 000), no funds from own source is used to fund capital budget.

External Interests on loans made on the previous financial year is standing at 1% and is payable at the value of 1 903 857 per annum. Debt equity ratio could not be done as the AFS are not available.

The municipal expenditure reported to PT to date (as at May 2007) shows that the percentage of 2.5 spent on Capital budget and 58% on Operating budget. Municipality has under spent on both Capital and Operating, this raises a concern or a question of the ability of the municipality to spend their budget. The must indicate to PT as to what measures has been put in place to ensure that the municipality will be able to spend the increased budget in 2007/08 financial year.

Budget Impact on household.

The analysis has proven that the municipality did not exceed the NT growth parameters as indicated in Circular 41 of MFMA. The CPIX remains within 3-6 % target range and over the MTEF period (2007/08, 2008/09 and 2009/10) is expected to be 5.1% 4.3%, 4.5%, respectively. The municipality must also indicate if the tariff increase calculations were done on sample households at varying income levels to be able to know the impact of the increase on households as well as the public consultation thereof.

D. Financial Viability.

The budget document as presented shown that the municipality will operate at a surplus. The analysis has proven that there is an increase in debtors which subsequently means the municipal revenue will drop and this will affect the revenue enhancement, the financial viability and sustainability of the municipality. The audit opinion for the previous financial year was a disclaimer. The municipality must ensure that the action plan which was developed to respond to the issues that were raised by the Auditor General is fully implemented.

Adherence to National Standard

The personnel remuneration / total operating expenditure is 21% and this shows that the municipality did not exceed the NT threshold (the personnel cost must not be more than 35% - 39% of the operating budget), the tariff charges also did not exceed the NT growth parameters.

The municipality has clearly depicted the alignment of IDP and budget on the supporting table 2 and executive summary of the budget document, which shows a good start in aligning the budget to the IDP and making sure that our budgets become responsive to our community needs stated in the IDP. The PT would like to commend the municipality on this regard as it is still a challenge in other municipalities.

THE OVERALL BUDGET DOCUMENT

The Municipality’s draft was tabled before council on the 27 March 2007 and annual budget was tabled before council on the 07 June 2007 which means the municipality did not comply fully with the requirements of MFMA.

With regard to provincial allocations verification municipality has shown grants from National only amounts spread as Capital of R59 548 000 and Operating of R133 539 000 and the verification done on both DoRA and provincial allocations gazette are amounting to R159 520 000.The is a R32 067 000 that municipality has to clarify PT on that regard.

5.3 VENTERSDORP LOCAL MUNICIPALITY

Please take note that:

The analysis of the municipality’s budget is preformed based on the information made available to the Provincial Treasury by the Municipality at that point in time. The municipality has submitted the Appendix A, IDP and the final budget document, SDBIP and BEC and other related information were not submitted. With the use of the available information the following issues were picked-up:-

Credibility of the budget and Income

The budget document as presented shows that the operating expenditure is funded from revenue anticipated to be raised. Operating income of the municipality has increased by 26% as compared to 2006/07 income. The analysis has proven that there is a 9% increase of total debtors outstanding which paints a negative picture in terms of revenue collection and financial enhancement and financial viability of the municipality. The municipality must indicate to PT reasons for increase in debtors as well as measures put in place to address this matter.

Sustainability of Capital Investment.

The capital budget has increased with 30% as compared to 2006/07 financial year. Capital budget forms 26% of the total budget which is not a good thing because municipality are expected to spend the better part of their budget in providing sustainable and better services to the community than on the operational matters.

Out of 74% of the operating budget only 1.5% of the budget goes into the repairs and maintenance and it’s very low. The budget expenditure for repairs and maintenance has decreased as compare to 2006/07. It is imperative for the municipality to consider allocating more resources to repairs and maintenance because maintenance of the existing infrastructure improves the lifespan of these assets for effective provision of services.

The capital budget is funded from government grants and subsidies, external loans (R10 282 500) and also 956 883 from own source of funding. The municipality must provide PT with information on repayment interest rate of the loan as it could not be picked-up from the budget information (on information provided to determine the rate).

The municipal expenditure reported to PT to date (as at June 2007) shows that the percentage of 58 is spent on Capital budget and 120% on Operating budget. Municipality has under spent on Capital and overspent on Operating. The must provide a report in writing to PT indicating the reasons for the above-mentioned spending and measures put in place to address this matter.

Budget Impact on household.

According to the formula used to calculate the tariff increase it was picked up that the tariff increase of the municipality did not exceed the National Treasury growth parameters as indicated in Circular 41 of MFMA. The CPIX remains within 3-6 % target range and over the MTEF period (2007/08, 2008/09 and 2009/10) is expected to be 5.1% 4.3%, 4.5%, respectively. The municipality must also indicate if the tariff increase calculations were done on sample households at varying income levels to be able to know the impact of the increase on households as well as the public consultation thereof.

Financial Viability

Adherence to National Standards

The personnel remuneration/ total expenditure is 37% and this shows that the municipality did not exceed the NT threshold (the personnel cost must be more than 35%-39% of the operating budget), tariff charges also did not exceed the NT growth parameters.

Municipality must also strive to make sure that their budget is aligned to the IDP to ensure that the budget is responsive to our community needs and effective service delivery.

The overall budget document

The Municipality’s draft was tabled before council on the 02 April 2007 and annual budget was tabled before council on the 01 June 2007 which means the municipality did not comply fully with the requirements of MFMA.

The budget document did comply with Circular 28 of MFMA but not all supporting documents (measurable performance objectives and others) were attached and it poses a challenge for the analyst to provide inputs and comments on other issues.

5.4 MERAFONG LOCAL MUNICIPALITY

NB: Please take note that:

The analysis of the municipality’s budget is performed based on the information made available to the Provincial Treasury by the Municipality at the time the analysis was done. The municipality has submitted the Appendix A, IDP and the final budget document, SDBIP and the BEC. The submitted budget document did not comply with the requirements of MFMA Circular 28 and most of the information was sourced from the Appendix A to execute the budget analysis. With the use of the available information the following issues were picked-up:-

Credibility of the budget and Income

The Appendix A document as presented shows that the operating expenditure is funded from revenue anticipated to be raised and capital expenditure is funded from the grants and subsidies from National and Provincial government. Operating income of the municipality has increased by R125 201 736 as compared to 2006/07 income.

The analysis has proven that there is an increase of total debtors outstanding and provision for bad debt to be written off is R238 486 860. Municipality is expected to provide Provincial Treasury with the reasons for increase of debtors and also measures the municipality has put place to address this challenge of increased outstanding debtors.

Sustainability of Capital Investment.

The capital budget has increased with 169 784 053 as compared to 2006/07 financial year. Capital budget forms 41% of the total budget which is not bad because the municipality is expected to spend the better part of their budget in providing sustainable and better services to the community than on the operational matters.

Out of 59% of the operating budget only 2.6% of the budget falls into the repairs and maintenance and it’s a worrying factor because municipality has previously acquired fixed assets and that needs to be maintained in order to provide sustainable and better services to the communities. The budget expenditure for repairs and maintenance has decreased as compare to 2006/07.

It has been indicated on the Appendix A that an amount of R28 800 000 from external loans is going to be used to fund capital budget. The municipality has also contributed (internally) an amount of R26 023 041 towards capital budget which is a good move because most of the municipalities only depends on government grants to fund the capital expenditure.

With regard to spending for the 2006/07 financial year the expenditure reported to PT indicated that 44% has been spent on Capital budget and 29% on Operating budget. This subsequently means that the municipality has under spent on both capital and operating budget. The municipality is requested to provide PT with reasons for under spending and corrective measures put in place by the municipality to address the under spending (MFMA implementation plan review and other related plans).

Budget Impact on household.

According to the formula used to calculate the tariff increase it was picked up that the tariff increase of the municipality did not exceed the National Treasury growth parameters because according to MFMA circular 41 the CPIX remains within 3-6 % target range and over the MTEF period (2007/08, 2008/09 and 2009/10) is expected to be 5.1% 4.3%, 4.5%, respectively. The municipality must also indicate if the tariff increase calculations were done on sample households at varying income levels to be able to know the impact of the increase on households as well as the public consultation thereof.

Financial Viability

The budget document as presented has shown that the municipality is not operating at a surplus or deficit. The analysis has proven that there is an increase in debtors this will subsequently affect the revenue collection and cash flow of the municipality.

The municipality got a qualified opinion for the past financial year. The financial viability of the municipality could not be verified and analyzed further because there are no supporting documents attached to the budget document to enable the analyst to further explore the financial viability and sustainability of the municipality. The budget document does not even outline the budget process overview for analysts to be able to know the strategies the municipality will put in place to improve on revenue collection, Local Economic Development, other service delivery mechanisms and public consultation thereof.

Adherence to National Standards

The personnel remuneration/ total expenditure is 33% and this shows that the municipality did not exceed the NT threshold (the personnel cost must be more than 35%-39% of the operating budget)

Municipality did not comply with MFMA circular 28 and this limits the analyst to elaborate further on how the municipality adhered and liked its plan to National, Provincial and district programmes and plans.

The linkage between IDP and budget was not assessed because the detailed capital plan was not attached to the budget document and the IDP and Budget linkage schedule was not prepared.

The overall budget document

The Municipality’s draft was tabled before council on the 30 March 2007 and annual budget was tabled before council on the 31 May 2007 which means the municipality did comply with the timelines of MFMA. The budget document as presented did not comply with the requirements of MFMA circular no 28.

With regard to provincial and national allocations, the figures have been checked but the government grants are not broken down per source. The municipality has also received an amount of R450 000 from department of Sports, Arts and culture, the CFO has to confirm with PT if this allocation is incorporated in the budget.

6. FINDINGS IN THE CENTRAL DISTRICT

6.1 CENTRAL DISTRICT MUNICIPALITY

Please take note that:

The analysis of the municipality’s budget is preformed based on the information made available to the Provincial Treasury. The municipality has submitted the Appendix A, IDP and the annual budget document and no additional information was provided. With the use of the available information, the following issues were picked-up:-

A. Credibility of the budget and income

The operating income of the municipality has increased by R187 200 266 (33.8%) as compared to 2006/07 income and there is no operating deficit or surplus.

There is a high decrease in debtors of 131.5%, which simply means that the municipality’s debt collection capacity will enhance cash flow and financial viability of the municipality. Total debtors has decrease from R18 354 061 to R7 929 917 for this financial year.

B. Sustainability of Capital Investment

The capital budget has increased from an adjusted amount of R83 370 346 in 2006/07 to R203 475 305 in 2007/08 financial year which is R120 104 959 (59%) increase. Capital budget forms 52% of the total budget, which shows an improved allocation towards capital expenditure as compared to previous financial years.

Operating budget forms 48% forms of the overall budget and repairs and maintenance accounts for 11% of the operating expenditure which an improvement from only 3.2% in 2006/07. The salaries and related costs forms 34% of the Operating budget and it gives indication that the municipality did not exceed the National Treasury threshold of 35%.

With regard to spending for the 2006/07, financial year the expenditure reported to PT indicated that 66.5% has been on Capital budget and 70.5% on Operating budget. This subsequently means that the municipality has under spent on both Capital and Operating. The municipality must put in place measures to address this challenge of under spending.

An external loan of R24m has been secured from DBSA towards capital expenditure, and the municipality shows investment of R41 093 200 in a form of short-term deposits. The municipality must indicate to PT the strategies used to enable municipality to repay the loans and names of projects that to be funded by the external borrowings.

Financial Viability

According to the monthly expenditure reports submitted to PT, it shows that the municipality has been able to collect its revenue. Revenue consists mainly of grants & subsidies and interest earned.

The audit opinion for the previous financial year was an adverse. The municipality must ensure that the action plan, which was developed to respond to the issues that were raised by the Auditor General, is fully implemented.

E. Adherence to National Standard

The municipality is a district therefore; it does not charge any service fees. Salaries and employee- related costs of R64 995 284 makes up 34% of operating expenditure, this shows that the municipality did not exceed the NT threshold.

The IDP and budget linkage is still a challenge municipality need to take all possible efforts to improve on the IDP and budget linkage.

The allocation of grants from both provincial and national government were verified and they reconciled amounts on DoRA as well as provincial gazette.

THE OVERALL BUDGET DOCUMENT

The Municipality’s draft was tabled before council on the 29 March 2007 and annual budget was tabled before council on the 29 May 2007, which means the municipality complied with the requirements of MFMA. The tabled and the approved budget is in a schedule of three year estimates of capital and operating revenue by source and expenditure by vote showing projections for current year and actual for preceding year.

The budget provided a reconciliation of Budget with IDP, and the budget document shows improvement compared to previous years. The municipality adhered to the circular 28, although some sections of the budget were incomplete.

6.2 RATLOU LOCAL MUNICIPALITY

Please take note that:

The analysis of the municipality’s budget is preformed based on the information made available to the Provincial Treasury. The municipality has submitted the Appendix A, IDP and final budget document and additional information was not provided. With the use of the available information, the following issues were picked-up:-

A. Credibility of the budget and income

The Operating income of the municipality has decreased by R103 594 161 from R143 400 077 in 2006/07 to R39 805 916 in 2007/08. The total operating revenue anticipated to be raised is less than the budget expenditure which means the municipality will be operating at a deficit of R3 337 821. The rollover amounts from 2006/07 are not included budget.

The municipality managed to rise own revenue of about R679 915, the majority of the revenue comes from DoRA allocations, which makes up to 98% of the overall revenue. Operating expenditure amounts R26 093 229 is which makes up 60.5% of the overall budget.

B. Sustainability of Capital Investment

The capital budget for 2007/08 has decreased to R17 050 508 as compared to R122 184 250 in 2006/07. In the previous financial years, the municipality struggle to spend their capital budget due to lack of capacity to implement capital budget. The Infrastructure vote shows the highest expenditure accounting for 43% of the total expenditure of the municipality, and there is no proper breakdown of the funds allocated to this vote.

All the capital expenditure of the municipality is funded from MIG and other conditional grants, but the municipality is faced with challenges relating to long-term planning and as well as implementation of capital projects. There is no information on debtors, and 98.3% of their income comes from government grants and subsidies. There is no information on borrowing in the budget, which means the municipality does not have external borrowings.

C. Financial Viability

The budget document as presented shown that the municipality will be operating at a deficit of R3 331 821. The audit opinions has changed from an unqualified in 2003 to a disclaimer in 2006, and the municipality must provide a plan on how to address these queries raised by the Auditor General.

With regard to spending for the 2006/07, financial year the expenditure reported to PT indicated that 44% has been on Capital budget and 58.7% on Operating budget. The municipality has managed to monthly budget statements for 2006/07. The municipality must put in place measures to address the challenges of under spending reflected on the Sec 71 reports.

D. Adherence to National Standards

The municipality does not charge any service fees, because the majority of its residents are indigent and benefit from free basic services. Total salaries amounts to R16, 784,878 which is 64% of the total operating budget, this shows that the municipality exceeded the NT threshold of 35%-39%.

THE OVERALL BUDGET DOCUMENT

The Municipality tabled their budget before council on the 2 April 2007 and annual budget was tabled before council on the 29 May 2007, the draft budget was tabled after the 31 March 2007 and the annual budget complied with the requirements of MFMA. The tabled and the approved budget is in a schedule of three year estimates of capital and operating revenue by source and expenditure by vote showing projections for current year and actual for preceding year.

The budget documentation does not provide any evidence of long-term planning, and appropriate budget assumptions. Long-term planning and implementation of capital project remains a challenge in the municipality, this results from poor coordination internally and with stakeholders.

6.3 TSWAING LOCAL MUNICIPALITY

Please take note that:

The analysis of the municipality’s budget is preformed based on the information made available to the Provincial Treasury. The municipality has submitted the Appendix A, IDP, and approved budget document, and no additional information was provided. With the use of the available information the following issues were picked-up:-

A. Credibility of the budget and income

The budget shows an overall revenue of R84, 7m for 2007/08 as compared to only R68, 7m in 2006/07, which shows a percentage increase of 18.8%. There is a stead increase in collection of service charges. The budgeted amount of R36, 3m for service fees was adjusted to R39, 2m for 2006/07, which shows an increase of R2, 9m.

The projected revenue for the current year is based on collection levels of the previous year which showed improvement, therefore the revenue expected to be collected is based on reasonable percentage increases when compared to the actual revenue collected for 2005/06.

B. Sustainability of Capital Investment

Capital expenditure totals R10, 7m which shows a decrease of about -12.6% as compared to R11, 8m in 2006/07 and the capex forms only 14% of the total expenditure. No information provided on rollovers. The capital expenditure is funded mainly from MIG and other conditional grants.

An amount of R1, 7m has been set aside for Repairs and maintenance, forms 2.3% of the total expenditure instead of the recommended 10%. No information is provided on the external loan and the budgets shows investments of R570 269 in forms of call deposits. No contribution to capital is made, despite of the R50 808 000 own revenue generated.

C. Budget Impact on household

The impact on household could not be done because there is no information on appendix A that could be used to assess the situation.

D. Financial Viability

Revenue collection has improved significantly as compare to previous financial years. Total outstanding debtors decreased by 82.5% from R33, 300,000 in 2006/07 to only R18, 247,154 in 2007/08. The municipality outsourced debtors collection in 2005/06 financial year and that has resulted in improvement in management of debtors.

E. Adherence to National Standards

Total salaries or employee-related costs amount to R44, 661,000 which is 60% of the total operating budget (which is 25% more than the required target of 35).

THE OVERALL BUDGET DOCUMENT

The Municipality’s draft was tabled before council on the 4 May 2007 and annual budget was tabled before council on the 5 June 2007 which means the municipality failed to comply with the requirements of MFMA. The tabled and the approved budget is in a schedule of three year estimates of capital and operating revenue by source and expenditure by vote showing projections for current year and actual for preceding year.

The budget documentation does not provide any evidence of long-term planning, and appropriate budget assumptions, no supporting documents are submitted. The municipality is experiencing serious challenges as far as long-term planning is concerned and it impacts severely on capital plans. Therefore there is no proper linkage of capital projects in the budget with those in the IDP.

6.4 RAMOTSHERE MOILOA LOCAL MUNICIPALITY

Please take note that:

The analysis of the municipality’s budget is preformed based on the information made available to the Provincial Treasury by the Municipality at the time the analysis was made. The municipality has submitted the Appendix A, IDP, final budget document and no additional information was provided. With the use of the available information the following issues were picked-up:-

A. Credibility of the budget and income

The operating income of the municipality has increased by R1 558 278 (1.54%) as compared to 2006/07 income and the budget shows that the municipality may experience a deficit during the financial year.

Municipality failed to prepare an expenditure report or Section 71 report for the 2006/07 financial year, therefore information on debtors, revenue collection and spending trends for the previous year cannot be confirmed.

B. Sustainability of Capital Investment

The capital budget has decreased from an amount of R17 518 426 in 2006/07 to R15 614 200 in 2007/08 financial year which is R1 904 226 (12.2%) decrease. Capital budget forms 15% of the total budget and municipalities are expected to spend the better part of their budget in providing sustainable and better services to the community than on the operational matters.

Out of the total budget 75% forms part of the operating budget and 4.4% forms part of the repairs and maintenance. Repairs and maintenance has decreased by 0.6% as compared to 2006/07 financial year. The salaries and related costs forms 41% of the Operating budget and it gives indication that the municipality did not exceeded the National Treasury threshold of 35%.

C. Budget Impact on household

The impact on household could not be done because there is no information on appendix A that could be used to assess the situation.

D. Financial Viability

Municipality failed to prepare an expenditure report or Section 71 report for the 2006/07 financial year. The audit opinion for the previous financial year was a disclaimer. The municipality must ensure that the action plan, which was developed to respond to the issues that were raised by the Auditor General, is fully implemented.

E. Adherence to National Standards

Salaries or employee-related cost 41% of the total operating expenditure for 2007/08; this shows that the municipality has exceed the NT threshold of 35%-39% of the operating budget.

THE OVERALL BUDGET DOCUMENT

The Municipality’s draft was tabled before council on the 5 May 2007 and annual budget was tabled before council on the 28 May 2007 which means the municipality failed to comply with the act for the draft budget and complied with the requirements of MFMA for the annual budget. The tabled and the approved budget is in a schedule of three year estimates of capital and operating revenue by source and expenditure by vote showing projections for current year and actual for preceding year.

Annual budget does not articulate the plans to address service delivery backlogs of the municipality or to improve on the current levels of service delivery. And long-term planning and implementation of capital project remains a challenge in the municipality, this results from poor coordination internally and with stakeholders.

6.5 DITSOBOTLA LOCAL MUNICIPALITY

Please take note that:

The analysis of the municipality’s budget is preformed based on the information made available to the Provincial Treasury by the Municipality at the time the analysis was made. The municipality has submitted the Appendix A, IDP, final budget document and no additional information was provided. With the use of the available information the following issues were picked-up:-

A. Credibility of the budget and income

The operating income of the municipality has increased by R15 774 864 (10.5%) as compared to 2006/07 income and the budget shows that the municipality may experience a deficit during the financial year.

B. Sustainability of Capital Investment

The capital budget has decreased from an amount of R25 554 676 in 2006/07 to R10 817 000 in 2007/08 financial year which is R14 737 676 (57.7%) decrease. Capital budget forms 17% of the total budget and municipalities are expected to spend the better part of their budget in providing sustainable and better services to the community than on the operational matters.

Out of the total budget 97.2% forms part of the operating budget and 19.6% forms part of the repairs and maintenance. Repairs and maintenance has increased as compared to 2006/07 financial year. The salaries and related costs forms 45% of the Operating budget and it gives indication that the municipality did not exceeded the National Treasury threshold of 35%.

C. Budget Impact on household

The impact on household could not be done because there is no information on appendix A that could be used to assess the situation.

D. Financial Viability

Municipality failed to prepare an expenditure report or Section 71 report for the 2006/07 financial year. The audit opinion for the previous financial year was a disclaimer. The municipality must ensure that the action plan which was developed to respond to the issues that were raised by the Auditor General is fully implemented.

E. Adherence to National Standards

Salaries or employee-related cost 45% of the total operating expenditure for 2007/08; this shows that the municipality has exceeded the NT threshold of 35%-39% of the operating budget.

THE OVERALL BUDGET DOCUMENT

The Municipality’s draft was tabled before council on the 28 March 2007 and annual budget was tabled before council on the 29 May 2007 which means the municipality complied with the requirements of MFMA. The tabled and the approved budget is in a schedule of three year estimates of capital and operating revenue by source and expenditure by vote showing projections for current year and actual for preceding year.

NB: PLEASE NOTE THAT RECOMMENDATIONS WERE ALSO MADE PER MUNICIPALITY

_______________

B.P Motlagomang

Unit Manager: Municipal Budgets & Reporting

Municipal Support Unit: Provincial Treasury