Unit Standard 116364: Municipal budgeting and reporting Dr

Unit Standard 116364: Municipal budgeting and reporting-Dr Len Mortimer

Group 1: Strategic Management; Budgeting Implementation and Performance Management

Module 6: Budgeting Principles and Cycles

Submission details

All assignments must be submitted online at www.splshortcourses.co.za

Please make sure that assignments are acknowledged

The full programme Group Modules

1. Strategic Management; Budgeting Implementation & Performance Management

3. Strategic Planning & Multi Year Income & Expenditure

Management

6. Budgeting Principles & Cycles

7. Financial Reports & Performance Management

2. Municipal Accounting & Risk

Management

8. Cash, Investment, Asset, Liability Management

4. Risk Management; Internal Control Framework Design

and Audit Planning and Implementation

3. Governance & Legislation 1. Stakeholder Consultation & Ethics in Municipal Finance

2. Intergovernmental Fiscal Relations, Legislation & Policies

affecting Municipal Financial Management

4. & 5. Costing & Capital

Planning; Municipal IT

Support & Project

Management

9. Capital Planning & Financing & Costing Principles

5. Managing Information Technology Resources in

Municipal Finance

6. Supply Chain Management &

Public Private Partnerships

10. Municipal Supply Chain Management

11. Public Private Partnerships

The content 26 US -

ID’s: 1

16

33

9

11

63

40

11

63

41

11

63

42

11

63

43

11

63

44

11

63

45

11

63

46

11

63

47

11

63

48

11

63

51

11

63

53

11

63

57

11

63

58

11

63

60

11

63

61

11

63

62

11

63

63

11

63

64

11

93

31

11

93

34

11

93

41

11

93

43

11

93

48

11

93

50

11

93

52

NQF Le 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 5 5 5 5 5 5 5

Credits 10 11 12 15 10 10 15 10 15 8 12 12 8 15 8 8 11 12 8 12 12 15 15 12 15 12

CMFM 48965

C C E C F C C C C F E C E C E E C C C Not applicable for

CMFM

Key Certificate SAQA ID - 48965 - 166 credits; F = Fundamental; C = Core; E = Elective (1)

AccOff X X X X X X X X X X X X X X X X X X

CFO X X X X X X X X X X X X X X X X X X X X

SnrM X X X X X X X X X X X X X X X

MidFin X X X X X X X X X X X X X X X

SCMH X X X X X X X X X X X X X X X X

SCMM X X X X X X X X X X

Assessment Policy Assessment conditions summary (see full policy)

• Each Unit Standard will have at least two individual assessments for determining competence (or not yet competent (NYC)). One assessment will be scheduled to take place during the contact session and the other to be submitted one calendar month after the last day of the contact session

• The facilitator/assessor of the particular Unit Standard must prepare an assessment plan and explain it at the beginning of a Unit Standard contact session

• It is possible for a participant to only complete the Unit Standard registration form and do the assessments as scheduled, while not attending the rest of the contact time

BUT

• A participant found NYC from the first assessments will only be given a second (concession) opportunity for assessment if he/she has attended at least eighty per cent of the contact time

• A participant that has – for proven work-related / serious health reason – not been present at the contact session assessment(s), will only be given one other opportunity with participants referred to above if he/she has attended at least fifty per cent of the contact time

• The concession assessment opportunity referred to in the previous two paragraphs will be scheduled as a consultative process between facilitators and SDF’s involved

• A participant that has completed the contact time assessment, but has for a proven work-related or serious health reason been prevented from submitting the take-home assessments by the due date, will be granted a maximum of two weeks extension of time to submit, where after no further extension will be given

• The second assessment opportunity for resubmission of the take-home assignment must be resubmitted within one calendar month of the release of results to the SDFs

• All communication with participants involved will be done through the municipal SDF

Assessment conditions

• It is possible for a participant to only complete the US registration form and do the assessments as scheduled, while not attending the rest of the contact time

BUT

• A participant found not yet competent will be given a second opportunity for assessment only if he/she has attended at least 80% of the contact time

• A participant that has – for proven work-related or serious health reason – not been present during the contact time assessment(s), will be given the opportunity to do so at the same opportunity scheduled for participants referred to above only if he/she has attended at least 50% of the contact time

• The second assessment opportunity for the rewrite of the contact time assessment will be scheduled as a consultative process between facilitators of the Group (i.e. Group 1, 2, 3, 4/5 or 6 and SDF’s involved

• A participant that has completed the contact time assessment, but has for a proven work-related or serious health reason been prevented from submitting the take-home assessments by the set date, will be granted a maximum of two weeks extension of time to submit, where after no further extension will be given

• The second assessment opportunity for resubmission of the take-home assignment must be resubmitted within one calendar month of the release of results to the SDF’s

• All communication with participants involved will be done through the municipal SDF

• As part of the moderation process, written take-home assessments will be tested for plagiarism through “Turnitin” and if found that work has been copied directly from a source, including the work of other MMC participants, the participant will be found not yet competent he/she must re-register and redo the Unit Standard. The seriousness of the case will determine whether disciplinary action as per Stellenbosch University policy will also be taken against the participant.

Unit standard details

2012/07/12 9

Structure: 8 credits on NQF level 6 Outcomes: ON COMPLETION OF THIS UNIT STANDARD, YOU SHOULD BE ABLE TO: 1. Advise on the application of the South African local government

legislative framework for local government budgeting processes. 2. Advise on the timing of budget related events and the integration

of budget related processes with budget processes to ensure compliance with the legislative requirements.

3. Ensure legal requirements that non-budget documentation is correctly referenced in budget documentation is complied with and vice versa.

4. Advise on the roles and responsibilities of financial and non-financial management and political executives in the budget process, which should contribute to the overall process of social and economic development.

5 L

Emphasis in this Unit Standard: Chapter 1

1. Key stages of the budget and reporting cycle 2. Budget preparation process 3. Budget Implementation process 4. Budget evaluation process 5. Accountability cycle 6. IDP, sector plans, budget, SDBIP, adjustments budget, in-year

reports, annual financial statements, annual reports, oversight reports

7. Monthly budget statements, quarterly reports, mid-year budget and performance assessment

8. Schedule of key deadlines 9. Medium Term Revenue and Expenditure Framework (MTREF) 10. Municipal budget policy statement 11. Consultation in terms of the budget and reporting cycle

1. Budget preparation process 2. Budget preparation process timeline 3. Six steps to preparing a budget (Planning, Strategising, Preparing,

Tabling, Approving, Finalising) 4. Schedule of key deadlines 5. Budget evaluation checklist 6. Format of budget documentation to be tabled 7. Consultation 8. Budget implementation process 9. Using the budget and SDBIP to implement the budget 10. Monthly budget statements 11. Quarterly reports 12. Mid year budget and performance assessments 13. Adjustments budgets – conditions and frequency

Emphasis in this Unit Standard: Chapter 2

1. Separation of roles and responsibilities in terms of the budget and reporting cycle

2. Roles and responsibilities of the: 1. Council 2. non-executive councillors 3. Mayor 4. municipal manager 5. senior managers and other officials 6. chief financial officer 7. budget and treasury office 8. municipal entities 9. other spheres of government

3. Delegations by the municipal manager

Emphasis in this Unit Standard: Chapter 3

• The chronological sequence of events to deliver a municipal budget, reports and related financial management processes.

Emphasis in this Unit Standard: Chapter 4

ASSESSMENT

US Outcomes

ON COMPLETION OF THIS UNIT STANDARD, YOU SHOULD BE ABLE TO:

1. Advise on the application of the South African local government legislative framework for local government budgeting processes.

2. Advise on the timing of budget related events and the integration of budget related processes with budget processes to ensure compliance with the legislative requirements.

3. Ensure legal requirements that non-budget documentation is correctly referenced in budget documentation is complied with and vice versa.

4. Advise on the roles and responsibilities of financial and non-financial management and political executives in the budget process, which should contribute to the overall process of social and economic development.

Assessment of outcomes

1. Assessment nr 1, 2

2. Assessment nr 1, 2

3. Assessment nr 1, 2

4. Assessment nr 1, 2

Unit standard assessment plan

2012/07/12 16

• Formative assessments: Not contributing to final result, provided in material per Unit; Summative assessments contributing to final result:

Nr Type & conditions Weight Start date/date

Submission date/time

1. Individual assessment 50% 13/07/2012 13/07/2012

Nature & content

Open book test

Unit standard assessment plan

2012/07/12 17

• Formative assessments: Not contributing to final result, provided in material per Unit; Summative assessments contributing to final result:

Nr Type & conditions Weight Start date/date

Submission date/time

2. Individual practice-based written assignment, proper narrative style, electronic submission

50% 13/07/2012 13/08/2012

Nature & content

You are currently the chief finance officer of a municipality. You have been asked by the municipal manager to conduct a review of the budget implementation process in your municipality and prepare a report to be submitted back to the municipal manager. Structure your report according to the learner guide instructions found on pages 107 to 110.

Deviation from assessment as prescribed in material:

• The prescribed assessment plan makes provision for an open book test and the submission of a comprehensive assignment.

• In the study guide THE STRUCTURE OF THE ASSESSMENT IS AS FOLLOWS: 10% Attendance, 10% Participation in facilitated classroom environment,10% Presentation to class of selected assignment, 40% Assignments and 30% major assignment

• The prescribed assessment plan is to ensure competence is achieved at an individual level through structured participation and written assignments.

Introduction to municipal budgeting and reporting cycle in South Africa

• 2. KEY CONCEPTS • 2.1. Key stages of the budget and reporting cycle • 2.2. Budget preparation process • 2.3. Budget Implementation process • 2.4. Budget evaluation process • 2.5. Accountability cycle • 2.6. IDP, sector plans, budget, SDBIP, adjustments budget, in-year reports,

annual • financial statements, annual reports, oversight reports • 2.7. Monthly budget statements, quarterly reports, mid-year budget and

performance • assessment • 2.8. Schedule of key deadlines • 2.9. Medium Term Revenue and Expenditure Framework (MTREF) • 2.10. Municipal budget policy statement • 2.11. Consultation in terms of the budget and reporting cycle

18

4. INTRODUCTION

19

• A budgeting and reporting cycle is a sequence of interrelated events that occur throughout a budget period. The cycle is continuous and repetitive, meaning that events reoccur in a predictable and carefully planned sequence.

19

20

21

5.10. MEDIUM TERM REVENUE AND EXPENDITURE FRAMEWORK

(MTREF) • By adopting three-year budgets linked to

longer-term goals contained in the IDP, municipalities can adopt more forward looking and better-informed approaches

24

7 year horizon of budget process

24

6. A STRATEGIC APPROACH TO BUDGETING

• Prior to the reforms of the Municipal Finance Management Act 2003 (MFMA) and Municipal Systems Act 2000 (MSA) municipal budgets focused on one-year of estimates and were based mainly on applying increments to the previous year’s budget

25

7. SEPARATION OF ROLES AND RESPONSIBILITIES

26

8. ACCOUNTABILITY CYCLE

27

Definitions

• Pages 28 and 29

28

Diagram 2c: Accountability cycle processes

31

Diagram 2d: Accountability cycle roles & responsibilities

32

9. CONSULTATIVE PROCESSES

32

10. LEGISLATIVE FRAMEWORK

34

10.4. CONSTITUTIONAL AMENDMENTS

35

10.5. THE MFMA AND THE MUNICIPAL SYSTEMS ACT

• 10.6. DEFINITIONS

• 10.7. IDP AND BUDGETS

• 10.8. PERFORMANCE SYSTEMS AND ANNUAL REPORTS

• 10.9. ROLES OF MAYOR, COUNCILLORS AND OFFICIALS

• 10.10. ASSIGNMENT OF FUNCTIONS

35

10.11. OTHER LEGISLATION AND THE MFMA

37

10.12. SUMMARY

• Activity

40

Components of the budget and reporting cycle

• 2. KEY CONCEPTS • 2.1. Budget preparation process • 2.1.1. Budget preparation process timeline • 2.1.2. Six steps to preparing a budget (Planning,

Strategising, Preparing, Tabling, • Approving, Finalising) • 2.1.3. Schedule of key deadlines • 2.1.4. Budget evaluation checklist • 2.1.5. Format of budget documentation to be tabled • 2.1.6. Consultation • 2.2. Budget implementation process

42

Key concepts b

• 2.2.1. Using the budget and SDBIP to implement the budget

• 2.2.2. Monthly budget statements • 2.2.3. Quarterly reports • 2.2.4. Mid year budget and performance assessments • 2.2.5. Adjustments budgets – conditions and frequency • 2.2.6. Shifting funds between multi-year appropriations • 2.3. Budget evaluation process • 2.4. Audited annual financial statements • 2.5. Annual reports • 2.6. Oversight reports

4. INTRODUCTION

43

5. BUDGET PREPARATION PROCESS

• 5.2. SIX STEPS TO PREPARING A BUDGET

44

45

46

• 5.3. STEP 1: PLANNING

• 5.3.1. Coordination of the budget preparation process

5.2.2. Now let us consider each of the steps in more detail.

46

• ACTIVITY / STUDY:

• Spend 30 minutes studying the schedule of key deadlines below. Read each section of the appropriate Act referred to and note the definitions at the end of the schedule.

47

Step 1:- Planning

48

5.3.2. Review of previous budget process – budget evaluation checklist

• (www.treasury.gov.za/legislation/mfma)

54

5.4. STEP 2: STRATEGISING

• This step involves the review of the Integrated Development Plan and budget related policies through internal and external consultations. Internal consultation means consultation with staff within the municipality. External consultation means consultation with the community and other stakeholders.

• This step commences early in the process and carries on until October.

54

5.4.1. Review of IDP and budget related policies

• ACTIVITY / READ:

• Read the provisions of the Municipal Budget and Reporting Regulations “Preparing and amending budget-related policies”.

55

5.4.2. Internal consultations within the municipality

55

5.5. STEP 3: PREPARING

• The preparation of the budget is a lengthy process spanning many months. It can be said to start in August at the time the mayor tables the schedule of key deadlines and concludes when the mayor approves the Service Delivery and Budget Implementation Plan and annual performance agreements with senior managers.

57

5.7.9. Previous performance

58

5.8. STEP 4: TABLING

59

Tabling the budget and associated steps

• 5.8.4. Tabling of annual budgets

• 5.8.5. Funding the budget

• 5.8.6. Publication of annual budgets for consultation

• 5.8.7. Submission of annual budgets after tabling for consultation

• 5.8.8. Format of annual budget documentation to be tabled and approved

59

Format

PART 1 of a municipal budget

• 1. Mayor’s report

• 2. Resolutions

• 3. Executive summary

• 4. Annual budget tables (including charts and explanatory notes)

64

• PART 2 of a municipal budget • 4. Overview of annual budget process • 5. Overview of alignment of annual budget with Integrated

Development Plan • 6. Measurable performance objectives and indicators • 7. Overview of budget related policies • 8. Overview of budget assumptions • 9. Overview of budget funding • 10. Expenditure on allocations and grant programmes • 11. Allocations and grants made by the municipality • 12. Councillor and board member allowances and

employee benefits

64

• 13. Monthly targets for revenue, expenditure and cash flow

• 14. Annual budgets and SDBIPs – internal departments • 15. Annual budgets and SDAs – entities and external

mechanisms • 16. Contracts having future budgetary implications • 17. Capital expenditure details • 18. Legislation compliance status • 19. Other supporting documentation • 20. Annual budgets of municipal entities attached • 21. Municipal manager’s quality certification

64

Step 5:- Approving

• After the mayor has responded to the recommendations and made amendments to the tabled budget, the full council must meet to consider the budget for approval no later than 31 May (30 days before the start of the budget year).

• This step may commence as early as March and must be completed prior to the start of the budget year.

• 5.9.1. Approval of capital projects

• 5.9.2. Consideration of the annual budget for approval

• 5.9.3. Approval of annual budget

• 5.9.4. Publication of approved annual budget

• 5.9.5. Submission of approved annual budget

66

5.10. STEP 6: FINALISING PLANS TO IMPLEMENT THE BUDGET

• 5.10.4.1. Approval of SDBIP and annual performance agreements of senior managers

• 5.10.4.2. Publication of approved service delivery and budget implementation plan

• 5.10.4.3. Submission of approved SDBIP

70

5.10.5. Alternative view of the budget preparation process

• ACTIVITY / STUDY:

• Study the process flow indicated by the arrows in the diagram below. Refer to the explanation following the diagram.

72

Diagram 3e: Documentation for budget preparation

73

5.10.6. External consultations with the community and other

stakeholders

• There are two external consultation processes envisaged in the MFMA and Municipal Systems Act.

74

6. BUDGET IMPLEMENTATION PROCESS

• Implementation:

• Implementation using the budget and SDBIP

• Monitoring

• Monthly budget statements

• Quarterly performance review

• Mid-year budget and performance assessment

• Amending:

• Adjustments budget

75 - 95

IMPLEMENTATION

• SDBIP and Budget

• The municipal manager is responsible for implementation of the budget and must take steps to ensure that all spending is in accordance with the budget and that revenue and expenditure are properly monitored.

76

• The SDBIP is the main implementation tool for line managers as it has more detail than the budget.

• The SDBIP is essentially the management and implementation tool which sets quarterly service delivery and monthly revenue and expenditure targets, and links each service delivery output to the budget of the municipality.

76

• The SDBIP targets agree to the targets in the performance agreements of the municipal manager and senior managers, including the outputs and deadlines for which they will be held responsible. The SDBIP should also provide all expenditure information (for capital projects and services) per municipal ward, so that each output can be broken down per ward, where this is possible, to support ward councillors in service delivery information.

77

MONITORING

• The system of reporting developed in the MFMA will assist in making available improved and regular internal and external information.

• The monthly, quarterly, mid-year and annual reports will always come with a lag, for example the first-quarter reports must be available by the 30th day of the month after the end of the first quarter.

77

• Financial transparency and ongoing performance –

• Monitoring progress and financial reporting –

• Non-financial reporting –

• Variation from budget estimates -

78

In-year reporting

• Monthly budget statements;

• Quarterly reports; and

• Mid-year budget and performance assessments

79

• Monthly budget statements of municipalities

• By the 10th working day of each month, the municipal manager must submit a report on budget progress to the mayor and the relevant provincial treasury.

• Submission of monthly budget statements

81

• Publication of monthly budget statements

• Tabling of monthly budget statements

82

Quarterly reports

• Submission of quarterly reports to council

• Publication of quarterly reports on implementation of the budget

• Submission of quarterly reports on implementation of the budget

83

Mid-year budget and performance assessment

• Submission of mid-year budget and performance assessment to mayor and Treasuries

• Publication of mid-year budget and performance assessment

• Submission of mid-year budget and performance assessment to council

• Note that the MFMA requires submission to the mayor and treasuries, and publication before submission to council. This ensures a separation of roles and responsibilities and facilitates good governance.

84, 85

General in-year reporting obligations

• The municipal manager must advise the National Treasury, the relevant provincial treasury and the Auditor-General about all bank accounts as they are opened and must report to council, the provincial treasury and the Auditor- General the details of certain prescribed withdrawals each quarter.

86

AMENDING THE BUDGET – ADJUSTMENTS BUDGET

• An adjustments budget is the mechanism to amend an approved budget under certain specified conditions.

• It may be necessary on occasion for a council to consider a revision of its original budget, owing to material and significant changes in revenue collections, expenditure patterns, or forecasts thereof for the remainder of the financial year.

• It may not result in further increases in taxes and tariffs and it must contain appropriate justifications and supporting material when approved by council.

• Adjustments budgets must be appropriately funded and supporting documentation must contain an explanation of how the adjustments budget is funded.

• The most appropriate time for a single adjustments budget is at the time of the mid-year budget and performance assessment.

• Regulations on the adjustment budget specify the conditions and timeframes for tabling and approving adjustments budgets.

87

• Timeframes for tabling of adjustments budgets

• Adjustments budgets can be split into five types. For explanation purposes these can be described as:

87

Adjustments

• Ordinary adjustments

• Government allocations

• Material under-collection of revenue

• Unforeseeable and unavoidable expenditure

• Unauthorised expenditure

• Explained in more detail on the slides that follow

87

• So called ordinary adjustments must only be made once and this must occur after the mid-year budget and performance assessment is tabled to council and before 28 February of the current year.

• Ordinary adjustments relate to those described in sub sections 28(2)(b),(d),(e), and (f) of the MFMA as follows:

87

Government allocations

National and provincial adjustments budgets may occur outside of the timeframe for the municipal mid-year budget and performance assessment. In the case where a national or provincial adjustments budget adjusts allocations to a municipality, the municipality must table an adjustments budget within 30 days unless a longer period is otherwise approved by National Treasury.

88

Material under collection of revenue

• An adjustments budget must be approved at any time it becomes apparent that there will be a material under collection of revenue.

89

Unforeseeable and unavoidable expenditure

• An adjustments budget related to unforeseeable and or unavoidable expenditure must be tabled to council at the first available opportunity after the expenditure was incurred.

89

Unauthorised expenditure

• An adjustments budget related to unauthorised expenditure must be tabled and approved during the financial year in which the unauthorised expenditure occurred.

89

Submission of municipal adjustments budgets

• Once the mayor has tabled an adjustments budget (in the format set out in the regulations) to council the municipal manager must submit it to National Treasury, the relevant provincial treasury, and any other municipality affected by the adjustment budget.

• The MM must also submit the adjustments budget to any other organ of state upon request.

89

• Approval of adjustments budget

• A municipal council must consider the entire content of the adjustments budget and supporting documentation as set out in the regulations before approving the adjustments budget.

90

• Publication of approved adjustments budget

• The requirements for publication of the approved adjustments budget are very similar to those for the approved annual budget.

90

Submission of approved adjustments budgets and other documents

91

6.6. SHIFTING OF FUNDS BETWEEN MULTI-YEAR APPROPRIATIONS

• 31. When funds for a capital programme are appropriated in terms of section 16 (3) for more than one financial year, expenditure for that programme during a financial year may exceed the amount of that year’s appropriation for that programme, provided that –

• (a) the increase does not exceed 20 per cent of that year’s appropriation for the programme;

• (b) the increase is funded within the following year’s appropriation for that programme;

• (c) the municipal manager certifies that – • (i) actual revenue for the financial year is expected to exceed budgeted

revenue; and • (ii) sufficient funds are available for the increase without incurring further

borrowing beyond the annual budget limit; • (d) prior written approval is obtained from the mayor for the increase; and • (e) the documents referred to in paragraphs (c) and (d) are submitted to

the relevant provincial treasury and the Auditor- General.

96

7. BUDGET EVALUATION PROCESS

• 7.2.1. Audited Annual Financial Statements; • 7.2.2. Annual Report; • 7.2.3. Oversight Report; and • 7.2.4. Budget evaluation checklist.

• 7.3. The first three evaluate financial and service

delivery performance against the promised performance in the budget and SDBIP. The fourth (Budget evaluation checklist) evaluates the budget process itself.

96

7.4. ANNUAL REPORTING TIMETABLE

• 7.4.1. Diagram 3f below shows the annual reporting timetable. Study the timetable while referring to the following description:

97

98

7.5. AUDITED ANNUAL FINANCIAL STATEMENTS

98

7.6. ANNUAL REPORTS

• 7.6.3.1. provide a record of the activities of the municipality or entity;

• 7.6.3.2. provide a report on performance in service delivery and against the budget;

• 7.6.3.3. provide information that supports the revenue and expenditure decisions made; and

• 7.6.3.4. promote accountability to the local community for decisions made.

99

7.7. OVERSIGHT REPORTS

• 7.7.2. The oversight report must include a statement whether the council:

• 7.7.2.1. has approved the annual report, with or without reservations;

• 7.7.2.2. has rejected the annual report; or

• 7.7.2.3. has referred the annual report back for revision of those components that can be revised.

100

7.7.4. Understanding the annual report and determining conclusions

• Audit Committee,

• financial position of the municipality or entity, its efficiency and effectiveness,

• performance management and the level of compliance with the MFMA, Division of Revenue Act (DORA) and other relevant legislation.

101

7.7.5. Staff performance bonuses

• council reward performance in a manner that is commensurate with achievement of policy outcomes

102

7.7.6. Meetings to discuss the annual report

102

Roles and responsibilities in terms of the municipal budget and reporting

cycle • 2. KEY CONCEPTS • 2.1. Separation of roles and responsibilities in terms of the budget and

reporting cycle • 2.2. Roles and responsibilities of the: • 2.2.1. council • 2.2.2. non-executive councillors • 2.2.3. mayor • 2.2.4. municipal manager • 2.2.5. senior managers and other officials • 2.2.6. chief financial officer • 2.2.7. budget and treasury office • 2.2.8. municipal entities • 2.2.9. other spheres of government • 2.3. Delegations by the municipal manager

111

4. INTRODUCTION

• roles and responsibilities of key players in the budget and reporting cycle and the delegation of these responsibilities in terms of the legislation.

112

4.5. EMPOWERMENT, ACCOUNTABILITY AND OVERSIGHT

• underpinning the MFMA is that of developing a sound financial governance framework within every municipality.

113

Diagram 4a: The financial governance framework

114

• The MFMA, Municipal Systems Act and Municipal Structures Act are central to developing the governance framework within a municipality, clarifying and separating the roles of mayors, councillors and officials, and the system of accountability and oversight.

114

Diagram 4b: Political and administrative accountability

115

4.6. VARIATION BETWEEN MUNICIPALITIES

• The principles of transparency, accountability and oversight are identical for each and every municipality. However, the resources available and the capacity of municipalities will vary considerably, particularly between metropolitan and rural municipalities.

115

5. ROLE OF THE COUNCIL

• 5.3. ROLE OF THE NON-EXECUTIVE COUNCILOR

116

5.3.5. The oversight role of councillors may be summarised as:

• 5.3.5.1. setting the direction for municipal activities; • 5.3.5.2. setting policy parameters to guide these

activities; • 5.3.5.3. setting strategic objectives and priorities

stating what outcomes and outputs are to be achieved; • 5.3.5.4. monitoring the implementation of policies and

priorities by evaluating reports of outputs and outcomes;

• 5.3.5.5. ensuring that corrective action is taken where outputs deviate from plans; and

• 5.3.5.6. accounting back to the community for performance in terms of objectives.

118

5.4. ROLE OF COUNCIL COMMITTEES

119

6. ROLE OF THE MAYOR

• 6.7. The mayor remains accountable to council for proposing and implementing policy and overseeing the implementation of this policy by the administration. The following are some of the responsibilities of the mayor:

• 6.7.1. providing political guidance on the budget process; • 6.7.2. co-ordinating the budget process with the municipal manager; • 6.7.3. reviewing IDP and budget-related policies and ensuring consistency

with the budget; • 6.7.4. ensuring that the municipality complies with the legislative

deadlines for the tabling and approval of the budget; • 6.7.5. approving the service delivery and budget implementation plan and

the performance agreements of the municipal manager and senior management;

• 6.7.6. monitoring the financial performance of the municipality through monthly financial reports submitted by the municipal manager;

120

6. ROLE OF THE MAYOR (b)

• 6.7.7. providing council with quarterly budget reports, mid-year budget and performance assessments and taking action where necessary;

• 6.7.8. reporting instances of potential or real non-compliance with the budget chapter of the MFMA or in relation to issues that may necessitate provincial intervention;

• 6.7.9. tabling an adjustments budget; • 6.7.10. reporting instances of unforeseeable or unavoidable

expenditure; • 6.7.11. guiding the municipality in its dealings with its

municipal entities; and • 6.7.12. tabling the annual report to council each year.

122

7. ROLE OF THE MUNICIPAL MANAGER (THE ACCOUNTING

OFFICER)

• The municipal manager is responsible for the financial management of the municipality, ultimately ensuring that all financial systems are in place and are properly maintained.

123

MM responsibilities

• 7.6. The municipal manager is required to take on a number of specific responsibilities, which include, but are not limited to, the following:

• 7.6.1. Budget preparation:

• 7.6.1.1. assisting the mayor in preparing the budget;

• 7.6.1.2. assisting in conducting community participation meetings;

• 7.6.1.3. making public the draft budget;

• 7.6.1.4. assisting in the preparation of budget-related policies ;

124

MM responsibilities (b)

• 7.6.1.5. making public the approved budget; • 7.6.1.6. developing and submitting the service delivery

and budget implementation plan; • 7.6.1.7. submitting annual performance agreements

for all senior managers; • 7.6.1.8. ensuring information is supplied to council and

the public on debt proposals; • 7.6.1.9. making public any proposal to establish or

participate in a municipal entity; and • 7.6.1.10. making public and inviting comment on draft

contracts with a term greater than three years.

124

MM responsibilities (c)

• 7.6.2. Budget Implementation: 11

• 7.6.3. Budget evaluation:

• 7.6.3.1. providing an assessment of municipal performance for inclusion in the annual Report

• 7.6.3.2. preparing the annual financial statements for audit, verifying salaries and benefits paid; and

• 7.6.3.3. making public the annual report and the council’s oversight report.

125

8. ROLES OF SENIOR MANAGERS AND OTHER OFFICIALS

• 8.1. TOP MANAGEMENT OF MUNICIPALITIES • 8.2. ROLE OF SENIOR MANAGERS AND OTHER

OFFICIALS – 8.2.1. Subject to the directions of the municipal

manager each senior manager and each official exercising financial management responsibilities must take all reasonable steps to ensure that:

– 8.2.2. The role of the chief finance officer will be considered in more detail later in the context of the Budget and Treasury Office. For now let’s consider broadly the role that senior managers and other officials play in the budget and reporting cycle.

126

• 8.2.3. Budget preparation process

• 8.2.4. Budget implementation process

• 8.2.5. Budget evaluation process

128

9. DELEGATIONS BY THE MUNICIPAL MANAGER

• 9.1. Section 79 of the MFMA states that the accounting officer of the municipality:

• 9.1.1. must develop an appropriate system of delegation that will maximise administrative and operational efficiency and provide adequate checks and balances in the municipality’s financial administration;

129

• 9.1.2. may in accordance with the system, delegate to a member of the municipality top management or any other official of the municipality:

• 9.1.2.1. any of the powers or duties assigned to an accounting officer in terms of this Act

• 9.1.2.2. any power or duties reasonably necessary to assist the accounting officer in complying with a duty which requires the accounting officer to take reasonable or appropriate steps to ensure the achievement of the aims of a specific provision of this Act;

• 9.1.3. must regularly review delegations and amend or withdraw as necessary; and

• 9.1.4. may not delegate to any political structure or political office bearer of the municipality.

129

9.2. The delegation:

• 9.2.1. must be in writing; • 9.2.2. is subject to such limitations and conditions as

the accounting officer may impose in a specific case; • 9.2.3. may either be to a specific individual or to the

holder of a specific post in the municipality; • 9.2.4. may authorise a member of the top

management to sub-delegate the delegated power or duty to an official or the holder of a specific post in that member’s area of responsibility; and

• 9.2.5. does not divest the accounting officer of the responsibility concerning the exercise of the delegated power or the performance of the delegated duty.

129

9.4. DELEGATIONS AND ACCOUNTABILITY

• 9.5. DELEGATIONS TO BE IN WRITING

• 9.6. ENSURING THE SYSTEM OF DELEGATIONS IS OPERATING EFFECTIVELY AND EFFICIENTLY

• 9.7. SCHEDULE OF DELEGATIONS

130

10. ROLE OF THE CHIEF FINANCIAL OFFICER

132

11. BUDGET AND TREASURY OFFICE

133, 134

11.3. COMPETENCY LEVELS OF SENIOR MANAGERS AND FINANCE

OFFICIALS • Section 83 of the MFMA requires all senior

managers, including the CFO and municipal manager, and all financial officials to meet minimum prescribed financial management competency levels.

• 11.3.2. The CFO therefore in addition to technical finance management skills, has to be a professional with strong management and leadership skills, providing strategic leadership for the budget and planning process.

135

11.4. MOBILITY OF FINANCE OFFICIALS BETWEEN SPHERES OF

GOVERNMENT

136, 137

12. ROLES AND RESPONSIBILITIES OF OTHER LEVELS OF

GOVERNMENT

• The MFMA fosters a greater level of co-operation across (and within) the different spheres of government, based on systems of mutual support, information sharing and communication and coordination of activities – each aiming to add value to the others’ constitutional responsibilities with a view to improving outcomes for all.

137

12.6. CO-OPERATIVE GOVERNMENT

• NATIONAL GOVERNMENT • Assists and supports municipalities with compliance where

appropriate, assists in building capacity by providing financial or technical assistance, issues guides, manuals and regulations and provides three-year grant allocation details

• PROVINCIAL GOVERNMENT • Plays a co-ordinating role in implementation of the MFMA, assists

and supports municipalities where appropriate, intervenes when financial problems become evident in municipalities

• LOCAL GOVERNMENT • Provides the other spheres of government with appropriate

financial and service delivery information, liaises with other municipalities and districts on strategic budget issues, provides provincial and national government with budget and financial information

138

Municipal finance management calendar

• 2. KEY CONCEPTS

• 2.1. The learner will understand the chronological sequence of events to deliver a municipal budget, reports and related financial management processes.

142

4. INTRODUCTION

• 4.2. This chapter will provide the MFMA Finance Management Calendar published by the National Treasury. Learners are required to read through the calendar and take note of how the principles discussed in the previous chapters are put into practice. The calendar may be useful to the learner as a reference when completing the major assignment in Chapter 3.

143

4.3. The calendar that follows is a comprehensive chronological list of finance management actions throughout the year. It has been colour coded according

to the following topics:

5. MUNICIPAL BUDGET AND REPORTING CALENDAR

144-