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MOSES KOTANE LOCAL MUNICIPALITY Adjustments Budget 2010/2011

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MOSES KOTANE LOCAL MUNICIPALITY Adjustments Budget 2010/2011 MOSES KOTANE LOCAL MUNICIPALITY Adjustments Budget 2010/2011 Budget and Treasury Office 2010‐2011 ADJUSTMENT BUDGET AND SUPPORTING DOCUMENTATION Part 1 1.1 Mayoral overview 3 1.2 Resolutions 7 1.3 Executive Summary 8 1.4 Adjustment budget Tables 12 Part 2 2.1 Adjustments to budget assumptions 23 2.2 Adjustments to budget funding 24 2.3 Adjustments to expenditure on allocations 26 2.4 Adjustments to councillor allowances and employee benefits 31 2.5 Adjustments to service delivery and budget implementation plan 33 2.6 Adjustment to capital expenditure 39 2.7 Other supporting documentation 44 2.8 Municipal Manager’s quality certification 53 2 | Page Part I (Adjustments budget) 1.1 Mayoral report overview The country is slowly moving out of the most serious recession since the 1930’s, as indicated by the Minister of Finance on 27 October 2010 in his second Budget Policy Statement to Parliament. There are promising signs of economic recovery indicated by the relatively strong rand, the decrease in the repo rate as well as positive trends in certain parts of the economy. Rural municipalities were to and extend more affected by the economic slowdown as there revenue base are very limited. Our municipality is predominately rural in nature with a very limited revenue base. The infrastructure inherited from previous service providers presents a serious challenge to this municipality. The water assets transferred from the Department of Water Affairs are aging and not up to standard. Most of the 109 villages in the municipality receive water at RDP level or even below. Although millions of rands are spend annually to upgrade water schemes to at least RDP standards to improve the living conditions of our people, it does not provide additional income for the municipality but increase the cost of free basic services. The announcement by Magalies Water that bulk tariff will be increase with 15 percent from July 2011 will place further pressure on water tariffs. The council will have no alternative to increase its water tariffs substantially in the 2011‐2012 financial year. As a result of the economic slowdown the cash flow of the municipality has been negatively affected and a comprehensive report has been prepared to address this problem. The expenditure on the capital budget at this point in time is of serious concern. The Administrator has appointed service providers to speed up the implementation of projects provided for in the Capital Budget but the delay in the evaluation of water projects by the department of Water affairs presents a serious challenge. This results in the delay of the registration of MIG projects and of course a slowdown in service delivery. After meetings with the responsible officials at DWAF it is expected that the evaluation of all water related projects will be finalised by the first week in March 2011. 3 | Page The Administrator prepared a revised organisational structure which was adopted by council in the second halve of 2011. The goal of the revised structure is to streamline the council’s administration and to provide for additional positions to enhance service delivery. As previously mentioned the municipality have a very limited tax base and must control the cost of its administration to affordable levels without seriously affecting service delivery. The cost of human resources as provided for in the 2010‐2011 budget represents 40% of the total budget and cannot be increased. It is a well known fact that the cost of human resources should be limited to 35% of the total budget. The filling of all positions in the organisational is therefore impossible and the council should strictly control this by limiting the appointment of new staff members to the absolute minimum. It is of importance that a moratorium should be placed on all new appointments that will increase the provision for employee related cost above the existing level of 40%. It is also of importance that departments spend external funds (grant funding) received on a project first before internal funds provided by the municipality in order to prevent own funds generated from revenue being used as bridging finance affecting the cash‐flow negatively. The compilation of the 2010‐2011 Adjustment Budget posed many challenges and obstacles, owing to limited financial resources. Restrained expenditure was and is stil encouraged to ensure that spending remains within the affordability parameters of the MKLM’s finances, to ensure that the council deliver on its core mandate and achieve the development goals. Owing to prudent financial management little capacity for additional financing existed, and priority community issues will have to be prioritised within every department’s allocated budget. Services will have to be rendered responsibly with innovation and determination, as expected from responsible municipal officials in terms of the MFMA. The budget principles that informed the compilation of the 2010/2011 Adjustment Budget are in line with Section 28 of the MFMA and the following additional principals needs to be highlighted; The inclusion of additional funding requests are subject to; o Any savings identified departmentally; o Additional revenue generation; o Reprioritisation of services and priorities; and 4 | Page o Value for money, benefits to the municipality and affordability. It should be noted that there is unlimited needs but limited resources and affordability within the context of sustainability must be considered and maintained. Departments should concentrate on core functions, proactively review the operational budget and identify savings that can be affected if necessary to assist with the cash‐flow position. All proposed capital adjustments must be accompanied by revised cash‐flow and milestone projections to ensure timely submission to the performance management unit for the compilation of the revised 2010‐2011 SDBIP. The principals applied in compilation of the revised budget was if no expenditure or less expenditure than the budget amount realised over the first halve of the financial year the budget amount was reduced or removed. If the expenditure trend indicates an over expenditure or expected over expenditure the budgeted amount was aligned with the estimated expenditure. This process was also applied to the collection trend of revenue over the mentioned period. If and under collection was indicated on a specific account, the budget was decreased according to the actual revenue collected or the budget was increased if the revenue indicated such a trend. The following important adjustments were made to the operating budget; Refuse removal contract R 2 400 000 Consultants appointed by administrator R 2 609 428 Rental office equipment R 928 000 Bulk water purchases R 6 000 000 Provision for bad debts R 9 630 683 Full details of other adjustments are reflected in the line item budget summary. The following additions were made to the capital budget: Furniture for the newly completed buildings at the Civic centre R 400 000 Huts and furniture for meter readers R 50 000 Computer equipment R 1 200 000 Fencing Sandfontein cemetery R 60 000 3M Machine R 190 000 5 | Page Civic Centre phase 2 Absa loan R 12 000 000 Furniture and equipment (Parks) R 201 150 Furniture and Equipment (Planning) R 62 000 Mogwase Unit 8 Park BPDM R 310 000 Greening Moruleng Boulevard BPDM R 449 700 The detailed capital budget is attached and reflects all projects as reprioritised during the submission to Council in November 2010. The capital budget only focus on the 2010/2011 financial year while the outer years will be revised and aligned with the 2011 revised IDP. 6 | Page 1.2 Resolutions 1. That in terms of Section 28(2) of the Municipal Finance management Act, 2003 (Act 56 of 2003) the proposed 2010/2011 Adjustment Budget be approved as set out in the following tables as contained in Annexure A: 1.1 Adjustments Budget summary. B1 1.2 Adjustments Budget Financial Performance. (standard classification)B2 1.3 Adjustments Budget Financial Performance. (revenue and expenditure by municipal vote)B3 1.4 Adjustments Budget financial performance. (revenue and expenditure)B4 1.5 Adjustments Capital Expenditure Budget by vote and funding. B5 1.6 Adjustments Budget Financial Position. B6 1.7 Adjustment Budget Cash Flows. B7 1.8 Cash backed reserves/accumulated surplus reconciliation. B8 1.9 Asset Management. B9 1.10 Basic service delivery measurement. B10 2. That a moratorium be placed on the filling of new positions in the revised organisational structure until such time as a report on prioritised positions has been submitted to the Executive Committee for approval within the available funds in the revised budget and also taking in consideration future budget implications. 7 | Page 1.3 Executive Summary In terms of Section 72 of the MFMA the performance of a municipality must be reviewed before 25 January of each financial year and as part of the review recommend whether and adjustment budget is necessary and recommend revised projections and expenditure to the extent that it may be necessary. This has been done and the councils decided on 25 January after submission of the Section 72 report that the 2010/2011 budget be revised. Although the recovery from the recession is on the horizon there is no indication that the economic activities in MKLM will change drastically to increase the revenue base. The municipality remains dependable on government grants such as the equitable share and MIG funding to finance the backlogs in service delivery. The growth in the local tax base remains moderate while the council must remain within national targets with tariff increases. In general, the aim with the compilation of the 2010/2011 Adjustment Budget is to further prioritise and implement conservative expenditure strategies within the very limited financial resources available. Reprioritising and down scaling of non‐core functions will have to continue in order to uphold service delivery towards core functions and a sustainable level.
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