Average Annual Individual Income for FTM
2.6. FINANCIAL VIABILITY
The FTM has established a fully functional and effective Budget and Treasury Office (BTO) in line with chapter 9, section 80 of the MFMA. The key role of BTO is to carry out Revenue, Expenditure, Assets and Liability (REAL) as well as the strategic financial advice to both the senior management and the Council. The FTM has sound and effective financial management which is attested by the fact that the FTM has received two clean audits in a row. Clean financial governance is an indicator of democratic accountability.
Municipality is currently developing the five year financial plan with an objective of meeting future demands that municipality may face. Municipality is currently unable to fund all the priorities identified in the IDP due to insufficient funding. One of the potential funding mechanisms are PPP and borrowing therefore as part of financing the budget with an intention of meeting service delivery demand, municipality will have to source funding either through borrowing or PPP in order to address service delivery challenges.
In a space of three years municipality has implemented 90% of revenue enhancement strategy successfully which means four out of five revenue streamline were implemented. Municipality is currently engaging SDM on water SLA so that municipality could be water service provider. If this objective can be achieved the FTM will have significant revenue base which will be 40% inclusive of own revenue. In summation municipality implemented the following revenue sources e.g. refuse removal, property rates, traffic related revenue and billboard. One of the challenge facing a municipality is lack of formal township since the municipality is rural, the quicker council work on the implementation of township establishment the better, It is worth mentioning to indicate that to indicate that municipality is working hard to reduce operational expenditure with a view of increasing capital expenditure budget in order to address service delivery challenges.
All the expenditures incurred are generally in line with the approved budget in terms of section 15 of the MFMA and policies and procedures that governs expenditures management. The FTM complies with sections 65 and 66 of MFMA. Furthermore the system of internal controls were established and maintained to ensure that there is no breakdown in business process and activities. Budget management was decentralised to the senior managers responsible for budget vote which means section 77 of the MFMA were complied with. All the creditors were paid within 30 days of the receipt of invoice in line with section 65(e) and circular 49 issued by the National Treasury. All the section 71 and 52 reports were submitted to Provincial Treasury and National Treasury as well as to Council and this are an indication of oversight mechanism hence the principle of transparency and accountability.
Municipality has also successfully implemented GRAP 17 asset register and is also complying fully with Generally Recognised Accounting Practice standards and the requirement of Municipal Budget Regulation and Reporting. Municipality have achieved 95% of MFMA compliance in terms of monitoring tool issued by National Treasury which means municipality is MFMA compliant in terms of implementation. Municipality is working on 14 days turnaround time for processing procurement or tenders since procurement of goods and service equal service delivery, municipality is working hard to make procurement to be efficient and effective in order to meet the objective of section 217 of the constitution. Municipality is focusing on contract management as part of key driver to success on monitoring of performance of service providers with an intention of ameliorating high level of inefficiencies such as unspent grants and poor performance by service providers.
All the statutory reports were submitted to relevant authorities on time and key MFMA reports were published in the municipal website in order to enhance transparency in line with section 75 of the MFMA.
The robust internal control measures were put in place to ensure that sections 32 of MFMA expenditures are prevented or detected timeously.
DETAILED CASH FLOW STATEMENT AS AT 30 JUNE 2012
Note 2012 2011
R R
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts 62 928 352 54 424 961
Taxation -
Sales of goods and services 475 123 779 541
Grants 59 164 025 52 72481
Interest received 1 148 530 724 251
Other receipts 2 140 674 194 688
Payments (46 095 759) (38 110 241)
Employee costs (29 295 777) (23 648 973)
Suppliers (16 777 382) (14 430 135)
Finance cost (22 600) (31 133)
Other payments
Net cash flows from operating activities 34 16 832 593 16 314 720
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (PPE) (11 381 920) (18 088 222)
Proceeds from sale of fixed assets (197 396)
Proceeds from sale of (289 587)
Purchase of intangibles
Decrease/(Increase) in Loans and receivables
Net cash flows from investing activities (11 381 920) (18 575 205)
CASH FLOWS FROM FINANCING ACTIVITIES
Finance lease payment (58 096) 140 859
Repayment of borrowings
Proceeds from finance lease liability
Repayment of finance lease liability
Net cash flows from financing activities (58 096) 140 859
Net increase / (decrease) in net cash and cash equivalents 5 392 578 (2 119 626) Net cash and cash equivalents at beginning of period 8 739 124 10 858 750 Net cash and cash equivalents at end of period 12 14 131 702 8 739 124
Both liquidity and solvency ratio remained positive throughout the period and the FTM had unencumbered assets. Municipal asset base increase significantly due to implementation of GRAP 17 as the results the historical assets were re-measured by using DRC model prescribed by GRAP 17.Municipality is also converting their debtors into cash due to robust credit control and debt collection policy align with indigent management policy.
Table 30: Existing Revenue Sources
Revenue Observation
Rental of municipal facilities (community halls, , leasing of office space, guest house)
There are three community halls that the municipality rents out to the community, government departments as well as civil society organisations. Although the halls are not maximally utilised, the municipality is able to generate a little revenue from leasing the halls out.
The Civic Centre also assists a great deal. The leases sections of the Thusong Service Centre (ATOK multi- purpose community centre) to different government and private institutions. The user departments and private institution/s pay for the space leased. The leasing of office space has some maintenance implications, the costs thereof are recovered through the rental fees collectable on monthly basis.
Land use applications The Municipality is generating an income from the land use applications.
The collectable application fees vary in accordance to land use type that one is applying for. The fees are only payable once the application has been approved by the CocGHTA.The payment for building plans and other services are an add on
an ad hoc basis Investment and tender
documents
The interests earned on investment and tender documents are also revenue sources.
Traffic functions
This remain key source of revenue in the municipality as municipality claims 100% on learners licence and 80% on the other agreed upon services with Department of Transport and Roads.
Property rates Municipality has started with the billing on the 01st July 2011 and the municipality uses Munsoft billing system .Business are currently paying for the property rates however the challenge remain with the state or government department to honour payments due to unclear reasons advanced by the state or provincial department and the matter is handled at level of debt forum initiated by CocGTHA.
Refuse Removal This revenue source is currently collecting well and the challenge is buy in from some of the councillors.
Advertisement and billboards
Municipality appointed service provider to manage billboards activities on behalf of the municipality for the period of three year on contingency basis.
Proof of residents In terms of legislation this revenue sources is classified as cost recovery revenue which means all the collected is meant to cover the cost. This as key instrument in credit control due to the fact that municipality can effectively use this as the mechanisms especially on those who not pay for the services. If resident owes municipality no proof of resident must be provided to the individual who owes the municipality.
Further observations
The FTM is relying more on grants and subsidies as well as public contribution and donation which represent more than 86% of the total municipal revenue. Municipal revenue shows a positive improvement over the period of time and it is anticipated that by 2014 f/y the FTM will be having 40% of own revenue as the Revenue Enhancement Strategy will be fully implemented.
Audit Opinion
The FTM has over the past three financial years showed a significant improvement in financial management. The improvement has been linked directly to implementation of the internal and external audit recommendations. The challenge is to maintain the Clean Audit Opinion.
Table 31: Trend Analysis of Audit Opinion over the Last Four Years
2007/8 2008/9 2009/10 2010/11 2011/12
Unqualified with
emphasis of matter
Unqualified with emphasis of matter
Clean opinion Clean Audit opinion
Qulified
In order to keep repetition to minimum, indication of financial policies and controls will be done in the Integration Phase of this IDP. The following are the key challenges that could affect the FTM adversely:
Inadequate contract Management
Non adherence to demand management plan
Non-payment of services by residents
Dependency on grants
Lack of formalised township
Limited powers and functions
MATTERS AFFECTING THE AUDITOR’S REPORT PART A Exc
No.
Audit findings Course of actioni Responsible
person
Is the finding reported new or recurring
Target date
1
PROPERTY,PLAN AND EQUIPMENT Movable assets acquired before
01July 2009
measured at
depreciable replacement cost(DRC)
-Reconcile all the assets purchased before 1 July 2009 and measure them at fair value in line with directive 7 and GRAP 17.All assets purchases prior 2009 must be linked to the actual invoice and be reconciled against the old asset register to determine the completeness and accuracy thereof. The linking exercise must be finished by the 15th March 2013
- The completed information must be sent to AG for independent verification by the 30th March 2013.
CFO
New
30 April 2013
2 Contract awarded to contractor who’s previously
performance was unsatisfactory.
Perform due diligent exercise on all the contracted awarded in 2012/2013 with an intention of taking corrective action.
Submit the current issue to council for further scrutiny.
Municipal Manager
New
30 June 2013
3 Staff did not disclose in writing full particulars of benefits to council
Scrutinise the disclosure forms for all the employees to identify the correctness of disclosure and take corrective action on the offending parties.
SCM
Manager/HR Manager
New 31 March
2013
4 AOPO-No guideline for measuring stage of completion
All the construction projects will be measured through the use of engineering standard in order to determine the progress of work done
Strategic Manager- Technical Services
New 28 February
2013
5 AOPO-reported target not verifiable
All the targets will be measured through the identifiable targets process.
Strategic Manager- Development Planning
New 31 March
2013
6 The project was not registered in the
register of
construction
contracts with CIDB within 21 working days
Ensure that all the projects are registered with CIDB within 21 working days.
Strategic Manager- Technical Services /SCM Manager
New 28 February
2013
-
Financial Planning and Budgeting Table 32: Revenue, operational and Capital budget 2013/2014 and outer years (MTREF)
DESCRIPTION PRIOR
YEAR CURRENT YEAR BUDGET
2013 BUDGET BUDGET BUDGET
BUDGET ORIGINAL ADJUSTED YEAR YEAR YEAR
2012 BUDGET BUDGET 2014 2015 2016
EQUITABLE SHARE 33 103 283 46 115 000 46 115 000 52 946 000 63 595 000 83 249 999 FINANCE INTERNSHIP GRANT 1 250 000 1 500 000 1 500 000 1 650 000 1 800 000 1 950 000
MUNICIPAL SYSTEMS IMPROV 669 233 800 000 800 000 890 000 934 000 967 000
MUNICIPAL INFRASTRUCTURE 15 966 908 17 910 252 17 910 252 19 041 600 20 544 960 21 814 080
LGSETA GRANT 30 077 115 000 115 000 100 000 100 000 150 000
WARD COMMITTEE GRANT-
SEKHUKHUNE 1 106 980 - 500 000
- - -
MUNICIPAL PROPERTY GRANT 300 000 - - - - -
MIG-OPERATING GRANT - 779 748 779 748 793 400 856 000 908 920
VAT REFUNDS - 2 800 000 2 800 000 - - -
TRAFFIC FINES - 200 000 200 000 350 000 400 000 420 000
DRIVERS LICENSES 263 970 2 500 000 2 500 000 3 000 000 3 500 000 3 680 000
AGENCY FEES 370 632 750 000 750 000 450 000 550 000 650 000
REFUSE REMOVAL
SALES OF DUSTBINS - 2 304 000 2 304 000
200 000 5 346 000 5 880 600
INTEREST ON OUTSTANDING - 66 000 66 000 69 960 74 158 78 607
PROPERTY RATES TAXES - 900 354 3 900 354 4 000 000 5 000 000 5 500 000
PENALTIES ON PRPERTY RATES - 20 000 42 000 21 200 22 472 23 820
SALE OF ASSETS - 50 000 5 000 2 000 2 160 2 290
BILLBOARDS - 20 000 5 000 3 000 3 240 3 434
STREET TRADING - 3 500 1 000 2 000 2 000 2 000
SUNDRY INCOME 64 167 5 000 85 000 5 000 5 400 5 724
PROOF OF RESIDENCE 56 846 30 000 80 000 25 000 20 000 15 000
LAND USE CHARGES 1 518 2 000 8 000 2 140 2 311 2 450
TENDER DOCUMENTS 64 654 65 000 65 000 65 000 70 200 74 412
STAFF PARKING 7 505 20 000 20 000 22 000 24 000 25 440
GUEST HOUSE - 2 000 1 000 4 000 4 320 4 579
CIVIC HALL 25 965 34 500 34 500 48 300 52 164 55 294
HIRING OF HALLS-MOHLALETSE 1 579 3 500 3 500 4 000 4 320 4 579
HIRING OF HALLS-PELANGWE 877 1 500 1 500 3 000 3 240 3 434
HIRING OF HALLS-
SEOKODIBENG 395 1 500 1 500 3 000 3 240 3 434
OFFICE RENTAL ATOK 116 123 160 000 160 000 200 000 210 000 222 600
INTEREST RECEIVED 178 055 300 000 300 000 450 000 500 000 550 000
INTEREST ON INVESTMENT 546 196 600 000 600 000 1 000 000 1 050 000 1 113 000
EPWP GRANT - 1 012 000 1 012 000 1 000 000 - -
DESCRIPTION
PRIOR YEAR
CURRENT YEAR BUDGET
2013 BUDGET BUDGET BUDGET
BUDGET ORIGINAL ADJUSTED YEAR YEAR YEAR
2012 BUDGET BUDGET 2014 2015 2016
RENTING OF HAWKERS STALLS -
6 720 1 720 7 190 7 694 -
TOTAL 54 124 962 79 077 574 82 667 074 91 217 791 104 736 879 127 410 697
EXPENDITRE PER TYPE
Employee related costs 18 771 570 26 657 642 28 238 223 32 785 949 36 484 449 39 285 165 Remuneration of councillors 5 736 947 7 006 387 6 856 387 7 356 707 7 871 676 8 501 410
Debt impairment 44 367 2 358 248 4 800 248 6 288 000 6 839 040 7 522 944
Depreciation asset & impairment 2 017 604 1 823 800 2 823 800 3 269 850 3 760 328 4 512 393
Finance charges 192 804 85 000 85 000 89 250 96 390 104 101
Bulk purchases 1 037 838 1 300 000 1 300 000 1 500 000 1 700 000 1 870 000
Contracted services 873 206 1 913 600 2 553 600 3 000 000 3 300 000 3 630 000
Other expenditure 12 324 000 16 712 880 18 009 381 22 809 420 22 748 375 31 265 299
TOTAL OPERATING
EXPENDITURE 40 998 335
57 857 557 64 666 639 77 099 175 82 800 258 96 691 312 OPERATING SURPLUS 13 126 626 21 220 017 18 000 432 14 118 615 21 936 621 30 719 385 CAPITAL BUDGET 15 966 908 22 132 741 26 518 317 23 866 952 24 428 127 32 860 000 SURPLUS/-DEFICIT (2 840 282) (912 724) (8 517 882) (9 748 337) (2 491 506) (2 140 615)
The above budget was aligned with the IDP which makes it practical to implement. All the key processes were followed in compiling the above budget in line with the municipal process plan The FTM uses the Municipal Budget Reporting and Regulation issued by the Treasury in preparation of its budget and all relevant key legislative municipal finance frameworks.
Furthermore, the above budget is funded which means that all the activities or projects will be executed without any shortage of funds or potential budget implementation deficit.