2.4 OVERVIEW OF BUDGET RELATED POLICIES
The MFMA and the Municipal Budget and Reporting Regulations require budget related policies to be reviewed, and where applicable, to be updated on an annual basis. The main purpose of budget related policies is to govern and guide the budget process and inform the projections of the medium term.
The following are budget related policies which have been approved by Council, - been reviewed /amended and / or are currently being reviewed / amended in line with National Guidelines and other legislation.
2.4.1 ASSESSMENT RATES POLICY
As required in terms of section 5 of the Municipal Property Rates Act (MPRA), the Rates Policy has been reviewed for the 2020/21 financial year and the amended policy was adopted in principle by Council on 2019-12-12 for public comment, with a closing date of 31 January 2020. Main amendments include the removal of Clause 9 (governance of Special Rating Areas) to avoid duplication with Special Rating Areas Policy, which is managed by Economic Development and Investment Unit.
The amended policy is to be adopted with the final budget.
The applicable assessment rate randages are reflected in the Resolutions to Council on the budget.
2.4.2 CREDIT CONTROL AND DEBT COLLECTION POLICY
The primary objective of this policy is to ensure that all monies due and payable to the municipality in respect of services are collected efficiently and promptly. As required in terms of section 97 of the Municipal Systems Act, the credit control and debt collection policy for the 2020/21 financial year has been reviewed and amended and will be adopted with the final budget.
Main amendments included:
1. Provision for the exemption from payment of interest on arrear owed by the indigent debtor. The purpose of this addition is to align the Policy with the provision of the Indigent Policy.
2. Due to an increasing debt of Municipal employees and committee members, it became apparent that this clause needed to be strengthened. The Policy covers jointly and severally liability for debt, in case of co- ownership or spouse
3. Clause 19.2 records that failure to give access to read service meters may result in an increased estimated charges or deposit and disconnection as a last resort. These increased charges will be reversed once the meter reading is obtained.
4. Clause 20: Debt recovery using the pre-payment metering system (residential customers only): This clause sets out the criteria, which customers may qualify for such debt recovery mechanism. It further outlines that the determination of the property value threshold will be determined by the Municipal Council at its annual budget meeting.
Removal of Annexure A of the Policy (assistance to the poor). Annexure A listed the extent of the indigent support and was inserted in the Indigent Policy, to avoid duplication.
2.4.3 TARIFF POLICY
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The Municipal Systems Act requires a Municipality to have a Tariff Policy on the levying of fees for Municipal services provided by the municipality itself or by way of service delivery agreement, and which complies with the provisions of that Act, the Municipal Finance Management Act and other applicable legislation.
The policy has been reviewed for the 2020/21 financial year with no amendments required. Accordingly, the Tariff Policy adopted by Council on 2017-05-31 remains unchanged for the 2020/21 financial year.
2.4.4 INDIGENT POLICY
Council on 27 February 2020 approved a new Indigent Policy. This is a pro poor policy that extends relief to child headed households and the unemployed. The policy increases the capping of property values from R 230 000 to R 500 000 and monthly household income of R 3 600.
2.4.5 WATER POLICY
The initial water policy was approved by council on 2005-06-22 which has subsequently been amended and rovides for amongst others things: level of services, provision of water services, payment for services etc. There is no change in the current policy. However, the process for review has already commenced and a draft revised policy has been prepared.
The Council’s tariffs are affected by the following factors:
· Bulk purchase cost: Umgeni Water
· Unaccounted for water
· Debtors collection rate
· Cost of free basic water
· Capital Unit Charge for bulk DWA projects.
2.4.6 SUPPLY CHAIN MANAGEMENT POLICIES
The policy reflects and represents the context of a specific government policy that finds expressions within the provisions of the Municipal Finance Management Act 56 of 2003. The principal objectives of the policy are to provide, promote, and implement theoretical guidelines, governing processes and procedures within supply chain management. The initial SCM Policy was adopted by council on 2005-09-22 for implementation. In alignment with regulations and National Treasury Circulars, the policy has been revised and adopted by council on 2018-12-06.
This revised policy includes provisions for discounts or market related rental fees of office accommodation. This shall ensure that the municipality receives value for money for all municipal buildings that are rented out and realise savings on buildings that the municipality is renting from private landlords. Furthermore this provision empowers the municipality for the review of lease contracts in keeping with the MFMA requirements to review all contracts in every 3 years.
The policy has amplified Section 44 by putting measures to assist indigent persons who serve in community or civil structures such as ward Committee members as they are often excluded from participating in the tender process because of the narrow definition of “in the service of the state”.
Section 32 has been enhanced in accordance with the KZN Provincial Treasury Circular number 01A/2016. This amendment is aimed to ensure that the use of regulation 32 is not as a direct result of poor planning or as a result of unprecedented dire need to spend budget without any real identification of the need. Procurement of any goods and services through this provision must have been planned for and be part of the procurement plan.
Further revisions to the SCM Policy were undertaken and the amended policy was adopted by Council on 2019-06- 27.
The policy is has been reviewed for the 2020/21 financial year and the updated policy is to be adopted with the Budget.
2.4.7 INVESTMENT / CASH MANAGEMENT AND BORROWING POLICIES
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As required by the Municipal Finance Management Act, and in conformity with the Municipal Cash Management Regulations, the Investment Framework policy and Guidelines has been reviewed and the revised policy adopted by Council on 2017-06-28.
The main objectives of the Investment Framework Policy and Guidelines are:-
· To establish a framework and guidelines for the investment of funds.
· To undertake the investment of funds not immediately required in a prudent manner.
· To ensure the safety of principal, whilst managing liquidity requirements to meet cash flow needs.
· To ensure diversification of permitted investments.
· To ensure compliance with all legislation governing the investment of funds.
· To provide the highest investment returns at minimum risk, within the parameters of authorised instruments.
The borrowing Framework Policy and Guideline has also been reviewed and the revised policy adopted by Council on 2017-06-28. There are no changes to the policy for the 2020/ 21 year.
The main objectives of the Borrowing Policy are:
· To establish a framework and guidelines for the borrowing of funds.
· To ensure compliance with statutory requirements and National Treasury borrowing regulations.
· To outline the appropriate actions of a prudent person standard in the context of managing overall debt.
· To maintain debt within specified limits and ensure adequate provision for the repayment of debt and debt repayment to be sustainable.
· To ensure that the funds are obtained at the lowest possible interest rates at minimum risk, within the parameters of authorised borrowings
2.4.8 VIREMENTS BUDGET POLICY
In order to give departmental heads greater flexibility in managing their budgets, Virements budget procedures are in place for the revision of budgets (within votes – i.e. Output Unit) via a Virements budget. These procedures provide guidance to managers of when they may shift funds within votes.
To ensure compliance with Section 28 of the MFMA, and the Municipal Budget and Reporting Regulations, procedures were formulated with regards to the transfer of funds and the adjustment budget reporting.
2.4.9 INFRASTRUCTURE ASSET MANAGEMENT POLICY
The goal of infrastructure asset management is to meet required levels of services in the most cost effective manner, which is achieved through the management of facilities and infrastructure assets’ life cycles, for the benefit of present and future generations. National Government has legislated, the need for local government to formulate active asset management programmes. An infrastructure asset management plan technically analyses five facilities and infrastructure asset life cycle strategies – acquisition, operations, maintenance, renewal and disposal – to predict what facilities and infrastructure asset activities are required to provide municipal services sustainably. This links facilities and infrastructure asset planning, budgeting and reporting directly to financial planning and reporting.
Infrastructure assets support the fabric of modern society and represent a huge societal investment in eThekwini Municipality which has been built up over the years. Less than 2 % by Current Replacement Cost estimates of new facilities and infrastructure assets are added to eThekwini’s facilities and infrastructure asset portfolio annually.
To safeguard the 98 % by value of the existing portfolio, it is therefore essential that modern facilities and infrastructure asset systems and practices are applied to the whole portfolio in a consistent manner. EThekwini Municipality strives to continuously improve these systems and practices across all service types to enhance resilience of service delivery.
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The 2017 Infrastructure Asset Management Policy is being reviewed and is expected to be presented to council during the year. Apart from updating references to the latest standards and guides, the revisions include the requirement for a Tactical Infrastructure Asset Management Committee (TIAMC). The TIAMC replaces the previous requirement for both a Strategic and a Technical Committee. The TIAMC will report to the Executive Management Team which will provide the governance role previously envisaged for the Strategic Committee.
2.4.10 ACCOUNTING POLICY
In order to ensure that the financial statements are compliant with GRAP Standards, the accounting policies were realigned and approved by council on 2006-06-29. The latest amendments to the accounting policies were approved by council on 2019-06-25.
2.4.11 FUNDING AND RESERVES POLICY
A funding and reserves policy has been formulated and was approved by the council at its meeting on 2010-05-03.
The policy is aimed at ensuring that the Municipality procures sufficient and cost effective funding in order to achieve its capital expenditure objectives in an optimum manner.
2.4.11 BUDGET POLICY
There were no amendments to the Budget Policy which was approved by council on 23 February 2011.