Select Committee on Finance National Treasury FMG RG MFMA 26

Select Committee on Finance National Treasury FMG/RG/MFMA 26 February 2007

FMG Aim • Implement financial management reforms Conditions • Council commitment to MFMA reforms – Progress in multi-year budgeting, improving accounting & producing timely in-year reports; – The employment of an appropriately skilled CFO; – Capacity building - promotion of the internship programme in financial management; – Ongoing review and revision of implementation plans; and – Address weaknesses in financial management. 2

FMG - Implementation - Grant to assist municipalities in implementing financial management reforms and the MFMA - developing policies, reviewing and improving processes and procedures, improving consultation and information flows, updating budgeting, monitoring, accounting, reporting systems, - paying costs of interns and support financial management training and capacity building - Second year of the phase-in of the MFMA to high and medium capacity municipalities 3

FMG- Reporting Sept 06 to Feb 07 SLOW SPENDING Sept - 24 : Feb - 4 INCONSISTENT REPORTING Sept - 56 : Feb - 4 COMPLIANT TOTAL Sept - 203: Feb - 275 283 4

FMG – Spending Jan 07 Under 25% 39 municipalities (14%) Under 50% 53 municipalities (19%) Under 75% 108 municipalities (38%) Over 75% 83 municipalities (29%) 5

FMG Support/Monitoring/Actions • Letters, emails, faxes, telephone calls made to municipalities on a weekly basis, • Officials will follow up progress during municipal visits, • Transfers delayed during 2006, • Support and closer monitoring resulted in improvements - non compliance reduced from 28% in September 06 to 2% in February 07, • Letters advising of possible re-allocation sent to non-compliant muni’s, deadline 22 Feb 2007 – 6 responded, • Consider re-allocation of funds during March/July 2007, • Similar steps implemented during 2007 - consider re-allocation of funds for municipalities slow spending and funds not committed, • Close monitoring will continue during medium term 6

FMG - Transfers Months No. of Muni Total Paid Rm 75 JULY 146 SEPTEMBER 57 29 NOVEMBER 23 12 UNPAID 57 29 7

FMG - Administration EXPENDITURE Personnel costs AMOUNT R 200 000 Telephone/Fax 15 000 Filing/ Photo, etc 15 000 Other incidentals 20 000 Total - Approx 250 000 8

Restructuring Grant Aim – Support large municipalities with restructuring initiatives Conditions – – Municipality develop restructuring plans Adopt resolution committing to implementing plans Show progress in quarterly reports Transfers will depend upon the progressive implementation and achievements of agreed milestones • Grant agreements continue until 2008 • Grant has been incorporated into the Equitable Share for local government in the outer year of the MTEF 9

RG - 2006/07 10

RG – Expenditure (Dec 06) 11

RG - Measures • Feedback on evaluation of performance - quarterly basis • Visits undertaken 2 nd Quarter: – City of Tshwane; Mangaung and Emfuleni - Issues addressed: - Grant conditions and non compliance with reporting - Improvement in the submission, quality and content of reports - Low levels of expenditure - Confirmation of commitment - Notice with intention to withhold allocations • Continue to follow up outstanding matters • Varied degree of commitment and ownership • Changes in institutional landscape slows 12 implementation

RG - e. Thekwini • Backlogs in free basic electricity, supply of water and sanitation show significant improvements, • Staff placement and redeployment process almost complete, • Stability in senior management promotes continuity, • Improving and high payment levels for services, • Unqualified audit reports for last few years, • Improved credit rating, • However, service delivery agreement with Eskom not yet signed. 13

RG - Cape Town • • • Obtained positive credit rating, Improvements in oversight structure, Unqualified audit report, Steady achievement of financial ratios, LED implementation underway, Improved commitment to achieve RG conditions during last quarter, • Improvement in stability with appointment of CFO, • However, still experiencing some delays in finalisation of staff placements, • Spending on grant 14

RG - Tshwane • Positive credit rating, • AFS submitted to AG on time, • Implementation and integration of financial and reporting systems underway, • HR strategy – learnership & apprenticeship introduced, • Establishment of Eco Dev Agency, • Qualified Audit outcome, • Spending on capital, repairs and maintenance, • Institutional re-organisation and changes to senior management slowing implementation, • Council approval processes, • Low grant spending 15

RG - Emfuleni • Greater emphasis placed on addressing water and sanitation challenges, working with DWAF, • Raised awareness by investors on UDZ Tax Incentive, • Establishment of PMU to assist in MIG projects with almost all funds committed, • Quality of plans and budgets starting to improve, however, spending levels still low, • Reliance on consultants, • Appointment of MM and CFO should stabilise leadership, • Require more focus on balanced implementation of restructuring plan, • Need to improve revenue collections 16

RG - Buffalo City • • • Overall compliance with conditions, Improvement in credit rating, Implementation of Activity-Based Costing, Stable institutional environment, Improvement in service delivery levels, Improvement in general valuations, Adoption of single tax & tariff structure, Improvement in revenue collection, Qualified Audit 17

RG - NMBM • • • Poverty alleviation urban agriculture strategy, Installation of Human Resource system, Development of Property Valuation Project Plan, Improvement in delivery of free basic service, Submission of AFS on time, Completion of development plans, Qualified audit report, Appointment of MM, Partial compliance with financial conditions, Slow expenditure on repairs and maintenance, Spending on grant 18

RG - Mangaung • • • Payment of previous tranches delayed, Fluidity in senior management structure, Commitment to achieve grant conditions, Qualified audit opinion, Low revenue collections, Lack of comprehensive and consistent reports, • Progress in achieving restructuring outcomes 19

MFMA Training • Promote broader knowledge of MFMA through guides, circulars and multi-media facilities, • Using modern technology and simple assessment methodology, • Certificate issued after completion of modules, • Additional free support formal training, • Foundation being laid towards formal and regulated competency levels in financial management 20

MFMA - Benefits for learners & Progress • • Contributes towards MFMA competencies Contributes towards accredited courses Forms part of a portfolio of evidence Refresher for existing councillors & officials Induction for new councillors & officials Currently 3, 220 persons registered Approximately 200 completed all 6 modules 21

MFMA - Primary Audience • Municipal and municipal entity role players – – Mayor & Councillors involved with finance MM, CFO, All Senior Managers All finance staff including interns Corresponding roles in municipal entities • National & provincial officials supporting LG – Treasury departments – Local government departments • Other – SALGA (national and provincial) – Universities 22

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MFMA – Training Register National Registered Module 1 Module 2 Module 3 Module 4 Module 5 Module 6 66 13 13 11 9 10 9 Provincial 197 34 34 31 32 Municipal 2667 148 145 142 135 109 125 11 0 0 0 Other 229 3 3 2 3 Total 3170 195 192 187 178 150 166 Non Governmental 28

MFMA CFO MM Finance Professional Fin Clerical Other Managers - Non Finance Other Professi onals non financial Other Not currently employed Total registered 45 264 554 523 404 227 1056 32 Modules Completed % % % % Module 1 2. 22 11. 36 8. 66 7. 46 1. 49 2. 64 6. 25 0 Module 2 2. 22 10. 98 8. 48 7. 46 1. 24 2. 64 6. 25 0 Module 3 2. 22 10. 61 8. 12 7. 27 1. 24 2. 64 6. 16 0 Module 4 2. 22 10. 23 7. 22 7. 27 1. 24 2. 2 5. 97 0 Module 5 0 8. 71 6. 14 6. 88 0. 5 1. 76 4. 83 0 Module 6 2. 22 9. 09 6. 50 7. 27 1. 24 2. 2 5. 49 0 29

MFMA • Regional workshops planned for March and April 07, • Raise awareness on competency levels and training opportunities, • Targeting universities, technikons, training providers, MM, CFO, Interns, other officials • A senior official must be appointed to act as Mentor/coach for the interns • A Personal Development Plan must be prepared for each intern on commencement of the internship • During the internship, a workplace rotation plan must be put in place to ensure that interns are exposed to all areas of Municipal Finance • Accredited Education and Training Providers must be used for the provision of theoretical and 30 practical components of the programme

MFMA – Internship programme Province No. of municipalities with interns Total No. of Interns Total no. of Municipalities EC 39 83 45 FS 21 50 25 GT 11 26 14 KZN 48 84 61 LP 24 52 30 MP 15 35 21 NW 16 35 25 NC 20 38 32 WC 26 59 30 TOTAL 220 462 283 31

Thank You 32