Annexure A: Division of Revenue Bill and Mig Conditions

Private Bag X804, Pretoria, 0001 Tel: (012) 334 0600, Fax: (012) 334 0603

cnr Hamilton and Proes Street, Arcadia, Pretoria

ANNEXURE A: DIVISION OF REVENUE BILL AND MIG CONDITIONS

1. THE 2013 DIVISION OF REVENUE BILL AND ITS PROVISIONS RELATED TO MIG

Your municipality is required to comply with relevant sections of the 2013 Division of Revenue Bill as well as the framework for the Municipal Infrastructure Grant attached as Annexure E. Note that the MIG is now a schedule 5b grant. Amongst others, the following selected sections should be complied with at all times:

Section 12: Duties of the Receiving Officer for the Municipal Infrastructure Grant

(1)The receiving officer of a Schedule 5, or 7allocation must ensure compliance with the requirements of the relevant framework.

(2)The relevant receiving officer must, in respect of a Schedule 5 or 7allocation transferred to a municipality -

(b) as part of the report required in terms of section 71 of the Municipal Finance Management Act, report on the matters referred to in subsection (4) and submit a copy of the section 71 report to the relevant provincial treasury and the relevant transferring national officer

(c) and submit a quarterly performance report within 30 days after the end of each quarter to the transferring officer and the relevant provincial treasury..

(4)A report for a municipality in terms of subsection (2)(b) must set out for that month and for the financial year up to the end of that month –

(a)the amount received by the municipality;

(b)the amount of funds stopped or withheld from the municipality;

(c)the extent of compliance with this Act and with the conditions of an allocation or part of an allocation provided for in a framework;

(d)an explanation of any material problems experienced by the municipality regarding an allocation which has been received and a summary of the steps taken to deal with such problems;

(e)any matter or information that may be prescribed in the relevant framework for the particular allocation; and

(f)such other issues and information as the National Treasury may determine.

(5) A receiving officer must, within two months after the end of the financial year, evaluate its performance in respect of programmes or functions funded or partially funded by an allocation and submit such evaluation to the transferring national officer and the relevant provincial treasury.

Section 17, 18, and 19: Withholding, Stopping and Re-allocations

Please note that the 2013 Division of Revenue Billprovides for withholding, stopping and re-allocations of funds due to the following:

(i)The receiving officer does not comply with the provisions of Division of Revenue Act or conditions to which the allocations, as provided in the relevant framework, is subject ;

(ii)Roll-over of conditional allocations approved by National Treasury in accordance with section 21 have not been spent; and

(iii)Expenditure on previous transfers during the financial year reflects significant under-spending for which no satisfactory reason is given.

For a detailed process on withholding, stopping, and re-allocations, please refer to the processes and procedures manual which is available on the MIG-MIS website (

Section 22: Transfers and Payment Schedules

According to section 22 of the 2012Division of Revenue Bill, funds should be transferred according to the payment schedule approved by the National Treasury unless allocations are withheld or stopped in terms of section 17 or 18. This section also stipulates that the transfers for Schedule 4 or5 allocation must be done in line with the municipal financial year.

Please note that the first transfer will be effected from July 2013, provided that your municipality has submitted the payment schedule in the prescribe format. All the MIG funds must be budgeted for and appropriated by a municipality prior to any spending, and must be audited as part of the annual audit process by the Auditor-General.

Section 26: Preparation for next financial year and 2015/16 financial year

(1) (a) A category C municipality that receives a conditional allocation in terms of this Act must, using the envisaged conditional allocations to that municipality for the next financial year and the 2015/16 financial year as set out in Column B of the Schedules, by 2 October 2013—

(i) agree on the provisional allocations and the projects to be funded from those allocations in the next financial year and the 2015/16financial year with each category B municipality within the category C municipality’s area of jurisdiction; and

(ii) submit to the transferring national officer—

(aa) the provisional allocations referred to in subparagraph (i); and

(bb) the projects referred to in subparagraph (i) listed per municipality to be funded from the allocations for the next financial year and the 2015/16 financial year.

Section 28: Duties of Municipalities

All category C municipalities are reminded of section 28 of the Division of Revenue Bill that stipulates that they must, not later than 14 days after the 2013 Division of Revenue Act takes effect, submit to the National Treasury and all category B municipalities within their area of jurisdiction, the budget, as tabled in accordance with section 16 of the MFMA for the 2013/2014 municipal financial year and the two following municipal financial years. The budgets must indicate all allocations from its equitable share and conditional allocations to be transferred to each category B municipality within their jurisdiction and disclose the criteria for allocating funds between the category B municipalities. Please note that only the official budget template provided by the National Treasury must be used.

A category C municipality that is providing a municipal service must, before implementing any capital project for water, electricity, roads or any other municipal service, consult the category B municipalities within whose area of jurisdiction the project will be implemented, and agree in writing which municipality is responsible for the operational costs and the collection of user fees.

The Act emphasizes that district municipalities must strive to ensure that they do not duplicate a function currently performed by a category B municipality, and must transfer funds for the provision of services, including basic services, to the relevant category B municipality that is providing municipal services, irrespective of the fact that the category C municipality retains the power and function in terms of the Municipal Structures Act and a service delivery agreement for the provision of services by the category B municipality on behalf of the category C municipality has not been concluded.

A category B municipality which is not authorized to perform a function in terms of the Municipal Structures Act may not extend the scope or type of services that it currently provides without entering into a service delivery agreement with the category C municipality which is authorized to perform the function in terms of the Municipal Systems Act or without obtaining the legal authorization to perform the function in terms of the Municipal Systems Act.

1. ESTABLISHMENT AND PERFORMANCE OF THE PROJECT MANAGEMENT UNITS

It is important to note that DCoG views project management as a function within a municipality or a shared function between municipalities, and if possible existing personnel within the municipality should be utilized for this purpose. The duties that need to be performed relates to the planning, organising, coordinating, controlling and directing of the activities of projects funded through MIG.

The municipalities will draft a proposal to provinces detailing the manner in which the project management function will be implemented. The municipal proposal will be evaluated by an appraisal team consisting of the national DCoG, the province, sector departments (where available) and the Municipal Infrastructure Support Agency. A recommendation will be made in writing to the municipality facilitated by the Province. Although most municipalities already have this function established, it would still be subject to the appraisal process mentioned above. Provinces will coordinate the sessions for appraisal. The appraisal for 2013/14 must be concluded by 31 May 2013.

The municipality may utilise up to 5% of its MIG allocation to ensure a sustained project management function to support the MIG programme.

Provinces will as part of their responsibilities on the MIG programme ensure that the performance management function is performed by municipalities as agreed to in the approved business plans.

1. CONDITIONS OF THE MUNICIPAL INFRASTRUCTURE GRANT IMPLEMENTATION

MIG is a conditional grant that was established to address national priorities regarding municipal infrastructure that may not be realised through unconditional grants such as equitable share.

It is a grant that supplements infrastructure funding of municipalities. In this regard conditions are applied to ensure that municipalities appropriately address the objectives of the grant. Two groups of conditions have been established:

• cross-cutting conditions relating to overall performance of the municipality and all its projects; and
• sector specific conditions.

3.1Cross-cutting conditions

The following conditions are set as the founding conditions for the MIG programme, which may be varied from time to time:

• Conformity with IDPs: No MIG funds may be spent outside the framework of a municipality’s adopted Integrated Development Plan and its approved budget. The IDPs should be based on the provision of a basic package of services to the poor, appropriate services levels, financial sustainability and the existence of adequate organizational capacity.
• Limitation on operational spending: The MIG can only be used for capital investment and cannot be used to finance operating expenditure other than the prescribed percentage permitted for the operation of a project management unit in applicable municipalities.
• Restrictions on eligibility: Spending of MIG funds is restricted to those categories of infrastructure, beneficiaries and levels of service. To ensure that eligibility requirements are met, a cap on capital spending per household will be set and specific requirements may be set for the amount of spending on particular types of infrastructure.
• Adequate attention to rehabilitation: The municipality must invest an appropriate portion of the funds in rehabilitating existing infrastructure. Bank interests earned from MIG transfers as well VAT claimed on MIG funds can also be used to maintain existing infrastructure.
• Pledging of funds to secure loan finance: According to Section 8(4)(a) of the Division on Revenue Bill 2013, a municipality may only after obtaining the approval of the National Treasury, pledge, offer as security or commit to a person or institution future conditional allocation transfers due to the municipality for the next financial year and the 2015/16 financial year, for the purpose of securing a loan or any other form of financial or other support from that person or institution. Please refer to the MFMA Circular No 51.
• Poverty alleviation: It is important for the economic spin-offs of infrastructure delivery to be maximized. This relates primarily to temporary and permanent job creation arising from municipal infrastructure investments. This condition will be associated with national government’s 'Expanded Public Works Programme' (EPWP). The gender provisions of this programme must be adhered to.
• Reporting: The recipient municipality has prepared and submitted all monthly reports on grant utilization in the prescribed format by a specified time. All monthly expenditure reports should be accompanied by the proof of payment printed from a municipal financial system.
• MIG funds to be allocated in municipal budget: All MIG funds to be spent in any year must be allocated to specific projects which must be identified in municipal budgets
• Registration of MIG project business plan: All projects to be funded with MIG funds, wholly or partially, must have a project business plan which conforms with requirements to be established for the MIG.
• Completion certificates must be submitted to the province as and when projects are completed.

3.2Sector Specific conditions and roles

Each sector department (DWAF, DOT, DPW and DSRSA) may establish further conditions specific to their sectors. The following sector specific conditions have been approved by the Municipal Infrastructure Task Team:

Department of Public Works

• A minimum of 10% of all projects related to rural roads, low volume municipal roads (less than 500 vehicles per day), pipelines, trenches and sidewalks was to be conducted in a labour-intensive manner in terms of the Expanded Public Works Programme (EPWP) guidelines issued by the Department of Public Works.
• Labour-intensive construction methods involve the use of an appropriate mix of labour and machines, with a preference for labour where technically and economically feasible, without compromising the quality of the product
• To issue contracts for projects of the above type only to consulting engineers and contractors who are qualified (either through undergoing training to be qualified or through gaining recognition of prior learning) in managing labour-intensive projects.

Department of Water Affairs

• The funding is only to be used for the Basic Water Services component of the projects. Basic water services in this case means Basic Water Supply Facilities and/or Basic Sanitation Facilities as defined in the Strategic Framework for Water Services, approved by Cabinet in September 2003.
• Projects to be funded must be within the Water Services Development Plan (WSDP) as the Sector Component of the Integrated Development Plan (IDP).
• Projects to be funded must be proven to be viable, feasible, acceptable and sustainable based on a proper feasibility study.
• To ensure sustainable operation and maintenance of the proposed infrastructure the operating, finance and management arrangements must be in place and committed. (If acceptable to the other sectors this could be a cross-cutting condition).
• Projects must be implemented in line with the policies as set by the Strategic Framework for Water Services and the legal requirements of the Water Services Act [No. 108 of 1997] as well as the National Water Act [No. 36 of 1998].

Department of Transport

• The development of road infrastructure to poor households that would create access to trade, local economic development and essential services and to promote road safety.

Department of Sport and Recreation

• The sector specific conditions for sport and recreation projects if any will be communicated to the municipality at a later date.

Department of Environmental Affairs

• All projects that will have an impact to the environment are required to acquire approval from DEA through the Environmental Impact Assessment (EIA) process. Specific conditions relating to solid waste disposal sites are still awaited from the DEA’s directorate responsible for solid waste management. The conditions will be communicated to municipalities as soon as it is available.

1. IMPORTANT DATES TO REMEMBER

Your municipality is required to observe and comply with the dates listed in the following table.

Activity / 2013/14 Financial Year / 2014/15 Financial Year / 2015/16 Financial Year / Receiving officer
Technical reports to sector departments / The due date was 31 May 2012 / 31 May 2013 / 31 May 2014 / To the relevant sector department
Project registration forms / Due date was 1 August 2012. / 1-Aug-2013 / 1-Aug-2013 / Province and DCoG
Projects to be funded by category C municipality in a category B municipality / The due date was 2 October 2012 / 2 October 2013 / 2 October 2013 / Province and DCoG
Infrastructure Implementation Plans / The due date was 31 October 2012 / 31 October 2013 / 31 October 2014 / Province and DCoG
Submission of payment schedule (with projects to be implemented and their cash flows) / 8 April 2013 / 1 April 2014 / 1 April 2015 / Province and DCoG
PMU business plan as approved under the municipal budget / 31 May 2013 / 31 May 2014 / 30 May 2015 / Province and DCoG
Updated MIG Infrastructure Implementation based on capital budget / 31 May 2013 / 31 May 2014 / 30 May 2015 / Province and DCoG
Performance evaluation report / 29 August 2014 / 28 August 2015 / 30 August 2015 / Province and DCoG
PMU business plan as approved under the revised municipal budget / 31 Jan 2014 / 30 Jan 2015 / 29 Jan 2016 / Province and DCoG
Revised MIG Infrastructure Implementation based on adjusted capital budget / 31 Jan 2014 / 30 Jan 2015 / 29 Jan 2016 / Province and DCoG

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