Budget and Treasury Directorate

MNQUMA LOCAL MUNICIPALITY

BUDGET AND TREASURY DIRECTORATE

SECTION 71 FINANCIAL REPORT TO EXECUTIVE MAYOR

MAY2017

COMPILED BY:______

T. HANI

ACTING MUNICIPAL MANAGER

FINANCIAL REPORT

1. PURPOSE

The purpose of this report is to comply with section 71 of the MFMA, by the provision of an interim statement to the Executive Mayor containing certain financial particulars as legislated

2.STRATEGIC OBJECTIVES

To have an improved system of municipal governance in line with applicable legislation

3.LEGAL OR STATUTORY REQUIREMENT

Section 71 of the MFMA requires that:

The accounting officer of a municipality must by no later than 10 working days after the end of each month submit to the Mayor of the municipality, and the relevant National and Provincial treasury, a statement in the prescribed format on the state of the municipality's budget reflecting certain particulars for that month and for the financial year up to the end of that month.

For the reporting period ending 31 May2017, the ten working day reporting limit expires on 14 June2017.

PROVISIONAL MAY 2017 REPORT

This report is based upon financial information available at the time of preparation. The provisional financial results for the period ending 31 May 2017 are summarized as follows:

Statement of Financial Performance (SFP)

The SFP (Statement of Financial Performance) shown in Annexure A is prepared on a similar basis to the prescribed budget format, detailing revenue by source type and expenditure by input type. The detailed report below presents financial status of the Municipality for the period ending 31 May 2017.The municipality has billed R 16 100 000 which is 90% on property rates compared to the targeted billing of R 17 849 000 as per the budget. This is attributable to billing not been done due to financial management system problems.

The Service charges (refuse collection) billing are 3% more than the budget with interest from debtors being 32% more than the budget.

The transfers recognized are 10% more than budgeted due to Equitable Share that was received.

Interest from investment income, income from licenses and permits, agency services income and fines income were below the budgeted income. The detailed report indicates the following:

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EC122_REVENUE AND EXPENDITURE_2017_M10
Description / Ref / 2015/16 / Budget Year 2016/17
Audited Outcome / Original Budget / Adjusted Budget / Monthly actual / YearTD actual / YearTD budget / YTD variance / YTD variance
R thousands / %
Revenue By Source
Property rates / 19 472 / 19 472 / 19 472 / – / 16 100 / 17 849 / 1 750 / 90%
Service charges - refuse revenue / 4 100 / 4 100 / 4 100 / – / 3 493 / 3 758 / 265 / 93%
Rental of facilities and equipment / 2 317 / 2 700 / 2 700 / – / 1 678 / 2 475 / 798 / 68%
Interest earned - external investments / 4 500 / 4 500 / 4 500 / 219 / 3 702 / 4 125 / 423 / 90%
Interest earned - outstanding debtors / 4 525 / 4 525 / 4 525 / – / 5 482 / 4 148 / (1 335) / 132%
Fines / 2 201 / 2 322 / 2 322 / 73 / 889 / 2 129 / 1 239 / 42%
Licences and permits / 1 000 / 3 836 / 3 836 / 124 / 2 526 / 3 516 / 991 / 72%
Agency services / 4 283 / 920 / 920 / 291 / 335 / 843 / 508 / 40%
Transfers recognised - operational / 229 071 / 217 033 / 221 897 / – / 224 553 / 203 406 / (21 147) / 110%
Other revenue / 972 / 5 144 / 5 144 / 130 / 380 / 4 716 / 4 335 / 8%
Gains on disposal of PPE / 590 / 590 / 590 / – / 238 / 541 / 303 / 44%
Total Revenue (excluding capital transfers and contributions) / 273 030 / 265 143 / 270 006 / 837 / 259 376 / 247 506 / (11 870) / 105%

Actual Borrowings

The Municipality has the following loans with financial institutions:

ACTUAL EXPENDITURE

The table below reflects the expenditure incurred by the municipality as at end May 2017:

Description / Ref / 2015/16 / Budget Year 2016/17
Audited Outcome / Original Budget / Adjusted Budget / Monthly actual / YearTD actual / YearTD budget / YTD variance / YTD variance
R thousands / %
Expenditure By Type
Employee related costs / 154 386 / 165 411 / 161 270 / 13 139 / 148 751 / 161 270 / 12 519 / 92%
Remuneration of councillors / 27 021 / 24 421 / 22 275 / 2 539 / 17 373 / 20 419 / 3 045 / 85%
Debt impairment / 3 000 / 21 980 / 21 980 / 1 910 / 19 100 / 20 148 / 1 049 / 95%
Depreciation & asset impairment / 47 099 / 106 784 / 106 784 / 4 291 / 42 908 / 97 885 / 54 978 / 44%
Finance charges / 2 024 / 1 200 / 1 305 / 1 / 525 / 1 196 / 672 / 44%
Bulk purchases / 7 000 / 7 000 / 7 000 / 11 / 8 085 / 6 417 / (1 669) / 126%
Other materials / 6 698 / 7 757 / 6 493 / 72 / 1 388 / 5 952 / 4 564 / 23%
Contracted services / 7 349 / 7 285 / 16 445 / 646 / 14 380 / 15 075 / 695 / 95%
Other expenditure / 68 551 / 52 067 / 55 216 / 2 081 / 23 412 / 50 615 / 27 203 / 46%
Loss on disposal of PPE / –
Total Expenditure / 323 128 / 393 904 / 398 768 / 24 689 / 275 922 / 378 977 / 103 055 / 73%

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Capital expenditure report

The provisional Capital expenditure report shown in Annexure B has been prepared on the basis of the format required to be lodged electronically with National Treasury, and is categorized into major output ‘type’. The summary report indicates the following:

Summary of Statement of Capital Expenditure:
Description / Budget 2016/2017
R'000 / YTD Budget R'000 / YTD Actual R'000 / Variance R'000
Total Capital Expenditure / 72 224 / 66 205 / 56 114 / 10 091
Total Capital Financing(income) / (64 727) / (59 333) / (64 727) / 5 394

The status of year-to-date capital expenditure, compared to departmental Service Delivery Budget Implementation Plan (SDBIP) targets for the key infrastructure items as indicated in Annexure B are:

Description of Project / Amount
Roads Infrastructure / R 51842 324.00
ICT Hardware / R 1065 325.00
Electrification / R 2756 062.00
Office Furniture / Equipment / R 275 868.00
Other / R 174 539.00
TOTAL / R 56114 118.00

Cash Flow Statement (CFS)

The CFS report for May2017 indicates a closing balance (cash and cash equivalents) of

R34994384.00which comprise of the following:

• Bank balance andcash = R 34577926.00

Cheque Account balance = R 416458.00

Outstanding Debtors Report

The Debtors report has been prepared on the basis of the format required to be lodged electronically with National Treasury. This format provides an extended aged analysis, as well as an aged analysis by debtor type. The summary report indicates that the debtors >30 days balance as at 31 May 2017 amounts toR 87066 805.

Outstanding Creditors Report

The Creditors report has been prepared on the basis of the format required to be lodged electronically with National Treasury. This format provides an extended aged analysis, as well as an aged analysis by creditor type. The summary report indicates that the creditors >30 days balance as at 31 May2017amounts to R 15069 752.

4.FINANCIAL IMPLICATIONS

All the analysis done above is drawn from the approved budget.

5.IMPLICATIONS

Finances (budget and Actual)

This report is an overview of the provisional financial results for the period ended 31 May2017, as well as any Operating and Capital Budget variances.

6.RECOMMENDATION

It is hereby recommended that the Executive Mayor note the report:

7. ANNEXURES:

A. Statement of Financial Performance

B. Capital expenditure report

C. Cash Flow Statement

D. Outstanding Debtors Report

E. Outstanding Creditors Report

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Annexure A

EC122 Mnquma - Table C4 Monthly Budget Statement - Financial Performance (revenue and expenditure) - M11 May
Description / Ref / 2015/16 / Budget Year 2016/17
Audited Outcome / Original Budget / Adjusted Budget / Monthly actual / YearTD actual / YearTD budget / YTD variance / YTD variance / Full Year Forecast
R thousands / %
Revenue By Source
Property rates / 19 472 / 19 472 / 19 472 / – / 16 100 / 17 849 / (1 750) / -10%
Property rates - penalties & collection charges / –
Service charges - electricity revenue / –
Service charges - water revenue / –
Service charges - sanitation revenue / –
Service charges - refuse revenue / 4 100 / 4 100 / 4 100 / – / 3 493 / 3 758 / (265) / -7%
Service charges - other / – / –
Rental of facilities and equipment / 2 317 / 2 700 / 2 700 / – / 1 678 / 2 475 / (798) / -32%
Interest earned - external investments / 4 500 / 4 500 / 4 500 / 219 / 3 702 / 4 125 / (423) / -10%
Interest earned - outstanding debtors / 4 525 / 4 525 / 4 525 / – / 5 482 / 4 148 / 1 335 / 32%
Dividends received / – / – / –
Fines / 2 201 / 2 322 / 2 322 / 73 / 889 / 2 129 / (1 239) / -58%
Licences and permits / 1 000 / 3 836 / 3 836 / 124 / 2 527 / 3 516 / (989) / -28%
Agency services / 4 283 / 920 / 920 / 291 / 627 / 843 / (217) / -26%
Transfers recognised - operational / 229 071 / 217 033 / 221 897 / – / 224 553 / 198 947 / 25 605 / 13%
Other revenue / 972 / 5 144 / 5 144 / 130 / 380 / 4 716 / (4 335) / -92%
Gains on disposal of PPE / 590 / 590 / 590 / – / 238 / 541 / (303) / -56%
Total Revenue (excluding capital transfers and contributions) / 273 030 / 265 143 / 270 006 / 837 / 259 668 / 243 047 / 16 621 / 7% / –
Expenditure By Type
Employee related costs / 154 386 / 165 411 / 161 270 / 13 139 / 148 751 / 165 411 / (16 660) / -10%
Remuneration of councillors / 27 021 / 24 421 / 22 275 / 2 539 / 17 373 / 22 386 / (5 012) / -22%
Debt impairment / 3 000 / 21 980 / 21 980 / 1 910 / 21 010 / 20 148 / 861 / 4%
Depreciation & asset impairment / 47 099 / 106 784 / 106 784 / 4 291 / 47 199 / 97 885 / (50 687) / -52%
Finance charges / 2 024 / 1 200 / 1 305 / 1 / 526 / 1 100 / (574) / -52%
Bulk purchases / 7 000 / 7 000 / 7 000 / 11 / 8 085 / 6 417 / 1 669 / 26%
Other materials / 6 698 / 7 757 / 6 493 / 72 / 1 388 / 7 111 / (5 723) / -80%
Contracted services / 7 349 / 7 285 / 16 445 / 646 / 14 380 / 6 678 / 7 702 / 115%
Transfers and grants / – / – / – / – / – / - / –
Other expenditure / 68 551 / 52 067 / 55 216 / 2 081 / 14 520 / 47 728 / (33 208) / -70%
Loss on disposal of PPE / –
Total Expenditure / 323 128 / 393 904 / 398 767 / 24 689 / 273 232 / 374 863 / (101 631) / -27% / –
Surplus/(Deficit) / (50 099) / (128 761) / (128 760) / (23 852) / (13 564) / (131 816) / 118 252 / (0) / –
Transfers recognised - capital / 105 068 / 72 225 / 68 461 / 941 / 57 846 / 66 206 / (8 360) / (0)
Contributions recognised - capital / –
Contributed assets / –
Surplus/(Deficit) after capital transfers & contributions / 54 969 / (56 537) / (60 299) / (22 911) / 44 282 / (65 610) / –
Taxation / –
Surplus/(Deficit) after taxation / 54 969 / (56 537) / (60 299) / (22 911) / 44 282 / (65 610) / –
Attributable to minorities
Surplus/(Deficit) attributable to municipality / 54 969 / (56 537) / (60 299) / (22 911) / 44 282 / (65 610) / –
Share of surplus/ (deficit) of associate
Surplus/ (Deficit) for the year / 54 969 / (56 537) / (60 299) / (22 911) / 44 282 / (65 610) / –

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Annexure B

EC122 Mnquma - Supporting Table SC12 Monthly Budget Statement - capital expenditure trend - M11 May
Month / 2015/16 / Budget Year 2016/17
Audited Outcome / Original Budget / Adjusted Budget / Monthly actual / YearTD actual / YearTD budget / YTD variance / YTD variance / % spend of Original Budget
R thousands / %
Monthly expenditure performance trend
July / 3 834 / 6 019 / 6 019 / 2 464 / 2 464 / 6 019 / 3 555 / 59.1% / 3%
August / 3 834 / 6 019 / 6 019 / 864 / 3 328 / 12 038 / 8 710 / 72.4% / 5%
September / 3 834 / 6 019 / 6 019 / 9 678 / 13 006 / 18 056 / 5 050 / 28.0% / 18%
October / 3 834 / 6 019 / 6 019 / 11 895 / 24 901 / 24 075 / (826) / -3.4% / 34%
November / 3 834 / 6 019 / 6 019 / 2 562 / 27 463 / 30 094 / 2 631 / 8.7% / 38%
December / 3 834 / 6 019 / 6 019 / 19 355 / 46 818 / 36 113 / (10 706) / -29.6% / 65%
January / 3 834 / 6 019 / 6 019 / 3 202 / 50 020 / 42 131 / (7 889) / -18.7% / 69%
February / 3 834 / 6 019 / 6 019 / 988 / 51 008 / 48 150 / (2 858) / -5.9% / 71%
March / 3 834 / 6 019 / 6 019 / 4 862 / 55 870 / 54 169 / (1 701) / -3.1% / 77%
April / 3 834 / 6 019 / 6 019 / 1 035 / 56 905 / 60 188 / 3 283 / 5.5% / 0
May / 3 834 / 6 019 / 6 019 / 941 / 57 846 / 66 206 / 8 361 / 12.6% / 0
June / 3 834 / 6 019 / 6 019 / 72 225 / –
Total Capital expenditure / 46 008 / 72 225 / 72 225 / 57 846

Annexure C

EC122 Mnquma - Table C7 Monthly Budget Statement - Cash Flow - M11 May
Description / Ref / 2015/16 / Budget Year 2016/17
Audited Outcome / Original Budget / Adjusted Budget / Monthly actual / YearTD actual / YearTD budget / YTD variance / YTD variance / Full Year Forecast
R thousands / 1 / %
CASH FLOW FROM OPERATING ACTIVITIES
Receipts
Property rates, penalties & collection charges / 19 472 / 19 472 / 475 / 7 725 / 17 849 / (10 124) / -57%
Service charges / 4 100 / 4 100 / 26 / 1 180 / 3 758 / (2 578) / -69%
Other revenue / 10 772 / 14 922 / 130 / 429 / 13 678 / (13 250) / -97%
Government - operating / 229 071 / 217 033 / – / 224 553 / 198 947 / 25 605 / 13%
Government - capital / 105 068 / 72 225 / – / 63 727 / 66 206 / (2 479) / -4%
Interest / 9 025 / 9 025 / 219 / 10 024 / 8 273 / 1 751 / 21%
Dividends / – / –
Payments
Suppliers and employees / (321 105) / (392 704) / (24 688) / (277 018) / (359 979) / (82 961) / 23%
Finance charges / (2 024) / (1 200) / (1) / (525) / (1 100) / (575) / 52%
Transfers and Grants / – / – / –
NET CASH FROM/(USED) OPERATING ACTIVITIES / 54 378 / (57 127) / 0 / (23 840) / 30 094 / (52 367) / (82 461) / 157% / –
CASH FLOWS FROM INVESTING ACTIVITIES
Receipts
Proceeds on disposal of PPE / 590 / 590 / – / 238 / 541 053.33 / (303) / -56%
Decrease (Increase) in non-current debtors / –
Decrease (increase) other non-current receivables / –
Decrease (increase) in non-current investments / –
Payments
Capital assets / (105 068) / (72 225) / 941 / 57 846 / (66 206) / (124 052) / 187%
NET CASH FROM/(USED) INVESTING ACTIVITIES / (104 477) / (71 634) / – / 941 / 58 084 / (65 665) / (123 749) / 188% / –
CASH FLOWS FROM FINANCING ACTIVITIES
Receipts
Short term loans / –
Borrowing long term/refinancing / –
Increase (decrease) in consumer deposits / –
Payments
Repayment of borrowing / –
NET CASH FROM/(USED) FINANCING ACTIVITIES / – / – / – / – / – / – / – / –
NET INCREASE/ (DECREASE) IN CASH HELD / (50 099) / (128 762) / – / (22 899) / 88 178 / (118 032) / –
Cash/cash equivalents at beginning: / 90 602 / 41 369 / 49 212 / 41 369 / 49 212
Cash/cash equivalents at month/year end: / 40 503 / (87 393) / – / 137 390 / (76 663) / 49 212

Annexure D

Annexure E

EC122 Mnquma - Supporting Table SC4 Monthly Budget Statement - aged creditors - M11 May
Description / NT Code / Budget Year 2016/17 / Prior year totals for chart (same period)
0 -
30 Days / 31 -
60 Days / 61 -
90 Days / 91 -
120 Days / 121 -
150 Days / 151 -
180 Days / 181 Days -
1 Year / Over 1
Year / Total
R thousands
Creditors Age Analysis By Customer Type
Bulk Electricity / 0100 / 417 / 417
Bulk Water / 0200 / 12 / 12
PAYE deductions / 0300 / – / –
VAT (output less input) / 0400 / – / –
Pensions / Retirement deductions / 0500 / 2 570 / 2 570
Loan repayments / 0600 / – / –
Trade Creditors / 0700 / 6 779 / 84 / 2 476 / 6 / – / 14 / 193 / 9 553
Auditor General / 0800 / 2 517 / 2 517
Other / 0900 / – / –
Total By Customer Type / 1000 / 12 296 / 84 / 2 476 / 6 / – / 14 / 193 / – / 15 070 / –

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