DANNHAUSER MUNICIPALITY ADJUSTMENT BUDGET
2016/2017
KZN 254
Glossary
Adjustments Budget – Prescribed in section 28 of the MFMA. The formal means bywhich a municipality may revise its annual budget during the year.
Allocations – Money received from Provincial or National Government or othermunicipalities.
Budget – The financial plan of the Municipality.
Budget Related Policy – Policy of a municipality affecting or affected by thebudget, examples include tariff policy, rates policy and credit control and debtcollection policy.
Capital Expenditure - Spending on assets such as land, buildings and machinery.
Any capital expenditure must be reflected as an asset on the Municipality’s balancesheet.
Cash flow statement – A statement showing when actual cash will be received andspent by the Municipality. Cash payments do not always coincide with budgetedexpenditure timings. For example, when an invoice is received by the Municipalityit is shown as expenditure in the month it is received, even though it may not bepaid in the same period.
DORA – Division of Revenue Act. Annual legislation that shows the total allocationsmade by national to provincial and local government.
Equitable Share – A general grant paid to municipalities. It is predominantlytargeted to help with free basic services.
Fruitless and wasteful expenditure – Expenditure that was made in vain and wouldhave been avoided had reasonable care been exercised.
GFS – Government Finance Statistics. An internationally recognized classificationsystem that facilitates like for like comparison between municipalities.
GRAP – Generally Recognized Accounting Practice. The new standard for municipalaccounting.
IDP – Integrated Development Plan. The main strategic planning document of theMunicipality
KPI’s – Key Performance Indicators. Measures of service output and/or outcome.
MFMA – The Municipal Finance Management Act – No. 53 of 2003. The principlepiece of legislation relating to municipal financial management
MTREF – Medium Term Revenue and Expenditure Framework. A medium termfinancial plan, usually 3 years, based on a fixed first year and indicative further twoyears budget allocations. Also includes details of the previous and current years’financial position.
Net Assets – Net assets are the residual interest in the assets of the entity afterdeducting all its liabilities. This means the net assets of the municipality equatesto the "net wealth" of the municipality, after all assets were sold/recovered and allliabilities paid. Transactions which do not meet the definition of Revenue orExpenses, such as increases in values of Property, Plant and Equipment where thereis no inflow or outflow of resources are accounted for in Net Assets.
Operating Expenditure – Spending on the day to day expenses of the Municipalitysuch as salaries and wages.
Rates – Local Government tax based on the assessed value of a property. Todetermine the rates payable, the assessed rateable value is multiplied by the ratein the rand.
SDBIP – Service Delivery and Budget Implementation Plan. A detailed plancomprising quarterly performance targets and monthly budget estimates.
Strategic Objectives – The main priorities of the Municipality as set out in the IDP.
Budgeted spending must contribute towards the achievement of the strategicobjectives.
Unauthorized expenditure – Generally, spending without, or in excess of, anapproved budget.
Virement – A transfer of budget
Section 1 – Mayor’s Report
In accordance with section 28 of the Municipal Finance Management Act, No 56 of 2003 (MFMA) a municipality must revise its approved annual budget through an adjustments budget, in the following circumstances:
(i) To appropriate additional revenues that have become available over and above those anticipated in the annual budget, but only to revise or accelerate spending programmes already
Budgeted for.
(ii) To authorize the utilization of projected savings in one vote towards spending under another vote.
(iii) To authorize the spending of funds that were unspent at the end of the past financial year where the under-spending could not reasonably have been foreseen at the time to include projected rollovers when the annual budget for the current year was approvedby the Council.
(iv) To correct any errors in the annual budget.
In line with the MFMA, the 2016/17 approved Budget has now been adjusted.
The main adjustments proposed in this adjustment budget are:
Operating Budget
Property Rates decrease by R 663 013.00 because of updated indigent Relief list and accurate tariff setting.
Sundry income decreased by 32% because of the trade-in amount projected decreased to R 340 000.00 when the new motor vehicle purchased
Operating Expenditure
Employee Related Cost
Basic Salaries decrease by R 3 719 008.00 mainly because of the posts on the organogram that are not yet filled.
Travelling allowance increase by R 278 000.00
Pension Fund budget was not adequate and it has been adjusted by R 1 238 524.00
Employee Related Costs decreased by 15%.
General Expenses
Newsletter and Media Briefings increased by R 200 000.00, there’s a need to publicize the good work that is done by the Municipality.
Catering: Meetings and conference expenditure was at 92% in the Mid-Year assessment report, therefore adjusted by R 234 088.00
Rental Office Machinery increased by R 212 383.00, expenditure is above 100% to-date
Printing and Stationery budget was R 476,091.00, adjusted to R 749,652.00
Telephone by 91%, expenditure to date is R 292 803.00Insurance increased by R 100 000.00
Meetings: Subst / Travel increased by R 301 864.00
Conferences and seminars increased by R 211 869.00
Fuel & Oil decreased by R 365 318.00
Tertiary Aid decreased by R 210 000.00. Tertiary Aid adjusted because other payment will be made after July, they will then be catered in the new budget.
The Office of the Municipal Manager’s Substance and travel decreased from R 500 000.00 to R 280 000.00
Marketing and Corporate Image had not been budgeted for, however an amount ofR150 000.00 has been allocated.
Job Evaluation reduced to R 100 000.00 from R 204 000.00
Legal costs adjusted by R 100 000.00 from R 310 000.00 to R 210 000.00
Licenses Fees Budget was R 54 162.00 adjusted to R 300 000.00. MSIG used to fund all the systems improvement in the municipal and Grant is no longer offered by National Government, municipality must made the provision for systems improvement.
The municipality has a provision of R 200 000.00 for Zibambele on top of R 1 119 000.00 Grant.
Professional Fees reduced by R 200 000.00
Public Participation increased by R 230 000.00
Security and Alarms increased by R 534 327.00
Sports and Recreation original budget was R 470 000.00 adjusted R 200 000.00
Training for officials increased by R 200 00.00
General Expenses increased by 5%
Ward Committees increased by R500000.
Grandstands were not budgeted for in the original budget but was allocated R200000.
Meter Conversion reduced by R400000.
Jojo Tanks were reduced by R136000.
Repairs and Maintenance
Buildings and Property maintenance increase by R 133 944.00
Streets and Drainage maintenance decreased by R 150 000.00
Money for Streets Lights maintenance was reduced by R 190 000.00
Maintenance of Roads increased by R 2 200 000.00
Repairs & Maintenance increased by 30 %
Hiring of Machine increased by R2 000000.
Capital Expenditure
The office Bearers original budget was R 2 000 000.00 for the new vehicle.
There will be additional Traffic vehicle that will be purchased to replace the traffic vehicle written off due to accident. Rural Roads budget was R 7 000 000.00, it has been increased to R 13 374 642.00. Rural Roads is the MIG project, as result Taxi Rank budget was reduced to R 5 197 942.00. Electrification counter- Funding budget was R 10 000 000.00, it has been increased to R 11 000 000.00. Urban Road Budget was R 4 000 000.00 to date no expenditure. An amount of R 1000 000.00 was taken to Maintenance of Roads
Capital Expenditure decreased by 1%
The revised forecasted expenditure can be summarized as follows:
TYPE / Original Budget / 2016/17Adjustment Budget / 2017/18
Original Budget / 2018/19
Original Budget
Operating / R 92 295 872.00 / R 91 273 545.00 / R 94 974 44.00 / R 99 873 799.00
Capital / R 51 352 914.00 / R 51 018 901.00 / R 46 389 901.00 / R 43 318 895.00
Total / R 143 648 786.00 / R 142 292 446.00 / R 141 364 54.00 / R 143 192 94.00
As can be seen from the above the municipality’s cash resources will decline by R 1,1m for the current year and a projected R 61 830.00 over the MTREF period. This continuous decline in the municipality’s cash position remains a concern and is mainly attributable to the amount of investment in assets from own cash resources rather than external funding sources
Supporting Information
The results of the adjustments budget, as well as projections for the next2 years, are for information reflected in the graphs below:
Property Rates decrease by R 663 013.00 because of updated indigent Relief list and accurate tariff setting
Equitable share is R 75 694 000.00
As can be seen from the graph above operating transfers makes out asignificant percentage of the municipality’s revenue. This is mainly theEquitable Share allocation.
Significant expenditure items
Advertising process for vacant positions has started, it anticipated that these positions will be filled towards the end of the financial year, hence the downwards adjustment.
General expenses increased by 8% from Original Budget.
Repairs & Maintenance increased by 30% during the adjustment Budget.
Section 2 - Budget Related Resolutions
Dannhauser Municipality
MTREF 2016/2017
These are the resolutions that must be approved by Council with the finaladoption of the adjustments budget
RESOLVED
That the adjustments budget, inclusive of changes in terms of section28(2) of the MFMA, of Dannhauser Municipality for the financial year 2016/2017; and indicative for the two projected years 2017/18 and 2018/19, as set-out in the schedules contained in Section 4, be approved:
1.1 Table B1: Budget Summary
1.2 Table B2: Budgeted Financial Performance (expenditure by standard classification)
1.3 Table B3: Budgeted Financial Performance (expenditure by municipal vote)
1.4 Table B4: Budgeted Financial Performance (revenue by source)
1.5 Table B5: Budgeted Capital Expenditure for both multi-year and single year by vote, standard classification and funding.
1.6 Table B6: Budgeted Financial Position
1.7 Table B7: Budgeted Cash Flow
1.8 Table B8: Cash backed reserves/Accumulated surplus reconciliation
1.9 Table B9: Asset Management
That it be noted that there are no changes to any budget related policies.
Section 3 – Executive Summary
Introduction
This MTREF 2014 – 2015 adjustments budget is prepared on a multi-yearbasis, in line with the MFMA Municipal Budget and Reporting Regulations
Effect of the adjustment budget
A key consideration for the compilation of the adjustments budget waslong term financial sustainability and especially stabilizing the cash flowposition, while also ensuring continued service delivery and improvedservice delivery.
All major adjustments made to the original budget are included in the
Mayor’s report.
The new projected forecasts for the MTREF are as follows:
TYPE / 2016/2017 / 2017/18 / 2018/19Revenue / R 142,641,296 / R 141,710,293 / R 143,196,982
Expenditure / R 142,606,445 / R 141,682,214 / R 143,170,539
Surplus/(Deficit) / R -34,851 / R -28,079 / R -26,443
CAPITAL BUDGET
Executive & Council / 148,000Corporate Services / 1,029,433 / 1,086,051.82 / 1,150,128.87
Budget & Treasury / 732,390 / 86,921.58 / 92,049.96
Technical Services / 40,853,087 / 42,888,997 / 39,317,121
Community Services / 1,070,000 / 601,350.00 / 636,829.65
Protection Services / 750,000 / 105,500.00 / 111,724.50
Planning & Development / 100,000
Municipal Manager / 6,000,000 / 1,055,000.00 / 1,117,245.00
The projected funding of the capital budget is as follows:
Funding Source / 2016/2017 / 2017/2018 / 2018/2019National Government / R 21,767,000 / R 21,767,000 / R 22,807,000
Own Funds / R 29 251 901 / R 24 622 301 / R 20 511 895
Total / R 51,018,901 / R 46,389,301 / R 43,318,895
The reliance on internally generated funding remains high in 2016/2017 and is clearly depicted in the following chart
A summary of the revised budget is included in Section 4 of this report.
Section 4 – Budget related policies
There are no changes to the budget related policies proposed in the adjustments budget.
Section 5 – Overview of budget assumptions
Budget Assumptions
There are no changes to the budget assumptions proposed in the adjustments budget.
Section 6 – Funding compliance
The adjustments budget is cash – funded which is the first indicator of a “credible” budget.
Section 7 – Overview of budget funding
Funding the Budget
Section 18(1) of the MFMA states that an annual budget may only be funded from:
• Realistically anticipated revenues to be collected;
• Cash backed accumulated funds from previous years' surpluses not committed for other purposes; and
A Credible Budget
Amongst other things, a credible budget is a budget that:
• Funds only activities consistent with the revised IDP and vice versa ensuring the IDP is realistically achievable given the financial constraints of the municipality;
• Is achievable in terms of agreed service delivery and performance targets;
• Contains revenue and expenditure projections that are consistent with current and on past performance and supported by documented evidence of future assumptions;
• Does not jeopardize the financial viability of the municipality (ensures that the financial position is maintained within generally accepted prudential limits and that obligations can be met in the short, medium and long term); and
• Provides managers with appropriate levels of delegation sufficient to meet their financial management responsibilities
Section 8 – Councilor Allowances and employee benefits
Salaries, Allowances and Benefits
There are no changes proposed for Councilor Allowances.
Details of Councilor Allowances and employee benefits are included in supporting table SB11 attached.
Section 9 – Capital expenditure details
Capital expenditure details are listed in Supporting Table SB 18 to SB 19.
Section 10 – Municipal Manager’s quality certification
I, Mr. WB NKOSI, Municipal Manager of Dannhauser Municipality, hereby certify that the adjustments budget and supporting documentation have been prepared in accordance with the Municipal Finance Management Act and the regulations made under the Act, and that the adjustmentsbudget and supporting documents are consistent with the Integrated
Development Plan of the Municipality.
Mr WB Nkosi
Municipal Manager of Dannhauser Municipality
Signature …………………………………….
Date ……………………………………..