increases in specifically the electricity tariffs.
2.4 OVERVIEW OF BUDGET RELATED POLICIES
The MFMA and the Budget and Reporting Regulations require budget related policies to be reviewed, and where applicable, be updated on an annual basis.
2.4.1 Financial Management Policies (FMP)
The policies were adopted by the Council in May 2010. The policies govern the financial management functions of the Municipality, such as budgeting, virements, financial statements, etc.
There are no anticipated amendments that are required to the FMP, a section that deals with virements has recently been amended.
2.4.2 Review of credit control and debt collection policies
The Collection Policy was reviewed and approved by Council in March 2011. A review of certain components of the policy was considered necessary to achieve a higher collection rate.
The 2016/17 MTREF has been prepared on the basis of achieving an average revenue collection rate of 95% on current billings, excluding ATTP subsidies. In addition, the collection of debt in excess of 120 days has been prioritised as a specific strategy, in order to improve the Municipality’s cash position. The NMBM has recently appointed a service provider in order to enhance the municipality’s revenue collection strategies.
2.4.3 Budget Adjustment Policy (part of Financial Management Policies)
The adjustments budget process is regulated by the MFMA and is aimed at entrenching increased levels of discipline, responsibility and accountability in the financial management practices of the Municipality. In order to ensure that the Municipality continues to deliver on its core service delivery mandate, the mid-year review and adjustments budget processes are utilised to ensure that underperforming functional areas are identified and funds redirected to performing functional areas.
2.4.4 Supply Chain Management Policy
A revised Supply Chain Management Policy was adopted by Council in September 2013.
2.4.5 Cash Management and Investments Policy
The Cash Management and Investments Policy was amended by Council in December 2005. The aim of the policy is to ensure that surplus cash and investments are adequately managed, especially the funds set aside for the cash backing of certain reserves.
2.4.6 Tariff Policies
The different tariff policies provide a broad framework for the determination of tariffs. The different policies were approved on various dates.
All the above policies are available on the Municipality’s website, as well as the following budget
related policies:
54
• Asset Management Policy;
• Property Rates Policy;
• Basic Social Services Package (Assistance to the Poor Policy).
2.5 OVERVIEW OF BUDGET ASSUMPTIONS
Budget assumptions/parameters are determined in advance of the budget process to allow budgets to be constructed to support the achievement of the longer-term financial and strategic targets.
The municipal fiscal environment is influenced by a variety of macro economic control measures.
National Treasury provides guidelines on the ceiling of year-on-year increases in the total Operating Budget, whilst the National Electricity Regulator of South Africa (NERSA) regulates bulk electricity tariff increases and the Department of Water Affairs (DWA) regulates bulk water tariff increases. The Municipality’s employee related costs are also influenced by collective agreements concluded in the South African Local Government Bargaining Council. Various government departments also affect municipal service delivery through the level of grants and subsidies.
The following principles and guidelines directly informed the compilation of the Budget:
• The priorities and targets, relating to the key strategic focus areas, as determined in the IDP.
• The need to enhance the municipality’s revenue base.
• The level of property rates and tariff increases to take into account the need to address maintenance and infrastructural backlogs, including the expansion of services.
• The level of property rates and tariff increases to ensure the delivery of services on a financially sustainable basis.
• No budget allocations have been made to programmes and projects, unless the respective programme and project plans have been submitted by the relevant Acting/Executive Directors.
• An assessment of the relative human resources capacity to implement the Budget.
• No growth in revenue sources has been provided for in view of current consumption trends in municipal services.
The Municipality faced the following significant challenges in preparing the 2016/17 – 2018/19 Budget:
• Budgeting for a surplus on the Operating Budget;
• Fully implementing cost containment measures and removing non-core expenditure items;
• Maintaining revenue collection rates at the targeted levels;
• Increased costs associated with bulk electricity and water purchases, placing upward pressure on municipal tariff increases. Continued high tariff increases may soon render municipal services financially unaffordable;
• Maintaining electricity and water losses at acceptable levels;
• Allocation of the required operating budget provision for newly created infrastructure and facilities, with a consequential impact on the level of rates and tariff increases;
• Allocation of the required budget provision for the rehabilitation and maintenance of infrastructure;
• Depleted Capital Replacement Reserve, impacting on the Municipality’s ability to fund capital expenditure from internal sources;
• Maintaining an acceptable cost coverage ratio;
• Reprioritisation of capital projects and operating expenditure within the financial affordability
limits of the Budget, taking the municipality’s declining cash position into account.
55
• All other demands not included in the draft / tabled budget such as (i) Harmonisation of the Long Service Bonus, (ii) Establishment of Metro Police Force, (iii) Critical Vacancies, (iv) Costs relating to the raising of a loan facility, amongst others.
The multi-year budget is therefore underpinned by the following assumptions:
2016/17 2017/18 2018/19
Income % % %
Tariff Increases for water 9 9 9
Tariff Increases for sanitation 9 9 9
Tariff Increases for refuse 9 9 9
Property rates increase 9.5 9.5 9.5
Electricity tariff increase 12.20 12.20 12.20
Revenue collection rates (excluding ATTP subsidies) 95 96 97 Total expenditure increase allowed (excluding repairs
and maintenance) 6 6 6
Salary increase 8 8 8
Increase in repairs and maintenance 8 8 8
Increase in bulk purchase of power costs 12.20 12.20 12.20
Increase in bulk purchase of water costs 12 12 12
It is to be noted that the Budget has been prepared, based on Generally Recognised Accounting Practice (GRAP).
2.6 OVERVIEW OF BUDGET FUNDING 2.6.1 Medium-term outlook: operating revenue
The following table provides a breakdown of operating revenue over the medium-term:
Formatted: Font color: Red
Formatted: Font color: Red
56
Dalam dokumen
2016/17 – 2018/19 budget | mfma
(Halaman 58-61)