Cost Drivers
Part 2 Supporting Documentation
2.1 Overview of the annual budget process
Section 53 of the MFMA requires the metro’s mayor to provide general political guidance in the budget process and the setting of priorities that must guide the preparation of the budget. In addition, Chapter 2 of the Municipal Budget and Reporting Regulations states that the metro’s mayor must establish a Budget Steering Committee to provide technical assistance to the mayor in discharging the responsibilities set out in Section 53 of the Act.
The Budget Steering Committee consists of the City Manager and senior metro officials, meeting under the chairpersonship of the MMC for Finance.
The primary aims of the Budget Steering Committee are to ensure:
That the process followed to compile the budget complies with legislation and good budget practices.
That there is proper alignment between the policy and service delivery priorities set out in the metro’s IDP and the budget, taking into account the need to protect the financial sustainability of municipality.
That the municipality’s revenue and tariff setting strategies ensure that the cash resources needed to deliver services are available.
That the various spending priorities of the different municipal departments are properly evaluated and prioritised in the allocation of resources.
2.1.1 Budget Process Overview
The key deadlines for the compilation of the IDP and MTREF was submitted to Council for approval during August 2014 as required by Section 21(b) of the MFMA. In terms of the approved key deadlines, the draft IDP and Budget must be tabled to Council at the end of January 2015. Input from the various oversight committees will be obtained after tabling and public participation is scheduled for April 2015 with final adoption of the IDP and budget during May 2015.
The Strategy and Corporate Planning Department conducted meetings with ward committees on 10 September 2014 to get input for the review of the IDP. During the period, ward committees were consulted to obtain their priorities and needs. The proposals formulated in terms of the high level results which departments will work towards achieving to support the GDS’s 2055 programmes has been drafted. These still need further refinement in terms of detailed targets to be reflected in the SDBIP.
The IDP engaged meetings with each department during November 2014. This consisted of one-on-one engagement with departments to discuss the SDBIP and to finalise indicators and targets. The process also ensures that departmental outputs are aligned with national outcomes and the GDS.
The departments received budget compilation guidelines and templates to be submitted in support of their budget requests during October 2014.
Departments duly complied and submitted their Operating Budget and Capital Budget requests to the Finance Department for consolidation during November 2014.
Consolidation of the departmental input received and analysis of the requests took place during November 2014.
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IBALCO Meetings
The IDP, Budget, Assets and Liabilities Committee (IBALCO) have been set up as a subcommittee of the City Manager’s Strategic Management Team (SMT). This committee is tasked with the technical evaluation of departmental budget requests. Meetings took place regularly since the initial budget process started, to consider all the matters affecting the compilation of the new budget.
IBALCO meetings took place prior to all the Budget Steering Committee meetings to review documentation before submission to the Budget Steering Committee.
Budget Steering Committee
The Budget Steering Committee was set up by the Executive Mayor in terms of Section 4 of the Municipal Budget and Reporting Regulations.
The Budget Steering Committee is chaired by the MMC Finance all the members of Mayoral Committee are invited to the meetings. The Executive Mayor is an ex officio member of the Budget Steering Committee and attended several meetings.
The following meetings were held by the Budget Steering Committee:
28 July 2014: Meeting to detail the key deadlines for the 2015/16 MTREF cycle.
20 August 2014: Meeting held to finalise the report for Council regarding the key deadlines and discussion of the Draft Medium-term Budget Policy Statement.
13-17 October 2014: Various meetings took place to look at budget related matters.
It included the tabling of the raw budget requests for capital and operating prior to any balancing or prioritization. The BSC also looked at the progress made in terms of meetings the IDP needs as identified for the budget.
8 December 2014: Meeting held to discuss draft 2015/16 MTREF as well as the Adjustments Budget for the 2014/2015 financial year.
10 December 2014: Follow up meeting to finalise the agenda of the previous meeting.
19 January 2015: Meeting held to consider 2014/15 Adjustment Budget of departments as well as the draft budget to be submitted to Council in January 2015.
The Revenue Frameworks of the main income generating services and budget related policies were also discussed.
6 May 2015: The final changes of the Operating and Capital Budget after the public participation meetings were discussed.
Key dates as approved by Council in August 2014 were as follows:
First round public engagements which will entail individual meetings at CCA level with ward councillors and ward committees determine budget input from the community from August – September 2014. This will focus on the following:
o Basic feedback on the past IDP Budget Process o Discussion of 5 Priorities of wards. It will include
The discussion of the 5 priorities as identified in the 2014/15 Budget cycle
Feedback how the priorities have / have not been accommodated in the current 2014/15 Budget (e.g. departmental plans and relation to
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ward priorities as well as standard, Report on Capital Budget to be implemented in CCA per Ward)
Give strategic direction and obtain the 5 priorities for the 2015/16 Budget cycle
The Strategy and Corporate Planning Department has already commenced to arrange ward committee meetings on 10 & 11 September 2014.
Tabling of an Unaudited Annual Report in Council (as per National Treasury Circular No 63 guidelines) for referral to Oversight Committees in August 2014.
Interrogation of the Unaudited Annual Report by Oversight Committees from October – November 2014.
Various Lekgotla meetings including the Mayoral Lekgotla in September 2014 to set priorities for the IDP / Budget to be compiled.
IDP engagements with the Departments - Draft Departmental Plans and SDBIP submitted as part of the IDP review process from September to October 2014. The departments must include the priorities as reconfirmed and identified at the Mayoral Lekgotla into consideration. The input from various stakeholders and forums must also be incorporated during the compilation of the priorities to ensure an all-inclusive and comprehensive prioritization.
Preparation, submission and administrative evaluation of the capital and operating requirements of departmental budget from September to November 2014. This will also include a number of meetings of the Budget Steering Committee during the process. It will also include the various other budget related processes such as the review of budget policies, tariff modelling and tariff setting, evaluation of the capital budget requests based on the Capital Investment Framework (CIF), compilation of all the supplementary budgets, submission of demand management plans and motivations for budget requests.
Finalisation and completion of the entire Budget / IDP in terms of legislative requirements in order to ensure that a complete budget book is compiled in December 2014.
The complete 2015/16 MTREF/IDP will be tabled at Council in January 2015.
Engagement with oversight committees regarding the Tabled Budget will take place during February and March 2015.
The Mid-Year Budget and Performance Assessments engagement with the National Treasury is planned for February 2015. However, the final dates will be determined by National Treasury.
Public meetings regarding the Tabled 2015/16 MTREF/IDP is scheduled to take place in April 2015. A programme with preliminary dates has already been compiled and is attached to this report. This will ensure that notifications and awareness campaigns to inform communities could be done well in advance.
Benchmarking Review of the Draft Budget by National Treasury will take place during March/April 2015.
The feedback from the various Oversight Committees and the input from the public participation process will be considered in April 2015, before the Budget/IDP is submitted for final approval by Council.
Budget Day for the final approval of 2015/16 MTREF/IDP will take place on 28 May 2015.
2.1.2 IDP and Service Delivery and Budget Implementation Plan
The IDP is the EMM’s principal strategic planning instrument, which directly guides and informs its planning, budget, management and development actions. This framework is rolled out into planning statements covering the five-year objectives, key performance indicators and targets for implementation which directly inform the Service Delivery and
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Budget Implementation Plan. The whole process was structured around supporting and working towards contributing to the achievement of the programmes set in the GDS 2055.
In terms of Section 34 of the Municipal Systems Act, 32 of 2000, the Council must annually review its IDP in terms of a predetermined process. This process was adopted by the Council on 30 August 2012.
The review of the IDP in terms of the Municipal Systems Act is guided and informed by the following:
It must support and work towards achieving the vision and mission of EMM.
Working towards the achievement of the EMM GDS 2055 programmes.
Addressing the national outcomes set by Parliament.
Focus on basic service delivery in terms of the eradication of backlogs and the maintenance of existing infrastructure and community needs.
Provincial plans and programmes applicable to the specific budget allocations by the respective provincial sector departments to these projects should also be reflected as far as possible.
All departments were part of the process of reviewing the IDP and SDBIP in terms of the newly approved GDS 2055.
2.1.3 Financial Modelling and Key Planning Drivers
As part of the compilation of the 2015/16 MTREF, financial modelling was undertaken to ensure affordability and long-term financial sustainability. The following key factors and planning strategies have informed the compilation of the 2015/16 MTREF:
City growth.
Policy priorities and strategic objectives.
Asset maintenance.
Economic climate and trends (i.e. inflation, Eskom increases, household debt, migration patterns).
Performance trends.
The approved 2014/15 adjustments budget and performance against the SDBIP.
Cash Flow Management Strategy.
Debtor payment levels.
Loan and investment possibilities.
The need for tariff increases versus the ability of the community to pay for services.
Improved and sustainable service delivery.
In addition to the above, the strategic guidance given in National Treasury’s MFMA Circular 74 have been taken into consideration in the planning and prioritisation process.
Flagship Projects
EMM pronounced on a number of flagship projects. All of these projects has been allocated to certain departments and the status and progress on these projects are discussed in detail as part of the departmental budget reports.
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2.1.4 Community Consultation
Section 29 (1) (b) of Chapter 5 of the Municipal Systems Act of 2000 states that municipalities through appropriate mechanisms, processes and procedures established in terms of public participation; allow for communities to be consulted on their development needs and priorities; and that the local community to participate in drafting of the IDP.
EMM used the ward committees as a mechanism for the purpose of engaging and consulting communities on their needs and priorities. The IDP review meetings were held in all 20 Customer Care Centres with ward committees from 101 wards. Several wards (between two and nine) were combined into a single CCA with the effect that only 17 meetings were held across the metro.
These meetings took place 10 September 2014.