MEMORANDUM
MINISTER
DIRECTOR-GENERAL
COMPLIANCE WITH DEADLINES FOR THE TABLING AND APPROVAL OF MUNICIPAL BUDGETS FOR THE 2011 AND 2012 MTREF: REQUEST TO TABLE INFORMATION IN PARLIAMENT
PURPOSE:
To seek the Minister’s approval to:
1. Table in Parliament the dates on which all 278 municipalities tabled and adopted their 2011 and 2012 Medium Term Revenue and Expenditure Framework (MTREF) budgets; and
2. Publish the same information, once tabled in Parliament, and on the National Treasury website.
BACKGROUND:
3. Section 16(2) of the Municipal Finance Management Act, 2003 (Act No. 56 of 2003)(MFMA) requires the Mayor of a municipality to table the annual budget at a Council meeting at least 90 days before the start of the municipal budget year.
4. In order to monitor compliance with this very important requirement, and to track improved performance of municipalities over time, the National Treasury has instituted a process to collect this information annually in the form of a budget questionnaire. The results of this exercise have previously been used as input into the Chapter on “Financial Management and MFMA Implementation” as part of the 2011 Local Government Budgets and Expenditure Review.
5. The "tabling of the budget questionnaire" was sent to all 278 municipalities and they were requested to complete it by 30 September 2012. The overall response has improved in comparison to previous years, however with the support of provincial treasuries and the municipalities; there is still room for improvement on the current response rate of 99 per cent.
6. The overall quality of the input from municipalities has also improved. Most municipalities appear to understand the importance of tabling their budgets on
INTERGOVERNMENTAL RELATIONS
From: Jan Hattingh Tel: (012) 315 5009 Fax: (012) 395 6553 Ref: #
time and the negative impact of late tabling. We are therefore at a point where National Treasury can confidently publish this information in the public domain.
7. The questionnaire is straight forward. Municipalities are required to answer questions pertaining to the budget preparation process. The questions relate to the tabled budget, the adopted (approved) budget and the previous year’s adjustments budget.
8. The responses received are summarized into provincial tables.
9. (Annexure A1 - A9 for 2012 MTREF and Annexure B1 - B9 for 2011 MTREF.
RATIONALE FOR TABLING THIS INFORMATION IN PARLIAMENT:
10. National Treasury embarked upon this course of action in order to complement the work of the Auditor-General, who, in terms of Section 133(2) of the MFMA;
tables in Parliament a quarterly report on the submission of annual financial statements along with a list of municipalities that have failed to submit their statements to the Auditor-General.
11. The MFMA was promulgated in 2003 and its implementation plan was deliberately designed to assist municipalities to phase in the requirements of the Act based on their capacity constraints. Given this background, and the fact that we are now in the ninth year of implementation of the MFMA, it is reasonable to expect full compliance on the budget submission requirements of the Act and also that there would be evidence to suggest that both quality and credibility have improved. This improvement is evident in the information contained in the supporting documentation. See Annexure A1 - 9 (2012 MTREF) and Annexure B1 - 9 (2012 MTREF). The information contained in these Annexures will be useful to several users of such information and also serves to strengthen municipal accountability entrenched in the MFMA.
12. On 17 April 2009, the Minister of Finance promulgated the Municipal Budget and Reporting Regulations. All municipalities were required to comply with the new schedules with effect from 2010/11 when compiling their annual budgets. Since the inception of the regulations, there has been a significant improvement in the level of compliance with all municipalities submitting their 2012/13 budgets in the prescribed formats. This represents an improvement from the previous financial year where 6 municipalities did not comply with the prescribed schedules.
13. Publishing municipal budget information in these new formats has greatly increased transparency and understanding of municipal finances, and also facilitated more effective oversight.
BROAD TRENDS:
14. In aggregate 256 out of 278 or 92 per cent of the municipalities tabled their budgets in their respective municipal councils on time, 12 municipalities more than last year’s 244 municipalities.
15. 277 out of 278 or 99 per cent of the municipalities adopted their budget within the prescribed period. Mangaung municipality is the only municipality that did
16. 267 municipalities prepared their own budgets, an increase of 2 municipalities from last year, and 10 out of 278 or 4 per cent of the municipalities had their budgets prepared by external service providers.
17. 11 out of 278 or 4 per cent of the 278 municipalities planned to table another adjustments budget for their previous year’s budget i.e. for the 2011/12 municipal financial year; this is a decrease of 2 per cent from last year’s 6 per cent.
18. The table below shows the trend in tabling and approving municipal budgets since 2005/06.
2005/06 2006/7 2007/8 2008/9 2009/10 2010/11 2011/12 2012/13
Tabled on time 47% 81% 86% 81% 89% 89% 88% 92%
Approved on time 97% 94% 98% 91% 61% 82% 97% 99%
0%
20%
40%
60%
80%
100%
Percentage
Trend in tabling dates of municipal budgets per year 2005/06 - 2012/13
19. 234 municipalities or 84 per cent of the 278 municipalities complied with section 22(b) and section 24(3) of the MFMA which requires them to submit their adjustments budget in both printed and electronic formats to National Treasury, the relevant provincial treasury, prescribed national or provincial state organs as well as to other municipalities affected by the budget. This is a 4 per cent improvement over the 2011/12 financial year.
20. From a provincial perspective, the figures suggest that Free State and Gauteng municipalities performed the worst in terms of tabling their budgets within the legislated timeframes with 17 per cent of the municipalities in each of these provinces not meeting the deadline. It should however be noted that Free State’s figures maybe skewed by the fact that Mangaung municipality did not respond to National Treasury’s request for information. Gauteng on the other hand has experienced a decline in the level of compliance where 17 per cent of their municipalities did not table their 2012/13 budgets on time compared to full compliance with the legislated deadline of 31 March in the previous financial year. The highest rate of compliance with the deadline was in the Eastern Cape where only 2 per cent of their municipalities tabled their budgets late.
RECOMMENDATION:
21. It is recommended that the Minister of Finance
Notes the background and contents of the submission;
Approves that the National Treasury can proceed to table the information contained in the Annexures in Parliament which reflects the actual dates on which municipalities have tabled and adopted their 2011 and 2012 MTREF Budgets; and
Approves that once the tabling has been done in Parliament, that the same information can be released on the National Treasury’s website.
Compiled by:
SYLVESTER MOHLOLI
SENIOR ECONOMIST: LOCAL GOVERNMENT BUDGET ANALYSIS DATE:
Recommended / Not recommended
JAN HATTINGH
CHIEF DIRECTOR: LOCAL GOVERNMENT BUDGET ANALYSIS DATE:
Recommended / Not recommended.
KENNETH BROWN
DEPUTY DIRECTOR-GENERAL: INTERGOVERNMENTAL RELATIONS DATE:
Recommended / Not recommended.
LUNGISA FUZILE DIRECTOR-GENERAL DATE:
Comments noted Comments (if any):
Approved / Not Approved.
PRAVIN GORDHAN MINISTER OF FINANCE DATE:
