RESPONSE TO THE BUDGET FINDINGS
1. On the A4- REVENUE- Interest on external investment of R 5.4M is not realistic considering past and current performances.
Until the end of April 2020 municipality has received R4, 721,000 for interest on investment, the amount was used as guideline to determine the projection for (A4) 2020/2021 interest on investment.
IF Provincial Treasury look under SA30 (interest on investment), municipality has projected to collect an actual of R 3.8 million which is less than the actual collection of 2019/2020 financial year by R 921 thousands–this is due to the municipality’s current financial situation that might affect the period of investing our grants . Provincial to give their opinion /advice on the projection of Interest on Investment.
2. SA16 - to be completed to be certain about the interest disclosed or to be realized
The comment is noted.
The Municipality was still in the negotiation with the financial system service
provider regarding the population of the sheet manually, since it was affecting other sheets by displaying errors.
Municipality need assistance from Provincial Treasury to compile SA16
3. Other expenditure on the SA1 to be broken down/split to determine what consists of "other expenditure"
Separate spreadsheet has been attached indicating the detailed breakdown of other expenditure
Municipality has a same challenge as above where the spreadsheet displaying errors when capturing manually this is due to the long list that entails all the other
expenditure.
Can’t Provincial Treasury allow Municipalities to submit a separate sheet as the evidence to support the amount disclosed under SA1?
4. Employee related cost increased by 30% SA24 to be populated.
The municipality might be sure how Provincial Treasury has calculated the 30%
increase mentioned above.
Municipality has increased the salaries with 6.5% which is higher than Salga Circular by 0.25% reason being to cater for all unresolved grievances and disputes.
Employee Related Cost has increase by 10% in total compared to 2019-2020 Financial Year.
Included in the 10% difference is the projection for filling of vacant positions.
If the Provincial Treasury can compare the Original Budget for employee related Cost 2019-2020 they will realise that it has actually increased by 3%.
Only critical positions has been budgeted for.
Based on the 2020-2021 Financial Year employee related cost is 30% of the Total Operational Expenditure.
SA 24 will be populated.
5. The municipality adopted a deficit on the A4 this impacts negatively on the sustainability of the institution.
Comment is noted.
Included in the Deficit of R42.3 million is the projection of Depreciation of R 133.5 million which is a non-cash item, by adding the Depreciation back municipality would like to assume that it has a projected cash surplus of R 91.2 Million.
6. To correct audited outcome figures. A7 closing with a deficit vs what is on the Annual Financial Statements.
Comment is noted.
7. Cash and cash equivalent have been overstated when compared to the cash flow statement.
Can the Provincial Treasury please Clarify on the above comment, since
municipality cannot understand which line item the provincial treasury refers to.
8. Consumer debtors are overstated considering Audited Outcome.
Consumer debtors are follows:
(20/21) 427 385 (21/22) 595 609 (22/23) 771 664
The above mentioned figure for 20/21 has been calculated as follows:
Age debtors for 2019-2020 Add Service charges (20/21)
Equals to consumer debtors June 2020 Debt impairment 2019-2020
Add debt impairment (20/21)
Equals to debt impairment June 2020
Then the difference between consumer debtors June 2020 and debt impairment June 2020 Equals to consumer debtors 2020/2021
Can Provincial Treasury please assist in calculating the above in case the municipality’s calculations are incorrect, figures used are disclosed under SA3.
9. Investment Property has been omitted
Comment is noted
10. Property, Plant and Equipment is understated based on past and current performance.
Noted
10. Current liabilities not disclosed.
Current liabilities is disclosed on the attached A1 Schedule.
11. Financial Position is not correctly completed.
• Financial position is disclosed on the attached A1 Schedule.
SUMMARY TO THE DRAFT BUDGET 2020/2021
NW375 Moses Kotane - Table A4 Budgeted Financial Performance (revenue and expenditure)
Revenue
1. Services Charges
Services charges are increased by 4.5% as per the CPIX estimates for 2020/2021 Financial year except for water Tariffs.
Please refer to page 16 to 19 of the MBRR report.
2. Rental Of facilities and Equipment
Municipality received 60 000 to date for rental of facilities but due to this pandemic municipality decided to project 40 000 less than the previous financial year.
3. Interest earned on external investments
Until the end of April 2020 municipality has received R4, 721,000 for interest on investment, the amount was used as guideline to determine the projection for (A4) 2020/2021 interest on investment.
IF Provincial Treasury look under SA30 (interest on investment), municipality has projected to collect an actual of R 3.8 million which is less than the actual collection of 2019/2020 financial year by R 921 thousands–this is due to the municipality’s current financial situation that might affect the period of investing our grants .
4. Interest on Outstanding Debtors
This is due to the increase of non-payment of services which municipality foresees due to the effect of covid 19.
5. Fines and Penalties
Municipality received R 750 000 for the 2019/2020 financial year the actual amount received With a billing of R 4,500,000
Municipality will need advice from treasury on how to budget especially for A4.
New office for Mabeeskraal was open during this financial this might also have an impact on traffic fines revenue.
6. Transfers and Subsidise
Grants and Subsidise has been disclosed as per Division of Revenue Act.
7. Other Revenue
Other Revenue Consists of the following:
Advertising
Sale of tender Documents Town Planning
Skills development levy fund Sale of property
The list is attached as annexure B
Expenditure
8. Employee Related Costs
Municipality has increased the salaries with 6.5% which is higher than Salga Circular by 0.25% reason being to cater for all unresolved grievances and disputes.
Employee Related Cost has increase by 10% in total compared to 2019- 2020 Financial Year.
Included in the 10% difference is the projection for filling of vacant positions.
If the Provincial Treasury can compare the Original Budget for employee related Cost 2019-2020 they will realise that it has actually increased by 3%.
Only critical positions has been budgeted for.
Based on the 2020-2021 Financial Year employee related cost is 30% of the Total Operational Expenditure.
9. Remuneration of Councillors
Remuneration of councillors has been increased by 5%.
10. Debt impairment
Debt impairment has been determined by using Actual projected collection minus 100%
The following projection was determined for non-collection Water Services- 60%
Refuse-95%
Sewer-70%
Traffic fines-68%
Property Rates-45%
11. Depreciation
Assets register was used in this regards.
12. Bulk Purchases
Magalies water has increase their water tariff with 12% on the coming financial year.
Previous payment has been used to determine the current projection for bulk purchases.
13. Other Material
Included in the other material is the cleaning material, stationery ect.
Zero base budgeting was used when determining the budget as well as the previous months spending.
14. Contracted Services
Combination of Zero base budgeting and 4.5 %( CPIX) was used.
15. Other Expenditure
Combination of Zero base budgeting and 4.5 %( CPIX) was used
Previous year spending was also considered
The list of others expenditure is attached as Annexure A.
NW375 Moses Kotane - Table A5 Budgeted Capital Expenditure by vote, functional classification and funding CAPITAL GRANTS
The amount attached to the disclosed projects are line with the Division of Revenue Act.
No project will be funded with own revenue on the draft budget.
NW375 Moses Kotane - Table A6 Budgeted Financial Position
Most of the line items under balance sheet has been discussed above, see number 6-10.
Although Municipality did not disclose intangible assets separately which has been added to Property plant and equipment, the correction will be done during final budget.
The outer year for investment property disclosed on A6 will also be corrected during final budget since they relate to intangible assets. Municipality will have to check its mapping.
Municipality will also have to correct/recalculate the consumer Debtors for outer years.
Municipality will have to re look the issue of borrowings.
NW375 Moses Kotane - Table A7 Budgeted Cash Flows
Cash flow from Investing and Operating activities where captured manually
Only Cash flow from financing activities populates its self.
The following Collection Projections were determined:
Water Services- 40%
Refuse-5%
Sewer-30%
Traffic fines-32%
Property Rates-55%
Until March 2020 the municipality collection rate is as follows:
• Water Services- 46%
• Refuse-4.5%
• Sewer-34%
• Traffic fines-30%
• Property Rates-60%
NW375 Moses Kotane - Table A9 Asset Management
A9 is populated accordingly.
Audited Figures
Audited figures were done manually ,but according to our financial system figures need to be captured directly to the system and populates itself in the A1 Schedule
Not all sheets populated Audited figures on the A1 schedule, this will be corrected during final budget.
