Summary:
The fourth quarter local government budget statement was released today by the National Treasury. The statement covers revenue and expenditure for the twelve months of the 2009/10 municipal financial year, which ended on 30 June 2010. The publication also includes information on the spending of local government conditional grants. The statement is available on the National Treasury's website: http://www.treasury.gov.za
National Treasury publishes this information in terms of section 71 of the Municipal Finance Management Act, 2003 (Act No. 56 of 2003) (MFMA), and in terms of section 44(3) of the 2009 Division of Revenue Act.
Referred to as the in-year management (IYM), monitoring and reporting system for local government, this information will enable provincial and national government to exercise oversight over municipalities, and identify possible problems in the implementation of municipal budgets and conditional grants.
All information in this publication is based on the section 71 MFMA reports that all municipal managers and chief financial officers were required to sign and submit to the National Treasury by 16 August 2010.
Therefore, any queries on the budget, revenue or expenditure figures reflected in the statement must be referred to the relevant municipal manager or chief financial officer. Queries on conditional grants may be referred to the national department responsible for administering each grant.
The information released with this press statement aggregates the municipal financial performance information for the fourth quarter of the 2009/10 financial year for 280 municipalities.
The coverage of municipal financial information in terms of section 71 of the MFMA has increased from 239 municipalities published for the first quarter and 274 for the second quarter of the 2009/10 financial year to 280 municipalities for the third quarter of 2009/10 and remained the same for the fourth quarter.
The budgeted figures disclosed are based on the 2009/10 adjusted budget statements tabled in the various municipal councils during January and February 2010.
Some of the notable trends that emerge from this information include:
Highlights
Aggregated trends
The fourth quarter local government budget statement of revenue and expenditure, published by the National Treasury in terms of section 71 of the MFMA, covers spending for the twelve months of the 2009/10 financial year. It also includes spending on conditional grants in terms of Sections 44(3) of the 2009 DoRA.
As at 30 June 2010 (fourth quarter year to date (YTD) results for the 2009/10 financial year), municipalities in aggregate spent 92.2 percent or R196.6 billion of the R213.3 billion total adjusted budget. On the revenue side they collected in aggregate, 95.1 percent or R210.8 billion of the R221.8 billion total adjusted revenue budget.
Metropolitan municipalities collected 92.1 percent of their billed revenue by the end of the fourth quarter or R120.4 billion of the total adjusted revenue budget of R130.8 billion. Cape Town collected the highest proportion of its budgeted revenue at 96.4 percent with eThekwini following at 96.0 percent.
Of the aggregated adjusted capital budget amounting to R47.8 billion, R39.7 billion or 83.1 percent had been spent as at 30 June 2010. Metropolitan municipalities' contribution of the total capital adjusted budget accounted for R24.9 billion.
Metropolitan municipalities spent 88.6 percent or R22.1 billion as at 30 June 2010. Overspending occurred in eThekwini at 112.6 percent or R6.7 billion out of a R6.0 billion adjusted capital budget, followed by Cape Town at 83.3 percent or R4.7 billion out of a R5.6 billion adjusted capital budget and City of Tshwane at 82.0 percent or R2.2 billion of a R2.7 billion adjusted capital budget. The lowest capital spending was in the Nelson Mandela Bay at 78.9 percent.
Aggregated municipal consumer debts amount to R56.1 billion as at 30 June 2010 (unaudited figures) of which government's contribution represents 5.2 percent or R2.9 billion. The largest component relates to households which account for 56.3 percent or R31.6 billion.
Metropolitan municipalities were owed a total of R30.6 billion as at 30 June 2010. This is an increase of R1.2 billion or 3.9 percent from the same period in the previous year. The City of Johannesburg is still owed the largest amount at R8.4 billion, although this is a decrease of R713 million when compared to the same period in the previous year. It is followed by Ekurhuleni Metro at R7.8 billion, Cape Town at R5.0 billion and eThekwini at R4.6 billion.
Consumer debts owing to secondary cities decreased from R11.9 billion reported in the third quarter to R11.7 billion as at 30 June 2010. However, when compared to the corresponding period last year, consumer debtors have increased from R8.3 billion to R11.7 billion or 40.9 percent. As with the metropolitan municipalities, consumer debtors over 90 days constitute a very large proportion, comprising of R9.3 billion or 79.8 percent of the total amount outstanding.
As at 30 June 2010, municipalities owed their creditors R11.6 billion. This represents an increase of R3.5 billion from the quarter ended March 2010. Free State had the highest percentage of creditors outstanding for more than 90 days at 36.0 percent, followed by North West at 31.0 percent, Limpopo at 28.9 percent and Northern Cape at 18.0 percent. The creditor age analysis results differ vastly from quarter to quarter.Of concern are the figures reported in the period 0 to 30 days for Gauteng and KwaZulu-Natal.
Conditional grants
Through the Division of Revenue Act, 2009 (Act No.12 of 2009), R21.9 billion was originally allocated to local government for both direct and indirect grants.However, this amount did not include the unconditional grant component in the form of the Equitable Share which amounts to R23.8 billion.This brings the total amount allocated to local government to R45.7 billion.Direct conditional grants to municipalities amounted to R19.3 billion for the 2009/10 financial year.
These allocations have since been adjusted in line with the December adjustment gazette reflecting additional allocations, new allocations, re-allocations, rollovers and technical adjustments to the local sphere of government. These adjustments were done in terms of Sections 6(3) and 37 and re-allocations in terms of Section 29 of the 2009 Division of Revenue Act.
The total revised amount for conditional grants available to municipalities was R22.2 billion for the 2009/10 financial year ended on 30 June 2010. An amount of R19.3 billion was allocated as direct conditional grants of which R18.9 billion was transferred as at 31 March 2010. According to expenditure reports provided by the national departments, only 79.4 percent was spent against the total conditional allocations. This has declined by 3.7 percent from 83.1 percent of the 2009 fourth quarter.
It should be noted that the expenditure reported by national departments for the fourth quarter period excludes performance by all metropolitan municipalities receiving the municipal infrastructure grant (MIG cities).
Metropolitan municipalities' report on the entire capital programme, hence no reports specifically for MIG cities are required in terms of section 11(2)(b) of the Division of Revenue Act, 2009. Secondly, the Expanded Public Works Programme (EPWP) incentive grant performance is not reflected in the publication due to its "after the event performance nature".
The municipal systems improvement grant (MSIG) reflects an under spending of 68.7 percent against the allocated amount of R200 million as reported by the national transferring officer.
However, municipalities reported different amounts for all the quarters for MSIG expenditure. A total of 94.3 percent was reported by the municipalities at the end of the municipal financial year. This indicates the inconsistencies of reporting by municipalities when reporting to the transferring national officers and National Treasury.
Revenue reported is based on billed revenue and not collected revenue. All revenue figures should be analysed by taking into account the municipality's cash flow and ageing debtors reported.
Over and under spending
As indicated above, the National Treasury is again publishing the over-and under-spending of municipalities as at the end of the financial year, 30 June 2010. The following points are worth noting:
- In aggregate, municipalities under spent their total budgets by R18.9 billion. This is almost 8.9 percent of the total municipal budget. When compared to previous years, no improvement in the level of under spending has been noted. In 2008/09 aggregate net under spending was R16.6 billion or 9.1 percent of the total municipal budget
- Under spending of the operating budget in 2009/10 was R10.6 billion, while overspending was R2.1 billion. Under spending was highest (in percentage terms) in the Free State and North West at 18.8 percent and 11.8 percent
- Municipalities under spent their capital budgets in 2009/10 by R8.5 billion or 17.1 percent. This indicates either weaknesses in the ability of municipalities to compile credible budgets, or to manage the implementation of their infrastructure programmes and
- In 2009/10 municipalities under spent their conditional grants by R3.6 billion or 15.9 percent. In 2008/09 aggregate net under spending of conditional grants was R3.2 billion or 17.1 percent. This suggests that conditional grant spending performance in municipalities has remained largely unchanged.
The above figures reflect the aggregate situation. Tables 12a, b and c show the number of municipalities that overspent and under spent their operating, capital and conditional grants budgets, respectively. In this regard:
- Twenty nine 29 municipalities overspent their total adjusted budgets by more than 15 percent, while 27 under spent their total adjusted budgets by more than 15 percent
- Despite the total amount of under spending of conditional grants it is notable that 226 municipalities over or under spent their conditional grants allocations by 10 percent. This certainly indicates improved management in spending and
- A similar trend is observed with regards to capital spending, which is positive.
General issues
To align the required electronic reporting with the municipal budget and reporting regulations, repairs and maintenance now form part of the asset management reporting. This will assist in eliminating the distortion by under-reporting of repairs and maintenance due to classification discrepancies when municipalities capture this expenditure.
While the new budget formats begin to deal with this problem, it will only be fully resolved once there is a uniform Municipal Standard Chart of Accounts in place. Municipalities will start to use these new reports on 1 July 2010 for the new municipal financial year 2010/11.
However, in order to allow the municipalities to align their systems with the new reporting requirements, a phased approach will be followed for the next two years with regard to returns that need to be lodged with the National Treasury in terms of section 71 and 74 of the MFMA.
Structure of information released
The information released on National Treasury's website as part of this process includes the following:
- press release: this document
- municipal budget statements:
- cash flow closing balances as at 30 June 2010
- over and under spending on the Section 71 outcomes as at 30 June 2010
- over and under spending on conditional grants as at 30 June 2010
- high level summary of revenue for 280 municipalities
- high level summary of expenditure for 280 municipalities
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- Summary per function (electricity, water, etc):
- high level summary of revenue per function
- high level summary of expenditure per function
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- Consolidation of revenue and expenditure numbers for each municipality in one file
- Detail per province per municipality:
- Eastern Cape
- Free State
- Gauteng
- KwaZulu-Natal
- Limpopo
- Mpumalanga
- Northern Cape
- North West
- Western Cape
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- Summary of conditional grant (CG) information:
- Consolidated Conditional Grant information for all municipalities
- Per grant type
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- CG - Detail per province per municipality:
- Eastern Cape
- Free State
- Gauteng
- KwaZulu-Natal
- Limpopo
- Mpumalanga
- Northern Cape
- North West
- Western Cape
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- Summary information (section 71):
- summary of total monthly operating expenditure, fourth quarter, 280 municipalities
- summary of total monthly capital expenditure, fourth quarter, 280 municipalities
- summary, fourth quarter, metros
- conditional grant summary, fourth quarter, metros
- summary, fourth quarter, top 21 municipalities
- conditional grant summary, fourth quarter, top 21 municipalities
- summary, fourth quarter, provinces
- conditional grant summary, fourth quarter, provinces
- analysis of sources of revenue, fourth quarter, 280 municipalities
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- Non compliance:
- List of non compliance to section 71 of the MFMA
All information is available on the National Treasury's website at: http://www.treasury.gov.za
This information will assist policy makers, researchers, sector specialists, elected representatives, academics and those responsible for implementation. The MFMA envisages that regularly published budget implementation information will enable and empower communities to hold their municipal councils accountable.
