portfolio committee on provincial and local government mfma implementation national treasury mfma...
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Portfolio Committee on Provincial and Local
Government
MFMA Implementation
National Treasury
MFMA Implementation Unit26 February 2008
2
Background
• Development of the financial reforms commenced in 1998 to address fragmented approach
• Selected testing followed in municipalities during 2000 and legislated in 2003
• Package of support entailed financial and technical via FMG & MFMTAP
• All municipalities receive some form of support from national and provincial departments
3
Implementation
• MFMA took effect on 1 July 2004 – Phase-in approach – Capacity reviews guided phase-in– Certain sections delayed or exempted– Nominal compliance in first three years– Qualitative improvements visible and will
take between 3 to 8 years
4
Implementation
Municipal Capacity• Survey undertaken 03/04• Three capacity levels
• High 50 municipalities• Medium 106 municipalities• Low 128 municipalities
• Depending on capacity, key provisions have different dates of effect (sec.177 Gazette notice)
5
Implementation
• Establishment of the Internal Audit Unit – High capacity : 1 July 2005 – Medium capacity : 1 July 2006– Low capacity : 1 July 2007
• Reporting : 2004/05 f/year
• Budgets : 2005/06 budget
• Financial problems: 1 July 2005
• Competency levels: 1 July 2006
6
Implementation
Priorities at launch• Prepare
- MFMA implementation plan• Appointment of
- MM and CFO • Verify and address all cash management
matters• Establish primary bank account • Establish top mgt team• Implement delegations• Produce monthly reporting from 2004/05
7
Implementation
Priorities at launch • Identify
- all municipal entities
- establish status of PPP’s, long-term contracts, borrowing
• Submit all old outstanding AFS for audit • by 30 April 04
• 2003/04 AFS by 30 Sept 04
• Review role and responsibility of councillors and
officials
• Full compliance with DoRA
8
Background
• Phase-in of regulations– Investments : effect April 05– Public-Private Partnership : effect April 05– Supply Chain : effect 1 July 05
– (High: Oct 05, Med: Jan 06, Low: Jul 06)
– GRAP phase - in : effect July 06– (High: 07/08, Med: 07/08, Low: 08/09)
– Debt Disclosures : effect July 07– Minimum Competencies: effect July 07
– (5 years all officials Jan 2013)
– Asset Transfers : effect July 08
9
Implementation
Planning - 3 to 5 years
• Asset management• Budget process, content and formats• In-year reporting (section 71 and 72)• Service delivery and budget implementation plan• Measurable performance indicators (financial and non-financial)• Publication of information on municipal, national treasury websites• Establishment of budget and treasury office• Annual report guidelines • GRAP implementation - annual financial statements• Internal audits, audit outcome, risk management• Costing services• Competency based training in financial management• Financial recovery service• Credit Ratings
11
Management arrangements and commitment to the MFMA reform programme - "Yes" responses
2004/05, 2005/06 & 2006/07
0
10
20
30
40
50
60
70
80
90
100
Capacity
Per
cent
age
"Y
es"
resp
onse
s
2004/2005 84 81 75 83
2005/2006 91 92 83 89
2006/2007 92 91 84 89
High % Meduim % Low % All %
12
Increase in vacancies for Municipal Managers and Chief Financial Officers at the time of Municipal Elections March 2006 (shown as
red line) per Quarter
0
5
10
15
20
25
Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06
Num
ber o
f Vac
anci
es
CFOs
Municipal Managers
2006 Elections
13
Failure to table report to council on roles and responsibilities of
Municipal Manager
66
73
62
64
66
68
70
72
74
2005/2006 2006/2007
Nu
mb
er
of
rep
ort
s n
ot
tab
led
14
Establishment of delegation systems and their effectiveness for high capacity municipalities
2004/05 to 2006/07
70
75
80
85
90
95
100
Financial Years
Perc
enta
ge "
Yes"
resp
onse
s
Delegations 82 92 97
Effectiveness 89 93 94
Trend 86 92 96
2004/2005 2005/2006 2006/2007
15
Management arrangements and commitment to the reform programme -
"Yes" responses 2004/05, 2005/06 & 2006/07
0
10
20
30
40
50
60
70
80
90
100
Capacity
Pe
rce
nta
ge
"Y
es"
resp
on
ses
2004/2005 84 81 75 83
2005/2006 91 92 83 89
2006/2007 92 91 84 89
High % Meduim % Low % All %
16
Where Technical Advisors have assisted municipalities with the implementation of the MFMA it has resulted in a more rapid
implementation than the national average
Implementation success for municipalities w ith Technical Advisors as at 31 December 2005,
versus national average
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Implementation P lan Developed Formal Delegation Finalised
23 munic ipalities with Technical Advisors National Average
18
Percentage of municipalities that tabled and approved budgets on time
2005/2006
2005/20062006/2007
2006/2007
2007/2008
2007/2008
0 10 20 30 40 50 60 70 80 90 100
Tabled on time (on/before 1 April)
Approved on time(before 1 July)
Percent
19
Percentage of municipalities with credible budgets (capital expenditure)
0
20
40
60
80
100
ALL High Capacity Medium Capacity Low Capacity
Per
cent
2005/2006 2006/2007 2007/2008
20
Percentage of municipalities with credible budgets (operating expenditure)
0
20
40
60
80
100
ALL High Capacity Medium Capacity Low Capacity
Perc
ent
2005/2006 2006/2007 2007/2008
21
Percentage of municipalities credible budgets (operating revenue)
0
20
40
60
80
100
ALL High Capacity Medium Capacity Low Capacity
Per
cent
2005/2006 2006/2007 2007/2008
22
Percentage of municipalities complying with key budget reforms (18 non-delegated municipalities)
0
20
40
60
80
100
Multi Year BudgetApproved
IDP & BudgetLinked
Revenue by SourceApproved
Expenditure byVote Approved
Per
cent
2005/2006 2006/2007 2007/2008
24
136
103
45
201
59
23
162
35
86
0
50
100
150
200
250
300
2004/05 2005/06 2006/07
Submission of AFS to Auditor-General2004/05, 2005/06 and 2006/07
Non Submission
Submitted late
Submitted on time
25
Municipalities LP,KZN,GT,NW,NC,MP,WCAudits opinions for 2004/05 to 2005/06 for seven
provinces expressed as an average
0
5
10
15
20
25
30
pe
rce
nt
2004/05 9 27 21 27 19
2005/06 7 24 22 23 27
Adverse opinion
Disclaimer of opinion
Qualified UnqualifiedAudit report outstanding
26
Section 71 reporting from 2004/05 to 2006/07 (per capacity)
0
20
40
60
80
100
120
2004/05 82 63 55 63
2005/06 98 92 77 86
2006/07 96 91 84 89
High Meduim Low ALL
27
Tabling of Annual Report for 2005/06 and all entities by 31 Jan 2006
0
20
40
60
80
100
Yes 38 49 30 39
No 62 51 70 61
High Meduim Low ALL
29
Internal Audit Units
No % No % No % No % No % No %Totals 82 40 42 21 4 2 17 8 51 25 8 4
Co-sourced
(in house plus
external)
100% outsourced to external providers
Other sharing
arrangementIn house
Shared at district
municipal level
Shared with
municipal entity
30
Municipalities with Audit Committees - 2006/07
Percent %
82
64
50
0 20 40 60 80 100
High
Medium
Low
percent
32
Municipalities displaying all information on website s75
48
26
15
0 20 40 60 80 100
High
Medium
Low
percent
33
Municipal Entities by function Feb 2007
Transport Buses & Roads, 3
Sport & Recreation, 2
Sew erage, 5
Solid Waste, 4
Health, 1
Public Safety, 3
Other Community, 3
Manufacturing, 1
Markets, 3Other, 3 Tourism, 5
Water, 6
Housing, 13Development and
Planning, 21
Finance & Administration, 6
Museums and Art Galleries, 2
Community Halls & Facilities, 6
Environmental Protection, 1
Electricity Services, 5Other Social, 2
34
Supply Chain Management Implementation
0102030405060708090
100
Adoption of SCMpolicy by the
Council
Delegation ofSCM roles and
responsibilities (in writing)
Development of aSCM procedure
manual
Bid Committeemembership
Training of SCMpractioners
"YE
S"
res
po
ns
es
pe
rce
nt
High Capacity Medium Capacity Low Capacity
35
Cash Management
Does the Municipal Manager administer all bank? accounts - 2004/05 to 2006/07
Yes
Yes Yes
YesYes
Yes
Yes
YesYes
0%
20%
40%
60%
80%
100%
Per
cen
tag
e
No Data 17 10 6 34 23 15 58 30 19
No 2 0 1 1 1 0 3 4 2
Yes 31 40 43 72 83 92 66 93 105
2004/05 2005/06 2006/07 2004/05 2005/06 2006/07 2004/05 2005/06 2006/07
High Medium Low
36
Expenditure Controls
Expenditure controls comply with the MFMA 2004/05, 2005/06, 2006/07
Negative
Negative
Negative
Negative
Negative Negative
Negative
Negative
Negative
No D
ata
No D
ata
No D
ata
No D
ata
No D
ata
0%
20%
40%
60%
80%
100%
No Data 34.0% 20.0% 12.0% 31.8% 9.3% 14.0% 45.7% 33.9% 15.1%
Negative 8.0% 11.5% 8.0% 7.0% 14.7% 7.2% 6.5% 7.7% 10.3%
Positive 58.0% 68.5% 80.0% 61.2% 75.9% 78.7% 47.8% 58.5% 74.6%
2004/05 2005/06 2006/07 2004/05 2005/06 2006/07 2004/05 2005/06 2006/07
High Medium Low
37
Municipality Long-term Short-term
Amathole District Municipality zaBBB zaA2
Breede Valley Municipality zaBBB- zaA3
Buffalo City zaA- zaA2
City of Cape Town zaA+ zaA1
City of JohannesburgZAR 1 bln bond maturing 2010 (COJ01)ZAR 700 mln bond maturing 2013 (COJ03)ZAR 1,2 bln bond maturing 2018 (COJ04)
zaA+zaA+zaA+zaA+
zaA1
City of Matlosana zaBBB zaA2
City of Tshwane zaA+ zaA1
City of Windhoek zaBBB zaA2
Ekurhukeni Metro zaAA- zaA1+
Emnambithi / Ladysmith Municipality zaBB+ zaB
George Municipality zaA- zaA2
Greater Tzaneen Municipality zaBBB- zaA3
Lephalale Municipality zaBB+ zaB
Makana Municipality zaBB- zaB
Mbombela Municipality zaA- zaA2
Mogalakwena Municipality zaBBB- zaA3
Nelson Mandela Metro zaA zaA1
Polokwane Municipality zaBBB+ zaA2
Potchefstroom Municipality zaA- zaA2
uMngeni Municipality zaBB- zaB
West Coast District Municipality zaBBB+ zaA2
West Coast District Municipality zaBB+ zaB
Westonaria Municipality zaBB zaB
39
MFRS
Established in NT to perform following functions:• Assist to identify causes of financial problems and
provide potential solutions• Assist in preparation of financial recovery plans,
undertake research and provide guidance• Review, monitor and support quality
implementation of recovery plans for sustainable outcomes
• Assist in co-ordinated actions to limit wastage of resources
40
MFRS
Research finalised on:• Interventions in municipalities from 2004/05 to 2006/07• Legislative basis of intervention• Corrective actions including support rendered to resolve financial
problems Preparing technical material to assist and guide further
interventions Initial outcomes of research:
inappropriate follow through on implementation of plans, need to improve co-ordination with officials (national and two
provincial depts) to avoid duplication Province to inform NT of all interventions (formal or informal) which is
as a result of financial problems Province to forward NT assessment report on the financial problems
in the municipality prior the development of recovery plans
42
Training and development
• Introduced in 2003 and funded by FMG;• Develop knowledge and skills of graduate interns in
strategic management, budgeting and finance management;
• MFMIP guidelines issued assist in criteria for selection, mentorship, progress reports and personal development plans;
• Use of provincial and municipal advisors to fast-track skills transfer;
• Two SAQA unit standard based programmes registered;– ND: Public Finance Management and Administration (NQF
Lvl 5) June 2005 and Cert. in Municipal Finance Management (NQF Lvl 6) Sept 2007
43
Training and development
• Development of training material - April/May 2008;– Currently programme offered by Wits, Afrec, Samdi– LGSETA accredited service providers to decentralise roll-out
• Validation of material content by National Treasury encouraged to accredited service providers to ensure quality and value for money training for municipalities;
• Support rendered to all municipalities to attend training and skills development;
• Competency Regulations require reports on progress tabled in council, during January and July annually.
44
Internships in Municipalities
474593835355284395082Interns as at 30 April 2007
3010010010Unemployed
22312331324No Trace
12102103401Employed by private sector
54653446899Employed by Municipalities
3000100200Employed by government
-94-10-7-7-9-8-10-17-12-14Total movement due to retention or resignation
568694542446094566296Subtotal
76145336524511New recruitments
492554039415489325785Interns as at 31 October 2005
TotalWCNCNWMPLPKZNGPFSEC
474593835355284395082Interns as at 30 April 2007
3010010010Unemployed
22312331324No Trace
12102103401Employed by private sector
54653446899Employed by Municipalities
3000100200Employed by government
-94-10-7-7-9-8-10-17-12-14Total movement due to retention or resignation
568694542446094566296Subtotal
76145336524511New recruitments
492554039415489325785Interns as at 31 October 2005
TotalWCNCNWMPLPKZNGPFSEC
45
Internships
Municipal participation in the internship programme - 31/10/2005 to 30/06/2007
01020
3040506070
8090
100
ALL HIGH MEDIUM LOW
perc
ent
% Municipalities with atleast 2 interns % Municipalities with atleast 1 intern
46
MFMA LearnersCompleted modules 1 to 6
1 2 3 4 5 6National 119 39 38 36 33 33 33Provincial 352 103 103 102 98 94 96Municipal 4885 1042 1025 1004 984 915 959Non-govenrmental 51 10 10 9 9 9 9Other 148 10 10 10 10 9 10Total 5555 1204 1186 1161 1134 1060 1107Percentage 18% 17% 17% 17% 15% 16%
complusory modules
Completed Module NumberTotal Registered
Sector
47
Programme of Reforms
• Budget Regulations, Guides and new formats • Standard Chart of Accounts for municipalities• Asset Management Guides • Asset Transfer Guides• Training and Material development for officials • Financial Management Wall Calendar• Annual Report Guides• Cash Management & Investment Guides• Tariff, Revenue, Costing Guides• Credit Rating support• Technical support to Provincial Treasuries • MFRS Practical Guide to Interventions• Quarterly MFMA co-ordination meeting with NT/ PT/SALGA/DPLG
and implementation of MOU in provinces• Publication of section 71 reports on Websites• Implement new FMG grant framework• Councillor training co-ordinated by SALGA and Issue guide for Prov
Legislatures• Improvement on quality of information on database (financial and
non-financial) in-year, annual reports and municipal websites
49
ConclusionChallenges
• Implement the spirit of the MFMA and utilise grants to address objectives in DORA frameworks
• Set key priority, ownership and implement timeously• Improve on employment practices, selection and
appointment of suitable candidates• Continues learning, skills development and retention• Weaknesses in internal processes, execution of
delegations, change mind-set and behavour patterns• Introduce and improve on rewards but link these to
performance • Implement mechanisms to deal with failure to comply
with the law, introduction of appropriate disciplinary measures, including withholding of funds
50
Conclusion
• MFMA Implementation Unit established in National Treasury to assist municipalities in financial reforms
Website: www.treasury.gov.zaEmail : [email protected] : 012 315 5850Fax : 012 315 5230