ANÁLISIS DEL MACRO Y MICRO AMBIENTE
CUADRO # 3 PIB
2.4. FACTORES POLÍTICOS Y LEGALES
Financial reporting, the monitoring of progress, non-financial reporting, and general in-year reporting are discussed in this section.
14.6.1. Financial reporting
Monthly, quarterly, semi-annual and annual reports must all be drafted in terms of the budget reform formats, and in accordance with the requirements of the MFMA, sections 71 and 72, and the MB&RR, in particular Part 5 of Chapter 2 and Schedule C (or part 5 of Chapter 3 for municipal entities, as well as Schedule F). The annual report forms part of another chapter in this learner guide.
The above-mentioned financial reporting provides monthly reports on the year-to-date financial performance of the municipality. If correct information is reported, and the long- term projections are carefully considered, the reports should serve as early warning systems,
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by advising on where revenue collection is lagging behind the budget provisions, where expenditure is lagging, or where it is exceeding provisions, and where capital expenditure is lagging, or where it is exceeding the approved capital budget. This will ensure that the managers become aware of the financial situation, so that they can implement remedial action. Table 12 below provides an overview of financial reports.
Table 13: Overview of financial reports Type of report When produced To whom submitted
Benefits to be gained from Monthly section 71 report No later than 10 working days after the end of the month Provided to the mayor and to the provincial treasury by the accounting officer. The mayor may, but does not have to, table the report in the municipal council.
Shows the state of the municipality’s budget for the year to date against actual revenue; actual expenditure per vote; actual capital expenditure per vote; and explanations of material variances from budget figures, as well as from the information that is provided in the SDBIP, and any remedial or corrective action to be taken. Quarterly section 52 (d) report Within 30 days of the end of each quarter Must be tabled by the mayor in council
Gives information on the implementation of the budget and on the financial state of affairs of the municipality. Includes a summary on the municipality’s consolidated performance against the SDBIP, and the approved and any adjusted budgets, with explanations of material variances; performance in relation to quarterly performance targets for the delivery of basic services; and the financial impact of the performance on the MTREF and on long- term sustainability.
All quarterly reports tabled in the council must be placed on the municipal website (see section 21A of the Systems Act). Mid-year budget and performanc e assessment (section 72 report) By 25 January of each year The accounting officer must submit a report to the mayor, the National Treasury, and the provincial treasury
Provides an assessment of the performance of the municipality for the first half of the year. Considers financial information, performance against the SDBIP, progress made with resolving problems identified in the previous annual report, and the performance of the municipal entities (if any). Further, an explanation of the impact of national and provincial budgets must be provided. The municipal manager also makes
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Benefits to be gained from
recommendations on whether an adjustments budget is necessary, and recommends revised projections for revenue and expenditure, to the extent that this may be necessary. This report should be considered together with the oversight report on the annual report, which stipulates the performance of the municipality up to 30 June of the previous year, and which includes the AFSs and the related audit report. This allows for a true review of performance, and for the mayor to recommend adjustments to the budget process under way. [Refer to the three-year reporting programme Figure E – Annexure 1.] The monthly information must be presented to the mayor to review. The mayor may, but does not have to, table such information in the council.
The quarterly information must be tabled by the mayor within 30 days of the end of each quarter. At this meeting, the in-year performance must be monitored, and corrective action must be taken.
It is important to note that the six-month report must be presented to the council by 25 January.
14.6.2. Financial transparency and ongoing performance
In order to achieve an effective oversight mechanism and the appropriate fiscal discipline and managerial accountability, financial management systems must provide sufficient transparency for accurate measurement of the ongoing performance of the municipality. The MFMA facilitates the above by requiring the municipality to develop measurable performance objectives for revenue and expenditure, taking into account the IDP. The municipality must report against these measures in the mid-year and annual reports. 14.6.3. Monitoring progress
Managerial oversight of performance should operate, in the first instance, within the municipality itself. With this in mind, the MFMA requires that the section 71 and 72 reports must be submitted by the accounting officer to the mayor, who must give them all due consideration. The reports should also contain recommendations on the remedial action to be taken. The mayor should check to see that there is alignment with what was proposed in the SDBIPs, and issue any instructions regarding the implementation of the budget and the spending of funds. Any related remedial action must be assigned to the accounting officer to implement. This ensures that there is an ongoing review of the financial position of the municipality, and that there is continual review of the progress that is being made toward attaining the set performance objectives.
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government, the MFMA requires the municipality to report on certain issues, thus identifying problems as they arise. This helps to ensure that, where required, prompt remedial action can be taken by the province, or by the National Treasury.
14.6.4. Non-financial reporting
All reports must contain both financial and non-financial information, in order to communicate performance effectively. Non-financial information, such as subjective
narratives on service delivery backlogs, the number of electricity and water connections, and explanations of council policy on indigents and free basic services, should supplement the financial data and the key performance measures.
14.6.5. General in-year reporting obligations
The municipal manager must advise the National Treasury, the relevant provincial treasury, and the AGSA about all bank accounts as they are opened. Said manager must also report to council, the provincial treasury and the AGSA the details of certain prescribed withdrawals each quarter. The municipal manager must also report on any unauthorised, irregular, or fruitless and wasteful expenditure as it occurs, and on any impending budget shortfalls or overspending. Details of expenditure on staff benefits must regularly be reported to the council, as well as be reflected in the annual report. The mayor must also report to the Member of the Executive Council (MEC) for Local Government any issue that necessitates provincial intervention, as it arises.
The CEO of a municipal entity must provide the municipal manager of the parent municipality with regular reports on the entity’s finances and performance.
Table 13 below provides a summary of the budget and reporting cycle in a municipality. This table should be compared to Figure 11, which shows the high-level budget timetable outlining the time frames for the budget preparation, approval and implementation that are described in Chapter 8.
Table 14: Summary of the budget and reporting cycle Month Previous financial
year
Current financial year Future financial year July Start of the AFSs for
the financial year ended on 30 June – stand-alone
municipality
Drafting of the annual report
Implementation of budget for financial year, starting on 1 July
Monitoring and reporting on the implementation of the budget for the first month at the end of the month
Report submitted to the council for the approval of the IDP and the budget timetable for the next financial year
August Finalisation of the AFSs for the financial year ended on 30 June – stand-alone
municipality Review of the draft
Approval of the rollovers for all contractual commitments from the previous financial year in an adjustments budget for the current year,
Public consultation on the priorities that should be in the IDP for the next year, supported by the evidence contained in the unaudited annual report
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municipal manager, after which sent to the Audit Committee, and tabled in the council Recommendation by the council that the unaudited annual report be used for the IDP public
consultation, whereupon report sent to the MPAC for the drafting of the oversight report
which started on 1 July At the end of the month, monitoring and reporting on the implementation of the budget for the second month
September First month of audit by the AGSA on the AFS Finalisation of the consolidated AFSs Receipt of public comments on the unaudited annual report
Monitoring and reporting on the implementation of the budget for the first quarter
Consultation with sector authorities for drafting the legislated sectoral plans for the following financial year
October Second month of audit by AGSA on stand- alone/ municipal AFS Review by the MPAC of the public comments on the unaudited annual report, as well as drafting of the oversight report
Monitoring and reporting on the implementation of the budget for the fourth month
Review of the priorities of the community and sectoral requirements, and determination of the MTREF
November Audit report of the AGSA on stand- alone/municipal AFS Within 7 days of receiving the final audit report, the final oversight report on the stand-alone municipal annual report must be
prepared and tabled in council for
Monitoring and reporting on the implementation of the budget for the fifth month
Review of the national allocations that are published in draft format Review of the service delivery agreements and the contractual
obligations into the future
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approval
December Audit AGSA report on the consolidated AFS Within 7 days of the final audit report on the consolidated AFS being received from the AGSA, the final oversight report must be prepared and tabled in council for consideration and approval
Monitoring and reporting on the implementation of the budget for the second quarter
Ongoing review of priorities, based on the realistically achievable revenue through the tariff review
January Monitoring and reporting
on the implementation of the budget – half-yearly review and table adjustments budget (if necessary)
Finalisation of the capital budget portion of the new year’s budget Review of the budget- related policies
February Monitoring and reporting
on the implementation of the budget for the eighth month
Finalisation of the budget-related policies Finalisation of the operating budget for the new year’s budget
March Monitoring and reporting
on the implementation of the budget for the third quarter
Review of the finalised sectoral tariffs that are published on 15 March Tabling of the budget 90 days before approval date
April Monitoring and reporting
on the implementation of the budget for the tenth month
Public participation on the draft new year’s budget
Publicising of the draft tariffs
May Monitoring and reporting
on the implementation of the budget for the eleventh month
Revision of the draft budget, taking into consideration the public participation
Approval of the budget for 30 days before the implementation date
June Monitoring and reporting
on the implementation of
Uploading of budget data Preparation of the SDBIPs
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the budget for the fourth quarter
for the new financial year starting on 1 July
Drafting of the
performance agreements for the new financial year starting on 1 July
A comprehensive guide of all MFMA responsibilities on a month-by-month basis, titled the MFMA Finance Management Calendar, is available from the National Treasury.