Restructuring Grant

1
Restructuring Grant

• Select Committee on Finance (SCoF)
• National Treasury
• 10 October 2007

2
Restructuring Grant

• Aim
• Support large municipalities with restructuring
  initiatives
• Conditions
• Municipality develop own restructuring plans
• Contractual obligations on plans
• Adopt resolution committing to implementing plans
• Show progress in quarterly reports
• Transfers will depend upon the progressive
  implementation and achievements of agreed
  milestones
• Grant agreements end in 2008
• Continue to monitor the grant beyond its
  projected life

3
2006/07 transfers
4
Withholding for 2006/07

• Withheld R180 million for the 2006/07 financial
  year for C ape Town (R80 m), Tshwane (R50 m) and
  Nelson Mandela Bay (R50 m)
• Reason for withholding
• City of Cape Town Slow organisational
  transformation, inconsistent reporting,
  significant and persistent under expenditure on
  the grant (39)
• City of Tshwane Slow spending (41),
  inconsistent reporting, slow implementation of
  institutional conditions and slow execution of
  capital budget (25)
• Nelson Mandela Bay Non compliance in meeting
  obligations to creditors, slow organisational
  transformation, slow spending on capital budget
  (14.7) and slow spending on grant (52)

5
Issues addressed

• Feedback on evaluation of performance - quarterly
  basis
• Visits undertaken
• City of Tshwane Nelson Mandela Bay City of Cape
  Town and Emfuleni
• Issues addressed
• Grant conditions and non compliance with
  reporting
• Improvement in the submission, quality and
  content of reports
• Confirmation of commitment
• Low levels of expenditure
• Continue to follow up outstanding matters during
  this quarter
• Improvements in commitment and ownership to
  achieving grant conditions
• Regular meetings with some municipalities to
  resolve the above issues

6
Expenditure levels April - June 2007
7
2007/08 Budget
8
Expenditure levels as at Aug 2007
9
Financial Management Grant
10
Conditions

• Councils and Municipal Managers commitment to
  promote all aspects of the financial management
  reforms
• Establishment of a budget and treasury office
  with positions filled by appropriately skilled
  staff
• Establishment of SCM and Internal Audit units in
  all municipalities
• The Employment of an appropriately skilled CFO
• Ongoing review, revision, and submission of
  implementation plans to address weakness in
  financial management
• Acquisition of a financial management system that
  can produce multi-year budgets, in-year reports,
  SDBIP, annual reports,etc.
• Expansion of the financial management graduate
  internship programme to all municipalities

11
2006/07 OUTCOMES

• Grant transferred to all 283 municipalities
• Transfers made in July 06, September 06, November
  06 and March 07 due to challenges to obtain
  resolutions and commitment
• Grant for certain municipalities initially
  withheld due to inconsistent reporting and slow
  spending

12
Status of reports submitted and spending patterns
of 283 municipalities as at June 2007
13
Status of reports submitted and spending patterns
of 283 municipalities as at August 2007
14
Transfers for 2007/08 F/y
Payment period Number of Municipalities Paid (R m)
July 2007 118 29
August 2007 108 56
Unpaid 57 60
TOTAL 283 145

15
Outcomes 2007/08

• Municipalities not complying with the conditions
  of the grant at 30 June 07 were sent letters
  requesting written representations indicating
  reasons for slow spending and inconsistent
  reporting
• Allocations temporarily withheld for July and
  August
• Follow up procedures instituted resulting in 28
  positive responses
• No responses from 29 municipalities without
  CFOs, new officials being appointed, promises
  not kept

16
General findings

• Slow spending and inconsistent reporting
• Interns resigned or were permanently retained by
  municipality
• Vacant posts not filled
• Allocations received later than anticipated
• Funds set aside for
• capacity building and training for the 2007/08
  financial year
• the establishment and re-organisation of B.T.O.
• conversion of AFS
• skills development programmes
• HR information system upgrade
• Assets valuation, asset registers and cleaning of
  billing systems
• interns salaries, IT requirements and systems
  enhancement with financial software

17
Monitoring and Reporting

• Letters sent to munis clarifying channel and
  method of reporting
• Follow-ups being made to ensure compliance by all
  munis and subsequent payment of outstanding FMG
  transfers
• Ongoing review and analysis of reports and
  monitoring of outcomes assisting to refocus
  Financial Management support initiatives

18

• Thank You

19
MFMA - Outputs

• Improved and sustained graduate internship
  programme on financial management reforms
• Upgrading of IT systems to deliver reports
  required for financial reforms thus ensuring
  compliance with the MFMA
• Preparation and implementation of multi-year
  budgets meeting uniform norms and standards
• The implementation of SCM reforms, accounting
  reforms, producing quality and timely financial
  statements as reflected by improved audit
  opinions
• Improvements to internal and external reporting
  on budgets, finances, SDBIP, etc.
• Implementation of the MFMA

20
MFMA - 2006/07 outcomes

• Report on performance against reform objectives
  by capacity category for those that have
  responded

21
MFMA - AVERAGE FMG SPENDING BY CAPACITY CATEGORY
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Restructuring Grant

• Indicators
• Institutional and Organisational
• Optimal staff complement
• Frequency of meetings
• Structure of organisation
• Service delivery mechanisms and service levels
• Economic Development
• Innovative programmes
• Job creation activities
• Financial
• Credit ratings
• Debt ratios
• Revenue collection ratios
• Infrastructure spending levels
• Budget implementation