FINAL REPORT MARCH 2010 AMAJUBA DISTRICT MUNICIPALITY BUDGET 2010/2011.

FINAL REPORTMARCH 2010

AMAJUBA DISTRICT MUNICIPALITY

BUDGET 2010/2011

This presentation is designed to provide a general overview of the Municipality’s finances and to demonstrate the Municipality’s accountability for the money it receives.  The 2010/11 MTREF Budget has been prepared in compliance with the MFMA. This is a financial plan as informed by the municipality’s strategic plan (IDP) in order to ensure service delivery to the community that will enable the municipality to meet its operational and strategic objectives for the 2010/11 MTREF period.

BACKGROUND

In view of its strategic priorities the Amajuba District followed a program of reconstruction and development that included:• the provision of basic services;• the progressive redressing of backlogs in infrastructure;• job creation; and• the enhancement of service delivery and financial management capacity.

The 2010/11 medium-term budget sought to address development and transformation challenges by deliberately and Purposefully directing resources to the key priorities of the Municipalities. This included additional resources for economic development, safety and security and service delivery. Financial sustainability and viability remained the key principles and, to ensure compliance with the Municipal Finance Management Act

The Municipality, having played a leading role in piloting the implementation of the National Treasury Financial Management Reforms, is proud of the continued implementation and roll-out of reforms and of the key developments and shifts that have taken place in financial management in the last two financial years.

The Integrated Development Plan recognizes that the development and implementation of the various financial planning reforms(e.g. MFMA, GAMAP/GRAP and National Treasury financial reforms will fundamentally change the approach adopted in terms of financial planning. An integrated approach when appropriating resources has become essential for sustainable outcomes, especially taking into consideration the size of the Municipalities and the diverse challenges it faces. The Integrated Development Plan was based on various factors and financial variables which ultimately influence the budget and the financial performance of the Municipalities. The following are the major factors that have been taken into consideration and that primarily determine the financial approach:• Employee-related costs• Debt recovery• Tariff increases• Cost increases• Borrowing levels• Asset management

CHALLENGES SUCCESSFULLY ADDRESSED DURING 2008/09

IMPLEMENTATION OF GENERALLY ACCEPTED MUNICIPAL ACCOUNTING PRACTICE/GENERALLY RECOGNISED ACCOUNTING PRACTICE (GAMAP/GRAP)

Although the 2007/08 financial statements had already been compiled according to GAMAP/GRAP, the 2008/09 financial statements were further improved to comply with the latest specimen financial statements issued by National Treasury.

CURRENT CHALLENGES

The Amajuba District is faced with the following constraining factors which impedes its ability to expand: -

• High levels of poverty and unemployment resulting in high service demands.• Capital spending pressures to eradicate infrastructure backlogs.• High level of deferred maintenance, coupled with inadequate spending on existing maintenance.• Scarcity of technical staff which has an impact on infrastructure development and maintenance of assets.

THE PRIORITIES OF THE MUNICIPALITY FOR 2010/11 ARE:

• Managing and developing our infrastructure

• Developing our economy

• Ensuring community safety

• Building and sustaining our communities

• Developing and enhancing our natural resources

• Building our institution and governing well

• Enhancing the image of the District

THE PRIORITIES OF THE MUNICIPALITY FOR 2010/11 ARE

TABLE 9

RECONCILLATION OF IDP & BUDGET -OPEX

Medium Term Revenue and Expenditure Framework

Adjustment Budget

Budget Year +2

Budget Year +3

2010/11 2011/12 2012/13  REVENUE BY SOURCE             

Intergrated Service Delivery

54,324,765

66,031,474 70,123,849

  Social Facilitation 23,995,637 25,146,630 26,630,281  Institutional & Governance 60,829,177 43,613,370 49,286,725  Enviromental Management 1,000,000 1,059,000 1,121,481  Municipal Planning 17,711,807 18,756,804 19,863,455  Economic Development 1,140,000 1,207,260 1,278,488

TOTAL OPERATING REVENUE

159,001,38

6

155,814,53

7

168,304,279        

    -

-

-

THE PRIORITIES OF THE MUNICIPALITY FOR 2010/11 ARE:OPERATING AND CAPITAL BUDGET

BUDGET ASSUMPTIONS /PARAMETERS 2010/11

The budget assumptions/parameters have been amended taking into account the parameters and guidelines from uThukela Water and National Treasury (Refer Circular No.51 of the MFMA dated 19 February 2010)

Description 2009/2010 2010/2011 2011/2012 2012/2013NT Guidelines 3%-6% 3%-6% 3%-6% 3%-6%

CPIX 5.4% 5.7% 6.2% 5.9%

Salaries 6.7% 7.2% 8.2% 8.3%

Free Basic Water

6 kl p.m 6 kl p.m 6 kl p.m 6 kl p.m

Equitable Share Allocation

66,487,000.00 78,331,000.00 86,968,000.00 95,266,000.00

REVIEW OF OPERATING RESULTS

Figures with regard to the 2010/11 MTREF budget are included in this report. A graphic presentation of the Operating and Capital budgets is shown below. SUMMARY OF OPERATING AND CAPITAL BUDGET VS EXPENDITURE 

DRAFT OPERATING AND CAPITAL BUDGET

2010/2011 2011/2012 2012/2013CAPITAL BUDGET 45,228,000.00 56,398,000.00 59,922,000.00

OPERATING BUDGET

113,773,386.00 99,416,537.00 108,382,279.00

TOTAL BUDGET 159,001,386.00 155,814,537.00 168,304,279.00

REVIEW OF OPERATING RESULTS

Figures with regard to the 2010/11 MTREF budget are included in this report. A graphic presentation of the operating budgets is shown below. SUMMARY OF OPERATING INCOME AND EXPENDITURE 

 DRAFT OPERATING AND CAPITAL BUDGET

INCOME EXPENDITURE SURPLUS /DEFICIT

2009/2010 107,922,461 107,922,461 0

2010/2011 113,773,386 113,773,386 0

2011/2012 99,416,537 99,416,537 0

2012/2013

108,382,279 108,382,279 0

REVIEW OF OPERATING RESULTS The graph below indicates the breakdown of Budgets for the 2009/2010 , 2010/2011,2011/2012 and 2012/2013

REVIEW OF OPERATING RESULTS The graph below indicates the breakdown of Budgets for the 2009/2010 , 2010/2011,2011/2012 and 2012/2013

ACTUAL BUDGET

YEAR

ADJUSTMENT

BUDGET YEAR

BUDGET YEAR

BUDGET YEAR

2008/2009 2009/2010 2009/2010 2010/2011 %

increase

OPERATING EXPENDITURE BY TYPE          

  Salaries , Wages & Allowances

21,072,677

28,675,699

29,248,101

33,763,378 17.74%

  Renumeration of Councillors

2,689,502

3,722,021

4,429,602

4,429,602 19.01%

  Depreciation

2,631,812

1,615,000

1,265,000

1,317,850 -18.40%

  Repairs & Maintenance

1,481,494

2,250,858

2,727,991

1,946,483 -13.52%

  Capital Costs-External Interest -

32,000 32,000

-

-100.00%

  General Costs

95,808,721

70,526,883

91,062,726

71,966,073 2.04%

  Contributions to capital -

-

-

-

0.00%

  Contributions to funds

1,680,717

1,100,000

350,000

350,000 -68.18%

TOTAL OPERATING EXPENDITURE BY VOTE

125,364,922

107,922,461

129,115,42

1

113,773,386 5%

OPERATING EXPENDITURE 2010/2011The graph below indicates the breakdown per main expenditure group.

OPERATING EXPENDITURE 2010/2011The breakdown of expenditure per Department.

Medium Term Revenue and Expenditure Framework

Description Budget Year Budget Year +1 Budget Year +22010/11 2011/12 2012/13

OPERATING EXPENDITURE BY VOTE        Executive and Council 34,990,394 16,684,962 20,769,541

Office of the Municipal Manager 9,183,238 9,289,136 9,837,195

  Corporate Services 7,677,995 8,132,047 8,611,838  Community Services 12,486,317 13,223,010 14,003,167  Financial Services 8,977,549 9,507,225 10,068,151  Technical Services 9,096,765 9,633,474 10,201,849  Thusong Service Centre 1,510,039 1,334,381 1,413,110  Development and Planning 18,851,807 19,964,064 21,141,944  Disaster Management Centre 10,999,281 11,648,239 12,335,485  Uthukela Water Pty -Entity - - -TOTAL OPERATING EXPENDITURE BY VOTE 113,773,386 99,416,537 108,382,279

OPERATING EXPENDITURE 2010/2011The breakdown of expenditure per Department.

OPERATING EXPENDITURE 2010/2011The breakdown of Prioritized Projects included in General Expenditure

  Budget Year 2010/2011

Sports & Recreation; 3,075,260 WSP Agreement -Uthukela Water 29,659,386 Senior Citizens Programme; 160,000 Experience Training; 50,000 OHS Admin; 5,000 Disabled Programmes; 450,000 Placement of Health Servic 1,000,000 Poverty Alleviation; 1,000,000 HIV/AIDS Plan Implementati 1,000,000 Environment Plan Review; 350,000 Environment Awareness; 100,000 Cemetry Implementation; 200,000 Annual Report; 200,000 Youth; 500,000 Gender & Children; 700,000 IDP Review Support Grant; 50,000 PMS Management & Review; 500,000 Arts & Culture; 1,400,000 Emergency Water Supplies; 800,000 Marketing & Corporate Imag 986,627 Tourism Shows & Exibitions 70,000 Gijima Manufacturing Plan; 100,000 ADM Tourism Project Suppor 550,000

OPERATING EXPENDITURE 2010/2011The breakdown of Prioritized Projects included in General Expenditure

  Budget Year 2010/2011

Develop Inform System Supp 750,000 CTO Support; 250,000 Amajuba Tourism Marketing; 400,000 LED Project Support; 1,000,000 GIS Implementation; 140,000 Disaster Management Centre 2,000,000 Disaster Manage Capacity B 450,000 Disaster Management Implem 200,000 Fire Fighting Services; 800,000 LED Manufacturing Strategic Project Support 1,000,000 LED Agricultural Strategic Proj Support 1,000,000 Budget & IDP Roadshows-Strategic Support 650,000 Growth & Development Summit 200,000 Project Initiation Fund 1,000,000 Town Planning Support 1,000,000 Employee Wellness Programme 90,000 Disaster Relief interventions 4,200,000

SubTotal 58,036,273

BUDGET YEAR BUDGET YEAR BUDGET

YEAR

2009/2010 2010/2011 %

increaseOfficials Remuneration 28,675,699 33,763,378 30%Renumeration of Councillors 3,722,021 4,429,602 4%TOTAL OPERATING EXPENDITURE 107,922,461 113,773,386 34%

REMUNERATIONThe actual expenditure on remuneration expressed as a percentage of the total expenditure .According to National Treasury a benchmark of less than 35% is acceptable.

•Given the current economic climate, the municipality remains cautious when it comes to increasing salary budgets.The Salga collective agreement negotiated for the 2010/2011 an across the board increase based on the average CPI percentage plus one and a half(1.5%) percent.We have provided for a 10.5% increase, this will be adjusted on finalization of the budget.

GOVERNMENT GRANTS AND SUBSIDIES

The following table and graph show the amounts receivable in terms of contributions from the National & Provincial and Local government, which amounts have been included in the total revenue:

BUDGET YEAR

BUDGET YEAR

BUDGET YEAR

2010/2011 2011/2012 2012/2013

LOCAL GOVERNMENT FINANCIAL MANAGEMENT GRANT 1,000,000 1,250,000 1,250,000MUNICIPAL INFRASTRUCTURE GRANT -MIG GRANT 34,265,000 41,211,000 50,109,000MUNICIPAL SYSTEMS IMPROVEMENT GRANT 750,000 790,000 1,000,000REGIONAL BULK INFRASTRUCTURE GRANT 5,871,000 15,187,000 9,813,000EXPANDED PUBLIC WORKS PROGRAMME 4,592,000 - -EQUITABLE SHARE ALLOCATION 78,331,000

86,968,000

95,266,000

GOVERNMENT GRANTS AND SUBSIDIES

The following table and graph show the amounts receivable in terms of contributions from the National & Provincial and Local government, which amounts have been included in the total revenue:

BUDGET YEAR

BUDGET YEAR

BUDGET YEAR

2010/2011 2011/2012 2012/2013

LOCAL GOVERNMENT FINANCIAL MANAGEMENT GRANT 1,000,000 1,250,000 1,250,000MUNICIPAL INFRASTRUCTURE GRANT -MIG GRANT 34,265,000 41,211,000 50,109,000MUNICIPAL SYSTEMS IMPROVEMENT GRANT 750,000 790,000 1,000,000REGIONAL BULK INFRASTRUCTURE GRANT 5,871,000 15,187,000 9,813,000EXPANDED PUBLIC WORKS PROGRAMME 4,592,000 - -EQUITABLE SHARE ALLOCATION 78,331,000

86,968,000

95,266,000

CAPITAL EXPENDITURE AND FINANCING

•The Municipality’s capital expenditure budget for 2010/11 amounts to R45,228,000 million .

•Due to the fact that the external grant funding is limited, the Municipality has to provide bridging finance for projects from other sources, such as own cash or external loans.

DRAFT OPERATING AND CAPITAL BUDGET

2010/2011 2011/2012 2012/2013CAPITAL BUDGET 45,228,000.00 56,398,000.00 59,922,000.00

MUNICIPAL ENTITIES

The Legal Division was tasked with investigating the entity and making them compliant with relevant legislation. This brought about difficulties in the accountability of this entity towards the Amajuba District Municipalities.

1.UThukela Water(Pty) Ltd

INCOME FROM MUNICIPAL ENTITYIncome from the Municipal Entity is recognized on a monthly basis once the income collected on behalf of Municipal Entity has been quantified. The income recognized is in terms of the WSP agreement.

BUDGET YEAR BUDGET YEAR

BUDGET YEAR

2009/2010 2010/2011 %

OPERATING INCOME-BILLING FROM WATER SALES

8,171,620 7,457,494 25%

OPERATING EXPENDITURE 24,448,552 29,659,386 100%

ADM CONTRIBUTION TO THE WSP16,276,932 22,201,892 75%

PROPOSED TARIFFS INCREASE

ADM has concluded that in order to provide a sustainable service, it is necessary for the WSP to adopt principals of cost-recovery, to charge an affordable fee for water that is used to keep the local infrastructure operational.

BUDGET YEAR

BUDGET YEAR

2009/2010 2010/2011

WATER SALES 8% 6%

SANITATION AND SEWERAGE 8% 10%

BUDGET RELATED POLICIES

The following polices have been taken into account in the development of the Draft 2010/11 MTREF budget: -

Credit Control PolicyBudget PolicySupply Chain Management (SCM) PolicyTariff PolicyInvestment and Cash Management PolicyAsset Management Policy

RECOMMENDATION

It is recommended that: -

1.The annual budget for the financial year 2010/11; and the indicative budget for the two projected outer years 2011/12 and 2012/13 be approved as set out in the following annexure: - (a) Annexure A – National Treasury Tables A1 to A10 (b) Annexure B – Detailed Operating Projects (c) Annexure C – Detailed Capital Projects

2. The 2010/2011 Draft Medium Term Revenue and Expenditure Framework Budget be approved as detailed in the Budget Summary

 DRAFT OPERATING AND CAPITAL BUDGET

INCOME EXPENDITURE SURPLUS /DEFICIT

2009/2010 107,922,461 107,922,461 0

2010/2011 113,773,386 113,773,386 0

2011/2012 99,416,537 99,416,537 0

2012/2013

108,382,279 108,382,279 0

3. Approval be granted for the increase in tariffs and charges with effect from 1 July 2010 in respect of the following: -

(a)Rates and Service Tariffs

Sewerage 10% Water 6%

4. That free basic water be granted to a registered indigent of 6Kl per month.

………………………………DR MS MLANGENIEXECUTIVE MAYOR