The purpose of this article is to highlight our interpretations and conclusion of Circular 99. We thought it beneficial to our clients and the municipal sector at large to share these.
MFMA Circular No. 99 Municipal Budget Circular for the 2020/21 MTREF:
- Contingency reserves and provisional allocations to Local government will be 8.8% which is lower than the 9.1% allocated in the 2019/20 Financial year.
- Reason being that local government has extensive powers to raise their own revenue.
- Emphasis is placed on local government to make every effort to improve collections rates by improving billing and collection practices.
- Equitable share allocated to Local government to increase with 6.6% annually over a period of 3 years.
- The above inflation increases are to allow municipalities to offer free basic services to indigent residents.
- The Municipal Fiscal Powers and Functions Act allows municipalities to apply for levy of additional taxes for alternative revenue sources.
- Additional taxes include Tourism Levy and Fire Levy.
- Application for additional taxes should be supported with details on how the taxes incurred will be spent, tax collection authority, rate, relief measures etc.
- Weaknesses in preparing and authorising projects and programmes are one of the main causes of poor performance on infrastructure transfers.
- Eskom bulk tariff increases to remain as approved in March 2019 as court case between NERSA and Eskom is still pending.
- Budget issues to be addressed:
- Municipalities to address bloated organisational structures and above inflation wage increases.
- Strategic action to be taken to ensure effective water management and resilience to drought.
- Emphasis is to be placed on clean cities and investment in waste collection and treatment infrastructure.
- An update to the chart is made to version 6.4.1 which is effective from the 2020/21 MTREF.
- The only update is for amendments to conditional grants as per 2020 DoRA.
- Cash Flow Statement Alignment:
- The item and funding segment will be used together to report amounts on the Cash Flow Statement.
- Item Liabilities Payable and Accruals will be broken down to the relevant sections of Schedule SA30 in the 6.5 Chart, therefore not possible to align whole Cash flow statement per item segment for the 2020/21 MTREF.
- Receipts to be populated by looking at Item Bank Deposit and Fund Segment used.
- Payments to be populated by looking at Item Liabilities Trade and other payables Withdrawals and Fund Segment used.
- This new mapping guideline will be issued to vendors.
- This will allow that only actual cash amounts reflect on the Cashflow statement, but will not assist with accurately allocating expenditure amounts on Schedule SA30.
- Bulk of actual expenditure will be grouped as Other payments on table SA30, but the total of actual expenditure will be correct.
- This will allow Schedules A6 Balance sheet to balance with Schedule A7 Cash Flow Statement.
- Budget Submissions:
- The Draft Budget must be submitted to National Treasury and relevant Provincial Treasury immediately after the council approved it, except for any changes that may be requested from council then the Draft Budget should still be submitted within ten (10) working days from the council meeting.
- The A Schedule should be submitted in PDF format – The circular refers to PDF format to be used, but after discussion with Elsabe from NT this is not a requirement
