Executive Mayor 2014/2015 Adjustment Budget Speech

Transcription

1 A place of excellence Executive Mayor 2014/2015 Adjustment Budget Speech Speaker, it is my privilege and also as Executive Mayor my obligation as per Section 28(4) of the Municipal Finance Management Act (MFMA) to submit this adjustments budget. This year it is an absolute pleasure to present an adjustment budget that is an improvement on previous years simply due to the fact that it speaks to our 2013/2014 annual financial statements and the first ever clean audit in the history of Drakenstein Municipality obtained for the 2013/2014 financial year. Speaker, I indeed have some great news to share today: When we look at the big picture, we can only come to one conclusion: We as Council, have indeed since 2011, succeeded in turning this gigantic Drakenstein ship around from financial disaster to a financial sustainable organisation. We have turned the negative working capital results of the past around and are now en route to achieve our mandate from the public to create a local municipality of excellence.

2 Speaker, finally after four years of fiscal discipline, we obtained a clean audit and are seriously busy with our mission to start rebuilding our reserves that have been depleted over many years prior to We are indeed delivering to our people and it is our target this year to spend at least 96% of our capital budget as set out in our Service Delivery Budget Implementation Plan (SDBIP) and as set out in our Integrated Development Plan (IDP) for Drakenstein to become truly A Place of Excellence. Although our target is 96% for the financial year, we are positive that we will improve on our actual capital budget expenditure of 98.9% for the 2013/2014 financial year. Speaker, the Oxford dictionary defines a budget as a plan for spending money wisely. We are certainly spending wisely and I would like to congratulate the Municipal Manager, his team and especially the CFO and his team, for fiscal discipline that led to an excellent adjustments budget for the 2013/2014 financial year. I wish to thank them for the long hours of extra work to ensure that we travel a safe fiscal road and in obtaining a clean audit opinion from the Auditor-General. Speaker, It is good news to announce that Drakenstein in the 2013/2014 financial year with an operating expenditure budget of the magnitude of R billion, have spent R billion (102.1%) of its budgeted expenditure. The over-expenditure of R 32 million is due 2

3 to the R 47 million actual provision for fines bad debt impairment in terms of the requirements of the South African Accounting Standards that was not budgeted for. This provision became a requirement after the Accountant-General, Auditor-General and the Accounting Standards Board issued a joint directive in April 2014 how to recognise fines revenue and the provision for fines bad debt impairment. Taking this provision out of the equation, the revised actual expenditure of R billion compared with the budgeted R billion relates to spending of 99.0% - a saving of R 15 million that is indeed excellent financial discipline. It is also good news and needs mentioning that we have spent 98.9% of the final capital budget of R million to improve service delivery during the 2013/2014 financial year. Again, the Auditor- General gave us a clean bill of health for all financial transactions recorded in our asset register. Speaker, it is great news that the adjustments budget for 2014/2015 that I table today is funded with realistically anticipated revenue sources and it also takes all the requirements of the South African Accounting Standards into consideration. The main purpose of this adjustment budget is to correct the material under and over budgeted figures as well as to accommodate additional revenues received from government grants. Furthermore, 3

4 will this adjustments budget also address any possible unauthorised expenditure with regard to non-cash expenditure items (off-setting depreciation, bad debt provision, provision for fines bad debt impairment, leave provision, rehabilitation of landfill site provision, long service bonus provision and medical aid provision for continued members after retirement or the so-called paper money as the Chief Financial Officer calls it) that needs to be budgeted for to comply with the South African Accounting Standards. This adjustments budget will also form the basis on which our third zero based budget will be compiled for the 2015/2016 financial year. Historical incremental type budgeting led to the huge budget problems of the past which we inherited. Speaker, the Municipal Manager and Chief Financial Officer, based on the mandate given to them, compiled the adjustments budget and discussed it in detail with the MAYCO members and the Budget Steering Committee. The Adjustments Budget Report was circulated to all councillors. However, there is one short coming in the Adjustments Budget Report and that is the under-provision of R 54.3 million for landfill site rehabilitations. Based on a report from the consultant received after the Adjustments Budget Report was compiled, the adjustments budget item now includes this additional provision as set out in the adjustments budget item. The compiled adjustments budget can thus be summarised as follows. 4

5 Operating revenue will increase with R 112 million (7.1%) from R billion to R billion. Operating expenditure will increase with R 230 million (14.7%) from R billion to R billion. The four main reasons for these high increases is in the first instance the way fines revenue and provision for fines bad debt impairment needs to be recognised in accounting terms and therefore to be budgeted for. The second reason is the additional provision for landfill site rehabilitations. The third reason is the additional housing top structure grant allocation (R 10.1 million) received from the Department of Human Settlements. Lastly, it is the way that indigent subsidy expenditure to indigent households are now budgeted for as operating expenditure and not as revenue forgone. Speaker, it is important to note that no property rates or tariffs (electricity, water, sanitation, refuse removal and sundry tariffs) will increase as it is not allowed by the MFMA. Some great news is that through strict fiscal discipline our goals of savings were successful and as a result some savings could be affected in the operating budget. Through virements this adjustments budget now makes provision for additional operating expenditure for cleaning-up projects (R 1.7 million), the maintenance of streets (R 1.8 million), the maintenance of storm water systems (R 440 thousand), provision for disaster relief (R 300 thousand), basic services to informal settlements (R 500 thousand) and rental stock 5

6 maintenance (R 700 thousand). In addition to this we received from Provincial Treasury a grant for being a Standard Charts of Accounts (SCOA) pilot site (R 300 thousand) and a grant for developing a longterm financial plan (R 300 thousand). The importance of these savings is that it shall enable us to focus on better service delivery in areas where it is needed. This shall include especially the previously disadvantaged areas. Speaker, a Municipality may budget for a deficit in terms of the budget guidelines from National Treasury, based on the way noncash off-setting depreciation may be treated in terms of the South African Accounting Standards. This also includes other non-cash items as mentioned before. Table 7 on page 20 of the Adjustments Budget Report (replaced with the revised Table 7 on page 94 of the adjustments budget item in the Council agenda) clearly explains to what extend this Municipality may budget for an operating deficit. This adjustments budget projects an operating cash deficit of R 2.5 million that represents 0.1% of the total adjustments budget operating expenditure of R billion. The Municipal Manager and his executive management team assured me that they will find operating expenditure cash savings to ensure that we can realise a cash surplus and to continue rebuilding our capital replacement reserve. 6

7 Speaker some more good news: Capital expenditure will increase with R 3.6 million to R million due to additional government grant funding. One of the most important functions of political leadership and strategic management is to obtain additional funds through proactive planning of projects and submitting business plans to provincial and national government departments. Under the leadership of the Executive Mayor and Municipal Manager this has been a priority in this financial year, resulting in these much needed additional funding. The administration is positive that they will be able to spend the capital budget on the very much needed capital projects to improve the quality of life of our citizens. Each capital project is listed in Annexure C attached to the Adjustments Budget Report. One of the main contributing factors to adjust the capital budget is the fact that we managed to secure grant funding of R 2.4 million from Provincial Transport to be used for the construction of phase one of a vehicle impound facility. We also obtained National Treasury s approval to roll-over R 1.1 million electrification grant funding to supply electricity infrastructure to low-cost houses and / or informal housing structures. Speaker, more good news is that savings on certain capital projects were identified and that this adjustments budgets through virements now makes provision for additional allocations for infrastructure with 7

8 regard to traffic calming measures in Drakenstein (R 1 million) and the upgrading of sidewalks in Drakenstein (R 3 million). The good news and importance of this is that this DA led Council cares about the wishes and demands of our communities and listens to our citizens. We have taken note of what our communities wants and we have ensured that all the important capital projects have been identified and prioritised for implementation this year. Speaker, I can carry on listing good news and achievements, but would rather act in modesty and thank all members of this Council, including all representatives of all political parties and all members of the administration for their contributions made. I would also like to thank all members of the public who assisted and took part in putting Drakenstein on the winning path. Every input, suggestion and all active participation is valued. Drakenstein is a shining example of what can be achieved with a partnership of an active and participating community and a responding local government. Speaker, we dare never forget that this is the purpose of local government and that we are mere servants placed here to serve our community. I would also like to thank all sectors of all communities, who still need upgrading of facilities and assistance, and who have been working patiently with us to achieve this. 8

9 Speaker, I am humbled by the huge task entrusted to me as leader of this Council, and the opportunity to table this Adjustment Budget to better serve our people. It is of note that this Adjustments Budget amounting to R billion (operating and capital expenditure wise) for the first time in Drakenstein s history exceeds the R 2 billion mark. My team and I would like to ensure every citizen of Drakenstein that we shall work tirelessly and leave no stone unturned to create a city of excellence for all with the funds entrusted to us. Speaker, in the item serving before Council the recommendations are set out as recommended in the Adjustments Budget item. I herewith formally submit recommendations 4.1 to 4.8 to Council for consideration and approval of the 2014/2015 adjustments budget. ADV GESIE VAN DEVENTER EXECUTIVE MAYOR 25 February