Presentation to the Municipal Managers Forum Technical Support to improve revenue and debt management

Transcription

1 Presentation to the Municipal Managers Forum Technical Support to improve revenue and debt management Presenter: Sadesh Ramjathan - Local Government Budget Analysis - 23 August 2013

2 That the WHOLE local government fiscal framework is designed to finance municipalities Transfers and Grants Direct transfers Equitable share National / provincial operating grants Municipal operating budget Municipal own revenues Operating revenues Rates and taxes Service charges Sources of capital funding National / provincial infrastructure grants Surplus / cashbacked reserves Municipal borrowing Indirect transfers Municipal capital budget Chapter 3 Intergovernmental relations and the local government fiscal framework 2

3 Evolution of the infrastructure grant system Increased!

4 Municipalities continue to face important fiscal challenges Limited own revenue; Cash and liquidity challenges; Outstanding debtors = R86.9 (preliminary figures 2012/13 FY) a growth a R2.7 billion from previous financial year; Municipalities becoming more grant dependent Fiscal capacity versus limited fiscal effort? 4

5 Setting the scene The pressure is on municipalities to maximize own revenue (1) As government (including local government) we must recognise: Evolving global economic context Many parts of world economy are weakening Implications of a 3-speed global economy Changes in US monetary policy feed global market turbulence National government elections Deterioration in local economic conditions Weak growth Slowing job creation Large twin deficits (current account and budget deficit) Weaker revenues Infrastructure formation and job creation are key levers for economic growth All municipalities are becoming more reliant on grants to fund their infrastructure Substantial under spending on local government infrastructure grants a major concern Metros and large cities can be catalysts in economic growth Previous growth rates to LG grants cannot be maintained going forward The World Bank estimates that about R250b is required for the development of new infrastructure in metros and secondary cities to support growth and rehabilitate infrastructure. Current capital spending by metros is R29b p.a. (2013/14) World Bank estimates of investment needed,

6 Setting the scene The pressure is on municipalities to maximize own revenue (2) Population growth per province, And for different types of municipalities, Census revealed: SA s population grew by 15.5% from 2001, but number of households grew by 29% placing additional service demands on municipalities as their services are mostly to households Shifts in where people live - urbanisation resulted in rapid growth in metros Service delivery requirements demands vary Metros to prioritise human settlements and rural municipalities basic services backlogs Housing Infrastructure backlogs per type of municipality Basic services 6

7 Fiscal expansion vs enduring backlogs in local government Though progress made, backlogs remained at same levels Households With (bottom of graph) and Without (top of graph) Access to Services in 2001 then 2011 Without With Local Government Infrastructure Grants (adjusted for inflation) SECRET

8 The outcomes of the 2013/14 Benchmark Assessment Non Delegated Municipalities Outcomes from the 2013/14 MTREF Budget Metros Secondary Cities Funded 5 Funded 2 Funded 2 Funded with Risk 1 Funded with Risk 1 Not Funded 6 Not Funded Sustainable 4 Sustainable 3 Sustainable 3 Sustainable with Risk 1 Sustain with Risk 1 Not Sustainable 5 Not Sustainable 8

9 The need to improve on fiscal capacity against fiscal effort HENCE Revenue Management Project

10 The legislative range governing revenue management The Legislative Range The Constitution The Municipal Finance Management Act The Municipal Systems Act The Municipal Property Rates Act The Water Act The Electricity Act 10

11 The challenges in general Billing Process Distribution of municipal account statement Credibility and Accuracy of Municipal Account Information Consolidation of Billing Information Town Planning Certificates of Occupation Coordination & Communication of information relevant to billing Proclamation of development Deeds Office Metered Services Time frames for meter reading Exception Reports & process for verification Service & Maintenance on meters Meter Consumption Information & Data Credibility and Accuracy 11

12 The challenges in general Property Rates Property Valuations Refuse Collection Accuracy and Credibility of the Property Information Tariff Setting & Modeling Property Rates Effectiveness of the Property Rates Policy Coordination & Communication of information relevant to billing Accuracy and Credibility of Property Information & Values - Valuation Roll Delays in resolving disputes & objections in Property Valuations negative impact in the MTREF Budget process Results & Performance of the Service Provider contracted by the Municipality Uncertainty on no. of properties that service is provided & billed 12

13 The challenges in general Municipal Accounts Opening & Closing Municipal Accounts Process in obtaining municipal clearances Arrear Municipal Services Debt not paid in full settlement Clearance Protracted legal challenges Undefined or Uncertainty Functionality of the Costumer Care Service Time frames in resolving municipal account queries Inadequate or weak human, technical and other relevant Resources sustain effective functionality of the Costumer Care Service Ineffectiveness in coordination & communication 13

14 The following are fundamental to maximising the potential of existing revenue sources: The billing system must correctly reflect all billing data and customer data that are required to issue an accurate invoice on time to the relevant customer. Billing records must be routinely reconciled to the source of the billing data and customer data. Billing queries must be resolved within reasonable timeframes. All properties within the municipality s area of jurisdiction must be correctly valued whether in the General Valuation Roll or Supplementary Valuation Rolls; and the billing system must be updated with any change in property ownership. This is necessary to grow and protect the municipality s property rates base. Correct categorisation of properties in terms of the Municipal Property Rates Policy; this impacts usage and property rates tariffs applied to the properties. Property usage must be correctly recorded so that the relevant property rates tariff is applied to the property; changes to property usage must also be communicated to the revenue function so that the billing system is updated. Effective business processes to ensure that new property development and improvements to existing properties are valued as required and that billing records are updated accordingly; this requires good working relations between the municipality s town planning, valuations and revenue management functions. 14

15 The following are fundamental to maximising the potential of existing revenue sources: Water and electricity meter numbers must be recorded correctly and linked to the corresponding property on the billing system. Water and electricity meters must be adequately maintained to minimise losses due to leakages or incorrectly measured consumption. Water and electricity meters must be read with regularity and accuracy so that the correct consumption information is recorded on the billing system; meter reading estimates must be minimised or at least undertaken in accordance with the municipality s Credit Control Policy prescriptions. Refuse and sanitation service charges must be included in the billing records; these services are often neglected as a source of revenue; in fact, some municipalities operate refuse removal services at a loss. Municipal functions must be adequately staffed with competently skilled individuals who understand the job requirements and how to deliver on it. To achieve and sustain a minimum 95% Revenue rate & standard To implement initiatives to strengthen the Institutional Capability within the Key Components for the Role-Players to sustain the high revenue collection standard & debt management To implement initiatives to limit & monitor water & electricity losses Acquire a continuous conceptual understanding of the Challenges that is encountered by Key Components To achieve effective and efficient coordination & communication between all role players within the Revenue Value Chain. 15

16 National Treasury s approach to Revenue Management

17 The approach revenue management initiative The Revenue Management initiative is one of the Special Projects that is planned, undertaken and managed LGBA o o o The 17 non-delegated municipalities (metros & 2 nd Cities) The 9 Provincial Treasuries The delegated municipalities NT to work jointly with the Municipality to provide technical support to : Strengthen & Sustain Functionality Revenue Value Chain The Lead and Direct role by Key Role Players within the Municipality Coordination & Communication Division Revenue Management Town Planning GIS Housing / Human Settlements Infrastructure Water & Electricity Legal Services By Laws & Policy Imperatives To assist Municipalities to implement a Funded & Sustainable Revenue Framework during the financial year 17

18 The process revenue management project NT to work jointly with the Municipality to enhance the role of the Mayor & Municipal Council to support the Municipal Manager & Senior Management achieve outcomes on revenue management To utilize the outcomes of the 2013/14 Benchmark Assessment to identify weaknesses and deficiencies in the Revenue Management function Support the Municipality with new initiatives to strengthen function. To engage with all key role players from the Municipality integral component of the Revenue Value Chain To undertake monthly/quarterly analytical reviews to identify negative & positive trends in revenue and debt collection. 18

19 The process revenue management project ENGAGEMENT ONE ENGAGEMENT TWO ENGAGEMENT THREE NT to work jointly with the Municipality to Strengthen current institutional & technical capability Implement initiatives to eliminate institutional & governance risks To work with the MM & CFO to identify and address the broader issues that encounter the BTO i.e. revenue & financial management To create and entrench a municipal wide accountability & responsibility for revenue management NT to work jointly with the Municipality to Identify, define & implement Business Processes for the TEAM Support the TEAM in undertaking analytical reviews against revenue collection trends monthly/quarterly Provide revenue management policy reviews support effective revenue & debt collection Assist the Revenue Management Division to map out their procedures & processes, including Citizens Relations Management NT to work jointly with the Municipality to Implement the Revenue Value Chain underpinned by effective contribution by all role players Relate to the dependencies within the RVC ensure accuracy in Billing process The acknowledgement and contribution to the RVC work output Town Planning Municipal Valuations Human Settlements G.I.S Infrastructure water & electricity (metered services) Surveyor-General Deeds Office The Team within the Municipality knowledgeable of the Annual Benchmark Assessment & Mid-Year Performance review The Divisional Managers provided an opportunity to present Work Outputs Plan, coordination and communication with other relevant components The Team within the Municipality adopt a Pre-Emptive & Pro-Active Approach in readiness to sound Early Warning Alert Signals to Mayor & Municipal Council negative trends in revenue collection Monthly/Quarterly Reporting to NT on revenue collection outcomes achieved Planning on Implementation of Service Standards, Service Agreements, Significant improvement to Municipal Services Data Billing & Collection activities To facilitate Coordination, Communication & Information Sharing Role Players 19

20 The process revenue management project first assignments NT to work jointly with the Non-Delegated Municipalities umhlathuze - 7 August 2013 Mahikeng - 14 August 2013 Rustenburg - 15 August 2013 Mbombela - 21 August 2013 Msunduzi - 26 August 2013 Polokwane - 27 August 2013 Buffalo City - 4 September 2013 NMBM - 5 September 2013 Sol Plaatjie - 11 September 2013 Mangaung - 12 September

21 The outcome of the initiative The Desired Future o Negotiate a guaranteed political support sustain effective & high revenue collection rate & standard. Section 53 of the MFMA o Demonstrating joint Accountability & Transparency in resolving RM Problems. Section 64 & 70 of the MFMA o Commitment & understanding amongst staff to achieve & sustain a balanced work place staff will have a conceptual understanding of the work output, results and performance o The devotion to the TEAM effort. Collective responsibility to revenue management. o The joint role of the Mayor & the Citizens on municipal revenue. o Municipal revenue protection service 21

22 The outcome of the initiative The Desired Future o Undertake quarterly reviews on the procedure, process of the effect on credit control and debt management and the impact on revenue collection o Undertake monthly analytical reviews to determine negative & positive trends in revenue collection with remedial measures o Continuous improvement to IT FMS Capability to manage the Revenue Management Function o Pre-emptive and Pro-active to safeguard revenue collection against institutional and governance risks o Effective and Accurate monthly reporting to the Municipal Council on status of revenue collection & debt management 22

23 THANK YOU 23