REVENUE MASTER CLASS 2015 JAY BALWANTH

Transcription

1 REVENUE MASTER CLASS 2015 JAY BALWANTH 1

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3 CONTENT What does Rating do for municipalities? Factors applied in Credit Rating Economic Fundamentals Financial Performance Liquidity Debt Profile Governance and Management Institutional Framework Key Performance Indicators 3 3

4 Rating as an investment analysis Lenders and investors set interest rates related to the rating. Platform for negotiating commercial conditions 4 4

5 Rating as report on the economic activity of the Municipality: Comprehensive analytic document based on international criteria. Gives opinion on future intentions and plans of municipality. It serves as an example of transparency and openness of municipality. 5

6 Rating as an instrument of Control: Provides the local authority with immediate information on the municipality situation with recommendations. 6

7 Factors applied in Credit Rating: Credit Rating analyses the following factors Basel II regulations: Country and sector risk Credit risk Operational risk Market and liquidity risk Financial risk(solvency) 7 7

8 Rating Factors Quantitative Factors Economic fundamentals Financial performances Liquidity Debt Profile 8

9 Qualitative Factors Institutional Framework Governance and Management 9

10 Economic Fundamentals: Socio- Economic Indicators Population; Dependency Ratio Employment; Housing Basic Services reach 10

11 Indigency Support Municipal resources utilized. Capex programme and roll out Private Sector initiatives. Employment and strategic development 11

12 Financial Performance: Sources of Revenue mix- sustainability? Grants, subsidies and fuel levies Assessment rates Growing base Limitations on cost of basket of services 12

13 Trading services Electricity and water increases Loans in distribution General services revenue and expenditure Comparison with industry norms. 13

14 Liquidity Cash Flows Collection rates Utilization of overdrafts Working Capital absorption Investments Daily cash on hand Capital Expenditure spend 14

15 Gearing Ratio Debt Profile Amortizing Loans; Bond Bullet(Debt to asset ratio) Debt coverage Ratio Covenants-no slippage 15

16 Governance and Management Roles and Responsibilities of political and administration structures. Values embedded in organization(accountability, transparency, responsive, participatory, Batho Pele) Focus on strategic imperatives of the organisation rather than fulfilling legislative requirements. 16

17 Policies in place and how effectively applied. Quality of Management reports Responsiveness to actioning recommendations. Focus on strategic Internal Control enviroment Unqualified Audit Report 17

18 Institutional Framework Organizational structure and staffing Number of Professional and Technical personnel and vacancies. Reporting lines Capacity development-training, education and skills development. Research capacity-existence of appropriate technology and research to deliver on mandate of municipality. 18

19 Credit Rating is not an annual event. Determinants to Credit Rating need constant monitoring. Early warning system and response to red flag critical. 19

20 No Performance indicator for Period ending 31 March Benchmark 2015 (Q3) YTD Remarks Corrective action 1 Annual debtors collection rate % Capital cost ratio Total debt: total income (%) Total debt: total income excluding operating grants(%) Days cash on hand (days) Distribution loss - water (%) Distribution loss - electricity (%) Net debtors: total income (%) 30.0 Remarks urgent attention Under watch satisfactory 20

21 Thank you 21