28 FEBRUARY 2017 - Municipal Institute of Learning

1 RELATIONSHIP BETWEEN THE BUDGET AND THE IDP. 28 FEBRUARY 2017. 1. Contents Introduction Legislative Requirements Inc. MSCOA. Why MSCOA. Local Government Accountability Cycle Budget Process and linkage to IDP. IDP Strategic Focus Areas SDBIP. Challenges in preparing Budgets National Treasury Benchmark 2. Legislative Mandate Section 216(1) of the Constitution states that: national legislation must establish a national treasury and prescribe measures to ensure both transparency and expenditure control in each sphere of government by introducing: i. GRAP. ii. Uniform expenditure classification SCOA/General Ledger iii. Uniform treasury norms and standards Section 168 of the MFMA states that: the Minister of Finance, acting with the concurrence of the cabinet member responsible for local government, may make regulations for, among other things (p).

2 Any other matter that may facilitate the enforcement and administration of the Act . SCOA to be prescribed ito section 168 of the MFMA to ensure compliance by ALL MUNICIPALITIES and Municipal ENTITIES. SCOA Regulations gazetted on 22 April 2014. Impact of non compliance NT can withhold Equitable Share to the municipality Why mSCOA? 278 different Municipal charts of accounts' (COA) aggregation of budget and other information extremely difficult with inconsistent use of account labels and definitions across municipalities Quality of Municipal information is compromised due to lack of uniform classifications for revenue and expenditure items (posting level).

3 Lack of consistent information across the IDP, Budget, SDBIP, IYM and AFS. Compromises monitoring and oversight by Councils, DCoG, treasuries and legislatures. Compromises government's ability to formulate coherent policies affecting local government, and its ability to use the budget as a redistribution tool to address poverty and inequality Municipalities continuously change and amend detail COA No consistency year-on-year 4. MSCOA Background The object of these Regulations is to provide for a national standard for the uniform recording and classification of Municipal budget and financial information at a transaction level by prescribing a standard chart of accounts for municipalities and Municipal entities mSCOA is not only a re-creation of the Municipal Votes/GL structure but also a change in business processes A vote will now compromise 7 segments which need to be budgeted against and transacted against.

4 Posting level transactions will need to be at the segment level going forward. No mapping permitted as mSCOA requires transacting on all segments and is not reporting. mSCOA will enable uniform information sets recorded in terms of national norms and standards across the whole of government for the purposes of national policy coordination and reporting, benchmarking and performance measurement in the local government sphere. Segments of mSCOA. Standard Classification Function Segments Regional Indicator Costing Project Item What's budgeting Budgeting is a careful juggling/balancing act Input from all stakeholders considered are considered and prioritized based on the IDP.

5 In compliance with the Municipal Structures Act and MFMA a the City's budget must be informed by and aligned to the IDP objectives The budgetary allocations for both capital and operating expenditure needs to be undertaken in a manner that will not only ensure that the IDP outcomes are achieved but also leads to the city's vision being realised It is a process not an event and requires continuous improvement Balanced and sustaiable budgets L Local Government Accountability Cycle IDP 5 Year Strategy The IDP determines the strategy, objectives and Spatial transformation plan & service delivery targets for the municipality BEPP process mSCOA, creates the environment to enable the execution of the accountability cycle, from IDP to Annual Report mSCOA , if well implemented and managed, after Budget 3 Year Budget future phases have been completed, will provide direct evidence in dashboard format, of the achievement of IDP strategy, objectives and service delivery targets in the municipality.

6 AnnualLimits Plan tounauthorised expenditure. SDBIP Implement Monitoring & Council IYR Oversight Oversight AFS. Annual Standard Chart of Accounts Improved Service delivery Report 8. STRATEGIC PLANNING AND THE IDP. 9. By 2030 eThekwini will be Africa's most caring and liveable city ALIGNMENT OF THE BUDGET TO THE IDP. IDP derived from LTDF. IDP 8 point plan of action Aligned to budget via programs and action plans NOTE: IDP COVERED IN A SEPARATE PRESENTATION. 10. By 2030 eThekwini will be Africa's most caring and liveable city From Vision to Action action . Where we What we have to How we are going A Plan to make it want to be do to do it happen A defined Making hard Development 8 action plans Vision choices Principles 8 city plans with key Deciding on the Screening all actions to focus areas that outline a Refining and platform to build in promote only set of programmes and refocusing or Vision order to achieve the development that projects with budgets to help guide action: prosperity we desire supports our core and timeframes for principles and values delivery VISION CHOICES MADE eThekwini's By 2030 Creating Sustainable Livelihoods EIGHT.

7 EThekwini A Socially Cohesive City will be A Financially Sustainable City POINT. Africa's most Creating a Safer City caring and Promoting an Accessible City Environmentally Sustainable City PLAN. livable city ETM 8 Point Plan 8 Point plan Develop and Sustain our Spatial, Natural and Built Environment Developing a Prosperous, Diverse Economy and Employment Creation Creating a Quality Living Environment IDP 8 POINT PLAN. Fostering a Socially Equitable Environment Creating a Platform for Growth, Empowerment and Skills Development Embracing out Cultural Diversity, Arts and Heritage Good Governance and Responsive Local Government Financially Accountable and Sustainable City PROCESS : BUDGET LINK TO IDP.

8 Ward workshops IDP Approval & Budget Review Other workshops Other input ( Sectors). Assess previous year's spend Commitments STEP 1 Approve budget Principles (capital and operating), which provide guidance on how allocations are made and budgets are spent. Principles are drawn from intent of IDP. STEP 2 Key projects prioritised as identified in the IDP and allocated budgets (if not previously budgeted as part of Mostly capital, but also MTEF). operating where it is project related PROCESS : BUDGET LINK TO IDP. STEP 3 8 Programme meetings led by plan owners ABM budgeting Community needs budgeting STEP 4 Discussion on first draft capital budget STEP 5 Budget workshop with politicians STEP 6 Budget Workshop input from all stakeholders (business, community based organisations, ward committees, etc).

9 PROCESS : BUDGET LINK TO IDP. Review and prioritise all requests STEP 7. Finalise impact of tariff increases STEP 8 Approval of Draft Budget by Council Feedback/presentation to business, community based organisations and wards STEP 9 Approval of final budget by Council Prepare SDBIP. Quarterly monitoring BUDGET ALLOCATION IDP STRATEGIC FOCUS AREAS. R' 000. 16. By 2030 eThekwini will be Africa's most caring and liveable city Example of Linkage of IDP to SFA and Budgets Key Performance Area 8 point plan Strategic Focus Area Operational Budget Capital Budget Strategic Priority Municipal Institutional Creating a Platform for Human Capital 183 194 3 297 Socially Development and Growth, Empowerment Development Cohesive City Transformation and Skills Development Develop City as a 101 417.

10 Learning City Healthy and productive 271 089 1 500. employees Basic Service delivery Develop and Sustain our Develop, manage and 447 461 2 825 Environmentally Spatial, Natural and Built regulate the Built and sustainable city Environment Natural Environment Climate protection 167 001. planning Creating a Quality Living Meet infrastructure and 19 916 787 5 242 417 Accessible City Environment household service needs and backlogs Address community 1 759 612 227 397. service backlogs Develop, manage and Environmentally regulate the Built and sustainable city Natural Environment Coordinate and All KPAs Good Governance and Implement INK projects Public Participation Example Linkage ofAligEnt IDP to SFA and Budgets Key Performance Area 8 point plan Strategic Focus Area Operational Budget Capital Budget Strategic Priority Fostering a Socially Promoting the safety of 1 653 997 79 303 Safe City Equitable Environment citizens Promoting the health of 682 405 34 941.