NELSON MANDELA BAY MUNICIPALITY CYCLE NO. 4 2014 … · MUNICIPALITY’S FINANCIAL POSITION AS AT...

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NELSON MANDELA BAY MUNICIPALITY

CYCLE NO. 4 / 2014

REPORT OF THE CHIEF FINANCIAL OFFICER

TO THE

BUDGET AND TREASURY COMMITTEE

MEETING DATE: 29 APRIL 2014

1. QUARTERLY FINANCIAL REPORT FOR THE PERIOD JULY 2013 TO MARCH 2014 (QUARTERLY BUDGET STATEMENT) AND THE ASSESSMENT OF THE MUNICIPALITY’S FINANCIAL POSITION AS AT 31 MARCH 2014 (2013114 FINANCIAL YEAR)

1.1 PURPOSE

The purpose of this monthly report is to assess the financial performance and financial position of the Municipality and its consequential impact on the implementation of the approved 2013114 Adjustments Budget.

1.2 LEGISLATIVE REQUIREMENTS

The Municipality is required to assess on an ongoing basis whether it collects sufficient revenue to meet its commitments, such as paying Employees, Councillors, Eskom, Department of Water Affairs, service providers, etc. In accordance with Section 71 of the MFMA, the Accounting Officer is required to submit to the National and Provincial Treasuries a monthly statement on the state of the municipality’s budget.

1.3 EXECUTIVE SUMMARY

This report provides a balanced and consolidated financial performance overview to assist the Committee in its oversight role.

An analysis of the financial position and performance was undertaken to determine the relative financial strength and liquidity of the Municipality. In order to provide a comprehensive analysis it was necessary to compare the Budget, the General Ledger and the actual cash inflows and outflows of the Municipality, thereby determining relationships and the associated spending and income trends experienced for the period July 2013 to March 2014. The aforementioned was complemented by analysing the cash flow position, the investment portfolio, ratios, the operating and capital budget performance for the period July 2013 to March 2014, so as to facilitate an informed assessment of the relative liquidity and financial position of the Municipality.

The financial performance highlights are as follows:

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Operating revenue amounted to R5.40 billion, whilst operating expenditure amounted to R5.00 billion, resulting in an operating surplus of R396.6 million. Capital expenditure constituted 39.6% of the approved budget. Overdue consumer debts increased by R331.9 million (20.9%) since June 2013.

current creditors. The municipality’s investment portfolio has increased by R697.7 million (44.14%) since June 201 3 from R1.581 billion to R2.278 billion.

0 An amount of R I 16.83 million is owing to creditors, of which R97.1 million (83.1%) represents

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Ratio

In line with the Financial Recovery Plan the following financial ratios are monitored on an ongoing basis:

Actual as Actual as Actual as Actual as Actual as Targets at June 2011 at June at at at

. unspent conditional grants) months months months

. Revenue Ratio Debt servicing costs to Operating 0.046:l 0.044:l 0.042:l 0.034:l 0.037:l 0.040:l

The aforementioned ratios generally reflect an improvement since the position as at 30 June 201 1. Upon exclusion of the unspent conditional grants, the cost coverage ratio is 2.12 months (63.6 days)

1.4 STRATEGIES ADOPTED

To achieve and maintain a sound financial position, the Municipality must continue to ensure that strict financial discipline is exercised and that expenditure does not exceed the approved Budget.

In order to further strengthen the Municipality’s cash position, the following strategies are being implemented:

0 Ongoing implementation of the Municipality’s Operational Efficiencies Work Plan 0

0 Disposal of serviced land 0 Housing Revolving Fund Management 0

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Debt Relief Programme is being implemented

Cash Flow Forecasting & Cash Flow monitoring against the forecast Dedicated attention to managing available cash flows effectively Cash Management - Payment of Creditors

A report on the effectiveness of the Operational Efficiencies Work Plan was requested by the MPAC Committee, and has been submitted to the committee for consideration.

The Human Settlements Directorate has been asked to provide this committee with an updated report on the disposal of serviced land, including a cost /benefit analysis if available serviced land will not be sold. The disposal of serviced land takes place in terms of Sect 14 of the MFMA read together with the Asset Transfer Regulations.

The following matter must also be addressed:

0 The Human Settlements Directorate to implement the necessary control measures to ensure that bridge-funding via the Housing Revolving Fund remains within the determined threshold of RIOO million. As at 31 March 2014 the funding was at R131.9 million.

The Human Settlements Directorate has been unable to maintain the bridge-funding, via the Housing Revolving Fund within the RIOO million threshold.

With the concurrence of the City Manager, a meeting was held between officials of the Human Settlements Directorate and the Budget and Treasury directorate on 9 April 2014 to create a project steering committee to identify the exact causes of claims for expenditure incurred, not being able to be claimed back from EC Prov Govt Human Settlements Department. The committee will take each housing project individually identify the root cause, find the solution and then submit the claim. A regular report will be submitted to this Standing Committee highlighting the progress being made.

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It is considered imperative that the NMBM maintains at least the budgeted collection rate of 94%, in order to ensure service delivery aligned to the 2013/14 Budget.

In order to ensure the ongoing financial sustainability of the Municipality as well as growth in the reserves, it is considered important that the cost coverage ratio exceeds the target of 1 month as set in the IDP. In this regard the municipality is required to develop a long-term financial strategy to address issues, such as the appropriate cash backing of reserves, replenishment of the Capital Replacement Reserve and long-term financial planning. This implies that the NMBM needs to exceed the budgeted collection rate of 94%.

In pursuit of achieving the above (i.e. long-term financial strategy) a multi- Directorate Task Team has been established, consisting of the B & T Directorate together with the Directorates from Infrastructure and Engineering, Electricity & Energy, Human Settlements and Public Health. Two meetings of the Task Team have been convened where matters of strategic modeling were discussed. Baseline information has been agreed upon in order to ensure a common platform for service delivery.

As part of the municipality’s revenue enhancement initiatives all revenue sources such as fines, rentals charged for properties, etc. must be maximized to the fullest extent possible. The cost coverage ratio (excluding unspent conditional grants) requires close monitoring, scrutiny and improvement as the available investments only cover 2.12 months’ operating expenses.

1.5 DETAILED REPORTS

In order to comply with Schedule C of the Municipal Budget and Reporting Regulations 2008 the following detailed schedules for the period ending March 201 4 are attached:

Annexure “AI” - Operating Revenue and Expenditure Performance Annexure “A2” - Capital Budget Performance Annexure “A3” - Projected Cash Flow Statement Annexure “A4” - Consolidated Budget Tables (incl MBDA figures) Annexure “AS’ - Analysis of Municipalities Balance Sheet

i. Outstanding Consumer Debtors ii. Overview of Creditors position iii. Investment portfolio iv. Grants receipts and Expenditure v. vi. Key performance Indicators

Annexure “A6” - MBDAs Quarterly Report & Budget Tables

Councillor & Officials allowances & benefits

1.6 GENERAL

The Performance scorecards of the Budget and Treasury Directors and Assistant Directors are monitored by the CFO on an ongoing basis.

1.7 RECOMMENDATION

It is recommended the Municipality’s Consolidated March 201 4 Quarterly Budget statement and supporting documentation contained in this report be noted.

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2 OTHER FINANCIAL REPORTS

2.1 MONTHLY REPORTS

2.1 .I Bank Reconciliation

The Bank reconciliation for the period ending March 2014 could not be completed in time due to the early agenda closure date. The previous standing committee agenda had the reconciliation for the period ending February 2014.

FOR INFORMATION

2.1.2 Capital Spending - B&T Directorate

The attached Annexure ‘‘B” indicates the status of the various capital projects in the Budget and Treasury directorate for the year 2013/2014 as at 16 April 2014. This annexure is extracted directly from the Councils FMT program and a more up to date picture can therefore be presented than the remaining statistical data in the agenda. The progress in spending can be seen by comparing the information in Annexure A3 to the totals of this annexure.

FOR INFORMATION

2.2 QUARTERLY REPORTS

2.2.1 Quarterly reporting on withdrawals from the municipal bank accounts

The purpose of this report is to report on withdrawals from the municipal bank accounts as required in terms of Section 11 of the Municipal Finance Management Act. The format of the report has been amended to comply with National Treasury guidelines. Attached as Annexure “Ci” is the report for the half-year ending 31 December 2013, and Annexure Cii for the quarter ending 31 March 2014.

FOR INFORMATION

2.2.2 Performance report of the Budget & Treasury Directorate: quarter ending March 2014

The performance report of the Budget & Treasury Directorate for the quarter ending 31 March 2014 will be included in the agenda once the verification process has been completed by the Acting COO’S office.

FOR INFORMATION

2.2.3 Revenue Management and Customer Care Report for Quarter ending March 2014

The performance report for the Revenue Management and Customer Care sub-directorate for the quarter ending 31 March 2014 is attached as Annexure “D”.

FOR INFORMATION

2.2.4 Supply Chain Management Report for quarter ending March 2014.

In terms of Sect 6 (3) of the Supply Chain Management Policy, a report at the end of each quarter on the implementation of the policy must be submitted to the Executive Mayor. Attached as Annexure “E” is the report for the quarter ending 31 March 2014. FOR INFORMATION

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2.2.5 Actual Overtime Spending Patterns for the 2013/2014 Financial Year

The purpose of this report is to highlight actual overtime spending patterns of the different directorates, compared to the available budgetary provisions in the 201 311 4 Operating Budget.

Attached as Annexure “F” is a schedule indicating the overtime spending of the Directorates in Council for the period ending 31 March 2014.

FOR INFORMATION.

T HARPER CHIEF FINANCIAL OFFICER

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Grants & Subsidies Paid 335,512

General Expenses - Other 986,632 Total Direct Operating Expenditure r,857.418 Surplus/ Deficit (131,281)

ANNEXURE “Al”

242,858 72.4

554,793 56.2 4,999,344 63.6 396,552

OVERVIEW OF OPERATING REVENUE AND EXPENDITURE PERFORMANCE FOR THE PERIOD JULY 2013 TO MARCH 2014

Below is an analysis of the operating revenue and expenditure performance compared to the approved 2013/14 Adjustments Budget.

Below is a discussion of the significant revenue and expenditure variations:

The statement of financial performance indicates a surplus of approximately R396.6 million. It is, however, not fully represented in cash due to the accrual basis of accounting. The statement of financial performance should not be viewed in isolation from the cash flow statement and the cash flow forecast as discussed in Annexure A3 of this report.

Revenue Variations

Ren ta I of facilities

In order to enhance the income derived from this revenue source market related rentals should be charged relating to all Council’s properties. A report in this regard was submitted to Mayoral Committee and included in the agenda of 16/10/2013.

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Directorate

Budget & Treasury

Public Health

Interest Earned - External Investments

Adjustments Actual as at 31 % of Budget March 2014 Budget

2,111,180 843,144 39.9 7,402,800 1,981,151 26.8

Interest earnings are influenced by the extent of the municipality’s investment portfolio. The increase in the investment portfolio is also influenced by the extent of spending of grant funding.

Interest Earned - Outstandinq Debtors

Interest is influenced by the extent of outstanding debtors.

- Fines

The revenue from traffic fines for the period July 2013 to March 2014 of R3.2 million is already below the projected level of R24.1 million. The shortfall as at 31 March 2014 was already approximately R20.9 million in respect of Traffic Fines. It is evident that the collection of fines requires improved effort by the Safety and Security Directorate. In this regard, Council resolved on 7 June 2013 that: - The Acting Executive Director: Safety and Security develop and report on a strategy by 30 June 2013 to collect outstanding traffic fines, for implementation in the 2013/14 financial year.

The Budget and Treasury Committee again resolved on 1 November 2013 that - The Safety and Security Directorate develop and report on a strategy to collect outstanding traffic fines.

Despite repeated requests by the Budget and Treasury Directorate no report was submitted by the Safety and Security Directorate at the time of preparing this report.

ExPenditure Variations:

Interest Expense - External Borrowinas

The interest expense is in line with the Municipality’s loan repayment obligations.

Bad Debts

Bad debts are written off upon Council’s approval. The Provision for Bad Debts has increased significantly due to the escalation in outstanding debtors.

Repairs and Maintenance

The repairs and maintenance of assets are undertaken on an ongoing basis.

Below is an analysis of actual repairs and maintenance expenditure by Directorate, compared to the approved 2013/14 Adjustment Budget.

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Total Purchases Energy (kW h) Total Sales

(kWh) Losses in Units % losses or units not charged for Average Selling Price Rand Value Technical Losses Rand Value Non Technical Losses Rand value of losses

Energy

1.3.1 Electricity losses Council resolved on 7 June 2013 that:- The Acting Executive Director: Electricity and Energy develop and report on a strategy by 30 June 2013 to reduce electricity losses by at least 5% from 15% to IO%, for implementation in the 2013114 financial year, so as to achieve a minimum reduction of R1OO million in bulk electricity purchases.

Jul A w Sept Oct Nov Dec Jan Feb Total

‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 date Accum to

317,279 305,733 277,687 297,339 292,137 241,600 290,170 380,807 2,402,752

277,753 265,587 247,289 261,525 269,257 226,890 257,250 336,336 2,141,887

39,526 40,146 30,398 35,814 22,880 14,710 32,920 44,471 260,865

12.5% 13.1% 10.9% 12.0% 7.8% 6% 13% 13% 12%

0.62 0.62 0.62 0.62 0.62 0.62 0.62 0.62 0.62

10,332 9,880 9,199 9,729 10,016 8,440 9,570 12,512 79,678

14,174 15,011 9,648 12,476 4,169 0,680 10,841 15,060 82,058

24,506 24,890 18,846 22,205 14,187 9,120 20,410 27,572 161,736

The losses as a percentage of sales have increased in the past few years from 7% to 15%. These losses comprise both technical and non technical losses. The non technical losses have seen the biggest increase due to the theft of electricity. The Directorate has appointed a service provider that will assist with the reduction of losses, with effect from 1 March 2014.

Electricity and Energy Losses for 201 3/14 are as follows:

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0 Electricity losses comprise of both Technical and Non Technical losses. 0 Technical Losses are assumed to be at 6% and include electricity line losses that

are unavoidable, Streetlights, High Mast lights and Traffic signals. 0 Non Technical losses include theft by way of illegal connections, tampering etc 0 The above table is calculated using the average selling price, so losses show the

potential loss in income if the electricity were to be sold.

1.3.2 Water Losses In the Council agenda of 7 June 2013 it was resolved that:

The Acting Executive Director: Infrastructure & Engineering develop and report to the Infrastructure, Engineering & Energy Committee in the first instance on a strategy by 30 June 2013 to reduce water losses, indicating the funding requirements and the potential associated benefits, the outcome to be reported to Council via the normal reporting structures and procedures.

The Department of Water Affairs has issued a new template for calculating Water losses. The results of these calculations will be submitted once the calculations have been processed and verified.

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CAPITAL BUDGET PERFORMANCE

Below is an analysis of the capital expenditure compared to the approved 2013/14 Adjustments Capital Budget.

It is to be noted that an amount of R664.1 million has been spent as at 31 March 2014, compared to the approved adjustments budget of R1.676 billion. This represents a spending performance of 39.6% relating to the Capital Budget.

The low spending on the Capital budget can be attributed to the following: The late approval of the Ward Budget in September 2013. Directorates held back with project implementation pending the finalising of the ward allocations.

0 Meetings of the Bid Committees are being postponed, resulting in delays in tender awards.

0 Tenders at the Bid Evaluation Committee take too long to be evaluated by the Com m ittee. The minutes of the BSC & BEC committees take too long to reach the project managers causing delays in the award of tenders. Project delays and stoppages due to community unrest and interference by SMME’s

0 Critical Material and Labour Contracts are not or were not in place to ensure the spending of the budget. The renewal of the most critical contracts are in progress and at various stages in the procurement process. Slow spending is as a result of long delivery periods for certain infrastructure equipment.

The impact of the Capital Budget on the Municipality’s cash flow position is discussed in Annexure A3 of this report.

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Vote Description

R thousands

CASH FLOW FROM OPERATING ACTMTIES

Receipts

ANNEXURE “A3”

2012113 Budget Year 2013/14

Audited Original Adjusted Monthly YearTD YearTD YTD KYTD FullYear Outcome Budget Budget actual actual budget variance variance F o m s t

PROJECTED CASH FLOW STATEMENT FOR THE 2013/14 FINANCIAL YEAR

Projected Cash Flow Statement as at 31 March 2014

The purpose of the cash flow statement is to compare the cash inflows (receipts) with the cash oufflows (payments), so as to ascertain the adequacy of the cash inflows to cover the cash oufflows.

Table C7 Monthly Budget Statement - Cash Flow - M09 March 2014

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Vote Description

R thousands

2012f13 Budget Year 201314

Audited Original Adjusted Monthly YearTD YearTD YlD KYTD Full Year Outcome Budget Budget actual actual budget variance variance Fonrcast

Cashhsh equivalents at month/year end:

The significant variances are discussed below:

1 580 882 998 222 1 162 924 2 278 627 1 312 650 1 162 924

Government Grants - Operating

0 The variance is mainly attributable to the Provincial Treasury Housing Top structures funding being received on an ad hoc basis..

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Description R thousands

Financial Performance

Property rates

Investment revenue

Transfers recognised - operational

Other own

Total Revenue (excluding capital transfers and contributions)

Service charges

revenue

Employee costs Remuneration of

Councillors Depreciation &

asset impairment

ANNEXURE “A4”

201Z13 Budget Year 201W14

Audited Original Adjusted Monthly YearTD YearTD YTD % YTD Full Year Outcome Budget Budget actual actual budget variance variance Forecast

1058523 1214337 1254365 89888 942898 905 982 36 916 4% 1254365 3 633 275 4 089 228 3 982 035 303 381 2 804 521 2 846 561 (42 040) -1% 3982035

68 224 45 740 62 860 5895 47381 38 726 8 655 22% 234 659

1 270 307 I 119 572 1 438 836 21 514 838 575 1 164 873 (326 299) -28% 1438836

1 026 409 931 002 988041 184282 762522 644 529 117994 18% 988 041 7 0 5 6 7 3 7399879 7726136 6 0 4 ~ 5395896 5600670 (204774) 4% 7897936

I 723 762 1 972 548 1 988 633 146 664 1 408 824 1 406 176 2 649 0% 1988633

53 010 57 199 56 722 4614 41666 41 811 (145) -0% 56 722

774 430 885 807 816913 32755 623408 664 433 (41 026) -6% 816913 ,

NMBM BUDGET TABLES

Finance charges Materials and bulk

Transfers and purchases

1 Monthly Budget Tables

201 167 190 534 189567 15899 113167 112 827 340 0% 189 567

2 658 115 2 829 759 2 865 478 226 280 1 774 682 1 785 486 (10 803) -1% 2 865 478

The seven main budget tables, as required in terms of the Municipal Budget and Reporting Regulations, are included in this section of the report. These tables set out the Municipality’s 2013/14 budget performance for the period July 2013 to March 2014 and are to be noted by Council. Each table is accompanied by explanatory notes.

grants Other expenditure

Total Expenditure

Surplus/@eficit) Transfers

Contributions & Contributed assets Surpius/@eficit) after capital transfers 8 contributions

Share of surplus/ (deficit) of associate Surplus/ (Deficit) for the year

recognised -capital

Table C1 Consolidated Monthly Budget Statement Summary - M09 March 2014

19 714 340 520 335512 32438 242858 255 094 (1 2 236) 335 512

1 667 345 1 344 545 1 604 593 104 547 794 738 912 693 (117 955) -13% 1604593

7097542 7620913 7857418 563198 4999344 5178520 (179176) -3% 7857418

(40 804) (221 034) (131 281) 41763 396552 422 150 (25 598) -6% 40 518

895 330 709812 1194 108 82 126 572761 514 141 58 621 11% 1194108

- - - - - - - 854 526 488779 1062827 123888 969314 936 291 33 023 4% 1234626

- - - - - - - -

854 526 488779 1062827 123888 969314 936 291 33 023 4% 1234626

Cam1 expend itUre 8 funds sources

Capital expenditure

recognised Capital transfers

Public

1 195 870 1 177 277 1 676 127 109 523 664 143 764 870 (100 727) -13% 1676127

895 330 717512 1050217 82126 474253 508 879 (34 626) -7% 1050217

contributions & donations 4 410 41 201 49 069 5193 16084 19 OOO (2 916) -15% 49 069

Borrowing - - - - - - - -

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Descriptlon R thousands

generated funds

Total sources of capital funds

2012113 Budget Year 2013/14

Audlted Original Adjusted Monthly YearTD YearTD YTD KYTD FullYear Outcome Budget Budget actual actual budget variance variance Forecast

109 i is 870 i in 277 i 676 127 523 664143 764 871 (100 727) -1% 1676127

Financial w s l o n Total current

assets Total non cumnt

assets Total current

liabilities Total non cumnt

l i a b i l i Community VfealthlEquity

Cash flow Net cash from

(used) operating Net cash from

(used) investing Net cash from

(used) financing Cashlcash equivalents at the month/year end

I

624 994 1688780 1294098 394 683 30% 1377222

(104

(1 9

1 720 314 1 307 169 1 377 222

(1 267 597) (1 218 292) (1 692 956) 5%) (851 819) (899 878) 48 059 -5% (1 692 956)

(86 815) (105 159) (102 224) 532) (84679) (96 074) 11 395 -12% (102 224)

1580882 998222 1162924 - 2278627 1312650 965 9 n 74% 1108386

2 320 118

3 326 729

Description 1 2012113 I Budaet Year 2013114 I

2 262 641

13 612 755

2 103 251

3 126 983

10 645 163

R thousands

Revenue - Standard Governance and

odmlnistraffon

Executive and faunal Budget and treasury

Office

Audited Original Adjusted Monthly YearTD YearTD YTD %YTD FullYear Outcome Budget Budget actual actual budget variance variance Forecast

2135260 2134729 2202174 239264 1751006 1886223 (135217) -7% 2202174

809 316 269 1 44 87 (42) 49% 269

2 119 110 2 123 759 2 182 116 238002 1740 359 1875497 (135 138) -7% 2182116

Explanatory notes to Table C1 - Monthly Budget Summary

The aim of the Budget Summary is to provide a concise overview of the actual budget performance from all of the major financial perspectives (operating expenditure, capital expenditure, financial position, cash flow, and MFMA funding compliance). The table provides an overview of the actual amounts spent compared to the monthly budget projections within the context of operating performance, resources utilised for capital expenditure, financial position, cash and funding compliance.

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R thousands

Carpotate services Community and public

Community and social

Sport and recreation Public safely

safe&

services

Housing

Description I 2012113 1 Budget Year 2013114 I I I

Audited Original Adjusted Monthly YearTD YearTD YTD %YTD FullYear Outcome Budget Budget actwl actual budget variance variance Forecast

15340 10654 19790 1262 10603 10640 (37) 0% 19 790

426537 322553 323339 30713 238889 224145 14743 7% 323 339

16188 20559 28795 1377 13545 13840 (295) -2% 28 795 40230 50511 29192 6429 22683 22532 151 1% 29 192

335685 216702 229569 15632 190396 173576 16820 10% 229 569 28073 34567 35667 573 5496 14097 (8601) 81% 35 667

Economic and I I I I I I

Waste management

Other Total Expenditure - Surplus/ (Deficit) for the year

Standard

3

184671 237 192 241 544 35467 160801 140531 20270 14% 241 544

6961 54334 33681 1705 9 491 5 671 3 820 67% 33 681

7097542 7620913 7an41a ~ 3 1 ~ 4999344 5178520 (179176) -3% 7851418

(40 804) (221 034) (131 281) 41 763 396552 422150 (25598) -6% (131281)

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Vote Description

R thousands

Explanatory notes to Table CZ - Budgeted Financial Performance (revenue and expenditure by standard classification)

201Z13 Budget Year 2013114

YTD Full Year Audited Original Adjusted Monthly YearTD YearTD YTD Outcome Budget Budget actual actual budget variance Forecast

The ‘standard classification’ refers to a modified Government Finance Statistics (GFS) reporting structure. The aim of the standard classification approach is to ensure that all municipalities report their operations in one common format, to facilitate comparison across all municipalities. It is to be noted that the revenue by vote as reflected in this table, includes revenue attributable to capital grants.

ExMtndWure bv Vote

Vote 1 -Budget and Treasury Vote 2 - Public Health

Vote 3 - Human Settlements Vote 4 - Economic Development

Vote 5 -Corporate Services Vote 6 - Rate and General

and Recreational Services

Engineers Vote 7 -Water Services Vote 8 -Sanitation Services Vote 9 -Electricity and Energy

Vote 11 - Safety and Sew* Vote 12 - Nelson Mandeb Bay

Vote 13 -Strategic Programmes

Vote 10 -Executive and Council

Stadium

Directorate

Total Expenditure by Vote

Surplusl (Deficit) for the year

Table C3 Consolidated Monthly Budget Statement - Financial Performance (revenue and expenditure by municipal vote) - M09 March 201 4

490093 560699 551 946 44329 309922 326 164 (16242) -5,0% 551 946 693 205 717 283 735 129 (64 846) 368 521 476 056 (107 535) -22,696 735 129 503 997 381 431 587044 51 776 419079 412681 6398 1,6% 587044 .

332 583 360 231 355 559 (9 728) 215 741 272 700 (56 959) -20,9% 355 559 277641 413520 385981 37558 303 160 285880 17280 6,0% 385981

440653 451 659 495972 88567 357897 349269 8628 2,5% 495972 570 697 596 018 601 387 65325 362141 382429 (20288) -5,336 601 387 228 601 442 496 458743 51 805 288188 292868 (4681) -1,6% 458743

2 780 159 2 912 251 2 862 545 210 015 1 811 495 1 804 389 7 106 0,4% 2862545 ,

408 141 392 935 405023 63010 323683 288466 35217 12,256 405023 172068 216869 220926 7424 111 582 141 168 (29585) -21,0% 220926

173586 129487 142871 14718 114345 125940 (11 595) -9,2% 142871

26 118 46033 54292 3246 13590 20510 (6920) -33,7% 54292

7097542 7620913 7857418 563198 4999344 5178520 (179176) -33% 7857418

(40 804) (221 033) (131281) 41 763 396552 422150 (25598) 4,1% (131 281)

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r 201 211 3

Outcome Budget Budget actual actual budget variance e

Budget Year 2013114 Description R thousands Audited Original Adjusted Monthly YearTD YearTD YTD variam %*’ ~ u ~ ~ ~ e a r Forecsst

Revenue Bv Source

Property rates 1058523 1214337 1254365 89888 942898 905982 36916 4% 1254365 Property rates - penalties &

Service charges - electricity

Service charges - water

Service charges - sanitation

Service charges - refuse

collection charges - revenue 2 819 71 1 3 070 366 2 963 173 214 288 2 002 521 2 073 235 (70 713) -3% 2963 173

revenue 430698 498414 498414 47699 403523 376316 27206 7% 498414

revenue 273384 343381 343381 26304 263178 249986 13191 5% 343381

Explanatory notes to Table C3 - Budgeted Financial Performance (revenue and expenditure by municipal vote)

The purpose of the format in which the monthly budget reporting table is presented, is to enable the Council to enforce a vote in accordance with the municipality’s organisational structure, so as to assign responsibility for the revenue and expenditure recorded against these votes to the Municipal Manager and Executive Directors concerned. Operating revenue and expenditure is thus presented by ‘vote’. A ‘vote’ is defined as one of the main segments into which a budget of a municipality is divided into, for the appropriation of funds.

Table C4 Consolidated Monthly Budget Statement - Financial Performance (revenue and expenditure) - M09 March 2014

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Loss on disposal of PPE

2012113 Budget Year 2013/14

Audited Original Adjusted Monthly YearTD YearTD YTD XYTD FullYear Outcome Budget Budget actual actual budget variance vatz" Forecast

94 839 -

Explanatory notes to Table C4 - Budgeted Financial Performance (revenue and expenditure)

to municipality Share of surplus/ (deficit) of

associate Surplus/ (Deficit) for the year

The Financial Performance Budget is required to be approved concurrently by revenue source and expenditure type, so as to ensure consistency with annual reporting format requirements. A key aim is to facilitate comparison between the monthly results, the monthly budget-to-date projections and the original budget, so as to assess performance.

1 062 827 854526 488779 1062827 123888 969314 936291

1 062827 8 S 526 488 779 1 062 827 123 888 969 314 936 291

Table C5 Consolidated Monthly Budget Statement - Capital Expenditure (municipal

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Explanatory notes to Table C5 - Budgeted Capital Expenditure by vote, standard classification and funding

Table C5 is a breakdown of the capital programme in relation to capital expenditure by municipal vote; capital expenditure by standard classification; and the funding necessary to fund the capital budget, including information on capital transfers from national and provincial departments.

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Other debtors

Current portion of long-term receivables

Inventory

Total current assets

Table C6 Consolidated Monthly Budget Statement - Financial Position - M09 March 2014

351 996 402 440 352 071 346 584 352 071 0 5 5 0 5

105 956 117 000 112 313 I09 033 112 313 2640083 2056765 2262641 3370896 2262641

Biological assets Intangible assets Other noncurrent assets

Total non current assets TOTAL ASSETS

207 022 310 692 198 483 207 020 198 483

13 186 843 13 164 9 9 13 612 755 13 228 936 13 612 755 15826926 15221723 15875397 16599832 15875397

~ ~ ~~ -~ ~

Total current liabilities 2 320 1 1 8 r 2 005471 1 2 1 0 3 2 4 2 140 796 r 2 103 251 I I I I

Non current liabllities

Borrowing

Provisions

Total non current liabilities

TOTAL LIABILITIES

~ ~ - ~

1 715 791 1 516 045 1 516 045 1 516 045 1 516 045

1 610 938 1 536 374 1 610 938 1 679 667 1 610 938

3326729 3052419 3126983 3195712 3126983 5646847 son890 5230234 5336508 5230234

NET ASSETS I 10 180079 I 10163833 I 10645163 I 11 263324 I 10645163 I I I I I

COMMUNITY WEALTHEQUITY

Accumulated Surplus/(Deficit) 10061948 4052808 10595563 11 128190 10595563

. Reserves 118 131 6 111 024 49 600 135 134 49 600

TOTAL COMMUNITY WEALTHlEQUlTY 10 180 079 10 163 833 10 645 163 11 263 324 10 645 163

a

25

Explanatory notes to Table C6 - Budgeted Financial Position

1. The table presents Assets less Liabilities as Community Wealth. The order of items within each group is also aligned to the convention of showing items in order of liquidity; Le. assets readily converted to cash or liabilities immediately required to be met from cash appear first.

2. Any movement on the Budgeted Financial Performance or the Capital Budget will invariably impact on the Budgeted Financial Position. For example, the collection rate assumption will impact on the cash position of the municipality and consequently inform the level of cash and cash equivalents at year end. Similarly, the collection rate assumption informs the budget provision for debt impairment, which in turn impacts on the provision for bad debts. These budget and planning assumptions form a critical link in determining the applicability and relevance of the budget as well as the determination of ratios and financial indicators. In addition the funding compliance assessment is directly informed by forecasting the statement of financial position.

Table C7 Consolidated Monthly Budget Statement - Cash Flow - M08 February 2014

9

26

Variance Description R thousands

Explanatory notes to Table C7 - Budgeted Cash Flow Statement

Remedial or corrective stepslremarks Reasons for material deviations

I. The budgeted cash flow statement represents the first measurement in determining whether the budget is funded.

Revenue Bv Source Service Charges-electricity

Transfers-recognised - operational

2. It reflects the expected cash in-flows versus cash outflows that are likely to result from the implementation of the budget.

(70,713) Mainly due to lower consumption patterns.

Transfers are only recognized once mnditions have been met Housing Top Structures subsidy received on an ad hoc

(326,299) basis this stage.

No corrective action required at this stage.

No corrective action required at

2. Monthly Budget Supporting Tables

ExDenditure Bv Tvpe Contracted Services

Debt impainent

The supporting budget reporting tables, as required in terms of the Municipal Budget and Reporting Regulations, are included in this section of the report. The table below sets out the material variances relating to the Municipality’s financial performance for the period July 2013 to March 2014.

(83,238) IPTS processes behind schedule No corrective action required at

(32,406) Can only process write-offs once approved by Council Will reduce once Council has Outstanding invoices for security services provided this stage.

approved the write-offs.

Supporting Table SC1 Material variance explanations - M09 March 2014

I

Financial Position Cash and Cash Equivalents 1 1,115,704 Mainly due to Unspent conditionalgrants. No corrective action required at

Rate payer and other 264,664 The VAT claimed back from SARS for expenditure assists in the excess over the budgeted cash flow amount that is VAT exclusive.

No corrective action required at thisstage.

10

27


Government - operating

Pavments Suppliers and Employees

Remedial or corrective stepslremarlts

No corrective action required at this stage.

No corrective action required at thisstage.

Variance Reasons for material deviations

101,971 Timing of grant payments in resped of Hwsing Top Sttuctures not in line with projections

The VAT paid to SARS for expenditure assists in the excess over the budgeted cash flow amount that is VAT exclusive

142,025

11

28

Organs of State R 8,432,723 R 14,601,177 R 4,607,903 R 7.216.357 R 8,636,076 R 4,886.735 R 4,409.565 R 4,418,994 R 57209,529

>ommerclal R 77,236,730 R 18,799.270 R 13,106,959 R 12,794.830 R 11,951.775 R 10,834,985 R 97.903.861 R 173,261,371 R415.888.781

Households R 312,753.682 R 82,609,989 R 51,647,794 R 40,391,047 R 48,778,225 R 47,089,786 R 185,893,408 R 742.943.287 R 1,512,107,218

ANNEXURE “AS’

ther NMBM)

ANALYSIS OF THE MUNICIPALITY’S BALANCE SHEET

R 5,850.115 R 2,710,582 R 587,582 R 36,263 0 0 0 0 R 9,184.W

In this section the Municipality’s Debtors, Creditors and Investments will be analysed. These components have a significant impact on the Municipality’s financial position.

Total- 0 - 31 - 61 - 91 - 121 - 151 - 181 Days - over 1 30 Days 60 Days 90 Days 120 Days 150Days 180Days 1 Year Year Detail

Trade and Other

1. Overview of Outstanding Consumer Debtors (Inclusive of VAT)

ct,ons- R61,890.840 R34.221,381 R23,527.126 R14.081.254 Rl3,450.278 R11.376.493 R47,638.297 R204.404.498

ctionS R 173.756.890 R 46,779,309 R 32.904.985 R 25,301,464 R 20.034.569 R 23,501,760 R 82,426,365 R 163,296,612

Electduty Receivables from Non- UwchangeTransactions- R331.311,170 R32.821,914 R33.213.581 R 11,464.823 R 14.791.864 R 7,038.828 R38.675.074 R 180,109,935 Property Rates Receivables from 3ChangeTransactions * R 39,333,375 R 17,424,752 R 12,009,243 R 7.855.731 R6,965,350 R 6,574,772 R 26526.481 R 94.199.251 Uaste Water Uanagement 3eceivables from 3change Transactions - R 17578.766 R 9,313,281 R4.741,601 R 2,487.293 R 5,464,744 R 2,616,078 R 19,602,366 R 84,315,877 Naste Manwement

Below is an analysis of the outstanding consumer debtors as at 31 March 2014, compared to the position as at 30 June 2013.

R410,590,169

R 568,001,954

R 649,427,198

R 210,888,955

R 116.120P06

Debtors’ Age Analysis (Inclusive of VAT) as at 30 June 2013

1

29

On R 18,324,640 R 21,467,762 I R 13,877,798 R 7.225.882 R 18,184,429 R 6,839,538 R 64,265,750 I R 252.681.501 R 402,667AW Acuxrnts puler R 13,097,952 R6.954,606 I R2.604.853 R 3,336,320 R 5.698.166 R 8,065,326 R 20.965.030 1 R 113,396,854 R 174.119,110

I eceivables from change Transadions - pew Rental Debtors

R855.455 I R667,889 1 R345.679 1 R83.530 I R697.165 1 R171,530 1 R2.062.334 I R11.502,939 I R 16,J86,Y1

-1 R 656,149298 1 R 169,650,895 R 123,224,867 R 71,836,298 R 85,286,566 R 65,984,328 R 302,161,695 R 1,103,907,466 R 2,578,201,413

%her NMBM) R 6,763,201 R 2,636,092 R 61 7,476 R 101,128 R413,151 R 50,072 R 472,832 R 1,144,254 R 12,198,206

R 656,149,298 R 169,650,895 R 123,224,867 R 71,836,298 R 85,286,566 R 65,984,328 R 302,161,695 R 1,103,907,466 R 2,578,201,413

brgans of sate I R14,514,131 I R7,623.112 I R2,713,692 I R2.385.242 I R2.913.062 I R956.598 1 R11.735.379 I R20,379,605 I R63,220,821 I JCornmenial I R312.010.151 I R68,962.308 I R46.074.078 I R30,768,411 I RM.372.645 I R25.531,621 I R 127,680,191 I R353,144,407 I R 1,000,543,812 I households I R322,861.815 I R90,429.383 I R73.819.622 1 R38,581.516 I R45.587.708 I R39.446.037 I R 162273.293 I R729.239.200 I R 1,502238,574 I

The aforementioned analysis indicates that from 30 June 2013 to March 2014 the overdue debts have increased by R 331.9 million as follows:

- OVERDUE AMOUNTS AS AT

Debtors &e Analvsis Bv Income 30 June 2013 3 1 March 2014 Difference Source R 303,036,467 R 348,699,328 R 45,662,861

R 394,245,064 R 73,526,612 R 320,718,452

R 240,774,205 R 318,116,020 R 77,341,815

Trade a n d Other Receivables f rom Exchange Transactions - Water Trade and Other Receivables f rom Exchange Transactions - Electricity Receivables f r o m Non-exchange Transactions - Property Rates Receivables from Exchange Transactions - W a s t e Water R 137,777,694 R 171,555,580 R 33,777,886 Management

eceivables f r o m Exchange ransactions - Waste Management R 106,013,485 F R 128,541,240 R 22,527,755

R 2,903,051

q o u s e h o l d r R 1,199,353,536 1 R 1,179,376,760 I -R 19,976,776 3 t h e r NMBM R 3,334,427 I R5,435,005 I R 2,100,578

~

Total Bv Customer Groua R 1,590,117,821 I R 1,922,052,115 1 R 331,934,294 I

The credit control policy is being implemented to its fullest extent except for the component dealing with the sale in execution of both movable and immovable assets. The Municipality is currently implementing the Debt Relief Programme, as previously approved by Council.

The increase in: 0 Electricitv: Mainly due to the 14 large electricity consumers only paying 75% of

their consumption since 1 July 2013. These are the companies disputing the electricity tariffs approved by the NMBM Council for the 2012/13 and 2013114 financial years. Originally there were five (5) companies that disputed the

2

30

I

Detail 0 - 30 Days 31-60 days 61 - 90 days Above 91 days Total

R ‘000 R ‘000 R ‘000 R ‘000 R ‘000 % Bulk Electricity

Bulk Water

PAYE deductions

VAT (output less input)

Pensions I Retirement deductions

Loan Repayments

Trade Creditors

Auditor-General 301 301 1 Other

28 040 28,040 24

86 86 0

68,670 9 431 2 086 8 216 88404 75

electricity tariffs approved for the 2012/13 financial year. Their dispute was under consideration by the High Court as a matter between a Group of Five (5) companies and the NMBM. In the 2013/2014 financial year, a further group of nine (9) new companies joined the original five (5) companies.

0 These fourteen (14) companies are having their matter as sub judice. The combined total debt that these companies owe the NMBM as at 31 March 2014 is R135 591 388.20.

0 On the advice of their attorneys they have elected to pay only a portion of their electricity accounts which amounts to 75% of their monthly electricity bills.

97,097 Total

0 Interest: This is due to the fact that interest is being raised at 16.5% per month on overdue a moun ts .

9 431 2 086 8 216 116830 100

2. Overview of Creditors position

Below is an analysis of the status of the major creditors:

The above amounts represent invoices still to be paid. Creditors’ payments approximate 48 days, based on the date of invoice. The target for payment days is recorded at 35 days from date of the relevant invoice by the directorate to the payment date. The 48 days excludes delayed payments as a result of irregular expenditure.

A monthly report is submitted to Management Team on the outcome of the creditors’ payment process. Executive Directors are held responsible for outcomes in the following two areas: -

Adhering to the 19 days allocated to Directorates for processing of payments - this currently forms part of the Executive Directors’ scorecards; and

Reporting on and being held accountable for irregular expenditure - this is dealt with through the MPAC Sub-committee on Irregular, Fruitless and Wasteful expenditure.

0

3

31

Payment of Service Providers

Section 65(2)(e) of the MFMA states that ”all monies owing by the Municipality must be paid within 30 days of receiving the relevant invoice or statement, unless prescribed otherwise for certain categories of expenditure”.

To ensure efficient administration all reporting in relation to payment is based on using the invoice date as the baseline and not the date of receipt of the invoice. An average number of days to make payment from the date of invoice have been calculated at 35 days, by allowing 5 days for postal travel of the invoice from the supplier to the municipality.

For performance measuring purpose the 35 days has been split as follows: . . Phase 1 - The Directorate has 19 days to process from invoice receipt date; Phase 2 - Creditors, Accountants & Cash Management have 16 days to finalise the payment process.

It must be noted that the date of receipt is inserted in the payments program by the directorate

This reporting standard is being applied due to the fact that: Service Providers give discount based on the invoice date, irrespective of the invoice receipt date. Performance of the NMBM in relation to payment is determined by the Service Provider from the date of the invoice. Recording of the invoice receipt date may be subjective, impractical to manage and difficult to prove.

Table 1: Reflecting number of Days taken by Directorates to process documentation for payment by Creditors Section from Date of Invoice

4

32

Directorate Chief Operating Officer Office of the Executive Mayor Economic Development, Tourism & Agriculture Recreational 8 Cultural Services Public Health Sanitation Safetv & Securitv

Table 1 above illustrates by Directorate the number of days taken to process documentation from the date of the invoice. The Directorates are still lagging in meet the 19 days turnaround time assigned to them in Phase 1.

No. of Days ( March ) 145 80 65 54 53 47 41

payment efforts to

Number of Days taken by

Accountant to sign

The following Directorates have met the 19 days turnaround time for the latest month (March):

0 Municipal Manager: Administrative Support 0 Budget & Treasury

Number of Days taken Delay in Total No. of days by Creditors to release of from date

process 8 final Sign EFT’S Directorate approves

The following Directorates have improved for the latest month (March): 0 Electricity & Energy 0 Human Settlement 0 Water Services 0 Special Projects & Programmes 0

0 Corporate Services Infrastructure & Engineering: Rate & General

During March the number of days to process documentation has increased from February for the following Directorates:

The March 2014 payment days result of the COO’S Office is attributed to payments made to Attorneys that were in excess of 100 days per payment.

The number of days taken by the Directorates to process documentation for payment remains unacceptable and impacts significantly on the NMBM’s compliance with Section 65(2)(e) of the MFMA. Compliance with Section 65(2)(e) of the MFMA is dependant on all role players within the payment value chain adhering to their respective timeframes.

Table 2: Reflecting Average number of Days taken by the NMBM to pay Service Providers from the date that the EFT is available for release

Table 2 above reflects the Phase 2 process payment cycle where the target has been set at 16 days. This phase of processing is consistently within the target number of days except in January when a large number of officials were on vacation.

If we combine Phase 1 and Phase 2 in the payment process then the number of days taken to pay creditors from date of invoice is as follows against the target of 35 days.

5

33

Financial institution

Type of Investment

Value of Investment 3OJune 2013

Add: Investments Made (July to March 2014)

Less: Investments Matured (July to March

Net movement in current account

Value of Investments: 31 March 2014

% Exposure Of Institution Actual Interest Earned (July to March 2014)

201 4)

0 January 201 4 - 63 days 0 February 201 4 - 45 days 0 March 201 4 - 48 days

ABSA FNB lnvestec Nedbank Nedbank Standard Stanlib ABSA Total

Term Term Call Term Call Term Cali Current

R'000 R'000 R'000 R O O 0 R'000 R'000 R'000 ROO0

Bank

Deposit Deposit Deposit Deposit Deposit Deposit Deposit Account R'000

320,000 220.000 165,607 ioo,oao 165.500 239,200 35,071 335,504 1,580,882

1,055,000 795,000 645,000 565,000 225,000 1,100,302 0 0 4,385,302

-985,000 -630,000 -515.000 -420,000 -245,000 -954,200 0 0 -3,149,200

0 0 0 0 0 0 61,643 61,643

390,000 385,000 295,607 245,000 145,500 385,302 35,071 397,147 2.278,627

17.12 16.90 12.97 10.75 6.39 16.91 1.54 17.42 100

7,666 7,514 7,327 3,792 4,479 8,611 1,234 5,078 45,701

The National Treasury target has been set at 30 days from the date when the invoice has been received. By using the receipt date of the invoice, as recorded by the Directorate, the number of days taken to pay creditors during the quarter is as follows:

a January 201 4 - 35 days 0 February 2014 - 27 days 0 March 201 4 - 29 days

It remains the responsibility of each Directorate to ensure that Invoices are received and processed relating to service delivery within their respective Directorates. The results in Table 1 indicate that the Directorates are still taking an exceptionally high number of days to process source documentation.

3. Investment PortFolio

Below is an analysis of the Investment Portfolio as at 31 March 2014

The increase in the investment portfolio since 30 June 2013 amounts to R697.7 million. The increase in the investment portfolio is mainly due to the receipt of government grants during December 2013 and March 2014, in respect of the 2013/14 financial year. The following analysis indicates the extent to which the investments are committed:

Cash backed Reserves Bank Balances and Cash Short-term Investment Deposits

Application of Cash Unspent Conditional Grants Statutory Funds - COlD Self Insurance Fund Outstanding Creditors Liability

1,924,457 2,278,627

1,148,145 19,009 31,500

1 16,830

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34

Description

R thousands

Internally Generated Funding Current Provisions Capital Replacement Reserve

2012/13 Budget Year 2013114

Audited Original Adjusted Monthly YearTD YearTD YTD %YTD FullYear Outcome Budget Budget actual actual budget variance variance Forecast

403,035 230,957 34,903

1,984,379

Finance Management Other Grants including Training, Disaster

Management, etc

Reserves in excess of commitments 294,248

1,250 1,250 1,250 1,250 1,250 - 1,250 . 226,354 79,773 75,585 71,961 3,624 5.0% 79,773

The cash backed reserves exceed the commitments at this stage by an amount of R294,2 million. The sustainability of the Municipality will remain under pressure until sufficient working capital levels have been established. The following financial strategies are being implemented to address this situation:

Operating and Capital expenditure funded from the Municipality’s own revenue sources have been reduced to the financial affordability levels established in terms of the 201 3/14 Budget. Optimisation of all revenue streams. Increasing collection rates above the targeted percentage utilising the credit control policy of Council and the Debt Relief Programme, integrated with the Masakhane Programme.

0 Disposal of serviced land in order to boost the depleted Capital Replacement Reserve.

0 No capital projects will be funded from the Municipality’s own revenue sources until such time as sufficient funds are available to cover the commitments not yet funded.

4. Allocation and Grant receipts and expenditure for the 2013114 financial year

7

35

Total Capital Transfers and Grants

TOTAL RECEIPTS OF TRANSFERS a GRANTS

772,062 809,186 900,386 138,315 920,097 082,492 - 900,386

2,183,037 1,915,603 2,274,434 533,472 2,238,013 2,194,214 6,194 0.3% 2,274,434

Below is an analysis of the spending associated with the grants as at 31 March 201 4:

Supporting Table SC7 Monthly Budget Statement - transfers and grants expenditure - M09 March 2014

Description I 2012113 I Budget Year 2013114

1 Rthousands Audited Original Adjusted I Monthly I YearTD I YearTD I YTD I XYTD 1 Full Year 1 1 Outcome I Budget I Budget actual actual budget varlance variance Forecast

1 EXPENDITURE

Ooeratlna exoendlture of Trensfers and Grants

Urban Settlements Development Grant 1 6,170 I 6,170 I

8

36

Description 201243

Audited Outcome R thousands

Disaster Management, etc 227,604

Library Grant 3,752 Housing Accredrtaton 9,766 Housing 317,257

Other Grants induding Training,

Provincial Government: 397,922

lnstrtubnal Support Grant DRPW ( Road Matntenance)

Other Grants 67,147 Other grant providers: (150)

EU Trendre 413

Nefronel LOftenes

Budget Year 2013114

Original Adjusted Monthly YearTD YearTD YTD %YTD FullYear Budget Budget actual actual budget variance variance Forecast

130 - 130 221,504 429,613 32,034 290,965 300,826 (9,861) -3.3% 429,613 3,752 3,752 - 3,752 - 9,352 19,997 1,371 8,590 8,500 90 11% 19,997

206,900 397,146 28,337 280,049 290,000 (9,951) -34% 97,146 1,500 1,500 1,500

5,000 2,326 2,326 2,326 5,000 . 2,218 - 2,218

- 21,286 496 1,754 2,070 (316) -153% 21,286

5,605 - 5,605 12,603 31 1,176 1,500 (324) -21 6% 12,603

Urban Settlements Development Grant Integrated National Electrification

Neghhhood Development

National Informal Housing

United Nations DeveloDment

Programme

Partnership

Elecbification

Note: The equitable share allocation is utilised to fund A T P subsidies granted to qualifying households, with the remainder being used to support the Municipality’s operations.

593,216 727,986 721,816 46,378 337,974 360,280 (22,306) -6.2% 721,816

15,000 51,200 53,585 2,196 15,179 20,000 (4,821) -24.1% 53,585

64,062 30,000 39,267 2,843 9,127 13,954 (4,826) -24.6% 39,267

- -

5. Councillor and Board members’ allowances and employee benefits

Below is an analysis of Councillor, Board members’ allowances and employee benefits:

9

37

Summary of Employee and Councillor remuneration

Supporting Table SC8 Monthly Budget Statement - Councillor and staff benefits - M09 March 2014

Eudget Year 2OlW14 2012/13

10

38

11

39

l , l l6 , l l2

1,123,162

Summary of Employee and Councillor remuneration

R thousands

% increase

Total Municlpal Entities

TOTAL SALARY, ALLOWANCES 6 BENEFITS

% increase TOTAL MANAGERS AND STAFF

2,029,148 2,045,354 151,2l8 1,450,491 1,441,987 2,504 0% 2,045,354 14.2% 15.1% 1 5 . 1 ~

i , g n , s a i,gaa,az 146,664 1,408,824 1 , 4 0 5 , ~ 3,319 0% 1,988,632

Description of financial indicator

Borrowina Manaaement

Capital Charges to Operating Expenditure

6. Key performance indicators

The table below reflects the key performance indicators as per the 2013/14 Budget and the associated performance to date.

Supporting Table SC2 Monthly Budget Statement - performance indicators - M08 February 2014

Basis of cakulation Budget Year 2013114

Original Adjuetments YearTD Full Year Budget Budget actual Forecast

Interest & principal paidloperating Expenditure 3.9% 3.0 4.0% 3.8%

0.0% Borrowed funding of 'own' capital Borrowiqs/Capital expenditure excl. transfers and expenditure grants 0.0% 0.0% 0.0%

Safety of Capital

Gearing

1 DebttoEquily

Long Term Borrowing/ Funds & Reserves 14.9% I 14.2 1 13.5% I 14.2%

1 32.6% 1 30.9 I 29.2% 1 30.9% 1 Loans, Accounts Payable, Overdraft & Tax Provision/ Funds & Reserves

Revenue Management

Annual Debtors Collection Rate Last 12 Mths Receipts/ Last 12 Mths Billing (Payment Level %) 94.0% 94.0 93.9% 94.0%

I Current Ratio I Current assetslcurrent liabilities I 102.5% I 107.6 I 157.5% I 107.6% I Liauiditv Ratio I Monetary AsseWCurrent Liabilities I 49.8% I 55.3 I 106.4% I 55.3%

The above table is discussed in detail below.

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40

6.1 Borrowing Management

6.1.1 Borrowina to Asset Ratio

This ratio assesses to what extent there are adequate assets to cover the amount of outstanding long-term borrowing (refer figure 1 ).

The ratio is determined as follows:

Long-Term Borrowing / Total Assets

The risk that the Municipality might not be able to settle its long term borrowing becomes greater if this ratio is high. The Municipality must therefore exercise due caution, so that its assets are not overburdened by raising excessive borrowing. The careful and judicious management of borrowing is considered very critical, in order to ensure the Municipality’s continued financial viability.

As at the end of March 2014, the borrowing to asset ratio was at 0.0913:1, compared to Adjustments budgeted target of 0.0955:l.The actual ratio as at 31 March 2013 was 0.1021:l. As no further borrowing is planned over the 2013/14 MTREF, this ratio is expected to reduce. The actual ratio as at 30 June 2013 was 0.108:l. A ratio of 0.0955:l as reflected in the 201 3/14 Approved Adjustments Budget appears to be appropriate for the Municipality from a financial affordability and sustainability perspective. External borrowing should only be utilised for the creation of economic assets that will generate future revenue streams for the Municipality.

Figure 1: Borrowinn to Asset Ratio

0.2

0.15

0.1

0.05

0 Mar - I3 Apr- I3 M a y 1 3 Jun- I3 Jut - I3 Aug-13

--c Actual -t- Target

13

41

6.1.2 Capital Charges to Operatins Expenditure

This ratio indicates the proportion of capital charges (interest and principal paid on borrowing) to actual operating expenditure to date. The ratio also provides an assurance that the proportion of capital charges to total annual operating expenditure is financially prudent. (Refer figure 2).


Capital Charges I Total Operating Expenditure to date

The ratio indicates that 3.96% of the Operating Budget was utilised for capital charges, compared to the adjustments budgeted target of 3.75%. The ratio is anticipated to increase as operating expenditure increases over the remainder of the financial year. The actual ratio was 4.41% as at 31 March 2013, whilst as at 30 June 2013 the actual ratio was 4.21 %.

Capital charges (Debt servicing costs) are paid at specific intervals. However, the ability of the Municipality to service new borrowing is increasingly becoming under pressure, and it is clear from an overall cash flow position that the Municipality cannot afford to take up external loans for the 2013/14 MTREF period up to 30 June 2017.

Figure 2: Capital Charnes to Annual Operatina Expenditure

1A 4 I

i f ! I

;it 'i A

2 4 I I - - 4 I

0 I 1 I I I 1

Mar-I3 Apr-I3 May13 Jun-13 Jul-I3 Aug-I3 Sep-13 Oct-I3 Nov-I3 Dec-13 Jaw14 Feb-14 Mar-I4

+Actual +Target

6.1.3 Borrowed funding of capital exDenditure

This ratio indicates the proportion of borrowed funding to actual capital expenditure to date (excluding transfers and grants). The ratio also indicates the extent of capital expenditure being financed from borrowed funding compared to own and other funding sources, excluding transfers and grant funded expenditure (refer figure 3).

14

42

0.05 -


Capital expenditure funded from Borrowings / Total Capital Expenditure to date (excluding transfers and grants)

The ratio was 0% (or 0.O:l) as no capital expenditure was funded from borrowings, which is in line with the adjustments budgeted target as per the 2013/14 Adjustments Budget as no borrowing is planned for the 2013/14 to 2015/16 financial years. As indicated elsewhere in the report, the Municipality has exhausted its borrowing capacity and will therefore not take up any further loans over at least the next two financial years.

Figure 3: Borrowed funding of Capital Expenditure

1 +Actual -Target 1 6.1.4 Debt Servicins Costs to Ooeratina Revenue Ratio

This ratio indicates the proportion of debt servicing costs (interest and principal paid borrowing) to actual operating revenue to date. (refer figure 4).

on


Debt Servicing Costs / Operating Revenue

The risk that the Municipality might not be able to settle its annual long term borrowing commitments becomes greater if this ratio is high. The Municipality must therefore exercise due caution, so that its operating revenues are not overburdened by the level of borrowing. The careful and judicious management of borrowing is considered very critical, in order to ensure the Municipality’s continued financial viability.

As at the end of March 2014, the debt servicing costs to operating revenue ratio was at 0.0367:1, compared to an adjustments budgeted target of 0.0381:l. The actual ratio as at 31 March 2013 was 0.037:1, whilst the actual ratio as at 30 June 2013 was 0.042. As no further borrowing is planned over the 201 3/14 MTREF, this ratio is expected to reduce. A ratio of 0.03:l appears to be the maximum borrowing level for the Municipality from a financial affordability and sustainability perspective.

Figure 4: Debt Servicing Costs to Operating Revenue Ratio

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43

6.2 Safety of Capital

6.2.1 Gearing Ratio

The gearing ratio assesses the percentage of capital employed that is financed by long term borrowing (refer figure 5).


Long Term Borrowing / Funds & Reserves (Equity)

The higher the gearing ratio, the higher the dependence will be on borrowings. The lower the gearing ratio, the higher will be the dependence on the Municipality’s funds and reserves.

The gearing ratio as at the end of March 2014 was 0.135:1, compared to the 2013114 adjustments budgeted target of 0.142:l. The actual ratio was 0.151:l as at 31 March 2013, whilst the actual ratio as at 30 June 2013 was 0.169:l.

As no further borrowing is anticipated for the 2013/14 to 2015/16 financial years, the ratio will reduce as outstanding borrowings decrease and equity improves over the next three financial years.

Figure 5: Gearinn Ratio

0.4

0.1 -A-

I a 1

16

44

0.1 -

0.4 -

0.3 -

rn - - - - - - - - w I - v 7 - 0.2 4 I

Current assets Cash and Investments Consumer Debtors Other Debtors

Inventory Current portion of long term Receivables

Total

R % 2,278,627 67.60 636,652 18.89 346,584 10.28

109,033 3.23 3,370,896 100

0 0

I *Actual +Target I

Borrowing Consumer Deposits Trade and Other Payables

6.3 Liquidity

6.3.1 Current Ratio

1 12,968 5.28 90,224 4.21

1,706,646 79.72

The current ratio assesses a Municipality’s ability to meet its short-term commitments (refer figure 6).


Current assets I Current liabilities

The different components of current assets and current liabilities are reflected below.

Provisions Total

230,957 10.79 2,140,795 100

It is to be noted that cash and investments, consumer debtors and inventory comprise 67.60%, 18.89% and 3.23% respectively of total current assets. Trade and other payables constitute 79.72% of total current liabilities (refer to Sections 1.8.3, 1.8.1 and 1.8.2 of this report for a further discussion on investments, debtors and creditors).

A favourable ratio would ensure that the Municipality is able to settle its short-term commitments to its creditors. In this regard, it is important that the Municipality ensures the relative liquidity of its current assets. Non-liquid assets, such as long outstanding debtors, could negatively impact on liquidity, possibly resulting in a situation where current assets are not liquid enough to cover current liabilities. The ratio as at 31 March 2013 was

17

45

Monetary assets R Cash and Investments 2,278,627

2.278.627

1.47:l. The actual ratio as at 31 March 2014 was 1.57:l whilst the actual ratio as at 30 June 2013 was 1.14:l.

% 100.0 100%

The current ratio is of utmost importance to measure the financial liquidity and sustainability of the Municipality. Although the 201 3/14 adjustments budgeted target is 1.08:1, it does not imply that it is a satisfactory target. In this regard a financial recovery plan has been drafted and is being implemented to ensure the ongoing financial sustainability of the Municipality.

Figure 6: Current Ratio

0.5

0 , 9

20051200(1 200612007 200712008 2008/2009 2009/2010 201012011 201112012 201212013

-Actual -Targot

1 -

Mar-13 Apr-13 M a y 1 3 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dee13 Jan-14 Feb-14 Mar-14

6.3.2 Liauiditv Ratio

The liquidity ratio assesses a Municipality’s ability to meet its short-term commitments from Monetary Assets (refer figure 7).


Monetary assets I Current liabilities

The different components of monetary assets and current liabilities are reflected below.

18

46

Current liabilities Borrowing Consumer Deposits Trade and Other Payables Provisions Total

R % 1 12,968 5.28 90,224 4.21

1,706,646 79.72 230,957 10.79

2,140,795 100

A favourable ratio would ensure that the Municipality is able to settle its short-term commitments from monetary assets. The liquidity ratio as at 31 March 2014 was 1.06:l. The actual ratio was 0.94:l as at 31 March 2013, whilst the actual ratio as at 30 June 2013 was 0.68:l.

The liquidity ratio is of utmost importance to measure the financial liquidity and sustainability of the Municipality. The 2013/14 adjustments budgeted target of 0.551 is not a satisfactory target. The liquidity ratio of 1.06:l indicates a risky cash flow position. It would, however, appear that the action plans implemented as per the financial recovery plan have already assisted as the liquidity ratio of 1.06:l is above the adjustments budgeted target of 0.55:l for the 2013/14 financial year. However, with all DORA grant funding received for the year the liquidity ratio of 1.06 will substantially decrease over the remainder of the financial year depending on grant spending.

Figure 7: Liauiditv Ratio

200512006 200612007 200712008 200812009 200912010 20101201 1 201112012 20121201 3

+Actual -#- Target

1.4 - 1.2 -

0.8 -\ A

0 4 I Mar-13 May1 3 JuI-13 Sep-13 Nov-13 Jan-14 Mar-14

6.4 Revenue Management

6.4.1 Annual Debtors Collection Rate

This ratio assesses the actual cash collected, compared to the monetary value of the municipal accounts rendered for municipal rates and services. The ratio is 94% as per the 2013/14 IDP and Budget. However a collection rate of 100% or more is required to

19

47

105 -.

100 -

95 - 90 -

decrease the provision for doubtful debts so that more funds are released for service delivery.

The ratio to determine the percentage collection rate is as follows:

Percentage

Rate Total Payments Received in Current month X 100 = Collection

6.4 Revenue Management

6.4.1 Annual Debtors Collection Rate

This ratio assesses the actual cash collected, compared to the monetary value of the municipal accounts rendered for municipal rates and services. The ratio is 94% as per the 2013/14 IDP and Budget. However a collection rate of 100% or more is required to decrease the provision for doubtful debts so that more funds are released for service delivery.

The ratio to determine the percentage collection rate is as follows:

Total Payments Received in Current month

Total Value of Accounts Rendered in the Previous month

Percentage

Rate X 100 = Collection

- Note: The reason for using the previous month’s billing is due to the accounts only being payable the following month (i.e. account-holders are given one calendar month to pay their current accounts).

The collection rate for March 2014 was 98.6%, whilst the average collection rate amounted to 93.91% for the period 1 July 2013 to 31 March 2014. The average collection rate as at 31 March 2013 amounted to 91.74%.

Figure 8: Annual Debtors Collection Rate

110 , 1

20

48

105

100

95

90

85

4- _____

- _ _ ~ Lr~'Y?:?-=:d Mar-I3 Apr-13 I May13 Jun-13 Jul-13 Aug-13 Sep-I3 I Oct-I3 Nov-13 Dec-13 Jan-14 Feb-I4 Mar-I4 I

Mar-I3 Apr-13 May13 Jun-13 Jul-13 Aug-13 Sep-I3 Oct-I3 Nov-13 Dec-13 Jan-14 Feb-I4 Mar-I4

I -Actual +Target j I

The September decline has always been offset by an increase in the October collection rate and has been the trend in the collection rates for the 2011/12 and 2012/13 financial years. The reason for this fluctuation is due to annual rates being payable by end of September each year, only being received in October due to late payments by certain annual ratepayers.

6.4.2 Outstandinq Debtors to Annual Operatina Revenue

This ratio focuses on the amount owed by outstanding debtors as a percentage of the annualised operating revenue.


Outstanding Debtors I Annualised Operating Revenue

The ratio at the end of March 2014 was 13.5% compared to the target of 20%. The actual ratio was 14.04% as at 31 March 2013, whilst the actual ratio as at 30 June 2013 was 12.86.

It is considered of the utmost importance that strict financial management is maintained, in order to decrease the outstanding debt owed to Council. A Revenue Enhancement Strategy to improve revenue collection has been drafted and is being reviewed. This strategy is monitored by the CFO on a monthly basis and reported to the Budget and Treasury Standing Committee on a quarterly basis. Amongst others, the decline in the current economic climate has had a negative impact on this ratio.

The implementation of the Debt Relief Programme has been undertaken in order to recover outstanding debtors to stabilise the cash flow situation and to ensure that the targeted collection rate of 94% is achieved.

Figure 9: Outstanding Debtors to Annual Operating Revenue

21

49

20

30

I 25 I I

60 55 50 45 -' / \ 40- / 35 - '

30 25 - '

204 7

/ \ A A - - * I I I I - I -- F

I I 10

5 - 1 I Mar-I3 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-I3 Oct-13 Nov-I3 Dec-I3 Jan-I4 Feb-I4 Mar-I4

I -Actual -Target 1

6.5 Creditors Management

6.5.1 Creditors Turnover (days)

This ratio reflects the number of days that it takes on average to pay the Municipality's suppliers. Section 65 (2) (e) of the MFMA states that all money owing by the Municipality must be paid within 30 days of receiving the relevant invoice or statement (refer figure IO).

The ratio is determined from the date of receipt of the invoice until the date of payment. The ratio as at 31 March 2014 amounted to 29 days (also refer to Section 1.8.2 of this report). The ratio as at 31 March 2013 amounted to 32 days, whilst the actual creditor's turnover as at 30 June 2013 was 31 days.

Figure I O : Creditors Turnover (days)

22

50

45

40

35

30

25

20 8

L I

I I

A v

Mar-13 Apr-13 May13 Jun-13 Nov-13 Dec-13 Jan-I4 Feb-14 Mar-14

6.6 Other indicators

6.6.1 Cost coveraqe

The ratio indicates the extent to which the available cash and investments are adequate to cover monthly payments (refer figure 11).


Cash and Cash Equivalents - Unspent Conditional Grants - Overdraft + Short Term Investments /Monthly Fixed Operational Expenditure excluding (Depreciation, Amortisation, Provisions for Bad Debts, Impairment and Loss on the disposal of Assets:

R2278627000-R1148145000 R 533555667 = 2.1 I months (63.6 days)

The cost coverage ratio of 2.1 1 months is above the IDP target of 1 month. The monthly average projected operating payments for the period July 2013 to June 2014 was used as a basis for the calculation.

The cost coverage ratio of 2.11 months still indicates that the Municipality is facing pressures on its cash flows in the short-term, but it has improved over the period since the NMBM has implemented strategies to address the cash flow situation.

23

51

I."

2 -

1.5 -

Figure 11 : Cost Coverane (months)

0.5

0 4 I Jun-13 Jul-13 Aug43 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14

6 Actual -m- Target r 6.6.2 EmDlovee costs as a % of Total ODeratina Income

This ratio assesses the extent to which the Municipality's Operating Revenue is consumed by costs associated with the employment of human resources (refer figure 12).


Employee Costs to Date / Total Operating Revenue to Date

The target has been set at 30% for the financial year. As at 31 March 2014, the actual personnel costs constituted 26.1% of the total operating income. The actual ratio was 22.59% as at 31 March 2013. The rate at which vacant positions are filled influences this ratio. The actual ratio as at 30 June 201 3 was 24.4%.

Figure 12: Personnel Cost as a % of Total Revenue

24

52

35

. 30 - -

25 -

20 -

15 I

Mar-13 Apr-13 Map13 Jun-13 Dec-13 Jan-14 Feb-14 Mar-14

-+Actual -+- Targe

6.6.3 Repairs and Maintenance as a % of Total Operatins Revenue

This ratio assesses the extent to which the Municipality’s Operating Revenue is consumed by costs associated with the repairs and maintenance of its assets (refer figure 13).


Repairs and Maintenance expenditure to date / Total Operating Income to date

The actual expenditure of 5.41% is below the adjustments budgeted target of 7.97%. The actual ratio as at 31 March 2013 was 5.7%.

Repairs and Maintenance of assets are undertaken on an ongoing basis.

Figure 13: Repairs and Maintenance as a % of Total Operatinn Income

2.5 -I

0.5 -r I

200512006 200612007 2007l2008 200812009 200912010 2010111 201112012 2012l2013

-+-Actual +Targat

25

53

7.5 6.5 5.5 4.5 3.5 2.5 1.5 0.5

Mar-13 Apr-I3 May-13 Jun-13 Jul-13 Aug-13 Sep-I3 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14

-C Actual +Target

6.6.4 Repairs and Maintenance as a % of the book value of Propertv, Plant and Eauipment (PPE)

This ratio assesses the level of repairs and maintenance expenditure incurred, compared to the book value of PPE (refer figure 14).


Repairs and maintenance expenditure to date / Book value of PPE to date

The repairs and maintenance expenditure incurred to date constitutes 2.25% of the book value of PPE, as at the end of March 2014, compared to an adjustments budget target of 4.60%. The actual ratio as at 31 March 2013 was 2.48%. This indicates a relatively low level of repairs and maintenance expenditure, taking into account that significant backlogs currently exist. The expenditure levels are anticipated to increase in future as the maintenance backlogs have now been determined.

It should be noted that new assets will not have an immediate effect on the repairs and maintenance component as they do not generally deteriorate within the first few years.

Figure 14: Repairs and Maintenance as a % of the book value of (PPE)

9.00

I .. - 4.00 3.00 2.00

A \ - v v \ -

Y-

200512006 200612007 200712008 200812009 200912010 201012011 201 112012 201212013

-Actual +Target

26

54

I: i 4 2

0 Mar-13 Apr-13 May13 Jun-13 Jul-13 Aug-13 Sepl3 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14

+ Actual +Target

6.6.5 Capital Budset Spending

This ratio assesses the level of actual capital spending compared to the budgeted capital expenditure (refer figure 15).


Actual Capital spending to date I Approved Capital Budget

The actual spending as at the end of March 2014 amounted to 39.6%, compared to the 2013114 Adjustments Budget. The actual comparative spending level as at 31 March 2013 was 43.7%

The Budget Performance Monitoring Forum meets every two months, as opposed to previously meeting on a quarterly basis. The Executive Directors present their capital budgets at the Forum meetings by project, with detailed explanations in the event of undedover spending.

Monthly one-on-one sessions are held with Directorates, in order to identify problem areas early on in the process. These meetings are attended by the Chairperson of the Budget and Treasury Committee, the Portfolio Councillor and the Executive Director of the Directorate concerned and representatives from the Budget and Treasury Directorate.

Figure 15: Capital Budaet Spending

I120 , I

~ _ _ _ _ _ _ _ _ \ 80 -- A

70 60 -7

___ 7

____.-

200512006 200612007 200712008 200812009 200912010 20101201 1 201 112012 2012l2013 ___-__-

&Actual -o-TargeI

27

55

~ 120 I I 100 80 60 40 20

0 Mar-13 APT-13 May-13 Jun-13 Jul-13 Aug-13 Sep-I3 Oct-13 Nov-13 Dec-I3 Jan-14 Feb-I4 Mar-I4

I +Actual +Target 1

6.6.6 Own Revenue Generation

This ratio measures the extent to which the Municipality has control over its revenue sources, i.e. what percentage of its revenue is generated locally. The higher the ratio, the less reliant a Municipality is on Provincial and National Government to support its operations (refer figure 16).


Own Revenue Sources I Total Operating Income (includes operating grants)

As at the end of March 2014, the Municipality’s own revenue sources constituted 84.46% of its total Operating Income compared to the 2013/14 Adjustments Budget target of 81.38%. The ratio as at 31 March 2013 was 81.27%. The Municipality is thus not fully reliant on the finances received from Provincial and National Government to support its day to day operations. The equitable share, for example greatly assists the Municipality to cover the ATTP subsidies. Although the Municipality would like to become sufficient by not having to rely on Government support via Grants and Subsidies it has become very clear that without increased Government funding the Municipality will not be able to meet its service delivery mandate from its limited revenue base.

Figure 16: Own Revenue Generation

200512006 Bo612007 200712008 200812009 200912010 201012011 2011/2012 2012Mo13

- - tActwl -m-Tirg.t

28

56

90 1 1 85

80

75

70

65

60

55

50 Mar-I3 Apr-13 May13 Jun-13 Jul-13 Aug-I3 Sepl3 Oct-I3 Nov-13 Dee13 Jan-14 Feb-14 Mar-I4

+Actual -n- Target l-----l

29

57 ANNEXURE "A6i"

mandela bay '0. *- DEVELOPMENT AGENCY @a* T H E S P l R l T OF G R O W T H

A Municipal Entity of the Nelson Mandela Bay Municipality

MONTHLY BUDGET STATEMENT REPORT

MARCH 2014

58 2

FINANCIAL MONTHLY REPORT FOR MARCH 2014

Report by the Chief Financial Officer

1. In terms of Section 71 of the MFMA the accounting officer must no later than 10 working days after the end of each month submit the monthly budget statement report in the prescribed format as specified in of the Municipal Budget and Reporting Regulations under Schedule F which must include the required tables, charts and explanatory information.

2. The monthly in-year report on the implementation of the Annual Budget in accordance with the Service Delivery Budget Implementation Plan to be submitted to the Executive Mayor, National Treasury and the relevant Provincial Treasury consists out of two parts containing the following information and which is attached as an annexure hereto:

2.1 PART 1 - IN YEAR REPORT

Executive Summary

In-year Budget Statements tables (see attached annexure)

2.2 PART 2 - SUPPORTING DOCUMENTATION

Supporting Table F2 - Entity Financial and non-financial indicators Supporting Table F3 - Entity Aged Debtors Supporting Table F4 - Entity Aged Creditors Supporting Table F5 - Entity Investment portfolio monthly statement Supporting Table F6 - Entity Board member allowances and staff benefits Supporting Table F7 - Entity monthly actual and revised targets Supporting Table F8a - Entity capital expenditure on new assets by asset class Supporting Table F8b - Entity capital expenditure on existing assets by asset class Chief Executive Officer’s quality certification In-year budget statements supporting tables (see attached annexure)

Recommendation:

4.1 4.2

That the monthly in-year report for March 2014 be noted. That the report be submitted in both an electronic and hard copy format to the National and Provincial Treasury.

59 3

Recommendation by the Chief Executive Officer

That the report by the Chief Financial Officer regarding the monthly in - year report for March 2014 of the MBDA be noted and that this report be submitted by its parent municipality the NMBM in both electronic and hard copy format to the National and Provincial Treasury.

It should however, be noted that this is a draft report and it is anticipated that it will change on receipt of outstanding financial information pertaining to March 201 4.

PART 1 - IN YEAR REPORT

1. Executive Summary

The Mandela Bay Development Agency (MBDA) is a municipal entity of Nelson Mandela Bay Municipality (NMBM) and was formed in 2003 by the NMBM and the Industrial Development Corporation as a special development vehicle to introduce urban renewal projects in Nelson Mandela Bay.

TABLE F1: Monthly Budget Statement Summary

This is a summary schedule for the month of March 201 4 and total revenue of R2.5 million was realized which relates to revenue recognized from operating expenditure incurred in line with the requirements of the accounting standards as well as interest earned on investments being mainly short term call and notice deposits.

Expenditure for March 2014 of R4.9 million reflects a favourable variance of R39.5 million to budget on a year to date basis.

Capital project expenditure of R2.4 million was incurred for March 2014.

TABLE F2: Monthly Budget Statement - Financial Performance (revenue and expenditure)

This table measures the monthly actual revenue and expenditure against the budgeted revenue and expenditure costs for the month in question as well as on a year to date basis.

Revenue actual for March 2014 versus budget represents an unfavourable variance of R4.4 million on a year to date basis mainly due to timing of expenditure incurred on operating expenditure. It must be further noted that revenue is recognized against expenditure incurred for each month and that fixed assets (PPE) purchased are reflected against revenue earned in the month it is incurred and effectively the financial statements reflects an accumulated surplus of R887 518. This represents the undepreciated cost of the fixed assets (PPE) in line with this accounting treatment.

As the Agency is funded from various sources, the following breakdown of revenue recognized is made per funding source:

0

0

0

NMBM - R4.9 million (R48.6 million on a year to date basis) National Lotteries Board - RO (R296 827 on a year to date basis) ECDC - RO (R343 200 on a year to date basis)

60 4

Expenditure for March 2014 of R4.9 million reflects a favourable variance of R39.5 million to budget on a year to date basis.

TABLE F3: Monthly Budget Statement - Capital Expenditure

This table indicates the monthly actuals as well as year to date actuals versus the year to date budget figures on capital expenditure for the various capital projects being implemented by the Agency as well as property, plant and equipment purchased for use by the Agency.

For the month of March 2014 capital project expenditure amounted to R2.4 million. It must also be borne in mind that the Agency’s capital projects are all multi-year in nature and the schedule also reflects projects that were committed in 2012/13 and which are still in progress during the 2013/14 period.

TABLE F4: Monthly Budget Statement - Financial Position

Total assets of the Agency for March 2014 amount to R61.5 million and relate mainly to bank and investments totaling R60.1 million, debtors of R518 178, property, plant and equipment of R850 039 as well as intangible assets of R15 892.

Trade and other payables of R60.3 million include trade payables, deposits received, provisions, retention creditors as well as unspent conditional grants. Unspent grants of R57.8 million are further broken down as follows: R56.3 million - NMBM, R630 51 4 - National Lotteries Board, R36 800 - ECDC and R800 000 - Department of Arts & Culture.

TABLE F5: Monthly Budget Statement - Cash Flows

Table F5 provides details of the monthly cash inflows and outflows. For the month of March 2014 net cash from operating activities amounted to a favorable R14.9 million mainly due to the net of cash receipts from the NMBM and cash payments to suppliers and employees. Net cash flows from investing activities amounted to an unfavourable R3.0 million for March 2014 and an unfavourable R46.8 million on a year-to-date basis. This is made up of payments with respect to various capital projects as well as property, plant and equipment.

61

PART 2 - SUPPORTING DOCUMENTATION

5

Supporting Table F2 - Entity Financial and non-financial indicators

This schedule reflects certain financial indicators and Creditors Management is reflected as being 98%. Many of the other indicators are not applicable to the MBDA in view of the nature of its activities.

Supporting Table F3 - Entity Aged Debtors

The entity’s debtors were comprised mainly of the street traders’ fees for the kiosk rentals in Govan Mbeki Avenue.

Supporting Table F4 - Entity Aged Creditors

All creditors were settled within 30 days of receipt of invoice during March 2014.

supporting Table F5 - Entity Investment portfolio monthly statement

At the end of March 2014 the Agency did not have any long-term investments.

Supporting Table F6 - Entity Board member allowances and staff benefits

The total remuneration including allowances and benefits paid to management and staff for March 2014 totaled R975 731,

Supporting Table F7 - Entity monthly actual and revised targets

This schedule reflects actual figures for July to March 2014 as well as estimates for April to June 201 4.

Supporting Table F8a - Entity capital expenditure on new assets by asset class

This schedule reflects capital expenditure on new assets and reflects R131 700 that was spent during March 2014.

Supporting Table F8b - Entity capital expenditure on existing assets by asset class

This schedule reflects capital expenditure on existing assets and reflects R2.3 million that was spent during March 201 4.

62 6

Chief Executive Officers quality certification

Quality certificate

I, PIERRE VOGES, Chief Executive Officer of Mandela Bay Development Agency, hereby certify that the monthly budget statement and supporting documentation for the month of March 2014 has been prepared in accordance with the Municipal Finance Management Act and the regulations made under the Act.

PIERRE VOGES

Chief Executive Officer - Mandela Bay Development Agency

SIGNATURE:

DATE: I O April 2014

ANNEXURE: In-year budget statement tables and supporting tables (see attached annexure)

ANNEXURE “A6ii” 63

Properly rates Sewice charges Investment revenue Transfers W n i s e d - operatonal Other own revenue

Total Revenue (eXCiUdlnQ capbl transfen and contribulons)

Employee costs Remuneration of Board Members Depreciation and asset impairment Finance charges Materials and bulk purchases Transfers and grants Other expenditure

Tot81 EXpOlldifUl8

surpiurl(Dancit) Transfers recognised - capital Contributions recognised - capital & contributed assets

Surplusl(Denc1t) after capbl tranafen EL contributions

Taxation Surplus/ (Deficit) for the year

axmditure L funds source8 Capltal expendltun

Transfers recognised - capital Public contributions & donations Borrowing Internally generated funds

Total sources of capital funds

Financial POSIUO~I Total current assets Total non current assets Total current liabilities Total non current liabilities Communlty weaithlEqulty

Mandela Bav Develoment Aaencv - Table F l

- -

2,500 19,689

Description

- - - - - - - -

2,500 202 1,680 1,875 29,867 2,263 18,283 22,400

R thousands Financial RlfomuncQ

250 250 13 134 188 -28% 2%

Cash flows Net cash from (used) operating Net cash from (used) investing Net cash from (used) financing

Cashlcash equivalents at the year end

Dabton EL crediton analysis

22,439 32,617 -I 9,180 11,553

Debton Aae Anelvsis Total By Revenue Source Creditors Aae Analvsls Total Creditors

2,478 20,097 24,463 (4,365) (0) 22,4311 976 8,033 8,665 (631) (0) 9,18C

Monthli

54,169 63,749

(41,310)

2012113

106,162 3,917 40,854 79,624 (38,770) (0) 54,169

(85,498) (2,442) (29,030) (64,126) 35,096 (0) (41,310 118,114 4,920 49,127 88,588 (39,462) (0) 63,748

A u d M OUtCOme

30,504 - - -

30,504

- -

2 m 19,84r

18:

22,621 7,991

1C 151

-

- -

61,18< 69,52I

(46,SOi 47,003

- 101

85,478 2,413 28,796 34,600 (5,804) - - - - - - - - - - - - - - -

85,478 2,413 28,796 34,600 (5,804)

43,151 - - -

43,151

(0)

(0)

66,927 947

66,927

947

-

86,196 - - -

86,196

51,513 (46,953:

60,652 -

39,314 (42,824)

52,582 -

0. 30 Days

( 2 3 w (0) 52,058 52,058 14,917 36,538 39,043 (62,449) (3,W) (36,999) (46,836) 9,837 (0) (62,4491

45,701 11,908 (462) (7,793) 7,332 (0) 45,701

- - - - - -

6

413

31 - I 61 - 1 91. I 121 - 1 151 - BODays 90Days 120Da)r 150Days 180Days

- .___ __-

udget Statement Summaty - M09 March

181 Days- Over1 Total 1 Year Year

Current Year 2OW14

I I I I I I I YTD vatlance Full Year I K I Forecast YearTD YTD variance Original Adjusted Monthly YearTD actual

Budget ~ Budga I sctuai 1 1 budget I

- 220 180 -

- I

landela Bay Development Agency - Table F2 Mo

Descrlptlon

thousands

(195,

gvenue Bv Source Property rates Property rates - penalties & collection charges S e n b charges -electricity revenue Service charges - water revenue Service charges ~ sanitafjon revenue Service charges - refuse revenue Servb charges -other Rental of facilities and equipment Interest earned - external investments Interest earned - outstanding debtors Dividends received Fines Licences and permits Agency services Transfers recognised -operational Other revenue Gains on disposal of PPE

-10.4%

tal Revenue (excluding capltrl transfers and contrlbutlons)

urn Bv TVOB Employee related msts Remuneration of Directors Debt impairment Collection msts Depreciation & asset impairment Finance charges Bulk purchases Other materials Contracted services Transfers and grants Other expenditure Loss on disposal of PPE til ExDMditurn

- - - - -

(4,117) (53) -

(4,385)

(631) -

(IO)

(48)

-

(12) - - - -

(38,760)

(39,462)

35,096 (35,141)

-

- rplud(Deficlt) Transfers recognised - capital Contributions recognised -capital Contributions of PPE rplus/(Deficit) before taxation

-18.4% -28.5%

-17.8%

-7.3%

-100.0%

-29.4% -8.8%

48.7%

44.5%

-54.7% -54.9%

Taxation rplud(Deficlt) for the year

ily Budgei 201U13 Audited Outcome

-

22.628

7,998

4

184

-

-

61,165

69.529 -

102

64

itatement - Financial Performance (revenue and expenditure) - M09 March Cumnt Year 2013114

Orlglnal Adjusted Monthly Budget I Budget 1 actual

22,439 I 32,617 I 2,478

85,378 2,419

(120)

YearTD budOet YearTD actual

24,463 +

YTD vrriance YTD vsriana 1 %

(kj 49.0% - I

Full Year Forecnt

9,180

10

220 I80

-

-

- - - -

54,159

63,749

(41,310: 41,490

-

- - 180

180 -

65

Mandela Bay Development Agency - Table F3 Month1

Vote Description

R thousands

W - Y W r exDendltuW

Capltal multltlyear expenditure sub-total

Sinole Year exwnditure

Capnatal singleyear upendlture sub-total Total Ctdtal exDendltUR

Funded bv: National Government Provincial Government Parent Municipality DisW Municipality

Transfers recognlsed .capital Public contributions 8 Donallons Borrowing

internally generated funds .

Total Capltal Funding

dget Statement - Capital Expenditure - M09 March 2012113

Audited Outcome

16,74 -

- -

28: 43,151

- 43,151

-

43,151

43,151

43,151

---i----i --__

I 2,413

-

84,759 2,413

2,413 * 85,478 2,413

Current Year 2013114

- - 28,796 34,60(

- 1 -

28,796 1 34,60(

28,796

fTDvariance 1 YID vatlanu

I % (814) -13.6% (31) -12.5%

(513) -25.7%

-

- (293) -17.3% (183) -36.7% (721) 36.0%

(2,376) -13.2%

(296) -59.2% (125) -25.0%

(187) -8.7%

(57) -8.7% - - - - (34) -34.0% -

(125) -83.3% - -

- (48) 47.5% (5,804) 46.8%

- 1

Full Year Forecast

7,m 300 500

2220

2,300 400 66

1,71 I,@ 3,00 249

60 21

85,47

- 85,471

711

85,471

86,19(

86,19(

66

Vote Description

R thousands ASSETS Current assets

2012113

Audited Outcome

CUrrent portion of long-term receivables Inventory

Total current assets

Non current assets Long-term receivables Investments Investment property Property, plant and equipment Agricultural assets Biological assets Intangible assets

_ _ _ _ _ ~ Total non current assets TOTAL ASSETS

LIABILITIES Current liabilities

Bank overdraft Bonowing Consumer deposits Trade and other payables Provisions

Total current liabilities

Non current liabilities Borrowing Provisions

_ _ Total non current liabilities TOTAL LIABILITIES

NET ASSETS

COMMUNITY WEALTHlEQUlTY Accumulated Surplus/(Deficit) Reserves Share capital

____ _- - -

TOTAL COMMUNITY WEALTHlEQUlTY -

66,921

- - -

930 - - 17

947

40,995 66,927 41,295 60,580 40,995

66,927 -~

- I

947 -

947 - -

- I - I -

947

itatement - Financial Position - M09 March Current Year 2013114

Full Year Original Adjusted YearTD actual Forecast Budget 1 Budget 1 1

41,175 1 47,115 1 61,468 I 41,175

40,995 1 47,295 1 60,580 I 40,995

180 I (120)/ 888 180 I I

67

Mandela Bay Development Agency Table F5 I

Description I Monthly Budget Statement - Cash Flow - M09 March

2012113 Current Year 201314 AudM winst Adwed YEr: Outcome Budget Budgrt

R thoulands CASH FLOW FROM OPERATING ACTNITIES

CASH FLOWS FROM INVESTING ACTNITIES Rocelpta

Proceeds on disposal of PPE Decrease (Increase) In non-curreni debtors Decrease (inaaasa) other noncurrent wivables Decrease (increase) in noncurrent investments

Capital assets Payments

NET CASH FROW(USED) INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES R d P b

Short ten loans Borrowing h g termlrefinancing Increase (decrease) in consumer deposits

Repayment of bowing Paymenta

NET CASH FROWWSED) FINANCING ACTIVITIES __I___

.

R d m Ratspayes and other Government - operating Government - capital IfltereSl Dividends

Suppliers and employees Finance charges Dividends paid Transfers and Grants

PlylllWtS

INET CASH FROMINSED) OPERATING ACTIVITIES

_-__ NET INCREASE/ (DECREASE) IN CASH HELD I Cashlcash equivalents at the year begin: I Cashlcash muivalents at the veal end:

6,565

- ,

(46,953) (42,824) (62,449 7GiG+i

I I

-----I

I 1 ,So8 + 11,908

YTD varianc MD vatirnc

K

-3.7% 4.7% -4.9% 3.6%

4.9%

4.1%

-21.0% 21.o.h

Full Year Forecart

6,565 228973 53,717 2,250

-

(10,391 56,09; 45,701

68 ANNEXURE “B”

69 ANNEXURE “Ci”

BANK ACCOUNT WITHDRAWALS NOT IN TERMS OF AN APPROVED BUDGET Municipal Finance Management Act, section 1 l(4)

Consolidated Quarterly Report for period 01 /07/2013 to 31 /12/2013

naoonal treasury izzET-- I * U c f I M * M

Amount in Description and Purpose Authorised by (name) Date Payee R’000 (including Mctlon reference e.8. sec il(f))

Instructions for completing this mport: The Accounting officer must include information motivating the non-budgetled withdrawals, action taken to rectify the breach and identify how funding will be sourced through an Adjustments Budget. This motivation can be an additional report to cwncil or incorporated into the table above by inserting addtonal space. T M reporl must be tabled in Council within 30 days after the end of each quarter where a withdrawal 0ccut-s.

Wnhdnwpls that musf be mpomd each qua*: 1. Section I l (b) - Expenditure authorised by the MEC for finance in terms of section 26 (4) when a municipality has failed to approve a budget by 30 June: 2. Section 1 l(c) - Unforeseeable and unavoidable expendiie authorised by the mayor in terms of section 29 (1); 3. Section 1 l(d) -Payments from a trust, charitable or relief fund without budget appropriation in terms of section lZ(4); 4. Section 1 l(e) - Payments to a person or organ of state of money received by the municipality on behalf of that parson or organ of state, induding

(i) money collected by the municipality on behalf of that person or organ of state by agreement; or (ii) any insurance or other payments received by the municipality for that person or organ of state; Section 1 l(f) - Refund money incwrectly paid into a bank accwnt; Section 1 l(g) - Refund guarantees. sureties and securlty deposits; Section I l (h) - Payments for cash management and investment purposes in accordance with section 13; Section 1 l(i) - To defray increased expenditure on a multiyear capital project in terms of section 31; Section I l(i) - Payments for such other purpmas as may be prescribed from timeto-time.

Table thk report in a full council meeting, including additional motivation on ac t in taken to rectii.within 30 days after the end of each quarter (section 1 l(4)) Submit a copy to the relevant National Treasury, provincial treasury and the Auditor-General

5. 6. 7. 8. 9. Distribution: 1. 2.

70 ANNEXURE "Cii"

BANK ACCOUNT WITHDRAWALS NOT IN TERMS OF AN APPROVED BUDGET nauonal treasury Municipal Finance Management Act, section 1 l(4) EzzL---

Consolidated Quarterly Report for period 01 101 12014 to 31 /03/2014 . M L l i O l M * " U

Amount In Description and Purpose Authorlsed by Date Payee woo0 (Including rectlon reference e.g. sec ll(t)) (name)

I I I t I I

Instructions b r completing this report: The Accounting Officer must include information motivating the non-budgetted withdrawals. action taken to r e m the breach and identify how funding will be sourced through an Adjustments Budget. This motivation can be an additional report to council or incorporated into the table above by inserting additional space. This report must be tabled in Council within 30 days efter the end of each quarter where a withdrawal occurs.

Wlthdrawals ?hat must be reported wch qm&r 1. 2. 3. 4.

Section l l (b) - Expenditure authorised by the MEC for finance in terms of section 26 (4) when a municipality has failed to approve a budget by 30 June; Section 1 l(c) - Unforeseeable and unavoidable expenditure authoiised by the mayor in terms of section 29 (1); Section 1 l(d) -Payments from a trust, charitable or relief fund withwt budget appropriation in terms of section 12(4); Section l l (e ) - Payments to a person or organ of state of money received by the municipality on behalf of that person or organ of state, including (i) money collected by the municipality on behalf of that person or organ of state by agreement; or (ii) any insurance or other payments received by the municipality for that person or organ of state; Section 1 l(f) - Refund money incorrectly paid into a bank account; Section 1 l(g) - Refund guarantees. sureties and security deposits; Section 1 l(h) - Payments for cash management and investment purposes in accordance with section 13; Section 1 l(i) -To defray increased expenditure on a multi-year capital project in terms of section 31; Section l l u ) - Payments for such other purposes as may be prescribed from time-to-time.

Table this report in a full council meeting. including additional motivation on action taken to rectii,within 30 days after the end of each quarter (section l i (4)) Submit a copy to the relevant National Treasury, provincial treasury and the AuditwGenaral

5. 6. 7. 8. 9. DirMbution: 1. 2.

71 ANNEXURE “D”

REVENUE MANAGEMENT AND CUSTOMER CARE QUARTERLY REPORT: 01 JANUARY TO 31 MARCH 2014

Purpose

The purpose of the report is to inform Council on a quarterly basis of the activities of Revenue Management and Customer Care Sub-directorate.

Background

The Nelson Mandela Bay Municipality (NMBM) currently produces an average of over 350 000 accounts per month. For purposes of this report, the following graphical information and brief discussion will touch on some of the key activities relevant in this regard.

OVERDUE AMOUNTS: RATES, SERVICES AND SUNDRIES (Inclusive of VAT)

The statistics below indicate the amounts outstanding by debt type at the end of each month. Overall there was a increase of R53 963 779 million from 1 January 2014 to 31 March 2014.

1 I Overdue rates and service debts Displaying available data for months from 01 January 2014 to 31 March 2014

VAT Included NMBM Directorates Included

Interest Included

1

72

I. Overdue rates and service debts Refuse, Sewerage, Sundry income, Arrangements, LetSell, Water, Electricity, General rates, Interest, General

service charges VAT Included, NMBM Directorates Included

2

73

OVERDUE AMOUNTS BY DEBTOR CATEGORY (Inclusive of VAT)

The statistics below indicate the amounts outstanding by customer type at the end of each month.

A noticeable increase in Domestic for overdue amounts of over R38 million is observed between the month of February and March, the reasons can be attributed to the end of the year festive spending as well as household disposable income redirected to prioritize other paymentsldebts, such as school fees, etc.

3. Overdue amounts by debtor category Displaying available data for months from 01 January 2014 to 3f March 2014

VAT Included NMBM Directorates Included

lnteres t Included

Subdotal 1,691,536,315( 1,931,110,748( 1,937,733,a 6,672,?8 Arranaements

3

74

3. Overdue amounts by debtor category VAT Included, NMBM Directorates Included, Interest Included

Data a s at: 09 April 2014

4

75

TOTAL DEBT BY AGE (Inclusive of VAT)

The statistics below indicate the total amount owed at the end of each month by age and legal process.

The amount in the 90 day fields has increased slightly while there is a visible decrease in the 60 days field.

Over this period the number of summonses, demands and judgments has decreased slightly while on the other hand arrangements show a considerable increase in this quarter. The total overdue debt stood at R1 971 199 693 as at 31 March 2014.

5, Total debt by age Displaying available data for months from Of January 2014 to 31 March 2014

VAT Included NMBM Directorates included

Interest Included

5

76

. .~ I 5. Total debt by age

VAT Included, NMBM Directorates Included Data as at: 09 April 2014

' CCI FrincJpal IExd Arrangements) m 6 0 Day5 c.7 Summonsed

I,& Total debt not due +Principal fArranQements) &Interest

llkr Judgements taken Lz)n Extra a w h (from database) LJP 90 Days Ll)n currerrt cl' Demanded L& Grand Total

3,000 000,ooO

2,50D.000.000

2,000 000,000

1,500.000,000

1 .oDo,ooo.ooo

500 000,000

0

-~oo,ooa.ooo

6

78

0 cy

80

Collection rate per payment method January 2014 to March 2014

Data as at: 14 April 2014

The chart for the Quarter ending March 2014 indicates that electronic payments are still by far the most preferred method of payment. Over R822 million over the period January to March 2014 has been paid by means of Electronic and IVR.

81

METERED SERVICES

Water Meters

The total number of water meters installed have increased from 217 270 in January to 218 106 in March 2014, this is as a result of the water meters that are being uncovered.

The number of water meters for which readings could not be obtained had decreased from 24 041 during January to 18726 during March 2014. This is as a result of access being gained in properties which were inaccessibility during the December period as consumers were on holiday.

Meter Reading Performance Management r 1

11

mmm

82

Electricity Meters

The total number of (pre-paid) electricity meters installed have increased from 243 545 in January to 244 009 in March 2014. The number of electricity meters for which readings could not be obtained had decreased from 7469 during January to 6202 during March 2014.

Meter Readinu Performance Management

1 37,8811 39,16q 39,162

12

84

PROPERTY RATES REBATES

Rates Rebates are granted to certain categories of property owners in terms of Section 19 of the Property Rates Policy, i.e. Pensioners and Disabled Persons and Biodiversity. In order to qualify for the said rebates, owners must apply on the prescribed forms and comply with the criteria stipulated in the Rates Policy. The majority of applicants apply early in the financial year and as a result most rebates are processed in the first quarter of a financial year.

Furthermore, Section 21 of the Municipal Property Rates Act stipulates that rates on newly rateable properties must be phased-in (Ph). As this is a condition of the Act, the reductions in rates are automatically applied to qualifying properties. Any changes to such categories will take place when general and supplementary valuation rolls become effective (1 July and 1 January).

FOR INFORMATION

I

85 ANNEXURE “E”

Bid Committee

Specification

SUPPLY CHAIN MANAGEMENT REPORT FOR THE QUARTER ENDING 31 MARCH2014

Category Scheduled Actual Meeting Meetings

5 2

General 5 2

Built Environment

1.

2.

3.

4.

5.

PURPOSE

The purpose of this report is to comply with statutory reporting provisions on the implementation of Supply Chain Management Policy (SCMP) of the NMBM in accordance with Section 6(3). The report covers the quarter ending 31 March 2014.

ORGANISATIONAL STRUCTURE

Currently there are no changes in the SCM organizational structure; changes will only be effected once the advertised posts are filled. The position of Director: SCM is currently vacant and is being advertised.

OPENING OF TENDERS AT SCM OFFICES

Tender documents are paid for at any of the Revenue Management cash offices and collected from SCM offices at the corner of Harrower Road and Buxton Avenue, Kensington, Port Elizabeth and 17 Sellick Street, Uitenhage. Bids are then submitted and opened at the SCM offices in Harrower Road and also in Uitenhage, Market Street in the Conference Room situated at first floor. Bids are closed and opened on Thursdays at 11 am weekly.

BID COMMITTEES

All Bid Specification Committee meetings are held on Tuesday every week. Bids are advertised every Wednesday in the Herald and in the Die Burger. Bid Evaluation Committee meetings are held Mondays. In June 2013, the Accounting officer re-appointed new committee members, and these committees were also sub divided into Technical and General for Bid Specification and Bid Evaluation.

NUMBER OF BID COMMITTEES HELD IN THE QUARTER

86

Bid Committee

Evaluation

Category Scheduled Actual Meeting Meetings

10 4

General 6 5

Built Environment

3 Both Built & General

Adjudication

6. SERVICE PROVIDERS DATABASE MANAGEMENT

SCM need to comply with the requirements of SCM regulations 14 which states that the accounting officer must keep a list of accredited prospective provider of goods and services that must be used for the procurement requirements through written or verbal quotations and formal written price quotations.

An in-house. Supplier database management system was implemented with effect from 01 October 2013.

Benefits of this system include the following:

3

Strengthen compliance with the above mentioned SCM regulations and regulation 4 which prohibits the accounting officer to sub delegate SCM duties or powers to a person who is not an official of the municipality.

Enhance service delivery as the new SCSOOO49 is a real-time system, meaning changes and amendments captured are available immediately

System is being maintained and serviced by NMBM officials that ensures quick response to SCM requirements

Strengthening of NMBM relationship with service providers

Ease communication between NMBM and its service providers

System has built in control measures.

Allows for proper document management processes which include reliability of information and safeguarding of documents.

It also allows for proper segregation of duties

SCM compliance conducted road shows in 201 3, prospective providers requested that the municipality need to provide database management services to Uitenhage

87

Number of Verified Service Providers

New Registrations

Amendments

BBBEE Compliant

BBBEE Non Compliant

providers as well. Their request was considered and a satellite ofice was opened. It operates only on Wednesdays and Thursdays weekly.

Previous Qtr Jan - Variance Quarter March 2014 in %

1040 1145 10%

395 31 6 -20%

645 829 28.5%

81 1 943 16.3%

229 202 -11.8%

The above table indicates that suppliers are becoming more BBBEE compliant.

Table below records a detailed narration of BBBEE status of application forms received in both periods.

7. PERFORMANCE MANAGEMENT OF SERVICE PROVIDERS

The Integrated Contract Management System (ICMAS) has been completed. The SCM office is conducting training of all SCM role-players and the system will be fully implemented by 31 May 2014

88

Demand Management section is very crucial as it is responsible for the development of procurement plans for the entire Institution in order to be compliant with National Treasury Regulations. Procurement plans prepared and submitted by the compliance office are not monitored due to lack of capacity.

SCM office is in the process of establishing this office under the caretaker-ship of the Assistant Director: SCM Compliance. Recruitment notices were completed and submitted to Human Resources management.

9. WRITTEN QUOTATION

In terms of section 16 of the SCMP quotations must be obtained from at least three different providers preferably from providers whose names appear on the NMBM Database. If it is not possible to obtain at least three quotations, the reasons must be recorded and reported quarterly to the accounting officer or another official designated by the accounting officer.

The Acquisitions and Logistics section records all quotations received in order to comply with SCMP. Assistant Director: Acquisitions and Logistics forwards documents to Directorates to make a decision in the event that only one service provider responded.

89 ANNEXURE ‘‘F’’

NELSON MANDELA BAY MUNICIPALITY CYCLE NO. 4 2014 … · MUNICIPALITY’S FINANCIAL POSITION AS AT...

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