Budget & Treasury

Subject to section 10G(5) of the Local Government Transition Act, 1993, as amended, read with Government Gazette Notice No. 19886 dated 26/03/99, a Municipality may dispense with the calling of tenders.

In respect of any contract which is for the execution of any work or the supply or sale of any goods or materials to the Municipality where:

• The amount concerned does not exceed R 50 000 in case of Category 1, R 70 000 in case of Category 2, and R 120 000 in case of Category 3. However, it is recommended that all municipalities, in terms of best practices, adopt a uniform limit of R 50 000;
• The contract relates to the publication of notices and advertisements by or on behalf of the Municipality;
• Any purchase is done on behalf of the Municipality at a public auction or by competitive tender;
• The contract is for the supply of goods or materials to a Municipality by a contractor of the national or provincial sphere of government at the price and on the terms and conditions applicable to each sphere of government;
• The contract relates to any purchase by or on behalf of the Municipality of a work of art and the Council has consented to such a purchase;
• The contract relates to the appointment of any person to provide professional advice or services and the Council has consented to such an appointment, provided that it is in accordance with a schedule of fees approved by a nationally recognised institute or body; and
• The contract is for the repairs to or the purchase of spare parts for machinery or equipment for which only one authorised supplier is available in the municipal area or in the Republic.
• In respect of any contract which is for the sale of any goods or materials by the Municipality:
• At a public auction of which notice has been published in the press;
• Commonly sold to the public at a charge fixed by law or by resolution of the Municipality;
• At a uniform price or tariff fixed by a law or by resolution of the Municipality;
• Which have previously been offered by sale at a public auction or in respect of which tenders have previously been invited but which could not be disposed of;
• The value of which, as assessed by the Municipality, does not exceed a prescribed amount determined by Council; and
• Where the sale of such goods or materials is so urgent that it would not be in the interest of the Municipality to invite tenders.

All goods and materials belonging to the Council and held for future consumption shall be retained in the Council's Main Store. With the approval of the Municipal Manager or his/her delegate, certain goods and materials may be held by Cost Centres in a sub-store, provided that all items not required shall be returned to the Main Store.

A Store's record reflecting full particulars of purchases and issues of goods and materials and the balances of stock on hand shall be maintained by the Chief Financial Officer or his/her delegate. Similar stores records shall be maintained by Departmental Managers in respect of sub-stores under their control. The average monthly consumption of each item of stock shall be determined as well as the number of months' stock to be held. The stock card shall show the number of months' consumption that is in stock.

Stock shall not, except where the Chief Financial Officer or his/her delegate is satisfied that special circumstances exist, be carried by or for any Cost Centre in excess of normal requirements. Whenever it appears to the Chief Financial Officer or his/her delegate that a proposed purchase would result in infringement of this clause, he/she shall draw the attention of the Head of the Cost Centre concerned thereto and, if he/she feels it is necessary, shall report the matter to the Municipal Manager.

Requisitions for goods and materials shall be signed by the Head of the Cost Centre or his/her nominees, provided written notification of such nominees and the extent of their authority is given to the Chief Financial Officer or his/her delegate.

Departmental Managers shall advise the Chief Financial Officer or his/her delegate of the persons authorised to sign such requisitions in respect of the following recommended categories:

• Not exceeding R10 000 per requisition;
• Not exceeding R20 000 per requisition; and
• Amounts in excess of R 20 000 will need the specific authority of the Chief Financial Officer and the Head of Section.
• Specimen signatures of all persons authorised to sign requisitions shall be supplied to the Chief Financial Officer or his/her delegate;

Except in the case of emergency requisitions, if the Municipal Manager or his/her delegate has reason to believe that insufficient budgetary provision exists to cover the requisition presented to the Store's Section, he/she shall immediately inform the Head of the Cost Centre concerned, who shall forthwith report the matter to the Council for consideration.

The Municipal Manager or his/her delegate shall be responsible for the ordering, custody and issue of receipt forms, tickets, tokens, vouchers of value, and such other stationary as he/she may deem necessary to control;

The Municipal manager or his/her delegate shall submit tenders for goods, materials or services to the Cost Centre concerned, and the Head of that Cost Centre shall recommend the tender or tenders to be accepted.

If the lowest tender is not recommended the reason/s for not doing so shall accompany the recommendation. If the Municipal Manager or his/her delegate does not agree with the reason/s for not accepting the lowest tender, he/she shall send his/her reason/s for disagreement/s to the head of the Cost Centre concerned and include them in his/her report to the Council. This report should include details of the financial provision and vote number to cover the relevant acquisition.

All surplus goods and materials left over on completion of works or the fulfilment of the purpose for which they were issued or goods recovered in the course of covering out works or on hand for any reason what so ever, shall be returned to and recorded by the Chief Financial Officer or his/her delegate without delay. An Advice Note describing such goods and materials shall be furnished to the Treasury Cost Centre in consultation with the Administration Manager concerned. The Municipal Manager or his/her delegate shall in consultation with the head of the Cost Centre concerned, decide on the value, if any, to be credited to the appropriate vote/s.

Plant and Equipment and other good and materials shall be deemed to be redundant or obsolete as approved by the Council, on the recommendation of the Head of the Cost Centre Technical Services. Similarly, in the case of obsolete or redundant stores items, the Municipal manager or his/her delegate shall report to the Council.

Subject to the Local Authorities Ordinance, the amount and value of any surpluses and shortages in stock revealed in stocktaking, shall be reported by the Municipal manager or his/her delegate to the Council, together with reasons for discrepancies. Where the stock is not under his/her control, the Municipal Manager or his/her delegate may require the responsible Head of the Cost Centre to furnish him/her with a set of reason/s. Any adjustments thereafter must be formally authorised by the Council, save and except that the Municipal Manager or his/her delegate, may authorise adjustments in stocks and losses not involving negligence or identifiable theft, provided favourable audit reports are presented in all cases.

The Chief Financial Officer shall at least once each year cause stock to be taken of all stores and other loose property under his/her control. A report on such stocktaking shall be compiled and certified by the persons appointed by the Chief Financial Officer to take stock and such certified report shall be laid before the Council. The report shall indicate:

• The value of the stores and other loose property found at the stock taking;
• Whether a suitable record has been maintained showing what articles should have been found at stocktaking;
• Any discrepancies between the articles found at stocktaking and the record referred to above; and
• The stores in respect of which no issues have taken place since the previous stocktaking.

The Municipal Manager or his/her delegate shall be responsible for raising of such loans, as may be required form time to time, on such terms and conditions and from such sources as may be approved by the Council.

The Municipal Manager or his/her delegate shall be responsible for the management of the Council's insurances covering such risks as the Council may form time to time determine. The Municipal Manager or his/her delegate shall be responsible for the placing of insurances as approved by the Council from time to time.

The Departmental Managers shall be responsible for ensuring that the insurance cover in respect of assets under their control is sufficient having regard to the current value and replacement costs of these assets and shall notify the Municipal Manager or his/her delegate immediately of the acquisition or disposal or any change in insurable value of any asset.

Annually before 1st July, the Municipal Manager or his/her delegate shall provide the Departmental Managers with Schedules of all insured items stating their value and the premium for the following year; and The Departmental Managers shall notify the Municipal Manager or his/her delegate promptly of all accidents, damage or loss involving the Council?s employees or assets and refer all claims received to him/her for attention.

Financial Statements

The Municipal Manager or his/her delegate shall prepare financial statements annually and report thereon to the Council. No revenue collection or accounting system shall be introduced in any Cost Centre and no alteration shall be made to any existing system unless the approval of the Municipal Manager or his/her delegate has first been obtained.

Generally Accepted Municipal Accounting Practice (GAMAP)

Much progress has been made in recent years in defining and introducing GAMAP standards for local government. Only minor changes are now required, except in the case of accounting for fixed assets. Applying accounting principles specifically tailored for Municipalities promotes transparency. It will enable the content and the presentation of financial statement information to be consistent and so enable informed decision making on risk and returns. It is therefore of utmost importance that the Municipal Manager or his/her delegate applies GAMAP in the compiling of the budgets and financial statements of the Municipality as well as the financial systems in use.

Internal Audit

The Internal Audit staff of the Council shall perform such duties and conduct such investigations, as may be prescribed by law, or required by the Council, or the Municipal Manager or his/her delegate, and at all times review the systems of internal control and report to the Municipal Manager or his/her delegate upon changes as they are required.

In performing such duties or conducting such investigations, the internal audit staff shall be given access to any Cost Centre records required for the purpose of the audit and a Head of a Cost Centre and every officer thereof shall upon request by the Municipal Manager or his/her delegate supply such information as may be required; and

The Internal Auditor shall report to the Audit Committee on the result of his investigations and unless under obligation by law, or by resolution of the Council, the Audit Committee shall in their discretion submit such reports to the Council.

Assets

Each Administration Manager shall be responsible for an annual inventory for furniture, equipment and other movable property under his control showing quantities and values. The Council shall at least once in each year cause stock to be taken of all stores and other loose property under its control. A report on such stocktaking shall be compiled and certified by the persons appointed by the Council to take stock and such certified report shall be laid before the Council.

The report shall indicate:

• The value of the stores and other loose property found at the stocktaking;
• Whether a suitable record has been maintained showing what articles should have been found at stocktaking;
• Any discrepancies between the articles found at stocktaking and the record referred to; and
• The stores in respect of which no issues have taken place since the previous stocktaking.

Internal Reporting

The lack of minimum internal reporting standards in the past limited the effectiveness of senior management and Councillors?key financial information was not presented on a regular basis or in a clear and easy-to-understand format. As a result, it was difficult for management and Councillors to react proactively to a change in the financial position of the Municipality. The promulgated regulations on financial reporting by Municipalities under the Local Government Transitional Act regulates such reporting. Further guidelines on the content and frequency of internal reports need to be formulated to improve financial management.

External Reporting

An important policy principle in ensuring accountability in municipal finances is the submission of annual financial statements to an external body such as the Auditor-General. The Local Government Transitional Act spells out the Municipal Manager or his/her delegate's responsibilities with respect to the compilation of annual financial statements to the Auditor-General. Annual financial statements need to portray financial viability and enable an accurate assessment of the risk to be undertaken if the use of private sector funding, in which ever form, is to be undertaken.

In respect of reporting to the community, there is a perceived lack of transparency as Municipalities often do not understand the information needs of the community. It is unlikely that there will be significant demand for audited annual financial statements. Therefore Municipalities need to consider preparing Mayoral Budget Addresses and annual reports as a way to present information which is credible and understandable and allows citizens to assess municipal expenditure against the municipal Integrated Development Plan.