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PROVINCE OF KWAZULU-NATAL

MUNICIPAL FINANCE

4th

QUARTER REVIEW

CLOSE-OUT REPORT 2015/16

PROVINCE OF KWAZULU-NATAL

ISBN: -1-920041-08-7

KwaZulu-Natal Provincial Treasury, Municipal Finance Close-out Report 2015/16

‘Be the Centre of Excellence in Fiscal and Financial Management in the Country’

Contact Details:

Municipal Finance Provincial Treasury

Treasury House

145 Chief Albert Luthuli Street Pietermaritzburg, 3201

P O Box 3613 Pietermaritzburg, 3200

Tel: 033 – 897 4321 Fax: 033 – 342 4662

E-mail: [email protected]

www.kzntreasury.gov.za

© 2016 KwaZulu-Natal Provincial Treasury

All rights reserved

mailto:[email protected]

http://www.kzntreasury.gov.za/

Contents

Data Source and Reliability i

Methodology and Approach i

List of Appendices ii

Chapter 1: Introduction 1

Chapter 2: Socio-economic Profile of KwaZulu-Natal Districts 3

Chapter 3: Overview of Provincial Budget Performance 25

3.1: Operating Revenue 25

3.2: Operating Expenditure 29

3.3: Capital Expenditure 32

3.4: Capital and Operating Expenditure Comparatives 36

3.5: Debt Management 38

3.6: Bulk Services 40

3.7: National Conditional Grants 44

3.8: Unspent Conditional Grants 47

3.9: Cash Flow Position - 2014/15 51

Chapter 4: District Performance Analysis 61

4.1: Ugu District 62

4.2: uMgungundlovu District 85

4.3: Uthukela District 109

4.4: Umzinyathi District 129

4.5: Amajuba District 146

4.6: Zululand District 160

4.7: Umkhanyakude District 180

4.8: uThungulu District 201

4.9: iLembe District 221

4.10: Harry Gwala District 238

Chapter 5: MFMA Implementation 259

5.1: 2015/16 Mid-Year Budget and Performance Assessment Reports and

Adjustments Budget 259

5.2: 2016/17 Budget Evaluation Process 263

5.3: Non-Compliance with the Division of Revenue Act and Municipal

Finance Management Act Reporting Requirements 268

5.4 Municipal Standard Chart of Accounts (mSCOA) 276

5.5: Municipal Demarcation Process 278

Chapter 6: Municipal Support and Oversight 281

6.1: Municipal Support Program 281

6.2: Municipal Supply Chain Management 282

6.3: Banking 286

6.4: Internal Audit - Risk and Advisory Services 289

6.5: Norms and Standards 294

6.6: Financial Reporting 299

6.7: Municipal Public Private Partnerships 304

6.8: Infrastructure Management 306

6.9: Intergovernmental Relations 307

Chapter 7: Conclusion 311

Appendices 313

References 327

i

Data Source and Reliability

This publication contains information in summary form and is therefore intended for general

guidance only. It is not intended to be a substitute for detailed research or the exercise of professional

judgment. KZN Provincial Treasury hereby disclaims any and all responsibility for any loss, injury,

damages, or expense directly or indirectly arising out of or relating to the use or reliance on this

publication or the material contained therein. This publication has been prepared for the KwaZulu-

Natal Legislature. Provincial Treasury does not accept responsibility to any other party to whom it

may be shown, or who on their own volition, may decide to rely on it. This report has been compiled

based on information provided by the municipalities in the form of Annual Financial Statements,

Budgets, and preliminary information from the National Treasury Local Government Database. The

information provided, accounting records or financial statements of the municipalities have not been

audited and accordingly the KZN Provincial Treasury can express no assurances thereon. This

publication is in compliance with, amongst others, Section 71 of the Municipal Finance Management

Act No. 56 of 2003 (MFMA), and is not to be used for any other purpose.

Provincial overview and municipal analysis contained in this report is based on the Section 71

MFMA reports that each Municipal Manager and Chief Financial Officer were required to sign and

submit to National Treasury. Therefore, any queries on the budgeted and actual figures reflected in

the publication must be referred to the relevant Municipal Manager or Chief Financial Officer.

This publication may not be copied in whole or in part without the written consent of the KZN

Provincial Treasury.

© 2016 KwaZulu-Natal Provincial Treasury

All rights reserved.

Methodology and Approach

The methodology and approach used for the compilation of this report included the following:

The data for the consolidated performance analysis at a district level (Provincial Overview) and for

the performance analysis per municipality in this report was extracted from the National Treasury

Local Government Budgets and Expenditure published Section 71 report. The data for the non-

delegated municipalities have been included in the report (namely: eThekwini Metro, Msunduzi and

uMhlathuze Municipalities). It should be noted that the budget performance figures published by

National Treasury are preliminary figures and do not take the year-end reconciliations into

consideration.

It is probable that there will be material adjustments to the unaudited 2015/16 Annual Financial

Statements, in which case the analysis may be rendered irrelevant as they are based on unaudited

information and reliance can be placed on the figures once the Auditor-General has finalised the

audits thereon.

ii

List of Appendices

Appendix 1: Operating Revenue - 4th Quarter 2015/16

Appendix 2: Operating Expenditure - 4th Quarter 2015/16

Appendix 3: Capital Revenue - 4th Quarter 2015/16

Appendix 4: Capital Expenditure - 4th Quarter 2015/16

Appendix 5: Debtors Age Analysis - 4th Quarter 2015/16

Appendix 6: Debtors by Customer Group - 4th Quarter 2015/16

Appendix 7: Creditors Age Analysis (Total) - 4th Quarter 2015/16

Appendix 8: National Conditional Grants - 2015/16

Appendix 9: Stopping of Funds in terms of Section 19 of the 2015 DoRA

Appendix 10: Breakdown of Unspent National Conditional Grants - 2014/15


Appendix 12: Unspent National Conditional Grants 2010/11 - 2014/15

Appendix 13: Approved Rollover 2014/15

1

Chapter 1: Introduction

In terms of Section 71(7) of the Municipal Finance Management Act, Act 56 of 2003 (MFMA), the

Provincial Treasury must, within 30 days after the end of each quarter, make public as may be

prescribed, a consolidated statement in the prescribed format on the state of municipalities’ budgets

per municipality and per municipal entity.

The purpose of this report is to provide the reader thereof with a concise view of the financial state of

municipalities as at 30 June 2016 inclusive of the support rendered to municipalities by the various

business units within the Provincial Treasury.

This consolidated 2015/16 Municipal Finance Quarterly Review (MFQR) has been prepared in

compliance with the legislative requirement indicated above. The report not only covers the budget

and expenditure performance of the municipalities, but also includes performance in other non

financial areas which are critical to ensuring sustainable improvements in internal controls, financial

efficiency as well as accurate reporting which leads to informed decision making. The report also

reflects on support initiatives by various business units within the Provincial Treasury with a view of

ensuring that municipalities are sufficiently capacitated to ensure effective and efficient service

delivery. The report includes all 61 municipalities in the province comprising of 58 delegated and 3

non delegated municipalities.

The review provides a balanced overview on the state of the budget performance of municipalities

with a view of, amongst others, identifying areas of financial weaknesses and risks that must be

addressed in order to improve their financial positions and achieve overall sustainability. Thus,

assessing the budget performance of municipalities serves as a management tool that may be used as

an early warning signal for the identification of municipalities facing financial challenges.

This report allows municipalities to compare their performance to other municipalities within the same

category of municipalities in their district or in other districts in the province.

The report is structured in the following format:-

Chapter 1 presents the introduction to the report;

Chapter 2 presents an analysis on the socio-economic outlook of municipalities at a district level;

Chapter 3 provides an overview of the 2015/16 budget performance of all municipalities,

aggregated at a district level to provide a provincial perspective. The chapter also includes the sale

of Bulk Services of Water and Electricity by Water Boards and Eskom respectively, the level of

spending on Conditional Grants and finally, the status of municipal Cash flow positions for the

2014/15 audited financial year;

Chapter 4 provides an overview of each district in terms of municipalities’ information in respect

of employment status of the Accounting Officer (Municipal Manager), Chief Financial Officer,

audit opinions, etc; as well as a budget performance analysis per municipality in each district;

Chapter 5 highlights the process of the 2015/16 Mid-Year Budget and Performance Assessments

Reports and Adjustments Budgets as well as the 2016/17 Budget Evaluation, followed by the

status of Non-Compliance with the MFMA and the Division of Revenue Act (DoRA) reporting

requirements. This chapter also reports on the progress on the implementation of the Municipal

Regulations on Standard Chart of Accounts (mSCOA) and the Municipal Demarcation Process;

Chapter 6 provides an overview of the support provided to municipalities by the business units

within Provincial Treasury such as the Municipal Support Program (MSP), Supply Chain

Management (SCM), Banking, Risk and Advisory Services (Internal Audit), Financial Reporting

and Norms and Standards; Infrastructure, Inter-Government Relations and Public Private

Partnerships; and

2

Chapter 7 concludes the report and highlights the need for municipalities to rise to the challenges

faced which will be determined by the quality of their governance, financial and administrative

practices.

Therefore, as part of my mandate as a Member of the Executive Committee (MEC) for Finance I

hereby submit a consolidated statement to the Provincial Legislature as prescribed by Section 71(7) of

the MFMA.

3

Chapter 2: Socio-economic Profile of KwaZulu-Natal Districts

1. Introduction

The purpose of this chapter is to provide an insight into the social and economic indicators that

influence the overall performance of the province of KwaZulu-Natal (KZN) and the municipalities

therein. These indicators include demographics, economic performance, labour market, international

trade, development, social grants, education, household infrastructure and crime.

Population dynamics are important in any society that is serious about planning and service delivery.

This chapter analyses the population of the province according to age group. The age structure of the

population guides policy makers in terms of prioritising developmental needs of society.

The economic analysis in this chapter indicates the gaps that need to be addressed when it comes to

service delivery. The economic performance focuses on gross domestic product (GDP) globally,

nationally and provincially. The sector analysis is based on a broad analysis of the primary, secondary

and tertiary sectors. The dynamics of the labour market are discussed with emphasis on

unemployment, job scarcity, labour force participation rate and labour remuneration and productivity.

The province has the two largest deep water ports (Richards Bay and Durban) in Southern Africa,

giving it an economic advantage in respect of international trade. This is characterised by imports and

exports which are outlined in this chapter. Export and import contribution by different municipalities

is discussed, where eThekwini dominates the trade at more than 55 percent.

The chapter also focuses on the economic risks that can affect the performance of the province. The

analysis of risk is of importance because it conscientises investors with regard to how safe it is to

invest in the province. This analysis focuses mainly on the major economic hubs, which collectively

account for more than 80 percent of the provincial GDP.

Development indicators are also analysed to assist in providing a better understanding of the well-

being of the inhabitants of the province. Poverty, income inequality and standard of living are the

main development indicators discussed. In addition, this chapter also provides analysis of social

grants, education, household infrastructure and crime.

2. Socio-Economic Review of KwaZulu-Natal Districts

2.1 Demographic profile 2.1.1 Total population

South Africa (SA) is a diverse country, comprising of a wide variety of cultures, languages and

religious beliefs. The 2016 community survey by Statistics South Africa (Stats SA) shows that the

country’s population is currently estimated at 55.7 million, indicating an increase of 7.5 percent from

51.8 million recorded in 2011. The province of KZN is home to an estimated 11.1 million people,

which accounts for 19.9 percent of the South African population. This represents a marginal increase

of 0.1 percentage point from 19.8 percent recorded in 2011. The provincial population is increasing at

a diminishing rate as the decrease from 2001 to 2011 was 1.6 percentage points. The province is the

second most populated after Gauteng which has an estimated 13.4 million people constituting 24.1

percent of the total national population.

4

Table 2.1 shows the population size of the province and its districts, percentage share of KZN

population by districts, area in square kilometres and the population density. Migration patterns within

the province play a crucial role in the variation of the population size in the districts.

Table 2.1: Population size, area in square kilometres and population density in 2016

Population size % Share of KZN

population

Area in square

KMs

% Share of KZN

area

Population density

eThekwini Metro 3 661 911 33.1 2 273 2.4 1 611.0

Ugu 789 953 7.1 5 042 5.4 156.7

uMgungundlovu 1 111 872 10.0 9 655 10.3 115.2

Uthukela 706 808 6.4 11 342 12.1 62.3

Umzinyathi 551 177 5.0 8 601 9.2 64.1

Amajuba 531 107 4.8 6 921 7.4 76.7

Zululand 892 310 8.1 14 820 15.9 60.2

Umkhanyakude 689 090 6.2 12 825 13.7 53.7

uThungulu 971 135 8.8 8 213 8.8 118.2

iLembe 657 612 5.9 3 257 3.5 201.9

Harry Gwala 502 265 4.5 10 428 11.2 48.2

KwaZulu-Natal 11 065 240 100 93 378 100 118.5 Source: Global Insight, 2016 and Stats SA, 2016

eThekwini Metro was the most populous in the province with approximately 3.7 million in 2016

which is 33.1 percent of the KZN population. One of the main contributing factors is rural-urban

migration, with the hope of finding jobs in the main economic hub of the province and also to improve

education as most of the educational institutions are located around the eThekwini Metro. It is not

surprising that eThekwini has the highest population density of 1 611.0 per square kilometre (km2) in

2016, given the size of the population in the metro. Harry Gwala District is the least populated district

at 502 265 and consequently has the least population density at 48.2 per km2 in 2016. uMgungundlovu

District is the most populous district (following eThekwini Metro) in the province at approximately

1.1 million, constituting 10 percent of the KZN population.

Table 2.2 shows the migration patterns across the provinces for 2011 and 2016.

Table 2.2: Estimated provincial migration streams in 2011 and 2016

In-migrants Out-migrants Net-migration In-migrants Out-migrants Net-migration

Eastern Cape 383 004 1 975 802 -1 592 798 320 619 1 914 036 -1 593 417

Free State 336 555 673 196 -336 641 275 149 622 507 -347 358

Gauteng 5 246 861 934 657 4 312 204 4 732 032 885 878 3 846 154

KwaZulu-Natal 788 935 997 806 -208 871 450 078 939 765 -489 686

Limpopo 478 654 1 615 090 -1 136 436 389 151 1 565 654 -1 176 503

Mpumalanga 789 621 727 522 62 099 630 074 668 341 -38 267

Northern Cape 164 658 365 487 -200 829 149 394 235 525 -86 130

North West 739 918 596 366 143 552 700 035 540 900 159 135

Western Cape 1 568 642 422 050 1 146 592 1 593 553 288 939 1 304 614

Provinces2011 2016

Source: Stats SA, 2016

Although there had been an increase in the size of the population in KZN, the year 2011 revealed that

inter-provincial migration between provinces has been taking place across the country. This migration

had affected KZN negatively where out-migration exceeded in-migration by 208 871 people in the

same year. It is also projected that out-migration in the year 2016 will exceed in-migration by 489 686

people. Migration is cited as one of the main factors contributing to the decline in the KZN’s share of

the national population and consequently affecting its equitable share allocation.

5

2.1.2 Population distribution by age and gender Figure 1 shows the population distribution for KZN by age and gender in 2016. The population distribution indicates that the largest population in 2016 ranges between the ages of 00-04 to 25-29, which is approximately 63.7 percent of the total population. Approximately 34.8 percent of the population age group are children between 00 and 14, and approximately 36.6 percent is the youth that is economically active (15-34), thus indicating that the province is predominantly youth. It can be seen in the diagram that the male population decreased at a faster pace than their female counterparts. This could be a result of factors such as migration patterns and social behavior of both genders. Figure 1: KZN population distribution by age and gender in 2016

6.2

5.9

5.5

4.9

4.8

4.7

3.7

2.9

2.3

1.8

1.5

1.2

1.0

0.8

0.5

0.2

0.1

0.1

-6.0

-5.8

-5.5

-4.9

-4.9

-4.8

-4.0

-3.1

-2.6

-2.2

-2.0

-1.7

-1.5

-1.2

-0.8

-0.5

-0.3

-0.3

-8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0

00-04

05-09

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-84

85+

% Male % Female

Source: Stats SA, 2016 The total provincial dependent population is estimated at 4 376 559, while the economically active population is estimated at 6 688 681. The implication of these estimates is a high dependency ratio of 65.4 percent1. It is noted that the dependency ratio is not totally reflective of the situation in the economy, since some of the people in the economically active population are not actively involved in the labour market.

2.2 Economic performance Despite the cheaper oil price, the global economy is projected to continue to perform below expectations in 2016. However, economies in developed countries are improving, particularly in the United States (US). Emerging markets (EMs) growth prospects, especially for commodity-producing countries, remain constrained amid persistent capital outflows. The South African economic growth outlook remains extremely challenging, particularly following the contraction in GDP in the first quarter of 2016. The economy of the country is expected to record a

1Dependency Ratio = [((Number of people under 15 years) + (Number of people aged 65 and over)/ (Number of people between 15 and 64))] * 100 = (4 376 559/ 6 688 681) * 100 = 65.4 percent. The dependency ratio is an age population ratio of those not in the labour force.

6

zero growth rate in 2016 (SARB, 2016). The sectors that are showing negative growth in SA,

particularly in the first quarter of 2016 are agriculture, mining, electricity and water. Financial markets

have become volatile and currencies of EMs have become weakened and fluctuated widely. The prices

of commodities that SA exports to the rest of the world have dropped significantly. Rising food prices,

resulting from severe drought that is being experienced in the country, higher than expected inflation

and rising interest rates are some of the major challenges facing SA.

Taking into account both global and national economic performance, this section provides the

Economic Review and Outlook of the province of KZN and the districts thereof. The analysis

commences with an outline of the global, national and KZN economic review and outlook. This is

then followed by a brief review of the sectorial analysis and tourism in KZN.

2.2.1 Global economic outlook

The International Monetary Fund (IMF) projects global economic growth to remain at 3.1 percent in

2016, compared to the 3.4 percent posted in 2014. The sluggish but moderate performance of 3.1

percent in 2015 was mainly due to the moderate decline of 0.6 percentage point reported by emerging

economies and slow growth in advanced economies. The expected subdued global growth in 2016 is

largely influenced by the outcome of the United Kingdom (UK) referendum, which to some extent

caused volatility on financial markets. This is however, expected to improve slightly to 3.4 percent in

2017. The UK vote implied the materialisation of a significant downside risk for the world economy.

Moreover, this uncertainty is projected to take a toll on confidence and investment, including its

repercussions on financial conditions and market sentiment (IMF, 2016c).

Growth in most advanced economies remained lacklustre, with low potential growth and a gradual

closing of output gaps. As such, advanced economies are projected to grow by 1.8 percent in both

2016 and 2017. This is marginally lower than 1.9 percent average growth reported in 2015. Prospects

remained diverse across emerging markets and developing economies, thus output is expected to

improve slightly to 4.1 percent in 2016, before accelerating slightly to 4.6 percent in 2017. In Sub-

Saharan Africa, growth is expected to continue at a sluggish pace in 2016, thereby reporting 1.6

percent falling down from 3.3 percent in 2015 (IMF, 2016c). This is however projected to pick-up to

3.3 percent in 2017. The IMF (2016c) maintained that the prevailing slowdown is primarily propelled

by challenging macroeconomic conditions in its largest economies, which are adjusting to lower

commodity revenues.

2.2.2 South African economic review and outlook

Following the sluggish global economic trajectory, the South African economic outlook is projected to

remain subdued. The country’s economy grew at an average rate of 1.3 percent in 2015, before

contracting by 1.2 percent in the first quarter of 2016 (Stats SA, 2016a). In line with the IMF (2016c),

which expects the national economy to grow by a mere 0.1 percent, the SARB (2016a) projects a zero

percent growth rate this year. Inherently, lower economic growth implies among others, lower revenue

collection and fewer employment prospects. The main risks to the national outlook are the heightened

global financial volatility and domestic politics (IMF, 2016c).

7

The projected subdued growth rate in the national economic performance is further confirmed by the

Kagiso Purchasing Managers’ Index (PMI)2, which stood at 52.5 in July, slowing down from 53.7 in

June of 2016. The Manufacturing PMI, which is reported by the Bureau for Economic Research

(BER)3, averaged 51.6 from 1999 until 2016, reaching an all-time high of 64.20 in July of 2006 and a

record low of 34.20 in April of 2009. The South African Reserve Bank (SARB) composite business

cycle indicator4 also followed a slight downward trend in June 2016, confirming subdued economic

outlook.5

2.2.3 KwaZulu-Natal economic review and outlook

KZN is the second largest contributor to the South African economy in terms of regional gross

domestic product (GDP-R). The estimated real GDP-R generated by the province amounted to

approximately R488.1 billion in 2015, making KZN the second largest contributor to the national

output (16 percent), after Gauteng with 36.1 percent and slightly above Western Cape at 13.8 percent.

Given the economic activities that take place within eThekwini Metro, it is therefore not surprising

that the total provincial output is predominantly concentrated in the metro at 57.7 percent. This is

followed by uMgungundlovu District at 10.5 percent and uThungulu at 7.8 percent. The least

contributing districts are Umzinyathi, Harry Gwala and Umkhanyakude Districts at the estimated rates

of 1.7 percent, 1.9 percent and 2.4 percent respectively (Figure 2).

Figure 2: Provincial GDP contributions by districts, 2015

Source: Global insight, 2016

2 Kagiso PMI is an indicator of activity in the manufacturing sector, where a level below 50 suggests a contraction in activity

while one above 50 points suggests expansion (www.kagiso.com), accessed on the 30/01/2015. 3 See South Africa Manufacturing PMI, available online: http://www.tradingeconomics.com/south-africa/ manufacturing –

pmi, accessed on 11/08/2016. 4The leading business cycle indicator is a composite index comprising of monthly time series, which tend to shift direction in

advance of the business cycle. It comprises the number of employees on non-agricultural payrolls, the index of industrial

production, level of manufacturing and trade sales as well the aggregate amount of personal income excluding transfer

payment, www.resbank.co.za and http://www.investopedia.com/terms/t/tcioci.asp 5 See Composite business cycle indicators for South Africa, available online: http://www.resbank.co.za, accessed on

11/08/2016.

http://www.kagiso.com/

http://www.resbank.co.za/

8

2.2.4 Sector analysis

Table 2.3 reflects the sector contribution towards the provincial GDP-R, in real terms, over the period

2007 to 2015. The table shows that the economy of KZN is mainly driven by the tertiary sector with

an estimated contribution of 68.6 percent of the Gross value added in 2015. Projections indicate that

this sector will continue to dominate. Gross Value added by the primary sector increased from 6.4

percent in 2007 to the highest level of 7 percent in 2008 and eventually dropped to 5.4 percent in

2015. The Gross value added by the secondary sector improved slightly from 25.6 percent in 2007 to

26 percent in 2015.

The table further illustrates that the most prosperous sector had been largely driven by community

services. This industry’s value added had grown from 18.6 percent in 2007 to an estimated 21.9

percent in 2015. The largest contributing industries within community services have been education as

well as health at 7.6 percent and 5.8 percent, respectively. This is no surprise as 41.7 percent

(R45.464 billion) and 33.6 percent (R35.579 billion), of the total provincial budget (R109.006 billion)

is allocated towards the sustainability and development of these two sector departments.6

Manufacturing and finance also contributed significantly to the economy with gross valued added

amounting to 17.7 percent and 17.9 percent, respectively in 2015. Trade and transport sector followed

at 14.8 percent and 14.0 percent, respectively.

Table 2.3: Gross Value Added by Sector in KZN, 2007 to 2015

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Primary sector 6.4% 7.0% 6.7% 6.5% 6.1% 5.8% 5.7% 5.6% 5.4% 5.3% 5.2%

Agriculture 4.6% 5.0% 4.9% 4.5% 4.2% 3.9% 3.8% 3.8% 3.7% 3.6% 3.6%

Mining 1.8% 2.0% 1.8% 2.0% 1.9% 1.9% 1.9% 1.8% 1.7% 1.7% 1.6%

Secondary sector 25.6% 26.2% 26.5% 26.3% 26.0% 25.3% 25.9% 26.5% 26.0% 25.6% 25.7%

Manufacturing 20.5% 20.2% 19.4% 19.0% 17.6% 17.0% 17.2% 18.0% 17.7% 17.3% 17.4%

Electricity 1.8% 1.7% 2.3% 2.7% 3.5% 3.9% 4.0% 3.9% 3.8% 3.8% 3.8%

Construction 3.2% 4.4% 4.8% 4.6% 4.9% 4.4% 4.7% 4.7% 4.5% 4.5% 4.5%

Tertiary sector 68.0% 66.8% 66.8% 67.2% 67.9% 68.8% 68.5% 67.8% 68.6% 69.1% 69.1%

Trade 16.8% 17.1% 15.4% 15.5% 16.1% 16.1% 15.5% 14.8% 14.8% 14.6% 14.2%

Transport 14.1% 13.0% 12.4% 12.2% 12.6% 13.3% 13.8% 13.9% 14.0% 14.2% 14.2%

Finance 18.6% 17.8% 18.6% 17.9% 17.5% 17.9% 17.4% 17.5% 17.9% 18.3% 18.6%

Community services 18.6% 18.9% 20.4% 21.5% 21.7% 21.6% 21.8% 21.6% 21.9% 22.1% 22.2%

Sectors / IndustriesEstimates Projections

Source: Global Insight, 2016

2.3 Labour markets

Economic performance of a country can be determined by the extent to which socio-economic factors

such as unemployment, poverty and inequality are addressed. Hence, substantial reduction to these

major challenges signals effective performance of the economy. These are, amongst others, reasons

that the national government has formulated policies such as the National Development Plan (NDP),

New Growth Path, Industrial Policy Action Plan, Special Economic Zones and many more.

The purpose of this section is therefore to provide the labour market dynamics in KZN. The section

starts by providing an outline of the national labour market, focusing mainly on employment and

unemployment rates. It proceeds by providing an analysis on both labour force participation and

labour absorption rates. The section concludes by providing an analysis of the relationship between

labour remuneration and productivity.

6 See KZN Provincial Treasury (2016): Estimates of Provincial Revenue and Expenditure, 2016/17

9

2.3.1 Unemployment

The Quarterly Labour Force Survey (QLFS) for the first quarter of 2016 reveals that the official

unemployment rate in SA is currently at 26.7 percent (Stats SA, 2016a). The number of unemployed

persons increased by 521 000 to 5.7 million between the final quarter of 2015 and the first of 2016.

This resulted in a 2.2 percentage point increase in unemployment rate. The official unemployment rate

in KZN is 23.2 percent in 2016, moderately below the national rate over the same quarter.

Table 2.4 shows the unemployment rate trend across the districts in the province, over the period 2005

to 2015. In 2015, Uthukela (32.8 percent) Umkhanyakude (32.1 percent), Zululand (31.6 percent), and

Amajuba (29.1 percent) districts had the highest levels of unemployment rate in the province. As

expected, eThekwini Metro (15.0 percent) had the lowest unemployment rate, which was far below

the average provincial rate of 21.6 percent for the period under review.

Table 2.4: Unemployment rate trend (percentages), 2005 to 2015

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

eThekwini Metro 23.7 22.2 20.5 18.8 17.6 16.5 15.9 15.7 15.3 15.0 15.0

Ugu 30.6 28.7 27.2 26.6 26.8 27.5 27.9 28.0 28.3 28.7 28.5

uMgungundlovu 25.5 23.7 22.3 21.9 22.4 23.2 23.7 23.4 23.0 22.6 22.2

Uthukela 34.3 31.6 29.7 29.4 29.9 31.0 31.7 32.0 32.9 32.9 32.8

Umzinyathi 37.7 34.4 31.7 30.5 30.0 30.0 29.5 29.1 28.8 28.4 27.7

Amajuba 33.3 31.5 30.0 29.6 30.1 31.0 31.4 30.5 30.0 29.4 29.1

Zululand 37.5 34.9 32.9 32.2 32.5 33.2 33.4 33.0 32.7 32.2 31.6

Umkhanyakude 35.7 32.5 30.4 30.5 31.5 33.2 34.4 34.1 33.4 33.1 32.1

uThungulu 29.1 27.2 25.8 25.5 25.9 26.9 27.4 27.6 27.6 27.5 27.1

iLembe 26.2 24.2 22.8 22.4 22.7 23.4 23.8 24.2 24.0 24.0 23.5

Harry Gwala 32.5 29.8 27.8 27.4 27.7 28.6 28.9 27.8 27.2 27.0 26.0

KwaZulu-Natal 27.6 25.7 24.1 23.0 22.6 22.5 22.4 22.2 22.0 21.9 21.6

Unemployment rate trends


2.3.2 Job scarcity rate

Table 2.5 reflects job scarcity7 rate over the period 2005 to 2015. Job scarcity rate is one of the useful

indicators in the analysis of labour market conditions. Similar to other indicators, such as poverty and

education, job scarcity plays an integral role in the high levels of the unemployment rate. The

province’s job scarcity had been decreasing between 2005 and 2015. This indicates a lower job

creation capacity and contradicts the trend in the change in the unemployment rate of the province

relative to the national rate. This is due to the fact that the number of people who were unemployed

had been increasing provincially, whilst the economically active population grew faster than those not

economically active8.

7The job scarcity rate is the difference between the economically active population and formal employment. It should be

noted that this is not an unemployment rate, but a useful indicator of an economy’s job creation capacity. A higher rate

means lower job creation capacity and vice versa (Mohr P, 2008). 8Not economically active refers to discouraged workers, students, homemakers and others.

10

Table 2.5: Job scarcity rate, 2005 to 2015

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

eThekwini Metro 20.7 19.0 17.2 15.4 15.1 14.1 12.6 11.6 10.5 10.3 8.9

Ugu 29.9 27.8 26.2 25.6 26.7 27.1 27.0 26.0 24.5 24.5 25.4

uMgungundlovu 26.4 24.4 22.9 22.5 23.3 24.2 24.4 22.9 20.9 20.0 21.5

Uthukela 32.3 29.4 27.2 26.7 30.0 30.4 30.3 28.7 27.9 27.1 28.5

Umzinyathi 47.5 45.1 43.2 42.4 43.7 44.0 43.8 41.3 39.4 38.5 39.6

Amajuba 34.6 32.8 31.3 30.8 33.6 34.1 34.0 30.7 28.5 27.2 29.2

Zululand 42.5 40.0 38.1 37.5 39.8 40.2 40.0 37.7 35.6 34.3 35.7

Umkhanyakude 39.0 36.3 34.6 34.7 37.1 38.4 39.2 37.4 34.7 34.1 34.9

uThungulu 29.1 27.2 25.7 25.2 27.7 28.1 28.1 26.4 24.4 23.7 24.9

iLembe 33.1 31.3 30.1 29.8 30.0 30.7 30.9 30.7 28.6 28.4 29.3

Harry Gwala 35.0 32.5 30.6 30.1 32.5 32.7 32.4 29.4 27.4 26.9 27.8

KwaZulu-Natal 27.4 25.4 23.7 22.6 22.1 22.0 21.9 21.7 21.5 21.4 22.1

Job scarcity rate


The Umzinyathi District had the highest job scarcity rate over the years and recorded 39.6 percent in

2015. This was followed by Zululand and Umkhanyakude District at 35.7 percent and 34.9 percent,

respectively over the same period. eThekwini Metro had the lowest job scarcity at 8.9 percent during

the same period. However, considering the link between unemployment rate and job scarcity, it is

apparent that the districts with high unemployment rate also have the highest job scarcity rate.

2.3.3 Labour force participation rate

The Labour Force Participation Rate (LFPR)9 shows the extent to which the working population is

economically active. A lower rate can be attributed to various factors, ranging from discouraged work

seekers, students, home makers and others. Table 2.6 shows that eThekwini Metro had the highest

LFPR at 41.9 percent, followed by uMgungundlovu and iLembe Districts at 37.2 and 29.5 percent

respectively. The districts with the lowest LFPR were Umzinyathi (17.2 percent), followed by

Umkhanyakude (17.8 percent) and Zululand (19.1 percent).

Table 2.6: Labour force participation rate, 2005 to 2015

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

eThekwini Metro 43.3 43.6 43.7 43.3 42.4 41.3 40.8 40.6 40.7 40.7 41.9

Ugu 25.4 25.9 26.3 26.1 25.7 25.2 24.9 24.9 25.4 26.1 26.6

uMgungundlovu 37.9 38.1 38.1 37.7 36.9 36.0 35.3 35.2 35.8 36.7 37.2

Uthukela 25.1 25.2 25.0 24.5 23.6 22.8 22.2 22.1 22.5 23.2 23.6

Umzinyathi 17.7 17.9 18.0 17.6 17.0 16.3 15.7 15.8 16.2 16.8 17.2

Amajuba 31.1 30.8 30.4 29.5 28.3 27.2 26.2 26.2 26.8 27.7 28.0

Zululand 19.8 19.9 19.8 19.4 18.7 18.1 17.5 17.5 18.0 18.7 19.1

Umkhanyakude 17.4 17.9 18.3 17.9 17.3 16.8 16.3 16.3 16.8 17.4 17.8

uThungulu 27.1 27.5 27.6 27.2 26.5 25.8 25.3 25.3 25.9 26.7 27.3

iLembe 28.4 28.8 29.0 28.9 28.4 28.0 27.6 27.5 28.2 28.9 29.5

Harry Gwala 22.0 22.5 22.7 22.4 21.8 21.2 20.8 21.0 21.6 22.4 22.9

KwaZulu-Natal 31.6 32.0 32.1 31.7 31.0 30.2 29.7 29.6 30.0 30.6 31.3

Labour force participation rate


2.3.4 Labour absorption rate

Another key indicator in the labour market analysis is the Labour Absorption Rate (LAR)

10. The LAR

provides an alternative indication to the unemployment rate regarding the lack of job opportunities in

the labour market. Overall job creation capacity had been declining due to the financial crisis which

led to the global recession experienced in 2008 to 2009.

9The LFPR is the proportion of the working age population which is economically active (Stats SA, 2011). 10The labour absorption rate is the proportion of working age group 15-64 that are employed (Stats SA, 2014).

11

Table 2.7: Labour absorption rate, 2005 to 2015

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

eThekwini Metro 34.4 35.3 36.2 36.6 36.3 35.9 35.6 35.5 35.7 35.9 36.5

Ugu 17.8 18.7 19.4 19.5 19.1 18.6 18.3 18.3 18.6 19.0 19.3

uMgungundlovu 27.9 28.8 29.4 29.3 28.5 27.5 26.8 26.8 27.4 28.2 28.4

Uthukela 17.0 17.8 18.2 18.0 17.2 16.4 15.8 15.7 15.8 16.3 16.4

Umzinyathi 9.3 9.8 10.2 10.1 9.8 9.4 9.1 9.2 9.4 9.8 10.0

Amajuba 20.3 20.7 20.8 20.4 19.5 18.5 17.8 18.0 18.5 19.3 19.4

Zululand 11.4 11.9 12.2 12.1 11.6 11.1 10.8 10.9 11.2 11.7 11.9

Umkhanyakude 10.6 11.4 11.9 11.7 11.2 10.5 10.1 10.1 10.5 10.9 11.1

uThungulu 19.2 20.0 20.5 20.4 19.7 19.0 18.5 18.5 19.0 19.6 19.9

iLembe 19.0 19.8 20.3 20.3 19.9 19.4 19.1 18.9 19.4 19.9 20.2

Harry Gwala 14.3 15.2 15.8 15.7 15.2 14.6 14.2 14.6 15.1 15.7 16.0

KwaZulu-Natal 23.0 23.8 24.5 24.6 24.1 23.5 23.2 23.2 23.6 24.0 24.4

Labour arbsoption rate


2.3.5 Labour remuneration and productivity

Labour productivity11

is the measure usually used when calculating unit labour cost. It is a meaningful

indicator since it helps reflect changes in the price of labour. An improvement in this variable can be

due to an accumulation of machinery, improvement in technology, investment in infrastructure, skills

development and improvement in the health of organisations.

Figure 3: KwaZulu-Natal remuneration and productivity trend analysis, 2005 to 2015


As can be viewed in Figure 3, the trend shows high magnitude between these two variables where

remuneration is higher than productivity in KZN. Labour remuneration growth in the province has

outstripped productivity growth. Inherently, productivity levels should be consistent with

remuneration trend. This implies that efficiency in production is low compared to costs of labour by

observing the trend from 2005 to 2015, whereby productivity is far below the labour remuneration.

The unit labour cost in Figure 4 measures the average cost of output, therefore rapid growth in

remuneration per worker is not harmful as long as it is coupled with a proportional increase in

productivity. This measure serves as an important indicator of cost pressures, competitiveness and cost

efficiency of labour. If unit labour costs increase faster than in the economies of its international

11Labour productivity is defined as output per unit of labour. Labour remuneration is measured as remuneration per worker at

current prices.

12

competitors, the situation might be temporarily absorbed by cutting profit margins, but in the long

term the deteriorating competitiveness will reduce exports, output and employment (Mohr, 2008).

Figure 4: Unit labour cost, 2005 to 2015

4.9

5.8

7.8

12.0

8.9

5.5

6.76.4

7.3

6.4

7.6

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015


2.4 International trade

An actively trading country benefits from new technologies that come from its trading partners. These

technological spillovers are particularly important for developing countries since trade provides them

with the opportunity to catch up with developed countries.

SA’s trade and industrial policy has evolved over the years. This is due to the country’s movement

from a highly protected, inward looking economy towards a more open economy. A key challenge for

SA and KZN revolves around reducing the current account deficit by improving the country’s

domestic and international markets.

Encouragingly, KZN is the second largest contributor to the South African’s economy, as it is home to

the busiest and largest ports being Durban and Richards Bay. This section therefore provides an

analysis of international trade with reference to exports, imports, percentage share of KZN’s exports

as well as exports as a percentage of GDP-R and imports by KZN and its districts.

2.4.1 KwaZulu-Natal exports

Exports in KZN amounted to an estimated R122.8 billion in 2015 which was 18.9 percent of the

provincial real GDP-R. This was more than double compared to the R46.6 billion or 17.2 percent

recorded in 2005. eThekwini Metro contributed 52.1 percent to KZN exports at an estimated value of

R64 billion in 2015. This contribution constituted 16.9 percent of the total GDP-R of eThekwini

Metro. As a result, eThekwini Metro remained the largest contributor to KZN exports in actual Rand

values over the period under review. uThungulu District was the second largest contributor to KZN’s

GDP after eThekwini Metro with an estimated value of R33.4 billion in 2015, which was 27.2 percent

of KZN’s exports and 67.8 percent of the district’s GDP12

(Table 2.8).

12Note that exports from uThungulu District also come from other regions.

13

Table 2.8: KwaZulu-Natal value of Exports by district, 2005 and 2015

R'000 Exports % Share of KZN

exports

Exports as a % of

GDP

Exports % Share of KZN

exports

Exports as a % of

GDP

eThekwini Metro 24 883 187 53.4 15.7 63 968 464 52.1 16.9

Ugu 82 731 0.2 0.7 363 006 0.3 1.3

uMgungundlovu 5 580 925 12.0 20.3 11 781 946 9.6 17.3

Uthukela 66 468 0.1 0.6 872 642 0.7 3.6

Umzinyathi 276 094 0.6 6.3 426 012 0.3 3.9

Amajuba 337 133 0.7 3.7 796 319 0.6 3.7

Zululand 23 566 0.1 0.3 170 168 0.1 0.9

Umkhanyakude 3 562 0.0 0.1 22 623 0.0 0.1

uThungulu 15 173 565 32.5 73 33 422 546 27.2 67.8

iLembe 199 070 0.4 2 10 977 852 8.9 44.1

Harry Gwala 5 028 0.0 0.1 36 139 0.0 0.3

KwaZulu Natal 46 631 330 100 17.2 122 837 717 100 18.9

2005 2015


2.4.2 KwaZulu-Natal imports

KZN imported an estimated R125.8 billion worth of goods in 2015, which grew by 159.2 percent from

imports realised in 2005 (R48.5 billion). The eThekwini Metro was the largest importer in the

province with an estimated value of R95.8 billion in 2015 which was 76.2 percent of KZN imports.

This was followed by uMgungundlovu District at the value of R11.7 billion in 2015 constituting 9.3

percent of the total value of provincial imports (Table 2.9).

Table 2.9: KwaZulu-Natal value of Imports by district, 2005 and 2015

R'000Imports

% Share of KZN

imports Imports

% Share of KZN

imports

eThekwini Metro 40 375 105 83.2 95 774 199 76.2

Ugu 150 913 0.3 983 101 0.8

uMgungundlovu 2 249 806 4.6 11 737 715 9.3

Uthukela 329 514 0.7 1 507 127 1.2

Umzinyathi 29 595 0.1 238 745 0.2

Amajuba 176 533 0.4 519 401 0.4

Zululand 18 994 0.0 81 719 0.1

Umkhanyakude 9 529 0.0 125 338 0.1

uThungulu 4 501 463 9.3 11 525 655 9.2

iLembe 666 860 1.4 3 239 940 2.6

Harry Gwala 2 023 0.0 25 000 0.0

KwaZulu- Natal 48 510 334 100 125 757 938 100

2005 2015


14

2.5 Provincial economic risk index13 Economic risk refers to incidences where macroeconomic conditions such as exchange rates,

government regulation and political stability affect the expected outcomes in an economy. The

analysis of economic risk contained in this section focuses on the six key regions in KZN; namely:

eThekwini Metro, Msunduzi, uMhlathuze, Hibiscus Coast, Newcastle and KwaDukuza

Municipalities.

2.5.1 Model specification14

The variables utilised in the estimation of the economic risk are: the rand dollar exchange rate, interest

rates, inflation, oil prices, sugar prices, gold price, credit extended and electricity supply. The

theoretical impact of a change in each of the economic risk or condition shows that for example, when

the rand dollar exchange rate depreciates, the risk associated is assumed to be decreasing. This is due

to the potential improvement in the economic conditions associated with a depreciating currency.

2.5.2 Results

The results have been smoothed using a 12 month moving average method because of the inclusion of

monthly data in the calculations. The risk monitor is interpreted as follows: positive values indicate a

low or decreasing risk, zero implies neutral risk and the negative numbers indicate high or increasing

risk. The results for the province and each of the six regions are displayed in Figure 5 and Table 2.10.

Figure 5: Economic risk/ condition monitor from January 2010 to March 2016

Source: Own calculations using KZN Economic Model, 2016

Figure 5 suggests that the economic risk profile and economic conditions of the province during

quarter four of 2015 improved significantly, primarily because of the weakening rand and the

significant fall in oil prices. However, the continuing rise in inflation is and should be a serious cause

of concern. Nevertheless, the economic risk profile of the province deteriorated significantly, due to

the rise in interest rates and inflation during the first quarter of 2016.

13The views expressed in this section are those of the author (Dr C Coetzee) and do not necessarily represent those of the

KZN Provincial Treasury. 14The weights utilised in the model are purely assumed and not based on any econometric modelling or calculations simply

because of a lack of sufficient time series data. However, it must be mentioned that various weightings have been modelled

with very little impact on the overall results.

15

Table 2.10 suggests that the economic risk profile and economic conditions of the province and six

regions from 2010 to 2016 were favourable and supportive, primarily because of the significant fall in

international oil prices and weak currency. As observed in the table, the change in fortunes seems to

be evenly distributed across the six regions.

Table 2.10: Economic risk/conditions (averages), 2010 to 2016

2010 2011 2012 2013 2014 2015 2016:Q1

eThekwini Metro -0.33 -0.21 0.31 0.39 0.38 0.97 0.79

Msunduzi -0.26 -0.14 0.29 0.37 0.36 0.90 0.76

uMhlathuze -0.25 -0.12 0.27 0.35 0.36 0.90 0.77

Hibiscus Coast -0.27 -0.12 0.34 0.38 0.37 1.02 0.99

Newcastle -0.23 -0.10 0.33 0.37 0.35 0.94 0.87

KwaDukuza -0.27 -0.12 0.27 0.38 0.39 0.91 0.89

KwaZulu Natal -0.28 -0.16 0.30 0.37 0.37 0.94 0.82

Economic risk / conditions (averages)

Source: Own calculations using KZN Economic Model, 2016

2.6 Development

According to the Organisation for Economic Co-operation and Development (OECD, 2013), SA is

advancing, but is still failing to fully achieve its considerable potential. Per capita incomes are

growing, public services are expanding, health indicators are improving, crime rates are falling and

demographic trends are favourable. However, an extremely high proportion of the country’s

population is unemployed. Moreover, income inequality remains high, educational outcomes are poor

on average and uneven. However, the government of the country is addressing these challenges

through formulation of policies that are pro poverty alleviation.

There are a number of methods that can be used to measure the development of a country. This

include among others; poverty, inequality of income, employment, education and health. As a result of

the latter challenges, policies such the National Development Plan (NDP) for the country and

Provincial Growth and Development Plan for the province of KZN have been formulated.

2.6.1 Poverty

As indicated above, poverty is a national problem in respect of which the government has taken a

number of steps to address. A sustainable and inclusive growth of the economy would ensure

reduction of poverty. KZN has the highest poverty rate when compared to other provinces irrespective

of being the second largest contributor to the national GDP.

Table 2.11 indicates that the African community in KZN has the largest percentage of people living in

poverty at 45.5 percent in 2015. As expected, eThekwini Metro has the lowest percentage of African

people living below the poverty line, whereas Zululand District has the highest at 53.6 percent.

Coloured people are ranked the second when compared to other racial groups.

16

Table 2.11: Percentage of population living in poverty in KZN and districts, 2015

African White Coloured Asian Total

eThekwini 38.6 0.1 12.2 1.1 29.6

Ugu 48.3 0.2 17.2 1.2 43.7

uMgungundlovu 40.9 0.1 11.3 1.0 35.2

Uthukela 52.9 0.2 17.5 1.5 50.6

Umzinyathi 50.6 0.3 23.0 1.3 49.0

Amajuba 50.5 0.2 21.7 1.0 47.3

Zululand 53.6 0.2 23.2 3.3 52.7

Umkhanyakude 53.5 0.5 30.7 4.4 52.9

uThungulu 45.8 0.1 13.6 1.4 43.3

iLembe 43.2 0.1 19.7 1.2 39.5

Harry Gwala 46.9 0.2 15.2 2.2 45.7

KwaZulu-Natal 45.5 0.1 13.6 1.1 39.9

2015


2.6.2 Income Inequality

The Gini coefficient is a measure of income inequality. It ranges between the scale of 0 and 1, where 0

indicates perfect distribution of income and 1 indicates the imperfect distribution of income. Figure 6

indicates how the income is distributed across people in KZN and its districts. eThekwini Metro and

uMgungundlovu District have the highest Gini coefficient at 0.63 which is equivalent to the provincial

average. Since income inequality measure is above 0.50, the province has a challenge of unequal

distribution of income.

Figure 6: GINI Coefficient by district, 2015

0.53

0.54

0.55

0.56

0.57

0.58

0.59

0.60

0.61

0.62

0.63

0.64

KwaZulu-Natal eThekwini Ugu DM uMgungundlovu Uthukela Umzinyathi Amajuba Zululand Umkhanyakude uThungulu iLembe Harry Gwala

0.630.63

0.60

0.63

0.59

0.57

0.62

0.58 0.58

0.62

0.60

0.57


17

2.6.3 Human Development Index (HDI)

The HDI is an average measure of basic human development achievements in a country. It focuses on

average achievement based on key dimensions of human development; namely, a long and healthy

life, being knowledgeable and a decent standard of living. The aforementioned dimensions have

certain indicators usually applied to assess progress made by the country with respect to each and

every dimension. Firstly, the health dimension is assessed by life expectancy at birth. It is followed by

the education dimension which is easily measured by mean of years of schooling for adults aged 25

years and above, and expected years of schooling for children of school entering age. Lastly, the

standard of living dimension is measured by gross national income per capita.

It is categorised into three phases, that is, regions with an HDI value of 0.80 or more are classified as

having high human development status. Those with HDI values between 0.50 and 0.80 are classified

as having medium human development. An HDI of less than 0.50 indicates low human development.

Figure 7 indicates that there have been some changes in the human development from the year 2009,

2012 and 2015 in KZN. The HDI value has increased from 0.52 in 2009 to 0.61 in 2015. It can also be

noted that most of the districts in 2009 were underdeveloped when compared to 2015. They were all

below an HDI value of 0.50 except eThekwini Metro, uMgungundlovu and Amajuba Districts.

However, in 2015 all the Districts were above 0.5.

Figure 7: Human Development Index by district; 2009, 2012 and 2015


2.7 Social grants

Table 2.12 shows the number and percentage of grant beneficiaries in SA by provinces. KZN

continued to have the highest number of social grant beneficiaries at 3.9 million beneficiaries in the

country, followed by the Eastern Cape (2.7 million) and Gauteng (2.4 million).

18

Table 2.12: Grant beneficiaries by province as at 31 May 2016

Number % Number % Number % Number % Number % Number % Number %

South Africa 3 207 280 100.0 233 100.0 1 073 866 100.0 142 604 100.0 130 864 100.0 487 383 100.0 11 931 494 100.0 16 973 724

Eastern Cape 537 837 16.8 38 16.3 180 774 16.8 19 022 13.3 19 653 15.0 112 658 23.1 1 868 529 15.7 2 738 511

Free State 188 751 5.9 1 0.4 74 095 6.9 2 949 2.1 6 803 5.2 37 361 7.7 667 525 5.6 977 485

Gauteng 519 769 16.2 65 27.9 112 914 10.5 4 527 3.2 16 823 12.9 54 663 11.2 1 719 277 14.4 2 428 038

KZN 650 090 20.3 29 12.4 249 941 23.3 48 133 33.8 37 016 28.3 109 977 22.6 2 805 409 23.5 3 900 595

Limpopo 442 368 13.8 12 5.2 95 190 8.9 30 195 21.2 13 856 10.6 54 769 11.2 1 748 863 14.7 2 385 253

Mpumalanga 234 860 7.3 12 5.2 77 916 7.3 7 513 5.3 9 915 7.6 35 374 7.3 1 049 375 8.8 1 414 965

North West 241 059 7.5 6 2.6 80 980 7.5 8 377 5.9 9 082 6.9 37 297 7.7 813 413 6.8 1 190 214

Northern Cape 81 757 2.5 7 3.0 50 426 4.7 7 542 5.3 5 037 3.8 14 403 3.0 297 086 2.5 456 258

Western Cape 310 789 9.7 63 27.0 151 630 14.1 14 346 10.1 12 679 9.7 30 881 6.3 962 017 8.1 1 482 405

Child Support GrantTotal

Old Age Grant War Veteran's Grant Disability Grant Grant-in-aid Care Dependency Grant Foster Child Grant

Source: SASSA, 2016

KZN had the highest share of recipients of the Old Age Grant (20.3 percent), Disability Grant

(23.3 percent), Grant in Aid (33.8 percent), Care Dependency Grant (28.3 percent), and the Child

Support Grant (23.5 percent). Within the province, 71.9 percent of the various grants were allocated to

the Child Support Grant, whilst 16.7 percent was for the Old Age Grant, and 6.4 percent was allocated

towards the Disability Grant (Figure 8).

Figure 8 shows the growth rates of grant beneficiary numbers between 30 June 2015 and 31 May

2016. There was an increase in the percentage of grant beneficiaries in all categories with the

exception of the War Veteran’s Grant, Foster Child Grant, and the Disability Grant. The highest

growth was seen in the Grant in Aid (18.6 percent), implying that there was an increase in people who

were already beneficiaries of either the Old Age Grant, Disability Grant or War Veteran’s Grant who

needed full time care from someone else.

Figure 8: KZN’s share of grant beneficiary by grant type as at 31 May 2016 and growth from 30 June 2015

Old Age Grant(16.7%, 2.3%)

Disability Grant(6.4%, -11.0%)

Grant-in-aid(1.2%, 18.6%)

Care Dependency Grant(0.9%, 1.3%)

Foster Child Grant ((2.8%, -10.0%)

Child Support Grant (71.9%, 0.5%)

-0.1

0

0.1

0.2

0.3

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9

Grant name, share (%), growth (%)

Source: SASSA, 2015

19

2.8 Education

Education is essential for the enhancement of human capital, thus rendering a greater prospect for

income generation. One of the Department of Education’s (DoE) strategic objectives is to extend a

better quality of life to children of school-going age. According to Calman and Tarr-Whelan (2005)15

investing in early education generates economic development for communities in the short-term in the

form of jobs, the purchase of goods and services and a more efficient workforce. In the long term,

early quality education builds an employable and educated workforce. It is from this backdrop that

quality basic education is one of the fourteen national outcomes as indicated in the Medium-Term

Strategic Framework (MTSF) of SA.

2.8.1 School and educator: Learner ratios 2010 and 2014

The Learner-to-Educator Ratio (LER) is a general way to measure workloads and resource allocations

in schools as well as the amount of individual attention a child is likely to receive from educators.

Small classes are often seen as beneficial because they allow educators to focus more on the needs of

the individual learners and thus reducing the amount of class time and effort devoted to managing

disruptions. Evidence by the OECD (2014)16

suggests a positive relationship between smaller classes

and more innovative practices. The more crowded the classrooms, the more difficult it is for educators

to give personal attention to learners to help them along in the learning process. Learners in

overcrowded classes may find it difficult to follow the lesson or to ask questions when they do not

understand the material being taught.

Table 2.13 shows the number of learners, educators and schools across districts in KZN in 2010 and

2014. A comparison of the years 2010 and 2014 indicates that there was a moderate increase in the

province’s number of learners, educators and schools.

The total number of learners in KZN increased marginally from 2.807 million in 2010 to 2.902 million

in 2014, representing an increase of 3.4 percent. This was coupled by a rise in the total number of

educators from 91 926 in 2010 to 95 560 in 2014, leading to an estimated 4 percent increase. During

the same period, the number of schools increased marginally by 0.1 percent from 6 147 to 6 153.

Subsequently, LER on average decreased slightly in all districts from the aggregate 31 in 2010 to 30

in 2014. Although the districts’ LER appears to be on a downward trend, it is still above the

benchmark of 30 in most districts with the exception of eThekwini Metro (28) and uMgungundlovu

(28) which are below the benchmark.

15 Calman L.J. & Tarr-Whelan L. (2005) Early childhood education for all. A wise investment. Available online:

http://web.mit.edu/workplacecenter/docs/Full%20Report.pdf [Accessed 25/03/2016]

16 OECD (2014) TALIS 2013 Results: An International Perspective on Teaching and Learning, TALIS, OECD Publishing,

Paris, Available Online: http://dx.doi.org/10.1787/9789264196261-en [Accessed 11/02/2016]

http://web.mit.edu/workplacecenter/docs/Full%20Report.pdf

http://dx.doi.org/10.1787/9789264196261-en

20

Table 2.13: The learners, educators and schools across districts in KZN, 2010 and 2014

No.of learnersNo.of

educators

No.of

schoolsLER LSR

No.of

learners

No.of

educators

No.of

schoolsLER LSR

eThekwini 681 615 23 889 1 057 29 645 714 373 25 068 933 28 766

Ugu 218 242 7 202 507 30 430 217 738 7 206 544 30 400

uMgungundlovu 238 484 8 454 548 28 435 246 644 8 712 517 28 477

Uthukela 204 878 6 498 454 32 451 211 772 6 653 669 32 317

Umzinyathi 180 880 5 587 485 32 373 196 423 6 006 455 33 432

Amajuba 134 039 4 243 249 32 538 141 679 4 521 533 31 266

Zululand 288 891 9 008 747 32 387 295 447 9 325 757 32 390

Umkhanyakude 235 270 7 199 544 33 432 241 843 7 397 501 33 483

uThungulu 296 751 9 378 673 32 441 302 104 9 677 452 31 668

iLembe 171 948 5 416 432 32 398 177 315 5 697 248 31 715

Harry Gwala 155 990 5 052 451 31 346 156 359 5 298 544 30 287

KwaZulu-Natal 2 806 988 91 926 6 147 31 457 2 901 697 95 560 6 153 30 472

2010 2014

Source: Department of Basic Education, 2016

The Learner to School Ratio (LSR) in KZN increased marginally from 457 in 2010 to 472 in 2014. It

appears that most of the districts in the province recorded increasing LSRs with the exception of Ugu,

uThukela, Amajuba and Harry Gwala (Table 2.13).

2.9 Household Infrastructure

2.9.1 Housing, water, electricity, sanitation and refuse removal

The Provincial Government is committed to service delivery with the primary areas of focus being

access to water and electricity, the removal of refuse and the availability of sanitation services. Access

to these services promotes good hygiene, which plays a pivotal role in preventing the spread of

infectious diseases such as diarrhoea. Access to electricity promotes economic activity and

development.

Figure 9: Access to Housing, Sanitation, Water, Electricity and Refuse removal, 2014 to 2015


21

Figure 9 illustrates that eThekwini Metro is primarily the leading municipality in the province in

respect of providing service delivery to households. Specifically, the metro leads in the areas of formal

refuse removal (87.3 percent), electricity (91.7 percent), the share of households with piped water at or

above the RDP-level (87.8 percent), and share of households with hygienic toilets (82.2 percent).

Amajuba District has the leading share of households occupying formal dwellings at 88.6 percent.

Zululand (53.2 percent), Harry Gwala (59.1 percent) and Umkhanyakude (59.3 percent) districts have

the lowest share of households with access to sanitation.

In respect of piped water at or above the RDP-level, Amajuba District (86.4 percent) falls in second

after eThekwini Metro (87.8 percent), followed by uMgungundlovu District at 79.2 percent. After

eThekwini Metro (87.3 percent), Amajuba District has a share of 57.2 percent of households with

access to refuse removal services while uMgungundlovu District has a share of 44.8 percent.

22

2.10 Crime

Table 2.14: Crime per 100 000 people in KwaZulu-Natal, 2011 to 2015

Crime Category April 2011 to

March 2012

April 2012 to

March 2013

April 2013 to

March 2014

April 2014 to

March 2015

April 2011 to

March 2012

April 2012 to

March 2013

April 2013 to

March 2014

April 2014 to

March 2015

Murder 3 418 3 623 3 616 3 810 - 6.0 -0.2 5.4

Total sexual offences 11 034 10 964 9 889 9 077 - -0.6 -9.8 -8.2

Attempted murder 3 643 3 827 3 835 3 915 - 5.1 0.2 2.1

Assault with the intent to inflict grievous bodily harm 29 504 28 832 28 982 29 189 - -2.3 0.5 0.7

Common assault 31 841 30 087 26 307 23 997 - -5.5 -12.6 -8.8

Common robbery 7 586 8 188 8 397 7 852 - 7.9 2.6 -6.5

Robbery with aggravating circumstances 18 417 19 923 20 957 20 861 - 8.2 5.2 -0.5

Arson 1 030 946 896 853 - -8.2 -5.3 -4.8

Malicious damage to property 15 394 15 670 14 954 14 595 - 1.8 -4.6 -2.4

Burglary at non-residential premises 10 944 11 954 11 194 11 016 - 9.2 -6.4 -1.6

Burglary at residential premises 41 010 45 404 43 969 43 155 - 10.7 -3.2 -1.9

Theft of motor vehicle and motorcycle 10 059 9 738 8 674 8 394 - -3.2 -10.9 -3.2

Theft out of or from motor vehicle 15 912 18 014 18 614 18 051 - 13.2 3.3 -3.0

Stock-theft 6 508 6 018 5 754 5 955 - -7.5 -4.4 3.5

Illegal possession of firearms and ammunition 4 692 4 444 4 586 4 078 - -5.3 3.2 -11.1

Drug-related crime 37 414 42 167 45 950 47 365 - 12.7 9.0 3.1

Driving under the influence of alcohol or drugs 12 866 15 109 12 595 11 695 - 17.4 -16.6 -7.1

Sexual offences detected as a result of police action 935 1 188 1 765 2 258 27.1 48.6 27.9

All theft not mentioned elsewhere 52 467 50 361 49 846 47 473 - -4.0 -1.0 -4.8

Commercial crime 13 375 14 226 12 431 11 207 - 6.4 -12.6 -9.8

Shoplifting 12 399 13 014 13 378 14 116 - 5.0 2.8 5.5

Carjacking 2 218 2 413 2 262 2 190 - 8.8 -6.3 -3.2

Truck hijacking 64 82 46 62 - 28.1 -43.9 34.8

Robbery of cash-in-transit 25 20 37 18 - -20.0 85.0 -51.4

Bank robbery 1 2 - - - 100.0 - -

Robbery at residential premises 3 751 4 119 4 099 3 945 - 9.8 -0.5 -3.8

Robbery at non-residential premises 1 909 2 347 2 696 2 748 - 22.9 14.9 1.9

Culpable homicide 2 411 2 282 2 238 2 236 - -5.4 -1.9 -0.1

Public violence 117 132 157 216 - 12.8 18.9 37.6

Crimen injuria 6 206 5 641 4 077 3 389 - -9.1 -27.7 -16.9

Neglect and ill-treatment of children 302 306 244 183 - 1.3 -20.3 -25.0

Kidnapping 839 896 890 872 - 6.8 -0.7 -2.0

PROPERTY-RELATED CRIMES

CRIME DETECTED AS A RESULT OF POLICE ACTION

OTHER SERIOUS CRIMES

SUBCATEGORIES OF AGGRAVATED ROBBERY

OTHER CRIME CATEGORIES

Crime figures Growth Rate (%)

CONTACT CRIMES ( CRIMES AGAINST THE PERSON)

CONTACT-RELATED CRIMES

Source: SAPS, 2016

Burglary at residential units, Assault with intent to do grievous bodily harm, Theft and Drug related

crime, continued to be the most prevalent offences in KZN in 2014/15. The leading crime category,

with a crime ratio of 47 473 per 100 000 people, in 2014/15 was All theft not mentioned elsewhere17

. It

is noted, however, that since 2011/12 this category has decreased from 52 467 in 2011/12 to 47 473 in

2014/15.

17

It is implied that this theft is not related to stock, nor theft of (or out of) motor vehicles. Consequently, crimes such as

identity theft would fit into this category.

23

Assault with the intent to do grievous bodily harm and Drug-related crime both increased from

2013/14 to 2014/15. The former increased by 0.7 percent and the latter by 3.1 percent. Burglaries at

residential premises decreased from 43 969 per 100 000 people in 2013/14 to 43 155 per 100 000

people in 2014/15.

25

Chapter 3: Overview of Provincial Budget Performance

3.1 Operating Revenue

Table 3.1 shows the Original Budget, Adjusted Budget and Unaudited Actual Operating Revenue per

source and per district for the 2015/16 financial year.

Table 3.1: Operating revenue per revenue source and per district

Electricity

revenue

Water

revenue

Other2

eThekw ini 29 534 286 29 540 627 29 054 560 98.4 6 268 606 11 442 035 3 017 209 1 529 041 2 460 853 3 054 692 1 282 124

Ugu 2 163 659 2 168 716 2 425 190 111.8 476 522 119 447 214 697 182 485 1 004 273 318 852 108 913

uMgungundlov u 5 433 769 5 720 547 5 285 208 92.4 990 208 1 885 362 587 110 233 382 1 223 450 132 406 233 289

Uthukela 1 856 218 1 847 341 1 781 010 96.4 280 567 445 306 143 296 41 464 774 259 21 473 74 648

Umziny athi 1 103 233 1 309 694 1 142 711 87.3 124 850 189 615 34 101 34 102 692 723 7 728 59 590

Amajuba 1 929 013 1 613 741 2 103 959 130.4 272 410 613 740 182 080 178 617 790 679 28 001 38 431

Zululand 1 693 625 1 694 431 1 447 312 85.4 161 765 246 825 50 138 65 999 857 627 12 487 52 472

Umkhany akude 1 014 839 1 016 694 978 849 96.3 80 400 3 689 33 417 10 140 762 836 44 667 43 701

uThungulu 3 866 062 3 791 311 3 810 318 100.5 448 776 1 467 757 274 409 191 961 1 113 638 138 538 175 240

iLembe 2 285 379 2 376 091 2 275 435 95.8 383 175 660 419 90 161 125 179 869 440 52 140 94 921

Harry Gw ala 1 118 999 1 147 272 1 023 354 89.2 136 582 103 778 33 188 43 030 642 887 8 058 55 830

Total 51 999 081 52 226 464 51 327 907 98.3 9 623 862 17 177 972 4 659 806 2 635 400 11 192 666 3 819 042 2 219 159

R'000 Original

Budget

Adjusted

Budget

Unaudited

Actual % Generated

Detail

Property

rates1

Service charges Transfers

recognised

- operational

Other own

revenue

Other

revenue3

Source: NT Lgdatabase 1. Include Property Rates and Property Rates - penalties and collection charges. 2. Include Service charges for Sanitation revenue, Refuse revenue and Other. 3. Include Rental of facilities and equipment, Interest earned on external investments & outstanding debtors, Dividends received, Fines, Licences and permits, Agency

services and Gains on disposal of PPE.

The total Operating Revenue as per the Original Budget was R52 billion. An upwards adjustment of

R227.4 million was made in the 2015/16 financial year, with the final amount for the Adjustments

Budget being R52.2 billion. As shown in Table 3.1, R51.3 billion of Operating Revenue was

generated which resulted in a revenue shortfall of R898.6 million or 1.7 percent against the

Adjustments Budget. This was due to the under generation of revenue within the respective districts

where eight districts generated less than 100 percent of their Adjustments Budget amounts for

Operating Revenue. Ugu, Amajuba and uThungulu Districts generated revenue in excess of their

Adjustments Budgets. Amajuba District had the highest revenue generation of 130.4 percent followed

by Ugu District at 111.8 percent and uThungulu District at 100.5 percent.

Dannhauser Municipality, Newcastle Municipality, eMadlangeni Municipality and Amajuba District

Municipality all generated more than 100 percent of their Adjustments Budget for Operating Revenue

with actual amounts for Operating Revenue of R178 million (164.8 percent), R1.7 billion

(132.1 percent), R74.9 million (108.9 percent) and R167.4 million (103.2 percent), respectively.

The Operating Revenue generated by Dannhauser Municipality is significantly higher than the

Adjusted Budget amounts for Transfers recognized - operational (193.4 percent), Interest earned-

external investments (164 percent) and Property rates (122.9 percent).

Inaccurate Operating Revenue reported by Vulamehlo Municipality resulted in revenue figures which

were abnormally higher than the Adjusted Budget amounts for Other own revenue (321 896.1

percent), Interest earned – external investments (618.5 percent), Property rates (381 percent) and

Rental of facilities and equipment (313.5 percent). Furthermore uMuziwabantu, Ezinqoleni and

Hibiscus Coast municipalities all generated more than 100 percent of their Adjustments budget which

resulted in the overall over performance for the District.

Nkandla, uMlalazi, uMfolozi and uMhlathuze Municipalities all generated more than 100 percent of

their Adjustments Budget with actual amounts generated for Operating Revenue of R85.3 million

(212.9 percent), R304.5 million (106.5 percent), R123.4 million (102.5 percent) and R2.5 billion

(100.6 percent) respectively. The following revenue sources contributed to the abnormal over

generation of revenue for Nkandla Municipality: Transfers recognized - operational (4 692.4 percent),

26

Property rates-penalties and collection charges (830 percent), and Other own revenue (173.3

percent).

Figure 10 shows Operating Revenue generated per source as a percentage of Total Operating Revenue

generated as at 30 June 2016.

Figure 10

18.7%

33.5%

9.1%

5.1%

21.8%

7.4%

4.3%

0.0%

10.0%

20.0%

30.0%

40.0%

Property rates

Service charges -Electricity

Service charges -

Water

Service charges -

Other

Transfers recognised

Other own revenue

Other revenue

Service charges totaling R24.5 billion made up of Electricity R17.2 billion or 33.5 percent, Water

R4.7 billion or 9.1 percent and Other R2.6 billion or 5.1 percent, contributed the most towards the

total Operating Revenue for the 2015/16 financial year ended 30 June 2016. This was followed by

Transfers recognised-operational amounting to R11.2 billion or 21.8 percent, Property rates

amounting to R9.6 billion or 18.7 percent and Other own revenue amounting to R3.8 billion or 7.4

percent. Other revenue amounted to R2.2 billion or 4.3 percent, is made up of Fines, Rental of

facilities and equipment, Interest earned on external investments and outstanding debtors, Dividends

received, Licences and permits, Agency fees and Gains on disposal of property, plant and equipment.

Of the non-delegated municipalities, eThekwini Metro made the most significant contribution to

Property rates and Service charges R6.3 billion (65.1 percent) and R16 billion (65.3 percent),

respectively.

The non-delegated municipalities are considered significant contributors to the revenue generated

from Service charges as they are densely populated cities with a large number of paying customers.

When excluding the non-delegated municipalities, the Amajuba (R974.4 million or 4 percent) and

iLembe (R875.8 million or 3.6 percent) Districts contributed the most to the total Service charges

revenue generated (refer to Appendix 1).

27

Figure 11 shows a breakdown in terms of Operating Revenue per district and per source for the

2015/16 financial year.

Figure 11

22 20 19 16 11 13 11 8 1217 13

55

21

51

35

23

46

25

5

51 38

18

15

18

7

5

6

3

4

9

8

6

6

8

41

23

43

61

38

59

78

29 38

63

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Property Rates Service Charges Other Revenue Operating grants

The total Operating Revenue for eThekwini Metro, Ugu, uMgungundlovu and iLembe Districts

consisted of the largest portions in respect of Property rates amounting to more than 16 percent of

their total Operating Revenue when compared to the same revenue source across the remaining

districts. Hibiscus Coast Municipality contributed R373.9 million (78.5 percent) of the total Property

rates revenue of R476.5 million for the Ugu District. Msunduzi Municipality contributed

R759.7 million (76.7 percent) of the total Property rates revenue of R990.2 million for the

uMgungundlovu District. KwaDukuza Municipality contributed R323.9 million (84.5 percent) of the

total Property rates revenue of R383.2 million for the iLembe District. (Refer to Appendix 1)

The total Operating Revenue of Umzinyathi, Umkhanyakude, Zululand and uThungulu Districts

consisted of the smallest portions in respect of Property rates at 8.2 percent for Umkhanyakude,

10.9 percent for Umzinyathi, 11.2 percent for Zululand and 11.8 percent for uThungulu Districts. A

similar trend was identified for the Umkhanyakude District in the 2013/14 and 2014/15 financial

years. This can be attributed to the fact that the Umkhanyakude District is largely rural and highly

grant dependent.

Revenue from Service charges constituted 55 percent of the total Operating Revenue for the

eThekwini Metro. The districts that generated the bulk of their revenue from Service charges are

iLembe District at 38.5 percent, Amajuba District at 46.3 percent, uThungulu District at 50.8 percent

and uMgungundlovu District at 51.2 percent. The district that generated the least portion of their

revenue from Service charges was Umkhanyakude District with 4.8 percent. This can be attributed to

the fact the district is mainly made up of rural settlements and infrastructure for the provision of water

and electricity is under developed.

A significant portion of the Operating Revenue for Umzinyathi District (60.6 percent), Zululand

District (59.3 percent), Umkhanyakude District (77.9 percent) and Harry Gwala District (62.8 percent)

is made up of Transfers recognised-operational. This indicates a very high dependency on grants by

these districts. The Operating Revenue of eThekwini Metro constitutes only 8.5 percent of Transfers

28

recognised-operational as the municipality is able to generate the bulk of their revenue from Service

charges due to its predominantly urban area.

Other revenue contributed the least to Operating Revenue generated by the municipalities. eThekwini

Metro’s Operating Revenue consists of 14.9 percent of Other revenue and Ugu District’s Operating

Revenue consists of 17.6 percent of Other revenue. The Operating Revenue of all other districts

consists of less than 10 percent of Other revenue.

Table 3.2 shows the over and under generation of Operating Revenue against the Adjusted Budgets

per district for the 2015/16 financial year.

Table 3.2: Over and Under Generation of Operating Revenue budget per District – 2015/16

1 eThekw ini Metro - - - 1 - - - - 1

2 Ugu 1 - 1 1 1 1 1 1 7

3 uMgungundlov u 1 - 2 5 - - - - 8

4 Uthukela - 1 1 3 - 1 - - 6

5 Umziny athi 1 - 1 2 1 - - - 5

6 Amajuba - - - - 1 1 - 2 4

7 Zululand 3 - 1 2 - - - - 6

8 Umkhany akude 1 - - 4 1 - - - 6

9 uThungulu - - 3 - 2 1 - 1 7

10 iLembe 1 - - 1 2 - - 1 5

11 Harry Gw ala 2 1 1 2 - - - - 6

Totals 10 2 10 21 8 4 1 5 61

Districts

Under On Target (Over)

More than

15%

Between

10% and 15%

Between

5% and 10%

Between 0%

and -5%

Between

0% and 5%

Between 5%

and 10%

Between

10% and 15%

Total No. of

Municipalities

in District

More than

15%

Source: NT Lgdatabase

Of the 61 reporting municipalities:

10 municipalities or 16.4 percent generated revenue in excess of their Adjusted Budget. Of the

10 municipalities, 5 municipalities generated revenue in excess of 15 percent of their Adjusted

Budget.

29 municipalities or 47.5 percent were on target with their Adjusted Budgets, which is within a

range of 95 percent to 105 percent of the Adjusted Budget. It was noted that 5 out of the 8

municipalities in the uMgungundlovu District and 5 out of the 6 municipalities in the

Umkhanyakude District were on target with their revenue generation.

22 municipalities or 36.1 percent generated revenue lower than their Adjusted Budgets and 10 of

these municipalities under generated revenue by more than 15 percent. 4 out of the 6

municipalities in the Zululand and Harry Gwala Districts generated revenue that is lower than

their Adjustments Budget.

The following are some of the reasons for the outcomes noted above:

Non-submission of returns;

Incorrect population of Adjustments Budget returns and monthly returns;

Municipalities not reflecting all the grants received as per the approved Gazettes;

No revenue reported for revenue items budgeted for; and

No budget for revenue items reported.

29

3.2 Operating Expenditure

Table 3.3 shows Original Budget, Adjusted Budget and Unaudited Actuals per item of operating

expenditure and per district for the 2015/16 financial year.

Table 3.3: Operating Expenditure per item and per district – 2015/16

eThekwini 29 436 059 29 532 140 27 876 032 94.4 7 681 226 105 334 422 425 2 013 416 993 582 9 493 502 3 711 137 3 191 544 263 868

Ugu 2 198 384 2 226 853 2 112 211 94.9 822 781 74 820 – 261 433 6 533 157 920 73 132 592 100 123 491

uMgungundlovu 5 440 418 5 653 536 5 218 723 92.3 1 311 486 82 765 5 960 529 351 77 520 2 015 873 287 974 706 442 201 352

Uthukela 1 988 059 1 977 244 1 642 837 83.1 513 585 48 198 97 691 79 989 7 783 275 593 60 859 473 871 85 267

Umzinyathi 1 214 354 1 399 512 1 122 445 80.2 329 782 32 593 47 021 54 220 3 531 133 691 113 215 304 422 103 972

Amajuba 2 150 960 2 230 691 2 552 988 114.4 617 991 31 867 333 265 298 648 54 260 467 943 93 561 493 417 162 037

Zululand 1 830 279 1 831 460 1 648 653 90.0 524 672 56 116 15 323 124 798 6 417 257 278 143 305 458 183 62 560

Umkhanyakude 954 899 1 036 241 717 109 69.2 263 459 39 983 10 900 21 553 623 51 629 57 877 212 938 58 147

uThungulu 3 877 393 3 963 969 3 990 765 100.7 917 181 74 833 28 641 409 804 73 098 1 223 848 307 352 881 205 74 803

iLembe 2 272 309 2 342 343 2 145 680 91.6 562 034 54 878 48 985 166 261 34 865 560 472 136 855 381 341 199 988

Harry Gwala 1 183 561 1 238 645 1 195 457 96.5 353 271 41 041 14 579 204 075 4 849 85 895 85 515 343 824 62 407

Total 52 546 675 53 432 634 50 222 899 94.0 13 897 469 642 427 1 024 788 4 163 547 1 263 062 14 723 643 5 070 782 8 039 287 1 397 893

Other1

R'000 Original

Budget

Adjusted

Budget

Unaudited

Actual

%

Spent

Detail

Employee

related

costs

Remun. of

councillors

Debt

impairment

Depreciation

and asset

impairment

Finance

charges

Bulk

purchases

Contracted

services

Other

expenditure

Source: NT Lgdatabase 1 Include Other Materials, Transfers and Loss on disposal of PPE

The total Operating Expenditure budget for all the municipalities in the province was adjusted

upwards by R886 million from R52.5 billion to R53.4 billion during the 2015/16 Adjustments Budget

process. The consolidated Operating Expenditure performance of the districts reflects spending of

R50.2 billion or 94 percent against the Adjustments Budget of R53.4 billion. The Operating

Expenditure Adjusted Budget has been under spent by R3.2 billion or 6 percent. The under

expenditure has decreased in comparison to the under spending of R3.3 billion or 6.8 percent reported

in the previous financial year.

Except for the Amajuba and uThungulu Districts, the expenditure on the operating budgets for all the

districts were within their budgets at a district level. However, it should be noted that certain

municipalities within the various districts over spent on their Adjusted Operating Expenditure

Budgets, while other municipalities under spent against their Adjusted Operating Expenditure

Budgets. This had an impact on the Operating Expenditure performance of their respective districts.

Municipalities that reflected over spending against their Adjustments Budgets include; Vulamehlo

Municipality (222.4 percent) in the Ugu District, Mkhambathini Municipality (101.6 percent) in the

uMgungundlovu District, Imbabazane Municipality (102.2 percent) in the Uthukela District, Amajuba

District Municipality (123.8 percent) and Newcastle Municipality (115.8 percent) in the Amajuba

District, Zululand District Municipality (112.7 percent) and Abaqulusi Municipality (100.6 percent) in

the Zululand District, Nkandla (125.3 percent), uMfolozi (106.1 percent) and uMhlathuze

(102.1 percent) Municipalities in the uThungulu District, Mandeni Municipality (106.2 percent) in the

iLembe District and finally, Ingwe (109.1 percent) and Umzimkhulu (103.7 percent) Municipalities in

the Harry Gwala District (refer to Appendix 2). Detailed explanations of the over expenditure

recorded by these municipalities are provided in Chapter 4 under the relevant municipal budget

performance analysis.

As shown in Table 3.3, Amajuba District (114.4 percent), uThungulu District (100.7 percent), and

Harry Gwala District (96.5 percent) recorded the most expenditure against their Adjustments Budgets,

while the rest of the districts had spent between 94.9 and 69.2 percent of their respective Operating

Expenditure budgets. Umkhanyakude District spent the least at 69.2 percent of their Adjustments

Budget due to Umkhanyakude District, Jozini and Hlabisa Municipalities spending less than 63

percent of their budgets (refer to Appendix 2).

30

Figure 12 shows the breakdown of Operating Expenditure for the 2015/16 financial year.

Figure 12

27.7%

1.3%2.0%

8.3%

2.5%

29.3%

10.1%

18.8%

0%

5%

10%

15%

20%

25%

30%

35%

Employee related

costs

Remun. of councillors

Debt Impairment

Depreciation & asset

impairment

Finance Charges

Bulkpurchases

Contracted services

Other Expenditure

Bulk purchases of R14.7 billion or 29.3 percent comprised the largest item of the Operating

Expenditure. This was followed by Employee related costs of R13.9 billion or 27.7 percent and Other

expenditure of R9.4 billion or 18.8 percent. Remuneration of councillors of R642.4 million or

1.3 percent represents the lowest contributor to Operating Expenditure as shown in Figure 12. It is

expected that municipalities would have spent a major portion of their budgets on Bulk purchases.

In many districts in the province, Water and Sanitation services are provided by the district

municipalities while the Electricity service is provided directly by Eskom. Hence, it was noted that

27 local municipalities (refer to Appendix 2) did not report on Bulk purchases for water and

electricity.

Of the total of 61 municipalities in the province, 35 municipalities or 57.4 percent did not report on

Debt impairment. However, this represents a slight increase in compliance as compared to the 2014/15

financial year where 36 municipalities or 59 percent had not reported on Debt impairment. The reason

for municipalities’ failure to report on their Debt impairment expense is due to the fact that

municipalities tend to submit preliminary figures in their Section 71 returns prior to effecting all

necessary year-end adjustments for the submission of the Annual Financial Statements (hereafter

referred to as AFS). In light of the uncertainty in the recoverability of municipal debt, municipalities

that provide services should review the recoverability of the debtors balance and adequately provide

for Debt impairment continuously throughout the financial year.

It was also noted that 17 municipalities or 27.9 percent did not report on Depreciation and asset

impairment, contributing to an incorrect status of the performance against this item. This also

represents an improvement in compliance as 26 of the 61 municipalities or 42.6 percent had not

reported their Depreciation and asset impairment in the prior year. Similar to Debt impairment,

municipalities are not reporting their Depreciation and asset impairment due to the fact that

municipalities tend to submit preliminary figures in their Section 71 returns prior to effecting all

necessary year-end adjustments.

31

Figure 13 shows a breakdown of Operating Expenditure per district and per item of expenditure for

the 2015/16 financial year.

Figure 13

2839

2531 29

2432 37

23 26 30

34 7 3917

12 18

16 7 31 267

2550

31

48

4954 44 48

39 41

56

13 3 6 4

10 4

9 8 8 6 7

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Employee related costs Bulk purchases Other expenditure Contracted services

The uMgungundlovu District (38.6 percent), eThekwini Metro (34.1 percent) and uThungulu District

(30.7 percent) spent the highest percentage for Bulk purchases as compared to the other districts. This

was due to Msunduzi Municipality spending R1.8 billion or 89.3 percent (uMgungundlovu District)

and uMhlathuze Municipality spending R1.1 billion or 90.8 percent (uThungulu District) of the

district total for Bulk purchases. This influenced the expenditure under this item in their respective

districts. It is not surprising that these districts reflected the highest expenditure on Bulk purchases due

to the fact that uMgungundlovu and uThungulu Districts host secondary cities (Msunduzi and

uMhlathuze), while eThekwini is a Metro. They provide services such as Water and Electricity to

densely populated areas in the province.

At a consolidated district level, municipalities spent between 23 percent and 39 percent of their

budgets on Employee related costs. Districts with the largest portions of Employee related costs are

Ugu (39 percent), Umkhanyakude (36.7 percent), Zululand (31.8 percent) and Uthukela (31.3 percent)

Districts. ILembe (26.2 percent), uMgungundlovu (25.1 percent), Amajuba (24.2 percent) and

uThungulu (23 percent) Districts spent the smallest portions on Employee related costs when

compared to the other districts.

Other expenditure constituted the largest portion of Operating Expenditure for the majority of the

districts, ranging from 56.1 percent for Harry Gwala District and 53.8 percent for Amajuba District to

50.1 percent for Ugu District and 48.6 percent for Umzinyathi District. Other expenditure contributed

25.1 percent of the Operating Expenditure of eThekwini Metro, with the largest portion of the metro’s

total operating expenditure being spent against Bulk purchases (34.1 percent).

32

Table 3.4 shows a summary of the districts’ spending against the Adjusted Budgets for Operating

Expenditure by district municipalities for the 2015/16 financial year.

Table 3.4: Over and Under Spending against the Adjusted Budgets for Operating Expenditure by district

municipalities for the 2015/16 financial year

1 eThekw ini Metro - - 1 - - - - - 1

2 Ugu 4 - 2 - - - - 1 7

3 uMgungundlov u 1 1 3 2 1 - - - 8

4 Uthukela 4 - 1 - 1 - - - 6

5 Umziny athi 2 2 1 - - - - - 5

6 Amajuba 1 - - 1 - - - 2 4

7 Zululand 2 - 2 - 1 - 1 - 6

8 Umkhany akude 4 - 1 1 - - - - 6

9 uThungulu 1 - 1 2 1 1 - 1 7

10 iLembe - 2 2 - - 1 - - 5

11 Harry Gw ala - 1 2 1 1 1 - - 6

Totals 19 6 16 7 5 3 1 4 61

Districts

Total No. of

Municipalities

in District

More than

15%

Between

10% and 15%

Between

5% and 10%

Between 0%

and -5%

Between

0% and 5%

Between 5%

and 10%

Between

10% and 15%

More than

15%



Of the 61 reporting municipalities:

41 municipalities or 67.2 percent under spent their Adjusted Budgets for Operating Expenditure.

19 of these municipalities or 31.1 percent under spent their budgets by more than 15 percent.

12 or 19.7 percent of the municipalities were on target, which is between 95 percent (-5 percent)

and 105 percent (+5 percent) expenditure against their Adjustments Budgets. 3 out of the 7

municipalities in the uMgungundlovu and uThungulu Districts were on target with the spending

against their Adjustments Budgets.

8 municipalities or 13.1 percent recorded over expenditure against their Adjusted Operating

Expenditure Budgets. 4 of these municipalities overspent their Adjustments Budgets by more than

15 percent.

3.3 Capital Expenditure

At the end of the 2015/16 financial year, the aggregated municipal adjusted capital budget for the

61 municipalities in KwaZulu-Natal was R14.1 billion.

The total capital expenditure aggregated for all municipalities in the province amounted to R11.8

billion (83.4 percent) of the total Adjusted Budget. This equates to an under spending of R2.3 billion

for the 2015/16 financial year. This is a regression when compared to the under spending of R1.4

billion in the 2014/15 financial year. Capital expenditure increased significantly towards the end of the

2015/16 financial year from R7.4 billion at the end of Quarter 3 to R11.8 billion at the end of Quarter

4. The trend indicates that municipalities usually spend the bulk of their capital expenditure in the

fourth quarter of the financial year which is probably due to poor planning.

Table 3.5 shows the Original Budget, Adjusted Budget and Unaudited Actual per standard

classification per district for the 2015/16 financial year.

33

Table 3.5: Capital Expenditure per item and per district –2015/16

Housing Health Other2 Road Transport Other

3 Electricity Water and Waste

Water Mgt.

Waste Mgt

eThekwini 6 046 926 6 038 935 5 100 987 84.5 251 002 720 164 16 177 164 724 2 216 145 136 502 423 978 1 014 598 73 542 84 154

Ugu 789 302 844 487 653 774 77.4 134 236 311 49 77 766 91 631 21 428 932 319 266 7 905 250

uMgungundlovu 1 104 169 1 170 787 1 040 717 88.9 72 049 5 864 – 75 476 191 612 41 987 100 574 547 263 3 534 2 357

Uthukela 691 893 677 906 566 223 83.5 7 985 456 126 44 559 199 037 86 119 27 906 200 036 – –

Umzinyathi 749 890 773 230 637 413 82.4 42 463 – – 44 943 121 287 1 999 52 282 369 180 5 258 –

Amajuba 538 457 532 869 408 269 76.6 119 248 3 645 – 26 830 95 491 15 427 33 660 113 969 (0) –

Zululand 765 968 789 577 793 862 100.5 4 363 – – 21 405 124 126 35 827 104 265 502 175 1 702 –

Umkhanyakude 479 777 484 748 384 407 79.3 3 483 – – 11 856 85 308 51 618 339 227 500 4 302 –

uThungulu 1 201 178 1 233 927 859 673 69.7 42 178 86 819 347 71 963 85 259 64 591 45 420 460 192 2 128 777

iLembe 983 200 974 066 899 907 92.4 45 893 894 – 23 554 260 702 26 345 91 400 450 957 162 –

Harry Gwala 592 492 612 560 444 419 72.6 7 999 – – 20 420 84 028 130 134 2 073 199 766 – –

Total 13 943 250 14 133 089 11 789 650 83.4 730 899 818 152 16 699 583 497 3 554 626 611 976 882 829 4 404 901 98 533 87 538

Trading Services

OtherR'000

Original

Budget

Adjusted

Budget Unaudited Actual

%

Spent

Detail

Governance and

Admin.1

Community and Public Safety Economic and Environmental

Services

Source: NT Lgdatabase 1 Include Expenditure & Council, Budget & Treasury Office and Corporate Services. 2 Include Community & Social Services, Sports and Recreation and Public Safety. 3 Include Planning and Development and Environmental Protection.

Zululand District recorded R793.9 million of capital expenditure (100.5 percent) and has thus

exceeded their Adjusted Budget for capital expenditure. eThekwini Metro and the other nine districts

all recorded poor levels of capital expenditure as they all achieved less than 95 percent. Capital

expenditure is directly linked to service delivery and under spending on capital expenditure impacts

on service delivery.

The bulk of capital expenditure amounting to R4.4 billion was spent on Water and Waste Water

Management capital projects, which constitutes 37.4 percent of the total Unaudited Actual expenditure

for the 2015/16 financial year. The second highest category of capital expenditure was on Road

Transport with R3.6 billion (30.2 percent), followed by Electricity amounting to R882.8 million

(7.5 percent) and Housing amounting to R818.2 million (6.9 percent).

The lowest spending for the 2015/16 financial year was on Health amounting to R16.7 million

(0.1 percent), Other amounting to R87.5 million (0.7 percent), Waste Management amounting to

R98.5 million (0.8 percent), Community and Public Safety – Other amounting to R583.5 million

(4.9 percent), Economic and Environmental Services – Other amounting to R612 million (5.2 percent)

and Governance and administration amounting to R730.9 million (6.2 percent).

None of the municipalities under Umzinyathi, Zululand, Umkhanyakude and Harry Gwala Districts

budgeted and spent on Housing as the function is performed by the Department of Human

Settlements. Msunduzi Municipality significantly exceeded its Housing budgeted expenditure with

total expenditure against the budget amounting to 259.8 percent. eThekwini Metro and six

municipalities that budgeted for Housing underperformed against their Adjusted Budgets, namely,

uMhlathuze (86.5 percent), Umdoni (84 percent), KwaDukuza (77.7 percent), eThekwini Metro (59.1

percent), Newcastle (53.9 percent), Hibiscus Coast (51.4 percent) and Emnambithi/Ladysmith (22.8

percent).

The expenditure on Housing was largely related to the municipalities performing the function as an

agent on behalf of the Department of Human Settlements. Agency functions include overseeing the

work of the service providers appointed by the Department of Human Settlements, inspecting the

completed units to verify that the service providers complied with the tender specifications and the

transfer of payments to service providers upon instruction from the Department of Human

Settlements. Where no expenditure was reflected, this does not imply that no housing projects were

undertaken in these districts as the houses are transferred to the occupants upon completion and the

municipalities therefore do not reflect any capital expenditure against these projects.

The municipalities delivering Health services that under performed in the 2015/16 financial year were

eThekwini Metro (55.8 percent), Uthukela (53.4 percent), uThungulu (50 percent) and uMlalazi

(35.6 percent) whereas Hibiscus Coast Municipality incurred capital expenditure of R49 351 for

Health services which was 93.1 percent of their budget for Health services.

34

Roads Transport ranked second in terms of capital expenditure in the 2015/16 financial year. Zululand

and Umkhanyakude Districts reported over expenditure against their Adjusted Budget for Road

Transport of 113.7 percent and 198.4 percent respectively. The uMgungundlovu and uThungulu

Districts spent the least of their Adjusted Budgets for Road Transport reporting expenditure rates of

47.3 percent and 55.3 percent respectively.

The Uthukela and uThungulu Districts reported satisfactory levels of capital expenditure for

Electricity against their Adjusted Budgets amounting to 84.1 percent and 97.8 percent respectively.

Zululand District reported over expenditure of 145.4 percent against their Adjusted Budget. The

remaining districts reported poor levels of capital expenditure for Electricity, namely Ugu (23.5

percent), Harry Gwala (26.9 percent), Amajuba (67.6 percent), Umzinyathi (69 percent),

uMgungundlovu (72.9 percent) and iLembe (73.6 percent) Districts and eThekwini Metro (70.3

percent). Umkhanyakude District spent only 1.7 percent or R252 000 of the R15 million included in

the Adjustments Budget of Jozini Municipality.

The districts in the province performed well, reporting an average spending of 87.2 percent for Water

and Waste Water Management despite the severe drought that affected the entire province. The

uMgungundlovu and iLembe Districts overspent their Water and Waste Water Management Adjusted

Budgets by 37.8 percent and 7.5 percent respectively while the remaining districts reported

satisfactory spending against their Adjusted Budgets, namely, Ugu (82.8 percent), Uthukela (84.3

percent), Umzinyathi (85.1 percent), Amajuba (81.3 percent), Zululand (95.5 percent) Umkhanyakude

(91.2 percent), uThungulu (72.1 percent) and Harry Gwala (80.3 percent) Districts and eThekwini

Metro (73.8 percent).

The over spending of the Adjusted Budgets for capital projects by various municipalities can be

attributed to municipalities understating their adjusted capital budgets by erroneously reflecting

incorrect figures or not incorporating additional capital funding in their adjusted capital budgets.

Therefore, the reported actual capital expenditure performance is questionable in these instances.

On the other hand, under spending of the Adjusted Budget for capital can be attributed to poor

planning by certain municipalities; over budgeting for capital projects; poor management of

procurement processes; non-submission of monthly capital expenditure returns for the 2015/16

financial year and delays in spending due to disputes with service providers. Furthermore,

municipalities are in the process of finalising their 2015/16 Annual Financial Statements (AFS) which

includes the updating and balancing of their asset registers with the latest available financial

information and factoring in accounting journal entries such as accruals. Thus, the year-end

adjustments to the capital expenditure figures would have not been included in the Section 71 reports

submitted to the Local Government Database. This could result in final figures being significantly

different from the ones reported in the MFMA Section 71 reports. The low spending on capital

expenditure projects will delay the delivery of infrastructure for basic services and exacerbate the

current backlogs.

Most municipalities indicated that the unspent grant funding was committed to specific projects.

Provincial Treasury Circular TC/RM 3 of 2016/17 was issued to remind the municipalities of the

31 August 2016 deadline for the submission of rollover applications/motivations to National Treasury

to retain unspent grant funding, as required in terms of the Division of Revenue Act (DoRA).

In terms of the provisions of the 2015 DoRA Section 22, any conditional allocation that is not spent at

the end of a municipal financial year reverts to the National Revenue Fund, unless the relevant

receiving officer can prove to the satisfaction of National Treasury that the unspent allocation is

committed to identifiable projects. Therefore, it is imperative that municipalities adopt appropriate

monitoring systems and take corrective steps where under spending is recorded.

35

Figure 14 shows a breakdown in terms of Capital expenditure per district and by standard

classification for the 2015/16 financial year.

Figure 14

5

21

71

7

29

1 15 5 2

18

12

8

8

7

7

3 3

19

35

46 17

22

50

19

27

20

36

17

32

48

30

50

63

40

67

36

77

60 59 60

45

2 0 0 0 0 0 0 0 0 0 0

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Other Trading Services Economic and Environmental Services Community and Public Safety Governance and Admin.

The largest portion of capital spending by standard classification was in Trading services with

R5.4 billion or 45.7 percent of total capital expenditure. All districts with the exception of the

Uthukela and Harry Gwala Districts spent the largest portion of their capital expenditure on Trading

services. The districts with the highest spending on Trading services were Zululand and Umzinyathi

with 77 percent and 67 percent respectively.

The second highest expenditure was for Economic and Environmental Services which reported capital

spending per standard classification of R4.2 billion or 35.3 percent of total capital expenditure.

Uthukela District (50 percent), Harry Gwala District (48 percent) and eThekwini Metro (46 percent)

spent the bulk of their capital expenditure on Economic and Environmental Services.

The third largest portion of spending per standard classification, R1.4 billion or 12 percent of total

capital expenditure was on Community and Public Safety with uThungulu District and eThekwini

Metro municipalities spending 19 percent and 18 percent of their capital expenditure on this

classification respectively.

Lastly, the lowest portion of spending per standard classification, R730.9 million or 6.2 percent of

total capital expenditure was on Governance and Administration. Amajuba District spent 29 percent

of their total expenditure on Governance and Administration while Ugu District spent 21 percent.

36

Table 3.6 shows the range of over and under spending against the adjusted capital budgets by districts

for the 2015/16 financial year.

Table 3.6: Over and Under spending against the adjusted capital budgets by districts for the 2015/16

financial year

1 eThekw ini Metro 1 - - - - - - - 1

2 Ugu 6 - - 1 - - - - 7

3 uMgungundlov u 5 1 - 1 - - - 1 8

4 Uthukela 3 - 1 1 1 - - - 6

5 Umziny athi 3 2 - - - - - - 5

6 Amajuba 2 2 - - - - - - 4

7 Zululand 1 - - 3 - 1 - 1 6

8 Umkhany akude 3 - 1 1 - - - 1 6

9 uThungulu 4 - - - - 2 - 1 7

10 iLembe 2 1 - - 2 - - - 5

11 Harry Gw ala 4 1 - - - - - 1 6

Totals 34 7 2 7 3 3 0 5 61

Districts

Total No. of

Municipalities

in District

More than

15%

Between

10% and 15%

Between

5% and 10%

Between 0%

and -5%

Between

0% and 5%

Between 5%

and 10%

Between

10% and 15%

More than

15%



Under-spending on capital budgets is a common and concerning trend among municipalities. Of the

61 municipalities:

43 municipalities or 70 percent have under-spent their Adjusted Budgets by at least 5 and more

percent. This is an improvement from the 46 municipalities which reported significant under-

expenditure in the 2014/15 financial year;

9 municipalities or 15 percent were on target as they achieved a spending that was between 95 and

105 percent as at the end of the 2015/16 financial year; and

the remaining 9 municipalities or 15 percent have over spent their adjusted capital budgets by 5

percent and more.

The low spending on capital projects will impact negatively on the service delivery by the

municipalities. Moreover, renewal of municipal infrastructure to ensure reliability and quality of

municipal services to support economic growth within their jurisdictions will be affected.

3.4 Capital and Operating Expenditure Comparatives

Analysing capital expenditure in relation to operating expenditure provides an insight into expenditure

trends at municipalities.

Figure 15 shows the comparatives of capital against operating expenditure for the reporting

municipalities, aggregated at a district level. The graph reveals district performance against the budget

and thus reflects capital expenditure as a percentage of the adjusted capital budget together with

operating expenditure as a percentage of the adjusted operating expenditure budget for the 2015/16

financial year.

37

Figure 15

84.5%77.4%

88.9%

83.5%82.4%

76.6%

100.5%

79.3%

69.7%

92.4%

72.6%

94.4% 94.9% 92.3%

83.1% 80.2%

114.4%

90.0%

69.2%

100.7%

91.6%

96.5%

-

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

% Capital Spent % Operating Spent

The variance between the average capital expenditure against capital budget; and average operating

expenditure against operating budget is 9 percent at an aggregate level for the 2015/16 financial year.

This compares unfavorably to the variance of 8 percent in the 2014/15 financial year, which implies

that the gap between capital expenditure and operating expenditure has widened from 2014/15 to

2015/16. Only the Uthukela, Umzinyathi, Zululand, Umkhanyakude and iLembe District reported

capital expenditure performance against adjusted capital budget that exceeded their operating

expenditure performance against the adjusted operating budget. The remaining districts have spent

significantly less against their capital expenditure budget in relation to their operating expenditure

budget for 2015/16 with the largest differences being noted in the Amajuba (37.8 percent), uThungulu

(31 percent), Harry Gwala (24 percent) and Ugu Districts (17.4 percent). The least difference was

noted in the Uthukela District with 0.4 percent.

The average capital expenditure across districts against their respective adjusted capital budgets was

82.5 percent for the 2015/16 financial year, which is an improvement when compared to the district

average of 80.3 percent in 2014/15. The Zululand (100.5 percent), iLembe (92.4 percent),

uMgungundlovu (88.9 percent), Uthukela (83.5 percent) Districts and eThekwini Metro (84.5 percent)

reported to have spent more than the district capital expenditure average at the end of the financial

year, while the remainder of the districts reported to have spent less than the average of 82.5 percent.

The average operating expenditure against the respective adjusted operating budgets across all

districts was 91.6 percent for the 2015/16 financial year and represents an increase of 3 percent from

the average of 88.6 percent for the 2014/15 financial year. The eThekwini Metro (94.4 percent) and

the Amajuba (114.4 percent), uThungulu (100.7 percent), Harry Gwala (96.5 percent), Ugu (94.9

percent), uMgungundlovu (92.3 percent) and iLembe (91.6 percent) Districts spent more than the

district average, whilst the other five districts spent less than the district average at the end of the

financial year. Significant under-spending against their operating expenditure budgets could be

attributed to inaccurate reporting on non-cash items such as Depreciation and asset impairment and

Debt impairment.

38

3.5 Debt Management

Debtors by age analysis

Table 3.7 shows debtors age analysis per district as at 30 June 2016.

Table 3.7: Debtor Age Analysis per district (Total)

Total % Total % Total % Total %

eThekwini866 336

14.7 386 329

6.6 230 354

3.9 4 410 793

74.8 5 893 812

Ugu47 266

8.9 19 161

3.6 20 587

3.9 443 840

83.6 530 854

uMgungundlovu336 677

12.8 170 996

6.5 83 814

3.2 2 028 952

77.4 2 620 439

Uthukela30 248

3.3 26 716

2.9 22 948

2.5 834 057

91.3 913 969

Umzinyathi23 900

5.3 12 677

2.8 9 203

2.0 403 479

89.8 449 259

Amajuba69 133

7.4 37 800

4.0 28 466

3.0 802 412

85.6 937 811

Zululand29 807

6.9 11 905

2.8 74 042

17.1 316 544

73.2 432 298

Umkhanyakude9 027

2.2 12 054

2.9 5 930

1.4 382 619

93.4 409 630

uThungulu248 427

46.3 18 877

3.5 11 816

2.2 257 094

47.9 536 214

iLembe46 288

9.0 24 105

4.7 22 064

4.3 420 499

82.0 512 956

Harry Gwala13 686

5.5 10 176

4.1 6 990

2.8 216 078

87.5 246 929

Total 1 720 794 12.8 730 796 5.4 516 213 3.8 10 516 367 78.0 13 484 170

R'0000 - 30 Days 31 - 60 Days 61- 90 Days Over 90 Days

Total


The total debt owed to municipalities at the end of the fourth quarter of the 2015/16 financial year was

R13.5 billion and represents an increase of only 2 percent from an amount of R13.2 billion in the


eThekwini Metro had the largest amount of outstanding debt (R5.9 billion), followed by the

uMgungundlovu District (R2.6 billion) and the Amajuba District (R938 million). The Harry Gwala

District recorded the lowest amount of outstanding debt (R246.9 million).

Figure 16 further illustrates the debtors age analysis as at 30 June 2016.

Figure 16

12.8%

5.4%

3.8%

78.0%

0 - 30 Days

30 - 60 Days

60 - 90 Days

Over 90 Days

At the end of 2015/16 financial year a substantial amount of debt, R10.5 billion (78 percent) was

outstanding in the Over 90 Days category, indicating an increase of R8.9 million debt outstanding in

the same category since 2014/15. In the 2015/16 financial year, the debtors per age category were as

follows: 0-30 Days R1.7 billion (12.8 percent), 31-60 Days R730.8 million (5.4 percent), and 61-90

Days R516.2 million (3.8 percent).

39

The majority of the Districts had more than 70 percent of their debt outstanding in the Over 90 Days

category with the exception of uThungulu District that only had 47.9 percent of debt outstanding in

this category. It should be noted that the high level of debt across districts is influenced by a number

of factors such as the social-economic environment, economic factors including high level of

indigents, state social grants dependency and the unemployment rate.

Municipalities need to implement effective debt collection strategies and policies in order to improve

their collection rate and thus ensuring that debt does not become irrecoverable. All municipalities in

the province reported on their debt with the exception of the following municipalities: Mpofana,

Ulundi, Hlabisa, Ntambanana and Amajuba District, which represents a regression from the 2014/15

financial year when all municipalities reported on their outstanding debt.

Debtors by Customer Group

Table 3.8 shows debtors by customer group per district as at 30 June 2016.

Table 3.8: Debtors by Customer Group (Total)


eThekwini Metro208 812

3.52 480 105

42.13 042 501

51.6162 394

2.85 893 812

Ugu30 532

5.8106 226

20.0383 733

72.310 363

2.0530 854

uMgungundlovu166 076

6.3467 080

17.81 699 628

64.9287 655

11.02 620 439

Uthukela137 998

15.159 216

6.5677 414

74.139 341

4.3913 969

Umzinyathi43 884

9.844 315

9.9344 142

76.616 918

3.8449 259

Amajuba20 448

2.2101 866

10.9775 062

82.640 434

4.3937 811

Zululand46 725

10.833 287

7.7328 017

75.924 269

5.6432 298

Umkhanyakude47 931

11.775 662

18.5224 999

54.961 038

14.9409 630

uThungulu33 707

6.3265 464

49.5195 165

36.441 878

7.8536 214

iLembe27 738

5.496 390

18.8355 517

69.333 311

6.5512 956

Harry Gwala26 708

10.845 814

18.6163 045

66.011 362

4.6246 929

Total790 558 5.9 3 775 425 28.0 8 189 224 60.7 728 963 5.4 13 484 170

R'000Organs of State Commercial Household Other

Total


Figure 17 shows municipal debt owed by Customer Group as at 30 June 2016.

Figure 17

5.9%

28.0%

60.7%

5.4%Organs of State

Commercial

Household

Other

The largest portion of outstanding debtors in the province, as at the end of June 2016, is owed by the

Household customer group amounting to R8.2 billion (60.7 percent). This customer group is followed

by debtors classified as Commercial: R3.8 billion (28 percent), Organs of State: R790.6 million

(5.9 percent) and Other: R729 million (5.4 percent).

40

The Household debt has slightly increased by 7.8 percent from R7 billion (52.9 percent) in 2014/15 to

R8.2 billion (60.7 percent) in 2015/16, however, this amount may not be the true reflection due to

several municipalities not reporting debtors for Month 12 in the 2015/16 financial year, namely

Mpofana, Amajuba District, Ulundi, Hlabisa and Ntambanana. eThekwini Metro (R3 billion),

uMgungundlovu District (R1.7 billion) and Amajuba District (R775.1 million) Municipalities had

significant amounts of debt owed to them by the Household category.

eThekwini Metro contributed the greatest amount to debtors in the Commercial category with R2.5

billion or 65.7 percent of the total Commercial debtors of R3.8 billion. Other significant contributors

to this category were uMgungundlovu and uThungulu Districts amounting to R467.1 million and

R265.5 million, respectively.

With the exception of the uThungulu District, all districts within the province had the bulk of their

debtors reflected against the Household customer group. Amajuba, Umzinyathi and Zululand Districts

recorded more than 75 percent of their debtors outstanding by this customer group.

It was noted that the Other customer group has reduced considerably from 2014/15 (R1.8 billion) to

the 2015/16 financial year (R728.9 million), contributing 5.4 percent of the total debt outstanding,

which is an indication that municipalities have attempted to classify debt correctly under the relevant

customer group. uMgungundlovu District classified R287.7 million or 11 percent of the district’s total

debt as Other and contributed the greatest amount to total debt classified as Other. Significant

contributors to debt in the Other category were eThekwini Metro (R162.4 million) and

Umkhanyakude District (R61 million).

3.6 Bulk Services

The Municipal Finance Management Act (MFMA) promotes a co-operative approach to fiscal and

financial management across government. In the spirit of co-operative governance, Section 41(2) of

the MFMA states that, each organ of the state providing bulk resources to a municipality must within

15 days after the end of each month furnish the National Treasury with a written statement setting out,

for each municipality or for each municipal entity providing municipal services on behalf of such

municipalities:

(a) the amount to be paid by the municipality or municipal entity for such bulk resources for that

month and for the financial year up to the end of that month;

(b) the arrears owing and the profile of such arrears; and

(c) any action taken by that organ of the state to recover arrears.

The organs of state providing bulk services in the Province of KwaZulu-Natal are Umgeni Water

Board for the provision of bulk water services and Eskom for the provision of bulk electricity.

The amounts shown in Table 3.9 to Table 3.13 are based on Umgeni Water Board and Eskom’s

MFMA Section 41 reports as at 30 June 2016 that were submitted to National Treasury. The

municipalities are required to pay for their bulk purchases from Umgeni Water Board and Eskom

within 30 days after receiving the invoice as per Section 65(e) of the MFMA.

41

3.6.1 Sale of Bulk Water

Table 3.9 shows the sale of bulk water to municipalities by Umgeni Water Board for the month of

June 2016 and actual year to date expenditure.

Table 3.9: Sale of bulk water to municipalities

Name of municipality

June 2016 YTD

eThekwini Metro 138 697 1 789 071

Msunduzi 33 337 486 222

uMgungundlovu DM 9 096 110 642

Ugu DM 5 630 64 387

iLembe DM 5 286 62 935

Harry Gwala DM 648 8 486

Total 192 694 2 521 743

Sale of Bulk Water (R'000)

Source: Umgeni Water Board MFMA Section 41 Report

Sale of bulk water to the municipalities for the year under review amounted to R2.5 billion, which is

an increase of R100 million when compared to June 2015. The increase was attributed to increases in

both volume and price. eThekwini Metro (R1.8 billion) and Msunduzi Municipality (R486.2 million)

were the largest purchasers of bulk water at the end of the financial year, contributing 70.9 percent and

19.3 percent of total sales, respectively. This was mainly due to the fact that they provide water to the

most densely populated regions in the province. Harry Gwala District Municipality purchased the least

amount of water (R8.5 million or 0.3 percent).

Table 3.10 shows the capital unit charge incurred by municipalities for the month of June 2016 and

actual year to date expenditure.

Table 3.10: Capital Unit Charge


June 2016 YTD

eThekwini Metro 12 979 167 421

Msunduzi 2 385 36 519

uMgungundlovu DM 833 10 138

Ugu DM 516 5 897

iLembe DM 484 5 633

Harry Gwala DM 23 345

Total 17 220 225 953

Capital Unit Charge (R'000)


The Capital Unit Charge is based on volume of water sold to municipalities on behalf of the

Department of Water and Sanitation, using a tariff which is provided by the department. Umgeni

Water Board invoices and collects these amounts from the municipalities on behalf of the Department.

The Capital Charge Unit to the municipalities for the year under review amounted to R226 million.

eThekwini Metro (R167.4 million) and Msunduzi Municipality (R36.5 million) incurred the highest

Capital Unit Charge at the end of the financial year, contributing 74.1 percent and 16.2 percent of

total expenditure, respectively. Harry Gwala District Municipality incurred the least amount of the

total Capital Unit Charge (R345 000 or 0.2 percent).

42

Age Profile of Municipal Umgeni Water Board Debtors

Table 3.11 shows the age analysis of the Umgeni Water Board MFMA (Bulk water) Section 41 report

as at 30 June 2016 that was submitted to National Treasury:

Table 3.11: Age analysis of municipal Umgeni Water Board debtors (Bulk water)


R'000

eThekwini Metro 138 697 – – – – 138 697

Msunduzi 33 337 – – – – 33 337

uMgungundlovu DM 9 096 – – – – 9 096

Ugu DM 5 630 – – – – 5 630

iLembe DM 5 286 5 596 – – – 10 881

Harry Gwala DM 648 671 – – – 1 318

Total 192 694 6 267 – – – 198 960

120 Days + TotalCurrent 30 Days 60 Days 90 Days


As per the MFMA Section 41 report submitted to National Treasury by the Umgeni Water Board,

R199 million was owed to the Umgeni Water Board as at 30 June 2016. With the exception of the

iLembe District and Harry Gwala District Municipalities, all municipalities as shown in Table 3.11

ensured that their debt for bulk water does not fall into arrears.

Harry Gwala District Municipality paid a portion toward their debt in July, however they still have

an amount owing for 30 days and longer. iLembe District Municipality also made a payment toward

their debt in July, however there is still an amount owing for 30 days.

Table 3.12 shows the age analysis of the Umgeni Water Board MFMA (Capital Unit Charge) Section

41 report as at 30 June 2016 that was submitted to National Treasury:

Table 3.12: Age analysis of municipal Umgeni Water Board debtors (Capital Unit Charge)


R'000

eThekw ini Metro 12 979 – – – – 12 979

Msunduzi 2 385 – – – – 2 385

uMgungundlov u DM 833 – – – – 833

Ugu DM 516 – – – – 516

iLembe DM 484 513 478 450 13 462 15 387

Harry Gw ala DM 23 25 – – – 48

Total 17 220 538 478 450 13 462 32 148

Current 30 Days 60 Days 90 Days 120 Days + Total


In terms of the MFMA Section 41 report submitted to National Treasury by the Umgeni Water

Board, R32.1 million was owed to the Umgeni Water Board as at 30 June 2016 for the Capital Unit

Charge. With the exception of iLembe and Harry Gwala Districts Municipalities, all municipalities

as shown in Table 3.12 ensured that their Capital Unit Charge debt did not fall into arrears.

Harry Gwala District Municipality paid a portion toward their debt in July, however they still have

an amount owing for 30 days. Capital Unit Charge which is being administered by Umgeni Water

on behalf of the Department of Water and Sanitation (DWS). iLembe District Municipality has sent

a letter to DWS and requested that DWS passes credit notes amounting to R10.2 million relating to

the amount already paid by the iLembe District for the period July 2012 to January 2014. iLembe

District Municipality has informed Umgeni Water that due to this, they will not be paying the

Capital Unit Charge.

43

3.6.2 Sale of bulk electricity

As per the MFMA Section 41 report submitted to National Treasury by Eskom, R3.6 billion in sales

were made to the KZN municipalities in the 2015/16 financial year, which is an increase of R489

million when compared to June 2015. The increase was attributed to increases in both volume and

price.

eThekwini Metro (R2.3 billion) and Msunduzi Municipality (R401.3 million) were the highest

purchasers of bulk electricity at the end of the financial year, contributing 63.6 percent and 11.2

percent of total sales, respectively.

Age Profile of Municipal Eskom Debtors

Table 3.13 shows the age analysis (municipal debts greater than current) of Eskom MFMA Section 41

report as at 30 June 2016 that was submitted to National Treasury.

Table 3.13: Age analysis of municipal Eskom debtors

eThekwini 1 012 384 10 – – – 1 012 394

Umdoni (1) 38 – – – 37

Ugu DM 116 5 – – – 121

Mpofana 6 178 – 4 484 3 924 4 908 19 495

Umtshezi 22 390 8 647 – – – 31 037

Newcastle 58 163 40 456 191 – – 98 810

Amajuba DM 274 – 108 – – 382

eDumbe 2 438 1 358 1 274 1 278 – 6 348

Abaqulusi 18 649 2 235 – – – 20 885

Ulundi 7 585 – 11 504 6 118 34 570 59 777

Zululand DM 723 1 039 832 – – 2 595

Umkhanyakude DM 643 6 14 4 – 666

uMfolozi 64 – 63 – – 127

Nkandla 1 425 907 67 67 – 2 467

uThungulu DM 1 061 – 3 – – 1 064

Mandeni 79 – 45 – – 124

Ndwedwe 55 – 14 – – 69

Greater Kokstad (2) 47 – – – 45

Harry Gwala DM 265 – 64 0 – 329

Total 1 132 490 54 750 18 662 11 392 39 479 1 256 772

R'000 Current 30 Days 60 Days 90 Days 120 Days + Total

Source: Eskom MFMA Section 41 Report

As per the MFMA Section 41 report submitted to National Treasury by Eskom, R1.3 billion was

owed to Eskom as at 30 of June 2016 by municipalities.

Abaqulusi, Amajuba District, uMfolozi, Nkandla, Mandeni, Ndwedwe and Greater Kokstad

Municipalities settled their total outstanding debt owed to Eskom in July.

Ulundi Municipality has payment arrangements in place with Eskom and has not honoured the

arrangement resulting in a disconnection letter being served to the municipality in alignment with the

PAJA process. Mpofana Municipality has requested a six month payment arrangement and is awaiting

approval from Eskom.

44

3.7 National Conditional Grants

3.7.1 National Conditional Grants – Provincial Total (Summary)

In terms of the Division of Revenue Act (DoRA) of 2015, direct allocations to all 61 KwaZulu-Natal

municipalities amounted to R8 billion, while in-kind allocations amounted to R874.7 million, totaling

R8.9 billion.

Of the direct allocations of R8 billion, only R6.9 billion or 85 percent have been transferred to

municipalities as at the end of the 2015/16 financial year.

Municipalities have reported spending of R6.6 billion or 96 percent against the total amount

transferred of R6.9 billion. However, when compared to the total DoRA allocation of R8 billion, 82

percent has been spent.

Table 3.14 shows the total national conditional grants transferred to all 61 municipalities in KwaZulu-

Natal for the 2015/16 financial year and the related expenditure against the transfer.

Table 3.14: National Conditional Grants – Summary

Expenditure

Nat. Dept.

%

Spent

Expenditure

Munis.

%

Spent

Local Government Financial Management Grant 101 625 101 625 101 625 95 676 94.1% 105 726 104.0%

Infrastructure Skills Development Grant 32 239 32 239 32 239 32 133 99.7% 32 135 99.7%

Neighbourhood Development Partnership (Schedule 5B) 130 636 130 636 126 620 94 997 75.0% 91 588 72.3%

Municipal Systems Improvement Grant 55 910 55 910 55 910 14 262 25.5% 54 069 96.7%

Municipal Disaster Recovery Grant 87 215 87 215 87 215 37 393 42.9% 84 423 96.8%

Municipal Demarcation Transition Grant 27 858 27 858 - - - 1 096 -

Public Transport Network Grant 1 445 439 1 445 439 1 445 439 1 253 993 86.8% 1 319 479 91.3%

Rural Road Assets Management Systems Grant 22 314 22 314 22 314 16 618 74.5% 17 910 80.3%

Expanded Public Works Programme Integrated Grant (Municipality) 148 959 148 959 148 959 116 826 78.4% 172 524 115.8%

Integrated National Electrification Programme (Municipal) Grant 591 800 591 800 591 800 331 790 56.1% 562 500 95.0%

Energy Efficiency and Demand Side Management (Municipal) Grant 20 000 20 000 20 000 3 099 15.5% 4 896 24.5%

Regional Bulk Infrastructure Grant 1 087 062 1 087 062 - - - - -

Water Services Operating and Transfer Subsidy Grant (Schedule 5B) 50 500 50 500 50 500 - - 32 532 64.4%

Municipal Water Infrastructure Grant (Schedule 5B) 803 068 803 068 803 068 778 520 96.9% 760 414 94.7%

Rural Households Infrastructure Grant (Schedule 5B) 21 682 21 682 21 682 21 483 99.1% 18 830 86.8%

Municipal Human Settlements Capacity Grant 14 342 14 342 14 342 14 342 100.0% - -

Municipal Infrastructure Grant 3 388 816 3 388 816 3 388 816 3 334 498 98.4% 3 355 121 99.0%

Total 8 029 465 8 029 465 6 910 529 6 145 630 6 613 243

Integrated National Electrification Programme (Allocation in-kind) Grant 815 566 815 566 - - - - -

Neighbourhood Development Partnership (Schedule 6B) 5 072 5 072 - - - - -

Municipal Water Infrastructure Grant (Schedule 6B) 33 775 33 775 - - - - -

Rural Households Infrastructure Grant (Schedule 6B) 20 328 20 328 - - - - -

Total 874 741 874 741 - - - - -

Unaudited Actual

R'000

DoRA 2015

Total Avail.

Inc.Adjust.)

Approved Payment

Schedule

Transferred to Munis.

(year to date)

Unaudited Actual


45

3.7.2 Financial Management Grant

The purpose of the Financial Management Grant (FMG) is to promote and support reforms in

financial management by building capacity in municipalities to implement the MFMA.

The FMG grant is also used to pay for the stipend of municipal interns.

Table 3.15 shows the total FMG transferred by district in KwaZulu-Natal for the 2015/16 financial

year and the related expenditure against the transfer.

Table 3.15: Expenditure on Financial Management Grant 2015/16

eThekwini 1 050 1 050 1 050 1 050 100.0 6 306 600.5

Ugu 12 000 12 000 12 000 10 392 86.6 11 887 99.1

uMgungundlovu 13 450 13 450 13 450 13 037 96.9 13 175 98.0

Uthukela 9 925 9 925 9 925 8 892 89.6 8 604 86.7

Umzinyathi 8 150 8 150 8 150 8 065 99.0 8 296 101.8

Amajuba 6 700 6 700 6 700 6 425 95.9 6 928 103.4

Zululand 9 950 9 950 9 950 9 795 98.4 10 100 101.5

Umkhanyakude 10 250 10 250 10 250 9 348 91.2 9 994 97.5

uThungulu 11 650 11 650 11 650 11 644 99.9 11 270 96.7

iLembe 8 350 8 350 8 350 8 216 98.4 9 247 110.7

Harry Gwala 10 150 10 150 10 150 8 812 86.8 9 920 97.7

Total101 625 101 625 101 625 95 676 94.1 105 726 104.0

R'000

Financial Management Grant

DoRA

Total Avail. (Inc.Adjust.)

Approved Payment

Schedule


(Year to date) Unaudited Actual Unaudited Actual

Expenditure

Nat. Dept. % Spent Expenditure Munis. % Spent


At a provincial level, R105.7 million or 104 percent had been spent against a transfer of R101.6

million. eThekwini metro recorded the highest amount spent at R6.3 million or 600.5 percent and

Uthukela district recorded the lowest amount spent at R8.6 million or 86.7 percent. The over

expenditure is a result of municipalities rolling over unspent amounts from the previous financial

years.

As per appendix 8, a total of 11 municipalities reported over expenditure on the FMG for the 2015/16

financial year, with 37 municipalities having spent exactly the amount that was allocated to them. The

remaining 13 municipalities reported under expenditure on the FMG for the 2015/16 financial year.

3.7.3 Municipal Systems Improvement Grant

The purpose of the Municipal Systems Improvement Grant (MSIG) is to assist municipalities in

building in-house capacity to perform their functions and to stabilise institutional and governance

systems, as required by the Local Government Municipal Systems Act and other related local

government legislation and policies.

The total MSIG transferred to municipalities within the province was R55.9 million, including

transfers to two non-delegated municipalities, namely Msunduzi and uMhlathuze. As per National

CoGTA, Metros do not receive MSIG, hence eThekwini did not receive MSIG funding.

At the end of the fourth quarter, R54.1 million was spent resulting in municipalities spending 97

percent of their total allocation at aggregate level.

46

Table 3.16 shows the total MSIG transferred by district in KwaZulu-Natal for the 2015/16 financial


Table 3.16: Expenditure on Municipal Systems Improvement Grant

eThekwini – – – – – – –

Ugu 6 520 6 520 6 520 1 616 24.8 5 806 89.0

uMgungundlovu 7 450 7 450 7 450 2 564 34.4 7 402 99.4

Uthukela 5 590 5 590 5 590 52 0.9 5 722 102.4

Umzinyathi 4 660 4 660 4 660 1 686 36.2 4 579 98.3

Amajuba 3 730 3 730 3 730 – - 3 052 81.8

Zululand 5 590 5 590 5 590 443 7.9 5 627 100.7

Umkhanyakude 5 590 5 590 5 590 1 384 24.8 4 880 87.3

uThungulu 6 520 6 520 6 520 2 519 38.6 5 743 88.1

iLembe 4 670 4 670 4 670 1 241 26.6 5 780 123.8

Harry Gwala 5 590 5 590 5 590 2 757 49.3 5 478 98.0

Total55 910 55 910 55 910 14 262 25.5 54 069 96.7

R'000

Municipal Systems Improvement Grant

DoRA


Approved Payment

Schedule


(Year to date) Unaudited Actual Unaudited Actual

Expenditure



As per appendix 8, a total of 9 municipalities reported over expenditure on the MSIG for the 2015/16

financial year, with 37 municipalities having spent exactly the amount that was allocated to them. The

remaining 14 municipalities reported under expenditure on the MSIG for the 2015/16 financial year.

Emnambithi/Ladysmith and Ndwedwe Municipalities are the largest contributors towards over

spending in Uthukela and iLembe Districts which reported spending of R1.8 million (189 percent) and

R2 million (219 percent), respectively.

Newcastle and Vulamehlo municipalities are the largest contributors towards the under spending in

the Amajuba and Ugu Districts, with reported spending of R251 000 (27 percent) and R264 000 (28

percent) respectively against their MSIG allocations.

3.7.4 Municipal Infrastructure Grant

The Division of Revenue Act (DoRA) states that the purpose of the Municipal Infrastructure Grant

(MIG) is to:

Provide capital finance for the basic municipal infrastructure for poor households, micro

enterprises and social institutions;

Provide for new, rehabilitation and upgrading of municipal infrastructure; and

Eradicate bucket sanitation system mainly in urban townships.

Table 3.17 shows the total MIG transferred by district in KwaZulu-Natal for the 2015/16 financial


The total MIG allocation to municipalities within the province was R3.3 billion, including allocations

to the two of the three non-delegated municipalities; namely uMhlathuze and Msunduzi. It must be

noted that eThekwini Metro receives the MIG for Cities grant and hence it is not included in the

National transfer for this grant.

47

Table 3.17: Expenditure on Municipal Infrastructure Grant

eThekwini – – – – – – –

Ugu 409 619 410 059 410 059 400 321 97.7 411 003 100.3

uMgungundlovu 406 747 413 747 413 747 395 392 97.2 404 022 99.3

Uthukela 314 873 314 873 314 873 314 872 100.0 309 748 98.4

Umzinyathi 292 540 316 540 316 540 307 824 105.2 307 832 105.2

Amajuba 181 081 183 081 183 081 183 081 101.1 183 332 101.2

Zululand 363 195 364 995 364 995 364 995 100.5 396 271 109.1

Umkhanyakude 336 999 341 999 341 999 334 620 99.3 341 021 101.2

uThungulu 382 121 388 276 388 276 388 273 101.6 398 712 104.3

iLembe 324 433 331 433 331 433 326 442 100.6 331 050 102.0

Harry Gwala 307 813 323 813 323 813 318 679 103.5 272 129 88.4

Total 3 319 421 3 388 816 3 388 816 3 334 499 100.5 3 355 121 101.1

Unaudited Actual Unaudited Actual

Expenditure


R'000

Municipal Infrastructure Grant

DoRA


Approved Payment

Schedule


(Year to date)


During the period July 2015 to June 2016, R3.38 billion was transferred to municipalities according to

the data supplied by National Treasury. A total of R3.35 billion was expended against the allocation

for the 2015/16 financial year.

Ugu, uMgungundlovu, Zululand and uThungulu Districts had the largest MIG transfers of more than

R360 million per district. As per appendix 8, a total of 15 municipalities have spent more than the

amount transferred to them, suggesting the possible spending of rollover funds from previous years.

Abaqulusi municipality recorded the highest amount spent at R62.1 million or 157 percent.

A total of 24 municipalities appeared to have displayed good financial prudence by spending 100

percent of the grant allocation.

The remaining 21 municipalities reported under expenditure on MIG for the 2015/16 financial year.

uMngeni, eDumbe and The Big Five False Bay Municipalities spent less than 75 percent of their MIG

allocations as at the end of the 2015/16 financial year. uMngeni Municipality’s expenditure was by far

the lowest at 52 percent.

3.8 Unspent Conditional Grants

Section 214 of the Constitution provides for National Government to transfer funds to municipalities

in terms of the Division of Revenue Act (DoRA) to assist them in exercising their powers and

performing their functions. In this regard the National Government allocates monies to

municipalities for specific purposes and the use of the allocated monies is subject to various

conditions.

In general, Conditional Grant transfers aim to:

Address the structural imbalance between revenue available to municipalities and the expenditure

responsibilities assigned to them;

Support national and provincial priorities, as outlined through different sector policies, in particular

those focused on providing universal and sustainable access to services; and

Establish incentives for good governance and building local government capacity within a sound

fiscal framework.

Often, municipalities do not fully utilise the conditional grants received by the end of the financial

year. When preparing their Annual Financial Statements, a municipality must determine what portion

of each national conditional allocation remained unspent as at the end of the financial year. In terms of

48

Section 22 of DoRA, unspent conditional grants revert to the National Revenue Fund (NRF), unless the relevant municipality can prove to the satisfaction of National Treasury that the unspent allocation is committed to identifiable projects, in which case the funds may be rolled over.

National Treasury will then confirm in writing whether or not the municipality may retain as a rollover any of the unspent funds or whether it has agreed to any alternative payment methods or schedules. Municipalities are then required to appropriate the approved rollover funds in an Adjustments Budget in terms of Regulation 23 of the Municipal Budget and Reporting Regulations (MBRR). Furthermore, municipalities must report spending on conditional grants that are rollover on a separate National Treasury customized template.

Where municipalities fail to apply for a roll over and where Unspent National Conditional Grant funds are not refunded to the NRF, National Treasury will offset such amounts against the municipality’s equitable share allocation and recover the funds accordingly. The inability of the municipality to refund these amounts is a consequence of using those monies for purposes other than in accordance with the conditions of the grant.

3.8.1 Unspent Conditional Grants – (2013/14)

In 2013/14 unspent conditional grants of R119.5 million was offset against the November 2014 Equitable Share. National Treasury further offset R1.5 million in July 2015 against the first installment of Equitable Share representing a payment arrangement with the eDumbe municipality for 2013/14 unspent grants.

On the 27 November 2015 National Treasury released the second tranche of the 2015/16 Equitable Share payment to KZN municipalities after offsetting R28.7 million unspent conditional grants for the 2013/14 financial year. The amount related to unspent roll overs for eThekwini Metro (R3.2 million), Vulamehlo (R648 000) and Msunduzi (R23.3 million) municipalities respectively. In addition, this amount also included a further R1.5 million payment arrangement with eDumbe municipality.

Furthermore, KwaDukuza municipality repaid R7.1 million unspent grant rollovers, resulting in a total of R156.9 million unspent grants being returned to the NRF by KZN municipalities for the 2013/14 financial year.

3.8.2 Unspent Conditional Grants – (2014/15) During 2015/16, 46 municipalities submitted rollover motivations to National Treasury in respect of unspent conditional grants for the 2014/15 financial year. On the 16th and 17th September 2015, National Treasury together with key stakeholders i.e. KZN Provincial Treasury, Department of Co-operative Governance and Traditional Affairs (CoGTA National and Provincial) and the Department of Energy, jointly assessed the rollover applications received as at 31 August 2015.

On the 01 October 2015, National Treasury sent a letter to Municipal Managers notifying them as to whether their request for rollover of the unspent conditional grant was approved or rejected in terms of Section 22 of the Division of Revenue Act (DoRA) and provided them with reasons for their rejection based on the criteria as per Circular 75 of the Municipal Finance Management Act (MFMA).

National Treasury initially approved rollovers for 32 municipalities in KZN, amounting to a total of R180.1 million for 2014/15. Following engagements with municipalities, National Treasury further assessed and approved rollover motivations of R14.6 million. This brought the total amount approved for rollover to R194.7 million for the 2014/15 unspent grants. Appendix 10 shows the respective municipalities and the approved rollovers for 2014/15.

Municipalities who had their rollover applications rejected were requested to return any unspent conditional grants that were not approved, to the National Revenue Fund by the 23 October 2015.

49

National Treasury subsequently sent a letter to affected Municipal Managers on the 19 October 2015 advising them of the following:

“National Treasury has finalised the unspent conditional grant process for the 2014/15 financial year and has determined the unspent amount to be repaid to the National revenue Fund.

National Treasury has used the 2014/15 pre-audited Annual Financial Statements to update the unspent conditional grant dataset for the 2014/15 financial year. In the absence of the AFS, National Treasury used the Section 71 report for the fourth quarter of 2014/15 to determine the amount to be surrendered to the National Revenue Fund.”

Municipalities were notified of their unspent amount and were reminded that it reverts to the National Revenue Fund. Municipalities were provided with bank account details and once again requested to return the unspent grants by 23 October 2015.

Municipalities were warned that failing to return the unspent grants or comply with Section 22(1) of the 2014 DoRA by 23 October 2015, would result in National Treasury deducting the entire unspent amount from the respective municipality’s equitable share installment due on the 27 November 2015, in terms of Section 22(4) of the 2014 DoRA.

In terms of Section 22(5) of DoRA, municipalities were also given 14 days upon receipt of the letter to propose an alternative repayment arrangement for the unspent grants to be repaid into the NRF.

National Treasury offset R756.4 million unspent conditional grants from the affected municipalities for the 2014/15 financial year. In total, R785.1 million (2013/14: R28.7 million and 2014/15: R756.4 million) of the second installment of Equitable Share was offset in November 2015.

A further R21.6 million relating to 2014/15 unspent conditional grants was offset in equal installments against the March 2016 and July 2016 Equitable Share tranche for uThungulu District municipality.

Subsequent engagements with the municipalities resulted in National Treasury reimbursing R34.6 million in relation to the 2014/15 unspent grants offset in November 2015. This included R20 million which was erroneously deducted off eThekwini Metro’s November equitable share.

The above events consequently resulted in a total of R743.4 million for the 2014/15 unspent grants. In addition, Mkhambathini (R1.8 million), Emnambithi/Ladysmith (R122 000) and KwaDukuza (R3.6 million) municipalities repaid their 2014/15 unspent conditional grants directly to the National Revenue Fund resulting in a total of R748.9 million being returned to the National Revenue Fund.

Appendix 10 shows the total amount (R748.9 million) offset and/or returned and provides a further breakdown per grant offset. Of concern is the fact that the largest amounts offset are in respect of the basic service delivery grants, namely MIG (R54.4 million), NDPG (R57.6 million), PTIS (R460.1 million) and PTNOG (R84.7 million) the result of which will have a negative impact on service delivery and development in the Province.

Appendix 12 shows that historically a total amount of R1.7 billion of unspent conditional grants was returned to the National Revenue Fund (NRF) for the period 2010/11 to 2014/15. It further reflects an increasing trend in the amount of funds returned to the NRF. These are funds that could have been used by our municipalities to develop infrastructure and provide essential services but has now left our Province due to poor management of grants by municipalities. eThekwini Metro, Msunduzi and Newcastle municipalities have surrendered the highest amount of unspent conditional grants to the NRF.

50

Provincial Treasury has made every effort to assist municipalities in the rollover process for 2014/15.

This was evidenced by the issue of Provincial Treasury Circular 3 on the 6 August 2015 which

provided guidance, summarised legislation and key deadlines on the conditional grant management

and rollover process. Following the release of the circular, Provincial Treasury officials engaged with

municipalities in order to reiterate the importance of following the rollover process correctly and

offered direction and support on the preparation of rollover motivations.

Provincial Treasury was one of the key stakeholders together with National Treasury involved in

comprehensively evaluating municipalities’ motivations for rollovers for 2014/15. In addition

Provincial Treasury assisted numerous municipalities that raised queries or required clarity regarding

the rejection of rollover motivations.

3.8.3 Unspent Conditional Grants – (2015/16)

Municipalities are required to submit their 2015/16 AFS to the Auditor General by the 31 August

2016. During this process, they are required to determine the unspent portion of the National

Conditional Grants for the 2015/16 financial year which will be subject to the scrutiny of the Auditor

General when they perform the audit.

Municipalities are also requested to submit their rollover applications and supporting documentation

in accordance with National Treasury MFMA Circular 75 and 2015 DoRA to National Treasury by 31

August 2016.

Provincial Treasury has also issued Circular TC/RM 3 on the 25 August 2016 providing guidance and

key deadlines on the conditional grant management and rollover process.

3.8.4 Stopping of Conditional Grants

In terms of Section 38 of the Municipal Finance Management Act (MFMA) and Section 19 of the

DoRA, 2015, National Treasury may, in its discretion or at the request of a transferring officer stop

the transfer of funds to a municipality for the following reasons:

Persistent and material non-compliance with DoRA; or

If National Treasury anticipates that a municipality will substantially under-spend on the

programme or allocation in the financial year.

In terms of Section 38(2)(a) of the MFMA, municipalities are requested to submit written

representations regarding the proposed stopping of the allocated funds.

National Treasury notified 6 municipalities on the 04 December 2015 of its intention to stop a portion

of the 2015/16 Integrated National Electrification Programme and Neighbourhood Development

Programme Grant allocations in terms of Section 19 of DoRA and Section 38 of the MFMA.

Municipalities were given 7 days to make representation regarding the stopping of these grants.

National Treasury then issued a notification letter to CoGTA and Provincial Treasury identifying 5

municipalities for which the grants will be officially stopped. Government Gazette number 39746

issued on the 26 February 2016 confirmed the stopping of allocations of the affected municipalities.

Further to this National Treasury notified 8 municipalities on the 05 February 2016 of its intention to

stop a portion their respective Municipal Infrastructure Grants and Energy Efficiency and Demand

Side Management grant due to underperformance of the grant allocation. National Treasury issued a

letter on 22 March 2016 to CoGTA and Provincial Treasury identifying 7 municipalities that will have

their grants officially stopped. The stopping was made official in government gazette number 39869.

51

The failure to fully or appropriately utilise conditional grants negatively impacts the development of

infrastructure and exacerbates the current backlogs thus impeding economic growth and the provision

of service delivery by municipalities. It therefore becomes essential that municipalities engage in

proper management of conditional grant funding and strictly adhere to the requirements regarding

reporting as well as the submission of motivation for rollover.

3.9 Cash Flow Position

Cash, the lifeblood of an organisation, is a vital element in the success and continuity of a

municipality.

Cash is the fuel that drives municipalities, and a municipality’s cash flow is one of the most important

indicators of financial health. A well-managed flow of cash, like a strong heart, is usually indicative of

a healthy municipality, while a poorly managed cash flow, or weak heart, can cause problems that

affect the entire operation. The proper management of cash resources is thus paramount in ensuring

financial viability and sustainable growth and development.

Municipalities are required, at a very minimum to maintain a positive cash position. Provincial

Treasury conducted an analysis of the cash resources of the municipalities in KwaZulu-Natal by

assessing their Net Available Cash and their Cash Coverage Ratio using the audited 2014/15 annual

financial statements. It was concluded that there is deterioration in the cash position of a significant

number of municipalities and increasing challenges experienced by municipalities regarding the

management of cash. The results of the analysis are detailed below.

3.9.1 Net Available Cash

Net Available Cash is calculated as ‘Cash and Investment’ less ‘Unspent Conditional Grants’, where

‘Cash and Investments’ comprises of Cash, Bank, and Call Investment Deposits and Long Term

Investments.

If Net Available Cash is positive, it indicates that the municipality’s unspent conditional grants are

cash backed. If the Net Available Cash is negative, it indicates that the unspent conditional grants are

not cash backed.

Table 3.18 shows 9 municipalities with a negative ‘Net Available Cash’ (Red) position in the 2014/15

financial year and consequently, a negative Cash Coverage Ratio.

52

Table 3.18 Unspent Conditional Grants Not Cash Backed

R'000 Cash and

Investments

Unspent

Conditional

Grants

Net Available

Cash

Cash Coverage

Ratio - No of

months

Cash and

Investments

Unspent

Conditional

Grants

Net Available

Cash

Cash

Coverage

Ratio - No of

months

Mpofana 14 193 15 744 -1 552 -0.2 12 175 19 230 -7 055 -0.9

Amajuba District 332 22 618 -22 285 -1.3 148 6 810 -6 662 -0.5

eDumbe 1 465 6 555 -5 091 -0.8 1 125 2 770 -1 645 -0.2

Nongoma 960 9 921 -8 961 -1.1 15 678 14 003 1 675 0.2

Zululand District -5 499 558 -6 058 -0.2 -45 481 0 -45 481 -1.1

The Big Five False Bay -1 355 1 550 -2 904 -1.1 -1 841 148 -1 989 -0.5

Hlabisa 1 732 5 122 -3 390 -0.8 4 954 6 376 -1 421 -0.3

Mtubatuba 895 9 780 -8 885 -1.2 13 844 3 269 10 575 1.5

Umkhanyakude District 11 378 22 273 -10 895 -0.3 12 696 33 540 -20 844 -0.7

uMfolozi 156 9 935 -9 779 -1.8 3 188 4 765 -1 577 -0.2

Maphumulo 35 084 25 111 9 973 1.7 15 683 28 438 -12 755 -1.7

2013/14 2014/15

Source: Auditor General: Audited 2014/15 Annual Financial Statements

One also needs to consider if the cash balances are continuing. In other words, is the negative cash

balance temporary or is it an indication of deeper rooted financial difficulties prevalent in the

municipality. Table 3.18 also shows that the financial position for the majority of the municipalities

listed above reflect continuing negative cash balances over the 2013/14 and 2014/15 financial years.

3.9.2 Unspent Conditional Grants - Not Cash-backed

Table 3.19 shows the net available cash after making provision to cash back the unspent conditional

grants and whether the unspent conditional grants were cash backed for the 2013/14 and 2014/15

financial years.

Based on the analysis of the 2014/15 audited AFS in Table 3.19, the following was noted:

8 of the 61 municipalities’ Unspent Conditional grants are not cash backed;

4 of the 8 municipalities’ Unspent Conditional grants are not cash backed by less than

R5 million; and

2 of the 8 municipalities’ Unspent Conditional grants are not cash backed by more than R10

million.

The following is a detailed breakdown per district for 2014/15, with the relevant amounts by which the

municipalities are not cash backed:

uMgungundlovu District: Mpofana (R7.1 million);

Amajuba District: Amajuba DM (R 6.7 million);

Zululand District: eDumbe (R1.6 million);

Umkhanyakude District: The Big Five False Bay (R2 million), Hlabisa (R1.4 million) and

Umkhanyakude DM (R20.8 million);

uThungulu District: uMfolozi (R1.6 million); and

iLembe District: Maphumulo (R12.8 million).

Based on the figures in the Annual Financial Statements the unspent conditional grants for all the

municipalities in the Ugu, Uthukela, Umzinyathi and Harry Gwala Districts appear to be cash backed.

53

Table 3.19: Unspent Conditional Grants Not Cash Backed

R'000 Cash and

Investments

Unspent

Conditional

Grants

Net Available

Cash

Cash Coverage

Ratio - No of

months

Cash and

Investments

Unspent

Conditional

Grants

Net Available

Cash

Cash Coverage

Ratio - No of

months

eThekwini Metro 6 593 432 1 328 247 5 265 185 2.9 5 898 801 1 125 784 4 773 017 2.4

Vulamehlo 8 773 3 113 5 660 1.5 31 716 5 776 25 940 6.1

Umdoni 83 029 7 966 75 063 7.3 110 351 11 764 98 586 9.4

Umzumbe 91 786 7 702 84 084 12.0 110 413 8 492 101 921 12.9

uMuziwabantu 59 638 17 225 42 413 6.0 77 097 10 541 66 556 7.6

Ezinqolweni 36 624 1 814 34 810 14.8 40 974 1 866 39 108 14.1

Hibiscus Coast 150 715 8 089 142 626 3.1 91 829 14 644 77 184 1.5

Ugu District 157 328 48 333 108 995 2.5 232 922 21 366 211 556 4.5

uMshwathi 5 470 0 5 470 0.8 5 679 0 5 679 0.7

uMngeni 38 474 17 831 20 643 1.1 46 652 22 223 24 428 1.3

Mpofana 14 193 15 744 -1 552 -0.2 12 175 19 230 -7 055 -0.9

Impendle 7 660 2 177 5 484 1.7 4 644 464 4 180 1.2

Msunduzi 834 221 298 530 535 692 2.3 842 114 108 258 733 856 2.7

Mkhambathini 5 571 3 620 1 951 0.5 14 614 4 055 10 558 2.6

Richmond 45 674 17 364 28 310 6.4 47 063 7 417 39 647 8.1

uMgungundlovu District 205 283 56 119 149 164 3.9 162 494 55 288 107 206 2.7

Emnambithi/Ladysmith 121 229 26 683 94 546 2.3 190 694 20 610 170 084 4.2

Indaka 103 052 12 822 90 230 37.5 140 591 10 792 129 799 43.8

Umtshezi 38 997 18 922 20 075 0.9 8 122 2 450 5 672 0.2

Okhahlamba 42 798 11 532 31 266 4.4 45 227 14 354 30 873 3.2

Imbabazane 49 263 0 49 263 7.7 22 704 0 22 704 2.8

Uthukela District 126 554 40 552 86 002 2.6 145 088 6 999 138 089 4.0

Endumeni 38 431 4 168 34 263 2.1 57 903 14 408 43 495 2.7

Nquthu 94 960 6 830 88 130 11.3 114 553 16 736 97 817 9.5

Msinga 84 198 16 903 67 296 9.0 69 269 17 220 52 048 4.9

Umvoti 59 860 4 741 55 119 4.9 39 476 13 304 26 172 1.5

Umzinyathi District 117 558 9 797 107 761 2.6 57 974 4 718 53 257 1.8

Newcastle 327 907 43 519 284 388 3.1 340 813 69 611 271 202 2.6

eMadlangeni 25 924 4 745 21 178 5.9 27 763 1 893 25 870 6.8

Dannhauser 20 530 4 421 16 109 2.2 31 924 21 886 10 038 1.5

Amajuba District 332 22 618 -22 285 -1.3 148 6 810 -6 662 -0.5

eDumbe 1 465 6 555 -5 091 -0.8 1 125 2 770 -1 645 -0.2

uPhongolo 13 602 6 863 6 739 0.7 13 137 11 098 2 039 0.2

Abaqulusi 53 151 6 310 46 841 1.6 36 636 5 245 31 391 0.9

Nongoma 960 9 921 -8 961 -1.1 15 678 14 003 1 675 0.2

Ulundi 9 317 3 568 5 749 0.3 4 246 1 286 2 960 0.2

Zululand District -5 499 558 -6 058 -0.2 -45 481 0 -45 481 -1.1

Umhlabuyalingana 71 050 3 034 68 016 11.2 77 638 2 357 75 281 9.8

Jozini 8 746 7 443 1 303 0.1 22 508 8 335 14 173 1.6

The Big Five False Bay -1 355 1 550 -2 904 -1.1 -1 841 148 -1 989 -0.5

Hlabisa 1 732 5 122 -3 390 -0.8 4 954 6 376 -1 421 -0.3

Mtubatuba 895 9 780 -8 885 -1.2 13 844 3 269 10 575 1.5

Umkhanyakude District 11 378 22 273 -10 895 -0.3 12 696 33 540 -20 844 -0.7

uMfolozi 156 9 935 -9 779 -1.8 3 188 4 765 -1 577 -0.2

uMhlathuze 404 509 100 315 304 195 1.9 421 638 39 733 381 905 2.2

Ntambanana 21 341 14 513 6 828 1.7 21 252 9 904 11 348 3.2

uMlalazi 71 509 18 175 53 334 3.4 79 035 14 951 64 085 3.8

Mthonjaneni 46 137 0 46 137 7.0 49 259 295 48 964 7.5

Nkandla 1 319 4 436 -3 117 -0.4 9 051 4 788 4 263 0.6

uThungulu District 518 756 51 722 467 034 12.3 428 309 38 603 389 706 8.3

Mandeni 60 905 15 297 45 608 4.4 29 057 7 318 21 739 1.6

KwaDukuza 542 371 75 476 466 894 6.0 540 391 39 226 501 165 5.9

Ndwedwe 57 484 36 453 21 032 3.8 76 667 18 921 57 746 9.1

Maphumulo 35 084 25 111 9 973 1.7 15 683 28 438 -12 755 -1.7

iLembe District 66 387 23 475 42 912 0.6 54 846 9 768 45 078 0.5

Ingwe 52 420 230 52 191 10.0 57 000 5 594 51 406 9.1

Kwa Sani 25 868 2 868 23 000 8.7 18 941 1 394 17 547 5.8

Greater Kokstad 13 523 4 783 8 739 0.5 52 716 6 446 46 270 2.5

Ubuhlebezwe 66 033 11 900 54 133 9.2 81 970 14 169 67 800 10.3

Umzimkhulu 51 828 8 966 42 862 5.0 94 283 20 168 74 116 7.2

Harry Gwala District 29 474 20 782 8 693 0.3 25 871 10 980 14 891 0.5

2013/14 2014/15


Table 3.19 shows that R2 billion for National, Provincial and other conditional grants were unspent as

per the 2014/15 Audited Annual Financial Statements as compared to R2.6 billion in 2013/14.

It must also be noted that Zululand District Municipality and The Big Five False Bay Municipality

were in a negative cash position before even considering the cash backing of unspent conditional

grants. In terms of Section 45 of the MFMA municipalities are not allowed to close the financial year

54

with any short term borrowing or overdraft. The fact that the municipality was not able to close the

financial year with a positive cash position is a strong indicator that these municipalities are in severe

financial distress.

Table 3.20: Regression of Net Available Cash

R'000 Cash and

Investments

Unspent

Conditional

Grants

Net Available

Cash

Cash Coverage

Ratio - No of

months

Cash and

Investments

Unspent

Conditional

Grants

Net Available

Cash

Cash Coverage

Ratio - No of

months

Regression of Net

Available Cash

from 2013/14 to

2014/15

eThekwini Metro 6 593 432 1 328 247 5 265 185 2.9 5 898 801 1 125 784 4 773 017 2.4 -492 168

Hibiscus Coast 150 715 8 089 142 626 3.1 91 829 14 644 77 184 1.5 -65 442

Mpofana 14 193 15 744 -1 552 -0.2 12 175 19 230 -7 055 -0.9 -5 503

Impendle 7 660 2 177 5 484 1.7 4 644 464 4 180 1.2 -1 304

uMgungundlovu District 205 283 56 119 149 164 3.9 162 494 55 288 107 206 2.7 -41 959

Umtshezi 38 997 18 922 20 075 0.9 8 122 2 450 5 672 0.2 -14 403

Okhahlamba 42 798 11 532 31 266 4.4 45 227 14 354 30 873 3.2 -393

Imbabazane 49 263 0 49 263 7.7 22 704 0 22 704 2.8 -26 559

Msinga 84 198 16 903 67 296 9.0 69 269 17 220 52 048 4.9 -15 248

Umvoti 59 860 4 741 55 119 4.9 39 476 13 304 26 172 1.5 -28 947

Umzinyathi District 117 558 9 797 107 761 2.6 57 974 4 718 53 257 1.8 -54 505

Newcastle 327 907 43 519 284 388 3.1 340 813 69 611 271 202 2.6 -13 187

Dannhauser 20 530 4 421 16 109 2.2 31 924 21 886 10 038 1.5 -6 071

uPhongolo 13 602 6 863 6 739 0.7 13 137 11 098 2 039 0.2 -4 700

Abaqulusi 53 151 6 310 46 841 1.6 36 636 5 245 31 391 0.9 -15 450

Ulundi 9 317 3 568 5 749 0.3 4 246 1 286 2 960 0.2 -2 788

Zululand District -5 499 558 -6 058 -0.2 -45 481 0 -45 481 -1.1 -39 423

Umkhanyakude District 11 378 22 273 -10 895 -0.3 12 696 33 540 -20 844 -0.7 -9 949

uThungulu District 518 756 51 722 467 034 12.3 428 309 38 603 389 706 8.3 -77 328

Mandeni 60 905 15 297 45 608 4.4 29 057 7 318 21 739 1.6 -23 869

Maphumulo 35 084 25 111 9 973 1.7 15 683 28 438 -12 755 -1.7 -22 728

Ingwe 52 420 230 52 191 10.0 57 000 5 594 51 406 9.1 -784

2013/14 2014/15


Table 3.20 shows the Regression of Net Available Cash from 2013/14 to 2014/15. It was noted that

eThekwini Metro, uThungulu District, Hibiscus Coast and Umzinyathi District municipalities had

regressed the most in 2014/15.

3.9.3 Cash Coverage Ratio

Whilst a positive cash balance is a good indicator, a major challenge facing municipalities is to ensure

that there is sufficient cash available to cover their fixed monthly commitments.

A negative ratio indicates that the municipality has insufficient cash available to meet its fixed

monthly operating commitments, i.e. it has a negative net available cash position. A positive ratio

confirms that there is sufficient cash available to cover fixed monthly payments. Although a

municipality may have a positive ratio, the guideline is to have a ratio of greater than or equal to 3,

which reflects coverage of 3 months fixed monthly payments.

Using the 2014/15 Annual Financial Statements, Table 3.21 shows the period that each municipality

can meet its monthly fixed operating commitments without collecting any additional revenue during

that month. The results of this analysis are as follows:

25 of the 61 municipalities have a cash coverage ratio of 3 months or greater.

27 of the 61 municipalities have a cash coverage ratio between zero and less than 3 months.

9 of the 61 municipalities have a cash coverage ratio of less than zero.

55

Table 3.21: Cash Coverage Ratio (Ranking)

Municipalities with a negative

cash coverage ratio

( 9 Municipalities - 15%)

Mpofana eThekwini Metro Ulundi Vulamehlo eMadlangeni

Amajuba District Hibiscus Coast uPhongolo Umdoni Umhlabuyalingana

eDumbe uMshwathi Nongoma Umzumbe Ntambanana

Zululand District uMngeni Msunduzi uMuziwabantu uMlalazi

The Big Five False Bay Impendle Mkhambathini Ezinqoleni Mthonjaneni

Hlabisa Umvoti uMgungundlovu District Ugu District uThungulu District

Umkhanyakude District Umzinyathi District Imbabazane Richmond KwaDukuza

uMfolozi Dannhauser Endumeni Ladysmith/Emnambithi Ndwedwe

Maphumulo Abaqulusi Newcastle Indaka Ingwe

Jozini Greater Kokstad Okhahlamba Kwa Sani

Mtubatuba Uthukela District Ubuhlebezwe

uMhlathuze Nquthu Umzimkhulu

Nkandla Msinga

Mandeni

iLembe District

Harry Gwala District

Umtshezi

Municipalities with a cash coverage ratio between 0 and <3

months

Municipalities with a cash coverage ratio of greater than =3

months

( 27 Municipalities - 44%) ( 25 Municipalities - 41%)


As shown in Table 3.21, 59 percent of the municipalities in the province do not have a healthy cash

coverage ratio. Furthermore Table 3.19 shows the 18 municipalities that do not have sufficient cash

available to cover fixed monthly commitments. This indicates that these municipalities may not be

financially sustainable.

The analysis of the KZN municipalities’ Net Available Cash and their Cash Coverage Ratio

highlighted two major challenges facing a number of municipalities:

Unspent conditional grants are not cash backed:

Municipalities have insufficient available cash to ensure that unspent conditional grants are cash

backed, and/or

Municipalities are utilising unspent conditional grants to fund both operating and capital

expenditure without prior approval of Treasury, and/or

Municipalities are not complying with the conditions of the grant, and/or

Poor management and reporting on conditional grants.

Cash Coverage

Municipalities have insufficient funds available to meet their fixed monthly commitments, hence the

negative cash ratio. This results in municipalities depending on conditional grants to fund operating

expenditure.

The Auditor-General had identified matters relating to the going concern of Eight (8) municipalities

namely; Mpofana*, Amajuba District, eDumbe*, Abaqulusi*, Ulundi*, Umkhanyakude District*,

Hlabisa* and Maphumulo. Municipalities identified with an asterisk further reflect where going

concern matters were also raised in the prior year. Going concern matters were raised by the Auditor-

General based on the following:

conditional grants not being cash-backed;

repayments as per loan agreements that could not be met;

non-payment of current liabilities;

current liabilities exceeded cash resources;

poor cash coverage ratios;

56

poor current ratios; and

net loss for the year.

These issues may stem from municipalities incurring material losses, high levels of material

impairments and poor debt collection processes. The root causes of the going concern issues must be

identified and addressed.

Section 71 Reporting

When evaluating the cash position of the municipalities, it was also identified that for many

municipalities there was no alignment between the cash information in the Section 71 reports and the

annual year end financial statements figure. Possible reasons include:

Municipalities do not regularly prepare and/or review bank reconciliations throughout the year and

usually defer this important control process to year end. This indicates that the Section 71 reporting

of the cash position is flawed;

Municipalities have not implemented the practice of closing off their General Ledger either

monthly or quarterly. This results in transactions that continue to be processed for historical

periods (e.g. previous months) throughout the financial year. This practice leads to actual financial

information that is constantly changing or incomplete. Reporting appears to only stabilise at year

end when journals are processed and figures are finalised for submission of the Annual Financial

Statements to the Auditor- General.

The current state of municipal finances in KwaZulu-Natal reflects deterioration in the cash position of

a significant number of municipalities and major challenges being experienced in cash flow

management. Municipalities therefore need to take a proactive approach to avoid moving into a state

of financial distress.

3.9.4 Challenges faced by municipalities which are negatively impacting the cash position of municipalities:

The increasing rates and tariffs together with the slow recovery of the economy have negatively

impacted on the consumers’ ability to pay. This has resulted in a significant deterioration in

revenue collections. Many of the municipalities affected by cash flow problems also service an

increasing number of indigent and poor communities who are the victims of continued service

delivery backlogs and challenges;

The high debtor levels at municipalities indicate poor implementation of debt collection and credit

control policies and practices. This may also further reflect a failure on the part of mayors and

councillors to provide political backing to revenue enhancement programmes. Municipalities are

failing to collect revenues promptly and pursue debtors with due rigour;

Municipalities have demonstrated an inability to prepare or implement credible budgets resulting in

unrealistic revenue and cash projections, excessive operating expenditure or a capital budget which

is over ambitious. Many municipalities are still preparing budgets incorrectly by first planning their

spending and thereafter projecting their income. They are not accounting for the timing differences

between when revenue is billed and actual cash is collected. This results in major cash flow

difficulties as municipalities become vulnerable due to exhausting their historical cash reserves;

Municipalities experience poor management, monitoring and reporting of conditional grant

funding. Municipalities regularly utilize conditional grant funds to supplement operating

expenditure requirements instead of using the funds in accordance with the applicable grant

conditions;

The deteriorating system of governance resulting from the high vacancy rates and insufficient

municipal capacity due to lack of skills, has negatively affected the cash position, budgeting and

57

financial management at municipalities. The skills shortage and poor capacity at municipalities has

compromised the implementation of proper cash flow management;

Major unresolved disputes coupled with poor service delivery has resulted in increasing ratepayer/

consumer boycotts and have lead to resistance from communities to pay their accounts owing to

the municipalities;

The failure to optimise tariffs to ensure that they are cost reflective together with the cash flow

difference between increasing cost of bulk electricity/water and poor revenue collection, further

impacts negatively on the cash position of municipalities;

Weak billing system reflecting poor data integrity, failure to timeously update consumer

information, and inaccurate or delayed invoicing, further contributes to the poor cash position.

Failure to bill consumers accurately or on time results in delays in revenue collections; and

Municipalities are incurring significant water and electricity distribution losses caused by theft

and/or poor infrastructure. This results in material revenue losses and negatively impacts the

overall cash position.

3.9.5 Risks associated with a negative or low cash position:

A poor cash position may result in existing staff not getting paid and may make it difficult for a

municipality to hire and retain employees. This could further lead to labour disputes at the

municipality resulting in a disruption of operations;

Contractors, suppliers and service providers may also not get paid or experience extensive delays

in receiving payment due to lack of funds. This can result in poor service delivery and further

backlogs in infrastructure development;

Municipalities suffering from cash flow difficulties have no margin of safety in the case of

unanticipated expenses;

Deteriorating cash position makes it more expensive for municipalities to borrow funds from

financial institutions. Municipalities will therefore experience problems obtaining financing for

expansion and development;

A poor cash position indicates ineffective cash management which further implies poor processes

and systems and therefore exposes the municipality to the risk of theft, corruption and fraud;

When a municipality experiences a deteriorating financial position, repairs and maintenance is

usually one of the first categories of expenses that are reduced. This results in shortening the useful

life of assets while reducing the reliability and quality of services; and

A poor cash position could ultimately lead to technical insolvency which could further impact the

going concern position and negatively impact the audit opinion of a municipality.

Municipalities facing cash flow crises simply throw money at the problem by means of grant funding

or additional borrowing, which is a temporary solution at best. A cash flow crisis is usually a symptom

of a broader issue facing the municipality. Cash management requires more than just a financial fix; it

requires a holistic approach that focuses on making a municipality operate more efficiently.

58

A cash management process allows a municipality to control its cash and manage its operations

economically, efficiently and effectively. In this way the municipality can reduce operational

disruptions, operate in a smooth and efficient manner, and provide for ongoing growth and

development. Effective cash management optimizes the use of cash in a municipality.

3.9.6 The collective objectives of cash management can be summarized as follows:

To ensure the availability at all times of adequate liquid resources for operational purposes and

investment in assets. In effect generating positive cash flow by applying effective techniques for

collecting cash due to the municipality, and expending no more cash than necessary;

To have a positive cash buffer as a safety net against any unforeseen crises or emergencies.

To take advantage of opportunities that arises by attaining the highest possible return at the lowest

risk on investments of surplus cash; and

To demonstrate proper stewardship, accountability and implementation of effective controls on

cash resources – i.e. ensure the safety of public funds.

In order to support municipalities to improve on their cash coverage and overall cash position, the

Municipal Support Program (MSP) is currently undertaking a transversal initiative on cash

management at municipalities. Whilst the initiative has enjoyed wide spread success, the onus rests

with the municipality to implement the processes and procedures introduced by Provincial Treasury to

ensure the continued sustainability of the municipality.

59

Municipalities need to perform a cash management analysis in order to address short falls, increase

revenue collection and curtail spending. Understanding and managing cash is not nearly as

complicated as it first seems as there are only limited places where municipalities can look to identify

opportunities to generate more cash inflows or reduce cash outflows. Implementing sound cash

management may require harsh measures but it will minimize cash flow problems, help maintain

continued financial viability and invariably ensure the sustainability and survival of the municipality.

Every municipality has its own unique cash needs but good cash management is universally essential

to a financially healthy organisation.

61

Chapter 4: District Performance Analysis

The monthly budget reports produced by municipalities in terms of Section 71 of the MFMA are the

core of the In-Year Monitoring (IYM) process that National and Provincial Treasuries have

implemented and the objectives of the IYM process are amongst others:

to improve the quality and the credibility of the information provided;

to assist municipalities in identifying financial problems facing the municipalities, including any

emerging or impending financial problems (early warning system); and

to allow for appropriate and timeous action to be taken should there be an indication of

substantial over or under spending against the budget, or any other possible financial problems.

The information provided by municipalities through the Section 71 reports is often not credible and

the following are some of the factors contributing to the poor quality and credibility of these reports:

Section 71 reports are not submitted on time. Some reports were outstanding for a few

municipalities and as a result, these were not included in the Section 71 publication for the year

ended 30 June 2016. Those municipalities are listed in Chapter 5.3: Non-compliance with DoRA

and MFMA;

Non-submission of Signed Section 71 Quarterly Verification and Conditional Grant Schedules

for the fourth quarter of 2015/16. The following are the main non-complying municipalities:

Ezinqoleni, Umdoni, Hibiscus Coast, Ugu DM, Mpofana, Nquthu, eMadlangeni, Dannhauser,

Abaqulusi, and Ulundi. This implies that senior management at these municipalities did not

scrutinise and verify their information for accuracy prior to National Treasury publishing the

Section 71 figures;

Accruals are not processed on a monthly basis;

A large number of municipalities do not account for Depreciation and Debt impairment in their

financial performance returns on a monthly basis; and

Municipalities processed a number of adjustments to the Section 71 figures in preparation for the

submission of the AFS.

The above indicates that, it is probable that there will be material differences between the NT

Lgdatabase published Section 71 report figures and the 2015/16 pre-audited AFS figures that are

submitted to the Auditor-General at the end of August 2016.

While every attempt has been made in this chapter to provide a high level analysis of the budget

performance of all the delegated municipalities, Provincial Treasury’s assessment has been limited to

a large extent in terms of the accuracy and credibility of the figures submitted by the municipalities,

as indicated above. Thus, all queries on the budgeted and actual figures reflected in this report must be

referred to the relevant Municipal Manager (MM) and Chief Financial Officer (CFO) as they are

required to sign off the Section 71 reports as part of the quarterly verification process undertaken by

National Treasury. Furthermore, the reasons for over or under performance were obtained directly

from the municipalities. Where plausible reasons could not be obtained, it has been stated as such in

the report.

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4.1 Ugu District

Ugu District comprises of six local municipalities namely; Vulamehlo, Umdoni, Umzumbe,

uMuziwabantu, Ezinqoleni and Hibiscus Coast. Ugu District and Hibiscus Coast are classified as high

capacity municipalities whilst Umdoni is a medium capacity municipality. Vulamehlo, Umzumbe,

Ezinqoleni and uMuziwabantu are classified as low capacity municipalities. The district is located in

the South Coast of the KwaZulu-Natal province and covers a geographical area of 5 866 km2 with a

coastline of 112 kilometres. Well established commercial bases are found at Hibiscus Coast and

Umdoni Municipalities while the remaining municipalities are rural.

The core trading services rendered by Ugu District Municipality are Water and Sanitation services.

uMuziwabantu and Hibiscus Coast municipalities provide Electricity and Refuse removal services

whilst Umdoni and Ezinqoleni municipalities only render Refuse removal services. Vulamehlo and

Umzumbe municipalities do not render any trading services, however Umzumbe municipality has

budgeted to provide Refuse removal services in the 2016/17 financial year.

During the 2015/16 financial year all the municipalities within the Ugu district had their Municipal

Managers (MM) and Chief Financial Officers (CFO) in office except for Umdoni and uMuziwabantu

Municipalities where the position of the CFO was vacant from 1 February 2015 and 2 November

2015 respectively. Umdoni Municipality has since appointed a CFO on 2 November 2015 while

uMuziwabantu Municipality has an acting CFO.

Umdoni, uMuziwabantu and Hibiscus Coast municipalities improved from a financially unqualified

audit opinion with other matters in 2013/14 to a clean audit report in 2014/15. Ezinqoleni and

Umzumbe municipalities maintained a clean audit report from the 2013/14 financial year. Ugu

District municipality improved from a qualified audit opinion to a financially unqualified audit

opinion with other matters in 2014/15. Vulamehlo municipality remained unchanged with a qualified

audit opinion in the 2014/15 financial year.

Subsequent to the redetermination of municipal boundaries by the Municipal Demarcation Board,

Vulamehlo Municipality has been split between eThekwini Metro and Umdoni Municipalities while

Ezinqoleni and Hibiscus Coast Municipalities have been merged to form Ray Nkonyeni Municipality

after the 2016 local government elections.

It should be noted that the budget performance figures published by National Treasury are preliminary

figures and do not take the year-end reconciliations into consideration. The figures could also change

during the preparation and the audit of the 2015/16 Annual Financial Statements.

4.1.1 Overview of Ugu District Performance

Vulamehlo 87 983 87 983 361 627 411.0

Umdoni 174 836 172 288 158 092 91.8

Umzumbe 154 897 154 897 88 583 57.2

uMuziw abantu 127 772 131 336 138 877 105.7

Ezinqoleni 55 457 55 457 55 727 100.5

Hibiscus Coast 754 860 680 253 774 468 113.8

Ugu DM 807 854 886 502 847 817 95.6

Total 2 163 659 2 168 716 2 425 190 111.8

Source: NT lgdatabase

% Generated

Table 4.1(a) Operating Revenue - 2015/16

R'000 Original Budget Adjusted Budget Unaudited Actual

63

Vulamehlo 100 066 100 066 222 540 222.4

Umdoni 200 896 180 345 134 944 74.8

Umzumbe 154 897 154 897 113 821 73.5

uMuziw abantu 127 772 131 904 110 971 84.1

Ezinqoleni 55 305 55 305 41 139 74.4

Hibiscus Coast 754 860 730 543 680 283 93.1

Ugu DM 804 588 873 793 808 513 92.5

Total 2 198 384 2 226 853 2 112 211 94.9


% Spent

Table 4.1(b) Operating Expenditure - 2015/16


Vulamehlo 39 530 39 530 20 496 51.8

Umdoni 57 934 63 334 44 063 69.6

Umzumbe 57 137 76 084 73 209 96.2

uMuziw abantu 29 561 36 535 28 238 77.3

Ezinqoleni 45 150 45 150 38 043 84.3

Hibiscus Coast 163 336 163 336 100 313 61.4

Ugu DM 396 653 420 517 349 412 83.1

Total 789 302 844 487 653 774 77.4


R'000 Original Budget Adjusted Budget Unaudited Actual % Spent

Table 4.1(c) Capital Expenditure - 2015/16


Vulamehlo 204 3.2 286 4.5 270 4.2 5 658 88.2 6 418

Umdoni (3 551) (10.1) 1 661 4.7 923 2.6 36 185 102.7 35 218

Umzumbe - - - - (25) (0.3) 8 980 100.3 8 954

uMuziw abantu 2 678 21.2 1 388 11.0 400 3.2 8 181 64.7 12 647

Ezinqoleni 141 3.4 133 3.2 127 3.0 3 782 90.4 4 183

Hibiscus Coast 11 693 7.2 3 783 2.3 8 663 5.4 137 273 85.0 161 412

Ugu DM 36 103 12.0 11 910 3.9 10 229 3.4 243 781 80.7 302 022

Total 47 266 8.9 19 161 3.6 20 587 3.9 443 840 83.6 530 854


Total

Table 4.1(d) Debtors Age Analysis (Total)

R'0000 - 30 Days 31 - 60 Days 61 - 90 Days Over 90 Days

Table 4.1(e) Debtors by Customer Group (Total)


Vulamehlo - - - - - - 6 417 944 100.0 6 417 944

Umdoni 1 281 3.6 12 375 35.1 20 166 57.3 1 396 4.0 35 218

Umzumbe 5 102 71.0 2 083 29.0 - - - - 7 185

uMuziw abantu 2 670 21.1 3 388 26.8 6 588 52.1 - - 12 647

Ezinqoleni 760 18.2 3 423 81.8 - - - - 4 183

Hibiscus Coast 2 780 1.7 30 715 19.0 127 736 79.1 181 0.1 161 412

Ugu DM 17 939 5.9 54 242 18.0 229 243 75.9 599 0.2 302 022

Total 30 532 5.8 106 226 20.1 383 733 72.5 8 594 1.6 529 085


Organs of StateR'000 Total

OtherHouseholdCommercial


Vulamehlo (493) 106.0 (2 597) 557.9 3 133 (673.1) (508) 109.2 (465)

Umdoni 36 159 100.0 - - - - - - 36 159

Umzumbe - - - - - - - - -

uMuziw abantu 289 100.0 - - - - - - 289

Ezinqoleni 11 100.0 - - - - - - 11

Hibiscus Coast - - - - - - - - -

Ugu DM 19 528 67.7 8 925 30.9 95 0.3 293 1.0 28 840

Total 55 493 85.6 6 329 9.8 3 228 5.0 (216) -0.3 64 833


Table 4.1(f) Creditors Age Analysis (Total)


Total

64

4.1.2 Analysis per municipality: Vulamehlo Municipality

Table 4.1 (g) Operating Revenue and Expenditure Performance - Vulamehlo Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

2 369 2 369 9 026 381.0 The municipality indicated that the unaudited actual amounts reported in the monthly Section

71 returns are incorrect. Further adjustments and corrections to these misstatements will be

effected during the preparation of the AFS. The municipality's quarterly section 71

verification was not signed by the Municipal Manager to confirm the reported Section 71

figures. Therefore no reasons could be provided for the variances.

– – – -

84 532 84 532 71 580 84.7 The municipality indicated that all Transfers recognised - operational have been fully

recognised and that at the date of submission of the Section 71 returns, the figures were not

finalised.

1 082 1 082 281 021 25 971.7 The municipality indicated that the unaudited actual amounts reported in the monthly Section





87 983 87 983 361 627 411.0











938 938 – - The municipality indicated that Debt Impairment is calculated during the preparation of the

Annual Financial Statements to ensure accuracy and completeness. This information was

not available at the time of the submission of the Section 71 returns.






– – – -

3 869 3 869 387 10.0 The municipality indicated that the unaudited actual amounts reported in the monthly Section










100 066 100 066 222 540 222.4

(12 083) (12 083) 139 086


1 Includes Property rates and Property rates - Penalties and collection charges

2 Includes Serv ices Charges - electricity , w ater, sanitation, refuse and other

3 Includes Rental of facilities and equipment, Interest earned - ex ternal inv estments, Interest earned - outstanding debtors,

Div idends receiv ed, Fines, Licences and permits, Agency serv ices, Other ow n rev enue and Gains on disposal of PPE

4 Includes Finance charges, Transfers and grants, Other material, Other ex penditure and Loss on disposal of PPE

Debt impairment

Operating surplus/(deficit)

Depreciation and asset impairment

Bulk purchases

Contracted serv ices

Other expenditure items4

Total Operating Expenditure

Other sources of Revenue3

Total Operating Revenue

Operating Expenditure

Employee related costs

Remuneration of councillors

R'000

Operating Revenue

Property Rates1

Serv ice Charges2

Transfers recognised - operational

65

Table 4.1 (h) Capital, Cash and Conditional grant Performance - Vulamehlo Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

38 060 38 060 19 735 51.9 The municipality indicated that the actual percentage recognised on

Transfers recognised - capital amounts to 84 percent of the Adjusted

Budget. The Municipal Infrastructure Grant is fully spent and only 85

percent of the Municipal Disaster Recovery Grant has been spent.

– – – -

– – – -

1 470 1 470 761 51.8 The municipality indicated that the percentage spent on Internally

generated funds amounts to 100 percent of the Adjusted Budget.

However, at the date of submission of the Section 71 returns, the figures

were not finalised.

39 530 39 530 20 496 51.8

1 220 1 220 – - The municipality indicated that the unaudited actual amounts reported in

the monthly Section 71 returns are incorrect. Further adjustments and

corrections to these misstatements will be effected during the preparation

of the AFS. The municipality's quarterly section 71 verification was not

signed by the Municipal Manager to confirm the reported Section 71


– – 272 - The municipality indicated that the unaudited actual amounts reported in






38 310 38 310 20 224 52.8 The municipality indicated that the unaudited actual amounts reported in






– – – -

– – – -

39 530 39 530 20 496 51.8

2 733 2 733 – The municipality has not recorded its Cash and cash equivalents at year

beginning whereas the Cash and cash equivalents at year end as per the

2014/15 audited AFS is reflected as R31.7 million resulting in the

understatement of Cash and cash equivalents by R31.7 million.

6 084 6 084 219 264 The municipality indicated that the unaudited actual amounts reported in






3 351 3 351 219 264

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 875 1 875 100.0% –

930 264 28.4% 666 The municipality indicated that the MSIG grant has been fully spent.


were not finalised.

15 000 18 196 121.3% (3 196) The municipality indicated that the MIG grant has been fully spent.


were not finalised. Furthermore, R3.6 million of the grant was withheld by

National Treasury due to poor spending.

R'000

Capital Revenue

T ransfers recognised - capital

Public contributions and donations

Borrowing

Internally generated funds

Total Capital Revenue

Capital Expenditure

Governance and Administration

Community and Public Safety

Eco. & Environmental Services

Trading Services

Other

Total Capital Expenditure

Cash Receipts and Payments

Cash/cash equiv. at the year begin:


Cash/cash equiv. at the year end:

Net Increase/(Decrease) in cash held

National Conditional Grant


Municipal System Improvement Grant

66

Table 4.1 (i) Trade and other receivables, Trade and other payables and Key ratios - Vulamehlo Municipality

Amount % of

total debt /

payables

5 680

6 418

204 3.2%

286 4.5%

270 4.2%

5 658 88.2%

6 418 100.0%

– -

– -

– -

6 418 100.0%

6 418 100.0%

(493) -

(2 597) -

3 133 -673.1%

(508) -

(465) -

Norm/

Range

% Actual

25% - 40% 31.6%

2% - 5% 0.2%

- 80.2%

- 3.7%

10% - 20% 8.4%

= or > 0% 38.5% The municipality has recorded a ratio of 38.5 percent as Net operating surplus

margin. However, the ratio may be overstated due to the incorrect actual amounts

reported in the Section 71 reports.

The municipality has recorded 80.2 percent as Own sources of revenue to total

operating revenue. However, the ratio may be overstated due to the incorrect actual

amounts reported in the Section 71 reports.

The municipality has recorded 3.7 percent as Own funded capital expenditure.

However, the ratio may be overstated due to the incorrect actual amounts reported in

the Section 71 reports.

The municipality has recorded a ratio of 8.4 percent which is below the norm.

However, the ratio may be misstated due to the incorrect actual amounts reported in

the Section 71 reports.

The municipality has recorded a ratio of 31.6 percent which is within the norm.

However, this ratio may be overstated due to the incorrect actual amounts reported

in the Section 71 reports.

The municipality has recorded a ratio of 0.2 percent which is below the norm.

However, this ratio may be understated due to the incorrect actual amounts reported

in the Section 71 reports.

The municipality indicated that the unaudited actual amounts reported in the monthly

Section 71 returns are incorrect. Further adjustments and corrections to these

misstatements will be effected during the preparation of the AFS. The municipality's

quarterly section 71 verification was not signed by the Municipal Manager to confirm

the reported Section 71 figures. Therefore no reasons could be provided for the

variances.





the reported Section 71 figures.





the reported Section 71 figures.

Comments

R'000

Debtor

Debtors as at 30 June 2015


By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days

Total by age analysis

By customer group

Organs of state

Households

61-90 days

>90 days


Total by customer group

Creditor

By age analysis

0-30 days

31-60 days

Key Ratios

Expenditure management

Remuneration as a % of Total operating expenditure

Contracted services as a % of Total operating expenditure

Grant dependency

Efficiency

Net operating surplus margin

Own sources of revenue to total operating revenue

Own funded capital expenditure

Asset Management

Capital Expenditure to Total expenditure

67

4.1.3 Analysis per municipality: Umdoni Municipality

Table 4.1 (j) Operating Revenue and Expenditure Performance - Umdoni Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

70 060 70 064 69 960 99.9

8 250 8 250 8 136 98.6

71 273 71 473 60 678 84.9 The municipality indicated that all Transfers recognised - operational have been fully

recognised and that at the date of submission of the Section 71 returns, the figures were not

finalised.

25 253 22 501 19 318 85.9 The municipality indicated that Other revenue generated has actually exceeded the

budgeted amount as 110.7 percent of the budget was generated. At the date of submission

of the Section 71 returns, the figures were not finalised.

174 836 172 288 158 092 91.8

66 795 65 275 67 449 103.3 The municipality indicated that Employee related costs incurred were at 97.6 percent when

compared to the Adjustments Budget. However, at the date of submission of the Section 71

returns, the figures were not finalised.

6 782 6 838 2 548 37.3 The municipality indicated that Remuneration of Councillors incurred were at 94.7 percent

when compared to the Adjustments Budget. However, at the date of submission of the

Section 71 returns, the figures were not finalised.

2 000 – – - The municipality indicated that Debt Impairment is calculated and captured during the

preparation of the Annual Financial Statements to ensure accuracy and completeness. This

information was not available during the submission of the Section 71 returns. Furthermore,

the municipality has not populated the Adjustments Budget return accurately as the Adjusted

Debt impairment of R2 million was not reflected.

29 000 29 158 – - The municipality indicated that Depreciation and asset impairment is calculated during the

preparation of the Annual Financial Statements to ensure accuracy and completeness. This

information was not available at the time of the submission of the Section 71 returns.

– – – -

18 725 11 118 16 323 146.8 The municipality indicated that the actual Contracted Services incurred were at 93.8 percent

when compared to the Adjustments Budget. However, at the time of submission of the

Section 71 returns, the figures were not finalised. Furthermore, the amount of R11.1 million

reflected in the Adjustments Budget is incorrect. The approved Adjustments Budget amount

for this line item is R18.4 million.

77 593 67 955 48 624 71.6 The municipality indicated that Other expenditure incurred was at 85.1 percent of the

Adjustments Budget which is as a result of savings made on the cost of Repairs and

maintenance due to the replacement of old vehicles. At the date of submission of the Section

71 returns, the figures were not finalised.

200 896 180 345 134 944 74.8

(26 059) (8 057) 23 148 The municipality has reported an Operating surplus of R23.1 million. However, the

inclusion of the expenditure on Debt impairment and Depreciation and asset impairment

may result in an Operating deficit.







Debt impairment



Bulk purchases









R'000

Operating Revenue

Property Rates1

Serv ice Charges2


68

Table 4.1 (k) Capital, Cash and Conditional grant Performance - Umdoni Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

26 405 33 246 24 275 73.0 The municipality indicated that the percentage spent on Transfers

recognised - capital amounts to 80.3 percent of the Adjusted Budget. The

municipality has not fully spent its capital grants as 94 percent of the

Municipal Infrastructure Grant and 52.9 percent of the Municipal Disaster

Recovery Grant was spent.

– – – -

– – – -

31 529 30 088 19 789 65.8 The municipality indicated that the percentage spent on Internally

generated funds amounts to 88 percent of the Adjusted Budget.

57 934 63 334 44 063 69.6

381 6 023 3 565 59.2 The municipality indicated that the capital expenditure incurred in the

Governance and Administration vote amounts to 88.7 percent. However,

at the date of submission of the Section 71 returns, the figures were not

finalised.

2 177 1 961 1 886 96.2

55 377 55 350 38 612 69.8 The municipality indicated that the capital expenditure incurred in the

Economic & Environmental Services vote amounts to 85.7 percent.


were not finalised.

– – – -

– – – -

57 934 63 334 44 063 69.6

71 874 4 303 4 303 The municipality has recorded its Cash and cash equivalents at year

beginning as R4.3 million whereas the Cash and cash equivalents at year

end in the 2014/15 audited AFS are reflected as R91.8 million resulting in

the understatement of Cash and cash equivalents by R87.5 million.

60 290 7 912 6 333 The municipality has recorded its Cash and cash equivalents at year end

as R6.3 million whereas the closing Cash and cash equivalents balance

in the Bank reconciliation as 30 June 2016 is reflected as R5.7 million

resulting in the overstatement of Cash and cash equivalents at year end

by R800 000.

(11 584) 3 609 2 030

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 800 100.0% –

930 930 100.0% –

20 060 22 960 114.5% (2 900) The municipality indicated that expenditure on the MIG amounts to 94

percent. However, at the date of submission of the Section 71 returns, the

figures were not finalised.

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Services

Other










69

Table 4.1 (l) Trade and other receivables, Trade and other payables and Key ratios - Umdoni Municipality

Amount % of

total debt /

payables

46 185

35 218

(3 551) -

1 661 4.7%

923 2.6%

36 185 102.7%

35 218 100.0%

1 281 3.6%

12 375 35.1%

20 166 57.3%

1 396 4.0%

35 218 100.0%

36 159 100.0%

– -

– -

– -

36 159 100.0%

Norm/

Range

% Actual

25% - 40% 51.9%

2% - 5% 12.1%

- 61.6%

- 44.9%

10% - 20% 24.6%

= or > 0% 14.6%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


The negative balance is due to Debtors paying their accounts in advance. These

amounts will only be allocated as and when the debt becomes payable.

The municipality reported R36.2 million of Debtors outstanding for over 90 days and

R20.8 million or 57.4 percent of these Debtors relates to Property rates of which

R19.8 million or 95.5 percent is owed by Households. The municipality indicated that

the bulk of the Debtors resulting from Property rates cannot be written off and

recovery of the debt by legal processes takes a long time to resolve. However, there

are proper debt collection procedures in place.

The municipality indicated that the bulk of the Commercial Debtors result from

Property rates which cannot be written off and recovery of the debt by legal processes

takes a long time to resolve. However, there are proper debt collection procedures in

place.

The municipality indicated that the bulk of the Household Debtors result from Property

rates which cannot be written off and recovery of the debt by legal processes takes a

long time to resolve. However, there are proper debt collection procedures in place.

The municipality indicated that this category mainly relates to Agriculture, Public

Benefit Organisations and Vacant land.

The municipality has reported a Net Operating surplus margin of 14.6 percent.

However, the inclusion of the expenditure on Debt impairment and Depreciation and

asset impairment may result in an Operating deficit.

The municipality has reported a ratio of 24.6 percent of Capital expenditure to Total

expenditure. However, the ratio may be overstated as expenditure for Debt

impairment and Depreciation and asset impairment has not been recorded.

The municipality indicated that this ratio should be 48.8 percent after considering the

finalised figures for the year. However, the ratio may be overstated as expenditure for

Debt impairment and Depreciation and asset impairment has not been recorded.

The municipality uses the services of contractors for most of its routine activities which

include maintenance, security, assessment of landfill sites and meshing. However,

the ratio may be overstated as expenditure for Debt impairment and Depreciation

and asset impairment has not been recorded.

70

4.1.4 Analysis per municipality: Umzumbe Municipality

Table 4.1 (m) Operating Revenue and Expenditure Performance - Umzumbe Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

4 158 4 158 5 788 139.2 The municipality generated R5.8 million or 139.2 percent of revenue against the Adjusted

Budget of R4.2 million for Property rates. The municipality has attributed this over

generation of revenue to the budget which was understated, thus resulting in the Property

Rates revenue being higher than the Adjustments Budget.

– – 3 - The municipality generated R3,000 for Service charges, however no budget was reflected

for this line item in the Section 71 Reports for the period ended 30 June 2016. The

municipality indicated that an amount of R16,000 was budgeted for this line item in the

Adjusted Budget. However, there was an error in the Adjustments Budget returns thus

reflecting nil in the Section 71 reports.

139 557 139 557 73 320 52.5 According to the municipality, both the Adjusted Budget and the Unaudited Actual appears

to be incorrectly reflected in the Section 71 Reports for the period ended 30 June 2016.

The correct amount generated for Transfers recognised - operational is R124.7 million

against the Adjusted Budget of R128.9 million. The under generation of this line item is

attributed to the INEP grant that was not fully spent by the end of the 2015/16 financial year.

11 183 11 183 9 472 84.7 The under generation of this line item is mainly attributed to provincial rollover grants from

previous years that were not fully spent during the 2015/16 financial year, namely Low

Cost Housing grant which amounted to R568,00; KZN Sports grant which amounted to

R524,000; Project Consolidate grant which amounted to R99,000 and Massification grant

which amounted to R2 million.

Notwithstanding the above, Interest earned - external investments generated R7.1 million

or 156.8 percent of revenue against the Adjusted Budget of R4.5 million. This was

attributed to the high interest rates generated by the municipality's current account.

154 897 154 897 88 583 57.2

40 589 40 589 36 045 88.8 The municipality attributed this under performance to reporting errors and misallocations in

the Section 71 Reports. The municipality indicated that the correct amount spent on

Employee related costs is R36.4 million and this amount will be reflected in the 2015/16

AFS.

12 521 12 521 13 603 108.6 The municipality attributed this over spending to reporting errors and misallocations in the

Section 71 Reports. The municipality indicated that it has spent R12.5 million or 100

percent of the Adjusted Budget and this will be reflected in the 2015/16 AFS.

– – – -

15 500 15 500 – - The municipality did not account for Depreciation and asset impairment at the end of

2015/16 financial year despite having budgeted R15.5 million for this item. The municipality

indicated that as at the reporting date, the depreciation calculations were not finalised and

will be incorporated in the 2015/16 AFS.

– – – -

2 250 2 250 655 29.1 The municipality reported expenditure of R655,000 or 29.1 percent for Contracted services

against the Adjusted Budget of R2.3 million. The municipality has indicated that the reported

amount excludes the 2015/16 year end accruals. The correct expenditure amount of R2.2

million will be reflected in the 2015/16 AFS.

84 037 84 037 63 518 75.6 The municipality attributed the under spending to the 2015/16 year-end accruals which

have not yet been finalised and cost-cutting measures that were implemented during the

2015/16 financial year. The correct amount of R69.7 million will be reflected in the 2015/16

AFS.

154 897 154 897 113 821 73.5

– – (25 238) The municipality reported an Operating deficit of R25.2 million, which may be understated

as the municipality has indicated that year-end accruals have not been taken into account,

errors in Transfers recognised - operational that has been understated and non-cash

items such as Depreciation has not yet been accounted for in the Section 71 Reports for the

period ended 30 June 2016.



2 Includes Serv ices Charges - electricity , water, sanitation, refuse and other

3 Includes Rental of facilities and equipment, Interest earned - external investments, Interest earned - outstanding debtors,

Div idends received, Fines, Licences and permits, Agency serv ices, Other own revenue and Gains on disposal of PPE

4 Includes Finance charges, Transfers and grants, Other material, Other expenditure and Loss on disposal of PPE

Debt impairment



Bulk purchases









R'000

Operating Revenue

Property Rates1

Serv ice Charges2


71

Table 4.1 (n) Capital, Cash and Conditional grant Performance - Umzumbe Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

57 137 76 084 73 209 96.2 The municipality reported capital revenue of R73.2 million or 96.6 percent for

Transfers recognised - capital in the Section 71 Reports for the period ended

30 June 2016. Under performance on this line item was attributed to the

Disaster management grant that was not fully spent by the end of the 2015/16

financial year.

– – – -

– – – -

– – – -

57 137 76 084 73 209 96.2

6 215 6 215 3 649 58.7 The municipality reported R3.6 million or 58.7 percent against the Adjusted

Budget of R6.2 million for Governance and administration. The municipality

has attributed this under expenditure to errors and misstatements in the

figures reported in the Section 71 reports. The correct amount spent on

Governance and Administration for the 2015/16 financial year is R5.1 million

and the under spending of R1 million was attributed to the unspent provincial

grants that will be rolled over for the 2016/17 financial year.

50 922 69 869 69 560 99.6

– – – -

– – – -

– – – -

57 137 76 084 73 209 96.2

91 786 – – The municipality did not report on the opening balances of the Cash and

cash equivalents at the beginning of the 2015/16 financial year. The correct

amount to be reflected for both the Adjusted Budget and Unaudited Actual

columns is R110.4 million. The municipality has however indicated that it will

rectify this error or omission in the 2015/16 AFS.

91 786 (24 822) 51 943 The municipality reported R51.9 million for Cash and cash equivalents for the

period ended 30 June 2016. However, the bank statements that were

obtained from the municipality reflected a closing balance of R112.6 million as

at 30 June 2016. The municipality indicated that it will rectify this error in the

2015/16 AFS.

0 (24 822) 51 943

Total Avail.

2015/16

Unaudited

Actual

% Spent Amount

Unspent/ 1 800 1 800 100.0% –

930 1 071 115.2% (141) The municipality reported expenditure of R1.1 million or 115.2 percent for the

MSIG grant in the Section 71 Reports for the period ended 30 June 2016.

The over performance on this grant was attributed to errors in the monthly

Section 71 reports. The municipality has indicated to have spent R930,000

or 100 percent of the MSIG as at 30 June 2016.

38 522 38 246 99.3% 276

R'000

Capital Revenue

Transfers recognised - capital


Borrowing



Capital Expenditure



Eco. & Environmental Serv ices

Trading Serv ices

Other



Cash/cash equiv . at the year begin:


Cash/cash equiv . at the year end:





72

Table 4.1 (o) Trade and other receivables, Trade and other payables and Key ratios - Umzumbe Municipality

Amount % of

total debt /

payables

6 223

8 954

– -

– -

(25) -

8 980 100.3%

8 954 100.0%

5 102 57.0%

2 083 23.3%

– -

1 769 19.8%

8 954 100.0%

– -

– -

– -

– -

– -

Norm/

Range

% Actual

25% - 40% 43.6%

2% - 5% 0.6%

- 17.2%

- 0.0%

10% - 20% 39.1%

= or > 0% -28.5%

Efficiency




Asset Management


Key Ratios



Contracted serv ices as a % of Total operating expenditure

Grant dependency

61-90 days

>90 days


Total by customer group Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


The municipality has attributed this negative amount of R25 000 to year-end accruals

which will reverse at the end of the 2015/16 financial year.

The municipality reported R8.9 million for Debtors as at 30 June 2016, which is a

R2.7 million or 43.9 percent increase from the 2014/15 financial year. The

municipality attributed the increase to the culture of non payment within the municipal

area and indicated that it will implement more debt collection initiatives in order to

encourage customers to pay their outstanding debts.

The municipality reported R9 million for Debtors outstanding for over 90 days. The

municipality has however embarked on various collection methods as part of an

incentive strategy to recover all outstanding debtors. In addition, the municipality will

seek to appoint officials to conduct data cleansing for all debtors. This strategy has

been approved by Council to be implemented in the 2016/17 financial year.

The municipality has reported R5.1 million or 57 percent of its debts outstanding from

Organs of state. This is mainly attributed to schools and the Department of Land Affairs.

The municipality has made enquiries with these government departments, however no

positive responses have been received.

The municipality has reported R2.1 million or 23.3 percent of its debts outstanding from

Commercial debtors. This is mainly attributed to agricultural farms. These farms will be

mostly targeted during the data cleansing exercise since it appears that they are not

responding to correspondence sent by the municipality.

The municipality has reported R1.8 million or 19.8 percent of its debts outstanding from

Other debtors. This is mainly attributed to communal land that is owned by Ingonyama

Trust and the municipality does encounter some challenges in collecting from this

customer group due to a number of factors.

The municipality has erroneously not reported on Creditors as required by the Section

71 reporting requirements.

The municipality has attributed the Operating deficit to year-end accruals, errors in

Transfers recognised - operational that has been understated and expenditure items

such as Depreciation that were not accounted for in the Section 71 Reports.

The low rate of Own sources of revenue is an indication that the municipality is highly

grant dependent. Furthermore, Own sources of revenue is based on the tariffs that

are not currently cost reflective as the community within the municipality is rural and the

affordability is still a concern.

The municipality did not budget for Internally generated funds in the 2015/16 financial

year. Hence, no capital expenditure was incurred on this line item.

The municipality has attributed this significant percentage to errors in the Section 71

Reports and anticipate to reflect correct figures in the 2015/16 AFS.

The municipality has attributed this significant percentage to errors in the Section 71

Reports as at 30 June 2016 and year end accruals have not been taken into account.

The municipality has attributed this low percentage to cost-cutting measures that were

implemented during the 2015/16 financial year.

73

4.1.5 Analysis per municipality: uMuziwabantu Municipality

Table 4.1 (p) Operating Revenue and Expenditure Performance - uMuziwabantu Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

11 618 14 647 15 588 106.4 The municipality indicated that the over generation of Property rates was as a result of the

underestimation of the Adjusted Budget amount of R14.6 million during the Adjustments

Budget process.

33 113 33 113 29 342 88.6 The municipality indicated that the under generation of Service charges was as a result of

the overestimation of the Adjusted Budget amount of R29.3 million during the Adjustments

Budget process.

74 307 73 584 78 638 106.9 The municipality incorrectly populated an amount of R73.6 million in the Adjusted Budget

return instead of R82.1 million as per the Approved Adjustments Budget. The municipality

also incorrectly populated the monthly Section 71 report as R78.6 million was reflected

instead of the Transfers recognised - operational of R82.1 million.

8 734 9 992 15 308 153.2 The over generation of this line item is mainly attributed to Interest earned - external

investments which reported R7.5 million or 188.4 percent of revenue against the Adjusted

Budget of R4 million and Other own revenue which reported R5.4 million or 192.8 percent

of revenue against the Adjusted Budget of R2.8 million.

127 772 131 336 138 877 105.7

45 715 44 700 36 835 82.4 The municipality indicated that some of the vacant posts in the 2015/16 financial year were

not filled.

6 612 6 612 6 174 93.4 The municipality stated that the under spending for the Remuneration of councillors was due

to some of the councillors not finishing their term of office.

169 169 – - The municipality reported no expenditure on Debt impairment against the Adjusted Budget

of R169 000, thus understating operating expenditure at the end of the 2015/16 financial

year.

6 259 8 924 – - The municipality reported no expenditure on Depreciation and asset impairment against the

Adjusted Budget of R8.9 million, thus understating operational expenditure at the end of the

2015/16 financial year. The municipality has stated that it only accounts for Depreciation and

asset impairment at the end of the financial year.

28 100 28 100 23 160 82.4 The municipality indicated that the budgeted amount of R28.1 million for Bulk purchases was

overestimated during the Adjusted Budget process.

1 584 2 852 2 977 104.4 According to the municipality, the Adjusted Budget of R2.9 million was underestimated as the

payments for Security services of R3 million were more that the budgeted amount.

39 332 40 548 41 825 103.2 The municipality reported R41.8 million or 103.2 percent for Other expenditure, which is

R1.3 million or 3.2 percent above the Adjusted Budget of R40.5 million. The municipality

indicated that the overspending was as a result of underestimation of the Adjustments

Budget.

127 772 131 904 110 971 84.1

0 (568) 27 907







Debt impairment



Bulk purchases









R'000

Operating Revenue

Property Rates1

Serv ice Charges2


74

Table 4.1 (q) Capital, Cash and Conditional grant Performance - uMuziwabantu Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

29 561 36 535 27 429 75.1 The municipality reflected the Adjusted Budget of R36.5 million in their returns

which incorrectly included R14.8 million for Internally generated funds.

According to the municipality, the Transfers recognised - capital of R21.6

million were fully spent as at the end of the 2015/16 financial year.

– – – -

– – – -

– – 809 - The municipality incorrectly populated Section 71 report which reflect

R809 000. According to the municipality, R5.6 million or 37.8 percent was

spent against the budgeted R14.8 million for Internally generated funds. The

under spending was attributed to delays in the implementation of capital

projects.

29 561 36 535 28 238 77.3

966 3 035 1 356 44.7 The municipality indicated that the under spending on this vote was due to

delays in the implementation of the capital projects.

3 047 1 391 155 11.2 The under spending reported in this vote is due to the misallocation of

expenditure to Trading Services vote, this was to be rectified by municipality

before the 2015/16 financial year end.

21 958 28 831 18 219 63.2 The municipality indicated that the under spending on this vote was due to

delays in the implementation of the capital projects.

3 590 3 078 8 507 276.4 The over spending reported on Trading services is due to the misallocation

of expenditure for Community and Public Safety and Government and

Administration votes, this was to be rectified by municipality before the

2015/16 financial year end.

– 200 – - The municipality has indicated that the Adjusted Budget amount of

R200 000 that was budgeted for the upgrade of municipal buildings was not

spent as at the end of 2015/16 financial year due to delays in the

implementation of the capital projects.

29 561 36 535 28 238 77.3

51 018 77 097 4 479 The municipality has incorrectly populated the Section 71 reports as they

reflected R4.5 million as Cash and cash equivalent at the year begin instead

of R77.1 million as reflected in the audited 2014/15 Annual Financial

Statements. This error has resulted in Cash and cash equivalent at the year

begin to be understated by R72.6 million.

59 079 73 901 (22 427) The municipality has incorrectly populated the Section 71 reports as they

reflected R4.5 million as Cash and cash equivalent at the year begin instead

of R77.1 million as reflected in the audited 2014/15 Annual Financial

Statements. This error has resulted in negative R22.4 million reported for the

Cash and cash equivalent at the year end. According to the municipality the

Cash and cash equivalent at the year end should be R108.6 million as per

the unaudited amount as at the end of the 2015/16 financial year.

8 062 (3 196) (26 906)

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 800 100.0% –

930 930 100.0% –

22 672 23 728 104.7% (1 056) The municipality has spent 94.5 percent of the allocated R22.7 million. The

over spending is due to the MIG rollover of R2.3 million included in the

Unaudited Actual expenditure by the municipality.









Trading Serv ices

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

75

Table 4.1 (r) Trade and other receivables, Trade and other payables and Key ratios - uMuziwabantu Municipality

Amount % of

total debt /

payables

14 514

12 647

2 678 21.2%

1 388 11.0%

400 3.2%

8 181 64.7%

12 647 100.0%

2 670 21.1%

3 388 26.8%

6 588 52.1%

0 0.0%

12 647 100.0%

289 100.0%

– -

– -

– -

289 100.0%

Norm/

Range

% Actual

25% - 40% 38.8%

2% - 5% 2.7%

- 43.4%

- 2.9%

10% - 20% 20.3%

= or > 0% 20.1%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


A significant percentage of Debtors are outstanding for more than 90 days and have

increased from 64.4 percent to 64.7 percent when compared to the previous financial

year under same period. It appears that the municipality has not implemented

measures to collect long outstanding Debtors which could negatively impact its cash

flow.

The major portion of the R2.7 million is owed by National Departments of Public Works.

According to the municipality, the Commercial Debtors are from various businesses

within the Harding area. The municipality is negotiating and encouraging the business

to settle their long outstanding accounts.

The municipality indicated that the significant amount of outstanding debtors over 90

days is largely influenced by the high unemployment rate, and the overall socio-

economic environment within the municipal area. Hence, R6.9 million or 52.1 percent

of total Debtors relates to Households.

The municipality indicated that the Creditors of R289 000 reported as at 30 June 2016

does not include the accruals. According to the municipality the journals for the accruals

will be processed during the finalisation of the figures for the 2015/16 Annual Financial

Statements.

The municipality realised 43.4 percent of its own revenue which will generate

surpluses to assist the municipality to fund capital projects to enhance service delivery.

According to the municipality the 2.9 percent is incorrect as there was an error in the

population of Adjustments Budget returns. The municipality has funded 40.4 percent or

R14.8 million of the total capital expenditure of R36.5 million from Internally generated

funds.

76

4.1.6 Analysis per municipality: Ezinqoleni Municipality

Table 4.1 (s) Operating Revenue and Expenditure Performance - Ezinqoleni Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

2 703 2 703 2 261 83.7 The municipality attributed the under generation of the Property rates to the overestimation

of the budgeted amount of R2.7 million during the Adjustments Budget process.

– – – -

50 283 50 283 49 612 98.7 The municipality attributed the undergeneration of this line item to the Municipal Demarcation

Transition Grant (MDTG) allocation that was not fully spent. In 2015/16, the National

Treasury reclassified the MDTG from a Schedule 5B (direct grant) to 6B (indirect grant)

which implied that the grant was to be transferred directly to the Department of CoGTA and

spent on behalf of the municipality.

2 471 2 471 3 854 156.0 The municipality generated R3.9 million or 156 percent of revenue against the Adjusted

Budget of R2.5 million for Other sources of revenue. The over generation of this line item is

mainly attributed to the income received from Hibiscus Coast Municipality for the secondment

of Ezinqoleni Municipality staff members which was not budgeted in the Adjustments Budget.

In addition, the municipality received an Interest - external investments of R2.2 million more

than the R1.8 million that was anticipated during the Adjustments Budget process.

55 457 55 457 55 727 100.5

14 734 14 734 15 494 105.2 The municipality indicated that the over spending was due to the underestimation of the

budget during the Adjustment Budget process.

3 663 3 663 3 320 90.6 The under spending is attributed to Month 06 expenditure for the Remuneration of

Councillors that was omitted in the MFMA Section 71 reporting. However, the municipality

has resubmitted the correcting return after the National Treasury's database have been

closed.

165 165 – - The municipality reported no expenditure on Debt impairment against the Adjusted Budget

of R165 000, thus understating operating expenditure at the end of the 2015/16 financial

year. The municipality indicated that at the reporting date, the Debt impairment calculation

was not finalised and would be incorporated in the 2015/16 Annual Financial Statements.

10 395 10 395 – - The municipality reported no expenditure on Depreciation and asset impairment against the

Adjusted Budget of R10.4 million, thus understating operational expenditure at the end of the

2015/16 financial year. The municipality has stated that it only accounts for Depreciation and

asset impairment at the end of the financial year.

– – – -

1 258 1 258 972 77.2 According to the municipality, Cost Containment Measures were implemented during the

year to reduce the expenditure to a minimal level.


below the Adjusted Budget of R25.1 million. The municipality indicated that the under

spending was as a result of the implementation of the Cost Containment Measures which

resulted in savings.

55 305 55 305 41 139 74.4

151 151 14 588 The operating surplus of R14.6 million reported by the municipality may be overstated as

no expenditure was recorded against Debt impairment and Depreciation and asset

impairment, which are budgeted at R165 000 and R10.4 million respectively.







R'000

Operating Revenue

Property Rates1

Serv ice Charges2







Debt impairment



Bulk purchases




77

Table 4.1 (t) Capital, Cash and Conditional grant Performance - Ezinqoleni Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

14 367 14 367 14 147 98.5 The municipality incorrectly populated monthly Section 71 reports as they

incorrectly reflected R14.1 million spending on Municipal Infrastructure Grant

instead of R13.5 million. Therefore, the municipality realised 93.8 percent on

Transfers recognised - capital. According to the municipality, the difference of

R891 000 relates to the Bhosiki and Qhinqa sport fields and Nyuswa skills

centre which were not completed as at the end of the 2015/16 financial year.

– – – -

– – – -

30 783 30 783 23 896 77.6 The municipality indicated that most capital projects that are funded by

Internal generated funds are still under construction. The municipality took a

decision to prioritise the capital projects funded by conditional grants in order

to ensure that grants are not surrendered to the National Revenue Fund.

45 150 45 150 38 043 84.3

1 050 2 250 2 418 107.5 The municipality indicated that they have spent 100 percent on this vote.

However, there were misallocations in this vote as the excess amount of

R168 000 should have been reported under Economic and Environment

Services.

11 500 – 128 - According to the municipality there was an error on the monthly Section 71

report submitted to the National Treasury's database as the amount of R128

000 should have been reported under Economic and Environment Services.

31 200 42 900 35 497 82.7 According to the municipality, the capital projects budgeted under this vote

were still under construction as at 30 June 2016. The municipality stated that

the incomplete projects are funded from the Internally generated funds.

Furthermore, an amount of R296 000 has been misallocated to Governance

and Administration and Community and Public Safety votes.

– – – -

1 400 – – -

45 150 45 150 38 043 84.3

41 230 40 974 39 889 The opening balance of R39.9 million for the 2015/16 financial year does not

agree to the 2014/15 closing balance of R41 million for Cash and cash

equivalents as per the audited 2014/15 AFS, resulting in the under statement

of the opening balance by at least R1.1 million.

21 433 23 513 32 555 The municipality incorrectly populated the monthly Section 71 report as they

reflected R32.6 million as Cash and cash equivalent at the year end.

According to the municipality the Cash and cash equivalent at the year end

should be R33.1 million as per the unaudited closing balance as at the end of


(19 797) (17 461) (7 335)

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 752 97.3% 48 The municipality budgeted to spend a portion of this grant for the

maintenance of financial systems. However, the actual expenditure was less

than the amount that was anticipated to be spent. As a result the Financial

Management Grant was underspent by R48 000.

930 936 100.7% (6) The municipality indicated that they spent 100 percent or R930 000 of the

Municipal System Improvement Grant. The difference of R6 000 was funded

by the Equitable Share. The correcting return has been subsequently

submitted to the National Treasury's database.

14 367 13 476 93.8% 891 The municipality spent 93.8 or R13.5 million of the allocated

R14.4 million for MIG. According to the municipality, the difference of R891

000 relates to the Bhosiki and Qhinqa sport fields and Nyuswa skills centre

projects which were not completed as at the end of the 2015/16 financial

year.

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Serv ices

Other










78

Table 4.1 (u) Trade and other receivables, Trade and other payables and Key ratios - Ezinqoleni Municipality

Amount % of

total debt /

payables

4 357

4 183

141 3.4%

133 3.2%

127 3.0%

3 782 90.4%

4 183 100.0%

760 18.2%

3 423 81.8%

– -

– -

4 183 100.0%

11 100.0%

– -

– -

– -

11 100.0%

Norm/

Range

% Actual

25% - 40% 45.7%

2% - 5% 2.4%

- 11.0%

- 62.8%

10% - 20% 48.0%

= or > 0% 26.2%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


The municipality reported R3.8 million for Debtors outstanding for over 90 days

and R4.2 million or 100 percent of these Debtors relates to Property rates of which

R3.4 million or 81.8 percent is owed by Commercial. The municipality indicated

that the significant amount of outstanding debtors over 90 days is largely influenced

by the socio-economic environment in the municipal area and the distorted

information in the financial system. However, the municipality is conducting data

cleansing to ensure that accurate Debtors records are kept.

The major portion of the R760 000 is owed by National Departments of Public

Works and Provincial Department of Education. The municipality has issued

notifications to remind Debtors of the amount owed to the municipality.

The municipality indicated that it is experiencing challenges with the recovering of

Commercial Debtors as the information in the financial system in distorted.

However, the municipality is conducting data cleansing to ensure that accurate

Commercial Debtors records are kept.

The Net operating surplus margin of 26.2 percent may be overstated as no

expenditure was reported against Debt impairment and Depreciation and asset

impairment, which are budgeted at R165 000 and R10.4 million respectively.

The municipality is situated in the rural area and only generate Own revenue from

items such as Tender sales, Library fees and refunds from LG SETA.

The municipality increased the Capital expenditure to address the backlog on the

service delivery to the community. The Internally generated funds financed 68

percent of the capital projects.

The municipality attributed this to labour intensive mechanism used to deliver

municipal services and the implementation of the Expanded Public Works

Programme which is also labour intensive.

79

4.1.7 Analysis per municipality: Hibiscus Coast Municipality

Table 4.1 (v) Operating Revenue and Expenditure Performance - Hibiscus Coast Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments


Budget of R320.4 million for Property rates. The supplementary valuation roll had new

properties which resulted to an increase in the Property rates billings.

171 352 169 566 159 528 94.1 The municipality generated R159.5 or 94.1 percent of revenue against the Adjusted Budget

of R169.6 million for Service charges. The municipality indicated that the under generation

of Service charges was due to electricity losses.

149 227 142 384 187 492 131.7 The municipality indicated that the unaudited actual of R187.5 million is incorrect due to

challenges with the submission of the corrected Section 71 reports. However, the

municipality will incorporate the correct figures in the 2015/16 Annual Financial Statements

(AFS).


Budget of R47.9 million for Other sources of revenue. The over generation of this line item

is mainly attributed to Fines which reported an increase of 3.8 million or 45.4 percent above

the Adjusted Budget of R8.4 million and Other own revenue with an increase of R2.1 million

or 18.4 percent above the Adjusted Budget of R11.7 million. This was mainly due to the

new revenue enhancement and collection strategies that were adopted by Council in March

2016.

754 860 680 253 774 468 113.8

297 087 312 616 320 602 102.6 The municipality indicated that the over spending was due to increase in Overtime and

Acting allowance as some of the vacant posts were not filled during the year.

19 189 19 664 19 907 101.2 The municipality reported the expenditure of R19.9 million or 101.2 percent for

Remuneration of councillors against the Adjusted Budget of R19.7 million. The over

spending of R243 000 against the Adjustments Budget of R19.7 million was attributed to

backpay payment to Councillors.

– 3 593 – - The municipality reported no expenditure on Debt impairment against the Adjusted Budget

of R3.6 million, thus understating operating expenditure at the end of the 2015/16 financial

year. The municipality indicated that at the reporting date, the Debt impairment expense

amount was not finalised and would be incorporated in the 2015/16 Annual Financial

Statement (AFS).

55 526 69 968 54 990 78.6 The municipality reported expenditure of R55 million or 78.6 percent for Depreciation and

asset impairment, which is R15 million or 21.4 percent below the Adjusted Budget of R70

million. The municipality indicated that the reported expenditure of R55 million for

Depreciation and asset impairment was understated as the Asset register was not updated

at the time of Section 71 reporting.

77 422 77 422 74 066 95.7 The municipality indicated that the budgeted amount of R77.4 million for Bulk purchases was

overestimated during the Adjusted Budget process.

37 967 33 330 29 076 87.2 The municipality attributed the under spending on Contracted services to the fact that the

expired contracts were not renewed during the 2015/16 financial year due to the upcoming

merger in 2016/17.

267 669 213 951 181 641 84.9 The municipality reported R181.6 million or 84.9 percent under spending against the

Adjusted Budget of R214 million. The municipality indicated that the reported under

spending was as a result of year end accruals that were not taken into account at the time of

the submission of Section 71 reports.

754 860 730 543 680 283 93.1

– (50 289) 94 184







R'000

Operating Revenue

Property Rates1

Serv ice Charges2







Debt impairment



Bulk purchases




80

Table 4.1 (w) Capital, Cash and Conditional grant Performance - Hibiscus Coast Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

109 268 109 268 66 059 60.5 The municipality attributed the under performance in Transfers recognised -

capital to the capital projects that were not completed as at the end of the

financial year.

– – – -

– – 19 - The municipality erroneously reported 19 150 as Borrowing in the monthly

Section 71 reports. According to the municipality, no Borrowing was

acquired to fund capital projects during the 2015/16 financial year.

54 068 54 068 34 236 63.3 The municipality indicated that year end accruals were not taken into

consideration at the reporting date of Month 12 Section 71 report. Therefore,

the reported amount is understated.

163 336 163 336 100 313 61.4

152 495 152 495 98 842 64.8 The municipality indicated that year end accruals were not taken into



3 482 3 482 537 15.4 The municipality indicated that year end accruals were not taken into



3 823 3 823 302 7.9 The municipality attributed the underspending in Economic and environment

services vote to tender disputes which resulted in delays in the Supply Chain

Management (SCM) processes.

3 162 3 162 382 12.1 The municipality attributed the underspending in Trading services to delays

in the electrification of low cost houses.

375 375 250 66.7 The municipality indicated that year end accruals were not taken into



163 336 163 336 100 313 61.4

– 91 829 91 829

– 59 090 592 128 The municipality has incorrectly populated the monthly Section 71 reports as

they reflected R592.1 million which is relatively high when compared to the

Adjusted Budget of R59.1 million.

– (32 739) 500 299

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 600 1 535 95.9% 65 According to the municipality, the under spending of R65000 or 4.1 percent

of the allocated R1.6 million was due to the resignation of one of the Interns

that was funded by the Financial Management Grant.

930 734 78.9% 196 The municipality indicated that year end accruals were not taken into

consideration at the reporting date of Month 12 Section 71 report.

Furthermore, the municipality did not provide the total actual amount spent on

Municipal System Improvement Grant taking into consideration the accruals

in the 2015/16 financial year.

50 122 45 080 89.9% 5 042 The municipality attributed the under spending on Municipal Infrastructure

Grant to the capital projects that were not completed by the end of the


R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Serv ices

Other










81

Table 4.1 (x) Trade and other receivables, Trade and other payables and Key ratios - Hibiscus Coast Municipality

Amount % of

total debt /

payables

123 825

161 412

11 693 7.2%

3 783 2.3%

8 663 5.4%

137 273 85.0%

161 412 100.0%

2 780 1.7%

30 715 19.0%

127 736 79.1%

181 0.1%

161 412 100.0%

– -

– -

– -

– -

– -

Norm/

Range

% Actual

25% - 40% 50.1%

2% - 5% 4.3%

- 75.8%

- 34.1%

10% - 20% 12.9%

= or > 0% 12.2%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


The Debtors balance increased by R37.6 million or 30.3 percent from

R123.8 million in the audited 2014/15 AFS to R161.4 million in the 2015/16 financial

year. According to the municipality, the increase was due to high unemployment rate

and the overall socio-economic environment within the municipal area.


The municipality indicated that the significant amount of outstanding Debtors over 90


economic environment within the municipal area.

The municipality indicated that it is experiencing challenges with the recovery of

Commercial Debtors which is largely influenced by the high unemployment rate, and

the overall socio-economic environment within the municipal area.



economic environment in the municipal area. Hence, R127.7 million or 79.1 percent


The municipality submitted a Section 71 return reflecting nil Creditors.

The Net operating margin of 12.2 percent reported by the municipality may be

overstated as no expenditure was recorded against the Adjusted Budget of

R3.6 million for Debt impairment.

The municipality attributed this to labour intensive mechanism used to deliver



82

4.1.8 Analysis per municipality: Ugu District Municipality

Table 4.1 (y) Operating Revenue and Expenditure Performance - Ugu District Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

– – – -

407 861 462 912 319 619 69.0 The municipality indicated that the budgeted Service charges - water revenue amount was

based on an overestimated consumption projection. However, the actual consumption was

lower than anticipated as a result the municipality billing was less than expected.

381 544 378 071 482 953 127.7 The municipality indicated that they have erroneously recognised roll-overs as Transfers

recognised - operational. This error will be rectified during the preparation of the Annual

Financial Statements. Furthermore, the municipality indicated that the 2015/16 operational

grants have been fully recognised.

18 449 45 519 45 245 99.4

807 854 886 502 847 817 95.6

290 324 309 766 295 974 95.5 The municipality indicated that there were positions that were budgeted for in the 2015/16

financial year but were not filled. Furthermore, some of the employees left the municipality

during the financial year due to retirement, death and other employment opportunities.

9 916 11 067 9 427 85.2 The municipality indicated that during the Adjustments Budget process it was anticipated that

Councillors would be paid more travelling allowances as a result the Remuneration of

councillors has been over budgeted.

23 072 23 069 – - The municipality indicated that the Debt impairment adjustment has not been calculated and

the necessary journal has not been processed at the time of the submission of the Section

71 reports. Once the AFS have been finalised Debt impairment will be included.

70 285 116 321 171 602 147.5 The municipality indicated that the assets that were identified during the verification of assets

in the current period were taken into consideration at the current replacement cost. The

Depreciation of these assets has resulted in the substantial increase in the Depreciation and

asset impairment in the current period.

69 255 69 255 60 693 87.6 The municipality indicated that during the 2014/15 financial year there was a severe

drought in the region therefore the municipality anticipated an increase in the water prices

for the 2015/16 financial year due to the demand for this scarce resource. Therefore Bulk

purchases was over budgeted.

22 337 23 121 22 743 98.4

319 400 321 194 248 073 77.2 The municipality attributed the under spending to a decrease in the Finance costs incurred

as a result of the early redemption of long-term loans. Furthermore, Electricity and Fuel for

generators were also over budgeted in anticipation of an increase which is compounded by

illegal connections at some of the pump stations and load shedding which did not occur

during the current financial period.

804 588 873 793 808 513 92.5

3 265 12 709 39 304 The municipality reported an Operating surplus of R39.3 million, which may be overstated

as the municipality has indicated that year end accruals have not been taken into account in

some expenditure line items.







Debt impairment



Bulk purchases









R'000

Operating Revenue

Property Rates1

Serv ice Charges2


83

Table 4.1 (z) Capital, Cash and Conditional grant Performance - Ugu District Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

354 998 368 087 324 982 88.3 The municipality indicated that an allocation of R8.4 million of the

Municipal Water Infrastructure Grant was withheld by National Treasury

and an allocation of R3.4 million of the Water Services Operating Subsidy

that was included in the budget was later reclassified as an allocation in

kind or indirect grant.

– – – -

– – – -

41 655 52 430 24 430 46.6 The municipality indicated that some projects that were budgeted to be

implemented during the 2015/16 financial year were deferred to the

2016/17 financial year which includes the acquisition of vehicles for the

new council.

396 653 420 517 349 412 83.1

27 375 27 335 24 405 89.3 The municipality indicated that the acquisition of vehicles for the new

council was deferred to the 2016/17 financial year.

3 000 6 500 5 588 86.0 The municipality indicated that the skid unit that was budgeted as part of

the disaster plan was deferred to the 2016/17 financial year.

680 1 509 205 13.6 The municipality indicated that the implementation of the project was

delayed.

365 598 385 174 319 214 82.9 The municipality indicated that this is a preliminary amount as it does not

take into account the accruals that would be capitalised as part of capital

expenditure in the 2015/16 AFS.

– – – -

396 653 420 517 349 412 83.1

190 605 246 549 198 086 The municipality has recorded its Cash and cash equivalents at year

beginning as R198.1 million whereas the Cash and cash equivalents at

year end in the 2014/15 audited AFS are reflected as R168.6 million

resulting in the overstatement of Cash and cash equivalents by R29.5

million.

234 571 263 709 206 660 The municipality has recorded its Cash and cash equivalents at year end

as R206.7 million whereas the closing Cash and cash equivalents

balance in the Bank reconciliation as 30 June 2016 is reflected as R265.7

million resulting in the understatement of Cash and cash equivalents at

year end by R59 million.

43 965 17 159 8 574

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 325 1 325 100.0% –

940 940 100.0% –

249 316 249 316 100.0% –









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

84

Table 4.1 (aa) Trade and other receivables, Trade and other payables and Key ratios - Ugu District Municipality

Amount % of

total debt /

payables

317 600

302 022

36 103 12.0%

11 910 3.9%

10 229 3.4%

243 781 80.7%

302 022 100.0%

17 939 5.9%

54 242 18.0%

229 243 75.9%

599 0.2%

302 022 100.0%

19 528 67.7%

8 925 30.9%

95 0.3%

293 1.0%

28 840 100.0%

Norm/

Range

% Actual

25% - 40% 37.8%

2% - 5% 2.8%

- 43.0%

- 7.0%

10% - 20% 30.2%

= or > 0% 4.6%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



By age analysis

0-30 days

31-60 days

Commercial

Other


By customer group

Organs of state

Households

Creditor


By age analysis

0-30 days

31-60 days

>90 days

61-90 days

Comments

R'000

Debtor


The municipality has recorded its Debtors as at 30 June 2016 at R302 million whereas

the closing Debtors balance in the Debtors reconciliation as 30 June 2016 is reflected

as R301.4 million resulting in the overstatement of Debtors by R600 000. However,

the municipality indicated that at the date of submission of the Section 71 returns, the

Debtors figures were not finalised.

The municipality indicated that these Debtors had not been written-off as the

municipality believes that they are still recoverable as they have been handed over to

the debt collectors. Furthermore, some of the Debtors are under dispute and

necessary adjustments are to be made where necessary.

The municipality indicated that Debtors in the Household category comprise of Water

and sanitation consumers and these long outstanding Debtors had not been written-off

as the municipality believes that they are still recoverable as they have been handed

over to the debt collectors. Furthermore, some of the Debtors are under dispute and

necessary adjustments are to be made where necessary.

The municipality indicated that these Creditors were as a result of invoices that were

under dispute due to incorrect invoicing and have been returned to supplier.


submitted late by a supplier.


submitted late by a supplier.

The municipality indicated that Ugu District Municipality covers a wide geographical

area with a huge backlog on basic service delivery to previously disadvantaged

communities which are rural areas therefore the municipality had to invest more

funding on capital infrastructure.

85

4.2 uMgungundlovu District

The uMgungundlovu District comprises of seven local municipalities namely; uMshwathi, uMngeni,

Mpofana, Impendle, Msunduzi, Mkhambathini and Richmond. There are four municipalities

classified as low capacity namely; uMshwathi, Mpofana, Impendle and Richmond while uMngeni,

Mkhambathini and the uMgungundlovu District Municipality are classified as medium capacity.

Msunduzi Municipality is classified as a high capacity municipality. Msunduzi Municipality is a well

established commercial hub and the capital of KwaZulu-Natal whilst the remaining municipalities are

more rural in nature.

The main trading services rendered by the District Municipality are Water and Sanitation services.

uMngeni and Mpofana Municipalities provide Electricity and Refuse removal services whilst

uMshwathi, Impendle and Richmond Municipalities only render Refuse removal services.

Mkhambathini Municipality did not render any trading services during the 2015/16 financial year,

however this municipality has budgeted to provide Refuse removal services during the 2016/17

financial year.

During the 2015/16 financial year uMgungundlovu District, Impendle and uMshwathi Municipalities

had both a permanent Municipal Manager (MM) and Chief Financial Officer (CFO) in office.

Mpofana and Richmond Municipalities had a permanent MM during the full 2015/16 financial year.

uMngeni Municipality had a new Acting MM from 7 September 2015 while Mpofana Municipality

appointed an acting CFO from 10 June 2016. The MM position was vacant at Mkhambathini

Municipality from 15 January 2015, however a permanent MM was appointed from 15 October 2015.

The CFO position was vacant at Richmond Municipality from 1 August 2014, however the

municipality appointed a permanent CFO from 13 July 2015.

uMgungundlovu District Municipality and Msunduzi Municipality achieved clean audits for the

2014/15 financial year. Richmond Municipality regressed from a clean audit in 2013/14 to a

financially unqualified audit report with other matters in 2014/15. All other municipalities in the

uMgungundlovu District maintained their audit opinions from the 2013/14 financial year and received

financially unqualified audit reports with other matters in the 2014/15 financial year with the

exception of Mpofana Municipality, which achieved a qualified audit opinion as it did in the 2013/14

financial year.

It should be noted that the budget performance figures published by National Treasury are preliminary

figures and do not take the year-end reconciliations into consideration. The figures could also change

during the preparation and the audit of the 2015/16 Annual Financial Statements.

The tables in this report reflect budget and actual figures for the delegated municipalities, as well as

the non-delegated municipality. However, the budget performance of Msunduzi Municipality is not

analysed as this municipality reports directly to National Treasury.

86

4.2.1 Overview of uMgungundlovu District Performance

uMshwathi 145 713 151 953 149 695 98.5

uMngeni 318 208 322 717 303 641 94.1

Mpofana 120 818 126 811 89 163 70.3

Impendle 60 410 50 803 49 936 98.3

Msunduzi 4 036 592 4 253 163 3 906 507 91.8

Mkhambathini 84 697 78 358 78 094 99.7

Richmond 88 329 96 800 95 336 98.5

uMgungundlovu DM 579 001 639 943 612 836 95.8

Total 5 433 769 5 720 547 5 285 208 92.4


% Generated



uMshwathi 140 213 125 953 118 679 94.2

uMngeni 317 183 322 449 282 975 87.8

Mpofana 139 333 125 543 69 373 55.3

Impendle 60 411 70 136 64 288 91.7

Msunduzi 4 033 134 4 236 150 3 916 165 92.4

Mkhambathini 83 628 74 231 75 416 101.6

Richmond 89 597 96 904 95 607 98.7


Total 5 440 418 5 653 536 5 218 723 92.3




uMshwathi 32 264 44 096 43 226 98.0

uMngeni 27 249 44 409 17 855 40.2

Mpofana 16 595 14 650 12 116 82.7

Impendle 13 353 13 353 8 485 63.5

Msunduzi 709 060 710 288 472 100 66.5

Mkhambathini 19 301 19 301 16 522 85.6

Richmond 25 850 47 646 30 314 63.6


Total 1 104 169 1 170 787 1 040 717 88.9




87


uMshwathi 1 849 1.9 1 198 1.2 1 204 1.3 91 909 95.6 96 161

uMngeni 2 639 2.7 16 107 16.6 4 532 4.7 73 579 76.0 96 857

Mpofana - - - - - - - - -

Impendle 345 5.8 181 3.0 71 1.2 5 384 90.0 5 981

Msunduzi 305 263 15.2 143 556 7.2 69 982 3.5 1 486 426 74.1 2 005 226

Mkhambathini 2 820 18.5 519 3.4 516 3.4 11 404 74.7 15 259

Richmond 1 185 10.4 322 2.8 256 2.3 9 623 84.5 11 386

uMgungundlovu DM 22 577 5.8 9 113 2.3 7 252 1.9 350 627 90.0 389 570

Total 336 677 12.8 170 996 6.5 83 814 3.2 2 028 952 77.4 2 620 439


Total





uMshwathi 46 810 48.7 15 557 16.2 33 794 35.1 - - 96 161

uMngeni 9 394 9.7 1 821 1.9 70 196 72.5 15 446 15.9 96 857

Mpofana - - - - - - - - -

Impendle 3 340 55.8 2 447 40.9 195 3.3 - - 5 981

Msunduzi 98 314 4.9 424 953 21.2 1 314 641 65.6 167 317 8.3 2 005 226

Mkhambathini 921 6.0 7 088 46.5 2 309 15.1 4 941 32.4 15 259

Richmond 1 462 12.8 2 212 19.4 4 535 39.8 3 178 27.9 11 386


Total 166 076 6.3 467 080 17.8 1 699 628 64.9 287 655 11.0 2 620 439





uMshwathi 1 801 100.0 - - - - - - 1 801

uMngeni - - - - - - - - -

Mpofana - - - - - - - - -

Impendle 98 100.0 - - - - - - 98

Msunduzi 563 987 98.4 5 358 0.9 92 0.0 3 956 0.7 573 392

Mkhambathini 1 774 98.3 31 1.7 (28) (1.5) 28 1.5 1 805

Richmond - - - - - - - - -


Total 669 336 97.8 6 584 1.0 1 452 0.2 6 733 1.0 684 105




Total

88

4.2.2 Analysis per municipality: uMshwathi Municipality

Table 4.2 (g) Operating Revenue and Expenditure Performance - uMshwathi Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

22 470 28 470 27 271 95.8

1 850 1 830 1 790 97.8

107 546 107 546 107 546 100.0


Budget of R14.1 million for Other sources of Revenue. The municipality indicated that the

under generation of revenue is attributed to the municipality not reporting the Interest

earned - external investments for month 12.

145 713 151 953 149 695 98.5

49 726 53 476 54 070 101.1 The municipality reported R54.1 million or 101.1 percent of expenditure against the

Adjusted Budget of R43.5 million for Employee related costs. The over expenditure is

largely attributed to the fact that the municipality incorrectly included the amount for leave

pay outs under the Employee related costs instead of the Leave provision. The municipality

indicated that this error has been corrected during the Annual Financial Statements (AFS)

preparation process.

8 305 8 305 7 970 96.0

– – – -

10 000 9 000 8 728 97.0

– – – -

46 418 29 343 26 700 91.0 The municipality reported R26.7 million or 91 percent of expenditure against the Adjusted

Budget of R29.3 million for Contracted services. The municipality indicated that the under

expenditure is largely attributed to the delays in the Supply chain management processes

for the Repairs and maintenance projects.

25 765 25 830 21 210 82.1 The municipality reported R21.2 million or 82.1 percent of expenditure against the Adjusted

Budget of R25.8 million for Other expenditure items. The under expenditure is attributed to

the fact that the municipality reported the expenditure of R537 613 or 30.7 percent for

Finance charges, R26.7 million or 91 percent for Contracted services and R20.7 million or

85.9 percent for Other expenditure. This was due to the implementation of cost cutting

measures and the year end accruals which were not processed at the time of the MFMA

Section 71 reporting.

Furthermore, the municipality indicated that some operational expenditure relating to INEP

was misallocated to Capital expenditure and thereby understating operating expenditure.

This error was corrected during the preparation of the AFS.

140 213 125 953 118 679 94.2

5 500 26 000 31 016







R'000

Operating Revenue

Property Rates1

Serv ice Charges2







Debt impairment



Bulk purchases




89

Table 4.2 (h) Capital, Cash and Conditional grant Performance - uMshwathi Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

26 764 26 764 26 764 100.0

– – – -

– – – -

5 500 17 332 16 462 95.0

32 264 44 096 43 226 98.0

5 500 7 090 3 846 54.2 The under expenditure is attributed to the fact that the municipality did not

procure the municipal fleet as was originally planned, due to the delays in the

Supply chain management processes.

12 340 19 296 22 767 118.0 The municipality reported R22.8 million or 118 percent of expenditure

against the Adjusted Budget of R19.3 million for Community and Public

Safety. The municipality indicated that the over expenditure was as a result

of the INEP expenditure being misallocated to Capital expenditure instead of

operating expenditure.

14 424 17 710 15 097 85.2 The municipality reported R15.1 million or 85.2 percent of expenditure

against the Adjusted Budget of R17.7 million for Eco. & Environmental

Services. The under expenditure is attributed to the delays in the Supply

chain management processes.

– – 1 515 - The municipality reported R1.5 million for Trading services - Electricity, which

was not budgeted for in the Adjusted Budget. The municipality indicated that

this was as a result of the INEP expenditure being misallocated to Capital

expenditure instead of operating expenditure and that this was corrected

during the preparation of the Annual Financial Statements.

– – – -

32 264 44 096 43 226 98.0

2 427 5 679 477 The opening balance of R477 000 for the 2015/16 financial year does not

agree to the 2014/15 closing balance of R5.7 million for Cash and cash

equivalents as per the audited 2014/15 AFS, resulting in the under statement

of the opening balance by at least R5.2 million.

3 841 2 214 586 The unaudited actual amount of R586 000 for the Cash and cash equivalents

at year end as per MFMA Section 71 report does not agree to the amount of

R7.7 million for Cash and cash equivalents at year end as per the draft

2015/16 AFS, resulting in the under statement of the closing balance by at

least R7.1 million.

1 414 (3 465) 109

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 850 102.8% (50) The municipality reported R1.9 million or 102.8 percent of expenditure

against the grant allocation of R1.8 million. The over expenditure was

attributed to the error in reporting for month 2 expenditure, whereby the

municipality incorrectly included month 1 expenditure of R49 632 into month

2 expenditure.

930 931 100.1% (1)

26 764 26 764 100.0% –

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Serv ices

Other










90

Table 4.2 (i) Trade and other receivables, Trade and other payables and Key ratios - uMshwathi Municipality

Amount % of

total debt /

payables

93 992

96 161

1 849 1.9%

1 198 1.2%

1 204 1.3%

91 909 95.6%

96 161 100.0%

46 810 48.7%

15 557 16.2%

33 794 35.1%

– -

96 161 100.0%

1 801 100.0%

– -

– -

– -

1 801 100.0%

Norm/

Range % Actual

25% - 40% 52.3%

2% - 5% 22.5%

- 28.2%

- 38.1%

10% - 20% 26.7%

= or > 0% 20.7%


grant dependant. Furthermore, Own sources of revenue is based on the tariffs that

are not currently cost reflective as the community within the municipality is rural and the

affordability is still a concern.

The municipality attributed the high rate of Capital expenditure to the fact that the INEP

expenditure was incorrectly included under Capital expenditure instead of Operating

expenditure and that the error will be corrected prior to the finalisation of the 2015/16

AFS.

The municipality attributed this to the labour intensive process used to deliver municipal

services and the implementation of the Expanded Public Works Programme which is

also labour intensive.

The municipality attributed the high spending on this line item to the fact that it currently

does not have in house professional engineers and as a result it relies on consultants

for the engineering professional services.

The Households owed R33.8 million or 35.1 percent of total Debtors, which is

attributed to a culture of non payment within the municipal area.

The municipality reported R91.9 million or 95.6 percent of Debtors outstanding for over

90 days of which R45.5 million or 49.5 percent is owed by Organs of state. The

municipality indicated that R35 million or 36.4 percent is owed by the Department of

Water Affairs and that the negotiations are under way to settle the outstanding amount

during the 2016/17 financial year. The Households owed R32.6 million or 35.5

percent of the Debtors in the Over 90 days category, which is attributed to a culture of

non payment within the municipal area. The municipality indicated that it has

approached attorneys to assist in the effective implementation of the Credit control and

Debt collection policies, such as attaching properties for long outstanding Debtors.

The municipality indicated that R35 million or 74.8 percent of total Debtors owed by the

Organs of state relates to the Department of Water Affairs and that the negotiations are

under way to settle the outstanding amount during the 2016/17 financial year.

The municipality attributed the increase in Debtors to the culture of non payment within

the municipal area and indicated that it has approached attorneys to assist in the

effective implementation of the Credit control and Debt collection policies.

Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management


91

4.2.3 Analysis per municipality: uMngeni Municipality

Table 4.2 (j) Operating Revenue and Expenditure Performance - uMngeni Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

147 379 150 212 162 198 108.0 The municipality generated R162.2 million or 108 percent of revenue against the R150.2

million Adjusted Budget for Property rates. The municipality has attributed the over

generation of this line item to the increase in property values as the property valuations are

being conducted on a monthly basis.

73 410 76 598 65 008 84.9 The municipality generated R65 million or 84.9 percent of revenue against the R76.6 million

Adjusted Budget for Service charges. The municipality indicated that the under generation

of revenue is attributed to the high number of illegal connections within the municipal area.


Budget of R56.6 million for Transfers recognised - operational. The municipality has

attributed the under generation of this line item to the year-end accruals not being

processed at the time of the MFMA Section 71 reporting.


Budget of R39.3 million for Other sources of revenue. The under generation of revenue is

mainly attributed to the fact that the municipality generated significantly less Fines than

originally anticipated. This was as a result of the municipal Traffic department being

dysfunctional due to some of the traffic officials currently undergoing an internal disciplinary

process.

318 208 322 717 303 641 94.1

103 729 96 424 83 697 86.8 The municipality reported R83.7 million or 86.8 percent of expenditure against the R96.4

million Adjusted Budget for Employee related costs. The municipality attributed the under

expenditure to some of the budgeted vacancies for general workers which were not filled

during the financial year.

6 726 7 092 7 237 102.0 The municipality reported R7.2 million or 102 percent of expenditure against the Adjusted

Budget of R7.1 million for Remuneration of councillors. The municipality attributed the over

expenditure to the fact that the budget for this line item was under budgeted.

21 462 22 100 2 266 10.3 The municipality reported expenditure of R2.2 million or 10.3 percent against the Adjusted

Budget of R22.1 million for Debt impairment. The under expenditure was attributed to the

fact that the Debt impairment calculation is finalised during the preparation of AFS in order to

ensure accuracy and completeness. As a result, the finalised Debt impairment figures were

not available at the time of MFMA Section 71 reporting.

11 232 11 232 11 232 100.0

80 432 88 632 86 395 97.5

10 249 12 128 13 550 111.7 The municipality reported R13.6 million or 111.7 percent of expenditure against the R12.1

million Adjusted Budget for Contracted services. The over expenditure is mainly attributed

to the fact that the municipality contracted more security personnel than budgeted in order to

curb land invasions that occurred within the municipal area.

83 351 84 841 78 597 92.6

317 183 322 449 282 975 87.8

1 025 268 20 666







Debt impairment



Bulk purchases









R'000

Operating Revenue

Property Rates1

Serv ice Charges2


92

Table 4.2 (k) Capital, Cash and Conditional grant Performance - uMngeni Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

27 249 22 249 7 191 32.3 The under performance is attributed to the fact that the Adjusted Budget of

R22.2 million is overstated by an amount of R9 million that was withheld

by National Treasury based on the low levels of expenditure reported for

MIG. The under performance is also attributed to the delays in the

Supply chain management processes for the MIG projects.

– – – -

– – – -

– 22 160 10 664 48.1 The under performance of revenue is attributed to the delays in the


27 249 44 409 17 855 40.2

– 471 322 68.4 The municipality reported R322 000 or 68.4 percent of expenditure

against the Adjusted Budget of R471 000 for Governance and

Administration. The under expenditure is attributed to the delays in the


3 500 3 728 813 21.8 The municipality reported R813 000 or 21.8 percent of expenditure

against the Adjusted Budget of R3.7 million for Community and Public

safety. The under expenditure is attributed to the delays in the Supply


18 749 40 075 16 720 41.7 The municipality reported R16.7 million or 41.7 percent of expenditure

against the Adjusted Budget of R40 million for Eco. & Environmental

Services. The under performance is attributed to the fact that the Adjusted

Budget of R40.1 million is overstated by an amount of R9 million that was

withheld by National Treasury based on the low levels of expenditure

reported for MIG. The under performance is also attributed to the delays

in the Supply chain management processes for the MIG projects.

5 000 135 – - The municipality has not reported expenditure against the Adjusted

Budget of R135 000 for Trading services. The municipality indicated that

the budgeted amount relates to INEP budget that was incorrectly budgeted

under the capital budget instead of the operational budget.

– – – -

27 249 44 409 17 855 40.2

8 377 46 652 25 115 The opening balance of R25.1 million for the 2015/16 financial year does

not agree to the 2014/15 closing balance of R46.7 million for Cash and

cash equivalents as per the audited 2014/15 AFS, resulting in the under

statement of the opening balance by at least R21.5 million.

8 761 24 989 40 643

384 (21 663) 15 528

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 600 1 600 100.0% –

930 930 100.0% –

13 249 6 852 51.7% 6 397 The municipality reported R6.9 million or 51.7 percent of expenditure

against the allocation of R13.2 million for MIG. The under expenditure is

attributed to the delays in the Supply chain management processes.









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

93

Table 4.2 (l) Trade and other receivables, Trade and other payables and Key ratios - uMngeni Municipality

Amount % of

total debt /

payables

86 417

96 857

2 639 2.7%

16 107 16.6%

4 532 4.7%

73 579 76.0%

96 857 100.0%

9 394 9.7%

1 821 1.9%

70 196 72.5%

15 446 15.9%

96 857 100.0%

– -

– -

– -

– -

– -

Norm/

Range

% Actual

25% - 40% 32.1%

2% - 5% 4.8%

- 82.1%

- 59.7%

10% - 20% 5.9%

= or > 0% 6.8%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor



R10.4 million or 12.1 percent increase from the 2014/15 financial year. The municipality

attributed the increase in Debtors to the culture of non payment within the municipal area

and indicated that it has approached attorneys to assist in the effective implementation of

the Credit control and Debt collection policies.

The municipality reported R73.6 million for Debtors outstanding for over 90 days of

which R41.4 million or 56.3 percent of these Debtors relates to Property rates. The

Households owed R51.1 million or 69.4 percent of the Debtors in the Over 90 days

category, which is attributed to a culture of non payment within the municipal area. The

municipality indicated that it has approached attorneys to assist with the effective

implementation of the Credit control and Debt collection policies, such as attaching

properties for long outstanding Debtors.

The Households owed R70.2 million or 72.5 percent of total Debtors, which is attributed

to a culture of non payment within the municipal area.

The low rate of Capital expenditure to total expenditure is attributed to the poor

implementation of the capital budget as a result of the delays in the Supply chain

management processes.

94

4.2.4 Analysis per municipality: Mpofana Municipality

Table 4.2 (m) Operating Revenue and Expenditure Performance - Mpofana Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

14 695 12 644 12 395 98.0 The municipality has attributed the under generation of the Property rates to the over

estimation of the budgeted amount of R12.6 million during the Adjustments Budget

process.


challenges with the submission of the Section 71 reports. The correct amount

generated for the Services charges was R45.9 million, resulting in an under generation

of 83.4 percent. The municipality stated that their 2015/16 budget estimates were based

on previous consumption levels. However, the actual consumption in the 2015/16

financial year was less than anticipated.


challenges with the submission of the Section 71 reports. However, the municipality has

recognised 100 percent or R38.4 million of the Transfer recognised - operational.

7 324 20 741 8 443 40.7 According to the municipality, the under generation of revenue amongst other items

was due to the rollover of the 2014/15 Small Town Rehabilitation Grant of R5 million that

was not fully spent by the end of the 2015/16 financial year and Fines of R6.9 million

which were not reported in the Section 71 reports as the municipality's Traffic

department was still capturing the 2015/16 issued traffic fines into the financial system.

However, the municipality will incorporate these figures in the 2015/16 AFS.

120 818 126 811 89 163 70.3

29 168 29 496 24 457 82.9 According to the municipality, the submitted monthly Section 71 reports were incorrect,

the actual amount spent was R29.5 million or 100 percent for Employee related costs.


the actual amount spent was R2.5 million or 100 percent for Remuneration of

councillors.

23 025 10 106 – - The municipality reported no expenditure on Debt impairment against the Adjusted

Budget of R10.1 million, thus understating operating expenditure at the end of the

2015/16 financial year. The municipality indicated that at the reporting date, the Debt

impairment calculation was not finalised and would be incorporated in the 2015/16 AFS.

10 367 5 371 – - The municipality reported no expenditure on Depreciation and asset impairment

against the Adjusted Budget of R5.4 million, thus understating operational expenditure

at the end of the 2015/16 financial year. The municipality has stated that it only accounts

for Depreciation and asset impairment at the end of the financial year during the

preparation of the AFS.


the actual amount spent was R35.7 million or 64.1 percent. The municipality attributed

the under spending to the electricity consumption that has been less than expected in


6 659 4 929 8 448 171.4 The municipality indicated that the Adjusted Budget of R4.9 million for Contracted

services was fully spent. According to the municipality, the reported over spending of the

line item is as a result of misallocations, the excess amount of R3.5 million should have

been reported under Other expenditure and this error will be corrected prior to the

finalisation of the AFS.

12 118 17 372 6 956 40.0 The municipality indicated that the reported under spending was as a result of certain

expenditure items being misallocated from Contracted services. Furthermore, the

municipality was facing cash flow problems during the 2015/16 financial year and was

unable to spend on certain expenditure items.

139 333 125 543 69 373 55.3

(18 515) 1 268 19 790 The Operating surplus of R19.8 million reported by the municipality may be overstated

as no expenditure was recorded against Debt impairment and Depreciation and asset

impairment, which are budgeted at R10.1 million and R5.4 million respectively.

Furthermore, the credibility of revenue and expenditure items is questionable as the

submitted monthly Section 71 reports were incorrect.



2 Includes Services Charges - electricity, water, sanitation, refuse and other


Dividends received, Fines, Licences and permits, Agency services, Other own revenue and Gains on disposal of PPE


R'000

Operating Revenue

Property Rates1

Service Charges2

T ransfers recognised - operational






Debt impairment



Bulk purchases

Contracted services



95

Table 4.2 (n) Capital, Cash and Conditional grant Performance - Mpofana Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

12 295 14 650 12 116 82.7 The municipality incorrectly populated the monthly Section 71 reports as

only R12.1 million spending on Municipal Infrastructure Grant (MIG) was

reflected instead of R16.3 million. The municipality also did not populate

the Adjustments Budget return to record the additional allocation of

R4 million received from the Department of CoGTA for MIG. The

municipality indicated that 100 percent of the Transfers recognised -

capital has been realised.

– – – -

– – – -

4 300 – – -

16 595 14 650 12 116 82.7

– – – -

4 300 – – -

12 295 14 650 12 116 82.7 The municipality incorrectly populated the monthly Section 71 reports as

only R12.1 million spending on Municipal Infrastructure Grant (MIG) was

reflected instead of R16.3 million. The municipality also did not populate

the Adjustments Budget return to record the additional allocation of

R4 million received from the Department of CoGTA for MIG. The

municipality indicated that 100 percent of the Transfers recognised -

capital has been realised.

– – – -

– – – -

16 595 14 650 12 116 82.7

13 766 12 175 – The municipality has not populated the opening balance of R12.2 million

in the Section 71 report as reflected in the audited 2014/15 AFS. This

error has resulted in Cash and cash equivalent at the year begin to be

understated by R12.2 million.

6 884 7 927 37 719 The municipality incorrectly populated the monthly Section 71 report as

R37.7 million was reflected as Cash and cash equivalent at the year end.

According to the municipality, the Cash and cash equivalent at the year

end should be R5.2 million as per the unaudited closing balance as at the

end of the 2015/16 financial year.

(6 882) (4 248) 37 719

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 800 100.0% -

930 1 031 110.8% (101) The municipality indicated that the R1 million or 101 percent spending is

incorrect. According to the municipality, the monthly Section 71 report was

incorrectly populated and the correct expenditure amount should be R540

210. The under spending was attributed to the delays in the acquisition of

the Performance Management System and sourcing of the vendor to

upgrade the server in order to accommodate mSCOA.

16 295 16 295 100.0% –









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

96

Table 4.2 (o) Trade and other receivables, Trade and other payables and Key ratios - Mpofana Municipality

Amount % of

total debt /

payables

34 864

–

– -

– -

– -

– -

– -

– -

– -

– -

– -

– -

– -

– -

– -

– -

– -

Norm/

Range

% Actual

25% - 40% 41.5%

2% - 5% 12.2%

- 73.4%

- 0.0%

10% - 20% 14.9%

= or > 0% 22.2%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


The municipality had challenges with the submission of Month 12 Debtors return until

the database was closed. According to the municipality, the Debtors return has been

subsequently submitted and it reflects an outstanding balance of R78 million as at 30

June 2016.

The municipality had challenges with the submission of Month 12 Creditors return until

the database was closed. According to the municipality, the return was subsequently

submitted and it reflects an outstanding balance of 26.9 million as at 30 June 2016.

The Net operating margin of 22 percent reported by the municipality may be

overstated as no expenditure was recorded against Debt impairment and Depreciation

and asset impairment, which are budgeted at R10.1 million and R5.4 million

respectively.

The municipality was facing cash flow problems as a result, there were no reserves

available to fund the Capital expenditure.

The municipality attributed this to labour intensive mechanism used to deliver municipal

services and the implementation of the Expanded Public Works Programme which is

also labour intensive.

According to the municipality there were misallocations in the Contracted services, the

amount of R3.5 million should have been reported under Other expenditure and it will

be corrected prior to the finalisation of the Annual Financial Statements.

97

4.2.5 Analysis per municipality: Impendle Municipality

Table 4.2 (p) Operating Revenue and Expenditure Performance - Impendle Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

1 200 4 506 4 501 99.9

41 51 45 87.7 The municipality generated R45,000 or 87.7 percent of revenue against the Adjusted

Budget of R51,000 for Service Charges. The municipality has attributed the under

generation of revenue to over budgeting during the Adjustments Budget Process.

43 651 44 031 42 658 96.9 The municipality generated R42.7 million or 96.9 percent of revenue against the

Adjusted Budget of R44 million for Transfers recognised - operational. The municipality

has attributed the under generation of this line item to errors and misstatements in the

Section 71 Reports relating to the FMG grant. The municipality will be reflecting 100

percent revenue generated from Transfers recognised - operational in the 2015/16

Annual Financial Statements (AFS).


Adjusted Budget of R2.2 million for Other sources of revenue. The over generation of

this line item is mainly attributed to Interest earned - external investments which

reported R935,000 or 156 percent of revenue against the Adjusted Budget of

R600,000; Interest earned - outstanding debtors which reported R447,000 or 373

percent of revenue against the Adjusted Budget of R120,000 and Rental of facilities and

equipment which reported R489,000 or 105 percent of revenue against the Adjusted

Budget of R466,000. These increases were not anticipated by the municipality during

the preparation of the 2015/16 Adjusted Budget.

60 410 50 803 49 936 98.3

18 399 19 412 15 782 81.3 The municipality reported expenditure of R15.8 million or 81.3 percent against the

Adjusted Budget of R19.4 million for Employee related costs. The municipality attributed

this under performance to reporting errors and misallocations in the Section 71

Reports. The municipality has indicated to have fully spent the Adjusted Budget of

R19.4 million.


Adjusted Budget of R2.2 million for Remuneration of councillors. The municipality

attributed this under performance to reporting errors and misallocations in the Section

71 Reports. The municipality has indicated to have fully spent the Adjusted Budget of

R2.2 million.

350 350 – - The municipality indicated that Debt impairment figures were not finalised at the time of

Section 71 reporting and will be incorporated in the 2015/16 AFS.

3 800 6 811 2 449 36.0 The amount of R2.5 million for Depreciation and asset impairment reflected in the

Section 71 reports for the year ended 30 June 2016 appears to be understated. The

municipality has indicated that it will reflect the correct amount in the 2015/16 AFS.

– – – -

950 950 1 410 148.5 The municipality reported expenditure of R1.4 million or 148.5 percent for Contracted

services against the Adjusted Budget of R950,000 as reflected in the Section 71 Reports

for the period ended 30 June 2016. The municipality has attributed this overspending to

the misallocation of expenditure.

34 712 40 427 42 960 106.3 Over spending on this line item was mainly attributed to Transfers and grants which

reported R13.9 million or 462 percent against the Adjusted Budget of R3 million. This

was due to an unexpected increase in the number of households receiving Free Basic

Services during the 2015/16 financial year and consequently increasing the cost to the

municipality of providing Free Basic Electricity (FBE).

Not withstanding the over spending from Transfers and grants above, Other

expenditure reported under expenditure of R28.8 million or 77.6 percent against the

Adjusted Budget of R37.2 million. This was attributed to cost-cutting measures that

were implemented during the 2015/16 financial year.

60 411 70 136 64 288 91.7

(1) (19 334) (14 353)







R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



98

Table 4.2 (q) Capital, Cash and Conditional grant Performance - Impendle Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

12 063 12 063 8 361 69.3 The municipality indicated that the allocation of R12 million for Transfer

recognised - capital was fully spent as at 30 June 2016. The amount of

R8.4 million reflected in the Section 71 Reports is not accurate.

– – 124 - The municipality reported R124,000 for Public contributions and

donations, however no budget was reflected for this line item in the

Section 71 Reports for the period ended 30 June 2016. The municipality

has attributed this to the reporting error in the Section 71 returns.

– – – -

1 290 1 290 – - The municipality indicated that it has spent the entire budget allocation of

R1.3 million for Internally generated funds on IT equipment and Office

fittings.

13 353 13 353 8 485 63.5

80 80 211 263.1 The municipality reported R211,000 or 263.1 percent against the

Adjusted Budget of R80,000 for Governance and administration. The

municipality has attributed this overspending to errors and misstatements

in the figures reported in the Section 71 reports for the year ended 30

June 2016 which will be corrected during the finalisation of the 2015/16

AFS.

27 27 711 2 621.9 The municipality reported R711,000 or 2622 percent against the Adjusted

Budget of R27,000 for Community and Public Safety. The municipality

has attributed this significant percentage of overspending to errors and

misstatements in the figures reported in the Section 71 reports for the

year ended 30 June 2016 which will be corrected during the finalisation of

the 2015/16 AFS.

13 246 13 246 7 564 57.1 The municipality indicated that the allocation of R13.2 million for

Economic & Environmental Services was fully spent as at 30 June 2016.

The amount of R7.6 million reflected in the Section 71 Reports was

inaccurate.

– – – -

– – – -

13 353 13 353 8 485 63.5

7 660 4 644 4 670

10 366 2 726 11 694 The municipality reported R11.7 million for Cash and cash equivalents for

the period ended 30 June 2016 whilst the bank statements that were

obtained from the municipality reflected a closing balance of R4.1 million

as at 30 June 2016.

2 706 (1 918) 7 024

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 598 88.8% 202 The municipality reported expenditure of R1.6 million or 88.8 percent for

the FMG grant in the Section 71 Reports for the period ended 30 June

2016. The under performance on this grant was attributed to errors in the

Section 71 monthly returns. The municipality indicated to have spent R1.8

million or 100 percent of the FMG as at 30 June 2016.

930 930 100.0% -

17 063 17 063 100.0% -









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

99

Table 4.2 (r) Trade and other receivables, Trade and other payables and Key ratios - Impendle Municipality

Amount % of

total debt /

payables

3 017

5 981

345 5.8%

181 3.0%

71 1.2%

5 384 90.0%

5 981 100.0%

3 340 55.8%

2 447 40.9%

195 3.3%

– -

5 981 100.0%

98 100.0%

– -

– -

– -

98 100.0%

Norm/

Range

% Actual

25% - 40% 27.2%

2% - 5% 2.2%

- 14.6%

- 0.0%

10% - 20% 11.7%

= or > 0% -28.7% The negative ratio of the Net operating surplus margin is an indication that the

municipality was operating at a deficit during the 2015/16 financial year.

Own funded capital expenditure has been reflected as zero percent due to errors

and misallocations for capital expenditure. The municipality indicated to have

contributed R1.3 million to fund own capital expenditure for 2015/16 financial year.

This will be correctly reflected in the 2015/16 AFS.

The municipality reported R5.4 million or 90 percent for Debtors outstanding for

over 90 days. The municipality attributed this to Organs of state and Commercial

properties. The municipality has however embarked on rigorous debt collection

strategies and this includes data cleansing, holding meetings with the Department

of Public Works and an appointment of a service provider to conduct a verification

of all state debtors.

The municipality reported R3.3 million or 55.8 percent of its debtors outstanding

from Organs of state. The municipality has attributed this debt to unverified

properties, farm land and forests which are assumed to be belonging to the state.

A service provider has been appointed to conduct a verification of the debt which

will be communicated to all affected government departments while demanding

settlements.


R2.9 million or 98.2 percent increase from the 2014/15 financial year. The

municipality attributed the increase in Debtors to the culture of non payment within

the municipal area and indicated that it has approached attorneys to assist with the


Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management


100

4.2.6 Analysis per municipality: Mkhambathini Municipality

Table 4.2 (s) Operating Revenue and Expenditure Performance - Mkhambathini Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

11 454 11 454 11 827 103.3 The municipality generated R11.8 million or 103 percent of revenue against the

Adjusted Budget of R11.4 million for Property rates. The municipality has attributed the

over generation of this line item to the implementation of a supplementary valuation roll

during the year which had revised property values thus increasing the Property rates

billed during the 2015/16 financial year.

– – – -


Adjusted Budget of R60.1 million for Transfers recognised - operational. The

municipality has attributed the under generation of this line item to EPWP and Library

grants that were not fully spent for the period ended 30 June 2016.



this line item is mainly attributed to Interest earned - external investments which

reported R1.9 million or 124 percent of revenue against the Adjusted Budget of R1.5

million; Interest earned - outstanding debtors which reported R2.2 million or 176

percent of revenue against the Adjusted Budget of R1.3 million; Licences and permits

which reported R3.9 million or 108 percent of revenue against the Adjusted Budget

of R3.6 million and Other own revenue which reported R621,000 or 162 percent of

revenue against the Adjusted Budget of R384,000. These increases were not

anticipated by the municipality during the preparation of the 2015/16 Adjusted Budget.

84 697 78 358 78 094 99.7

25 752 25 752 19 263 74.8 The municipality attributed the under performance on Employee related costs to the

senior management positions that were vacant at the beginning of 2015/16 financial

year. The Municipal Manager and the Manager Corporate Services positions were

subsequently filled during the year whilst the Manager Technical Services was reported

to be still vacant as at 30 June 2016.

4 800 4 800 4 620 96.2

800 800 – - The municipality did not account for Debt impairment at the end of 2015/16 financial

year despite having budgeted R800,000 for this item. The municipality indicated that at

the reporting date, the Debt impairment calculation was not finalised and would be

incorporated in the 2015/16 Annual Financial Statements (AFS).

4 700 4 700 2 594 55.2 The amount of R2.6 million for Depreciation and asset impairment reflected in the

Section 71 reports for the year ended 30 June 2016 appears to be understated. The

municipality has indicated that it will reflect the correct amount in the 2015/16 AFS.

– – – -

– – – -

47 576 38 179 48 940 128.2 The municipality reported R48.9 million or 128.2 percent for Other expenditure against

the Adjusted Budget of R38.2 million. The municipality has attributed this over spending

to Municipal Infrastructure Grant (MIG) infrastructure capital expenditure amounting to

R14.8 million that was incorrectly reflected in Other expenditure. The municipality will

rectify this error in the 2015/16 AFS.

83 628 74 231 75 416 101.6

1 069 4 128 2 678 The municipality reported an Operating surplus of R2.7 million which may be

overstated as the municipality has indicated that expenditure items such as Debt

impairment and Depreciation have not been taken into account in the total operating

expenditure. These will be incorporated in the 2015/16 AFS.







R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



101

Table 4.2 (t) Capital, Cash and Conditional grant Performance - Mkhambathini Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

16 851 16 851 16 522 98.1 The municipality indicated that the allocation of R16.9 million for

Transfers recognised - capital was fully spent as at 30 June 2016. The

amount of R16.5 million reflected in the Section 71 reports for the year

ended 30 June 2016 is not accurate. The municipality will rectify this error

in the 2015/16 AFS.

– – – -

– – – -

2 450 2 450 – - The municipality indicated that the entire budget allocation of R2.5 million

for Internally generated funds was spent on plant and equipment.

However, the municipality did not report any expenditure on Internally

generated funds in the Section 71 reports for the year ended 30 June

2016. The municipality will rectify this error in the 2015/16 AFS.

19 301 19 301 16 522 85.6

2 450 1 450 16 522 1 139.5 The municipality reported R16.5 million or 1.139 percent against the

Adjusted Budget of R1.5 million for Governance and administration. The

municipality has attributed this significant percentage of overspending to

errors and misstatements in the figures reported in the Section 71 reports

for the year ended 30 June 2016. The municipality indicated to have

spent R1.5 million or 100 percent on plant and equipment relating to this

line item.

– – – -

16 851 17 851 – - The municipality reported nil expenditure against the Adjusted Budget of

R17.9 million for Economic & Environmental services. The municipality

has attributed this error to misstatements in the figures reported in the

Section 71 reports for the year ended 30 June 2016.

– – – -

– – – -

19 301 19 301 16 522 85.6

5 571 6 034 14 679 The municipality reported R14.7 million for Cash and cash equivalents at

the beginning of the 2015/16 financial year as reflected in the Section 71

reports whilst the audited 2014/15 AFS reflected a closing balance of

R14.6 million.

6 034 9 556 25 189 The municipality reported R25.2 million for Cash and cash equivalents for

the period ended 30 June 2016. However, the bank statements that were

obtained from the municipality reflected R37 million as a closing balance

as at 30 June 2016.

463 3 522 10 511

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 799 99.9% 1

930 931 100.1% (1)

16 851 16 851 100.0% –









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

102

Table 4.2 (u) Trade and other receivables, Trade and other payables and Key ratios - Mkhambathini Municipality

Amount % of

total debt /

payables

12 202

15 259

2 820 18.5%

519 3.4%

516 3.4%

11 404 74.7%

15 259 100.0%

921 6.0%

7 088 46.5%

2 309 15.1%

4 941 32.4%

15 259 100.0%

1 774 98.3%

31 1.7%

(28) -

28 1.5%

1 805 100.0%

Norm/

Range

% Actual

25% - 40% 31.7%

2% - 5% 0.0%

- 26.3%

- 0.0%

10% - 20% 18.0%

= or > 0% 3.4%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


The municipality has attributed the increasing trend for ageing debtors to the

implementation of a supplementary valuation roll during the year which had

revised property values thus increasing debtors to R15.3 million for the period

ended 30 June 2016. Furthermore, the municipality indicated that it has a limited

capacity to implement its credit control policies as it has not filled the Revenue

Manager post.

The reported R11.4 million or 74.7 percent for Debtors in excess of 90 days was

attributed to the implementation of the supplementary valuation roll during the

2015/16 financial year. This resulted in a negative impact on the payment of the

debtors especially by industrial businesses. Final demands and notices have been

sent to all debtors and the municipality has also commenced with legal action.

The municipality reported R921,000 or 6 percent of its debtors outstanding from

Organs of state. The Department of Public Works has been engaged and has

subsequently agreed to settle the outstanding balance at the beginning of the

2016/17 financial year. The rest of the debtors is attributed to Transnet and Sanral

with whom the municipality has communicated the balance owing.


from Commercial properties. The municipality has attributed this to the delay in

appointment of the Revenue Manager, thus impeding on effectively implementing

the Credit Control and Debt Management policies. The municipality has

commenced with legal action, in order to recover all debtors owed by industrial

businesses.


from Households properties. The municipality has also attributed this to the delay

in the appointment of the Revenue Manager, thus impeding on effectively

implementing the Credit Control and Debt Management policies. The municipality

has commenced with legal action, in order to recover all debts owing by

Households.

The municipality attributed this customer group to Agricultural properties, State

Trust Land, Quarries, Race tracks and Game Reserves. The municipality has

commenced with legal action, in order to recover all debts owing by Other debtors.

The municipality has attributed this amount of R31,000 to year-end accruals which

will effectively reverse at the end of 2015/16 financial year.

Own funded capital expenditure has been reflected as zero percent due to errors

and misallocations for capital expenditure. The municipality has contributed R1.3

million to fund its capital expenditure and this error will be corrected during the

finalisation of the 2015/16 AFS.

The municipality utilises internal resources for cleaning and security services.

Consequently, it has neither budgeted for Contracted services nor committed any

expenditure.

103

4.2.7 Analysis per municipality: Richmond Municipality

Table 4.2 (v) Operating Revenue and Expenditure Performance - Richmond Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments


R11.3 million Adjusted Budget for Property rates. The municipality has attributed the

over generation of this line item to Property rates - penalties and collection charges

which was under budgeted during the Adjustments Budget process.

450 450 451 100.3



municipality has attributed the under generation of this line item to the year-end

accruals not being processed at the time of the MFMA Section 71 reporting and also to

the fact that the MSIG and Small Town Rehabilitation grants were not fully spent.


Adjusted Budget of R13.8 million for Other sources of revenue. The under generation

of this line item is mainly attributed to Licences and permits which reported R101 000 or

54.4 percent of revenue against the Adjusted Budget of R186 000 and Agency services

which reported R525 000 or 11.2 percent of revenue against the Adjusted Budget of

R4.7 million. This was mainly due to the driver testing ground not being opened during

the 2015/16 financial year as was originally anticipated.

Not withstanding the issues raised above, Rental of facilities and equipment generated

R6.2 million or 166 percent of revenue against the Adjusted Budget of R3.8 million.

This was attributed to the municipal plantations performing better than expected during


88 329 96 800 95 336 98.5


Adjusted Budget of R36.3 million for Employee related costs. The municipality

attributed this under expenditure to the implementation of cost cutting measures, which

included the decision to only fill critical vacant posts.

4 473 4 280 4 166 97.3

1 085 1 635 1 635 100.0

7 899 8 444 6 950 82.3 The municipality reported expenditure of R7 million or 82.3 percent for Depreciation

and asset impairment, which is R1.5 million or 17.7 percent below the Adjusted Budget

of R8.4 million. The municipality indicated that the expenditure of R7 million for

Depreciation and asset impairment may be understated as the municipality had not

finalised the asset verification process at the time of reporting for MFMA Section 71

reports.

– – – -

7 489 7 600 6 517 85.8 The municipality indicated that the reported expenditure is understated due to the fact

that the year end accruals had not been taken into account at the time of the MFMA

Section 71 reporting. As a result only R6.5 million or 85.8 percent of expenditure was

reported against the Adjusted Budget of R7.6 million for Contracted Services.


R3.4 million or 8.9 percent above the Adjusted Budget of R38.7 million. The

municipality indicated that this was as a result of certain expenditure items being

misallocated from Contracted services and that this will be corrected prior to the


89 597 96 904 95 607 98.7

(1 268) (105) (271) The municipality reported an Operating deficit of R271 000, which may be understated

as the municipality has indicated that year end accruals have not been taken into

account in some expenditure line items.







R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



104

Table 4.2 (w) Capital, Cash and Conditional grant Performance - Richmond Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

17 376 34 585 22 165 64.1 The under performance was attributed to the fact that an amount of

R7 million for MIG was received towards the end of the financial year and

as a result could not be fully spent. Furthermore, the municipality

indicated that the amount of R22.2 million is understated as the year end

accruals were not taken into consideration at the time of the MFMA

Section 71 reporting.

– 1 442 36 2.5 The municipality reported expenditure of R36 000 or 2.5 percent against

the Adjusted Budget of R1.4 million for Public contributions and donations.

This does not appear reasonable as the Public contributions and

donations line item was not budgeted for in the 2015/16 Adjustments

Budget. The municipality has indicated that there was an error in

reporting Adjusted Budget figures to the lgdatabase. Furthermore, the

municipality indicated that the unaudited actual of R36 000 relates to the

assets donated to the municipal library by the Department of Arts and

Culture, which were not budgeted for in the Adjusted Budget.

– – – -

8 474 11 619 8 113 69.8 The municipality indicated that the unspent funds relates to the Sidewalk

project, which could not be implemented due to the land dispute court

case currently in progress.

25 850 47 646 30 314 63.6

443 1 883 400 21.2 The under expenditure was attributed to the delays in receiving the

insurance pay out for the Municipal Managers office building that was

burnt down during the 2014/15 financial year.

2 440 11 008 3 554 32.3 The municipality indicated that the under spending was as a result of the

Sidewalk project that could not be implemented due to the land dispute

court case currently in progress.

22 667 34 450 26 283 76.3 The municipality indicated that an amount of R7 million was received

towards the end of the financial year and as a result could not be fully

spent.

300 306 77 25.2 The municipality reported R77 000 or 25.2 percent of expenditure against

the Adjusted Budget of R306 000 for Trading services - Waste

management. This was attributed to over budgeting and accruals not

taken into account at the time of the MFMA Section 71 reporting.

– – – -

25 850 47 646 30 314 63.6

31 162 47 063 562 The opening balance of R562 000 for the 2015/16 financial year does not

agree to the 2014/15 closing balance of R47.1 million for Cash and cash

equivalents as per the audited 2014/15 AFS, resulting in the under

statement of the opening balance by at least R46.5 million.

42 000 47 446 31 011

10 838 383 30 449

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 679 93.3% 121 The municipality indicated that this grant has been fully spent and that the

difference is due to the year-end accruals not being processed at the time

of the MFMA Section 71 reporting.

930 784 84.3% 146 The municipality indicated that this grant has been fully spent and that the

difference is due to the year-end accruals not being processed at the time

of the MFMA Section 71 reporting.

25 017 22 786 91.1% 2 231 The municipality indicated that an amount of R7 million was received

towards the end of the financial year and as a result could not be fully

spent. However, the municipality indicated that the amount of R22.8

million is understated as the year end accruals were not taken into

consideration at the time of the MFMA Section 71 reporting.









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

105

Table 4.2 (x) Trade and other receivables, Trade and other payables and Key ratios - Richmond Municipality

Amount % of

total debt /

payables

13 001

11 386

1 185 10.4%

322 2.8%

256 2.3%

9 623 84.5%

11 386 100.0%

1 462 12.8%

2 212 19.4%

4 535 39.8%

3 178 27.9%

11 386 100.0%

– -

– -

– -

– -

– -

Norm/

Range

% Actual

25% - 40% 40.1%

2% - 5% 6.8%

- 26.3%

- 26.8%

10% - 20% 24.1%

= or > 0% -0.3%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


The municipality reported R11.4 million for Debtors as at 30 June 2016, which is

relatively less than the 2014/15 closing balance of R13 million by R1.6 million or

12.4 percent. The municipality has indicated that this marginal improvement was

attributed to the effective implementation of the Credit Control and Debt Collection

policies.

The municipality reported R9.6 million for Debtors outstanding for over 90 days and

R9 million or 93.6 percent of these Debtors relates to Property rates of which R3.8

million or 39.1 percent is owed by Households. The municipality indicated that the

significant amount of outstanding debtors over 90 days is largely influenced by the

high unemployment rate, and the overall socio-economic environment in the

municipal area.



economic environment in the municipal area. Hence, R4.5 million or 39.8 percent


The municipality indicated that this category mainly relates to Agriculture, Public

Benefit Organisations and Vacant land.

This ratio indicates that the municipality is unable to generate sufficient own revenue

as the majority of communities in the municipal area are poor and rural.


grant dependant. Furthermore, Own sources of revenue is based on the tariffs that

are not currently cost reflective as the community within the municipality is rural and

the affordability is still a concern.

The higher percentage of Capital expenditure is due to higher spending on

Infrastructure which results in an acceleration of service delivery.

The municipality attributed this to the labour intensive mechanism used to deliver



The municipality attributed the high spending on this line item to the fact that it

currently does not have in house professional engineers and as a result it relies on

consultants for the engineering professional services.

106

4.2.7 Analysis per municipality: uMgungundlovu District Municipality

Table 4.2 (y) Operating Revenue and Expenditure Performance - uMgungundlovu District Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

– – – -


Adjusted Budget of R153 million for Service charges. The municipality indicated that

the under generation is attributed to the drought which had a negative impact on the

budgeted water consumption.



municipality has attributed the under generation of this line item to the year-end journals

not being processed at the time of the MFMA Section 71 reporting and also to the fact

that there were R4 million 2014/15 grant Rollovers that were not approved which were

off-set against the 2015/16 Equitable share.



revenue under this line item is mainly attributed to Interest earned - outstanding debtors

which reported R18.3 million or 636.5 percent of revenue against the Adjusted Budget

of R2.9 million and Other own revenue which reported R56.5 million or 143.2 percent of

revenue against the Adjusted Budget of R39.4 million.

579 001 639 943 612 836 95.8


Adjusted Budget of R208.1 million for Employee related costs. The municipality

attributed this under expenditure to the implementation of the cost cutting measures,

which included a decision to only fill critical vacant posts.

12 327 12 327 10 974 89.0 The municipality reported expenditure of R11 million or 89 percent against the Adjusted

Budget of R12.3 million for Remuneration of councillors. The under expenditure is

attributed to the fact that the municipality over budgeted for Remuneration of councillors

during the Adjusted Budget.


Adjusted Budget of R37.9 million for Debt impairment. The under expenditure was

attributed to the fact that the Debt impairment calculation is finalised during the

preparation of AFS in order to ensure accuracy and completeness. As a result, the

finalised Debt impairment figures were not available at the time of MFMA Section 71

reporting.


R30 million Adjusted Budget for Depreciation and asset impairment. The municipality

indicated that the over expenditure was due to the fact that the underground

Infrastructure assets were revaluated during the year and had resulted in higher

carrying values.


R95.6 million Adjusted Budget for Bulk purchases. The over expenditure is attributed to

the fact that there were new bulk water schemes completed during the current financial

year, which started operating in February 2016.


Adjusted Budget of R95 million for Contracted Services. The municipality indicated that

the reported expenditure is understated due to the fact that the year end accruals had

not been taken into account at the time of the MFMA Section 71 reporting. The

municipality indicated that the Contracted services line item is currently R153.7 million,

which is R58.7 million or 61.8 percent above the Adjusted Budget. The municipality

indicated that the over expenditure was due to the fact that it had to hire more water

tankers to assist in drought affected arrears within the municipal area.


Adjusted Budget of R123.3 million for Other expenditure items. The over expenditure is

attributed to the increased consultant fees for mSCOA pilot project and to increased

expenditure for motor vehicle hire.

576 918 602 170 596 220 99.0

2 082 37 773 16 615







Debt impairment



Bulk purchases

Contracted services








R'000

Operating Revenue

Property Rates1

Service Charges2


107

Table 4.2 (z) Capital, Cash and Conditional grant Performance - uMgungundlovu District Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

186 132 186 132 420 417 225.9 The municipality attributed the over generation of revenue to the

Borrowing revenue which was incorrectly reported under Transfers

recognised - capital. Furthermore, the municipality also attributed the

over generation of revenue to the fact that it received an additional

allocation of R25 million for Drought Intervention Programme Grant from

the Department of Water and Sanitation during the 2015/16 financial year.

– – – -

58 764 58 764 – - The municipality did not report revenue against the R58.8 million

Adjusted Budget for Borrowing. The municipality indicated that this was

due to the Borrowing revenue which was misallocated to Transfers

recognised - capital and this error will be corrected prior to the finalisation

of the 2015/16 AFS.

15 600 32 149 19 680 61.2 The municipality reported R19.7 million or 61.2 percent of revenue

against the R32.1 million Adjusted Budget for Internally generated funds.

The under generation of revenue is attributed to the fact that the Adjusted

Budget was overstated as funds relating to approved Rollovers were

incorrectly budgeted under this line item instead of Transfers recognised -

capital.

260 496 277 045 440 097 158.9

400 800 822 102.7 The municipality reported R822 000 or 102.7 percent of expenditure

against the Adjusted Budget of R800 000 for Governance and

Administration. The municipality indicated that the over expenditure was

due to the fact that the Adjusted Budget was understated.

– – – -

– – – -

252 896 276 245 439 276 159.0 The municipality reported R439.3 million or 159 percent of expenditure

against the R276.2 million Adjusted Budget for Trading services. The

over expenditure is attributed to the fact that an expenditure amount of

R165 million, which was incurred in the previous year was incorrectly

included in the Capital expenditure for the current financial year. The

municipality indicated that this error will be corrected during the

preparation of AFS.

7 200 – – -

260 496 277 045 440 097 158.9

152 436 162 494 215 158 The opening balance of R215.2 million for the 2015/16 financial year

does not agree to the 2014/15 closing balance of R162.5 million for Cash

and cash equivalents as per the audited 2014/15 AFS, resulting in the

over statement of the opening balance by at least R52.7 million.

148 467 202 667 (27 891) The municipality reported negative R27.9 million for Cash and cash

equivalents at year end, which does not agree to the Adjusted Budget of

R202.7 million. The municipality indicated that this was due to fact that it

incorrectly reported inter account transfers as actual payments to

Suppliers and employees in the MFMA Section 71 reports, which resulted

in the overstatement of the Suppliers and employees line item in the cash

flow statement.

(3 969) 40 173 (243 049)

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 250 1 250 100.0% –

940 940 100.0% –

106 052 106 052 100.0% –









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

108

Table 4.2 (aa) Trade and other receivables, Trade and other payables and Key ratios - uMgungundlovu District Municipality

Amount % of

total debt /

payables

262 019

389 570

22 577 5.8%

9 113 2.3%

7 252 1.9%

350 627 90.0%

389 570 100.0%

5 836 1.5%

13 003 3.3%

273 957 70.3%

96 773 24.8%

389 570 100.0%

101 675 95.0%

1 196 1.1%

1 388 1.3%

2 749 2.6%

107 008 100.0%

Norm/

Range

% Actual

25% - 40% 31.5%

2% - 5% 13.6%

- 34.4%

- 4.5%

10% - 20% 42.5%

= or > 0% 2.7%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


The municipality reported R389.6 million for Debtors as at 30 June 2016, which is

a R127.6 million or 48.7 percent increase from the 2014/15 financial year. The

municipality attributed the increase in Debtors to the culture of non payment within

the municipal area and indicated that it has approached attorneys to assist in the



and all relates to Water of which R248.6 million or 70.9 percent is owed by

Households. The municipality indicated that the significant amount of outstanding

debtors over 90 days is largely influenced by the high unemployment rate, and the

overall socio-economic environment within the municipal area.

The Households owed R274 million or 70.3 percent of total Debtors, which is

attributed to the overall socio-economic environment and to a culture of non

payment within the municipal area.

The municipality reported R5.3 million or 5 percent of Creditors outstanding for

more than 30 days. The municipality indicated that the non payment of these

Creditors is largely due to disputes with the suppliers relating to invoices that did

not comply with VAT requirements.

The low rate of Own sources of revenue is an indication that the municipality is

highly grant dependant. Furthermore, Own sources of revenue is based on the

tariffs that are not currently cost reflective as the community within the municipality

is rural and the affordability is still a concern.

The low rate of Own funded capital expenditure is largely attributed to the fact that

an amount of R165 million included in the total Capital expenditure, which was

incurred in the previous year was incorrectly included in the Capital expenditure for

the current financial year.

The high rate of spending under this line item is attributed to the fact that an

expenditure amount of R165 million, which was incurred in the previous year was

incorrectly included in the Capital expenditure for the current financial year.

The municipality attributed the high spending on this line item to the fact that it had

to hire more water tankers to assist in drought affected arrears within the municipal

area.

109

4.3 Uthukela District

Uthukela District comprises of six delegated municipalities namely: Indaka, Emnambithi/Ladysmith, Umtshezi, Okhahlamba, Imbabazane and Uthukela District Municipality. Three of these municipalities are categorised as low capacity (Indaka, Okhahlamba and Imbabazane), two are medium capacity municipalities (Umtshezi and Uthukela District Municipality) and one (Emnambithi/Ladysmith) is a high capacity municipality. The municipal area is 11 329 km2 and largely comprises of high density rural settlements.

Subsequent to the redetermination of municipal boundaries by the Demarcation Board, Umtshezi and Imbabazane Municipalities will be merged to form Inkosi Langalibalele Local Municipality and Emnambithi/Ladysmith and Indaka Local Municipalities will also be merged to form Alfred Duma Local Municipality in August 2016.

Uthukela District Municipality is responsible for providing Water and Sanitation services for the entire district. Indaka and Okhahlamba Municipalities only provide Refuse removal services in their areas, whilst Emnambithi/Ladysmith and Umtshezi Municipalities provide Electricity services in addition to Refuse removal services.

Umtshezi municipality has been without the Technical Services Manager for the entire 2015/16 financial year and the Municipal Manager (MM) resigned during the month of May 2015. The municipality has not yet appointed the new MM.

Imbabazane Municipality was placed under administration in terms of Section 139(1)(b) of the Constitution of the Republic of South Africa since January 2013. The municipality has had three Administrators since being placed under administration. Despite being under administration, the municipality continued to experience administrative and political challenges. The MM was suspended by Council in March 2015 following allegations of financial mismanagement. The services of the CFO who was seconded by CoGTA were also terminated by the Administrator in April 2015 as a result of allegations of financial mismanagement. The CFO, senior managers and other junior officials whose employment was terminated in October 2012 on allegations of being illegally appointed, won the case against the municipality in May 2015, and the Labour Court ordered the municipality to reinstate them.

Indaka Municipality had been placed under administration in terms of Section 139(1)(b) of the Constitution of the Republic of South Africa since November 2009. This intervention was relaxed on January 2013 when the municipality operated under Section 139(1)(a)of the Constitution without an Administrator up to the end of March 2015 when the intervention was terminated. The MEC for CoGTA subsequently re-instated the Section 139(1)(b) intervention due to the deterioration of governance and administration at the municipality. The MM was murdered on 16 July 2015 due to unknown reasons. The intervention was terminated on the disestablishment of Indaka municipality on 21 July 2016 as per Provincial Notice 141 of 2016.

At the end of the 2015/16 financial year, the positions of the MM and CFO posts were filled at all municipalities within Uthukela District with the exception of Imbabazane and Umtshezi where there was no MM as at 30 June 2016. Indaka municipality had an acting MM and CFO as at 30 June 2016.

Emnambithi/Ladysmith, Indaka, Umtshezi and Imbabazane municipalities received unqualified audit opinions with other matters for their 2014/15 financial year. Uthukela District Municipality and Umtshezi municipality received a qualified audit opinion and Okhahlamba municipality received an unqualified audit opinion with no other matters.

110

4.3.1 Overview of Uthukela District Performance

Emnambithi/Lady smith 634 257 605 783 589 867 97.4

Indaka 90 508 96 836 88 572 91.5

Umtshezi 348 956 346 345 342 233 98.8

Okhahlamba 140 177 172 486 147 882 85.7

Imbabazane 123 908 109 223 115 770 106.0

Uthukela DM 518 412 516 670 496 685 96.1

Total 1 856 218 1 847 341 1 781 010 96.4


% Generated



Emnambithi/Ladysmith 692 262 655 583 511 339 78.0

Indaka 60 287 63 033 40 205 63.8

Umtshezi 393 579 401 071 319 415 79.6

Okhahlamba 133 369 175 533 132 674 75.6

Imbabazane 128 010 111 115 113 564 102.2

Uthukela DM 580 552 570 910 525 640 92.1

Total 1 988 059 1 977 244 1 642 837 83.1




Emnambithi/Ladysmith 168 275 197 368 159 635 80.9

Indaka 60 201 60 877 57 603 94.6

Umtshezi 34 935 46 610 32 534 69.8

Okhahlamba 81 062 83 799 81 570 97.3

Imbabazane 28 350 28 350 28 429 100.3

Uthukela DM 319 070 260 903 206 451 79.1

Total 691 893 677 906 566 223 83.5





Emnambithi/Ladysmith 12 464 6.9 7 513 4.2 3 516 1.9 157 277 87.0 180 770

Indaka 88 1.3 87 1.3 87 1.3 6 567 96.2 6 829

Umtshezi 14 500 14.2 3 481 3.4 2 909 2.8 81 577 79.6 102 467

Okhahlamba 2 242 6.4 1 539 4.4 1 179 3.3 30 284 85.9 35 245

Imbabazane 704 3.0 711 3.1 658 2.8 21 145 91.1 23 218

Uthukela DM 249 0.0 13 385 2.4 14 599 2.6 537 207 95.0 565 440

Total 30 248 3.3 26 716 2.9 22 948 2.5 834 057 91.3 913 969


Total





Emnambithi/Ladysmith 44 112 24.4 27 093 15.0 94 275 52.2 15 289 8.5 180 770

Indaka 3 467 50.8 333 4.9 1 583 23.2 1 445 21.2 6 829

Umtshezi 53 513 52.2 14 732 14.4 30 707 30.0 3 515 3.4 102 467

Okhahlamba 10 246 29.1 1 234 3.5 8 825 25.0 14 940 42.4 35 245

Imbabazane 19 932 85.8 103 0.4 36 0.2 3 147 13.6 23 218

Uthukela DM 6 728 1.2 15 720 2.8 541 988 95.9 1 004 0.2 565 440

Total 137 998 15.1 59 216 6.5 677 414 74.1 39 341 4.3 913 969




111


Emnambithi/Ladysmith 42 179 96.2 939 2.1 281 0.6 449 1.0 43 848

Indaka 595 96.4 8 1.2 - - 15 2.4 617

Umtshezi 31 632 97.7 108 0.3 543 1.7 77 0.2 32 361

Okhahlamba 5 467 100.0 - - - - - - 5 467

Imbabazane - - - - - - 2 100.0 2

Uthukela DM 44 0.3 92 0.6 - - 14 091 99.0 14 227

Total 79 917 82.8 1 147 1.2 823 0.9 14 634 15.2 96 521


Total

4.3.2 Analysis per municipality: Emnambithi/Ladysmith Municipality Table 4.3 (g) Operating Revenue and Expenditure Performance - Emnambithi/Ladysmith Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

151 415 137 480 157 019 114.2 The adjusted budget correctly excluded Revenue foregone, however, the municipality

incorrectly included Revenue foregone in the Section 71 report, thereby, overstating the actual

performance.

299 720 295 791 267 444 90.4 The main reason for the under generation appears to be attributable to Electricity which was

under generated due to more consumers moving to prepaid electricity and as a result, being

more energy conscious and closely monitoring their electricity consumption. In addition, the

municipality incorrectly submitted negative figures for Service charges - refuse revenue in

months 11 and 12 which further decreased the expected total for the year for Service charges.

The municipality has indicated that further adjustments are to be made during the finalisation

of the Annual Financial Statements (Hereafter referred to as AFS).

136 790 134 013 129 361 96.5

46 332 38 499 36 043 93.6 The main reason for the under generation is due to under performance in Interest earned -

outstanding debtor (72.4 percent).

634 257 605 783 589 867 97.4

196 205 204 266 176 815 86.6 A number of budgeted vacant posts were not filled during the 2015/16 financial year as a result

of not obtaining suitable personnel and concerns raised by Provincial Treasury during the mid-

year engagements regarding the municipality's ongoing ability to afford expenditure on

personnel additions to the organogram.

15 911 16 483 16 100 97.7

19 995 22 995 20 076 87.3 The municipality reported low expenditure of 87.3 percent as a result of reporting incomplete

transactions for the year. Further adjustments are to be made to Debt impairment during the


72 447 61 943 31 538 50.9 The municipality reported low expenditure of 50.9 percent as a result of reporting incomplete

transactions for the year. Further adjustments are to be made to Depreciation and asset

impairment during the finalisation of the AFS.

183 766 187 418 123 104 65.7 The municipality did not submit any expenditure for Bulk purchases in August 2015 and

February 2016. Further adjustments are to be made during the finalisation of the AFS.

3 000 3 000 3 980 132.7 The municipality appears to have under estimated the contracted service work undertaken for

the second half of the year resulting in the utilisation of significantly more than the Adjustment

Budget.

200 938 159 477 139 727 87.6 The expenditure reported excludes accrual adjustments that were finalised after the

submission of the Section 71 report.

692 262 655 583 511 339 78.0

(58 005) (49 800) 78 528







R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



112

Table 4.3 (h) Capital, Cash and Conditional grant Performance - Emnambithi/Ladysmith Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

107 647 108 207 97 224 89.8 The municipality failed to report all of the expenditure funded from Transfers

recognised - capital. Further adjustments are still being processed which will

increase expenditure significantly closer to 100 percent of the Adjustments

Budget figure.

– – 6 385

– – – -

60 628 89 161 56 026 62.8 The municipality failed to report all of the expenditure funded from Internally

generated funds. Further adjustments are still being processed which will

increase expenditure significantly closer to 100 percent of the Adjustments

Budget figure.

168 275 197 368 159 635 80.9

– – – -

37 700 45 400 23 949 -

110 575 131 937 119 621 90.7 The poor capital expenditure is attributable to incomplete reporting. Further

adjustments are still being processed which will increase expenditure

significantly closer to 100 percent of the Adjustments Budget figure.

20 000 18 171 16 065 88.4 The poor capital expenditure is attributable to incomplete reporting. Further

adjustments are still being processed which will increase expenditure


– 1 860 – -

168 275 197 368 159 635 80.9

145 020 190 694 190 694

89 490 105 591 88 715 Cash and cash equivalents at year end of R88.7 million appears to be

understated in comparison to total cash as per the bank statements as at 30

June 2016 of R164 million. The Section 71 report should be reviewed by senior

management prior to submission to ensure accuracy thereof.

(55 530) (85 104) (101 979)

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 600 1 378 86.1% 222 The poor capital expenditure is attributable to incomplete reporting. The

municipality has subsequently submitted returns which will increase

expenditure for the year significantly closer to 100 percent expenditure of the

allocated grant.

930 1 760 189.2% (830) The municipality inaccurately included expenditure which was not funded from

the Municipal System Improvement Grant in the expenditure reports submitted

to National Treasury. The expenditure returns have been subsequently been

corrected and resubmitted.

42 647 41 807 98.0% 840









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

113

Table 4.3 (i) Trade and other receivables, Trade and other payables and Key ratios - Emnambithi/Ladysmith Municipality

Amount % of

total debt /

payables

166 432

180 770

12 464 6.9%

7 513 4.2%

3 516 1.9%

157 277 87.0%

180 770 100.0%

44 112 24.4%

27 093 15.0%

94 275 52.2%

15 289 8.5%

180 770 100.0%

42 179 96.2%

939 2.1%

281 0.6%

449 1.0%

43 848 100.0%

Norm/

Range

% Actual

25% - 40% 37.7%

2% - 5% 0.8%

- 78.1%

- 35.1%

10% - 20% 23.8%

= or > 0% 13.3%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


A significant portion of this debtor over 90 days relates to Property Rates Debtors. This

debt cannot be written off since it prescribes after 30 years. The municipality therefore

needs to exhaust all legal processes before considering writing off this debt and this

normally consumes a significant amount of time.

Households comprise the major portion of the debt since mostly household individuals are

experiencing the strain of the local economy.

Late payment of creditors has resulted in non-compliance with Section 65(2)(e) of the

Municipal Finance Management Act. Payment delays arise from investigations

undertaken to address queries on invoices.







The ratio assesses the extent of the municipality's own revenue generated in comparison

to total revenue. Emnambithi/Ladysmith municipality has generated a greater portion of

revenue from its own sources of revenue in comparison to grants received from National

and Provincial sources.

The ratio assesses the extent to which the municipality's total capital expenditure is

funded through internally generated funds. Emnambithi/Ladysmith municipality has

invested a substantial portion of its cash backed reserves to fund capital expenditure.

Capital expenditure was substantially increased in comparison to the prior years to

implement as many projects as possible in the municipality's Integrated Development Plan

before conclusion of the current councillors' terms.

114

4.3.3 Analysis per municipality: Indaka Municipality Table 4.3 (j) Operating Revenue and Expenditure Performance - Indaka Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

3 220 3 220 5 337 165.7 Significant over performance occurred as a result of under budgeting during the Adjustments

Budget process. Billing as at mid-year (December 2015) already exceeded the Adjustments

Budget reflected.

180 180 158 87.7 The under performance reported is attributable to over budgeting during the Adjustments

Budget process. Billing as at mid-year (December 2015) was in line with the under

performance noted at 30 June 2016, however, the municipality did not adjust the budget

accordingly.

81 911 81 911 79 894 97.5

5 197 11 524 3 183 27.6 The municipality significantly increased its capital expenditure budget by R30.8 million from the

Original Budget of R60.2 million during the Adjustments Budget process. The entire increase

was funded from Internally generated funds therefore the municipality generated significantly

less Interest earned - External Investments (26.3 percent).

90 508 96 836 88 572 91.5

12 421 11 911 10 516 88.3 Under performance occurred as a result of personnel who were not appointed to certain

budgeted positions due to the municipality's inability to attract potential employees to its rural

offices.

6 002 6 997 5 490 78.5 The Remuneration of councillors appears to be understated as a result of incomplete reporting

during the financial year. The expenditure reported for months 9 and 12 appear to be

significantly lower than the average expenditure per month.

700 1 400 – - The municipality has not yet processed the Debt impairment for the year which is going to be

processed as part of the year end journal entries. This was despite the municipality being

advised by Provincial Treasury to report expenditure on a monthly basis as reporting actuals

only at the end of the year could result in significant misstatements or unauthorised

expenditure on non cash items.

13 000 13 000 – - The municipality has not yet processed the Depreciation and asset impairment for the year

which is going to be processed as part of the year end journal entries. This was despite the

municipality being advised by Provincial Treasury to report expenditure on a monthly basis as

reporting actuals only at the end of the year could result in significant misstatements or

unauthorised expenditure on non cash items.

– – – -

8 246 9 703 7 277 75.0 The municipality appears to have over budgeted for Contracted services during the

Adjustments Budget as actual performance amounted to R7.2 million which was below both

the Original Budget of R8.2 million and the Adjusted Budget of R9.7 million (an inflation of 18

percent of the Original Budget).

19 918 20 022 16 922 84.5 The under performance was mainly due to:

- Transfers and grants (32.9 percent)

- Finance charges (62 percent)

- Other expenditure (90.8 percent)

The municipality did not provide reasons for the above mentioned variances.

60 287 63 033 40 205 63.8

30 221 33 803 48 367







Debt impairment



Bulk purchases

Contracted services








R'000

Operating Revenue

Property Rates1

Service Charges2


115

Table 4.3 (k) Capital, Cash and Conditional grant Performance - Indaka Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

30 051 30 051 27 972 93.1 Under performance was due to the low expenditure on the Municipal

Infrastructure Grant (MIG) and the Integrated National Electrification

Programme (INEP) grant. The appointed consultant took a long time to visit

construction sites which resulted in a delay of the certification of completion of

certain stages of the MIG projects resulting in the lower expenditure. The INEP

project consultant was appointed late which resulted in lower annual

expenditure.

– – – -

– – – -

30 150 30 826 29 631 96.1

60 201 60 877 57 603 94.6 The Section 71 reported amount of R60.9 million does not agree to the

Adjusted Budget amount of R90.3 million as approved by Council.

1 595 – 519 Delays in the implementation of capital projects resulted in low capital

expenditure for the year.

11 572 – – -

39 034 60 877 57 084 93.8 Delays in the implementation of capital projects resulted in low capital

expenditure for the year.

8 000 – – -

– – – -

60 201 60 877 57 603 94.6 The Section 71 reported amount of R60.9 million does not agree to the

Adjusted Budget amount of R90.3 million as approved by Council.

132 055 132 055 140 591

144 372 144 372 141 109 Total Cash and cash equivalents as per the bank reconciliation and the

Investments register amounts to R136.2 million therefore the amount as per the

Section 71 report appears to be overstated.

12 317 12 317 519

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 380 76.7% 420 Slow expenditure during the first half of the financial year due to poor planning

led to the low expenditure for the financial year.

930 648 69.7% 282 Slow expenditure during the first half of the financial year due to poor planning


22 051 21 572 97.8% 479 Slow expenditure during the first half of the financial year due to poor planning










Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

116

Table 4.3 (l) Trade and other receivables, Trade and other payables and Key ratios - Indaka Municipality

Amount % of

total debt /

payables

3 537

6 829

88 1.3%

87 1.3%

87 1.3%

6 567 96.2%

6 829 100.0%

3 467 50.8%

333 4.9%

1 583 23.2%

1 445 21.2%

6 829 100.0%

595 96.4%

8 1.2%

– -

15 2.4%

617 100.0%

Norm/

Range

% Actual

25% - 40% 39.8%

2% - 5% 18.1%

- 9.8%

- 51.4%

10% - 20% 58.9%

= or > 0% 54.6%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


Debtors increased substantially as no write offs for applicable household debt was

performed in the 2015/16 financial year. A culture of non-payment combined with a high

unemployment rate means that credit control steps to recover this debt has not been

successful.

The majority of the debtors balance which has aged in excess of 90 days is attributable to

household debt which has a very poor recovery rate as a result of a poor payment culture

as well as partly incomplete debtors records.


Municipal Finance Management Act.



This ratio assesses the extent of the municipality's own revenue generated in comparison

to total revenue. Indaka municipality has generated a significantly lesser portion of

revenue from its own sources of revenue in comparison to grants received from National

and Provincial sources and is significantly grant dependent.

This ratio assesses the extent to which the municipality's total capital expenditure is

funded through internally generated funds. Indaka municipality has invested a substantial

portion of its cash backed reserves to fund capital expenditure. Some of the grant

rollovers that the municipality applied for in the prior year were not approved and the

municipality decided to fund these projects from Internally generated funds.

Incomplete reporting of Operating Expenditure performance resulted in a distorted asset

management ratio.

The ratio is within the norm however it is distorted due to incomplete reporting.

The municipality has paid a substantial amount to an external party for the refuse

collection service which has resulted in the high ratio.

117

4.3.4 Analysis per municipality: Umtshezi Municipality Table 4.3 (m) Operating Revenue and Expenditure Performance - Umtshezi Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual % of

Budget

Generated /

Spent

Comments

68 455 68 455 75 539 110.3 The municipality did not adjust the budget for Property rates during the Adjustments Budget

period despite having generated 56 percent which was more than the straightline projection of

50 percent expected at mid-year. This appears to be a norm as in the past, the municipality

had over generated Property rates revenue at year end. Provincial Treasury is concerned that

this could be an indication of incorrect budgeting by the municipality.

202 355 203 666 201 117 98.7

58 152 57 895 55 505 95.9 In terms of the preliminary figures for grant transfers to municipalities by National Treasury, all

grants gazetted for the municipality were transferred to the municipal bank account. Therefore,

it appears incorrect that the municipality reported to have received only 95.9 percent of the

allocated transfers. The municipality indicated that some conditional grants are still appearing

as liabilities in the general ledger which will be corrected before finalisation of the Annual

Financial Statements (AFS).

19 994 16 329 10 072 61.7 Significant under generation of Other sources of revenue was largely influenced by under

performance noted on Interest on external investments (29.3 percent), Interest on outstanding

debtors (63.7 percent) and Other own revenue (39.7 percent). This is despite the downward

adjustment of the budget for Interest on external investments from R3.5 million to R1 million

and Interest on outstanding debtors from R2 million to R1 million during the Adjustments

Budget period.

Other own revenue was not adjusted in the Adjustments Budget as the municipality was

anticipating cash inflows from the sale of vacant sites in the municipal area. However, the

delay in the processes has resulted in anticipated revenue of R4.5 million not being realised at

30 June 2016.

348 956 346 345 342 233 98.8

79 739 79 739 82 122 103.0 Over spending on Employee related costs appears to be a norm with the municipality as it was

also noted in the previous financial years. The municipality has been alerted of this however,

the municipality has indicated that this is due to over spending on Overtime and Subsistence

and Travelling.

5 326 5 326 5 672 106.5 The municipality did not adjust the budget to include the increment for remuneration of office

bearers as per the gazette issued by CoGTA in December 2015 during the Adjustments

Budget period.

12 908 12 908 – - The municipality indicated that the Debt impairment amount will be finalised during the

compilation of the 2015/16 AFS. The municipality is encouraged to record Debt impairment on

a monthly basis and not only at year end.

44 436 44 436 – - Although the municipality was encouraged to capture the Depreciation and asset impairment

amount during the course of the financial year to avoid unauthorised expenditure should the

amount exceed the budget, the municipality has indicated that this will be finalised during the

compilation of the 2015/16 AFS.

161 065 161 065 149 593 92.9 The municipality indicated that an invoice for June 2016 was received after the municipality

had submitted the Section 71 reports to the database and will be reported fully in the 2015/16

AFS.

10 886 10 887 13 341 122.5 The municipality indicated that the over spending was due to payments for the provision of

Security services. This is an indication of incorrect budgeting by the municipality.

79 219 86 710 68 688 79.2 The municipality has continued to face cash flow challenges in the 2015/16 financial year and

therefore had to be prudent in spending and focus mainly on essential operating expenses.

393 579 401 071 319 415 79.6

(44 623) (54 726) 22 818







Debt impairment



Bulk purchases

Contracted services








R'000

Operating Revenue

Property Rates1

Service Charges2


118

Table 4.3 (n) Capital, Cash and Conditional grant Performance - Umtshezi Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

33 055 34 955 29 773 85.2 Several invoices which were due to be paid from grant funding were received

after 30 June 2016 and will be reflected accordingly in the 2015/16 AFS.

Furthermore, the municipality has not fully utilised the Small Town

Rehabilitation Grant. The municipality received a further R2 million from CoGTA

at mid-year which it could not spend.

– – – -

– – – -

1 880 11 655 2 762 23.7 The municipality was faced with severe cash flow challenges during the course

of the financial year and could not generate surpluses to fund capital

expenditure as anticipated.

34 935 46 610 32 534 69.8

1 590 1 690 1 451 85.8

330 3 988 2 108 52.9

17 985 25 902 17 135 66.2

15 030 15 030 11 841 78.8

– – – -

34 935 46 610 32 534 69.8 The municipality attributed low spending to the following:

1. Cash flow challenges which resulted in the municipality's inability to generate

surpluses to fund capital (Internal generated funds)

2. Several invoices were received after 30 June 2016 and will be reflected in

the 2015/16 AFS once all accruals have been captured.

9 000 2 300 2 300

7 768 3 970 9 614

(1 232) 1 670 7 314 During the process of assessing the 2015/16 Adjustments Budget, Provincial

Treasury noted that the budget was unfunded due to errors and omissions that

were noted but the municipality did not correct and re-table the budget.

Therefore, credibility of Cash and cash equivalents at year end as captured in

the Adjustments Budget is questionable.

Available cash (R6.6 million) is far less than the Unspent conditional grants

balance (R16.4 million) indicating that unspent grants are not cash backed.

The Net cash position at 30 June 2016 (as per documents submitted by the

municipality) amounts to negative R9.8 million. Therefore, the Unaudited actual

Cash at year end of R9.6 million does not appear correct.

The cash coverage at the end of June 2016 is negative 0.44 (less than one

month coverage) which is far below the acceptable norm of 3 months.

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 600 1 612 100.8% (12) The municipality indicated that the amount over spent in the grant will be

financed internally.

930 409 44.0% 521 The municipality indicated that the grant was fully utilised. The under spending

reported is an error and there were invoices received after 30 June 2016 which

will be captured accordingly before the 2015/16 AFS is finalised.

17 955 17 368 96.7% 587 The municipality indicated that the grant was fully utilised. Various invoices

were received after 30 June 2016 and will be captured accordingly before the

2015/16 AFS is finalised.









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

119

Table 4.3 (o) Trade and other receivables, Trade and other payables and Key ratios - Umtshezi Municipality

Amount % of

total debt /

payables

126 572

102 467

14 500 14.2%

3 481 3.4%

2 909 2.8%

81 577 79.6%

102 467 100.0%

53 513 52.2%

14 732 14.4%

30 707 30.0%

3 515 3.4%

102 467 100.0%

31 632 97.7%

108 0.3%

543 1.7%

77 0.2%

32 361 100.0%

Norm/

Range

% Actual

25% - 40% 27.5%

2% - 5% 4.2%

- 83.8%

- 8.5%

10% - 20% 9.2%

= or > 0% 6.7%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


According to the municipality, the Department of Water Affairs owes the municipality more

than R20 million. Debt collectors and Legal advisors appointed by the municipality have

engaged the department on various occasions during the financial year but payments

have not been made by the department. This has severely set back the municipality as far

as the cash flow is concerned.

Most of the outstanding debtors relate to Property rates revenue which is meant to sustain

the municipality financially as they are not grant dependant. Therefore, it is serious course

for concern.

Provincial Treasury is also concerned that appointment of Debt collectors by the

municipality did not yield much results despite the collectors having been paid more than

R4.7 million in the 2015/16 financial year.

According to the municipality, the Department of Water Affairs owes the municipality more

than R20 million. Debt collectors and Legal advisors appointed by the municipality have

engaged the department on various occasions during the financial year but payments

have not been made by the department. This has severely set back the municipality as far

as the cash flow is concerned.

Unresolved disputes with suppliers and cash flow challenges have resulted in some

creditors being outstanding for longer than 90 days.

The percentage indicates that the municipality does not rely on grants to finance its


The percentage indicates that the municipality is dependant on grants to fund capital

expenditure.

Invoices received after 30 June 2016 have not been included in the expenditure reported

therefore the ratio is not a true reflection of the actual performance of the municipality.

120

4.3.5 Analysis per municipality: Okhahlamba Municipality Table 4.3 (p) Operating Revenue and Expenditure Performance - Okhahlamba Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual % of

Budget

Generated /

Spent

Comments

30 584 30 852 28 988 94.0 The municipality adjusted the budget for Property rates upwards to R29 million in the 2015/16

Adjustments Budget period however, 85.4 percent (R24.8 million) was billed at year end.

Property rates penalties and collection charges generated amounted to R4.2 million or 229.5

percent of the Adjusted Budget of R1.8 million.

The municipality has not provided reasons for both of the above variances.

387 1 905 1 911 100.3 Service charges generated have slightly exceeded the budget. However, it was noted with

concern that the municipality reported revenue under Service charges-sanitation and Service

charges-other which were not budgeted for and are not being provided by the municipality.

104 103 134 028 109 055 81.4 As per explanation obtained from the municipality, the following were reasons for the variance

noted in Transfers recognised - operational:

- The INEP grant allocation of R10 million was budgeted as an operational grant in the

Adjustments Budget however, the municipality recognised it under capital upon receipt.

- The Electrification grant allocation from CoGTA amounting to R14 million was budgeted as an

operational grant in the Adjustments Budget however, the municipality recognised it under

capital upon receipt.

- An amount of R431 900 to be transferred by LGSETA was not received at the end of the

financial year.

- An amount of R541 000 for EPWP received in November 2016 was erroneously excluded

from the total amount for Transfers recognised-operational reported at the end of the financial

year.

5 102 5 701 7 928 139.1 The following contributed to over collection of Other sources of Revenue:

- Interest earned-external investments (111.3 percent)

- Fines (112.2 percent)

- Agency fees (107.4 percent)

- Other own revenue (248.2 percent)

The municipality did not provide reasons for these variances.

Furthermore, it was noted that Rental of facilities and equipment was significantly under

generated at 74.3 percent.

140 177 172 486 147 882 85.7

43 361 47 763 47 101 98.6 Positions ( Budget and Treasury Officer; Internal Auditor; Creditors Clerk) which became

vacant during the financial year were not filled as at 30 June 2016.

7 765 8 608 8 606 100.0

2 582 4 582 260 5.7 The municipality indicated that Debt impairment will be finalised during the compilation of the

2015/16 Annual Financial Statements (AFS). The municipality is encouraged to record Debt

impairment on a monthly basis and not only at year end.

12 963 20 101 4 433 22.1 The municipality indicated that a number of assets which were still under work in progress

(such as Disaster Centre and Testing Station) were not yet transferred to fixed assets when

the Section 71 reports were submitted at 30 June 2016. The municipality indicated that

Depreciation and asset impairment will therefore be finalised during the compilation of the

2015/16 AFS.

The municipality was advised during the financial year to recognise Depreciation and asset

impairment on a monthly basis to avoid a possibility of unauthorised expenditure should the

expenditure exceed the budget. It was noted that depreciation was only recognised in

December 2015 (R4.4 million) and March 2016 (R36 954).

– – – -

3 151 3 425 4 610 134.6 The budget for Contracted services was over spent due to Security services. The municipality

indicated that the number of security guards had to be increased by the service provider to

make provision for the Testing Station and the Disaster Centre which started operating in the

last quarter of the financial year.

63 546 91 054 67 665 74.3 Under spending in this category was highly influenced by the following:

- Finance charges (21.5 percent)

- Other materials (74 percent)

- Other expenditure (76.2 percent)

The municipality indicated that most of the Repairs and maintenance expenditure had been

capitalised. The explanation does not cover all the variances indicated above.

133 369 175 533 132 674 75.6

6 808 (3 047) 15 208







R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



121

Table 4.3 (q) Capital, Cash and Conditional grant Performance - Okhahlamba Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

37 456 42 456 42 812 100.8

– – – -

– – 139 - The municipality indicated that expenditure should have been captured under

Internally generated funds.

43 606 41 343 38 619 93.4 As per the municipality, the main focus is to ensure that expenditure financed

through grants is prioritised to avoid grant funds being rolled over to the next

year. Hence a few of the Internally funded projects were delayed.

81 062 83 799 81 570 97.3

750 750 2 488 331.7 The municipality indicated that expenditure for Quarter 3 and 4 was incorrectly

captured under Corporate Services instead of Social and Technical Services.

It was also noted that the budget for Budget and Treasury Office (R150 000)

had not been spent at the end of the financial year and no explanation was

provided.

3 082 3 926 3 098 78.9 The municipality indicated that expenditure for Quarter 3 and 4 was incorrectly

captured under Corporate Services.

It was also noted that the municipality spent an amount of R97 165 on Public

Safety which had not been budgeted for. The municipality did not provide an

explanation for this unauthorised expenditure.

77 230 79 122 75 984 96.0 The municipality indicated that expenditure for Quarter 3 and 4 was incorrectly

captured under Corporate Services.

– – – -

– – – -

81 062 83 799 81 570 97.3

6 825 45 227 45 222

26 520 16 943 39 154

19 695 (28 284) (6 068) Unspent conditional grants (R21.1 million) appear to be sufficiently cash backed

as the total Cash as at 30 June 2016 as per documents submitted by the

municipality amounted to R41.3 million. Therefore, the unaudited actual Cash at

year end (as per Section 71 reports) of R39.2 million might not be correct.

The Net cash position at 30 June 2016 per documents submitted by the

municipality amounts to R20.3 million.

The Cash coverage at 30 June 2016 is 4 months which is above the

recommended norm of 3 months.

It was noted with concern that the municipality ended the financial year with a

Net decrease in cash held of R6.1 million. This indicates that the municipality

could not generated the anticipated revenue and expenditure was more that

what was budgeted for. Cash flow items which recorded over spending and

under generation of revenue are highlighted below:

- Property rates, penalties and collection charges were budgeted at R25.1

million and R20.6 million was collected.

- Service charges were budgeted at R1.6 million and no collections were

recorded.

- Other revenue collected exceeded the budgeted amount by R14.8 million.

- Government - operating was budgeted at R134 million and only R109.6 million

was recorded as received.

- Government - capital exceeded the budget by R24 million.

- Proceeds from Property, plant and equipment of R354 000 were budgeted

and not collected.

- Repayment of borrowing budgeted (R2.6 million) was not paid.

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 800 100.0% –

930 930 100.0% –

27 456 27 456 100.0% –

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Services

Other










122

Table 4.3 (r) Trade and other receivables, Trade and other payables and Key ratios - Okhahlamba Municipality

Amount % of

total debt /

payables

30 578

35 245

2 242 6.4%

1 539 4.4%

1 179 3.3%

30 284 85.9%

35 245 100.0%

10 246 29.1%

1 234 3.5%

8 825 25.0%

14 940 42.4%

35 245 100.0%

– -

– -

– -

– -

– -

Norm/

Range

% Actual

25% - 40% 42.0%

2% - 5% 3.5%

- 26.3%

- 47.3%

10% - 20% 38.1%

= or > 0% 10.3%

The ratio of 26.3 percent indicates that although the municipality can finance some of its

operating activities through own sources of revenue, it is still highly reliant on grant

funding.

The ratio of 47.3 percent on unaudited actual indicates that the municipality is dependant

on grants to fund capital expenditure.

The ratio is distorted because Operating expenditure has not been fully reported at the

end of the financial year.

The municipality has indicated that Employee related costs expenditure includes

subsistence and travelling claims. Furthermore, the municipality has not captured total

expenditure incurred during the year for Depreciation and asset impairment and Debt

impairment. This means Operating expenditure is understated therefore the ratio is

distorted.

Other category primarily relates to the hospitality sector customers. The municipality is

continuing to engage with them every financial year however, very few seem to be keen to

come forward to make payments or arrangements.

The municipality has appointed a panel of lawyers to hand over debtors outstanding for

longer than 90 days to the Sheriff of the Court. The process is still on-going and a number

of customers are coming forth to make special payment arrangement. The process will be

closely monitored to observe if it is yielding any results going forward.

Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management


123

4.3.6 Analysis per municipality: Imbabazane Municipality Table 4.3 (s) Operating Revenue and Expenditure Performance - Imbabazane Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual % of

Budget

Generated /

Spent

Comments

12 064 12 864 13 682 106.4 Both Property rates and Property rates penalties and collection charges were over generated.

During the Adjustments Budget period, the municipality transferred the budget (R800 000) for

Interest earned - outstanding debtors to Property rates - penalties and collection charges but

the budget was not adjusted to cater for both categories of revenue.

The municipality did not submit working papers on calculation of Property rates when the

2015/16 Final Budget was submitted. Therefore incorrect budgeting could be the reason for

over generating Property rates revenue.

– – – -

94 347 94 201 94 802 100.6

17 497 2 158 7 286 337.7 During the Adjustments Budget period, the municipality reduced the budget for Other revenue

from R15.1 million to R61 501. The municipality excluded R15 million which was meant for

funding electrification projects. However, it was noted that at the end of the financial year, R5.5

million was spent (9021.1 percent). The municipality did not provide any reasons for the

significant over spending.

It was also noted that the following Other sources of revenue were significantly under spent:

- Rental of facilities and equipment (49 percent)

- Interest earned - external Investments (86 percent)

- Fines (50 percent)

- Licences and permits (29.3 percent)

The municipality did not provide reasons for the under performance noted in the above

mentioned categories.

123 908 109 223 115 770 106.0

35 310 31 512 28 651 90.9 The municipality did not provide reasons for under spending on Employee related costs,

however, this could be attributed to the various vacant positions in the municipality which could

not be filled because the municipality is merging with Umtshezi Municipality in the 2016/17

financial year.

7 221 7 225 7 235 100.1

750 803 803 100.0

9 230 10 039 – - During the course of the financial year, the municipality was advised to recognise Depreciation

and asset impairment on a monthly basis to avoid any possibility of unauthorised expenditure

should it exceed the budget. However, the municipality had indicated that due to problems with

the asset management module in the system, it is impossible capture Depreciation and asset

impairment monthly.

– – – -

4 300 4 710 6 315 134.1 Despite having adjusted the budget for Contracted services from R4.3 million to R4.7 million in

the 2015/16 Adjustments Budget, the municipality over spent the budget. The municipality did

not provide reasons for the over spending on Contracted services. However, it was noted that

this appears to be a norm as the municipality had over spent Contracted services in the

previous year.

71 200 56 826 70 559 124.2 Over spending in Other expenditure items was largely influenced by Other expenditure

wherein the municipality spent 142.7 percent of the Adjusted Budget. The municipality reduced

the budget for Other expenditure from R57.7 million to R39.1 million in the 2015/16

Adjustments Budget. The municipality did not provide reasons for this significant over

spending.

It was also noted that Other materials was under spent (78.1 percent) and no reasons were

provided by the municipality.

128 010 111 115 113 564 102.2

(4 102) (1 893) 2 207







R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



124

Table 4.3 (t) Capital, Cash and Conditional grant Performance - Imbabazane Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

23 517 23 517 24 758 105.3 As per preliminary results on the 4th quarter ended 30 June 2016 from the

National Treasury database, the municipality has reported to have spent 94.7

percent of MIG which is the only grant constituting Transfer recognised-capital.

This indicates a possibility of an error in reporting.

– – – -

– – – -

4 833 4 833 3 670 76.0 The municipality has not indicated the reasons for not being able to spend the

amount budgeted. Significant under spending was noted under Governance

and Administration which could have been budgeted to be funded from


28 350 28 350 28 429 100.3

1 910 1 910 408 21.4 The municipality has not provided reasons for under spending in this vote.

15 012 15 012 15 860 105.6 The municipality has not provided reasons for over spending in this vote.

11 427 11 427 12 161 106.4 The municipality has not provided reasons for over spending in this vote.

– – – -

– – – -

28 350 28 350 28 429 100.3

30 213 22 709 22 709

25 788 26 217 5 095

(4 425) 3 508 (17 614) The municipality did not submit additional IYM information (Bank reconciliation,

Investments and Grants registers, Trial balance) as requested for the month of

June 2016. Therefore the cash position and cash coverage at year end could

not be calculated.

It was noted with concern that the municipality closed off the financial year with

a Net decrease in cash held of R17.6 million. This indicates that the

municipality could not generate the anticipated revenue and expenditure was

more than what was budgeted for. Some of the categories with over spending

and under generation of revenue are highlighted below:

- Property rates, penalties and collection charges were budgeted at R12.9

million and only R4.6 million was collected.

- Government - operating was budgeted at R94.2 million and only R90.4 million

was recorded in the cash flow as received.

- Interest on investments was budgeted at R2 million and R1.7 million was

recorded as collected.

- Suppliers and employees were budgeted at R95.7 million but R110.7 million

was recorded as spent.

- Proceeds from Property, plant and equipment of R790 000 were budgeted

and not collected.

- Capital assets expenditure was budgeted at R28.3 million and R28.4 million

was recorded as spent.

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 800 100.0% –

930 930 100.0% –

23 517 22 276 94.7% 1 241 A possibility of an error in reporting will have to be investigated by the

municipality as expenditure per Section 71 reports indicates that the grant was

fully utilised.

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Services

Other










125

Table 4.3 (u) Trade and other receivables, Trade and other payables and Key ratios - Imbabazane Municipality

Amount % of

total debt /

payables

32 133

23 218

704 3.0%

711 3.1%

658 2.8%

21 145 91.1%

23 218 100.0%

19 932 85.8%

103 0.4%

36 0.2%

3 147 13.6%

23 218 100.0%

– -

– -

– -

2 100.0%

2 100.0%

Norm/

Range

% Actual

25% - 40% 31.6%

2% - 5% 5.6%

- 18.1%

- 12.9%

10% - 20% 20.0%

= or > 0% 1.9%

The percentage indicates that the municipality is highly dependant on grants to finance its


The percentage indicates that the municipality is highly dependant on grants to fund its

capital expenditure.

The budget for contracted services was over spent hence the ratio is above 5 percent.

The municipality has not provided reasons for over spending.

Creditors outstanding for more than 90 days is in contravention of Section 65 (e) of the

MFMA irrespective of the materiality of the outstanding amount. The municipality did not

provide reasons for not paying the amount. This could be as a result of a dispute with the

supplier or an error in reporting.

Outstanding debt in this category relates mainly to government debt (R19.9 million). The

municipality has engaged the Department of Public Works regarding the outstanding

government debt and it was noted that the debt does not fall under this department.

Various attempts to engage other departments such as Department of Water Affairs have

not been successful.

The municipality has engaged the Department of Public Works regarding the outstanding

government debt and it was noted that the debt does not fall under this department.

Various attempts to engage other departments such as Department of Water Affairs have

not been successful.

Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management


126

4.3.7 Analysis per municipality: Uthukela District Municipality

Table 4.3 (v) Operating Revenue and Expenditure Performance - Uthukela District Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

– – – -

165 107 165 107 159 435 96.6

318 371 314 628 305 642 97.1

34 934 36 934 31 608 85.6 Other sources of revenue were over budgeted in the 2015/16 financial year. The most

significant component of the under generation was due to Interest earned - outstanding

debtors which was under generated by 30 percent (R8 million).

518 412 516 670 496 685 96.1

219 377 219 377 168 381 76.8 A number of budgeted vacant posts were not filled during the 2015/16 financial year as a result

of not obtaining suitable personnel.

5 332 6 146 5 097 82.9 The municipality did not submit the expenditure for month 11 therefore the actual expenditure

for the year is understated.

28 222 28 222 76 552 271.3 The municipality understated the Adjustments Budget for Debt impairment as the budgeted

figure was lower than the R71.1 million reported in the 2014/15 Annual Financial Statements.

The actual expenditure in 2015/16 is consistent with the prior year audited amount.

51 430 51 430 44 018 85.6 The municipality did not submit expenditure for month 11 therefore the actual expenditure for

the year is understated.

6 377 5 535 2 896 52.3 The municipality did not submit expenditure for a number of months (months 1, 2, 5, 6, 7 and

12) therefore the actual expenditure for the year is understated.

42 261 46 234 25 336 54.8 The municipality over estimated the Adjustments Budget for Contracted services as the budget

was significantly higher than the R27.5 million reported in the 2014/15 Annual Financial

Statements. The actual expenditure in 2015/16 is more consistent with the prior year audited

amount.

227 554 213 966 203 361 95.0

580 552 570 910 525 640 92.1

(62 140) (54 240) (28 955) All expenditure and revenue line items appear to be understated as no figures were submitted

to the database for month 11 in the 2015/16 financial year.







Debt impairment



Bulk purchases

Contracted services








R'000

Operating Revenue

Property Rates1

Service Charges2


127

Table 4.3 (w) Capital, Cash and Conditional grant Performance - Uthukela District Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

237 940 237 940 174 424 73.3 The municipality misallocated capital expenditure funded from Transfers

recognised - capital resulting in under expenditure in this category. In addition,

further adjustments are still being processed which will increase expenditure


– – – -

– – – -

81 130 22 963 32 027 139.5 The municipality misallocated capital expenditure funded from Internally

generated funds resulting in over expenditure in this category.

319 070 260 903 206 451 79.1

2 420 4 020 3 119 77.6 Misallocation of capital expenditure which was allocated to Economic and

Environmental services resulted in significant under expenditure in Governance

and Administration. In addition, further adjustments are still being processed

which will increase expenditure significantly closer to 100 percent of the

Adjustments Budget figure.

28 410 17 221 126 -

2 311 2 311 3 170 137.2 The municipality inaccurately included capital expenditure which should have

been included under Governance and Administration resulting in significant

over expenditure in Economic and Environmental Services.

285 929 237 352 200 036 84.3 Further adjustments are still being processed which will increase expenditure


– – – -

319 070 260 903 206 451 79.1

176 047 145 088 145 088

47 030 63 734 (21 733) The negative Cash and cash equivalents balance at year end appears to be

inaccurate in comparison to Investments of R35.2 million and a main bank

account balance of R903 858 as at 30 June 2016.

(129 017) (81 353) (166 821)

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 325 634 47.8% 691 The poor operating grant expenditure is attributable to incomplete reporting.

940 1 045 111.2% (105) The municipality inaccurately included expenditure which was not funded from

the Municipal System Improvement Grant in the expenditure reports submitted

to National Treasury. The capital expenditure returns have been subsequently

corrected and resubmitted.

181 247 179 268 98.9% 1 979









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

128

Table 4.3 (x) Trade and other receivables, Trade and other payables and Key ratios - Uthukela District Municipality

Amount % of

total debt /

payables

496 462

565 440

249 0.0%

13 385 2.4%

14 599 2.6%

537 207 95.0%

565 440 100.0%

6 728 1.2%

15 720 2.8%

541 988 95.9%

1 004 0.2%

565 440 100.0%

44 0.3%

92 0.6%

– -

14 091 99.0%

14 227 100.0%

Norm/

Range

% Actual

25% - 40% 33.0%

2% - 5% 4.8%

- 38.5%

- 15.5%

10% - 20% 28.2%

= or > 0% -5.8%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


The municipality's large debtors balance over 90 days is partly attributable to an incorrect

debtors ledger. Furthermore, a substantial portion of the accumulated debtors balance is

attributable to the lack of a valid indigent register which has meant that all of the

municipality's water and sanitation consumers were combined and billed without

implementing the municipality's indigent policy. A data cleansing process is currently

being conducted to improve the accuracy of the debtors ledger. Furthermore an indigent

register is being compiled to ensure equitable and valid billing.

Households comprise the major portion of the debt since mostly household individuals are

experiencing the strain of the local economy. Furthermore the lack of validity of certain

accounts in the debtors ledger has resulted in the accumulation of irrecoverable debt.

This was compounded by the lack of a valid indigent register which meant that some of

the municipality's water and sanitation consumers which should have been subsidised

were not separately disclosed as indigents and were billed accordingly.




The large long outstanding creditors balance is attributable to a creditor balance from the

Department of Water Affairs where the municipality has negotiated a payment

arrangement.

The municipality's Operating Expenditure significantly exceeded Operating Revenue

resulting in a negative margin and substantially decreasing the municipality's cash backed

reserves.

This ratio assesses the extent of the municipality's own revenue generated in comparison

to total revenue. Uthukela District municipality has generated a lesser portion of revenue

from its own sources of revenue in comparison to grants received from National and

Provincial sources.

This ratio assesses the extent to which the municipality's total capital expenditure is

funded through internally generated funds. Uthukela District municipality has invested a

portion of its cash backed reserves to fund capital expenditure.

Under performance in Operating Expenditure as a result of non-submission of month 11

figures has resulted in a distorted asset management ratio.

The ratio is distorted as the municipality did not report expenditure for month 11.

The ratio is distorted as the municipality did not report expenditure for month 11.

129

4.4 Umzinyathi District

The Umzinyathi District Municipality is located 360 kilometres South East of Johannesburg and 290

kilometres North of Durban. The district is comprised of four local municipalities, namely Endumeni,

Nquthu, Msinga, and Umvoti. The Municipal area is 8 079 km² in size with Umvoti occupying the

largest area of 2 509 km², Msinga 2 500 km², Endumeni 1 612 km² and Nquthu 1 451 km².

Umzinyathi District Municipality is the water services authority for all the local municipalities in the

district. Endumeni, Nquthu and Umvoti municipalities’ main trading services are Electricity and

Refuse removal whilst Msinga Municipality only provides Refuse removal.

Nquthu, Msinga and Umvoti municipalities had Municipal Managers (MM’s) for the entire 2015/16

financial year, whilst Umzinyathi District municipality appointed a Municipal Manager (MM) on

01 September 2015 and Endumeni municipality had numerous Acting MM’s for the entire 2015/16

financial year.

Nquthu, Endumeni and Msinga municipalities had Chief Financial Officers (CFO’s) for the entire

2015/16 financial year. Umzinyathi District municipality and Umvoti municipality had acting CFO’s

for the entire 2015/16 financial year.

Umzinyathi District, Endumeni, Nquthu, Msinga and Umvoti municipalities audit opinions remained

unchanged and they received unqualified audit opinions with other matters for the 2014/15 financial

year.

4.4.1 Overview of Umzinyathi District Performance

Endumeni 250 324 261 281 244 893 93.7

Nquthu 160 338 172 878 171 383 99.1

Msinga 177 064 177 064 12 411 7.0

Umv oti 204 843 309 624 307 152 99.2

Umziny athi DM 310 663 388 847 406 872 104.6

Total 1 103 233 1 309 694 1 142 711 87.3


% Generated



Endumeni 258 211 259 554 222 231 85.6

Nquthu 127 240 132 828 117 011 88.1

Msinga 216 102 216 102 81 137 37.5

Umv oti 207 773 337 805 285 054 84.4

Umziny athi DM 405 027 453 223 417 012 92.0

Total 1 214 354 1 399 512 1 122 445 80.2


% Spent



130

Endumeni 45 844 48 770 30 794 63.1

Nquthu 115 392 141 026 125 033 88.7

Msinga 58 048 58 048 26 959 46.4

Umv oti 105 731 84 545 70 696 83.6

Umziny athi DM 424 875 440 841 383 931 87.1

Total 749 890 773 230 637 413 82.4





Endumeni 8 105 11.5 1 643 2.3 1 166 1.7 59 659 84.5 70 573

Nquthu 1 579 5.9 592 2.2 743 2.8 23 656 89.0 26 570

Msinga 954 5.5 672 3.9 514 3.0 15 191 87.7 17 331

Umv oti 7 514 16.9 4 218 9.5 1 742 3.9 31 058 69.7 44 533

Umziny athi DM 5 747 2.0 5 552 1.9 5 039 1.7 273 915 94.4 290 252

Total 23 900 5.3 12 677 2.8 9 203 2.0 403 479 89.8 449 259


Total





Endumeni 3 134 4.4 8 145 11.5 57 822 81.9 1 471 2.1 70 573

Nquthu 2 658 10.0 8 488 31.9 14 785 55.6 639 2.4 26 570

Msinga 17 010 98.1 319 1.8 3 0.0 – - 17 331

Umv oti 2 832 6.4 5 796 13.0 21 097 47.4 14 807 33.3 44 533

Umziny athi DM 18 251 6.3 21 567 7.4 250 435 86.3 – - 290 252

Total 43 884 9.8 44 315 9.9 344 142 76.6 16 918 3.8 449 259





Endumeni 30 196 100.0 – - – - – - 30 196

Nquthu 9 297 100.0 – - – - – - 9 297

Msinga 638 100.0 – - – - – - 638

Umvoti 187 20.6 (6) (0.6) 344 37.9 383 42.1 908

Umzinyathi DM 6 839 47.7 45 0.3 1 0.0 7 463 52.0 14 348

Total 47 157 85.1 39 0.1 345 0.6 7 846 14.2 55 387




Total

131

4.4.2 Analysis per municipality: Endumeni Municipality

Table 4.4 (g) Operating Revenue and Expenditure Performance - Endumeni Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual % of

Budget

Generated

/ Spent

Comments

57 814 68 279 64 014 93.8 The municipality attributed the under generation of 93.8 percent to the fact that customers

took advantage of paying early in order to qualify for rebates.

126 427 131 138 120 924 92.2 The municipality attributed the under generation of 92.2 percent to the fact that the

municipality appointed a service provider to audit the electricity meters with the aim of

reducing distribution losses and ultimately increasing revenue.

48 404 48 404 48 186 99.6

17 679 13 459 11 768 87.4 The municipality attributed the under generation of 87.4 percent to year end entries to

recognise the sale of redundant assets still to be processed.

250 324 261 281 244 893 93.7 In total the municipality has generated 93.7 percent of its Operating Revenue Adjusted Budget

of R261.3 million.

94 988 93 280 79 547 85.3 The municipality attributed the under expenditure to vacancies of key managers.

3 595 3 595 3 261 90.7 The municipality attributed the under expenditure of 90.7 percent to year end entries still to

be processed.

8 707 7 207 6 212 86.2 The municipality has reported low expenditure of R6.2 million or 86.2 percent on Debt

impairment against an Adjusted Budget of R7.2 million for 2015/16. The municipality

attributed this to pending year end entries. There is a possibility of unauthorised expenditure

should the Adjusted Budget of R7.2 million not be sufficient.

10 664 9 773 3 248 33.2 The municipality has reported low expenditure of R3.2 million or 33.2 percent on

Depreciation and asset impairment against an Adjusted Budget of R9.8 million for 2015/16.

The municipality attributed this to pending year end entries. There is a possibility of

unauthorised expenditure should the Adjusted Budget of R9.8 million not be sufficient.

85 247 85 247 65 824 77.2 The municipality has reported low expenditure of R65.8 million or 77.2 percent on Bulk

purchases against an Adjusted Budget of R85.2 million for 2015/16. The municipality

attributed the under expenditure of 77.2 percent to the accrued June 2016 expenditure not

been included in the year to date figures as reported. Even when taking into account the Bulk

purchases for June 2016 of at least R6.0 million, the Unaudited Actual will at least be R71.8

million or 84.3 percent.

15 640 18 670 18 309 98.1

39 370 41 783 45 830 109.7 The municipality has reported over expenditure of R45.8 million or 109.7 percent on Other

expenditure items against an Adjusted Budget of R41.8 million 2015/16. The municipality

attributed the over expenditure of 109.7 percent to year end entries to be still processed. This

has resulted in unauthorised expenditure of R4.0 million.

258 211 259 554 222 231 85.6 In total the municipality has spent 85.6 percent of its Operating Expenditure Adjusted Budget

of R259.6 million.

(7 887) 1 727 22 662 The municipality has reflected an Unaudited Actual Operating Surplus of R22.7 million

against an Adjusted Budget of R1.7 million, a difference of R21.0 million. This will be subject

to change once all the final year end adjustments have been processed.







R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



132

Table 4.4 (h) Capital, Cash and Conditional grant Performance - Endumeni Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated

/ Spent

Comments

34 841 37 841 23 693 62.6 The municipality has reported Transfers recognised capital of R23.7 million

(62.6 percent) against an Adjusted Budget of R37.8 million. The municipality

attributed this to the capital expenditure budget not being fully spent. This

could result in the unspent grants being returned to National Treasury should

the roll over application not be approved.

– – – -

– – – -

11 003 10 929 7 101 65.0 The municipality has reported Internally generated funds of R7.1 million


attributed this to the capital expenditure budget not being fully spent.

45 844 48 770 30 794 63.1

2 417 1 444 961 66.5 The municipality has spent R961 000 (66.5 percent) on Governance and

Administration at the end of the 2015/16 financial year. The low expenditure

was attributed to delays in supply chain management processes and this

impacts negatively on service delivery.

17 983 17 347 10 570 60.9 The municipality has spent R10.6 million (60.9 percent) on Community and

Public Safety at the end of the 2015/16 financial year. The low expenditure

was attributed to delays in supply chain management process and this

impacts negatively on service delivery.

12 295 14 966 13 650 91.2 The municipality has spent R13.7 million (91.2 percent) on Eco. &

Environmental Services at the end of the 2015/16 financial year. The low

expenditure was attributed to delays in supply chain management processes

and this impacts negatively on service delivery.

13 148 15 013 5 614 37.4 The municipality has spent R5.6 million (37.4 percent) on Trading Services

at the end of the 2015/16 financial year. The low expenditure was attributed

to delays in supply chain management processes and this impacts negatively

on service delivery

– – – -

45 844 48 770 30 794 63.1 In total, the municipality has spent 63.1 percent of its Capital Expenditure


29 627 29 627 – The municipality did not report Unaudited Actual Cash/cash equiv. at the

year begin. As per the 2014/15 Annual Financial Statements the Cash/cash

equivalent is R57.9 million which should have been reflected as the opening

figure for 2015/16.

38 535 42 379 302

8 908 12 753 302 As the result of the above mentioned error the net increase/(decrease) in

cash held is R302 000.

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 600 1 600 100.0% –

930 930 100.0% –

14 841 14 557 98.1% 284









Trading Serv ices

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

133

Table 4.4 (i) Trade and other receivables, Trade and other payables and Key ratios - Endumeni Municipality

Amount % of

total debt /

payables

29 327

70 573

8 105 11.5%

1 643 2.3%

1 166 1.7%

59 659 84.5%

70 573 100.0%

3 134 4.4%

8 145 11.5%

57 822 81.9%

1 471 2.1%

70 573 100.0%

30 196 100.0%

– -

– -

– -

30 196 100.0%

Norm/

Range

% Actual

25% - 40% 37.3%

2% - 5% 8.2%

- 80.3%

- 23.1%

10% - 20% 12.2%

= or > 0% 9.3%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


Debtors increased by R41.2 million in 2015/16 despite the municipality having

appointed a debt collector.

The majority of the municipality's debtors are in the "over 90 days" category which

indicates that the municipality is struggling to collect from its debtors and this impacts

negatively on its cash inflows. The revenue enhancement strategy is still in place,

which includes among others a ITC system which is already functional, a debt relief

program (debt concession) and a meter auditing company removing tampared meters.

Majority of municipal debt is in the household category.

This indicates compliance with Section 65 of the MFMA which requires that creditors be

settled within 30 days.

This ratio indicates that the municipality is not grant dependent to fund its operations.

This ratio indicates that the municipality is grant dependent to fund its capital budget.

This ratio is within the norm.


This ratio indicates that many functions are being outsourced to consultants or that

contractors services are not effectively utilised. This can expose the municipality to

other risks, such as its inability to build capacity and ongoing reliance on contractors.

134

4.4.3 Analysis per municipality: Nquthu Municipality

Table 4.4 (j) Operating Revenue and Expenditure Performance - Nquthu Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual % of

Budget

Generated

/ Spent

Comments

17 681 21 501 21 269 98.9

17 311 18 188 13 631 74.9 The municipality attributed the under generation of 74.9 percent to the fact that Service

charges - electricity is based on consumption, therefore when the municipality

increased its tariffs, consumption decreased which resulted in reduced consumption.

121 188 121 712 122 285 100.5

4 158 11 477 14 198 123.7 The municipality attributed the over generation of 123.7 percent to over generation of

interest earned -outstanding debtors. This is evidenced by the growth in outstanding

debtors as at 30 June 2016.

160 338 172 878 171 383 99.1 In total the municipality has generated 99.1 percent of its Operating Revenue Adjusted

Budget of R172.9 million.

38 960 38 960 35 172 90.3 The municipality attributed the under expenditure of 90.3 percent to vacant posts not

filled.

18 180 10 102 10 014 99.1

1 200 – – - The municipality has reported nil expenditure on Debt impairment thus understating

operating expenditure for 2015/16. The municipality did not populate the Adjusted

Budget figure of R1.2 million. There is a possibility of unauthorised expenditure should

the Adjusted Budget of R1.2 million be understated.

6 500 – 6 510 6 510.0 The municipality has reported R6.5 million on Depreciation and asset impairment

against a nil Adjusted Budget for 2015/16. The municipality did not the populate the

Adjusted Budget figure of R9.2 million. When comparing the Unaudited Actual figure of

R6.5 million to Adjusted Budget figure of R9.2 million, expenditure is 70.7 percent.

18 800 18 800 16 207 86.2 The municipality has reported R16.2 million or 86.2 percent on Bulk purchase against

an Adjusted Budget of R18.8 million for 2015/16 . The municipality attributed this to the

fact that Bulk purchases is based on electricity consumption therefore if consumers are

not consuming electricity the municipality will under spend on Bulk purchases and

under collect on Service charges - electricity.


Contracted services against an Adjusted Budget of R7.8 million for 2015/16. The

municipality attributed the under expenditure of 85.4 percent to the fact that contracts

were terminated and there were delays in appointing new service providers.

36 016 57 135 42 424 74.3 The municipality has reported R42.4 million or 74.3 percent on Other expenditure items

against an Adjusted Budget of R57.1 million for 2015/16 . The municipality attributed

this to the fact that the municipality is implementing cost cutting measures.

127 240 132 828 117 011 88.1 In total the municipality has spent 88.1 percent of its Operating Expenditure Adjusted


33 097 40 051 54 372 The municipality has reflected an Unaudited Actual Operating Surplus of R54.4 million

against an Adjusted Budget of R40.0 million, a difference of R14.4 million. This will be

subject to change once all the final year end adjustments have been processed.







Debt impairment



Bulk purchases

Contracted services








R'000

Operating Revenue

Property Rates1

Service Charges2


135

Table 4.4 (k) Capital, Cash and Conditional grant Performance - Nquthu Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated

/ Spent

Comments

58 246 64 246 84 430 131.4 The municipality has reported Transfers recognised - capital of R84.4 million


attributed over generation to pending year entries which is questionable.

– – – -

– – – -



attributed this to the capital expenditure budget not being fully spent due to

delays in supply chain management processes.

115 392 141 026 125 033 88.7

1 505 124 33 222 26 724.5 The municipality has spent R33.2 million (26724.5 percent) on Governance

and Administration against an Adjusted Budget of R124 000 for 2015/16.

The over expenditure was attributed to misallocations which will be rectified

with the pending year end entries.

63 349 57 844 22 644 39.1 The municipality has spent R22.6 million (39.1 percent) on Community and

Public Safety for 2015/16. The under expenditure was attributed to

misallocations which will be rectified with the pending year end entries.

45 173 48 726 30 937 63.5 The municipality has spent R30.9 million (63.5 percent) on Eco &

Environmental Services against an Adjusted Budget of R48.7 million for

2015/16. The under expenditure was attributed to misallocations which will

be rectified with the pending year end entries.

5 365 34 332 38 230 111.4 The municipality has spent R38.2 million (111.4 percent) on Trading

Services for 2015/16. The over expenditure was attributed to misallocations

which will be rectified with the pending year end entries.

– – – -


Adjusted Budget of R141.0 million and this impacts negatively on service

delivery.

(48 673) 201 114 302 The municipality incorrectly reported Unaudited Actual Cash/cash equiv. at

the year begin. As per the 2014/15 Annual Financial Statements the

Cash/cash equivalent at year end is R111.8 million which should have

been reflected as the opening figure for 2015/16. A difference of R2.5 million.

(65 377) (84 096) 34 575 The Adjusted Budget Cash/cash equiv. at the year end is a negetive R84.1

million, whereas the Unaudited Actual Cash/cash equiv at the year end is a

postive R34.6 million, a difference of R118.7 million.

(16 704) (84 297) (79 728)

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 941 107.8% (141) The municipality has spent R1.9 million (107.8 percent) on the Financial

Management Grant against a Budget of R1.8 million for 2015/16. The

municipality stated that the over spend of R141 000 will be funded from their

own funds.

930 806 86.6% 124 The municipality has spent R806 000 (86.6 percent) on the Municipal

System Improvement Grant against a Budget of R930 000 for 2015/16. The

municipality attributed that low expenditure to the fact that projects are still in

progress and invoices will be paid once completed.

35 246 39 790 112.9% (4 544) The municipality has spent R39.8 million (112.9 percent) on the Municipal

Infrastructure Grant against a Budget of R35.2 million for 2015/16. The

municipality attributed over expenditure to the fact that the project

implementation was ahead of schedule, therefore the municipality avoided

stopping appointed contractors working since these are multi year projects.

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Serv ices

Other










136

Table 4.4 (l) Trade and other receivables, Trade and other payables and Key ratios - Nquthu Municipality

Amount % of

total debt /

payables

18 357

26 570

1 579 5.9%

592 2.2%

743 2.8%

23 656 89.0%

26 570 100.0%

2 658 10.0%

8 488 31.9%

14 785 55.6%

639 2.4%

26 570 100.0%

9 297 100.0%

– -

– -

– -

9 297 100.0%

Norm/

Range

% Actual

25% - 40% 38.6%

2% - 5% 5.7%

- 28.6%

- 32.5%

10% - 20% 51.7%

= or > 0% 31.7%

The ratio indicates that the municipality is grant dependant.

This ratio indicates that the municipality is grant dependent to fund its capital budget.

This ratio indicates higher spending on infrastructure and acceleration in service

delivery, but could also hold financial sustainability risks if the infrastructure does not

include both economic and social type infrastructure.


This ratio is slightly above the norm.

This indicates compliance with Section 65(e) of the MFMA which requires that creditors

be settled within 30 days.


The municipality has total outstanding debt of R26.6 million of which R23.7 million (89.0

percent) is in the over 90 days category. This indicates that the municipality is

struggling to collect from its debtors and this impacts negatively on cash flows.

Debtors increased by R8.2 million in 2015/16.

Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management


137

4.4.4 Analysis per municipality: Msinga Municipality

Table 4.4 (m) Operating Revenue and Expenditure Performance - Msinga Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

10 351 10 351 12 411 119.9 The municipality has recognised R12.4 million (119.9 percent) for Property Rates

against an Adjusted Budget of R10.4 million. This discrepancy casts doubt on the

budget assumption of the municipality. Explanations were requested from the

municipality on numerous occasions without success.

– – – -

162 953 162 953 – - The municipality has not reported any revenue recognised from Transfers recognised -

operational against an Adjusted Budget of R163.0 million thus understating the

operating revenue in 2015/16. Explanations were requested from the municipality on

numerous occasions without success.

3 760 3 760 – - The municipality has not reported any revenue recognised from Other sources of

Revenue against an Adjusted Budget of R3.8 million thus understating the operating

revenue in 2015/16. Explanations were requested from the municipality on numerous

occasions without success.

177 064 177 064 12 411 7.0 The low generation of Total Operating Revenue of R12.4 million (7.0 percent) is

attributed to the fact that the municipality did not report on the majority of revenue items

during 2015/16.

31 680 31 680 33 681 106.3 The municipality has incurred R33.7 million (106.3 percent) on Employee Related

costs against an Adjusted Budget of R31.7 million. The municipality has incurred

unauthorised expenditure of R2.0 million for 2015/16. Explanations were requested

from the municipality on numerous occasions without success.

10 284 10 284 6 757 65.7 The municipality has incurred R6.8 million (65.7 percent) on Remuneration of

councillors against an Adjusted Budget of R10.3 million. The municipality might have

over budgeted on this expenditure item. This discrepancy indicates poor financial

management on the part of the municipality. Explanations were requested from the


1 068 1 068 – - The municipality has reported nil expenditure on Debt impairment against an Adjusted

Budget of R1.1 million thus understating operating expenditure for 2015/16. This will

change once the 2015/16 Annual Financial Statements have been finalised.

Explanations were requested from the municipality on numerous occasions without

success.

22 042 22 042 64 0.3 The municipality has under expended on Depreciation and asset impairment by R22.0

million for 2015/16. The underspending is attributed to the fact that the municipality only

reported on this expenditure item in Month 1 (July 2015). Explanations were requested


– – – -

13 450 13 450 – - The municipality has reported nil expenditure on Contracted services against an

Adjusted Budget of R13.5 million thus understating operating expenditure for 2015/16.

Explanations were requested from the municipality on numerous occasions without

success.

137 578 137 578 40 635 29.5 The municipality has incurred R40.6 million (29.5 percent) on Other expenditure items

against an Adjusted Budget of R137.6 million. The under spending is mainly due to the

municipality reporting low expenditure of R29.8 million on Other expenditure against an

Adjusted Budget of R130.2 million (22.9 percent). The municipality appears to have

over budgeted on the expenditure item. This casts doubt on the budgeted assumption

of the municipality. Explanations were requested from the municipality on numerous

occasions without success.

216 102 216 102 81 137 37.5 Due to the under expenditure noted in the various expenditure items above, the

municipality has underspent on the Total Operating Expenditure Adjusted Budget by

R135.0 million.

(39 038) (39 038) (68 726) The Unaudited Operating deficit is R68.7 million. This figure might change once the

2015/16 Annual Financial Statements have been finalised and also taking into account

the comments above.







Debt impairment



Bulk purchases

Contracted services








R'000

Operating Revenue

Property Rates1

Service Charges2


138

Table 4.4 (n) Capital, Cash and Conditional grant Performance - Msinga Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

58 048 58 048 26 959 46.4 The municipality has reported Transfers recognised - capital of R27.0

million (46.4 percent) against an Adjusted Budget of R58.0 million. This

could result in the unspent grants being returned to National Treasury

should the roll over application not be processed and/or unsuccessful.

– – – -

– – – -

– – – -

58 048 58 048 26 959 46.4

– – 235 235.0 The municipality has reported to have spent R235 000 on Governance

and Administration with a nil budget, resulting in unauthorised expenditure

of R235 000 for 2015/16.

– – – -

38 048 38 048 26 724 70.2 The municipality has reported to have spent R26.7 million (70.2 percent )

on Economic & Environmental Services against an Adjusted Budget of

R38.0 million. The low spending could impact negatively on service

delivery and lead to community dissatisfaction.

– – – -

20 000 20 000 – - Nil expenditure was reported on Other against an Adjusted Budget of

R20.0 million during 2015/16. This could impact negatively on service


58 048 58 048 26 959 46.4 The municipality has reported significantly low Capital Expenditure of 46.4

percent. R31.1 million of the Capital Expenditure Adjusted Budget

remains unspent.

83 155 83 155 76 032

49 363 49 363 142 275 The municipality has reported Unaudited Cash/cash equivalents at the

year end of R142.3 million when compared to the Adjusted Budget of

R49.4 million, a difference of R92.9 million.

(33 792) (33 792) 66 243

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 800 100.0% –

930 930 100.0% –

38 048 38 048 100.0% –









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

139

Table 4.4 (o) Trade and other receivables, Trade and other payables and Key ratios - Msinga Municipality

Amount % of

total debt /

payables

16 663

17 331

954 5.5%

672 3.9%

514 3.0%

15 191 87.7%

17 331 100.0%

17 010 98.1%

319 1.8%

3 0.0%

– -

17 331 100.0%

– -

– -

– -

– -

– -

Norm/

Range

% Actual

25% - 40% 49.8%

2% - 5% 0.0%

- 100.0%

- 0.0%

10% - 20% 24.9%

= or > 0% -553.7%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


The Debtors balance has increased by R668 000 (4.0 percent) from R16.7 million as

at 30 June 2015 to R17.3 million as at 30 June 2016. This is an indication that the

municipality is not collecting debtors which will have an adverse effect on the Cash

Flow.


indicates that the municipality is struggling to collect long over due debts and this impacts

negatively on Cash Flows. The municipality needs to urgently implement its debt

collection and credit control policy.

The majority of municipal debt is in the Organs of state category.

As a result of the municipality not reporting on creditors in their S71 returns, there are

no amounts reflected amongst the various creditor categories.

The Net operating surplus margin is negative 553.7 percent. This implies that the

municipality is operating at a deficit and measures must be implemented to address this

situation to ensure sustainable service delivery. This ratio is questionable based in the

assessment of the Operating Revenue and Expenditure performance.

This ratio indicates that the municipality is wholly grant dependant.

This ratio indicates that Capital Expenditure is entirely funded from grants.

The Capital Expenditure to Total expenditure ratio is 24.9 percent. This implies that the

is higher spending on infrastructure and acceleration in service delivery, but could also

hold financial sustainability risks if the infrastructure do not include both (economic

revenue generating) and social type infrastructure.

The Remuneration as a percentage of Total operating expenditure is 49.8 percent .

This ratio indicates that there are inefficiencies, overstaffing or even the incorrect focus

due to misdirected expenditure to non-essentials or non-service delivery related

expenditure.

140

4.4.5 Analysis per municipality: Umvoti Municipality

Table 4.4 (p) Operating Revenue and Expenditure Performance - Umvoti Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual % of

Budget

Generated

/ Spent

Comments

31 691 31 699 27 156 85.7 The municipality has generated R27.2 million (85.7 percent) for Property Rates against

an Adjusted Budget of R31.7 million. Explanations were requested from the municipality

on numerous occasions without success.

70 691 69 052 80 555 116.7 The municipality has generated R80.6 million (116.7 percent) for Service Charges

against an Adjusted Budget of R69.1 million. Explanations were requested from the


91 052 179 306 186 490 104.0 The municipality has generated R186.5 million (104.0 percent) for Transfers

recognised - operational against an Adjusted Budget of R179.3 million. Explanations

were requested from the municipality on numerous occasions without success.

11 409 29 567 12 951 43.8 The municipality has generated R13.0 million (43.8 percent) for Other sources of

Revenue against an Adjusted Budget of R29.6 million. Explanations were requested


204 843 309 624 307 152 99.2 The municipality has generated R307.2 million (99.2 percent) for Total Operating

Revenue with an Adjusted Budget of R309.6 million.

83 011 73 123 79 462 108.7 The municipality has incurred R79.5 million (108.7 percent) for Employee related costs

with an Adjusted Budget of R73.1 million. There is unauthorised expenditure of R6.3

million incurred by the municipality. Explanations were requested from the municipality

on numerous occasions without success.

8 484 9 257 8 315 89.8 The municipality has incurred R8.3 million (89.8 percent) for Remuneration of

councillors with an Adjusted Budget of R9.3 million. Explanations were requested from

the municipality on numerous occasions without success.

2 700 2 700 – - The municipality did not report any expenditure for Debt impairment with an Adjusted

Budget of R2.7 million. This will change once the 2015/16 Annual Financial Statements

have been finalised. Explanations were requested from the municipality on numerous

occasions without success. The Audited Actual for 2014/15 is R3.9 million.

24 854 21 339 14 974 70.2 The municipality has incurred R15.0 million (70.2 percent) for Depreciation and asset

impairment with an Adjusted Budget of R21.3 million. This figure might change once the

2015/16 Annual Financial Statements have been finalised. Explanations were

requested from the municipality on numerous occasions without success. The Audited

Actual for 2014/15 is R20.1 million.

46 838 46 838 41 250 88.1 The municipality has incurred R41.3 million (88.1 percent) for Bulk purchases with an

Adjusted Budget of R46.8 million. The municipality reported expenditure of R29 000 in

Month 3 (September 2015) and nil expenditure was reported in Month 4 (October

2015). Explanations were requested from the municipality on numerous occasions

without success.

16 616 12 772 13 495 105.7 The municipality has incurred R79.5 million (108.7 percent) for Contracted services with

an Adjusted Budget of R73.1 million. There is unauthorised expenditure of R723 000

incurred by the municipality. Explanations were requested from the municipality on

numerous occasions without success.

25 270 171 777 127 558 74.3 The municipality has incurred R127.6 million (74.3 percent) for Other expenditure items

with an Adjusted Budget of R171.8 million. Explanations were requested from the


207 773 337 805 285 054 84.4 The municipality has incurred R285.1 million (84.4 percent) for Total Operating

Expenditure with an Adjusted Budget of R337.8 million. Total Operating Expenditure

might be understated due to the municipality reporting low expenditure in Month 3 of

R29 000 and reporting nil expenditure in Month 4 for Bulk purchases.

(2 930) (28 181) 22 097 The Unaudited Operating surplus is R22.1 million. This figure might change once the

2015/16 Annual Financial Statements have been finalised.







Debt impairment



Bulk purchases

Contracted services








R'000

Operating Revenue

Property Rates1

Service Charges2


141

Table 4.4 (q) Capital, Cash and Conditional grant Performance - Umvoti Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

69 570 54 500 37 435 68.7 The municipality has reported Transfers recognised - capital of R37.4

million (68.7 percent) against an Adjusted Budget of R54.5 million. This

could result in the unspent grants being returned to National Treasury

should the roll over application not be processed and/or successful.

– 14 224 – - The municipality has reported nil expenditure on Public contributions and

donations with an Adjusted Budget of R14.2 million. Explanations were

requested from the municipality on numerous occasions without success.

30 000 – – -


(210.2 percent) against an Adjusted Budget of R15.8 million. Explanations

were requested from the municipality on numerous occasions without

success.

105 731 84 545 70 696 83.6 The R70.7 million (83.6 percent) Total Capital Revenue is understated by

Pubic contributions and donations not reported by the municipality. The

Total Capital Revenue appears understated due to the municipality not

reporting on Public contributions and donations with an Adjusted Budget of

R14.2 million.

21 090 1 210 1 591 131.5 The municipality has expended R1.6 million or 131.5 percent against an

Adjusted Budget of R1.2 million for 2015/16. The result is unauthorised

expenditure against this vote of R381 000.

10 778 4 157 3 434 82.6 The municipality has under expended by R723 000 on Community and

Public Safety for 2015/16. This could impact negatively on service




expenditure against this vote of R8.1 million.

26 610 35 332 13 696 38.8 The municipality has under expended by R21.6 million on their Trading

Services for 2015/16. This could impact negatively on service delivery

and lead to community dissatisfaction.

– – – -

105 731 84 545 70 696 83.6 The municipality has reported low Capital Expenditure of 83.6 percent.

R13.9 million of the Capital Expenditure Adjusted Budget remains

48 000 48 000 – The municipality has not reported Cash/cash equiv at the year begin for

the 2015/16 financial year of R48.0 million as per the 2014/15 Annual

Financial Statements.

46 741 64 710 84 368 Cash/cash equiv. at the year end appears to be questionable due to the

non-inclusion of the Cash/cash equiv. at the year begin.

(1 259) 16 710 84 368

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 700 1 706 100.3% (6)

930 973 104.6% (43) The municipality has reported to have spent R973 000 (104.6 percent) on

the Municipal System Improvement Grant (MSIG) with a Total available

for 2015/16 of R930 000. This results in unauthorised expenditure of R43

000.

24 570 24 570 100.0% –

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Services

Other










142

Table 4.4 (r) Trade and other receivables, Trade and other payables and Key ratios - Umvoti Municipality

Amount % of

total debt /

payables

32 409

44 533

7 514 16.9%

4 218 9.5%

1 742 3.9%

31 058 69.7%

44 533 100.0%

2 832 6.4%

5 796 13.0%

21 097 47.4%

14 807 33.3%

44 533 100.0%

187 20.6%

(6) -

344 37.9%

383 42.1%

908 100.0%

Norm/

Range % Actual

25% - 40% 30.8%

2% - 5% 4.7%

- 39.3%

- 47.0%

10% - 20% 19.9%

= or > 0% 7.2%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


The Debtors balance has increased by R12.1 million (37.4 percent) from R32.4 million

as at 30 June 2015 to R44.5 million as at 30 June 2016. This is an indication that the

municipality is not collecting debtors which will have an adverse effect on the Cash

Flow.



negatively on Cash Flows. The municipality needs to urgently implement its debt

collection and credit control policy.

The majority of municipal debt is in the household category.

The municipality has reported to owe Creditors of R727 000 for more than 30 days.

This is in contravention of Section 65(e) of the Municipal Finance Management Act

(MFMA).

This is within the norm.

This ratio indicates that the municipality is not wholly grant dependant.

This is as a result of the municipality over expending on the Capital Internally

generated funds by R17.5 million.




143

4.4.6 Analysis per municipality: Umzinyathi District Municipality

Table 4.4 (s) Operating Revenue and Expenditure Performance - Umzinyathi District Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated

/ Spent

Comments

– – – -

54 838 49 534 42 708 86.2 The municipality attributed the under generation of 86.2 percent to the drought being

experienced. The billing is based on the consumption of consumers. The municipality also

had restrictions on water supplied.

246 498 312 485 335 762 107.4 The municipality had over generation on Transfers recognised - operational of 107.4

percent due to the fact that the municipality received additional funds in March 2016 from the

National- Department of Water and Sanitation for a drought relief grant of R20.5 million and

uMgungundlovu District Municipality ( for Ophathe project) of R1.6 million that were not

gazetted.

9 328 26 827 28 402 105.9 The municipality attributed the over generation of 105.9 percent to over generation on

interest earned - outstanding debtors due to prescribed debtors that were only written off

by council in July 2016 and the municipality had planned that this be done in 2015/16.



120 583 107 679 101 921 94.7

4 022 4 308 4 246 98.6

33 127 33 127 40 809 123.2 The municipality has reported expenditure of R40.8 million or 123.2 percent on Debt

impairment against an Adjusted Budget of R33.1 million for 2015/16. The municipality

attributed this to pending year end entries. This has resulted in unathorised expeniture of

R7.7 million.


Depreciation and asset impairment against an Adjusted Budget of R54.8 million for 2015/16.

The municipality attributed this to pending year end entries since the expenditure reported

was only for PPE and not infrastructure . There is a possibility of unauthorised expenditure

should the Adjusted Budget of R54.8 million not be sufficient.

16 157 11 657 10 410 89.3 The municipality has reported low expenditure of R10.4 million or 89.3 percent on Bulk

purchases against an Adjusted Budget of R11.7 million for 2015/16. The municipality

attributed the under expenditure of 89.3 percent to the fact that the in July 2015 there was

a misallocation of expenditure which will be corrected with the year end adjustments.


Contracted services against an Adjusted Budget of R92.1 million for 2015/16. The

municipality attributed the under expenditure of 81.2 percent to the fact that the in July 2015

there was a misallocation of expenditure which will be corrected with the year end

adjustments.

103 206 149 620 155 478 103.9 The municipality reported expenditure of R155.4 million or 103.9 percent on Other

expenditure items against an Adjusted Budget of R149.6 million.This has resulted in

unathorised expeniture of R5.8 million.

405 027 453 223 417 012 92.0 In total the municipality has spent 92.0 percent of its Operating Expenditure Adjusted


(94 364) (64 377) (10 140) The municipality has reflected an Unaudited Actual Operating Deficit of (R10.1 million)

against an Adjusted Budget of (R64.4 million), a difference of R54.3 million. This will be

subject to change once all the final year end adjustments have been processed.







R'000

Operating Revenue

Property Rates1

Serv ice Charges2







Debt impairment



Bulk purchases




144

Table 4.4 (t) Capital, Cash and Conditional grant Performance - Umzinyathi District Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated

/ Spent

Comments

419 159 421 509 373 933 88.7 The municipality has reported Transfers recognised capital of R373.9

million (88.7 percent) against an Adjusted Budget of R421.5 million.The

municipality attributed this to the fact that the municipality received

additional funding on MIG and WSOS which were not gazetted and led to

the late Adjusted Budget. The municipality has applied for a roll-over of

the unspent grants.

– – 3 423 - The municipality reported R3.4 million recognition for Public contributions

and donations against a nil budget. The municipality attributed to pending

year entries.

– – – -


(34.0 percent) against an Adjusted Budget of R19.3 million.The

municipality attributed this to the capital expenditure budget not being fully

spent.

424 875 440 841 383 931 87.1

5 600 5 980 6 455 108.0 The municipality has spent R6.5 million (108.0 percent) on Governance

and Administration at the end of 2015/16. The over expenditure was

attributed to pending year entries. This has resulted in unauthorised

expenditure of R500 000.

60 8 296 8 296 100.0

16 16 – -

419 199 426 549 369 180 86.6 The municipality attributed slow spending on Trading Services of R369.2

million (86.6 percent ) to the fact that the municipality received additional

funding on MIG and WSOS which was not gazetted and led to the late

Adjusted Budget. The municipality has applied for a roll-over of the

unspent conditional grants from National Treasury.

– – – -



5 075 57 974 11 735 The municipality has correctly reported the budgeted Cash/cash equiv. at

the year begin of R58.0 million as per the 2014/15 Annual Financial

Statements.

(19 427) 16 036 9 599 Cash/cash equivalent at the year end decreased from R16.0 million in

Adjusted budget to R9.6 million in Unaudited Actual, a difference of R6.4

million.

(24 502) (41 938) (2 136)

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 250 1 250 100.0% –

940 940 100.0% –

203 835 190 867 93.6% 12 968 The municipality attributed low expenditure of 93.6 percent to the fact that

the municipality received an additional R21.0 million which was not

gazzetted and as a result of this a late Adjusted Budget was passed.

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Services

Other










145

Table 4.4 (u) Trade and other receivables, Trade and other payables and Key ratios - Umzinyathi District Municipality

Amount % of

total debt /

payables

249 885

290 252

5 747 2.0%

5 552 1.9%

5 039 1.7%

273 915 94.4%

290 252 100.0%

18 251 6.3%

21 567 7.4%

250 435 86.3%

– -

290 252 100.0%

6 839 47.7%

45 0.3%

1 0.0%

7 463 52.0%

14 348 100.0%

Norm/

Range

% Actual

25% - 40% 25.5%

2% - 5% 17.9%

- 17.5%

- 1.7%

10% - 20% 47.9%

= or > 0% -2.5%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


Debtors increased by R40.4 million in 2015/16. The municipality advised that the

council has approved to write off debtors amounting to R133.0 million in 2016/17.

The municipality indicated that council approved to write-off amounts on domestic and

business accounts which amount to R133.0 million. The majority will be on households.


The municipality has R7.5 million of creditors in over 30 days in total. This is in

contravention of Section 65 of the MFMA.

This ratio implies that the municipality is operating at a deficit and measures must be

implemented to address the situation to ensure sustainable service delivery.



This ratio indicates higher spending on infrastructure and acceleration in service

delivery, but could also hold financial sustainability risks if the infrastructure does not

include both economic and social type infrastructure.


This ratio indicates that many functions are being outsourced to consultants or that


other risks, such as its inability to build capacity and ongoing reliance on contractors.

146

4.5 Amajuba District

The Amajuba District Municipality is comprised of three local municipalities, namely Newcastle,

eMadlangeni and Dannhauser. Amajuba District is 6 910 km² in size with eMadlangeni occupying the

largest area of 3 539 km² followed by Newcastle with a geographical area of approximately 1 854.6

km² and Dannhauser at 1 516 km². Amajuba District Municipality is the Water Service Authority for

Dannhauser and eMadlangeni Municipalities whilst the Newcastle Municipality performs its own

water reticulation.

Newcastle Municipality’s main trading services are Water, Electricity and Refuse removal,

eMadlangeni Municipality’s main trading services are Electricity and Refuse removal whilst

Dannhauser Municipality only renders a Refuse removal service.

Amajuba District, eMadlangeni and Dannhauser Municipalities had Municipal Managers (MM’s) for

the entire 2015/16 financial year whilst Newcastle Municipality had an acting MM from 01 July 2015

until 03 May 2016 when a permanent MM was appointed. Dannhauser and eMadlangeni

Municipalities had Chief Financial Officers (CFO’s) for the entire 2015/16 financial year whilst

Newcastle Municipality and Amajuba District Municipality had an Acting CFO for the entire 2015/16

financial year.

Dannhauser Municipality regressed from a clean audit in 2013/14 to an unqualified opinion with other

matters in 2014/15. eMadlangeni Municipality maintained an unqualified audit opinion for the

2014/15 financial year, whilst the Amajuba District and Newcastle Municipalities, similar to the

2013/14 financial year, received qualified audit opinions for 2014/15.

4.5.1 Overview of Amajuba District Performance

Newcastle 1 580 961 1 274 772 1 683 636 132.1

eMadlangeni 68 770 68 770 74 889 108.9

Dannhauser 116 113 108 001 178 028 164.8

Amajuba DM 163 168 162 198 167 406 103.2

Total 1 929 013 1 613 741 2 103 959 130.4


% Generated



Newcastle 1 834 688 1 894 525 2 194 319 115.8

eMadlangeni 68 666 68 666 65 317 95.1

Dannhauser 85 954 86 514 69 284 80.1

Amajuba DM 161 652 180 985 224 069 123.8

Total 2 150 960 2 230 691 2 552 988 114.4


% Spent



147

Newcastle 400 509 389 560 293 295 75.3

eMadlangeni 24 896 24 896 11 357 45.6

Dannhauser 42 537 49 089 43 244 88.1

Amajuba DM 70 515 69 324 60 372 87.1

Total 538 457 532 869 408 269 76.6





Newcastle 66 670 7.5 36 051 4.0 22 431 2.5 765 109 85.9 890 261

eMadlangeni 1 512 5.5 908 3.3 5 301 19.4 19 653 71.8 27 373

Dannhauser 950 4.7 841 4.2 734 3.6 17 651 87.5 20 176

Amajuba DM – - – - – - – - –

Total 69 133 7.4 37 800 4.0 28 466 3.0 802 412 85.6 937 811


Total





Newcastle 13 331 1.5 94 536 10.6 753 555 84.6 28 840 3.2 890 261

eMadlangeni 4 187 15.3 4 360 15.9 9 000 32.9 9 825 35.9 27 373

Dannhauser 2 930 14.5 2 971 14.7 12 507 62.0 1 768 8.8 20 176

Amajuba DM – - – - – - – - –

Total 20 448 2.2 101 866 10.9 775 062 82.6 40 434 4.3 937 811





Newcastle 81 741 66.0 42 114 34.0 – - – - 123 856

eMadlangeni 2 532 55.7 1 838 40.4 150 3.3 27 0.6 4 547

Dannhauser 1 038 93.6 – - – - 71 6.4 1 109

Amajuba DM 13 252 22.4 13 603 23.0 1 599 2.7 30 755 51.9 59 209

Total 98 563 52.2 57 555 30.5 1 749 0.9 30 853 16.3 188 721




Total

148

4.5.2 Analysis per municipality: Newcastle Municipality

Table 4.5 (g) Operating Revenue and Expenditure Performance - Newcastle Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of Budget

Generated /

Spent

Comments

240 640 232 130 240 367 103.5

987 463 998 461 935 895 93.7 The municipality has generated R935.9 million (93.7 percent) against an Adjusted Budget of

R998.5 million. The municipality under generated on Service charges - electricity of R601.9

million (92.7 percent) against an Adjusted Budget of R651.7 million.

307 059 – 462 502 - The municipality has recognised R462.5 million for Transfers recognised - operational. The

municipality reported nil for the 2015/16 Adjusted Budget, thus rendering the figures reported

questionable.


R44.2 million. The municipality has stated that there is a misallocation of line items which were

meant to be allocated under the Service Charges votes and the municipality is in the process

of aligning the misallocated line items.

1 580 961 1 274 772 1 683 636 132.1 The municipality has generated R1.7 billion (132.1 percent) Total Operating Revenue against

an Adjusted Budget of R1.3 million. The figure is distorted as there is no Adjusted Budget

figure for Transfers recognised - operational.

442 461 446 857 465 310 104.1 The municipality has incurred R465.3 million (104.1 percent) on Employee related costs

against an Adjusted Budget of R446.9 million. The municipality has incurred unauthorised

expenditure of R18.5 million as at 30 June 2016. The municipality has stated that the re-

engineering process impacted employee related costs which was not included in the Adjusted

Budget.

19 208 19 440 19 437 100.0

102 308 102 308 331 745 324.3 The municipality has incurred R331.7 million (324.3 percent) on Debt impairment against an

Adjusted Budget of R102.3 million. The municipality has incurred unauthorised expenditure of

R229.4 million as at 30 June 2016. The municipality stated that the method of calculating the

debt Impairment was amended after the budget review process.

247 952 311 729 265 578 85.2 The municipality has incurred R265.6 million (85.2 percent) on Depreciation and asset

impairment against an Adjusted Budget of R311.7 million. This figure might be subject to

change with the finalisation of the 2015/16 Annual Financial Statements.

474 096 457 000 441 088 96.5

190 653 168 608 76 208 45.2 The municipality has incurred R76.2 million (45.2 percent) on Contracted services against an

Adjusted Budget of R168.6 million. The municipality has stated that an amount for uThukela

Water was budgeted for under Contracted services, however during the course of the year a

journal was passed and the expenditure was then allocated to Bulk purchases, thus resulting in

the low expenditure rate.



expenditure of R206.4 million as at 30 June 2016. The municipality has stated that the over

expenditure is due to Water tankers purchased for drought relief and departmental charges for

Eskom. The purchase of water tankers is of a capital nature and may need to be reallocated to

Capital Expenditure.

1 834 688 1 894 525 2 194 319 115.8 The municipality has incurred R2.2 billion (115.8 percent) Total Operating Expenditure against

an Adjusted Budget of R1.9 billion. The municipality has overspent by R299.8 million.

(253 726) (619 753) (510 683) The municipality incurred an Unaudited Operating deficit of R510.7 million. The Adjusted

Budget figure of R619.8 million is understated by the Transfers recognised - operational that

was not recorded.







R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



149

Table 4.5 (g) Operating Revenue and Expenditure Performance - Newcastle Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of Budget

Generated /

Spent

Comments

240 640 232 130 240 367 103.5


R998.5 million. The municipality under generated on Service charges - electricity of R601.9

million (92.7 percent) against an Adjusted Budget of R651.7 million.

307 059 – 462 502 - The municipality has recognised R462.5 million for Transfers recognised - operational. The

municipality reported nil for the 2015/16 Adjusted Budget, thus rendering the figures reported

questionable.


R44.2 million. The municipality has stated that there is a misallocation of line items which were

meant to be allocated under the Service Charges votes and the municipality is in the process

of aligning the misallocated line items.

1 580 961 1 274 772 1 683 636 132.1 The municipality has generated R1.7 billion (132.1 percent) Total Operating Revenue against

an Adjusted Budget of R1.3 million. The figure is distorted as there is no Adjusted Budget

figure for Transfers recognised - operational.

442 461 446 857 465 310 104.1 The municipality has incurred R465.3 million (104.1 percent) on Employee related costs


expenditure of R18.5 million as at 30 June 2016. The municipality has stated that the re-

engineering process impacted employee related costs which was not included in the Adjusted

Budget.

19 208 19 440 19 437 100.0


Adjusted Budget of R102.3 million. The municipality has incurred unauthorised expenditure of

R229.4 million as at 30 June 2016. The municipality stated that the method of calculating the

debt Impairment was amended after the budget review process.

247 952 311 729 265 578 85.2 The municipality has incurred R265.6 million (85.2 percent) on Depreciation and asset

impairment against an Adjusted Budget of R311.7 million. This figure might be subject to

change with the finalisation of the 2015/16 Annual Financial Statements.

474 096 457 000 441 088 96.5

190 653 168 608 76 208 45.2 The municipality has incurred R76.2 million (45.2 percent) on Contracted services against an

Adjusted Budget of R168.6 million. The municipality has stated that an amount for uThukela

Water was budgeted for under Contracted services, however during the course of the year a

journal was passed and the expenditure was then allocated to Bulk purchases, thus resulting in

the low expenditure rate.



expenditure of R206.4 million as at 30 June 2016. The municipality has stated that the over

expenditure is due to Water tankers purchased for drought relief and departmental charges for

Eskom. The purchase of water tankers is of a capital nature and may need to be reallocated to

Capital Expenditure.

1 834 688 1 894 525 2 194 319 115.8 The municipality has incurred R2.2 billion (115.8 percent) Total Operating Expenditure against

an Adjusted Budget of R1.9 billion. The municipality has overspent by R299.8 million.

(253 726) (619 753) (510 683) The municipality incurred an Unaudited Operating deficit of R510.7 million. The Adjusted

Budget figure of R619.8 million is understated by the Transfers recognised - operational that

was not recorded.







R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



150

Table 4.5 (i) Trade and other receivables, Trade and other payables and Key ratios - Newcastle Municipality

Amount % of

total debt /

payables

1 149 965

890 261

66 670 7.5%

36 051 4.0%

22 431 2.5%

765 109 85.9%

890 261 100.0%

13 331 1.5%

94 536 10.6%

753 555 84.6%

28 840 3.2%

890 261 100.0%

81 741 66.0%

42 114 34.0%

– -

– -

123 856 100.0%

Norm/

Range

% Actual

25% - 40% 22.1%

2% - 5% 3.5%

- 72.5%

- 30.0%

10% - 20% 11.8%

= or > 0% -30.3% The Net operating surplus margins is negative 30.3 percent. This implies that the

municipality is operating at a deficit and measures must be implemented to address this

situation to ensure sustainable service delivery.





The municipality has reported to owe Creditors R42.1 million for more than 30 days. This

is in contravention of Section 65(e) of the Municipal Finance Management Act (MFMA).

The majority of municipal debt is in the household category. This indicates that the

municipality is not collecting 84.6 percent of debts due. The municipality must improve

their debt collection strategy to inrease collection from Households.

The municipality has total outstanding debtors of R890.3 million of which R765.1 million

(85.9 percent) are in the over 90 days category.

The total outstanding debtors has decreased from R1.1 billion in 2014/15 to R890.3

million in 2015/16. The municipality indicated that R359.0 million of debts were written off

in 2015/16.

Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management


151

4.5.3 Analysis per municipality: eMadlangeni Municipality Table 4.5 (j) Operating Revenue and Expenditure Performance - eMadlangeni Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of Budget

Generated /

Spent

Comments

16 981 16 981 15 954 94.0

15 205 15 205 13 219 86.9 The municipality has recognised R13.2 million (86.9 percent) on Service Charges against an

Adjusted Budget of R15.2 million. The municipality has indicated that this is due to electricity

sales being slightly lower than anticipated and new residential connections are now done on

their prepaid system and consumers are able to closely monitor their electricity consumption.

25 650 25 650 39 889 155.5 The municipality has recognised R39.9 million (155.5 percent) on Transfers recognised -

operational against an Adjusted Budget of R25.7 million. The municipality has indicated that

there is a misallocation of Capital revenue of R14.4 million reported in transfers recognised -

operational. Therefore the correct amount should be R25.5 million (99.6 percent).

10 934 10 934 5 826 53.3 The municipality has recognised R5.8 million (53.3 percent) on Other sources of Revenue

against an Adjusted Budget of R10.9 million. The municipality has indicated that this is due to

Town hall and other facilities not being open for public bookings, Traffic fines revenue now

being recognised on an accrual basis as opposed to cash basis and low revenue generated

from the Game Park. The municipality was made aware of the fact that it has over budgeted

for some Revenue items during the assessment of the 2015/16 Adjusted Budget and was

advised to amend the Revenue items accordingly.

68 770 68 770 74 889 108.9 The Total Operating Revenue is R74.9 million (108.9 percent) against an Adjusted Budget of

R68.8 million. The over generation of Total Operating Revenue is mainly as a result of the high

generation of the Unaudited Transfers recognised - operational reported which is incorrect and

overstated by R14.4 million. Therefore, Total Operating Unaudited Actual Revenue should be

R60.5 million (88.0 percent).

23 252 23 252 19 626 84.4 The municipality has incurred R19.6 million (84.4 percent) on Employee related costs against

an Adjusted Budget of R23.3 million. The municipality stated that the Adjusted Budget figure

should be R20.5 million. This is a result of the municipality submitting incorrect returns. This

would make the percentage Budget Spent 95.6 percent.

1 999 1 999 1 859 93.0 The municipality has spent R1.9 million (93.0 percent) on Remuneration of councillors against

an Adjusted Budget of R2.0 million. The municipality stated that the Adjusted Budget figure

should be R1.9 million. This is a result of the municipality submitting incorrect returns. This

would make the percentage Budget Spent 100.0 percent.


Adjusted Budget of R2.3 million. The municipality indicated that the low spending on Debt

impairment is due to an improved collection rate and indigent household debt being written off.

This figure might change once the 2015/16 Annual Financial Statements have been finalised.

5 294 5 294 3 698 69.9 The municipality has spent R3.7 million (69.9 percent) on Depreciation and asset impairment

against an Adjusted Budget of R5.3 million. The municipality indicted that there is low spending

on Depreciation and asset impairment due to later than expected completion of infrastructure

projects. This figure might change once the 2015/16 Annual Financial Statements have been

finalised.

11 310 11 310 10 905 96.4

1 316 1 316 2 495 189.7 The municipality has spent R2.5 million (189.7 percent) on Contracted services against an

Adjusted Budget of R1.3 million. The municipality stated that the Adjusted Budget figure should

be R2.5 million. This is a result of the municipality submitting incorrect returns. This would

make the percentage Budget spent 100.0 percent.

23 195 23 195 25 214 108.7 The municipality has spent R25.2 million (108.7 percent) on Other expenditure items against

an Adjusted Budget of R23.2 million. There is unauthorised expenditure of R2.0 million

incurred by the municipality as a result thereof.

68 666 68 666 65 317 95.1 The Total Operating Expenditure is R65.3 million (95.1 percent) against an Adjusted Budget of

R68.7 million.

104 104 9 572 The Unaudited Operating surplus is R9.6 million as a result of the over generation of Transfers

recognised - operational. The Total Unaudited Actual Operating Revenue should be R60.5

million and therefore the Unaudited Operating deficit should be R4.8 million. This figure might

change once the 2015/16 Annual Financial Statements have been finalised.







Debt impairment



Bulk purchases

Contracted services








R'000

Operating Revenue

Property Rates1

Service Charges2


152

Table 4.5 (k) Capital, Cash and Conditional grant Performance - eMadlangeni Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of Budget

Generated /

Spent

Comments


(59.9 percent) against an Adjusted Budget of R18.9 million. This could result in

the unspent grant being returned to National Treasury should the roll over

application not be processed and/or unsuccessful.

– – – -

– – – -

5 950 5 950 – - The municipality has not recognised any revenue received from Internally

generated funds against an Adjusted Budget of R6.0 million.

24 896 24 896 11 357 45.6



expenditure against this vote of R200 000.

– – – -

3 700 3 700 – - No expenditure was reported on Economic & Environmental Services against

an Adjusted Budget of R3.7 million. This could impact negatively on service


10 000 10 000 – - No expenditure was reported on Trading Services against an Adjusted Budget

of R10.0 million. This could impact negatively on service delivery and lead to

community dissatisfaction.

– – – -

24 896 24 896 11 357 45.6 The municipality has reported significantly low Capital Expenditure of

45.6 percent. R13.5 million of the Adjusted Budget remains unspent.

7 000 7 000 8 345

1 315 1 315 21 028 The municipality has reported Unaudited Cash/cash equivalents at the year end

of R21.0 million which is questionable when compared to the Adjusted Budget

of R1.3 million. The bank reconciliation as at 30 June 2016 indicates that the

municipality's bank balance was R6.6 million, a difference of R14.4 million.

(5 685) (5 685) 12 683

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 819 101.1% (19) The municipality has spent R1.8 million (101.1 percent) on the Financial

Management Grant with a budget of R1.8 million, an over spending of

R19 000.

930 930 100.0% –

11 183 10 412 93.1% 771 The municipality has spent R10.4 million (93.1 percent) on the Municipal

Infrastructure Grant with a budget of R11.2 million, an under spending of

R771 000. This could result in the unspent grant being returned to National

Treasury should the roll over application not be processed and/or unsuccessful.









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

153

Table 4.5 (l) Trade and other receivables, Trade and other payables and Key ratios - eMadlangeni Municipality

Amount % of

total debt /

payables

13 744

27 373

1 512 5.5%

908 3.3%

5 301 19.4%

19 653 71.8%

27 373 100.0%

4 187 15.3%

4 360 15.9%

9 000 32.9%

9 825 35.9%

27 373 100.0%

2 532 55.7%

1 838 40.4%

150 3.3%

27 0.6%

4 547 100.0%

Norm/

Range

% Actual

25% - 40% 32.9%

2% - 5% 3.8%

- 46.7%

- 0.0%

10% - 20% 14.8%

= or > 0% 12.8%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


The Debtors balance has increased by R13.6 million (99.2 percent) from R13.7 million as

at 30 June 2015 to R27.4 million as at 30 June 2016. This is an indication that the

municipality is not collecting debtors which will have an adverse effect on the Cash Flow.



negatively on Cash Flows. The municipality needs to urgently implement its debt collection

and credit control policy.

The majority of municipal debt is in the Other category.

The municipality has reported to owe Creditors of R2.0 million for more than 30 days. This

is in contravention of Section 65(e) of the Municipal Finance Management Act (MFMA).

This ratio is questionable as the municipality has in fact incurred an Unaudited Actual

Operating deficit for 2015/16 based on the assessment of the Operating Revenue and

Operating Expenditure.


This ratio indicates that Capital Expenditure is wholly funded from grants.




154

4.5.4 Analysis per municipality: Dannhauser Municipality

Table 4.5 (m) Operating Revenue and Expenditure Performance - Dannhauser Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual % of

Budget

Generated /

Spent

Comments

10 249 13 087 16 089 122.9 The municipality attributed the over generation of 122.9 percent to misallocations which will be

corrected with the year end entries.

981 981 913 93.1 The municipality attributed the under generation of 93.1 percent to misallocations which will be

corrected with the year end entries.

83 634 77 704 150 312 193.4 The municipality attributed the over generation of 193.4 percent to the fact that the

Electrification grant amounting to R5.0 million was initially reported as a capital grant but in the

section 71 reports it was incorrectly reported as operational grants. This explanation is

questionable as there is still a difference of R67.6 million. Which the municipality was unable to

explain.

21 249 16 229 10 714 66.0 The municipality generated R10.7 million (66.0 percent) on Other sources of revenue. The

municipality attributed the low generation to that fact that this figure reflects Surplus Cash that

the municipality financed with other services. This explanation is questionable .


Budget of R108.0 million. The credibility of this is questionable due to discrepancies noted

regarding Transfers recognised - operational.

29 429 36 580 23 912 65.4 The municipality attributed the low expenditure of 65.4 percent to the fact that some of

employees benefits are not utilised by the employees i.e. housing and medical aid. This

explanation is questionable as the difference of R12.6 million cannot be for solely housing and

medical aid.

7 413 – 6 222 6 222.0 The municipality did not populate the Adjusted Budget figure. When comparing the Unaudited

Actual figure for remuneration of councillors, the municipality has expended R6.2 million or

83.8 percent. The municipality attributed the low expenditure to the expected councillors back

pay which was not fully utilised.

– – – -

5 000 6 500 – - The municipality has reported nil expenditure on Depreciation and asset impairment against an

Adjusted Budget of R6.5 million, thus understating the operating expenditure for 2015/16 .

This could result in unauthorised and irregular expenditure should the Depreciation and asset

impairment be in excess of the budgeted R6.5 million. The Audited Actual for 2014/15 is R17.2

million. Provincial Treasury has been advising the municipality for the past 3 years to budget

adequately for Depreciation and asset impairment.

– – – -

– – – -

44 112 43 434 39 150 90.1 The municipality attributed the under expenditure of 90.1 percent to pending year end entries.

85 954 86 514 69 284 80.1 In total the municipality has spent 80.1 percent of its Operating Expenditure Adjusted Budget

of R86.5 million. This figure is understated as the municipality has not accounted for

Depreciation and asset impairment as well as debt impairment figures which were not

included.

30 159 21 487 108 744 The municipality has reflected an Unaudited Actual Operating Surplus of R108.7 million

against an Adjusted Budget of R21.5 million, a difference of R87.2 million. This will be subject

to change once all the final year end adjustments have been processed and is questionable.







Debt impairment



Bulk purchases

Contracted services








R'000

Operating Revenue

Property Rates1

Service Charges2


155

Table 4.5 (n) Capital, Cash and Conditional grant Performance - Dannhauser Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

26 074 26 074 26 951 103.4

– – – -

– – – -

16 463 23 015 16 294 70.8 The municipality has reported Internally generated funds of R16.3 million (70.8

percent) against an Adjusted Budget of R23.0 million. The municipality

attributed this to pending year end entries.

42 537 49 089 43 244 88.1

39 686 46 658 42 285 90.6 The municipality has spent R42.3 million (90.6 percent) on Governance and

Administration for 2015/16. The low expenditure was attributed to delays by

appointed service providers.

2 851 2 381 959 40.3 The municipality has spent R959 000 (40.3 percent) on Community and Public

Safety for 2015/16. The low expenditure was attributed to delays by appointed

service providers.

– 50 – - The municipality did not report any expenditure for Eco. & Environmental

Services against an Adjusted Budget of R50 000. No reasons for such was

provided.

– – – -

– – – -


Adjusted Budget of R49.1 million and this impacts negatively on service

delivery.

– – – The municipality did not report Original Budget, Adjusted Budget and

Unaudited Actual Cash/cash equiv. at the year begin. As per the 2014/15

Annual Financial Statements the Cash/cash equivalent is R21.8 million which

should have been reflected as the opening figure for 2015/16.

3 695 49 791 10 197 A difference of R39.7 million was noted when comparing Adjusted Budget

Cash/cash equiv at the year end of R49.8 and an Unaudited Actual Cash/cash

equivalent at the year end of R10.1 million.

3 695 49 791 10 197

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 800 100.0% –

930 930 100.0% –

21 074 21 074 100.0% –









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

156

Table 4.5 (o) Trade and other receivables, Trade and other payables and Key ratios - Dannhauser Municipality

Amount % of

total debt /

payables

22 087

20 176

950 4.7%

841 4.2%

734 3.6%

17 651 87.5%

20 176 100.0%

2 930 14.5%

2 971 14.7%

12 507 62.0%

1 768 8.8%

20 176 100.0%

1 038 93.6%

– -

– -

71 6.4%

1 109 100.0%

Norm/

Range % Actual

25% - 40% 43.5%

2% - 5% 0.0%

- 15.6%

- 37.7%

10% - 20% 38.4%

= or > 0% 61.1%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


Debtors decreased by R1.9 million in 2015/16 .

The municipality has total outstanding debt of R20.2 million of which R17.7 million (87.5

percent) is in the over 90 days category. This indicates that the municipality is struggling

to collect from its debtors and this impacts negatively on cash flows. The municipality

indicated that a debt collector has been appointed to mitigate the challenge.


The municipality has R71 000 of creditors in over 30 days in total. This is in

contravention of Section 65(e) of the MFMA.

This ratio is questionable due to the concerns raised on the analysis of the Operating

Revenue and Expenditure Performance.



This ratio indicates higher spending on infrastructure and acceleration in service delivery,

but could also hold financial sustainability risks if the infrastructure does not include both

economic and social type infrastructure.

This could indicate inefficiencies and/or overstaffing.

157

4.5.5 Analysis per municipality: Amajuba District Municipality

Table 4.5 (p) Operating Revenue and Expenditure Performance - Amajuba District Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of Budget

Generated /

Spent

Comments

– – – -

19 666 22 666 24 410 107.7 The municipality has reported to have recognised an amount of R24.4 million (107.7 percent)

against the Adjusted Budget of R22.7 million in respect of Service Charges. The municipality

indicated that the variance is as a result of having marginally under-budgeted for Service

Charges in the 2015/16 Adjusted Budget despite having increased the budget by R3.0 million

from the 2015/16 Original Budget.

128 624 129 876 137 976 106.2 The municipality has reported to have recognised an amount of R138.0 million (106.2 percent)

against the Adjusted Budget amount of R129.9 million. The municipality indicated that the

variance is due to a misallocation of an amount of R5.0 million received from DWAF as a

refund for Water Tanker deliveries supplied for drought-stricken areas. This amount was

incorrectly reflected under Transfers recognised - operational as opposed to Other sources of

Revenue.

14 878 9 656 5 020 52.0 The municipality has reported to have received an amount of R5.0 million (52.0 percent)

against the Adjusted Budgeted amount of R9.7 million. The municipality indicated that the

variance is due to a misallocation of an amount of R5.0 million received from DWAF as a

refund for Water Tanker deliveries supplied for drought-stricken areas. This amount was

incorrectly reflected under Transfers recognised - operational as opposed to Other sources of

Revenue.

163 168 162 198 167 406 103.2 The municipality has in total reported to have recognised R167.4 million (103.2 percent) of the

Adjusted Budget amount of R162.1 million.

81 242 70 790 109 144 154.2 The municipality has reported and amount of R109.1 million (154.2 percent) against an

Adjusted Budget amount of R70.8 million. According to the municipality the amount of R109.1

million reflected under the Unaudited Actual column is incorrect as a result of the municipality

having incorrectly captured the S71 returns. The correct figure should be R74.7 million which

represents 106.0 percent of the Adjusted Budget for Employee related costs. No reasons for

the budget performance was provided by the municipality.

5 708 5 174 4 348 84.0 The municipality has reported an amount of R4.3 million (84.0 percent) against an Adjusted

Budget amount of R5.2 million. The municipality indicated that the reason for the

underperformance of Remuneration of councillors is that the budgeted amount of R5.2 million

was based on the Upper Limits as per the Remuneration of Public Office Bearers Act. This

amount was not approved by the MEC for CoGTA and therefore the actual expenditure was

less than budgeted for.

1 800 5 691 – - The municipality has not reported on Debt impairment against an Adjusted Budget amount of

R5.7 million, thus understating Operating Expenditure for 2015/16. This could result in

unauthorised expenditure should Debt impairment be in excess of the Adjusted Budget of

R5.7 million.

2 685 25 542 29 371 115.0 The municipality has reported an amount of R29.4 million against an Adjusted Budget amount

of R25.5 million. According to the municipality the amount of R29.4 million reflected under the

Unaudited Actual column is incorrect as a result of the municipality having incorrectly captured

the S71 returns.The municipality indicated that the correct Unaudited Actual figure in respect of

Depreciation and asset impairment is R28.8 million which represents 113.0 percent of the

2015/16 Adjustment Budget of R25.5 million. The municipality further indicated that the reason

for the variance is as a result of having under-budgeted for this line item in the 2015/16

Adjusted Budget. This is unauthorised expenditure of R3.3 million.

9 509 15 000 15 950 106.3 The municipality has reported to have expended R16.0 million (106.3 percent) on Bulk

purchases against an Adjusted Budget of R15.0 million for 2015/16. The municipality indicated

that the reason for the variance is due to having marginally under budgeted for Bulk Purchases

in the 2015/16 Adjusted Budget. This is unauthorised expenditure of R950 000.

12 750 15 688 14 857 94.7

47 957 43 100 50 399 116.9 An amount of R50.4 million (116.9 percent) has been recorded against the Adjusted Budget of

R43.1 million, unauthorised expenditure of R7.3 million. As a result this may eventuate in

unauthorised expenditure. The municipality indicated the following reasons are attributable to

the over-expenditure of Other expenditure; Increased expenditure in Water Delivery Tanker

Services due to the drought experienced during the financial year; Increased ICT and

Professional Fees due to mSCOA planning and implementation.

161 652 180 985 224 069 123.8 The municipality has in total reported to have expended R224.1 million (123.8 percent) of the

Adjusted Budget amount of R181.0 million .

1 516 (18 787) (56 663) The municipality has budgeted for an Operating deficit of R18.8 million and in comparison,

irrespective of the concerns reflected above, the Unaudited Actual shows that the municipality

recorded an Unaudited deficit of R56.7 million. A difference of negative R37.9 million. It must

be noted however, that this figure is subject to increase with the inclusion of Debt impairment

and other possible year-end entries.







R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



158

Table 4.5 (q) Capital, Cash and Conditional grant Performance - Amajuba District Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of Budget

Generated /

Spent

Comments



indicated that the correct Unaudited Actual amount received in respect of

transfers recognised - capital is R68.9 million (107.8 percent). This is as a result

of the municipality having incorrectly captured the S71 returns. The municipality

indicated that they had received an additional R5.0 million relating to a Disaster

Building Grant (CoGTA) that was not included in the 2015/16 Adjusted Budget.

– – – -

7 637 – – -

1 080 5 380 6 170 114.7 The municipality has reported Internally generated funds of R6.2 million (114.7

percent) against an Adjusted Budget of R5.4 million. The municipality indicated

that the correct Unaudited Actual amount is in fact R5.6 million which

represents 104.0 percent of the 2015/16 Adjusted Budget. This is as a result of

the municipality having incorrectly captured the S71 returns.

70 515 69 324 60 520 87.3

8 537 5 200 5 073 97.6

– – – -

180 180 9 765 5 424.9 The municipality indicated that expenditure relating to Trading Services was

misallocated to the Eco. & Environmental Services which resulted in the over

expenditure noted in Eco. & Environmental Services. The municipality indicated

this will be rectified in the AFS.

61 798 63 944 45 535 71.2 As noted above, the municipality indicated that expenditure relating to Trading

Services was misallocated to the Eco. & Environmental Services which resulted

in the under expenditure noted in Trading Services. The municipality indicated

this will be rectified in the AFS.

– – – -

70 515 69 324 60 372 87.1 Notwithstanding the misallocations noted above in respect of Capital Revenue

and Expenditure, the municipality has expended 87.1 percent of its Total

Capital Adjusted Budget for 2015/16 which could impact negatively on service

delivery.

330 148 145

767 (18 640) 12 063 Considering the well documented financial difficulties being experienced at the

municipality currently, the closing Cash/cash equiv. at year end amount of

R12.1 million is questionable.

436 (18 787) 11 918

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 500 1 707 113.8% (207) The municipality has indicated that R1.5 million (100 percent) has been

received and spent and indicated that the amount of R1.7 million reflected in the

Unaudited Actual column was uploaded by the municipality erroneously.

940 940 100.0% –

40 119 41 142 102.5% (1 023) The municipality has indicated that the over-expenditure reflected in the

Unaudited Actual column was uploaded by the municipality erroneously in

respect of the Municipal Infrastructure Grant (MIG) and that 100.0 percent of

the MIG has been spent at year end.

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Services

Other










159

Table 4.5 (r) Trade and other receivables, Trade and other payables and Key ratios - Amajuba District Municipality

Amount % of

total debt /

payables

34 253

–

– -

– -

– -

– -

– -

– -

– -

– -

– -

– -

13 252 22.4%

13 603 23.0%

1 599 2.7%

30 755 51.9%

59 209 100.0%

Norm/

Range % Actual

25% - 40% 50.7%

2% - 5% 6.6%

- 17.6%

- 10.2%

10% - 20% 21.2%

= or > 0% -33.8% The negative Net operating surplus margin ratio indicates that the municipality has

significant financial contraints and is unable to generate an Operating surplus for 2015/16.

The low Own sources of revenue to total operating revenue ratio result indicates that the

municipality is highly grant dependant.

The low outcome of the Own funded capital expenditure ratio indicates that the

municipality is funding the majority of their capital expenditure with conditional grants.

The municipality's ratio of Remuneration as a percentage of Total operating expenditure

is in excess of the norm range of 25 - 40 percent. This could indicate inefficiencies,

overstaffing or even the incorrect focus due to misdirected expenditure to non-essentials

or non-service delivery related expenditure. However it must be noted that the high ratio

could be as a result of the incorrect amount of R109.1 million having been reflected as

Employee related costs by the municipality as opposed to the correct amount of R74.7

million.

Considering this ratio is in excess of the norm limit of 5 percent, it could indicate that

many functions are being outsourced to Consultants, or that Contracted Services are not

effectively utilised.

The municipality has total outstanding creditors amounting to R59.2 million, of which,

R46.0 million (77.6 percent) is in the over 30 days category in contravention of section

65(e) of the MFMA . This could result in fruitless and wasteful expenditure as interest on

outstanding debts or penalties will be incurred. The municipality indicated that the current

cash flow and financial contraints have contributed to the large outstanding creditors

balance.

As indicated above, although there is a slight decrease in the amount of outstanding debt,

the high amount of debt outstanding for greater than 90 days indicates that the

municipality is struggling to collect from its debtors and this impacts negatively on cash

flows.

The municipality urgently needs to implement its debt collection and credit control policy

towards the settlement of these amounts.

As a result of the municipality not reporting on debtors in their S71 returns, there are no

amounts reflected amongst the various debtor customer groups.

As a result of the municipality not reporting on debtors in their S71 returns, there are no

amounts reflected for Debtors as at 30 June 2016. The municipality has however

indicated that the Unaudited Actual total outstanding debt amounts to R32.0 million, of

which, R26.1 million (81.5 percent) is in the over 90 days category. The total outstanding

debtors has decreased from R34.3 million in 2014/15 to R32.0 million in 2015/16.

Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management


160

4.6 Zululand District

Zululand District is located on the northern region of KwaZulu-Natal Province and it covers a

geographical area of approximately 14 810 km². Approximately half of the area is under the

jurisdiction of traditional authorities while the remainder is divided between commercially-owned

farms and conversation areas. The district comprises of the following local municipalities, namely:

eDumbe, uPhongolo, Abaqulusi, Nongoma and Ulundi.

The main trading services rendered by the District Municipality are Water and Sanitation services,

while Abaqulusi Municipality provides Electricity, Water, Sanitation and Refuse removal services.

Ulundi, eDumbe and uPhongolo Municipalities render Electricity and Refuse removal services, while

Nongoma Municipality only providing Refuse removal services.

The Chief Financial Officer (CFO) positions for all municipalities in the district, namely eDumbe,

uPhongolo, Abaqulusi, Nongoma, Ulundi and Zululand District Municipalities were filled for the

entire 2015/16 financial year.

The Municipal Manager (MM) positions for eDumbe, Nongoma, and Zululand District Municipalities

were filled for the entire 2015/16 financial year.

Abaqulusi Municipality’s MM position has been vacant since October 2011 till the date of this

reporting, as the litigation on the appointment of the MM had not been concluded. The Acting MM

currently placed in the position was appointed temporarily in July 2015. The municipality has faced

continuous labour disputes and strikes by municipal workers during the 2015/16 financial year, which

disrupted the functionality of the municipality.

The MM of uPhongolo Municipality was appointed on 15 October 2015, during the 2015/16 financial

year.

Ulundi Municipality’s MM has been away from office due to ill health since the beginning of the

financial year however, the Directors were rotating in three month intervals in accepting the role of

Accounting Officer as Acting MM. The Director of Corporate Services has been appointed as MM

since 1 March 2016.

eDumbe, uPhongolo, Abaqulusi, Ulundi and Nongoma Municipalities managed to maintain an

Unqualified audit opinion with other matters in 2014/15. Zululand District Municipality has also

managed to maintain the Unqualified opinion with no other matters (clean audit) from 2013/14 until

2014/15.

4.6.1 Overview of Zululand District Performance

eDumbe 110 236 110 236 93 568 84.9

uPhongolo 185 932 185 932 178 908 96.2

Abaqulusi 458 213 458 213 434 374 94.8

Nongoma 152 789 156 225 153 437 98.2

Ulundi 321 511 321 511 215 575 67.1

Zululand DM 464 944 462 314 371 450 80.3

Total 1 693 625 1 694 431 1 447 312 85.4


% Generated



161

eDumbe 107 577 107 577 85 819 79.8

uPhongolo 185 931 185 931 176 432 94.9

Abaqulusi 489 545 489 545 492 411 100.6

Nongoma 142 767 145 578 136 860 94.0

Ulundi 445 463 445 463 241 505 54.2

Zululand DM 458 996 457 366 515 626 112.7

Total 1 830 279 1 831 460 1 648 653 90.0


% Spent



eDumbe 39 322 39 322 21 012 53.4

uPhongolo 56 332 56 332 66 053 117.3

Abaqulusi 65 061 65 061 98 920 152.0

Nongoma 47 873 47 873 50 443 105.4

Ulundi 53 994 53 994 51 352 95.1

Zululand DM 503 386 526 995 506 081 96.0

Total 765 968 789 577 793 862 100.5





eDumbe 1 975 2.2 966 1.1 1 245 1.4 86 970 95.4 91 156

uPhongolo 5 380 4.4 3 518 2.9 3 759 3.1 110 066 89.7 122 723

Abaqulusi 15 369 13.5 5 822 5.1 4 258 3.7 88 257 77.6 113 706

Nongoma 699 2.2 368 1.1 196 0.6 31 251 96.1 32 514

Ulundi - - - - - - - - -

Zululand DM 6 383 8.8 1 230 1.7 64 586 89.5 - - 72 199

Total 29 807 6.9 11 905 2.8 74 042 17.1 316 544 73.2 432 298


Total





eDumbe 6 327 6.9 5 322 5.8 67 180 73.7 12 327 13.5 91 156

uPhongolo 10 525 8.6 9 578 7.8 87 440 71.3 15 179 12.4 122 723

Abaqulusi 6 442 5.7 28 164 24.8 72 328 63.6 6 772 6.0 113 706

Nongoma 14 485 44.5 (11 998) (36.9) 40 707 125.2 (10 680) (32.8) 32 514

Ulundi - - - - - - - - -

Zululand DM 8 946 12.4 2 221 3.1 60 361 83.6 671 0.9 72 199

Total 46 725 10.8 33 287 7.7 328 017 75.9 24 269 5.6 432 298





eDumbe 339 3.1 1 400 12.6 3 120 28.2 6 225 56.2 11 085

uPhongolo 330 3.3 7 941 79.5 1 116 11.2 601 6.0 9 989

Abaqulusi - - - - - - - - -

Nongoma 2 203 45.0 292 6.0 - - 2 397 49.0 4 892

Ulundi - - - - - - - - -

Zululand DM 27 820 51.1 - - - - 26 647 48.9 54 467

Total 30 692 38.2 9 634 12.0 4 237 5.3 35 870 44.6 80 433




Total

162

4.6.2 Analysis per municipality: eDumbe Municipality

Table 4.6 (g) Operating Revenue and Expenditure Performance - eDumbe Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

8 568 9 849 13 532 137.4 The Property Rates income has been over generated by 37.4 percent. The municipality

has mentioned that the reason for the over generation was that they received complains

from ratepayers, which forced the municipality to perform the revaluation of properties.

Based in the revaluation most properties values increased resulting to this over

generation of revenue.

29 023 28 950 18 220 62.9 Under generating of 62.9 percent reported by the municipality for Service charges is

expected to change when all final journal entries are captured. In addition the

municipality has acknowledge the under generation and stated that drought within the

Zululand District has also contributed to this under generation as there was notable

decrease in consumption by the community i.e. not utilising their geysers.

63 498 63 498 56 787 89.4 Incorrect reporting by the municipality lead to variance in Transfers recognised-

operational, but this is expected to change when all errors and final journal entries are

captured. The municipality resubmitted some of their Month 12 returns to correct the

errors that were identified in the Section 71 quarterly verifications. Annual Financial

Statements will have the most recent and correct figures.

9 148 4 816 5 029 104.4

110 236 107 113 93 568 87.4

38 584 38 981 39 865 102.3

4 862 4 951 5 217 105.4

1 171 – – - The municipality indicated that Debt impairment is calculated at year-end. Therefore, at

the time of the Section 71 reporting, this amount was not yet determined as it will be

calculated during the finalisation of the Annual Financial Statements.

2 047 2 840 – - The Depreciation and asset impairment is calculated at year-end by the municipality

and the amount was not yet calculated by the time of the Section 71 reporting as it will

be calculated during the finalisation of the Annual Financial Statements.

18 012 19 717 11 879 60.2 The municipality reported expenditure of 60.2 percent at the end of the period under

review. However, the municipality indicated that these figures reported in the Section 71

reports are expected to change when all final journal entries are populated.

3 480 3 400 1 935 56.9 Reason for this variance has not been provided by the municipality, but it has been

noticed that the municipality has been spending less on Contracted services as a result

of the cash flow challenges that the municipality is currently experiencing.

39 421 36 677 26 923 73.4 The municipality has stated that the underspending resulted from the cost containment

measures that have been implemented by the municipality to address the cash flow

challenges and this expenditure item is not expected to increase in the coming years.

107 577 106 565 85 819 80.5 The under spending on Total operating expenditure as at 30 June 2016 was noted by

Provincial Treasury, but this is expected to change when all the journal entries are

populated during the process of finalisation of the Annual Financial Statements as not all

entries were captured at the time of reporting for the Section 71.

2 659 548 7 749







R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



163

Table 4.6 (h) Capital, Cash and Conditional grant Performance - eDumbe Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

34 692 34 692 21 012 60.6 The under generating on Transfers recognised - capital is as a result of

low spending reported on the Integrated National Electrification

Programme Grant spent R15.5 million or 86.1 percent and Municipal

Infrastructure Grant where only 62.3 percent or R10.9 million was spent.

Some of the reasons provided by the municipality for under spending on

these grants were related to delays in supply chain management

processes.

– – – -

– – – -

4 630 280 – - The municipality over budgeted on Internally generated funds. The

municipality indicated that this will be corrected in the budgets for the

coming years. It appears that that the budget for Internally generated

funds was not credible including the Adjustments Budget amount.

39 322 34 972 21 012 60.1

780 280 – - No expenditure has been recorded for Governance and Administration

over the years and the municipality was advised to budget accordingly by

budgeting for items under these items in the correct votes.

6 600 5 150 2 766 53.7 Low expenditure on MIG resulted in low expenditure on Community and

Public Safety and the reason provided by the municipality was the late

awarding of tenders and thereby delaying expenditure. The municipality

stated that this will change once all the accruals are recorded during the

finalisation of the Annual Financial Statements.

13 242 10 842 5 494 50.7 Low expenditure on MIG resulted in low expenditure on Economic and

Environmental Services and the reason provided by the municipality was

also attributed to delays in supply chain management processes thereby

delaying expenditure. The municipality stated that this will change once all

the accruals are recorded during the finalisation of the Annual Financial

Statements.

18 700 18 700 12 752 68.2 The under spending arose from low expenditure reported in the

Integrated National Electrification Programme (Municipal) Grant . Of the

allocated budget of R18 million as at 30 June 2016, the municipality

managed to spend R15.5 million or 86.1 percent as per the Section 71

reporting. The municipality stated that this will change once all the

accruals are recorded during the finalisation of the Annual Financial

Statements.

– – – -

39 322 34 972 21 012 60.1

1 465 1 125 74

(4 910) 2 334 112

(6 375) 1 209 38

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 645 91.4% 155 The municipality indicated that this is expected to change in line with the

budget once all final journal entries are captured.

930 965 103.7% (35) The variance of 3.7 percent as per the Section 71 reports is expected to

change when all final journal entries are captured and the Annual

Financial Statements will have the correct figures for the 2015/16 financial

year.

17 570 10 942 62.3% 6 628 Low expenditure on MIG was as a result of the late awarding of tenders

and the municipality indicated that this will be addressed going forward to

avoid the negative process of surrendering unspent conditional grants.

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Services

Other










164

Table 4.6 (i) Trade and other receivables, Trade and other payables and Key ratios - eDumbe Municipality

Amount % of

total debt /

payables

67 036

91 156

1 975 2.2%

966 1.1%

1 245 1.4%

86 970 95.4%

91 156 100.0%

6 327 6.9%

5 322 5.8%

67 180 73.7%

12 327 13.5%

91 156 100.0%

339 3.1%

1 400 12.6%

3 120 28.2%

6 225 56.2%

11 085 100.0%

Norm/

Range

% Actual

25% - 40% 52.5%

2% - 5% 2.3%

- 39.3%

- 0.0%

10% - 20% 19.7%

= or > 0% 8.3%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


There is a possible error processed by the municipality while they were reporting on

debtors in the Section 71 reports. This increase as per the Section 71 reports is

expected to change when all final journal entries are captured and the Annual

Financial Statements will have the correct figures for the 2015/16 financial year.

The majority of the municipality's debtors are in the over 90 days category which

indicates that the municipality is struggling to collect long overdue debts and this

impacts negatively on cash flow.

The third largest group of customers owing the municipality are the Organs of state.

Of the total of R91.2 million owed to the municipality, R6.3 million or 6.9 percent is

owed by the Organs of state. Continuous engagements between the municipality

and the owing departments is ongoing and the municipality expect debt owed by

this customer group to decrease going forward.

Commercial customers owe the municipality R5.3 million as at the end of 2016. Of

the total owed by Commercial customers to the municipality, R4.3 million has been

outstanding for over 90 days. Disconnections to non paying businesses has been

implemented by the municipality as a solution to force businesses to pay for

services.

Households comprise the major portion of the debt since most households

individuals are experiencing the strain of the local economy, furthermore, the lack of

validity of certain accounts in the debtors ledger has resulted in the accumulation of

irrecoverable debt. This was compounded by the lack of valid indigent register

which meant that some of the municipality's customers which should have been

subsidised were not separately categorised as indigents and billed accordingly.

It was noted that this Other customers group was not explained by the municipality.

As at the end of the financial year, the municipality reported creditors outstanding for

a period greater than 30 days which is in contravention with Section 65(2)(e) of the

MFMA. This was mainly due to cash flow challenges prevailing at the municipality,

which has a negative impact on the municipality's liquidity and solvency position.

This ratio indicates that the municipality is not wholly dependent on grants.

As at the time of reporting for the Section 71, there was no amount reported

indicating capital expenditure funded from Internally generated funds. However, this

is expected to improve when all year-end transactions are captured in the Annual


Total operating expenditure is understated as some of expenditure e.g.

Depreciation and Debt impairment were not reported thereby distorting the correct

picture for determining the correct ratio for Remuneration as percent of Total


The municipality did not populate figures for Depreciation and Debt impairment

figures as indicated above. Therefore, the proper basis for calculation of contracted

services as a percent of Total operating expenditure was not possible.

165

4.6.3 Analysis per municipality: uPhongolo Municipality

Table 4.6 (j) Operating Revenue and Expenditure Performance - uPhongolo Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

24 732 24 732 26 831 108.5 The over generation of revenue resulted from the billing of annual ratepayers in the first

quarter of 2015/16. It would appear that the municipality has under budgeted on

Property rates.

42 086 42 086 40 816 97.0

106 754 106 754 99 525 93.2

12 360 12 360 11 736 94.9 The variance on Other revenue sources below the Adjusted Budget amount was due to

a under generation on Rental of facilities and Fines. The municipality has attributed the

under generation on Fines to culture of non-payment as a result of adverse economic

conditions and also to technical challenges experienced with the system utilised to

record traffic fines. Furthermore, the under generation on Rental of facilities is due to

decrease in demand on rental facilities.

185 932 185 932 178 908 96.2

60 765 60 765 60 980 100.4

7 762 7 762 7 663 98.7

9 460 9 460 12 613 133.3 A significant variance has been reported on Debt impairment in the Adjusted budget

amount in 2015/16 financial year. There appears to be a misallocation issue and the

municipality has indicated that the error will be rectified before the finalisation of 2015/16

Annual Financial Statements.

7 833 7 833 1 797 22.9 The municipality has indicated that the Depreciation and asset impairment is incorrect

at the end of the financial year. The amount recorded is expected to increase once the

municipality has processed year end adjustments.

25 052 25 052 25 330 101.1

16 935 16 935 21 489 126.9 A significant over spending by 26.9 percent under Contracted services has been

reported. The municipality has attributed the over spending on Contracted services to

grass cutting contract which was exceeded.

58 124 58 124 46 560 80.1 The variance reported under Other expenditure items against the Adjusted budget has

been attributed to under spending on Other materials. The municipality has indicated

that spending on Repairs and maintenance is expected to increase after all adjustments

have been taken into account at year end. Furthermore, Section 71 report has not

indicated actual spending relating to Transfers and grants, however the municipality has

indicated that 79.6 percent has been spent against this expenditure item and the

budgeted amount is expected to be fully spent after all invoices for the period have

been taken into account.

185 931 185 931 176 432 94.9

0 0 2 476 The municipality has not fully accounted for Depreciation and asset impairment,

therefore the operating surplus of R2.5 million appears to be overstated.

Source: NT database






R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



166

Table 4.6 (k) Capital, Cash and Conditional grant Performance - uPhongolo Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated

/ Spent

Comments

38 459 38 459 55 845 145.2 The adjusted budget amount reported by the municipality does not

correspond with the amount recorded in B Schedule. Therefore, spending

reported has been distorted. According to the amount reported in B

Schedule the Adjusted figure should have been R59.3 million

subsequently resulting in 94.1 percent of the Transfers recognised -

capital.

– – 3 105 - The municipality indicated that the amount reported against this line item

is an error as the municipality did not receive any public contributions and

donations during the 2015/16 financial year. The municipality undertook

to rectify the error in the Annual Financial Statements.

13 550 13 550 4 047 29.9 The municipality has budgeted to fund Capital projects from Borrowings

i.e. the refurbishing of council chambers and the acquisition of Transnet

property. The anticipated capital projects have not materialised. The

municipality has indicated that negotiations with Transnet are still

underway to finalise the acquisition of the property.

4 323 4 323 3 056 70.7 The municipality has budgeted to utilise an amount of R4.3 million to fund

Capital projects from Internally generated funds. However 70.7 percent

has been utilised. It therefore appears that the municipality over estimated

the utilisation of Internally generated funds. The under utilisation is

attributed to Capital projects that have been deferred by the municipality.

56 332 56 332 66 053 117.3

11 563 11 563 2 493 21.6 The municipality has indicated that it has budgeted for an acquisition of

the new financial system and the acquisition of a new generator. The

municipality had planned to acquire the assets utilising the borrowed

funds. However, due to financial constraints that the utilisation of borrowed

funds was going to place to the municipality, the municipality further

decided to defer the acquisition.

870 870 271 31.1 The municipality has attributed poor performance on Community and

Public Safety to low spending on Public safety. The municipality has

indicated that the planned acquisition of vehicles for the disaster unit has

not taken place pending the finalisation of specifications of the vehicle

required.

28 750 28 750 36 800 128.0 Over spending on Economic and Environmental Services has resulted

from an incorrect Adjusted Budget amount recorded in Section 71 reports

on Planning and development. The municipality has stated that projects

relating to Planning and Development for 2015/16 are still being

evaluated by the bid evaluation committee and has further stated that

challenges were faced in initiating capital projects under Road Transport.

The municipality has undertaken to ensure that the correct figure will be

reported in the Annual Financial Statements.

15 150 15 150 26 490 174.9 The municipality has indicated that the over spending has resulted from

the incorrect recording under Electricity service. The adjustment will be

processed during the preparation of the Annual Financial Statements.

– – – -

56 332 56 332 66 053 117.3

29 818 29 818 13 148

33 626 33 626 9 772

3 809 3 809 (3 377)

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 800 100.0% –

930 930 100.0% –

27 852 30 098 108.1% (2 246) Over spending under Municipal Infrastructure Grant exceeds 2015/16

allocation. There appears to be a reporting error or an indication that the

municipality has utilised its own funds to finance some capital projects.

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Services

Other










167

Table 4.6 (l) Trade and other receivables, Trade and other payables and Key ratios - uPhongolo Municipality

Amount % of

total debt /

payables

56 643

122 723

5 380 4.4%

3 518 2.9%

3 759 3.1%

110 066 89.7%

122 723 100.0%

10 525 8.6%

9 578 7.8%

87 440 71.3%

15 179 12.4%

122 723 100.0%

330 3.3%

7 941 79.5%

1 116 11.2%

601 6.0%

9 989 100.0%

Norm/

Range

% Actual

25% - 40% 38.9%

2% - 5% 12.2%

- 44.4%

- 4.6%

10% - 20% 27.2%

= or > 0% 1.4%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


The municipality's debtors balance as at the end of 2015/16 financial year has

significantly increased when compared to the previous years balance. The

municipality has recorded the gross debtors in the 2015/16 financial year. The

provision for doubtful debt has not been considered.

The bulk of outstanding debt for uPhongolo Municipality is under 90 days category.

The municipality has indicated that it has appointed an external service provider to

assist with debt collection. However due to high rate of unemployment and

economic conditions affecting the customers at uPhongolo Municipality the

collection exercise has not yielded any positive results.

The municipality has indicated that it has been in consultation with the Department

of Cooperative Governance and Traditional Affairs to assist with the recovery of

outstanding debts by the organs of states.

The municipality has struggled to collect outstanding debt under Commercial as

owners have vacated the buildings without settling debts. However, the municipality

has indicated that the repayment arrangements will be instituted in order to

improve collection rate.

Households constitutes the majority of outstanding debts. The municipality has

been liaising with the external debt collector with the purpose of increasing the

collection rate within households, however this exercises has not yielded any

positive outcome due to the number of indigent customers. The municipality has

indicated that data cleansing will be effected in order to identify indigent customers

as households consumers are predominantly indigent.

The municipality has indicated that defaulting consumers under this category will

be handed over to the attorneys in order to improve the collection rate.

As at the end of 2015/16 financial year the municipality has a balance of R10

million owed to creditors. The municipality has reported creditors outstanding for

over 30 days, which is in contravention with Section 65(2)( e ) of the MFMA.

Own sources of revenue to Total operating revenue ratio indicates the

municipality's self sufficiency. The ratio of 44.4 percent indicates the extent to

which the municipality's own revenue contributes towards the municipality's

operating revenue.

The ratio indicates the extent to which the Total Capital expenditure is funded

through Internally generated funds. Own funds towards Capital expenditure

contributes 4.6 percent which is an indication that the funding of Capital

programme depends mainly on grants.

The ratio of 27.2 percent exceeds the norm range of 10-20 percent, which is an

indication that the municipality remains grant dependant.

The Total operating expenditure is understated due to the fact that the municipality

has not fully provided for Depreciation and asset impairment. This may have

inflated the remuneration as a percentage of Total operating expenditure.

Contracted services as a percentage of Total operating expenditure is 12.2

percent. The ratio significantly exceeds the norm. This is an indication that most of

services are outsourced more than the acceptable level. This may also negatively

affect the municipality in terms of capacity building.

168

4.6.4 Analysis per municipality: Abaqulusi Municipality

Table 4.6 (m) Operating Revenue and Expenditure Performance - Abaqulusi Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

55 889 62 210 56 111 90.2

256 409 248 567 232 938 93.7

105 867 132 809 119 624 90.1

40 048 47 760 25 702 53.8 Abaqulusi Municipality has not been able to raise sufficient revenue as projected in the

Adjustments Budget. The municipality has raised R25.7 million or 53.8 percent of

R47.8 million. The inability to realise the anticipated revenue was attributable to income

from Traffic fines not being generated as anticipated, low demand on Rentals and Burial

fees not reaching the set target as this line item is unpredictable in nature.

458 213 491 346 434 374 88.4

130 170 139 814 126 205 90.3

16 590 15 533 15 308 98.6

1 698 7 000 2 710 38.7 The municipality mentioned that this line item will be accounted for during the

compilation of the Annual Financial Statements for 2015/16. At the stage where the

Section 71 reports were due for submission, the amount had not been finalised and

only 11 months amount had been calculated. An adjustment will be processed for the

financial year end to incorporate the final amount.

21 994 104 088 83 127 79.9 Despite the municipality being urged throughout the financial year in the IYM analyses,

Mid Year Budget and Performance Assessments, as well as the Adjustments Budget

process, to report the Depreciation and asset impairment on a monthly basis, they have

failed to implement the advise from Provincial Treasury. The municipality stated that the

low expenditure of 79.9 percent was still to be adjusted, as adjustments relating assets

are still to be processed to update the Asset register. Depreciation and asset

impairment was only journalised for 11 months. The final depreciation figures will be

rectified with the completion of the AFS.

154 425 145 350 117 130 80.6 As per the municipality, at the time of the preparation of the end of June 2016 figures,

only 11 months accounts from Eskom had been received, hence the expenditure

budget being underspent. Furthermore, the municipality emphasised that due to the

drought in the district and municipal jurisdiction, residents were not purchasing the

same amount of electricity as geysers were not all functioning due to lack of water.

57 259 64 815 45 023 69.5 Expenditure incurred on Contracted services amounted to R45 million which is lower

than the adjusted budget of R64.8 million. The reason for the low expenditure is directly

linked to the severe drought and the loss of income by the municipality, where a

decision was taken to limit expenditure, especially on awarding of new contracts that

could be postponed until the situation improves in terms of revenue generation.

107 410 137 992 102 909 74.6 Through cost cutting measures being implemented by the municipality due to the

severe drought and the loss of income by the municipality, a decision was taken to limit

expenditure to emergency items only. As result, Abaqulusi Municipality has spent 74.6

percent of the adjusted budget for Other expenditure.

489 545 614 590 492 411 80.1

(31 333) (123 245) (58 036)







R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



169

Table 4.6 (n) Capital, Cash and Conditional grant Performance - Abaqulusi Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of Budget

Generated /

Spent

Comments

53 566 55 566 87 277 157.1 The over generation for Transfers recognised - capital for the fourth

quarter has been justified by the municipality where the municipality has

erroneously reported R31.7 million for capital funding generated. The

correction has been processed in the municipal financial system in

preparation for the AFS. Furthermore, the amended returns will also be

resubmitted to correct the misallocation, as the municipality should not

report on grant funding that is not gazetted.

– – – -

– – – -

11 495 15 300 11 642 76.1 As part of the cost containment measures, the municipality reduced the

projected spending on some capital projects, which in turn reduced the

funding allocated to those projects.

65 061 70 866 98 920 139.6

1 370 1 170 544 46.5 The Governance and administration capital projects were part of the

projects which were affected by the decision that was taken by Abaqulusi

Municipality to limit expenditure especially on capital projects that could

be delayed until the revenue generation improves in the municipality.

1 690 1 250 62 4.9 The Community and public safety capital projects were part of the projects

which were affected by the decision that was taken by Abaqulusi

Municipality to limit expenditure especially on capital projects that could

be delayed until the revenue generation improves in the municipality.

35 926 35 926 58 674 163.3 The expenditure reported for Economic & environmental services

amounted to R58.7 million against an adjusted budget of R35.9 million,

resulting in an over expenditure of 63.3 percent. The municipality has

explained that the expenditure for this vote comprises solely of grant

funding from MIG therefore, there was an error in terms of the

expenditure reported. This misallocation has been rectified during the

compilation of the AFS.

26 075 32 520 39 641 121.9 The expenditure reported for Trading services amounted to R39.6 million

against an adjusted budget of R32.5 million, resulting in an overspend of

21.9 percent. This vote has funding allocated from the Department of

Energy amounting to R20 million for the transformer at Emondlo area.

Abaqulusi Municipality has confirmed that there was an error in terms of

the expenditure reported. This misallocation has been rectified during the

compilation of the AFS.

– – – -

65 061 70 866 98 920 139.6 The overspend is in line with the incorrect reporting mentioned by the

municipality above. The over receipt for Transfers recognised - capital for

the fourth quarter has resulted in expenditure also exceeding the

projected budget due to the municipality erroneously reporting R31.7

million for capital funding received. The correction has been processed in

the municipal financial system in preparation for the AFS. Furthermore,

the amended returns will also be resubmitted to correct the misallocation,

as the municipality should not report on grant expenditure and funding

that is not gazetted.

120 32 447 – Cash and cash equivalents at beginning of the year has been omitted in

the Section 71 reports submitted to the National Treasury's lgdatabase,

which distort the end result as the Cash and cash equivalents at the year

end is dependant on the opening Cash and cash equivalents at beginning

of the year.

(31 793) 36 636 66 365

(31 913) 4 189 66 365

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 600 1 629 101.8% (29) The Financial Management grant was fully utilised at 101.8 percent

expenditure reported. This grant was utilised by Abaqulusi Municipality for

the municipal Internship programme stipend, as well as upgrading the

financial system. The portion of expenditure exceeding the grant was

catered for through the municipality sourcing own funds.

930 787 84.6% 143 As per the municipality, the figures reported in the forth quarter report for

expenditure incurred on the Municipal System Improvement grant are not

an accurate reflection of actual expenditure as at the end of June 2016. At

the time of submissions of Section 71 report, some of the transactions

relating to this line item were not processed e.g. invoice for the mSCOA

conversion. As a result, the expenditure on this grant appears lower than

anticipated at 84.6 percent.

39 566 62 067 156.9% (22 501) Municipal Infrastructure grant was fully utilised and exceeded by 56.9

percent expenditure reported. The municipality has stated above that

there was an error in reporting, which might have contributed to this

variance. This grant was utilised by Abaqulusi Municipality for

Infrastructure projects.


Trading Services

Other












R'000

Capital Revenue



Borrowing



Capital Expenditure

170

Table 4.6 (o) Trade and other receivables, Trade and other payables and Key ratios - Abaqulusi Municipality

Amount % of

total debt /

payables

82 663

113 706

15 369 13.5%

5 822 5.1%

4 258 3.7%

88 257 77.6%

113 706 100.0%

6 442 5.7%

28 164 24.8%

72 328 63.6%

6 772 6.0%

113 706 100.0%

– -

– -

– -

– -

– -

Norm/

Range

% Actual

25% - 40% 28.7%

2% - 5% 9.1%

- 72.5%

- 11.8%

10% - 20% 16.7%

= or > 0% -13.4% Evidently, the municipal net operating surplus margin is a negative 13.4 percent,

which is attributable to the fourth quarter figures for the year ending 30 June 2016.

Due to the drought, the municipality indicated to have lost considerable income in

the last 4 months of the financial year, as only Basic Water and Sanitation fees

were billed to consumers, as a result of a reduction in usage.

The only capital expenditure incurred from own sources of funding by Abaqulusi

Municipality was a transformer for Emondlo, finalising of the High Street bridge and

purchasing road patching equipment. The amount was not spent due to the

implementation of cost containment measures. The municipality reduced the

expenditure on some capital projects, which in turn reduced the own source of

funding allocated to those projects.

Contracted services mainly comprise of Repairs and maintenance projects which

can be costly. However, the municipality has also indicated that this line item

accommodates payments for Lease of vehicles, Security services, VAT

Consultants, Leasing of heavy duty equipment (graders). Due to the drought in the

district, additional chemicals had to be purchased to treat the water that is being

delivered by water tankers to the community.

As mentioned above, the municipality's vast amount of outstanding debtors (R72.3

million or 63.6 percent) is mainly from the residents of Vryheid, who are indigents.

There is a service provider appointed by the municipality to assist with the debt

collection, however the municipality indicated that the service provider is currently

occupied with following up on all outstanding debts, investigating each transaction.

Abaqulusi Municipality has no figures appearing under Creditors for the last month

of the financial year, it appears that the Aged Creditors return for Month 12 was not

uploaded on the National Treasury lgdatabase. The municipality has not provided

a reason not reporting on creditors.

Abaqulusi Municipality was experiencing challenges in collections for services from

residential property owners within the Abaqulusi municipal area. A significant

portion of their Debtors balance (77.6 percent) resides in the Over 90 days

category, which shows that the municipality has historical debtors which they are

struggling to collect.

The Debtors balance as at the end of June 2016 (R113.7 million) appears to have

increased substantially from Debtors reported as at 30 June 2015 (R82.7 million).

The municipality has not provided reasons for the substantial increase in the

Debtors balance which was noted by Provincial Treasury.

Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management


171

4.6.5 Analysis per municipality: Nongoma Municipality

Table 4.6 (p) Operating Revenue and Expenditure Performance - Nongoma Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

19 296 22 405 18 230 81.4 The municipality has indicated that there were concerns raised by ratepayers in terms

of tariff increases being levied on their accounts, which has resulted in Ingonyama Trust

Board Properties not being billed while disagreements are still being resolved. The

disputes have contributed to the under generation of revenue in Property Rates for

Nongoma Municipality amounting to R18.2 million or 81.4 percent of the adjusted

budget of R22.4 million.

1 679 1 679 1 685 100.4

129 124 129 124 127 760 98.9

2 690 3 018 5 761 190.9 According to Nongoma Municipality, the excess revenue recognised in respect of Other

revenue, emanates from additional interest earned from investments, as well as a

substantial VAT refund from SARS of R5.6 million, which was not anticipated.

152 789 156 225 153 437 98.2

56 681 63 232 64 932 102.7

11 996 11 996 11 552 96.3

1 819 1 819 – - The municipality mentioned that this line item will be accounted for during the


Section 71 reports were due for submission, the amount had not been finalised. An

adjustment will be processed for the financial year end to incorporate the final amount.




failed to implement recommendations from Provincial Treasury. The municipality stated

that the low expenditure of 60.1 percent was attributable to the balance of the amount

being accounted for at the end of the financial year. An adjustment entry is still to be

processed.

– – – -

14 785 16 974 10 747 63.3 It was noted that the municipality had initially budgeted R14.8 million for Contracted

services, and further increased their budget during the Adjustments Budget to R17

million. This is an indication that the municipality was anticipating to accelerate their

contractual expenditure. However, as per the response from the municipality, the low

expenditure against Contracted services was as a result of numerous contracts being

cancelled or coming to a halt, due to delays experienced in supply chain management

procedures. There was Repairs and maintenance work that had been projected to

occur during the financial year, although it appears the municipality was unable to

implement all projects as planned. The under spending could also be related to

incorrect planning and budgeting on the side of the municipality.

39 156 38 614 41 855 108.4 Other expenditure items reported over expenditure, due to additional expenses that

were incurred by the municipality. It was noted that Nongoma Municipality reported

Finance charges amounting to R472 000 against a budget of R23 000. The

municipality further stated that the cause for over expenditure was related to unplanned

emergencies and excessive commitments to line items such as Car rentals and LED

projects, to name a few.

142 767 145 578 136 860 94.0

10 022 10 647 16 577







Debt impairment



Bulk purchases

Contracted services








R'000

Operating Revenue

Property Rates1

Service Charges2


172

Table 4.6 (q) Capital, Cash and Conditional grant Performance - Nongoma Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of Budget

Generated /

Spent

Comments

42 381 52 181 44 488 85.3 Transfers recognised - capital, as a capital source of finance, received

only 85.3 percent of the allocations budgeted for. Furthermore, Nongoma

Municipality increased the Original Budget allocations from R42.4 million

to R52.2 million in the Adjustments Budget. It was cited from the response

provided by the municipality has linked the amount reported, as at the

end of Quarter 4 of 2015/16, to the amount of R6.2 million, which had

been withheld from the 2014/15 unspent Municipal Infrastructure Grant by

National Treasury. This amount was forfeited as it was an unspent portion

of MIG funding received, which had not been included in the rollover

application for 2015/16 however, this reduction in revenue should have

been catered for in the Adjustments Budget in January 2016.

– – – -

– – – -

5 492 9 733 5 956 61.2 The municipality has recognised R6 million against an adjusted budget of

R9.7 million, which was increased from the Original budget of R5.5

million. Provincial Treasury raised a concern with the municipality during

the Approved Budget assessments that the Cash flow position raises a

question of whether the municipality will be in a suitable financial position

to raise Internally generated funds as there was an indication of poor

collection rates and minimal chances of raising sufficient revenue to cater

for these funds. The municipality has conceded that sufficient funds were

not generated in the prior financial year.

47 873 61 914 50 443 81.5

252 654 487 74.5 As per the 2015/16 Quarter 4 Section 71 figures submitted by the

municipality, expenditure reported for the Governance and administration

vote amounted to R487 000 or 74.5 percent, which is under expenditure

in relation to the budgeted amount of R654 000. Anticipated expenditure

was not incurred by Nongoma Municipality as some capital projects were

deferred.

668 1 018 724 71.1 Expenditure reported by Nongoma Municipality for the Community and

public safety vote amounted to R724 000 or 71.1 percent, which is under

expenditure in relation to the budgeted amount of R1 million. The budget

that was approved had expenditure per vote submitted for the capital

budget although no spending was incurred, due to the municipality being

unable to implement the capital projects as planned.

46 403 56 692 47 713 84.2 Under expenditure noted on the capital budget for Economic &

environmental services vote was substantiated by the municipality as

being attributable to the MIG capital projects portion which was withheld

from the municipality, due to the municipality not including the unspent

portion of MIG in their rollover application, resulting in various projects

being rescheduled for the next financial year.

550 3 550 1 520 42.8 Similarly, the under spend noted under Trading services of R1.5 million

or 42.8 percent was also attributable to the withholding of MIG funding,

due to the municipality not including the unspent portion of MIG in their

rollover application, resulting in several Trading services projects not

being implemented in 2015/16.

– – – -

47 873 61 914 50 443 81.5

5 296 15 678 15 674

20 399 10 639 6 509

15 103 (5 039) (9 165)

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 800 100.0% (0)

930 931 100.1% (1)

24 691 35 505 143.8% (10 814) Despite National Treasury withholding MIG funding amounting to R6.2

million, the municipality has exceeded their budget allocation of R24.7

million by R10.8 million. During the Adjustments Budget assessments in

February 2016, the municipality had increased the MIG budget allocation

by R9.8 million due to the National Treasury approved rollover which was

to provide assistance to the municipality in completing recurring projects

from 2014/15. However, the municipality has justified the over

expenditure as a result of the approved rollover amount, although it was

already included in the Adjusted Budget. This explanation does not

correlate with the actual expenditure incurred.









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

173

Table 4.6 (r) Trade and other receivables, Trade and other payables and Key ratios - Nongoma Municipality

Amount % of

total debt /

payables

16 125

32 514

699 2.2%

368 1.1%

196 0.6%

31 251 96.1%

32 514 100.0%

14 485 44.5%

(11 998) -

40 707 125.2%

(10 680) -

32 514 100.0%

2 203 45.0%

292 6.0%

– -

2 397 49.0%

4 892 100.0%

Norm/

Range

% Actual

25% - 40% 55.9%

2% - 5% 7.9%

- 16.7%

- 11.8%

10% - 20% 26.9%

= or > 0% 10.8%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor



doubled from Debtors reported as at 30 June 2015 (R16.1 million). The

municipality has explained that they had erroneously reported on gross debtors

balances in the Section 71 reports however, these amounts are subject to change

as the municipality is currently processing the final Provision for doubtful debts,

which should reduce the Debtors balance considerably in the Annual Financial

Statements for 2015/16.

Nongoma Municipality, being in a rural geographical area are experiencing

challenges regarding collections for services from residential property owner's

within the Nongoma area. A significant portion of their Debtors balance (96.1

percent) resides in the Over 90 days category, which shows that the municipality

has historical debts which they are struggling to collect. Nongoma Municipality has

planned to engage debt collectors which will be appointed to deal with the

outstanding collection of debt in the new financial year.

A substantial portion of outstanding debt owed to the municipality is from the

Department of Public Works, which has been part of the debtors balance for a

lengthy period. The municipality has engaged with Provincial Treasury to assist in

negotiations with the Public Works Department to ensure payments of amounts

owed to the municipality are collected.

The negative balance under the Commercial customer group appears

questionable, however, the municipality has not provided the reason for the

negative amount which distorts this report. There is a possible error that may have

occurred in classifying customer groups while they were reporting on debtors in the

Section 71 reports.

As mentioned above, the municipality's substantial amount of outstanding debtors

is mainly from the residents of Nongoma area, who are unable to pay for services

rendered. Over and above the non payment of Service charges, the municipality

has indicated that there is an issue relating to the subdivision of land and tittle

deeds, which has lead to a culture of non payment.

The negative balance under the Other customer group appears questionable,

however, the municipality has provided the reason for the distortion that has been

noted. There is a possible error that may have occurred in classifying customer

groups while reporting on debtors in the Section 71 reports.

Creditors' payments which have not been honoured by the municipality are mainly

residing under the Over 90 days category, amounting to 49 percent of the total debt

owed to service providers. It is evident that the municipality has reported Creditors

greater than 30 days, which is in contravention with Section 65 of the MFMA.

Due to the municipality only providing the Refuse service, which has led to the

municipality being heavily reliant on grants from National and Provincial Treasury.

Furthermore, the municipal area is rural which constitutes the majority of Indigent

residents.

Capital expenditure has a history of being funded mainly through transfers and

grants from National and Provincial Treasury, which makes it difficult for low

revenue generating municipalities to fund their own capital expenditure, such as

Nongoma Municipality.

Capital expenditure has been reduced in comparison to the Capital budget due to

delays in executing capital projects. Although the capital budget in comparison to

the Total expenditure budget appears to be substantially above the norm, the end

result will shows a different picture as transactions are still being finalised for the

Annual Financial Statements, therefore the final figures may be far less than the

budget.

The response from the municipality indicates that the municipality has overspent

on Employee related costs due to critical and strategic posts that management of

the municipality had to fill, notwithstanding that they had also incurred high

Overtime costs for the 2015/16 financial year. These factors would have

contributed to Remuneration being such a substantial portion of 55.9 percent in

comparison to Total operating expenditure.

Contracted services mainly comprises of Repairs and maintenance projects which

can be costly. However, the municipality has planned to reduce the budget

allocation provided for Contracted services as the municipality experienced delays

in supply chain management procedures.

174

4.6.6 Analysis per municipality: Ulundi Municipality

Table 4.6 (s) Operating Revenue and Expenditure Performance - Ulundi Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

55 145 85 874 47 061 54.8 Ulundi Municipality increased the Original budget of R55.1 million to an adjusted budget

of R85.9 million, however the municipality has under generated under Property Rates,

resulting in revenue generation of 54.8 percent. During the Adjustments Budget process

the municipality indicated that this increase was due to an amount that will be billed to

Department of Public Works for an amount they had not paid which was long

outstanding. However, the inability to raise sufficient revenue was caused by not billing

the Department of Public Works, who had not paid the amount agreed upon as at the

end of the fourth quarter.

122 271 101 000 43 858 43.4 Service charges have reported revenue amounting to R101 million or 43.4 percent of

the anticipated revenue of R122.3 million. The municipality generates the largest

portion of the Service charges from the Electricity service. The under generation against

the budget was attributable to the municipality expecting to back bill customers through

Smart metering however, the implementation of smart metering did not start off as

anticipated, as the municipality is experiencing difficulties in implementing the concept.

This has lead to tampering of meters in households, which contributed immensely

towards the under generation of revenue.

133 175 133 175 115 668 86.9 As per the Division of Revenue Act (DoRA) and Provincial Gazette, the municipality had

provided for the allocations to be received accordingly however, as at the end of June

2016 the municipality had only reported operating allocations of R115.7 million instead

of R133.2 million. The under generation was caused by difficulties in updating the

outstanding returns on the National Treasury lgdatabase but corrective measures were

taken, through consulting with National Treasury, who has promised to investigate more

and assist the municipality with this challenge.

10 920 13 490 8 988 66.6 As mentioned above, the municipality experienced technicalities in uploading various

Section 71 returns during the latter part of the fourth quarter, causing distortion on the

reported information. Annual Financial Statements will reflect the correct amounts, as

per the returns which has not been uploaded.

321 510 333 539 215 575 64.6

101 151 99 500 74 406 74.8 During the course of the financial year, Ulundi Municipality took a decision to curtail over

expenditure and control their cash flow through applying strict cost containment

measures such as not recruiting any further staff for vacant posts, due to a financial

challenges. The municipality took the decision to fill critical vacancies in the 2016/2017

financial year, hence the expenditure is lower than the budget.

12 845 14 027 9 743 69.5 The under expenditure noted for Remuneration of councillors was caused by difficulties

in updating the outstanding returns on the National Treasury lgdatabase but corrective

measures were taken, through consulting National Treasury, who has undertaken to

investigate the matter and assist the municipality with this challenge. The municipality

confirmed that the actual amount paid for 2015/16 financial year is R12.9 million.

2 124 2 124 – - The municipality mentioned that this line item will be accounted for during the


Section 71 reports were due for submission, the amount had not been finalised. An

adjustment will be processed for the financial year end to incorporate the final amount.




failed to implement advise from Provincial Treasury. The municipality stated that the low

expenditure of 9.7 percent is not for the 12 months and that the correct amount will be

reflected in the Annual Financial Statements.

99 715 79 715 33 132 41.6 Ulundi Municipality and Eskom have been involved in lengthy discussions and

engagements regarding debts owed to each other seeking solution to this matter. There

are various issues which are still under discussion by both parties. The municipality has

struggled during the 2015/16 financial year to honour the expected payments due to

financial constraints, which resulted in the revision of Repayment plan in November

2015 and the municipality has committed to adhere to the Repayment plan.

100 191 111 872 24 962 22.3 Contracted services have reported under expenditure of 77.7 percent or R86.9 million

as at the end of the fourth quarter. The municipality has mentioned that the difference

was due to a misallocation of expenditure to the Other expenditure line item. Ulundi

Municipality have not indicate whether corrective steps have been taken to rectify the

error.

47 880 59 641 92 589 155.2 As indicated above, the municipality has mentioned that the difference was due to a

misallocation of Contracted services expenditure to the Other expenditure line item.

Expenditure was incorrectly classified.

445 463 435 890 241 505 55.4

(123 953) (102 351) (25 930) The operating deficit of R25.9 million is a result of all the issues and errors noted above,

which not true reflection of the municipality performance.







R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



175

Table 4.6 (t) Capital, Cash and Conditional grant Performance - Ulundi Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

44 957 44 957 51 352 114.2 The municipality has recorded the amount that exceed the gazetted

amounts. Ulundi Municipality explained that National Treasury transferred

an additional R4 million for MIG projects after the Adjustments Budget had

been approved.

– – – -

– – – -

9 037 9 429 – - Internally generated funds for capital purchases reflects R9.4 million for

the Adjustments Budget, however no expenditure has been reported as at

the last quarter of 2015/16. On the contrary, the municipality has stated

that the actual amount utilised to fund capital from own resources is R6

million, however the municipality had technical challenge in updating

some of the outstanding returns on lgdatabase.

53 994 54 386 51 352 94.4

500 892 – - It appears that the Governance and administration vote has not incurred

expenditure against an Adjustments Budget of R892 000. The

municipality has stated that the actual amount utilised for capital

expenditure for this vote is R705 107. The return for capital expenditure

had not been processed on the lgdatabase when these figures were

released.

24 500 6 500 16 656 256.3 As per the Section 71 reports submitted to National Treasury, the capital

expenditure recorded is 256.3 percent of the adjusted budget, meaning

the adjusted budget was over spent by 156.3 percent. The municipality

has stated that there was a misallocation of the budget, where items that

relate to Community and public safety were classified as Economic &

environmental services.

11 656 29 656 8 975 30.3 The actual expenditure submitted to National Treasury is correct however,

as mentioned above, the budget for Economic & environmental services

was erroneously classified as Community and public safety. The

municipality has realised that there was a misallocation of the budget for

these votes therefore, the budgets should be corrected to reflect the ideal

situation.

17 338 17 338 25 721 148.3 Trading services have reflected over expenditure of 48.3 percent or R8.4

million against a budget of R17.3 million. The municipality has further

explained that this expenditure appears inflated due to the inclusion of

Internally generated funds which were utilised for the Electricity function.

– – – -

53 994 54 386 51 352 94.4

11 561 15 807 3 529

14 852 28 322 (99 596) As per the fourth quarter figures for the year ending 30 June 2016, the

municipality's cash flow Cash/cash equivalent at year end has resulted in

a deficit of R99.6 million, which is significantly high when compared to the

three previous financial years and once all entries posted and errors

corrected, the correct amount will be reflected. Contrary to the budgeted

cash flow surplus of R28.3 million, this deficit is relatively high.

3 291 12 515 (103 125)

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 700 1 976 116.2% (276) The expenditure reported for the FMG grant is over spent by R276 000.

The grant allocation was fully utilised, as per the municipality. The

municipality indicated that the over expenditure has been funded through


930 1 074 115.5% (144) The municipality has also reported over expenditure for the MSIG grant of

R144 000. The grant allocation was fully utilised, as per the municipality.

The municipality indicated that the over expenditure has been funded

through Internally generated funds.

33 957 36 299 106.9% (2 342) MIG projected expenditure has exceeded the allocated budget as at the

end of June 2016 by R2.3 million or 6.9 percent. The grant allocation was

fully utilised, as per the municipality. The municipality indicated that the

over expenditure is inclusive of the additional R4 million that was granted

before the financial year end.









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

176

Table 4.6 (u) Trade and other receivables, Trade and other payables and Key ratios - Ulundi Municipality

Amount % of

total debt /

payables

16 125

–

– -

– -

– -

– -

– -

– -

– -

– -

– -

– -

– -

– -

– -

– -

– -

Norm/

Range

% Actual

25% - 40% 34.8%

2% - 5% 10.3%

- 46.3%

- 0.0%

10% - 20% 17.5%

= or > 0% -12.0% Evidently, the municipal net operating surplus margin is a negative 12 percent,

which is attributable to the fourth quarter figures for the year ending 30 June 2016,

where the municipality's cash flow Cash/cash equivalent at year end has resulted in

a deficit of R99.6 million. The municipality has admitted that the cash book has

closed the financial year with an overdraft.

This percentage of 46.3 percent was caused by the municipality being heavily

reliant on National and Provincial allocations. Furthermore, the municipal area is

rural which constitutes the majority of residents as Indigents.

It appears that the municipality has no expenditure reported as at the last quarter of

2015/16 for Internally generated funds. On the contrary, the municipality has stated

that the actual amount utilised to fund capital from own resources is R6 million,

however the municipality had technical challenge in updating some of the

outstanding returns on lgdatabase. Furthermore, the municipality depends heavily

on grants for capital expenditure.

The municipality had mentioned that the increase was due to a misallocation of

Other expenditure which was classified as Contracted services.

The municipality provided the figure that should have appeared on this category

which is R2.1 million for 0-30 days.


which is R68.3 million for Over 90 days category. The long outstanding Eskom

debt is the result of most creditors being reported for more than 90 days, however

the municipality has a repayment arrangement with Eskom, although the

municipality has struggled during the 2015/16 financial year to honour the

expected payments due to financial constraints, the municipality has committed to

adhere to the Repayment plan. There are various issues which are still under

discussion by both parties, once these issues are finalised, which should be in the

near future, the municipality will be able to reduce the outstanding amount

substantially as Eskom is also owing the municipality a certain amount which has

not been finalised as yet.

Households owe a significant balance of R51.4 million which is due to Ulundi

Municipality.

The majority of outstanding debtors is recorded under Other customer group

amounting to R99.5 million. The municipality has not provided further information

on this line item.

Ulundi Municipality has no figures appearing under Creditors for the last month of

the financial year due to the municipality experiencing technical challenge in

returns being uploaded on the National Treasury lgdatabase. They have been in

consultation with National Treasury who are assisting in sorting out this challenge.

It was a great concern that the municipality indicated that for the Over 90 days

category the outstanding debtors were R113 million, which is high. This shows that

the municipality has historical debtors which they are struggling to collect.

Organs of state owe the municipality R21.4 million, according to the municipal

records.

R26 million of the outstanding debtors is due from Commercial customers.


which is R79.4 million for 0-30 days.

The figure that should have appeared on this category is R3.6 million for 31 - 60

days.

Ulundi Municipality indicated that the figure that should have appeared on this

category is R2.3 million for 61 - 90 days.

Ulundi Municipality has no figures appearing under Debtors for the last month of

the financial year due to the municipality experiencing technical challenge in

returns being uploaded on the National Treasury lgdatabase. They have been in

consultation with National Treasury who are assisting in sorting out this challenge.

Total Debtors balance as at the end of June 2016 should read as R198.3 million

which is questionable and a substantial difference in comparison to the audited

debtors in June 2015 amounting to R16.1 million.

Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management


177

4.6.7 Analysis per municipality: Zululand District Municipality

Table 4.6 (v) Operating Revenue and Expenditure Performance - Zululand District Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

– – – -

31 668 27 668 25 445 92.0

336 761 331 061 338 263 102.2 Section 71 reports submitted by the municipality reflected over generation on Transfers

recognised - operational, where the district municipality has recorded a receipt of

R338.3 million against an adjusted budget of R331.1 million. Zululand District

Municipality has clarified that the excess revenue was due to an additional allocation

received in March 2016. The grants received were Water Services Operating Subsidy

(R6 million) and Environmental Management Framework & Strategic Environment

Assistance (R1.5 million).

96 515 103 584 7 742 7.5 Greater portion of revenue on this item related to Accumulated surplus, as a result the

report on the performance against the budget for this item has been distorted. This is

despite the Provincial Treasury's advise to the municipality against the inclusion of

Budget for Accumulated surpluses under this line items as they would not be generated

in the year under review.

464 944 462 314 371 450 80.3

149 581 152 578 158 285 103.7 Although the variance does not appear to be material, Zululand District Municipality has

reported expenditure of R158.3 million which is above the adjusted budget of R152.6

million for Employee related costs. The municipality has explained that the

overspending was as a result of Overtime costs, where the technical officials worked

additional hours during emergencies. The municipality has also indicated that this

Overtime was not budgeted for and could result in unauthorised expenditure, however

the municipality has already processed an adjustment to correct the over expenditure

reported in the Section 71 reports.

6 175 6 325 6 634 104.9 Remuneration of councillors expenditure has been reported as R6.6 million in

comparison to an adjusted budget of R6.3 million resulting in over spending of 4.9

percent. It appeared that the municipality did not properly budgeted for this line item as

the municipality indicated that there will be further processing of adjustment to correct

the over spending of Remuneration of councillors line item. The municipality did not

provide a valid reason for the over spending on this line item.

3 594 3 594 – - The district municipality mentioned that this line item will be accounted for in the Annual

Financial Statements for 2015/16. At the stage where the Section 71 reports were due

for submission, the amount had not been finalised as yet. An adjustment will be

processed for the financial year end to incorporate the final amount.




failed to implement advise from Provincial Treasury. The municipality stated that the low

expenditure of 78.1 percent will be adjusted as assets to be written off will be processed

through a year end journal and other further entries to account fully for Depreciation and

asset impairment.

84 868 79 868 69 807 87.4 The district municipality appears to have underspent on Bulk purchases as expenditure

reported as at the end of the fourth quarter amounts to R69.8 million or 87.4 percent of

the adjusted budget. Further clarity was provided by the municipality stating that the

figure reported in the Section 71 reports at the end of the financial year, does not take

the accruals into account and the figure in the Annual Financial Statements could be

different to what was reported.

47 383 47 146 39 149 83.0 The under expenditure recorded by the district municipality in the Section 71 reports

was the Year to date actual paid as at the end of June 2016. Contracted services have

been corrected since, and the returns have been resubmitted to the National Treasury

database, where the payments that went through as accruals have been recorded.

134 830 135 289 216 324 159.9 Other expenditure has reflected total expenditure of R216.3 million or 159.9 percent of

the adjusted budget of R135.3 million. The district municipality has exceeded the

adjusted budget significantly, however the municipality was advised to reduce non-

priority spending, which might have partly contributed to the over expenditure.

Moreover, the municipality indicated that the high expenditure of above 100% is mainly

due to a certain portion of the Municipal Infrastructure Grant (MIG) expenditure being

Rural Sanitation, which is reported as Operating expenditure as it does not qualify to be

capitalised as an asset in terms of GRAP. As a result, the expenditure is classified

under Operating expenditure budget in the Statement of Financial Performance.

458 996 457 366 515 626 112.7

5 948 4 948 (144 176) The municipality has mentioned that the explanation provided under Other expenditure

has a significant impact on the Operating deficit appearing to be excessive. The portion

of the Rural Sanitation budget has remained under the Capital expenditure budget. The

correction of reallocation to operating expenditure will be processed as a journal entry

when finalising Annual Financial Statements.









Bulk purchases

Contracted services



R'000

Operating Revenue

Property Rates1

Service Charges2


Debt impairment






178

Table 4.6 (w) Capital, Cash and Conditional grant Performance - Zululand District Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of Budget

Generated /

Spent

Comments

497 538 522 147 503 658 96.5

– – 23 - The district municipality has erroneously reported R23 000 for Public

contributions and donations. The correction has been processed in the

municipal financial system in preparation for the Annual Financial

Statements. Furthermore, the amended returns were also resubmitted to

correct the misallocation, as the municipality does not have any Public

contributions and donations to report.

– – – -

5 848 4 848 2 400 49.5 Provincial Treasury advised the municipality during the Approved budget

assessments that the Cash flow position raises a question of whether the

municipality will be in a suitable financial position to raise Internally

generated funds as there was an indication of poor collection rates and

minimal chances of raising sufficient revenue to cater for these funds. The

municipality has indicated that anticipated funds were not realised prior to

the end of the financial year due to financial constraints the municipality is

currently facing.

503 386 526 995 506 081 96.0

2 500 2 500 840 33.6 The capital expenditure budget for the Governance and administration

vote was R2.5 million however the municipality has only incurred

expenditure amounting to R840 000 or 33.6 percent of the budget.

Particular capital projects were budgeted to be funded by Zululand District

Municipality and the municipality has acknowledged that they did not

implement all projects allocated under this vote due to financial viability

and challenges.

– – 927 - Zululand District Municipality has erroneously allocated expenditure to

Community and public safety of R927 000. The misallocation has since

been corrected on the municipal financial system in preparation for the

Annual Financial Statements. Furthermore, the amended returns were

also resubmitted to correct the misallocation, as the municipality does not

have any capital expenditure relating to this vote.

2 181 2 181 2 297 105.3 According to the Section 71 reports submitted by the district municipality,

the Economic & environmental services vote is over spent by 5.3 percent.

The reason provided by the municipality for the budget being exceeded is

misallocation of expenditure which has been corrected through

resubmission of returns as the correct expenditure is 100% or R2.2

million and not R2.3 million.

498 705 522 314 502 018 96.1

– – – -

503 386 526 995 506 081 96.0

(5 499) (5 499) (45 487)

13 853 64 253 (39 599) As per the fourth quarter figures for the year ending 30 June 2016, the

municipality's cash flow Cash/cash equivalent at year end has resulted in

a deficit of R39.6 million, which is significantly high when compared to the

three previous financial years and once all entries have been posted and

errors have been corrected this deficit is expected to increase. The

municipality has admitted that the cash book has closed the financial year

with an overdraft, which does not correspond to the budgeted cash flow

surplus of R64.3 million.

19 352 69 752 5 888

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 250 1 250 100.0% –

940 940 100.0% –

221 359 221 359 100.0% –

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Services

Other










179

Table 4.6 (x) Trade and other receivables, Trade and other payables and Key ratios - Zululand District Municipality

Amount % of

total debt /

payables

21 237

72 199

6 383 8.8%

1 230 1.7%

64 586 89.5%

– -

72 199 100.0%

8 946 12.4%

2 221 3.1%

60 361 83.6%

671 0.9%

72 199 100.0%

27 820 51.1%

– –

– –

26 647 48.9%

54 467 100.0%

Norm/

Range

% Actual

25% - 40% 32.0%

2% - 5% 7.6%

- 8.9%

- 0.5%

10% - 20% 49.5%

= or > 0% -38.8% Evidently, the municipal net operating surplus margin is a negative 38.8 percent,

which is attributable to the fourth quarter figures for the year ending 30 June 2016,

where the municipality's cash flow Cash/cash equivalent at year end has resulted in

a deficit of R39.6 million.

The lower percentage may be due to limited services being provided by the

municipality as the municipality provides the Water and Sanitation services only.

This has led the municipality to be heavily reliant on National and Provincial

allocations. Furthermore, the municipal area is rural which constitutes the majority

of residents which are Indigents. Over and above, the effects of the drought that is

currently affecting the district area has caused a reduction in revenue generation

through reducing the billings across the Zululand district.

Capital expenditure has a history of being funded mainly through transfers and

grants from National and Provincial departments, which makes it difficult for low

revenue generating municipalities to fund their own capital expenditure, which is the

case with Zululand District Municipality.

The district municipality is grant dependent as more than 90% of the Capital budget

is funded through grants, as a result Capital expenditure will be higher than the

expected norm. This indicator relates to Capital expenditure which is derived from

the Capital grants gazetted in the Division of Revenue Act (DoRA).

Contracted services mainly comprise of Repairs and maintenance projects which

can be costly. This contributes to 7.6 percent reported which is above the norm.

The majority of the Creditors owed by the municipality are reflected at 51.1 percent

under current creditors in the 0-30 days category however, the district municipality

confirmed that the payments have been sorted out. The municipality no longer

owes service providers under this age analysis category. The payments made will

be reported accordingly in the Annual Financial Statements.

Creditors' payments which have not been honoured by the municipality are mainly

residing under the Over 90 days category, amounting to 49 percent of the total debt

owed to service providers. It is evident that the municipality has reported Creditors

greater than 30 days, which is in contravention with Section 65 of the MFMA.

Furthermore, the district municipality has clarified that this balance includes

retentions that were withheld during the financial year. These retentions include

those that are withheld on the projects that are implemented and will be released

after one year of completing the projects.

As mentioned above, the municipality's vast amount of 83.6 percent of total

outstanding debtors is from the residents of the Zululand District rural areas, who

are unable to pay the outstanding amounts owed to the municipality for services

rendered.

Zululand District Municipality, being in a rural geographical area, are experiencing

challenges in collections for services from residential property owners within the

Zululand District area as the municipality has reported 89.5 percent of the debtors

outstanding under the 61-90 days category.

The municipality has also mentioned that the Debtors they have are beyond 90

days however the template on the financial system restricts the capturing and

reporting to 90 days.


tripled from Debtors balance as at 30 June 2015 (R21.3 million). The municipality

has not substantiated the immense growth in the Debtors balance which was noted

by Provincial Treasury.

Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management


180

4.7 Umkhanyakude District Umkhanyakude District is located in the North-eastern region of KwaZulu-Natal and it covers a geographical area of approximately 13 859 km2. The district is mainly rural with the only developed town being Mtubatuba in the south. Large areas of land are under communal tenure in the district, located in the traditional authority areas under the jurisdiction of the Ingonyama Trust. Umkhanyakude District comprises of the following local municipalities, namely: Umhlabuyalingana, Jozini, The Big Five False Bay, Hlabisa, and Mtubatuba Municipalities. Furthermore, a large proportion of land in The Big Five False Bay Municipality is used for agricultural and game lodge activities.

The main trading services rendered by the District Municipality are Electricity, Waterand Sanitation whereas Umhlabuyalingana, Jozini, The Big Five False Bay, Hlabisa and Mtubatuba Municipalities only provide Refuse removal services.

Umkhanyakude District Municipality has been experiencing a serious drought since the 2015/16 financial year especially in the Mtubatuba Area. The dry season followed by the drought conditions has resulted in the uMfolozi River drying up. This is affecting the supply of water to the areas of Mtubatuba, St Lucia and Nkolokotho Water Treatment Plants which is causing interrupted supply of water from time to time.

Following the redetermination of boundaries by the Demarcation Board in terms of Section 26 of the Municipal Demarcation Act, No 27 of 1998, Hlabisa Municipality and The Big Five False Bay Municipality within the Umkhanyakude District will be merging to form one municipality (Big Five Hlabisa Municipality) after the 2016 Local Government Elections.

Umhlabuyalingana Municipality had the MM and CFO position filled for the entire period. For both Jozini and Mtubatuba Municipalities, the MM and CFO positions were vacant for the entire 2015/16 financial year. At Jozini Municipality, Provincial CoGTA deployed an Acting MM for a period of 12 months and an Acting CFO for a period of 7 months. The Big Five False Bay Municipality had an Acting MM for the entire 2015/16 financial year whilst an Acting CFO was appointed in November 2015 after the resignation of the permanent CFO. Hlabisa Municipality had an Acting CFO as at the end of June 2016 whilst the MM was appointed on a contract basis in June 2015 after the resignation on the permanent MM in December 2014.

In August 2015, the Umkhanyakude District Municipality was placed under intervention in terms of Section 137 of the MFMA which was upgraded to an intervention in terms of Section 139(1)(b) of the constitution in November 2015. CoGTA appointed an Administrator in August 2015 to develop a recovery plan. The Administrator’s term of office ended in February 2016. A second CoGTA Administrator was appointed in the same month. The munipality has experienced instability in leadership positions with both the MM and CFO being suspended in October 2015. CoGTA appointed both an Acting MM and CFO in the same month. At the end of their contract period, CoGTA appointed a new Acting MM and CFO in the month of April 2016. The contracts of the suspended MM and CFO have since been terminated.

In 2014/15, The Big Five False Bay, Hlabisa and Mtubatuba Municipalities had unqualified audit opinions while Umkhanyakude District received disclaimer audit opinion. Jozini Municipality received a qualified audit opinion and Umhlabuyalingana on the other hand obtained a financially unqualified audit (without matters).

Hlabisa Municipality did not submit their Adjusted budget returns and the Section 71 returns for Quarter 4 and as a result, the performance as at 30 June 2016 is misstated. Provincial Treasury was not in a position to assess performance against figures reflected as at June 2016. A non-compliance letter in respect of non-submission of returns was forwarded to the municipality on 27 June 2016. Challenges in respect of the uploading of Adjustments budget returns in time for publication were also experienced by the Umkhanyakude District Municipality and Jozini Municipality.

181

4.7.1 Overview of Umkhanyakude District Performance

Umhlabuyalingana 157 178 155 898 156 873 100.6

Jozini 182 124 182 124 180 885 99.3

The Big Five False Bay 70 855 62 463 60 528 96.9

Hlabisa 70 497 70 497 49 232 69.8

Mtubatuba 167 361 172 009 171 903 99.9

Umkhanyakude DM 366 824 373 704 359 428 96.2

Total 1 014 839 1 016 694 978 849 96.3


% Generated




Jozini 167 108 167 108 87 830 52.6


Hlabisa 65 555 65 555 40 035 61.1

Mtubatuba 135 257 148 185 144 189 97.3

Umkhanyakude DM 366 824 406 469 254 074 62.5

Total 954 899 1 036 241 717 109 69.2





Jozini 66 229 66 229 34 753 52.5


Hlabisa 16 452 16 452 8 657 52.6

Mtubatuba 48 250 42 022 48 634 115.7

Umkhanyakude DM 252 173 253 372 230 902 91.1

Total 479 777 484 748 384 407 79.3





Umhlabuyalingana 1 195 3.4 1 190 3.4 1 004 2.8 32 063 90.4 35 452

Jozini 1 367 1.4 2 199 2.3 1 927 2.0 92 198 94.4 97 691

The Big Five False Bay 539 2.7 732 3.6 439 2.2 18 562 91.6 20 271

Hlabisa – - – - – - – - –

Mtubatuba 3 631 4.6 5 826 7.4 1 576 2.0 67 385 85.9 78 418

Umkhanyakude DM 2 295 1.3 2 107 1.2 983 0.6 172 412 97.0 177 798

Total 9 027 2.2 12 054 2.9 5 930 1.4 382 619 93.4 409 630


Total





Umhlabuyalingana 5 137 14.5 13 379 37.7 56 0.2 16 879 47.6 35 452

Jozini 21 197 21.7 18 503 18.9 26 043 26.7 31 948 32.7 97 691

The Big Five False Bay 4 958 24.5 5 500 27.1 9 808 48.4 5 0.0 20 271

Hlabisa – - – - – - – - –

Mtubatuba 3 182 4.1 11 153 14.2 51 878 66.2 12 206 15.6 78 418

Umkhanyakude DM 13 456 7.6 27 128 15.3 137 214 77.2 0 0.0 177 798

Total 47 931 11.7 75 662 18.5 224 999 54.9 61 038 14.9 409 630




182


Umhlabuyalingana 27 772 110.5 (1 788) (7.1) (560) (2.2) (299) -1.2 25 125

Jozini – - – - – - – - –

The Big Five False Bay 1 450 18.2 2 957 37.1 952 11.9 2 611 32.8 7 970

Hlabisa – - – - – - – - –

Mtubatuba 489 42.4 155 13.4 243 21.0 267 23.1 1 153

Umkhanyakude DM 25 509 17.8 6 673 4.7 1 845 1.3 108 915 76.2 142 943

Total 55 221 31.2 7 997 4.5 2 479 1.4 111 494 62.9 177 191




Total

183

4.7.2 Analysis per municipality: Umhlabuyalingana Municipality

Table 4.7 (g) Operating Revenue and Expenditure Performance - Umhlabuyalingana Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of Budget

Generated /

Spent

Comments

20 019 17 198 17 198 100.0

81 202 202 100.0

126 728 126 910 126 801 99.9

10 350 11 588 12 672 109.3 The municipality exceeded the budget in respect of Interest earned- external

investments (R6.4 million or 115 percent against the budget of R5.6 million), Fines

(R1.3 million or 159 percent against budget of R800 000) and Other revenue

(R899 000 or 257 percent against budget R312 000) which was offset by low

revenue generated against Interest earned-outstanding debtors ( R117 or 0.01

percent against budget of R603 000).

According to the municipality, the budget for Interest earned-external investments

was exceeded due to the municipality underestimating the opening investments

balance (R67 million) when the correct opening balance was in fact R70 million

and obtaining higher than anticipated interest rates than budgeted. The

municipality further conceded that the budget for Fines and Other revenue was

understated.

In respect of Interest earned -outstanding debtors, the municipality indicated that

the under generation against the budget was due a technical system issue where

the revenue generated was incorrectly calculated and thus not reported. The

municipality confirmed that the issue had been resolved and had generated an

amount of R747 244 as at the end of 2015/16 due to a higher than expected

debtors balance.

157 178 155 898 156 873 100.6

38 237 40 422 34 410 85.1 As per the municipality, the under expenditure against Employee related costs is

due to the municipality filling new positions later than anticipated towards the end

of the financial year.

9 955 9 972 9 529 95.6

4 000 4 000 – - The municipality confirmed that no expenditure was reported due to Debt

impairment not being processed monthly to the financial system. The municipality

further indicated that the expenditure will be calculated and incorporated when

preparing the 2015/16 AFS.

12 000 12 000 – - Similar to Debt impairment, the municipality confirmed that Depreciation will be

calculated at financial year end and incorporated in the 2015/16 AFS.

– – – -

2 540 31 736 8 873 28.0 The municipality indicated that the low expenditure against the Contracted

services line item was due to expenditure incorrectly classified against Other

materials and Other expenditure. As per the municipality expenditure amounting

to R26.2 million was incurred against Contracted Services before the processing

of accruals.

83 392 88 419 81 036 91.6 As per the Section 71 report, the main reason for the under expenditure against

'Other expenditure items' relates to Other expenditure (R71.1 million incurred or

80.8 percent of a budget of R87.9 million which is partially offset by the

overspending against Other materials (R9.9 million incurred versus a budget of

R489 660).

As discussed under Contracted services, the municipality has misallocated

expenditure against Other materials which should have been classified against

Contracted Services. The municipality further indicated that accruals have yet to

be processed which has led to the under expenditure against Other expenditure.

Furthermore, not all expenditure has been incurred as planned.

150 124 186 550 133 849 71.7

7 054 (30 652) 23 024 The municipality's reported surplus is misstated mainly due to no expenditure

being reported against Debt impairment and Depreciation.






4 Includes Finance charges, Transfers and grants, Other materials, Other expenditure and Loss on disposal of PPE

Debt impairment



Bulk purchases

Contracted services








R'000

Operating Revenue

Property Rates1

Service Charges2


184

Table 4.7 (h) Capital, Cash and Conditional grant Performance - Umhlabuyalingana Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

48 827 58 925 37 747 64.1 The municipality indicated that capital expenditure reflected in the Section 71

report is understated and indicated that spending against Transfers recognised-

capital amounted to R52.5 million or 89 percent against budget. An amount of

R6.5 million relating to a Provincial Electrification grant is the only 2015/16

capital allocation that remains unspent at year end.

– – – -

– – – -

36 127 36 029 11 893 33.0 Similar to Transfers recognised- capital, the funding realised related to

Internally generated funds is understated with the correct amount being R20.3

million or 56 percent against the budget.

84 954 94 954 49 641 52.3 Thus, the correct expenditure to be reflected in the 2015/16 AFS would amount

to R72.8 million or 76.7 percent of the budget.

800 – 159 -

– – – -

84 154 94 954 49 604 52.2

– – – -

– – – -

84 954 94 954 49 763 52.4 The municipality attributed the low expenditure of R72.8 million or 76.7 percent

against their capital budget of R94.95 million to the following:

1. Failure to obtain approval from the Department of Transport for a major

project relating to the erection of street lights in Mbazwana and Manguzi Town;

2. Delays in procurement processes which had resulted in projects being

delayed; and

3. Budgeted projects not being implemented due to time constraints.

107 767 77 638 77 638

92 358 10 957 79 314 The municipality confirmed that the reported figure of R79.4 million was

overstated. The correct 2015/16 closing Cash and equivalents amounted to

R62 million and is sufficient to cash back all unspent conditional transfers.

(15 409) (66 681) 1 676

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 800 100.0% 0

930 930 100.0% –

33 827 33 872 100.1% (45) The municipality indicated that expenditure related to minor assets had been

misallocated to the MIG grant. The municipality confirmed that journal entries

have been processed to correct the error. The municipality confirmed that the

entire MIG allocation was fully spent at year end.









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

185

Table 4.7 (i) Trade and other receivables, Trade and other payables and Key ratios - Umhlabuyalingana Municipality

Amount % of

total debt /

payables

29 532

35 452

1 195 3.4%

1 190 3.4%

1 004 2.8%

32 063 90.4%

35 452 100.0%

5 137 14.5%

13 379 37.7%

56 0.2%

16 879 47.6%

35 452 100.0%

27 772 110.5%

(1 788) -

(560) -

(299) -

25 125 100.0%

Norm/

Range

% Actual

25% - 40% 32.8%

2% - 5% 6.6%

- 19.2%

- 23.9%

10% - 20% 27.1%

= or > 0% 14.7%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


As per the municipality, the year on year growth in Debtors is as a result of the

implementation of a new valuation roll where increases in the valuation of properties as

well as the number of ratepayers were noted. The ongoing billing of indigent consumers

(including newly identified ratepayers) has compounded growth in the debtors balance.

The municipality should consider fast tracking the updating of the indigent register and

thereafter consider writing off irrecoverable debt.

Umhlabuyalingana Municipality is situated in a rural arrear and has historically struggled

to collect on long outstanding debt due to the large number of indigents within the

municipality. The municipality confirmed that most of the debtors are not paying for their

accounts.

Furthermore, similar to prior years, the municipality indicated that debt related to

properties owned by the Ingonyama Trust Board are not being paid. The municipality

conceded that they have not yet fully implemented their Credit Control and Debt

Collection Policy which has resulted in the majority of the debt being reflected in the >90

days category.

The municipality also indicated that they are in the process of implementing their Credit

Control and Debt Collection Policy and are handing over the outstanding accounts to the

municipality's legal department for collection in order to improve the current situation.

The municipality categorises debt owed by the Ingonyama Trust Board as "Other". As

discussed above, non-payment of Ingonyama Trust Board debt has resulted in the

majority of the municipality's debtors being classified in this category

According to the municipality, a system error has resulted in the municipality reflecting

negative creditors. The municipality further indicated that the balance of R25.1 million is

correct and has since rectified the system issue.

This ratio is distorted by the understatement of Debt impairment and Depreciation as

discussed in Table 4.7(g).

As discussed in Table 4.7(g), the municipality understated expenditure against Contracted

services with the correct amount being R26.2 million. Even without the consideration of

Debt impairment and Depreciation expense, the recalculated ratio would significantly

exceed the norm. A high ratio could indicate that many functions are being outsourced to

Consultants, or that Contracted Services are not effectively utilised as per MFMA Circular

71 and depends on the model of service delivery selected by the municipality.

186

4.7.3 Analysis per municipality: Jozini Municipality Table 4.7 (j) Operating Revenue and Expenditure Performance - Jozini Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of Budget

Generated /

Spent

Comments

It was noted that many of the Adjustment Budget figures did not reconcile to the

adopted Adjusted Budget (B Schedule). This is primarily due to challenges in

uploading of Adjustments budget returns in time for publication. Furthermore, the

municipality is currently in the process of compiling the 2015/16 AFS, thus the reported

S71 figures are subject to change. For purposes of analysis, the updated amounts,

where appropriate, are noted in the comments column.

25 134 25 134 22 549 89.7 According to the municipality, the correct Unaudited Actual Property Rates is R25.5

million which represents 101 percent of the Property rates budget amount, and is in

line with the Adjusted Budget.

3 512 3 512 2 833 80.7 Similar to Property Rates, the municipality indicated that the correct Unaudited Actual

amount in respect of Service Charges amounts to R3.7 million which represents 105

percent of the Adjusted Budget.

142 067 142 067 139 526 98.2

11 411 11 411 15 977 140.0 The Unaudited Actual performance of R15.9 million represents 97 percent of the

correct Adjusted Budget amount of R16.5 million as per the adopted B Schedule.

182 124 182 124 180 885 99.3

42 803 42 803 27 448 64.1 The municipality conceded that the Unaudited Actual Amount is incorrect and should in

fact be R40.1 million, representing 95 percent of the Employee related cost budget

which is in line with expected expenditure.

11 949 11 949 7 669 64.2 It was conceded by the municipality that the Unaudited Actual amount is incorrect and

should in fact be R9.5 million, representing 80 percent of the budgeted amount for

Remuneration of councillors. The municipality indicated that they had over-budgeted

for Remuneration of councillors and as a result had under-performed in comparison to

the budget although having met all obligations towards councillors.

8 024 8 024 – - The municipality indicated that the amount for Debt impairment was not available when

submitting their Section 71 returns as it will be calculated during the preparation of the


13 734 13 734 – - Similar to Debt Impairment, Depreciation and asset impairment had not been

calculated at the time of submitting their Section 71 returns. The municipality indicated

that this will be calculated during the preparation of the Annual Financial Statements.

– – – -

2 543 2 543 2 329 91.6

88 055 88 055 50 385 57.2 Under-performance in respect of Other expenditure is as a result of the late

implementation of LED projects, some of which, at year-end, remain unimplemented.

Late implementation is due to the instability in the leadership (political and

administrative) experienced at the municipality throughout the 2015/16 financial year.

167 108 167 108 87 830 52.6

15 016 15 016 93 055 The reported surplus of R93.1 million does not reflect the true operating performance

at the end of the 2015/16 financial year due to, amongst others, non reporting of Debt

impairment and Depreciation and asset impairment, as well as the inaccurate reporting

of various line items noted above.









R'000



Bulk purchases

Contracted services







Debt impairment

Operating Revenue

Property Rates1

Service Charges2

187

Table 4.7 (k) Capital, Cash and Conditional grant Performance - Jozini Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

51 213 51 213 34 333 67.0 Under-performance in respect of Transfers recognised - capital is as a result of

the late implementation of capital projects, some of which, at year-end, have

still not been implemented due to the instability in the leadership (political and

administrative) experienced throughout the 2015/16 financial year at the

municipality .

– – – -

– – – -

15 016 15 016 420 2.8 Similar to Transfers recognised - capital, under-performance in respect of

Internally generated funds is as a result of the late implementation of projects,

some of which, at year-end, have still not been implemented.

66 229 66 229 34 753 52.5

3 012 3 012 416 13.8

24 468 24 468 49 0.2

– – 34 036 - The municipality indicated that expenditure relating to Community and Public

Safety, Governance and Administration, and Trading Services was misallocated

to the Eco. & Environmental Services. This expenditure will be accurately

reflected in the AFS.

17 000 17 000 252 1.5

21 749 21 749 – -

66 229 66 229 34 753 52.5 As indicated above, Under-performance of Capital Expenditure is as a result of

the late implementation of capital projects, some of which, at year-end, have

still not been implemented due to the instability in the leadership (political and

administrative) experienced throughout 2015/16. Furthermore, it must be noted

that the correct Adjusted Budget amount as per the adopted B Schedule is

R63.8 million.

20 992 20 992 22 508

21 182 21 182 52 132 The projected Cash/cash equiv.at the year end Adjusted Budget amount as per

the Adopted B Schedule is R38.1 million. Although the municipality confirmed

that they had closed the financial year with R52 million, they have not submitted

any supporting documentation to this effect.

190 190 29 624

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 800 100.0% –

930 930 100.0% (0)

36 213 37 326 103.1% (1 113) An amount of R4.7 million in respect of MIG was rolled-over from the 2014/15

financial year. This was fully spent during the 2015/16 financial year, however,

an amount of approximately R3.8 million of the current allocation remains

unspent at year-end. It must be noted that the municipality was not supposed to

report on the roll-over against the 2015/16 allocation.

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Services

Other










188

Table 4.7 (l) Trade and other receivables, Trade and other payables and Key ratios - Jozini Municipality

Amount % of

total debt /

payables

78 617

97 691

1 367 1.4%

2 199 2.3%

1 927 2.0%

92 198 94.4%

97 691 100.0%

21 197 21.7%

18 503 18.9%

26 043 26.7%

31 948 32.7%

97 691 100.0%

– -

– -

– -

– -

– -

Norm/

Range

% Actual

25% - 40% 40.0%

2% - 5% 2.7%

- 22.9%

- 1.2%

10% - 20% 28.4%

= or > 0% 51.4%

The ratio is in excess of the norm and may be attributed to non reporting of expenditure

against Debt impairment, Depreciation and asset impairment and the misstatement of

Employee related cost, amongst others, as mentioned above.

While the ratio of Employee Remuneration to Total Expenditure may have been distorted

by the non reporting of expenditure against Debt impairment, Depreciation and asset

impairment and the misstatement of Employee related cost, amongst others, as

mentioned above, any value in the upper limit of the norm is indicative of inefficiencies,

overstaffing and incorrect focus due to misdirected expenditure to non-essential and non-

service delivery related expenditure as per MFMA Circular No. 71.

The municipalty indicated that Other debtors relates to outstanding amounts from the

Ingonyama Trust Board. As per the municipality, they are in the proces of resolving these

outstanding amounts through engagement with the Ingonyama Trust Board.

The municipality indicated that the debt reflected under this category is primarily

attributable to the Ingonyama Trust Board and Agricultural properties.

This category of debt constitutes Property rates relating to the National Department of

Public works, Department of Rural Development and the Department of Human

Settlements .The municipality has been in discussions with these departments regarding

the settlement of the outstanding amounts and have been assisting in the process of

verifying properties.

The municipality's debtors has increased significantly from 2014/15 to the 2015/16

financial year. Similar to prior periods, this is mainly due to the continued billing of

indigents and the Ingonyama Trust Board where outstanding debt has been difficult to

collect.

Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management


189

4.7.4 Analysis per municipality: The Big Five False Bay Municipality

Table 4.7 (m) Operating Revenue and Expenditure Performance - The Big Five False Bay Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

10 310 11 216 11 199 99.8

1 657 1 657 1 550 93.6

45 398 45 400 43 587 96.0

13 490 4 190 4 192 100.1

70 855 62 463 60 528 96.9

21 134 18 467 16 895 91.5

1 866 1 866 1 993 106.8 According to the municipality the amount of R1.99 million reflected as at June 2016 is not a

true reflection of the municipality's performance against Remuneration of councillors.

Adjustments have been made to the unaudited actual figures in the preparation of the 2015/16

Annual Financial Statements (AFS). The adjustments will result in total expenditure incurred of

98.5 percent as at June 2016.

7 000 4 000 5 250 131.2 The municipality indicated that the amount reflected against Debt impairment is overstated and

that a thorough calculation is being performed for the inclusion of the correct figure in the

2015/16 AFS.

4 000 4 000 4 000 100.0

– – – -

18 263 17 474 10 952 62.7 The implementation of the some of the contracts was delayed which resulted in the low

expenditure incurred against Contracted services as per the municipality. The municipality did

not provide further information in respect of the reasons for the delay.

17 768 16 567 18 042 108.9 General expenditure included subsistence and travelling, fuel and oil, etc and as a result of the

merger, the municipality indicated that they incurred more than the anticipated

expenditure.The municipality did not provide additional information on whether this expenditure

was reported to Council as unauthorised.

70 031 62 374 57 133 91.6

824 89 3 396 Considering the inaccurate reporting as discussed above, the unaudited operating surplus

might not be a true reflection of the municipality's performance.







R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



190

Table 4.7 (n) Capital, Cash and Conditional grant Performance - The Big Five False Bay Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

11 419 11 419 11 419 100.0

– – – -

– – – -

300 300 278 92.8

11 719 11 719 11 697 99.8

300 300 278 92.8

– – – -

11 419 11 419 11 419 100.0

– – – -

– – – -

11 719 11 719 11 697 99.8

44 (1 840) (1 841)

83 193 2 574 Available cash of R2.6 million is less than an Unspent conditional grants

balance of R5.2 million indicating that unspent grants are not cash backed.

Provincial Treasury could not confirm the Net cash position at 30 June 2016 as

the municipality indicated thay they were still finalising the supporting

documents due to adjustments that had to be done for the preparation of the

2015/16 AFS.

39 2 033 4 415

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 991 110.6% (191) As per the municipality, there were discrepancies in the Section 71 reports

submitted to National Treasury. The municipality indicated that they incorrectly

recognised expenditure not funded from Finance Management Grant, thus,

accounting the over-expenditure. These discrepancies will be corrected during

the preparation of the 2015/16 AFS.

930 528 56.8% 402 The MSIG activity plan reflected an amount of R400 000 which was allocated to

mSCOA. Due to challenges experienced during the preparation of the merger,

this amount could not be spent. The municipality will be applying for a roll-over

in the 2016/17 financial year.

16 419 11 419 69.5% 5 000 The municipality has spent the100 percent of the original allocation (R11.5

million). During the third quarter of the 2015/16 financial year, the municipality

received a further R5 million due to good performance against MIG from the

transferring department for which the municipality did not have planned

projects. As a result, the additional allocation of R5 million was set aside for

implementation in 2016/17. The municipality will apply for a rollover in August

2016 as required by National Treasury.

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Services

Other










191

Table 4.7 (o) Trade and other receivables, Trade and other payables and Key ratios - The Big Five False Bay Municipality

Amount % of

total debt /

payables

30 948

20 271

539 2.7%

732 3.6%

439 2.2%

18 562 91.6%

20 271 100.0%

4 958 24.5%

5 500 27.1%

9 808 48.4%

5 0.0%

20 271 100.0%

1 450 18.2%

2 957 37.1%

952 11.9%

2 611 32.8%

7 970 100.0%

Norm/

Range % Actual

25% - 40% 33.1%

2% - 5% 19.2%

- 28.0%

- 2.4%

10% - 20% 17.0%

= or > 0% 5.6%

This might be an indication that many functions are being outsourced or that Contracted

services are not effectively utilised as per the MFMA Circular 71. In addition, outsourcing

decisions will have to be weighed against the ability to attract skills; however, increases in

the ratio can further expose the municipality to other risks, such as its inability to build

capacity and ongoing reliance on contractors.

Creditors above 30 days and even greater than 90 days have been reported by the

municipality as at June 2016 which is in contravention with Section 65 of the MFMA. As

per the municipality, delays in submission of invoices and statements from suppliers have

resulted in late payments. The municipality also indicated that there were invoices with

queries which were still being resolved.

The majority of debtors against Households could have been the result of the billing of

Indigents. However, this can only be confirmed upon the finalisation of the Indigent

register and debt relating to these customers will be written off as initially planned by the

municipality.

The municipality indicated that there is a possibility that the majority of the debtors

reflected against this category should have been clasisfied as Indigent customers. The

municipality had anticipated to write off long outstanding debts during the 2015/16

financial year. However, this was delayed due to the municipality not having an Indigent

register.

As per the municipality, billed Property rates relating to Organs of state have not been

paid on time as the majority of the customers in this category have objections on the

valuations. The objections are being reviewed and the debtors balance will be updated

upon finalisation thereof. Provincial Treasury notes the lengthy time the municipality is

taking to resolve objections against this category.

Debtors reported at 30 June 2016 reflected a decrease when compared to the balance of

Debtors as at 30 June 2015. The municipality did not provide reasons for this decrease.

Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management


192

4.7.5 Analysis per municipality: Hlabisa Municipality Table 4.7 (p) Operating Revenue and Expenditure Performance - Hlabisa Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual % of

Budget

Generated /

Spent

Comments

665 665 599 90.0 The municipality adjusted the budget for Property rates upwards. However, due to the fact

that the municipality did not submit the Adjusted budget returns and also the fact that the

Section 71 returns for Quarter 4 were not submitted, the performance as at Quarter 4 is

misstated. As a resulft of this, Provincial Treasury is not a position to assess performance

against figures reflected as at 30 June 2016. A non-compliance letter in respect of non-

submission of returns was forwarded to the municipality on 27 June 2016, wherein the

municipality was requested to provide reasons for non-submission of returns and also to

provide remedial or corrective measures that the municipality will implement to avoid

recurrence of late submission of the required returns. It should be noted that this is

applicable to all line items reflected below.

80 80 36 44.7

65 952 65 952 46 208 70.1

3 799 3 799 2 389 62.9

70 497 70 497 49 232 69.8

27 949 27 949 18 111 64.8

5 307 5 307 2 876 54.2

326 326 – - As also done in the previous years, the municipality indicated that the process of identifying

long outstanding debt for the purposes of providing for Debt impairment has already started

as they are preparing for the 2015/16 Annual Financial Statements (AFS). The expenditure

relating to Debt impairment will be updated in the 2015/16 AFS.

4 715 4 715 – - The municipality's Asset register was not updated during the year and as a result, no

expenditure against Depreciation and asset impairment has been reflected as at 30 June

2016. According to the municipality, they are currently in the process of finalising the Asset

register and the full expenditure will be reflected in the municipality's 2015/16 AFS.

– – – -

1 559 1 559 1 670 107.1

25 700 25 700 17 378 67.6

65 555 65 555 40 035 61.1

4 941 4 941 9 197 Considering the fact that the municipality has not taken into account the expenditure relating

to Depreciation and Debt impairment and the fact that both revenue and expenditure might

be mistated as a result of the municipality not reporting on performance in the last three

months of the financial year, the operating surplus of R9.2 million is clearly overstated.







R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



193

Table 4.7 (q) Capital, Cash and Conditional grant Performance - Hlabisa Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

14 345 14 345 8 564 59.7 Although the figures are as at Quarter 3, it has been noted that the municipality

has reflected R12.9 million against Municipal Infrastructure Grant (MIG) whilst

Transfers recognised-capital (fully funded by MIG) reflected R8.6 million.

– – – -

– – – -

2 107 2 107 92 4.4

16 452 16 452 8 657 52.6

1 507 1 507 56 3.7

11 345 11 345 6 587 58.1

3 600 3 600 2 014 55.9

– – – -

– – – -

16 452 16 452 8 657 52.6 Due to the municipality not submitting the Section 71 returns for the last three

months of the 2015/16 financial year, Provincial Treasury was not in a position

to assess the performance as at the end of Quarter 4. As also indicated under

the Operating Budget Performance, a non-compliance letter was forwarded to

the municipality in this regard.

6 822 6 822 4 954 As a result of the municipality not submitting the revised returns when tabling

the 2015/16 Adjustments Budget, the opening Cash and cash equivalents is

incorrect. Furthermore, the monthly cashflow returns were also not amended to

reflected the correct opening balance as per the 2014/15 audited AFS. Thus,

balances carried forward were incorrect.

12 741 12 741 17 328 Provincial Treasury could not confirm the Net cash position as at 30 June 2016

as the municipality indicated that they were still finalising the supporting

documents due to adjustments that had to be done for the preparation of the

2015/16 AFS.

5 919 5 919 12 374

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 354 75.2% 446 The municipality did not submit returns for the full 12 month period and as a

result, the performance reflected might be understated. This also applies to

Municipal Systems Improvement Grant and Municipal Infrastruture Grant below.

930 622 66.9% 308

14 345 12 905 90.0% 1 440

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Services

Other










194

Table 4.7 (r) Trade and other receivables, Trade and other payables and Key ratios - Hlabisa Municipality

Amount % of

total debt /

payables

2 643

–

– -

– -

– -

– -

– -

– -

– -

– -

– -

– -

– -

– -

– -

– -

– -

Norm/

Range

% Actual

25% - 40% 52.4%

2% - 5% 4.2%

- 6.1%

- 1.1%

10% - 20% 17.8%

= or > 0% 18.7%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


Due to the municipality not submitting the Debtor's return reflecting debtors as at the end

of June 2016, Provincial Treasury is not in a position to assess performance on the

outstanding debtors.

Similar to Debtors, the municipality did not submit the Section 71 report for Creditors and

as a result, Provincial Treasury could not assess performance against Creditors as at the

end of June 2016.

The high ratio, while based only on the Quarter three figures could be an indication of

overstaffing or incorrect focus due to misdirected expenditure to non-service delivery

related expenditure as per the MFMA Circular 71. It should be further noted that the high

ratio could also be distorted as a result of the municipality not recognising Debt

impairment and Depreciation.

195

4.7.6 Analysis per municipality: Mtubatuba Municipality

Table 4.7 (s) Operating Revenue and Expenditure Performance - Mtubatuba Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

25 482 26 100 28 852 110.5

7 472 5 760 5 087 88.3 The municipality indicated that they had not achieved the anticipated billing due to the

implementation of a new Valuation Roll in 2015/16. The new Valuation Roll included a fewer

number of properties that received services than anticipated when the municipality budgeted

for Service Charges. Despite having reduced the Original Budget amount by R1.7 million in the

Adjustment Budget, the municipality indicated that they had still over-budgeted in respect of

Service Charges.

125 711 124 711 124 379 99.7

8 695 15 438 13 585 88.0 The under-generation of the budgeted revenue is attributable to items such as Fines and Sale

of tender documents amongst others, which according to the municipality, were not raised as

anticipated.

167 361 172 009 171 903 99.9

46 146 54 270 40 509 74.6 The low expenditure in respect of Employee related costs is due to the municipality not filling

budgeted vacant posts during the 2015/16 financial year. The municipality indicated that the

primary contributing factor towards the high vacancy rate is due to the instability in the

leadership (political and administrative) experienced throughout the 2015/16 financial year.

11 022 11 219 11 470 102.2

8 617 – 5 650 - Due to the incorrect population of the Adjustment Budget returns, no amount is reflected under

the Adjusted Budget column. As per the Adjusted Budget (B Schedule), Debt Impairment has

been budgeted at R8.5 million. Furthermore, the municipality indicated that they are still in the

process of determining provision for debt impairment for the purpose of preparing the 2015/16

Annual Financial Statements. The expenditure relating to Debt impairment will therefore be

updated in the 2015/16 AFS.

16 520 16 520 17 553 106.3

– – – -

13 904 16 612 15 916 95.8

39 048 49 563 53 091 107.1

135 257 148 185 144 189 97.3

32 104 23 824 27 714







R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



196

Table 4.7 (t) Capital, Cash and Conditional grant Performance - Mtubatuba Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

30 000 23 600 35 521 150.5 The municipality conceded that the amount captured in the Adjustment Budget

return in respect of this line item is incorrect and should in fact be R32 million

as per the adopted Adjusted Budget (Schedule B). In addition, the Unaudited

Actual amount should be R32 million(100 percent of Adjusted Budget). This has

since been rectified by the municipality in the AFS preparation process.

– – – -

– – – -

18 250 18 422 13 113 71.2 The under-performance against this line item is as a result of the delays in the

implementation of projects funded from Internally generated funds due to

reprioritising projects by the new Council that had come in after they had been

under administration.

48 250 42 022 48 634 115.7

900 1 603 2 574 160.6 The municipality indicated that expenditure relating to Community and Public

Safety and Trading Services was misallocated to the Economic and

Environmental Services and Governance and Administration departments

which resulted in the over-expenditure noted in Governance and Administration

and Economic and Environmental Services. This will be rectified in the AFS.

13 000 4 237 1 818 42.9

27 200 27 982 39 853 142.4

7 150 8 200 4 389 53.5

– – – -

48 250 42 022 48 634 115.7

4 743 13 183 13 183

29 483 29 939 16 117 The municipality confirmed that they have ended the 2015/16 financial year with

a positive cash balance of R16.1 million which is sufficient to cover the Unspent

National grants amounting to R2.8 million (Low Cost housing, Infrastructure

Sports Facilities, Cybercadet, Energy Efficiency and Demand Management

Grant). Although having confirmed that they had closed the financial year with a

positive cash balance, the municipality have not submitted supporting

documentation to this effect.

24 740 16 756 2 934

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 800 100.0% 0

930 930 100.0% –

30 776 30 776 100.0% (0)

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Services

Other










197

Table 4.7 (u) Trade and other receivables, Trade and other payables and Key ratios - Mtubatuba Municipality

Amount % of

total debt /

payables

72 277

78 418

3 631 4.6%

5 826 7.4%

1 576 2.0%

67 385 85.9%

78 418 100.0%

3 182 4.1%

11 153 14.2%

51 878 66.2%

12 206 15.6%

78 418 100.0%

489 42.4%

155 13.4%

243 21.0%

267 23.1%

1 153 100.0%

Norm/

Range

% Actual

25% - 40% 36.0%

2% - 5% 11.0%

- 27.6%

- 27.0%

10% - 20% 25.2%

= or > 0% 16.1%

When considering the low rate of Own sources of revenue, this is an indication that the


The ratio of Employee Remuneration to Total Expenditure is in the upper region of the

norm of 25-40 percent and might be an indication of inefficiencies, overstaffing and

incorrect focus due to misdirected expenditure to non-essential and non-service delivery

related expenditure as per MFMA Circular No. 71.

Considering this ratio is in excess of the norm limit of 5 percent, it could indicate that

many functions are being outsourced to Consultants, or that Contracted Services are not

effectively utilised as per MFMA Circular No. 71. However, the municipality anticipates a

reduction in the amount expended on Contracted services in 2016/17 as the Dumpsite

Maintenance is planned to be done in-house.

As at the end of the financial year, the municipality reported creditors outstanding for a

period greater than 30 days which is in contravention with Section 65(2)(e) of the MFMA.

This was mainly due to slow payment of some creditor invoices.

Incorrect billing of indigent households due to an incomplete Indigent register have

resulted in the majority of outstanding debt residing under this category.

Debtors outstanding for greater than 90 days has increased by R4.5 million as compared

to the 2014/15 financial year (R62.8 million). The municipality indicated that the reasons

for the high percentage of debtors outstanding for greater that 90 days are incorrect billing

of indigents and accumulated debt from prior financial years which have proved difficult to

collect. The municipality has implemented debt collection strategies in 2015/16 which has

proven successful in respect of the 2015/16 billing. The municipality has undertaken a

project to visit all wards to accurately collect data in respect of indigents to prevent future

billing of indigent households. Once the process is completed, a recommendation based

on the infomation gathered will be made to the CFO to determine if long-outstanding debt

in respect of indigents should be written off.

Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management


198

4.7.7 Analysis per municipality: Umkhanyakude Municipality Table 4.7 (v) Operating Revenue and Expenditure Performance - Umkhanyakude District Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

It was noted that the majority of adjustments budget figures did not reconcile to

the adopted B Schedule. Upon further investigation, it has been noted that

despite the municipality submitting updated adjustments budget returns

timeously, the figures from previous adjustments budget returns are still

reflected on the lgdatabase. For the purposes of analysis, the differences,

where appropriate are noted in the comments column.

– – 4 - As per the municipality, the amount of R4 000 relates to penalties for late

payment for an amount not related to Property rates and has been

misallocated. The amount should have be recorded as Other revenue.

48 063 41 641 37 539 90.1 As per the adopted B schedule, the budget for Service charges amounted to

R34.4 million (Water: R29.2 million, Electricity R4.7 million and Sanitation:

R484 000). The municipality conceded that the amount of R37.5 million

reflected against Service charges was understated, with the correct amount

being R38.6 million or 103 percent against the budget. The majority of the

over generation resulted from revenue related to Water (R33.4 million, an

over generation of R4.2 million against budget). The municipality attributed

this to an unanticipated increase in water consumption in the second half of the

financial year while the adjusted budget was based on consumption reflected

in the first 6 months.

284 387 277 844 282 334 101.6 As per the adopted B Schedule, the municipality's budget for Transfers

recognised-operational amounted to R288.1 million. The municipality has

therefore generated 98 percent against their budget.

34 374 54 219 39 552 72.9 The municipality generated R39.6 million or 86 percent of the R46.2 million

budget for Other sources of revenue as per the adopted B Schedule (Other

revenue (R38.9 million), Interest earned- Outstanding debtors (R4.7 million),

Interest earned- external investments (R2.5 million) and Rentals (R88 000)).

The main reason for the under generation against was due to the municipality

not recognising any revenue in respect of Interest earned- Outstanding

debtors for which no invoices had been sent out and no revenue accrued.

Furthermore, under generation of revenue was noted against the municipal

entity as the schools nutrition programme which is on a claim back basis was

not fully implemented.

366 824 373 704 359 428 96.2

135 491 125 330 126 087 100.6

11 409 7 076 6 446 91.1

38 511 29 209 0 0.0 The municipality further indicated that the calculation of the Debt impairment

expense has yet to be finalised at the time of preparation of the Quarter 4

report and would be incorporated in the 2015/16 AFS.

24 607 28 204 – - Similar to Debt impairment, the calculation of the Depreciation had yet to be

finalised before the finalisation of the Quarter 4 Section 71 report and will be

incorporated in the 2015/16 AFS.

63 237 60 544 51 629 85.3 The municipality indicated that all invoices had yet to be processed resulting in

the under expenditure reported. The municipality anticipates that expenditure

will be within budget expectation on conclusion of the processing of

outstanding invoices.

18 309 16 809 18 135 107.9

75 260 139 297 51 777 37.2 As per the adopted B Schedule, the budget for Other expenditure items

amount to R101.6 million. The amount spent against these expenditure items

therefore represent only 51 percent of the adjusted budget. The main

contributors to the poor expenditure are Other materials (R17.8 million or

57.1 percent against a budget of R30.9 million) and Other expenditure

(R30.5 million or 45.6 percent against a budget of R66.9 million). The

municipality indicated that the reported expenditure against both these line

items were understated as the municipality was still in progress with the

processing of invoices. However, the municipality indicated that savings had

occurred due to the implementation of an Interim Finance Committee which

ensured that only critical expenditure items were incurred. The municipality

further stated that the full expenditure incurred would be reflected in the

2015/16 AFS.

366 824 406 469 254 074 62.5

– (32 765) 105 354 The municipality's operating surplus is significantly overstated due to the

municipality still processing invoices and finalising the calculations for

Depreciation and Debt Impairment.







R'000

Operating Revenue

Property Rates1

Serv ice Charges2







Debt impairment



Bulk purchases




199

Table 4.7 (w) Capital, Cash and Conditional grant Performance - Umkhanyakude District Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

252 173 253 372 230 902 91.1

– – – -

– – – -

– – – -

252 173 253 372 230 902 91.1 As per the adopted Adjustments budget (B Schedule), the municipality's capital

budget amounted to R248.2 million and consisted of grants (R235.2 million)

and an approved rollover in respect of MIG (R12.3 million). The municipality

correctly budgeted for the approved rollover as Internally generated funding in

the adopted Adjustments Budget (B Schedule) and incorrectly reported as

Transfers recognised- capital in the Section 71 report. Based on the adopted B

Schedule, the municipality incurred 93 percent of budgeted capital expenditure.

The municipality confirmed that not all invoices had yet to be processed at the

date of reporting and accruals have yet to be taken into account, thus the

reported expenditure is expected to increase. It should be noted that the

municipality has incorrectly reported expenditure related to the approved

rollover against Transfer recognised-capital in the Section 71 report instead of

Internally generated funds, despite correctly budgeting for the approved

rollover.

– – – -

– – 3 402 - The municipality conceded that expenditure recorded against Community and

Public safety had been misallocated and should have been reflected against

Economic and Environmental services.

52 275 4 000 – -

199 898 249 372 227 500 91.2 As per the adopted B Schedule, the budget for Trading Services amounted to

R244.2 million. Expenditure as a percentage of the budget is therefore 93

percent.

– – – -

252 173 253 372 230 902 91.1

5 095 12 696 13 543

37 506 519 793 22 110 The municipality confirmed that the reconciled closing cash and cash

equivalents balance which will appear on the draft 2015/16 AFS would amount

to R27.4 million. The municipality has therefore, understated their closing cash

and equivalents balance by R5.3 million.

32 411 507 097 8 567

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 250 1 250 100.0% 0

940 940 100.0% –

210 419 214 723 102.0% (4 304) As discussed above, the municipality has incorrectly recorded expenditure

relating to an approved 2014/15 rollover against the 2015/16 allocation which

has resulted in the municipality's expenditure exceeding their 2015/16

allocation.

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Services

Other










200

Table 4.7 (x) Trade and other receivables, Trade and other payables and Key ratios - Umkhanyakude District Municipality

Amount % of

total debt /

payables

174 582

177 798

2 295 1.3%

2 107 1.2%

983 0.6%

172 412 97.0%

177 798 100.0%

13 456 7.6%

27 128 15.3%

137 214 77.2%

0 0.0%

177 798 100.0%

25 509 17.8%

6 673 4.7%

1 845 1.3%

108 915 76.2%

142 943 100.0%

Norm/

Range

% Actual

25% - 40% 52.2%

2% - 5% 7.1%

- 21.4%

- 0.0%

10% - 20% 47.6%

= or > 0% 29.3% Once again, the main reason for the high net operating margin is operating expenditure

being understated. The margin is expected to decrease.

The main reason for the high Capital Expenditure to Total Expenditure is due to the

municipality's total operating expenditure being understated. The ratio is expected to

decrease once the municipality fully recognises their total operating expenditure.

As noted in the discussion on the operating expenditure in Table 4.7(v), the municipality is

still in the process of finalising many expenditure items, thus operating expenditure can be

expected to significantly increase after the inclusion of Debt impairment, Depreciation and

the processing of invoices related to Bulk purchases, Other materials and Other

expenditure. Thus, the current ratio of 52.2 percent is not a true reflection of the

municipality's remuneration as a percentage of total operating expenditure.

As noted above, the operating expenditure of the municipality is significantly understated.

Hence, the ratio of 7.1 percent is not a true reflection of the ratio of contracted services as

a percentage of total operating expenditure.

As at the end of the 2015/16 financial year, the municipality reported 82.2 percent of their

total creditors for a period of greater than 30 days which is in contravention with Section

65(2)(e) of the MFMA. Similar to the 2014/15 financial year, this was mainly due to cash

flow challenges prevailing at the municipality which has had a negative impact on the

municipality's liquidity position.

Similar to the prior period, the municipality indicated that Council does not intend

charging interest on long outstanding debt. Furthermore, the municipality should consider

fast tracking the updating of their indigent register which forms part of their financial

recovery plan of the municipality.

The most significant portion (R172.4 million or 97 percent) of the municipality's debtors

have been outstanding for a period greater than 90 days with the majority falling within the

Households customer group. The municipality indicated that the majority of the amount

owing is attributable to long outstanding debtors who do not pay on their municipal debt

due to high levels of unemployment and poverty. This is indicative of the high number of

indigents within the municipal area, however, the municipality still does not have an

updated indigent register, resulting in the incorrect billing of these consumers which has

led to growth in the debtors balance.

Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management


201

4.8 uThungulu District

The Integrated Development Plan (IDP) of uThungulu District shows that uThungulu District

Municipality is located on the North-Eastern Region of the KwaZulu-Natal Province on the eastern

sea-board of South Africa and it covers a geographical area of approximately 8 000 km². The IDP

document also states that agricultural sector is a dual economy, consisting of commercial agriculture

on one hand and traditional agriculture on the other. uThungulu District comprises of the following

local municipalities, namely: Nkandla, uMfolozi, Ntambanana, Mthonjaneni, uMlalazi and

uMhlathuze (non delegated).

Subsequent to the redetermination of municipal boundaries by the Demarcation Board, Ntambanana

Municipality will be disestablished and wards will be incorporated to Mthonjaneni, uMhlathuze and

uMfolozi Municipalities. This will take place after the local government elections in 2016.

The main trading services rendered by the uThungulu District Municipality are Water, Sanitation and

Refuse removal services. uMfolozi Municipality provide Refuse removal services, while

Mthonjaneni, Nkandla and uMlalazi Municipalities are providing Electricity and Refuse removal

services.

With the exception of Nkandla Municipality, all the Chief Financial Officer (CFO) positions in the

district were filled throughout the 2015/16 financial year and at the time of this reporting. The CFO of

Nkandla Municipality was appointed in March 2016 and the Assistant Director: Expenditure and

Financial Reporting was acting as CFO prior to this.

As at the end of 2015/16 financial year, Ntambanana Municipality had an acting Municipal Manager

(MM). The position was vacant since January 2013. The MM for Mthonjaneni Municipality has been

on suspension since the fourth quarter of 2015/16 while the MM for Nkandla Municipality has been

on suspension for the 2015/16 financial year and the Director: Community Services has been acting as

MM. The rest of the MM positions in the district were filled for the entire period under review.

Two municipalities in the uThungulu District namely, uMhlathuze and uThungulu District received

Unqualified audit opinions with no other matters (clean audit) while the other five municipalities

received Unqualified audit opinions with other matters in the 2014/15 financial year.

It should be indicated that with effect from the 21 July 2016 uThungulu District Municipality will be

officially known as King Cetshwayo District Municipality.

The tables in this report reflect budget and actual figures for the delegated municipalities, as well as

the non-delegated municipality namely, uMhlathuze Municipality. The budget performance of

uMhlathuze Municipality is not discussed in the analysis due to the fact that this municipality reports

directly to National Treasury.

4.8.1 Overview of uThungulu District Performance

uMfolozi 131 617 120 463 123 438 102.5

uMhlathuze 2 524 301 2 462 577 2 478 119 100.6

Ntambanana 67 469 67 469 63 106 93.5

uMlalazi 285 813 285 813 304 471 106.5

Mthonjaneni 113 647 113 647 107 557 94.6

Nkandla 123 815 40 064 85 287 212.9

uThungulu DM 619 400 701 278 648 341 92.5

Total 3 866 062 3 791 311 3 810 318 100.5


% Generated



202

uMfolozi 101 743 160 000 169 792 106.1

uMhlathuze 2 519 364 2 474 871 2 527 865 102.1

Ntambanana 67 175 67 175 61 914 92.2

uMlalazi 317 057 317 057 306 702 96.7

Mthonjaneni 105 091 105 091 80 678 76.8

Nkandla 122 904 124 630 156 111 125.3

uThungulu DM 644 059 715 145 687 703 96.2

Total 3 877 393 3 963 969 3 990 765 100.7




uMfolozi 63 257 52 412 6 108 11.7

uMhlathuze 448 781 510 261 345 562 67.7

Ntambanana 15 367 15 367 16 648 108.3

uMlalazi 72 364 79 745 61 005 76.5

Mthonjaneni 28 956 28 956 41 153 142.1

Nkandla 60 208 57 588 63 172 109.7

uThungulu DM 512 245 489 598 326 024 66.6

Total 1 201 178 1 233 927 859 673 69.7





uMfolozi 753 6.2 519 4.3 338 2.8 10 546 86.8 12 156

uMhlathuze 234 608 58.4 12 459 3.1 7 964 2.0 146 635 36.5 401 666

Ntambanana – - – - – - – - –

uMlalazi 3 821 10.6 1 455 4.0 772 2.1 30 093 83.3 36 141

Mthonjaneni 2 477 32.9 633 8.4 550 7.3 3 870 51.4 7 530

Nkandla 784 4.1 722 3.8 720 3.8 16 696 88.2 18 922

uThungulu DM 5 983 10.0 3 090 5.2 1 472 2.5 49 253 82.4 59 799

Total 248 427 46.3 18 877 3.5 11 816 2.2 257 094 47.9 536 214


Total





uMfolozi 7 905 65.0 1 744 14.3 2 077 17.1 430 3.5 12 156

uMhlathuze 10 003 2.5 251 641 62.6 120 699 30.0 19 323 4.8 401 666

Ntambanana – - – - – - – - –

uMlalazi 8 650 23.9 4 076 11.3 12 323 34.1 11 091 30.7 36 141

Mthonjaneni 2 398 31.8 1 771 23.5 2 157 28.6 1 204 16.0 7 530

Nkandla 150 0.8 3 055 16.1 5 887 31.1 9 829 51.9 18 922

uThungulu DM 4 602 7.7 3 176 5.3 52 021 87.0 – - 59 799

Total 33 707 6.3 265 464 49.5 195 165 36.4 41 878 7.8 536 214





uMfolozi 1 061 100.0 – - – - – - 1 061

uMhlathuze 301 381 100.0 – - – - – - 301 381

Ntambanana – - – - – - – - –

uMlalazi 38 182 100.0 – - – - – - 38 182

Mthonjaneni 1 538 100.0 – - – - – - 1 538

Nkandla 2 863 24.9 3 648 31.8 1 870 16.3 3 103 27.0 11 484

uThungulu DM 26 054 55.0 10 016 21.1 285 0.6 11 048 23.3 47 403

Total 371 080 92.5 13 664 3.4 2 156 0.5 14 150 3.5 401 050




Total

203

4.8.2 Analysis per municipality: uMfolozi Municipality

Table 4.8 (g) Operating Revenue and Expenditure Performance - uMfolozi Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

5 502 5 502 5 737 104.3

313 313 38 12.3 Revenue generated on Service charges is significantly lower than the expected amount

at the end of the financial year. The municipality indicated that the under generation on

Service charges was due to the year-end transactions not being captured when the

Section 71 figures were finalised, however, the municipality indicated that this will be

corrected in the Annual Financial Statements.

98 402 98 402 98 402 100.0

27 401 10 400 19 260 185.2 Incorrect budgeting seems to be the reason for this significant over generation of

revenue in this category. This was largely influenced by over generation of revenue on

Interest earned on external investments. Vat refunds from SARS for the 2015/16

financial year also contributed to this over generation on Other sources of revenue.

131 618 114 618 123 438 107.7

31 596 28 662 29 387 102.5

7 772 7 839 7 765 99.1

– – – - The municipality indicated that Debt impairment is calculated at year-end. Therefore, at

the time of the Section 71 reporting, this amount was not yet determined. The

municipality was advised to calculate Debt impairment on a monthly basis.

1 750 1 750 – - The Depreciation and asset impairment is calculated at year-end according to the

municipality's policy and the amount was not yet calculated by the time of the Section 71

reporting. However, the municipality has undertaken to ensure that the correct amount

is reflected in the Annual Financial Statements.

– – – -

3 800 3 800 3 200 84.2 Low expenditure was reported for Contracted services and the municipality indicated

that expenditure relating to this item might be misallocated to under Other expenditure.

The municipality has undertaken to investigate the amount and process necessary

corrections on the Annual Financial Statements.

56 826 59 692 129 440 216.8 The municipality has significantly over spent by 116.8 percent on Other expenditure.

This is as a result of over expenditure on Publicity and inclusion of Consulting and

professional fees which should have been included under Contracted services. Internal

audit fees were also more than what was budgeted for. The municipality also included

expenditure on Community services which should have been included under capital

expenditure. However, the municipality indicated that this will be corrected during the

preparation of the Annual Financial Statements.

101 743 101 743 169 792 166.9

29 875 12 875 (46 354)








R'000

Operating Revenue

Property Rates1

Service Charges2






Debt impairment



Bulk purchases

Contracted services



204

Table 4.8 (h) Capital, Cash and Conditional grant Performance - uMfolozi Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

33 382 33 382 – - The Section 71 report did not reflect the total amount generated on

Transfers recognised-capital. A portion of the amount generated has

been erroneously recorded under Public contributions and donations.

However, the municipality indicated that this will be corrected in the Annual


– – 6 108 - This was incorrectly populated by the municipality under Public

contributions and donations instead of Transfers recognised-capital in the

Section 71 reports, however, the municipality indicated that this will be

corrected in the Annual Financial Statements.

17 000 – – - The municipality has deferred the utilisation of loans to 2016/17 financial

year and receipts will be expected in the 2016/17 financial year.

12 875 12 875 – - Section 71 report does not reflect actual amount to date on Internally

generated funds item. This raises the question of credibility of the

budgeted amount and the information reported during the year. However,

the municipality indicated that this will be corrected during the finalisation

of the Annual Financial Statements.

63 257 46 257 6 108 13.2

12 875 12 875 6 108 47.4 Only 47.4 percent of the allocated expenditure for Governance and

Administration. However, the municipality indicated that this is as a result

of over budgeting for this item and this will be corrected in the budget for

the next financial year. Some of the budget under this item should have

been included under the budget for Other expenditure.

– – – -

– – – -

– – – -

50 382 33 382 – - The municipality did not report any expenditure for this item for the entire

financial year raising the question of credibility of budgeting and reporting

by the municipality. Some of the capital expenditure has been

misallocated to Contracted services. The municipality has undertaken to

report the correct amount on this item when all the year-end journal

entries are processed.

63 257 46 257 6 108 13.2 Due to errors noted above the capital expenditure reported does not

reflect the true capital spending of the municipality. It should be noted that

the under spending on capital expenditure has a negative impact towards

eradicating backlogs on service delivery.

156 3 188 3 160

1 774 39 425 201

1 618 36 237 (2 959)

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 367 75.9% 433 The under expenditure is as a result of misallocations. The municipality

indicated that this is expected to change when all year-end journal entries

are populated during the finalisation of the Annual Financial Statements.

930 930 100.0% –

30 537 33 742 110.5% (3 205) This over expenditure on Municipal Infrastructure Grant is as a result of

misallocations. The municipality indicated that this is expected to change

when all year-end journal entries are populated and reallocations to the

correct votes are done.









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

205

Table 4.8 (i) Trade and other receivables, Trade and other payables and Key ratios - uMfolozi Municipality

Amount % of

total debt /

payables

23 639

12 156

753 6.2%

519 4.3%

338 2.8%

10 546 86.8%

12 156 100.0%

7 905 65.0%

1 744 14.3%

2 077 17.1%

430 3.5%

12 156 100.0%

1 061 100.0%

– -

– -

– -

1 061 100.0%

Norm/

Range

% Actual

25% - 40% 21.9%

2% - 5% 1.9%

- 20.3%

- 0.0%

10% - 20% 3.5%

= or > 0% -37.6%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


The municipality indicated that there were some amounts written off and some

businesses have settled their debts.



impacts negatively on cash flow position.

Large percentage of debt appears to be owed by the Organs of state. The

municipality indicated that they are engaging the relevant government departments

to settle their debts. The municipality will continue to engage all relevant

departments in next financial year to ensure that all debts have been paid up.

The municipality is in the process of handing over all the long-term debts owed by

businesses which are not paying their accounts. Visits to these businesses are

done by senior management of the municipality to ensure that they are always

reminded of their balances due to the municipality.

A significant portion (R2.1 million or 17.1 percent) of debt owed to the municipality

is owed by Household and a larger portion of this debt is outstanding for more than

90 days. uMfolozi Municipality is a rural municipality and most household owing

the municipality appears to be Indigents.

Net operating surplus margin is currently negative 37.6 percent which is below the

acceptable norm of equal or greater than 0.

This is an indication that the municipality is not self sufficient and reliance is placed

on grant allocations to fund operations.

As at the time of reporting for the Section 71, no capital expenditure was funded

from the Internally generated funds. However, this is expected to reflect correct

status when all year-end transactions are captured in the Annual Financial

Statements.

This ratio clearly indicates that the municipality is not investing sufficient on capital

expenditure. The norm of capital expenditure to total expenditure should be 10 to

20 percent and the municipality is only spending 3.5 percent, which below the

norm.

Total operating expenditure is misstated as expenditure for Depreciation and Debt

impairment were not reported and misallocation noted above thereby distorting this

ratio.

Low expenditure was reported for Contracted services and the municipality

indicated that expenditure relating to this item might be misallocated to Other

expenditure. Once this has been corrected, when all year-end entries are captured

in the Annual Financial Statements and this ratio is expected to change and be

within the norm of 2 to 5 percent.

206

4.8.3 Analysis per municipality: Ntambanana Municipality

Table 4.8 (j) Operating Revenue and Expenditure Performance - Ntambanana Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

1 353 1 353 1 225 90.5 Revenue generated from Property rates was lower than the budgeted amount in the

2015/16 budget year. The Adjusted budget figure reported in Section 71 does not

correspond with the figure reported in the Adjustments Budget. The municipality has

slightly decreased the budget for Property rates. The variance has resulted partly due to

non submission of some of the returns for month 12 relating to Section 71 report. It is

expected that the figure will be correctly recorded in the Annual Financial Statement for


– – – -

64 848 64 848 53 632 82.7 The Adjustment amount in Section 71 does not correspond with the figure reported by

the municipality in the Adjustments Budget raising the question of credibility of reported

information. Using Section 71 report, the municipality has under recognised Transfer

recognised - operational by 82.7 percent. The municipality did not timeously submit all

their conditional grants reports. Therefore it appear that the under generation of

revenue on this line item has resulted from error in reporting on Section 71 report.

1 268 1 268 8 249 650.7 The municipality increased the budgeted amount relating to Other revenue in the

Adjustments Budget, however the adjustment amount in Section 71 does not

correspond with the figure reported by the municipality in the Adjustments Budget. A

significant over generation has been reported which raises question of credibility of

reported information. Other revenue generated does not appear to be credible and due

to the municipality's late submission of Section 71 reporting. The Municipality was

advised on numerous occasions about the importance of timeous submission of

Section 71 reports and the accuracy thereof.

67 469 67 469 63 106 93.5

15 883 15 883 11 972 75.4 Underspending on this item has been related to staff benefit which were not utilised

during 2015/16 financial year. The non filling of the Municipal Manager position has

also contributed to this variance. However, due to the late submission of Section 71

reports, the figure reported will be adjusted in the Annual Financial Statements.

4 595 4 595 3 532 76.9 As at mid year the municipality had only spent 43.8 percent on Remuneration of

councillors and the municipality further indicated that spending on this item was

expected to increase from the second quarter of 2015/16 financial year. As at the end of

2015/16 the municipality has spent 76.9 percent against the Adjusted Budget amount of

R4.6 million. Due to failure to timeously submit the monthly returns the reported figure

may not be a true reflection of the municipality's spending at the end of 2015/16

financial. Therefore, the figure reported will be adjusted in the Annual Financial

Statements.

76 76 – - The municipality has not recorded Debt impairment expenditure incurred as at the end

of 2015/16 financial year. The unrecorded figure will be correctly accounted for in the



the municipality in the Adjustments Budget. Using the Adjustments budget amount of

R4.4 million. It will result in 97.9 percent of Depreciation and asset impairment

accounted for at the end of 2015/16 financial year.

– – – -

18 038 18 038 12 586 69.8 The municipality has recorded under spending on Contracted services. It may therefore

appear that the municipality over budgeted for Contracted services. However the figures

reported as at the end of 2015/16 financial remains questionable due to the

municipality's failure to submit all the monthly returns to National Treasury timeously.

The variance reported may not be a true reflection of the municipality's spending as at

the of the 2015/16 financial year.

25 758 25 758 29 418 114.2 The figure reported by the municipality in Section 71 does not correspond with the figure

reported in the Adjustments Budget, using the Section 71 figure the municipality has

significantly overspent on Other expenditure. This is due to an overspending in Other

expenditure item. The spending reported may be incorrect due to lack of credibility of

figures submitted by the municipality. The figure reported is subject to change in the


67 175 67 175 61 914 92.2

294 294 1 192 Due to errors identified above the Operating surplus may not be a true reflection of the

municipality's financial performance. The figure reported may change in the Annual








R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



207

Table 4.8 (k) Capital, Cash and Conditional grant Performance - Ntambanana Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

15 073 15 073 16 648 110.4 The figure reported on Transfers and grants appears to be inaccurate

due to the reporting error in the Section 71 reports. The error will be

correctly recorded in the Annual Financial Statements.

– – – -

– – – -

294 294 – - The municipality has budgeted to utilise R294 000 to fund capital projects.

However to date the municipality has not utilised Internally generated

funds. In the mid year review the municipality was advised to review this

source of funding during the Adjustments Budget process. It therefore

appears that the municipality had incorrectly projected the use of Internally

generated funds to finance capital projects.

15 367 15 367 16 648 108.3

– – – -

– – – -

15 367 15 367 16 648 108.3 The overspending on Economic and Environmental Services relates to

overspending on Roads Transport. Due to incorrect Section 71 reporting

the figure reported may not be a true reflection of the municipality's

performance.

– – – -

– – – -

15 367 15 367 16 648 108.3

21 341 21 341 21 252

24 173 24 173 30 332 The Cash/cash equivalents as at year end maybe incorrectly reported

due to errors identified above. Based on the inaccuracy of the figures

provided and the late submission of the Section 71 reports, the figure

reported may not be true reflection of the municipality's closing balance.

2 832 2 832 9 080

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 792 99.6% 8

930 741 79.7% 189 Due to late submission of Section 71 reports the spending reported may

be incorrect. However, the municipality has indicated that the allocation on

Municipal System Improvement Grant has been fully spent.

15 073 16 393 108.8% (1 320) The municipality has indicated that the grant has been fully spent.

However the municipality has indicated that the error will be rectified

during the process of preparation of the Annual Financial Statements.

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Services

Other










208

Table 4.8 (l) Trade and other receivables, Trade and other payables and Key ratios - Ntambanana Municipality

Amount % of

total debt /

payables

1 246

1 839

153 8.3%

81 4.4%

78 4.3%

1 527 83.0%

1 839 100.0%

903 49.1%

936 50.9%

– -

– -

1 839 100.0%

2 042 100.0%

– -

– -

– -

2 042 100.0%

Norm/

Range

% Actual

25% - 40% 25.0%

2% - 5% 20.3%

- 15.0%

- 0.0%

10% - 20% 21.2%

= or > 0% 1.9% This ratio indicates that the municipality is operating at a surplus. However, as it

has been alluded in other sections that the municipality has not timeously

submitted the returns, the ratio reported might therefore be incorrect.

This is an indication that the municipality is not self sufficient and reliance is placed

on grant allocations to fund operations.

This is an indication that the municipality is solely grant dependent and does not

finance capital projects with Internally generated funds.

The municipality's ratio is slightly above the norm. This suggest that to a certain

extent spending is focused on infrastructure and service delivery.

The municipality's ratio of 25 percent is within the norm range. However based on

the incomplete figures submitted, the ratio might change. Total operating

expenditure and Employee related costs and Remuneration of councillors appears

to be understated based on late submission of Section 71 reports.

Contracted services as a percentage of Total operating expenditure exceeds the

norm. However it should be noted that based on the discrepancies identified above

this ratio may not be a true refection of Contracted services as a percentage of

Total operating expenditure. However this may suggest that the municipality relies

on contractors to provide services.

The municipality does not provide municipal services to Households. The

municipality's debt is split between the Organs of state and Commercial. Therefore

no amount of outstanding debt relating to Households.

The substantial amount of debts is in the 90 Days category. This indicates that debt

management strategies implemented by the municipality have not yielded any

positive outcome and that control policies are not being properly implemented. The

municipality has not provided reasons for failure to collect outstanding debts.

A portion of outstanding debt of the municipality is under Organs of state customer

group. It therefore appears that the collection strategies implemented by the

municipality has not yielded positive outcome. The municipality has not provided

reasons for failure to collect outstanding debts.

A portion of outstanding debt of the municipality is under Commercial customer

group. It therefore appears that the collection strategies implemented by the

municipality has not yielded positive outcome. The municipality has not provided

reasons for failure to collect outstanding debts.

Debtors balance has slight increased when compared to Debtors balance as at the

end of June 2015.

Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management


209

4.8.4 Analysis per municipality: uMlalazi Municipality

Table 4.8 (m) Operating Revenue and Expenditure Performance - uMlalazi Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

42 748 49 541 48 690 98.3

69 179 67 745 67 627 99.8

137 720 167 065 140 879 84.3 Incorrect reporting by the municipality lead to variance in Transfers recognised-


captured. The municipality resubmitted some of their Month 12 returns to correct the

errors that were identified in the Section 71 quarterly verifications. Annual Financial

Statements will have the correct figures.

36 167 41 035 47 275 115.2 The municipality stated that this variance is due to Fines issued and Interest received on

external investments being more than budgeted amounts.

285 814 325 386 304 471 93.6

88 209 77 088 80 503 104.4

17 792 17 564 17 443 99.3

21 583 24 293 24 294 100.0

28 484 36 675 36 675 100.0

45 474 44 735 38 287 85.6 The municipality indicated that the under expenditure of 14.4 percent is due to Eshowe

Eskom main account for June 2016 being received late in July 2016, the billing date for

this account is on the 1st of each month and the due date is on the 15th of each month,

the amount for June’s account is R 4.9 million. The June amount was paid after the

figures for the Section 71 had already been signed and submitted to National Treasury.

This item will be correct in the Annual Financial Statements as all the year-end journal

entries will be captured.

26 958 29 319 25 275 86.2 The variance is due to the final invoices for Contracted services being received in July

for the work performed in June. However, the municipality indicated that this will be

corrected in the Annual Financial Statements when all the final journal entries are

captured.

88 555 117 148 84 226 71.9 Final payments will be done in July for the expenditure that took place in June which will

reduce the level of underspending and the correct expenditure amount for this item will

be reflected in the Annual Financial Statements.

317 057 346 823 306 702 88.4

(31 243) (21 437) (2 231)







Debt impairment



Bulk purchases

Contracted services








R'000

Operating Revenue

Property Rates1

Service Charges2


210

Table 4.8 (n) Capital, Cash and Conditional grant Performance - uMlalazi Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

64 464 71 097 61 005 85.8 The municipality indicated that the low generation on Transfers

recognised-capital is expected to change when all the year-end journal

entries are populated. One of the reasons sited by the municipality for low

expenditure was that expenditure incurred in June was paid in July after

Section 71 reporting for had been submitted. This is expected to change

when all the final journal entries are populated.

– – – -

– – – -

7 900 8 648 – - Section 71 report shows no actual amount to date on Internally generated

funds item. This raises the question of credibility of the budgeted amount

and the information reported during the year. However, the municipality

indicated that this an error in reporting and will be corrected during the


72 364 79 745 61 005 76.5

14 620 17 371 7 437 42.8 The municipality reported expenditure of only 42.8 for this item for the

entire financial year. Misallocations contributed to this unexpected under

spending. However, the municipality indicated that this is expected to

change when all the year-end transactions are populated. Not all

expenditure had been populated at the time of reporting for the Section

71.

12 267 23 089 26 325 114.0 The municipality exceeded their Governance and Public Safety budget by

14 percent as a result of misallocations. However, the municipality

indicated that this is expected to change when all the year-end

transactions are populated.

39 044 34 050 24 213 71.1 Low expenditure on MIG resulted in low expenditure on Economic and

Environmental Services and the reason provided by the municipality was

also attributed to delays in supply chain management processes thereby

delaying expenditure. The municipality stated that this will change once all

the accruals are recorded during the finalisation of the Annual Financial

Statements.

6 433 5 234 3 009 57.5 The municipality indicated that expenditure relating to Electricity

administration is always very low and this will be revisited in the budgets

for the coming financial years.

– – 21 - This was incorrectly populated by the municipality under Other

expenditure in the Section 71 reports, however, the municipality indicated

that this will be corrected in the Annual Financial Statements.

72 364 79 745 61 005 76.5 It should be noted that the underspending on capital expenditure has a

negative impact towards eradicating backlogs on service delivery. This

does not reflect a true capital spending, due to errors noted above.

49 173 79 034 79 034

52 605 81 326 102 819

3 432 2 292 23 785

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 600 1 595 99.7% 5

930 708 76.1% 222 The under expenditure is expected to improve after the final payments

are processed in July and expenditure will be in line with the budget.

39 090 42 881 109.7% (3 791) This over expenditure of R3.8 million or 9.7 percent is expected to

decrease when all journal entries are captured. The Annual Financial

Statements will present the true picture as not all transactions had been

processed at the time of the Section 71 reporting and other returns were

resubmitted and that resulted to changes in some of the figures that were

published by National Treasury.









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

211

Table 4.8 (o) Trade and other receivables, Trade and other payables and Key ratios - uMlalazi Municipality

Amount % of

total debt /

payables

31 760

36 141

3 821 10.6%

1 455 4.0%

772 2.1%

30 093 83.3%

36 141 100.0%

8 650 23.9%

4 076 11.3%

12 323 34.1%

11 091 30.7%

36 141 100.0%

38 182 100.0%

– -

– -

– -

38 182 100.0%

Norm/

Range

% Actual

25% - 40% 31.9%

2% - 5% 8.2%

- 53.7%

- 0.0%

10% - 20% 16.6%

= or > 0% -0.7% Net operating surplus margin is currently negative 0.7 percent which is below the

acceptable norm of equal to or greater than 0.

This ratio suggest that the municipality is not wholly dependent on grants to fund

some of the operating expenditure.

As at the time of reporting for the Section 71, no capital expenditure was funded

from the Internally generated funds. However, this is expected to change when all

year-end transactions are captured in the Annual Financial Statements.

This ratio clearly indicates that some functions are outsourced to consultants and/or


other risks, such as inability to build capacity and ongoing reliance on consultants.


is owed by Household and a larger portion of this debt is outstanding for more than

90 days. This municipality is a rural municipality and most household owing the

municipality appears to be Indigents.

30 percent of the municipality's debtors are in the Other customer group. It was

noted that this Other customers group was not explained by the municipality and

the municipality should consider explaining this Other customers in their Section 71

reports or reallocate Other debtors to the correct customer group.



impacts negatively on cash flow position.

The third largest group of customers owing the municipality are the Organs of state.

Of the total of R36.1 million owed to the municipality, R8.7 million or 23.9 percent is

owed by the Organs of state. Continuous engagements between the municipality

and the owing departments is ongoing and the municipality expect debt owed by

this customer group to decrease going forward.

The municipality is in the process of handing over all the businesses that are not

willing to pay for services that they are provided by the municipality. Disconnections

have also been introduced to ensure that businesses pay.

Reasons for a increase in debtors as at 30 June 2016 were not provided by the

municipality as debtors increased from R31.8 million in 30 June 2015 to R36.1

million in 30 June 2016 translating to an increase of R4.4 million. It appears that

the municipalities debtors are increasing and debt collection and credit control

policies should be urgently implemented or improved in the coming years.

Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management


212

4.8.5 Analysis per municipality: Mthonjaneni Municipality

Table 4.8 (p) Operating Revenue and Expenditure Performance - Mthonjaneni Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual % of

Budget

Generated

/ Spent

Comments


the municipality in the Adjustments Budget raising the question of credibility of reported

information. Using Section 71 report, the municipality has under generated Property

rates revenue by 46.8 percent. The main reason has been attributed to indigent register

which is not updated and such the municipality could not determine all the households

which should be billed.

23 503 23 503 20 059 85.3 Poor performance in Services charges is attributable to under generation on Service

revenue - electricity. The municipality has indicated that poor performance is as a result

of decrease in electricity consumption.

46 537 46 537 46 489 99.9

27 948 27 948 33 689 120.5 The over generation of Other sources of Revenue has resulted from the municipality

generating more than the budgeted amount under Interest earned external investment

(R3.3 million) against a budget amount of R2.9 million and a further over generation of

revenue under Other own revenue (R3.9 million) against a budget amount of R1.5

million. During mid year review the municipality was advised to review the budget figure

relating to Other own revenue during the Adjustment budget process. The over

generation has not been further substantiated by the municipality.

113 647 113 647 107 557 94.6

27 665 27 665 25 061 90.6 The variance in Employee related cost was as a result of vacant posts that were not filed

during the 2015/16 financial year. The municipality has been affected by

redetermination of municipal boundaries process. Therefore the filling of position has

not been actioned prior to the finalisation of the demarcation process regarding the

upgraded organogram.

3 366 3 366 3 022 89.8 The municipality has indicated that under spending on Remuneration of councillors

has resulted from one of the councillors that resigned during the year.

10 500 10 500 – - The municipality has not reported actual spending as at the end of 2015/16 financial

year for Debt impairment. The municipality has indicated that at the time of Section 71

submission the municipality had not processed the year end journal. The correct figure

will be recorded in the Annual Financial Statements.

5 613 5 613 – - At the stage of submitting the Section 71 reports, the amount for the Depreciation and

asset impairment was not determined. The correct amount is expected to be reflected

on the Annual Financial Statements to be prepared at the end of financial year.

21 051 21 051 18 936 90.0 The expenditure against Bulk purchases is lower than the budgeted amount by 10

percent. The underspending was attributed to the consumers purchasing less electricity

as well as the negative impact of drought that affected the District.

2 905 2 905 1 295 44.6 The municipality has attributed the lower expenditure to the under performance by one

of the service provider relating to Traffic Fines. The municipality has not collected to

offset the expenditure incurred in respect of issuing traffic fines. However during the mid

year review the municipality was advised to review the budget amount on this line item.

33 992 33 992 32 364 95.2 The municipality has not incurred expenditure on mSCOA implementation and

demarcation process. During the mid year budget review the municipality was advised

to review the budget amount relating to Other expenditure. However the item was not

adjusted to indicate actual spending anticipated at the end of 2015/16 financial year. It

therefore appears that the municipality over budgeted for this item.

105 091 105 091 80 678 76.8

8 555 8 555 26 880







Debt impairment



Bulk purchases

Contracted services








R'000

Operating Revenue

Property Rates1

Service Charges2


213

Table 4.8 (q) Capital, Cash and Conditional grant Performance - Mthonjaneni Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated

/ Spent

Comments

20 904 20 904 19 952 95.4

– – – -

– – – -

8 052 8 052 21 201 263.3 The municipality has recognised Internally generated funds that exceeds

the budgeted amount. The municipality has indicated that the over

generating reported has resulted from an error in reporting and further

indicated that the amount will be corrected accordingly in the Annual


28 956 28 956 41 153 142.1

897 897 6 540 729.1 A substantial over spending in Governance and Administration was

related to Executive and council. In Section 71 report the Adjusted Budget

amount does not correspond with the figure reported by the municipality

in B Schedule. The amount for capital expenditure reported in the

Adjusted budget was R7.5 million. The municipality has indicated that only

12.8 percent has not been spent.

9 214 9 214 10 068 109.3

4 104 4 104 2 005 48.8 No explanation for under performance under Economic and

Environmental Services has been provided by the municipality. During In-

Year-Monitoring review, the municipality was advised to ensure that

spending is accelerated to avoid the surrender of funds to National

Treasury.

14 741 14 741 22 540 152.9 The municipality has indicated that the adjusted budget amount has been

incorrectly reported. A virement was processed, but it has been omitted in

the Adjusted budget column. This has resulted in the incorrect variance.

– – – -

28 956 28 956 41 153 142.1 The municipality has indicated that the amount might change during the


42 139 42 139 71 054

37 509 37 509 111 721 Based on the errors identified above the reported Cash and Cash

equivalents does not appear to be reasonable.

(4 630) (4 630) 40 667

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 800 100.0% –

930 930 100.0% –

12 904 12 904 100.0% –









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

214

Table 4.8 (r) Trade and other receivables, Trade and other payables and Key ratios - Mthonjaneni Municipality

Amount % of

total debt /

payables

7 932

7 530

2 477 32.9%

633 8.4%

550 7.3%

3 870 51.4%

7 530 100.0%

2 398 31.8%

1 771 23.5%

2 157 28.6%

1 204 16.0%

7 530 100.0%

1 538 100.0%

– -

– -

– -

1 538 100.0%

Norm/

Range

% Actual

25% - 40% 34.8%

2% - 5% 1.6%

- 56.8%

- 51.5%

10% - 20% 33.8%

= or > 0% 25.0%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


Debtors balance has slight decreased when compared to Debtors balance as at

the end of June 2015.

A significant portion of outstanding debt is under 90 Days category. The

municipality has stated that outstanding debts will be handed over to debt collectors

to assist with debt collection.

Organs of state constitutes the highest percent of debt owed to the municipality. The

municipality will strive towards increasing debt collection efforts in order to yield

positive results.

It further appears that the municipality is struggling to collect debt owed by

Commercial customers. The municipality has not provided reasons for the inability

of commercial consumers to pay their debt.

Households constitutes the majority of outstanding debts. It therefore appears that

the debt collection strategies implemented by the municipality have not yielded any

postive results.

Considering the municipality's lack of reporting on Depreciation and asset

impairment and Debt impairment, the Net operating surplus margin maybe

incorrectly stated.

Own source of revenue as a percentage of total operating revenue is 56.8 percent.

The ratio is an indication that the municipality does not mainly relies on operational

grants to fund certain operations.

The ratio indicates the extent to which Capital expenditure is funded through

Internally generated funds. However based on the incorrect reporting of the actual

on Internally generated funds the ratio calculated may not be a reasonable

reflection of the municipality's Own funded capital expenditure.

The ratio of Capital expenditure to Total expenditure exceeds the norm, which is an

indication that the municipality might be investing more on service delivery.

The ratio of 34.8 percent is within the norm, however it should be noted that based

on the errors identified above the ratio might not be a true reflection of the

municipality's ratio of Remuneration as a percentage of Total operating

expenditure as not all Section 71 amounts have been populated.

The ratio of 1.6 percent is below the norm, indicating that the municipality does not

rely on contractors to provide services. However it should be noted that based on

the underspending mentioned above the ratio might not be a true reflection.

215

4.8.6 Analysis per municipality: Nkandla Municipality

Table 4.8 (s) Operating Revenue and Expenditure Performance - Nkandla Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

8 203 10 480 12 513 119.4 New properties were added during the year belonging to Department of Public Works

i.e. Clinics and Schools as per Section 78 of the Municipal Property Rates Act, thereby

resulting in over generation of revenue by 19.4 percent. Furthermore, the municipality

has stated that the over generation on Property Rates is as a result of Revenue

Enhancement Strategy that the municipality implemented in 2015/16.

14 194 14 078 9 769 69.4 The under generation on Service charges is due to that municipality anticipated to

generated revenue for Service charges - electricity for the new FET College and the

Shopping centre as these entities were expected to start operating during the 2015/16

financial year. As at the year end these entities were not operating as there was still work

in progress.

86 720 86 516 48 097 55.6 Incorrect reporting by the municipality lead to this variance in Transfers recognised-


captured and the Annual Financial Statements will have the correct information. The

municipality resubmitted some of their Month 12 returns to correct the errors that were

identified in the Section 71 quarterly verifications.

14 699 13 758 14 906 108.3 The municipality stated that the over generation in Other sources of revenue was as a

result of more than anticipated revenue being generated on Tender fees, VAT refunds,

Sale of land and Hall hire.

123 815 124 832 85 287 68.3

37 457 36 068 33 915 94.0

7 623 7 923 9 086 114.7 The actual expenditure for the Remuneration of councillors is inclusive of subsistence

and travelling which is misallocated and will be corrected during the finalisation of


– – – - The municipality indicated that Debt impairment is only calculated at year-end,

therefore, at the time of the Section 71 reporting, this amount was not yet determined.

Despite the municipality being urged to report the Depreciation and asset impairment

on a monthly basis, they have failed to implement advise from Provincial Treasury. It

was also noted that the municipality did not budget for this item in the original budget

and in the adjustments budget but figures for the prior years clearly indicate that the

municipality is always incurring expenditure on this item as the audited 2014/15 Annual

Financial Statements shows actuals of R2.2 million.

2 585 2 585 – - The Depreciation and asset impairment is only calculated at year-end by the

municipality and the amount was not yet calculated by the time of the Section 71

reporting. Despite the municipality being urged throughout the financial year in the IYM

analyses, Mid Year Budget and Performance Assessments, as well as the Adjustments

Budget process, to report the Depreciation and asset impairment on a monthly basis,

they have failed to implement advise from Provincial Treasury.

16 000 12 000 9 432 78.6 The municipality anticipated to incur expenditure for Bulk purchase for electricity for the

new FET College and the Shopping centre as these entities were expected to start

operating during the 2015/16 financial year. As at the year end these entities were not

operating as there was still work in progress.

7 504 11 305 5 345 47.3 The variance is due to misallocations as most expenditure which is Contracted services

like security services, professional fees, and cleaning services and Information

technology services have been misallocated to Other expenditure. This will be

corrected during the finalisation of Annual Financial Statements.

51 735 54 749 98 332 179.6 Other expenditure was budgeted exclusive of Repairs and maintenance while the actual

Other expenditure is inclusive of Repairs and maintenance e.g. electricity infrastructure.

The Other expenditure is also inclusive of misallocated Contracted services as

explained above. The municipality indicated that this will be corrected once all the final

journal entries have been captured.

122 904 124 630 156 111 125.3

911 202 (70 824)







Debt impairment



Bulk purchases

Contracted services








R'000

Operating Revenue

Property Rates1

Service Charges2


216

Table 4.8 (t) Capital, Cash and Conditional grant Performance - Nkandla Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

57 188 57 188 62 067 108.5 The municipality mentioned that the capital transfers revenue recognised

is 100 percent and reason for the variance is that most votes contain

misallocations due to the new system that the municipality is using and

officials are still not familiar on how to properly capture information on the

financial system. A service provider has been appointed to assist in the

preparation of Annual Financial Statements and journals to correct those

misallocations.

– – – -

– – – -

3 020 400 1 105 276.3 The capital revenue from the Internally generated funds comprises of

revenue from the sale of land that the municipality has disposed, which

was greater than what was initially budgeted for and this was used fund


60 208 57 588 63 172 109.7

3 020 400 – - The municipality had budgeted R400 000 in the Governance and

Administration to replace old office furniture for the staff. A resolution was

taken by management committee during the year to acquire the office

furniture in the 2016/17 financial year.

– – 907 - The municipality was issued a licence to operate the traffic unit during the

2015/16 financial year and before the licence was issued, the department

of transport requested the municipality to make some changes in their

existing building and add a new building. This has resulted in expenditure

which was not budgeted for.

57 188 57 188 62 265 108.9 The municipality indicated that some of the capital projects had variations

which were not budgeted for and had to be financed through equitable

share or Internally generated funds.

– – – -

– – – -

60 208 57 588 63 172 109.7

3 140 3 140 9 051

4 051 7 177 (5 056)

911 4 037 (14 107)

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 866 103.7% (66) Over expenditure of 3.7 percent was noted for the Financial Management

Grant. This was as a result of misallocations and the municipality

indicated that correct figures will be reflected in the Annual Financial

Statements.

930 560 60.2% 370 According to the municipality, expenditure on the Municipal System

Improvement Grant at the end of June 2016 is 100 percent. Most of the

votes contain misallocations and a service provider has been appointed

to assist in the preparation of the Annual Financial Statements and

journals to correct those misallocations.

22 188 24 308 109.6% (2 120) According to the municipality, most of the votes contain misallocations

and a service provider has been appointed to assist in the preparation of

the Annual Financial Statements and journals to correct those

misallocations.

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Services

Other










217

Table 4.8 (u) Trade and other receivables, Trade and other payables and Key ratios - Nkandla Municipality

Amount % of

total debt /

payables

22 084

18 922

784 4.1%

722 3.8%

720 3.8%

16 696 88.2%

18 922 100.0%

150 0.8%

3 055 16.1%

5 887 31.1%

9 829 51.9%

18 922 100.0%

2 863 24.9%

3 648 31.8%

1 870 16.3%

3 103 27.0%

11 484 100.0%

Norm/

Range

% Actual

25% - 40% 27.5%

2% - 5% 3.4%

- 43.6%

- 1.7%

10% - 20% 28.8%

= or > 0% -83.0%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


Debtors at year-end have decreased as a result of write-offs in the 2015/16

financial year and some businesses settling their debts.



impacts negatively on cash flow.

The municipality appears to be improving regarding the collection of debt from the

Organs of state as only 0.8 percent is owed by this customer group.

The municipality is in the process of handing over all the businesses that are not

paying their debts. Disconnections have also been introduced to ensure that

businesses pay.


is by Households and a larger portion (R5.6 million or 94.1 percent) of this debt is

outstanding for more than 90 days. The municipality is a rural municipality and

most household owing the municipality appears to be Indigents and should have

been properly classified in the billing system of the municipality.

51.9 percent of the municipality's debtors are in the Other customers group. The

municipality did not provide reason for the Other customers group.

The municipality indicated that suppliers send invoices to the respective units within

the municipality and those units keep invoices with them for long and when they

reach the payment section most of them are already 30 days old. A management

committee took a resolution to have one point where invoices are received. These

invoices are then distributed to respective units and the Office of the CFO does the

follow up to ensure that invoices do not take long in those units.

As at the end of the financial year, the municipality reported creditors outstanding

for a period greater than 30 days. The municipality is in contravention with Section

65(2)(e) of the MFMA by having creditors more than 30 days as they attract

interest charges. The municipality had a cash flow challenge, hence the

outstanding creditors of more than 30 days.

Net operating surplus margin is currently negative 83 percent which is below the

acceptable norm of equal to or greater than 0.

This ratio indicates that the municipality is not wholly dependent on grants.

The municipality's capital expenditure was mainly funded from National and

Provincial government grants and only 1.7 percent was funded from the Internally

generated funds.

The municipality's ratio of Capital expenditure to Total expenditure suggest that the

municipality is committed to improving their infrastructure in order to improve

service delivery. Another reason given by the municipality for this huge capital

expenditure was that the department of transport requested the municipality to

extend its building and as a result further expenditure was incurred by the

municipality in order to obtain the licence.

218

4.8.7 Analysis per municipality: uThungulu District Municipality

Table 4.8 (v) Operating Revenue and Expenditure Performance - uThungulu District Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

– – – -

65 748 65 748 64 527 98.1

490 849 477 364 470 626 98.6

62 804 158 166 113 188 71.6 The municipality has indicated that the variance in Other sources of Revenue is due to the

inclusion of accumulated surplus in their budget. The municipality has been advised during the

budget assessment process not to include Accumulated surplus under Other revenue as this

income has already been accounted for in previous years. This has distorted the income to be

generated for the period.

619 400 701 278 648 341 92.5

175 275 158 890 147 899 93.1

11 411 11 411 10 095 88.5 Included in the Adjustments Budget figure was the amount relating to councillors allowances in

respect of council meetings envisaged to be held in the 2015/16 financial year. The under

spending on Remuneration of councillors could reflect over budgeting in respect of council

allowances. The municipality has indicated that the number of council meetings envisaged to be

held in the 2015/16 financial year was over estimated. This has resulted in under spending on this

item.

3 637 3 637 3 637 100.0

52 920 52 920 52 920 100.0

40 533 43 841 45 682 104.2 The municipality has indicated that the over spending reported resulted from an error in Section 71

reporting. The municipality has undertaken to ensure that the figure will be accurately reported in

the Annual Financial Statements.

109 793 110 708 99 734 90.1 The municipality has indicated that the variance in Contracted services is due to accruals that were

not captured in the Section 71 reporting. The municipality has undertaken to ensure that the figure

will be accurately reported in the Annual Financial Statements.

250 490 333 738 327 736 98.2

644 059 715 145 687 703 96.2

(24 658) (13 867) (39 362)







Debt impairment



Bulk purchases

Contracted services








R'000

Operating Revenue

Property Rates1

Service Charges2


219

Table 4.8 (w) Capital, Cash and Conditional grant Performance - uThungulu District Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

490 275 456 837 303 380 66.4 This under performance on Transfers recognised - capital is an indication

that the municipality did not fully spend on conditional grants. The

municipality has indicated that an amount of R35 million has resulted

from unrecorded accruals that will be adjusted in the Annual Financial

Statements, the variance reported is subject to change.

– 2 500 500 20.0 The municipality has budgeted an amount of R2.5 million to fund capital

expenditure. The under generating on Public contribution and donations

was due to not receiving the donations from one of the company which

undertook to donate the funds in 2015/16 financial year.

– 2 775 1 552 55.9 The municipality has indicated the variance resulted from outstanding

payments that were not processed in the Section 71 reporting. The

adjustment will be processed in the 2015/16 Annual Financial Statements.

21 970 27 486 20 592 74.9 The variance in Internally generated funds has resulted from pending

invoices from suppliers that were not processed in the Section 71

reporting. The adjustment will be processed in the 2015/16 Annual


512 245 489 598 326 024 66.6

3 860 6 970 1 755 25.2 The municipality has indicated that under spending in finance services is

due to delays in implementation of mSCOA project and the appointment

of the service provider to conduct a detailed analysis of the municipality's

IT Infrastructure. Under spending in Executive and council has resulted

from accrual that have not been processed in the Section 71 reporting

and the municipality has undertaken to ensure that the figure will be

accurately reported in the Annual Financial Statements.

3 965 13 126 1 052 8.0 The municipality has further stated that low spending under Community

and Public Safety has resulted from delays in procurement processes

which have been recently finalised.

170 170 168 98.7

504 250 469 333 323 049 68.8 The municipality has attributed under spending on Trading services due

to delays in Supply chain management procurement process for the

purchasing of related capital assets for Waste water management. This is

despite the receipt of additional funding in February 2016 relating to

integrated waste water management.

– – – -

512 245 489 598 326 024 66.6

436 438 436 438 78 015

413 553 345 808 457 543 Cash/cash equivalent at the year end which is lower than the budgeted

amount may suggest that the municipality was conservative in budgeting

for Cash/cash equivalents at the year end. Part of cash could be attributed

to collection from long term debtors, as reflected by the decrease in

debtors balance when compared to 2014/15 balance. In determining the

cash position of the municipality it should be noted that the closing cash

and cash equivalents at the end of the year includes the municipality's

commitments i.e. unspent conditional grants which should be cash

backed.

(22 885) (90 630) 379 527

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 250 1 250 100.0% –

940 940 100.0% –

175 330 175 330 100.0% –









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

220

Table 4.8 (x) Trade and other receivables, Trade and other payables and Key ratios - uThungulu District Municipality

Amount % of

total debt /

payables

81 990

59 799

5 983 10.0%

3 090 5.2%

1 472 2.5%

49 253 82.4%

59 799 100.0%

4 602 7.7%

3 176 5.3%

52 021 87.0%

– -

59 799 100.0%

26 054 55.0%

10 016 21.1%

285 0.6%

11 048 23.3%

47 403 100.0%

Norm/

Range

% Actual

25% - 40% 23.0%

2% - 5% 14.5%

- 27.4%

- 6.3%

10% - 20% 32.2%

= or > 0% -6.1% As at the end of 2015/16 financial year, the municipality has reported an operating

deficit. The Net operating surplus margin of negative 6.1 percent is below the

norm.

This ratio indicates the level of funding operating activities through Internally

generated funds. Although the municipality to a certain extent can fund its

operating activities through Own source of revenue, the municipality appears to be

grant dependent.

Own funded capital expenditure ratio indicates a portion of Own fund utilised to fund

capital projects. uThungulu District Municipality has utilised 6.3 percent to finance

capital projects. Therefore municipality's capital expenditure is mainly funded

through National and Provincial grants at 93.7 percent.

The Capital expenditure to Total expenditure is above the norm, which indicates an

increase in spending on Infrastructure. This may suggest that the municipality has

accelerated service delivery.

The municipality has reported a Remuneration as a percentage of Total

expenditure of 23 percent which is below the norm.

Contracted services as a percentage of Total operating expenditure is at 14.5

percent. The ratio is significantly above the norm. This could be an indication that

the municipality utilises contractors at a higher level than is accepted, suggesting

that the municipality is under capacitated to a certain extent or services are being

outsourced.

The municipality has attributed the outstanding creditors more than 30 days to

delays by suppliers in submitting all required documents to timely process the

payments.

As at the end of 2015/16 financial year, the municipality reported an amount of

R11 million outstanding for a period of more than 90 days. The municipality is in

contravention of Section 65(2)(e) of the MFMA. The municipality has indicated that

the delays are due to late submission of invoices by suppliers and queries that are

being attended to prior to settlement of outstanding amount. Furthermore, the

municipality has indicated that the outstanding amount resulted from pending

issues mainly with the Department of Water Affairs. The municipality has indicated

that it has been in communication with the Department of Water affairs outlining its

dissatisfaction with time span it has taken the department to resolve the issue.

However the issues remains unresolved.

A significant portion of Outstanding debt is reported under Household category.

The municipality has indicated that Household category is predominantly indigent

customers. Alternative method of reducing debt under this category will be

implemented in order to reduce further accumulation of debt. Prepaid meters in

water provision will be implemented and the recovery methods of outstanding

debts prior to implementation of prepaid meters will be considered.

The municipality has indicated that the debt in excess of 90 Days is an

accumulation of uncollected debt from prior years. The municipality has planned to

install the prepaid system for water services as a measure to curb the problem of

increasing debt. A significant portion of outstanding debt is under the Household

category where this category is dominated by indigent consumers. The

municipality has stated that instituting legal actions against these customers would

not yield any positive results.

The decrease in Debtors as at 30 June 2016 when compared to previous financial

year suggests that the municipality managed to collect debts which were

outstanding. The reduction in debt compliments the increase in Cash/cash

equivalents at year end.

Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management

Capital expenditure to Total expenditure

221

4.9 iLembe District

iLembe District comprises of five municipalities, namely: Mandeni, KwaDukuza, Ndwedwe and

Maphumulo Local Municipalities and iLembe District Municipality. iLembe District Municipality

also has ownership of a municipal entity, namely, Enterprise iLembe which focuses on facilitating

local economic development, in response to the high unemployment rate and the resultant high levels

of poverty in the district.

The iLembe District Municipal area is amongst the many district areas within the province that are

still severely affected by drought conditions and had to be declared a disaster area. All municipalities

within the district are severely affected. The severe drought conditions particularly have affected the

Agricultural sector and reportedly resulted in huge stock losses and crop losses for provincial farmers.

The iLembe District Municipal area lies on the east coast of KwaZulu-Natal (KZN), between the

eThekwini Metro and the Tugela River mouth and is traversed by the N2. Covering an area of 3 269

km2, and a population size of 606 809 as per the 2011 census, the district is located between Africa’s

two great ports, that is, Durban and Richards bay and is approximately 10km away from King Shaka

International Airport. Despite its strategic location, iLembe District faces a number of challenges,

such as high poverty in the rural inland areas and a high level of unemployment.

The iLembe District Municipality is responsible for the provision of Water and Sanitation services for

the entire district. Mandeni and KwaDukuza Municipalities render Electricity and Refuse removal

services while Ndwedwe and Maphumulo Municipalities do not render any trading services.

Provincial Treasury could not undertake an analysis of the iLembe District Municipality figures as at

30 June 2016 as submitted in terms of Section 71 of the MFMA. According to the municipality, due

to delays experienced in the finalisation of the year end Trial Balance, the municipality could not

provide the reasons for variance for the performance against budget for 2015/16 as requested by

Provincial Treasury.

As at the end of the 2015/16 financial year, Mandeni, Ndwedwe, KwaDukuza and iLembe District

Municipalities had permanent MMs. The position of the MM in iLembe District Municipality was

filled permanently on 1 June 2015. The MM at Maphumulo Municipality (deployed by CoGTA) has

been in an acting position since October 2014. Prior to this date, the post of the MM had been filled in

an acting capacity by the CFO.

All the CFO positions were filled in the district as at the end of the 2015/16 financial year, with the

exception of Maphumulo Municipality, whose CFO was suspended in November 2014. For the

remainder of the year and in 2015/16, acting CFOs were appointed on a rotational basis at

Maphumulo Municipality.

All of the municipalities in the iLembe District had obtained financially unqualified audit opinions

with other matters for the 2014/15 financial year, with the exception of Mandeni Municipality whose

opinion was financially unqualified (without matters).

4.9.1 Overview of iLembe District Performance

Mandeni 202 807 203 307 242 128 119.1

KwaDukuza 1 263 206 1 273 091 1 226 602 96.3

Ndwedwe 125 402 127 172 131 495 103.4

Maphumulo 100 796 108 217 111 546 103.1

iLembe DM 593 167 664 304 563 664 84.9

Total 2 285 379 2 376 091 2 275 435 95.8


% Generated

Table 4.9.1(a) Operating Revenue - 2015/16


222

Mandeni 202 738 200 388 212 799 106.2

KwaDukuza 1 263 177 1 273 059 1 171 632 92.0

Ndwedwe 115 992 111 951 97 604 87.2

Maphumulo 99 403 93 546 85 030 90.9

iLembe DM 590 998 663 399 578 614 87.2

Total 2 272 309 2 342 343 2 145 680 91.6


% Spent

Table 4.9.1(b) Operating Expenditure - 2015/16


Mandeni 82 112 64 719 67 302 104.0

KwaDukuza 375 344 359 370 276 704 77.0

Ndwedwe 61 927 64 667 51 933 80.3

Maphumulo 39 330 32 365 28 843 89.1

iLembe DM 424 487 452 944 475 125 104.9

Total 983 200 974 066 899 907 92.4



Table 4.9.1(c) Capital Expenditure - 2015/16


Mandeni (1 172) (1.0) 4 162 3.5 3 778 3.2 112 769 94.3 119 538

KwaDukuza 32 671 21.5 10 054 6.6 6 644 4.4 102 634 67.5 152 003

Ndwedwe 380 4.7 317 4.0 312 3.9 7 010 87.4 8 020

Maphumulo 565 2.7 525 2.5 510 2.4 19 369 92.4 20 969

iLembe DM 13 844 6.5 9 047 4.3 10 820 5.1 178 716 84.1 212 426

Total 46 288 9.0 24 105 4.7 22 064 4.3 420 499 82.0 512 956


Total

Table 4.9.1(d) Debtors Age Analysis (Total)


Table 4.9.1(e) Debtors by Customer Group (Total)


Mandeni 1 847 1.5 45 867 38.4 71 505 59.8 319 0.3 119 538

KwaDukuza 6 456 4.2 28 893 19.0 108 607 71.5 8 046 5.3 152 003

Ndwedwe 1 997 24.9 4 787 59.7 1 085 13.5 151 1.9 8 020

Maphumulo 5 687 27.1 10 694 51.0 168 0.8 4 419 21.1 20 969

iLembe DM 11 751 5.5 6 147 2.9 174 152 82.0 20 376 9.6 212 426

Total 27 738 5.4 96 390 18.8 355 517 69.3 33 311 6.5 512 956





Mandeni 175 100.0 – - – - – - 175

Kw aDukuza 205 480 75.6 65 830 24.2 255 0.1 192 0.1 271 757

Ndw edw e 33 100.0 – - – - – - 33

Maphumulo 11 3.1 85 24.7 (31) (9.0) 281 81.2 346

iLembe DM 51 228 75.9 12 305 18.2 2 354 3.5 1 587 2.4 67 474

Total 256 927 75.6 78 221 23.0 2 578 0.8 2 059 0.6 339 785


Table 4.9.1(f) Creditors Age Analysis (Total)


Total

223

4.9.2 Analysis per municipality: Mandeni Municipality

Table 4.9 (g) Operating Revenue and Expenditure Performance - Mandeni Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

26 770 26 770 37 174 138.9 The municipality attributed the over-generation of revenue to the increase in the interest

charged on debtors due to non-payment of their accounts. It should however, be noted

that the Interest earned on long-outstanding debtors should have been recognised

against Interest earned-outstanding debtors under Other sources of revenue and not

against Property rates, penalties and collection charges. Previously, the municipality

had incorrectly classified Interest earned-outstanding debtors as Property rates,

penalties and collection charges. Thus, it is unclear whether the municipality has once

again incorrectly classified the Interest on long-outstanding debtors as Property,

penalties and collection charges.

21 656 21 656 19 545 90.3 The main contributor to the revenue generated from Service charges being lower than

the budget is due to the municipality overstating their 2015/16 budget for electricity. The

municipality has since rectified this in their 2016/17 budget by incorporating the impact

of the municipality converting to prepaid meter system.

143 970 143 970 167 871 116.6 The municipality indicated that their Unaudited actual amount includes an amount of

R39.8 million relating to capital grants. Therefore, excluding the R39.8 million relating to

capital grants results in an Unaudited actual amount of R128.1 million, which is 89

percent of the budgeted amount of R143.9 million. The municipality attributed the low

performance to the under expenditure noted against Massification grant as well as the

Library grant.

10 412 10 912 17 538 160.7 According to the municipality, the over-generation of revenue against Other sources of

revenue as compared to budget is due to donations that were received by the

municipality as well as VAT refunds that were not included in the budget. It should be

noted that the municipality should not recognise cash inflows related to VAT refunds in

the Operating performance statement but rather in the Cash flow statement.

202 807 203 307 242 128 119.1

60 614 60 614 63 420 104.6

11 292 11 292 10 159 90.0 According to the municipality, the under-expenditure noted for Remuneration of

councillors was due to the municipality receiving instructions from COGTA to withhold

the remuneration of certain councillors for 2 months. The remuneration for these

councillors was subsequently recognised as an expense and paid after the submission

of the Section 71 report.

3 218 3 218 – - The municipality indicated that their Debt impairment provision are calculated and

recognised at year end, thus, no actual performance amount was available at the time

of the Section 71 reporting. The municipality did however, indicate that they are trying to

improve reporting on this expenditure item by ensuring that Debt impairment is

recognised on a monthly basis.

19 000 19 000 21 838 114.9 As per the municipality, the over-expenditure noted against this expenditure item is due

to the municipality understating their budget for Depreciation and asset impairment

based on the assumption that most of the municipality's assets were still Work-in-

progress.12 556 12 056 8 972 74.4 The municipality indicated that the low actual performance reported for Bulk purchases

against the budget is as a result of the municipality overstating the budget for this

expenditure item. According to the municipality, the budget for Bulk purchases was

reviewed downwards for the 2016/17 budget and amended accordingly.

15 345 18 495 25 263 136.6 According to the municipality, the over-expenditure noted for Contracted services

resulted from the delays in providing refuse removals services internally. The

municipality had initially budgeted to outsource the refuse removal service for only 7

months and then provide the service internally for the remainder of the 2015/16

financial year. However, the municipality ended up outsourcing the refuse removal

service for the entire 2015/16 financial year.

80 712 75 712 83 147 109.8

202 738 200 388 212 799 106.2

69 2 919 29 329 Considering that Transfers recognised is overstated, as noted above, and that the

municipality has not accounted for Debt impairment expense, amongst others, the

operating surplus of R29.3 million may not be a true reflection of the municipality's

actual performance as at the end of the 2015/16 financial year.







Debt impairment



Bulk purchases

Contracted services








R'000

Operating Revenue

Property Rates1

Service Charges2


224

Table 4.9 (h) Capital, Cash and Conditional grant Performance - Mandeni Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

43 886 34 263 49 746 145.2 As per the 2015/16 Adjustment budget (B-Schedule), Transfers recognised- capital

amount to R43.9 million. Therefore, Unaudited actual expenditure as a percentage of

the correct budgeted amount is 113 percent.The municipality indicated that the

reason for the high expenditure is due to the municipality incorrectly recognising roll-

over expenditure of R5.8 million for Massification grant from COGTA against

Transfers recognised-capital instead of Internally generated funds.

– – 214 According to the municipality, a donation was received from the Department of

Economic Development for the development of a park within Mandeni. The

expenditure for this donation was not budgeted for in the 2015/16 budget.

– – – -

38 226 30 456 17 342 56.9 It should be noted that the correct adjusted budget amount as per the B-Schedule is

R20.8 million, thus expenditure as a percentage of the correct budgeted amount is

48.8 percent. According to the municipality, a major portion of the Internally

generated funds budget was allocated for the refurbishment of municipal buildings.

The implementation of the refurbishment project was delayed due to unforeseen

circumstances and will be rolled-over to the next financial year. Furthermore, the

municipality incorrectly recognised expenditure on the Massification grant roll-over of

R5.8 million against Transfer recognised-capital instead of Internally generated funds

as indicated above.82 112 64 719 67 302 104.0

1 300 1 300 3 771 290.1 According to the municipality, overspending against this expenditure function is due to

the maintenance of the municipality's ICT infrastructure which was damaged by

unforeseen storm conditions. The municipality should have adjusted their 2015/16

budget accordingly to reflect the expenditure that was incurred.

7 526 2 383 1 766 74.1 Under spending against Community and Public Safety is as a result of the

municipality not incurring any expenditure against the budget allocated for cemetery

development. A feasibility study conducted by the municipality indicated that the

municipality will need to identify another land for the cemetery development as the

land that was initially identified is not suitable.

70 686 57 536 53 986 93.8 According to the municipality, under spending against Economic and Environmental

Services is due to delays in the refurbishment of municipal building as a result of

unforeseen circumstances (strikes from labourers).

2 600 3 500 7 779 222.3 Due to the conversion by the municipality to prepaid meter electricity system, prepaid

meters had to be installed in all properties for successful implementation of the

project. This resulted in the high expenditure noted against Trading services, which

was not budgeted for in the adjustment budget.

– – – -

82 112 64 719 67 302 104.0

59 798 29 057 29 057

28 486 505 927 116 268 Cash and cash equivalents comprising of cash and short term investments

amounted to R33 million, as at 30 June 2016, as per the municipalities bank

reconciliation statements and investment register. However, the municipality's Section

71 report reflects a closing balance of R116.3 million which is significantly overstated

in relation to the R33 million reflected as per the supporting documents submitted by

the municipality. It is noted that the R505.9 million Closing cash and cash equivalents

reflected in the adjusted budget column is inconsistent with the R28.4 million reflected

in the municipality's 2015/16 Adjustment budget (B-Schedule).When considering the

closing Cash and cash equivalents balance, it must be taken into account that a

portion of the funds sitting under cash and investments balance represents the

municipality's financial commitments and as such needs to be cash-backed, for

example; Unspent conditional grants.

(31 312) 476 870 87 211

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 800 100.0% –

940 940 100.0% –

34 263 34 263 100.0% (0)









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

225

Table 4.9 (i) Trade and other receivables, Trade and other payables and Key ratios - Mandeni Municipality

Amount % of

total debt /

payables

87 669

119 538

(1 172) -

4 162 3.5%

3 778 3.2%

112 769 94.3%

119 538 100.0%

1 847 1.5%

45 867 38.4%

71 505 59.8%

319 0.3%

119 538 100.0%

175 100.0%

– -

– -

– -

175 100.0%

Norm/

Range % Actual

25% - 40% 34.6%

2% - 5% 11.9%

- 30.7%

- 25.8%

10% - 20% 24.0%

= or > 0% 12.1%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


Outstanding debtors have increased from R87.7 million in the 2014/15 financial year to

R119.5 million in 2015/16, an increase of 36.3 percept.

Debtors outstanding for more than 90 days constitute a significant portion of the

municipality's debtors balance, the majority of non-paying debtors being Households

debtors (59.8 percept) as indicated below. The majority of Household debtors whose

accounts are long outstanding are debtors from the Sundumbili area whose electricity is

supplied by Eskom. The municipality is, therefore, unable to disconnect their electricity

in the event that their account is overdue, in an attempt to recover outstanding debt.

The municipality is however, currently in negotiations with Eskom to implement

measures to enable the municipality to recover the outstanding debt from these

Household debtors.

Considering that the municipality has overstated their Transfers recognised-operational

in the Operating performance statement and Debt impairment expense as well as

Remuneration for councillors has been understated, the municipality's Net operating

surplus margin maybe overstated.

The high percentage for Contracted services maybe distorted due to the municipality

not recognising the full Debt impairment expense in the Operating statement, thus

understating their Total operating expenditure.

226

4.9.3 Analysis per municipality: KwaDukuza Municipality

Table 4.9 (j) Operating Revenue and Expenditure Performance - KwaDukuza Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of Budget

Generated /

Spent

Comments

317 977 310 921 323 927 104.2

708 412 707 154 704 584 99.6

119 022 123 283 122 156 99.1

117 795 131 733 75 935 57.6 As per the Section 71 report, the under generation against Other sources of revenue

is mainly due to the poor performance against Fines (R3.4 million generated or 10.9

percent against a budget of R31.3 million) and Other revenue (R26.9 million

generated or 45 percent against the budget of R59.6 million).

Similar to prior years, the municipality confirmed that the under generation against

Fines was due to the municipality recognising revenue on a cash basis. Subsequent

to the publishing of the Section 71 figures, the municipality calculated the accrued

revenue to be R17.8 million or 56.8 percent against the adjusted budget. According

to the municipality, the under generation is mainly due to an overoptimistic budget

which was based on prior period upward trends which did not continue in the


The municipality attributed the under generation against Other revenue to 2 main

reasons. Information related to the Developers contribution demand fund was not

available at the time of reporting and revenue amounting to R15.9 million has been

subsequently recognised. Furthermore, no revenue was recognised in relation to

the Housing Accreditation fund amounting to R15.9 million due to the municipality

not incurring expenditure (Revenue from this revenue source is on a claim-back

basis). The municipality conceded that the budget was overstated as the relevant

department was not in a position to implement the project.

1 263 206 1 273 091 1 226 602 96.3

306 084 294 494 281 867 95.7

20 189 20 129 18 544 92.1

11 372 35 372 4 372 12.4 The municipality indicated that the low expenditure against Debt impairment was due

to the calculation not being finalised at the time of Section 71 reporting. The

municipality confirmed that the final calculated amount will be reflected in the AFS.

Notwithstanding this, the municipality anticipates the final reported figure to be

significantly less than budget. This is due to the municipality finalising the contribution

related to Fines which amounted to R11.4 million which is significantly less than the

budget of R24 million. As discussed under Operating revenue, the municipality did

not generate all anticipated revenue from Fines, which resulted in the contribution

being less than expected.

71 082 73 912 73 912 100.0 The municipality indicated that the reported amount for Depreciation and asset

impairment of R73.9 million was an estimate and has since been updated. The

Depreciation amount for the 2015/16 financial year amounts to R71 million and is

within budgeted expectations.

496 944 490 000 488 651 99.7

31 118 30 422 30 281 99.5

326 389 328 730 274 005 83.4 The main factors to the low spending against “Other expenditure items” were due to

low expenditure against Transfers and grants (R33.3 million or 72.3 percent against

a budget of R46.1 million) and Other expenditure (R160.1 million or 76.7 percent

against a budget of R208.8 million).

The municipality indicated that a journal relating to Transfer and grants in respect of

Property Rates amounting to R12.4 million had yet to be taken into account and will

be incorporated in the 2015/16 AFS , thus, expenditure against Transfers and

Grants would be in line with the approved budget. The municipality further confirmed

that the main contributor to under spending against Other expenditure was due to the

fact that the Contribution to Capital redemption (Budget: R13.9 million) and

contributions to Other provisions (Budget R17.8 million) were yet to be finalised and

will only be available during the finalisation of the 2015/16 AFS.

1 263 177 1 273 059 1 171 632 92.0

29 32 54 971 The reported operating surplus is questionable considering that the various

expenditure items are yet to be finalised such as Debt impairment, Depreciation and

Provisions under the Other Expenditure line item.Source: NT lgdatabase






R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



227

Table 4.9 (k) Capital, Cash and Conditional grant Performance - KwaDukuza Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

83 317 75 755 75 409 99.5

14 500 2 500 – - Public contributions and donations relate to funding obtained from

Tongaat Hullett-Zimbali (Pty) Ltd. in 2014/15 for the development of social

facilities within KwaDukuza Municipality. Spending had yet to commence

against this project due to the project still being in implementation stage

with expenditure expected to be incurred only in 2016/17 financial year,

thus no revenue was recognised against this funding source in 2015/16.

17 295 18 368 16 316 88.8

260 232 262 747 184 978 70.4 As per the Section 52(d) report, the municipality indicated that major

reasons for the municipality not meeting their service delivery targets

included contractors not meeting their contractual obligations and

needed to be replaced. Furthermore, capital projects such as Website

development, Street naming, purchases of a tipper truck and the

purchase of land for a community safety centre were not fully

implemented during the 2015/16 financial year, and have been rolled

over into the 2016/17 financial year.

Furthermore, projects such as the upgrading of the cemetery and

crematorium were incorrectly budgeted in full for the 2015/16 financial

year, while these projects have a multi-year horizon. This resulted in an

under expenditure of R11 million as a result of the 2015/16 budget being

overstated.

375 344 359 370 276 704 77.0

32 335 22 685 18 310 80.7

43 267 33 602 20 600 61.3

185 402 194 881 167 992 86.2

114 340 108 202 69 802 64.5

– – – -

375 344 359 370 276 704 77.0 The municipality conceded that the reported capital expenditure of R276.7

million did not take into account accruals which are closed off on the 15th

of each month. Including accruals, capital expenditure amounted to R311

million or 87 percent of the capital budget. As noted above, the lower than

anticipated expenditure is mainly attributable to planned projects not

commencing in 2015/16 and being carried forward into the 2016/17

financial year. Furthermore, projects budgeted in full in the 2015/16

financial year were in fact multi-year projects.

420 164 540 391 540 391

280 890 363 286 436 963 The municipality confirmed that the reconciled 2015/16 cash and cash

equivalents closing balance amounted to R452.8 million as per the

2015/16 draft AFS and is sufficient to cash back all unspent allocations.

(139 274) (177 105) (103 428)

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 700 1 700 100.0% –

930 930 100.0% –

56 984 56 985 100.0% (1)

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Services

Other










228

Table 4.9 (l) Trade and other receivables, Trade and other payables and Key ratios - KwaDukuza Municipality

Amount % of

total debt /

payables

243 483

152 003

32 671 21.5%

10 054 6.6%

6 644 4.4%

102 634 67.5%

152 003 100.0%

6 456 4.2%

28 893 19.0%

108 607 71.5%

8 046 5.3%

152 003 100.0%

205 480 75.6%

65 830 24.2%

255 0.1%

192 0.1%

271 757 100.0%

Norm/

Range

% Actual

25% - 40% 25.6%

2% - 5% 2.6%

- 90.0%

- 66.9%

10% - 20% 19.1%

= or > 0% 4.5%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


The significant decrease in debtors in 2015/16 noted from the 2014/15 financial

year is due to the municipality still incorrectly reporting for debtors on a net basis in

the Section 71 report, while the 2014/15 debtors balance reflects gross debtors as

per the audited AFS. The following analysis is therefore based on the net debtors

reported.

The most significant portion of the municipality's debtors have been outstanding for

a period of greater than 90 days. In order to improve debt collection in the 2015/16

financial year, the municipality indicated that debt outstanding for a period longer

than 120 days and exceeding R100 000 have been taken to the high court.

However, the municipality indicate that the process is time consuming and dates of

the high court take up to 18 months to be obtained.

In order to reduce the debtors balance, the municipality applies any payment

made by a debtor to the oldest debt first and effects electricity cut-off’s for accounts

in excess of 60 days to encourage payment. Whilst the debtors incentive scheme

proved successful in the prior years, the municipality is now enforcing collection

procedures to encourage timely debtor payment. The municipality further

indicated that they have difficulty in collecting debt related to liquidation and estate

debtors which compound the over than 120 days category.

.

Similar to prior periods, the most significant portion of debt outstanding falls within

the Households category. This category of debtors has historically provided the

greatest challenge in collecting municipal debt.

As at the end of the financial year, the municipality reported Creditors of R66.3

million outstanding for a period greater than 30 days which is in contravention with

MFMA Section 65(2). The municipality indicated that these creditors relate to

suppliers where queries such as differences in prices or quantity have been noted.

Furthermore, the municipality indicated that delays in payment have also occurred

due to internal challenges between the user department and finance. The

municipality indicated that they are reviewing controls in order to avoid the late

payment of creditors.

The ratio indicates that the municipality is to a large extent, self-sufficient.

The municipality's ratio is on the upper end of the norm range of between 10 and

20 percent, however, as noted in the discussion in Table 4.9(j), operating

expenditure is understated, thus, the percentage reflected can be expected to

229

4.9.4 Analysis per municipality: Ndwedwe Municipality

Table 4.9 (m) Operating Revenue and Expenditure Performance - Ndwedwe Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of Budget

Generated /

Spent

Comments

7 417 7 417 9 308 125.5 As per the municipality, additional government properties were added on to the

valuation roll after the finalisation and approval of the annual budget. The Adjusted

budget was not increased to account for the additional properties, thus the adjustment

budget amount of R7.4 million was understated.

– – – -

114 943 113 785 113 772 100.0

3 042 5 970 8 414 140.9 Due to delays in the implementation of capital projects, interest earned on investment

exceeded the budget and resulted in an over-generation of interest earned on external

investments which forms part of Other sources of revenue.

125 402 127 172 131 495 103.4

34 734 30 651 29 249 95.4 The under-spending against budgeted Employee related cost was as a result of

budgeted vacant positions that were not filled during the 2015/16 financial year

according to the municipality. These included, amongst others, the positions of

Manager: Internal Audit and Fleet officer.

10 331 10 331 10 057 97.3

3 409 3 000 958 31.9 Debt impairment is calculated bi-annually and at the time of submission of the Section

71 report, the calculation for the last half of the year had not been finalised. However, as

per the municipality, Debt impairment for the second half of the financial year amounted

to R926 505. The total Unaudited actual amount for Debt impairment for the 2015/16

financial year is therefore R1.9 million, which is 63 percent of the Adjusted budget

amount of R3 million. The budget for Debt impairment was therefore overstated.

14 472 14 472 12 459 86.1 The amount of Depreciation, as recalculated by the municipality for Annual Financial

Statement purposes is R14.7 million. The percentage spent against budget is therefore

101 percent.

– – – -

13 696 10 136 10 442 103.0

39 350 43 361 34 440 79.4 A number of expenditure items such as Training and seminars, Cellular charges, Legal

and consulting and Professional fees were budgeted for the 2015/16 financial, however,

expenditure against these items were lower than anticipated which resulted in a cost

savings.

115 992 111 951 97 604 87.2

9 410 15 221 33 890 Considering the understated Depreciation amount and Debt impairment amounts as

reported in the Section 71 reports, the Operating surplus amount of R33.9 million

appears overstated.







Debt impairment



Bulk purchases

Contracted services








R'000

Operating Revenue

Property Rates1

Service Charges2


230

Table 4.9 (n) Capital, Cash and Conditional grant Performance - Ndwedwe Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

52 517 57 517 48 612 84.5 The under spending against capital grants was a result of the NDPG as

well as the Massification grant not being fully spent in the 2015/16

financial year.

– – – -

– – – -

9 410 7 150 3 321 46.4 Some capital items which were budgeted to be procured within the

2015/16 financial year have not been acquired due to delays in the

municipality's Supply Chain Management process.

61 927 64 667 51 933 80.3

960 1 520 536 35.3 Capital items budgeted against the Governance and Administration

function were not acquired. These include, amongst others, the

acquisition of a municipal bus as well as other office equipment.

– – – -

32 187 49 147 37 415 76.1 Although capital projects budgeted against Economic and Environmental

Services have not been completed, the funds appropriated to this function

are committed.

9 000 14 000 13 981 99.9

19 780 – – -

61 927 64 667 51 933 80.3

58 456 58 456 76 667

51 577 51 577 109 380 Based on the bank reconciliation statements and the investments register

submitted by the municipality as at the end of 30 June 2016, the actual

Closing cash and cash equivalents balance is R109.3 million and is

consistent with that reported in the municipality's Section 71 reporting.

When considering the closing Cash and cash equivalents balance, it must

be taken into account that a portion of the funds sitting under cash and

investments balance represents the municipality's financial commitments

and as such needs to be cash-backed, for example: Unspent conditional

grants.

(6 879) (6 879) 32 712

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 2 749 152.7% (949) The over-expenditure reflected in the Section 71 report is incorrect. The

Financial Management Grant has been fully spent. The municipality has

sent correspondence to National Treasury in order to correct the Section

71 report. The municipality's grant register also indicates that the 2015/16

allocation of the Finance Management Grant has been fully spent.

930 2 040 219.4% (1 110) Similar to FMG, the over-expenditure against the Municipal Systems

Improvement Grant in the Section 71 report is incorrect. The grant has

been fully spent. The municipality's grant register also confirms that the

2015/16 allocation of the Municipal Systems Improvement Grant has

been fully spent.28 907 28 524 98.7% 383









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

231

Table 4.9 (o) Trade and other receivables, Trade and other payables and Key ratios - Ndwedwe Municipality

Amount % of

total debt /

payables

11 049

8 020

380 4.7%

317 4.0%

312 3.9%

7 010 87.4%

8 020 100.0%

1 997 24.9%

4 787 59.7%

1 085 13.5%

151 1.9%

8 020 100.0%

33 100.0%

– -

– -

– -

33 100.0%

Norm/

Range

% Actual

25% - 40% 40.3%

2% - 5% 10.7%

- 13.5%

- 6.4%

10% - 20% 34.7%

= or > 0% 25.8% Considering that the Debt impairment expense reported by the municipality in the

Operating performance statement is incomplete and the Depreciation expense is

understated, the Net operating surplus margin of 25.8 percent may decrease once the

full Debt impairment and Depreciation expense have been accounted for.

When considering the low rate of Own sources of revenue, this is an indication that the


Notwithstanding the fact that Total operating expenditure has been understated, as

noted above, the municipality has committed to improving their infrastructure in order to

improve service delivery, thus the high capital expenditure as compared to total


The ratio of 40.3 percent exceeds the norm range. However, it should be noted that

the fact that Total operating expenditure is understated distorts the ratio.

Notwithstanding this, the municipality needs to implement measures to ensure their

Remuneration is kept within reasonable ratio as a high ratio could indicate that the

municipality is overstaffed, or there is mis-directed expenditure towards non-essential

services or non-delivery of service related expenditure, as per MFMA Circular No.71.


understating their Depreciation and Debt impairment in the Operating performance

statement, thus understating Total operating expenditure.


municipality's debtors balance. The majority of non-paying debtors relates to

Commercial debtors (59.7 percent) as the municipality is having challenges with

collection from these debtors. It should be noted that the inability to collect billed

revenue from debtors will negatively affect the liquidity position of the municipality as the

municipality may be unable to meet their short term obligations as and when they fall

due. Stringent controls should therefore be implemented by the municipality to improve

the municipality's debtors collection ratio.

Outstanding debtors have decreased from R11 million in the 2014/15 financial year to

R8 million in 2015/16, a decrease of 27 percent. According to the municipality, the

decreased is due to the Department of Public Works paying for their Property rates

debt earlier, thus avoiding interest on outstanding debt.

Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management


232

4.7.5 Analysis per municipality: Maphumulo Municipality

Table 4.9 (p) Operating Revenue and Expenditure Performance - Maphumulo Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

11 667 16 172 12 767 78.9 The municipality stated that the correct Unaudited actual amount is R14.1 million for

Property rates. Numerous submission of Month 01 return were made by the

municipality to LG database before the 2015/16 quarter one publication of figures to

ensure that the figure is correct, however, the figures were never updated. The variance

is therefore R2.1 million which is 87.1 percent instead of 78.9 percent. The municipality

stated that the variance was due to the Adjustment budget of R16.2 million being

incorrectly overstated during the 2015/16 Adjustment budget process.

– – – -

85 966 85 966 89 954 104.6 As per the municipality's explanation, included in Unaudited actual amount of R89.95

million is provincial grants amounting to R2.2 million which were previously recorded as

unspent grants that have been recognised in the 2015/16 financial year.

3 163 6 079 8 825 145.2 According to the municipality, the over-generation of revenue for "Other sources of

revenue" were as a result of VAT refunds from SARS which were not included in the

budget. It should be noted however, that the cash inflows from VAT refunds should be

recognised in the Cash flow statement instead of the Operating Performance statement.

The municipality indicated that they also generated Interest from external investments

which was more than the budget due to an increase in unspent funds for the 2015/16

financial year.

100 796 108 217 111 546 103.1

29 491 25 914 25 183 97.2

5 746 6 519 6 404 98.2

4 500 1 500 857 57.1 The municipality conducts their Debt impairment assessment bi-annually and as at the

end of the 2015/16 financial year, the municipality had not completed the impairment

test for the last half of the year, thus the Unaudited actual amount is incomplete.

12 113 13 152 8 556 65.1 As per the municipality, the budget for Depreciation and asset impairment was

overstated during the Adjustment budget.

– – – -

9 502 7 531 7 395 98.2

38 051 38 929 36 636 94.1

99 403 93 546 85 030 90.9

1 393 14 671 26 516 Considering the understated Property rates, overstatement of Other revenue due to

SARS refunds and the incomplete Debt impairment reported in the Section 71 report,

the operating surplus of R26.5 million is not a true reflection of the municipality's

operating performance for the 2015/16 financial year.







R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



233

Table 4.9 (q) Capital, Cash and Conditional grant Performance - Maphumulo Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

29 689 21 689 23 076 106.4 The municipality reported expenditure on the MIG roll-over against

Transfers recognised-capital instead of reporting it against Internally

generated funds. This resulted in the over-expenditure reported against

Transfers recognised-capital.

– – – -

7 600 – – -

2 041 10 676 5 767 54.0 The under expenditure reported against Internally generated funds was

due to the municipality reporting expenditure on the MIG roll-over (R4.5

million) against Transfers recognised-capital instead of Internally

generated funds, as indicated above. Furthermore, no expenditure was

incurred for the roll-overs of the Corridor Development (R4.7 million) and

the Small Town Rehabilitation grants (R6.3 million).

39 330 32 365 28 843 89.1

2 250 32 365 736 2.3 As per the 2015/16 Adjusted budget (B-Schedule), the correct budgeted

amount for Governance and Administration function is R515 000 and not

R32.4 million as reflected in the Section 71 report. The variance against

the Adjusted budget amount is therefore 143 percent, representing an

over expenditure against the Governance and Administration function.

The municipality indicated that the over expenditure was due to the

municipality under budgeting for this capital expenditure function.

491 – 2 081 - Expenditure of R2.1 million against the Community and Public Safety

functions relates to the development of a sports field. The municipality

indicated that although the funds for this project were available from the

Sport grant, the municipality had erroneously omitted the budget for this

project from the Adjustment budget. It should therefore be noted that as

the expenditure on the sports field was not appropriated in the

municipality's Adjustment budget, the expenditure thereof represents

unauthorised expenditure.

22 839 – 26 026 - As per the 2015/16 Adjusted budget, the correct budgeted amount for

Economic & Environmental Services is R31.8 million, while no budget

has been reflected in the Section 71 report. With an Unaudited actual

amount of R26 million, the under expenditure against budget is attributed

to the municipality not fully spending on some of their grant roll-over

amounts for the 2015/16 financial year.

13 000 – – -

750 – – -

39 330 32 365 28 843 89.1

35 039 15 693 15 693

40 418 15 201 22 798 Based on the bank reconciliation statements and the investments register

submitted by the municipality as at the end of 30 June 2016, the actual

Closing cash and cash equivalents balance is R22.8 million and is

consistent with that reported in the municipality's Section 71 reporting.

When considering the closing Cash and cash equivalents balance, it must

be taken into account that a portion of the funds sitting under cash and

investments balance represents the municipality's financial commitments

and as such needs to be cash-backed, for example: Unspent conditional

grants.

5 379 (492) 7 105

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 748 97.1% 52

930 930 100.0% –

21 689 21 689 100.0% –

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Services

Other










234

Table 4.9 (r) Trade and other receivables, Trade and other payables and Key ratios - Maphumulo Municipality

Amount % of

total debt /

payables

17 426

20 969

565 2.7%

525 2.5%

510 2.4%

19 369 92.4%

20 969 100.0%

5 687 27.1%

10 694 51.0%

168 0.8%

4 419 21.1%

20 969 100.0%

11 3.1%

85 24.7%

(31) -

281 81.2%

346 100.0%

Norm/

Range

% Actual

25% - 40% 37.1%

2% - 5% 8.7%

- 19.4%

- 20.0%

10% - 20% 25.3%

= or > 0% 23.8%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


Outstanding debtors have increased from R17.4 million in the 2014/15 financial year

to R21 million in 2015/16, an increase of 20 percent.


municipality's debtors balance. A significant portion of the debt is owed by Commercial

(51.0 percent). According to the municipality, Commercial debtors are refusing to pay

the municipality's Property rates as they indicated that they do not benefit from

municipal services such as refuse removal. It should be noted that the inability to

collect billed revenue from debtors will negatively affect the liquidity position of the

municipality as the municipality may be unable to meet their short term obligations as

and when they fall due. Stringent controls should therefore be implemented by the

municipality to improve the municipality's debtors collection ratio.

Although the Section 71 report reflects that the majority of municipal creditors are not

paid within 30 days as required by Section 65 of the MFMA, the municipality indicated

that the creditors age analysis as per the Section 71 report is not accurate and would

be corrected in the 2015/16 Annual Financial Statements.

Considering that the Debt impairment expense reported by the municipality in the

Operating performance statement is incomplete, the Net operating surplus margin of

23.8 percent may decrease once the full Debt impairment expense has been

accounted for.

Notwithstanding the fact that total operating expenditure has been understated, as

noted above, the municipality has committed to improving their infrastructure in order

to improve service delivery, thus the high capital expenditure as compared to total


The ratio of 37.1 percent is in the upper region of the norm range. However, it should

be noted that the fact that Total operating expenditure is understated distorts the ratio.

Notwithstanding this, the municipality needs to implement measures to ensure their

Remuneration is kept within reasonable ratio as a high ratio could indicate that the

municipality is overstaffed, or there is mis-directed expenditure towards non-essential

services or non-delivery of service related expenditure, as per MFMA Circular

No.71.


not recognising the full Debt impairment expense in the Operating statement, thus

understating their Total operating expenditure.

235

4.7.6 Analysis per municipality: iLembe Municipality

Table 4.9 (s) Operating Revenue and Expenditure Performance - iLembe District Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

– – – -

181 000 222 929 151 630 68.0 Provincial Treasury could not undertake an analysis of the iLembe District Municipality

figures as at 30 June 2016 as submitted in terms of Section 71 of the MFMA. According to

the municipality, due to delays experienced in the finalisation of the year end Trial Balance,

the municipality could not provide the reasons for variance for the performance against

budget for 2015/16 as requested by Provincial Treasury.

366 590 369 390 375 687 101.7

45 577 71 985 36 347 50.5

593 167 664 304 563 664 84.9

186 176 187 057 162 316 86.8

8 788 10 098 9 714 96.2

37 714 42 798 42 798 100.0

60 581 64 817 49 496 76.4

40 320 68 527 62 849 91.7

53 153 60 040 63 475 105.7

204 267 230 062 187 966 81.7

590 998 663 399 578 614 87.2

2 169 905 (14 950)







R'000

Operating Revenue

Property Rates1

Serv ice Charges2







Debt impairment



Bulk purchases




236

Table 4.9 (t) Capital, Cash and Conditional grant Performance - iLembe District Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

290 646 286 353 343 984 120.1

110 672 117 689 105 251 89.4

– – – -

23 169 48 902 25 890 52.9

424 487 452 944 475 125 104.9

20 734 31 455 22 541 71.7

150 125 – -

1 856 1 856 1 628 87.7

401 747 419 508 450 957 107.5

– – – -

424 487 452 944 475 125 104.9

26 037 36 718 36 719

33 636 59 824 60 543

7 599 23 106 23 824

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 250 1 250 100.0% –

940 940 100.0% –

189 590 189 590 100.0% 0

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Serv ices

Other










237

Table 4.9 (u) Trade and other receivables, Trade and other payables and Key ratios - iLembe District Municipality

Amount % of

total debt /

payables

230 430

212 426

13 844 6.5%

9 047 4.3%

10 820 5.1%

178 716 84.1%

212 426 100.0%

11 751 5.5%

6 147 2.9%

174 152 82.0%

20 376 9.6%

212 426 100.0%

51 228 75.9%

12 305 18.2%

2 354 3.5%

1 587 2.4%

67 474 100.0%

Norm/

Range

% Actual

25% - 40% 29.7%

2% - 5% 11.0%

- 33.3%

- 5.4%

10% - 20% 45.1%

= or > 0% -2.7%

Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management


238

4.10 Harry Gwala District

The Harry Gwala District is located to the South West of the KwaZulu-Natal province. Its population

is sparsely spread throughout a largely rural area of 11 128 km2. The district forms part of the border

between KwaZulu Natal and the Eastern Cape Province and is comprised of six municipalities,

namely: Ingwe, KwaSani, Greater Kokstad, Ubuhlebezwe, Umzimkhulu and Harry Gwala District

Municipality. Greater Kokstad Municipality functions as the district node and the dominant

commercial centre in the Harry Gwala District. Ingonyama Trust land makes up a significant part of

the district.

Four of the six municipalities are categorised as low capacity (KwaSani, Greater Kokstad,

Ubuhlebezwe and Harry Gwala District Municipality) and two are medium capacity municipalities

(Ingwe and Umzimkhulu Municipality). Following the redetermination of boundaries by the

Demarcation Board, Ingwe Municipality and Kwa Sani Municipality will be merging to form one

municipality (Dr.Nkosazana Dlamini Zuma Local Municipality) in August 2016.

The core function of the Harry Gwala District Municipality is the provision of Water and Sanitation

services. Greater Kokstad Municipality provides Electricity and Refuse removal services, whilst

Ingwe, Ubuhlebezwe, KwaSani and Umzimkhulu municipalities provide Refuse removal services.

At the end the 2015/16 financial year the positions of the Municipal Manager (MM) and Chief

Financial Officer (CFO) posts were filled at all the municipalities within the Harry Gwala District

with the exception of Kwa Sani Municipality which currently has an Acting CFO and Greater

Kokstad which has an acting MM. The positions were still vacant as at the end of the 2015/16

financial year.

In February 2016, the Mayor of Ingwe Municipality resigned. Subsequently, the KwaZulu-Natal MEC

for Co-operative Governance and Traditional Affairs Department (CoGTA), placed the municipality

under administration in terms of Section 139(4) of the Constitution of the Republic of South Africa.

The intervention was terminated on the disestablishment of Ingwe municipality on 21 July 2016 as per

Provincial Notice 141 of 2016.

All the municipalities in the Harry Gwala District obtained unqualified audit opinions with other

matters for the 2014/15 financial year with the exception of Ubuhlebezwe which received an

unqualified audit opinion with no other matters.

4.10.1 Overview of Harry Gwala District Performance

Ingw e 101 564 101 553 85 516 84.2

Kw a Sani 44 088 48 373 41 504 85.8

Greater Kokstad 294 855 294 855 292 321 99.1

Ubuhlebezw e 112 543 125 780 125 243 99.6

Umzimkhulu 195 951 199 520 183 880 92.2

Harry Gw ala DM 369 998 377 191 294 890 78.2

Total 1 118 999 1 147 272 1 023 354 89.2


% Generated



239

Ingwe 89 168 93 196 101 633 109.1

Kwa Sani 44 077 48 371 42 481 87.8

Greater Kokstad 322 704 322 704 307 533 95.3

Ubuhlebezwe 124 671 125 444 115 956 92.4

Umzimkhulu 205 360 209 281 217 116 103.7

Harry Gwala DM 397 581 439 649 410 737 93.4

Total 1 183 561 1 238 645 1 195 457 96.5




Ingwe 91 218 91 218 56 780 62.2

Kwa Sani 10 320 10 320 12 856 124.6

Greater Kokstad 37 967 47 180 24 377 51.7

Ubuhlebezwe 88 189 102 526 79 113 77.2

Umzimkhulu 58 149 82 969 70 881 85.4

Harry Gwala DM 306 650 278 348 200 412 72.0

Total 592 492 612 560 444 419 72.6





Ingwe 78 0.7 70 0.7 44 0.4 10 441 98.2 10 633

Kwa Sani 18 0.5 1 068 30.5 864 24.7 1 550 44.3 3 501

Greater Kokstad 10 619 18.4 5 074 8.8 2 855 4.9 39 287 67.9 57 835

Ubuhlebezwe (1 314) (5.4) 579 2.4 541 2.2 24 668 100.8 24 474

Umzimkhulu 393 5.8 313 4.6 144 2.1 5 972 87.5 6 822

Harry Gwala DM 3 891 2.7 3 071 2.1 2 543 1.8 134 160 93.4 143 665

Total 13 686 5.5 10 176 4.1 6 990 2.8 216 078 87.5 246 929


Total





Ingwe 5 246 49.3 3 366 31.7 1 681 15.8 340 3.2 10 633

Kwa Sani 516 14.8 1 000 28.6 505 14.4 1 480 42.3 3 501

Greater Kokstad 300 0.5 18 700 32.3 29 840 51.6 8 995 15.6 57 835

Ubuhlebezwe 6 672 27.3 9 620 39.3 8 180 33.4 3 0.0 24 474

Umzimkhulu 1 759 25.8 1 982 29.1 2 535 37.2 545 8.0 6 822

Harry Gwala DM 12 214 8.5 11 146 7.8 120 305 83.7 - - 143 665

Total 26 708 10.8 45 814 18.6 163 045 66.0 11 362 4.6 246 929





Ingwe - - - - - - - - -

Kwa Sani 7 520 100.0 - - - - - - 7 520

Greater Kokstad 603 52.8 538 47.2 - - - - 1 140

Ubuhlebezwe 857 86.1 112 11.3 12 1.3 14 1.4 995

Umzimkhulu 22 576 100.0 - - - - - - 22 576

Harry Gwala DM 10 954 42.1 713 2.7 322 1.2 14 058 54.0 26 047

Total 42 510 72.9 1 363 2.3 335 0.6 14 072 24.1 58 279




Total

240

4.10.2 Analysis per municipality: Ingwe Municipality

Table 4.10 (g) Operating Revenue and Expenditure Performance - Ingwe Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

5 312 5 335 5 431 101.8

250 250 536 214.3 Over performance was due to incorrect information submitted to the National Treasury Local

Government Database. The municipality incorrectly duplicated figures for Service charges -

refuse revenue under Service charges - other.

89 991 89 991 75 453 83.8 An amount of R12.5 million was offset by National Treasury from the Equitable share for the

municipality due to Unspent conditional grants (INEP) hence the under generation on

operating grants.

6 011 5 977 4 097 68.5 Under performance resulted from a negative R2.1 million reported by the municipality for

Other own revenue in the fourth quarter.

101 564 101 553 85 516 84.2

32 418 29 243 24 542 83.9 A number of posts were not filled during the 2015/16 financial year since appointment was

dependent on the Technical Change Management Committee (TCMC) approval and the

committee did not approve of the new appointments.

7 112 7 595 5 911 77.8 Under performance resulted from incorrectly budgeting for Remuneration of councillors in

the 2015/16 financial year as the municipality did not adjust the budget in order to be in line

with the Remuneration of Office Bearers gazette as issued by CoGTA in December 2015

during the Adjustments Budget period.

572 472 2 212 468.7 The 2015/16 budget for Debt impairment was understated thereby resulting in unauthorised

expenditure. The municipality indicated that the unauthorised expenditure has not yet been

condoned by Council.

6 332 12 332 8 552 69.3 Under performance resulted from incorrect (negative) figures being reported by the

municipality to the National Treasury Local Government database in Month 12 of the

financial year. This appears to be an error in reporting.

– – – -

3 668 4 945 2 344 47.4 Under performance was due to the fact that Contracted services were incorrectly budgeted

for by the municipality in the 2015/16 financial year. The municipality increased the budget

for this expenditure item during the 2015/16 Adjustments Budget. This is as indication of

poor budgeting by the municipality.

39 066 38 610 58 071 150.4 Over performance on Other expenditure items has resulted in unauthorised expenditure

being incurred. The reason for the over expenditure was not provided by the municipality.

89 168 93 196 101 633 109.1

12 396 8 357 (16 116)

R'000

Operating Revenue

Property Rates1

Serv ice Charges2







Debt impairment



Bulk purchases




241

Table 4.10 (h) Capital, Cash and Conditional grant Performance - Ingwe Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

49 819 49 819 39 478 79.2 The under generation of capital revenue reported against Transfers

recognised - capital is due to incorrect amounts reported to the National

Treasury Local Government database. The municipality has indicated

that the 2015/16 gazetted capital grants revenue (Municipal Infrastructure

Grant and Integrated National Electrification Programme Grant) was

recognised and fully spent by the end of the financial year. The root cause

for the incorrect reporting is a lack of review and supervision by senior

municipal officials of the MFMA Section 71 reports submitted.

– – – -

– – – -

41 399 41 399 17 302 41.8 The under performance is due to the fact that Internally generated funds

was over budgeted as it incorrectly includes a budgeted amount R18.7

million for electrification projects which are classified as Operating

expenditure, thus overstating the capital budget. Furthermore, during the

IYM engagements the municipality was cautioned that they may lack the

capacity to implement the capital budget.

91 218 91 218 56 780 62.2

945 945 718 76.0 Under performance is due to the fact that the budget for Governance and

Administration was for office equipment. However, a number of posts

were not filled during the 2015/16 financial year as a result of the merger

between the Ingwe and Kwa Sani municipalities therefore the office

equipment was not procured.

700 700 481 68.7 Under performance was due to the fact that the municipality encountered

delays in securing land for the construction of public toilets in the 2015/16

financial year.

89 573 89 573 55 581 62.1 Under performance is due to the fact that Economic and Environmental

Services was over budgeted as it incorrectly includes the budget for

electrification projects which are classified as Operating expenditure, thus

overstating the capital budget. There were also some projects which

began late in the financial year.

– – – -

– – – -

91 218 91 218 56 780 62.2

50 120 50 120 57 000

34 813 49 948 68 134 Based on the supporting documents submitted by the municipality, the

unaudited Cash and cash equivalents at the year end amounts to R69

million which is another indication of incorrect reporting by the

municipality.

(15 307) (172) 11 134

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 800 100.0% (0)

930 930 100.0% –

24 319 21 478 88.3% 2 841 The municipality has indicated that there are errors which were noted

between the reports sent to National Treasury database and internal

reports. The expenditure reported in the Section 71 reports was

understated.









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

242

Table 4.10 (i) Trade and other receivables, Trade and other payables and Key ratios - Ingwe Municipality

Amount % of

total debt /

payables

9 327

10 633

78 0.7%

70 0.7%

44 0.4%

10 441 98.2%

10 633 100.0%

5 246 49.3%

3 366 31.7%

1 681 15.8%

340 3.2%

10 633 100.0%

– -

– -

– -

– -

– -

Norm/

Range % Actual

25% - 40% 30.0%

2% - 5% 2.3%

- 11.8%

- 30.5%

10% - 20% 35.8%

= or > 0% -18.8% The municipality has an unaudited Operating deficit of R16.1 million for the 2015/16

financial year resulting in a net operating surplus margin which is less than the

recommended percentage. The municipality is encouraged to implement measures to

address this situation and ensure sustainable service delivery.

The ratio indicates that the municipality is heavily dependent on Operating grants to

fund its Operating activities. The municipality is encouraged to formulate and implement

strategies to increase its capacity to generate revenue internally thereby reducing its

grant dependency.

The ratio indicates that the municipality is dependent on Capital grants to fund its Capital

expenditure. The municipality is encouraged to implement strategies to build up Cash

reserves and reduce grant dependency for capital expenditure.

Capital Expenditure as a percentage of Total expenditure amounts to 35.8 percent,

which is higher than the norm of between 10 and 20 percent. However, the ratio is

distorted because of incorrect figures reported by the municipality.

The municipality indicated that Property rates debtors, especially Organs of state,

contribute a significant amount to the total outstanding debt. During the IYM

engagements, the municipality was advised to ensure that steps are taken to improve

collection strategies and write off irrecoverable debt where applicable.

The municipality indicated that they are struggling to collect outstanding debt from

Organs of state, the Department of Public Works in particular.

Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management


243

4. 10.3 Analysis per municipality: Kwa Sani Municipality

Table 4.10 (j) Operating Revenue and Expenditure Performance - Kwa Sani Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual % of

Budget

Generated /

Spent

Comments

15 172 15 418 15 357 99.6

2 360 2 727 2 575 94.4 As at 31 December 2015, R1.3 million (54.7 percent) had been billed for Service

charges - refuse revenue therefore suggesting an annual expectation of R2.6 million.

Under performance on Service charges - refuse therefore resulted from the

Adjustments Budget being overstated.

21 536 21 536 20 309 94.3 The municipality has indicated that there are errors between the conditional grants

reports sent to the National Treasury database and the internal reports which will be

corrected during the compilation of the 2015/16 Annual Financial Statements (AFS).

5 021 8 693 3 263 37.5 Under performance resulted from poor revenue generation of Interest earned -

outstanding debtors (81.4 percent), Fines (63.9 percent) and Other own revenue

(R10.4 percent). The 2015/16 Adjustments Budget was overstated as it was increased

by 73.1 percent from the Original Budget. This is an indication of poor budgeting by the

municipality.

44 088 48 373 41 504 85.8

18 402 18 164 18 350 101.0

1 876 2 014 1 826 90.6 Under performance resulted from incorrectly budgeting for Remuneration of councillors

in the 2015/16 financial year as the municipality did not adjust the budget in order to be

in line with the Remuneration of Office Bearers gazette as issued by CoGTA in

December 2015 during the Adjustments Budget period.

115 – – - The Debt impairment expenditure was not reported on a monthly basis by the

municipality for the 2015/16 financial year. This was despite the municipality being

advised by Provincial Treasury to report this expenditure on a monthly basis as

reporting actuals only at the end of the year could result in significant misstatements or

unauthorised expenditure on non cash items. The result is that the unaudited actual

deficit of R978 000 is understated.

3 038 3 871 3 789 97.9 The municipality did not record the actual Depreciation and asset impairment charge

for February 2016, April 2016 and May 2016 therefore the expenditure for the year

appears to be understated. This will result in the municipality incurring unauthorised

expenditure when transactions are subsequently recorded.

– – – -

4 031 10 015 7 884 78.7 Under performance was due to the fact that Contracted services was incorrectly

budgeted for by the municipality in the 2015/16 financial year. The municipality

increased the budget for Contracted services during the 2015/16 Adjustments Budget.

This is an indication of poor budgeting by the municipality.

16 614 14 307 10 632 74.3 Under performance of Other expenditure items is mainly attributed to under

performance of Finance charges (78.6 percent) and Other expenditure (74 percent).

The Finance charges expenditure was not reported on a monthly basis by the

municipality for the 2015/16 financial year.

44 077 48 371 42 481 87.8

11 1 (978)







R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



244

Table 4.10 (k) Capital, Cash and Conditional grant Performance - Kwa Sani Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

7 530 7 530 10 530 139.8 Over performance was due to incorrect information submitted to the

National Treasury Local Government Database (LGdatabase). The

municipality has indicated the error will be adjusted during the finalisation

of the 2015/16 AFS.

– – – -

– – – -

2 790 2 790 2 326 83.4 Under performance was due to delays in the implementation of internally

funded projects as most of the projects started towards the end of the


10 320 10 320 12 856 124.6

890 632 735 116.1 Over performance was due to incorrect information submitted to the

LGdatabase. The municipality has indicated the error will be adjusted

during the finalisation of the 2015/16 AFS.

9 101 70 1 592 2 273.7 Over performance was due to incorrect information submitted to the

Lgdatabase. The municipality has indicated the error will be adjusted


325 9 617 10 530 109.5 Over performance was due to incorrect information submitted to the

Lgdatabase. The municipality has indicated the error will be adjusted


– – – -

4 – – -

10 320 10 320 12 856 124.6

25 044 25 044 18 941

23 961 20 053 12 900 Based on the supporting documents submitted by the municipality, the

unaudited Cash and cash equivalents at the year end amounts to R13.7

million therefore the reported amount appears to be understated. The

municipality should ensure that the Section 71 reports are reviewed by

senior management prior to submission to ensure the accuracy thereof.

(1 083) (4 991) (6 042) It was noted with concern that the municipality closed off the financial year

with a Net Decrease in cash held of R6 million. This indicates that the

municipality could not generate the anticipated revenue that was budgeted

for.

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 800 100.0% –

930 930 100.0% –

10 530 10 530 100.0% 0









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

245

Table 4.10 (l) Trade and other receivables, Trade and other payables and Key ratios - Kwa Sani Municipality

Amount % of

total debt /

payables

14 555

3 501

18 0.5%

1 068 30.5%

864 24.7%

1 550 44.3%

3 501 100.0%

516 14.8%

1 000 28.6%

505 14.4%

1 480 42.3%

3 501 100.0%

7 520 100.0%

– -

– -

– -

7 520 100.0%

Norm/

Range

% Actual

25% - 40% 47.5%

2% - 5% 18.6%

- 51.1%

- 18.1%

10% - 20% 23.2%

= or > 0% -2.4%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


The bulk (44.3 percent) of the municipality's outstanding debtors are in the Over 90

days category, of which, 88 percent relates to Property rates. The municipality has

indicated that payment arrangements have been concluded with some debtors for long

outstanding debts.

The municipality has an unaudited Operating deficit of R978 000 for the 2015/16

financial year resulting in a net operating surplus margin which is less than the

recommended margin. The municipality should implement measures to address the

deficit to ensure sustainability.

This ratio suggests that the municipality partially depends on grants to fund its

operational expenses.

The ratio of 18.1 percent on unaudited actual indicates that the municipality is

dependant on grants to fund capital expenditure.


which is higher than the norm of between 10 and 20 percent. This is due to incorrect

information submitted to the LGdatabase therefore the ratio is not a true reflection of the

actual performance of the municipality.

The ratio is not a true reflection of the municipality's performance as Total operating

expenditure appears to be understated.

The ratio is not a true reflection of the municipality's performance as Total operating

expenditure appears to be understated.

246

4.10.4 Analysis per municipality: Greater Kokstad Municipality

Table 4.10 (m) Operating Revenue and Expenditure Performance - Greater Kokstad Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of Budget

Generated /

Spent

Comments

91 493 91 493 92 348 100.9 The Original Budget figure of R91.5 million was adjusted downwards by R4 million as

per the Adjustments Budget approved by Council. The municipality did not update the

Adjusted Budget figures in the S71 Report therefore the municipality actually generated

105.6 percent when compared to the R92.3 million reported against the Adjusted

Budget of R87.5 million. The reason for over generating on Property rates was not


123 339 123 339 130 923 106.1 The amount of R130.9 million per the S71 Report does not agree to the Adjusted

Budget amount of R129.2 million which was approved by Council. The municipality

therefore generated 101.3 percent on Service Charges which was due to the over

performance on Service charges - Refuse. The reason for the over generation on

Service charges - Refuse was not provided by the municipality.

53 928 53 928 51 078 94.7 Unspent grants amounting to R1.3 million for Municipal Infrastructure Grant (MIG) and

R6 000 for Financial Management Grant (FMG) was paid back to the National Revenue

Fund which resulted in the under generation on Transfer recognised - operational.

26 095 26 095 17 972 68.9 Under performance noted was mainly due to Gains on disposal of Property, plant and

equipment. The municipality had budgeted for R10 million, however, only R250 000

was generated.

294 855 294 855 292 321 99.1

96 948 96 948 86 588 89.3 The Adjusted Budget figure of R96.9 million reported in the submitted Signed S71

Report does not agree to the figure of R102.8 million as per the Adjusted Budget

approved by Council. The municipality actually spent 84.2 percent of the Adjusted

Budget on Employee related costs. According to the municipality, the under

performance was due to the termination and resignation of some employees which

were budgeted for.

6 109 6 109 5 265 86.2 The amount of R6.1 million per the S71 Report does not agree to the Adjusted Budget

amount of R5.5 million which was approved by Council. The actual performance is

therefore 94.9 percent of the Adjusted Budget. The reason for the under performance

was not provided by the municipality.

13 000 13 000 21 0.2 The low expenditure of R21 000 reported is due to the municipality only reporting the full

transactions relating to Debt impairment at the end of the financial year. Reporting

actuals only at the end of the financial year could result in significant misstatements or

unauthorised expenditure. The municipality was advised of this risk during the year

through the monthly IYM feedback.

Additionally, the S71 Report amount of R13 million does not agree to the Adjusted

Budget amount of R9.5 million which was approved by Council.

42 000 42 000 72 636 172.9 The S71 Report amount of R72.6 million does not agree to the Adjusted budget amount

of R69.4 million which was approved by Council. The performance is therefore 104.7

percent against the Adjusted Budget. The reason for the over expenditure was not


86 413 86 413 76 546 88.6 Under spending noted on Bulk purchases of 88.6 percent does not correlate to the 96.6

percent under generation of Service Charges Electricity. This indicates that the budget

was overstated.

24 599 24 599 22 031 89.6 The municipality adjusted the budget for Contracted service from R24.6 million to R30.6

million as per the Adjustments Budget approved by Council. The Adjusted Budget

amount was not reflected in the submitted S71 Report. The municipality has only

managed to spend 72.1 percent as at the end of Quarter 4 when compared to the

Adjusted Budget figure of R30.6 million and has not provided a reason for the under

expenditure.

53 635 53 635 44 446 82.9 The S71 Report amount of R53.6 million does not agree to the Adjusted Budget amount

of R46.2 million as approved by Council. The actual performance is therefore 96.2

percent against the Adjusted Budget.

322 704 322 704 307 533 95.3

(27 849) (27 849) (15 213)







R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



247

Table 4.10 (n) Capital, Cash and Conditional grant Performance - Greater Kokstad Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

19 867 21 455 14 828 69.1 The Adjusted Budget figure of R21.5 million reported in the Signed

MFMA S71 Report does not agree to the figure of R24.2 million as per

the Adjusted Budget approved by Council. According to the municipality,

all capital grants were fully spent with the exception of the Energy

efficiency grant which reported 5.6 percent against the budget. The

reason for under spending on the Energy efficiency grant was due to

delays in the supply chain management processes. The difference noted

will be corrected in the 2015/16 Annual Financial Statements (AFS). The

root cause could be the lack of review and supervision of the submitted

MFMA S71 Report by senior management.

– – 627 The municipality erroneously allocated R627 000 to Public contributions

and donations instead of Internally generated funds.

– – – -

18 100 25 725 8 921 34.7 The municipality has not indicated the reasons for not being able to spend

the budgeted amount.

37 967 47 180 24 377 51.7

8 950 3 488 1 619 46.4 The municipality has not provided a reason for the under spending on

Governance and Administration.

2 550 2 550 – - The municipality has not provided a reason for the under spending on

Community and Public Safety.


Economic and Environmental Services.

4 700 9 700 2 073 21.4 Poor performance noted is due to the under spending on the Energy

Efficiency and Demand Side Management (Municipal) Grant which only

reported expenditure of 5.6 percent as compared to the budget.

– – – -

37 967 47 180 24 377 51.7

54 727 54 727 52 716

56 924 56 924 112 250 The IYM information (Bank reconciliation, investments register and grants

register) was not submitted by the municipality therefore the Cash and

cash equivalents actual amount could not be verified.

The municipality did not adjust the cash flow during the adjustments

budget process which resulted in under generation of revenue and over

spending in budgeted expenditure. The following categories reported

under generation of revenue or over spending :

-Property rates, penalties and collection charges were budgeted at R82.3

million and only R81.3 million was collected

-Interest was budgeted at R5.1 million and only R1.2 million was received

-Finance charges were budgeted R1.5 million and R12.4 million was

recorded as spent

-Repayment of borrowings was budgeted at R897 471 and R4 million was

reported as paid.

2 197 2 197 59 534

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 700 1 480 87.1% 220 The municipality spent R1.7 million on the FMG grant as per the

unaudited AFS. The amount of R1.5 million reported by the municipality

in the MFMA S71 is inaccurate. This root cause could be the lack of

review of the S71 Report by senior management.

930 930 100.0% (0)

16 867 16 867 100.0% 0









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

248

Table 4.10 (o) Trade and other receivables, Trade and other payables and Key ratios - Greater Kokstad Municipality

Amount % of

total debt /

payables

37 630

57 835

10 619 18.4%

5 074 8.8%

2 855 4.9%

39 287 67.9%

57 835 100.0%

300 0.5%

18 700 32.3%

29 840 51.6%

8 995 15.6%

57 835 100.0%

603 52.8%

538 47.2%

– -

– -

1 140 100.0%

Norm/

Range

% Actual

25% - 40% 29.9%

2% - 5% 7.2%

- 82.5%

- 36.6%

10% - 20% 7.3%

= or > 0% -5.2% The negative 5.2 percent ratio is as a result of the municipality recording an unaudited

deficit of R15.2 million for the 2015/16 financial year.

The 82.5 percent ratio of Own sources of revenue to total operating revenue indicates

that the municipality is not grant reliant to fund it operating expenditure.

The ratio of 36.6 percent unaudited actual indicates that the municipality is dependant on

grants to fund capital expenditure.

The ratio is below the norm of 10 percent, however, total operating expenditure is

understated due to Debt impairment not being recorded. The ratio is therefore distorted

and not a true reflection of actual performance.

The ratio is within the norm, however, total operating expenditure is understated due to

Debt impairment not being recorded. The ratio is therefore distorted and not a true

reflection of actual performance.

The ratio is above the norm of 5 percent, however, total operating expenditure is

understated due to Debt impairment not being recorded. The ratio is therefore distorted

and not a true reflection of actual performance.

In total, creditors amounting to R538 000 were outstanding for more than thirty days in

contravention of MFMA Section 65(2)(e). According to the municipality, this is due to

internal delays within the municipality.

A significant percentage of Debtors amounting to 67.9 percent are outstanding for more

than 90 days. In the prior year, the municipality indicated an external service provider

will be appointed in the 2015/16 financial year to collect long outstanding debtors on

behalf of the municipality, however, the appointment process was only concluded at the

end of the 2015/16 financial year.

Comments

R'000

Debtor



By age analysis

0-30 days

31-60 days

>90 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Key Ratios




Grant dependency

Efficiency




Asset Management


249

4.10.5 Analysis per municipality: Ubuhlebezwe Municipality

Table 4.10 (p) Operating Revenue and Expenditure Performance - Ubuhlebezwe Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

12 980 12 983 13 063 100.6

1 878 1 878 1 676 89.2 Under performance of 89.2 percent reported against the Adjusted Budget of R1.8

million is as a result of over budgeting. This may be due to the municipality using

incorrect basis for projecting the budget for Service Charges. It appears that this is a

recurring problem for this municipality as the issue was raised in the previous financial

year.

90 100 90 100 95 735 106.3 The municipality has reported 106.3 percent against the Transfer recognised-

operational budget which is more than the amount allocated. The municipality did not

provide reasons for the variance noted.

7 585 20 819 14 770 70.9 Other sources of revenue reported under performance was as a result of poor

performance on Other own revenue which reported only 14 percent of the Adjusted

Budget of R11.4 million. According to the municipality, this was due to over budgeting.

112 543 125 780 125 243 99.6

55 135 54 029 52 200 96.6 According to the municipality, the budget for Employee related cost has been fully

spent. The variance noted is due to incorrect figures reported by the municipality in the

submitted MFMA S71 Report. The root cause could be the lack of the review and

supervision by senior management.

7 556 6 933 7 138 103.0

1 700 1 700 – - The municipality has not reported any expenditure against Debt impairment. This is

due to the municipality only reporting Debt impairment at the end of the financial year.

This could result in significant misstatements or unauthorised expenditure on non cash

items as expenditure is not monitored during the year.

18 000 18 000 27 491 152.7 According to the municipality, the figure of R27.5 million as per the signed MFMA S71

Report is incorrect. The actual amount that should be reflected for Depreciation and

asset impairment is R18.6 million resulting in the revised variance of only 3 percent as

compared to the Adjusted Budget. This will be corrected during the compilation of the

2015/16 Annual Financial Statements (AFS).

– – – -

6 073 6 684 5 248 78.5 The municipality under spent on Contracted services by 21.5 percent. The variance is

due to transactions that were not processed at the end of Quarter 4. These transactions

will be processed during the finalisation of the 2015/16 AFS.

36 206 38 098 23 879 62.7 Other expenditure items reported 62.7 percent or R23.9 million of the Adjusted Budget

of R38 million which is significantly below 100 percent expected for Quarter 4. Under

spending was noted due to poor spending on the following items:

- Other materials which reported 68.2 percent

- Transfers and grants reported 52.6 percent

- Other expenditure reported 62.7 percent

It was further noted that the municipality reported R31.3 million for Other expenditure in

the signed S71 Reports whilst the Adjustments Budget tabled to Council reflects R30.7

million. The municipality should ensure that the S71 Report is reviewed for accuracy

prior to submission.

124 671 125 444 115 956 92.4

(12 128) 336 9 287







Debt impairment



Bulk purchases

Contracted services








R'000

Operating Revenue

Property Rates1

Service Charges2


250

Table 4.10 (q) Capital, Cash and Conditional grant Performance - Ubuhlebezwe Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

64 493 68 602 68 369 99.7 The Adjusted Budget figure of R68.6 million reported in the Signed

MFMA S71 Report does not agree to the figure of R78.9 million as per

the Adjusted Budget approved by Council. According to the municipality,

the Municipal Infrastructure Grant (MIG) was fully spent although the

MFMA S71 Report indicates that only 83.3 percent was spent. The

difference noted will be corrected in the 2015/16 AFS. The root cause

could be the lack of review and supervision of the submitted MFMA S71

Report by senior management.

– 12 421 51 0.4 The Adjusted Budget figure of R12.4 million relates to a misallocation on

Transfers recognised capital and Internally generated funds which was

incorrectly reported in the MFMA S71 Report.

– – – -

23 696 21 503 10 694 49.7 The municipality has not indicated the reasons for not being able to spend

the budgeted amount. Significant under spending was noted under

Governance and Administration which could have been budgeted to be

funded from Internally generated funds.

88 189 102 526 79 113 77.2

6 010 4 845 691 14.3 The municipality has not provided a reason for the under spending on

Governance and Administration.


Community and Public Safety.


Economic and Environmental Services.

– – – -

– – – -

88 189 102 526 79 113 77.2

63 731 63 731 – Cash and cash equivalents per the Adjustment Budget of R58 million

does not agree to the S71 Report which reflects R63.7 million.

Additionally, the municipality did not report the actual opening Cash and

cash equivalents balance in the S71 Report therefore the closing balance

is incorrect.

44 584 44 584 (14 398) The IYM information (Bank reconciliation, investments register and the

grants register) was not submitted by the municipality therefore the Cash

and cash equivalents actual amount could not be verified.

(19 148) (19 148) (14 398)

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 800 100.0% –

930 930 100.0% –

24 335 20 278 83.3% 4 057 The municipality spent R24.3 million on MIG as per the unaudited AFS.

The information reported by the municipality in the MFMA S71 Report of

R20.2 million is inaccurate.









Trading Services

Other





Capital Expenditure



R'000

Capital Revenue



Borrowing

251

Table 4.10 (r) Trade and other receivables, Trade and other payables and Key ratios - Ubuhlebezwe Municipality

Amount % of

total debt /

payables

20 782

24 474

(1 314) -

579 2.4%

541 2.2%

24 668 100.8%

24 474 100.0%

6 672 27.3%

9 620 39.3%

8 180 33.4%

3 0.0%

24 474 100.0%

857 86.1%

112 11.3%

12 1.3%

14 1.4%

995 100.0%

Norm/

Range % Actual

25% - 40% 51.2%

2% - 5% 4.5%

- 23.6%

- 13.5%

10% - 20% 40.6%

= or > 0% 7.4%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


A significant percentage of Debtors amounting to 95.7 percent excluding debtors with

credit balances of R1.3 million are outstanding for more than 90 days. It appears that the

municipality has not implemented measures to collect long outstanding debtors which

could negatively impact Cash Flow in the future. The municipality must ensure that

Credit control policy is implemented accordingly.

According to the municipality, creditors outstanding for more than thirty days is due to

part payments made on invoices. This is usually when the service has not been fully

provided.

The ratio of 23.6 percent indicates that although the municipality can finance some of

their operating activities through own sources of revenue, it is still highly reliant on grant

funding.

The ratio of 13.5 percent unaudited actual indicates that the municipality is dependant on

grants to fund capital expenditure.

The 40.6 percent ratio of Capital Expenditure to Total expenditure is above the norm of

10 to 20 percent. This is due to higher spending on infrastructure. This could also

increase financial sustainability risks if the infrastructure does not include revenue

generating infrastructure. Furthermore, the ratio of 40.6 percent does not reflect a true

reflection of the actual performance due to operating expenditure being understated as

mentioned above.

The ratio is distorted due to the errors in the submission of the MFMA S71 Reports

where some of the expenditure items were not reported for example Debt impairment.

Incorrect reporting by the municipality will lead to incorrect analysis of the municipality's

performance.

The ratio is distorted due to the errors in the submission of the MFMA S71 Reports

where some of the expenditure items were not reported for example Debt impairment.

Incorrect reporting by the municipality will lead to incorrect analysis of the municipality's

performance.

252

4.10.6 Analysis per municipality: Umzimkhulu Municipality

Table 4.10 (s) Operating Revenue and Expenditure Performance - Umzimkhulu Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of Budget

Generated /

Spent

Comments

7 922 10 380 10 384 100.0

786 830 830 100.0

178 247 178 247 161 910 90.8 Transfer recognised - operational reported less than the expected benchmark of 100

percent as at the end of Quarter 4 as a result of incorrect budgeting for the Integrated

National Electrification Programme Grant which was supposed to be budgeted for under

the Capital Budget as per the advise from National Treasury and Department of energy.

Expenditure relating to this grant was reported in the Capital expenditure performance.

8 996 10 063 10 757 106.9 The variance of 6.9 percent noted on Other sources of Revenue is as a result of over

performance on Interest earned on external investments due to under budgeting by the

municipality on this item.

195 951 199 520 183 880 92.2

50 011 56 492 54 185 95.9 Under spending noted on Employee related costs was due to two vacant positions which

were only filled at the end of 2015/16 financial year.

14 968 14 798 14 863 100.4

63 2 500 – - The municipality has not reported any expenditure against Debt impairment. This is

due to the municipality only accounting for Debt impairment at the end of the financial

year. Reporting actuals only at the end of the financial year could result in significant

misstatements or unauthorised expenditure as expenditure is not monitored during the

year. 36 965 39 837 40 542 101.8

– – – -

6 852 6 637 6 774 102.1 The municipality indicated that the variance of 2.1 percent noted for Contracted services

is due to variable costs in some of the Contracted services e.g. cleaning services which

was above the budget.

96 502 89 017 100 751 113.2 Over spending on Other expenditure items is mainly due to over spending on Transfers

and grants (100.4 percent or R24.8 million on the Adjusted budget of R24.7 million)

and Other expenditure (118.4 percent or R75.1 million on the Adjusted budget of R63.4

million). The municipality has not provided reasons for over spending on these items.

205 360 209 281 217 116 103.7

(9 409) (9 761) (33 236)







Debt impairment



Bulk purchases

Contracted services








R'000

Operating Revenue

Property Rates1

Service Charges2


253

Table 4.10 (t) Capital, Cash and Conditional grant Performance - Umzimkhulu Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of Budget

Generated /

Spent

Comments

40 299 42 299 50 919 120.4 The significant over spending reported on Transfers recognised-capital is

as a result of incorrect budgeting for the Integrated National Electrification

Programme grant of R20 million which was budgeted for under the

Operating Budget. The municipality had to report expenditure relating to

this grant under Capital performance as advised by National Treasury

and Department of energy.

– – – -

– – – -

17 850 40 670 19 962 49.1 Under spending noted on Internally generated funds was due to the

inability of the municipality to obtain a qualified supplier for the acquisition

of the credit control system and computer software which formed a

significant percentage of the expenditure to be funded from Internally

generated funds.

There were differences noted in the Adjustments Budget figures for

Internally generated funds. An amount of R40.6 million was reported in

the signed S71 Report whereas the Adjustments Budget approved by

Council reflected R42.3 million.

58 149 82 969 70 881 85.4

2 250 5 304 3 989 75.2 Under spending noted on Governance and Administration was due to the

inability of the municipality to obtain a qualified supplier for the acquisition

of computer software and the credit control system which formed part of

the budget for Executive and council.

5 150 4 550 4 510 99.0

50 749 73 115 62 382 85.3 Under spending noted under Economic and Environmental Services was

due to the under performance on Road Transport department which was

as a result of late receipt of the Small Town Rehabilitation grant. The

municipality is in a process of applying for a roll over of the unspent

portion to 2016/17 financial year.

– – – -

– – – -

58 149 82 969 70 881 85.4

53 768 94 283 94 283

60 029 86 209 88 806 The total Cash and cash equivalents was R11.7 million as at 30 June

2016 therefore the S71 Report balance of R88.8 million appears to be

understated. The municipality should ensure that the S71 Report is

reviewed by senior management prior to submission to ensure the

accuracy thereof.

6 261 (8 074) (5 477) It was noted with concern that the municipality closed off the financial year

with a Net decrease in cash held of R5.5 million. This indicates that the

municipality could not generate the anticipated revenue and expenditure

was more than what was budgeted for. The following categories reported

under generation of revenue or over spending :

- Service charges were budgeted at R8.9 million and only R5.7 million

was collected.

- Suppliers and employees expenditure was budgeted at R141.4 million

and R145.2 million was recorded as spent.

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 800 1 800 100.0% –

930 930 100.0% –

47 978 47 978 100.0% –

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Services

Other










254

Table 4.10 (u) Trade and other receivables, Trade and other payables and Key ratios - Umzimkhulu Municipality

Amount % of

total debt /

payables

5 582

6 822

393 5.8%

313 4.6%

144 2.1%

5 972 87.5%

6 822 100.0%

1 759 25.8%

1 982 29.1%

2 535 37.2%

545 8.0%

6 822 100.0%

22 576 100.0%

– -

– -

– -

22 576 100.0%

Norm/

Range

% Actual

25% - 40% 31.8%

2% - 5% 3.1%

- 11.9%

- 28.2%

10% - 20% 24.6%

= or > 0% -18.1%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


A significant percentage of Debtors amounting to 87.5 percent are outstanding for

more than 90 days. The contributing factors to this high percentage is due to a

historic debt from the Department of Public Works as well as the poor debt control in

Other debtors relating to Households and Commercial which was due to the manual

system used by the municipality. However, according to the municipality, there are

engagements currently being held with the Department of Public Works to make

arrangements to settle the outstanding amount. The municipality is also in the

process of procuring the credit control system which will assist in ensuring

customers are notified timeously of their outstanding debt.

The negative 18.1 percent ratio is as a result of the municipality reporting an

unaudited deficit of R33.2 million for the 2015/16 financial year.

The ratio of 11.9 percent indicates that although the municipality can finance some

of their operating activities through own sources of revenue, it is still highly reliant on

grant funding.

The ratio of 28.2 percent on the unaudited actual indicates that the municipality is

dependant on grants to fund capital expenditure.

The 24.6 percent ratio on Capital Expenditure to Total expenditure is due to higher

spending on infrastructure. This could also increase financial sustainability risks if

the infrastructure does not include revenue generating infrastructure.

The ratio is distorted as the municipality has not recorded all operating expenditure

relating to the 2015/16 financial year.

The ratio is distorted as the municipality has not recorded all operating expenditure

relating to the 2015/16 financial year.

255

4.10.7 Analysis per municipality: Harry Gwala District Municipality

Table 4.10 (v) Operating Revenue and Expenditure Performance - Harry Gwala District Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual % of

Budget

Generated /

Spent

Comments

– – – -

55 902 55 902 43 458 77.7 According to the municipality, under performance on Service charges - water and

Service charges - sanitation charges is mainly attributable to the decreased water

supply due to the drought experienced by the district and water restrictions implemented

by the municipality.

302 323 308 503 238 402 77.3 The municipality indicated that there are errors which were noted between the

conditional grants report sent to the National Treasury database and their own internal

report. The expenditure reported in the Section 71 reports was understated. A

reconciliation of the recognition of revenue and the unconditional grants liability was

performed which showed close to 100 percent revenue generation on Transfers

recognised - operational.

11 773 12 785 13 030 101.9

369 998 377 191 294 890 78.2

122 390 124 391 117 406 94.4 Although the municipality adjusted Employee related costs upwards in the 2015/16

Adjustments Budget, under expenditure was mainly as a result of the decision by the

municipality to curb the escalating Employee related costs by only filling critical posts in


7 321 7 321 6 038 82.5 Under performance resulted from incorrectly budgeting for Remuneration of councillors

in the 2015/16 financial year as the municipality did not adjust the budget in order to be

in line with the Remuneration of Office Bearers gazette as issued by CoGTA in

December 2015 during the Adjustments Budget period.

24 692 24 692 12 346 50.0 The Debt impairment expenditure was not reported on a monthly basis by the

municipality for the 2015/16 financial year. This was despite the municipality being

advised by Provincial Treasury to report expenditure on a monthly basis as reporting

only at the end of the year could result in significant misstatements or unauthorised

expenditure on non cash items. The municipality indicated that the preliminary figure as

at 30 June 2016 is likely to escalate once the calculation of the impairment charge is

finalised.

30 300 30 600 51 065 166.9 The municipality indicated that the over performance is due to the historical depreciation

of capitalised water schemes. The preliminary figure is likely to change once the

reconciliation of the asset register is completed.

8 706 9 852 9 348 94.9 According to the municipality, under performance on Bulk purchases was due to less

than projected demand caused by the drought that was experienced in the Harry Gwala

District.

32 015 53 356 41 233 77.3 According to the municipality, under performance on Contracted services was mainly

due to the cost cutting measures implemented by the municipality to minimise cash flow

problems during the 2015/16 financial year.

172 158 189 438 173 301 91.5 According to the municipality, under performance on Other expenditure items was

mainly attributed to under performance of Other expenditure (R154.9 million or 82.3

percent) as a result of the cost cutting measures implemented by the municipality to

minimise the cash flow challenges.

397 581 439 649 410 737 93.4

(27 583) (62 458) (115 847)







R'000

Operating Revenue

Property Rates1

Service Charges2







Debt impairment



Bulk purchases

Contracted services



256

Table 4.10 (w) Capital, Cash and Conditional grant Performance - Harry Gwala District Municipality

Original

Budget

Adjusted

Budget

Unaudited

Actual

% of

Budget

Generated /

Spent

Comments

298 290 271 790 197 468 72.7 The municipality indicated that there are errors which were noted between

the conditional grants report sent to the National Treasury database and

their own internal report. The expenditure reported in the Section 71

report was understated. A reconciliation of the recognition of revenue and

the unconditional grants liability was performed which showed close to

100 percent revenue recognition on Transfers recognised - capital.

– – – -

– – – -

8 360 6 558 2 944 44.9 The municipality indicated that the under performance was due to the

minimisation of cash flow risk and reprioritisation of internally funded

projects.

306 650 278 348 200 412 72.0

2 600 1 643 247 15.0 Governance and Administration is funded from Internally generated funds

which was reprioritised by the municipality to minimise the cash flow risk.

– – – -

24 800 27 900 400 1.4 The municipality's Original and Adjusted Budgets are consolidated with

that of its Entity (Harry Gwala Development Agency), however, the

municipality only reported capital expenditure that related to the District

Municipality in the Section 71 report. This has the effect of understating

the unaudited actual performance.

279 250 248 805 199 766 80.3 The municipality indicated that at the time of the preparation of the Section

71 report, not all capital expenditure had been accrued for. This will be

corrected during the finalisation of the 2015/16 Annual Financial

Statements (AFS).

– – – -

306 650 278 348 200 412 72.0

36 320 36 115 25 871

80 520 19 017 5 819 The reasonability of the Cash and cash equivalents balance at year end

could not be verified as the municipality did not provide any supporting

documents as requested by Provincial Treasury.

44 200 (17 098) (20 052) It was noted with concern that the municipality closed off the financial year

with a Net Decrease in cash held of R20.1 million. This indicates that the

municipality could not generate the anticipated revenue that was budgeted

for.

Total Avail.

2015/16

Unaudited

Actual

expenditure

by munis.

% Spent Amount

Unspent/

(Overspent)

1 250 1 240 99.2% 11

940 828 88.1% 112 The municipality indicated that at the time of the preparation of the Section


corrected during the finalisation of the 2015/16 AFS.

199 784 154 998 77.6% 44 786 The municipality indicated that at the time of the preparation of the Section


corrected during the finalisation of the 2015/16 AFS.

R'000

Capital Revenue



Borrowing



Capital Expenditure




Trading Services

Other










257

Table 4.10 (x) Trade and other receivables, Trade and other payables and Key ratios - Harry Gwala District Municipality

Amount % of

total debt /

payables

125 692

143 665

3 891 2.7%

3 071 2.1%

2 543 1.8%

134 160 93.4%

143 665 100.0%

12 214 8.5%

11 146 7.8%

120 305 83.7%

– -

143 665 100.0%

10 954 42.1%

713 2.7%

322 1.2%

14 058 54.0%

26 047 100.0%

Norm/

Range

% Actual

25% - 40% 30.1%

2% - 5% 10.0%

- 19.2%

- 1.5%

10% - 20% 32.8%

= or > 0% -39.3%

Efficiency




Asset Management


Key Ratios




Grant dependency

61-90 days

>90 days



Creditor

By age analysis

0-30 days

31-60 days

Commercial

Other

61-90 days


By customer group

Organs of state

Households


By age analysis

0-30 days

31-60 days

>90 days

Comments

R'000

Debtor


The bulk of the municipality's outstanding debtors are in the Over 90 days category

due to historic debt that was inherited from the local municipalities in the Harry

Gwala District. The municipality has implemented a debt collection strategy

whereby 50 percent of each customer’s outstanding debt is written off if they are

able to make arrangements to pay the balance. However there has been a slow

response due to the large indigent customer base.

The bulk of Harry Gwala District Municipality's outstanding debtors by customer

group are in the Households category which consists of historic debt that was

inherited from the local municipalities in the Harry Gwala District.

The municipality has a total of R15.1 million (57.9 percent) Creditors outstanding

for periods greater that 30 days which is in contravention of Section 65(2)(e) of the


The municipality has an unaudited Operating deficit of R115.8 million for the

2015/16 financial year resulting in a net operating surplus margin which is less

than the recommended percentage. The municipality is encouraged to implement

measures to address this situation and ensure sustainable service delivery.

The ratio of 19.2 percent indicates that the municipality is heavily dependent on

Operating grants to fund its Operating activities. The municipality is encouraged to

formulate and implement strategies to increase its capacity to generate revenue

internally thereby reducing its grant dependency.

The ratio of 1.5 percent indicates that the municipality is heavily dependent on

Capital grants to fund its Capital expenditure. The municipality is encouraged to

implement strategies to build up Cash reserves and reduce grant dependency for



which is higher than the norm of between 10 and 20 percent. This is due to

incorrect information submitted to the LGdatabase. The ratio is therefore, not a true

reflection of the actual performance of the municipality.

Although the municipality's ratio of 30.1 percent is within the norm, it may be

distorted as a result of operating expenditure not being reported on a monthly

basis. The ratio is distorted as a result of expenditure not being reported on a monthly

259

Chapter 5: MFMA Implementation

5.1 2015/16 Mid–Year Budget and Performance Assessment Reports and Adjustments Budgets

5.1.1 Background

Section 72(1)(a) of the Municipal Finance Management Act, Act No. 56 of 2003 (MFMA) states that

the accounting officer of a municipality must by 25 January of each year assess the performance of

the municipality during the first half of the financial year. Section 72(3) of the MFMA further

requires that, as part of the review, the accounting officer must make recommendations on whether an

Adjustments Budget is necessary. Section 28(1) of the MFMA states that a municipality may revise an

approved annual budget through an Adjustments Budget. Section 28(2)(a-g) of the MFMA provides

scenarios for which municipalities would need to adjust their annual budget.

To ensure compliance with the requirements of the MFMA and the Municipal Budget and Reporting

Regulations (MBRR), Provincial Treasury issued Circular TC/RM 5 of 2015/16 on 07 December 2015

to all delegated municipalities providing guidance on the following:

Preparation of the 2015/16 Mid-Year Budget and Performance Assessment Report;

Format of a Mid-Year Budget and Performance Assessment Report;

Engagements with municipalities on the Mid-Year Budget and Performance Assessment Reports;

2015/16 Adjustments Budget Process;

Adjusted Allocations;

Separation of tabling dates for the Mid-Year Budget and Performance Assessment Report and the

Adjustments Budget;

Submission of the 2015/16 Mid-Year Budget and Performance Assessment Report and the

2015/16 Adjustments Budget; and

Publication of the 2015/16 Mid-Year Budget and Performance Assessment Report and the

2015/16 Adjustments Budget.

Subsequently, Provincial Treasury provided municipalities with a quick checklist in order to assist the

municipalities in the preparation of their Section 72 Mid-Year Budget and Performance Report as

well as the Adjustments Budget in December 2015 and again in January 2016.

5.1.2 Process for the submission, tabling and assessment of the 2015/16 mid-year budget and performance assessment reports

Submission of the 2015/16 Mid-Year Budget and performance Assessment Reports

As at 25 January 2016, 53 of the 58 delegated municipalities had submitted their 2015/16 Mid-Year

Budget and Performance Assessment Reports to Provincial Treasury. Letters for non-compliance

were sent to the 5 municipalities listed in Table 5.1, that did not submit their 2015/16 Mid-Year

Budget and Performance Assessments Reports to Provincial Treasury, thereby contravening Section

72(1)(b)(iii) of the MFMA. All these municipalities have subsequently submitted their 2014/15 Mid-

Year Budget and Performance Assessment Reports to Provincial Treasury.

260

Table 5.1: List of municipalities that did not submit their 2015/16 Mid-Year Budget and Performance

Assessment Reports to Provincial Treasury by 25 January 2016

No Name of municipality No Name of municipality No Name of municipality

1 Nquthu 3 Mthonjaneni 5 Vulamehlo

2 uPhongolo 4 Mandeni

Source: KZN Provincial Treasury

Tabling of the 2015/16 Mid-Year Budget and performance Assessment Reports

With the exception of the municipalities listed in Table 5.2, all delegated municipalities have tabled

their 2015/16 Mid-Year Budget and Performance Assessments to Council by 31 January 2016 as

required by Section 54(1)(f) of the MFMA. The 2015/16 Mid-Year Budget and Performance

Assessment Report for Abaqulusi, Jozini and Umzinyathi District Municipalities were subsequently

tabled on, 02 February 2016, 04 February 2016 and 11 February 2016, respectively.

Table 5.2: List of municipalities that did not table their 2015/16 Mid-Year Budget and Performance Assessment Reports to Council by 31 January 2016


1 Umzinyathi DM 2 Abaqulusi 3 Jozini


Uploading of the 2015/16 Mid-Year Budget and performance Assessment Reports onto

municipal website

The 20 municipalities listed in Table 5.3 did not upload their 2015/16 Mid-Year Budget and

Performance Assessments Reports on their municipal websites within 5 days of 25 January 2016,

thereby contravening Regulation 34(1) of the MBRR as well as Section 75(2) of the MFMA.

Table 5.3: List of the municipalities which did not upload their 2015/16 Mid -Year Budget and Performance Assessments Reports on their websites within 5 working days of 25 January 2016

No Name of Municipality No Name of Municipality No Name of Municipality

1 Vulamehlo 8 Umtshezi 15 eDumbe

2 uMuziwabantu 9 Imbabazane 16 uPhongolo

3 Ezinqolweni 10 Msinga 17 Abaqulusi

4 Mpofana 11 NewCastle 18 Nongoma

5 Impendle 12 Amajuba DM 19 Hlabisa

6 Umkhanyakude DM 13 Mfolozi 20 Ntambanana

7 Nkandla 14 Greater Kokstad


Tabling of the 2015/16 Mid-Year Budget and Performance Assessment Report together with the

2015/16 Adjustments Budget

Provincial Treasury requested the municipalities in Circular TC/RM 5 of 2015/16 not to table their

2015/16 Mid-Year Budget and Performance Assessment Reports together with their 2015/16

Adjustments Budgets. This was to allow Provincial Treasury sufficient time to assess the Mid-Year

Budget and Performance Assessment Reports with a view of Provincial Treasury providing comments

on the Mid-Year Reports which would influence the 2015/16 Adjustments Budgets. Despite this

request, the municipalities listed in Table 5.4 tabled their 2015/16 Mid-Year Budget and Performance

Assessment Reports together with the Adjustments Budget. Provincial Treasury was therefore, unable

to conduct a comprehensive assessment for these municipalities and thus, a high level assessment

highlighting the main issues was undertaken and communicated to these municipalities.

261

Table 5.4: List of the municipalities which tabled their 2015/16 Mid -Year Budget and Performance Assessments Reports together with their 2015/16 Adjustments Budget


1 Umdoni 2 Indaka 3 Nongoma

4 Umzumbe


Engagements on the 2015/16 Mid-Year Budget and Performance Assessments Reports

In line with the monitoring and oversight roles in terms of Section 5 of the MFMA, Provincial

Treasury conducted bi-lateral engagements with the delegated municipalities on their 2015/16 Mid-

Year Budget and Performance Assessments. The aim of engagements was not only to assess and

review the progress made on the implementation of 2015/16 Budgets, but also to influence the

2015/16 Adjustments Budget process.

In order to improve on the quality of bilateral engagements with the municipalities, the Supply Chain

Management Unit was invited to participate at the engagements. Due to a large number of

municipalities in the province, it was not feasible to conduct the joint engagements with all the

municipalities but to select those to be visited for the joint engagements. The same 13 municipalities

indicated in Table 5.5 which were selected for joint engagements on their 2014/15 Mid-Year Budget

and Performance Assessment Reports and Adjustments Budget were again selected to be engaged in

2015/16 in order to assess progress made by these municipalities. 12 of the 13 municipalities were

engaged with the SCM Unit, however, Provincial Treasury could not engage Mtubatuba Municipality

due to the unavailability of the relevant municipal officials.

Table 5.5: Municipalities selected for joint engagements on their 2015/16 Mid Year Budget and

Performance Assessments

No Name of municipality No Name of municipality No Name of municipality No Name of municipality No Name of municipality

1 Ugu DM 4 Endumeni 7 Amajuba DM 10 Mtubatuba 13 Greater Kokstad

2 Mpofana 5 Umziny athi DM 8 Abaqulusi 11 Mfolozi

3 Uthukela DM 6 Umv oti 9 Hlabisa 12 Jozini


The following key focus areas were on the agenda for the engagements, amongst others:

The actual mid-year results for the 2015/16 financial year;

Cash flow Position and projections;

Infrastructure delivery achievements against the Infrastructure Plan of the municipality for

2015/16;

Performance and spending of all national and provincial conditional grants and progress made in

achieving the grant conditions for 2015/16;

The preparation of the 2015/16 Adjustments Budget and inputs thereto;

Progress made on the preparation of the 2015/16 Revised Procurement Plan;

Progress made on the preparation of the 2016/17 Procurement Plan; and

Progress made in achieving the milestones and timelines specified in the approved 2016/17

Budget, IDP and Schedule of Key Deadlines.

In total, engagements on the 2015/16 Mid-Year Budget and Performance Assessments Reports were

conducted with 44 municipalities including the 12 municipalities discussed above. Table 5.6 lists the

44 municipalities which were engaged on their 2015/16 Mid-Year Budget and Performance

Assessments Reports.

262

Table 5.6: List of the 44 Municipalities which were engaged on their 2015/16 Mid Year Budget and

Performance Assessments

No Name of municipality

Date of

Engagement No Name of municipality

Date of

Engagement No Name of municipality

Date of

Engagement

1 Vulamehlo 19-Feb-16 17 Umv oti 16-Feb-16 33 Mthonjaneni 18-Feb-16

2 uMuziw abantu 15-Feb-16 18 Umziny athi DM 10-Feb-16 34 Nkandla 18-Feb-16

3 Ezinqolw eni 15-Feb-16 19 New castle 19-Feb-16 35 uThungulu DM 16-Feb-16

4 Hibiscus Coast 08-Feb-16 20 Amajuba DM 09-Feb-16 36 Kw aDukuza 05-Feb-16

5 Ugu DM 16-Feb-16 21 eDumbe 17-Feb-16 37 Ndw edw e 16-Feb-16

6 uMshw athi 18-Feb-16 22 uPhongolo 22-Feb-16 38 Maphumulo 12-Feb-16

7 uMngeni 15-Feb-16 23 Abaqulusi 10-Feb-16 39 Ingw e 17-Feb-16

8 Mpofana 09-Feb-16 24 Ulundi 12-Feb-16 40 Kw a Sani 19-Feb-16

9 Impendle 11-Feb-16 25 Zululand DM 16-Feb-16 41 Greater Kokstad 23-Feb-16

10 Mkhambathini 17-Feb-16 26 Jozini 10-Feb-16 42 Ubuhlebezw e 16-Feb-16

11 Emnambithi/Lady smith 03-Feb-16 27 Big Fiv e False Bay 17-Feb-16 43 Umzimkhulu 11-Feb-16

12 Indaka 18-Feb-16 28 Hlabisa 11-Feb-16 44 Harry Gw ala DM 17-Feb-16

13 Umtshezi 19-Feb-16 29 Umkhany akude DM 17-Feb-16

14 Okhahlamba 10-Feb-16 30 Mfolozi 08-Feb-16

15 Uthukela DM 18-Feb-16 31 Ntambanana 17-Feb-16

16 Endumeni 15-Feb-16 32 Umlalazi 16-Feb-16


The remaining municipalities were not engaged due to the following:

Tabling the 2015/16 Mid-Year Budget and Performance Assessment report together with the

2015/16 Adjustments Budget;

Unavailability of municipal officials on proposed engagements dates despite Provincial Treasury

providing them with alternative dates; or

The Mid-Year Budget Performance Assessment Report was poorly populated and consequently an

assessment could not be undertaken.

5.1.3 Process for the submission, tabling and assessment of the 2015/16 adjustments budget

When the annual budget has been adjusted, the municipality should table their Adjustments Budget to

Council at any time after the Mid-Year Budget and Performance Assessment has been tabled in

Council but not later than 28 February of the current year as required by Regulation 23(1) of the

MBRR.

Tabling of the 2015/16 Adjustments Budget

As at 28 February 2016, 55 of the 58 delegated municipalities tabled their 2015/16 Adjustments

Budgets in Council with the exception of 3 municipalities listed in Table 5.7. Subsequent to receiving

an MEC Non-compliance letter, the 3 municipalities tabled their 2015/16 Adjustments Budget.

Table 5.7: List of municipalities that did not table the 2015/16 Adjustments Budgets by 28 February 2016


1 Zululand DM 2 eDumbe 3 Maphumulo Source: KZN Provincial Treasury

263

Submission of the 2015/16 Adjustments Budget

eMadlangeni Municipality is the only municipality that submitted their 2015/16 Adjustments Budget

after the legislated deadline of 10 working days after tabling in Council. A non-compliance letter was

sent to the municipality accordingly.

Assessment of the 2015/16 Adjustments Budget

The 13 municipalities’ tabled Adjustments Budget listed in Table 5.8; were assessed by Provincial

Treasury to be unfunded. Only Maphumulo Municipality (04 April 2016); Hlabisa Municipality (27

May 2016) and uMshwathi (30 March 2016) subsequently tabled funded Adjustments Budget in

Council. The remaining municipalities did not resubmit funded Adjustments Budgets to Provincial

Treasury as requested.

Table 5.8: Unfunded 2015/16 Adjustments Budget

No Name of municipality No Name of municipality No Name of municipality No Name of municipality No Name of municipality

1 Umtshezi 4 Amajuba DM 7 iLembe DM 10 Hlabisa 13 Abaqulusi

2 Harry Gwala DM 5 eDumbe 8 Umkhanyakude DM 11 Umshwathi

3 Umvoti 6 uPhongolo 9 Maphumulo 12 Mpofana Source: KZN Provincial Treasury

For the 5 municipalities listed in Table 5.9, Provincial Treasury could not determine the true funding

position of these municipalities due to the poor population of Cash Flow Tables B7 and B8.

Table 5.9: Funding position of the 2015/16 Adjustments Budget could not be established


1 Nongoma 3 Zululand DM 5 Ntambanana

2 Ulundi 4 Mthonjaneni


These municipalities did not resubmit a funded Adjustments Budget within 3 working days as

requested by Provincial Treasury. Their Adjustments Budgets were thus classified as unfunded, which

increased the total of number of unfunded 2015/16 Adjustment Budgets to 18 for purposes of

reporting to National Treasury.

5.2 2016/17 Budget Evaluation Process

5.2.1 Annual Budget Process

The annual municipal budget cycle is shown in Figure 18 while Figure 19 illustrates timeframes in the

Budget Process Cycle. The cycle starts in July when the municipalities prepare their budget timetables

which sets out the key actions and timeframes required to ensure that the annual budget process and

the review of the Integrated Development Plan (IDP) are completed before the start of the next budget

year. The key milestones in the municipal budget cycle are the tabling of the budget in Council by 31

March, the subsequent public participation process, the consideration of the budget for approval in

Council by 31 May and the approval of the budget by Council on or before 30 June.

264

Figure 18

Annual Budget Cycle

Start of the budget year

July to AugustMayor tables budget timetable in Council

September to FebruaryReview IDP and budget policies

Prepare budget

May to JuneCouncil considers and

approves budget

April Consultation on tabled

budgets

MarchMayor tables budget in

Council

Figure 19

In this regard, 49 of the 58 delegated municipalities timeously tabled their Time schedule outlining

key deadlines by 31 August 2015 as per the requirements of the MFMA. Table 5.10 lists the 9

municipalities which did not table their Time schedule outlining key deadlines by the 31 August 2015.

Table 5.10: Municipalities which did not table their 2016/17 Time schedule outlining key deadlines by

31 August 2015


1 iLembe 4 Indaka 7 Nongoma

2 Umdoni 5 Umvoti 8 uMlalazi

3 Umzumbe 6 uPhongolo 9 Maphumulo


However, all the municipalities listed above subsequently tabled their 2016/17 Time schedule

outlining their key deadlines.

The illustrative time frames in the Budget Process Cycle Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

Mayor tables Budget Timetable Mayor reviews IDP and previous Annual Report Review financial policies, e.g. rates, tariffs etc. Refine Tabled Budget before adoption by Council Opex and Capex Budget tabled in Council Stakeholders consultation process Finalise and approve financial policies Approve business plans, prepare SDBIP and performance contracts Council approves Budget and IDP revisions Council publishes new tariff structures Approved Budget made public and posted on website Mayor approves SDBIP and performance agreements are concluded IDP Report to MEC: Local Government Submission of Tabled Budget to Provincial/National Treasury Submission of Approval Budget to Provincial/National Treasury

Tabling of Budget

Approving Budget

Reporting

Preparation Phase

265

5.2.2 Budget preparation

Section 5(4)(a)(ii) of the MFMA states: to the extent necessary to comply with subsection (3), a

Provincial Treasury must monitor the preparation by municipalities in the province of their budgets.

Furthermore, Section 5(4)(b) of the MFMA states: a Provincial Treasury may assist municipalities in

the province in the preparation of their budgets.

As part of the budget preparation process, all municipalities which provide Electricity are expected to

submit their applications for a tariff increase in line with Section 43 of MFMA to the National Energy

Regulator of South Africa (NERSA). To ensure an improved quality of submitted applications for

tariff increases, NERSA jointly with Provincial Treasury conducted a two day workshop from 1 to 2

October 2015 in Pietermaritzburg. The purpose of the workshop was mainly to highlight the correct

process of completing and submitting the relevant application forms as well as meeting the deadlines

for various processes. The workshop was conducted for all delegated and non-delegated

municipalities which are licenced to provide the electricity service. With the exception of officials

from the Umkhanyakude District Municipality, 76 municipal officials from 25 municipalities attended

the workshop.

Furthermore, Provincial Treasury provided on-site technical support to a number of delegated

municipalities with a view of ensuring amongst others:

That the correct version 2.8 of Schedule A1 of the prescribed Budget format is used in the

2016/17 Budget preparation;

That the 2016/17 MTREF budgets incorporate the requirements of the latest budget circulars,

namely, MFMA Circulars No. 78 and 79; and

To support the Pre-election and post-election municipalities to ensure that the correct grant

allocation amounts are applied in the 2016/17 MTREF budget preparation process.

To further guide municipalities in the preparation of the 2016/17 budgets and to monitor compliance

with the Municipal Budget and Reporting Regulations (MBRR) format, Provincial Treasury issued

Provincial Treasury Circular (TC/RM7 of 2015/16 dated 13 March 2016) to municipalities. The

circular covered the following main reporting areas:

Format requirements for the 2016/17 MTREF Municipal Budget;

Re-determination of Municipal Boundaries;

2016/17 Budget Verification Process;

Further matters for consideration in the 2016/17 Budget Process;

Hand-over report for the newly elected council;

Municipal Standard Chart of Accounts (mSCOA);

Cost Containment Measures;

Funding of the 2016/17 MTREF Budgets;

Provincial Transfers to Municipalities (Annexure A);

Budget Steering Committee (BSC);

Service Delivery and Budget Implementation Plans (SDBIPs);

Preparation of the Municipal Budget Working Paper File (Annexure C);

2016/17 Budget Preparation Checklist;

Budget Documents Required;

266

Certification that the Budget is correctly captured and locked in the Financial System;

Publication of budgets on municipal websites;

Budget Submission Process; and

Annexures.

5.2.3 2016/17 Budget Evaluation

Tabling of the 2016/17 Budgets

Section 16(2) of the MFMA states that, the Mayor of the municipality must table the annual budget at

a Council meeting at least 90 days before the start of the budget year.

With the exception of Ingwe Municipality, all delegated municipalities tabled their 2016/17 Budgets

in Council by 31 March 2016.

Ingwe Municipality requested the extension for the late tabling of their 2016/17 Budget in line with

Section 27(1) of MFMA from the MEC for Finance and the extension was granted accordingly.

Subsequently, Ingwe Municipality tabled their 2016/17 Budget on 6 May 2016.

Status of the 2016/17 Budgets Assessments/Evaluations

Section 22(b)(i) of the MFMA requires that immediately after an annual budget is tabled in a

municipal Council, the annual budget must be submitted to National and Provincial Treasury in both

printed and electronic format.

Upon the receipt of the Tabled 2016/17 municipal budgets, Provincial Treasury conducted budget

assessments and provided comments to the municipalities as per the requirement of Section 23(1) of

the MFMA.

The assessment process also included compliance checks on all tabled budgets received to establish

the level of compliance with the requirements of the MFMA and MBRR in general and to verify

amongst others whether:

The tabled budgets submitted were in the correct version (version 2.8 of Schedule A1) of the

prescribed format (A Schedule);

The information provided in the main budget Tables (A1 to A10) and supporting Tables (SA1-

SA37) reconcile to the electronic budget returns submitted to [email protected]; and

The information is sufficient to enable the assessments of the Tabled Budgets.

The Tabled 2016/17 Budgets for all delegated municipalities were found to be in correct format of

version 2.8 of Schedule A1 and provided sufficient basis for assessments by Provincial Treasury.

Of 58 Tabled Budgets assessed, Provincial Treasury determined that only 25 Tabled Budgets were

Funded, 16 were Unfunded while it could not be determined whether the Tabled Budgets for the

remaining of 17 municipalities were Funded or Unfunded.

Provincial Treasury continued to support the delegated municipalities throughout the 2016/17 Budget

preparation process including the bilateral meetings with 50 municipalities to discuss Provincial

Treasury’s Comments and Assessments of Tabled Budgets prior to approval of these Budgets.

The MEC for Finance also wrote letters to the Mayors of 33 municipalities whose 2016/17 Tabled

Budgets were not Funded. The Mayors were required to ensure that the 2016/17 Budget to be

approved by the Council in terms of Section 24(1) of the MFMA is Funded.

mailto:[email protected]

267

5.2.4 High Level Assessment of 2016/17 Approved Budgets

As per Section 24(1) of the MFMA, the municipal council must at least 30 days before the start of the

budget year consider approval of the annual budget, while Section 25(1) of the MFMA stipulates that

if a municipal council fails to approve an annual budget, including revenue-raising measures

necessary to give effect to the budget, the council must reconsider the budget and again vote on the

budget, or on an amended version thereof, within seven days of the council meeting that fails to

approve the budget.

With exception of Ingwe Municipality, all the delegated municipalities tabled their 2016/17 Budgets

for consideration 30 days before the start of the budget year. All the budgets were approved as per

Section 24(2) of the MFMA on the same day of tabling with exception of the Umkhanyakude District

Municipality which approved their budget on 07 June 2016. Ingwe Municipality considered and

approved their 2016/17 Budget on 02 June 2016.

Provincial Treasury conducted a high level assessment of the 2016/17 Approved Budgets of the 58

KZN delegated municipalities with a view of establishing whether the comments and

recommendation by Provincial Treasury were considered in the 2016/17 Approved Budget. The

municipalities whose 2016/17 Approved Budgets were not Funded have been afforded an opportunity

to rectify such challenges through an Adjustments Budget, failing which, the MEC for Finance in the

Province will report the errant municipalities to National Treasury to consider the stopping of their

Equitable Share transfers in term of Section 38 of the MFMA.

5.2.5 Summary of 2016/17 Budget Process

A summary of the outcome on the 2016/17 municipal budget assessment process is shown in Table

5.11:

Table 5.11: Summary of the outcomes on the 2016/17 Budget Assessment Process

Budget No of Budgets Name of municipality

2016/17 Tabled Budgets

Budget tabled late (after 31 March) 1 Ingwe

Budgets received 58

Budgets evaluated 58

Funded Budgets 25

Unfunded Budgets 16

Undetermined Budgets whether Funded or not Funded 17

2016/17 Approved Budgets

Budget not considered for Approval by 31 May 2016 1 Ingwe

Budgets approved in correct formats (Version 2.8 of A1 Schedule) 58

Budgets received (Electronic copies) 58

Budgets received (Hard copies) 58

High level assessments conducted on Approved Budgets 58

Funded Budgets 41

Unfunded Budgets 13

Undetermined Budgets whether Funded or not Funded 4


Provincial Treasury also conducted High level assessments on the 2016/17 Budgets of the Post-

election municipalities. Post-election municipalities are the municipalities which have been

established based on the process of re-determination of demarcation boundaries. The process includes

amongst others, the dis-establishment of some of the municipalities which will be merged to form

new municipalities effectively from the date of the Local government elections held on 03 August

268

2016. With exception of the Inkosi Langalibalele Municipality, the 2016/17 Budgets for the Post-

election municipalities were Funded.

Table 5.12: Post -election municipalities whose 2016/17 Budgets were assessed

Pre-election Municipalities No Post- election Municipalities

Ingw e

Kw a Sani

Ezinqolw eni

Hibiscus Coast

Emnambithi/Lady smith

Indaka

Umtshezi

Imbabazane

The Big Fiv e False Bay

Hlabisa

Ntambanana

Mthonjaneni

Vulamehlo

Umdoni

1 Dr Nkosazana Dlamini Zuma (KZN436)

2 Ray Nkony eni (KZN216)

3 Alfred Duma (KZN238)

7 Umdoni (KZN212)

4 iNkosi Langalibalele (KZN237)

5 Big Fiv e Hlabisa (KZN276)

6 Mthonjaneni (KZN285)


5.3 Non Compliance with the Division of Revenue Act and Municipal Finance Management Act Reporting Requirements

Municipalities are required to comply with the Division of Revenue Act, Act No. 1 of 2015 (DoRA)

and MFMA reporting requirements. The MEC for Finance issues circulars to Mayors regarding non-

compliance with DoRA and the MFMA twice a year. Despite previously issued non-compliance

circulars, it is of serious concern that a number of municipalities in KwaZulu-Natal are still not fully

complying with all the reporting requirements of the DoRA and MFMA.

Following the reports submitted for the fourth quarter of the 2015/16 financial year, it emerged that a

number of municipalities in the province are either failing to comply with ALL the reporting

requirements as set out in the different sections of the MFMA and DoRA or are submitting reports for

compliance purposes only without ensuring the accuracy of the information submitted.

Both National and Provincial Treasuries have provided support and training to assist municipalities in

meeting their reporting requirements and can no longer allow any deliberate or inadvertent non-

compliance with the law. During the 2015/16 financial year, Provincial Treasury reported non-

compliance with the MFMA and DoRA reporting requirements to the KwaZulu-Natal Provincial

Legislature on a quarterly basis through the Section 71(7) report, where the MEC for Finance is

required to submit a consolidated statement on the state of municipalities’ budgets. The tables below

list some of the important MFMA and DoRA reporting requirements that have not been complied

with by municipalities together with a list of those municipalities who did not fully comply with these

reporting requirements as noted in Provincial Treasury Circular TC/RM 2 of 2016/17 issued on 12

August 2016.

5.3.1 MFMA Implementation Plan

National Treasury issued MFMA Circular No. 7 “MFMA Implementation Plan Template” on

23 September 2004. All municipalities were required to prepare and submit the MFMA

Implementation Plan indicating how they would implement the MFMA reforms. The MFMA

Implementation Plan should be used by municipalities to enable them to achieve compliance with

relevant legislation. Municipalities are required to establish a steering committee to manage and

oversee, inter alia the MFMA Implementation Plan. The MFMA Implementation Plan for 2015/16

269

was due on 31 October 2015. As at 25 July 2016, the municipalities shown in Table 5.13 had still not

submitted their 2015/16 MFMA Implementation Plans.

Table 5.13: List of the municipalities that did not submit their MFMA implementation plan for the 2015/16

financial year


1 Umzumbe 5 Nquthu 9 Ntambanana

2 Ezinqoleni 6 Ubuhlebezwe 10 Mthonjaneni

3 Hibiscus Coast 7 Msinga 11 Ndwedwe

4 Mpofana 8 Hlabisa


5.3.2 2015/16 Budget Returns (Appendix B) and Annual Returns

In terms of Section 22(b) of the MFMA, the accounting officer of the municipality must submit the

annual budget -

(i) in both printed and electronic formats to the National Treasury and the relevant Provincial

Treasury; and

(ii) in either format to any prescribed national or provincial organs of the state and to other

municipalities affected by the budget.”

The budget figures from Appendix B: Budget Returns are utilised by National Treasury for the

quarterly publication on municipal financial performance. National Treasury further administers the

LG Database to which the municipalities submit various monthly, quarterly and annual reports, as the

department endeavours to maintain accurate and complete financial information on all municipalities

for planning, reporting and decision making purposes. Table 5.14 shows the municipalities that have

not uploaded/submitted all of their relevant returns. The non-complying municipalities were identified

from the National Treasury database report dated 25 July 2016.

Table 5.14: List of municipalities that have not submitted the Appendix B Budget Returns Forms and

Annual Returns as at 25 July 2016

No Name of Returns Period Non Compliant Municipalities

1 Age Creditors Audited 2014/15 eDumbe

2 Age Debtors Audited 2014/15 eDumbe and Ulundi

3 Asset Management Audited 2014/15 Harry Gw ala DM, Hibiscus Coast, Nquthu, Uthukela DM, eDumbe,

Nongoma, uPhongolo, Mthonjaneni and uMlalazi

4 Financial Position Audited 2014/15 eDumbe

5 Capital Acquisition Audited 2014/15 eDumbe

6 Cash Flow Audited 2014/15 Hibiscus Coast, eDumbe and Mthonjaneni

7 Financial Perform Audited 2014/15 eDumbe and Mpofana

8 Asset Management Budgeted 2015/16 Harry Gw ala DM, Hibiscus Coast, Nquthu, Uthukela DM, eDumbe,

Nongoma, Ulundi, uPhongolo, Mthonjaneni and uMlalazi

9 Cash Flow Budgeted 2015/16 Hibiscus Coast, eDumbe and Mthonjaneni

10 Grant And Subsidies Giv en 2015/16 Hibiscus Coast and Mpofana

11 Grant And Subsidies Receiv ed 2015/16 Mpofana

12 IDP to Budget 2015/16 Ezinqoleni, Hibiscus Coast, Mpofana, Mfolozi and Ntambanana


270

5.3.3 2015/16 Section 71 Monthly Returns

In terms of Section 71(1) of the MFMA, the accounting officer of a municipality must by no later than

10 working days after the end of each month submit to the mayor of the municipality and the relevant

Provincial Treasury a statement in the prescribed format on the state of the municipality’s budget

reflecting the following particulars for that month and for the financial year up to the end of that

month:

(a) actual revenue, per revenue source;

(b) actual borrowings;

(c) actual expenditure, per vote;

(d) actual capital expenditure, per vote;

(e) the amount of any allocations received;

(f) actual expenditure of those allocations.

The Section 71 Monthly Returns are divided into two categories, namely the monthly Budget Reform

Returns and the Conditional Grants Returns.

As at 25 July 2016, the monthly returns shown in Table 5.15 had not been submitted to the local

government database.

271

Table 5.15: List of municipalities that did not submit the monthly returns No Name of Returns Period Non Compliant Municipalities

1 Age Creditors April 2016 Mpofana

May 2016 Hlabisa

June 2016 eMadlangeni, Greater Kokstad, Harry Gw ala DM,

Hlabisa, Jozini, Msinga, Nquthu, Imbabazane,

Abaqulusi, Ulundi, Mpofana and Ntambanana

2 Age Debtors January 2016 Umv oti and uPhongolo

February 2016 Ulundi

April 2016 Hlabisa, Ulundi and Mpofana

May 2016 eMadlangeni, Ubuhlebezw e, Umzimkhulu and Hlabisa

June 2016 eMadlangeni, Harry Gw ala DM, Hlabisa, Msinga,

Nquthu, Imbabazane, Ulundi, Mpofana and

Ntambanana

3 Financial Position July 2016 Ulundi

January 2016 Hibiscus Coast

April 2016 Hibiscus Coast, Hlabisa, Msinga, Nquthu, Uthukela

DM, Nongoma and Mpofana

May 2016 Hibiscus Coast, Hlabisa, Msinga, Uthukela DM,

Nongoma and Mandeni

June 2016 Dannhauser, eMadlangeni, New castle, Harry Gw ala

DM, Ingw e, Hlabisa, Msinga, Nquthu, Imbabazane,

Nongoma, Ulundi, Mandeni, Mpofana and

Ntambanana

4 Capital Acquisition Actuals February 2016 Abaqulusi and Ulundi

March 2016 Greater Kokstad

April 2016 Hlabisa and Msinga

May 2016 Ubuhlebezw e, Hlabisa, Msinga, Umv oti and

Emnambithi/Lady smith

June 2016 eMadlangeni, Ubuhlebezw e, Hlabisa, Jozini, Msinga,

Nquthu, Emnambithi/Lady smith, Imbabazane, Ulundi,

Mpofana and Ntambanana

5 Cash Flow Actuals January 2016 Hibiscus Coast

February 2016 Hibiscus Coast

March 2016 Hibiscus Coast

April 2016 Hibiscus Coast, Hlabisa, Ulundi and Mpofana

May 2016 New castle, Hibiscus Coast, uMuziw abantu, Hlabisa

and Ulundi

June 2016 eMadlangeni, New castle, Greater Kokstad, Harry

Gw ala DM, Hibiscus Coast, Hlabisa, Msinga, Nquthu,

Imbabazane, Ulundi and Ntambanana

6 Repairs and Maintenance May 2016 Hibiscus Coast, Hlabisa and Umv oti

June 2016 eMadlangeni, Hlabisa, Msinga, Nquthu, Imbabazane,

Uthukela DM, Abaqulusi, Ulundi and Ntambanana


5.3.4 2015/16 Quarterly Returns

Section 74(1) of the MFMA states that the accounting officer of a municipality must submit to the

National Treasury, the Provincial Treasury, the department for local government in the province or

the Auditor-General such information, returns, documents, explanations and motivations as may be

prescribed or as may be required.

National Treasury has prescribed that the quarterly returns must be submitted on borrowings,

investments, long term contracts, municipal entities, the implementation of the MFMA priorities (as

specified in MFMA Circular No. 38) and public-private partnerships. Table 5.16 shows the list of

municipalities that did not submit the required quarterly returns for 2015/16 as at 25 July 2016.

It should be noted that Table 5.16 also shows municipalities that do not have a municipal entity,

however were still required to submit a MFMA Municipal Entity return with nil information.

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Table 5.16: List of the municipalities that did not submit the different quarterly returns for the 2015/16

financial year

No QuarterBorrowings

Monitoring

MFMA Long Term

Contracts

MFMA Municipal

Entity

MFMA Implementation

Priorities

Investment

Monitoring

1 Quarter 1 Abaqulusi Amajuba DM

Uthukela DM

2 Quarter 2 Hibiscus Coast Amajuba DM

Harry Gw ala DM

Ezinqoleni

Uthukela DM

Abaqulusi

Ulundi

Harry Gw ala DM

Ezinqoleni

Nongoma

Ulundi

Mpofana

3 Quarter 3 Msinga

Mpofana

Amajuba DM

Ubuhlebezw e

Msinga

Uthukela DM

Abaqulusi

Ulundi

uPhongolo

Mpofana

Ntambanana

Amajuba DM

eMadlangeni

Ubuhlebezw e

Ezinqoleni

Msinga

Nquthu

Uthukela DM

Ulundi

Ntambanana

eMadlangeni

Ezinqoleni

Msinga

Mpofana

Ntambanana

Msinga

eDumbe

uPhongolo

Mpofana

4 Quarter 4 Umv oti uMuziw abantu

eDumbe

Umdoni

eDumbe Source: NT Lgdatabase

5.3.5 2015/16 Conditional Grants Returns

In terms of Section 12(2)(b) of the 2015 DoRA, a municipality must, as part of the report required in

terms of Section 71 of the MFMA, report on their grant expenditure to the relevant Provincial

Treasury, the National Treasury and the relevant transferring national officer.

Section 12(4) of 2015 DoRA further specifies that the report by a municipality in terms of Section

2(b) must set out for that month and for the financial year up to the end of that month:

(a) the amount received by the municipality;

(b) the amount of funds stopped or withheld from the municipality;

(c) the extent of compliance with this Act and with the conditions of an allocation or part of an

allocation provided for in a framework;

(d) an explanation of any material problems experienced by the municipalityregarding an allocation

which has been received and a summary of the steps taken to deal with such problems;

(e) any matter or information that may be prescribed in the relevant framework for the particular

allocation; and

(f) such other issues and information as the National Treasury may determine.

Table 5.17 shows a list of the municipalities that did not submit the monthly conditional grants returns

for the 2015/16 financial year as at 25 July 2016.

273

Table 5.17: Municipalities that did not submit the monthly conditional grants returns for the 2015/16

financial year

No Name of Returns Period Non Compliant Municipalities

1 Municipal Disaster Grant May 2016 Umv oti and Emnambithi/Lady smith

June 2016 Umdoni and Emnambithi/Lady smith

2 Energy Efficiency And Demand Management Grant June 2016 Greater Kokstad

3 Finance Management Grant February 2016 Abaqulusi

March 2016 Abaqulusi

April 2016 Hlabisa and Abaqulusi

May 2016 Hlabisa and Abaqulusi

June 2016 Dannhauser, Greater Kokstad, Hlabisa, Msinga, Nquthu,

Emnambithi/Lady smith, Imbabazane, Uthukela DM,

Abaqulusi, eDumbe and Ulundi

4 Integrated National Electrification Programme May 2016 Hlabisa, Umv oti and Emnambithi/Lady smith

June 2016 eMadlangeni, Hlabisa, Msinga, Nquthu,

Emnambithi/Lady smith, Imbabazane, Abaqulusi, eDumbe,

Ulundi, and Maphumulo

5 Municipal Demarcation Transition Grant March 2016 Ntambanana

May 2016 Hlabisa

June 2016 Hlabisa

6 Municipal Infrastructure Grant May 2016 Hlabisa, Umv oti and Abaqulusi

June 2016 Greater Kokstad, Hlabisa, Msinga, Nquthu,



7 Municipal Sy stems Improv ement Programme Grant December 2015 Ulundi

April 2016 Hlabisa

May 2016 Hlabisa, Umv oti and Emnambithi/Lady smith




8 Municipal Water Infrastructure Grant June 2016 Uthukela DM

9 Ex panded Public Works Programme Grant December 2015 Ulundi

February 2016 Nquthu

May 2016 Hlabisa, Umv oti and Emnambithi/Lady smith




10 Rural Roads Asset Management Grant June 2016 Uthukela DM

11 Water Serv ice Operating Subsidy Grant June 2016 Uthukela DM


5.3.6 2015/16 Verification of Figures for Quarter 4

Provincial Treasury is concerned about the reliability of budget and expenditure figures published by

National Treasury. It was noted in the past that there has been discrepancies in the data submitted to

the Local Government Database by municipalities. To ensure that the figures published by National

Treasury are reliable, it is imperative that municipalities scrutinise, verify and sign-off the

verifications schedules sent to them by National Treasury on a quarterly basis.

There are four quarterly verification schedules, namely:

(a) Statement of Operating and Capital Expenditure (Section 71 Verification);

(b) Conditional Grants Actual Transfers and Expenditure Schedule (Grant Verification);

(c) Borrowing monitoring Schedule; and

(d) Investment monitoring Schedule.

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Table 5.18: List of municipalities that did not submit their Quarter 4 signed verifications to National

Treasury by 25 July 2016

No Section 71 Conditional Grants Borrowing Monitoring Investment Monitoring

1 Vulamehlo Vulamehlo Vulamehlo Vulamehlo

2 Umdoni Umdoni Umdoni Umdoni

3 Hibiscus Coast Ezinqoleni Hibiscus Coast Hibiscus Coast

4 Ugu DM Hibiscus Coast Ugu DM Ugu DM

5 Mpofana Ugu DM Mpofana Mpofana

6 Impendle Mpofana Endumeni Endumeni

7 Imbabazane Impendle Nquthu Nquthu

8 Nquthu Imbabazane New castle New castle

9 New castle Nquthu eMadlangeni eMadlangeni

10 eMadlangeni Umv oti Dannhauser Dannhauser

11 Dannhauser New castle Abaqulusi uPhongolo

12 eDumbe eMadlangeni Ulundi Abaqulusi

13 Abaqulusi Dannhauser Zululand DM Ulundi

14 Ulundi Abaqulusi Ntambanana Zululand DM

15 Zululand DM Ulundi Mthonjaneni Ntambanana

16 Hlabisa Hlabisa

17 Ntambanana Ntambanana

18 Ubuhlebezw e Mthonjaneni Source: NT Lgdatabase

5.3.7 Publication of Section 75 Information on Municipal Websites

In terms of Section 75(1) of the MFMA, municipalities are required to place the following documents

on their municipal websites:

a) The annual and adjustments budgets and all budget-related documents;

b) All budget-related policies;

c) Annual Report;

d) All performance agreements required in terms of Section 57(1)(b)of the Municipal Systems Act;

e) All service delivery agreements;

f) All long-term borrowing contracts;

g) All supply chain management contracts above a prescribed value;

h) An information statement containing a list of assets over a prescribed value that have been

disposed of in terms of Section 14(2) or (4) during the previous quarter;

i) Contracts to which subsection (1) of Section 33 apply, subject to Subsection (3) of that Section;

j) Public-private partnership agreements referred to in Section 120;

k) All quarterly reports tabled in the council in terms of Section 52(d); and

l) Any other documents that must be placed on the website in terms of this Act or any other

applicable legislation, or as may be prescribed.

Section 75(2) of the MFMA further requires that documents must be uploaded on the website not later

than five working days after tabling in Council, or on the date on which they must be made public,

whichever occurs first.

275

As at 25 July 2016, the municipalities shown in Table 5.19 had not uploaded majority of the required

documents on their websites:

Table 5.19: List of the municipalities that did not place majority of the required documents on their

websites

No Non Compliant Municipalities No Non Compliant Municipalities No Non Compliant Municipalities

1 Vulamehlo 5 uPhongolo 9 Mpofana

2 uMuziwabantu 6 Abaqulusi 10 Newcastle

3 uMshwathi 7 Nongoma 11 Ntambanana

4 Umkhanyakude DM 8 Impendle Source: Municipal Websites

5.3.8 Financial Management Grant (FMG) Conditions/Appointment of Municipal Interns

In terms of the FMG conditions published in the 2015 DoRA, the grant may be utilised for amongst

others, the establishment of a Budget and Treasury Office with positions filled by appropriately

qualified personnel and the appointment of a minimum of five interns over a multi-year period. As at

25 July 2016, the municipalities shown in Table 5.20 had not appointed five interns.

Table 5.20: List of the municipalities that did not appoint five interns No Non Compliant Municipalities No Non Compliant Municipalities No Non Compliant Municipalities

1 Vulamehlo 6 Nquthu 11 Mpofana

2 Mthonjaneni 7 Umzinyathi DM 12 uMgungundlovu DM

3 Umdoni 8 Umzumbe 13 Ugu DM

4 uMshwathi 9 eMadlangeni

5 Emnambithi/ Ladysmith 10 Impendle Source: KZN Provincial Treasury

5.3.9 2015/16 MFMA Competency Level Return (S1)

Section 14(1) of the Municipal Regulations on Minimum Competency Levels states that the municipal

manager of the municipality and chief executive officer of a municipal entity must monitor the

compliance with the prescribed minimum competency levels of financial and supply chain

management officials. Section 14(2) states further that such information must be reported to National

Treasury and the relevant Provincial Treasury by 30 January and 30 July of each year.

As at 25 July 2016, municipalities shown in Table 5.21 had not submitted the relevant return

pertaining to the minimum competency levels for the first half of the 2015/16 financial year, which

was due on 30 January 2016.

Table 5.21: List of the municipalities that had not submitted the minimum competency levels return (S1) No Non Compliant Municipalities No Non Compliant Municipalities

1 eDumbe 5 Mpofana

2 Ulundi 5 uMgungundlovu

3 uPhongolo 7 Mthonjaneni

4 Maphumulo Source: NT Lgdatabase

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5.4 Municipal Standard Chart of Accounts (mSCOA)

The Minister of Finance promulgated Government Gazette No. 37577, Municipal Regulations on

Standard Chart of Accounts (mSCOA), on 22 April 2014.

The objective of this Regulation is to provide a national standard for uniform recording and

classification of municipal budget and financial information at a transaction level by providing a

standard chart of accounts:

aligned to budget formats and accounting standards; and

enable uniform information sets across the whole of government to better inform national policy

coordination and reporting, benchmarking and performance measurement.

In accordance with this Regulation, all municipalities and related municipal entities are required to be

mSCOA compliant on 01 July 2017.

In order to achieve compliance by 01 July 2017, Provincial Treasury has established a dedicated

mSCOA Operational Task Team to support municipalities and their entities in the implementation of

the mSCOA reform.

A Provincial mSCOA and Financial Management Forum has been implemented, the purpose of which

is to engage municipalities and their entities on their readiness of implementation of mSCOA, and

support in addressing their challenges and concerns. It further provides a platform to communicate

with National Treasury, pilot municipalities and other key stakeholders such as CoGTA and the KZN

Auditor General on key issues related to mSCOA.

Two Provincial Circulars have further been issued, providing municipalities and their entities with the

guidance required in undertaking the planning processes and assessment of system vendors for

implementation of mSCOA. Standardised templates for risk registers, terms of reference for the

establishment of mSCOA project steering committees and a project planning template have been

developed and distributed to municipalities and their entities to assist them in planning for this reform.

Provincial Treasury has further presented to municipalities and entities at the following platforms

relating to mSCOA during the 2015/16 financial year:

Technical Munimec: Overview of mSCOA and its requirements;

Munimec: Overview of mSCOA and its requirements;

CoGTA Finance Task Team meeting: mSCOA implications for re-demarcated municipalities;

IMFO Mini Conference: mSCOA planning and requirements; and

SALGA Conference: Presentation by our MEC for Finance on mSCOA implementation and

compliance with the Regulation.

Provincial Treasury has further undertaken various capacity development workshops and

engagements with municipalities and their respective entities to effectively support in the

implementation of mSCOA, with detail indicated below.

277

Table 5.22: Support provided for the implementation of mSCOA No. Municipality Three day District Training

on mSCOA segments

Overview and Governance

Workshop

Unpacking the chart into

mSCOA segments

Workshop

MANCO Presentations Finance Committee

Presentations

1 Ugu District a

2 Vulamehlo a

3 Umdoni a a a

4 Umzumbe a

5 uMuziwabantu a

6 Ezinqoleni a

7 Hibiscus Coast a

8 uMgungundlovu District a

9 uMshwathi a

10 uMngeni a

11 Mpofana a

12 Impendle a

13 Msunduzi a a a a

14 Mkhambathini a

15 Richmond a

16 Uthukela District a

17 Emnambithi/Ladysmith a a

18 Indaka a

19 Umtshezi a

20 Okhahlamba a

21 Imbabazane a

22 Umzinyathi District a

23 Endumeni a

24 Nquthu a

25 Msinga a

26 Umvoti a

27 Amajuba District a

28 Newcastle a

29 eMadlangeni a

30 Dannhauser a Source: KZN Provincial Treasury

278

Table 5.22: Support provided for the implementation of mSCOA Conti… No. Municipality Three day District Training

on mSCOA segments

Overview and Governance

Workshop

Unpacking the chart into

mSCOA segments

Workshop

MANCO Presentations Finance Committee

Presentations

31 Zululand District a

32 eDumbe a

33 uPhongolo a

34 Abaqulusi a

35 Nongoma a

36 Ulundi a

37 Umkhanyakude District a

38 Umhlabuyalingana a

39 Jozini a

40 The Big Five False Bay a

41 Hlabisa a

42 Mtubatuba a

43 Uthungulu District a

44 Mfolozi a

45 uMhlathuze a

46 Ntambanana a

47 Umlalazi a

48 Mthonjaneni a a a

49 Nkandla a

50 Ilembe District a a

51 Mandeni a

52 KwaDukuza a a a a

53 Ndwedwe a

54 Maphumulo a

55 Harry Gwala District a

56 Ingwe a

57 Kwa Sani a

58 Greater Kokstad a

59 Ubuhlebezwe a

60 Umzimkulu a a a Source: KZN Provincial Treasury

5.5 Municipal Demarcation Process

The Municipal Demarcation Board embarked on a process of re-determining municipal boundaries in

terms of Section 21 of the Municipal Demarcation Act, No 27 of 1998. This process will change the

municipal landscape and will result in the reduction of municipalities in the province from 61

municipalities to 54 municipalities.

Section 152 of the Constitution states that a municipality must strive, within its financial and

administrative capacity, to achieve the objects of local government. The process of the re-

determination of municipal boundaries was embarked upon with a view of enabling local government

to achieve its objectives as outlined in Section 152 of the Constitution. This process aims to facilitate

the integration of communities, to contribute to developmental local government and to enable

effective local government and integrated development.

279

In terms of the Section 14(5) Notice of the Municipal Structures Act, the affected municipalities were

required to establish a Municipal Political Change Management Committee (PCMC) and a Municipal

Technical Change Management Committee (TCMC) which will oversee the smooth implementation

of the restructuring process. All the affected municipalities were required to adopt and implement the

restructuring process plan.

Provincial Treasury has participated in the Provincial Transformation Committee which is responsible

to provide guidance and support to affected municipalities. The Provincial Transformation Committee

is also responsible to monitor the implementation of restructuring process plans. Furthermore,

Provincial Treasury has made a presentation on the budget process to be followed by affected

municipalities at the Provincial Finance Task Team Committee meeting.

Furthermore, Provincial Treasury issued two circulars supporting the process of restructuring.

Circular TC/RM 4 of 2015/16 was a reminder to the affected municipalities about the compliance

with the Extra-Ordinary Provincial Gazette Number 1169 relating to functions of the TCMC and

PCMC in the restructuring process. Circular TC/RM 8 of 2015/16 provided guidance to affected

municipalities about the Accounting requirements as well as the preparation of the financial

statements in accordance with the Standards of Generally Recognised Accounting Practice (GRAP).

In addition Provincial Treasury issued a guide to the affected municipalities relating to the 2016/17

Budgets and supporting documents expected to be submitted by the newly demarcated municipalities.

The MEC for CoGTA issued Section 12 Notices in terms of Municipal Structures Act which makes

provision for a merger, amendment and disestablishment of an existing municipality with a view of

establishing the new municipality.

Table 5.23 shows the municipalities which were the core of the restructuring process in line with the

Section 12 Notice and eventually being merged or disestablished to form a new municipality.

Table 5.23 below shows the impact of Section 12 Notice

1 Ingwe

2 Kwa Sani

3 Ezinqolweni

4 Hibiscus Coast

5 Emnambithi/Ladysmith

6 Indaka

7 Umtshezi

8 Imbabazane

9 The Big Five False Bay

10 Hlabisa

11 Ntambanana All wards will split between Mthonjaneni, uMhlathuze and uMfolozi

12 Vulamehlo All wards will split between eThekwini Metro and Umdoni

Inkosi Langalibalele (KZN237)

Big Five Hlabisa (KZN276)

No Names Current Municipalities Names of Newly Demarcated Municipalities

Dr Nkosazana Dlamini Zuma (KZN436)

Ray Nkonyeni (KZN216)

Alfred Duma (KZN238)

Source: Section 12 Notice

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Chapter 6: Municipal Support and Oversight

6.1 Municipal Support Program

The Municipal Support Program (MSP) within the Municipal Finance Unit was established to assist

and provide technical support to delegated municipalities in financial distress and has had a positive

impact on the financial management within municipalities.

The main objective of the program is to identify the cause of financial problems experienced by the

municipalities, support the municipalities where their financial sustainability is threatened and

implement turnaround strategies that will ensure that municipalities remain financially viable.

6.1.1 Support Provided to Municipalities

The main concern relating to municipal financial management is the high staff turnover and

competency of officials appointed. It is for this reason that the MSP focuses on providing capacity

building initiatives. The result is a solid foundation on which municipalities can base their internal

policies and procedures thereby ensuring sound financial management and sustainability.

Municipalities were selected based on the extent of support required and the municipality’s

unreserved acceptance of support offered. Successful implementation of support initiatives hinges on

commitment by the leadership and staff in embracing the improvements introduced and implementing

the processes effectively.

The focus for the 2015/16 financial year was on cash management as it affects overall sustainability

as well as VAT management which has traditionally been perceived to be a specialist function.

The Cash Flow Management initiative was designed to implement a disciplined approach to the

management of a municipality’s cash resources and identify and address any shortfalls that may be

projected to arise. Cash is a vital resource and the effective management thereof is essential for the

successful operation of a municipality.

The VAT Review initiative is intended to address the shortcomings relating to the management of

VAT. The filing of VAT Returns by municipalities and the processes associated with this function

have often been outsourced to service providers which has resulted in external resources preparing

and filing the Returns on behalf of the municipality at a considerable cost thereto. Consequently, the

municipal officials have not necessarily been trained in the tasks involved and could be unaware of

the best practices to follow in fulfilling these responsibilities. The VAT Review initiative aims to

capacitate municipalities to undertake the function on their own.

Officials are capacitated in a manner that constantly reinforces the basic principles through formal

training, on-the-job training as well as allowing officials to undertake the function independently and

providing review queries thereafter.

In addition to the above initiatives, the MSP performs a detailed financial analysis of all

municipalities and publishes the “Financial Landscapes” which is intended to highlight key focus

areas that municipalities are required to address to ensure that they deliver on their mandate.

282

Table 6.1: Municipalities supported during the 2015/16 financial year No. Municipality Cash Flow

Management

Cash Flow

Management

Review

Internal Control

Enhancement

VAT Review Financial

Management

Support

1 Amajuba a2 Dannhauser a3 Emadlangeni a4 Ezinqoleni a5 Harry Gwala a6 Hibiscus Coast a7 Hlabisa a8 Impendle a9 Jozini a

10 KwaSani a11 Mandeni a12 Mkhambathini a a13 Ndwedwe a a14 Richmond a15 Ubuhlebezwe a16 Ulundi a a17 Umgungundlovu a a18 Umhlabuyal ingana a19 Umkhanyakude a20 Umlalazi a a21 Umvoti a a22 Umzumbe a23 Uphongolo a


The Municipal Finance Unit within the Provincial Treasury remains committed to assisting

municipalities in their quest to improve service delivery and will continue to innovate and provide

new ways of support.

6.1.2 Other Support

The MSP also engaged with other sub-programmes within Provincial Treasury to support

municipalities with challenges that they are specifically skilled to assist with. These included supply

chain management, risk management, infrastructure and asset management.

Municipal financial management support initiatives were also undertaken under the direction of

Municipal Finance. This has been reported separately under section 6.6 as the function currently

resides under Financial Reporting.

6.2 Municipal Supply Chain Management

The Provincial Treasury Supply Chain Management (SCM) Unit continued to provide support to all

delegated municipalities in the province through routine and ad-hoc SCM assessments, direct and

indirect support interventions, policy revision and formulation and SCM training and workshops. Key

challenges from the prior year through to the 2015/16 financial year remained the same. These include

the lack of policy and implementation thereof, inadequate segregation of duties, poor skills capacity

and contract and supplier management.

Interventions at the Umkhanyakude District Municipality, Hlabisa, Mpofana and Maphumulo Local

Municipalities were undertaken by the Provincial SCM Unit. The interventions were in the form of

direct assistance by managing the procurement processes as well as instituting reforms in these

institutions. SCM compliance assessments were done at all delegated municipalities.

The municipal bid appeals tribunal project is ongoing. For the 2015/16 financial year, the Municipal

Bid Appeals Tribunal (MBAT) structures have dealt with one hundred and thirty six (136) appeals

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throughout the KwaZulu Natal Province. The KZN Treasury will be training Bid Committees and

SCM practitioners in the 2016/17 financial year on how to efficiently and effectively deal with

appeals in order to accelerate service delivery at local government level. The Provincial SCM Unit

continues to provide active support in the hearing and facilitation of MBAT matters.

One of the targeted interventions by the SCM Unit is the Contract Management Project. There are two

phases to the Contract Management Project that were implemented to ten identified municipalities.

Phase 1 comprises of implementing a contract register and filing. Phase 2 comprises of

comprehensive legal and financial reviews of contracts concluded with third parties and the

preparation of action plans to be carried out by the institutions in order to correct any anomalies

identified in the contracts under review.

The next section outlines the different areas of support provided to municipalities during the 2015/16

financial year.

6.2.1 Scope of Support

Routine Compliance Assessments

The support provided at municipalities entailed assessing compliance with prescripts and then

providing guidance and assistance where required. The following areas of SCM were assessed:

The structure and functioning of the SCM unit,

SCM Policy and Procedures;

The structure and functioning of Bid Committees;

Contract Management;

Suppliers Database;

Emergency Delegations;

SCM Processes; and

Objections/Complaints.

During the year, ad-hoc assessments covered the following areas:

Documentary evidence of approval by the Municipal Manager in the awarding of contracts in

terms of SCM Regulation 36(1)(a);

Documentary evidence of approval by the Municipal Manager on the ratification of minor

breaches of the SCM policy in terms of SCM regulation 36(1)(b);

Documentary evidence of approval by the Municipal Manager in the awarding of contracts in

terms of SCM regulation 32; and

Existence of an Annual Procurement plan approved by the accounting officer.

6.2.2 Summary of the key challenges identified in the assessments

The Provincial Treasury SCM Unit, as part of the routine compliance assessment, identified the

following key challenges faced by municipalities, amongst others:

Shortage of staff resulting in inadequate segregation of duties and poor performance and

accountability;

Poor procurement planning;

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Poor contract management;

Poor supplier management;

Poor bid appeals process management; and

Lack of proper procedures and understanding of policy.

6.2.3 Training and Workshops

Training and workshops are seen as key interventions to improve awareness and skills on the ground.

The unit conducted training on the role of bid committees, the SCM policies and procedures and other

SCM related issues. Over the course of the year, training was conducted at the municipalities shown in

Table 6.2.

Table 6.2: Training conducted at the following municipalities


1 Amajuba DM 6 Mthonjaneni 11 Umkhanyakude DM

2 Endumeni 7 Mtubatuba 12 Uthukela DM

3 Harry Gwala DM 8 Nkandla 13 uThungulu DM

4 Hlabisa 9 Richmond 14 Zululand DM

5 Mkhambathini 10 Ubuhlebezwe


6.2.4 Policy development/review

The Municipal SCM Regulations require that SCM Policies be reviewed on an annual basis. The

Policy Development section of the SCM Unit has assisted the municipalities listed in Table 6.3 with

the process of SCM Policy review.

Table 6.3: SCM policies reviewed at the following municipalities

No Name of Municipality No Name of Municipality

1 uMgungundlovu DM 3 Vulamehlo

2 Nquthu 4 Ezinqoleni


6.2.5 Direct Support Interventions, Ad-Hoc Assessments, Routine and Follow-up Assessments

Different support interventions were undertaken at some of the municipalities on request. This

normally happens with the municipalities that do not have the necessary skills or capabilities.

Officials from the Provincial Treasury’s SCM unit then assume certain duties at the municipality with

the aim of capacitating and transferring skills. Operational assistance also ensures compliance with

policies.

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Table 6.4 shows the municipalities which were given direct operational assistance.

Table 6.4: Operational assistance provided to the following municipalities No Name of Municipality Support Description

1 Amajuba DM Procedure support

2 Vulamehlo Procedure support

3 Hlabisa Routine SCM support and Support Intervention

4 Richmond Routine SCM support and Bid Committee Training

5 Umkhanyakude DM Routine SCM support, Bid Committee Training and Support Intervention

6 eMadlangeni SCM support

7 Newcastle SCM support

8 Maphumulo Support Intervention

9 Mpofana Support Intervention


In the course of the 2015/16 year, routine assessments were done as part of the unit’s operational plan.

In some cases, follow-up assessments were done to measure progress made with respect to the action

plan emanating from previous routine assessments. Table 6.5 shows the municipalities where routine

and follow-up assessments were conducted.

Table 6.5: Routine assessments and Follow-up assessments at the following municipalities


1 Abaqulusi 14 Kw a Sani 27 Ubuhlebezw e

2 The Big Fiv e False Bay 15 Maphumulo 28 Ugu DM

3 eDumbe 16 Imbabazane 29 Ulundi

4 eMadlangeni 17 Mkhambathini 30 Umdoni

5 Emnambithi 18 Msinga 31 Umkhany akude DM

6 Endumeni 19 Ndw edw e 32 uMlalazi

7 Greater Kokstad 20 New castle 33 uMngeni

8 Hibiscus Coast 21 Nongoma 34 Umtshezi

9 Hlabisa 22 Nquthu 35 Umzimkhulu

10 Impendle 23 Ntambanana 36 Umziny athi DM

11 Indaka 24 Okhahlamba 37 Umzumbe

12 Ingw e 25 Richmond 38 uPhongolo

13 Jozini 26 Sisonke Dev elopment Agency 39 Zululand DM Source: KZN Provincial Treasury

6.2.6 Implementation of Contract Management System

The Unit implemented Contract Management in 10 municipalities who mostly received Qualifications

and Disclaimers in the 2013/14 audit opinion. This system ensures effective supplier performance

management and value for money and will culminate in municipalities having fully completed

contract registers supported by legitimate contract documents.

Table 6.6: Contract Management implementation at the following municipalities


1 Amajuba DM 5 New castle 9 Uthukela DM

2 Hlabisa 6 Ugu DM 10 Vulamehlo

3 Jozini 7 Umkhany akude DM

4 Mpofana 8 Umziny athi DM


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6.2.7 Conclusion

There have been notable improvements in the vacancy rates within municipal SCM units, SCM policy

development and general functioning of bid committees. However, Contract Management and

Supplier Management continued to be a concern in most of the municipalities.

6.3 Banking

In terms of the Municipal Finance Management Act (MFMA), municipalities and municipal entities

are required to advise Council (or the parent municipality in a case of a municipal entity), the National

and Provincial Treasuries and the Auditor-General of changes in banking, overdraft and investment

information.

6.3.1 Quarterly Withdrawals from Municipal Bank Accounts

Background

Section 11(4) of the MFMA states that the accounting officer must within 30 days after the end of

each quarter: -

(a) table in the municipal council a consolidated report of all withdrawals made in terms of

subsection (1)(b) to (j) during that quarter; and

(b) submit a copy of the report to the relevant Provincial Treasury and the Auditor General.

During the 2015/16 financial year, municipalities were provided with quarterly report templates and a

guideline on how to complete the template to enable them to comply with Section 11(4) of the

MFMA.

Progress / Outcome

Table 6.7 shows the municipalities that have not submitted reports for Quarter 3 and 4 in respect of

the 2015/16 financial year. An urgent appeal was made to municipalities to ensure that the report

regarding withdrawals from municipal bank accounts is submitted timeously.

Table 6.7: Municipalities that have Outstanding Quarterly Reports for Quarter 3 and 4 of 2015/16

NoName of Municipality

Quarter 3

1 Vulamehlo 1 uMgungundlov u DM 12 Abaqulusi 23 Vulamehlo 34 Amajuba DM

2 Indaka 2 uMshw athi 13 Nongoma 24 Umdoni 35 New castle

3 Umtshezi 3 uMngeni 14 uThungulu DM 25 Umzumbe 36 eMadlangeni

4 Mpofana 15 Ntambanana 26 uMuziw abantu 37 Dannhauser

5 Mkhambathini 16 uMlalazi 27 Ezinqoleni 38 Umkhany akude DM

6 Umziny athi DM 17 Harry Gw ala DM 28 Hibiscus Coast 39 Jozini

7 Nquthu 18 Ingw e 29 Uthukela DM 40 Hlabisa

8 Msinga 19 Kw a Sani 30 Indaka 41 iLembe DM

9 Zululand DM 20 Umzimkhulu 31 Umtshezi 42 Ndw edw e

10 eDumbe 21 Ubuhlebezw e 32 Okhahlamba 43 Maphumulo

11 uPhongolo 22 Ugu DM 33 Imbabazane

Name of Municipality Quarter 4


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6.3.2 Bank Accounts

Background

In terms of Section 9 and 86 of the MFMA, No. 56 of 2003, the accounting officer of a municipality

and municipal entity must submit to Provincial Treasury in writing:

(a) within 90 days after opening a bank account, the details of such new bank account; and

(b) annually, before the start of the financial year, the name of each bank where the municipalities

holds an account.

Progress / Outcome

Provincial Treasury monitors changes to primary bank accounts of municipalities in KZN. During the

2015/16 financial year, KwaDukuza Municipality changed their bankers in October 2015. A request

in terms of Section 9(b), 86(1)(b) and 86(2) of the MFMA was sent to all municipalities requiring the

accounting officer to submit a schedule of all bank accounts held by the municipality and of those

held by any municipal entities. A total of 44 municipalities did not comply with this request as shown

in Table 6.8.

Table 6.8: Municipalities that have not complied with the request

No Municipality No Municipality No Municipality No Municipality

1 Ugu DM 13 Umhlabuy alingana 25 Mkhambathini 37 UThungulu DM

2 Vulamehlo 14 Jozini 26 Richmond 38 uMfolozi

3 Umdoni 15 Hlabisa 27 Umziny athi DM 39 Ntambanana

4 Ezinqoleni 16 Mtubatuba 28 Endumeni 40 Mthonjaneni

5 Uthukela DM 17 iLembe DM 29 Nquthu 41 Nkandla

6 Indaka 18 Mandeni 30 Msinga 42 Harry Gw ala DM

7 Umtshezi 19 Kw aDukuza 31 Umv oti 43 Ingw e

8 Okhahlamba 20 Ndw edw e 32 Zululand DM 44 Kw a Sani

9 Imbabazane 21 uMshw athi 33 eDumbe

10 Amajuba DM 22 uMngeni 34 uPhongolo

11 eMadlangeni 23 Mpofana 35 Abaqulusi

12 Dannhauser 24 Impendle 36 Ulundi


6.3.3 Cash Management and Investments

Background

In terms of Section 13(1) of the MFMA, No. 56 of 2003, the Minister, acting with the concurrence of

the Cabinet member responsible for local government, may prescribe a framework within which

municipalities must:

(a) conduct their cash management and investments; and

(b) invest money not immediately required.

Section 13(2) of the MFMA further states that a municipality must establish an appropriate and

effective cash management and investment policy in accordance with any framework that may be

prescribed in terms of subsection (1).

Progress / Outcome

All municipalities were provided with:

a) the municipal Investment Regulations (Government Gazette No. 27431); and

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b) a generic investment policy.

These were to be used by municipalities to tailor their own investment policy in order to ensure

compliance with the regulations and to make economically beneficial investments.

6.3.4 Status of support offered to Municipalities

Background

Provincial Treasury visited 58 municipalities when implementing the MFMA. Assistance was

provided on the following sections.

Section 11(4) – Quarterly bank withdrawal reports

Section 8(5) – Primary Bank Account

Section 9(b) – Details of all bank accounts details before year-end

Section 45(4) (a) – Short Term Debt

Section 13 – Investment and Cash Management Policy

During the 2015/16 financial year telephonic support was provided to all municipalities on the above

mentioned sections of the MFMA.

6.3.5 Impending Overdrafts

Background

In terms of Section 70(2) of the MFMA, No. 56 of 2003; if a municipality’s bank account, or if the

municipality has more than one bank account, the consolidated balance in those bank accounts,

shows a net overdraft position for a period exceeding a prescribed period, the Accounting Officer of

the municipality must promptly notify the National Treasury in the prescribed format of:

(a) the amount by which the account or accounts are overdrawn;

(b) the reason for the overdrawn account or accounts; and

(c) the steps taken or to be taken to correct the matter.

In terms of Section 101 of the MFMA, (1) the accounting officer of a municipal entity must report, in

writing , to the board of directors of the entity, at its next meeting, and to the Accounting Officer of

the entity’s parent municipality any financial problems of the entity, including-

(a) Any impending or actual-

(i) Under collection of revenue due;

(ii) Shortfalls in budgeted revenue;

(iii) Overspending of the entity’s budget;

(iv) Delay in the entity’s payments to any creditors; or

(v) Overdraft in any bank account of the entity for a period exceeding 21 days; and

(b) Any steps taken to rectify such financial problems.

(2) The accounting officer of the municipality must table a report referred to in subsection (1) in the

municipal council at its next meeting.

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National Treasury MFMA Circular No. 61 on Banking, Overdrafts and Investments, dated April 2012

further states that if the bank account, or if the municipality or municipal entity has more than one

bank account, the consolidated balance in those bank accounts shows a net overdrawn position for a

period exceeding 3 months, the Accounting Officer of the municipality must notify the National

Treasury (Form F) within 14 days after the 3 months period lapses for municipalities and 21 days for

municipal entities.

Progress / Outcome

Municipalities were made aware of the reporting requirements of Sections 70 and 101 of the MFMA.

No municipality reported any impending overdrafts during the 2015/16 financial year.

6.3.6 General Remarks

The non-compliance by municipalities with provisions of the MFMA regarding reporting matters

must be addressed as a matter of urgency.

6.4 Internal Audit – Risk and Advisory Services

6.4.1 Introduction

The Provincial Internal Audit Services (PIAS) provides risk management and internal audit support

services to delegated municipalities in the province. For the 2015/16 financial year, support was

provided to municipalities that lacked the capacity to properly implement the requirements of risk

management and internal audit as stated in the Municipal Finance Management Act (MFMA) 56 of

2003.

6.4.2 Risk Management Services

Municipalities operate in environments where factors such as technology, regulation, restructuring,

changing service requirements and political influence create uncertainty. Uncertainty emanates from

an inability to precisely determine the likelihood that potential events will occur together with the

associated outcomes. Therefore risk management processes must be implemented to assist

municipalities in identifying and managing risks to provide reasonable assurance that goals and

objectives are met and services to the community are delivered.

The following risk management support was provided during the period under review:

Risk and control assessment;

Risk management training and awareness;

Business continuity plans review;

Monitoring implementation of risk mitigation action plans; and

Risk management maturity gap analysis.

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6.4.3 Fraud Risk Management

Fraud, corruption and maladministration represent a significant risk to municipalities’ assets and

reputation. Municipalities are therefore required to develop and implement fraud prevention plans to

deal with such activities should they occur.

The following fraud risk management support was provided for the period under review:

Assessment of the fraud risk management practices;

Review of the fraud prevention plans (development of fraud prevention plans for municipalities

that do not have plans); and

Fraud risk awareness and campaigns.

6.4.4 Internal Audit Services

Internal audit plays a vital role by assisting the organisation through identifying and evaluating

significant exposures to risk and contributing to the improvements of the risk management and control

systems by providing an independent and objective reasonable assurance that controls put in place are

working as intended.

The following internal audit support was provided during the period under review:

Capacity building (allocation of internal audit resources);

Internal audit assessment;

Audit committee assessment; and

Development of standardised documents for internal audit units and audit committees.

Table 6.9 shows services provided to all municipalities and municipal entities that were supported

during the 2015/16 financial year.

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Table 6.9: Overview of Risk Management and Internal Audit Support for the 2015/16 financial year No. Name of Municipality/Entity Risk Assessments Risk Awareness/

Induction

Risk Actions

Follow Up

Internal Audit and

Audit Committee

Assessment

Internal Audit

Support

Audit Committee

Induction

1 uMgungundlov u DM

2 uMngeni

3 Mpofana - - - -

4 Mkhambathini - - - -

5 Richmond - - - -

6 Impendle - - - -

7 uMshw athi - - - -

8 Harry Gw ala DM - - - -

9 Umzimkhulu - - - -

10 Ubuhlebezw e - - - -

11 Greater Kokstad - - - -

12 Ingw e - - - -

13 Kw aSani - - - -

14 Harry Gw ala DA - - - -

15 Ugu DM -

16 Hibiscus Coast -

17 Umdoni - - -

18 Umzumbe -

19 uMuziw abantu - - -

20 Vulamehlo - - - -

21 Ezinqoleni - - - -

22 Ilembe DM

23 Ilembe DA - - - -

24 Kw aDukuza - - - -

25 Ndw edw e - - - -

26 Maphumulo - - - -

27 Mandeni - - - -

28 uThungulu DM - - - - -

29 uMfolozi - - - -

30 Nkandla - - - -

31 Mthonjaneni -

32 Amajuba DM - - - -

33 uMlalazi -

34 Umkhany akude - - - -

35 Jozini - - - -

36 Umhlabuy alingana - - - -

37 The Big Fiv e False Bay -

38 Mtubatuba - - - -

39 Hlabisa - - - -

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Table 6.9: Overview of Risk Management and Internal Audit Support for the 2015/16 financial year Cont.. No. Name of Municipality/Entity Risk Assessments Risk Awareness/

Induction

Risk Actions

Follow Up

Internal Audit and

Audit Committee

Assessment

Internal Audit

Support

Audit Committee

Induction

40 uMhlosinga DA - - - -

41 Zululand DM - - - -

42 Ulundi -

43 Nongoma -

44 Abaqulusi -

45 uPhongolo - - -

46 eDumbe -

47 Umziny athi - - - -

48 Endumeni - - - -

49 Nquthu - - - -

50 Msinga - - - -

51 Umv oti - - - -

52 Amajuba DM - -

53 New castle - - - - -

54 Emadlangeni

55 Dannhauser - - -

56 Uthukela DM -

57 Emnambithi/Lady smith -

58 Umtshezi - - - -

59 Imbabazane - - - -

60 Indaka - - - -

61 Okhahlamba -

Based on the 2015/16 KZN local government risk profile, Table 6.10 shows the top 10 risks facing

municipalities:

Table 6.10: The top 10 common risks facing KZN municipalities

No Risk Name

1 Failure to plan for and spend infrastructure grants

2 Disregarding and abuse of supply chain management regulations

3 High rate of v acancies (Inability to attract and retain critical scarce skills)

4 Poor financial management practices

5 Ineffectiv e implementation of the performance management sy stem

6 Poor collection of rev enue and other monies ow ed to the municipality

7 Ageing infrastructure leading to w ater losses delay s in implementing completing infrastucture projects

8 Inadequate ICT infrastucture

9 Inability to attract inv estment to stimulate economic dev elopment

10 Unethical business practices

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Challenges

The following challenges were noted during the period under review:

Risk Management

Our assessments of the municipalities and discussion with management revealed that risk

management is not prioritised by municipalities therefore making the process a mere compliance

issue.

Below are some of the root causes for poor implementation of risk management:

The process is not integrated with the activities of the municipality making it reactive rather than

proactive;

Lack of ownership by the accounting officers and participation by key officials (senior

management);

Risk management is relegated to internal audit as their responsibility;

Unavailability of management during the risk and control assessment workshops;

Insufficient budget allocated to the process; and

Lack of consequence management.

Internal Audit Units

While it was noted that all municipalities have internal audit units in place (outsourced, in-house or

co-sourced), most internal audit units were not effective and these are some of the root causes:

Insufficient budget allocated to internal audit units;

Lack of adequate skills within the internal audit units (IT, legal, forensic);

Internal audit units not being taken seriously by management (junior officials appointed to head

the unit);

Lack of implementation of internal audit recommendations;

Internal audit is not represented at management level; and

Weak audit committees resulting in ineffective internal audit units.

Audit Committees

It was noted that all municipalities had audit committees in place during the period under review.

However, most audit committees were not as effective as they should be and the following are some

of the root causes:

Deliberate disregarding of guidance practices issued by National Treasury (MFMA Circular No.

56);

Lack of specialist skills among members (including finance, performance management,

information technology and legal skills);

Unavailability of all members for meetings leading to postponements;

High number of resignations by audit committee members;

Lack of annual work plans for the audit committee; and

Poor reporting to Council leading to Council not receiving advice on time.

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General Challenges

Some of the challenges and concerns noted during the interactions with municipal officials are

indicated below. They are not necessarily risks relating to the specific process or function within the

municipality, however they still pose a threat to the functioning of the municipality:

Delays in filling of critical vacant positions;

Due to the imminent merger of some municipalities, officials are reluctant to commit themselves

thereby compromising the functioning of those municipalities; and

Poor morale as a result of uncertainty created by mergers and election outcomes.

Proposed Solutions

In terms of our 2016/17 operational plan, Provincial Treasury plans to provide the following support

to municipalities:

Assist municipalities with the standardisation of internal audit and audit committee documents;

Review risk management practices to encourage integration with other process to achieve

maximum benefits from the process;

Review internal audit plans to ensure adequate audit coverage;

Assist municipalities with the review of their risk management policies and procedure manuals;

Facilitation of risk and control assessment workshops;

Provision of internal audit resources to certain municipalities;

Assist district municipalities establish internal audit and risk management forums;

Assist district municipalities to establish district risk management and internal audit forums; and

Review of fraud risk management practices.

6.5 Norms and Standards

6.5.1 Introduction

The development of adequate financial norms and standards contribute to sustainable environments in

municipalities where constant changes, particularly in senior management, are evident. The Norms

and Standards Unit assists municipalities in ensuring that such constant change in leadership has a

minimum impact in the financial practices and processes of the municipalities. This section of the

report provides an overview of the support provided to municipalities in the areas of policy

assessment and the system of delegations.

The President of the Republic of South Africa identified the need to modernise public service across

all three spheres of Government. The system of delegation has a profound effect and places emphasis

on the strategic planning and decision making on both, the budgetary and financial management

implications and the plan on implementation in which service delivery is undertaken and managed. In

view thereof, it is a requirement that the functionality of the system of delegations, including its

procedure and process, must be results and performance driven and must contribute towards

effectiveness and efficiency with no delays in service delivery. A major concern is therefore that there

is no correlation between the delegation of authority and service delivery.

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This concern is driven by the Governance and Administration Cluster through the President’s

Outcome 12 that places its focus on ‘efficient, effective and a developmental orientated public

service’.

As part of its mandate to deliver services to the community, municipalities have to manage the

resources under their control to ensure they are utilised efficiently and effectively. As custodian of the

financial resources, the Accounting Officer has to implement policies and procedures to be able to

manage (operationally and strategically) all transactions that have financial implications. The Norms

and Standards Unit has determined that it is imperative that the Accounting Officer (in line with

his/her mandate as stated above) ensures the development of at least the following critical finance-

related policies:

Credit Control and Debt Collection policy;

Indigent policy;

Cash Management, Banking and Investment policy;

Budget policy;

Virement policy; and

Tariff policy.

6.5.2 Policy Development and Review

During the period under review, the Norms and Standards Unit provided assistance to municipalities

that emanated either from the results of the annual survey on municipal policies or from ad-hoc

requests made by municipalities seeking assistance. In certain cases, the requests received included

the development of new finance related policies.

Support was provided to the municipalities and municipal entities shown in Tables 6.11 and 6.12

during the 2015/16 financial year.

Table 6.11: Municipalities/Entities where finance-related policies have been developed

No Municipality Name/ Entity Name Policy Development

1 Umzimkhulu Virement Policy

2 Mpofana Virement Policy

3 Hlabisa Indigent Policy

4 uPhongolo Stores Management Policy

5 Ugu DM Credit Control and Debt Collection by -law

6 Uthukela Water (Pty ) Ltd Virement Policy

Creditors, Councillors and Staff pay ment Policy

Virement Policy

Budget Policy

7 South Coast Dev elopment Agency


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Table 6.12: Municipalities/Entities where finance-related policies have been reviewed

No Municipality Name/ Entity Name Policy Review

Tariffs Policy

Budget Policy

Funding and Reserv es Policy

Bad Debt and w rite-off Policy

Indigent Policy

Property Rates Policy

Unallocated Rev enue Policy

Cash, Banking and Inv estment Policy

Petty Cash Management Policy


Inv estment Policy

Cash and Banking Management Policy

Bad Debt Write-off Policy

Borrow ing Policy

Budget Policy

Consumer Pay ment Incentiv e Policy

Credit control and Debt Collection Policy

Free Basic Serv ices Policy

Indigent Policy

Rev enue Management Policy

Cash, Banking and Inv estment Management Policy

Budget Policy

Virement Policy

Tariffs Policy


Credit Control and Debt Collection Policy

Indigent Policy

Tariffs Policy


Budget Policy


Budget Policy

uPhongolo Credit control and Debt Collection Policy

Tariffs Policy


Budget Policy

Virement Policy

Funds and Reserv es Policy

Borrow ing Management Policy

1 Imbabazane

2 Umzimkhulu

3 Uthukela District

4 Mpofana

5 Umzumbe

6

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Table 6.12: Municipalities/Entities where finance-related policies have been reviewed Cont...

No Municipality Name/ Entity Name Policy Review

Budget Policy


Virement Policy

Fraud Prev ention and Anti-Corruption Policy


Tariffs Policy

Budget Policy


Cellular Phone Usage Policy

Virement Policy

Consumer Incentiv e Policy

Credit control and Debt Collection By -Law

Creditors, Councillors and Staff Pay ment Policy

Indigent Policy

Tariffs Policy

Virement Policy

Budget Policy



Free Water serv ices Policy

Borrow ing Policy

Indigent Policy

Credit Control and Debt Collection Policy

Cash, Bankoing and Inv estment Policy

Petty Cash Policy

Creditors, Board Members and Staff Pay ment Policy

Petty Cash Policy

Budget Policy

Subsistence and Trav elling Allow ance Policy



Ugu South Coast Tourism Credit Control and Debt Collection Policy


Budget Policy

Virement Policy


Petty Cash Policy

Creditors, Board Members and Staff Pay ment Policy

7 Hlabisa

8 uThungulu District

9 Ugu District


11 uThukela Water (Pty ) Ltd

12



Every effort is made by the unit to render assistance limited to the six critical finance related policies.

However, due to a high demand and the fact that services are rendered to municipalities free of

charge, municipalities request the unit to consider reviewing other finance-related policies. This is

evident in the above two tables.

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The unit increased its focus in providing support to municipal entities, visiting a total of three entities

during the financial year under review i.e. uThukela Water (Pty) Ltd, Ugu South Coast Tourism and

South Coast Development Agency. The policy and financial delegation support provided to these

entities vary largely, as each entity is established to achieve a certain unique objective. The outcome

was a success with entities commending the thorough review and professionalism that the unit

displayed during its engagement with each of them. Among the policies that were specifically

requested by entities are, the Subsistence and Travel Allowance policy and the Creditors, Board

Members and Staff Payment policy.

6.5.3 Delegations Framework

The Norms and Standards Unit followed up on the financial delegations implemented at the identified

municipalities. These follow-ups were necessitated by the following reasons:

Change in senior management;

Need for further clarity and assistance regarding customising of delegations to align with the

approved organisational structure;

Request by the Accounting Officer/Chief Financial Officer to assist with presenting financial

delegations to Council; and

Requests to review draft financial delegations prior to tabling in Council.

Various factors may influence the implementation and acceptance of the system of delegations. This

may include, amongst others: resistance to accept delegations, reluctance to delegate to subordinates,

unwillingness to take additional responsibility and misuse and manipulation of delegations.

The resistance to accept delegations may be due to the existing workload being excessive and/or the

responsibilities that are linked to the post.

In certain instances, the officials may also be unwilling to take on additional responsibility in a non-

acting capacity due to the non-payment of remuneration for the additional functions and

responsibilities that were not originally attached to the post. In other instances, the officials may also

be unwilling to accept additional responsibility due to certain implications where decision making

may have negative personal consequences.

The financial delegations template was rolled out to all municipalities in the 2011/12 financial year.

Re-visits to some of the municipalities shown in Table 6.13 were conducted subsequent to the initial

roll-out as part of support to municipalities in their annual review of financial delegations:

Table 6.13: Municipalities/Entities where assistance was provided with regard to the Delegations

Framework No Name of Municipality/Entity No Name of Municipality/Entity

1 Imbabazane 7 Ugu District

2 Umzimkhulu 8 Hlabisa

3 Uthukela District 9 uThungulu District

4 Mpofana 10 South Coast Dev elopment Agency

5 Umzumbe 11 Ugu South Coast Tourism

6 uPhongolo 12 uThukela Water (Pty ) Ltd


The relevant authority at the municipality is tasked with developing an appropriate system of

delegations that will both maximise administrative and operational efficiency and provide adequate

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checks and balances in the municipality’s financial administration. The regular review of the

framework is crucial to ensure that they are allied to all relevant factors in the municipality with any

related changes taken into consideration in a timeous manner.

Some of the above-mentioned municipalities were revisited due to a major change in key senior

management positions in the municipalities concerned i.e. the uMngeni, Umzimkhulu, Jozini and

Imbabazane Municipalities. The unit has also extended its support to the uThukela Water (Pty) Ltd,

Ugu South Coast Tourism and South Coast Development Agency employing similar principles

established for municipalities’ delegations framework and customising it to suit the relatively smaller

organisational structures of municipal entities.

6.6 Financial Reporting

6.6.1 Implementation: Financial Management Municipal Support Program

Introduction and Background

In keeping with the Provincial Treasury’s mandate to support municipalities in strengthening their

financial management capacity, an initiative was undertaken to provide financial management on-site

support to identified municipalities within the Province. The objective of this program is to improve

basic financial management practice and improve audit opinions at municipalities. The audit results

for the 2014/15 financial year would suggest that the objective of this initiative was largely achieved

and effort is being made to further improve the audit outcomes for the 2015/16 financial year.

The on-site support intervention strategy conducted by the Accounting Services Unit entailed the

following:

An assessment of the status of financial management practices at identified municipalities and the

development of a project plan;

On-site support and quality control review of basic accounting and routine monthly reconciliation

processes in support of the preparation of the annual financial statements;

On-site support to facilitate:

o Monthly reconciliation preparation and accounting processes;

o Submission of a year-end audit working paper file;

o Quality control review of accounting working papers and supporting documentation; and

o Addressing audit queries during the audit process, as well as providing technical accounting

support as required.

Capacitate and transfer of skills to financial management officials at identified municipalities in

the following areas:

o Preparation of interim financial statements, year-end financial management processes, as well

as annual financial statements and accounting working papers; and

o Training on GRAP standards and the implementation thereof.

Audit outcomes of municipalities supported in the Financial Management Municipal Support

Program for the 2014/15 municipal financial year

The success of the implementation of the Financial Management Municipal on-site support to the

selected municipalities is reflected in Table 6.14 below:

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Table 6.14: Audit Outcomes

No Name of Municipality 2013-14 Audit Opinion 2014-15 Audit Opinion

1 Amajuba District Disclaimer Qualified

2 Hlabisa Disclaimer Unqualified

3 Impendle Unqualified Unqualified

4 Jozini Disclaimer Qualified

5 Kw aDukuza Unqualified Unqualified

6 Mkhambathini Unqualified Unqualified

7 Mpofana Qualified Qualified

8 Umhlabuy alingana Unqualified Clean

9 Ubuhlebezw e Clean Clean

10 Ugu District Qualified Unqualified

11 uMngeni Unqualified Unqualified

12 Umkhany akude District Qualified Disclaimer

13 Umziny athi District Unqualified Unqualified

14 Umv oti Unqualified Unqualified

15 Vulamehlo Qualified Qualified


From the audit results presented in Table 6.14 above, it must be noted that the success of the

intervention by Financial Reporting resulted in a significant improvement in the audit outcomes for

the following municipalities:

Amajuba District Municipality moved from a Disclaimer Audit Opinion in the 2013/2014

financial year to a Qualified Audit Opinion in the 2014/15 financial year;

Hlabisa Municipality moved from a Disclaimer Audit Opinion in the 2013/14 financial year to an

Unqualified Audit Opinion in the 2014/15 financial year;

Jozini Municipality moved from a Disclaimer Audit Opinion in the 2013/14 financial year to a

Qualified Audit Opinion in the 2014/15 financial year;

Ugu District Municipality moved from a Qualified Audit Opinion in the 2013/14 financial year to

an Unqualified Audit Opinion in the 2014/15 financial year;

Umhlabuyalingana Municipality moved from an Unqualified Audit Opinion in the 2013/14

financial year to a Clean Audit Opinion in the 2014/15 financial year; and

Ubuhlebezwe Municipality maintained their Clean Audit Opinion in the 2014/15 financial year.

Challenges Identified During the On-Site Support Program

Municipalities are faced with challenges which include, among others, the following:

Continued high levels of vacancies/skills deficit in key positions resulting in an increased

dependency on consultants and interns;

Dependency on Provincial Treasury officials to undertake and address outstanding monthly

reconciliations and attendant to routine accounting processes that should be normally performed by

municipal officials.

Inadequate skills on credit control and debt management, including basic financial accounting and

document management systems in most instances;

Lack of systems to address audit queries and recommendations, for both internal and external

auditing; and

Inadequate asset management processes within the municipality, which impacts on the

maintenance of the asset register and reporting thereof:

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o Poor controls over routine accounting processes: Reconciliations incorrect/incomplete/lack of

supporting schedules;

o Occurrence of unauthorised expenditure resulting from the budget not being spent for the

purposes intended;

o Occurrence of irregular, fruitless and wasteful expenditure resulting from non-compliance with

legislation and supply chain management processes, and wasteful expenditure which could

have been avoided;

o Inadequate action taken in addressing unauthorised, irregular, fruitless and wasteful

expenditure;

o Lack of evidence based reporting and preparation of audit working paper files; and

o Availability of Municipal Financial Management Officials to address identified challenges.

Action steps to address identified challenges

To address the challenges identified above, the Financial Management Municipal Support Program

has as its focus, areas of audit risk that are aimed at the following objectives:

Identify inadequate financial management risk areas and implement appropriate mitigating

strategies;

Mitigation of audit qualifications by focusing on the basic accounting and routine monthly

reconciliation processes through on-site oversight support and quality assurance;

Robust consultative forums through effective collaboration with all relevant stakeholders internal

to Provincial Treasury (Supply Chain Management, Norms and Standards, Internal Audit,

Municipal Finance Office) and the Auditor General for a uniform, integrated and consistent

support approach; and

Strengthen financial management by training and developing municipal officials in effective

accounting processes and reconciliations, including the preparation of the annual financial

statements and supporting documentation.

Current Financial management support for the 2015/16 municipal financial year

The Financial Management Support Program continued to be implemented during the 2015/16

financial year, as municipalities are gearing toward the upcoming preparation of the annual financial

statements.

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Table 6.15, below, indicates the municipalities that are currently being supported in this regard.

Table 6.15: Financial management support for the 2015/16 municipal financial year

1 Amajuba District Qualified a a a a

2 The Big Fiv e False Bay Unqualified a a a a

3 eMadlangeni Unqualified a a

4 Emnambithi/Lady smith Unqualified a a a

5 Hlabisa Unqualified a a a a

6 Kw aDukuza Unqualified a a

7 Maphumulo Unqualified a a a

8 Mkhambathini Unqualified a a

9 Ndw edw e Unqualified a a a a

10 Umkhany akude District Disclaimer a a a a

11 Umv oti Unqualified a a a a

Working Paper File

Preparation

No Municipality Name Audit outcome

FY 2014/15

Monthly

Reconciliations and

Accounting

Prior year audit

queries

Preparation of

Annual Financial

Statements


6.6.2 Asset Management Improvement Program

In response to the continuing challenges faced by municipalities and the resulting impact on audit

outcomes, particularly as it relates to Asset Management, Provincial Treasury has implemented

numerous initiatives to improve Asset Management Practices among municipalities that are aligned to

the Financial Management Municipal Support Program. Figure 20 below is an illustration, in

summary, of the initiatives undertaken by the Financial Reporting Unit:

Figure 20

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OVERVIEW OF ASSET MANAGEMENT LONG TERM STRATEGY

Primarily, the Asset Management Improvement Program has as its fundamental goal the key objective

of institutionalising Asset Management Best Practice among all municipalities. It is anticipated that

municipalities, through a process of full participation and commitment of all stakeholders and the

sufficient allocation of Local Government’s Resources, can reasonably expect to have the following

in place in the long term:

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A fully resourced, skilled and integrated Asset Management Unit;

Approved asset management policies and procedures;

Self-Assessment Asset management scorecards;

Planning templates for all phases of the Asset Management Life Cycle;

Identification of Asset Maintenance and renewal funding models; and

Accounting and accountability processes in place.

To this end, and in accordance with the mandate of Provincial Treasury, the process of establishing

Asset Management District Support Forums was initiated by Provincial Treasury (Financial

Reporting), to address asset management weaknesses in the Province. To date, five (5) Asset

Management District Forums (iLembe, uThungulu, Zululand, Ugu, Umzinyathi) have been

established and are functional to a certain degree.

The establishment of Asset Management District Forums was aimed at addressing, among others, the

following:

Establishing the current status of asset management within the district, including critical

weaknesses;

A Self-assessment questionnaire was designed and implemented by the Financial Reporting Unit at

KZN Provincial Treasury to identify the current challenges being experienced by participating

municipalities affiliated to the current Asset Management Forums;

Development and implementation of long term key support strategies to institutionalise Asset

Management within the district, with the aim of ensuring sustainability in asset management for

future financial years;

Training and developmental needs in terms of asset management practice; and

Mechanism for on-going monitoring and technical assistance in terms of addressing asset

management issues within municipalities.

Below is a summary of the support initiatives undertaken by the Financial Reporting Unit:

Asset Management Training;

Municipal Standard Chart of Accounts (mSCOA) Implementation;

Reviewing of the Asset Management Unit’s structure to determine capacity and effectiveness of

officials in undertaking asset management activities;

Reviewing of the Asset Management Policy;

Facilitating municipal-wide asset management co-ordination;

Developing a generic procedure manual to be customised to iLembe District Municipality

functions; and

GRAP training and assistance in compliance with asset accounting requirements.

Further to the initiation of the District Asset Management Forums in the said districts, a Provincial

Asset Management Forum has been established in collaboration with iLembe District Municipality.

The Asset Manager of iLembe District Municipality, as the interim Chairperson, is spearheading the

Provincial Asset Management Forum initiatives. To date, the following initiatives have been

successfully undertaken by the Provincial Asset Management Forum:

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Support to District Asset Management Forums in institutionalising asset management practice in

municipalities and formulating strategies to address asset management challenges prevalent at a

district-wide level through collaboration and shared best practice;

Provision of asset management planning templates, generic asset management policies and

procedures to each district;

Asset Management workshops;

Audit Readiness; and

A Provincial Asset Management Web Site hosted by iLembe District Municipality as an Asset

Management resource base and repository of asset management information.

6.6.3 Conclusion

In order to sustain the improved audit status of the municipalities under review, the need for

municipal-wide and cross-cutting support by key stakeholders becomes increasingly significant. To

this end, ensuring the appropriate and proportionate balance between effective municipality

stewardship and the dependency on outside support becomes critical, if not significant. It is hoped that

the support provided by the Financial Reporting Unit during the period under review has provided

municipalities with the necessary skills and expertise to continue their quest for sound financial

management and an improvement in the audit outcomes in the forthcoming financial year.

6.7 Municipal Public Private Partnerships

Provincial Treasury provides effective and efficient transversal Public Private Partnerships (PPP)

project advisory services to a number of municipalities in the Province. Provincial Treasury

established a PPP Unit with the main objective of facilitating, managing and overseeing PPPs at a

provincial level, in accordance with legislative mandates (Municipal Finance Management Act,

Municipal Systems Act and Municipal PPP Regulations).

Provincial Treasury assisted the following 2 municipalities with projects registered with National

Treasury as PPPs:

KwaDukuza Municipality; and

iLembe District Municipality

6.7.1 Advisory services and support to municipalities with registered projects

KwaDukuza Municipality

KwaDukuza Municipality undertook a Section 78 Assessment in terms of the Municipal Systems Act

(MSA) to investigate a solution to provide Solid Waste Removal services through a PPP. In relation to

this project, Provincial Treasury was involved with the appointment of the Transaction Advisor to

undertake the investigation on behalf of the municipality. The municipal council resolved, in terms of

Section 78(2)(b) of the MSA, that before a decision on an appropriate mechanism could be taken, the

possibility of providing the service through an external mechanism had to be explored. Provincial

Treasury has on more than one occasion provided its comments on the investigation, more specifically

the compliance with the Municipal PPP Guidelines and Solid Waste Management Toolkit. The

feasibility study was completed and submitted to National Treasury. Treasury Views and

Recommendations (TVR1) was granted and the council took a resolution to procure the service

through a PPP model.

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The municipality is yet to initiate the procurement process. Provincial Treasury is currently in

communication with the municipality in order to assist them in terms of compliance with the relevant

legislation and provide transaction support should this be deemed necessary by the municipality.

6.7.2 Advisory services and support to municipalities with closed projects

iLembe District Municipality

Background

In January 1999 the Borough of Dolphin Coast (now iLembe District Municipality) entered into a PPP

Agreement whereby the concessionaire would oversee, manage and implement the provision of water

and sanitation services within the then municipal boundary, on a concession basis, for a period of 30

years.

Contract Legal Review

Provincial Treasury encouraged the municipality to undertake a review of the concession in 2008. The

purpose of the review was to ensure that there was sufficient performance and that the PPP agreement

continues to meet the municipality’s objectives. The outcome of the review was a recommendation

that certain terms of the PPP agreement had to be amended to align with the municipality’s current

objectives and the current legislation.

Provincial Treasury assisted the municipality in conducting a legal review of the concession contract.

This concession contract legal review is in preparation for the proposed concession contract third

supplementary agreement, which seeks to align and strike a mutual balance between Sembcorp Siza

Water’s contractual obligations and the municipality’s legislative mandate, to ensure both the

legislative prescripts and the performance of the concession contract works in compliance and

alignment to the national legislation and is beneficial to both parties.

Siza Water has recently launched a recycle waste water treatment plant that will provide a capacity of

30 percent daily water supply in the concession area. This is the measure to deal with drought which

is affecting the water industry. The impact of this investment will start to yield a positive impact in the

next quarter as water restrictions will be decreased from 50 percent to 30 percent with effect from

August 2016.

Dispute with Umgeni Water

Each year, Umgeni Water presents its proposed tariffs to its customers, applicable for the following

financial year. Sembcorp Siza Water was informed that Umgeni Water would levy a 38 percent tariff

increase on Sembcorp Siza Water, however municipalities were presented with an 8.3 percent tariff

charge. According to the concession contract, Bulk Water costs is a pass through cost in the tariff

model and the increase will be passed through to the consumers, of which more than 50 percent are

indigent.

It is believed that this dispute has escalated to a court order and the effects of the increase have been

provided for in the financial records showing the full impact of the increase by Umgeni Water.

Sembcorp Siza Water invoices the municipality based on the new proposed tariffs and is therefore

transferring the new tariff to the municipality.

Umgeni Water has since filed their opposing affidavit and Sembcorp Siza Water’s legal team is

reviewing same.

The Bulk Water Supply Agreement is a tripartite agreement and any addendums have been signed by

Umgeni Water, the iLembe District Municipality and Sembcorp Siza Water. Provincial Treasury is

assisting with the dispute.

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6.8 Infrastructure Management

6.8.1 “Crack Team”

The provision of infrastructure is integral in the realisation of government’s goal to provide basic

services to all South Africans. However, under performance on capital expenditure (within the full

value change of delivery) by municipalities delays the delivery of basic infrastructure services and

exacerbates the current infrastructure backlogs.

To assist municipalities in resolving this challenge a provincial infrastructure “Crack Team” was

established by the KwaZulu-Natal Provincial Treasury. The second panel consists of 22 built

environment professional companies (compared to 18 during the first panel) which include Engineers

(from various disciplines), Town Planners, Architects, Project Managers and Quantity Surveyors.

The objective of the team is to assist provincial departments, entities as well as municipalities in the

identification and unblocking of bottlenecks in the assessment, planning, implementation and delivery

of essential infrastructure services to communities.

The second “Crack Team” has been deployed at various municipalities since August 2015.

Table 6.16 shows a list of municipalities where members of the “Crack Team” have been deployed

until the end of March 2016:

Table 6.16: Municipalities currently being supported by the “Crack Team”

No Name of municipality Area where support is provided

1 Mtubatuba Plan, Implement and Manage the Comprehensive Electrification Plan for the Mtubatuba Municipality (820 connections).

2 Jozini Supported the municipality wrt Preparation of a Road Maintenance Plan and Preparation of a Building Maintenance Plan.

3 Umkhanyakude DM Support all Aspects of the Water Serv ices Delivery Programme.

4 Amajuba DM Supported the developed of a PEP (Project Execution Plan) for the PMU and Technical Div ision be prepared.

5 eMadlangeni Completion of the Infrastructure Status Quo Report in respect of Water and Sanitation, Roads and Storm water and Electrical

Reticulation.

6 uMhlathuze Supported the Development of the Traffic Master Plan and MIG Project Plan.

7 uPhongolo Supported the Development of the Imbube Cultural Village/Tourism Center.

8 Imbabazane Supported the way forward with regards to the Rosedale/Gourton Bridge electrification of 677 households.

9 Hibiscus Coast Packaging Of Lots 19 And 20 Port Shepstone For Light Industrial Use.

10 Endumeni National Implementation Plan for Endumeni and Bulk serv ices report for Gap Housing and Developed the Glencoe Solid Waste

Site Management of the Glencoe Solid Waste.

11 Ubuhlebezwe Manage the planning for the implementation at Ofafa , Amahhehle and uMkhunya electrification project.

12 Umkhanyakude DM Developed the Scope of Works and Bill of Quantities for Fence and Conducted Basic Environmental Assessment Exercise for the

Mkuze Airport.

13 Hibiscus Coast Finalised the Airport Infrastructure Master Plan and Facilitated a number of workshops wrt possible sustainability scenario’s.

14 Emnambithi/Ladysmith Developed the Airport Infrastructure Master Plan and Developed the Scope of Works and Bill of Quantities for Lighting System

Repairs, Runway and Taxiway upgrades.

15 uMhlathuze Facilitated a discussion on behalf of the Municipality wrt the possible relocation of the Airport.


The deployment of the team provides the municipalities with the necessary expertise to tackle

infrastructure related projects in various stages of the project cycle thus increasing the delivery

capacity. This will (and has) ultimately improve the return on investment and the value for money in

the delivery of infrastructure.

In addition, the services of the team seeks to improve internal capacity at municipalities by

augmenting the required skills, thereby improving spending on capital projects/infrastructure.

Provincial Treasury expects to have achieved the following outcomes for the above-mentioned

municipalities:

Improved infrastructure spending;

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Improved planning, coordinating and implementation of infrastructure projects;

Customer satisfaction;

Effective and efficient systems in the delivery of projects;

Adequate water and electricity supply;

Value for money on project delivery;

Community and environment sustainability; and

Leadership and employee development.

Table 6.17 shows on average, annual capital expenditure in the supported municipalities

(14 municipalities) have increased from the 2010/11 financial year to the 2014/15 financial year at a

faster rate than those non supported municipalities (46 municipalities) increasing from 58.5 percent to

87.2 percent compared to 67.5 percent to 77.0 percent over the period. This does seem to suggest that

the deployment of the KZN Treasury infrastructure team added value and delivered on the mandate

and expectations.

Table 6.17: MIG Expenditure in a sample of municipalities supported by the KZN Treasury Infrastructure

Team

MIG Expenditure (percentage spend) 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 Average

Av erage pa CAPEX All municipalities 65.42 66.13 72.71 71.03 79.36 70.93

Av erage pa CAPEX by Municipalities Supported 14 municipalities 58.47 70.16 72.17 70.51 87.17 71.70

Av erage pa CAPEX by Municipalities NOT Supported 46 municipalities 67.54 64.91 72.87 71.19 76.98 70.70

Av erage pa Capex pa change by Municipalities Supported 14 municipalities - 11.69 2.01 -1.66 16.66 7.18

Av erage pa Capex pa change by Municipalities Not Supported 46 municipalities - -2.63 7.96 -1.68 5.80 2.36

Source: NT Lgdatabase, KZN Provincial Treasury

Table 6.18 shows the municipalities which the Crack Team intends to support in 2016/17 as per the needs

requested by the municipalities

Municipality Requirements/Needs New or Continued Support

Hlabisa Preparation Of The Asset Register New

Umkhany akude DMSupport all Aspects of the Water Serv ices Deliv ery

ProgrammeContinued

Greater KokstadAssistance and Capacity in Preparation of the Infrastructure

Plan New

eMadlangeni

Scoping and due diligence on infrastructure, planning,

management, implementation and ov ersight of the

infrastructure budget

Continued

uMhlathuze

Infrastructure and precinct planning and programming, design,

scope of w orks, bill of quantities of v arious infrastructure

projects including City Theme Park and City Technology

Centre

New

Hibiscus CoastPlanning, Building Control, Economic Dev elopment and

Tourism w rt spatial planning for four identified areas.New

6.9 Intergovernmental Relations

6.9.1 Minimum Competency Regulations

Sections 83, 107 and 119 of the MFMA state that, the Accounting Officer/Municipal Manager (MM),

Senior Managers, the Chief Financial Officer (CFO) and other finance officials of a municipality must

meet the prescribed financial management competency levels. The Municipal Regulations on

Minimum Competency Levels were promulgated in 2007 and gave effect to these sections of the Act.

To fast track the process, National Treasury advocated that the Local Government Sector Education

and Training Authority fund the Certificate Programme on Municipal Development (CPMD)

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programme in the provinces. The implementation of the programme is through the University of

Pretoria and Moses Kotane Institute. Provincial Treasury has been monitoring the implementation of

the Minimum Competency Regulations since 2013.

The table below illustrates that there has been significant progress in ensuring that Senior Officials

acquire these minimum competencies, however there is still a need to cascade the programme to

subsequent ranks within the Budget and Treasury Offices in Municipalities. This in turn will improve

the general performance of all staff and contribute to a positive turn around in audit outcomes of

municipalities.

Table 6.19: Compliance with Municipal Regulations on Minimum Competency Levels in all 61 Municipalities

Total Employed Total Acting in

positions

Total Compliance Not Compliant Total in Training

MMs 48 7 44 4 7

CFOs 44 12 46 2 8

Supply Chain Management Head 46 3 43 2 4

Technical Serv ices 40 4 30 6 8

Planners 60 1 49 6 6

Community Dev elopment 44 2 39 2 7

Corporate Serv ices 52 5 48 2 7

Manager Engineering 31 3 22 7 5 Source: Salga

The Municipal Finance Management Internship Program

The Municipal Finance Management Internship Program (MFMIP) seeks to assist municipalities to

develop the knowledge and skills of the Interns employed under this program in areas such as

strategic planning and management, municipal budgeting and finance management.

It is an organised professional training and work experience program with the goal of providing high

quality training and practical exposure in all aspects of municipal finance management.

The program is designed to provide Interns (who are graduates in the fields of Accounting,

Economics and Finance) with a logical training sequence founded on the knowledge competencies

that they acquired as graduates. It is envisaged that through workplace rotation, there will be

interaction and mentoring by Chief Financial Officers, Heads of Supply Chain Management and other

components within the Budget and Treasury Office.

As an introductory to the 2016 outgoing Interns, Provincial Treasury embarked on the MFMA

induction roll-out in the entire Province. This was done during the first months on the inception of

their two year contracts. The MFMA Induction Programme was implemented as part of a

comprehensive Public Finance Management Capacity Development Strategy. The overarching goal of

this non-accredited two-day MFMA Induction Course was to provide finance Interns and New

Officials (one year or less) within the Budget and Treasury Office of the municipality with a broad

overview and understanding of the public sector ethos and ethics, including the municipal service

delivery mandate, as well as the municipal finance environment and MFMA reforms. The induction

together with the MFMA DVD learning served as a stepping stone in order to gain increased in-depth

learning and professionalisation of municipal finance management.

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Table 6.20: The status quo on the Interns in Municipalities

No District No. of Interns Contract Inception Contract End

1 Ugu DM 14 January 2016 December 2018

2 Uthukela DM 20 Nov ember 2015 October 2017

3 uMgungundlov u DM 10 December 2014 June 2016

4 Umziny athi DM 19 August 2015 July 2017

5 Amajuba DM 12 February 2016 February 2018

6 Umkhany akude DM 4 December 2015 March 2017

7 ilembe DM 17 June 2016 June 2018

8 Zululand DM 24 June 2015 June 2017

9 uThungulu DM 24 June 2015 March 2017

10 Harry Gw ala DM 10 February 2016 February 2017

11 eThekw ini Metro 41 June 2016 June 2019 Source: Municipalities

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Chapter 7: Conclusion

The Provincial Treasury is mandated to monitor compliance as legislated in Sections 5(4)(a)(i) and

5(4)(a)(iii) of the MFMA. The aim of this report is not only to report on compliance with the MFMA,

but it also provides a holistic view of the financial state of the municipalities as at 30 June 2016. This

report reflects on the financial performance of municipalities for 2015/16. Included in the report, are

the initiatives and support provided by the various business units within Provincial Treasury to

municipalities in assisting them to comply with the MFMA and related Regulations.

It is noted that some municipalities are still not fully complying with the reporting prescripts of the

DoRA and MFMA despite these pieces of legislation now being applicable for a number of years and

the Provincial Treasury Municipal Finance unit providing ongoing technical support on these aspects.

The non-compliance has been reported in detail in Chapter 5 (Section 5.3) and is a matter that can

only be rectified if there is strong political and administrative leadership at a municipal level.

The socio-economic review in Chapter 2 provides an overview of the current socio-economic status of

the province of KwaZulu-Natal. The improvement in economic activity can be a catalyst for

addressing the socio-economic challenges of poverty and unemployment in the province and this

cannot be achieved without enhancing skills, promoting education and investing in infrastructure at all

levels.

As part of its responsibilities in terms of Section 5 of the MFMA, the Provincial Treasury assessed

58tabledmunicipal budgets submitted for the 2016/17 MTREF. Majority of the municipalities are still

experiencing difficulty with cash flow budgeting and as a result, some of the municipalities populated

the budget tables on Cash flows (Table A7) and Cash backed reserves/accumulated surpluses (Table

A8) incorrectly and/or inadequately. In these cases, it could not be determined whether these budgets

were funded. Feedback letters were issued to the municipalities informing them of Provincial

Treasury’s findings. The Provincial Treasury also conducted a high level assessment of the approved

2016/17 budgets with a view of assessing whether municipalities have considered the comments and

recommendations provided by Provincial Treasury on their tabled budgets and whether the

2016/17approved budgets complied with the MFMA and the MBRR. The findings were

communicated to the respective municipalities as well as by The MEC for Finance to Mayors of

municipalities whose budgets were deemed to be unfunded.

The report focuses extensively on the analysis of the performance per municipality within the

province as required by Section 71(7) of the MFMA for 2015/16. For 2015/16, Operating Revenue of

R51.3 billion or 98.3 percent was generated against the Adjusted Budget of R52.2 billion which

resulted in a revenue shortfall of R899.0 million or 1.7 percent. The consolidated Operating

Expenditure performance of the districts reflects spending of R50.2 billion or 94.0 percent against the

Adjusted Budget of R53.4 billion.

Regarding Capital Expenditure, municipalities in the province continue to under spend on this most

crucial driver in service delivery, having only expended R11.8 billion or 83.4 percent of an Adjusted

Budget of R14.1 billion for 2015/16 (2014/15: R11.6 billion or 89.1 percent against the Adjusted

Budget of R13.0 billion). This can probably be attributed to poor planning and management of supply


Municipal debt remains problematic and has increased from R13.2 billion in 2014/15 to R13.5 billion

in 2015/16. This represents an increase of only 2.0 percent. A significant portion of the debt at the end

of 2015/16; R10.5 billion (78.0 percent) was outstanding for more than 90 days, an increase of R8.9

million from the R10.5 billion of debt outstanding in the same category in 2014/15.

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Poor collection rates by municipalities coupled with the increase in outstanding debts year on year is

testament to the fact that municipalities are experiencing challenges in collecting their outstanding

debts and it is therefore imperative that the political and administrative leadership takes ownership of

the debt management processes and enforce their municipality’s debt collection and credit control

policies. When municipalities are not able to collect the revenue generated from services rendered, the

rendering of such services becomes unsustainable. Municipalities should be able to recoup the

maintenance costs of the revenue generating assets from the users thereof and if a culture of non-

payment continues, local government will not succeed in its mandate to deliver basic services to

communities.

In terms of the 2015 DoRA, direct allocations to all 61 KwaZulu-Natal municipalities amounted to

R8.0 billion, while in-kind allocations amounted to R874.7 million, totaling R8.9 billion. Of the direct

allocations of R8.0 billion, R6.9 billion or 86.1 percent was transferred to municipalities for 2015/16.

Municipalities have reported spending of R6.6 billion or 96.0 percent against the total amount

transferred of R6.9 billion. However, when compared to the total DoRA direct allocations of R8.0

billion, 82.0 percent has been spent.

In terms of Section 22 of 2015 DoRA, any conditional allocation that is not spent at the end of a

municipal financial year reverts to the National Revenue Fund (NRF), unless the relevant receiving

officer can prove to the satisfaction of National Treasury that the unspent allocation is committed to

identifiable projects. Municipalities are returning funds to the NRF while basic services to

communities remain undelivered and capital budgets not fully spent. Municipalities therefore need to

adopt appropriate monitoring systems and initiate corrective steps where under spending is recorded.

To assist in the monitoring of grant spending and reduction in the unspent amounts returned to the

NRF, Provincial Treasury through its Municipal Support Program (MSP) will introduce a grant

management initiative for selected municipalities in the province in 2016/17.

In to the 2013/14 financial year, 11 municipalities had a negative Net Available Cash position whilst 9

municipalities had a negative Net Available Cash position at the end of 2014/15. This area of financial

management in municipalities requires close and constant monitoring in order to ensure that our

municipalities remain solvent and are able to honour their financial obligations. The MSP continued

with the implementation of the Cash Flow Management and VAT projects at various municipalities in

2015/16 to assist municipalities in line with these objectives

In its oversight role, the Provincial Treasury has allocated substantial resources in terms of human

capital across the various business units of the department during 2015/16 in assisting municipalities

to achieve full compliance with the MFMA and related legislation as well as improving credibility of

figures for budgeting and reporting purposes.

The Provincial Treasury will continue to support municipalities in line with its mandate, however the

primary responsibility to avoid, identify and resolve financial problems in a municipality rests with

the municipality itself and the ability of municipalities to rise to these challenges will ultimately be

determined by the quality of their governance and administrative practices.

Strong and participatory governance practices will only have a meaningful impact once municipalities

provide a stable and attractive work environment and Councils appoint the right people with the right

qualifications and experience. It is therefore incumbent upon the political and administrative

leadership at municipalities to be vigilant with regard to early identification of financial problems that

would threaten their liquidity and service delivery obligations.

313

Propertyrates

Propertyrates - penalties and collection

charges

Servicecharges -

electricity revenue

Servicecharges - water

revenue

Servicecharges -sanitation

revenue

Servicecharges -refuse

revenue

Servicecharges -Other

Rental of facilities and equipment

Interest earned -external

investments

Interest earned -outstanding

debtors

Dividends received

Fines Licences and permits

Agency services


Other own revenue Gains on disposal of

PPE

A KZN2000 eThekwini 29 534 286 29 540 627 29 054 560 98.4 6 155 636 112 970 11 442 035 3 017 209 802 606 563 920 162 516 418 584 536 129 228 162 - 52 159 28 804 9 300 2 460 853 3 054 692 8 985

B KZN211 Vulamehlo 87 983 87 983 361 627 411.0 9 026 - - - - - - 931 4 329 951 - - - - 71 580 273 612 1 197B KZN212 Umdoni 174 836 172 288 158 092 91.8 69 360 600 - - - 8 067 69 4 720 71 - - 2 155 6 657 - 60 678 5 714 - B KZN213 Umzumbe 154 897 154 897 88 583 57.2 5 788 - - - - - 3 - 7 056 - - - - - 73 320 2 417 - B KZN214 uMuziwabantu 127 772 131 336 138 877 105.7 14 733 855 27 383 - - 1 960 - 120 7 538 - - 29 456 1 745 78 638 5 421 - B KZN215 Ezinqoleni 55 457 55 457 55 727 100.5 2 261 - - - - - - 10 2 195 427 - - 14 - 49 612 1 208 - B KZN216 Hibiscus Coast 754 860 680 253 774 468 113.8 373 753 147 92 064 - - 42 415 25 048 2 962 4 219 8 517 - 12 215 6 536 3 336 187 492 13 882 1 879C DC21 Ugu DM 807 854 886 502 847 817 95.6 - - - 214 697 104 922 - - 1 104 23 523 4 019 - - - - 482 953 16 599 - Total: Ugu Municipalities 2 163 659 2 168 716 2 425 190 111.8 474 921 1 602 119 447 214 697 104 922 52 443 25 120 9 848 48 930 13 915 - 14 400 13 663 5 081 1 004 273 318 852 3 077B KZN221 uMshwathi 145 713 151 953 149 695 98.5 26 072 1 199 - - - 1 786 4 491 779 9 193 - 88 - 882 107 546 1 655 - B KZN222 uMngeni 318 208 322 717 303 641 94.1 154 855 7 343 59 193 - - 5 815 - 701 3 781 1 715 - 9 101 3 206 - 54 232 3 699 - B KZN223 Mpofana 120 818 126 811 89 163 70.3 9 911 2 484 41 606 - - 2 963 - 1 367 218 1 985 - 302 904 - 23 756 3 668 - B KZN224 Impendle 60 410 50 803 49 936 98.3 4 500 2 - - - - 45 489 935 447 - 2 37 - 42 658 822 - B KZN225 Msunduzi 4 036 592 4 253 163 3 906 507 91.8 739 501 20 236 1 784 563 472 849 126 183 84 201 - 20 181 58 717 60 214 - 9 677 90 532 465 581 63 460 521B KZN226 Mkhambathini 84 697 78 358 78 094 99.7 11 827 - - - - - - - 1 875 2 242 - 94 3 857 - 57 579 621 - B KZN227 Richmond 88 329 96 800 95 336 98.5 10 985 1 294 - - - 451 - 6 223 3 327 91 - 40 101 525 70 303 1 996 - C DC22 uMgungundlovu DM 579 001 639 943 612 836 95.8 - - - 114 261 11 933 - - 202 9 878 18 281 - - - - 401 795 56 486 - Total: uMgungundlovu Municipalities 5 433 769 5 720 547 5 285 208 92.4 957 650 32 558 1 885 362 587 110 138 117 95 217 48 29 654 79 510 94 167 - 19 303 8 196 1 939 1 223 450 132 406 521B KZN232 Emnambithi/Ladysmith 634 257 605 783 589 867 97.4 149 719 7 301 251 122 - - 15 920 402 516 10 404 1 821 - 8 988 5 414 - 129 361 8 425 475B KZN233 Indaka 90 508 96 836 88 572 91.5 5 337 - - - - 158 - 130 2 948 - - - - - 79 894 54 50B KZN234 Umtshezi 348 956 346 345 342 233 98.8 65 480 10 059 194 184 - - 6 933 - 460 293 641 - 75 5 514 - 55 505 3 090 - B KZN235 Okhahlamba 140 177 172 486 147 882 85.7 24 805 4 183 - - 159 1 748 4 78 2 525 - - 457 391 684 109 055 3 793 - B KZN236 Imbabazane 123 908 109 223 115 770 106.0 12 155 1 527 - - - - - 15 1 720 - - 3 0 - 94 802 5 548 - C DC23 Uthukela DM 518 412 516 670 496 685 96.1 - - - 143 296 16 140 - - - 12 466 18 580 - - - - 305 642 562 - Total: Uthukela Municipalities 1 856 218 1 847 341 1 781 010 96.4 257 497 23 070 445 306 143 296 16 299 24 759 406 1 199 30 357 21 042 - 9 522 11 319 684 774 259 21 473 525B KZN241 Endumeni 250 324 261 281 244 893 93.7 57 595 6 419 103 434 - - 17 490 - 1 541 3 984 3 - 1 025 4 285 - 48 186 931 - B KZN242 Nquthu 160 338 172 878 171 383 99.1 20 492 776 11 728 - - 1 903 - 382 10 287 737 - 711 634 63 122 285 1 381 1B KZN244 Msinga 177 064 177 064 12 411 7.0 12 411 - - - - - - - - - - - - - - - - B KZN245 Umvoti 204 843 309 624 307 152 99.2 25 523 1 633 74 453 - - 6 098 5 3 168 2 109 897 - 267 1 365 - 186 490 5 145 - C DC24 Umzinyathi DM 310 663 388 847 406 872 104.6 - - - 34 101 8 607 - - 473 7 705 19 952 - - - - 335 762 271 - Total: Umzinyathi Municipalities 1 103 233 1 309 694 1 142 711 87.3 116 022 8 828 189 615 34 101 8 607 25 491 5 5 565 24 086 21 588 - 2 003 6 284 63 692 723 7 728 1B KZN252 Newcastle 1 580 961 1 274 772 1 683 636 132.1 240 367 - 601 919 161 231 95 237 77 509 0 6 636 7 809 7 156 - 4 854 10 - 462 502 18 406 (0)B KZN253 eMadlangeni 68 770 68 770 74 889 108.9 13 777 2 177 11 821 - - 1 398 - 923 1 655 - - 379 904 - 39 889 1 965 - B KZN254 Dannhauser 116 113 108 001 178 028 164.8 16 089 - - - - 913 - 118 2 460 - - 45 1 219 - 150 312 6 872 - C DC25 Amajuba DM 163 168 162 198 167 406 103.2 - - - 20 850 3 560 - - 248 1 651 2 363 - - - - 137 976 758 - Total: Amajuba Municipalities 1 929 013 1 613 741 2 103 959 130.4 270 233 2 177 613 740 182 080 98 797 79 820 0 7 925 13 576 9 520 - 5 278 2 133 - 790 679 28 001 (0)B KZN261 eDumbe 110 236 110 236 93 568 84.9 13 532 - 13 185 - - 5 035 - 1 477 217 - - 583 854 - 56 787 1 897 - B KZN262 uPhongolo 185 932 185 932 178 908 96.2 26 831 0 32 345 - - 8 471 - 686 1 567 5 656 - 200 1 500 857 99 525 1 271 - B KZN263 Abaqulusi 458 213 458 213 434 374 94.8 53 982 2 128 162 664 33 120 21 182 15 972 - 13 991 1 364 13 - 3 928 3 840 - 119 624 2 551 15B KZN265 Nongoma 152 789 156 225 153 437 98.2 18 230 - - - - 1 685 - 61 1 798 2 121 - 271 768 - 127 760 742 - B KZN266 Ulundi 321 511 321 511 215 575 67.1 45 806 1 255 38 632 - - 5 226 - 695 1 031 - - 3 369 1 921 - 115 668 1 971 1C DC26 Zululand DM 464 944 462 314 371 450 80.3 - - - 17 017 8 428 - - 123 3 536 28 - - - - 338 263 4 055 - Total: Zululand Municipalities 1 693 625 1 694 431 1 447 312 85.4 158 382 3 383 246 825 50 138 29 611 36 389 - 17 033 9 514 7 818 - 8 351 8 883 857 857 627 12 487 16B KZN271 Umhlabuyalingana 157 178 155 898 156 873 100.6 17 198 - - - - - 202 242 6 421 0 - 1 276 3 834 - 126 801 899 - B KZN272 Jozini 182 124 182 124 180 885 99.3 22 549 - - - - 2 833 - 616 2 772 4 752 - 238 777 - 139 526 6 823 - B KZN273 The Big 5 False Bay 70 855 62 463 60 528 96.9 11 199 - - - - 1 550 - 36 196 1 280 - 443 - - 43 587 2 237 - B KZN274 Hlabisa 70 497 70 497 49 232 69.8 367 231 - - - 36 - 155 628 79 - 17 1 313 - 46 208 193 5B KZN275 Mtubatuba 167 361 172 009 171 903 99.9 28 852 - - - - 3 436 1 650 214 1 678 7 393 - 1 645 2 338 - 124 379 318 - C DC27 Umkhanyakude DM 366 824 373 704 359 428 96.2 - 4 3 689 33 417 433 - - 30 5 323 - - - - - 282 334 34 198 - Total: Umkhanyakude Municipalities 1 014 839 1 016 694 978 849 96.3 80 165 236 3 689 33 417 433 7 855 1 852 1 294 17 017 13 503 - 3 620 8 261 - 762 836 44 667 5B KZN281 Mfolozi 131 617 120 463 123 438 102.5 5 737 - - - - - 38 156 704 - - 335 359 - 98 402 12 184 5 521B KZN282 uMhlathuze 2 524 301 2 462 577 2 478 119 100.6 373 290 - 1 389 194 232 818 81 972 68 122 - 12 589 23 764 54 - 2 387 3 525 6 250 255 512 28 643 0B KZN283 Ntambanana 67 469 67 469 63 106 93.5 1 225 - - - - - - 47 1 202 63 - - - - 53 632 6 937 - B KZN284 uMlalazi 285 813 285 813 304 471 106.5 46 376 2 315 56 549 - - 11 078 - 1 156 6 502 457 - 32 198 3 426 - 140 879 2 624 911B KZN285 Mthonjaneni 113 647 113 647 107 557 94.6 6 665 655 18 820 - - 1 239 - 233 3 269 - - 24 310 2 001 - 46 489 3 875 - B KZN286 Nkandla 123 815 40 064 85 287 212.9 10 024 2 490 3 194 - - - 6 575 499 1 611 187 - 0 139 725 48 097 11 746 - C DC28 uThungulu DM 619 400 701 278 648 341 92.5 - - - 41 590 5 801 16 866 270 38 38 861 1 760 - - - - 470 626 72 529 - Total: uThungulu Municipalities 3 866 062 3 791 311 3 810 318 100.5 443 316 5 460 1 467 757 274 409 87 773 97 304 6 883 14 719 75 913 2 521 - 59 230 9 450 6 975 1 113 638 138 538 6 433B KZN291 Mandeni 202 807 203 307 242 128 119.1 27 408 9 766 13 206 - - 6 339 - 257 3 745 - - 32 1 141 - 167 871 12 364 - B KZN292 KwaDukuza 1 263 206 1 273 091 1 226 602 96.3 316 535 7 391 647 213 - - 57 371 - 1 017 30 410 5 564 - 3 432 231 8 351 122 156 26 858 74B KZN293 Ndwedwe 125 402 127 172 131 495 103.4 9 308 - - - - - - 339 7 336 426 - - - - 113 772 314 - B KZN294 Maphumulo 100 796 108 217 111 546 103.1 12 767 - - - - - - 882 2 149 5 027 - - - - 89 954 767 - C DC29 iLembe DM 593 167 664 304 563 664 84.9 - - - 90 161 58 892 - 2 577 14 4 769 18 196 - - - 1 531 375 687 11 837 - Total: Ilembe Municipalities 2 285 379 2 376 091 2 275 435 95.8 366 018 17 157 660 419 90 161 58 892 63 710 2 577 2 509 48 408 29 212 - 3 464 1 371 9 882 869 440 52 140 74B KZN431 Ingwe 101 564 101 553 85 516 84.2 5 196 235 - - - 291 244 351 5 084 - - 261 - - 75 453 (1 600) - B KZN432 Kwa Sani 44 088 48 373 41 504 85.8 13 978 1 378 - - - 2 575 - 532 1 118 137 - 28 807 - 20 309 641 - B KZN433 Greater Kokstad 294 855 294 855 292 321 99.1 92 348 - 103 778 - - 25 939 1 206 1 155 5 211 5 040 - 657 3 401 - 51 078 2 257 250B KZN434 Ubuhlebezwe 112 543 125 780 125 243 99.6 13 063 - - - - 1 676 - 967 6 404 - - 1 508 3 570 750 95 735 1 570 - B KZN435 Umzimkhulu 195 951 199 520 183 880 92.2 10 384 - - - - 830 - 837 4 990 103 - 600 395 - 161 910 3 833 - C DC43 Harry Gwala DM 369 998 377 191 294 890 78.2 - - - 33 188 10 270 - - - 2 998 8 673 - - - - 238 402 1 358 - Total: Harry Gwala Municipalities 1 118 999 1 147 272 1 023 354 89.2 134 968 1 613 103 778 33 188 10 270 31 310 1 450 3 843 25 806 13 954 - 3 055 8 173 750 642 887 8 058 250

51 999 081 52 226 464 51 327 907 98.3 9 414 808 209 054 17 177 972 4 659 806 1 356 325 1 078 216 200 858 512 171 909 246 455 403 - 180 384 106 538 35 531 11 192 666 3 819 042 19 886Source: NT lgdatabase

Appendix 1: Operating Revenue - 4th Quarter 2015/16 Detail

R'000

Total

Original Budget

AdjustedBudget

Unaudited Actual

% Generated

314

Employee relatedcosts

Remun. of councillors

Debt impairment


Finance charges Bulkpurchases

Other Materials Contracted services

Transfers and grants Other expenditure Loss on disposal of

PPE

A KZN2000 eThekwini 29 436 059 29 532 140 27 876 032 94.4 7 681 226 105 334 422 425 2 013 416 993 582 9 493 502 4 625 3 711 137 256 971 3 191 544 2 271

B KZN211 Vulamehlo 100 066 100 066 222 540 222.4 50 381 19 841 - 34 840 - - (24) 387 11 889 105 225 - B KZN212 Umdoni 200 896 180 345 134 944 74.8 67 449 2 548 - - 490 - - 16 323 3 728 44 406 - B KZN213 Umzumbe 154 897 154 897 113 821 73.5 36 045 13 603 - - 1 - - 655 - 63 517 - B KZN214 uMuziwabantu 127 772 131 904 110 971 84.1 36 835 6 174 - - - 23 160 990 2 977 1 262 39 573 - B KZN215 Ezinqoleni 55 305 55 305 41 139 74.4 15 494 3 320 - - - - - 972 6 072 15 281 - B KZN216 Hibiscus Coast 754 860 730 543 680 283 93.1 320 602 19 907 - 54 990 4 727 74 066 26 892 29 076 5 825 144 196 - C DC21 Ugu DM 804 588 873 793 808 513 92.5 295 974 9 427 - 171 602 1 315 60 693 8 638 22 743 58 218 179 902 - Total: Ugu Municipalities 2 198 384 2 226 853 2 112 211 94.9 822 781 74 820 - 261 433 6 533 157 920 36 496 73 132 86 995 592 100 - B KZN221 uMshwathi 140 213 125 953 118 679 94.2 54 070 7 970 - 8 728 538 - - 26 700 - 20 673 - B KZN222 uMngeni 317 183 322 449 282 975 87.8 83 697 7 237 2 266 11 232 3 267 86 395 - 13 550 2 820 72 510 - B KZN223 Mpofana 139 333 125 543 69 373 55.3 24 457 4 349 - - (2 645) 25 163 - 8 448 - 9 600 -B KZN224 Impendle 60 411 70 136 64 288 91.7 15 782 1 686 - 2 449 217 - - 1 410 13 919 28 825 - B KZN225 Msunduzi 4 033 134 4 236 150 3 916 165 92.4 902 975 41 763 - 438 777 70 782 1 799 214 156 404 150 130 5 911 346 655 3 554B KZN226 Mkhambathini 83 628 74 231 75 416 101.6 19 263 4 620 - 2 594 - - - - 15 096 33 844 - B KZN227 Richmond 89 597 96 904 95 607 98.7 34 164 4 166 1 635 6 950 178 - - 6 517 - 41 996 - C DC22 uMgungundlovu DM 576 918 602 170 596 220 99.0 177 079 10 974 2 058 58 620 5 184 105 101 648 81 218 3 000 152 339 - Total: uMgungundlovu Municipalities 5 440 418 5 653 536 5 218 723 92.3 1 311 486 82 765 5 960 529 351 77 520 2 015 873 157 052 287 974 40 746 706 442 3 554B KZN232 Emnambithi/Ladysmith 692 262 655 583 511 339 78.0 176 815 16 100 20 076 31 538 242 123 104 - 3 980 19 315 120 170 - B KZN233 Indaka 60 287 63 033 40 205 63.8 10 516 5 490 - - 223 - - 7 277 658 16 041 - B KZN234 Umtshezi 393 579 401 071 319 415 79.6 82 122 5 672 - - 6 159 149 593 10 577 13 341 - 51 952 - B KZN235 Okhahlamba 133 369 175 533 132 674 75.6 47 101 8 606 260 4 433 778 - 1 455 4 610 2 075 63 356 - B KZN236 Imbabazane 128 010 111 115 113 564 102.2 28 651 7 235 803 - 371 - 10 449 6 315 3 999 55 740 - C DC23 Uthukela DM 580 552 570 910 525 640 92.1 168 381 5 097 76 552 44 018 10 2 896 23 583 25 336 13 157 166 612 - Total: Uthukela Municipalities 1 988 059 1 977 244 1 642 837 83.1 513 585 48 198 97 691 79 989 7 783 275 593 46 063 60 859 39 204 473 871 - B KZN241 Endumeni 258 211 259 554 222 231 85.6 79 547 3 261 6 212 3 248 854 65 824 570 18 309 3 613 40 792 - B KZN242 Nquthu 127 240 132 828 117 011 88.1 35 172 10 014 - 6 510 15 16 207 - 6 684 5 940 36 469 - B KZN244 Msinga 216 102 216 102 81 137 37.5 33 681 6 757 - 64 - - - - 10 879 29 757 - B KZN245 Umvoti 207 773 337 805 285 054 84.4 79 462 8 315 - 14 974 - 41 250 - 13 495 82 971 44 587 - C DC24 Umzinyathi DM 405 027 453 223 417 012 92.0 101 921 4 246 40 809 29 423 2 661 10 410 - 74 727 (0) 152 817 - Total: Umzinyathi Municipalities 1 214 354 1 399 512 1 122 445 80.2 329 782 32 593 47 021 54 220 3 531 133 691 570 113 215 103 403 304 422 - B KZN252 Newcastle 1 834 688 1 894 525 2 194 319 115.8 465 310 19 437 331 745 265 578 53 652 441 088 54 233 76 208 90 733 396 332 - B KZN253 eMadlangeni 68 666 68 666 65 317 95.1 19 626 1 859 1 520 3 698 92 10 905 - 2 495 4 655 20 467 - B KZN254 Dannhauser 85 954 86 514 69 284 80.1 23 912 6 222 - - - - 5 891 - - 32 969 289C DC25 Amajuba DM 161 652 180 985 224 069 123.8 109 144 4 348 - 29 371 515 15 950 6 235 14 857 - 43 649 - Total: Amajuba Municipalities 2 150 960 2 230 691 2 552 988 114.4 617 991 31 867 333 265 298 648 54 260 467 943 66 359 93 561 95 388 493 417 289B KZN261 eDumbe 107 577 107 577 85 819 79.8 39 865 5 217 - - 223 11 879 82 1 935 - 26 619 - B KZN262 uPhongolo 185 931 185 931 176 432 94.9 60 980 7 663 12 613 1 797 1 143 25 330 6 625 21 489 - 38 792 - B KZN263 Abaqulusi 489 545 489 545 492 411 100.6 126 205 15 308 2 710 83 127 - 117 130 12 118 45 023 17 102 52 417 21 273B KZN265 Nongoma 142 767 145 578 136 860 94.0 64 932 11 552 - 7 774 472 - - 10 747 976 39 003 1 405B KZN266 Ulundi 445 463 445 463 241 505 54.2 74 406 9 743 - 6 674 4 579 33 132 395 24 962 2 586 85 029 - C DC26 Zululand DM 458 996 457 366 515 626 112.7 158 285 6 634 - 25 427 - 69 807 - 39 149 - 216 324 - Total: Zululand Municipalities 1 830 279 1 831 460 1 648 653 90.0 524 672 56 116 15 323 124 798 6 417 257 278 19 219 143 305 20 663 458 183 22 678B KZN271 Umhlabuyalingana 150 124 186 550 133 849 71.7 34 410 9 529 - - - - 9 938 8 873 - 71 098 0B KZN272 Jozini 167 108 167 108 87 830 52.6 27 448 7 669 - - - - 55 2 329 118 50 211 - B KZN273 The Big 5 False Bay 70 031 62 374 57 133 91.6 16 895 1 993 5 250 4 000 32 - 1 479 10 952 300 16 231 - B KZN274 Hlabisa 65 555 65 555 40 035 61.1 18 111 2 876 - - 59 - 1 216 1 670 4 072 12 031 - B KZN275 Mtubatuba 135 257 148 185 144 189 97.3 40 509 11 470 5 650 17 553 194 - 14 370 15 916 80 32 886 5 561C DC27 Umkhanyakude DM 366 824 406 469 254 074 62.5 126 087 6 446 0 - 339 51 629 17 784 18 135 3 174 30 480 - Total: Umkhanyakude Municipalities 954 899 1 036 241 717 109 69.2 263 459 39 983 10 900 21 553 623 51 629 44 843 57 877 7 743 212 938 5 562B KZN281 Mfolozi 101 743 160 000 169 792 106.1 29 387 7 765 - - - - - 3 200 638 128 802 - B KZN282 uMhlathuze 2 519 364 2 474 871 2 527 865 102.1 588 444 23 891 711 315 802 51 741 1 111 511 41 956 159 917 9 255 224 637 - B KZN283 Ntambanana 67 175 67 175 61 914 92.2 11 972 3 532 - 4 406 - - 638 12 586 649 28 132 - B KZN284 uMlalazi 317 057 317 057 306 702 96.7 80 503 17 443 24 294 36 675 577 38 287 - 25 275 3 865 79 784 - B KZN285 Mthonjaneni 105 091 105 091 80 678 76.8 25 061 3 022 - - - 18 936 7 651 1 295 140 24 572 - B KZN286 Nkandla 122 904 124 630 156 111 125.3 33 915 9 086 - - - 9 432 340 5 345 - 96 131 1 861C DC28 uThungulu DM 644 059 715 145 687 703 96.2 147 899 10 095 3 637 52 920 20 780 45 682 246 99 734 7 563 299 147 - Total: uThungulu Municipalities 3 877 393 3 963 969 3 990 765 100.7 917 181 74 833 28 641 409 804 73 098 1 223 848 50 832 307 352 22 110 881 205 1 861B KZN291 Mandeni 202 738 200 388 212 799 106.2 63 420 10 159 - 21 838 - 8 972 13 228 25 263 (2 608) 72 527 - B KZN292 KwaDukuza 1 263 177 1 273 059 1 171 632 92.0 281 867 18 544 4 372 73 912 24 920 488 651 55 651 30 281 33 333 160 101 - B KZN293 Ndwedwe 115 992 111 951 97 604 87.2 29 249 10 057 958 12 459 5 - - 10 442 - 34 435 - B KZN294 Maphumulo 99 403 93 546 85 030 90.9 25 183 6 404 857 8 556 1 331 - - 7 395 9 870 25 435 - C DC29 iLembe DM 590 998 663 399 578 614 87.2 162 316 9 714 42 798 49 496 8 609 62 849 52 988 63 475 37 525 88 844 - Total: Ilembe Municipalities 2 272 309 2 342 343 2 145 680 91.6 562 034 54 878 48 985 166 261 34 865 560 472 121 867 136 855 78 121 381 341 - B KZN431 Ingwe 89 168 93 196 101 633 109.1 24 542 5 911 2 212 8 552 387 - - 2 344 855 56 829 - B KZN432 Kwa Sani 44 077 48 371 42 481 87.8 18 350 1 826 - 3 789 211 - - 7 884 138 10 283 - B KZN433 Greater Kokstad 322 704 322 704 307 533 95.3 86 588 5 265 21 72 636 1 290 76 546 - 22 031 16 212 26 944 - B KZN434 Ubuhlebezwe 124 671 125 444 115 956 92.4 52 200 7 138 - 27 491 - - 2 925 5 248 1 297 19 657 - B KZN435 Umzimkhulu 205 360 209 281 217 116 103.7 54 185 14 863 - 40 542 704 - - 6 774 24 884 75 163 - C DC43 Harry Gwala DM 397 581 439 649 410 737 93.4 117 406 6 038 12 346 51 065 2 258 9 348 - 41 233 16 096 154 947 - Total: Harry Gwala Municipalities 1 183 561 1 238 645 1 195 457 96.5 353 271 41 041 14 579 204 075 4 849 85 895 2 925 85 515 59 482 343 824 -

52 546 675 53 432 634 50 222 899 94.0 13 897 469 642 427 1 024 788 4 163 547 1 263 062 14 723 643 550 851 5 070 782 810 827 8 039 287 36 215Source: NT lgdatabase

Appendix 2: Operating Expenditure - 4th Quarter 2015/16 Detail

R'000

Total

Original Budget

AdjustedBudget

Unaudited Actual

% Spent

315

National Govt. Provincial Govt. District Municipality Other transfers and grants

Borrowing Internally generated funds

Public contr. and donations

A KZN2000 eThekwini 6 046 926 6 038 935 5 100 987 84.5 2 075 802 535 139 - 14 766 - 2 475 280 -

B KZN211 Vulamehlo 39 530 39 530 20 496 51.8 19 735 - - - - 761 - B KZN212 Umdoni 57 934 63 334 44 063 69.6 23 631 644 - - - 19 789 -B KZN213 Umzumbe 57 137 76 084 73 209 96.2 73 209 - - - - - - B KZN214 uMuziwabantu 29 561 36 535 28 238 77.3 26 739 690 - - - 809 - B KZN215 Ezinqoleni 45 150 45 150 38 043 84.3 13 147 1 000 - - - 23 896 - B KZN216 Hibiscus Coast 163 336 163 336 100 313 61.4 39 538 26 520 - - 19 34 236 -C DC21 Ugu DM 396 653 420 517 349 412 83.1 319 395 5 588 - - - 24 430 -Total: Ugu Municipalities 789 302 844 487 653 774 77.4 515 393 34 442 - - 19 103 920 -B KZN221 uMshwathi 32 264 44 096 43 226 98.0 26 764 - - - - 16 462 -B KZN222 uMngeni 27 249 44 409 17 855 40.2 7 191 - - - - 10 664 -B KZN223 Mpofana 16 595 14 650 12 116 82.7 12 116 - - - - - -B KZN224 Impendle 13 353 13 353 8 485 63.5 8 282 79 - - - - 124B KZN225 Msunduzi 709 060 710 288 472 100 66.5 270 602 17 710 - - 62 181 121 607 - B KZN226 Mkhambathini 19 301 19 301 16 522 85.6 16 522 - - - - - - B KZN227 Richmond 25 850 47 646 30 314 63.6 22 164 0 - - - 8 113 36C DC22 uMgungundlovu DM 260 496 277 045 440 097 158.9 420 417 - - - - 19 680 -Total: uMgungundlovu Municipalities 1 104 169 1 170 787 1 040 717 88.9 784 059 17 789 - - 62 181 176 526 160B KZN232 Emnambithi/Ladysmith 168 275 197 368 159 635 80.9 97 224 - - - - 56 026 6 385B KZN233 Indaka 60 201 60 877 57 603 94.6 27 972 - - - - 29 631 -B KZN234 Umtshezi 34 935 46 610 32 534 69.8 27 665 2 108 - - - 2 762 -B KZN235 Okhahlamba 81 062 83 799 81 570 97.3 36 888 5 924 - - 139 38 619 -B KZN236 Imbabazane 28 350 28 350 28 429 100.3 24 758 - - - - 3 670 -C DC23 Uthukela DM 319 070 260 903 206 451 79.1 174 424 - - - - 32 027 -Total: Uthukela Municipalities 691 893 677 906 566 223 83.5 388 931 8 032 - - 139 162 736 6 385B KZN241 Endumeni 45 844 48 770 30 794 63.1 16 875 6 819 - - - 7 101 -B KZN242 Nquthu 115 392 141 026 125 033 88.7 62 704 21 726 - - - 40 603 -B KZN244 Msinga 58 048 58 048 26 959 46.4 26 959 - - - - - -B KZN245 Umvoti 105 731 84 545 70 696 83.6 28 671 8 763 - - - 33 261 -C DC24 Umzinyathi DM 424 875 440 841 383 931 87.1 368 933 5 000 - - - 6 576 3 423Total: Umzinyathi Municipalities 749 890 773 230 637 413 82.4 504 141 42 308 - - - 87 541 3 423B KZN252 Newcastle 400 509 389 560 293 295 75.3 130 630 4 575 - - 69 974 88 117 -B KZN253 eMadlangeni 24 896 24 896 11 357 45.6 11 357 - - - - - -B KZN254 Dannhauser 42 537 49 089 43 244 88.1 26 944 - - 6 - 16 294 -C DC25 Amajuba DM 70 515 69 324 60 520 87.3 54 350 - - - - 6 170 -Total: Amajuba Municipalities 538 457 532 869 408 417 76.6 223 281 4 575 - 6 69 974 110 580 -B KZN261 eDumbe 39 322 39 322 21 012 53.4 18 589 2 423 - - - - -B KZN262 uPhongolo 56 332 56 332 66 053 117.3 47 856 7 990 - - 4 047 3 056 3 105B KZN263 Abaqulusi 65 061 65 061 98 920 152.0 78 429 8 849 - - - 11 642 -B KZN265 Nongoma 47 873 47 873 50 443 105.4 44 488 - - - - 5 956 -B KZN266 Ulundi 53 994 53 994 51 352 95.1 51 352 - - - - - -C DC26 Zululand DM 503 386 526 995 506 081 96.0 502 732 927 - - - 2 400 23Total: Zululand Municipalities 765 968 789 577 793 862 100.5 743 444 20 188 - - 4 047 23 054 3 128B KZN271 Umhlabuyalingana 84 954 94 954 49 641 52.3 37 747 - - - - 11 893 -B KZN272 Jozini 66 229 66 229 34 753 52.5 34 333 - - - - 420 -B KZN273 The Big 5 False Bay 11 719 11 719 11 697 99.8 11 419 - - - - 278 -B KZN274 Hlabisa 16 452 16 452 8 657 52.6 8 564 - - - - 92 -B KZN275 Mtubatuba 48 250 42 022 48 634 115.7 35 455 67 - - - 13 113 -C DC27 Umkhanyakude DM 252 173 253 372 230 902 91.1 230 902 - - - - - -Total: Umkhanyakude Municipalities 479 777 484 748 384 285 79.3 358 421 67 - - - 25 797 -B KZN281 Mfolozi 63 257 52 412 6 108 11.7 - - - - - - 6 108B KZN282 uMhlathuze 448 781 510 261 345 562 67.7 112 715 83 266 - - 73 603 74 114 1 865B KZN283 Ntambanana 15 367 15 367 16 648 108.3 12 683 - 3 965 - - - -B KZN284 uMlalazi 72 364 79 745 61 005 76.5 61 005 - - - - - -B KZN285 Mthonjaneni 28 956 28 956 41 153 142.1 19 699 - - 254 - 21 201 -B KZN286 Nkandla 60 208 57 588 63 172 109.7 62 042 25 - - - 1 105 -C DC28 uThungulu DM 512 245 489 598 326 024 66.6 303 380 - - - 1 552 20 592 500Total: uThungulu Municipalities 1 201 178 1 233 927 859 673 69.7 571 523 83 291 3 965 254 75 155 117 012 8 473B KZN291 Mandeni 82 112 64 719 67 302 104.0 39 262 10 483 - - - 17 342 214B KZN292 KwaDukuza 375 344 359 370 276 704 77.0 68 197 7 212 - - 16 316 184 978 -B KZN293 Ndwedwe 61 927 64 667 51 933 80.3 48 612 - - - - 3 321 -B KZN294 Maphumulo 39 330 32 365 28 843 89.1 21 689 1 387 - - - 5 767 -C DC29 iLembe DM 424 487 452 944 475 125 104.9 343 984 - - - - 25 890 105 251Total: Ilembe Municipalities 983 200 974 066 899 907 92.4 521 745 19 083 - - 16 316 237 298 105 465B KZN431 Ingwe 91 218 91 218 56 780 62.2 39 478 - - - - 17 302 -B KZN432 Kwa Sani 10 320 10 320 12 856 124.6 10 530 - - - - 2 326 -B KZN433 Greater Kokstad 37 967 47 180 24 377 51.7 12 123 2 705 - - - 8 921 627B KZN434 Ubuhlebezwe 88 189 102 526 79 113 77.2 45 084 23 285 - - - 10 694 51B KZN435 Umzimkhulu 58 149 82 969 70 881 85.4 47 978 2 941 - - - 19 962 -C DC43 Harry Gwala DM 306 650 278 348 200 412 72.0 197 468 - - - - 2 944 -Total: Harry Gwala Municipalities 592 492 612 560 444 419 72.6 352 662 28 930 - - - 62 149 678

13 943 250 14 133 089 11 789 675 83.4 7 039 402 793 844 3 965 15 026 227 832 3 581 893 127 712Source: NT lgdatabase

Appendix 3: Capital Revenue (Source of finance) - 4th Quarter 2015/16

Total

OriginalBudget

AdjustedBudget

Unaudited Actual % Generated/ Received

DetailTransfers recognised - capital

R'000 Other sources of finance

316

Executive & Council

Budget & Treasury Office

Corporate Services

Community & Social Services

Sport And Recreation

Public Safety Housing Health Planning and Dev.

Road Transport Environ. Protection

Electricity Water Waste Water Mgt.

Waste Mgt.

A KZN2000 eThekwini 6 046 926 6 038 935 5 100 987 84.5 17 630 109 623 123 750 82 883 18 718 63 123 720 164 16 177 136 502 2 216 145 - 423 978 548 480 466 117 73 542 84 154

B KZN211 Vulamehlo 39 530 39 530 20 496 51.8 - - - 272 - - - - - 20 224 - - - - - -B KZN212 Umdoni 57 934 63 334 44 063 69.6 3 005 27 533 1 084 293 353 156 - 373 38 238 - - - - - -B KZN213 Umzumbe 57 137 76 084 73 209 96.2 - - 3 649 69 560 - - - - - - - - - - - -B KZN214 uMuziwabantu 29 561 36 535 28 238 77.3 780 - 577 155 - - - - 399 17 820 - 903 - - 7 604 -B KZN215 Ezinqoleni 45 150 45 150 38 043 84.3 1 736 399 283 - - 128 - - 20 230 15 267 - - - - - -B KZN216 Hibiscus Coast 163 336 163 336 100 313 61.4 97 487 95 1 260 55 - 277 155 49 221 82 - 29 - 52 302 250C DC21 Ugu DM 396 653 420 517 349 412 83.1 51 230 24 124 - - 5 588 - - 205 - - - 274 108 45 106 - -Total: Ugu Municipalities 789 302 844 487 653 774 77.4 103 058 751 30 426 71 127 293 6 347 311 49 21 428 91 631 - 932 274 108 45 158 7 905 250B KZN221 uMshwathi 32 264 44 096 43 226 98.0 2 770 1 076 - 22 767 - - - - - 15 097 - 1 515 - - - -B KZN222 uMngeni 27 249 44 409 17 855 40.2 30 113 180 23 791 - - - 9 934 6 785 - - - - - -B KZN223 Mpofana 16 595 14 650 12 116 82.7 - - - - - - - - - 12 116 - - - - - -B KZN224 Impendle 13 353 13 353 8 485 63.5 158 41 12 711 - - - - 7 105 459 - - - - - - B KZN225 Msunduzi 709 060 710 288 472 100 66.5 7 174 36 292 6 460 4 763 39 844 3 022 5 864 - 23 269 130 955 1 594 99 059 74 326 33 662 3 457 2 357B KZN226 Mkhambathini 19 301 19 301 16 522 85.6 16 522 - - - - - - - - - - - - - - -B KZN227 Richmond 25 850 47 646 30 314 63.6 337 23 40 505 556 2 494 - - 85 26 198 - - - - 77 -C DC22 uMgungundlovu DM 260 496 277 045 440 097 158.9 - 822 - - - - - - - - - - 439 276 - - -Total: uMgungundlovu Municipalities 1 104 169 1 170 787 1 040 717 88.9 26 992 38 366 6 692 28 769 41 190 5 516 5 864 - 40 392 191 612 1 594 100 574 513 602 33 662 3 534 2 357B KZN232 Emnambithi/Ladysmith 168 275 197 368 159 635 80.9 - - - 21 853 145 1 495 456 - 2 632 116 989 - 16 065 - - - -B KZN233 Indaka 60 201 60 877 57 603 94.6 480 33 6 - - - - - - 57 084 - - - - - -B KZN234 Umtshezi 34 935 46 610 32 534 69.8 - 1 383 68 2 108 - - - - 1 129 16 006 - 11 841 - - - -B KZN235 Okhahlamba 81 062 83 799 81 570 97.3 - - 2 488 3 001 - 97 - - 75 984 - - - - - - -B KZN236 Imbabazane 28 350 28 350 28 429 100.3 128 94 187 15 860 - - - - 3 203 8 958 - - - - - -C DC23 Uthukela DM 319 070 260 903 206 451 79.1 1 342 747 1 031 - - - - 126 3 170 - - - 200 036 - - -Total: Uthukela Municipalities 691 893 677 906 566 223 83.5 1 949 2 257 3 779 42 822 145 1 592 456 126 86 119 199 037 - 27 906 200 036 - - -B KZN241 Endumeni 45 844 48 770 30 794 63.1 143 420 397 10 443 - 127 - - - 13 650 - 4 144 - - 1 470 -B KZN242 Nquthu 115 392 141 026 125 033 88.7 32 717 200 305 19 071 - 3 573 - - 1 645 29 292 - 38 230 - - - -B KZN244 Msinga 58 048 58 048 26 959 46.4 235 - - - - - - - - 26 724 - - - - - -B KZN245 Umvoti 105 731 84 545 70 696 83.6 1 114 177 300 3 434 - - - - 354 51 621 - 9 908 - - 3 788 -C DC24 Umzinyathi DM 424 875 440 841 383 931 87.1 - 1 6 455 8 296 - - - - - - - - 365 219 3 960 - -Total: Umzinyathi Municipalities 749 890 773 230 637 413 82.4 34 209 797 7 457 41 244 - 3 699 - - 1 999 121 287 - 52 282 365 219 3 960 5 258 -B KZN252 Newcastle 400 509 389 560 293 295 75.3 55 295 1 454 3 785 15 989 7 116 2 766 3 645 - 15 355 85 798 - 33 660 62 929 5 505 (0) -B KZN253 eMadlangeni 24 896 24 896 11 357 45.6 11 357 - - - - - - - - - - - - - - -B KZN254 Dannhauser 42 537 49 089 43 244 88.1 928 128 41 230 321 - 638 - - - - - - - - - -C DC25 Amajuba DM 70 515 69 324 60 372 87.1 - 52 5 021 - - - - - 72 9 693 - - 45 535 - - -Total: Amajuba Municipalities 538 457 532 869 408 269 76.6 67 580 1 633 50 035 16 310 7 116 3 404 3 645 - 15 427 95 491 - 33 660 108 464 5 505 (0) -B KZN261 eDumbe 39 322 39 322 21 012 53.4 - - - 2 766 - - - - - 5 494 - 12 752 - - - -B KZN262 uPhongolo 56 332 56 332 66 053 117.3 - 30 2 463 83 - 188 - - 32 692 4 108 - 26 320 - - 170 -B KZN263 Abaqulusi 65 061 65 061 98 920 152.0 78 104 361 37 - 24 - - 33 58 641 - 39 472 120 36 12 -B KZN265 Nongoma 47 873 47 873 50 443 105.4 65 358 64 211 - 513 - - 805 46 908 - - - - 1 520 -B KZN266 Ulundi 53 994 53 994 51 352 95.1 - - - 14 149 - 2 507 - - - 8 975 - 25 721 - - - -C DC26 Zululand DM 503 386 526 995 506 081 96.0 - 625 215 927 - - - - 2 297 - - - 502 018 - - -Total: Zululand Municipalities 765 968 789 577 793 862 100.5 143 1 116 3 103 18 172 - 3 232 - - 35 827 124 126 - 104 265 502 139 36 1 702 -B KZN271 Umhlabuyalingana 84 954 94 954 49 763 52.4 - 159 - - - - - - 49 604 - - - - - - -B KZN272 Jozini 66 229 66 229 34 753 52.5 - - 416 52 - (3) - - - 34 036 - 252 - - - -B KZN273 The Big 5 False Bay 11 719 11 719 11 697 99.8 - 278 - - - - - - - 11 419 - - - - - -B KZN274 Hlabisa 16 452 16 452 8 657 52.6 3 53 - 5 296 1 254 36 - - 2 014 - - - - - - -B KZN275 Mtubatuba 48 250 42 022 48 634 115.7 43 - 2 530 1 383 - 435 - - - 39 853 - 87 - - 4 302 -C DC27 Umkhanyakude DM 252 173 253 372 230 902 91.1 - - - 3 402 - - - - - - - - 152 965 74 535 - -Total: Umkhanyakude Municipalities 479 777 484 748 384 407 79.3 47 490 2 946 10 134 1 254 468 - - 51 618 85 308 - 339 152 965 74 535 4 302 -B KZN281 Mfolozi 63 257 52 412 6 108 11.7 6 108 - - - - - - - - - - - - - - -B KZN282 uMhlathuze 448 781 510 261 345 562 67.7 5 028 33 15 277 33 958 - - 86 819 - - 43 559 992 20 306 84 319 53 149 1 368 756B KZN283 Ntambanana 15 367 15 367 16 648 108.3 - - - - - - - - - 16 648 - - - - - -B KZN284 uMlalazi 72 364 79 745 61 005 76.5 566 2 704 4 166 4 127 21 614 437 - 147 794 23 419 - 2 574 - - 435 21B KZN285 Mthonjaneni 28 956 28 956 41 153 142.1 6 440 42 58 10 068 - - - - 372 1 633 - 22 540 - - - -B KZN286 Nkandla 60 208 57 588 63 172 109.7 - - - 907 - - - - 62 265 - - - - - - -C DC28 uThungulu DM 512 245 489 598 326 024 66.6 682 212 861 648 - 204 - 200 168 - - - 319 637 3 089 324 -Total: uThungulu Municipalities 1 201 178 1 233 927 859 673 69.7 18 825 2 990 20 363 49 708 21 614 641 86 819 347 63 599 85 259 992 45 420 403 955 56 237 2 128 777B KZN291 Mandeni 82 112 64 719 67 302 104.0 409 3 138 223 750 18 997 - - 16 896 37 091 - 7 779 - - - -B KZN292 KwaDukuza 375 344 359 370 276 704 77.0 14 910 1 410 1 990 13 062 3 763 2 881 894 - 9 202 158 790 - 69 640 - - 162 -B KZN293 Ndwedwe 61 927 64 667 51 933 80.3 - 159 377 - - - - - 84 37 331 - 13 981 - - - -B KZN294 Maphumulo 39 330 32 365 28 843 89.1 - 232 503 2 081 - - - - 164 25 862 - - - - - -C DC29 iLembe DM 424 487 452 944 475 125 104.9 - 17 037 5 504 - - - - - - 1 628 - - 424 126 26 831 - -Total: Ilembe Municipalities 983 200 974 066 899 907 92.4 15 319 21 976 8 597 15 894 3 782 3 879 894 - 26 345 260 702 - 91 400 424 126 26 831 162 -B KZN431 Ingwe 91 218 91 218 56 780 62.2 94 212 412 481 - - - - 55 581 - - - - - - -B KZN432 Kwa Sani 10 320 10 320 12 856 124.6 1 303 (575) 7 1 592 - - - - 10 530 - - - - - - -B KZN433 Greater Kokstad 37 967 47 180 24 377 51.7 1 528 92 - - - - - - - 20 684 - 2 073 - - - -B KZN434 Ubuhlebezwe 88 189 102 526 79 113 77.2 265 116 310 13 838 - - - - 63 112 1 473 - - - - - -B KZN435 Umzimkhulu 58 149 82 969 70 881 85.4 123 531 3 335 4 510 - - - - 511 61 871 - - - - - -C DC43 Harry Gwala DM 306 650 278 348 200 412 72.0 - - 247 - - - - - 400 - - - 4 330 195 436 - -Total: Harry Gwala Municipalities 592 492 612 560 444 419 72.6 3 312 376 4 311 20 420 - - - - 130 134 84 028 - 2 073 4 330 195 436 - -

13 943 250 14 133 089 11 789 650 83.4 289 063 180 377 261 459 397 483 94 111 91 902 818 152 16 699 609 390 3 554 626 2 586 882 829 3 497 424 907 476 98 533 87 538Source: NT lgdatabase

Appendix 4: Capital Expenditure - 4th Quarter 2015/16

Total

Detail Governance and Admin. Community and Public Safety Economic and Environmental Services Trading Services

Other Original Budget

AdjustedBudget

Unaudited Actual

R'000 %

Spent

317

R'000 Total % Total % Total % Total % Amount % Amount %

A KZN2000 eThekwini 866 336 14.7 386 329 6.6 230 354 3.9 4 410 793 74.8 5 893 812 85 847 1.5 2 710 563 46.0

B KZN211 Vulamehlo 204 3.2 286 4.5 270 4.2 5 658 88.2 6 418 - - - - B KZN212 Umdoni (3 551) -10.1 1 661 4.7 923 2.6 36 185 102.7 35 218 - - - - B KZN213 Umzumbe - - - - (25) -0.3 8 980 100.3 8 954 - - - - B KZN214 uMuziwabantu 2 678 21.2 1 388 11.0 400 3.2 8 181 64.7 12 647 - - - - B KZN215 Ezinqoleni 141 3.4 133 3.2 127 3.0 3 782 90.4 4 183 - - - - B KZN216 Hibiscus Coast 11 693 7.2 3 783 2.3 8 663 5.4 137 273 85.0 161 412 - - - - C DC21 Ugu DM 36 103 12.0 11 910 3.9 10 229 3.4 243 781 80.7 302 022 - - - - Total: Ugu Municipalities 47 266 8.9 19 161 3.6 20 587 3.9 443 840 83.6 530 854 - - - - B KZN221 uMshwathi 1 849 1.9 1 198 1.2 1 204 1.3 91 909 95.6 96 161 - - - - B KZN222 uMngeni 2 639 2.7 16 107 16.6 4 532 4.7 73 579 76.0 96 857 - - - - B KZN223 Mpofana - - - - - - - - - - - - - B KZN224 Impendle 345 5.8 181 3.0 71 1.2 5 384 90.0 5 981 - - - - B KZN225 Msunduzi 305 263 15.2 143 556 7.2 69 982 3.5 1 486 426 74.1 2 005 226 - - 726 362 36.2 B KZN226 Mkhambathini 2 820 18.5 519 3.4 516 3.4 11 404 74.7 15 259 - - 3 209 21.0 B KZN227 Richmond 1 185 10.4 322 2.8 256 2.3 9 623 84.5 11 386 - - - - C DC22 uMgungundlovu DM 22 577 5.8 9 113 2.3 7 252 1.9 350 627 90.0 389 570 - - - - Total: uMgungundlovu Municipalities 336 677 12.8 170 996 6.5 83 814 3.2 2 028 952 77.4 2 620 439 - - 729 571 27.8 B KZN232 Emnambithi/Ladysmith 12 464 6.9 7 513 4.2 3 516 1.9 157 277 87.0 180 770 - - - - B KZN233 Indaka 88 1.3 87 1.3 87 1.3 6 567 96.2 6 829 - - - - B KZN234 Umtshezi 14 500 14.2 3 481 3.4 2 909 2.8 81 577 79.6 102 467 - - - - B KZN235 Okhahlamba 2 242 6.4 1 539 4.4 1 179 3.3 30 284 85.9 35 245 - - - - B KZN236 Imbabazane 704 3.0 711 3.1 658 2.8 21 145 91.1 23 218 - - - - C DC23 Uthukela DM 249 0.0 13 385 2.4 14 599 2.6 537 207 95.0 565 440 - - - - Total: Uthukela Municipalities 30 248 3.3 26 716 2.9 22 948 2.5 834 057 91.3 913 969 - - - - B KZN241 Endumeni 8 105 11.5 1 643 2.3 1 166 1.7 59 659 84.5 70 573 6 363 9.0 - - B KZN242 Nquthu 1 579 5.9 592 2.2 743 2.8 23 656 89.0 26 570 - - - - B KZN244 Msinga 954 5.5 672 3.9 514 3.0 15 191 87.7 17 331 - - - - B KZN245 Umvoti 7 514 16.9 4 218 9.5 1 742 3.9 31 058 69.7 44 533 - - - - C DC24 Umzinyathi DM 5 747 2.0 5 552 1.9 5 039 1.7 273 915 94.4 290 252 - - - - Total: Umzinyathi Municipalities 23 900 5.3 12 677 2.8 9 203 2.0 403 479 89.8 449 259 6 363 1.4 - - B KZN252 Newcastle 66 670 7.5 36 051 4.0 22 431 2.5 765 109 85.9 890 261 - - - - B KZN253 eMadlangeni 1 512 5.5 908 3.3 5 301 19.4 19 653 71.8 27 373 - - - - B KZN254 Dannhauser 950 4.7 841 4.2 734 3.6 17 651 87.5 20 176 - - - - C DC25 Amajuba DM - - - - - - - - - - - - - Total: Amajuba Municipalities 69 133 7.4 37 800 4.0 28 466 3.0 802 412 85.6 937 811 - - - - B KZN261 eDumbe 1 975 2.2 966 1.1 1 245 1.4 86 970 95.4 91 156 - - - - B KZN262 uPhongolo 5 380 4.4 3 518 2.9 3 759 3.1 110 066 89.7 122 723 - - - - B KZN263 Abaqulusi 15 369 13.5 5 822 5.1 4 258 3.7 88 257 77.6 113 706 - - - - B KZN265 Nongoma 699 2.2 368 1.1 196 0.6 31 251 96.1 32 514 - - - - B KZN266 Ulundi - - - - - - - - - - - - - C DC26 Zululand DM 6 383 8.8 1 230 1.7 64 586 89.5 - - 72 199 - - - - Total: Zululand Municipalities 29 807 6.9 11 905 2.8 74 042 17.1 316 544 73.2 432 298 - - - - B KZN271 Umhlabuyalingana 1 195 3.4 1 190 3.4 1 004 2.8 32 063 90.4 35 452 - - - - B KZN272 Jozini 1 367 1.4 2 199 2.3 1 927 2.0 92 198 94.4 97 691 - - - - B KZN273 The Big 5 False Bay 539 2.7 732 3.6 439 2.2 18 562 91.6 20 271 - - - - B KZN274 Hlabisa - - - - - - - - - - - - - B KZN275 Mtubatuba 3 631 4.6 5 826 7.4 1 576 2.0 67 385 85.9 78 418 - - - - C DC27 Umkhanyakude DM 2 295 1.3 2 107 1.2 983 0.6 172 412 97.0 177 798 - - - - Total: Umkhanyakude Municipalities 9 027 2.2 12 054 2.9 5 930 1.4 382 619 93.4 409 630 - - - - B KZN281 Mfolozi 753 6.2 519 4.3 338 2.8 10 546 86.8 12 156 - - - - B KZN282 uMhlathuze 234 608 58.4 12 459 3.1 7 964 2.0 146 635 36.5 401 666 - - - - B KZN283 Ntambanana - - - - - - - - - - - - - B KZN284 uMlalazi 3 821 10.6 1 455 4.0 772 2.1 30 093 83.3 36 141 - - - - B KZN285 Mthonjaneni 2 477 32.9 633 8.4 550 7.3 3 870 51.4 7 530 - - - - B KZN286 Nkandla 784 4.1 722 3.8 720 3.8 16 696 88.2 18 922 - - - - C DC28 uThungulu DM 5 983 10.0 3 090 5.2 1 472 2.5 49 253 82.4 59 799 1 916 3.2 35 605 59.5 Total: uThungulu Municipalities 248 427 46.3 18 877 3.5 11 816 2.2 257 094 47.9 536 214 1 916 0.4 35 605 6.6 B KZN291 Mandeni (1 172) -1.0 4 162 3.5 3 778 3.2 112 769 94.3 119 538 - - - - B KZN292 KwaDukuza 32 671 21.5 10 054 6.6 6 644 4.4 102 634 67.5 152 003 - - - - B KZN293 Ndwedwe 380 4.7 317 4.0 312 3.9 7 010 87.4 8 020 - - - - B KZN294 Maphumulo 565 2.7 525 2.5 510 2.4 19 369 92.4 20 969 - - - - C DC29 iLembe DM 13 844 6.5 9 047 4.3 10 820 5.1 178 716 84.1 212 426 - - - - Total: Ilembe Municipalities 46 288 9.0 24 105 4.7 22 064 4.3 420 499 82.0 512 956 - - - - B KZN431 Ingwe 78 0.7 70 0.7 44 0.4 10 441 98.2 10 633 - - - - B KZN432 Kwa Sani 18 0.5 1 068 30.5 864 24.7 1 550 44.3 3 501 - - 12 921 369.1 B KZN433 Greater Kokstad 10 619 18.4 5 074 8.8 2 855 4.9 39 287 67.9 57 835 - - - - B KZN434 Ubuhlebezwe (1 314) -5.4 579 2.4 541 2.2 24 668 100.8 24 474 - - - - B KZN435 Umzimkhulu 393 5.8 313 4.6 144 2.1 5 972 87.5 6 822 (156) -2.3 - - C DC43 Harry Gwala DM 3 891 2.7 3 071 2.1 2 543 1.8 134 160 93.4 143 665 - - - - Total: Harry Gwala Municipalities 13 686 5.5 10 176 4.1 6 990 2.8 216 078 87.5 246 929 (156) -0.1 12 921 5.2

1 720 794 12.8 730 796 5.4 516 213 3.8 10 516 367 78.0 13 484 170 93 970 0.7 3 488 660 25.9 Source: NT Publication

Actual Bad Debts Written Off to Debtors

Impairment - Bad Debts ito Council Policy

Total

Appendix 5 - Debtors Age Analysis (Total) - 4th Quarter 2015/16

0 - 30 Days 30 - 60 Days 60 - 90 Days Over 90 Days Total

318

R'000 30 - 60 60 - 90 Over 90 Total % 30 - 60 60 - 90 Over 90 Total % 30 - 60 60 - 90 Over 90 Total % 30 - 60 60 - 90 Over 90 Total %

A KZN2000 eThekwini 17 690 26 282 1 942 162 897 208 812 3.5 269 473 184 861 135 695 1 890 076 2 480 105 42.1 554 642 162 235 85 386 2 240 237 3 042 501 51.6 24 531 12 951 7 330 117 582 162 394 2.8 5 893 812

B KZN211 Vulamehlo - - - - - - - - - - - - - - - - - - 204 286 270 5 658 6 418 100.0 6 418B KZN212 Umdoni (153) 43 25 1 366 1 281 3.6 (78) 153 78 12 221 12 375 35.1 (3 272) 1 431 794 21 213 20 166 57.3 (49) 33 26 1 385 1 396 4.0 35 218B KZN213 Umzumbe - - - 5 102 5 102 57.0 - - (25) 2 109 2 083 23.3 - - - - - - - - - 1 769 1 769 19.8 8 954B KZN214 uMuziwabantu 463 121 17 2 069 2 670 21.1 1 156 311 81 1 840 3 388 26.8 1 058 957 301 4 272 6 588 52.1 - - - - - - 12 647B KZN215 Ezinqoleni 4 9 10 737 760 18.2 137 124 117 3 045 3 423 81.8 - - - - - - - - - - - - 4 183B KZN216 Hibiscus Coast 856 60 69 1 796 2 780 1.7 5 471 1 628 1 311 22 306 30 715 19.0 4 478 1 876 7 277 114 104 127 736 79.1 888 219 7 (932) 181 0.1 161 412C DC21 Ugu DM 5 323 1 286 1 236 10 094 17 939 5.9 9 564 3 078 2 036 39 564 54 242 18.0 21 212 6 976 6 957 194 098 229 243 75.9 3 570 - 26 599 0.2 302 022Total: Ugu Municipalities 6 493 1 518 1 356 21 164 30 532 5.8 16 250 5 295 3 597 81 084 106 226 20.0 23 478 11 239 15 330 333 687 383 733 72.3 1 046 1 109 303 7 905 10 363 2.0 530 854B KZN221 uMshwathi 426 579 340 45 465 46 810 48.7 893 504 313 13 847 15 557 16.2 530 115 551 32 597 33 794 35.1 - - - - - - 96 161B KZN222 uMngeni 930 249 249 7 966 9 394 9.7 255 147 86 1 334 1 821 1.9 2 635 12 757 3 743 51 062 70 196 72.5 (1 180) 2 955 454 13 218 15 446 15.9 96 857B KZN223 Mpofana - - - - - - - - - - - - - - - - - - - - - - - - -B KZN224 Impendle 2 44 1 3 292 3 340 55.8 311 125 62 1 948 2 447 40.9 32 12 7 144 195 3.3 - - - - - - 5 981B KZN225 Msunduzi 25 421 14 049 3 466 55 379 98 314 4.9 158 377 63 253 26 079 177 245 424 953 21.2 114 014 61 760 37 552 1 101 316 1 314 641 - 7 451 4 495 2 885 152 487 167 317 8.3 2 005 226B KZN226 Mkhambathini 197 31 30 662 921 6.0 1 379 230 202 5 277 7 088 46.5 495 91 119 1 604 2 309 15.1 749 167 165 3 861 4 941 32.4 15 259B KZN227 Richmond 183 76 68 1 134 1 462 12.8 309 11 11 1 881 2 212 19.4 498 155 121 3 761 4 535 39.8 194 80 57 2 846 3 178 27.9 11 386C DC22 uMgungundlovu DM 1 714 341 181 3 600 5 836 1.5 1 685 299 335 10 684 13 003 3.3 13 515 6 013 5 801 248 629 273 957 70.3 5 664 2 460 936 87 713 96 773 24.8 389 570Total: uMgungundlovu Municipalities 28 873 15 369 4 337 117 498 166 076 6.3 163 208 64 568 27 089 212 216 467 080 17.8 131 719 80 903 47 893 1 439 114 1 699 628 64.9 12 877 10 157 4 496 260 125 287 655 11.0 2 620 439B KZN232 Emnambithi/Ladysmith 5 680 836 668 36 929 44 112 24.4 12 441 2 338 510 11 804 27 093 15.0 (5 465) 3 815 1 950 93 975 94 275 52.2 (192) 524 388 14 569 15 289 8.5 180 770B KZN233 Indaka 31 31 31 3 374 3 467 50.8 9 9 9 308 333 4.9 20 19 19 1 526 1 583 23.2 29 29 29 1 359 1 445 21.2 6 829B KZN234 Umtshezi 2 285 1 916 1 680 47 632 53 513 52.2 10 132 401 320 3 880 14 732 14.4 1 901 1 043 807 26 956 30 707 30.0 181 122 103 3 109 3 515 3.4 102 467B KZN235 Okhahlamba 336 371 361 9 177 10 246 29.1 278 111 67 779 1 234 3.5 558 325 300 7 643 8 825 25.0 1 070 733 452 12 686 14 940 42.4 35 245B KZN236 Imbabazane 521 521 521 18 369 19 932 85.8 18 5 5 75 103 0.4 3 1 1 30 36 0.2 163 184 131 2 670 3 147 13.6 23 218C DC23 Uthukela DM 65 626 546 5 491 6 728 1.2 (53) 429 324 15 020 15 720 2.8 220 12 321 13 655 515 792 541 988 95.9 17 9 74 904 1 004 0.2 565 440Total: Uthukela Municipalities 8 918 4 300 3 808 120 972 137 998 15.1 22 825 3 292 1 234 31 865 59 216 6.5 (2 763) 17 524 16 731 645 922 677 414 74.1 1 267 1 601 1 176 35 297 39 341 4.3 913 969B KZN241 Endumeni 632 42 11 2 450 3 134 4.4 3 988 225 127 3 805 8 145 11.5 3 321 1 348 1 003 52 151 57 822 81.9 164 29 26 1 252 1 471 2.1 70 573B KZN242 Nquthu 166 72 122 2 297 2 658 10.0 919 248 315 7 007 8 488 31.9 473 254 289 13 769 14 785 55.6 21 18 17 584 639 2.4 26 570B KZN244 Msinga 950 670 513 14 877 17 010 98.1 2 2 2 314 319 1.8 3 - - - 3 0.0 - - - - - - 17 331B KZN245 Umvoti 665 480 (288) 1 975 2 832 6.4 535 (1 007) 137 6 132 5 796 13.0 2 738 1 189 911 16 259 21 097 47.4 3 577 3 556 982 6 693 14 807 33.3 44 533C DC24 Umzinyathi DM 825 1 019 801 15 606 18 251 6.3 612 682 408 19 865 21 567 7.4 4 311 3 850 3 830 238 444 250 435 86.3 - - - - - - 290 252Total: Umzinyathi Municipalities 3 237 2 284 1 158 37 205 43 884 9.8 6 055 150 988 37 122 44 315 9.9 10 846 6 641 6 032 320 623 344 142 76.6 3 762 3 603 1 025 8 529 16 918 3.8 449 259B KZN252 Newcastle (7 346) 9 835 234 10 608 13 331 1.5 37 504 3 763 2 098 51 171 94 536 10.6 33 912 18 412 18 806 682 425 753 555 84.6 2 601 4 041 1 293 20 906 28 840 3.2 890 261B KZN253 eMadlangeni 248 177 (356) 4 118 4 187 15.3 399 154 130 3 677 4 360 15.9 508 320 274 7 899 9 000 - 357 257 5 252 3 959 9 825 - 27 373B KZN254 Dannhauser 222 261 195 2 253 2 930 14.5 232 147 126 2 466 2 971 14.7 406 364 344 11 394 12 507 62.0 91 70 70 1 538 1 768 8.8 20 176C DC25 Amajuba DM - - - - - - - - - - - - - - - - - - - - - - - - -

Total: Amajuba Municipalities (6 875) 10 272 72 16 979 20 448 2.2 38 135 4 063 2 354 57 314 101 866 10.9 34 825 19 096 19 425 701 717 775 062 82.6 3 048 4 369 6 614 26 403 40 434 4.3 937 811B KZN261 eDumbe 199 (148) 100 6 176 6 327 6.9 661 162 248 4 250 5 322 5.8 856 682 669 64 975 67 180 73.7 259 270 228 11 570 12 327 13.5 91 156B KZN262 uPhongolo 509 501 586 8 929 10 525 8.6 2 461 1 361 1 599 4 158 9 578 7.8 1 888 1 278 1 236 83 039 87 440 71.3 522 378 338 13 941 15 179 12.4 122 723B KZN263 Abaqulusi 2 077 1 207 1 033 2 125 6 442 5.7 6 893 1 560 849 18 862 28 164 24.8 6 212 2 905 2 225 60 986 72 328 63.6 186 150 152 6 284 6 772 6.0 113 706B KZN265 Nongoma 69 68 (121) 14 469 14 485 44.5 (294) (552) (593) (10 558) (11 998) -36.9 935 867 949 37 956 40 707 125.2 (10) (16) (39) (10 616) (10 680) -32.8 32 514B KZN266 Ulundi - - - - - - - - - - - - - - - - - - - - - - - - -C DC26 Zululand DM 1 627 246 7 073 - 8 946 12.4 659 82 1 480 - 2 221 3.1 3 980 891 55 490 - 60 361 - 116 12 543 - 671 - 72 199Total: Zululand Municipalities 4 481 1 875 8 671 31 698 46 725 10.8 10 380 2 613 3 582 16 712 33 287 7.7 13 871 6 623 60 568 246 956 328 017 75.9 1 074 794 1 222 21 179 24 269 5.6 432 298B KZN271 Umhlabuyalingana 686 686 531 3 234 5 137 14.5 400 399 399 12 180 13 379 37.7 1 1 1 52 56 0.2 107 103 73 16 596 16 879 47.6 35 452B KZN272 Jozini 23 25 (26) 21 175 21 197 21.7 895 882 717 16 009 18 503 18.9 226 623 604 24 591 26 043 26.7 223 669 632 30 423 31 948 32.7 97 691B KZN273 The Big 5 False Bay 73 (61) 1 4 945 4 958 24.5 87 362 266 4 786 5 500 27.1 379 431 172 8 827 9 808 48.4 0 0 0 4 5 0.0 20 271B KZN274 Hlabisa - - - - - - - - - - - - - - - - - - - - - - - - -B KZN275 Mtubatuba 147 236 64 2 734 3 182 4.1 516 829 224 9 583 11 153 14.2 2 402 3 855 1 043 44 578 51 878 - 565 907 245 10 489 12 206 - 78 418C DC27 Umkhanyakude DM 1 347 504 347 11 258 13 456 7.6 523 276 179 26 150 27 128 15.3 424 1 327 458 135 005 137 214 77.2 1 - - (1) 0 0.0 177 798Total: Umkhanyakude Municipalities 2 277 1 390 917 43 346 47 931 11.7 2 421 2 747 1 785 68 709 75 662 18.5 3 432 6 237 2 277 213 053 224 999 54.9 897 1 679 950 57 511 61 038 14.9 409 630B KZN281 Mfolozi 282 203 200 7 220 7 905 65.0 256 198 55 1 236 1 744 14.3 144 92 70 1 772 2 077 17.1 72 27 12 319 430 3.5 12 156B KZN282 uMhlathuze 6 326 248 114 3 316 10 003 2.5 170 772 7 942 3 543 69 384 251 641 62.6 53 646 3 631 3 755 59 667 120 699 30.0 3 865 638 553 14 268 19 323 4.8 401 666B KZN283 Ntambanana - - - - - - - - - - - - - - - - - - - - - - - - -B KZN284 uMlalazi 334 89 19 8 208 8 650 23.9 2 264 320 111 1 381 4 076 11.3 1 003 824 506 9 990 12 323 34.1 220 221 137 10 513 11 091 30.7 36 141B KZN285 Mthonjaneni 894 142 137 1 225 2 398 31.8 849 165 124 634 1 771 23.5 596 208 176 1 177 2 157 28.6 138 119 113 834 1 204 16.0 7 530B KZN286 Nkandla 13 13 14 109 150 0.8 160 208 176 2 511 3 055 16.1 104 101 141 5 542 5 887 31.1 507 399 389 8 535 9 829 51.9 18 922C DC28 uThungulu DM 1 481 578 266 2 277 4 602 7.7 765 324 88 1 998 3 176 5.3 3 737 2 188 1 118 44 978 52 021 87.0 - - - - - - 59 799Total: uThungulu Municipalities 9 330 1 273 750 22 354 33 707 6.3 175 066 9 156 4 098 77 144 265 464 49.5 59 229 7 044 5 765 123 127 195 165 36.4 4 801 1 405 1 203 34 469 41 878 7.8 536 214B KZN291 Mandeni (8) 72 119 1 663 1 847 1.5 (310) 1 863 1 870 42 445 45 867 38.4 (854) 2 227 1 790 68 342 71 505 59.8 (0) 0 (1) 319 319 0.3 119 538B KZN292 KwaDukuza 733 181 91 5 451 6 456 4.2 8 546 2 492 2 150 15 705 28 893 19.0 21 782 6 585 4 040 76 200 108 607 71.5 1 610 796 362 5 278 8 046 5.3 152 003B KZN293 Ndwedwe 51 51 51 1 844 1 997 24.9 293 231 226 4 038 4 787 59.7 26 26 26 1 008 1 085 13.5 10 10 10 120 151 1.9 8 020B KZN294 Maphumulo 151 150 148 5 239 5 687 27.1 308 273 262 9 852 10 694 51.0 14 14 14 126 168 0.8 93 89 85 4 152 4 419 21.1 20 969C DC29 iLembe DM 1 338 1 940 1 508 6 964 11 751 5.5 1 381 638 2 277 1 851 6 147 2.9 7 135 6 008 6 659 154 351 174 152 82.0 3 990 461 376 15 550 20 376 9.6 212 426Total: Ilembe Municipalities 2 266 2 394 1 917 21 161 27 738 5.4 10 217 5 496 6 785 73 891 96 390 18.8 28 102 14 859 12 529 300 027 355 517 69.3 5 702 1 356 833 25 420 33 311 6.5 512 956B KZN431 Ingwe 50 33 27 5 136 5 246 117 49.3 6 21 2 3 336 3 366 31.7 21 15 14 1 630 1 681 15.8 1 1 0 338 340 3.2 10 633B KZN432 Kwa Sani 2 169 127 218 516 462 14.8 5 367 239 389 1 000 28.6 11 162 123 209 505 14.4 - 371 374 735 1 480 42.3 3 501B KZN433 Greater Kokstad 111 59 (18) 147 299 734 0.5 6 728 2 087 884 9 001 18 700 32.3 3 789 2 923 1 971 21 157 29 840 51.6 (9) 6 17 8 982 8 995 15.6 57 835B KZN434 Ubuhlebezwe (358) 60 60 6 911 6 672 068 27.3 (849) 303 282 9 884 9 620 39.3 (109) 217 199 7 872 8 180 33.4 2 0 0 1 3 24 474B KZN435 Umzimkhulu 2 2 1 1 755 1 759 393 25.8 252 132 33 1 565 1 982 29.1 119 157 97 2 162 2 535 37.2 20 22 13 490 545 8.0 6 822C DC43 Harry Gwala DM 1 162 556 336 10 160 12 213 731 8.5 493 283 157 10 214 11 146 7.8 2 237 2 233 2 049 113 786 120 305 83.7 - - - - - - 143 665Total: Harry Gwala Municipalities 969 878 533 24 328 26 708 10.8 6 635 3 193 1 598 34 388 45 814 18.6 6 068 5 706 4 455 146 816 163 045 66.0 13 400 404 10 545 11 362 4.6 246 929

77 661 67 834 25 462 619 602 790 558 5.9 720 665 285 435 188 804 2 580 521 3 775 425 28.0 863 450 338 106 276 389 6 711 279 8 189 224 60.7 59 018 39 422 25 558 604 965 728 963 5.4 13 484 170Source: NT Publication

Age category (Days) Age category (Days) Age category (Days)

Total

Appendix 6: Debtors by Customer Group (Total) - 4th Quarter 2015/16

Organs of State Commercial Household Other Total Age category (Days)

319

R'000 Total % Total % Total % Total %

A KZN2000 eThekwini 1 504 263 57.1 66 999 2.5 250 870 9.5 810 146 30.8 2 632 278

B KZN211 Vulamehlo (493) 106.0 (2 597) 557.9 3 133 -673.1 (508) 109.2 (465)B KZN212 Umdoni 36 159 100.0 - - - - - - 36 159B KZN213 Umzumbe - - - - - - - - -B KZN214 uMuziwabantu 289 100.0 - - - - - - 289B KZN215 Ezinqoleni 11 100.0 - - - - - - 11B KZN216 Hibiscus Coast - - - - - - - - -C DC21 Ugu DM 19 528 67.7 8 925 30.9 95 0.3 293 1.0 28 840Total: Ugu Municipalities 55 493 85.6 6 329 9.8 3 228 5.0 (216) -0.3 64 833B KZN221 uMshwathi 1 801 100.0 - - - - - - 1 801B KZN222 uMngeni - - - - - - - - -B KZN223 Mpofana - - - - - - - - -B KZN224 Impendle 98 100.0 - - - - - - 98B KZN225 Msunduzi 563 987 98.4 5 358 0.9 92 0.0 3 956 0.7 573 392B KZN226 Mkhambathini 1 774 98.3 31 1.7 (28) -1.5 28 1.5 1 805B KZN227 Richmond - - - - - - - - -C DC22 uMgungundlovu DM 101 675 95.0 1 196 1.1 1 388 1.3 2 749 2.6 107 008Total: uMgungundlovu Municipalities 669 336 97.8 6 584 1.0 1 452 0.2 6 733 1.0 684 105B KZN232 Emnambithi/Ladysmith 42 179 96.2 939 2.1 281 0.6 449 1.0 43 848B KZN233 Indaka 595 96.4 8 1.2 - - 15 2.4 617B KZN234 Umtshezi 31 632 97.7 108 0.3 543 1.7 77 0.2 32 361B KZN235 Okhahlamba 5 467 100.0 - - - - - - 5 467B KZN236 Imbabazane - - - - - - 2 100.0 2C DC23 Uthukela DM 44 0.3 92 0.6 - - 14 091 99.0 14 227Total: Uthukela Municipalities 79 917 82.8 1 147 1.2 823 0.9 14 634 15.2 96 521B KZN241 Endumeni 30 196 100.0 - - - - - - 30 196B KZN242 Nquthu 9 297 100.0 - - - - - - 9 297B KZN244 Msinga 638 100.0 - - - - - - 638B KZN245 Umvoti 187 20.6 (6) -0.6 344 37.9 383 42.1 908C DC24 Umzinyathi DM 6 839 47.7 45 0.3 1 0.0 7 463 52.0 14 348Total: Umzinyathi Municipalities 47 157 85.1 39 0.1 345 0.6 7 846 14.2 55 387B KZN252 Newcastle 81 741 66.0 42 114 34.0 - - - - 123 856B KZN253 eMadlangeni 2 532 55.7 1 838 40.4 150 3.3 27 0.6 4 547B KZN254 Dannhauser 1 038 93.6 - - - - 71 6.4 1 109C DC25 Amajuba DM 13 252 22.4 13 603 23.0 1 599 2.7 30 755 51.9 59 209Total: Amajuba Municipalities 98 563 52.2 57 555 30.5 1 749 0.9 30 853 16.3 188 721B KZN261 eDumbe 339 3.1 1 400 12.6 3 120 28.2 6 225 56.2 11 085B KZN262 uPhongolo 330 3.3 7 941 79.5 1 116 11.2 601 6.0 9 989B KZN263 Abaqulusi - - - - - - - - -B KZN265 Nongoma 2 203 45.0 292 6.0 - - 2 397 49.0 4 892B KZN266 Ulundi - - - - - - - - -C DC26 Zululand DM 27 820 51.1 - - - - 26 647 48.9 54 467Total: Zululand Municipalities 30 692 38.2 9 634 12.0 4 237 5.3 35 870 44.6 80 433B KZN271 Umhlabuyalingana 27 772 110.5 (1 788) -7.1 (560) -2.2 (299) -1.2 25 125B KZN272 Jozini - - - - - - - - -B KZN273 The Big 5 False Bay 1 450 18.2 2 957 37.1 952 11.9 2 611 32.8 7 970B KZN274 Hlabisa - - - - - - - - -B KZN275 Mtubatuba 489 42.4 155 13.4 243 21.0 267 23.1 1 153C DC27 Umkhanyakude DM 25 509 17.8 6 673 4.7 1 845 1.3 108 915 76.2 142 943Total: Umkhanyakude Municipalities 55 221 31.2 7 997 4.5 2 479 1.4 111 494 62.9 177 191B KZN281 Mfolozi 1 061 100.0 - - - - - - 1 061B KZN282 uMhlathuze 301 381 100.0 - - - - - - 301 381B KZN283 Ntambanana - - - - - - - - -B KZN284 uMlalazi 38 182 100.0 - - - - - - 38 182B KZN285 Mthonjaneni 1 538 100.0 - - - - - - 1 538B KZN286 Nkandla 2 863 24.9 3 648 31.8 1 870 16.3 3 103 27.0 11 484C DC28 uThungulu DM 26 054 55.0 10 016 21.1 285 0.6 11 048 23.3 47 403Total: uThungulu Municipalities 371 080 92.5 13 664 3.4 2 156 0.5 14 150 3.5 401 050B KZN291 Mandeni 175 100.0 - - - - - - 175B KZN292 KwaDukuza 205 480 75.6 65 830 24.2 255 0.1 192 0.1 271 757B KZN293 Ndwedwe 33 100.0 - - - - - - 33B KZN294 Maphumulo 11 3.1 85 24.7 (31) -9.0 281 81.2 346C DC29 iLembe DM 51 228 75.9 12 305 18.2 2 354 3.5 1 587 2.4 67 474Total: Ilembe Municipalities 256 927 75.6 78 221 23.0 2 578 0.8 2 059 0.6 339 785B KZN431 Ingwe - - - - - - - - -B KZN432 Kwa Sani 7 520 100.0 - - - - - - 7 520B KZN433 Greater Kokstad 603 52.8 538 47.2 - - - - 1 140B KZN434 Ubuhlebezwe 857 86.1 112 11.3 12 1.3 14 1.4 995B KZN435 Umzimkhulu 22 576 100.0 - - - - - - 22 576C DC43 Harry Gwala DM 10 954 42.1 713 2.7 322 1.2 14 058 54.0 26 047Total: Harry Gwala Municipalities 42 510 72.9 1 363 2.3 335 0.6 14 072 24.1 58 279

3 211 157 67.2 249 533 5.2 270 251 5.7 1 047 641 21.9 4 778 583Source: NT Publication

Total

Appendix 7: Creditors Age Analysis (Total) - 4th Quarter 2015/16

0 - 30 Days 30 - 60 Days 60 - 90 Days Over 90 Days Total

320

R'000 Expenditure

Nat. Dept. % Spent Expenditure

Munis. % Spent Expenditure




Munis. % Spent

A KZN2000 eThekwini 1 050 1 050 1 050 1 050 100 6 306 601 - - - - - - - - - - - - - -

B KZN211 Vulamehlo 1 875 1 875 1 875 1 373 73 1 875 100 930 930 930 - - 264 28 18 560 15 000 15 000 13 781 92 18 196 121 B KZN212 Umdoni 1 800 1 800 1 800 1 346 75 1 800 100 930 930 930 830 89 930 100 20 060 20 060 20 060 19 187 96 22 960 114 B KZN213 Umzumbe 1 800 1 800 1 800 1 217 68 1 800 100 930 930 930 408 44 1 071 115 34 522 38 522 38 522 38 521 100 38 246 99 B KZN214 uMuziwabantu 1 800 1 800 1 800 1 794 100 1 800 100 930 930 930 378 41 930 100 22 672 22 672 22 672 22 672 100 23 728 105 B KZN215 Ezinqoleni 1 800 1 800 1 800 1 800 100 1 752 97 930 930 930 - - 936 101 14 367 14 367 14 367 13 071 91 13 476 94 B KZN216 Hibiscus Coast 1 600 1 600 1 600 1 537 96 1 535 96 930 930 930 - - 734 79 50 122 50 122 50 122 43 773 87 45 080 90 C DC21 Ugu DM 1 325 1 325 1 325 1 325 100 1 325 100 940 940 940 - - 940 100 249 316 249 316 249 316 249 316 100 249 316 100 Total: Ugu Municipalities 12 000 12 000 12 000 10 392 87 11 887 99 6 520 6 520 6 520 1 616 25 5 806 89 409 619 410 059 410 059 400 321 98 411 003 100 B KZN221 uMshwathi 1 800 1 800 1 800 1 800 100 1 850 103 930 930 930 377 41 931 100 26 764 26 764 26 764 26 764 100 26 764 100 B KZN222 uMngeni 1 600 1 600 1 600 1 598 100 1 600 100 930 930 930 - - 930 100 22 249 13 249 13 249 5 233 39 6 852 52 B KZN223 Mpofana 1 800 1 800 1 800 1 499 83 1 800 100 930 930 930 - - 1 031 111 12 295 16 295 16 295 16 021 98 16 295 100 B KZN224 Impendle 1 800 1 800 1 800 1 738 97 1 598 89 930 930 930 910 98 930 100 12 063 17 063 17 063 17 063 100 17 063 100 B KZN225 Msunduzi 1 600 1 600 1 600 1 553 97 1 600 100 930 930 930 909 98 926 100 192 456 192 456 192 456 186 387 97 191 358 99 B KZN226 Mkhambathini 1 800 1 800 1 800 1 800 100 1 799 100 930 930 930 - - 931 100 16 851 16 851 16 851 16 838 100 16 851 100 B KZN227 Richmond 1 800 1 800 1 800 1 800 100 1 679 93 930 930 930 - - 784 84 18 017 25 017 25 017 21 034 84 22 786 91 C DC22 uMgungundlovu DM 1 250 1 250 1 250 1 249 100 1 250 100 940 940 940 368 39 940 100 106 052 106 052 106 052 106 052 100 106 052 100 Total: uMgungundlovu Municipalities 13 450 13 450 13 450 13 037 97 13 175 98 7 450 7 450 7 450 2 564 34 7 402 99 406 747 413 747 413 747 395 392 96 404 022 98 B KZN232 Emnambithi/Ladysmith 1 600 1 600 1 600 1 600 100 1 378 86 930 930 930 - - 1 760 189 42 647 42 647 42 647 42 647 100 41 807 98 B KZN233 Indaka 1 800 1 800 1 800 1 648 92 1 380 77 930 930 930 52 6 648 70 22 051 22 051 22 051 22 050 100 21 572 98 B KZN234 Umtshezi 1 600 1 600 1 600 1 599 100 1 612 101 930 930 930 - - 409 44 17 955 17 955 17 955 17 955 100 17 368 97 B KZN235 Okhahlamba 1 800 1 800 1 800 1 132 63 1 800 100 930 930 930 - - 930 100 27 456 27 456 27 456 27 456 100 27 456 100 B KZN236 Imbabazane 1 800 1 800 1 800 1 588 88 1 800 100 930 930 930 - - 930 100 23 517 23 517 23 517 23 517 100 22 276 95 C DC23 Uthukela DM 1 325 1 325 1 325 1 325 100 634 48 940 940 940 - - 1 045 111 181 247 181 247 181 247 181 247 100 179 268 99 Total: Uthukela Municipalities 9 925 9 925 9 925 8 892 90 8 604 87 5 590 5 590 5 590 52 1 5 722 102 314 873 314 873 314 873 314 872 100 309 748 98 B KZN241 Endumeni 1 600 1 600 1 600 1 600 100 1 600 100 930 930 930 737 79 930 100 14 841 14 841 14 841 12 802 86 14 557 98 B KZN242 Nquthu 1 800 1 800 1 800 1 715 95 1 941 108 930 930 930 9 1 806 87 30 246 35 246 35 246 35 246 100 39 790 113 B KZN244 Msinga 1 800 1 800 1 800 1 800 100 1 800 100 930 930 930 - - 930 100 38 048 38 048 38 048 38 048 100 38 048 100 B KZN245 Umvoti 1 700 1 700 1 700 1 700 100 1 706 100 930 930 930 - - 973 105 26 570 24 570 24 570 24 570 100 24 570 100 C DC24 Umzinyathi DM 1 250 1 250 1 250 1 250 100 1 250 100 940 940 940 940 100 940 100 182 835 203 835 203 835 197 158 97 190 867 94 Total: Umzinyathi Municipalities 8 150 8 150 8 150 8 065 99 8 296 102 4 660 4 660 4 660 1 686 36 4 579 98 292 540 316 540 316 540 307 824 97 307 832 97 B KZN252 Newcastle 1 600 1 600 1 600 1 388 87 1 600 100 930 930 930 - - 251 27 110 705 110 705 110 705 110 705 100 110 705 100 B KZN253 eMadlangeni 1 800 1 800 1 800 1 800 100 1 819 101 930 930 930 - - 930 100 9 183 11 183 11 183 11 183 100 10 412 93 B KZN254 Dannhauser 1 800 1 800 1 800 1 800 100 1 801 100 930 930 930 - - 931 100 21 074 21 074 21 074 21 074 100 21 074 100 C DC25 Amajuba DM 1 500 1 500 1 500 1 437 96 1 707 114 940 940 940 - - 940 100 40 119 40 119 40 119 40 119 100 41 142 103 Total: Amajuba Municipalities 6 700 6 700 6 700 6 425 96 6 928 103 3 730 3 730 3 730 - - 3 052 82 181 081 183 081 183 081 183 081 100 183 332 100 B KZN261 eDumbe 1 800 1 800 1 800 1 645 91 1 645 91 930 930 930 - - 965 104 17 570 17 570 17 570 17 570 100 10 942 62 B KZN262 uPhongolo 1 800 1 800 1 800 1 800 100 1 800 100 930 930 930 - - 930 100 27 852 27 852 27 852 27 852 100 30 098 108 B KZN263 Abaqulusi 1 600 1 600 1 600 1 600 100 1 629 102 930 930 930 - - 787 85 35 566 39 566 39 566 39 566 100 62 067 157 B KZN265 Nongoma 1 800 1 800 1 800 1 800 100 1 800 100 930 930 930 83 9 931 100 30 891 24 691 24 691 24 691 100 35 505 144 B KZN266 Ulundi 1 700 1 700 1 700 1 700 100 1 976 116 930 930 930 - - 1 074 115 29 957 33 957 33 957 33 957 100 36 299 107 C DC26 Zululand DM 1 250 1 250 1 250 1 250 100 1 250 100 940 940 940 360 38 940 100 221 359 221 359 221 359 221 359 100 221 359 100 Total: Zululand Municipalities 9 950 9 950 9 950 9 795 98 10 100 102 5 590 5 590 5 590 443 8 5 627 101 363 195 364 995 364 995 364 995 100 396 271 109 B KZN271 Umhlabuyalingana 1 800 1 800 1 800 1 729 96 1 800 100 930 930 930 - - 930 100 33 827 33 827 33 827 33 827 100 33 872 100 B KZN272 Jozini 1 800 1 800 1 800 1 760 98 1 800 100 930 930 930 - - 930 100 36 213 36 213 36 213 35 218 97 37 326 103 B KZN273 The Big 5 False Bay 1 800 1 800 1 800 1 800 100 1 991 111 930 930 930 442 48 528 57 11 419 16 419 16 419 12 515 76 11 419 70 B KZN274 Hlabisa 1 800 1 800 1 800 1 427 79 1 354 75 930 930 930 - - 622 67 14 345 14 345 14 345 11 865 83 12 905 90 B KZN275 Mtubatuba 1 800 1 800 1 800 1 755 98 1 800 100 930 930 930 580 62 930 100 30 776 30 776 30 776 30 776 100 30 776 100 C DC27 Umkhanyakude DM 1 250 1 250 1 250 877 70 1 250 100 940 940 940 362 39 940 100 210 419 210 419 210 419 210 419 100 214 723 102 Total: Umkhanyakude Municipalities 10 250 10 250 10 250 9 348 91 9 994 98 5 590 5 590 5 590 1 384 25 4 880 87 336 999 341 999 341 999 334 620 98 341 021 100 B KZN281 Mfolozi 1 800 1 800 1 800 1 800 100 1 367 76 930 930 930 853 92 930 100 24 382 30 537 30 537 30 537 100 33 742 110 B KZN282 uMhlathuze 1 600 1 600 1 600 1 600 100 1 600 100 930 930 930 930 100 934 100 93 154 93 154 93 154 93 153 100 93 154 100 B KZN283 Ntambanana 1 800 1 800 1 800 1 800 100 1 792 100 930 930 930 - - 741 80 15 073 15 073 15 073 15 073 100 16 393 109 B KZN284 uMlalazi 1 600 1 600 1 600 1 594 100 1 595 100 930 930 930 - - 708 76 39 090 39 090 39 090 39 090 100 42 881 110 B KZN285 Mthonjaneni 1 800 1 800 1 800 1 800 100 1 800 100 930 930 930 195 21 930 100 12 904 12 904 12 904 12 904 100 12 904 100 B KZN286 Nkandla 1 800 1 800 1 800 1 800 100 1 866 104 930 930 930 167 18 560 60 22 188 22 188 22 188 22 187 100 24 308 110 C DC28 uThungulu DM 1 250 1 250 1 250 1 250 100 1 250 100 940 940 940 374 40 940 100 175 330 175 330 175 330 175 329 100 175 330 100 Total: uThungulu Municipalities 11 650 11 650 11 650 11 644 100 11 270 97 6 520 6 520 6 520 2 519 39 5 743 88 382 121 388 276 388 276 388 273 100 398 712 103 B KZN291 Mandeni 1 800 1 800 1 800 1 720 96 1 800 100 940 940 940 - - 940 100 34 263 34 263 34 263 34 263 100 34 263 100 B KZN292 KwaDukuza 1 700 1 700 1 700 1 700 100 1 700 100 930 930 930 798 86 930 100 49 984 56 984 56 984 56 984 100 56 985 100 B KZN293 Ndwedwe 1 800 1 800 1 800 1 800 100 2 749 153 930 930 930 - - 2 040 219 28 907 28 907 28 907 25 876 90 28 524 99 B KZN294 Maphumulo 1 800 1 800 1 800 1 746 97 1 748 97 930 930 930 443 48 930 100 21 689 21 689 21 689 19 729 91 21 689 100 C DC29 iLembe DM 1 250 1 250 1 250 1 250 100 1 250 100 940 940 940 - - 940 100 189 590 189 590 189 590 189 590 100 189 590 100 Total: Ilembe Municipalities 8 350 8 350 8 350 8 216 98 9 247 111 4 670 4 670 4 670 1 241 27 5 780 124 324 433 331 433 331 433 326 442 98 331 050 100 B KZN431 Ingwe 1 800 1 800 1 800 1 800 100 1 800 100 930 930 930 515 55 930 100 24 319 24 319 24 319 19 185 79 21 478 88 B KZN432 Kwa Sani 1 800 1 800 1 800 1 800 100 1 800 100 930 930 930 774 83 930 100 7 530 10 530 10 530 10 530 100 10 530 100 B KZN433 Greater Kokstad 1 700 1 700 1 700 424 25 1 480 87 930 930 930 454 49 930 100 16 867 16 867 16 867 16 867 100 16 867 100 B KZN434 Ubuhlebezwe 1 800 1 800 1 800 1 800 100 1 800 100 930 930 930 84 9 930 100 24 335 24 335 24 335 24 335 100 20 278 83 B KZN435 Umzimkhulu 1 800 1 800 1 800 1 800 100 1 800 100 930 930 930 930 100 930 100 41 978 47 978 47 978 47 978 100 47 978 100 C DC43 Harry Gwala DM 1 250 1 250 1 250 1 188 95 1 240 99 940 940 940 - - 828 88 192 784 199 784 199 784 199 784 100 154 998 78 Total: Harry Gwala Municipalities 10 150 10 150 10 150 8 812 87 9 920 98 5 590 5 590 5 590 2 757 49 5 478 98 307 813 323 813 323 813 318 679 98 272 129 84

101 625 101 625 101 625 95 676 94 105 726 104 55 910 55 910 55 910 14 262 26 54 069 97 3 319 421 3 388 816 3 388 816 3 334 499 98 3 355 121 99Source: NT Publication


Total

Unaudited Actual Unaudited Actual Unaudited Actual DoRA Total Avail. (Inc.Adjust.) Approved

Payment Schedule


(Year to date)

Unaudited Actual DoRA Total Avail. (Inc.Adjust.) Approved

Payment Schedule


(Year to date)

Unaudited Actual Unaudited Actual DoRA Total Avail. (Inc.Adjust.) Approved

Payment Schedule


(Year to date)

Appendix 8: National Conditional Grants - 2015/16 Financial Management Grant Municipal System Improvement Grant

321

R'000 Expenditure






Munis. % Spent

A KZN2000 eThekwini 30 000 30 000 30 000 30 000 100 39 542 132 40 618 40 618 40 618 40 618 100 62 059 153 - - - - - - -

B KZN211 Vulamehlo 8 000 8 000 8 000 - - 16 000 200 1 000 1 000 1 000 468 47 1 196 120 - - - - - - -B KZN212 Umdoni - - - - - - - 1 069 1 069 1 069 179 17 1 069 100 - - - - - - -B KZN213 Umzumbe 12 000 13 000 13 000 3 786 29 12 570 97 1 084 1 084 1 084 1 082 100 1 084 100 - - - - - - -B KZN214 uMuziwabantu - - - - - - - 1 036 1 036 1 036 947 91 1 036 100 - - - - - - -B KZN215 Ezinqoleni - - - - - - - 1 430 1 430 1 430 602 42 1 348 94 - - - - - - -B KZN216 Hibiscus Coast 8 000 3 000 3 000 - - 5 062 169 1 000 1 000 1 000 1 000 100 817 82 - - - - - - -C DC21 Ugu DM - - - - - - - 1 826 1 826 1 826 1 826 100 1 826 100 100 095 100 095 100 095 91 774 92 91 697 92 Total: Ugu Municipalities 28 000 24 000 24 000 3 786 16 33 632 140 8 445 8 445 8 445 6 104 72 8 377 99 100 095 100 095 100 095 91 774 92 91 697 92 B KZN221 uMshwathi 18 000 18 000 18 000 1 419 8 18 001 100 1 115 1 115 1 115 1 115 100 1 115 100 - - - - - - -B KZN222 uMngeni 5 000 5 000 5 000 - - 1 715 34 1 438 1 438 1 438 1 366 95 1 403 98 - - - - - - -B KZN223 Mpofana 6 000 6 000 6 000 - - 6 000 100 1 000 1 000 1 000 631 63 1 119 112 - - - - - - -B KZN224 Impendle 6 000 6 000 6 000 3 552 59 6 000 100 1 255 1 255 1 255 905 72 1 267 101 - - - - - - -B KZN225 Msunduzi 10 000 10 000 10 000 8 675 87 9 449 94 4 032 4 032 4 032 1 857 46 4 032 100 58 333 58 333 58 333 57 741 99 57 033 98 B KZN226 Mkhambathini 10 000 2 000 2 000 - - 2 171 109 1 058 1 058 1 058 818 77 1 012 96 - - - - - - -B KZN227 Richmond 10 000 10 000 10 000 144 1 10 000 100 1 046 1 046 1 046 843 81 1 046 100 - - - - - - -C DC22 uMgungundlovu DM - - - - - - - 2 499 2 499 2 499 700 28 2 499 100 80 080 80 080 80 080 80 080 100 80 080 100 Total: uMgungundlovu Municipalities 65 000 57 000 57 000 13 790 24 53 336 94 13 443 13 443 13 443 8 235 61 13 493 100 138 413 138 413 138 413 137 821 100 137 113 99 B KZN232 Emnambithi/Ladysmith 15 000 15 000 15 000 15 000 100 15 000 100 4 513 4 513 4 513 3 045 67 4 513 100 - - - - - - -B KZN233 Indaka 8 000 8 000 8 000 432 5 6 696 84 1 000 1 000 1 000 109 11 1 000 100 - - - - - - -B KZN234 Umtshezi 15 000 15 000 15 000 7 331 49 13 376 89 1 050 1 050 1 050 294 28 940 90 - - - - - - -B KZN235 Okhahlamba 10 000 10 000 10 000 10 000 100 10 000 100 1 803 1 803 1 803 1 496 83 1 803 100 - - - - - - -B KZN236 Imbabazane 18 000 18 000 18 000 - - 11 355 63 1 409 1 409 1 409 955 68 1 417 101 - - - - - - -C DC23 Uthukela DM - - - - - - - 2 384 2 384 2 384 1 597 67 1 609 67 50 000 50 000 50 000 50 000 100 49 202 98 Total: Uthukela Municipalities 66 000 66 000 66 000 32 763 50 56 427 85 12 159 12 159 12 159 7 496 62 11 282 93 50 000 50 000 50 000 50 000 100 49 202 98 B KZN241 Endumeni 10 000 10 000 10 000 5 262 53 2 503 25 1 125 1 125 1 125 656 58 1 125 100 - - - - - - -B KZN242 Nquthu 20 000 20 000 20 000 15 546 78 20 699 103 1 529 1 529 1 529 1 373 90 925 60 - - - - - - -B KZN244 Msinga 20 000 20 000 20 000 20 000 100 604 3 2 422 2 422 2 422 594 25 7 098 293 - - - - - - -B KZN245 Umvoti 25 000 25 000 25 000 25 000 100 15 000 60 1 954 1 954 1 954 1 455 74 3 312 170 - - - - - - -C DC24 Umzinyathi DM - - - - - - - 3 434 3 434 3 434 3 099 90 3 395 99 78 250 78 250 78 250 78 250 100 78 250 100 Total: Umzinyathi Municipalities 75 000 75 000 75 000 65 808 88 38 806 52 10 464 10 464 10 464 7 177 69 15 855 152 78 250 78 250 78 250 78 250 100 78 250 100 B KZN252 Newcastle 8 000 8 000 8 000 7 110 89 7 999 100 3 286 3 286 3 286 3 144 96 3 286 100 14 825 14 825 14 825 14 825 100 14 804 100 B KZN253 eMadlangeni 10 000 10 000 10 000 - - 8 196 82 1 030 1 030 1 030 864 84 1 012 98 - - - - - - -B KZN254 Dannhauser 5 000 5 000 5 000 4 245 85 4 884 98 1 000 1 000 1 000 600 60 953 95 - - - - - - -C DC25 Amajuba DM - - - - - - - 1 252 1 252 1 252 915 73 1 252 100 19 825 19 825 19 825 19 825 100 15 127 76 Total: Amajuba Municipalities 23 000 23 000 23 000 11 355 49 21 080 92 6 568 6 568 6 568 5 523 84 6 503 99 34 650 34 650 34 650 34 650 100 29 931 86 B KZN261 eDumbe 18 000 18 000 18 000 - - 15 504 86 1 055 1 055 1 055 952 90 807 76 - - - - - - -B KZN262 uPhongolo 12 000 12 000 12 000 6 843 57 12 000 100 4 449 4 449 4 449 2 493 56 4 449 100 - - - - - - -B KZN263 Abaqulusi 18 000 19 000 19 000 19 000 100 18 089 95 1 417 1 417 1 417 1 334 94 878 62 - - - - - - -B KZN265 Nongoma 12 000 12 000 12 000 11 847 99 12 000 100 1 624 1 624 1 624 1 448 89 1 450 89 - - - - - - -B KZN266 Ulundi 15 000 15 000 15 000 9 463 63 18 739 125 1 332 1 332 1 332 1 135 85 1 747 131 - - - - - - -C DC26 Zululand DM - - - - - - - 3 800 3 800 3 800 3 154 83 3 800 100 79 006 79 006 79 006 78 810 100 79 006 100 Total: Zululand Municipalities 75 000 76 000 76 000 47 153 62 76 332 100 13 677 13 677 13 677 10 516 77 13 131 96 79 006 79 006 79 006 78 810 100 79 006 100 B KZN271 Umhlabuyalingana 15 000 15 000 15 000 12 356 82 15 000 100 1 294 1 294 1 294 1 288 100 1 294 100 - - - - - - -B KZN272 Jozini 15 000 15 000 15 000 3 633 24 11 288 75 1 899 1 899 1 899 838 44 1 899 100 - - - - - - -B KZN273 The Big 5 False Bay 8 000 8 000 8 000 - - 8 002 100 1 000 1 000 1 000 382 38 1 146 115 - - - - - - -B KZN274 Hlabisa 10 000 10 000 10 000 5 254 53 9 662 97 1 000 1 000 1 000 869 87 869 87 - - - - - - -B KZN275 Mtubatuba - 2 000 2 000 - - 2 000 100 1 000 1 000 1 000 705 71 1 000 100 - - - - - - -C DC27 Umkhanyakude DM - - - - - - - 1 308 1 308 1 308 72 6 1 058 81 - - - - - - -Total: Umkhanyakude Municipalities 48 000 50 000 50 000 21 243 42 45 952 92 7 501 7 501 7 501 4 154 55 7 265 97 - - - - - - -B KZN281 Mfolozi 9 000 9 000 9 000 9 000 100 9 000 100 1 000 1 000 1 000 651 65 1 700 170 - - - - - - -B KZN282 uMhlathuze 9 000 9 000 9 000 9 000 100 948 11 2 961 2 961 2 961 1 032 35 2 955 100 50 882 50 882 50 882 44 755 88 37 663 74 B KZN283 Ntambanana 8 000 8 800 8 800 4 000 45 8 849 101 1 463 1 463 1 463 1 270 87 1 478 101 - - - - - - -B KZN284 uMlalazi 8 000 8 000 8 000 - - 4 079 51 3 037 3 037 3 037 1 789 59 2 592 85 - - - - - - -B KZN285 Mthonjaneni 8 000 8 000 8 000 7 711 96 8 118 101 2 264 2 264 2 264 1 317 58 2 264 100 - - - - - - -B KZN286 Nkandla 35 000 35 000 35 000 181 1 35 129 100 1 025 1 025 1 025 859 84 1 323 129 - - - - - - -C DC28 uThungulu DM - - - - - - - 6 639 6 639 6 639 6 639 100 6 639 100 88 118 88 118 88 118 78 806 89 73 897 84 Total: uThungulu Municipalities 77 000 77 800 77 800 29 892 38 66 125 85 18 389 18 389 18 389 13 557 74 18 952 103 139 000 139 000 139 000 123 561 89 111 560 80 B KZN291 Mandeni 10 000 10 000 10 000 10 000 100 6 618 66 1 755 1 755 1 755 1 610 92 1 769 101 - - - - - - -B KZN292 KwaDukuza 18 000 18 000 18 000 18 000 100 18 000 100 1 418 1 418 1 418 1 418 100 1 418 100 - - - - - - -B KZN293 Ndwedwe 9 000 9 000 9 000 - - 8 510 95 1 158 1 158 1 158 1 096 95 1 273 110 - - - - - - -B KZN294 Maphumulo 8 000 8 000 8 000 - - 6 280 79 1 003 1 003 1 003 926 92 1 003 100 - - - - - - -C DC29 iLembe DM - - - - - - - 1 536 1 536 1 536 801 52 1 536 100 140 154 140 154 140 154 140 154 100 140 154 100 Total: Ilembe Municipalities 45 000 45 000 45 000 28 000 62 39 407 88 6 870 6 870 6 870 5 851 85 6 999 102 140 154 140 154 140 154 140 154 100 140 154 100 B KZN431 Ingwe 18 000 18 000 18 000 18 000 100 18 000 100 1 070 1 070 1 070 1 070 100 1 070 100 - - - - - - -B KZN432 Kwa Sani - - - - - - - 1 000 1 000 1 000 955 96 1 054 105 - - - - - - -B KZN433 Greater Kokstad - - - - - - - 1 997 1 997 1 997 1 774 89 2 209 111 - - - - - - -B KZN434 Ubuhlebezwe 30 000 30 000 30 000 30 000 100 53 863 180 1 420 1 420 1 420 1 040 73 1 421 100 - - - - - - -B KZN435 Umzimkhulu 20 000 20 000 20 000 - - 20 000 100 1 872 1 872 1 872 868 46 1 872 100 - - - - - - -C DC43 Harry Gwala DM - - - - - - - 3 466 3 466 3 466 1 888 54 981 28 43 500 43 500 43 500 43 500 100 43 500 100 Total: Harry Gwala Municipalities 68 000 68 000 68 000 48 000 71 91 863 135 10 825 10 825 10 825 7 595 70 8 608 80 43 500 43 500 43 500 43 500 100 43 500 100

600 000 591 800 591 800 331 790 56 562 500 95 148 959 148 959 148 959 116 826 78 172 524 116 803 068 803 068 803 068 778 520 97 760 414 95Source: NT Publication

Total

DoRA Total Avail. (Inc.Adjust.) Approved

Payment Schedule


(Year to date)

Unaudited Actual DoRA Total Avail. (Inc.Adjust.) Approved

Payment Schedule


(Year to date)

Unaudited Actual Unaudited Actual Intergrated National Electrification Programme (municipal) Grant Expanded Public Works Programme Intergrated Grant (municipality) Municipal Water Infrastucture Grant

Appendix 8: National Conditional Grants - 2015/16

Approved Payment Schedule


(Year to date)

Unaudited Actual Unaudited Actual Unaudited Actual DoRA Total Avail. (Inc.Adjust.)

322

Municipal Infrastructure Grant(MIG)

Energy Demand Sided Management Grant

(EDSM)

Neighbourhood Development Partnership Grant

(NDPG)

Intergrated National Electrification Programme

(INEP) Total

A KZN2000 eThekwini - 5 000 16 200 - 21 200

B KZN211 Vulamehlo 3 600 - - - 3 600B KZN212 Umdoni - - - - -B KZN213 Umzumbe - - - - -B KZN214 uMuziwabantu - - - - -B KZN215 Ezinqoleni - - - - -B KZN216 Hibiscus Coast - - - 5 000 5 000C DC21 Ugu DM - - - - -Total: Ugu Municipalities 3 600 - - 5 000 8 600B KZN221 uMshwathi - - - - -B KZN222 uMngeni 9 000 - - - 9 000B KZN223 Mpofana - - - - -B KZN224 Impendle - - - - -B KZN225 Msunduzi - - - - -B KZN226 Mkhambathini - - - 8 000 8 000B KZN227 Richmond - - - - -C DC22 uMgungundlovu DM - - - - -Total: uMgungundlovu Municipalities 9 000 - - 8 000 17 000B KZN232 Emnambithi/Ladysmith - - - - -B KZN233 Indaka - - - - -B KZN234 Umtshezi - - - - -B KZN235 Okhahlamba - - - - -B KZN236 Imbabazane - - - - -C DC23 Uthukela DM - - - - -Total: Uthukela Municipalities - - - - - B KZN241 Endumeni - - - - -B KZN242 Nquthu - - - -B KZN244 Msinga - - - - -B KZN245 Umvoti 2 000 - - - 2 000C DC24 Umzinyathi DM - - - - -Total: Umzinyathi Municipalities 2 000 - - - 2 000B KZN252 Newcastle - 7 000 7 900 - 14 900B KZN253 eMadlangeni - - - - -B KZN254 Dannhauser - - - - -C DC25 Amajuba DM - - - - -Total: Amajuba Municipalities - 7 000 7 900 - 14 900B KZN261 eDumbe - - - - -B KZN262 uPhongolo - - - - -B KZN263 Abaqulusi - - - - -B KZN265 Nongoma 6 200 - - - 6 200B KZN266 Ulundi - - - - -C DC26 Zululand DM - - - - -Total: Zululand Municipalities 6 200 - - - 6 200B KZN271 Umhlabuyalingana - - - - -B KZN272 Jozini - - - - -B KZN273 The Big 5 False Bay - - - - -B KZN274 Hlabisa - - - - -B KZN275 Mtubatuba - 1 000 - - 1 000C DC27 Umkhanyakude DM - - - - - Total: Umkhanyakude Municipalities - 1 000 - - 1 000B KZN281 Mfolozi - - - - - B KZN282 uMhlathuze - - - - - B KZN283 Ntambanana - - - - - B KZN284 uMlalazi - - - - - B KZN285 Mthonjaneni - - - - - B KZN286 Nkandla - - - - - C DC28 uThungulu DM - - - - - Total: uThungulu Municipalities - - - - - B KZN291 Mandeni - - - - - B KZN292 KwaDukuza - - 8 500 - 8 500B KZN293 Ndwedwe - - - - - B KZN294 Maphumulo - - - - - C DC29 iLembe DM - - - - - Total: Ilembe Municipalities - - 8 500 - 8 500B KZN431 Ingwe - - - - - B KZN432 Kwa Sani - - - - - B KZN433 Greater Kokstad - - - - - B KZN434 Ubuhlebezwe - - - - - B KZN435 Umzimkhulu - - - - - C DC43 Harry Gwala DM - - - - - Total: Harry Gwala Municipalities - - - - -

20 800 13 000 32 600 13 000 79 400Source: National Treasury. Government Gazette No. 39746 & 39869

Appendix 9: Stopping of funds in terms of Section 19 of the 2015 DoRA

R'000

Total

323

A KZN2000 eThekwini - - - - 18 400 - - 422 200 84 700 - - 3 206 - - - - 525 306

B KZN211 Vulamehlo 3 900 - - - - - - - - - - - - 648 401 463 4 764B KZN212 Umdoni - - - - - - - - - - - - - - - - -B KZN213 Umzumbe - - - - - - - - - - - - - - - - -B KZN214 uMuziwabantu 6 490 - - - - - - - - - - - - - - - 6 490B KZN215 Ezinqoleni - - - - - - - - - - - - - - - - -B KZN216 Hibiscus Coast 3 400 - - - - - 4 330 - - - - - - - - 37 7 767C DC21 Ugu DM - - 34 - - - - - - - - - 8 571 - - 326 8 931Total: Ugu Municipalities 13 790 - 34 - - - 4 330 - - - - - 8 571 648 401 826 27 952B KZN221 uMshwathi - - - - - - - - - - - - - - - - -B KZN222 uMngeni - - - - - - - - - - - - - - - - -B KZN223 Mpofana - - - - - - - - - - - - - - - - -B KZN224 Impendle - - - - - - - - - - - - - - - - -B KZN225 Msunduzi - - - - - - 2 000 37 904 - - - - - - - - 39 904B KZN226 Mkhambathini - - - 271 - - 1 487 - - - - - - - - - 1 758B KZN227 Richmond - - - - - - - - - - - - - - - - -C DC22 uMgungundlovu DM - - - - - - - - - - 765 - - - - 3 879 4 644Total: uMgungundlovu Municipalities - - - 271 - - 3 487 37 904 - - 765 - - - - 3 879 46 306B KZN232 Emnambithi/Ladysmith - - - - - - - - - - - - - - 122 - 122B KZN233 Indaka 2 024 - 513 128 - - - - - - - - - - - - 2 665B KZN234 Umtshezi - - - - - - - - - - - - - - - - -B KZN235 Okhahlamba - - - - - - - - - - - - - - - - -B KZN236 Imbabazane - - - - - - - - - - - - - - - - -C DC23 Uthukela DM - - - - - 742 - - - - - - - - - - 742Total: Uthukela Municipalities 2 024 - 513 128 - 742 - - - - - - - - 122 - 3 529B KZN241 Endumeni - - - - - - - - - - - - - - - - -B KZN242 Nquthu - - 394 76 - - 699 - - - - - - - - 192 1 361B KZN244 Msinga 2 376 - - - - - - - - - - - - - - 1 500 3 876B KZN245 Umvoti 3 956 - - 149 - - - - - - - - - - - - 4 105C DC24 Umzinyathi DM - - - - - - - - - - - - - - - - -Total: Umzinyathi Municipalities 6 332 - 394 225 - - 699 - - - - - - - - 1 692 9 342B KZN252 Newcastle - - - - 15 000 - 22 - - - - - 5 700 - - 344 21 066B KZN253 eMadlangeni - - - - - - - - - - - - - - - - -B KZN254 Dannhauser - - - - - - - - - - - - - - - - -C DC25 Amajuba DM 31 - 54 57 - - - - - - - - 259 - - - 401Total: Amajuba Municipalities 31 - 54 57 15 000 - 22 - - - - - 5 959 - - 344 21 467B KZN261 eDumbe - - 135 - - - - - - - - - - - - 371 506B KZN262 uPhongolo - - - - - - - - - - - - - - - -B KZN263 Abaqulusi 447 - - - - - - - - - - - - - - 447B KZN265 Nongoma 3 061 - - - 1 500 - - - - - - - - - - 4 341B KZN266 Ulundi - - - - - - - - - - - - - - - -C DC26 Zululand DM - - - - - - - - - - - - - - - -Total: Zululand Municipalities 3 508 - 135 - 1 500 - - - - - - - - - - 371 5 294B KZN271 Umhlabuyalingana - - - - - - - - - - - - - - - - -B KZN272 Jozini - - 278 281 - - - - - - - - - - - - 559B KZN273 The Big 5 False Bay - - - - - - - - - - - - - - - 145 145B KZN274 Hlabisa - - 14 - - - - - - - - - - - - 123 137B KZN275 Mtubatuba - - - - - - - - - - - - - - - - -C DC27 Umkhanyakude DM - - - - - - - - - - 1 115 - - - - - 1 115Total: Umkhanyakude Municipalities - - 292 281 - - - - - - 1 115 - - - - 268 1 956B KZN281 Mfolozi - - - - - - - - - - - - - - - - -B KZN282 uMhlathuze - - - - - 1 300 - - - 2 300 - - 4 131 - - - 7 731B KZN283 Ntambanana - - - - - - - - - - - - - - - - -B KZN284 uMlalazi 810 - 491 61 - - 863 - - - - - - - - - 2 225B KZN285 Mthonjaneni - - - - - - - - - - - - - - - - -B KZN286 Nkandla - - - 121 - - - - - - - - - - - 83 204C DC28 uThungulu DM - - - - - - - - - - 1 600 - 30 833 - - - 32 433 Total: uThungulu Municipalities 810 - 491 182 - 1 300 863 - - 2 300 1 600 - 34 964 - - 83 42 593 B KZN291 Mandeni - - - - 6 546 - - - - - - - - - - - 6 546B KZN292 KwaDukuza - - - - 3 585 - - - - - - - - - - - 3 585B KZN293 Ndwedwe 14 600 - - 101 12 579 - 3 700 - - - - - - - - - 30 980 B KZN294 Maphumulo - - - - - - 4 270 - - - - - - - - - 4 270C DC29 iLembe DM - - - - - - - - - - - - - 999 - 2 267 3 266Total: Ilembe Municipalities 14 600 - - 101 22 710 - 7 970 - - - - - - 999 - 2 267 48 647 B KZN431 Ingwe 11 985 - 131 292 - - - - - - - - - - - 123 12 531 B KZN432 Kwa Sani - - - - - - - - - - - - - - - - -B KZN433 Greater Kokstad 1 318 - - 6 - - - - - - - - - - - - 1 324B KZN434 Ubuhlebezwe - - - - - - - - - - - - - - - - -B KZN435 Umzimkhulu - - - - - - - - - - - - - - - - -C DC43 Harry Gwala DM - - - - - - - - - - 195 2 439 - - - - 2 634Total: Harry Gwala Municipalities 13 303 - 131 298 - - - - - - 195 2 439 - - - 123 16 489

54 398 - 2 044 1 543 57 610 2 042 17 371 460 104 84 700 2 300 3 675 5 645 49 494 1 647 523 9 853 748 881Source: NT lgdatabase

Total

NeighbourhoodDevelopment

Partnership Grant (NDPG)

Water Services Operating Subsidy

Grant (WSOS)

Intergrated National Electrification

Programme (INEP)

Public Transport Infrastructure Grant

(PTIS)

Public Transport Network Operations

Grant(PTNOG)

Rural Households Infrastructure Grant

(RHIG)



(MIG)

Infrastructure Skills Development Grant

(ISDG)


(MSIG)

Financial Mgnt Grant (FMG)

R'000 Total Amount Unspent

Rural Roads Asset Management Grant

(RRAMS)

Energy Efficiency Demand Side Management

(EDSM)

Municipal Water Infrastructure Grant

(MWIG)

Municipal Disaster Grant(MDG)

Municipal Disaster Recovery Grant

(MDRG)

Expanded Public Works Programme

(EPWP)

324

Municipal Improvement Grant

(MIG)

Infrastructure Skills Development Grant

(ISDG)


(MSIG)


(FMG)

Neighbourhood Development

Partnership Grant (NDPG)

Water Services Operating Subsidy

Grant (WSOS)


(INEP)

Public Transport Infrastructure Grant

(PTIS)

Rural Households Infrastructure Grant

(RHIG)


(RRAMS)

Energy Efficiency Demand Side Management

(EDSM)


(MWIG)


Expanded Public Works Programme

(EPWP)

Total Amount Unspent

A KZN2000 eThekwini - - - - 3 200 - - - - - 3 194 - 957 - 7 351

B KZN211 Vulamehlo - - - - - - - - - - - - 648 - 648B KZN212 Umdoni - - - - - - - - - - - - - - -B KZN213 Umzumbe - - - - - - - - - - - - - - -B KZN214 uMuziwabantu - - - - - - - - - - - - - - -B KZN215 Ezinqoleni 592 - 47 22 - - - - - - - - - 169 830B KZN216 Hibiscus Coast 3 800 - - - - - - - - - 71 - - - 3 871C DC21 Ugu DM - - - - - - - - - 323 - - 2 500 117 2 940Total: Ugu Municipalities 4 392 - 47 22 - - - - - 323 71 - 3 148 286 8 289B KZN221 uMshwathi - - - - - - - - - - - - - - -B KZN222 uMngeni - - - - - - - - - - - - - 996 996B KZN223 Mpofana 1 700 - - - - - - - - - - - - - 1 700B KZN224 Impendle - - - - - - - - - - - - - - -B KZN225 Msunduzi - - - - 5 900 - 23 345 48 300 - - - - - - 77 545B KZN226 Mkhambathini - - - - - - - - - - - - - - -B KZN227 Richmond - - - - - - - - - - - - - - -C DC22 uMgungundlovu DM - - - - - - - - - - - - - - -Total: uMgungundlovu Municipalities 1 700 - - - 5 900 - 23 345 48 300 - - - - - 996 80 241B KZN232 Emnambithi/Ladysmith - - - - - - - - - - - - - -B KZN233 Indaka 5 200 - 68 84 - - 5 200 - - - - - - 237 10 789B KZN234 Umtshezi 3 000 - - - - - 1 600 - - - - - - - 4 600B KZN235 Okhahlamba - - - - - - - - - - - - - - -B KZN236 Imbabazane 2 900 - 172 117 - - - - - - - - - - 3 189C DC23 Uthukela DM - - - - - - - - - - - - - - -Total: Uthukela Municipalities 11 100 - 240 201 - - 6 800 - - - - - - 237 18 578B KZN241 Endumeni - - - - - - - - - - - - - - -B KZN242 Nquthu - - - - - - - - - - - - - - -B KZN244 Msinga 2 200 - - - - - - - - - - - - - 2 200B KZN245 Umvoti 646 - - - - - - - - - - - - - 646C DC24 Umzinyathi DM - - - - - - - - 2 900 - - 2 600 - 870 6 370Total: Umzinyathi Municipalities 2 846 - - - - - - - 2 900 - - 2 600 - 870 9 216B KZN252 Newcastle - - - - - - - - - - - - - - -B KZN253 eMadlangeni - - - 112 - - 584 - - - - - - - 696B KZN254 Dannhauser - - - - - - - - - - - - - 146 146C DC25 Amajuba DM 7 231 - - - - - - - - - - - - - 7 231Total: Amajuba Municipalities 7 231 - - 112 - - 584 - - - - - - 146 8 073B KZN261 eDumbe 3 400 - - - - - 1 200 - - - - - - - 4 600B KZN262 uPhongolo - - - - - - - - - - - - - - -B KZN263 Abaqulusi - - - - - - - - - - - - - - -B KZN265 Nongoma 7 900 - 24 - - - - - - - - - - 49 7 973B KZN266 Ulundi 885 - 382 - - - - - - - - - - - 1 267C DC26 Zululand DM - - - - - - - - - - - - - - -Total: Zululand Municipalities 12 185 - 406 - - - 1 200 - - - - - - 49 13 840B KZN271 Umhlabuyalingana - - - - - - - - - - - - - - -B KZN272 Jozini - - 278 281 - - - - - - - - - - 559B KZN273 The Big 5 False Bay 1 400 - - - - - - - - - - - - - 1 400B KZN274 Hlabisa - - - 46 - - 52 - - - - - - 141 239B KZN275 Mtubatuba - - - - - - - - - - - - - - -C DC27 Umkhanyakude DM - - - - - - - - - - - 1 600 - - 1 600Total: Umkhanyakude Municipalities 1 400 - 278 327 - - 52 - - - - 1 600 - 141 3 798B KZN281 Mfolozi - - - - - - 113 - - - - - - - 113B KZN282 uMhlathuze - - - - - - - - - - - - - - -B KZN283 Ntambanana - - - - - - - - - - - - - - -B KZN284 uMlalazi - - - - - - - - - - - - - - -B KZN285 Mthonjaneni - - - - - - - - - - - - - - -B KZN286 Nkandla - - - - - - - - - - - - - 98 98C DC28 uThungulu DM - - - - - - - - - - - - - 127 127Total: uThungulu Municipalities - - - - - - 113 - - - - - - 225 338B KZN291 Mandeni - - - - - - - - - - - - - - -B KZN292 KwaDukuza - - - - - - - - - - 7 126 - - - 7 126B KZN293 Ndwedwe - - - - - - - - - - - - - 51 51B KZN294 Maphumulo - - - - - - - - - - - - - - -C DC29 iLembe DM - - - - - - - - - - - - - -Total: Ilembe Municipalities - - - - - - - - - - 7 126 - - 51 7 177B KZN431 Ingwe - - - - - - - - - - - - - - -B KZN432 Kwa Sani - - - - - - - - - - - - - - -B KZN433 Greater Kokstad - - - - - - - - - - - - - - -B KZN434 Ubuhlebezwe - - - - - - - - - - - - - - -B KZN435 Umzimkhulu - - - - - - - - - - - - - - -C DC43 Harry Gwala DM - - - - - - - - - - - - - - -Total: Harry Gwala Municipalities - - - - - - - - - - - - - - -

40 854 - 971 662 9 100 - 32 094 48 300 2 900 323 10 391 4 200 4 105 3 001 156 901Source: National Treasury


R'000

Total

325

Unspent Conditional Grants for 2010/11





Total

A KZN2000 eThekwini 47 629 - 317 434 7 351 525 306 897 720

B KZN211 Vulamehlo 133 1 452 4 956 648 4 764 11 953B KZN212 Umdoni 4 536 424 - - - 4 960B KZN213 Umzumbe - - - - - - B KZN214 uMuziwabantu 11 101 171 - - 6 490 17 762B KZN215 Ezinqoleni - - - 830 - 830B KZN216 Hibiscus Coast 18 000 - 1 604 3 871 7 767 31 242C DC21 Ugu DM 11 609 30 2 837 2 940 8 931 26 347Total: Ugu Municipalities 45 379 2 077 9 397 8 289 27 952 93 094B KZN221 uMshwathi 342 - - - - 342B KZN222 uMngeni 748 465 - 996 - 2 209B KZN223 Mpofana - 178 162 1 700 - 2 040B KZN224 Impendle 1 019 4 948 - - - 5 967B KZN225 Msunduzi 8 688 7 879 52 386 77 545 39 904 186 402B KZN226 Mkhambathini - - 8 662 - 1 758 10 420B KZN227 Richmond - 6 412 - - - 6 412C DC22 uMgungundlovu DM - - 1 223 - 4 644 5 867Total: uMgungundlovu Municipalities 10 797 19 882 62 433 80 241 46 306 219 659B KZN232 Emnambithi/Ladysmith 2 472 8 000 - - 122 10 594B KZN233 Indaka 4 118 1 187 1 968 10 789 2 665 20 727B KZN234 Umtshezi 2 097 - 8 508 4 600 - 15 205B KZN235 Okhahlamba 9 460 3 919 - - - 13 379B KZN236 Imbabazane 6 206 188 - 3 189 - 9 583C DC23 Uthukela DM 227 7 544 7 045 - 742 15 558Total: Uthukela Municipalities 24 580 20 838 17 521 18 578 3 529 85 046B KZN241 Endumeni 78 4 694 - - - 4 772B KZN242 Nquthu 630 484 3 799 - 1 361 6 274B KZN244 Msinga 8 000 - 3 791 2 200 3 876 17 867B KZN245 Umvoti 274 2 187 - 646 4 105 7 212C DC24 Umzinyathi DM - - 1 000 6 370 - 7 370Total: Umzinyathi Municipalities 8 982 7 365 8 590 9 216 9 342 43 495B KZN252 Newcastle - 19 224 9 000 - 21 066 49 290B KZN253 eMadlangeni 1 238 5 285 2 303 696 - 9 522B KZN254 Dannhauser 115 - - 146 - 261C DC25 Amajuba DM 5 276 1 305 5 000 7 231 401 19 213Total: Amajuba Municipalities 6 629 25 814 16 303 8 073 21 467 78 286B KZN261 eDumbe 2 945 - - 4 600 506 8 051B KZN262 uPhongolo 9 417 1 996 - - - 11 413B KZN263 Abaqulusi 4 932 - 149 - 447 5 528B KZN265 Nongoma 224 - 259 7 973 4 341 12 797B KZN266 Ulundi 239 1 489 - 1 267 - 2 995C DC26 Zululand DM - - - - - -Total: Zululand Municipalities 17 757 3 485 408 13 840 5 294 40 784B KZN271 Umhlabuyalingana 2 437 - - - - 2 437B KZN272 Jozini 3 492 8 096 1 615 559 559 14 321B KZN273 The Big 5 False Bay 1 729 - - 1 400 145 3 274B KZN274 Hlabisa 3 449 2 557 - 239 137 6 382B KZN275 Mtubatuba - - 4 110 - - 4 110C DC27 Umkhanyakude DM 1 050 1 765 1 082 1 600 1 115 6 612Total: Umkhanyakude Municipalities 12 157 12 418 6 807 3 798 1 956 37 136B KZN281 Mfolozi 1 082 373 8 160 113 - 9 728B KZN282 uMhlathuze 1 385 374 - - 7 731 9 490B KZN283 Ntambanana 1 117 3 218 - - - 4 335B KZN284 uMlalazi - - - - 2 225 2 225B KZN285 Mthonjaneni - 10 695 - - - 10 695B KZN286 Nkandla 15 081 - 2 833 98 204 18 216C DC28 uThungulu DM 280 - - 127 32 433 32 840Total: uThungulu Municipalities 18 945 14 660 10 993 338 42 593 87 529B KZN291 Mandeni - 7 418 - - 6 546 13 964B KZN292 KwaDukuza 1 054 - 8 604 7 126 3 585 20 369B KZN293 Ndwedwe 62 - - 51 30 980 31 093B KZN294 Maphumulo 268 7 455 640 - 4 270 12 633C DC29 iLembe DM 434 - - - 3 266 3 700Total: Ilembe Municipalities 1 818 14 873 9 244 7 177 48 647 81 759B KZN431 Ingwe - - - - 12 531 12 531B KZN432 Kwa Sani - - 463 - - 463B KZN433 Greater Kokstad - - - - 1 324 1 324B KZN434 Ubuhlebezwe - 723 412 - - 1 135B KZN435 Umzimkhulu - - - - - -C DC43 Harry Gwala DM - - 2 500 - 2 634 5 134Total: Harry Gwala Municipalities - 723 3 375 - 16 489 20 587

194 673 122 135 462 505 156 901 748 881 1 685 095Source: National Treasury

Appendix 12: Unspent National Conditional Grants - 2010/11 to 2014/15

R'000

Total

326

Appendix 13: Approved Rollovers - 2014/15

Municipal Improvement Grant (MIG)

Municipal Systems Improvement Grant (MSIG)


(MWIG)

Financial Management Grant (FMG)

Neighbourhood Development Partnership Grant

(NDPG)

Water Services Operating Subsidy Grant

(WSOS)

Energy Demand Sided Management Grant

(EDSM)


(INEP)

Public Transport Infrastructure Grant (PTIS)


(RRAMS)

Municipal Human Settlements Capacity Grant

(MSHCG)

Rural Household Infrastructure Grant(RHIG)


Expanded Public Works Programme (EPWP) Total Amount Approved

A KZN2000 eThekwini - - - - - - - - - - 39 900 - 805 - 40 705

B KZN211 Vulamehlo - - - - - - - 1 400 - - - - - - 1 400B KZN212 Umdoni - - - - - - - - - - - - 5 100 - 5 100B KZN213 Umzumbe - - - - - - - 720 - - - - 4 800 - 5 520B KZN214 uMuziwabantu 2 300 - - - - - - - - - - - - - 2 300B KZN215 Ezinqoleni 142 2 - - - - - - - - - - - 5 149B KZN216 Hibiscus Coast 2 100 - - - - - - - - - - - - - 2 100C DC21 Ugu DM - - - - - - - - - - - - 4 900 - 4 900Total: Ugu Municipalities 4 542 2 - - - - - 2 120 - - - - 14 800 5 21 469B KZN221 uMshwathi - - - - - - - - - - - - - - -B KZN222 uMngeni - - - - - - - - - - - - - 28 28B KZN223 Mpofana - - - - - - - - - - - - - 119 119B KZN224 Impendle - - - - - - - - - - - - - - -B KZN225 Msunduzi - - - - 9 300 - - - - - - - - - 9 300B KZN226 Mkhambathini - - - - - - - - - - - - - - -B KZN227 Richmond 2 700 - - - - - - - - - - - - - 2 700C DC22 uMgungundlovu DM - - 24 800 - - - - - - - - - - - 24 800Total: uMgungundlovu Municipalities 2 700 - 24 800 - 9 300 - - - - - - - - 147 36 947B KZN232 Emnambethi-Ladysmith - - - - - - - - - - - - - - -B KZN233 Indaka 7 100 - - - - - - - - - - - - - 7 100B KZN234 Umtshezi - - - - - - - - - - - - - - -B KZN235 Okhahlamba - - - - - - - - - - - - 1 600 - 1 600B KZN236 Imbabazane - - - - - - - - - - - - - - -C DC23 Uthukela DM - - - - - - - 1 400 - - - - - - 1 400Total: Uthukela Municipalities 7 100 - - - - - - 1 400 - - - - 1 600 - 10 100B KZN241 Endumeni - - - - - - - 4 800 - - - - - - 4 800B KZN242 Nquthu - - - - - - - - - - - - - - -B KZN244 Msinga - - - - - - - - - - - - - - -B KZN245 Umvoti - - - - - - - - - - - - - - -C DC24 Umzinyathi DM - - - - - - - - - - - - 6 300 - 6 300Total: Umzinyathi Municipalities - - - - - - - 4 800 - - - - 6 300 - 11 100B KZN252 Newcastle - - - - - - - - - - - - - - -B KZN253 Emadlangeni - - - - - - - - - - - - - - -B KZN254 Dannhauser - - - - - - - - - - - - - - -C DC25 Amajuba DM - - 147 - - - - - - - - - - - 147Total: Amajuba Municipalities - - 147 - - - - - - - - - - - 147B KZN261 eDumbe - - - - - - - - - - - - - - -B KZN262 uPhongolo 5 320 - - - - - - - - - - - - - 5 320B KZN263 Abaqulusi - - - - - - - - - - - - - - -B KZN265 Nongoma 10 020 - - - - - - - - - - - - - 10 020B KZN266 Ulundi - - - - - - - - - - - - - - -C DC26 Zululand DM - - - - - - - - - - - - - - -Total: Zululand Municipalities 15 340 - - - - - - - - - - - - - 15 340B KZN271 Umhlabuyalingana - - - - - - - - - - - - - - -B KZN272 Jozini 4 700 - - - - - - - - - - - - - 4 700B KZN273 The Big 5 False Bay - - - - - - - - - - - - - - -B KZN274 Hlabisa - - - - - - - - - - - - - - -B KZN275 Mtubatuba - - - - - - - - - - - - - - -C DC27 Umkhanyakude DM 12 200 - - - - - - - - - - - - - 12 200Total: Umkhanyakude Municipalities 16 900 - - - - - - - - - - - - - 16 900B KZN281 uMfolozi 836 - - - - - - - - - - - - - 836B KZN282 uMhlathuze 9 100 - - - - - - - - - - - - - 9 100B KZN283 Ntambanana - - - - - - - - - - - - - - -B KZN284 Umlalazi 2 900 - - - - - - 5 400 - - - - - - 8 300B KZN285 Mthonjaneni - - - - - - - 118 - - - - - - 118B KZN286 Nkandla - - - - - - - - - - - - - - -C DC28 uThungulu DM - - - - - - - - - - - - - - -Total: uThungulu Municipalities 12 836 - - - - - - 5 518 - - - - - - 18 354B KZN291 Mandeni - - - - - - - 221 - - - - - - 221B KZN292 KwaDukuza 4 000 - - - - - - - - - - - - - 4 000B KZN293 Ndwedwe - - - - - - - - - - - - - - -B KZN294 Maphumulo 4 500 - - - - - - - - - - - - - 4 500C DC29 iLembe DM - - - - - - - - - - - - 5 500 - 5 500Total: Ilembe Municipalities 8 500 - - - - - - 221 - - - - 5 500 - 14 221B KZN431 Ingwe - - - - - - - - - - - - - - -B KZN432 Kwa Sani - - - - - - - - - - - - - 54 54B KZN433 Greater Kokstad - - - - - - - 2 700 - - - - - - 2 700B KZN434 Ubuhlebezwe - - - - - - - - - - - - - - -B KZN435 Umzimkhulu - - - - - - - 6 700 - - - - - - 6 700C DC43 Harry Gwala DM - - - - - - - - - - - - - - -Total: Harry Gwala Municipalities - - - - - - - 9 400 - - - - - 54 9 454Total 67 918 2 24 947 - 9 300 - - 23 459 - - 39 900 - 29 005 206 194 737Source: National Treasury

R'000

327

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