Executive Mayor 2014/2015 Adjustment Budget Speech
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“A place of excellence” Executive Mayor 2014/2015 Adjustment Budget Speech Speaker, it is my privilege and also as Executive Mayor my obligation as per Section 28(4) of the Municipal Finance Management Act (MFMA) to submit this adjustments budget. This year it is an absolute pleasure to present an adjustment budget that is an improvement on previous years simply due to the fact that it speaks to our 2013/2014 annual financial statements and the first ever clean audit in the history of Drakenstein Municipality obtained for the 2013/2014 financial year. Speaker, I indeed have some great news to share today: When we look at the big picture, we can only come to one conclusion: We as Council, have indeed since 2011, succeeded in turning this gigantic Drakenstein ship around from financial disaster to a financial sustainable organisation. We have turned the negative working capital results of the past around and are now en route to achieve our mandate from the public to create a local municipality of excellence.
Adjustments Budget Report for 2013/2014
Speaker, finally after four years of fiscal discipline, we obtained a
clean audit and are seriously busy with our mission to start rebuilding
our reserves that have been depleted over many years prior to 2011.
We are indeed delivering to our people and it is our target this year
to spend at least 96% of our capital budget as set out in our Service
Delivery Budget Implementation Plan (SDBIP) and as set out in our
Integrated Development Plan (IDP) for Drakenstein to become truly
“A Place of Excellence”. Although our target is 96% for the financial
year, we are positive that we will improve on our actual capital budget
expenditure of 98.9% for the 2013/2014 financial year.
Speaker, the Oxford dictionary defines a budget as “a plan for
spending money wisely”. We are certainly spending wisely and I
would like to congratulate the Municipal Manager, his team and
especially the CFO and his team, for fiscal discipline that led to an
excellent adjustments budget for the 2013/2014 financial year. I wish
to thank them for the long hours of extra work to ensure that we travel
a safe fiscal road and in obtaining a clean audit opinion from the
Auditor-General.
Speaker, It is good news to announce that Drakenstein in the
2013/2014 financial year with an operating expenditure budget of the
magnitude of R 1.489 billion, have spent R 1.521 billion (102.1%) of
its budgeted expenditure. The over-expenditure of R 32 million is due
2Adjustments Budget Report for 2013/2014
to the R 47 million actual provision for fines bad debt impairment in
terms of the requirements of the South African Accounting Standards
that was not budgeted for. This provision became a requirement after
the Accountant-General, Auditor-General and the Accounting
Standards Board issued a joint directive in April 2014 how to
recognise fines revenue and the provision for fines bad debt
impairment. Taking this provision out of the equation, the revised
actual expenditure of R 1.474 billion compared with the budgeted
R 1.489 billion relates to spending of 99.0% - a saving of R 15 million
that is indeed excellent financial discipline.
It is also good news and needs mentioning that we have spent 98.9%
of the final capital budget of R 210.3 million to improve service
delivery during the 2013/2014 financial year. Again, the Auditor-
General gave us a clean bill of health for all financial transactions
recorded in our asset register.
Speaker, it is great news that the adjustments budget for 2014/2015
that I table today is funded with realistically anticipated revenue
sources and it also takes all the requirements of the South African
Accounting Standards into consideration.
The main purpose of this adjustment budget is to correct the material
under and over budgeted figures as well as to accommodate
additional revenues received from government grants. Furthermore,
3Adjustments Budget Report for 2013/2014
will this adjustments budget also address any possible unauthorised
expenditure with regard to non-cash expenditure items (off-setting
depreciation, bad debt provision, provision for fines bad debt
impairment, leave provision, rehabilitation of landfill site provision,
long service bonus provision and medical aid provision for continued
members after retirement or the so-called “paper money” as the Chief
Financial Officer calls it) that needs to be budgeted for to comply with
the South African Accounting Standards.
This adjustments budget will also form the basis on which our third
zero based budget will be compiled for the 2015/2016 financial year.
Historical incremental type budgeting led to the huge budget
problems of the past which we inherited.
Speaker, the Municipal Manager and Chief Financial Officer, based
on the mandate given to them, compiled the adjustments budget and
discussed it in detail with the MAYCO members and the Budget
Steering Committee. The Adjustments Budget Report was circulated
to all councillors. However, there is one short coming in the
Adjustments Budget Report and that is the under-provision of R 54.3
million for landfill site rehabilitations. Based on a report from the
consultant received after the Adjustments Budget Report was
compiled, the adjustments budget item now includes this additional
provision as set out in the adjustments budget item. The compiled
adjustments budget can thus be summarised as follows.
4Adjustments Budget Report for 2013/2014
Operating revenue will increase with R 112 million (7.1%) from
R 1.569 billion to R 1.681 billion. Operating expenditure will increase
with R 230 million (14.7%) from R 1.559 billion to R 1.789 billion. The
four main reasons for these high increases is in the first instance the
way fines revenue and provision for fines bad debt impairment needs
to be recognised in accounting terms and therefore to be budgeted
for. The second reason is the additional provision for landfill site
rehabilitations. The third reason is the additional housing top
structure grant allocation (R 10.1 million) received from the
Department of Human Settlements. Lastly, it is the way that indigent
subsidy expenditure to indigent households are now budgeted for as
operating expenditure and not as revenue forgone. Speaker, it is
important to note that no property rates or tariffs (electricity, water,
sanitation, refuse removal and sundry tariffs) will increase as it is not
allowed by the MFMA.
Some great news is that through strict fiscal discipline our goals of
savings were successful and as a result some savings could be
affected in the operating budget. Through virements this adjustments
budget now makes provision for additional operating expenditure for
cleaning-up projects (R 1.7 million), the maintenance of streets
(R 1.8 million), the maintenance of storm water systems (R 440
thousand), provision for disaster relief (R 300 thousand), basic
services to informal settlements (R 500 thousand) and rental stock
5Adjustments Budget Report for 2013/2014
maintenance (R 700 thousand). In addition to this we received from
Provincial Treasury a grant for being a Standard Charts of Accounts
(SCOA) pilot site (R 300 thousand) and a grant for developing a long-
term financial plan (R 300 thousand). The importance of these
savings is that it shall enable us to focus on better service delivery in
areas where it is needed. This shall include especially the previously
disadvantaged areas.
Speaker, a Municipality may budget for a deficit in terms of the
budget guidelines from National Treasury, based on the way non-
cash off-setting depreciation may be treated in terms of the South
African Accounting Standards. This also includes other non-cash
items as mentioned before. Table 7 on page 20 of the Adjustments
Budget Report (replaced with the revised Table 7 on page 94 of the
adjustments budget item in the Council agenda) clearly explains to
what extend this Municipality may budget for an operating deficit.
This adjustments budget projects an operating cash deficit of R 2.5
million that represents 0.1% of the total adjustments budget
operating expenditure of R 1.789 billion. The Municipal Manager and
his executive management team assured me that they will find
operating expenditure cash savings to ensure that we can realise a
cash surplus and to continue rebuilding our capital replacement
reserve.
6Adjustments Budget Report for 2013/2014
Speaker some more good news: Capital expenditure will increase
with R 3.6 million to R 342.6 million due to additional government
grant funding. One of the most important functions of political
leadership and strategic management is to obtain additional funds
through proactive planning of projects and submitting business plans
to provincial and national government departments. Under the
leadership of the Executive Mayor and Municipal Manager this has
been a priority in this financial year, resulting in these much needed
additional funding. The administration is positive that they will be able
to spend the capital budget on the very much needed capital projects
to improve the quality of life of our citizens. Each capital project is
listed in Annexure C attached to the Adjustments Budget Report.
One of the main contributing factors to adjust the capital budget is
the fact that we managed to secure grant funding of R 2.4 million
from Provincial Transport to be used for the construction of phase
one of a vehicle impound facility. We also obtained National
Treasury’s approval to roll-over R 1.1 million electrification grant
funding to supply electricity infrastructure to low-cost houses and / or
informal housing structures.
Speaker, more good news is that savings on certain capital projects
were identified and that this adjustments budgets through virements
now makes provision for additional allocations for infrastructure with
7Adjustments Budget Report for 2013/2014
regard to traffic calming measures in Drakenstein (R 1 million) and
the upgrading of sidewalks in Drakenstein (R 3 million).
The good news and importance of this is that this DA led Council
cares about the wishes and demands of our communities and listens
to our citizens. We have taken note of what our communities wants
and we have ensured that all the important capital projects have been
identified and prioritised for implementation this year.
Speaker, I can carry on listing good news and achievements, but
would rather act in modesty and thank all members of this Council,
including all representatives of all political parties and all members of
the administration for their contributions made. I would also like to
thank all members of the public who assisted and took part in putting
Drakenstein on the winning path. Every input, suggestion and all
active participation is valued. Drakenstein is a shining example of
what can be achieved with a partnership of an active and participating
community and a responding local government. Speaker, we dare
never forget that this is the purpose of local government and that we
are mere servants placed here to serve our community. I would also
like to thank all sectors of all communities, who still need upgrading
of facilities and assistance, and who have been working patiently with
us to achieve this.
8Adjustments Budget Report for 2013/2014
Speaker, I am humbled by the huge task entrusted to me as leader
of this Council, and the opportunity to table this Adjustment Budget
to better serve our people. It is of note that this Adjustments Budget
amounting to R 2.132 billion (operating and capital expenditure wise)
for the first time in Drakenstein’s history exceeds the R 2 billion mark.
My team and I would like to ensure every citizen of Drakenstein that
we shall work tirelessly and leave no stone unturned to create a city
of excellence for all with the funds entrusted to us.
Speaker, in the item serving before Council the recommendations
are set out as recommended in the Adjustments Budget item. I
herewith formally submit recommendations 4.1 to 4.8 to Council for
consideration and approval of the 2014/2015 adjustments budget.
ADV GESIE VAN DEVENTER
EXECUTIVE MAYOR
25 February 2015
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