Legislative Policies - Financial Best Practice Manual - 3 Corporate Governance

8/12/2019 Legislative Policies - Financial Best Practice Manual - 3 Corporate Governance

1/24

FINANCIAL BEST PRACTICE MANUAL

CORPORATE GOVERNANCE

1. Introduction

Financial Standing Orders refers to a guideline on the financial operations in aMunicipality. The Financial Standing Orders establishes the basis for the

Municipalitys internal financial system and its financial rules and must not be

isolated from its financial plan, which in turn flows from its strategic plan.

The Financial Standing Orders is also derived from the Constitution, as well as

from the ocal !overnment Transition "ct, the #hite $aper on ocal

!overnment, the ocal !overnment Ordinance, the ocal !overnment Structures"ct, the #hite $aper on #ater and Sanitation, the Municipal Finance

Management "ct and all other applicable legislation.

The Constitution of the %epublic of South "frica mandates ocal !overnment to&

$rovide democratic and accountable governments for local communities'

(nsure the provision of services to communities in a sustainable manner'

$romote social and economic development'

$romote a safe and healthy environment' and

(ncourage the involvement of communities and community organisations in

the matters of ocal !overnment

The ob)ect of the Municipal Finance Management "ct is to secure sound and

sustainable management of fiscal and financial affairs of Municipalities and

Municipal entities by establishing norms and standards and other re*uirements

for&

(nsure transparency, accountability and appropriate lines of responsibility' Management of revenues, e+penditures, assets and liabilities and the handling

of financial affairs'

udgetary and financial planning processes and the co-ordination of those

processes with organs of state in other spheres of !overnment'

orrowing

The handling of financial problems in Municipalities

Supply chain management' and

Other financial matters.

2. Principl! o" Sr#ic $li#r%n choosing the delivery options for the different wards, the Municipality will be

guided by the following principles&

/.0 "ccessibility of services

The Municipality will ensure that all citi1ens 2 regardless of race, gender or

se+ual orientation 2 have access to at least a minimum level of services.

______________________________________________________________________________________

SALGA IMFO0


2/24



mbalances in access to services will be addressed through the development of

new infrastructure, and rehabilitation and upgrading of e+isting infrastructure.The Consolidated Municipal nfrastructure $rogram has been established to

provide capital grants to assist Municipalities in funding bul3 and connector

infrastructure for low 2 income households and so e+tended access to services.The Municipality underta3es to actively see3 approval for pro)ects identified

through community participation.

"ccessibility is not only about ma3ing services available, but also about ma3ing

services easy and convenient to use. The Municipality will therefore aim to

ensure that people with a disability are able to access Municipal services and

amenities.

/./ "ffordability of Services

"ccessibility is closely lin3ed to affordability. (ven when service infrastructure

is in place, services will remain beyond the reach of many unless they are

financially affordable. The Municipality will ensure affordability through&

Setting tariffs that balance the economic viability of continued service

provision and the ability of the poor to access services'

4etermining appropriate service levels. Service levels that are too high may be

economically unsustainable and may )eopardise continued service provision.

nade*uate service levels may perpetuate unsatisfactory delivery. 5owever,

inade*uate service levels may perpetuate spatial divisions between low,

medium or high-income users and )eopardise the socio-economic ob)ectives ofthe Council' and

Cross-subsidisation 6between high and low-income users and commercial and

residential users7 within and between services.

/.8 9uality of $roducts and Services

The *uality of services is difficult to define, but includes attributes such assuitability for purpose, timeliness, convenience, safety, continuity and

responsiveness to service-users. t also includes a professional and respectful

relationship between service-providers and service users.

/.: "ccountability for Services

#hichever delivery mechanism is adopted, the Council remains accountable forensuring the provision of *uality services that are affordable and accessible.

/.; ntegrated 4evelopment and Services

The Municipality should adopt an integrated approach to planning and ensuring

the provision of Municipal services. This means ta3ing into account the economicand social impacts of service provisions in relation to Municipal policy ob)ectives

______________________________________________________________________________________

SALGA IMFO/


3/24



such as poverty eradication, spatial integration and )ob creation through public

wor3s.

/.< Sustainability of Services

Ongoing service provision depends on financial and organisational systems that

support sustainability. Sustainability includes both financial viability and theenvironmentally sound and socially )ust use of resources.

/.= >alue-For-Money

>alue-For-Money in the Municipal sector is both matters of the costs of inputs,and the *uality and value of outputs. This principle re*uire that the best possible

use is made of public resources to ensure universal access to affordable and

sustainable services in order to meet predetermined ob)ectives.

/.? (nsuring and $romoting Competitiveness of ocal Commerce and ndustry

The )ob generating and competitiveness nature of commerce and industry must

not be adversely affected by higher rates and service charges on industry and

commerce in order to subsidise domestic users. Transparency must be maintained

at all times to ensure that investors are aware of the full costs of doing business inthe Municipal area.

/.@ $romoting 4emocracy

The Municipal administration must promote the democratic values and principles

enshrined in the Constitution.

/.0A Service 4elivery Options

The Municipality will consider the following service delivery options&

uilding on e+isting capacity'

Corporatisation'

Municipal Service $artnership'

$artnerships with community-based organisations and non-governmental

organisations'

Contracting out'

eases and concessions 6public-private partnerships7' and

Transfers of ownership.

The Municipality will see3 an appropriate mi+ of service delivery options.

Choices about delivery options will be guided by clear criteria such as coverage,

cost, *uality and the socio-economic ob)ectives of the Municipality.

______________________________________________________________________________________

SALGA IMFO8


4/24



&. T' Municip(lit%)! Fin(nc!* B(!ic Polic% Principl!8.0 " Framewor3 for the Municipalitys Finances

" framewor3 must be developed for the Municipalitys finances that must&

"ddress the root causes of the financial problems that face the Municipality' alance programs for poverty eradication and e*uity with strategies to enhance

growth, )ob creation and competitiveness' and

(mpower the Municipality to fulfil its constitutional mandate.

8./ $olicy Changes and Capacity-uilding

The underlying problems with the e+isting Municipal finance system relate bothto shortcomings in policy, and to poor implementation of the current system, such

as inade*uacies in financial management and service delivery. nterventions to

improve the system must therefore include changes to both policy, and capacity-building initiatives. The Municipal Finance Management "ct, Bo. ;8 of /AA8,

Sections 8:607 mandates that national and provincial governments must by

agreement assist Municipalities in building their capacity for efficient, effectiveand transparent financial management

8.8 %evenues from Services

Trading services 6i.e. electricity, water, refuse and sewerage7 must generate most

of the Municipalitys revenue. n aggregate, revenue from trading services should

account for the ma)or portion of the Municipalitys revenue. (lectricity usuallyconstitutes the largest revenue source for the Municipality. #hile the surplus

derived from the sale of electricity 6i.e. the difference between revenue and total

e+penditure7 is not large, it remains an important source of income for theMunicipality. "lternative income from levies on electricity sales could be

generated once restructuring within the electricity sector results and the

Municipality may no longer have a direct service provision role. The Municipal

Finance Management "ct, Bo. ;8 of /AA8, Sections


5/24



8.8./ $rinciples for Service Tariffs

The Municipality and sta3eholders have agreed on the following principles

to guide tariff policy&

$ayment in proportion to the amount consumed& "s far as practicallypossible, consumers must pay in proportion to the amount of service

consumed.

Full payment of service costs& "ll households, with the e+ception of

the indigent, must pay the full cost of the services consumed.

"bility to pay& The Municipality must develop a system of targeted

subsidies to ensure that poor households have access to at least aminimum level of basic services.

Fairness& Tariff policies must be fair in that all people must be treated

e*ually.

Transparency& Tariff policy must be transparent to all consumers and

any e+isting subsidies and concessions must be visible and understoodby all consumers.

ocal determination of tariff levels& The Municipality must have the

fle+ibility to develop its own tariffs in 3eeping with the aboveprinciples.

Consistent tariff enforcement& " consistent policy for dealing with

non-payment of tariffs needs to be maintained. This must be targeted

and enforced with sensitivity to local conditions.

(nsure local economies are competitive& ocal tariffs must not unduly

burden local business through higher tariffs, as these costs affect the

sustainability and competitiveness of such businesses and firms.

t is the responsibility of the Municipal Manager to ensure that the

Municipality has and implements a Tariff policy referred to in Section =:

of Municipal Systems "ct, as prescribed in section


6/24



t is vital to the long-term financial viability of any Municipality that it

collects the revenues due to it for services rendered. The onus is placed onthe Municipal Manager, as prescribed in section


7/24



The definition of the ta+ base'

The choice of the ta+ rate' and

Ta+ administration.

8.:.0 The Ta+ %ate

The choice of ta+ rate is the most critical means of promoting the fiscal

autonomy of local government. The freedom of the Municipality to varythe ta+ rate strengthens local accountability, and enables the community to

challenge the Municipality about the value-for-money of services

provided.

8.:./ Own %evenues

The Municipality re*uires access to ade*uate resources and budgetary

powers to fulfil its assigned functions. On average, the Municipality hassufficient revenue raising powers to fund the bul3 of its e+penditure, and

finance its recurrent e+penditure out of own revenues.

8.:.8 %egular >aluation $eriods

" process of regular assessments of property values needs to be

entrenched. "ll properties that fall within the boundaries of the Municipal

area should therefore be valued regularly at mar3et related values in line

with the re*uirements of the ocal !overnment Ordinance.

8.; %evenue "de*uacy and Certainty

The Municipality needs to have access to ade*uate sources of revenue - either

own resources or nter-!overnmental Transfer - to enable it to carry out the

functions that have been assigned to it. The Municipality should be encouraged tofully e+ploit these sources of revenue in order to meet its developmental

ob)ectives. The Municipality should have reasonable certainty of revenue to

allow for realistic planning.

8.< Sustainability

Financial sustainability re*uires that the Municipality ensures that its operatingbudget is balanced 6income should cover e+penditure7. !iven revenue constraints,

this involves ensuring that services are provided at levels that are affordable, and

that the Municipality is able to recover the costs of service delivery. Bo bailoutwill be provided if the Municipality overspends its budget andor fails to put in

place proper management controls. t is the responsibility of the

CouncillorCommittee for financial matters to ensure that they set realisticbudgets, however, there is a need for subsidisation to ensure that poor households,

______________________________________________________________________________________

SALGA IMFO=


8/24



who are unable to pay even a proportion of service costs, have access to basic

services.

8.= (ffective and (fficient %esource Dse

(conomic resources are scarce and should be used in the best possible way to reap

the ma+imum benefit for the local community. 5owever, there are no effectivemechanisms available to ensure that Municipal decision will indeed lead to aneffective allocation of resources. t is therefore important that local residents

contribute the necessary chec3s and balances. They can do this by participating in

the budgeting process to ensure that resources are being put to their best use.

(fficiencies in public spending and resource allocation will ultimately increasethe access of the poor to basic services.

8.? "ccountability, Transparency and !ood !overnance

The Municipality must be held responsible and accountable to local ta+payers for

the use of public funds. (lected representatives must be re*uired to )ustify theire+penditure decisions and e+plain why and how the revenue necessary to sustain

that e+penditure is raised. The fiscal system must be designed to encourage

accountability. Municipal budgeting and financial affairs must be open to public

scrutiny, and communities must have a greater voice in ratifying decisions abouthow revenue is raised and spent. Community participation in budgeting must aim

to incorporate those groups in the community, such as women, who face

particular constraints in participating. t should also include a capacity-buildingcomponent to ensure that people understand the process of prioritisation 2 why

resources are allocated to one set of things rather than to another. "ccounting and

financial reporting procedures must minimise opportunities for corruption and

malpractice.

8.@ (*uity and %edistribution

Municipalities must treat citi1ens e*uitably with regard to the provision of

services. n return, national and provincial government must treat Municipalities

e*uitably with regard to nter-!overnmental Transfers. ocal government cannotbe solely responsible for redistribution, and national government has a critical role

to play in this regard, particularly with respect to subsidising the provision of

basic services. The e*uitable share of national revenue to which local governmentis entitled will be directed primarily at this purpose. n addition to targeted

subsidies to poor households, funded from the e*uitable share, Municipalities cancross-subsidise between high and low-income consumers, both within particularservices and between services. The e+tent of this cross-subsidy is a local choice

that needs to be e+ercised carefully, within the framewor3 of the Municipal

integrated development plan.

+. Addition(l In#!t,nt in t' Municip(lit%

Meeting basic needs in the conte+t of e+isting service bac3logs will re*uire

increased investment in Municipal infrastructure. $ublic $rivate $artnerships,

______________________________________________________________________________________

SALGA IMFO?


9/24



such as leases and concessions, provide a mechanism for attracting private

investment in Municipal infrastructure. The Municipal Finance Management "ctstipulates the conditions and process for $ublic $rivate $artnerships.

There are three 3ey areas of Municipal finance that could lead to additionalinvestment in the Municipality, namely&

orrowing and investment powers of the Municipality'

Credit enhancement' and

Concessional loan finance.

:.0 orrowing and nvestment $owers of the Municipality

The ocal !overnment Transition "ct e+tended and introduced broad uniformity

into the borrowing powers of Municipalities.

The Municipality will need to establish its creditworthiness through proper

budgeting and sound financial management, including establishing firm creditcontrol measures and affordable infrastructure investment programs.

f private investment is to be encouraged, greater clarity needs to be achieved with

respect to the security of loan investments.

t is critical that the Municipality, investors, as well as national and provincial

government have a clear understanding of the character of their respective ris3s.

%is3s should not be unduly transferred to national or provincial government.

:./ Measures to (nhance Credit

Bational government will not provide sovereign guarantees of Municipal debt.5owever, there are a range of other mechanisms which can be considered to

enhance the credit of the Municipality, including&

Municipal bond insurance'

Treasury Trusts'

nterception of inter-governmental transfers'

4ebt syndication' and

ond ban3ing.

Other measures which may indirectly enhance the credit of the Municipality

include, introducing better Municipal accounting systems, the provision of

relevant and reliable information, a clear framewor3 for supervision by otherspheres of government, procedures for intervention when failure occurs,

establishing fiscal certainty 6grant flows, ownership of local ta+ bases, etc7 and

clarifying the role of concessional loan finance.

:.8 Concessional oan Finance

______________________________________________________________________________________

SALGA IMFO@


10/24



"lthough the Municipality has fairly e+tensive borrowing powers, current

conditions at Municipal level and in the capital mar3et effectively constrain theability of the Municipality to raise loans. Concessional loan finance, offered

through a public sector financial intermediary, can play an important role in

enabling Municipalities that cannot gain access to credit from the capital mar3et,to borrow at an affordable price.

Specialised institutions for providing concessional loan finances to Municipalitiesare not intended to replace the e+isting commercial financial institutions, but

rather to complement them. Commercial and public sector financial institutions

should play complementary roles.

:.8.0 Ob)ectives of Concessional oan Finance&

$ublic sector financial intermediaries are designed to achieve a range ofob)ectives, including to&

Ma3e credit accessible& One of the ma)or obstacles facingMunicipalities is securing loans on the private capital mar3et.Financial intermediaries have the potential to provide Municipalities

with access to credit'

Mobilise additional resources& Financial intermediaries can be granted

sufficient powers to enable them to pool funds from various sources 2

including the domestic capital mar3et, and thereafter, lend these funds

to various Municipalities' and

$rovide technical assistance& "part from the primary goal of ensuring

that the Municipality has access to long-term capital financing.Financial intermediaries can enable the Municipality to improve the

use of resources.Financial intermediaries generally provide long-term credit financing for

Municipal investments, and could potentially play a critical role in the

funding of Municipal infrastructure.

t should be noted that&

#here public sector financial intermediaries are involved, care must be

ta3en to ensure that government does not subsidise the borrower in a

manner which is not transparent or clearly *uantified so that the

subsidy is not absolutely clear' $ublic sector financial intermediaries should not Ecrowd out or

discourage private sector investment. n fact, they are 3ey agents to

support the development of an effective mar3et for Municipal debt and

to enhance the overall level of investment in the Municipal sector.#ithin the framewor3 of the %ural 4evelopment $rogramme, public

sector financial intermediaries should actively support financial

mar3ets and endeavour to engage the private sector in these mar3ets'and

______________________________________________________________________________________

SALGA IMFO0A


11/24



Concessional finance sources could introduce the discipline of loan

finance to Municipal institutions which find it difficult to access private

mar3ets. This discipline in the way Municipalities conduct theirfinancial affairs should be a basic principle of concessional loan finance

so that, in the long term, such Municipalities will be able to satisfy the

re*uirement of the mar3ets and so gain access to private sector

investment.

-. Budtin/ Accountin/ Fin(nci(l Rportin (nd M(n(,nt;.0. udgeting

;.0.0 ntroduction

Municipal budgets are a critical tool for re-focusing the resources and

capacity of the Municipality behind developmental goals. To this end,

budgets must be developed in relation to the policies and programs putforward in Municipal ntegrated 4evelopment $lans.

!iven that resources are scarce, community participation in the

development of both ntegrated 4evelopment $lans and Municipal budgetsis essential. $articipation provides an opportunity for community groups

to present their needs and concerns. t enables them to be involved in the

process of prioritisation, and to understand and accept the trade-offs thatneed to be made between competing demands for resources.

Current budgeting, accounting, financial reporting and a financial

management practise of Municipalities suffer from a number ofwea3nesses. These wea3nesses may act as disincentives to community

participation and to private investment. These wea3nesses could include

some of the following&

Dnrealistic budgeting'

$oor credit control'

" lac3 of budgetary and financial discipline' and

" lac3 of user-friendly accessible information on the budget process.

"ddressing these problems re*uires political will and improved

management efficiency.

;.0./ udget $rocess

Capital udget$rogram

o The three-year Capital $rogram shall be prepared annually by the

Municipal Manager or hisher delegate and reviewed continuously

by the Council'

______________________________________________________________________________________

SALGA IMFO00


12/24



o The three-year Capital $rogram will at all times be in line with the

framewor3 of the Municipal integrated development plan

6ntegrated 4evelopment $lan7'

o y no later than 80st Ganuary in each year the Council shall

approve the Capital udget for the following three years' and

o Capital charges 6interest and redemption7 and capital e+penditure

to be funded from income can now be transferred to the ne+t andfollowing years Operating udgets.

Operating udget

o The CouncillorCommittee responsible for financial matters, must

at least four months before the start of each financial year, prepare

a draft annual budget for that financial year'

o The CouncillorCommittee responsible for financial matters must&

"llow the public access to the draft budget by ma3ing it

available at the main administrative office of the Municipality'

"llow the public to submit written comments and

representations to the Municipality' and

Table the draft budget in the Municipal Council for discussionsand public hearing.


submit a copy of the Municipalitys draft budget to&

6!T" section 0A6!7, ocal "uthority Ordinance section0A;6077

The Bational Treasury in the case of a Municipality whosename appears on a list published by the Minister in the!overnment !a1ette'

The $rovincial !overnment, in the case of a 4istrict

Municipality 64M7, and local Municipality, whether such

names appear on the above list or not'

The 4istrict Municipality 64M7, in whose area it falls, in the

case of a local Municipality' and

The local Municipalities in its area, in the case of a 4M.


attend to the following matters as soon as the Council discussionsand the public hearings referred to above have been completed&

$repare the budget for the financial year, ta3ing into account&

The considerations of and public hearings conducted by the

Council on the draft budget'

"ny public comment and representations received by the

Municipality in terms of the above' and

______________________________________________________________________________________

SALGA IMFO0/


13/24



"ny recommendations of the $rovincial

!overnmentBational Treasury on the draft budget, and any

guidelines and policy statements issued by the $rovincial!overnmentBational Treasury.

Table the budget in the Council for approval.

o The CouncillorCommittee responsible for financial matters must

manage the budget process in a manner so as to ensure that the

budget is tabled in the Council within a sufficient timeframebefore the start of the financial year to which that budget relates.

;./ %evenue of the Council

;./.0 ncome

The revenue of the Council shall consist of rates, ta+es, fees, charges,

fines and other sums imposed or recoverable by or payable to theCouncil'

nterest shall be payable to the Council on rates which have not been

paid within thirty days, from the date on which such rates became due,at a rate of one percent higher than the rate payable by the Council to

its ban3 in respect of overdraft for the period during which such rates

remain unpaid after the e+piry of the said period of thirty days'

The Council will charge interest on any other amounts due to the

Council, which have not been paid within thirty days from the date on

which such amounts became due, at one percent higher than the rate

payable to the Council to its ban3 in the respect of overdraft for theperiod during which such amounts remain unpaid after the e+piry of

the said period of thirty days'

The Municipal Manager or hisher delegate shall be responsible for the

collection of all monies due to the Council, provided that by

arrangement with the Municipal Manager or hisher delegate and

sub)ect to hisher overall control, monies may be collected by other

Cost Centres %evenue Collection points'

"ny monies collected by any Cost Centre of the Municipality shall be

paid to the Municipal Manager or hisher delegate or ban3ed in

conformity with the relevant procedures'

Bo amount due to the Council shall be written-off as irrecoverablewithout the approval of the Council'

%eceipts issued for all monies collected by Cost Centres for the credit

of the Councils account shall be in a form approved by the Municipal

Manager or hisher delegate and in conformity with the relevantprocedures'

Bo money shall be accepted unless a receipt can be issued

immediately' and

______________________________________________________________________________________

SALGA IMFO08


14/24



#hen the Council suspects that a shortage, other than a shortage

discovered in the process of an audit, has arisen in the funds of other

property of the Council as a result of fraud or theft, the Council shall&

o "s soon as practicable institute an investigation to determine the

amount of the shortage'

o %eport the matter to the police' ando (+cept in the case of a shortage not e+ceeding %/;A, AA in such

other property, immediately notify the Chief Financial Officer

thereof.

;././ (ffective Cash Management

"ll funds due to the Council should be collected as soon as possible

and ban3ed on a daily basis. Cash left in the safe can pose a securityris3 and could necessitate additional insurance coverage and does not

earn any interest. arge amounts received should be ban3ed on thesame day on which it is received'

t is essential that all amounts owing to the Council be levied by way

of a debit in the applicable debtors system. " well managed debtors

and ban3ing control system is the proper measure for ensuring thatfunds owed to Council are timeously received and ban3ed. t is also

important to review debt collection performance by comparing funds

presently owed to the Council in relation to the total income as well asto the situation in previous financial years, in order to determine

whether the debt collection process is deteriorating or improving'

"nother aspect of effective cash management is ade*uate control over

the timing and payment of creditors accounts'

#ith the ban3 costs relating to che*ue payments getting more

e+pensive, it is essential to limit the payment of creditors to one

payment per creditor per month, if possible, and to consider ma3inguse of electronic transfer facilities 2 if these are available 2 sub)ect to

strict control measures'

#hen considering the time to pay a creditor, proper consideration

should be give to the conditions of credit terms offered for payment.

n cases where a cash discount is offered for early settlement, thediscount 2 if the relevant time scale is ta3en into account 2 will in most

cases be more than any investment benefit that could be gotten fromtemporarily investing the funds. f discounts are offered for early

settlement, therefore, they should be properly considered and utilised'

and

esides this, the normal conditions of credit in terms of payment

offered by suppliers, should also be considered and utilised to the full

by paying on the due date and not earlier.

______________________________________________________________________________________

SALGA IMFO0:


15/24



;./.8 Credit Control

mplementing and maintaining Councils Credit Control $olicy and

$rocedure shall be the responsibility of the Municipal Manager or hisher

delegate. The Member of the (+ecutive Committee and the Council needsto be informed on a monthly basis about debtors in arrears.

;./.: Subsidy for the ndigent

mplementing and maintaining Councils ndigent $olicy and $rocedure

shall be the responsibility of the Municipal Manager or hisher delegate

and an up to date indigent register should be available for audit purposes,at all times.

;./.; nter-!overnmental Transfers and Other Subsidies

%eceiving nter-!overnmental Transfers and Subsidies from the Centraland $rovincial !overnments, as well as from any other institution, shall be

the responsibility of the Municipal Manager or hisher delegate who will

on a monthly basis report thereon to the Council.

;.8 (+penditure of the Council

;.8.0 !eneral

The Council may incur such e+penditure approved in terms of its

estimates as may be necessary for any purpose&

o "uthori1ed by the Municipal Ordinance or any other law' and

o #hich, though not specially authori1ed by the ocal "uthority

Ordinance, is incidental to the e+ercise by the Council of its

powers and duties under the Ordinance or necessary or desirable in

the interest of the inhabitants of the Municipality in general'

The Council may out of revenue ma3e grants-in-aid in line with

provisions made in the ocal !overnment Ordinance'

(+cept where wor3, approved by the Council either specially or

generally, is to be underta3en on behalf of a third party where the full

costs are to be recovered from the persons or Cost Centres concerned,no e+penditure shall be incurred unless provision therefore has been

made in the Capital or Operating budgets, provided that in the case ofan emergency, any proposed e+penditure not provided for in the

budget, shall be authorised by the Municipal Manager or hisher

delegate after consultation with the Finance $ortfolio shall&

______________________________________________________________________________________

SALGA IMFO0;


16/24



o n the case of operating e+penditure, report as soon as possible to

the Council and nominate e*uivalent reductions and see3 the

formal approval of the Council to the action ta3en'

o n the case of capital e+penditure, report as soon as possible to the

Council and recommend a re-allocation of e+penditure' and

o 5aving regard to priority ratings within the level of the total

approved Capital udget.

;.8./ $ayments

The Municipal Manager and the Chief Financial Officer shall be

responsible for the payment of all accounts due by the Council.

The Chief Financial Officer shall advise the Municipal Manager or

hisher delegate of the names of officials empowered to sign vouchers

authorising payments of accounts and furnish himher with their

specimen signatures.

>ouchers submitted to the Municipal Manager or hisher delegate by

any Cost Centre for payment, shall be in such form as may be re*uired

by the Municipal Manager or hisher delegate and must state the vote

or pro)ect number on which budgetary provision has been made tomeet such payment.

The Chief Financial Officer submitting any voucher for payment by

the Municipal Manager or hisher delegate shall be responsible for the

accuracy of the amount to be paid and shall ensure that&

o The goods have been received, or the services rendered'

o The prices and calculations are correct'

o

"ny discounts to which the Council is entitled have been deducted'o The account has not previously been paid'

o Sufficient budgetary provision e+ists' and

o f e+cess e+penditure is involved and the Council on the

recommendation of the Municipal Manager or hisher delegate has

approved such e+cess, the resolution authorising such e+cess

e+penditure shall be *uoted on the voucher.

$ayments re*uiring the special authority of the Member of the

(+ecutive Committee shall be accompanied by the reference to the

authority for such payment, *uoted on the voucher submitted to the

Municipal Manager or hisher delegate. "ll payments due by the Council shall be made by che*ue drawn upon

the Councils ban3ing account, e+cept that in the case of items not

e+ceeding a prescribed limit set by Council, payment may be madefrom petty cash, should this method be more e+pedient.

"ll che*ues drawn on the Councils ban3ing account shall be signed

by not less than two persons authorised by the Council to do so in

compliance with legal re*uirements or Council resolutions.

______________________________________________________________________________________

SALGA IMFO0


17/24



The Municipal Manager or hisher delegate shall have authority to ma3e

imprest or advances to 4epartmental Managers and to other officials whenthe Municipal Manager or hisher delegate deems this necessary, for the

payment of e+penses not e+ceeding a prescribed limit set by Council, on

any one item or for the provision of change. The Municipal Manager orhisher delegate shall have the authority to determine the level of any such

advance from time to time, and to ma3e rules for the management thereof.

;.8.8 Salaries and "llowances


calculation and payment of salaries and allowances' and

The Municipal Manager or hisher delegate shall be notified by the

Municipal Manager or hisher delegate or 5ead of "dministration of

all appointments, promotions, dismissals, resignations, transfers,

absences for any reason and all the matters which may affect theemoluments of employees of the Council. The submission of such

information to the Municipal Manager or hisher delegate shall be insuch form and at such dates and times as the Municipal Manager orhisher delegate may determine from time to time.

;.8.: Capital (+penditure

Bo capital e+penditure shall be incurred on any pro)ect unless&

$rovision therefore has been made on the approved Capital udget'

"ny necessary $rovincial or State approvals to incur the e+penditure

have been obtained' and

The formal approval of the Council to such e+penditure has been

obtained.

;.8.; Operating ncome and (+penditure

Bo saving on an amount budgeted for a specific purpose may be

applied to meet e+penditure for another purpose without the approval

of the Council on the recommendation of the Finance $ortfolio and the

Municipal Manager or hisher delegate' and

Should a 5ead of a 4epartment have reason to believe that any

budgetary provision is or will be insufficient, or that estimated incomeis unli3ely to be received, heshe shall forthwith report to the

Municipal Manager or hisher delegate for consideration by the

Council. The reasons for the e+cess e+penditure 6or shortfall inincome7 shall be stated and any reductions that can be affected in order

to meet the e+cess shall be indicated. Should no e*uivalent reductions

be possible, the Council on the recommendation of the Finance$ortfolio and the Municipal Manager or hisher delegate shall consider

the matter.

______________________________________________________________________________________

SALGA IMFO0=


18/24



;.8.< Tenders and Contracts

Sub)ect to section 0A!6;7 of the ocal !overnment Transition "ct, 0@@8,

as amended, read with !overnment !a1ette Botice Bo. 0@??< dated

/


19/24



o #here the sale of such goods or materials is so urgent that it would

not be in the interest of the Municipality to invite tenders.

;.8.= !oods and Materials

"ll goods and materials belonging to the Council and held for future

consumption shall be retained in the Councils Main Store. #ith theapproval of the Municipal Manager or hisher delegate, certain goods

and materials may be held by Cost Centres in a sub-store, provided

that all items not re*uired shall be returned to the Main Store'

The Chief Financial Officer or hisher delegate shall maintain a Stores

record reflecting full particulars of purchases and issues of goods and

materials and the balances of stoc3 on hand. 4epartmental Managers

shall maintain similar stores records in respect of sub-stores undertheir control. The average monthly consumption of each item of stoc3

shall be determined as well as the number of months stoc3 to be held.

The stoc3 card shall show the number of months consumption that is

in stoc3' Stoc3 shall not, e+cept where the Chief Financial Officer or hisher

delegate is satisfied that special circumstances e+ist, be carried by or

for any Cost Centre in e+cess of normal re*uirements. #henever itappears to the Chief Financial Officer or hisher delegate that a

proposed purchase would result in infringement of this clause, heshe

shall draw the attention of the 5ead of the Cost Centre concerned

thereto and, if heshe feels it is necessary, shall report the matter to theMunicipal Manager.

The 5ead of the Cost Centre or hisher nominees, provided written

notification of such nominees, shall sign re*uisitions for goods and

materials and the e+tent of their authority is given to the ChiefFinancial Officer or hisher delegate. 4epartmental Managers shall

advise the Chief Financial Officer or hisher delegate of the personsauthorised to sign such re*uisitions in respect of the following

recommended categories&

o Bot e+ceeding %0A AAA per re*uisition'

o Bot e+ceeding %/A AAA per re*uisition' and

o "mounts in e+cess of % /A AAA will need the specific authority of

the Chief Financial Officer and the 5ead of Section.

Specimen signatures of all persons authorised to sign re*uisitions shall

be supplied to the Chief Financial Officer or hisher delegate.

(+cept in the case of emergency re*uisitions, if the Municipal

Manager or hisher delegate has reason to believe that insufficientbudgetary provision e+ists to cover the re*uisition presented to the

Stores Section, heshe shall immediately inform the 5ead of the Cost

Centre concerned, who shall forthwith report the matter to the Council

for consideration'


ordering, custody and issue of receipt forms, tic3ets, to3ens, vouchers

______________________________________________________________________________________

SALGA IMFO0@


20/24



of value, and such other stationary as heshe may deem necessary to

control'

The Municipal manager or hisher delegate shall submit tenders for

goods, materials or services to the Cost Centre concerned, and the

5ead of that Cost Centre shall recommend the tender or tenders to be

accepted. f the lowest tender is not recommended the reasons for not

doing so shall accompany the recommendation. f the MunicipalManager or hisher delegate does not agree with the reasons for not

accepting the lowest tender, heshe shall send hisher reasons fordisagreements to the head of the Cost Centre concerned and include

them in hisher report to the Council. This report should include details

of the financial provision and vote number to cover the relevant

ac*uisition'

"ll surplus goods and materials left over on completion of wor3s or

the fulfilment of the purpose for which they were issued or goods

recovered in the course of covering out wor3s or on hand for anyreason what so ever, shall be returned to and recorded by the Chief

Financial Officer or hisher delegate without delay. "n "dvice Botedescribing such goods and materials shall be furnished to the TreasuryCost Centre in consultation with the "dministration Manager

concerned. The Municipal Manager or hisher delegate shall in

consultation with the head of the Cost Centre concerned, decide on thevalue, if any, to be credited to the appropriate votes'

$lant and (*uipment and other good and materials shall be deemed to

be redundant or obsolete as approved by the Council, on the

recommendation of the 5ead of the Cost Centre Technical Services.

Similarly, in the case of obsolete or redundant stores items, theMunicipal manager or hisher delegate shall report to the Council'

Sub)ect to the ocal "uthorities Ordinance, the Municipal manager orhisher delegate to the Council, together with reasons fordiscrepancies, shall report the amount and value of any surpluses and

shortages in stoc3 revealed in stoc3ta3ing. #here the stoc3 is not

under hisher control, the Municipal Manager or hisher delegate mayre*uire the responsible 5ead of the Cost Centre to furnish himher with

a set of reasons. "ny ad)ustments thereafter must be formally

authorised by the Council, save and e+cept that the Municipal Manageror hisher delegate, may authorise ad)ustments in stoc3s and losses not

involving negligence or identifiable theft, provided favourable audit

reports are presented in all cases'

The Chief Financial Officer shall at least once each year cause stoc3 tobe ta3en of all stores and other loose property under hisher control. "report on such stoc3ta3ing shall be compiled and certified by the

persons appointed by the Chief Financial Officer to ta3e stoc3 and

such certified report shall be laid before the Council. The report shallindicate&

o The value of the stores and other loose property found at the stoc3

ta3ing'

______________________________________________________________________________________

SALGA IMFO/A


21/24



o #hether a suitable record has been maintained showing what

articles should have been found at stoc3ta3ing'

o "ny discrepancies between the articles found at stoc3ta3ing and

the record referred to above' and

o The stores in respect of which no issues have ta3en place since the

previous stoc3ta3ing.

;.8.? oans

The Municipal Manager or hisher delegate shall be responsible for raising

of such loans, as may be re*uired form time to time, on such terms and

conditions and from such sources as may be approved by the Council.

;.8.@ nsurance


management of the Councils insurances covering such ris3s as the

Council may form time to time determine' The Municipal Manager or hisher delegate shall be responsible for the

placing of insurances as approved by the Council from time to time'

The 4epartmental Managers shall be responsible for ensuring that the

insurance cover in respect of assets under their control is sufficient

having regard to the current value and replacement costs of these

assets and shall notify the Municipal Manager or hisher delegateimmediately of the ac*uisition or disposal or any change in insurable

value of any asset'

"nnually before 0stGuly, the Municipal Manager or hisher delegate

shall provide the 4epartmental Managers with Schedules of all insured

items stating their value and the premium for the following year' and

The 4epartmental Managers shall notify the Municipal Manager or

hisher delegate promptly of all accidents, damage or loss involvingthe Councils employees or assets and refer all claims received to

himher for attention.

;.: "ccounting

;.:.0 Financial Statements

The Municipal Manager or hisher delegate shall prepare financialstatements annually and report thereon to the Council.

Bo revenue collection or accounting system shall be introduced in any

Cost Centre and no alteration shall be made to any e+isting systemunless the approval of the Municipal Manager or hisher delegate has

first been obtained.

;.:./ !enerally "ccepted Municipal "ccounting $ractice 6!"M"$7 and

!enerally %ecognised "ccounting $ractice 6!%"$7

______________________________________________________________________________________

SALGA IMFO/0


22/24



"pplying accounting principles specifically tailored for Municipalities

promotes transparency. t will enable the content and the presentation offinancial statement information to be consistent and so enable informed

decision-ma3ing on ris3 and returns. t is therefore of utmost importance

that the Municipal Manager or hisher delegate applies !"M"$!%"$ inthe compiling of the budgets and financial statements of the Municipality

as well as the financial systems in use.

;.; nternal "udit

The nternal "udit staff of the Council shall perform such duties and conduct

such investigations, as may be prescribed by law, or re*uired by the Council,

or the Municipal Manager or hisher delegate, and at all times review thesystems of internal control and report to the Municipal Manager or hisher

delegate upon changes as they are re*uired'

n performing such duties or conducting such investigations, the internal

audit staff shall be given access to any Cost Centre records re*uired for the

purpose of the audit and a 5ead of a Cost Centre and every officer thereofshall upon re*uest by the Municipal Manager or hisher delegate supply suchinformation as may be re*uired' and

______________________________________________________________________________________

SALGA IMFO//


23/24



The nternal "uditor shall report to the "udit Committee on the result of his

investigations and unless under obligation by law, or by resolution of theCouncil, the "udit Committee shall in their discretion submit such reports to

the Council.

;.; "ssets;.

Documents

Legislative Policies - Financial Best Practice Manual - 3 Corporate Governance