The Capital Budget specifies expenditure expected to be incurred to acquire or create assets. Items are categorised as assets if their useful life is in excess of one year or the purchase value exceeds R5 000. Capital expenditure can be financed from the following sources:
A new accounting standard, Generally Accepted Municipal Accounting Practice (GAMAP), has been developed for South African Local Government. The Auditor-General prescribes a new format for financial statements based on GAMAP. The goal is to implement GAMAP in the 2002/2003 financial year-end.
Implementation of GAMAP will enable the content and presentation of financial statement information to be consistent and so enable informed decision-making on risks and returns. It is therefore of utmost importance that the Municipal Manager and Chief Financial Officer apply GAMAP in the compilation of the budgets and the financial statements pertaining to the Municipality as well as the financial systems in use. Accountability/Responsibility
Whilst the Municipal Manager is accountable and responsible for overall management, the Council is responsible for framing the budget prior to the financial year-end, in accordance with section 160 (1) Of the Constitution of South Africa, Act 108 of 1996., The Municipal Finance Management Bill indicates that a Councillor will be held responsible for compiling the Municipality?s draft annual budget, the consultative process and ultimately the submission to the Council of the municipality.
The Chief Financial Officer and the Councillor responsible for financial matters must at least four months before the beginning of the financial year, prepare a draft consolidated annual budget, incorporating the budgets of the various sections in the Municipality for that financial year.(Municipal Finance Management Bill, 2000, chapter 4, paragraph 15(1) Principles
A Municipality shall not budget for a year-end deficit on its operating account (Local Government Transition Act No. 209 of 1993, as amended, Section 10G(3)(b)(i)). The Municipal Annual Budget:
The Municipal Annual Budget must at least contain:
Any other information as may be prescribed, including any multi-year budget information (Municipal Finance Management Bill, 2000, chapter 4, paragraph 14(2)(a)-(i)).
When an annual budget is tabled in the Municipal Council, the Municipal Manager must submit measurable objectives for each vote in the budget (Municipal Finance Management Bill, 2000, chapter 4, paragraph 14(3)).
The National Treasury, after consulting the relevant Provincial Government / Treasury, may withhold funds due to a Municipality from the National Revenue Fund, if the Municipality fails to comply with a provision of this section or any other applicable treasury norms and standards established in terms of section 216 of the Constitution (Municipal Finance Management Bill, 2000, chapter 4, paragraph 14(4)).
The following are required for the drafting of the budget:
All departments must prepare departmental business plans for the short and medium term. These plans will contain budgets for the same period. The financial plans will be detail actual and potential sources of funding from internal and external sources. The departmental requirements are based on the individual departments' short and medium plans that flow from the IDP. Once the departmental draft budgets have been done and Key Performance Indicators identified, the department must submit it for consolidation to the Municipal Manager. The Councillor/committee responsible for financial matters must then:
The Councillor/committee responsible for financial matters must submit a copy of the Municipality's draft budget to:
The Councillor/committee responsible for financial matters must attend to the following matters as soon as the Council's discussions and the public hearings referred to above, have been completed):
Prepare the budget for the financial year, taking into account:
Table the budget before the Council for approval.
The Councillor/committee responsible for financial matters must manage the budget process in a manner so as to ensure that the budget is tabled in the Council at least 30 days before the beginning of the financial year to which that budget relates (Municipal Finance Management Bill, 2000, chapter 4, paragraph 15(5)).
The Director Finance will allocate final vote number to all budget items and supply the Municipal Manager and all departmental heads a copy of the budget with vote numbers and key performance indicators for each vote.
A Municipality must approve its annual budget before the beginning of the financial year to which it relates (Municipal Finance Management Bill, 2000, chapter 4, paragraph 15(6)).
The annual budget of a Municipality is approved by a decision taken by the Council of the Municipality, with a supporting vote of a majority of the members of the Council present at the meeting (Municipal Finance Management Bill, 2000, chapter 4, paragraph 16(1)). Failure to adopt a budget.
If a Municipal Council fails to approve an annual budget by the majority required, the Council must reconsider the budget and again vote on the budget or an amended version thereof, within 14 days of the meeting that failed to approve the budget (Municipal Finance Management Bill, 2000, chapter 4, paragraph 16(2)).
If a Municipal Council again fails to approve an annual budget by the required majority and, as a consequence of which, there is no approved annual budget at the beginning of the financial year to which it relates, funds may for the requirements of the Municipality be withdrawn from the Municipality's Revenue Fund in accordance with the requirements of 4.18 below (Municipal Finance Management Bill, 2000, chapter 4, paragraph 16(3)).
If a Municipality's annual budget is not approved before the beginning of the financial year to which it relates, funds may, with the approval of the MEC for Local Government in the Province concerned, after consulting the MEC for Finance, be withdrawn from the Municipality's Revenue Fund in accordance with this section, for the requirements of the Municipality until the budget is approved,as follows;. May be:
Used only to defray current expenditure in connection with matters for which funds were appropriated in the previous annual budget or adjustment budget; and May not:
The municipality may not utilise a saving in the amount appropriated under a vote in a budget towards the defrayment of excess expenditure under another vote in the budget unless such utilisation is authorised in an adjustments budget If a budget appropriates funds for specific purposes within a vote, the provisions of subsection (1) apply to those specific appropriations as if they were separate votes. Information to be submitted by municipal managers
The Municipal Manager of a municipality must submit to the National Treasury, the relevant provincial treasury or the Auditor-General, such information, returns, documents, explanations and motivations as may be prescribed or as the relevant treasury or the Auditor-General may require. If the Municipal Manager is unable to comply with any of the responsibilities determined for municipal managers in this Part, the Municipal Manager must promptly report the inability, together with reasons, to the municipal council, the National Treasury and the relevant provincial treasury.