Financial And Management Accounting And Reporting

The major tasks to be undertaken by the Financial Services Department can be categorized into five broad areas and every staff member in the department will be assigned within a work category.

These work categories consist of:

Revenue generation and collection
Procurement and payment of goods and services
Salaries and wages
Assets - procurement and safeguarding
Investments
Bank and cash resources
Liabilities - short and long term
Revenue

The are four categories of revenue, namely:

Operational Income,
Grants and subsidies,
Interest, and Other

Receipt of Payments

Receipt of money over the counter:

Every amount of payment received by a cashier or other officer responsible for the receipt of money shall be acknowledged at once by the issue of a numbered official receipt or cash ticket; and Every receipt form, which is cancelled, will be reattached, in the correct place, in the receipt book. Where computer generated receipts are used, the original receipt must be filed for audit purposes.
Receipt of Money by Post:

When money (including postal orders and cheques) is received with the Council's mail, the Registry Clerk shall record all payment remittances as and when received in the cheque register in the presence of a witness. Post-dated cheques received in the Council's mail must also be recorded in the cheque register. The cheque register shall be regarded as the register of remittances received by post:

The cheque register together with all remittances received must be sent to a designated official in the finance section;
The designated official on receipt of the cheque register together with the remittances will code all remittances and submit it to the cashier for receipting;
The cashier will receipt all remittances and issue official receipts to the designated official;
The designated official will record all receipts in the cheque register and return same to registry. The Registry Clerk must ensure that all receipts are recorded in the cheque register;
All documents relating to remittances received in the mail must be filed for audit purposes;
A separate register for post dated cheques will be maintained by the Registry Clerk and all postdated cheques must be stored safely in the Registry Strongroom; and
The Registry Clerk will ensure that all postdated cheques, which become due are sent promptly to the designated official for receipting and recording of receipts in the postdated cheque register.
Bank and Cash (Local Government Transitional Act No. 209 of 1993, as amended, Section 10 G (2)(a)):

District Council Levies

Registered enterprises are liable for the payment of the following levies

Non Registered Enterprises

Monthly Accounts

At the end of each month, (RC4) statements should be issued to the levy payers. If (RC4) is not submitted timeously to the Council, then a (RC6) statement should be issued to monthly levy payers, indicating an estimated figure, whilst providing a space for the levy payer to indicate the correct figure.

On a monthly basis levy will be raised on all known business within Sisonke District Municipality. This will be done by sending out levy declaration forms whereby the business completes the form by declaration remuneration for the month and turnover for the month. The levy amounts due are computed by the business and payment attached to the form that is returned to the District Council. Should payment be made by direct transfer, a confirmation of deposit will be attached. Those businesses able to pay in person can do so at the office of Sisonke District Municipality. Receipts will be issued for all payments. Levy payments can be made to the Council's office (cashier) or cheques may be handed to the Levy Inspector.

The computer system will generate receipt numbers that must be checked regularly (daily) to ensure all created numbers are accounted for in the receipting function. The Revenue Accountant will perform this checking function once the cashier has done his/her cashing up. The cashier cannot bank the money until the Revenue Accountant was checked and signed off the daily banking summary. Banking to be done a daily basis unless the Assistant Director Finance agrees otherwise.

If the Levy Inspector collects the payments, he must call at the cashier's office with the assessment form, where reconciliation is performed between the cheques and assessment forms. The cashier must acknowledge receipt of the payment and forms.

The assessments should be printed around the 21st of each month. Post the copy to the enterprise between the 21st and the 25th of the month. The copy must be completed by the levypayer and returned to the Council, where it should be filed in account sequence. If (RC6) is not returned, final reminders namely the, (RC7), must be sent to those levypayers whose levies are outstanding for 60 and 90 days.

If no response to the (RC7) is received a final notice is sent, thereafter a final telephonic warning is given to the levypayer requesting the full settlement of outstanding levies.

Memo reports are also printed indicating whether levypayers have been contacted and arrangements have been made for outstanding levies. Further attempts for recovery of amounts should be done for eg. Scanning of the newspapers for 'Sales of Execution' and 'Liquidations'. Any person who fails to pay levies shall be liable to a fine, not exceeding R5000 or imprisonment not exceeding 12 months.

Lack of response should result in debt recovery procedures being followed for balances outstanding. Where payments are received without the turnover and remuneration details, enterprises should be visited or a request should be made in writing to obtain the information.

Payments made through direct deposit in the Council's banking account should be accompanied by the (RC4) statement being faxed/posted to the Council, together with the confirmation slip obtained from the bank, indicating the amounts paid. Interest to be charged to all outstanding balances.

Comparison of Levies

Perform random checks on approximately 10 to15 enterprises, by comparing levies paid in terms of being in a similar business/size.
If substantial disparities are discovered request for further information to substantiate lower estimates eg. VAT returns and income tax returns.
If information is inaccessible due to unwillingness of the owner, then attempt to obtain information from other sources eg. South African Revenue Services.
If enterprises are found to understate their levies, communicate the issue to them in writing.
Lack of response to the above letter should result in a request for a directive from the Commissioner of Inland Revenue.
The Levy Inspector should act on instruction from the Commissioner of Inland Revenue, for the collection of under-declared levies.

Deregistration:

Returned and outstanding forms should be checked, and personal visits should be made to establish whether the business is in existence.
The Financial Controller should be advised accordingly of de-registration of enterprises which are not in existence.
When an application for exemption is received, check for a nil balance. Thereafter, a statement of the account since inception, should be furnished to the Financial Controller for approval.
Process the approved exemptions by closing off the account.

All relevant forms must be completed upon de-registration/exemption. Details pertaining to the de-registration or exemption must be entered in the de-registrations/exemptions register. If a business is closed, a physical check must be carried out to confirm the same, before the de-registration is processed. However, if a business is sold, obtain information from the new business and process the registration form. If the owner of a business cannot be traced for outstanding balances, obtain approval for write-offs and file the relevant documents.

Reports on outstanding levies, history of payments and age analysis obtained from the Financial Controller, must be reviewed monthly to establish non-paying and under-declaring enterprises. For zero or nil declarations received for longer than 3 months a letter should be sent to the levypayer requesting reason for such a declaration.

Reconciliation.The Revenue Accountant must print the debtors aged analysis monthly. The report must be analysed for capturing errors and other discrepancies. Business that have not submitted and/or have not paid must be highlighted for action as mentioned above. The Revenue Accountant will ensure that all receipts captured have updated the debtors' balances correctly and any unallocated receipts are allocated. After appropriate action has been taken, the report is given to the Assistant Director Finance for approval before the debtor module is closed for the month. After the ledger has been updated, a reconciliation between the debtors ledger and the ledger debtors control account needs to be done by the Revenue Accountant.

The reconciliation will contain the following:

Balance the aged analyses
Balance per control account
Reconciling items that could include unallocated and duplicate receipts
The reconciliation will be reviewed and signed off by the Assistant Director Finance
Journal Entries

The Financial Controller in the Levies Section should ensure that relevant journal entries are processed in instances where:

Incorrect receipting by cashier;
Return to Drawer (RD) cheques are received;
For incorrect capture of enterprises declarations; and
Reversal of interest.

Update of Information:

A form should be completed by the enterprise in respect of a change in physical and postal address.
The above procedures should be constantly up-dated in terms of relevant legislation.

Grants and Subsidies

Background

The national and the KwaZulu-Natal provincial governments provide various grants to municipalities to provide infrastructure capacity and other services to its communities. These grants are distributed to municipalities for specific purposes and are gazetted in the national or provincial gazettes. National government grants are allocated as a consequence of the Division of Revenue Act of the year concerned. The national and provincial governments have March financial year-ends whereas local governments? financial year is June.

Procedures

A Grant file must be opened containing a summary of all grants due to the municipality for the financial year. This information is obtainable from national and provincial gazettes. The summary will also contain expenditure on this grants and copies of the supporting documents of these expenditures. The Director with the assistance of the Assistant Director Finance need to ensure that the district council receives all grants that have been allocated to it and further grant funding is sought from the other spheres of government and other sources.

Interest Income

All excess funds of the Council must invested to obtain the highest return, which is interest. The Memorandum of Agreements for grant funding must be scrutinised to ascertain how interest earned on these funds needs to be allocated. The procedure for the control of interest is contained in the Investments chapter.

Other Income

Other income consists of income that is not classifiable to operational, grant or interest income. This income must be recognized when received.

Procedures

The cashier will allocate receipts for sundry income to sundry revenue accounts as allocated by the Revenue Accountant. Therefore if a vote number does not exist for a type of receipt that is received, the cashier needs to consult the revenue accountant. Should a vote number not be easily available, the amounts need to be allocated to another income account.

The Revenue Accountant must on a monthly basis analyse the other income account to allocate to other vote numbers or create vote numbers.

Effective Cash Management

All funds due to the Council should be collected as soon as possible and banked on a daily basis. Cash left in the safe can pose a security risk and could necessitate additional insurance coverage and does not earn any interest. Large amounts received should be banked on the same day on which it is received;

It is essential that all amounts owing to the Council be levied by way of a debit in the applicable debtors system. A well managed debtors and banking control system is the proper measure for ensuring that funds owed to Council are timeously received and banked. It is also important to review debt collection performance by comparing funds presently owed to the Council in relation to the total income as well as to the situation in previous financial years, in order to determine whether the debt collection process is deteriorating or improving;

Another aspect of effective cash management is adequate control over the timing and payment of creditor's accounts; With the bank costs relating to cheque payments getting more expensive, it is essential to limit the payment of creditors to one payment per creditor per month, if possible, and to consider making use of electronic transfer facilities " if these are available " subject to strict control measures;

When considering the time to pay a creditor, proper consideration should be give to the conditions of credit terms offered for payment. In cases where a cash discount is offered for early settlement, the discount "if the relevant time scale is taken into account " will in most cases be more than any investment benefit that could be gotten from temporarily investing the funds. If discounts are offered for early settlement, therefore, they should be properly considered and utilised; and

Besides 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.

Credit Control

Implementing and maintaining Council?s Credit Control Policy and Procedure shall be the responsibility of the Municipal Manager or his/her delegate. The Member of the Executive Committee and the Council needs to be informed on a monthly basis about debtors in arrears.

Subsidy for the Indigent

Implementing and maintaining Council?s Indigent Policy and Procedure shall be the responsibility of:

Credit Control

Implementing and maintaining Council's Credit Control Policy and Procedure shall be the responsibility of the Municipal Manager or his/her delegate. The Member of the Executive Committee and the Council needs to be informed on a monthly basis about debtors in arrears.

Subsidy for the Indigent

Implementing and maintaining Council's Indigent Policy and Procedure shall be the responsibility of the Municipal Manager or his/her delegate and an up to date indigent register should be available for audit purposes, at all times.

Inter-Governmental Transfers and Other Subsidies

Receiving Inter-Governmental Transfers and Subsidies from the Central and Provincial Governments, as well as from any other institution, shall be the responsibility of the Municipal Manager or his/her delegate who will on a monthly basis report thereon to the Council.

Expenditure of the Council

The Council may incur such expenditure approved in terms of its estimates as may be necessary for any purpose:

Authorized by the Municipal Ordinance or any other law; and
Which, though not specially authorized by the Local Authority Ordinance, is incidental to the exercise 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 make grants-in-aid in line with provisions made in the Local Government Ordinance;

Except where work, approved by the Council either specially or generally, is to be undertaken on behalf of a third party where the full costs are to be recovered from the persons or Cost Centres concerned, no expenditure shall be incurred unless provision therefore has been made in the Capital or Operating budgets, provided that in the case of an emergency, any proposed expenditure not provided for in the budget, shall be authorised by the Municipal Manager or his/her delegate after consultation with the Finance Portfolio shall:

In the case of operating expenditure, report as soon as possible to the Council and nominate equivalent reductions and seek the formal approval of the Council to the action taken;
In the case of capital expenditure, report as soon as possible to the Council and recommend
a re-allocation of expenditure; and
Having regard to priority ratings within the level of the total approved Capital Budget.

Payments

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 his/her delegate of the names of officials empowered to sign vouchers authorising payments of accounts and furnish him/her with their specimen signatures.
Vouchers submitted to the Municipal Manager or his/her delegate by any Cost Centre for payment, shall be in such form as may be required by the Municipal Manager or his/her delegate and must state the vote or project number on which budgetary provision has been made to meet such payment.

The Chief Financial Officer submitting any voucher for payment by the Municipal Manager or his/her delegate shall be responsible for the accuracy of the amount to be paid and shall ensure that:

The goods have been received, or the services rendered;
The prices and calculations are correct;
Any discounts to which the Council is entitled have been deducted;
The account has not previously been paid;
Sufficient budgetary provision exists; and
If excess expenditure is involved and the Council on the recommendation of the Municipal Manager or his/her delegate has approved such excess, the resolution authorising such excess expenditure shall be quoted on the voucher.
Payments requiring the special authority of the Member of the Executive Committee, shall be accompanied by the reference to the authority for such payment, quoted on the voucher submitted to the Municipal Manager or his/her delegate.
All payments due by the Council shall be made by cheque drawn upon the Council?s banking account, except that in the case of items not exceeding a prescribed limit set by Council, payment may be made from petty cash, should this method be more expedient.
All cheques drawn on the Council?s banking account shall be signed by not less than two persons authorised by the Council to do so in compliance with legal requirements or Council resolutions.
The Municipal Manager or his/her delegate shall have authority to make imprest or advances to Departmental Managers and to other officials when the Municipal Manager or his/her delegate deems this necessary, for the payment of expenses not exceeding a prescribed limit set by Council, on any one item or for the provision of change. The Municipal Manager or his/her delegate shall have the authority to determine the level of any such advance from time to time, and to make rules for the management thereof.