1. Presented by: Ndanduleni Makhari 04 October 2016
Revenue Value Chain Effective monitoring mechanism to ensure the revenue raising mechanism to support the budget are being effectively implemented

2. Table of Content 1. Legislative Imperative 2. Item Segment : Revenue
* Constitution
* Systems Act
* MFMA
* Property Rates Act
2. Item Segment : Revenue
* Definition
* Revenue Exchange and Non Exchange
* Revenue Categories
3. Effective Monitoring of Revenue
4. Responsible Persons
5. Conclusion

3. Legislative Imperatives - Constitution
Section Status of municipalities
(3) A municipality has the right to govern, on its own initiative, the local government affairs of its community, subject to national
and provincial legislation, as provided for in the Constitution
Section Objects of local government
(1) The objects of local government are –
(a) to provide democratic and accountable government for local communities;
(b) to ensure the provision of services to communities in a sustainable manner;
(c) to promote social and economic development
(d) to promote safe and healthy environment; and
(e) to encourage the involvement of communities and community organisations in the matter of local government.
(3) A municipality must strive, within its financial and administrative capacity, to achieve the objects set out in subsection (1)
Section Developmental duties of municipalities
A municipality must –
(a) structure and manage its administration and budgeting and planning process to give priority to the basic needs of the community and to promote social and economic development of the community
Section 155: Establishment of municipalities
The local government matters as set out in section 155 (6) (a) and (7) are as per Schedule 4 – Part B and Schedule 5 – Part B
Section 229 ; Municipal fiscal powers and functions
(1) Subject to subsection …………….., a municipality may impose –
(a) rates on property and surcharges on fees for services provided by or on behalf of the municipality

4. Legislative Imperatives – Systems Act
Section Executive and legislative authority
(1) The executive and legislative authority of a municipality is exercised by the council of the municipality
(3) A municipality exercises its legislative or executive authority by -
(h) preparing, approving and implementing its budgets;
(i) imposing and recovering rates, taxes, levies, duties, service fees and surcharges on fees, including setting and implementing tariff, rates and tax and debt collection policies;
(j) monitoring the impact and effectiveness of any services, policies, programmes or plans
Section Adoption of integrated development plans
(1) Each municipal council must, within a prescribed period after the start of its elected term, adopt a single, inclusive and strategic plan for the development of the municipality which –
(b) aligns the resources and capacity of the municipality with the implementation of the plan;

5. Legislative Imperatives - MFMA
Funding of expenditure
18. (1) An annual budget may only be funded from—
(a) realistically anticipated revenues to be collected;
(b) cash-backed accumulated funds from previous years’ surpluses not committed
for other purposes; and
(c) borrowed funds, but only for the capital budget referred to in section 17(2).
(2) Revenue projections in the budget must be realistic, taking into account—
(a) projected revenue for the current year based on collection levels to date;
Budget processes and related matters
(1) The mayor of a municipality must—
(a) provide general political guidance over the budget process and the priorities that must guide the
preparation of a budget
(3) The mayor must ensure—
(a) that the revenue and expenditure projections for each month and the service delivery targets and performance indicators for each quarter, as set out in the service delivery and budget implementation plan, are made public no later than 14 days after the approval of the service delivery and budget implementation plan; and

6. Legislative Imperatives - Property Rates Act
CHAPTER RATING
Part 2: Levying of rates
Rates to be levied on all rateable property
CHAPTER 3 : LIABILITY FOR RATES
Property rates payable by owners
* Accounts to be furnished
27. (1) A municipality must furnish each person liable for the payment of rate with a written account specifying the amount due, date, market value and amount of discount and additional rate if any
(2) A person is liable for payment of rate whether or not that person has received a written account

7. Legislative Imperatives – Property Rates Act cont’d….
Recovery of rates in arrears from tenants and occupiers
28. (1) If an amount due for rates levied in respect of a property is unpaid by the owner of the property after the date determined in term of section 26(2),the municipality may recover the amount in whole or in part from a tenant or occupier of the property, despite any contractual obligation to the contrary on the tenant or occupier.
The municipality may recover an amount only after the municipality has served a written notice on the tenant or occupier.
Recovery of rates from agents
29. (1) A municipality may, despite the Estate Agents Affairs Act, (Act No of 1976), recover the amount due for rates on a property in whole or in part from the agent of the owner, if this is more convenient for the municipality.

8. Item Segment: Revenue What is Revenue???
In general usage, revenue is income received by an organization in the form of cash or cash equivalents. In more formal usage, revenue is a calculation or estimation of periodic income based on a particular standard accounting practice. There are two common accounting methods, cash basis accounting and accrual basis accounting which does not use the same process for measuring revenue In accounting, Revenue is defined as the gross inflow of economic benefits of service potential during the reporting period when those inflows result in an increase in net assets, other than increases relating to contributions from owners. We have Exchange and Non-Exchange revenue

9. Item Segment: Revenue - Exchange and Non Exchange

10. Item Segment: Revenue Categories cont’d….

11. Effective Monitoring of Revenue
Systems Act : Chapter 9 : Credit Control and Debt Collection (ss )
95 – Customer care and management
In relation to the levying of rates and other taxes by a municipality and the charging of fees for municipality services, a
Establish a sound customer management system that aims to create a positive and reciprocal relationship between persons liable for these payment and the municipality, and where applicable, a service provider;
(b) Establish mechanism for users of services and rates payers to give feedback to the community or other
service provider regarding the quality of the services and the performance of the service provider;
(c) Takes reasonable steps to ensure that users of services are informed of the costs involved in service fees, and the manner in which monies raised from the service are utilised;
(d) Where the consumption of services has to be measured, take reasonable steps to ensure that the consumption by individual users of services is measured through accurate and verifiable metering systems;
(e) Ensure that persons liable for payments, receive regular and accurate accounts that indicate the basis for calculating the amounts due;
(f) Provide accessible mechanisms for those persons to query or verify accounts and metered consumption, and appeal procedures which allow such persons to receive prompt redress for inaccurate accounts

12. Effective Monitoring of Revenue
Systems Act : Chapter 9 : Credit Control and Debt Collection (ss )
95 – Customer care and management
(g) Provides accessible mechanisms for dealing with complaints from such persons, together with prompt replies and corrective action by the municipality;
(h) Provides mechanisms to monitor the response time and efficiency in complying with paragraph (g); and
Provide accessible pay points and other mechanisms for settling accounts or for making pre-payments for services
96 Debt collection responsibility of municipalities
A municipality –
(a) Must collect all money that is due and payable to it, subject to this Act and any other applicable legislation; and
(b) For this purpose, must adopt, maintain and implement a credit control and debt collection policy which is consistent with its rates and tariff policies and complies with the provisions of this Act

13. Effective Monitoring of Revenue cont’d…
97 Contents of Policy
(1) A credit control and debt collection policy must provide for -
(a) credit control procedures and mechanisms;
(b) debt collection procedures and mechanisms;
(c) provision for indigent debtors that is consistent with its rates and tariff policies and any national policy on indigents;
(d) realistic targets consistent with -
(i) general recognised accounting practices and collection ratios, and
(ii) the estimates of income set in the budget less an acceptable provision for bad debts;
(e) interest on arrears, where appropriate;
(f) extensions of time for payment of accounts;
(g) termination of services or the restriction of the provision of services when payments are in arrears;
(h) matters relating to unauthorised consumption of services, theft and damages; and
(i) any other matters that may be prescribed by regulation in terms of section 104.
(2) A credit control and debt collection policy may differentiate between different categories of ratepayers, users of services, debtors, taxes, services, service standards and other matters as long as the differentiation does not amount to unfair discrimination.

14. Effective Monitoring Mechanism of Revenue cont’d…
101 Municipality’s right of access to premises The occupier of premises in a municipality must give an authorised representative of the municipality or of a service provider access at all reasonable hours to the premises in order to read, inspect, install or repair any meter or service connection for reticulation, or to disconnect, stop or restrict the provision of any service Accounts (1) A municipality may - (a) consolidate any separate accounts of persons liable for payments to the municipality; (b) credit a payment by such a person against any account of that person; and (c) implement any of the debt collection and credit control measures provided for in this Chapter in relation to any arrears on any of the accounts of such a person. (2) Subsection (1) does not apply where there is a dispute between the municipality and a person referred to in that subsection concerning any specific amount claimed by the municipality from that person. (3) A municipality must provide an owner of a property in its jurisdiction with copies of accounts sent to the occupier of the property for municipal services supplied to such a property if the owner requests such accounts in writing from the municipality concerned.

15. Effective Monitoring Mechanism of Revenue cont’d…
103. Agreements with employers A municipality may - (a) with the consent of a person liable to the municipality for the payment of rates or other taxes, or fees for municipal services, enter into an agreement with that person's employer to deduct from the salary or wages of that person - (i) any outstanding amounts due by that person to the municipality; or (ii) such regular monthly amounts as may be agreed; and (b) provide special incentives for - (i) employers to enter into such agreements; and (ii) employees to consent to such agreements.

16. Effective Monitoring Mechanism of Revenue cont’d…
118. Restraint on transfer of property (1) A registrar of deeds may not register the transfer of property except on production to that registrar of deeds of a prescribed certificate- (a) issued by the municipality or municipalities in which that property is situated; and (b) which certifies that all amounts that became due in connection with that property for municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties during the two years preceding the date of application for the certificate have been fully paid. (2) In the case of the transfer of property by a trustee of an insolvent estate, the provisions of this section are subject to section 89 of the Insolvency Act, 1936 (Act No. 24 of 1936). (3) An amount due for municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties is a charge upon the property in connection with which the amount is owing and enjoys preference over any mortgage bond registered against the property.

17. Effective Monitoring Mechanism of Revenue cont’d…
Indigent
Development of Indigent Policy
Registration of indigent households and update of indigent register
Free basic services allocation and management support.
Tariff Policy
Settings tariffs which will balance the economic viability of continued service delivery; and
Determining appropriate service levels.

18. Whose responsibility is it? MFMA
Revenue management 64. (1) The accounting officer of a municipality is responsible for the management of the revenue of the municipality. (2) The accounting officer must for the purposes of subsection (1) take all reasonable steps to ensure— (a) that the municipality has effective revenue collection systems consistent with section 95 of the Municipal Systems Act and the municipality’s credit control and debt collection policy; (b) that revenue due to the municipality is calculated on a monthly basis; (c) that accounts for municipal tax and charges for municipal services are prepared on a monthly basis, or less often as may be prescribed where monthly accounts are uneconomical; (d) that all money received is promptly deposited in accordance with this Act into the municipality’s primary and other bank accounts;

19. Whose responsibility is it? MFMA cont’d….
(e) that the municipality has and maintains a management, accounting and information system which— (i) recognises revenue when it is earned; (ii) accounts for debtors; and (iii) accounts for receipts of revenue; (f) that the municipality has and maintains a system of internal control in respect of debtors and revenue, as may be prescribed; (g) that the municipality charges interest on arrears, except where the council has granted exemptions in accordance with its budget-related policies and within a prescribed framework; and (h) that all revenue received by the municipality, including revenue received by any collecting agent on its behalf, is reconciled at least on a weekly basis.

20. Whose responsibility is it? MFMA cont’d….
64 (3) The accounting officer must immediately inform the National Treasury of any
payments due by an organ of state to the municipality in respect of municipal tax or for
municipal services, if such payments are regularly in arrears for periods of more than 30
days.
78. SENIOR MANAGERS AND OTHER OFFICIALS OF MUNICIPALITIES
(1) Each senior manager of a municipality and each official of a municipality exercising financial management responsibilities must take all reasonable steps within their respective areas of responsibility to ensure—
(d) that all revenue due to the municipality is collected;
CHAPTER 9: MUNICIPAL BUDGET AND TREASURY OFFICE
81 Role of chief financial officer
(1) The chief financial officer of a municipality—
(e) must perform such budgeting, accounting, analysis, financial reporting, cash management, debt management, supply chain management, financial management, review and other duties as may in terms of section 79 be delegated by the accounting officer to the chief financial officer.

21. Whose responsibility is it? MFMA cont’d….
CHAPTER 7
RESPONSIBILITIES OF MAYORS
General responsibilities
52. The mayor of a municipality—
(a) must provide general political guidance over the fiscal and financial affairs of the municipality;
(b) in providing such general political guidance, may monitor and, to the extent provided in this Act, oversee the exercise of responsibilities assigned in terms of this Act to the accounting officer and the chief financial officer, but may not
interfere in the exercise of those responsibilities;
(c) must take all reasonable steps to ensure that the municipality performs its constitutional and statutory functions within the limits of the municipality’s approved budget;
(d) must, within 30 days of the end of each quarter, submit a report to the council on the implementation of the budget and the financial state of affairs of the municipality; and
(e) Must exercise the other powers and perform the other duties assigned to the mayor in terms of this Act or delegated by the council to the mayor

22. Whose responsibility is it? MFMA cont’d….
Budget processes and related matters 53. (1) The mayor of a municipality must— (a) provide general political guidance over the budget process and the priorities that must guide the preparation of a budget; Budgetary control and early identification of financial problems 54. (1) On receipt of a statement or report submitted by the accounting officer of the municipality in terms of section 71 or 72, the mayor must— (a) consider the statement or report; (b) check whether the municipality’s approved budget is implemented in accordance with the service delivery and budget implementation plan; (c) consider and, if necessary, make any revisions to the service delivery and budget implementation plan, provided that revisions to the service delivery targets and performance indicators in the plan may only be made with the approval of the council following approval of an adjustments budget; (d) issue any appropriate instructions to the accounting officer to ensure— (i) that the budget is implemented in accordance with the service delivery and budget implementation plan; and (ii) that spending of funds and revenue collection proceed in accordance with the budget; (e) identify any financial problems facing the municipality, including any emerging or impending financial problems; and (f) in the case of a section 72 report, submit the report to the council by 31January of each year.

23. Conclusion
Municipalities are required to provide services to the community that they serve – for this, they need a wide range of resources, including financial resources. Finance impact heavily on the municipality’s ability to deliver services effectively and efficiently. Municipalities are responsible in ensuring they have access to financial resources and that they use these resources responsibly. Good financial practices are essential to a municipality sustainability. If a municipality’s financial management is disorganised; its resources can be misdirected and abused, which in turn results in poor service delivery.

24. THANK YOU NDO LIVHUWA