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Revised MFM Bill

Revised MFM Bill. Portfolio and Select Committees of Finance 29 July 2002. Progress since Hearings. Extensive revision of Bill, taking account of views of members at hearings Better consistency with constitution Massive undertaking and also complex

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Revised MFM Bill

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  1. Revised MFM Bill Portfolio and Select Committees of Finance 29 July 2002

  2. Progress since Hearings • Extensive revision of Bill, taking account of views of members at hearings • Better consistency with constitution • Massive undertaking and also complex • Availability of legal drafter complicates re-drafting • More consistency and references to Systems Act • Chapters 1-8 completed with a legally refined draft • Chapters 10, 12 and 13 available on Wed • Difficult chapters: Ch 9 on entities, Ch 11 on financial emergency (first drafts only)

  3. Proposed Programme • Focus on clause-by-clause wording this week • Aim to finish wording of all chapters this week • BUT ch 9 (entities) and 11 may need Aug 13 meeting • Formal consideration of Bill (cl-by-cl) thereafter • Proposals for this week • Do chapter 1(definitions) at the end • Mon: Ch 2 (NT), 3 (bank acts), 5 (debt), 8(tr office) • Tues: Ch 4 (budget), 4A (co-op gov in budgeting), ch 7 (Ac Of) • Wed: Ch 7 (cont), Ch 10 (fin reports), 12 (treas matters) • Thursday: Ch 11 on financial emergencies • Friday: Ch 9 on mun entities

  4. Functions • Municipality responsible to its community • Council must oversee its exec and finances • Plenary local muni can do so via DC • Pleanary DC can do so via provincial legis • Council to set up public accts committee • BUT cannot be legislated • Done thru guidelines issued by NT

  5. Roles within Municipality • Council • Ordinary councillor attends meetings, votes to approve policy for the Council (IDP, Budget, tariffs) • Meetings of Council 4-12 times a year • Must play an oversight role over its Executive • Meetings of Council committees (4-12 a year) • Bigger role is a political role (with community) • Speaker • Presides over council meetings • Ensures council committees meet and report to Council • Enforces Code of Conduct • Is not the head of municipality • Does not normally report to provincial MEC or legislature

  6. Roles within Municipality • Mayor and Executive/Mayoral committee member • Mayor is head of the municipality • Responsible for proposing policy (IDP, budget, tariffs) • Responsible for outcomes • Responsible for guiding and supervising administration • Must ensure municipal manager and top managers are employed, and have performance contracts • Mayor is the link to the provincial sphere • Reports to MEC when there is potential non-compliance anticipated, or has occurred • Mayor may be called by provincial legislature • Mun manager responsible for implementation and outputs

  7. Role of Province • Roles for legis, MEC for LG and Finance • Often joint role for prov LG and treasury - one lead dept only in all cases • MEC for LG • Must ensure muni follows all processes • IDP and its annual review • Budget-related policy processes (rates, tariffs) • Must ensure municipality meets deadlines • Tabling and approval of budget • Submission of financial statements on time

  8. Role of Province • MEC for LG • Must ensure muni takes appropriate action • Post-FY accountability (public accts comm in muni) • Unauthorised expenditure etc • Monitoring councillors and mayors • Disciplinary code for councillors enforced • Councillor remuneration within national framework (Goldstone Commission and Rem of PO Act) • Imposition of section 139 and fin watch/emergency

  9. Role of Province • MEC for Finance • Must assist and oversee budget proposals (credibility test, priority tests) before tabling and before approval • Must assess capital budgets and plans • Assist in facilitating co-ordination between national/provincial entities within municipality • Enforcement of MFM Bill • Monitoring wrt in-year budget reporting by province (but work with LG prov dept)

  10. Province legislature • Provincial legislature • Only considers mun financial statements after the AG reports on how munis have dealt with the audit report • May deal with plenary councils in more detail • Public Accts or LG committee? • Non-fin part of annual reports

  11. Function of National • S216 allows for an enforcement role for NT • NT will delegate to provinces • Budget assessment, Co-ord IDPs with other sphere’s capex, Compliance with MFM Bill to Prov Treasury • Most other roles to MEC for local govt • No other direct role for national govt • Setting policy and frameworks • Procurement, banking arrangements, investment, grants etc • Possible role under fin emergency (MoF)

  12. Chapter 2 • Clause 5(1) • situates power of NT to ch 3, 13 and PFMA • co-operative govt • Clause 5(2) and (3) • changes take acct of Constitution (eg capacity, power to stop funds) • Clause 5A on capacity building (MUST) • Delegations limited to NT as dept or provincial dept (P treasury or LG dept only)

  13. Chapter 3: Mun Revenue • Clauses 7 and 8 • primary accounts (rename accredited accts) • less prescriptive approach • Clause 9: Bank acct details to AG • Better controls within muni (cl 8 and 10) • clause 10 no change • Clause 11: small tech changes only • Cl 12 changes on info from banks and on investments • Clause 13: Definition of municipal service • Clause 14: Minority interest acquisitions (minor change to take account of no subsidiary approach) • Issue of REDs

  14. Cl 13: Defn of municipal service • not currently defined in Constitution, Systems Act, or MFM Bill • Difficult to define: • Impacts on what councils may do (leads to broader definition) • Impacts on what councils must do (leads to narrower definition) • May impact on division of revenue per section 214 (2)(d) • One proposed definition: • A service the municipality is actually providing, and which is included in Part B of Schedules 4 or 5

  15. Ch 13: Minimum essential municipal service • What service is essential varies by community • e.g. solid waste and storm drainage essential in urban areas, often not provided in rural areas • What assets are needed varies with municipality • E.g. even if electricity is a “minimum essential service,” a particular power plant may not be • Because of these varying circumstances, determination of necessity is left to council

  16. Ch 13: Minimum essential municipal service (continued) • If asset is necessary for minimum essential service: • Council may not dispose of asset • Council may not pledge asset without indicating how the asset will be protected • Creditor may not impede continued service • May not be liquidated in terms of Chapter 11

  17. Cl 13: Basic municipal service • Defined in Municipal Systems Act • Similar wording to “minimum essential municipal service” per MFM Bill, but used differently: • Aspirational: IDP must seek to provide “basic municipal services,” see 26(b) • MSA sometimes qualifies, e.g. section 73(1)(c) “minimum level of basic municipal services” • MSA also uses other terms: • “Basic services” see 74(2)(c) • “Basic levels of service” see 74(2)(c)(ii) • “Municipal services,” see 4(d), (f); 5(1)(g); 6(2)(e); 11(2)(f),(g); 16(1)(a);55(1)(o);Chapter 8; 95; 103(a)

  18. Ch 13 on municipal service • Conclusions on definition of mun service • Must always consider definition and context in which term is used in the Bill • No one term works for all purposes • There is intended to be a difference between “basic municipal services,” per MSA and “minimum essential municipal services” per MFM Bill

  19. Chapter 8 • No change to budget and treasury office

  20. Ch 4: Budget Process • Major changes to original bill • Attempts to co-ordinate various processes • Annual review of IDP • Budget-related policies • Setting of rates and tariffs • Clause 17(3)(e)-(f) and clause 21 • docs to be tabled with budget • mayor must announce schedule for various processes 10 months before start of financial year • All consult processes ito Ch 4 of Systems

  21. Budget process (ch 4) • Clause 15 and 16 are standard • Clause 17 on contents and docs • for annual budget • with annual budget • Clause 18: Funding of budget (standard) • Clause 19: capex (new) • Clause 20 on formats and other assumptions to be prescribed • Clause 21 on budget process • Consultations before and after tabling • Before an internal process led by mayor • After an external process led by Council • Consultations ito Mun Systems Act (ch 4)

  22. MFM Bill - Chapter 5 Basic borrowing rules: • long term debt for plant, property, equipment • short term debt for cash flow management • no guarantees by national or provincial • guarantees by municipal of entities treated as debt • pledges of assets and revenues OK, but Council to apply its mind to whether assets are needed for “minimum essential municipal services”

  23. MFM Bill - Chapter 5 (cont’d) • Conditions for long term and short term split out per Committee request, see section 26 • Both LT and ST borrowing in rands only • Short term borrowing within prudential limits or necessary for emergency • Long term must be approved by council after notice to the community, disseminated per Municipal Systems Act requirements • Security may be given, as per section 27 • Disclosure required per section 28 (regulations now being prepared)

  24. Budget process • Clauses 23A, 23 B: passage or failure to pass a budget • clause 23C: adjustments budget • Various clauses on unauthorised expenditure etc

  25. Chapter 4A • Co-operative governance and budgeting • Address Division of Revenue issues • Effective planning through timely notices of grants • Stopping of funds sec 216(2) • Co-ordination of regulatory tariff setting bodies and timely announcing • May need to repeal tariff setting powers in other legislation • Disputes resolution by mediation • In assigning must reflect multi year implications including consultation with the FFC

  26. Chapter 6 • After public comment and committee deliberations agreed to delete chapter on Councillor for Financial matters

  27. Chapter 7 • Duties of MM • MM is accountable and is the accounting officer • Fiduciary responsibilities • Co-operative governance and budgeting • Division of Revenue • Effective planning through timely notices of grants • Stopping of funds sec 216(2) • Co-ordination of regulatory tariff setting bodies and timely announcing • Disputes resolution by mediation • In assigning must reflect multi year implications including consultation with the FFC

  28. Chapter 4A • Co-operative governance and budgeting • Division of Revenue • Effective planning through timely notices of grants • Stopping of funds sec 216(2) • Co-ordination of regulatory tariff setting bodies and timely announcing • Disputes resolution by mediation • In assigning must reflect multi year implications including consultation with the FFC

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