Transcript Legal Framework

INCA SUMMER SCHOOL 2004
REVENUE MANAGEMENT
PRESENTED BY:
CHRIS KAPP
ZADER MUNICIPAL SERVICES (PTY) LTD
ONTACT DETAILS: Tel : 044 874 7815
Fax : 044 874 7817
Cell : 082 655 1222
Email : [email protected]
REVENUE MANAGEMENT
 Legal framework (policies and by-laws)
 Budgeting
 Billing and billing administration
– Rates
– Service charges
– Sundry income
 Credit control and debt collection
 Cash management and investments
REVENUE MANAGEMENT – BUDGET
RELATED POLICIES
( Including tariff policy, rates policy debt
and credit control policy)
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Legal framework
Difficulties experienced by municipalities
Possible solutions
Financial performance
Legal Framework
The Constitution
Systems Act
Local Government: Municipal Finance Management Act
Local Government: Property Rates Act
Municipal Policies and By-Laws:
Tariffs
Credit Control and Debt Collection
Rates
Delegations
THE CONSTITUTION
 151 Status of Municipalities
– Separate sphere of government
 A municipality may govern subject to the national and
provincial legislation
 National and provincial may not compromise or
impede a municipality’s ability or right to exercise its
powers or perform its functions
 152 Objects of Local Government
– Ensure the provision of services in a
sustainable manner
THE CONSTITUTION
 153. Developmental duties of municipalities
– Municipality must:
 Structure and manage its administration, budgeting and
planning processes to give priority to the basic needs
 229. Municipality financial powers and
functions
– Municipality may impose: Rates on property and surcharges on fees for services
 If authorised by national legislation, other taxes, levies and
duties
THE SYSTEMS ACT
 4. Right and duties of municipal councils
– Municipality has a right to: Finance the affairs of the municipality by:–Charging fees for services
–Imposing surcharges on fees, rates and
other taxes, levies and duties (subject to
national legislation)
THE SYSTEMS ACT
 74 Tariff Policy
– Municipal council must implement and adopt a tariff
policy
– Must reflect the following principles:
 users of municipal services should be treated equitably
 amount individual users pay for services should be in proportion
to usage
 Poor households must have access to basic services, through:
– Tariffs that covers only operating and maintenance cost
– Special tariffs or life line tariffs
– Any other direct or indirect subsidisation
THE SYSTEMS ACT
(Tariff Policy continue)
 Must reflect the costs associated with the service
 Must be set at levels that facilitate financial
sustainability of the service
 Provision must be made for surcharge on tariffs
 Provision may be made promotion of local economic
development
 Efficient and effective use of resources must be
encouraged
 Extent of subsidisation of tariffs must be disclosed
May differentiate
THE SYSTEMS ACT
(Tariff Policy continue)
 75. By-laws to give effect to the policy
– Municipal council must adopt a by-law to give
effect to its policy
– By-law may differentiate between different
categories of ratepayers, users of services,
debtors, taxes, services and service standards
THE SYSTEMS ACT
(Credit Control and Debt Collection Policy )
 95. Customer care and management
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Establish a sound customer management system
Establish mechanism for users of services to give feedback
Users of services must be informed of the cost of services
Consumption must be verified
Consumers receive regular and accurate accounts
Create accessible mechanisms to query and verify accounts
Provide accessible mechanisms for dealing with complaints
Provide mechanisms to monitor response time
Provide accessible pay points
THE SYSTEMS ACT
(Credit Control and Debt Collection Policy )
 96 Debt collection responsibility of
municipalities
– Municipality must:
 Collect all money that is due and payable to it
 Adopt, maintain and implement a credit control and
debt collection policy
THE SYSTEMS ACT
(Credit Control and Debt Collection Policy )
 97. Contents of policy
– Policy must provide for:
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Credit control procedures and mechanisms
Debt collection procedures and mechanisms
Provision for indigent debtors
Realistic targets consistent with:
– Grap and collection ratios
– Estimates of income
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Interest on arrears
Extension of time for payment
Termination or restriction of services
Matters relating to unauthorised consumption, theft and
damages
 Other matters
THE SYSTEMS ACT
(Credit Control and Debt Collection Policy )
 98. By-laws to give effect to the policy
– Municipal council must adopt a by-law to give
effect to its policy
– By-law may differentiate between different
categories of ratepayers, users of services,
debtors, taxes, services and service standards
MUNICIPAL FINANCE
MANAGEMENT ACT
 64. Revenue management
– The Accounting Officer is responsible for the
management of revenue and must ensure that:
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The Municipality has effective revenue collection systems
Revenue is calculated monthly
Accounts are prepared monthly
Money received is promptly deposited
Internal control for debtors and revenue is in place
Interest in charged on arrears
Revenue is reconciled weekly
– The Accounting Officer must inform National Treasury of
late payments due to the municipality
MUNICIPAL FINANCE
MANAGEMENT ACT
17. Contents of the budget
– Prescribe format – setting out:
 Realistically anticipated revenue for budget year
 Expenditure for budget year
 Indicative revenue and expenditure for the following
two financial years
– Separate capital and operating budgets
– Accompanied by supporting documents
MUNICIPAL FINANCE
MANAGEMENT ACT
BUDGET RELATED POLICIES
 13. Cash management and investment
– A municipality must establish a cash
management and investment policy
 111. Supply chain management policy
– Each municipality must implement a supply
chain management policy
MUNICIPAL PROPERTY RATES ACT
 2. Powers to levy rates
– A metropolitan or local municipality may levy
rates on properties in its area
– A district municipality may levy rates on
properties in the district management area
– Rates must be subject to Section 229 of the Constitution
 Provisions of the Property Rates Act
 Rates policy
MUNICIPAL PROPERTY RATES ACT
 3. Adoption and contents of rates policy
– Rates policy takes effect on the effective date of the first
valuation prepared in terms of this Act
– A rates policy must:
 Treat persons equitably
 Determine criteria– Different rates
– Exemptions
– Grants, rebates or reductions to specific categories of owners or
category of properties
– Increases in rates
– Categories of properties or owners of properties
MUNICIPAL PROPERTY RATES ACT
– Any exemptions, rebates or reductions must comply and
be implemented in accordance with national framework
– No relief may be granted other than by way of an
exemption, a rebate or a reduction
 11. Amount due for rates
– A rate levied must be on the market value of the
property
– In the case of public service infrastructure on the market
value less 30%
– A rate levied on properties with a market value below a
prescribe valuation value may be an uniform fixed
amount
DELEGATIONS
 79. Delegations
– The Accounting Officer must : Develop an appropriate system of delegation
 Regularly review delegations
– The Accounting Officer may not delegate to
any political structure or political office
bearer any powers or duties
– Delegations must be In writing
 To a specific individual or holder of a specific post
MINISTER MFUMADI
Difficulties experienced by
municipalities
 Administrative difficulties:
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Lack of policies and by-laws
Inability to communicate policies and by-laws
Inability to administer debtors database
Inability to support indigent consumers
Number of defaulting consumers
Outdated archiving system
Limited response period
Monthly recurring rates and service charges
Lack of specialised credit control and debt collection system
Exorbitant legal costs
Lack of staff
Difficulties experienced by
municipalities
 Financial difficulties:
– Reluctance of councillors to increase
rates and service charges
– Insufficient provision for working capital
and bad debts
POSSIBLE SOLLUTION
 Political buy-in
 Data integrity
 Credit control and debt collection
POSSIBLE STRATEGIES
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Financial analysis (status quo)
Political buy-in
Community participation and communication
House-to-house survey
– Identify indigent consumers
– Gather information of consumers
– Update database
Electronic debt collection system capable to manage and control all internal
and external processes including legal actions
Electronic archiving system
System must interface with and produce a mirror image of accounting system
System must be able to distribute work to multiple users
System must have a workflow process to direct and interchange work between
credit control and debt collection staff, external contractors and departments
System must be user friendly and consumers must be encouraged to make
arrangements
Possible outsourcing
FEATURES OF A CREDIT CONTROL
AND DEBT COLLECTION SYSTEM
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Interface with accounting system
Handle large number of defaulting consumers
Workflow
Electronic Archiving
Telephone processes
Reminder & Final Demand processes
Dis- and Reconnection processes
 Legal Process up to Judgement
 Account queries
 Indigent applications and management
 Data Filtering
 Parameter driven system
FEATURES OF A CREDIT CONTROL
AND DEBT COLLECTION SYSTEM
 Management of :–
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Arrangements
Estates
Insolvencies
Administrations
Account Queries
Contractors
Attorneys
 Electronic Data Exchange
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Arrears Extracts
Daily Payments Processing
Municipal Costs
Handovers
FINANCIAL PERFORMANCE
W e i ght a nd s c or e a na l y s i s
20.0%
18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Cover age of STPLTL Shor t - t er m debt
Debt or s t est s
Cr edit or s t est
Capit alCost Bur den
St af f cost
Gr an t depen den cy
Cash f un ded
Salar y an d bulk
pur chases cover age
Net cur r en t asset s
Lon g- t er m asset s
ZADER MUNICIPAL SERVICES
PRODUCTS
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Financial analysis and strategies
Policies and by-laws
Performance management systems
Forecasting models
Zeus credit control and debt collection system
Turnaround strategies
Assistance with budgets, financial statements and
business processes