Structuring Your Portfolio of Evidence File

Unit Standard: 116345

In order to assist you we have listed each activity by page.

Remove these documents and place them in your POE file.

As you will see the content of each section is listed and we have also given you some tips on
what should be contained in the section.

Please read the activity question carefully and make sure that the evidence you select is
what is asked for. Failure to do so will result in the assessor returning your POE to you for
additional information.

When submitting evidence, please make sure that you write a short report as to why you
have selected this evidence so that the assessor can see the evidence in context.

Please ensure that the evidence supplied is your own work

The Structure of the Assessment

The assessment of this unit standard will take place in the form of formative and summative
assessments.

Formative assessments as well as preparation towards the summative assessment should

be conducted during the contact time in class.

Assessment Criteria
In assessing submitted work, the following will carry weight:
 Originality of the work presented;
 Knowledge of the preparation and analysis of municipal financial reports;
 Insight into the application of municipal financial reports;
 Ability to analyse identified problems and identify possible solutions;
 Comprehension of the subject content; and

National Treasury: PoE Unit Standard 116345 1

  Ability to organise assignment content in a logical and structured manner.
Assessment Methods/Strategies
The assessment of this module will be conducted in a form of formative and summative
assessments. Formative assessments comprise of activities to be conducted in class as well
as a presentation to be presented during the last day of facilitation. The summative
assessment comprises of the submission of a Portfolio of Evidence by each learner on the
activities included in the manual.

NB: Please note that although formative assessment will take place in class when you are
working with your fellow learners, it is important that you ensure that you are an active part
of the discussion or activity.

You will be required to include your notes in your POE. It will also be advantageous for you
to review and add to your notes before placing them in your POE. It is your responsibility to
prove that you are competent against the unit standard

National Treasury: PoE Unit Standard 116345 2

Divider 1:

Section 1: Background Information

1. Your CV

2. A Certified Copy of Your ID

3. Your Organisational Profile

NB: This refers to a brief overview of your council and its main focus regarding
products / services.

4. Departmental organagram
NB: Your departmental organagram enables the assessor to see where you fit into
the municipality. Highlight your position in the department.

If you do not work in the municipal finance department but serve on a related
committee, then indicate the portfolio or section in which you serve.

5. Your Job Profile

6. Your motivation for completing this programme

National Treasury: PoE Unit Standard 116345 3

Divider 2:

Section 2: Unit Standards

This POE relates to Unit Standard 116345

Municipal Budgeting and Implementation

National Treasury: PoE Unit Standard 116345 4

UNIT STANDARD 116345
All qualifications and unit standards registered on the National
Qualifications Framework are public property. Thus the only
payment that can be made for them is for service and
reproduction. It is illegal to sell this material for profit. If the
material is reproduced or quoted, the South African Qualifications
Authority (SAQA) should be acknowledged as the source.

SOUTH AFRICAN QUALIFICATIONS AUTHORITY

REGISTERED UNIT STANDARD:
Apply the principles of budgeting within a municipality

SAQA US ID UNIT STANDARD TITLE

116345 Apply the principles of budgeting within a municipality
ORIGINATOR REGISTERING PROVIDER
SGB Public Administration and
Management
FIELD SUBFIELD
Field 03 - Business, Commerce and Public Administration
Management Studies
ABET BAND UNIT STANDARD NQF LEVEL CREDITS
TYPE
Undefined Regular Level 5 15
REGISTRATION REGISTRATION REGISTRATION SAQA
STATUS START DATE END DATE DECISION
NUMBER
Reregistered 2007-09-18 2010-09-18 SAQA 0160/05
LAST DATE FOR ENROLMENT LAST DATE FOR ACHIEVEMENT
2011-09-18 2014-09-18
This unit standard does not replace any other unit standard and is not replaced by
any other unit standard.

PURPOSE OF THE UNIT STANDARD

This Unit Standard is intended for practitioners at local government who are
involved in municipal policy decision-making and strategic planning. Learners who
are required to advise on the legislative mandate of municipalities from a provincial
or national government perspective will also benefit from this Unit Standard.

The Unit Standard will contribute to social and economic transformation by

equipping municipal practitioners with skills in budgeting which could translate into
better use of resources and improved delivery services.

National Treasury: PoE Unit Standard 116345 5

 The qualifying learner will be able to:
 Explain the various approaches to budgeting within their organisation
 Ensure the strategic objectives of their organisation are achieved.
 Contribute to the efficient allocation of resources at municipalities
 Ensure that municipal funds are used effectively and efficiently.

LEARNING ASSUMED TO BE IN PLACE AND RECOGNITION OF PRIOR

LEARNING
It is assumed that Learners are competent in:
Communication at Level 4.
 Mathematical Literacy at Level 4.
 Accountancy at Level 4.
 Economics at Level 4.

UNIT STANDARD RANGE

Principles of Public Expenditure Management include:
Allocative Efficiency, Fiscal Discipline, Operational Efficiency

The components of the budgeting system include the processes of:

Planning, Budgeting, Implementation, Monitoring and Evaluation

The Key Stages in the budgeting process include:

Policy Prioritisation, Applying Fiscal Discipline, Financial Planning, Drawing up the
budget document, Implementing the budget, Financial Management.

The Relevant Legislation includes:

The 1996 Constitution (Act 108 of 1996), The Municipal Systems Act (Act 32 of
2000). The Municipal Finance Management Act (Act 56 of 2003)

Budget Formats include:

Line Items budgets, Programme Budgets, Performance Budgets

Other Budgeting Terms include:

Strategic outcomes, Outputs, Activities, Inputs, Measurable Performance
Objectives

Approaches to Budgeting include:

Incremental Budgeting, Zero based budgeting, Programme Budgeting and
Performance Budgeting.

Specific Outcomes and Assessment Criteria:

SPECIFIC OUTCOME 1
Demonstrate an awareness of the role of a budget in the municipal context.
ASSESSMENT CRITERIA
ASSESSMENT CRITERION 1
The term `budgeting` is defined within the context of a municipality.
ASSESSMENT CRITERION 2
The aim of budgeting is explained in the context of improving service delivery
within a municipality.

ASSESSMENT CRITERION 3

National Treasury: PoE Unit Standard 116345 6

 The importance of the budget is described in terms of the efficient allocation of
resources within a municipality.

ASSESSMENT CRITERION 4
The relationships between the components of a budgeting and service delivery
system are identified within a municipality.

ASSESSMENT CRITERION 5
Key stages within the budgeting process are recognised and discussed in a
municipal context.

SPECIFIC OUTCOME 2
Differentiate between formats of budgets used in a municipality.

ASSESSMENT CRITERIA
ASSESSMENT CRITERION 1
A range of budget formats is discussed in terms of their advantages and
disadvantages for a municipality.

ASSESSMENT CRITERION 2
The various formats of budgets are compared to each other.

ASSESSMENT CRITERION 3
The existing practices within a municipality are identified with respect to budget
formats and a reason given for why a particular format might have been chosen.

SPECIFIC OUTCOME 3
Evaluate a municipal budgeting system.

ASSESSMENT CRITERIA
ASSESSMENT CRITERION 1
Recommendations are made for improving the format of a municipal budget.

ASSESSMENT CRITERION 2
Recommendations are identified for improving the approach to preparing a
municipal budget.

ASSESSMENT CRITERION 3
Different approaches to preparing an annual budget are compared and evaluated
in the municipal context and conclusion drawn as to the most effective approach.

ASSESSMENT CRITERION 4
The impact of human aspects in budgetary control processes is recognised in the
municipal context and explained with examples.

SPECIFIC OUTCOME 4
Contribute to preparing a municipal budget that reflects an integrated development
plan.

ASSESSMENT CRITERIA
ASSESSMENT CRITERION 1

National Treasury: PoE Unit Standard 116345 7

 The integrated development plan, sector plans and municipal budget are explained
in terms of their relationship to each other in a budget.

ASSESSMENT CRITERION 2
A schedule for integrated development planning and municipal budget processes
is developed that ensures the integration of these processes.

ASSESSMENT CRITERION 3
The role of measurable performance objectives is demonstrated for integrating
IDP, budgeting, performance management and performance auditing.

ASSESSMENT CRITERION 4
A budget for an IDP is estimated based on cost information.

SPECIFIC OUTCOME 5
Differentiate between approaches to preparing a municipal budget.

ASSESSMENT CRITERIA
ASSESSMENT CRITERION 1
Different approaches are identified for preparing a municipal budget.

ASSESSMENT CRITERION 2
The advantages and disadvantages of each approach to preparing municipal
budgets are critically discussed within the context of a municipality.

ASSESSMENT CRITERION 3
The current approach to budgeting at a municipality are evaluated in terms of their
strengths and weaknesses.

ASSESSMENT CRITERION 4
A choice of the most suitable approach to budgeting is identified given the
legislative requirements.

UNIT STANDARD ACCREDITATION AND MODERATION OPTIONS

 An individual wishing to be assessed (including through RPL) against this
Unit Standard may apply to an assessment agency, assessor or provider
institution accredited by the relevant ETQA, or an ETQA that has a
Memorandum of Understanding with the relevant ETQA.
 Anyone assessing a learner against this Unit Standard must be registered
as an assessor with the relevant ETQA, or an ETQA that has a
Memorandum of Understanding with the relevant ETQA.
 Any institution offering learning that will enable achievement of this Unit
Standard or assessing this Unit Standard must be accredited as a provider
with the relevant ETQA, or an ETQA that has a Memorandum of
Understanding with the relevant ETQA.
 Moderation of assessment will be conducted by the relevant ETQA at its
discretion.

UNIT STANDARD ESSENTIAL EMBEDDED KNOWLEDGE

 The role budgeting plays in promoting the efficient allocation of resources
within a municipality.

National Treasury: PoE Unit Standard 116345 8

  Various budget formations.
 How strategic planning integrates with budgeting.
 Legislative requirements for municipal budgeting
 The link between budgeting and service delivery.

UNIT STANDARD DEVELOPMENTAL OUTCOME

N/A

UNIT STANDARD LINKAGES

N/A

Critical Cross-field Outcomes (CCFO):

UNIT STANDARD CCFO IDENTIFYING

Identify and solve problems using critical and creative thinking processes, e.g. by
trying to find the best possible budget format and processes.

UNIT STANDARD CCFO WORKING

Work effectively with others as a member of a team, group, organization or
community, e.g. through communicating with others regarding legislative issues
and fostering team commitment amongst the staff involved in compiling and
implementing a budget.

UNIT STANDARD CCFO ORGANISING

Organise and manage oneself and one’s activities responsibly and effectively, e.g.
through the demonstration of ethical and moral principles in all budgeting
processes.

UNIT STANDARD CCFO COLLECTING

Collect, analyse, organise and critically evaluate information, e.g. through assuring
that data used in a budget is accurate.

UNIT STANDARD CCFO COMMUNICATING

Communicate effectively using visual, mathematical and/or language skills in the
modes of oral and/or written persuasion, e.g. through advising and motivating
others with regard to risk management options.

UNIT STANDARD CCFO SCIENCE

Use Science and technology effectively and critically, showing responsibility to the
environment and health of others, e.g. use appropriate computer software for data
capturing and document storage purposes.

UNIT STANDARD CCFO DEMONSTRATING

Demonstrate an understanding of the world as a set of interrelated systems by
recognising that problem-solving contexts do not exist in isolation, e.g. in keeping
in mind that risk management effects the well being of not only the municipality but
the country as a whole.

National Treasury: PoE Unit Standard 116345 9

 UNIT STANDARD CCFO CONTRIBUTING
Participating as responsible citizens in the life of local, national and global
communities, e.g. acting as custodian of ethical behaviour and maintaining a high
level of commitment to providing effective risk management policies and practices.

QUALIFICATIONS UTILISING THIS UNIT STANDARD:

END
ID QUALIFICATION TITLE LEVEL STATUS
DATE
National Certificate: 2011-04-
Core 60529 Level 5 Registered
Municipal Governance 09
National Diploma: Public
2011-02-
Core 49554 Finance Management and Level 5 Reregistered
26
Administration
Certificate: Municipal 2010-09-
Core 48965 Level 6 Reregistered
Financial Management 18
Further Education and
2008-11-
Elective 50081 Training Certificate: Level 4 Registered
30
Leadership Development

All qualifications and unit standards registered on the National Qualifications

Framework are public property. Thus the only payment that can be made for them is
for service and reproduction. It is illegal to sell this material for profit. If the material is
reproduced or quoted, the South African Qualifications Authority (SAQA) should be
acknowledged as the source.

National Treasury: PoE Unit Standard 116345 10

Divider 3

Section 3: Formative Assignments

In this programme formative and summative assignments are integrated. For clarity we have
listed them in Section 4 of this POE Guide.

We would suggest that you include notes taken in class during your group and individual
activities in this section.

This will demonstrate to your assessor that you were an active participant in the course
activities and that you understand the concepts and material

National Treasury: PoE Unit Standard 116345 11

Divider 4

Section 4: Collected Evidence

We require you to submit evidence, for the following activities to demonstrate that you are
able to effectively demonstrate the outcomes of the Unit Standards as indicated by this POE.

This module is assessed by one comprehensive individual assignment.

You must make and keep a copy of your individual assignment before submitting your POE
to your provider.

Please note that there is a separate page for each evidence activity

We suggest that you put a divider between each assignment

Please ensure that you have completed all the activities as listed below

National Treasury: PoE Unit Standard 116345 12

 Divider 4.1 Assignments

Place a divider between each of the 5 sections

Assignments based on Chapter 2 (total 56 marks for this section)

We would suggest that each question is answered on a separate page. Clearly mark each
page

ACTIVITY NO 2.1:

Evidence Activity Marks allocated Is Evidence

for this Present in
assignment File
Activity 2.1
Provide a general definition of “budgeting” and explain
how it contributes to the efficient allocation of scarce 5
resources

Budgeting is the process of preparing and or/ planning and overseeing a financial
document that estimates income and expenses for a period.
Within the limitations of the available resources, Budget is about maximizing service
delivery to the community with an emphasis on sustainability, which is over time. It
further balances the Revenue and Expenditure incurred.
The distribution of resources follows the priorities set during the IDP representative
forum sessions. Tariffs are set to ensure that projected revenue is adequate to meet
expenditure required to deliver services

National Treasury: PoE Unit Standard 116345 13

 ACTIVITY NO 2.2:

Evidence Activity Marks allocated Is Evidence

for this Present in
assignment File
Activity 2.2
Explain how budgeting can contribute to strategy and
4
Accountability

In the strategic plan, targets are interlinked to long-term targets and reported against
annual reports. Budgets must prioritize both financial and non-financial goals, such
as the IDP, SDBIP, senior manager performance contracts, etc. The process of
reviewing strategic direction, evaluating actual performance, and transferring
accountability to stakeholders is ongoing.
By ensuring that goals are completed, the budgeting process review really helps to
hold people accountable for their performance. This includes both the Council's
oversight function and budget reporting.

National Treasury: PoE Unit Standard 116345 14

 ACTIVITY NO 2.3:

Evidence Activity Marks allocated Is Evidence

for this Present in
assignment File
Activity 2.3

Provide a few sentences each explaining the following Total 28

terms in the municipal context

IDP 4
budget 4
SDBIP 4
Adjustments Budget 1
In-year reports 3
Annual financial statements 3
Annual report 4
Oversight report 5

Tip:
Look at the marks allocated for each term. These will guide you as to how much information
must be provided in your question

IDP
An Integrated Development Plan is a strategic Plan of a Municipality for a specific time
period. It addresses the needs of the community, plans and programs of sector departments,
both National and Provincial and the private sector development. It contains long term goals
and targets. It should take into account the existing conditions and problems and resources
available for development. It should take 6 to 9 months to develop an IDP. During this period
service delivery and development continues. The IDP is reviewed every year and necessary
changes can be made. The IDP has a lifespan of 5 years that is linked directly to the term of
office for local councillors.
Budget

National Treasury: PoE Unit Standard 116345 15

The Municipal Finance Management Act sets out a prescribed format for budgets. A budget
in a municipal context be considered a medium term expenditure framework, covering at
least 7 years. The objective of the budget is to allocate resources to the objectives of the
IDP. The medium term aspect of the budget facilitates a more strategic and sustainable
result. It further, Enables the actual financial operation of the business to be measured
against the forecast.

SDBIP
The Service Delivery and Budget Implementation Plans (known as the SDBIPS) are detailed
plans approved by the mayor for implementing the municipality’s delivery of municipal
services and its annual budget. The Municipal Finance Management Act (MFMA) of 2003
requires that municipalities prepare a Service Delivery and Budget Implementation Plan
(SDBIP) as an implementation and management tool to ensure that budgetary decisions that
are adopted by municipalities for the financial year are aligned with their Integrated
Development Plan. Section 1 of the Municipal Finance Management Act (MFMA) No. 56 of
2003 defines the “service delivery and budget implementation plan” as the detailed plan
approved by the mayor of the municipality in terms of Section 53 (1) (c) (ii) for implementing
the municipality’s delivery of municipal services and its annual budget and which must
include the following: -
A) Projections of each month of-
(i) revenue to be collected, by source; and
(ii) operational and capital expenditure, by vote;
B) Service delivery targets and performance indicators for each
Quarter; and
C) Any other matters that may be prescribed, and includes any revisions of such plan by the
mayor in terms of section 54(1)(c).
In terms of Section 53 (i)(c)(ii) of the MFMA, the SDBIP must be approved by the Mayor of a
municipality within 28 days of the approval of the budget

Adjustments Budget
An adjustment budget is mechanism to amend an approved budget and occurs during the
implementation stage. We do our adjustments budget when we perform our mid-term
review. Adjustment budgets only impact the current fiscal year’s budget. The Budget
Adjustment document is a financial planning tool that allows an organization to adjust the
current and/or base budget figures for a given account as circumstances may change
throughout the fiscal year. It may be used to create a budget for a new account established
after the beginning of a new fiscal year, and it may also be used to transfer funds between
general fund accounts belonging to the same chart of accounts.
A Budget Adjustment document is normally used to:
• Reallocate current budget as necessary throughout the fiscal year
• Transfer funds from one general fund account to another
• Establish budget lines in new accounts created after the fiscal year begins

National Treasury: PoE Unit Standard 116345 16

In-year reports
In year reports consist of monthly budget statements, quarterly performance reviews and a
midyear budget and performance review.

Annual financial statements

A municipality's annual financial statement must comply with local government accounting
standards. They include information about a municipality's nonperformance and reflect its
financial performance and position.
An audit opinion on the accuracy of the annual financial statements must be issued.

They typically include four basic financial statements, accompanied by a management

discussion and analysis:[1]

1. Statement of Financial Position: also referred to as a balance sheet, reports on a

company's assets, liabilities, and ownership equity at a given point in time.
2. Statement of Comprehensive Income: also referred to as Profit and Loss
statement (or a "P&L"), reports on a company's income, expenses, and profits over a
period of time. A Profit & Loss statement provides information on the operation of the
enterprise. These include sale and the various expenses incurred during the
processing state.
3. Statement of Changes in Equity : explains the changes of the company's equity
throughout the reporting period
4. Statement of cash flows: reports on a company's cash flow activities, particularly its
operating, investing and financing activities

Annual report
The annual report encompasses the audited financial statement and focuses on
accountability for financial and non-financial performance against the Targets in the Service
Delivery and budget implementation plan. Annual reports are intended to give shareholders
and other interested people information about the company's activities and financial
performance. Typically, annual reports will include: Chairperson's report, CEO's report,
Auditor's report on corporate governance, Mission statement, financial statements and notes
to financial statements.
Oversight report
The Municipal Oversight Report includes a statement approving, rejecting, or referring the
annual report back for revision, concluding the accountability cycle. It also includes Council
comments on the oversight report. The oversight report is a report of the municipal council
and follows consideration and consultation on the annual report by the council itself. Thus
the full accountability cycle is completed and the separation of powers is preserved to
promote effective governance and accountability

National Treasury: PoE Unit Standard 116345 17

 ACTIVITY NO 2.4:

Evidence Activity Marks allocated Is Evidence

for this Present in
assignment File
Activity 2.4
Explain how municipal budgeting enables the efficient
allocation of resources and contributes to improved 7
service delivery

A municipal budget enables effective resource distribution among priorities. As a

consequence of dialogue with the community and pertinent stakeholders, as well as the
approval of an annual budget tied to service delivery targets, service delivery will therefore
be improved. The budget and IDP are connected to measurable performance in the SDBIP
and annual performance agreements. The basis for revenue estimates is the need to supply
services while keeping costs in check. All wards hold IDP meetings where their individual
service delivery needs are prioritized. Tariffs are established in accordance with National
Treasury's budget circulars and recommendations, and the necessary expenditure is
determined to guarantee that the majority of the community's service delivery demands are
covered by the allocations made

National Treasury: PoE Unit Standard 116345 18

 Assignments based on Chapter 3 (total 82 marks for this section)

Place a major divider before this section

ACTIVITY NO 3.1:

Evidence Activity Marks allocated Is Evidence

for this Present in
assignment File
Activity 3.1
This is a major assignment; as such sufficient time must
82
be allocated to it

The following standard marking scheme will be applied

where referenced for the executive summary and for
each component in the body of the report dealing with
the current practices in the municipality and
recommendations for improvement.

o < 3 Inadequate discussion to various degrees

o 3 Just adequate; some unclear points
o 4 Better than adequate, but some unclear points
o 5 Excellent discussion

In all other questions, where the standard marking

scheme is not specified, the convention of one (1) mark
for each point made is used. So if a question has been
allocated 5 marks then it is expected that five separate
points will be made by the learner.

National Treasury: PoE Unit Standard 116345 19

Task:
You are currently the chief finance officer of your municipality. You have been asked by the
municipal manager to conduct a review of the budget preparation process in your
municipality and prepare a report to be submitted back to the municipal manager. The report
should explain the relationships between the integrated development plan, sector plans and
municipal budget and provide information to assist the improvement of IDP and budget
processes.

Report Quality (5 marks)

2 marks for professional report layout including formal report headings sub headings and
recommendations. 3 marks for coherence of discussion and justification of conclusions.

Structure your report according to the following headings.

Executive summary (17 marks)

The learner will:
 provide an introduction to the MFMA reforms around budget preparation (5 - standard
marking scheme)
 state that the purpose of the report is to review current budget preparation processes
with a view to improving them (2)
 list the key findings in respect to current processes (5 - standard marking scheme)
 list the recommendations for each of the key findings (5 - standard marking scheme)

Note that the executive summary should only highlight the broad requirements in the MFMA
and regulations. It should provide a summary of the gaps in current processes and it should
list all recommendations.

Schedule of key deadlines (20)

With reference to your schedule of key deadlines for the budget process describe the IDP
and budget processes in your municipality (5 – standard marking scheme). Comment on the
extent to which they are or are not integrated (5 – standard marking scheme). Comment on
the extent to which your schedule of key deadlines meets the requirements set out in the
example provided by National Treasury (5 - standard marking scheme). Provide
recommendations for improvement (5 - standard marking scheme)

National Treasury: PoE Unit Standard 116345 20

Sector Plans (10)
Describe the current role of municipal sector plans in preparing the budget and compare this
to requirements (5 – standard marking scheme). Provide recommendations for improvement
(5 – standard marking scheme).

Measurable performance objectives (15)

Explain how measurable performance objectives should be used in the IDP, Budget, SDBIP,
in-year reports, annual financial statements, annual report and oversight report (5 –standard
marking scheme). Compare this with what actually happens in your municipality (5 –
standard marking scheme). Provide recommendations for improvement (5 – standard
marking scheme).

Reconciling IDP and budget (15)

State the requirements for IDPs to be based on realistic estimates and for budgets to be
driven by the strategic direction in the IDP including describing the budget format that
reconciles the budget to the IDP objectives (5 - standard marking scheme). Compare this to
actual practice in the municipality (5 – standard marking scheme). Provide recommendations
for improvement (5 – standard marking scheme)

Instructions:
Where there is more than one learner for a particular municipality the facilitator will discuss
options and agree on an alternative assignment.

Attach existing process documentation as appendices and make reference where

appropriate.

Attach proposed process documentation which takes into account your recommendations as
appendices and make reference where appropriate.

This report may be provided to councillors and as such needs to be informative and clearly
communicate requirements to non-finance professionals.

Learners should clearly demonstrate that gaps exist through a coherent discussion using
examples of current practice. If there appear to be no gaps in current processes the learner
must justify this.

National Treasury: PoE Unit Standard 116345 21

Learners should provide a recommendation for each item identified in the gap review
including areas where it has been reasoned that there are no gaps. The recommendation
must be a clear direction for action to be taken should the recommendation be approved /
endorsed.

Because gaps and the associated recommendations will be particular to each municipality
marking will be consistent for each section and follow the standard marking scheme
explained above

TO: MUNICIPAL MANAGER

FROM: CHIEF FINANCIAL OFFICER

DATE: 12 June 2023

REF: IDP/SECTOR PLANS/BUDGET

REPORT: REVIEW OF CURRENT BUDGET PREPARATION

PROCESSES

EXECUTIVE SUMMARY

National Treasury: PoE Unit Standard 116345 22

The Municipal Finance Management Act (MFMA) outlines changes related to budget
preparation. These Reforms were intended to address shortcomings in earlier budget
processes and rules. These included:
 Replacing a subpar consultation process with procedures that provide real informed
consultation with municipal communities and other spheres of government -
summarized in the integrated development plan;
 Overcoming significant weaknesses in a system that undermined the political role of
Council in the budget; and
 Changing from a non-strategic, single year, line item and incremental budget system
to a multi-year system that links the budget to outputs and outcomes.
 Improving the overall management of the budget through the full cycle of planning,
implementing, monitoring, and reporting; Adding post-budget performance
assessments and reporting;
 Making budgets more realistic and credible to prevent overestimating revenues.

CURRENT PROCESSES

 The municipality makes sure that the IDP is implemented in line with the budget and
that the budget and the IDP are compatible.
 The municipality budget documentation does include a reconciliation of the budget to
the IDP and National Treasury formats.
 The municipality complies with the MFMA requirements.
 The municipality's budget documentation does include a reconciliation of the budget
to the IDP and National Treasury forms.
 The municipality's budget is a multi-year (3 year) plan that includes 3 years of
audited figures and 3 years of budgeted figures.
 The SDBIP was adopted by the local council, and all departments must adhere to it.
 The municipal council has adopted the SDBIP and departments must comply with the
approved SDBIP

 The municipality implements the IDP and utilises MIG funding in respect of capital
projects in line with the IDP

 The SDBIP is not monitored regularly

 MIG capital funding is not spent timeously resulting in the municipality losing grant
funding

National Treasury: PoE Unit Standard 116345 23

  Department are underspending on budgets, and this is not being monitored.

 Some departments overspend and this is also not being monitored.

 National Treasury requirements in respect of requirements are not timeously being

sent back.

 Projects sometimes commence even though they are not captured in the IDP.

SCHEDULE OF KEY DEADLINES

The following is a schedule of key deadlines in respect of the IDP and budget processes
in the municipality.

MAYOR AND COUNCIL ADMINISTRATION -

MUNICIPALITY
JULY Mayor commence with Accounting officer and
planning for the next three Section 57 Managers
year budget commence with planning for
MFMA: S 53 the next three year budget
MSA S76-81

Planning includes review of Accounting Officer and

the previous years budget senior officials of municipality
processes and completion of and entities review options
Budget Evaluation Checklist- and contracts for service
(NB Cascaded through delivery
various months – August and (NOTE: Cascaded through
September) various months – August and
September)

AUGUST Mayor tables key deadlines

and time schedules for
preparing, tabling and
approving the budget,
reviewing the IDP

Mayor establishes

National Treasury: PoE Unit Standard 116345 24

 committees and consultation
forums for the budget
processes

MFMA S 21, 22, 23

MSA s 34, Chapter 4
SEPTEMBER Council – IDP review Budget office review and
process determines strategic determination of
objectives for service municipalities revenue
delivery and next three year projections and proposed
budget rates and service charges

Consultation with sector

departments (scattered
throughout the year)
OCTOBER Accounting officer reviews
national policies and budget
plans and potential price
increases of bulk resources
with function and department
officials
MFMA, s35,36,42
NOVEMBER Accounting Officer reviews
and drafts initial changes to
IDP
MSA S34
DECEMBER Council finalises tariff Accounting officer and senior
policies for next financial officials prepare proposed
year budget plans for next
MSA , s74,75 financial year taking into
account previous financial
year spending and annual
financial statements
JANUARY NOTE NO MUNICIPAL Accounting officer review
ENTITIES proposed national and
provincial allocations to

National Treasury: PoE Unit Standard 116345 25

 municipality for incorporation
into draft budget taking into
account mid year review,
corrective measures of
oversight report and annual
financial statements
MFMA s36
FEBRUARY NOTE NO MUNICIPAL Accounting officer finalises
ENTITIES and submits to mayor
proposed budget and plan
for next three budgets
Accounting officer notifies
relevant municipalities of
projected allocations for next
three years 120 days prior to
start of budget year
MFMA s 37(2)
MARCH NOTE NO MUNICIPAL Accounting officer publishes
ENTITY tabled budget, paln and
proposed revisions to IDP ,
invites local community
comment and submits to
National Treasury, Provincial
Treasury and other
prescribes
MFMA s22, 37 MSA chap 4
as amended
Accounting Officer reviews
any change in price for bulk
resources
MFMA s42
APRIL Consultation with national Accounting officer assists
and provincial treasury and mayor in revising budget
finalise sector plans for documentation, in
sanitation and electricity, accordance with consultative
water processes , taking into

National Treasury: PoE Unit Standard 116345 26

 MFMA s21 account the results form the
third quarter review of
current year

RECOMMENDATIONS

1. The municipality must ensure that the Finance Department monitors the SDBIP with
departments and that this be done in consultation with the Heads of Departments.
2. Departments must ensure that MIG funding received is spent timeously, taking
cognisance of the long drawn SCM processes.
3. The Finance Department complies with all directives of National Treasury.
4. Monitoring must be done monthly on the spending and budget of each department by
the Finance Department in consultation with the Heads of Department.
5. Monitoring to be done to ensure that projects undertaken are in line with the IDP

SECTOR PLANS
Examples of sectors are housing, water, energy, transport, agriculture, health, etc.
functions performed within the municipality covers many sectors and individual
departments may often cross sectors.

In our municipality, sector plans are developed in accordance with development that is
taking place in the area, as well as service level agreements that may require the
municipality to perform certain functions. The municipality does consult with the national
and provincial sectors and the Mngungundlovu District Municipality. The planning
department consults with the Department of Transport. The health sector has a good
relationship, ie: provincial department of Health and the municipal health department,
however, there are always delays in the payment of the quarterly claim by provincial
health. Our IDP does include sector plans and is informed by national and provincial
sector departments. There is however a lack of co-ordination and alignment as some
provincial department plan do not align with municipal plans.

The requirements are that municipalities will need to keep abreast of developments in
the various sectors to ensure their budgets for water, sanitation, electricity etc are well
informed. Municipal IDPs and budgets should inform and be informed by the
development plans of national and provincial sector departments to ensure a coordinated

National Treasury: PoE Unit Standard 116345 27

 approach to infrastructure planning and service delivery. Furthermore, municipalities
should have a good knowledge of all grants from government departments including their
objectives, conditions and medium term allocations as promulgated. To assist
municipalities in proper planning and budgeting all relevant sector departments are to
provide information on allocations in provincial budgets and the annual Division of
Revenue Act around February and March that reflect transfers to municipalities over a
multi-year period.

The Department of Co-operative Governance and Traditional Affairs (COGTA) has an

overarching responsibility for local government, while departments such as Water Affairs
and Forestry, Minerals and Energy, Transport, Housing, etc. have a direct role in
monitoring sector-specific outcomes and service delivery. The monitoring responsibilities
will be made easier on municipalities and these departments with the production of
relevant documentation also addressing the needs of the sectors (e.g. municipal sector
plans). In this regard, it is imperative that municipalities prepare their capital and
operating budgets, in-year reporting, annual reports, etc. with this in mind and provide
information that will support decision-making. Standard formats will achieve this. The
municipality does comply with in- year reporting and aligning their standard formats to
report to COGTA.

RECOMMENDATIONS FOR IMPROVEMENT

1. That the municipality improves relations with the provincial sectors in order to ensure
that there is alignment with municipal and provincial projects.
2. That the municipality ensure that the IDP reflects objectives of the National and
provincial sectors and ensure that these objectives are carried out and met.
3. That a co-ordinating committee be formed with provincial and national sectors and
that these meetings be monitored and minute.
4. That heads of departments of provincial and national sectors be advised of the gap in
communication and a resolution of the matters be discussed urgently.

MEASURABLE PERFORMANCE OBJECTIVES

OVERVIEW

National Treasury: PoE Unit Standard 116345 28

 The budget of the municipality must contain performance targets and measurable
objectives. The targets in the SDBIP and annual performance agreements must agree to
the approved targets in the budget. At the end of financial year, the municipality is to
publish an annual report reporting on financial and non- financial performance. The
annual report is considered by the municipal council as detailed in the MFMA. The
measurable performance targets in the budget and the quarterly service delivery targets
and Budget Implementation Plan must be consistent with the annual performance
agreements of senior managers in accordance with Section 57 of the Municipal Systems
Act. The SDBIP cannot be revised without council approval. Any changes must be done
in the adjustment budget to ensure that the Mayor and municipal manager do not revise
service delivery targets in the event of poor performance.

The approved measurable performance objectives are made public in the SDBIP that will
be used to measure performance on a quarterly basis during the financial year. In-year
reporting is a form of monitoring. The council should exercise its oversight role over
performance at the end of the financial year, when the mayor tables the annual report of
the municipality. The in-year reporting is designed to pick up problems that are major
and aimed at ensuring that the mayor and municipal manager take corrective steps when
problems arise. The SDBIP serves a critical role n focusing both, the administration and
council, on outputs by providing clarity of service delivery expectations, expenditure and
revenue requirements, service delivery targets and performance indicators.

WHAT HAPPENS AT OUR MUNICIPALITY

Our municipality has a performance management unit. Each year after the approved
budget and SDBIP, or during the process, each section 57 Manager is required to enter
into a performance agreement with the municipality. The targets are captured in each
performance scorecard of the managers including the municipal manager. The targets in
the SDBIP are captured in the scorecard of each manager. The targets and performance
in relation to the scorecard is reviewed every quarter by the Mayor and municipal
manager. The scorecards include identified IDP projects and are linked to the
scorecards, each target has a measurable objective, the performance bonuses of the
managers are linked to the scorecards and provide incentives to each manager.

The SDBIP is approved by the mayor and these targets are monitored by the
performance unit. The annual report reflects the performance of the managers and the

National Treasury: PoE Unit Standard 116345 29

 targets that have been met. The oversight report also includes the performance
scorecard and the results of the managers.

RECOMMENDATIONS FOR IMPROVEMENT

1. The SDBIP targets and spending on capital projects should be more strictly
monitored by the municipality as managers often fail to meet the targets in the
months as stipulated in the SDBIP.
2. The performance unit should play a more significant role in the operation and
monitoring of the performance scorecards and the SDBIP.
3. The SDBIP is not spent timeously and the municipality must implement
monitoring mechanisms to ensure timeous expenditure in line with IDP project

RECONCILING IDP AND BUDGET

OVERVIEW

The municipality can formulate a long term vision and undertake consultation if
necessary. The vision provides the basis for developing a five-year integrated
development plan (IDP) which must introduce a more rigorous approach by taking into
account the resources available to deliver service levels identified in the IDP. The IDP
must be considered carefully to determine what can realistically be delivered so false
hope is raised in the minds of the community and other stakeholders. Municipalities can
utilise medium term revenue and Expenditure (MTREF) budgets to provide realistic
estimates of available sources of revenue and required expenditure to deliver services.
The MTREF budget is prepared based on the strategic direction provided in the IDP.

The IDP must therefore be achievable and the budget must not include anything that is
not part of the approved strategic direction of council. The municipality must estimate the
revenue and expenditure implications of future goals and strategies. This includes capital
works and services as well as maintaining existing infrastructure and providing ongoing
services. It is important to cost the IDP with expenditure and income estimates.

ACTUAL PRACTICE OF THE MUNICIPALITY

The practice of the municipality is that the municipality has adopted a vision. The
municipality has also adopted a five-year strategic plan. The budget of the municipality is
reconciled to the IDP. The budget is adopted and the costing of all projects in the IDP is
approved with the budget approval. The municipality has estimates of the revenue and

National Treasury: PoE Unit Standard 116345 30

 expenditure implications of future goals and strategies. This includes capital works and
services as well as maintaining existing infrastructure and providing ongoing services.
The municipality does cost the IDP with expenditure and income estimates.

RECOMMENDATIONS FOR IMPROVEMENT

1. Budget must be realistic in that estimated must be correct so that projects do not
exceed the budget.
2. The IDP must be reconciled to the budget and projects must not be added on
during the year.
3. IDP and budget process must commence timeously.

Ncedile Mbokazi

CHIEF FINANCIAL OFFICER

National Treasury: PoE Unit Standard 116345 31

 
Assignments based on Chapter 4 (total 187 marks for this section)

Place a major divider before this section

ACTIVITY NO 4.1:

Evidence Activity Marks allocated Is Evidence

for this Present in
assignment File
Activity 4.1
This is a major assignment; as such sufficient time must
82
be allocated to it

Marking
The following standard marking scheme will be applied
where referenced for the executive summary and for
each component in the body of the report dealing with
the current practices in the municipality and
recommendations for improvement.

o < 3 Inadequate discussion to various degrees

o 3 Just adequate; some unclear points
o 4 Better than adequate, but some unclear points
o 5 Excellent discussion

In all other questions, where the standard marking

scheme is not specified, the convention of one (1) mark
for each point made is used. So if a question has been
allocated 5 marks then it is expected that five separate
points will be made by the learner.

National Treasury: PoE Unit Standard 116345 32

Task:

You are the chief finance officer of your municipality. Prepare a report for the municipal
manager that reviews current budget approaches in your municipality and recommends
improvements. Split the report into the following sections:

Executive summary (15)

 Summarise how there are a number of approaches to budgeting and it is important to
apply different approaches for different purposes (5 – standard marking scheme). List
the approaches covered here and highlight the key findings and recommendations
related to each approach (5 – standard marking scheme). Make an overall
recommendation for a programme to improve budgeting approaches in the municipality.
(5 – standard marking scheme)

Accounting classification budgeting (22)

 Briefly describe the accounting classification approach to budgeting (3). List the
disadvantages of using this approach in isolation (5). List the advantages of using it in
conjunction with other approaches (4). Comment on the extent to which the municipality
is using the approach and preparing budget formats aligned to the annual financial
statements (5 – standard marking scheme). Make recommendations for improvement (5
– standard marking scheme).

Programme budgeting (10)

 Briefly describe the programme budgeting approach to budgeting (3). List the
disadvantages of using this approach in isolation (3). List the advantages of using it in
conjunction with other approaches (4).

Programme budgeting by vote (20)

 Briefly describe the programme budgeting by vote approach (5). List the advantages of
using this approach (3). Comment on the extent to which the municipality is using the
approach and preparing budget formats which clearly show revenue, expenditure and
measurable performance objectives per municipal vote (5). Comment on the
appropriateness of the vote structure (2). Make recommendations for improvement (5).

National Treasury: PoE Unit Standard 116345 33

Programme budgeting by IDP objective (15)
 Briefly describe the programme budgeting by IDP objective approach (3). List the
advantages of using this approach (2). Comment on the extent to which the municipality
is using the approach and preparing budget formats which clearly show revenue,
expenditure and measurable performance objectives per IDP objective (5). Make
recommendations for improvement (5).

Programme budgeting by GFS function (17)

 Briefly describe the programme budgeting by GFS function approach (3). List the
advantages of using this approach (4). Comment on the extent to which the municipality
is using the approach and preparing budget formats which clearly show revenue,
expenditure and measurable performance objectives per GFS function (5). Make
recommendations for improvement (5).

Performance budgeting (17)

 Briefly describe the performance budgeting approach (3). List the advantages of using
this approach (4). Comment on the extent to which the municipality is using the
approach and preparing budget formats which clearly show revenue, expenditure and
measurable performance objectives per IDP objective (5). Make recommendations for
improvement (5).

Incremental budgeting (20)

 Briefly describe the incremental approach to preparing budget estimates (4). List the
disadvantages of using this approach in isolation (3). List the advantages of using it in
conjunction with other approaches (3). Comment on the extent to which the
municipality is using the approach and the appropriateness of this level of use (5). Make
recommendations for improvement (5).

Zero based budgeting (27)

 Briefly describe the zero based budgeting approach to preparing budget estimates (10).
List the disadvantages of using this approach in isolation (4). List the advantages of
using it in conjunction with other approaches (3). Comment on the extent to which the
municipality is using the approach and the appropriateness of this level of use (5). Make
recommendations for improvement (5).

National Treasury: PoE Unit Standard 116345 34

Incorporating the different approaches through the departmental SDBIP (24)
 Describe in detail how to go about preparing a departmental SDBIP and how this
incorporates the different approaches to budgeting (14). Comment on the extent to which
the municipality is using departmental SDBIPs appropriately (5). Make recommendations
for improvement (5).

TO: MUNICIPAL MANAGER

FROM: CHIEF FINANCIAL OFFICER

DATE: 12 June 2023

REF: IDP/SECTOR PLANS/BUDGET

REPORT: REVIEW OF CURRENT BUDGET PREPARATION

PROCESSES

EXECUTIVE SUMMARY

National Treasury: PoE Unit Standard 116345 35

The Municipal Finance Management Act (MFMA) outlines changes related to budget
preparation. These Reforms were intended to address shortcomings in earlier budget
processes and rules. These included:
 Replacing a subpar consultation process with procedures that provide real informed
consultation with municipal communities and other spheres of government -
summarized in the integrated development plan;
 Overcoming significant weaknesses in a system that undermined the political role of
Council in the budget; and
 Changing from a non-strategic, single year, line item and incremental budget system
to a multi-year system that links the budget to outputs and outcomes.
 Improving the overall management of the budget through the full cycle of planning,
implementing, monitoring, and reporting; Adding post-budget performance
assessments and reporting.
 Making budgets more realistic and credible to prevent overestimating revenues.

CURRENT PROCESSES

 The municipality ensures that the IDP and the budget are aligned and that the IDP is
implemented in terms of the budget.

 The municipality budget documentation does include a reconciliation of the budget to

the IDP and National Treasury formats. The municipality complies with the MFMA
requirements.

 • The municipality's budget documentation does include a reconciliation of the budget

to the IDP and National Treasury forms.

 The municipality's budget is a multi-year (3 year) plan that includes 3 years of

audited figures and 3 years of budgeted figures.

 The SDBIP was adopted by the local council, and all departments must adhere to it.

 The municipality implements the IDP and utilises MIG funding in respect of capital
projects in line with the IDP

 The SDBIP is not monitored regularly

 MIG capital funding is not spent timeously resulting in the municipality losing grant
funding

 Department are underspending on budgets and this is not being monitored

National Treasury: PoE Unit Standard 116345 36

  Some departments overspend and this is also not being monitored

 National Treasury requirements in respect of requirements are not timeously being

sent back

 Projects sometimes commence even though they are not captured in the IDP

RECOMMENDATIONS

6. The municipality must ensure that the Finance Department monitors the SDBIP with
departments and that this be done in consultation with the Heads of Departments.
7. Departments must ensure that MIG funding received is spent timeously, taking
cognisance of the long drawn SCM processes.
8. The Finance Department complies with all directives of National Treasury.
9. Monitoring must be done on a monthly basis on the spending and budget of each
department by the Finance Department in consultation with the Heads of
Department.
10. Monitoring to be done to ensure that projects undertaken are in line with the IDP.

SCHEDULE OF KEY DEADLINES

The following is a schedule of key deadlines in respect of the IDP and budget processes
in the municipality.

MAYOR AND COUNCIL ADMINISTRATION -

MUNICIPALITY
JULY Mayor commence with Accounting officer and
planning for the next three Section 57 Managers
year budget commence with planning for
MFMA: S 53 the next three year budget
MSA S76-81

Planning includes review of Accounting Officer and

the previous years budget senior officials of municipality
processes and completion of and entities review options
Budget Evaluation Checklist- and contracts for service
(NB Cascaded through delivery
various months – August and (NOTE: Cascaded through

National Treasury: PoE Unit Standard 116345 37

 September) various months – August and
September)

AUGUST Mayor tables key deadlines

and time schedules for
preparing, tabling and
approving the budget,
reviewing the IDP

Mayor establishes
committees and consultation
forums for the budget
processes

MFMA S 21, 22, 23

MSA s 34, Chapter 4
SEPTEMBER Council – IDP review Budget office review and
process determines strategic determination of
objectives for service municipalities revenue
delivery and next three year projections and proposed
budget rates and service charges

Consultation with sector

departments (scattered
throughout the year)
OCTOBER Accounting officer reviews
national policies and budget
plans and potential price
increases of bulk resources
with function and department
officials
MFMA, s35,36,42
NOVEMBER Accounting Officer reviews
and drafts initial changes to
IDP
MSA S34

National Treasury: PoE Unit Standard 116345 38

 DECEMBER Council finalises tariff Accounting officer and senior
policies for next financial officials prepare proposed
year budget plans for next
MSA , s74,75 financial year taking into
account previous financial
year spending and annual
financial statements
JANUARY NOTE NO MUNICIPAL Accounting officer review
ENTITIES proposed national and
provincial allocations to
municipality for incorporation
into draft budget taking into
account mid year review,
corrective measures of
oversight report and annual
financial statements
MFMA s36
FEBRUARY NOTE NO MUNICIPAL Accounting officer finalises
ENTITIES and submits to mayor
proposed budget and plan
for next three budgets
Accounting officer notifies
relevant municipalities of
projected allocations for next
three years 120 days prior to
start of budget year
MFMA s 37(2)
MARCH NOTE NO MUNICIPAL Accounting officer publishes
ENTITY tabled budget, paln and
proposed revisions to IDP ,
invites local community
comment and submits to
National Treasury, Provincial
Treasury and other
prescribes
MFMA s22, 37 MSA chap 4

National Treasury: PoE Unit Standard 116345 39

 as amended
Accounting Officer reviews
any change in price for bulk
resources
MFMA s42
APRIL Consultation with national Accounting officer assists
and provincial treasury and mayor in revising budget
finalise sector plans for documentation, in
sanitation and electricity, accordance with consultative
water processes , taking into
MFMA s21 account the results form the
third quarter review of
current year

EXTENT OF INTEGRATION

Our systems are connected such that the budget and IDP processes are finished at the
same time. The steps for creating the budget are complete, and the projects listed in the IDP
are included in the budget. According to the capital projects listed in the IDP, the budget is
approved. Only after the IDP projects have been included in the budget is it adopted and
authorized. The capital budget is authorized, and the amount for the costs associated with
each identified project is approved.

KEY DEADLINES PER NATIONALTREASURY EXAMPLE

The municipality complied, to an extent, with key deadlines as prescribed in terms of

National Treasury and guidelines of the MFMA. The following gaps need to be filled:

o July - Planning includes review of the previous years budget processes and
completion of the Budget Evaluation Checklist - this is not always in the month of July
but is staggered through the months .
o July - Accounting officers and senior officials of municipality and entities review
options and contracts for service delivery (MSA s76-81) - this is always not timeously
done by the municipality. This done erratically throughout the financial year, and this
is sometimes not comprehensively done, and some departments do not review
contracts of the municipality.

National Treasury: PoE Unit Standard 116345 40

 o September – The municipality does not timeously consult with Provincial and
National Sector Departments. The problem e.g., with the Department of Transport,
some sectors do not align their programmes with that of the municipality.
o In general - The municipality does not comply with timeframes and deadlines as
prescribed in the format, there are sometimes delays in the processes, but in most
instances, we do comply with legislative processes.

RECOMMENDATIONS FOR IMPROVEMENT

1. Identify schedule of deadlines.
2. Ensure compliance with timeframes and key deadlines.
3. Ensure that municipality forms and aligns their plans with national and provincial
sector.
4. Ensure that the municipality commences budget processes timeuosly.
5. Ensure that all gaps identified in respect of National Treasury guidelines are adhered
to.

SECTOR PLANS

Examples of sectors are housing, water, energy, transport, agriculture, health, etc.
functions performed within the municipality covers many sectors and individual
departments may often cross sectors.

In response to local development, our municipality develops sector plans as well as

service level agreements that may require the municipality to do particular tasks. The
municipality consults with the Msunduzi Municipality as well as the national and
provincial sectors. The planning department consults with the transportation department.
The provincial department of health and the municipal department of health work well
together in the healthcare field, although the provincial department of health routinely
misses the deadline for paying out quarterly claims. Our IDP does take sector plans into
account and is informed by national and provincial sector departments. However, there is
a lack of coordination and alignment because some provincial department plans do not
align with municipal plans.

Municipalities must stay up to date on developments in the various industries if they want
to make sure that their budgets for things like water, sanitation, and power are informed.
Municipal IDPs and budgets should both inform and be informed by the development

National Treasury: PoE Unit Standard 116345 41

 plans of national and provincial sector departments in order to guarantee a coordinated
approach to developing infrastructure and providing services. Additionally, municipalities
should be knowledgeable about all grants provided by governmental organizations,
including their aims, constraints, and publicly declared medium-term allocations. To
assist towns in appropriate planning and budgeting, all relevant sector departments are
expected to give information on allocations in provincial budgets and the annual Division
of Revenue Act in the months of February and March.

While other departments, such as those in charge of water affairs and forestry, minerals
and energy, transport, and housing, are directly in charge of monitoring the outcomes
and delivery of services in their respective fields, local government is overseen by the
Department of Cooperative Governance and Traditional Affairs (COGTA). One type of
relevant information that will assist municipalities and these agencies with their
monitoring tasks, for instance, is municipal sector plans. When planning their capital and
operating budgets, in-year reporting, annual reports, etc., municipalities must take this
into account and provide information that will help in decision-making. Common formats
will be employed to accomplish this. The municipality adheres to the COGTA criteria for
in-year reporting and aligns its typical reporting forms with them.
RECOMMENDATIONS FOR IMPROVEMENT

5. That the municipality improves relations with the provincial sectors in order to ensure
that there is alignment with municipal and provincial projects.
6. That the municipality ensure that the IDP reflects objectives of the National and
provincial sectors and ensure that these objectives are carried out and met.
7. That a co-ordinating committee be formed with provincial and national sectors and
that these meetings be monitored and minuted.
8. That heads of departments of provincial and national sectors be advised of the gap in
communication and a resolution of the matters be discussed urgently.

MEASURABLE PERFORMANCE OBJECTIVES

OVERVIEW

The municipality's budget must include measurable goals and performance metrics. The
agreed targets in the budget must align with the targets in the SDBIP and yearly

National Treasury: PoE Unit Standard 116345 42

 performance agreements. The municipality is required to issue an annual report detailing
both financial and non-financial performance at the conclusion of each fiscal year.The
municipal council evaluates the yearly report in accordance with the MFMA. According to
Section 57 of the Municipal Systems Act, the budget's quantifiable performance goals,
quarterly service delivery goals, and Budget Implementation Plan must all be in line with
senior managers' yearly performance agreements. Without council consent, no changes
to the SDBIP are permitted. The SDBIP cannot be revised without council approval. Any
changes must be done in the adjustment budget to ensure that the Mayor and municipal
manager do not revise service delivery targets in the event of poor performance.

The SDBIP, which will be used to evaluate performance on a quarterly basis throughout
the fiscal year, makes the authorized quantifiable performance objectives available to the
public. Monitoring takes the form of in-year reporting. When the mayor submits the
municipality's annual report at the conclusion of the fiscal year, the council should utilize
its oversight authority over performance. The in-year reporting is intended to identify
significant issues and to make sure that the mayor and municipal manager act
appropriately when issues arise. The SDBIP plays a crucial role in helping the
administration and council focus on the outcomes by making clear the expectations for
service delivery, the expenditure and revenue requirements, the service delivery targets,
and the performance indicators.

WHAT HAPPENS AT OUR MUNICIPALITY

The SDBIP, which will be used to evaluate performance on a quarterly basis throughout
the fiscal year, makes the authorized quantifiable performance objectives available to the
public. Monitoring takes the form of in-year reporting. When the mayor submits the
municipality's annual report at the conclusion of the fiscal year, the council should utilize
its oversight authority over performance. The in-year reporting is intended to identify
significant issues and to make sure that the mayor and municipal manager act
appropriately when issues arise. The SDBIP plays a crucial role in helping the
administration and council focus on the outcomes by making clear the expectations for
service delivery, the expenditure and revenue requirements, the service delivery targets,
and the performance indicators.
The SDBIP is approved by the mayor and these targets are monitored by the
performance unit. The annual report reflects the performance of the managers and the
targets that have been met. The oversight report also includes the performance
scorecard and the results of the managers.

National Treasury: PoE Unit Standard 116345 43

 RECOMMENDATIONS FOR IMPROVEMENT
4. The SDBIP targets and spending on capital projects should be more strictly
monitored by the municipality as managers often fail to meet the targets in the
months as stipulated in the SDBIP.
5. The performance unit should play a more significant role in the operation and
monitoring of the performance scorecards and the SDBIP.
6. The SDBIP is not spent timeuosly and the municipality must implement
monitoring mechanisms to ensure timeuos expenditure in line with IDP projects.

RECONCILING IDP AND BUDGET

OVERVIEW

The municipality may create a long-term vision and, if necessary, engage in dialogue.
The vision serves as the foundation for creating a five-year integrated development plan
(IDP), which must adopt a more stringent methodology by taking into account the
resources available to meet the service levels specified in the IDP. In order to prevent
the community and other stakeholders from developing unrealistic expectations, the IDP
must be thoroughly evaluated to see what can actually be achieved. Municipalities can
use MTREF budgets to provide accurate predictions of the sources of revenue that are
available and the expenses that will be needed to deliver services. Based on the
strategic guidance offered in the IDP, the MTREF budget is created.

Therefore, the IDP must be feasible, and nothing outside of the council's agreed strategic
direction may be included in the budget. Future goals and strategies' effects on revenues
and expenses must be estimated by the municipality. This covers services and capital
projects as well as upkeep of the current infrastructure and ongoing services. It is crucial
to assess the cost of the IDP using income and expenditure data.

ACTUAL PRACTICE OF THE MUNICIPALITY

According to the municipality's custom, a vision has been adopted. A five-year strategic
plan has also been established by the municipality. The municipality's spending plan is
balanced with the IDP. The budget is authorized, and along with it, the costing for each
project in the IDP is approved. Estimates of the revenue and expenditure impacts of
upcoming objectives and initiatives are available to the municipality. This covers services

National Treasury: PoE Unit Standard 116345 44

 and capital projects as well as upkeep of the current infrastructure and ongoing services.
The municipality calculates the IDP's costs in terms of expenses and income.

RECOMMENDATIONS FOR IMPROVEMENT

4. Budget must be realistic in that estimated must be correct so that projects do not
exceed the budget.
5. The IDP must be reconciled to the budget and projects must not be added on
during the year.
6. IDP and budget process must commence timeuosly.

Ncedile Mbokazi

CHIEF FINANCIAL OFFICER

National Treasury: PoE Unit Standard 116345 45

 Assignments based on Chapter 5 (total 89 marks for this section)

Place a major divider before this section

We would suggest that each question is answered on a separate page. Clearly mark each
page

ACTIVITY NO 5.1:

Evidence Activity Marks allocated Is Evidence

for this Present in
assignment File
Activity 5.1
23

What is the core objective of the reform to municipal

financial management? 4

How does standardised budget formats across all

municipalities and municipal entities contribute to this
objective?
19
In your answer, indicate each of the benefits of
standardised budget formats.

What is the core objective of the reform to municipal financial management?

In order to increase to municipality's capacity to provide fundamental services, it is
necessary to ensure that they are financially sustainable by adherence to policies,
processes, and legal requirements and medium term planning of service delivery.

How does standardised budget formats across all municipalities and municipal entities
contribute to this objective?

National Treasury: PoE Unit Standard 116345 46

 The core objective of the reform to municipal finance management is to improve the local
government sphere’s ability to deliver basic service to all. This achived through improved
financial sustainability, enhanced facilitation of policy choices and medium term planning
of service delivery

Benefits

 Standardised budget formats (SBFs) offer a strong alignment between the IDP and
budget, eg measurable performance objectives for each vote and IDP objective are
presented in programme budgeting and performance budgeting formats.

 Stakeholders obtain a better understanding of the budget versus actual revenue and
expenditure – greater transparency. All municipalities are required ensure that budget
documents and formats look similar and reflect similar items – this facilitates easier
comparisons to ensure best practice by officials, councillors and other government
departments.

 Greater transparency ensures greater accountability – budgeted/planned funding and the

management of the funding for the delivery of services.

 Greater accountability by providing budget formats that adhere to the same accounting
categorization standards as those outlined in the yearly financial statement. The audited
financial statements will show actual performance that is presented in a manner that is
identical to the budget.

 In-year reporting formats facilitate the assessment of performance in meeting targets set
in the budget.

 National government policy formulation role, in particular the ability to use of the national
budget effectively to address poverty and inequality is assisted.

 The need for several surveys from different government departments is removed or
considerably reduced, giving municipal staff more time to focus on the municipality's
business

 The benefits of standardised budget formats would it shortened times required for
completion of budgets, in-year reports, annual financial statements and annual reports
as budget prepares increase their proficiency in use of standard formats.

 Budget formats presented in the accounting classification as reflected in the annual

financial statements (AFS) ensures direct comparability between actual performance
versus planned performance.

National Treasury: PoE Unit Standard 116345 47

 SBFs facilitate the expeditious completion of the budget and other statutory financial
reports (per the MFMA)

 Facilitates the effective addressing of grant and equitable share allocations – programme
budgeting by GFS function.

 The oversight roles of parliament, legislatures, DPLG, national and provincial treasuries
are assisted.

National Treasury: PoE Unit Standard 116345 48

 ACTIVITY NO 5.2:

Evidence Activity Marks allocated Is Evidence

for this Present in
assignment File
Activity 5.2
6

Explain how the standard budget formats issued by the

National Treasury achieve simultaneous standardisation
6
and flexibility.

The formats simultaneously accomplish standardization and flexibility. By elevating some

critical tables to a universal standard and making them high level, they achieve
standardization. The primary tables employ generic names and labels, and the supporting
tables go into greater detail about those generic objects. Although the accompanying tables
will be partially standardized, they can be modified to fit local needs.

The generic labels and/or the supporting tables may be able to accommodate future
changes in disclosure requirements (caused, for example, by changes in accounting
standards). A key table should require modification. National Treasury has the right to
republish the entire collection of formats with any necessary adjustments.

National Treasury: PoE Unit Standard 116345 49

 ACTIVITY NO 5.3:

Evidence Activity Marks allocated Is Evidence

for this Present in
assignment File
Activity 5.3
3

Explain the principle that the format and content of

budget documentation must be the same for tabling to
council; making public at municipal offices and the
3
municipal website and distribution to National Treasury
and other stakeholders.

It is required that the structure and substance of budget paperwork be the same for
dissemination to National Treasury and other stakeholders, tabling to council, and making
public at municipal offices and on the municipal website. This guarantees that all interested
parties have access to the same information. However, depending on the demands of
stakeholders and interest groups, more information may also be disseminated. It is required
that the structure and substance of budget paperwork be the same for distribution to
National Treasury and other stakeholders, tabling to council, making public at municipal
offices and on the municipal website, and distribution. This guarantees that all interested
parties have access to the same information.

National Treasury: PoE Unit Standard 116345 50

 ACTIVITY NO 5.4:

Evidence Activity Marks allocated Is Evidence

for this Present in
assignment File
Activity 5.4
5

Following the principle in activity 5.3, explain why the

format of the budget tabled for consultation must be the
5
same as for the approved budget.

It is a statutory requirement that the format of the budget tabled for consultation must be the
same as for the approved budget and for good reason too. The draft budget is taken to the
community and is open for inspection and must therefore be clearly in the same format of
the approved budget to ensure transparency, credibility and comparability.

National Treasury: PoE Unit Standard 116345 51

National Treasury: PoE Unit Standard 116345 52
 ACTIVITY NO 5.5:

Evidence Activity Marks allocated Is Evidence

for this Present in
assignment File
Activity 5.5
7

Explain why municipal entity budget information needs to

be included in the municipal budget and how is this
7
achieved.

Comment on the additional reporting burden

Municipal entity budget information needs to be included in the municipal budget to disclose
the total service delivery projections to ensure transparency. This accomplished by
presenting consolidated financial and service delivery information. The additional reporting
burden serves to ensure transparency and accountability in service provision funding and
performance.

National Treasury: PoE Unit Standard 116345 53

 ACTIVITY NO 5.6:

Evidence Activity Marks allocated Is Evidence

for this Present in
assignment File
Activity 5.6
11

Explain the characteristics of the standard annual budget

columns shown below. 11

Annual budget columns - ten columns, seven year view

 The yearly budget format, which is a ten column, seven year view, is set forth and in
accordance with federal and provincial budget regulations.
 It includes three years' worth of audited result data. Instead of using just one year's
worth of audited result numbers for performance comparison, this helps with trend
analysis.
 For the year that is presently being implemented, four columns are needed: the
initial budget, the amended budget, the full-year prediction, and the pre-audit
result. The projection for the entire year represents the estimated actual result, which
is based on current trends and performance. It is critical to note the important of the
original budget as this was budget that extensively consulted on. The budget that
was discussed was the initial budget. When there are significant differences between
the initial budget, the amended budget, and the full-year prediction, poor planning
and financial management have led to unrealistic projections.
 Three columns are required for the medium term revenue and expenditure framework
(MTREF), reflecting the budget year, and the projections for the two years following the
budget year (also referred to as the outer years).

National Treasury: PoE Unit Standard 116345 54

 ACTIVITY NO 5.7:

Evidence Activity Marks allocated Is Evidence

for this Present in
assignment File
Activity 5.7
34

Review your municipality’s tabled and approved budget documentation for the latest
approved budget.

Explain and comment on the following based on your review:

A.
Format of documentation to be the same for tabled
and approved budget (15)
Total 15

Made up as follows :

 Explain why the budget tabled for consultation

must be presented in the same format as the
5
approved budget

 Comment on the extent of compliance

(Standard marking scheme0 5

 Make recommendation for improvement

(Standard marking scheme) 5

Explain why the budget tabled for consultation must be presented in the same format
as the approved budget
Of key importance is the notion that the format for the budget tabled for consultation must be
the same as for the approved budget. The format of the tabled budget is critical since this is
the documentation that must be consulted upon. This improves transparency during the
consultation process, allows a clear comparison between the budget tabled budget is in fact

National Treasury: PoE Unit Standard 116345 55

credible and could realistically be implemented as is should the consultation process result
in no changes.

Extent of Compliance

Recommendations

National Treasury: PoE Unit Standard 116345 56

B.
 Format of budget documentation to be standard Total 19

 Explain why the budget reforms require budget

documentation to conform to a standard structure 9

 Comment on the extent to which the municipal

budget documentation is set out as per the
headings required by the municipal budget and
5
reporting regulations
(Standard marking scheme)

 Make recommendations for improvement

(Standard marking scheme) 5

Explain why the budget reforms require budget documentation to conform to a

standard structure
Budget reforms require standard budget documentation to improve the credibility,
sustainability, transparency, consistency accuracy, and reliability of municipal budgets and
in-years reports. This is being done with a view to assisting all stakeholders implement a
seamless process linking planning, budgeting, reporting and the sharing of information.

Extent of Compliance

Recommendations

National Treasury: PoE Unit Standard 116345 57

Divider 5:

Section 5: Supporting Evidence

1. Witness testimonies to authenticate your evidence

2. Witness status list (personal details of all witnesses)

3. Resource list (Acknowledgement of resources used (Internet sites; Textbooks)

National Treasury: PoE Unit Standard 116345 58

FINAL COMMENTS

This may appear to be a lot of work, but it is based on what you should be doing and the
knowledge you should have if you wish to manage your data and reports and understand
your organisation’s IT systems and requirements. Much of this information should be
available. Gather what information you can and then organise it in the manner listed above.
Where you find gaps - address them.

Your POE must be completed and submitted to us by __________________________

If you wish to send us sections as you work on them for comment, please feel free to do so.
We will then be able to assess your progress and give you direction.

Remember, we are here to help you.

COMPLETED KNOWLEDGE ASSIGNMENTS CAN BE:

E-mailed to:
Faxed to:
Posted to:

PORTFOLIO ASSISTANCE OR GENERAL ASSISTANCE

You are welcome to contact us at:
POE’s must be posted to the above address or delivered to:

NB: Please keep copies of all documents in case of loss.

Please indicate if you would like your assessed POE to be returned to you at your
own cost.

National Treasury: PoE Unit Standard 116345 59