Treasury publishes municipal operating, capital budgets

National Treasury has published on its website the operating and capital budgets of municipalities as adopted by their respective councils.

In a statement, the department said these budgets give an overview of expected revenue and expenditure trends in local government over the next three years, referred to as the 2022/23 Medium Term Revenue and Expenditure Framework (MTREF).

The revenue and expenditure numbers are aggregated from the annual budgets that municipal managers are legally required to submit to the National Treasury and the relevant provincial treasury.

“The published information is presented in a variety of ways, including aggregated municipal budget totals for the 2022/23 financial year and over the medium-term period. In addition, the information is presented per category of municipality and province,” said the Treasury.

Highlights include:

• The aggregated budgeted revenue for 2022/23 is R529.7 billion, which is expected to increase to R558.1 billion in 2023/24 and R593.9 billion in 2024/25;

• Total municipal expenditure in 2023/24 is estimated to be R557.4 billion, increasing to R582.1 billion in 2023/24 and R614.5 billion in 2024/25. Total expenditure for 2022/23 is 5.1 per cent higher than the adjusted budget for 2021/22 financial year;

• Municipalities will realise operating deficits on the operating budgets in the 2022/23 financial year as the total operating expenditure increases at a higher rate than the revenue projections. This is an indication that municipalities are living beyond their means and a first sign of financial challenges. However, the situation is projected to improve in the outer years of the 2022/23 MTREF as operating surpluses will be realised;

• A net deficit of R269.6 million is expected in the 2022/23 financial year, which improves to a surplus of R3.5 billion in 2023/24 and R7.3 billion in 2024/25;

• The main cost drivers are employee related costs and materials and bulk purchases representing 28.9 per cent and 32.7 per cent of the operating expenditure respectively.Municipalities are experiencing a two-fold impact of the high electricity and water tariff increases; lower sales levels owing to changes in consumption patterns and increased bad debt as a result of affordability pressures;

• Capital expenditure increased by 1 per cent to R69.7 billion in 2022/23 compared to the original budget for the 2021/22 financial year. Capital expenditure in aggregate represents 12.5 per cent in 2022/23, 11.7 per cent in 2023/24 and 11.4 per cent in2024/25 of the overall budget of municipalities;

Trading services (electricity, water, wastewater management and waste management) represents 49.7 per cent of the total capital expenditure of R69.7 billion in 2022/23 and slightly decreases to 49.1 per cent by 2024/25;

• The 2022/23 capital expenditure budget reflects a R43.8 billion investments in new infrastructure which is 62.8 per cent of the total aggregated capital budget. Investment in the renewal and upgrading of existing assets is much lower at R10.9 billion (15.6 per cent) and R15.1 billion (21.6 per cent) of the total capital budget respectively; and

• Reporting on operational repairs and maintenance figures has been institutionalised as part of Section 71 in-year reporting. Municipalities allocated R27.7 billion to repairs and maintenance of assets in 2022/23. This will increase to R29.2 billion in 2023/24 and to R30.9 billion in 2024/25.

National Treasury publishes local government MTREF information on an annual basis.

Regularly published budget information enables communities to hold their municipal councils to account. The information is also used by National Treasury as the basis for the In-year Management, Monitoring and Reporting System for Local Government (IYM).

The Section 71 reports published by the National Treasury give an account of actual revenue collection and spending by municipalities per quarter against their budgeted figures. All this information feeds into the Municipal Money open local government data portal and can be accessed on: www.municipalmoney.gov.za.

In addition, the Municipal Money time series data can be accessed directly from http://municipaldata.treasury.gov.za.

A new development that facilitate transparency is the GoMuni portal which can be accessed at https://lg.treasury.gov.za/ibi_apps/signin  by clicking on the public access tab.

To improve the quality of reporting, the Municipal Budget and Reporting Regulations promulgated in 2009 prescribed new budget reporting formats for municipalities. In terms of the 2009 regulations, municipalities had to submit their 2022/23 MTREF budgets in the prescribed A1 Schedules as per the regulations.

In addition, with the implementation of the Municipal Standard Chart of Accounts (mSCOA) on 1 July 2017, municipalities must now prepare their budgets at the posting level over all segments as prescribed in the mSCOA classification framework.

All financial systems must have the facility to produce the A1 Schedule directly from their financial systems from the mSCOA classification framework.

Therefore, municipalities must put controls in place to ensure alignment of the adopted A1 Schedule to the financial system and the mSCOA data strings submitted to National Treasury. This publication is therefore based solely on the new regulated framework in terms of mSCOA.