Cash balance at the end of the financial year.
A municipality's cash balance refers to the money it has in the bank that it can access easily. If a municipality's bank account is in overdraft it has a negative cash balance. Negative cash balances are a sign of serious financial management problems. A municipality should have enough cash on hand from month to month so that it can pay salaries, suppliers and so on.
Months of operating expenses can be paid for with the cash available.
Cash coverage measures the length of time, in months, that a municipality could manage to pay for its day-to-day expenses using just its cash reserves. So, if a municipality had to rely on its cash reserves to pay all short-term bills, how long could it last? Ideally, a municipality should have at least three months' of cash cover.
Difference between budgeted operating expenditure and what was actually spent.
This indicator is about how much more a municipalty spent on its operating expenses, than was planned and budgeted for. It is important that a municipality controls its day-to-day expenses in order to avoid cash shortages. If a municipality sigificantly overspends its operating budget this is a sign of poor operating controls or something more sinister.
Overspending by up to 5 percent is usually condoned; overspending in excess of 15 percent is a sign of high risk.
Years 2019-2020 and after:
This does not use restated audited actuals.
Years 2018-2019 and before:
Difference between budgeted capital expenditure and what was actually spent.
Capital spending includes spending on infrastructure projects like new water pipes or building a library. Underspending on a capital budget can lead to an under-delivery of basic services. This indicator looks at the percentage by which actual spending falls short of the budget for capital expenses. Persistent underspending may be due to underresourced municipalities which cannot manage large projects on time.
Municipalities should aim to spend at least 95 percent of their capital budgets. Failure to spend even 85 percent is a clear warning sign.
The capital budget of a municipality consists of the capital projects that the municipality plans to do for the next three years arranged under the various functions of the municipal budget. Capital projects can be road upgrades, water distribution, community parks etc, linked to the relevant municipal function.
Spending on Repairs and Maintenance as a percentage of Property, Plant and Equipment.
Infrastructure must be maintained so that service delivery is not affected. This indicator looks at how much money was budgeted for repairs and maintenance, as a percentage of total fixed assets (property, plant and equipment). For every R10 spent on building/replacing infrastructure, R0.80 should be spent every year on repairs and maintenance.
This translates into a Repairs and Maintenance budget that should be 8 percent of the value of property, plant and equipment.
Unauthorised, Irregular, Fruitless and Wasteful Expenditure as a percentage of operating expenditure.
Unauthorised expenditure means any spending that was not budgeted for or that is unrelated to the municpal department's function. An example is using municipal funds to pay for unbudgeted projects. Irregular expenditure is spending that goes against the relevant legislation, municipal policies or by-laws. An example is awarding a contract that did not go through tender procedures. Fruitless and wasteful expenditure concerns spending which was made in vain and would have been avoided had reasonable care been exercised. An example of such expenditure would include paying a deposit for a venue and not using it and losing the deposit.
The value of a municipality's short-term assets as a multiple of its short-term liabilities.
The current ratio compares the value of a municipality's short-term assets (cash, bank deposits, etc) compared with its short-term liabilities (creditors, loans due and so on). The higher the ratio, the better. The normal range of the current ratio is 1.5 to 2 (the municipality has assets more than 1.5 to 2 times its current debts). Anything less than that and the municipality may struggle to keep up with its payments.
The municipality's immediate ability to pay its current liabilities.
Liquidity ratios show the ability of a municipality to pay its current liabilities (monies it owes immediately such as rent and salaries) as they become due, and their long-term liabilities (such as loans) as they become current.
These ratios also show the level of cash the municipality has and / or the ability it has to turn other assets into cash to pay off liabilities and other current obligations.
The percentage of new revenue (generated within the financial year) that a municipality actually collects.
Municipalities don't manage to collect all of the money they earn through rates and service charges. This measure looks at the percentage of new revenue that a municipality collects. It is also referred to as the Current Debtors Collection Ratio.
Total income for this municipality
This shows how much of this municipality's income is from its own activities that it bills for, and how much is paid to it by national and provincial government.
Municipalities are supposed to be able to support themselves financially - to fund the services they provide from the rates paid by the local residents.
A heavy reliance on outside funding is a cause for concern.
From residents paying for water & electricity, rates, licenses & fines, and from interest and investments.
From the Equitable Share of taxes, and Grants from national and provincial Government.
Total locally-generated income
Total transfers to this municipality
Transfers is income that the municipality receives from other parts of government.
This shows how much income this municipality receives from each type of transfer.
Each type of transfer is intended for an express purpose, and should not be used for anything else.
Total income from conditional grants from national departments for this municipality.
Conditional grants are money paid to municipalities and provinces to achieve specific outcomes.
This might be to ensure money is available for building infrastructure, or ensuring staff at the municipality receive the training needed to perform their job.
This shows how much money has been allocated to the municipality for each grant that they are receiving, how much has been paid to the municipality so far, and how much they have spent.
Total transfers from provincial government to this municipality.
Provincial transfers are income from the government of the province where this municipality is located.
This income could be for services that are provided by the municipality under an agreement with the province, when it is actually the provincial government's responsibility. This can happen when the municipality is better-placed to provide that service.
It could also be for conditional grants paid by the province for disaster relief or other purposes.
This shows how much income the municipality receives from each provincial department.
How much income is planned for, and how much is actually received?
Municipalities must plan for the income they can realistically receive.
Unrealistic plans result in disappointing service delivery.
On the time series we can see whether the municipality regularly over- or under-estimates how much money it will receive.
Which sources provided more or less income than planned?
By looking at where the differences in planned and actual income occurred, we can start seeing whether it was bad planning on unforeseeable circumstances.
Staff salaries and wages as a percentage of operating expenditure.
Employee-related costs are typically the largest portion of operating expenditure, but they should not grow so large that they threaten the sustainability of the operating budget.
The normal range for this indicator is between 25% - 40% of total operating expenditure. Municipalities must guard against spending too much on staff while also making sure they have the people they need to deliver services effectively.
Costs of contractor services as a percentage of operating expenditure.
Private contractors are sometimes needed for certain work, but they are usually more expensive than municipal staff. This should be kept to a minimum and efforts should be made to provide services in-house, where possible.
This measure is normally between 2 percent and 5 percent of total operating expenditure.
Municipalities spend money on providing services and maintaining facilities for their residents.
How much did the municipality plan on spending, and how much did they actually spend?
Running a municipality and delivering services costs money.
By looking at how much money a municipality planned to spend, and how much they actually spent, we can understand more of what happened during the year and what challenges they might have had.
A municipality might underspend - spend less than planned - if they did not get as much income as they planned, or if they did not manage their work properly. There might also have been other external disruptions.
What did the municipality spend more on, and where did they spend less than planned?
By looking at which items the municipality spent more on, and which they spent less on, we can get a sense of which services might have had funding challenges, or disruptions that slowed work in that area.
Some kinds of spending is also more flexible than others - if the municipality has less money than planned and has payment that can not be adapted to circumstances, the more flexible spending areas will have to suffer.
In order to compare the municipal bills of different household types, three example households have been defined. These households differ in the ways that generally affect household bills: municipal home valuation, monthly household water usage, electricity usage, and whether the household qualifies for indigent status.
Each municipality calculates how their tariff system would apply to these example households each year to come up with these example household bills for comparison over time, between households, and between municipalities each year.
All municipalities must provide Free Basic Services, specifically 50kWh of electricity and 6kl water, at no cost to households registered as indigent with the municipality. The Equitable Share transfer to municipalities guarantees that municipalities have funds to provide these services.
This household represents a family who qualify for indigent status after registering based on low income. They have part of their monthly bill covered as Free Basic Services. Individual municipalities may choose to further subsidise their bill.
This household represents a small household who live in a home valued between R500,000 and R700,000 and do not qualify for indigent status.
They consume 25kl of water and 500kWh of electricity per month.
R500 - R700k
This household represents a large household who do not qualify for indigent status and live in a home valued R700,000.
They consume 30kl of water and 1000kWh of electricity each month.
Please note: These example households were last updated on 17 April 2009. They are in the process of being updated to match more recent property values. However, they are still useful for comparing on the basis of the household attributes even though the name “middle income” might not apply to this house valuation any more.
This shows the relative sizes of the monthly bills for each of the example households. The range between the bills for the different households is highlighted above.
Household bills can differ due to consumption and the tariff system used by the municipality.
Sometimes there are big differences between different levels of consumption since municipalities can charge different rates for a base level of consumption, and higher rates for further consumption, to encourage saving resources
.Indigent households also have some or all of their consumption covered by the Free Basic Services allowance they are eligible for.
Average increase over the financial years
A middle income household use as base a property value of R700 000, consumption of 1 000 kWh electricity and 30kl water.
The bill is made up of property rates, service charges for electricity, water, sanitation and refuse removal and various other charges which are typically small.
Minimum service standards may differ between municipalities. These standards form part of the municipality’s budget which is consulted with citizens in the period 1 April to 31 May each year.
Average increase over the financial years
The statistical standard set for affordable income households is a base property value of between R500 000 and R700 000, consumption of 500 kWh electricity and 25kl water.
A basic levy is a fixed monthly charge that does not change with the amount of service consumed. Not all municipalities use basic levies.
Average increase over the financial years
Free basic service (FBS) is defined as the minimum amount of basic levels of services, provided on a day to day basis, sufficient to cover or cater for the basic needs of the poor households.
Various sector departments have set minimum standards outlining basic amount of services or quantity to be supplied to the indigents with regards to water, energy, sanitation and refuse removal.
Only indigent households qualify for FBS and the programme is solely intended to assist them. Municipalities subject all applications to means tests to determine whether households applying meet the criteria set by their municipality to qualify for indigent status.
There are different categories of subsidies as set out by the various indigent by-laws/policies of the municipalities. In some municipalities, households qualify for 100% subsidies while other qualify for less that 100% depending on the criteria set.
The bill represented in the graph reflects what it costs the municipality to render the services to indigent households, not what each indigent household needs to pay as these costs are covered by the Equitable Share grant allocation to the municipality.
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