Province of the

EASTERN CAPEDEPARTMENT OF PUBLIC WORKS

Devolution of Property Rates and Taxes Grant

PRESENTED BY : EUGENE V. JOOSTECHIEF FINANCIAL OFFICER

24th May 2011

Overview• Conditional Grant Summary• Conditional Grant Expenditure to 31 December• Factors Contributing to Increased Expenditure: Municipal

Finance Unit• Factors Contributing to Increased Expenditure: Provincial

Immovable Asset Register• Remaining Challenges• Material Discrepancies in Amounts Outstanding between

Municipalities & DPW• Rates and Taxes Charged on Non-Provincial Properties• Outstanding Amounts Prior to 1 July 2008

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Conditional Grant Summary1 April to 31 December 2010

Municipal YearA

Amount Appropriated Roll Over Total Allocation Rates & Taxes

Grant Paid

08/09 119,638,000 119,638,000 60,009,784

09/10 134,061,000 59,030,000 193,091,000 108,577,000

10/11 147,467,000 135,962,000 283,429,000 134,372,199

Total R 401,166,000 194,992,000 596,158,000 302,958,983

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The total amount spent as at 31st March amounts to R220,538,907 or 78%

Conditional Grant Expenditure 1 April to 31 December 2010

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District Municipality Local Municipality ORIGINAL

ALLOCATIONEXPENDITURE %

NMA Nelson Mandela Bay Nelson Mandela Bay Metro 74 903 49 103 66%

EC101 Camdeboo 3 878 2 731 70%DC10: Cacadu 20 8 40%EC102 Blue Crane Route 2 525 1 423 56%EC103 Ikwezi 1 319 248 19%EC104 Makana 6 063 7 283 120%EC105 Ndlambe 1 459 892 61%EC106 Sundays River Valley 1 459 769 53%EC107 Baviaans 1 773 636 36%EC108 Kouga 1 815 1 046 58%EC109 Kou-Kamma 1 863 95 5%

EC121 Mbhashe 1 280 308 24%EC122 Mnquma 2 188 799 37%EC123 Great Kei 650 0%EC124 Amahlati 1 145 237 21%EC125 Buffalo City 29 763 20 480 69%EC126 Ngqushwa 1 522 119 8%EC127 Nkonkobe 9 451 1 515 16%EC128 Nxuba 59 084 8 126 14%

DC10:Cacadu

DC12 Amatole

Conditional Grant Expenditure 1 April to 31 December 2010

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EC131 Inxuba Yethemba 2 254 0%EC132 Tsolwana 183 0%EC133 Inkwanca 1 005 302 30%EC134 Lukhanji 3 719 2 331 63%EC135 Intsika Yethu 950 0%EC136 Emalahleni 497 52 10%EC137 Engcobo 656 212 32%EC138 Sakhisizwe 699 0%

EC141 Elundini 1 165 1 135 97%EC142 Senqu 533 160 30%EC143 Maletswai 559 187 33%EC144 Gariep 3 300 1 808 55%

EC151 Mbizana 2 250 768 34%EC152 Ntabankulu 568 66 12%EC153 Ngquza Hill 3 404 0%EC154 Port St Johns 1 406 587 42%EC155 Nyandeni 470 51 11%EC156 Mhlontlo 671 573 85%EC157 King Sabata Dalindyebo 51 000 27 251 53%

EC442 Umzimvubu 936 479 51%EC441 Matatiele 5 294 2 592

TOTAL 283 429 134 372 47%

DC44 Alfred Nzo

DC13 Chris Hani

DC14 Ukhahlamba

DC15 Or Tambo

Factors Contributing to Increased Expenditure: Municipal Finance Unit

• A strategically focused Municipal Finance Unit has been established and 3 Managers and 8 Assistant Managers have been appointed. The managers are supported by 9 administrative officials.

• This unit is dedicated to all activities relating to municipalities and is responsible for the payment and reconciliation of rates and taxes and utilities (electricity / water / refuse) accounts.

• Each Manager has been allocated a group of municipalities and is responsible for the resolution of queries, the processing of payments and the reconciliation of accounts.

• Although the roll over has contributed to a reduced reported expenditure – at year end 78% of the grant was spent

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Factors Contributing to Increased Expenditure: Provincial Immovable Asset Register

The department received an unqualified audit opinion for the current year as the Auditor General was satisfied with the completeness of the GRAP compliant Immovable Asset Register (IAR). The IAR will:• facilitate the scientific calculation of the annual liability to municipalities. •facilitate accurate cash flows projections.•enable the department to apply for the correct annual appropriation•shorten the payment turnaround process due to reduced verification procedures

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Remaining Challenges

• Remaining outstanding debt relating to 2008 / 2009 and 2009 / 2010 although vastly reduced

• Material discrepancies between amounts reported as outstanding by municipalities and by the department

• Rates and Taxes charged on properties that are unregistered, properties on un-surveyed land and properties on municipal land

• Rates and taxes charged on provincial roads – the value on which the rateable amount is arrived at

• Amounts due by National Public Works prior to devolution (30 June 2008)

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Factors Contributing to Outstanding Debt for 2008 / 2009 and 2009 / 2010

• Incorrect invoicing by municipalities (e.g. incorrect valuations used for the calculation of rates, invoices at incorrect tariffs)

• Invoicing by municipalities on properties not owned by the province (the devolution took place based on an unaudited and unverified immovable asset base)

• Invoicing outside of the computerised system (i.e. manual invoices)

• The financial management capacity at the municipalities in the Eastern Cape remains a challenge

• Unallocated payments by municipalities

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Rates and Taxes Charged on Non-Provincial Properties

• The department is being invoiced rates and taxes on private property, property owned by National and property owned by the municipality itself. These errors are not being corrected in the municipality and continue to reflect as owing by the department.

• Municipalities are charging rates and taxes on un-surveyed land.

• Municipalities are charging rates and taxes on unregistered land.

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Outstanding Amounts Prior to 1 July 2008• The Devolution of Property Rates and Taxes Grant became

effective on the 1 April 2008 for rates and taxes charged in the municipal financial year 1 July 2008 to 30 June 2009.

• This transition from national to provincial was not effectively managed by municipalities

• The outstanding balances due by National Public Works at 30 June 2008 (invoices issued July 2007) were not transferred to a separate account by municipalities – these were charged to the province.

• The province is being charged interest on the outstanding balances of National Public Works at 1 July 2008

• Municipalities cannot provide all the supporting documents for the outstanding amounts at 1 July 2008

• The municipalities continue to reflect these amounts as due by the province.

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Prior to 1 July 2008Estimated Amounts Due by National per MunicipalityMunicipality R Outstanding Municipality R Outstanding Municipality R Outstanding

Amahlathi 5,113.92 Intsika Yethu 0.00 Ndlambe 669,606.09

Baviaans Inxuba Yethemba 188,554.79 Nelson Mandela Bay

Blue Crane Route (33,866.05) King Sabata Dalindyebo 0.00 Ngqushwa 0.00

Buffalo City 848,755.53 Kouga 47,247.48)Nkonkobe 0.00

Cacadu District 0.00Koukamma 15,846.97 Ntabankulu 0.00

Camdeboo 44,484.28 Lukhanji 1,974,793.99 Nxuba 45,916.28

Elundini 224,701.22 Makana 3,328,976.58 Nyandeni 0.00

Emalahleni 103,681.70 Maletswai 7,674.29Port St Johns 224,197.04

Engcobo 3,121.87Matatiele 503,057.19 Sakhisizwe 18,894.34

Gariep 77,879.57 Mbashe 74,170.79 Senqu 4,888.64

Great Kei 0.00Mbizana 0.00Sundays River Valley 306,771.82

Ikwezi (1,258.07) Mhlontlo 0.00 Tsolwana 199,323.38

Ingquza Hill 1,697,449.95 Mnquma 98,230.42 Umzimvubu 0.00

Inkwanca 0.00 TOTAL 10,678,214.01

Way Forward

• The department waiting for a legal opinion on whether it is liable for the payment of rates and taxes on un-surveyed land (note there are schools and clinics on this land)

• Complete 2 of the Rates and Taxes Project to address– The detail behind the amounts reported to Provincial

Treasury as outstanding by Provincial Public Works– The reconciliation of the amounts outstanding in the

municipality’s records to the amounts in the department’s records

– To verify the liability split between National and Provincial Public Works

– To pay all outstanding amounts that are not disputed13

Province of the

EASTERN CAPEDEPARTMENT OF PUBLIC WORKS 14

Questions