Kindly take note of the below communication released by the National Treasury on Thursday, 30 January 2020 regarding to the upcoming Adjustment Budget.
In terms of regulation 23(1) of the Municipal Budget and Reporting Regulations (MBRR), an adjustments budget referred to in section 28(2)(b), (d) and (f) of the Municipal Finance Management Act, 2003 (No 56 of 2003) (MFMA) may be tabled in the municipal council at any time after the mid-year budget and performance assessment has been tabled in council, but not later than 28 February of the current year.
It should be emphasized that section 18 of the MFMA requires that both the annual and the adjustments budget must be adequately funded. National Treasury has developed a budget funding assessment methodology and a funding assessment tool to test whether municipal budgets are funded. The tool is utilised by the National and provincial treasuries and the results of the funding assessment tool will be communicated to all municipalities going forward.
As per regulation 24 of the MBRR, the adjustments budget must be submitted to the National and relevant provincial treasury in both printed and electronic from within 10 working days after it has been tabled in the municipal council. Thereafter, the funding assessment test will be undertaken by the National Treasury and relevant provincial treasuries. Although municipalities are legally only required to submit the adjustments budget to the National Treasury and provincial treasuries within 10 working days after the tabling thereof in the municipal council, the risk is that your municipality might adopt an unfunded adjustments budget and as a result will be not be eligible to any national transfers.
To ensure that your municipality table a funded adjustments budget, the National and relevant provincial treasuries are willing to conduct a funding assessment test on your adjustments budget prior to it being tabled in Council. The budget information that will be used to assess the funding of the adjustment budget will be extracted from the mSCOA data strings. Should your municipality be interested in having the 2019/20 adjustments budget assessed to determine if it is adequately funded prior to tabling in Council, the data strings for the draft adjustments budget (ADJB) must be uploaded on the Local Government Portal immediately as agreed with the budget analyst.
It is important to note that mSCOA requires that the adjustments budget must be locked on the financial systems in order to generate data strings. However, there is no limitation to the number of adjustments budgets data strings that may be submitted to the Local Government Portal. Therefore, if amendments are required to your adjustments budget to ensure that it is funded, the municipality will be able to submit a revised adjustments budget to the portal. Importantly, municipalities should liaise with their respective financial system vendor to make the arrangements necessary in this regard and to confirm that the cost thereof is covered in the service level agreement with the vendor .
It should also be noted that the funding assessment test will be done for all adopted adjustment budgets, regardless of whether an assessment was done prior to the adjustments budgets being tabled in Council or not. However, it should be reiterated that those municipalities that have adopted unfunded adjustments budgets will not receive their 16 March 2020 tranche of the local government equitable share until the adjustments budget is funded.
Lastly, please be reminded that the adjustments budget, ADJB data strings, and regulated Schedule B must be prepared directly in and generated from the financial system. Not only is this a requirements in terms of the mSCOA Regulations, but also the only way to ensure that your municipality adopted adjustments budget (Schedule B) align to the ADJB data strings. When the National and relevant provincial treasuries conduct their verification processes to verify this alignment, it will become very clear which municipalities do not comply with the mSCOA Regulations.
If you have any queries, please contact your Service Delivery Manager.