The GCTCA interrogates the City budget

On the 28 March 2012, the City of Cape Town tabled a draft budget amounting to just over R24 billion in operating expenditure and over R5 billion in capital expenditure.

The draft budget now follows the processes of public participation as laid out in legislation, especially the Municipal Finance Management Act. As per the MFMA, this budget is available to the public at large for everyone to have a say and input before the budget is put before the Council for debate in May.

As part of the communicated public engagement and participation process the GCTCA has submitted the following questions and requests to the City. These questions and requests were addressed to: The Executive Mayor, Ms Patricia de Lille; The Executive Deputy Mayor and Mayco member for Finance, Mr Ian Neilson; The City Manager, Mr Achmat Ebrahim and The Executive Director : Finance, Mr Kevin Jacoby.

4th April 2012

Submitted by: Mr Henri Wolfaardt, GCTCA Executive Member for Public Finance

The Greater Cape Town Civic Alliance (GCTCA) wishes to participate in the budget process as envisaged in the Municipal Systems Act No. 32 of 2000, Chapter 4. To do this the GCTCA requires detailed information regarding revenue, expenditure and other items, as per the attached Request for Information.

 

REQUEST FOR INFORMATION REGARDING THE CITY of CAPE TOWN BUDGET

The City of Cape Town Budget for 2011/12 and Draft Budget for 2012/13

The GCTCA respectfully requests that the information listed below is made available for analysis and study to enable it to participate, to offer comment and make recommendations. Because of time constraints we request your early response. We also request that expenses should be itemized for all expenses exceeding R100,000 p.a. 

Information required:

1. General:

In addition to Property Rates and Utility Services charges; 

  1. have any other municipal taxes, levies or surcharges, as contemplated in the MFPFA chapters 2 and 3, been levied over the past 5 years from July 2007 to date?
  2. are any such charges planned for 2012/13?
  3. If so, please state the details thereof by type, % of applicable tariff or amounts per type
  4. Where are these revenues reflected in the budgets?
  5. Please state the annual revenue so generated;
  6. Where and how is the public made aware of these charges?
  7. Are these charges reflected separately and clearly on monthly accounts to users?
  8. Because of its Tax related nature, are these charges free of VAT?
  9. In budget terminology, what is a “spillage”? Please provide a detailed explanation.
  10. Public streets/roads of ± 10,000 km are maintained with a budget of R59 million. Is this adequate for proper maintenance and prevention of degradation to the point of total rebuild? What is the current state of Cape Town’s streets? When last was a quality audit done?
  11. Should more funds not be allocated for this crucial infrastructure? 

 

2. Annual Report – 2010/11

Notes to the Financial Statements:

Financial Statements (Item: 9) Debtors:

Debtors as at 30.06.2011

= R7.5 bn

60 days

= R 2.4 bn

>60 but <365 days

= R3.38 bn

Impairment prov.

= R3.81 bn

Collection costs

= R175 million

  1. At what point, after what length of time, are services disconnected?
  2. At what point, after what length of time, are delinquent accounts written off?
  3. How many accounts were classified as impaired in the above instance?
  4. Are judgments always obtained for outstanding debts? Plus costs of collection?
  5. Are delinquents “blacklisted” in the council’s books to prevent further service to bad payers? 

 

3. Financial Statements (Item: 26) Property Rates:

The GVR as at 01.07.2009 shows a huge values increase of R172 bn, i.e. 27.5% since 01.07.2006, during a time of economic recession and property slump. 

  1. Are the values market related per the MPRA Sec.46 & 47?
  2. Were values compared to actual property transfers recorded at the Deeds Office?
  3. What percentage of the GVR was so compared?
  4. Were all increases in values > 10% reviewed per MPRA Sec. 52 ?
  5. Does the council plan to do a new GVR before the current GVR expires? If so, why?

 

4. Financial Statements (Items: 29 & 30) Remuneration:

Contracted services of approximately R2bn is reflected elsewhere.

  1. Should this not be part of the cost of remuneration?
  2. What cost benefit calculations were conducted when assessing whether to use outside independent contractors rather than permanent employees?
  • A huge increase in the number of employees, with a payroll increase of 80% over the last 5 years is evident, in the midst of a recession whilst the private sector was shedding jobs and many businesses were forced to close or downsize.
  • It is of great concern that no reference is made to improved productivity and efficiency. Employment and remuneration is also not disclosed in relation to levels of service delivery. A payroll increase of the level above can only be justified if such increase is proportionate to improved productivity, efficiency and levels of service, not otherwise.

We request your detailed comments on the above please.

 

5. Financial Statements “TASK” (page 89)

  1. Review & revaluation of posts?
  2. Exactly what is this?
  3. Should a total re-structuring not be considered before revaluating posts?
  4. Is a pay comparison to the private sector part of this exercise?
  5. Is a productivity comparison to the private sector part of this exercise?
  6. What productivity improvement methods are employed to reduce and contain staff numbers?

 

6. Financial Statements (Items: 42 & 43)

Potential risks of losses due to non-compliance, mal-administration, poor procurement management, poor tenders management, corruption, contracts to employees or relatives of employees, nepotism, etc. = R2bn.

  1. Were any losses actually incurred? If so, how much?
  2. What actions were taken against transgressors?
  3. Any disciplinary actions?
  4. Dismissals?
  5. Were legal actions instituted?
  6. Were criminal charges laid?

 

7. Grants received:

The city annually receives major amounts from central and provincial government, including an Equitable Share, a General Fuel Levy and an IRT grant.

  1. Are any of the grants mentioned above conditional? If so, please provide details.
  2. If not conditional, are there directives or “understandings” regarding the use of such funds?
  3. Are all grants disclosed in the budget documents? If so, where, please provide details.

 

8. Remuneration

Please provide the following information:

  1. The total, all inclusive number of employees per level, showing in-service, temporary, and vacancies separately, e.g. councilors, executives, senior managers, managers, clerks, engineers, technicians, artisans, drivers, operators, laborers, etc (showing in-service, temporary and vacancies separately) employed or budgeted for by the city council, showing average per year over the past 5 years from July 2007 to June 2012, and the budgeted figures for 2012/13;
  2. The number of employee months budgeted but not used per the above;
  3. The total remuneration cost, including all fringe benefits and perks, per level of staff for the periods specified above, i.e. the total cost to the city;
  4. The total remuneration cost budgeted, including all fringe benefits and perks, per level of staff for the periods specified above, but not used;
  5. Quarterly statistics from the National Department of Statistics (QES per P0277) indicate that local government employees are paid approximately 22% more than similar jobs in the private sector:
    1. What measures are in place to ensure that productivity levels are in line with these increased remuneration levels
    2. How is productivity measured and monitored
    3. Is productivity regularly compared to the private sector to ensure that the increased remuneration is justified
    4. What measures are applied to constantly improve productivity
    5. What steps are taken to deal with laggards/ stragglers/ under-performers
  6. Please state the total number of days annual leave, special leave, sick leave per employee level and the resulting absence level as a percentage of annual workdays, for the 5 years to 2011/12 and for 2012/13;
  7. What measures are in place to manage absenteeism, abuse of leave benefits
  8. Please state the number of resignations and retirements, per employee level, for the 5 years to 2011/12 and for 2012/13;
  9. Please state the total remuneration cost, including all fringe benefits and perks, per level of staff so “saved” for the out-of-service numbers specified above;
  10. Please state the number and cost of new appointments, per employee level, for the 5 years to 2011/12 and planned for 2012/13;
  11. Please state the number and cost of temporary employees used, per employee level, for the 5 years to 2011/12 and for 2012/13;.
  12. On average, for how long are temps employed?
  13. To comply with labour laws, are temps made out-of-service and re-employed after a short absence, or in a different post under a new employee number?
  14. Please state the number of vacancies and its budgeted cost, per employee level, for the 5 years to 2011/12 and for 2012/13;
  15. Please state the number of vacancies filled during these periods, per staff level;
  16. Where is the budgeted cost of vacancies and temporary staff reflected?
  17. Where vacancies had not been filled, what happened to the budgeted expense?
  18. What are consultants used for?
  19. Please state the number of consultants contracted and the cost involved for the 5 years to 2011/12 and planned for 2012/13;
  20. Where is the cost of consultants reflected?
  21. What types of work, and how much work has been outsourced for the 5 years to 2011/12 and is planned for 2012/13?;
  22. Please disclose the number and cost of outsourced employees used, per employee level, for the 5 years to 2011/12 and for 2012/13;
  23. Where are outsourcing expenses disclosed in the budget?

 

9. Electricity

The Annual Report shows an electricity loss of >8% at a cost of R690 million for the year to 30 June 2011. 

  1. What is being done to curtail this loss to the public purse?

Please provide detailed information regarding the composition of electricity tariffs, for the financial periods 2010/11, 2011/12, and 2012/13, unless otherwise specified. 

  1. Copies of the council’s electricity tariffs applications to NERSA for the financial periods from July 2008 to June 2013;
  2. The basic bulk purchase cost per kwh. payable to Eskom for each of these years;
  3. The “cost of distribution” as defined by NERSA and The National Treasury in numerous circulars and advisories, broken down into bulk purchase cost, remuneration, maintenance, replacements, upgrades (itemized per expense item);
  4. Other costs incidental to the supply and distribution of electricity (itemized);
  5. Please state the “Municipal Base Tariff” per the MSA for the periods above;
  6. The number of employees in the Electricity Department per level, e.g. executives, senior managers, managers, clerks, engineers, technicians, artisans, drivers, operators, laborers, etc. employed, showing average per year over the past 5 years from July 2007 to June 2012, and the budgeted figures for 2012/13;
  7. The cost of outsourced services per year as above. Where is this reflected?
  8. The cost of contracted services per year as above. Where is this reflected?
  9. Are any surcharges, levies or taxes added to or included in the retail price of electricity, forming part of the cost of electricity to the public?
  10. Please state the total revenue value of such “extras” and its percentage of the retail price, per year as above;
  11. How are such “extra” charges brought to the attention of the public?
  12. Are these “extra” charges clearly reflected on monthly accounts to users?
  13. How and for what are these charges used?
  14. Are these “extras” free of VAT because of their tax related nature?
  15. Please state the revenue per category/class of user/supply, e.g. lifeline, residential low & high use separately, business, industrial, farming, etc., showing the average unit cost per kwh for each of these, per year as above;
  16. Please state the volume of electricity losses, categorized e.g theft, lost in transmission, not metered, etc., reflecting the cost and revenue cost of such losses, per year as above;
  17. Please state the cost of free to user electricity, and the revenue cost thereof, per year as above;
  18. Please state the cost of subsidized electricity, indicating separately the cost of “extra” subsidies above the minimum prescribed by central government, and the total revenue cost of all subsidies, per year as above;
  19. What measures are in place to ensure that only the poor and the indigent are subsidized, i.e. low volume users who can afford to pay are not subsidized?
  20. The cost of bad debts written off & the number of write-offs, per year as above,
  21. What measures are in place to ensure that write-offs do not get “new” services before settling all “old” debts;
  22. Are debts consolidated and collected in total with all other debts?

 

10. Water & Sanitation:

The Annual Report shows a fresh water loss of ± 20% at a cost of R500 million for the year to 30 June 2011. 

  1. What is being done to curtail this loss to the public purse? 

Please provide detailed information regarding the composition of water tariffs, for the financial periods 2010/11, 2011/12, and 2012/13 (for comparisons), eg. 

  1. The basic bulk purchase cost per cubic meter payable to the Dept. of Water Affairs;
  2. The “cost of distribution” as per National Treasury in numerous circulars and advisories, broken down into bulk cost, remuneration, maintenance, replacements, upgrades (itemized per expense item);
  3. The other costs incidental to the supply and distribution of water (itemized);
  4. Please state the number of employees in the Water & Sanitation Department per level, e.g. executives, senior managers, managers, clerks, engineers, technicians, artisans, drivers, operators, laborers, etc. employed, showing average per year over the past 5 years from July 2007 to June 2012, and the budgeted figures for 2012/13;
  5. What was/is the cost of outsourced services. Where is this reflected? How many jobs are outsourced?;
  6. What was/is the cost of contracted services. Where is this reflected?;How many jobs are involved?
  7. Are any surcharges, levies or taxes included in the retail price to users?
  8. Are all such surcharges, levies or taxes disclosed to the public?
  9. Please state the expected revenue per category/class of user e.g. residential, business, industrial, farming, etc., showing the average unit cost per cubic meter;
  10. Please state the expected volume of water losses, categorized e.g theft, lost in transition, etc., reflecting the cost and revenue cost of such losses;
  11. Please state the cost of free to user water, and the revenue cost thereof;
  12. Please state the cost of subsidized water, indicating separately the cost of “extra” subsidies over the minimum prescribed by central government, and the total revenue cost of all subsidies;
  13. Please state the cost of bad debts written off & the number of write-offs for the past 5 years from July 2007 to June 2012, and the budgeted figures for 2012/13;
  14. What measures are in place to ensure that write-offs do not get “new” services before settling all “old” debts;
  15. Are debts consolidated and collected in total? 

 

11. Property Rates:

Please provide the following detailed information: 

  1. The total Rand value of the municipal valuation roll, and its composition, e.g. residential, business, commercial, industrial, farming, for the financial periods 2007/08, 2008/09, 2009/10, 2010/11, 2011/12, and 2012/13;
  2. The reasons/explanations for changes (up or down >5%) in the total GVR values, eg natural growth, “normal” market value increases, inflation, revaluation ;
  3. What measures are in place to verify that GVR values are market related?
  4. Are GVR values regularly (monthly, quarterly, annually, constantly) reviewed, and adjusted if not in line with market values?
  5. Please state the tariffs for various types/categories of properties as applied during the 6 years from 2008 to 2013 inclusive;
  6. Please state the gross revenue, per year, for the 6 years per the above categories;
  7. Please state the revenue cost of rebates, subsidies & discounts allowed per above categories, for the 6 years from 2008 to 2013 inclusive
  8. Please state the cost of bad debts written off & the number of write-offs per category for the past 5 years,
  9. What was the cost of the maintenance and management of the GVR, including the cost of a GVR update or review;
  10. What measures are in place to ensure that write-offs do not get “new” services before settling all “old” debts;
  11. Are debts consolidated and collected in total with all other debts?

 

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