CFO FORUM MEETING

MOSSEL BAY

5 & 6 DECEMBER 2011

• What is a standard?

• 1. Put at its simplest, a standard is an

agreed, repeatable way of doing

something.

• 2. It is a published document that contains

a technical specification or other precise

criteria designed to be used consistently

as a rule, guideline, or definition.

• 3. Standards help to make life simpler and

to increase the reliability and the

effectiveness of many goods and services

we use.

• 4. Standards are created by bringing

together the experience and expertise

of all interested parties such as the

producers, sellers, buyers, users and

regulators of a particular material,

product, process or service.

• 5. Standards are designed for

voluntary use and do not impose any

regulations. However, laws and

regulations may refer to certain

standards and make compliance with

them compulsory.

• 6. Any standard is a collective

work. Committees of

manufacturers, users,

research organizations,

government departments and

consumers work together to

draw up standards that evolve

to meet the demands of

society and technology.

7. Something considered by an authority or by

general consent as a basis of comparison; an

approved model.

8. An object that is regarded as the usual or

most common size or form of its kind: We

stock the deluxe models as well as the

standards.

9. A rule or principle that is used as a basis

for judgment:

10. An average or normal requirement, quality,

quantity, level, grade, etc.

Standard Deviation and Variance

Deviation just means how far from the normal Standard Deviation The Standard Deviation is a measure of how spread

out numbers are. Its symbol is σ (the Greek letter sigma) The formula is easy: it is the square root of the

Variance. So now you ask, "What is the Variance?“

The Variance is defined as: The average of the squared differences from the

Mean. To calculate the variance follow these steps:

•Work out the Mean (the simple average of the

numbers) •Then for each number: subtract the Mean and square

the result (the squared difference). •Then work out the average of those squared

differences. (Why Square?)

Mean =

600 + 470 + 170 + 430 + 300 =

1970

= 394

5 5

Example You and your friends have just measured

the heights of your dogs (in millimeters):

The heights (at the shoulders) are: 600mm, 470mm, 170mm,

430mm and 300mm. Find out the Mean, the Variance, and the Standard Deviation. Your first step is to find the Mean: Answer:

So the mean (average) height is 394 mm. Let's plot this on the chart:

To calculate the Variance, take each difference, square it, and

then average the result:

So, the Variance is 21,704. And the Standard Deviation is just the square root of

Variance, so: Standard Deviation: σ = √21,704 = 147.32... = 147 (to

the nearest mm)

And the good thing about the Standard Deviation is

that it is useful. Now we can show which heights are

within one Standard Deviation (147mm) of the Mean:

So, using the Standard Deviation we have a "standard" way of knowing what is normal, and

what is extra large or extra small.

Rottweiler's are tall dogs. And Dachshunds

are a bit short ... but don't tell them!

ARE MUNICIPALITIES LIKE

DACHSHUNDS ???

•ARE WE A BIT SHORT IN CASH ?

•OVER BORROWED ?

•ARE SALARIES TOO HIGH ?

•CANNOT AFFORD TO PAY FOR

BULK SERVICES – WATER AND

ELECTRICITY ?

•LACK OF MAINTAINING

INFRASTRUCTURE ?

•CANNOT AFFORD SERVICE DELIVERY AT

A HIGH OR ACCEPTABLE STANDARD or

NORM ?

CANNOT AFFORD TO PROVIDE IN CASH

FOR THE REPLACEMENT OF

INFRASTRUCTURE OF THE PAST AND

PROVIDE FOR THE FURTURE

(DEPRECIATION)

•WE KNOW WE ARE IN SOME SORT OF

TROUBLE, BUT PLEASE DON’T TELL US

This Ratio determines whether

there is sufficient cash to finance

operational requirements

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

180.00

2006 2007 2008 2009 2010 2011

131.99

149.40 161.22

125.98

108.48 110.22

Cash available for operating purposes

This Ratio determines the

amount of Revenue required to

cover short-term debt

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

2006 2007 2008 2009 2010 2011

11.26

16.33

13.65 13.84 13.58

11.03

Short-term debt

Total long-term debt as % of

total revenue

0.00

5.00

10.00

15.00

20.00

25.00

2006 2007 2008 2009 2010 2011

14.49 13.10

9.09

24.21

19.29

17.32

Total long-term debt as % of total revenue

This Ratio measures the manner

in which current debtors are

managed

0.95

5.17

2.52

3.28

2.80 2.42

0.00

1.00

2.00

3.00

4.00

5.00

6.00

2006 2007 2008 2009 2010 2011

Debtors movement

This Ratio is used to measure the

turnover rate of debt in days

46

48

50

52

54

56

58

2006 2007 2008 2009 2010 2011

50

52

54

57 57 57

Debtors turnover (Days)

The number of days required to pay

Creditors

0

10

20

30

40

50

60

70

2006 2007 2008 2009 2010 2011

42

64 63

46 41

37

Creditors test(Days)

The extend to which the

operating budget is cash funded

is measured in this Ratio

-500

0

500

1000

1500

2000

2006 2007 2008 2009 2010 2011

1918

420

1900

-7 -418

278

Cash funded

Gives an indication of the ability of the

Municipality to meet its short term

obligations with short term liquid assets

0.000

0.500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

2006 2007 2008 2009 2010 2011

3.432

2.587

3.147

4.057 4.042 3.936

ASSET TEST RATIO

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

2006 2007 2008 2009 2010 2011

3.53

2.72

3.30

4.15 4.12 4.02

CURRENT RATIO

This Ratio Calculates how many times

current assets cover current liability

This Ratio indicates how often in a year all

debtors on average pay back what they

owe to the Municipality

0.000

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

9.000

10.000

2006 2007 2008 2009 2010 2011

7.147 7.773

6.691 7.171

9.005

8.134

TURNOVER OF ACCOUNTS RECEIVABLE

This Ratio shows the relationship

between Interest and Cash

0.000

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

2006 2007 2008 2009 2010 2011

26.733 27.121

36.597 36.956

25.857 26.381

CASH TO INTEREST

This Ratio Indicates at what level of

debt a Municipality is functioning

relative to its cash balances

-

0.200

0.400

0.600

0.800

1.000

1.200

1.400

1.600

2006 2007 2008 2009 2010 2011

0.797

1.444

0.719 0.748 0.776 0.792

DEBT TO CASH

This Ratio shows the relationship between

the cash available in a Municipality relative

to its net surplus

4.686 3.739 1.868

-159.625

-7.193

11.560

-180.000

-160.000

-140.000

-120.000

-100.000

-80.000

-60.000

-40.000

-20.000

0.000

20.000

40.000

2006 2007 2008 2009 2010 2011

CASH TO INCOME

Assist with the monitoring of consumers

debtors

0.920

0.930

0.940

0.950

0.960

0.970

0.980

0.990

1.000

1.010

2006 2007 2008 2009 2010 2011

0.999

0.947

0.977

0.967

1.001

0.968

PAYMENT LEVEL

Assist with the monitoring of

consumers debtors

-0.150

-0.100

-0.050

0.000

0.050

0.100

0.150

0.200

0.250

0.300

2006 2007 2008 2009 2010 2011

0.110

0.211

-0.095

0.024

-0.102

0.260

LONG OUTSTANDING DEBTORS RECOVERD

Employee Related Cost

As % of Total Expenditure As % of Total Income

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2006 2007 2008 2009 2010 2011

40%

31% 32%

26% 24%

28%

EMPLOYEE RELATED COST AS % OF TOTAL EXPENDITURE

0%

5%

10%

15%

20%

25%

30%

35%

2006 2007 2008 2009 2010 2011

35%

27%

23%

26% 26% 27%

EMPLOYEE RELATED COST AS % OF TOTAL INCOME

0%

10%

20%

30%

40%

50%

60%

2006 2007 2008 2009 2010 2011

52%

41% 42%

26%

31%

39%

EMPLOYEE RELATED COST AS % OF TOTAL EXPENDITURE EXCLUDING

BULK PURCHASES

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2006 2007 2008 2009 2010 2011

43%

34%

28%

33% 34% 37%

EMPLOYEE RELATED COST AS % OF TOTAL INCOME EXCLUDING BULK

PURCHASES

0%

10%

20%

30%

40%

50%

2006 2007 2008 2009 2010 2011

45%

33% 32% 33% 34% 36%

EMPLOYEE RELATED COST AS % OF TOTAL INCOME EXCLUDING CAPITAL GRANTS &

GAINS ON DISPOSALS & SALE OF LAND AND INVENTORIES , DONATED PPE

Repairs and Maintenance

0%

1%

2%

3%

4%

5%

6%

7%

5%

7% 7%

6%

5%

5%

REPAIRS AND MAINTENANCE AS % OF TOTAL EXPENDITURE

4%

6%

5%

6%

5% 5%

0%

1%

2%

3%

4%

5%

6%

7%

2006 2007 2008 2009 2010 2011

REPAIRS AND MAINTENANCE AS % OF TOTAL INCOME

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2006 2007 2008 2009 2010 2011

6%

9% 9%

8%

6%

7%

REPAIRS AND MAINTENANCE AS % OF TOTAL EXPENDITURE

EXCLUDING BULK PURCHASES

0%

1%

2%

3%

4%

5%

6%

7%

8%

2006 2007 2008 2009 2010 2011

5%

7%

6%

8%

7% 7%

REPAIR AND MAINTENANCE AS % OF TOTAL INCOME

EXCLUDING BULK PURCHASES

0%

2%

4%

6%

8%

2006 2007 2008 2009 2010 2011

5%

7% 7% 8%

7% 7%

REPAIRS AND MAINTENANCE AS % OF TOTAL INCOME EXCLUDING CAPITAL GRANTS &

GAINS ON DISPOSALS & SALE OF LAND AND INVENTORIES, DONATED PPE

Interest Paid

2.40%

2.17%

1.91% 1.91%

2.07%

1.80%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

2006 2007 2008 2009 2010 2011

INTEREST AS % OF TOTAL EXPENDITURE

2.07%

1.87%

1.39%

1.92%

2.23%

1.73%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

2006 2007 2008 2009 2010 2011

INTEREST PAID AS % OF TOTAL INCOME

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

3.10%

2.86%

2.50%

2.43%

2.65%

2.53%

INTEREST PAID AS %

OF TOTAL EXPENDITURE

EXCLUDING BULK

PURCHASES

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

2.57%

2.36%

1.68%

2.45%

2.93%

2.39%

INTEREST PAID AS % OF

TOTAL INCOME

EXCLUDING BULK

PURCHASES

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

2006 2007 2008 2009 2010 2011

2.72%

2.30%

1.93%

2.45%

2.90%

2.30%

INTEREST PAID AS A % OF TOTAL INCOME EXCLUDING CAPITAL GRANTS & GAINS ON DISPOSALS & SALE OF LAND AND INVENTORIES,

DONATED PPE

Depreciation

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

2006 2007 2008 2009 2010 2011

5.38% 5.96% 5.88%

23.28%

19.36% 17.98%

DEPRECIATION AS % OF TOTAL INCOME

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

2006 2007 2008 2009 2010 2011

6.26% 6.91%

8.08%

23.18%

17.92% 18.72%

DEPRECIATION AS % OF TOTAL EXPENDITURE

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

2006 2007 2008 2009 2010 2011

8.07% 9.11% 10.60%

29.48%

23.01% 26.29%

DEPRECIATION AS % OF TOTAL EXPENDITURE

EXCLUDING BULK PURCHASES

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

2006 2007 2008 2009 2010 2011

6.68% 7.52% 7.11%

29.65%

25.43% 24.86%

DEPRECIATION AS % OF TOTAL INCOME EXCLUDING BULK

PURCHASES

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

2006 2007 2008 2009 2010 2011

7.07% 7.32% 8.19%

29.70%

25.17% 23.96%

DEPRECIATION AS % OF TOTAL INCOME EXCLUDING CAPITAL GRANTS, DONATED PPE,GAINS ON DISPOSAL,SALE ON LAND AND PPE

Contracted Services

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

2006 2007 2008 2009 2010 2011

0.91%

1.07% 1.07% 1.00%

0.79% 0.83%

CONTRACTED SERVICES AS % OF TOTAL EXPENDITURE

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

2006 2007 2008 2009 2010 2011

0.78%

0.92%

0.78%

1.01%

0.86% 0.80%

CONTRACTED SERVICES AS % OF TOTAL INCOME

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

2006 2007 2008 2009 2010 2011

1.17%

1.41% 1.40%

1.27%

1.02%

1.16%

CONTRACTED SERVICES AS % OF TOTAL EXPENDITURE EXCLUDING

BULK PURCHASES

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

2006 2007 2008 2009 2010 2011

0.97%

1.17%

0.94%

1.28%

1.12% 1.10%

CONTRACTED SERVICES AS % OF TOTAL INCOME EXCLUDING BULK

PURCHASES

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

2006 2007 2008 2009 2010 2011

1.03%

1.13% 1.08%

1.28%

1.11% 1.06%

CONTRACTED SERVICES AS % OF TOTAL INCOME

EXCLUDING CAPITAL GRANTS, GAINS ON

DISPOSAL,SALE OF LAND AND PPE AND DONATED

PPE

Property Rates

19%

Electricity

42%

Water

9%

Refuse

4%

Sewerage

6%

Rent of Facilities

and Equipment

1%

Interest Earned:

External

Investments

3%

Interest Earned:

Outstanding

Debtors

0%

Fines

2%

Licenses and

Permits

1%

Income For

Agency Services

1%

Other

Grants

8%

Other Revenue

4%

Income 2010/2011

THE WAY FORWARD

• Swartland Municipality will get information on the

said excell format from the various 5 B municipalities

in the West Coast via the West Coast District

Municipality. WCDM will do the same with all District

Municipalities

• Put it together

• Do the necessary calculations

• Calculate the averages

• Set the standards

• Calculate the deviations and variances

• Give feedback to municipalities, Prov. Tes and rollout

to the Western Cape – then inform NT to follow.

BAIE DANKIE

THANK YOU

ENKOSI