INCA SUMMER SCHOOL 2004 REVENUE MANAGEMENT PRESENTED BY: CHRIS KAPP ZADER MUNICIPAL SERVICES (PTY)...

INCA SUMMER SCHOOL 2004INCA SUMMER SCHOOL 2004

REVENUE MANAGEMENT REVENUE MANAGEMENT

PRESENTED BY:PRESENTED BY:

CHRIS KAPPCHRIS KAPPZADER MUNICIPAL SERVICES (PTY) LTDZADER MUNICIPAL SERVICES (PTY) LTD

ONTACT DETAILS: Tel : 044 874 7815 ONTACT DETAILS: Tel : 044 874 7815 Fax : 044 874 7817Fax : 044 874 7817 Cell : 082 655 1222 Cell : 082 655 1222

Email : [email protected] : [email protected]

REVENUE MANAGEMENTREVENUE MANAGEMENT

Legal framework (policies and by-laws)Legal framework (policies and by-laws) Budgeting Budgeting Billing and billing administrationBilling and billing administration

– Rates Rates – Service chargesService charges– Sundry incomeSundry income

Credit control and debt collectionCredit control and debt collection Cash management and investmentsCash management and investments

REVENUE MANAGEMENT – BUDGET REVENUE MANAGEMENT – BUDGET RELATED POLICIES RELATED POLICIES

( Including tariff policy, rates policy debt ( Including tariff policy, rates policy debt and credit control policy)and credit control policy)

Legal frameworkLegal framework Difficulties experienced by municipalitiesDifficulties experienced by municipalities Possible solutionsPossible solutions Financial performanceFinancial performance

Legal Legal FrameworkFramework

The Constitution Systems Act Local Government: Municipal Finance Management Act Local Government: Property Rates Act Municipal Policies and By-Laws:

Tariffs Credit Control and Debt Collection Rates

Delegations

THE CONSTITUTIONTHE CONSTITUTION

151151 Status of MunicipalitiesStatus of Municipalities – Separate sphere of governmentSeparate sphere of government

A municipality may govern subject to the national and A municipality may govern subject to the national and provincial legislationprovincial legislation

National and provincial may not compromise or National and provincial may not compromise or impede a municipality’s ability or right to exercise its impede a municipality’s ability or right to exercise its powers or perform its functionspowers or perform its functions

152152 Objects of Local GovernmentObjects of Local Government– Ensure the provision of services in a Ensure the provision of services in a

sustainable mannersustainable manner

THE CONSTITUTIONTHE CONSTITUTION

153153. . Developmental duties of municipalitiesDevelopmental duties of municipalities– Municipality must:Municipality must:

Structure and manage its administration, budgeting and Structure and manage its administration, budgeting and planning processes to give priority to the basic needsplanning processes to give priority to the basic needs

229. Municipality financial powers and 229. Municipality financial powers and functionsfunctions– Municipality may impose:-Municipality may impose:-

Rates on property and surcharges on fees for servicesRates on property and surcharges on fees for services If authorised by national legislation, other taxes, levies and If authorised by national legislation, other taxes, levies and

dutiesduties

THE SYSTEMS ACTTHE SYSTEMS ACT

44.. Right and duties of municipal councilsRight and duties of municipal councils– Municipality has a right to:-Municipality has a right to:-

Finance the affairs of the municipality by:-Finance the affairs of the municipality by:-–Charging fees for servicesCharging fees for services– Imposing surcharges on fees, rates and Imposing surcharges on fees, rates and

other taxes, levies and duties (subject to other taxes, levies and duties (subject to national legislation)national legislation)

THE SYSTEMS ACTTHE SYSTEMS ACT

74 Tariff Policy74 Tariff Policy– Municipal council must implement and adopt a tariff Municipal council must implement and adopt a tariff

policypolicy– Must reflect the following principles:Must reflect the following principles:

users of municipal services should be treated equitablyusers of municipal services should be treated equitably amount individual users pay for services should be in proportion amount individual users pay for services should be in proportion

to usageto usage Poor households must have access to basic services, through:Poor households must have access to basic services, through:

– Tariffs that covers only operating and maintenance costTariffs that covers only operating and maintenance cost

– Special tariffs or life line tariffsSpecial tariffs or life line tariffs

– Any other direct or indirect subsidisationAny other direct or indirect subsidisation

THE SYSTEMS ACTTHE SYSTEMS ACT((Tariff Policy continueTariff Policy continue))

Must reflect the costs associated with the serviceMust reflect the costs associated with the service Must be set at levels that facilitate financial Must be set at levels that facilitate financial

sustainability of the servicesustainability of the service Provision must be made for surcharge on tariffsProvision must be made for surcharge on tariffs Provision may be made promotion of local economic Provision may be made promotion of local economic

development development Efficient and effective use of resources must be Efficient and effective use of resources must be

encouraged encouraged Extent of subsidisation of tariffs must be disclosed Extent of subsidisation of tariffs must be disclosed

May differentiate May differentiate

THE SYSTEMS ACTTHE SYSTEMS ACT ( (Tariff Policy continueTariff Policy continue))

75. By-laws to give effect to the policy75. By-laws to give effect to the policy– Municipal council must adopt a by-law to give Municipal council must adopt a by-law to give

effect to its policyeffect to its policy– By-law may differentiate between different By-law may differentiate between different

categories of ratepayers, users of services, categories of ratepayers, users of services, debtors, taxes, services and service standardsdebtors, taxes, services and service standards

THE SYSTEMS ACTTHE SYSTEMS ACT ( (Credit Control and Debt Collection Policy )Credit Control and Debt Collection Policy )

95. Customer care and management95. Customer care and management

– Establish a sound customer management system– Establish mechanism for users of services to give feedback – Users of services must be informed of the cost of services– Consumption must be verified – Consumers receive regular and accurate accounts– Create accessible mechanisms to query and verify accounts– Provide accessible mechanisms for dealing with complaints– Provide mechanisms to monitor response time – Provide accessible pay points


96 Debt collection responsibility of 96 Debt collection responsibility of municipalitiesmunicipalities– Municipality must:Municipality must:

Collect all money that is due and payable to itCollect all money that is due and payable to it Adopt, maintain and implement a credit control and Adopt, maintain and implement a credit control and

debt collection policy debt collection policy


97. Contents of policy97. Contents of policy– Policy must provide for:-Policy must provide for:-

Credit control procedures and mechanismsCredit control procedures and mechanisms Debt collection procedures and mechanismsDebt collection procedures and mechanisms Provision for indigent debtorsProvision for indigent debtors Realistic targets consistent with:Realistic targets consistent with:

– Grap and collection ratiosGrap and collection ratios– Estimates of incomeEstimates of income

Interest on arrearsInterest on arrears Extension of time for paymentExtension of time for payment Termination or restriction of servicesTermination or restriction of services Matters relating to unauthorised consumption, theft and Matters relating to unauthorised consumption, theft and

damagesdamages Other mattersOther matters


98. By-laws to give effect to the policy98. By-laws to give effect to the policy– Municipal council must adopt a by-law to give Municipal council must adopt a by-law to give

effect to its policyeffect to its policy– By-law may differentiate between different By-law may differentiate between different

categories of ratepayers, users of services, categories of ratepayers, users of services, debtors, taxes, services and service standardsdebtors, taxes, services and service standards

MUNICIPAL FINANCE MUNICIPAL FINANCE MANAGEMENT ACTMANAGEMENT ACT

64. Revenue management 64. Revenue management – The Accounting Officer is responsible for theThe Accounting Officer is responsible for themanagement of revenue and must ensure that:-management of revenue and must ensure that:-

The Municipality has effective revenue collection systemsThe Municipality has effective revenue collection systems Revenue is calculated monthlyRevenue is calculated monthly Accounts are prepared monthlyAccounts are prepared monthly Money received is promptly depositedMoney received is promptly deposited Internal control for debtors and revenue is in placeInternal control for debtors and revenue is in place Interest in charged on arrearsInterest in charged on arrears Revenue is reconciled weeklyRevenue is reconciled weekly

– The Accounting Officer must inform National Treasury of The Accounting Officer must inform National Treasury of late payments due to the municipalitylate payments due to the municipality


17. Contents of the budget17. Contents of the budget– Prescribe format – setting out:Prescribe format – setting out:

Realistically anticipated revenue for budget yearRealistically anticipated revenue for budget year Expenditure for budget year Expenditure for budget year Indicative revenue and expenditure for the following Indicative revenue and expenditure for the following

two financial yearstwo financial years

– Separate capital and operating budgetsSeparate capital and operating budgets– Accompanied by supporting documentsAccompanied by supporting documents


BUDGET RELATED POLICIESBUDGET RELATED POLICIES

13. Cash management and investment 13. Cash management and investment – A municipality must establish a cash A municipality must establish a cash

management and investment policymanagement and investment policy

111. Supply chain management policy111. Supply chain management policy– Each municipality must implement a supply Each municipality must implement a supply

chain management policy chain management policy

MUNICIPAL PROPERTY RATES ACTMUNICIPAL PROPERTY RATES ACT

2. Powers to levy rates2. Powers to levy rates– A metropolitan or local municipality may levy A metropolitan or local municipality may levy

rates on properties in its arearates on properties in its area– A district municipality may levy rates on A district municipality may levy rates on

properties in the district management areaproperties in the district management area– Rates must be subject to- Rates must be subject to-

Section 229 of the ConstitutionSection 229 of the Constitution Provisions of the Property Rates ActProvisions of the Property Rates Act Rates policy Rates policy


3. Adoption and contents of rates policy3. Adoption and contents of rates policy– Rates policy takes effect on the effective date of the first Rates policy takes effect on the effective date of the first

valuation prepared in terms of this Actvaluation prepared in terms of this Act– A rates policy must:A rates policy must:

Treat persons equitably Treat persons equitably Determine criteria-Determine criteria-

– Different rates Different rates

– Exemptions Exemptions

– Grants, rebates or reductions to specific categories of owners or Grants, rebates or reductions to specific categories of owners or category of propertiescategory of properties

– Increases in ratesIncreases in rates

– Categories of properties or owners of propertiesCategories of properties or owners of properties


– Any exemptions, rebates or reductions must comply and Any exemptions, rebates or reductions must comply and be implemented in accordance with national frameworkbe implemented in accordance with national framework

– No relief may be granted other than by way of an No relief may be granted other than by way of an exemption, a rebate or a reductionexemption, a rebate or a reduction

11. Amount due for rates11. Amount due for rates– A rate levied must be on the market value of the A rate levied must be on the market value of the

propertyproperty– In the case of public service infrastructure on the market In the case of public service infrastructure on the market

value less 30%value less 30%– A rate levied on properties with a market value below a A rate levied on properties with a market value below a

prescribe valuation value may be an uniform fixed prescribe valuation value may be an uniform fixed amountamount

DELEGATIONSDELEGATIONS

79. Delegations79. Delegations– The Accounting Officer must :-The Accounting Officer must :-

Develop an appropriate system of delegationDevelop an appropriate system of delegation Regularly review delegationsRegularly review delegations

– The Accounting Officer may not delegate to The Accounting Officer may not delegate to any political structure or political office any political structure or political office bearer any powers or dutiesbearer any powers or duties

– Delegations must be-Delegations must be- In writingIn writing To a specific individual or holder of a specific postTo a specific individual or holder of a specific post

MINISTER MFUMADIMINISTER MFUMADI

The underlying causes of the staggering debt

situation are “largely administrative” he said….

Difficulties experienced by Difficulties experienced by municipalitiesmunicipalities

Administrative difficulties:Administrative difficulties:– Lack of policies and by-lawsLack of policies and by-laws– Inability to communicate policies and by-lawsInability to communicate policies and by-laws– Inability to administer debtors databaseInability to administer debtors database– Inability to support indigent consumersInability to support indigent consumers– Number of defaulting consumersNumber of defaulting consumers– Outdated archiving systemOutdated archiving system– Limited response periodLimited response period– Monthly recurring rates and service chargesMonthly recurring rates and service charges– Lack of specialised credit control and debt collection Lack of specialised credit control and debt collection

system system – Exorbitant legal costsExorbitant legal costs– Lack of staffLack of staff

Difficulties experienced by Difficulties experienced by municipalitiesmunicipalities

Financial difficulties:Financial difficulties:

– Reluctance of councillors to increase Reluctance of councillors to increase rates and service charges rates and service charges

– Insufficient provision for working capital Insufficient provision for working capital and bad debtsand bad debts

POSSIBLE SOLLUTIONPOSSIBLE SOLLUTION

Political buy-inPolitical buy-in Data integrityData integrity Credit control and debt collectionCredit control and debt collection

POSSIBLE STRATEGIESPOSSIBLE STRATEGIES Financial analysis (status quo)Financial analysis (status quo) Political buy-in Political buy-in Community participation and communication Community participation and communication House-to-house surveyHouse-to-house survey

– Identify indigent consumersIdentify indigent consumers– Gather information of consumersGather information of consumers– Update databaseUpdate database

Electronic debt collection system capable to manage and control all internal Electronic debt collection system capable to manage and control all internal and external processes including legal actionsand external processes including legal actions

Electronic archiving systemElectronic archiving system System must interface with and produce a mirror image of accounting systemSystem must interface with and produce a mirror image of accounting system System must be able to distribute work to multiple users System must be able to distribute work to multiple users System must have a workflow process to direct and interchange work between System must have a workflow process to direct and interchange work between

credit control and debt collection staff, external contractors and departmentscredit control and debt collection staff, external contractors and departments System must be user friendly and consumers must be encouraged to make System must be user friendly and consumers must be encouraged to make

arrangementsarrangements Possible outsourcing Possible outsourcing

FEATURES OF A CREDIT CONTROL FEATURES OF A CREDIT CONTROL AND DEBT COLLECTION SYSTEMAND DEBT COLLECTION SYSTEM

Interface with accounting systemInterface with accounting system Handle large number of defaulting consumersHandle large number of defaulting consumers WorkflowWorkflow Electronic ArchivingElectronic Archiving Telephone processesTelephone processes Reminder & Final Demand processesReminder & Final Demand processes Dis- and Reconnection processesDis- and Reconnection processes Legal Process up to JudgementLegal Process up to Judgement Account queriesAccount queries Indigent applications and managementIndigent applications and management Data FilteringData Filtering Parameter driven systemParameter driven system

FEATURES OF A CREDIT CONTROL FEATURES OF A CREDIT CONTROL AND DEBT COLLECTION SYSTEMAND DEBT COLLECTION SYSTEM

Management of :-Management of :-– ArrangementsArrangements– EstatesEstates– InsolvenciesInsolvencies– AdministrationsAdministrations– Account QueriesAccount Queries– ContractorsContractors– AttorneysAttorneys

Electronic Data ExchangeElectronic Data Exchange– Arrears ExtractsArrears Extracts– Daily Payments ProcessingDaily Payments Processing– Municipal CostsMunicipal Costs– Handovers Handovers

FINANCIAL PERFORMANCEFINANCIAL PERFORMANCE

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

Coverage of STPLTL Short- term debt Debtors tests Creditors test Capital Cost Burden Staff cost Grant dependency Cash funded Salary and bulk

purchases coverage

Net current assets Long- term assets

Weight and score analysis

ZADER MUNICIPAL SERVICES ZADER MUNICIPAL SERVICES PRODUCTSPRODUCTS

Financial analysis and strategiesFinancial analysis and strategies Policies and by-lawsPolicies and by-laws Performance management systemsPerformance management systems Forecasting modelsForecasting models Zeus credit control and debt collection systemZeus credit control and debt collection system Turnaround strategiesTurnaround strategies Assistance with budgets, financial statements and Assistance with budgets, financial statements and

business processesbusiness processes

INCA SUMMER SCHOOL 2004 REVENUE MANAGEMENT PRESENTED BY: CHRIS KAPP ZADER MUNICIPAL SERVICES (PTY)...

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