Question

In: Finance

The slow spending of capital budgets by most municipalities is a national concern as it has a negative impact on service delivery.


The slow spending of capital budgets by most municipalities is a national concern as it has a negative impact on
service delivery. In most cases the hockey stick phenomenon that exists (i.e. spending increases in the last six
months of the year) is a direct result of poor planning by municipalities. Going forward and to address weak
planning process, all municipalities will be required to table the following supporting documents to Council, as
part of the budget pack, when they table their budgets by 29 March 2019:
 Service Delivery and Budget Implementation Plan (SDBIP); and
 Procurement Plan.
This is also in terms of the requirements and spirit of the MFMA and its Municipal Budget and Reporting
Regulations.
Adapted: MFMA Circular No.94, Municipal Finance Management Act No.56 of 2003

Solutions

Expert Solution

A budget is a plan of financial operations embodying an estimate of proposed expenditures for a given period of time and the proposed means of financing them. The annual budgetary process involves the following three Process

Preparation • The preparation phase is usually the responsibility of the chief financial executive of the municipality. It is accomplished by analyzing the financial data and projecting the program requirements of the various functions and activities for which a particular government may have responsibility

Adoption; Once the budget has been prepared, it is presented to the governmental unit’s legislative body for consideration, possible modification and final approval. Typically, the public is invited to participate in this phase via public hearings on proposed budgets.

Execution • Budgetary accounts are set up to record the estimated revenue and appropriations in the fund accounts. As economic conditions change, budget amounts can be amended by a process determined by the governmental unit’s legislative body.

The Budget process seems to be very weak, as mentioned the Hockey stick phenomenon exists which means Budget lies ideal for certain period of time and then we see a sharp peak in the budget which actually shall not happen. A budget shall be made keeping in view all the aspect and its effects on the economy .A Budget shall be planned in a way wherein a consistency can be retained.

For Example: If the Government has estimated 100 crores for road construction the Govt shall try to maintain it consistently throughout the year but during monsoons we can expect a slight rise in the budget as roads tends to get damaged, this is an exemption which can be considered.


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