Municipal Timeline

Mid-Year Budget and Performance Assessment must take place

Posted on by The CAN Team

Section 72 of the MFMA focuses on the Mid-Year Budget and Performance Assessment, a critical component in ensuring that municipalities maintain sound financial management and adjust their financial plans as necessary. This section provides a framework for evaluating municipal performance against the approved budget and Integrated Development Plan (IDP) during the financial year.

Key Provisions of Section 72

  1. Mid-Year Performance Assessment by the Accounting Officer
    • The accounting officer (typically the municipal manager) must, by 25 January each year, conduct a review of the municipality’s financial and non-financial performance for the first half of the financial year (July to December).
  2. Key Elements of the Assessment
    The assessment must:

    • Measure the municipality’s actual revenue and expenditure against the approved budget.
    • Assess performance on service delivery targets and other objectives in the approved Service Delivery and Budget Implementation Plan (SDBIP).
    • Evaluate whether adjustments to the budget are required based on revenue collection trends and expenditure patterns.
  3. Submission of Reports
    The accounting officer must:

    • Submit a report on the mid-year performance assessment to:
      • The mayor of the municipality.
      • The National Treasury and the relevant provincial treasury.
    • This report must include recommendations on adjustments to the budget if required.
  4. Recommendations for Adjustments
    • If necessary, the accounting officer’s report must propose adjustments to the budget to address significant variances, ensuring alignment with realistic revenue and expenditure projections.

Role of the Mayor and Council

  • Mayor’s Oversight:
    The mayor uses the mid-year report to provide political guidance over the budget and service delivery priorities. If adjustments to the budget are recommended, the mayor must ensure the necessary processes are initiated promptly.
  • Council’s Responsibility:
    The council may be required to consider and approve any adjustments budget tabled following the mid-year assessment, ensuring alignment with financial realities and municipal priorities.

Significance of Section 72 in the Budget Process

  1. Early Identification of Risks
    • The mid-year assessment identifies potential risks, such as under-collection of revenue or overspending, allowing the municipality to take corrective action before the end of the financial year.
  2. Performance Accountability
    • By evaluating service delivery targets and performance indicators, the municipality ensures accountability for meeting its objectives as outlined in the SDBIP and IDP.
  3. Informed Decision-Making
    • The report provides critical data to inform adjustments to the budget, helping to ensure financial sustainability and efficient use of resources.
  4. Transparency and Compliance
    • Submitting the report to the National and provincial treasuries enhances transparency and ensures compliance with broader fiscal oversight mechanisms.

Integration with Sections 16, 24, and 53 of the MFMA

  • Section 16 (Budget Preparation):
    Section 72 provides a mid-year checkpoint to assess whether the budget approved under Section 16 is being implemented effectively or needs adjustment.
  • Section 24 (Budget Approval):
    While Section 24 ensures timely approval of the budget, Section 72 ensures that the approved budget remains responsive to financial and operational realities throughout the financial year.
  • Section 53 (Budget Implementation):
    The mid-year performance review under Section 72 directly evaluates the municipality’s compliance with the SDBIP approved under Section 53, ensuring alignment between financial resources, service delivery, and performance targets.

Conclusion

Section 72 of the MFMA ensures municipalities regularly assess their financial and operational performance to remain aligned with their budgets, IDPs, and service delivery commitments. By requiring a comprehensive mid-year review and providing for adjustments, it upholds principles of transparency, accountability, and fiscal discipline. This section complements the broader budget framework set out in Sections 16, 24, and 53, ensuring municipalities remain on track to achieve their developmental goals.

The CAN Team