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BPA HONOURS
Management Public and Municipal finance
Ndwakhulu Tshishonga
Facilitator on Behalf of MANCOSA
UKZN INSPIRING GREATNESS
Chapter 1:
Introduction to Municipal Finance
placed in context
The role of municipal finance in the context of of
development, eliminating poverty and creating better life for
all in developing world and with particular reference to South
Africa, has to be understood within the context of politics
within the public sector. The contribution in the collapse and
the dysfunctional include corruption, nepotism, morass etc.
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Decentralization and definitions and
meanings

Decentralization is a very substantial in most textbook, and therefore, we will confine
ourselves to briefly understanding this issue, from the perspective of our studies.


We will list these as following:

Political decentralization and/or administrative decentralization

Territorial decentralization

Comparative decentralization

Internal decentralization / external decentralization

Vertical decentralization or horizontal decentralization
The above was discussed in your undergraduate syllabus; please referred to your notes or
pages 373 to 377 one of the prescribed books.
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Decentralization

Decentralisation of authority means conscious/systematic effort to bring dispersal
(spreading) of decision making power to the lower levels of the Organisation. In
decentralisation, only broad powers will be reserved at the top level. Such powers
include power to plan, organise, direct and control and maximum powers will
delegated to the authority at the lower level.

Decentralisation is just opposite to centralisation. Under centralisation, authority is
mostly concentrated at the top level management. Centralisation and
decentralisation are mutually dependent. In a large Organisation, the process of
centralisation and decentralisation co-exist and reinforce each other
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What then are the conclusion in respect
of decentralization?

It is the most protean concept in the field

It occupies a pivotal place in recent public management discourse

It can lead to efficiency and greater effectiveness

Certain structures such as size of the organization and technical
complexities can influence decentralization as well as the type of
decentralization.
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Fiscal decentralization

It means granting taxing power to local or regional government,
giving them united grant to run their own services or combination of
both

It is required to allow local government and their citizen to choose
projects, develop priorities, and implement goals.

Government should raised revenue in the same point the spend it.
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Budget and fiscal reforms in South Africa
post 1994: An overview

In the post apartheid South Africa the budget reforms are
intended to support the creation of a democratic
government

The country must generate sufficient funds to facilitate
economic development and alleviate poverty.
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Chapter 2:
Intro to the public budget: proposes and processes
Public budget from the perspective of purposes and
processes involved in the budgets.
Thus, the overall intention of this chapter is to look at
budget from a global perspective and to explain the
various techniques and the type of budget.
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Budget and Accounting Reforms

Public budget reforms has include a more dramatic changes over the
last decade.

Moving from centralized government bureaucracy to:

Adopting programme and performance budget,

Accounting changes

Entrepreneurial management

Fiscal decentralization
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The public budget: purposes and
processes

Budget are any currency, they are choices, policies and
philosophers and the way in which budget reflect the choices,
policies philosophers of the government.

The budget is the life blood of the government, it direct the nation’s
fiscal policy.

Thus, this chapter will look at the evolution of the budgetary concept
in government.
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Traditional line

The line-item budget has rapidly became associated with government honestly,
efficiency and less propitiously, inflexibility.

It was criticized on the basis that it was seen and associated with the routine
business government, because it was viewed not dealing with policy, save that of
economy and efficiency.

It emphasis factors such as skilled accountancy, the object needed to run an office
or program and their cost, incremental policy making throughout government,
dispersed responsibility for management and planning and a fiduciary role for the
budget agency.
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Performance budgeting

Performance budgeting is defined as a system of resource
allocation that organizes the budget document by
operations and programmes and links performance levels
of those operations and programmes with specific budget
amount. Furthermore, it covers more administrative
activities than the traditional line-item budgeting did. Now
outputs as well as inputs were considered.
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Planning-programming budgeting

It is also know as planning-programming budgeting system.

Is a system of resource allocation designed to improve government
efficiency and effectiveness by establishing a long range planning
goals.

It requires skills in economic analysis as well as accountancy and
administration

It is not only concern with inputs and outputs but also with effect and
alternatives.
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Management by objectives

It is popular known as MBO

Can be defined as the process whereby the organizational goals and
objectives are set through the participation of organizational
members in terms of results expected, and resources are allocated
according to the degree which goals and objectives are met.

It is concern with inputs, outputs as well as effect but not necessarily
alternatives.
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Zero – base budgeting

It was firstly introduced in United State

It is the allocation of resources to agencies based on
periodic re-evaluation by those agencies of the need for all
of the programmes for which they are responsible, justifying
the continuance or termination of each programme in the
agency budget proposal.

It assessing what is it doing from top to bottom from a
hypothetical zero base.
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Chapter three
introduction to the public financial management
act

This chapter looks at the South African issues in
relationship to municipal finance and governance.
Furthermore, the chapter will look at silent issues within
local government in south Africa. We will begin this chapter
with a discussion on both Public Financial Management Act
(PFMA) and Municipal Financial Management Act (MFMA).
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The Public Financial Management Act
(PFMA)

The Public Financial Management Act, 1999 (Act No. 1 of 1999) as
amended by (Act No. 29 of 1999) is one of the most important piece
of legislation passed by the first democratic government in South
Africa.

The Act promotes the objective of good and sound financial
management, in order to maximize service delivery though the
effective and efficient use of limited resources.
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Key objectives of the Act are summarized
bellow

Modernize the system of financial management in the
public sector

Enable public sector to manage but at the same time be
held accountable

Ensure the timely provision of quality information

Eliminate the waste and the corruption in the use of public
assets.
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Categories of the municipality
1. Category A Municipality

Areas of high population density

An intense movement of people

Extensive development

Multiple business districts and industrial areas
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Categories of the municipality Cont…
2. Category B Municipality

They have executive and legislative authority in the area
that has more than one municipality.

In terms of Municipal Structures Act, category B is a
municipal Council

It has no constitutional guarantee for specific bundles of
executive and legislative power.
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Categories of the municipality Cont…
3. Category C Municipality
 They
have executive and legislative authority in an
area that includes more than one municipality.
 It has
primacy over a category B municipality
For more information of Municipalities please refer to your reader
on page 111 to 114
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Chapter Four
Introduction to: Municipal budgeting in South Africa

The National budget is the budget of a country, which is a written
estimate of anticipated revenue and expenditures during a specific
period of time.

Pauw et al. (2009: 56) point out that government department
traditionally used the incremental approach in preparing budget. This
involve the preparation of estimates for a fiscal shift to an approach
that is conducive to measuring the performance of delivery. Budget
planning nowadays are thus based on strategic and operational
plans.
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Budgeting may be regarded as a

A planning process whereby the budget represent the financial components
of the strategic and operational business plan.

A source of information since it is a public document

Public budgeting involves a variety of actors who often have different
priorities and different levels of powers over the budget outcomes.

In government there is a distinction between those who pay taxes and those
who decide how money will be spent–the citizens and the elected
politicians respectively
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Expenditure are classified into two
distinct categories
Capital expenditure

It is defined as expenditure that is incurred in the
acquisition of a durable asset or in the extension of the
useful life such as a durable asset, in regards to any long
term work.

For instance, building a house or office block

To be included in the capital budget the asset should have
lifespan of three years or more
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Operating Expenditure
Operating Expenditure
Refers to day to day expenditure of the local authority. The institute of
municipal treasure and Accountants (IMTA) has over the years worked
on the standardization of accounts used by local authorities as indicated
below:

Salaries and Allowance

General expenses

Repair and maintenance
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Adjustment Budget
Adjustment Budget
Prescribed in section 28 of the MFMA.
The formal means by which a municipality may revise its annual budget
during the course of the financial year.
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The purpose of an adjustment is the
following

It must adjust the revenue and expenditure

It may appropriate additional revenues that have become available
over and above those anticipated in the annual budget, but only to
revise spending programmes already budgeted for.

Correct errors in the annual budget

Provide for and any other expenditure within a prescribed framework
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Budget cycle
Budget
Preparation
Budget control
Budget cycle
Budget
Approval
Budget
implementation
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Revenue Management

Revenue Management
is the application of disciplined analytics that predict
consumer behaviour at the micro-market level and optimize
product availability and price to maximize revenue growth.
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Chapter Five
introduction to the emergence of alternative development
theories
This chapter embark in a gestalt overview of discussing the importance
of local communities by emphasizing the importance of alternative
development theories, people-managed development, the issues that
permeate absolute poverty as well as the importance of informal sector
in relationship to local.
Furthermore, this chapter is going to look at the importance of IDP
construction in terms of municipal transformation and other salient and
important issues.
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Alternative Development Theory
Alternative development has been concerned with
introducing alternative practices and redefining the goals of
development.
 Arguably this has been successful, in the sense that key
elements have been adopted in mainstream development.
 It is now widely accepted that development efforts are more
successful when there is participation from the community.
 NGOs now play key roles on the ground and in development
co-operation. This success reflects not simply the strength of
NGOs and grassroots politics

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Poverty and social development

In the pas littles attention was paid to social inequality

They did not regard social imprecation of the growth
process
Poverty and the basic needs approach

Growth did not lead to employment

They emphasized increase in employment
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Criticism of Bureaucratic Governance: Guy Gran

It adds nothing at the abstract level, but is adds to the
debate in respect of his demonstration of how wrong it can
go in practice

its
negligence
of
informal
organization,
and
its
dehumanization as well as its tense relationship with
democracy.
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Basic Needs Approach



The basic needs approach is one of the major approaches to the
measurement of absolute poverty in developing countries. It attempts
to define the absolute minimum resources necessary for long-term
physical well-being, usually in terms of consumption goods.
The poverty line is then defined as the amount of income required to
satisfy those needs. The 'basic needs' approach was introduced by
the International Labour Organization's World Employment
Conference in 1976.
Perhaps the high point of the WEP was the World Employment
Conference of 1976, which proposed the satisfaction of basic human
needs as the overriding objective of national and international
development policy.
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