A Guide for Councillors

Part 4 Understanding the Municipal Finance Management Act

The following illustration demonstrates the concept of three budgets operating at the same time.

Three budget cycles overlapping all the time

Reporting on the previous year’s budget __________ __________ __________ __________ 2005/06

Preparation of the forthcoming budget

Implementation of the current year’s budget

__________ __________ __________ __________ 2006/07

__________ __________ __________ __________ 2007/08 2008/09 2009/10

1

2

3

Previous year’s budget This budget cycle requires council to account for past performance.

Councillors get feedback from the community about their performance. The of fi cials prepare annual reports and fi nancial statements that show how funds were spent and the Auditor-General reports on the fi nancial management of the municipality which provides councillors with an independent view. Council considers the annual report and adopts the oversight report. Councillors, especially the oversight committee, respond to the fi nancial report in writing by the end of each fi nancial year. Councillors need to take note of any problems that arose, so that they can respond to them in the next fi nancial year. The performance of the municipality will have a bearing on whether or not bonuses are paid to senior managers. Current year’s budget This budget cycle requires council to manage the activities that are being done currently. Council is required to report on the progress it has made on implementing its budget plans, showing actual results against planned targets. It should provide this information and feedback to the community and explain its reasons for over or under achievement against its targets.

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The Role of Councillors in Municipal Finance Management