With five months still to go in the financial year, Amathole district municipality (ADM) only has R300-million in its reserves.
Yet, the municipality has a R50-million a month salary bill and is hoping that the next tranche of its provincial equitable share of R175-million will cover salaries for March, April, May and June.
“This excludes lease agreements, electricity for pumps telephone expenses,” a confidential mid-year budget performance and financial viability report reveals.
The report was tabled at a council meeting on Friday. The report is scathing about the municipality’s poor finances, saying they are a result of ADM paying R40-million from its own coffers to contractors and suppliers.
The R40-million was supposed to have come from Treasury via the Municipal Infrastructure Grant (MIG). “This has threatened ADM’s ability to have cash available to pay for its operations,” the report said.
ADM had “overspent” on MIG projects, which had to be “bridged using ADM internal funds”.
The operational costs at risk include rentals, salaries and internally funded projects.
ADM spokesman Siyabulela Makunga said the municipality did not receive its MIG allocation in full but in tranches throughout the year.
“Many of the contractors undertaking large MIG projects during the 2014-15 financial year progressed beyond expectation resulting in milestones being reached outside MIG funding availability. The ADM had to step in in order to ensure payment of these contractors to be set off against future tranches.”
Makunga said the municipality had a financial recovery plan. “The mid-year budget performance report tabled to council is the first step of informing the council of the financial situation and the municipality’s plan to mitigate its financial position. This is followed by a mid-term budget adjustment.”
In addition to these financial woes, ADM must repay the Development Bank of Southern Africa R108-million by the end of March. This is made up of R56-million in a capital loan and accumulated interest of R52-million.
The debt is part of the bank’s R286-million loan to ADM for the controversial accelerated sanitation project.
The report warned that “further spending must only be incurred for necessities. Current spending rate is greater than cash available in the bank”.
The municipality had 5% cash-backed reserves by December last year, instead of 100%, the report stated. —msindisif@dispatch.co.za
Report slams ADM as their cash reserves start to run out
Yet, the municipality has a R50-million a month salary bill and is hoping that the next tranche of its provincial equitable share of R175-million will cover salaries for March, April, May and June.
“This excludes lease agreements, electricity for pumps telephone expenses,” a confidential mid-year budget performance and financial viability report reveals.
The report was tabled at a council meeting on Friday. The report is scathing about the municipality’s poor finances, saying they are a result of ADM paying R40-million from its own coffers to contractors and suppliers.
The R40-million was supposed to have come from Treasury via the Municipal Infrastructure Grant (MIG). “This has threatened ADM’s ability to have cash available to pay for its operations,” the report said.
ADM had “overspent” on MIG projects, which had to be “bridged using ADM internal funds”.
The operational costs at risk include rentals, salaries and internally funded projects.
ADM spokesman Siyabulela Makunga said the municipality did not receive its MIG allocation in full but in tranches throughout the year.
“Many of the contractors undertaking large MIG projects during the 2014-15 financial year progressed beyond expectation resulting in milestones being reached outside MIG funding availability. The ADM had to step in in order to ensure payment of these contractors to be set off against future tranches.”
Makunga said the municipality had a financial recovery plan. “The mid-year budget performance report tabled to council is the first step of informing the council of the financial situation and the municipality’s plan to mitigate its financial position. This is followed by a mid-term budget adjustment.”
In addition to these financial woes, ADM must repay the Development Bank of Southern Africa R108-million by the end of March. This is made up of R56-million in a capital loan and accumulated interest of R52-million.
The debt is part of the bank’s R286-million loan to ADM for the controversial accelerated sanitation project.
The report warned that “further spending must only be incurred for necessities. Current spending rate is greater than cash available in the bank”.
The municipality had 5% cash-backed reserves by December last year, instead of 100%, the report stated. —msindisif@dispatch.co.za
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