Revenue Management For Local Government

The single and Integrated Revenue Management Framework (SIRMF), builds on previous revenue management frameworks developed by government (National Treasury and Cooperative Governance and Traditional Affairs).

Revenue management is the set of synchronised activities that a municipality must undertake to manage its revenue in fulfilment of its mandate. Own revenue (trading services, property rates and sundry revenue) or fiscal transfers,
It requires the achievement of legislative compliance, while considering risks, costs and benefits.
Improving municipal revenue management entails; improving core revenue processes and policies, financial management systems, data quality, skills and competencies, organisational structures, cash management methods and tariff determination.
An integrated approach to municipal revenue management is required to maximise its revenue generation potential by improving coordination across the various departments in municipalities.

The Single and integrated Revenue Management Framework (SIRMF) is geared towards addressing both the short term and long term revenue management challenges facing the local sphere of government.

National Treasury, CoGTA and the Auditor General that have repeatedly shown that a significant number of municipalities are in distress and that a number of these municipalities are in danger of financial collapse.
The distress is due to multiplicity of factors including a lack of; oversight and accountability management, good governance, institutional arrangements, planning and budget management, systems / processes and procedures, human resource capacity.

Both National Treasury and CoGTA have identified the need for an integrated approach to revenue management required to address operational inefficiencies within the municipal environment.

National Treasury through its Technical Committee on Finance (TCF) developed a discussion document titled “Integrated Approach to Municipal Revenue Management”. An integrated approach to revenue management is required to address operational inefficiencies within the municipal environment. It supports collaboration among stakeholders in support of revenue management initiatives.
CoGTA has adopted the KZN CoGTA revenue model (National Replicable Revenue Plan based on the KZN Model) for implementation in identified municipalities to improve on the revenue and debt situation of the selected municipalities.
National Treasury and CoGTA in collaboration commissioned the development of a single and integrated revenue management framework. This framework integrates key drivers that have influence on a municipality’s financial sustainability from a spatial planning, infrastructure / services quality and operations, as well as revenue management perspectives. The Single and Integrated Revenue Management Framework (SIRMF) integrates and expands on the revenue management frameworks previously developed and includes the impact of trading services on revenue management.

The framework is divided into two parts. Part A covers the introduction and context to revenue management and Part B covers execution or implementation of revenue management initiatives, including guidelines and instructions.

Chapter 1: Introduction, background, purpose and structure of SIRMF
Chapter 2: Legislative framework
Chapter 3: Governance and institutional framework
Chapter 4: SIRMF Strategic framework
Chapter 5: Budget planning and management
Chapter 6: Revenue management and the revenue management value chain
Chapter 7: Understanding the opportunities for improving the revenue management across the revenue management value chain
Chapter 8: The management of trading services in the context of an integrated revenue management approach
Chapter 9: Key institutional and people issues in an integrated revenue management approach
Chapter 10: ICT and modernised systems for integrated revenue management
Chapter 11: Change Management as a fundamental in Integrated Revenue Management

Revenue Budgets

Municipalities are required to:

Establish a budget and treasury office.
Prepare, approve and implement their budgets.
Encourage local community participation in the development of the budget.
Prepare budget projections for at least the next three years.
Report in writing to the municipal council any shortfalls in budgeted revenue and over expenditure.
Include levying of rates in their annual budget.

Credit Control

Municipalities are required to:

Implement and maintain the credit and debt collection policy.
Implement and maintain credit control and debt collection systems, procedures and mechanisms.
A credit control and debt collection policy may differentiate between different categories of ratepayers, users of services, debtors, taxes, services, service standards and other matters.

Policies and by-laws:

Municipalities are required to develop, implement and maintain the following policies and related by-laws:

Tariff policy.
Credit control and debt collection policy.
Indigent policy.
Property rates policy.
Delegation Policy.
Rates Policy.
Supply Chain Management policy.
Cash Management and investment policy.
Budget Policy.

Indigent Management

Municipalities are required to:

Develop and implement and indigent policy.
Consider exempting indigent owners of properties of properties from paying property tax.

Billing

Municipalities are required to:

Hold the Municipal Manager responsible and accountable for all income and expenditure of the municipality.
Measure the consumption of services through accurate and verifiable metering systems.
Ensure that the amount paid for services is in proportion to the the use of that service.
Issue regular and accurate accounts on a monthly basis.
Determine and implement tariffs, rates and taxes.

Customer Care

Municipalities are required to:

Establish a sound customer management systems.
Establish feedback mechanisms for users.
Informed users of the costs of services.
Establish mechanisms for users to query or verify accounts and complaints, reply promptly and take corrective action.
Provide accessible pay points and other mechanisms for setting accounts or for making pre-payments.

Collections and Payment Receiving:

Municipalities are required to:

Collect money that is due and payable to it.
Must adopt, maintain and implement a credit control and debt collection policy.
Consolidate and separate accounts of persons.
Credit a payment against any account of a user.
Implement an effective revenue collection system.
Calculate revenue due to the municipality on a month basis.
Deposit all money received into its bank accounts.
Implements and maintains a management, accounting and information system, and a system of internal control.
Recover property rates in either monthly or annual payments.

Clearance and refunds

Municipalities are required to:

Issue a prescribed certificate which certifies that all amounts that became due in connection with a property for all monies due to the municipal for the two years preceding the date of application have been paid.
to refund guarantees, sureties and security deposits.

Revenue Management Road Map

The revenue management improvement roadmap sets out a phased approach which starts with long-term planning with a view of achieving financial sustainability.

The revenue management improvement roadmap requires municipalities to perform the following functions:

Long Term Planning – key plans of the municipality that sets out the municipality’s revenue management strategy.
Strategic Review – identify the gaps and challenges with a direct negative effect on revenue management.
Define the key drivers (strategic levers) – in line with municipalities long term plans and strategic review, a set of key drivers (strategic levers) and associated initiatives need to be identified.
Defining the Operating Model – in the operating model define how people, processes and technology will be applied and synchronised to achieve the revenue management goals.
Execution excellence – the implementation of the revenue management strategy and implementation plan, measuring performance and implementing corrective action.
Financial viability and sustainability – the goal of municipal revenue management is to ensure that the municipality has the ability to support, maintain and function to a degree that it meets service delivery and development obligations as a going concern.
Monitoring and Evaluation – refers to the ability of the municipality to monitor and perform remedial action in the implementation of the revenue management strategy of the municipality.

Strategic Pillars

The strategic pillars are unpacked to illustrate the possible key initiatives and outcomes under each strategic pillar. These are meant to serve as examples and each municipality will have adapted this framework to their specific circumstance.

Revenue Management For Local Government

The single and Integrated Revenue Management Framework (SIRMF), builds on previous revenue management frameworks developed by government (National Treasury and Cooperative Governance and Traditional Affairs).

Revenue management is the set of synchronised activities that a municipality must undertake to manage its revenue in fulfilment of its mandate. Own revenue (trading services, property rates and sundry revenue) or fiscal transfers,

It requires the achievement of legislative compliance, while considering risks, costs and benefits.

Improving municipal revenue management entails; improving core revenue processes and policies, financial management systems, data quality, skills and competencies, organisational structures, cash management methods and tariff determination.

An integrated approach to municipal revenue management is required to maximise its revenue generation potential by improving coordination across the various departments in municipalities.

The Single and integrated Revenue Management Framework (SIRMF) is geared towards addressing both the short term and long term revenue management challenges facing the local sphere of government.

National Treasury, CoGTA and the Auditor General that have repeatedly shown that a significant number of municipalities are in distress and that a number of these municipalities are in danger of financial collapse.

The distress is due to multiplicity of factors including a lack of; oversight and accountability management, good governance, institutional arrangements, planning and budget management, systems / processes and procedures, human resource capacity.

Both National Treasury and CoGTA have identified the need for an integrated approach to revenue management required to address operational inefficiencies within the municipal environment.

CoGTA has adopted the KZN CoGTA revenue model (National Replicable Revenue Plan based on the KZN Model) for implementation in identified municipalities to improve on the revenue and debt situation of the selected municipalities.

The framework is divided into two parts. Part A covers the introduction and context to revenue management and Part B covers execution or implementation of revenue management initiatives, including guidelines and instructions.

Chapter 1: Introduction, background, purpose and structure of SIRMF

Chapter 2: Legislative framework

Chapter 3: Governance and institutional framework

Chapter 4: SIRMF Strategic framework

Chapter 5: Budget planning and management

Chapter 6: Revenue management and the revenue management value chain

Chapter 7: Understanding the opportunities for improving the revenue management across the revenue management value chain

Chapter 8: The management of trading services in the context of an integrated revenue management approach

Chapter 9: Key institutional and people issues in an integrated revenue management approach

Chapter 10: ICT and modernised systems for integrated revenue management

Chapter 11: Change Management as a fundamental in Integrated Revenue Management

Revenue Budgets

Municipalities are required to:

Establish a budget and treasury office.

Prepare, approve and implement their budgets.

Encourage local community participation in the development of the budget.

Prepare budget projections for at least the next three years.

Report in writing to the municipal council any shortfalls in budgeted revenue and over expenditure.

Include levying of rates in their annual budget.

Credit Control

Municipalities are required to:

Implement and maintain the credit and debt collection policy.

Implement and maintain credit control and debt collection systems, procedures and mechanisms.

A credit control and debt collection policy may differentiate between different categories of ratepayers, users of services, debtors, taxes, services, service standards and other matters.

Policies and by-laws:

Municipalities are required to develop, implement and maintain the following policies and related by-laws:

Tariff policy.

Credit control and debt collection policy.

Indigent policy.

Property rates policy.

Delegation Policy.

Rates Policy.

Supply Chain Management policy.

Cash Management and investment policy.

Budget Policy.

Indigent Management

Municipalities are required to:

Develop and implement and indigent policy.

Consider exempting indigent owners of properties of properties from paying property tax.

Billing

Municipalities are required to:

Hold the Municipal Manager responsible and accountable for all income and expenditure of the municipality.

Measure the consumption of services through accurate and verifiable metering systems.

Ensure that the amount paid for services is in proportion to the the use of that service.

Issue regular and accurate accounts on a monthly basis.

Determine and implement tariffs, rates and taxes.

Customer Care

Municipalities are required to:

Establish a sound customer management systems.

Establish feedback mechanisms for users.

Informed users of the costs of services.

Establish mechanisms for users to query or verify accounts and complaints, reply promptly and take corrective action.

Provide accessible pay points and other mechanisms for setting accounts or for making pre-payments.

Collections and Payment Receiving:

Municipalities are required to:

Collect money that is due and payable to it.

Must adopt, maintain and implement a credit control and debt collection policy.

Consolidate and separate accounts of persons.

Credit a payment against any account of a user.

Implement an effective revenue collection system.

Calculate revenue due to the municipality on a month basis.

Deposit all money received into its bank accounts.

Implements and maintains a management, accounting and information system, and a system of internal control.

Recover property rates in either monthly or annual payments.

Clearance and refunds

Municipalities are required to:

Issue a prescribed certificate which certifies that all amounts that became due in connection with a property for all monies due to the municipal for the two years preceding the date of application have been paid.

to refund guarantees, sureties and security deposits.