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Full text of "ANNEXURE 3 DRAFT COST CONTAINMENT POLICY JULY 2019"

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ANNEXURE 3 



Morale City 



Local Municipality 


COST CONTAINMENT 

POLICY 


November 2019 











Table of Contents 


1. DEFINITIONS.3 

2. PURPOSE.3 

3. OBJECTIVES OF THE POLICY.3 

4. SCOPE OF THE POLICY.3 

5. LEGISLATIVE FRAMEWORK.3 

6. POLICY PRINCIPLES.4 

7. USE OF CONSULTANTS.4 

8. VEHICLES USED FOR POLITICAL OFFICE-BEARERS.5 

9. TRAVEL & SUBSISTENCE.5 

10. DOMESTIC ACCOMMODATION.6 

11. CREDIT CARDS.6 

12. SPONSORSHIPS, EVENTS & CATERING.6 

13. COMMUNICATION.7 

14. CONFERENCES, MEETINGS & STUDY TOURS.8 

15. OTHER RELATED EXPENDITURE ITEMS.8 

16. ENFORCEMENT PROCEDURES.9 

17. DISCLOSURES OF COST CONTAINMENT MEASURES.9 

18. IMPLEMENTATION & REVIEW PROCES S.9 

19. CONSEQUENCES FOR NON-ADHERENCE TO THE COST CONTAINMENT 

MEASURES.9 

20. SHORT TITLE.10 


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1. DEFINITIONS 


CFO - Chief Financial Officer 

CONSULTANT - means a professional person, individual partnership, corporation, or a 
company appointed to provide technical and specialist advice or to assist with a design and 
implementation of projects or to assist the municipality to achieve its objectives of local 
government in terms of section 152 of the Constitution. 

COST CONTAINMENT - the measures implemented to curtail spending in terms of this 
policy. 

COUNCIL - Municipal Council of Mogale City Local Municipality 
MM - Municipal Manager/Accounting Officer 
MSCOA - Municipal Standard Chart of Accounts 
MUNICIPALITY - Mogale City Local Municipality 

2. PURPOSE 

The purpose of the policy is to regulate spending and to implement cost containment measures 
at Mogale City Local Municipality. 


3. OBJECTIVES OF THE POLICY 


The objectives of this policy are to: 

3.1 To ensure that the resources of the municipality are used effectively, efficiently and 
economically; and 

3.2 To implement cost containment measures. 

4. SCOPE OF THE POLICY 

This policy will apply to all: 

4.1. Councillors; and 

4.2. Municipal employees. 

5. LEGISLATIVE FRAMEWORK 

5.1 The Municipal Finance Management Act, Circular 82, published on 7 December 2016; 

5.2 Municipal Cost Containment Regulations, 7 June 2019; and 

5.3 Travelling and subsistence policy. 


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6. POLICY PRINCIPLES 


This policy will apply to the procurement of the following goods and/or services: 

i. Use of consultants 

ii. Vehicles used for political office-bearers 

iii. Travel and subsistence 

iv. Domestic accommodation 

v. Credit cards 

vi. Sponsorships, events and catering 

vii. Communication 

viii. Conferences, meetings and study tours 

ix. Any other related expenditure items 


7. USE OF CONSULTANTS 


7.1 Consultants may only be appointed after an assessment of the needs and requirements has 
been conducted to support the requirement of the use of consultants. 

7.2 The assessment referred to in 7.1 must confirm that the municipality does not have requisite 
skills or resources in its full time employ to perform the function that the consultant will 
carry out. 

7.3 When consultants are appointed the following should be included in the Service Level 
Agreements: 

i. Consultants should be appointed on a time and cost basis that has specific start and 
end dates; 

ii. Consultants should be appointed on an output-specific, specifying deliverables and 
the associated remuneration; 

iii. Ensure that cost ceilings are included to specify the contract price as well travel 
and subsistence disbursements and whether the contract price is inclusive or 
exclusive of travel and subsistence; and 

iv. All engagements with consultants should be undertaken in accordance with the 
municipality’s supply chain management policy. 

7.4 Consultancy reduction plans should be developed. 

7.5 All contracts with consultants must include a retention fee or a penalty clause for poor 
performance. 

7.6 The specifications and performance of the service provider must be used as a monitoring 
tool for the work that is to be undertaken and performance must be appropriately recorded 
and monitored. 


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8. VEHICLES USED FOR POLITICAL OFFICE-BEARERS 


8.1 The threshold limit for vehicle purchases relating to official use by political office-bearers 
may not exceed seven hundred thousand rand (R700 000) or 70% of the total annual 
remuneration package for the different grades, whichever is greater. 

8.2 The procurement of vehicles must be undertaken using the national government transversal 
mechanism. 

8.3 If any other procurement process is used, the cost may not exceed the threshold set out in 
8 . 1 . 

8.4 Before deciding on another procurement process as in 8.2, the chief financial officer must 
provide the council with information relating to the following criteria that must be 
considered: 

i. Status of current vehicles 

ii. Affordability 

iii. Extent of service delivery 

iv. Terrain for effective usage of vehicle 

v. Any other policy of council 

8.5 Regardless of their usage, vehicles for official use by public office bearers may only be 
replaced after completion of 120 000 kilometers. 

8.6 Notwithstanding 8.5, a municipality may replace vehicles for official use by public office 
bearers before the completion of 120 000 kilometers only in instances where the vehicle 
experiences serious mechanical problems and is in a poor condition, and subject to 
obtaining a detailed mechanical report by the vehicle manufacturer or approved dealer. 

9. TRAVEL & SUBSISTENCE 

9.1 An accounting officer: 

i. May only approve the purchase of economy class tickets for officials where the flying 
time for a flight is five (5) hours or less; and 

ii. For flights that exceed five (5) hours of flying time, may purchase business class 
tickets only for accounting officers, and persons reporting directly to accounting 
officers. 

9.2 Notwithstanding 9.1, an accounting officer may approve the purchase business class tickets 
for officials with disabilities. 

9.3 International travel to meetings or events will only be approved if it is considered critical 
to attend the meeting or event, and only the officials that are directly involved with the 
subject matter will be allowed to attend the meeting or event. 


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9.4 Officials of the municipality must: 

i. Utilize the municipal fleet, where viable, before incurring costs to hire vehicles; 

ii. Make use of a shuttle service if the cost of such a service provider is lower than: 

a. the cost of hiring a vehicle; 

b. the cost of kilometers claimable by the employee; and 

c. the cost of parking. 

iii. not hire vehicles from a category higher than Group B; and 

iv. where a different class of vehicle is required for a particular terrain or to cater for 
the special needs of an official, seek the written approval of the accounting officer 
before hiring the vehicle. 

9.5 The municipality must use the negotiated rates for flights and accommodation as 
communicated by National Treasury, from time to time, or any other cheaper flight or 
accommodation that is available. 


10. DOMESTIC ACCOMMODATION 

An accounting officer must ensure that costs incurred for domestic accommodation and 
meals are in accordance with the maximum allowable rates for domestic 
accommodation and meals, as communicated by National Treasury, from time to time, 
and the travel and subsistence policy of the municipality. 

11. CREDIT CARDS 

11.1 An accounting officer must ensure that no credit card or debit card linked to a bank 
account of the municipality is issued to any official or public office-bearer. 

11.2 Where officials or public office bearers incur expenditure in relation to official 
municipal activities, such officials and public office bearers must use their personal 
credit cards or cash, and will request reimbursement from the municipality in terms of 

the travel and subsistence policy and petty cash policy. 

12. SPONSORSHIPS, EVENTS & CATERING 

12.1 The municipality may not incur catering expenses for meetings that are only 
attended by persons in the employ of the municipality, unless prior written 
approval is obtained from the accounting officer. 

12.2Catering expenses may be incurred by the accounting officer for the following, if 
they exceed five (5) hours: 


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i. Hosting of meetings; 

ii. Conferences; 

iii. Workshops; 

iv. Courses; 

v. Forums; 

vi. Recruitment interviews; and 

vii. Council proceedings 


12.3Entertainment allowances of officials may not exceed two thousand rand 

(R2 000,00) per person per financial year, unless otherwise approved by the 
accounting officer. 

12.4Expenses may not be incurred on alcoholic beverages. 

12.5Social functions, team building exercises, year-end functions, sporting events, 
budget speech dinners and other functions that have a social element must not be 
financed from the municipal budget or by any supplier or sponsor such as but not 
limited to: 

■ staff year-end functions 

■ staff wellness functions 

■ attendance of sporting events by municipal officials 

12.6Expenditure may not be incurred on corporate branded items like clothing or 
goods for personal use of officials, other than uniforms, office supplies and tools 
of trade, unless the costs thereto are recovered from the affected officials. 

12.7Expenditure may be incurred to host farewell functions in recognition of officials 
who retire after serving the municipality for ten (10) or more years, or retire on 
grounds of ill health, the expenditure should not exceed the limits of the petty 
cash usage as per the petty cash policy of the municipality. 

13. COMMUNICATION 

13.1 All municipal related events must, as far as possible, be advertised on the 
municipal website, instead of advertising in magazines or newspapers. 

13.2Publications such as internal newsletters must be designed internally and be 
published quarterly in an electronic media format and on the municipal 
website/intranet. 

13.3Newspapers and other related publications for the use of officials must be 
discontinued on the expiry of existing contracts or supply orders. 

13.4The acquisition of mobile communication services must be done by using the 
transversal term contracts that have been arranged by the National Treasury. 

13.5Allowances for officials for private calls is limited to R50,00 per official. 

13.6Provision of diaries be limited to secretaries and electronic diaries be kept by 
directorates. 


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14 


CONFERENCES, MEETINGS & STUDY TOURS 


14.1 Appropriate benchmark costs must be considered prior to granting approval for 
an official to attend a conference or event within and outside the borders of South 
Africa. 

14.2The benchmark costs may not exceed an amount determined by National 
Treasury. 

14.3When considering applications from officials to conferences or events within and 
outside the borders of South Africa, the accounting officer must take the 
following into account: 

i. The officials’ role and responsibilities and the anticipated benefits of the 
conference or event; 

ii. Whether the conference or event will address the relevant concerns of the 
municipality; 

iii. The appropriate number of officials to attend the conference or event, 
not exceeding three officials; and 

iv. Availability of funds to meet expenses related to the conference or event. 

14.4The amount referred to in 14.2 above excludes costs related to travel, 
accommodation and related expenses, but includes: 

i. Conference or event registration expenses; and 

ii. Any other expense incurred in relation to the conference or event. 

14.5When considering the cost for conferences or events the following items must be 
excluded, laptops, tablets and other similar tokens that are built into the price of 
such conferences or events. 

14.6Attendance of conferences will be limited to one (1) per annum with a maximum 
of two (2) delegates. 

14.7Meetings and planning sessions that entail the use of municipal funds must, as far 
as practically possible, be held in-house. 

14.8Municipal offices and facilities must be utilized for conferences, meetings and 
strategic planning sessions where an appropriate venue exists within the 
municipal jurisdiction. 

14.9The municipality must take advantage of early registration discounts by granting 
the required approvals to attend the conference, event or study tour, in advance. 


15. OTHER RELATED EXPENDITURE ITEMS 

15.1 All commodities, services and products covered by a transversal contract by the 
National Treasury must be procured through that transversal contract before 
approaching the market, in order to benefit from savings and lower prices or rates 
that have already been negotiated. 


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15.2Municipal resources may not be used to fund elections, campaign activities, 
including the provision of food, clothing and other inducements as part of, or 
during the election periods. 

16. ENFORCEMENT PROCEDURES 

16.1 Failure to implement or comply with this policy may result in any official of 
the municipality or political office bearer that has authorized or incurred any 
expenditure contrary to those stipulated herein being held liable for financial 
misconduct as set out in Chapter 15 of the MFMA. 

17. DISCLOSURES OF COST CONTAINMENT MEASURES 

17.1Cost containment measures applied by the municipality must be included in the 
municipal in-year budget report and annual cost savings must be disclosed in the 
annual report. 

17.2The measures implemented and aggregate amounts saved per quarter, together 
with the regular reports on reprioritization of cost savings, on the implementation 
of the cost containment measures must be submitted to the municipal council for 
review and resolution. The municipal council can refer such reports to an 
appropriate council committee for further recommendations and actions. 

17.3Such reports must be copied to the National Treasury and relevant provincial 
treasuries within seven calendar days after the report is submitted to municipal 
council. 


18. IMPLEMENTATION & REVIEW PROCESS 


18.1 This policy will be reviewed at least annually or when required by way of a council 
resolution, or when an update is issued by National Treasury. 


19. CONSEQUENCES FOR NON-ADHERENCE TO THE 
COST CONTAINMENT MEASURES 


19.1 Any person must report an allegation of non-compliance to the cost containment policy to 
the accounting officer of the municipality. 

19.2The accounting officer must investigate the allegations and if frivolous, speculative or 
unfounded, terminate the investigations. 

19.3 If the accounting officer determines the allegations are founded, a full investigation must 
be conducted by the disciplinary board. 

19.4After completion of a full investigation, the disciplinary board must compile a report on 
the investigations and submit a report to the accounting officer on: 

i. Findings and recommendations; and/or 

ii. Whether disciplinary steps should be taken against the alleged transgressor. 


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19.5The accounting officer must table the report with recommendations to the municipal 
council. 

19.6Subject to the outcome of the council decision the accounting officer must 
implement the recommendations. 

20. SHORT TITLE 

20. IThis policy shall be called the Cost Containment Policy of Mogale City Local 
Municipality and has taken effect as from 31 August 2019 when the Municipal Council 
resolved to adopt the Cost Containment Regulation for implementation. 


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