Explanatory notes to Table A8 - Cash Backed Reserves/Accumulated Surplus Reconciliation The cash backed reserves/accumulated surplus reconciliation is aligned to the requirements of MFMA Circular 42 Funding a Municipal Budget. – In essence the table evaluates the funding levels of the budget by firstly forecasting the cash and investments at year end and secondly reconciling the available funding to the liabilities/commitments that exist. The outcome of this exercise would either be a surplus or deficit. A deficit would indicate that the applications exceed the cash and investments available and would be indicative of with the MFMA requirements that the municipality’s budget must be “funded”. Non-compliance with section 18 of the MFMA is assumed because a shortfall would indirectly indicate that the annual budget is not appropriately funded. From the it can be seen that for the period 2010/11 to 2014/15 the surplus increased from R234 million to R330 million. Considering the requirements of section 18 of the MFMA, it can be concluded that the adopted 2014/15 was funded since the budget is showing a surplus which will be cash backed on the assumption that the revenue from what services is realistic and will be collected. As part of the budgeting and planning guidelines that informed the compilation of the 2014/15 MTREF the end objective of the medium-term framework was to ensure the budget is funded aligned to section 18 of the MFMA. As can be seen the budget has been modelled to have surplus funds available which will be used to fund the infrastructure of the municipality. The cash backed accumulated funds will also improve the cash flow position of the municipality.
Explanatory notes to Table A8 - Cash Backed Reserves/Accumulated Surplus Reconciliation The cash backed reserves/accumulated surplus reconciliation is aligned to the requirements of MFMA Circular 42 – Funding a Municipal Budget. In essence the table evaluates the funding levels of the budget by firstly forecasting the cash and investments at year end and secondly reconciling the available funding to the liabilities/commitments that exist. The outcome of this exercise would either be a surplus or deficit. A deficit would indicate that the applications exceed the cash and investments available and would be indicative of with the MFMA requirements that the municipality’s budget must be “funded”. Non-compliance with section 18 of the MFMA is assumed because a shortfall would indirectly indicate that the annual budget is not appropriately funded. From the it can be seen that for the period 2010/11 to 2014/15 the surplus increased from R234 million to R330 million. Considering the requirements of section 18 of the MFMA, it can be concluded that the adopted 2014/15 was funded since the budget is showing a surplus which will be cash backed on the assumption that the revenue from what services is realistic and will be collected. As part of the budgeting and planning guidelines that informed the compilation of the 2014/15 MTREF the end objective of the medium-term framework was to ensure the budget is funded aligned to section 18 of the MFMA. As can be seen the budget has been modelled to have surplus funds available which will be used to fund the infrastructure of the municipality. The cash backed accumulated funds will also improve the cash flow position of the municipality.