The municipality’s safety net, funds set aside for arrear debt, is up for revaluation, as it is every financial year. As of 30 June, government departments currently owe a total of R17-million including interest. Outstanding debts have not been settled with only two payments being received: R1-million from Settlers Hospital and R2.1-million from Public Works, which owes the most money – R9.7-million.
The municipality’s safety net, funds set aside for arrear debt, is up for revaluation, as it is every financial year. As of 30 June, government departments currently owe a total of R17-million including interest. Outstanding debts have not been settled with only two payments being received: R1-million from Settlers Hospital and R2.1-million from Public Works, which owes the most money – R9.7-million.
According to a report complied by the CFO’s office, the purpose of this provision, “ensures that the municipality is capable of ensuring that uncollectable debt can be written off and also the municipality is able to fairly present income for the upcoming year”.
The item recommended that the Budget, Treasury and IDP portfolio committee notes that the provision for bad debts has increased by R4.4-million, creating an increase from R92-million to R96-million.
The estimated provision also took indigents into account. “In that calculation you are trying to evaluate a provision for bad debts at a particular point in time, as any business would do,” said Makana chief financial officer Jackson Ngcelwane.
He said this exercise was evaluating whether the provision for debt is sufficient. During the BTI committee meeting, Councillor Luyanda Nase said, “These government departments are concerned about receiving bad audits, that is why they do not want to pay the interest.”
Councillor Michael Whisson said “Makana must take each government department to court if they owe us money.”
He said this would let everyone know that the municipality is serious about the R17-million debt and that the businesses which owe money can take cognisance of the severity of the matter.
“The issue of government debt is a concern, but this [item]was not saying that we shall not get interest from government in the arrear debt they owe” said Ngcelwane.
He explained that in government before interest is paid on an arrear account, approval has to be sought from an executive authority.
He added that the Public Finance Management Act and Municipal Financial Management Act does not promote the payment of interest without the appropriate authority’s comsent.
Moving ahead with the payment of interest without approval (even if it is because the request wasn’t processed in time) will lead to a qualification on the institution’s audit report.
