By Jonews Reporter
THE City of Johannesburg has recorded a financial surplus for the third year in a row, following four years of deficits that peaked in 1997/98 at R338m.
The financial accounts for the year ended 30 June 2002 have now been released by the Auditor-General and will be presented to the council on Thursday, 20 March. They show that the City ended last year with a positive cash balance of R92m compared to R24m. At the same time, the City's operating surplus rose to R83m from R71m last year.
Executive director of finance Roland Hunter said: "This shows that our revenue is exceeding our expenditure. We have a balanced budget and actually finished the year with a small operating surplus. This means that our current operations are running well."
During the previous financial year, the City had a debtors book of R4,4bn and for the first time set aside R1,6bn to cover bad debts, leaving the City's financial accounts with an overall deficit of R1,4bn for the year ended 2001. This compared to the annual budget of R10,5bn which is similar to the total budget of some other provinces. At the time, Hunter said: "The Auditor-General has confirmed that the city has now provided sufficiently for bad debts."
In its report on the 2001 accounts, the Attorney-General also raised the issue of unfunded liabilities in respect of the City's commitment to employee benefits. The City has now responded by setting aside R1,5bn in the 2002 accounts to cover these liabilities, as well as R370m not written off in 2001 for individual debtors. An additional R700m was also set aside for previous debits on the balance sheet, bringing the total to R2,5bn. This gives the City a deficit of R3,9bn for the financial year ended 2002.
Hunter said: "The R1,5bn represents our estimate right now of what we owe to our staff and is a real cash liability although it won't have to be paid out until staff retire. We have also set aside R1,1bn as a contingent liability which is dependent on three factors: the outcome of existing court cases such as the cancellation of a 13th cheque to council pensioners; an improvement in the quality of our data; and the possible rationalisation of employee benefits to a common basis for all staff."
He pointed out that many employees had different conditions of service depending on which council they came from before they were all amalgamated under the City of Johannesburg in 2000. "The council is determined to rationalise service benefits for all employees."
In late 2000, councils around the country were amalgamated, reducing the number of local authorities from 843 to 284. In the process, large "unicities" were created in Cape Town, Durban, Pretoria, the East Rand and Johannesburg. Johannesburg's boundaries were expanded to stretch from Orange Farm in the south to Midrand in the north. In the east, the previously independent municipalities of Edenvale and Modderfontein were included.
At the same time, the City embarked on an extensive restructuring by the creation of separate and financially independent municipal entities such as City Power and Pikitup. These separate companies, each with its own board, use commercial accounting principles, while the core administration remains on a municipal accounting basis. Amalgamating these different accounts is highly complex and the process should be completed by the end of 2004/2005.
Although the Auditor-General issued a disclaimer on the financial statements, the City last year committed itself to producing an unqualified Audit Report by 2005 through its Operation Clean Audit-Report programme which focuses on:
- Building a strong financial control environment
- Creating a comprehensive asset register
- Confirming the completeness of revenue
- Ensuring comprehensive record-keeping and full reconciliations of accounting records
- Funding the unfounded liabilities, which relate mainly to post-retirement employee benefits.
Hunter said that there is "real progress" on the project and the City is confident of having an unqualified report from the Auditor-General in 2005. "We know our problems, know the solutions, and are driving aggressively towards achieving results."
