Circular 107 Newsletter – December/January 2021

2021 Greetings

We hope that 2021 will be a safe and prosperous year for you all.

Covid-19 is a constant threat to our daily lives as we face the second wave of infections. The imminent roll out of the vaccine brings a sense of hope to the forthcoming year. The pandemic has presented many challenges. It has also provided space for reflection and time to think ‘out of the box’. We have learned to be adaptable and to take these opportunities to be innovative in response to the needs of our clients. The API’s with the various financial systems are finalised and operational, our technical support has moved on-line, we have hosted webinars and engaged on every virtual meeting platform available.  We look forward to continuing our relationships with you and walking the path together in 2021. It is no longer business as usual but it is business. The first important item is addressing the immediate requirements of the latest budgetary circular, Circular 107.

Important extracts for property rates &
valuations, MFMA Circular 107.

Prescribed Property Categories, MPRA

Section 8 of the Municipal Property Rates Act on the determination of categories of rateable properties has been revised. The new rateable property categorisation framework based on uses, provided these property categories exist within the municipality. All other discretionary property categories that are based on ownership, geographic location or any other basis fall away. Municipalities must implement the new property categorisation framework by 1 July 2021.

Category of property recommendations for implementation 1st July 2021

Please contact MetGovis if you require any further support with re-mapping your existing categories to the prescribed property categories. We are also able to facilitate your annual rates policy review focussing on reducing your income foregone through the strategic application of discretionary rates relief. The mSCOA chart Version 6.5 makes provision for the new and the old framework. However, the old framework will be retired in the next version of the chart, provisionally October 2021. Municipalities are advised to implement the new property categorisation framework as legislated.

Cautionary: Take care not to use both 6.4 and 6.5 frameworks to avoid duplication and overstatement of revenue from property rates.


Tariff setting for differential rating, budgetary processes

In terms of section 13 of the Municipal Property Rates Act, 2004 (MPRA) and sections 24 and 42 of the Municipal Finance Management Act, 2003 (MFMA), new tariffs for property rates, electricity, water and any other taxes and similar tariffs may be implemented from 1 July 2021.

This means that the municipal council must approve the relevant tariffs as part of the MTREF budget by 31st May 2021. The draft budget needs to be tabled by 30th March 2021.

MetGovis is able to support your rates tariff modelling and the compliance with the prescribed ratios for agricultural properties, public service infrastructure and public benefit organisations with our free on-line tool, MetRev.

Screenshots below showing tariff modelling reports generated by MetRev.

Please contact your dedicated consultant or the office for log in details and let us know if you require additional support.


Impact of municipal elections

If the elections take place after the start of the financial year, the outgoing council will be responsible for approving tariffs for the 2021/22 MTREF and the newly elected council for the implementation thereof as section 28(6) of the MFMA. There is no provision for the increase in tariffs during the financial year.

MFMA Circular No. 93 reconciliation reports

The emphasis is on municipalities to comply with Section 18 of the MFMA and ensure that they fund their budgets from realistically anticipated revenues. Municipalities are cautioned against assuming collection rates that are unrealistic and unattainable as this has been identified as a fundamental reason for municipalities not attaining their desired collection rates.

Municipalities are required to submit a reconciliation report of the consolidated valuation roll to the billing system to ensure that revenue anticipated from property rates are accurate.

The list of exceptions derived from this reconciliation will indicate where the municipality may be compromising its revenue generation in respect of property rates. In accordance with the MFMA Circular No. 93, municipalities must submit the reconciliation of the valuation roll to the financial system to the National Treasury by no later than 05 February 2021.

We recommend that municipalities use the updated report template that MetGovis workshopped with National Treasury. See the report template attached.

Screenshot of the category discrepancy report using InSight X.

mSCOA compliance

To date, the NT analysis of mSCOA implementation highlighted that municipalities are not using the FUND, REGION and COSTING segments correctly. If the municipality does not have a current geospatial property register and the financial system data is unable to link the accounts to the property parcels this reporting will continue to be a challenge from a compliance perspective. Municipalities are encouraged to update their geospatial data as the ‘single version of the truth’ for all property data within the municipality. This will enable both accurate regional segment reporting and timeous instructions for the preparation of supplementary valuations, whenever necessary, section 78(1), MPRA. The intention of the legislators is that property attribute changes, that materially change the value of any property, must be processed as a supplementary valuations as close to the change event as possible. The section 78 notices should be sent out promptly to avoid incurring financial prejudice to the ratepayers.

Screenshot of the VRMS supplementary valuation entry


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