VBS fiasco likely to affect municipal financial statements

As municipalities are currently working on the 2017/18 annual financial statements, there has been an uproar from the fourth estate about the regularisation of the VBS Mutual Bank capturing into the statements.
This was revealed by the acting Premier Jerry Ndou when addressing the Premier’s Intergovernmental Forum (PIGF) on Friday. Ndou reminded attendees that they were advised at the meeting with National Treasury in March and again with the Department of Cooperative Governance and Traditional Affairs in June to confirm the amounts invested, the term period, council policies, assess the impact of the VBS Mutual Bank investments on the budgets and finances of the municipality.
The 2018/19 Medium Term Revenue and Expenditure Framework (MTREF) must also be reviewed since the investments may not be realised, the municipalities would have lost such funds, subject to final confirmation by the curator appointed by South African Reserve Bank, he explained.
“This information should be obtained from the curator directly. Therefore, it is inevitable that this potential loss will have a negative impact on the budget that was compiled based on such revenues and consequently service delivery. The budget will therefore have to be adjusted accordingly. Municipalities were advised to adjust revenue and expenditure downwards in the 2018/19 MTREF if these were planned to be funded from the investments deposited with VBS Mutual Bank, before adoption by 30 June 2018,” Ndou explained.
He further indicated that if municipalities did not factor such adjustments before adoption of the 2018/19 MTREF, the mayor of the particular municipality may table an adjustment budget in council (at any time) to adjust the revenue and expenditure estimates downwards. This will ensure that a realistic budget is implemented, he said.
Ndou further indicated that the municipality must decide on the timing of this adjustment budget and immediate measures must be taken to reduce expenditure on projects and operations that were linked to these funds that were invested with the VBS Mutual Bank.

Story & photos: ENDY SENYATSI
>>endy@observer.co.za