CREDIT CONTROL POLICY - Midvaal Local Municipality

CREDIT CONTROL POLICY
FINANCIAL YEAR: 2012/2013
APPROVAL DATE BY COUNCIL:
COUNCIL RESOLUTION NUMBER:

Contents
INTRODUCTION .................................................................................................
LEGISLATICE FRAMEWORK ............................................................................
COUNCILLOR AND STAFF ARREARS .............................................................
APPLICATION FOR RENDERING SERVICES ...................................................
DISPUTES ...........................................................................................................
IRRECORVERABLE DEBT .................................................................................
GENERAL ...........................................................................................................
RATES AND TAXES ...........................................................................................
WATER AND ELECTRICITY ...............................................................................
OTHER DEBT ......................................................................................................
ARRANGEMENT TO PAY ARREARS ACCOUNT .............................................

Introduction
The purpose of this document is to outline the revenue management principles to
be adhered to in the Midvaal Local Municipality. The policy is aimed at ensuring
that the following broad objectives are achieved:
- The maximisation of revenue collection;
- The preparation and collection of debtors’ accounts timeously.
Legislative Framework
Section 96 of Local Government Municipal Systems Act (Act 32 of 2000)
stipulates that a municipality must:
- Collect all money that is due and payable to it, subject to the act (Act 320
of 2000) and any other applicable legislation and the Municipal Finance
Management Act (56 of 2003)
- Adopt, maintain and implement a credit control and debt collection policy
which is consistent with its rates and tariff policies and complies with the
provision of the Local Government Municipal Systems Act (Act 32 of
2000)
Councillor and staff arrears
1. Staff Accounts:
Staff arrears will be dealt with in accordance with Schedule 2 of the
Systems Act, and in terms of any procedures, method or action referred to
in this Policy. Notwithstanding any other procedure, method or action that

may be taken in terms of this Policy, the municipality will deduct any
outstanding amount from such staff members’ 3 (three) month period.
2. Councillor accounts:
In accordance with Schedule 1, item 12A of the Systems Act, a Councillor
of the Municipality may not be more than 3 (three) months in arrears for
municipal service fees, surcharges on fees, property rates or any other
municipal taxes, levies and duties levied by the municipality.
Notwithstanding any other procedure, method or action that may be taken
in terms of this Policy, the municipality will deduct any outstanding amount
from such councillors’ 3 (three) month period.
Application for rendering services
1. NO new applications will be allowed on a tenant’s name.
2. All new applications for the provision of a service will be subject to the
payment of a deposit based on the deposit detailed in the tariff policy.
3. The deposit determined by the municipality must be paid in full before
services can be provided.
4. The deposit must be paid in cash or by bank guarantee
5. The Municipality shall not conduct any business activity with or provide any
services to any persons who are in arrears with municipal accounts except as
provided for in this policy and as determined by the Municipality from time to
time, nor will any refunds of credits be made to any debtor who is in arrears
with their municipal account. The credit amount will be utilized against any
other arrears account.

6. Current tenant accounts:
- If the tenant account is in arrears, after the final account has
been issued, the outstanding amount will be transferred to
the owners account.
- Duplicate tenant statement can be issued on request by the
owner
- A letter will be issued to the owner notifying the owner of the
outstanding debt of the tenant.
Disputes
1. In this policy “dispute” refers to the instance when a debtor questions the
correctness of any account rendered by the Municipality with the Municipal
Manager as per the process in sub-item (2) below.
2. In order for a dispute to be registered with the municipality, the following
procedures must be followed:
By the debtor
a) The dispute must be submitted in writing
b) No dispute will be registered verbally whether in person or over the
telephone.
c) The debtor must furnish full personal particulars including ALL
account numbers held with the Municipality, direct contact
telephone number, fax-number, postal and e-mail addresses and
any other relevant particulars required by the municipality.
d) The full nature of the dispute must be described in the
correspondence referred to above.
e) The onus will be on the debtor to ensure that he receives a written
acknowledgement of the dispute.
f) The debtor will be liable for the amount due except for the dispute
amount on or before due date for the account rendered.
By the Municipality:
a) On receipt of the dispute the following actions are to be taken:
- A written acknowledgement of the receipt of the dispute must
be provided to the debtor.
- The amount payable by the debtor for the specific month of the
dispute and inform the debtor that all accounts thereafter must
be paid in full.
- Specify the time to resolve the dispute- disputes must be solved
within 3 (three) months

- The dispute must be registered in a dispute register
- Inform the Debtors Department and the Debt Collection
Department of the dispute
- Ensure that all relevant information received is rectified
accordingly on the finance system
- Conduct checks or follow-ups on all disputes as unresolved
3. The following provisions apply to the consideration of disputes:
a) All disputes must be concluded by the Municipal Manager or
delegated official
b) The Municipal Manager’s or the delegated official’s decision is final
and will result in the immediate implementation of any debt
collection and credit control measures provided for in this Policy
after the debtor is provided with the outcome of the appeal.
c) The same debt will not again be defined as a dispute in terms of
this paragraph and will not be reconsidered as the subject of a
dispute.
d) Should the debtor not be satisfied with the outcome of the dispute,
a debtor may lodge an appeal in terms of section 62 of the Systems
Act.
4. The Municipality reserves the right to declare a dispute on any account as
may be deemed necessary.
Irrecoverable debt
Criteria for irrecoverable debt
Debt will only be considered as irrecoverable if it complies with the following
criteria:
a) The cost to recover the debt does not warrant further action: or

Authorisation
b) A deceased estate has no liquid assets to cover the outstanding
amount following the final distribution of the estate; or
c) It has been proven that the debt has prescribed; or
d) Any amount equal to or less than R1 000.00 (one thousand) will be
considered too small, after having followed basic checks, to warrant
further endeavours to collect it; or
e) The outstanding amount is due to an irrecoverable administrative
error by the municipality; or
f) A court has ruled that the claim is not recoverable
g) All debtors who are registered as indigent
As rates are deemed to be recoverable in all instances, all requests to write-off
debt in respect of rates must be presented as individual items to the Council to
authorise such debt to be written off, exclude indigent approvals.
In respect of other debt, schedule indicating the debtor account number, the
debtor’s name, amount per account category as well as a reason to write-off the
amount must be complied.
Notwithstanding the above, Council will be under no obligation to write-off any
particular debt and will always retain sole discretion to do so.
General
Interest will be charged on all overdue accounts.
Rates and taxes
When an account has not been paid after 60 days the following procedures
apply:

a) The data per each debtor is extracted per ward and a final notice is sent
out via the post.
b) The amount due must be paid within 21 days.
c) If a debtor cannot make a payment, they can make an arrangement to
pay. All arrangements must be recorded on the system.
d) A debt rescheduling arrangement requires an initial payment of 50% of the
outstanding account, where after the current account plus an acceptable
but affordable amount towards the arrears each month. An arrangement
may, subject to all conditions in terms of the policy being adhered to, be
entered into to suspend the debt collection process/legal action.
e) The Ward Councillor will be informed of defaulting debtors following the
issuing of the statutory notice/judgement order for the occupant.
f) If no payment or arrangement is made within 21 days, the same data is
captured and transferred to a handover account. The arrears will then
reflect on this account and the normal monthly accounts will reflect in the
current account.
g) All arrears are handed over to lawyers and summonses will then be issued
from the lawyers’ offices.
h) The lawyers will proceed with judgement and then sale in execution if
timeous feedback is not received from the debtor. In doing so Council will
notify the ward councillor of the action taken.
i) The debtor is responsible for all legal costs and will have to pay such costs
before any legal action may be stopped. An acceptable and enforceable
debt rescheduling agreement must also be entered with Council’s
Attorneys before any legal action may be stopped.

Water and electricity
a) Final notices are hand- delivered at the gate of the default debtor by a
private firm, and the notices state that payment must be received within 7
days.
b) If the amount on the notice is not paid within the specified 7 days, the
electricity will be disconnected and the water flow will be reduced, or
disconnected in certain cases.
c) If the amount is not paid on or before due-date, the electricity will be
disconnected and the water flow will be reduced, or disconnected in
certain cases.
d) When disconnections of electricity and/or water takes place due to nonpayment,
the consumer’s deposit will be adjusted if necessary.
Other debt (Sundry Debt)
In the recovery of sundry debt, Council reserves the right to utilise any legal
action at its disposal.
Restriction, disconnection and the termination of services may be utilised to
obtain overdue payment.
Arrangements to pay arrears accounts
Debtors prepared to enter into arrears repayment arrangements must at least
pay half of the arrears or as determent by the Chief Financial Officer and enter
into an arrangement to pay the balance as follows:
Arrangements to pay arrears amounts are to be made in terms of the following
guidelines. For any arrangement that falls outside of the guidelines, the approval

of the Head of Revenue must be sought. The affixing of the signature of the Head
of Revenue to the arrangement contract must evidence such approval.
Debtors entering into arrangements must in addition, pay the current accounts
due or they will be considered to be in default of the arrangement.
Amount outstanding Initial payment Maximum
period
payment
Less than R2 000 OR
less than six months
More than R2 000 and
less than R5 000 OR
greater than six months
but less than 12 months
Greater than R5 000 OR
greater than 12 months
½ of outstanding balance 3 months
½ of outstanding balance 6 months
½ of outstanding balance 12 months but may differ
with particularly large and
old amounts, e.g. 3
years. The CFO and
senior management may
use discretion to decide
on such accounts.
Merit cases will be allowed, where special circumstances prevail, and must be
treated individually and could amongst others include the following categories :
- Unemployed persons.
- Deceased estates.
- Liquidated companies or CC’s.
- Private persons under administration.

- Outstanding enquiries on accounts, for example, misallocated payments, water
leaks, journals, incorrect levies, etc.
- Pensioners.
- Any other cases not mentioned which can be regarded as merit cases due to
circumstances.
Extension for payment of arrears in respect of merit cases should not exceed 5
years in the case of property owners and 6 months in the case of tenants with the
first payment within 30 days of the date of the agreement.
Written confirmation of all arrangements will be obtained. Such confirmation will
be on the standard form designed for this purpose and will list:
The debtors details;
The initial payment;
The monthly amount to be paid and the length of the arrangement;
Action to be taken if the debtor defaults against the arrangement;
Arrangements to pay must be entered onto the debtors system to prevent
further expense being incurred in additional, unnecessary follow-up action.