Municipal availability charges – what are they?

The Public Sector Accounting Forum considered the nature of municipal availability charges, which informs their classification -in financial statements.

It was noted that there is divergence  such as what is labelled as “availability charges” in accounting policies and notes among municipalities. To classify these charges as (a) exchange or non-exchange, and (b) contractual or statutory for financial reporting purposes, municipalities should consider whether (a) there is a direct exchange of approximately equal value, and (b) they are levied or charged as a result of a contract, or in terms of municipal by-law or other legislation.

The National Treasury will consider how to respond to the issue as the issue affects the classification on mSCOA and whether VAT should be levied. In the interim, municipalities should clearly document their assessment of the nature of their charges and the resultant classification in financial statements.