Public Audit Act, 2004 (Act No. 25 of 2004)Memorandum of Agreement (2020)Annexure AB. Criteria: Financial Performance IndicatorsB.1. Cash coverage |
Description:
| • | The Ratio indicates the auditees ability to meet at least its monthly fixed operating commitments from cash and short-term investment without collecting any additional revenue, during that month. |
| • | The Ratio is adjusted for Unspent Conditional Grants as the cash is not available for normal Municipal day-to-day operational expenditure but rather reserved for Grant related expenditure. |
This indicator assesses—
| • | how many months an auditee can continue to operate without inflows of additional cash; and |
| • | whether adequate cash is available to meet its operating expenditure requirements. |
Calculation
((Cash and Cash Equivalents - Unspent Conditional Grants - Overdraft) + Short Term Investment)/Monthly Fixed Operational Expenditure excluding (Depreciation, Amortization, and Provision for Bad Debts, Impairment and Loss on Disposal of Assets)).
Score |
Rating |
Score 3 |
Less than 1 month |
Score 2 |
Between 1 and 3 months |
Score 1 |
More than 3 months of operational expenditure |