Notes to the Annual Financial Statements
37. Fair value adjustments Other financial assets / liabilities
Dihlabeng Local Municipality
Annual Financial Statements for the year ended 30 June 2018
Notes to the Annual Financial Statements
Figures in Rand
34. Bulk purchases
Dihlabeng Local Municipality
Annual Financial Statements for the year ended 30 June 2018
Notes to the Annual Financial Statements
Figures in Rand
38. Auditors' remuneration Fees
39. Operating lease income
Projected income from operating lease agreements -Within one year
-In second to fifth year (inclusive) -Longer than 5 years
2018
6,508,575
531,174 1,961,250 2,492,424
2017
3,956,523
516,410 2,228,889 83,407 2,828,706 Rental contracts for the different flats (100), vacant land (7) and houses (160) are signed for a period of 12 months, thereafter the contract is done on a month to month basis. All the house and flat contracts got a month notice period. New tenants are normally found within that period. The projected income are thus only included in the period within one year.
Contacts for business premesis (7) rental are signed for a periods from 3 year to 9 years and 11 months. Escalation on these contracts are done on an annual basis linked to the inflation rate.
40. Cash generated from operations Deficit
Adjustments for:
Depreciation and amortisation
(Loss) I Profit on sale of assets and liabilities Gain (loss) on game stock
Actuarial loss I (gain)
Fair value adjustments on investments Debt impairment
Movements in provisions Changes in working capital:
Inventories
Receivables from exchange transactions Consumer debtors
Other receivables from non-exchange transactions Payables from exchange transactions
VAT
Unspent conditional grants and receipts Provisions
78
(124,666,463) (76,563,772) 106,505,409 73,366,952
16,013,476 (447,271) (298,960) 207,515 3,486,000 (1,926,000)
(114,019) (76, 146) 154,174,414 127,672,236
477,319 5,970 75,816 (184,812)
6,841,802 2,189,943
(153,635, 758) (123,067,803) (2,213,825) 812,448 62,263,682 83,421,508 (5,727,053) (6,479,021)
(5,000,000) 728,640 701,588 63,910,480 74,633,335
Dihlabeng Local Municipality
Annual Financial Statements for the year ended 30 June 2018
Notes to the Annual Financial Statements
Figures in Rand
41. Financial instruments Categories of financial instruments 2018
Financial assets
Other financial assets
Trade and other receivables from exchange transactions
Other receivables from non-exchange transactions Consumer debtors
Cash and cash equivalents
Financial liabilities
Other financial liabilities
Trade and other payables from exchange transactions Finance lease liability
2017
Financial assets
Other financial assets -
Trade and other receivables from exchange transactions
Other receivables from non-exchange transactions Consumer debtors
Cash and cash equivalents
Financial liabilities
Other financial liabilities
Trade and other payables from exchange transactions Bank overdraft
At fair value 1,662,933
1,662,933
At fair value 1,549,097
1,549,097
At amortised cost 11, 116,232
2,377,248
58,494,724 1,630,244 73,618,448
At amortised cost 17,958,034
163,423 60,013,924
181,119
78,316,500
2018 2017
At cost Total
170,000
170,000
1,662,933 11, 116,232 2,547,248 58,494,724 1,630,244 75,451,381
At amortised Total cost
37,906,652 402,400,572 1,688,141
37,906,652 402,400,572 1,688, 141 441,995,365 441,995,365
At cost Total
170,000
170,000
At amortised cost 41,409,208 335,252,561
4,239,871
380,901,640
1,549,097 17,958,034 333,423 60,013,924 181,119 80,035,597
Total 41,409,208 335,252,561 4,239,871 380,901,640
Dihlabeng Local Municipality
Annual Financial Statements for the year ended 30 June 2018
Notes to the Annual Financial Statements
Figures in Rand 2018 2017
42. Risk management Financial risk managei:nent
The municipality's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.
The municipality's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the municipality's financial performance. The municipality uses derivative financial instruments to hedge certain risk exposures. Risk management is carried out by a central treasury department (entity treasury) under policies approved by the accounting officer. Municipality treasury identifies, evaluates and hedges financial risks in close co-operation with the municipality's operating units. The accounting officer provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
Liquidity risk
The municipality's risk to liquidity is a result of the funds available to cover future commitments. The municipality manages liquidity risk through an ongoing review of future commitments and credit facilities.
The table below analyses the municipality's financial liabilities and net-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.
At 30 June 2018 Contractual Less than 1 Between 1 Between 2 Over 5 years
cash flow year and 2 years and 5 years
Borrowings 37,906,652 4,562,719 4,273,960 15,704,268 13,365,705
Trade and other payables 395,083,129 395,083,129
Finance lease liability 1,688, 141 278,534 308,116 1,101,491
At 30 June 2017 Contractual Less than 1 Between 1 Between 2 Over 5 years
cash flow year and 2 years and 5 years
Borrowings 41,409,208 4, 163,573 3,874,254 14,236,329
Trade and other payables 335,252,561 335,252,561
Credit risk
Credit risk consists mainly of cash deposits, cash equivalents, derivative financial instruments and trade debtors. The municipality only deposits cash with major banks with high quality credit standing and limits exposure to any one counter- party.
19,135,052
Trade receivables comprise a widespread customer base. Management evaluated credit risk relating to customers on an ongoing basis. If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, nsk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the council.
Outstanding accounts are followed up monthly and the supply of electricity accounts not paid on due dates are cut immediately.
Market risk
Interest rate risk
The municipality's interest rate risk arises from consumer debtors. Consumer debtors are levied at variable rates expose the municipality to cash flow interest rate risk. The interest rate is linked to the prime interest rate and the risk is not considered to be material at this stage. Long term borrowings was done at a fixed rate and interest rate risk will not impact the financial position of the municipality.
80
Dihlabeng Local Municipality
Annual Financial Statements for the year ended 30 June 2018
Notes to the Annual Financial Statements
Figures in Rand 2018 2017
42. Risk management (continued)