The Accounting Officer is required by the Municipal Finance Management Act (Act 56 of 2003) to maintain adequate accounting records and is responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is the accounting officer's responsibility to ensure that the annual financial statements fairly present the state of affairs of the municipality at the end of the financial year and its results. The annual financial statements have been prepared in accordance with Generally Recognized Accounting Practice Standards (GAAP) including any interpretations, guidance and directives issued by the Accounting Standards Board.
The Accounting Officer recognizes that he is ultimately responsible for the system of internal financial control established by the municipality and places great importance on maintaining a strong control environment. To enable the Accounting Officer to fulfill these responsibilities, the Accounting Officer establishes internal control standards aimed at reducing the risk of errors or deficiencies in a cost-effective manner. The Accounting Officer is of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records can be relied upon for the preparation of the annual financial statements.
The Accounting Officer has reviewed the City's cash flow forecast for the year ending June 30, 2016 and in light of this review and its current financial position is satisfied that the City has or has sufficient resources to continue its operational existence for the foreseeable future. The financial statements have been prepared on the basis of accounting principles applicable to going concern. Chief among these is that the Accounting Officer continues to acquire funding for the entity's ongoing operations.
The accountant is not aware of any matter or circumstance that has arisen since the end of the financial year.
Statement of Comparison of Budget and Actual Amounts
Accounting Policies
Presentation of Financial Statements
- Presentation currency
- Going concern assumption
- Significant judgements and sources of estimation uncertainty
- Significant judgements and sources of estimation uncertainty (continued) Useful lives of waste and water network and other assets
- Property, plant and equipment
- Property, plant and equipment (continued)
- Intangible assets
- Intangible assets (continued)
- Interest in joint ventures 1.7 Financial instruments
- Financial instruments (continued)
- Leases
- Leases (continued) Finance leases - lessee
- Impairment of cash-generating assets
- Impairment of cash-generating assets (continued)
- Impairment of non-cash-generating assets
- Share capital / contributed capital
- Employee benefits
- Provisions and contingencies Provisions are recognised when
- Provisions and contingencies (continued)
- Commitments
- Revenue from exchange transactions
- Revenue from exchange transactions (continued) Interest, royalties and dividends
- Revenue from non-exchange transactions 1.18 Investment income
- Borrowing costs
- Unauthorised expenditure Unauthorised expenditure means
- Fruitless and wasteful expenditure
- Irregular expenditure
- Irregular expenditure (continued)
- Revaluation reserve
- Budget information
- Related parties
- Events after reporting date
- Events after reporting date (continued)
- Investments
The fair value of financial instruments traded in active markets (such as securities traded and available-for-sale securities) is based on quoted market prices at the end of the reporting period. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward exchange contracts is determined using quoted forward exchange rates at the end of the reporting period.
If the fair value of the item acquired was not determinable, the assumed cost is the book value of the asset(s) disposed of. If a replacement cost is recognized in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised. An entity recognizes a financial asset or a financial liability in the statement of financial position when the entity becomes a party to the contractual provisions of the instrument.
An entity initially measures a financial asset and a financial liability at fair value plus transaction costs that are directly attributable to the acquisition or issuance of the financial asset or financial liability. The asset's book value is reduced directly OR using an impairment account. Finance leases are recognized as assets and liabilities in the statement of financial position in amounts equal to the fair value of the leased property or, if lower, the present value of the minimum rents.
The discount rate used to calculate the present value of the minimum lease payments is. Depreciation (Amortization) is the systematic allocation of an asset's depreciable amount over its useful life. Depreciation (Amortization) is the systematic allocation of an asset's depreciable amount over its useful life.
When the estimated amount for an impairment loss is greater than the carrying amount of the non-cash-generating asset to which it relates, the entity recognizes a liability only to the extent required by the GAAP standards. The amount of a provision is the best estimate of the expenditure expected to settle the present obligation at the reporting date. Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and volume discounts.
Royalties are recognized as they are earned in accordance with the content of the relevant agreements. Expenses are classified according to the nature of the expense and, when recovered, are subsequently recognized as revenue in the statement of financial performance.
Notes to the Financial Statements
- Property, plant and equipment
- Property, plant and equipment (continued) Reconciliation of property, plant and equipment - 2016
- Receivables from exchange transactions
- Revaluation reserve
- Payables from exchange transactions
- Other revenue
- Investment revenue Interest revenue
- Grants and subsidies paid Other subsidies
- Government grants and subsidies Operating grants
- Employee related costs
- Remuneration of councillors
- General expenses
- Contingencies
- Related parties Related party transactions
- Prior period errors
- Prior period errors (continued)
- Risk management Financial risk management
- Going concern
- Events after the reporting date
- Unauthorised expenditure
- Fruitless and wasteful expenditure
- Additional disclosure in terms of Municipal Finance Management Act Contributions to organised local government
The Company will adjust the amount recognized in the financial statements to reflect adjusting events after the reporting date when the event occurred. The company will disclose the nature of the event and an estimate of its financial effect, or a statement that such an estimate cannot be made in respect of all significant non-adjusting events where the lack of disclosure could affect users' financial decisions taken on the basis of the financial statements. The municipality's management is of the opinion that the accounting value of the bank balance and cash and cash equivalents, which are listed at amortized cost in the accounts, is approximately their fair value.
The amount included in investment income derived from exchange transactions amounts to R invested with various financial institutions derived from government grants and other interest received is taken from the main account of the municipality-. This related party transaction has been disclosed as a result of the amount of rent paid to the local municipality of Rustenburg being considered to be lower than a market related value. During an assessment of payables in relation to the financial period ending on 30 June 2015, it was discovered that some of the payables had been incorrectly calculated and therefore the VAT was also affected, hence the reduction of the Value Added Tax.
After a detailed assessment of work progress in the previous financial year period ended 30 June 2015, management discovered that some of the projects were incorrectly capitalized in the books of the Bojanala Platinum District Municipality as they were a direct project of the local municipality, resulting in a decrease in property, plant and equipment. Management conducted a detailed analysis of accounts payable and determined that the majority of accounts payable balances were the result of incorrect records and misallocations in the previous fiscal years, hence a decrease in accounts payable for the fiscal year ended June 30, 2015. An increase in other liabilities is a result of reclassification of the finance lease agreement, which was discovered at the end of the lease agreement as a result of the new lease agreement, which was discovered at the end of the lease period. The payments that have been made to Consesus are effectively lease payments and the owner of the machine retains all rights to the assets even after its lifetime, hence an increase in the 2014/15 financial year.
The management went through an integration process between the payroll system "PAY-DAY" and the municipality's accounting system, which is "PASTEL", and it was discovered that some of the votes are incorrectly connected in Pastel in relation to the payroll system and thus a balance on this account, which is accrual. An increase in overheads in the previous financial year comes as a result of a detailed analysis of payables which was an exercise in offsetting incorrect balances, hence an increase in overheads in the 2014/15 period and the same explanation relates to a movement on repairs and maintenance. Movement in previous depreciation is a result of life assessment of property, plant and equipment and therefore restating some of the assets with retrospective effect, this exercise includes assets that were written down at the end of the 2015/16 accounting period, thus a decrease in previous years' depreciation.
It was confirmed after a detailed review of the lease agreement that rights and obligations of the leased printing machines remain with the contractor at the end of the machines' life. Contracted services disclosed in the 2015 financial statements are renamed to Lease Rental. Due to the dynamic nature of the underlying businesses, entity treasury maintains flexibility in funding by maintaining availability under committed lines of credit.
The entity's ability to continue as a going concern depends on a number of factors. While certain going concern ratios may appear unfavorable, the entity will continue to receive funding from the government as evidenced by an equitable division of equity in terms of the Division of Revenue Act.
