The Accounting Officer is required by the Municipal Finance Management Act (Law 56 of 2003) to keep adequate records and is responsible for the content and integrity of the annual accounts and related financial information included in this report. It is the responsibility of the Accounting Officer to ensure that the financial statements give a true and fair view of the state of affairs of the Municipality at the end of the financial year and the results of its operations and cash flows for the period then ended. The accounting officer recognizes that he is ultimately responsible for the system of internal financial control set up by the municipality and attaches great importance to maintaining a strong control environment.
Although the accountant is primarily responsible for the financial operations of the municipality, he is supported by municipal auditors. External auditors are responsible for auditing and reporting on the municipality's annual financial statements. The annual financial statements were reviewed by the municipality's external auditors and their report is presented on page 6.
Presentation of Annual Financial Statements
Presentation currency
Going concern assumption
Significant judgements and sources of estimation uncertainty
Significant judgements and sources of estimation uncertainty (continued) Provisions
Investment property
Investment property (continued) Cost model
Property, plant and equipment
Property, plant and equipment (continued)
Site restoration and dismantling cost
Site restoration and dismantling cost (continued) If the related asset is measured using the cost model
Intangible assets
Intangible assets (continued)
Heritage assets
Financial instruments
Financial instruments (continued) Classification
Financial instruments (continued)
The reversal does not result in a carrying amount of the financial asset that exceeds what the amortized cost would have been if the impairment had not been recognized at the date the impairment is reversed. When financial assets are impaired through the use of a provision account, the amount of the loss is recognized in surplus or deficit within operating expenses. The carrying amount of the asset transferred is allocated between the rights or obligations retained and those transferred based on their relative fair value at the date of transfer.
Any difference between the amount received and the amounts recognized and derecognized is recognized in surplus or deficit in the period of the transfer. Upon derecognition of a financial asset in its entirety, the difference between the book value and the amount received is recognized as surplus or deficit. Similarly, a substantial modification of the terms of an existing financial liability or part thereof is considered to have extinguished the original financial liability and recognized a new financial liability.
Leases
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event that occurred after the impairment loss was recognized, the previously recognized impairment loss is reversed by adjusting a provision. When such financial assets are written off, the write-off is made against the related provision. The municipality removes a financial liability (or part of a financial liability) from its balance sheet when it falls due - i.e.
An exchange between an existing borrower and lender of debt instruments with substantially different terms is deemed to have extinguished the original financial liability and a new financial liability is recognised. The difference between the carrying amount of a financial liability (or part of a financial liability) settled or transferred to another party and the amount paid, including any non-monetary asset transferred or liability received, is recognized in surplus or deficit. Any liability that is waived, forgiven or assumed by another entity through a non-exchange transaction is accounted for in accordance with GRAP's Standard on Income from Non-Exchange Transactions (Taxes and Transfers).
Leases (continued) Finance leases - lessee
Inventories
Non-current assets held for sale and disposal groups
Impairment of cash-generating assets
Impairment of cash-generating assets (continued) Recognition and measurement (individual asset)
Impairment of cash-generating assets (continued) Reversal of impairment loss
Impairment of non-cash-generating assets
Impairment of non-cash-generating assets (continued) Value in use
Employee benefits Short-term employee benefits
Employee benefits (continued)
The municipality uses the Projected Unit Credit method to determine the present value of its defined benefit obligations and the related current service costs and, where applicable, past service costs. In determining the present value of its defined benefit obligations and the associated current service costs and, where applicable, past service costs, the municipality attributes benefits to periods of service according to the scheme's benefit formula. The results of the valuation are updated for any significant transactions and other significant changes in conditions (including changes in market prices and interest rates) up to the reporting date.
When it is almost certain that the other party will reimburse some or all of the expenditures necessary to settle the defined benefit obligation, the right to reimbursement is recognized as a separate asset. In surplus or deficit, defined benefit plan expenses are presented as the net amount recognized for reimbursement. The currency and term of the financial instrument chosen to represent the time value of money are consistent with the currency and estimated term of the post-employment benefit obligation.
Employee benefits (continued) Other long-term employee benefits
Provisions and contingencies Provisions are recognised when
Provisions and contingencies (continued)
Provisions and contingencies (continued) Decommissioning, restoration and similar liability
Revenue from exchange transactions
Revenue from exchange transactions (continued) Rendering of services
Revenue from non-exchange transactions
Revenue from non-exchange transactions (continued) Measurement
Borrowing costs
Offsetting
Comparative figures
Unauthorised expenditure Unauthorised expenditure means
Fruitless and wasteful expenditure
Irregular expenditure
Grants in aid
Value-Added Tax
Commitments
Budget information
Related parties
Events after the reporting date
Accumulated surplus
New standards and interpretations
Standards and interpretations effective and adopted in the current year
Employee Benefits
New standards and interpretations (continued)
The municipality adopted the change for the first time in the 2014 financial statements.
Intangible Assets - Website Costs
New standards and interpretations (continued) The impact of the interpretation is not material
- Standards and interpretations issued, but not yet effective
The municipality did not apply the following standards and explanations that were published and are mandatory for the municipality's accounting periods beginning on or after July 1, 2014, or later periods:
Segment Reporting
A transfer of functions between entities that are not under common control is the reorganization and/or reallocation of functions between entities that are not ultimately controlled by the same entity, before and after the transfer of functions. In the event of a transfer of functions between entities that are not under common control, assets and liabilities must be recognized (by the transferee) at fair value on the date of acquisition. The difference between the amount of consideration paid, if any, and the book value of assets acquired and liabilities assumed should be recognized in accumulated surplus/(deficit).
There are certain specific recognition and measurement principles and exceptions to the recognition and measurement principles for transfers of functions between entities that are not under common control. The municipality expects to adopt the standard for the first time in the financial statements for 2016. It is unlikely that the amendment will significantly affect the annual financial statements of the municipality.
The objective of this standard is to establish accounting principles for the combined entity and entities combined in a merger. A merger is where a new combined entity begins, the acquirer can be identified, and the merging entities have no control over the combined entity. In the event of a merger, assets and liabilities must be recognized (by the combined entity) at their book value and derecognized (by the combined entity) at their book value.
The difference between the book value of assets and liabilities should be included in the cumulative surplus / (deficit). The municipality expects to apply the standard for the first time in the 2016 annual accounts. The amendment is unlikely to have a material impact on the City's financial statements.
Related Parties
The standard states that a related party is a person or an entity with the ability to control or jointly control the other party, or to exercise significant influence over the other party, or vice versa, or an entity that is subject to common control, or joint control. If the reporting entity is itself such a plan, the sponsoring employers are related to the entity;. The standard states that a related party transaction is a transfer of resources, services or obligations between the reporting entity and a related party, regardless of whether a price is charged.
It only discloses transactions with related parties where the transactions are not concluded in the normal course of business or on terms that are no more or no less favorable than the terms that it would use to enter into transactions with another organization or person. The standard requires management remuneration to be disclosed on a per-person basis and in the aggregate. The standard has been approved by the Accounting Standards Board, but the Minister of Finance has not yet set a date for its implementation.
The municipality expects to adopt the standard for the first time as soon as it comes into force. The standard is unlikely to have a material impact on the council's financial statements.
Service Concession Arrangements: Grantor
An asset provided by the operator or an upgrade of an existing asset is recognized as a service concession asset with a corresponding obligation, which is an enforceable obligation if certain criteria and conditions are met. GRAP 108 deals only with those claims arising from legislation or an equivalent instrument, such as regulations, by-laws or other documents issued on the basis of legislation, such as ministerial orders and decisions of the cabinet or municipal council. Therefore, to be statutory in nature, special legislation should require the municipality to carry out transactions, such as determining who is to be taxed and at what rates and amounts.
Statutory receivables are not contractual receivables, the latter of which would normally meet the definition of a financial asset and fall within the scope of the GRAP financial instruments standard. Legal claims are not entered into voluntarily like contractual claims because they arise as a result of specific legal requirements.
Service Concession Arrangements where a Grantor Controls a Significant Residual Interest in an Asset This interpretation provides guidance to the grantor where it has entered into a service concession arrangement, but only
Legal receivables are initially measured at the transaction amount and then at the cost method. It is unlikely that the clarification will have a significant impact on the municipality's annual financial statements.
Inventories
Receivables from non-exchange transactions (continued) National and provincial government
Receivables from exchange transactions Gross balances
Receivables from exchange transactions (continued) Summary of debtors by customer classification
Receivables from exchange transactions (continued) Credit quality of receivables from exchange transactions
Cash and cash equivalents Cash and cash equivalents consist of
Cash and cash equivalents (continued) The municipality had the following bank accounts
Investment property
Investment property (continued)
Property, plant and equipment
Property, plant and equipment (continued)
Intangible assets
Heritage assets
Finance lease obligation Minimum lease payments due
Operating lease Government Garage
Payables from exchange transactions
Consumer deposits
Unspent conditional grants and receipts
Long term loan
Short term loan
Employee benefit obligations
Employee benefit obligations (continued) Employee benefit cost obligation
Employee benefit obligations (continued) History of experience adjustments: Gains and losses
Employee benefit obligations (continued) Key financial assumptions
Employee benefit obligations (continued)
Landfill closure provision
Service charges
Property rates Rates received
Property rates (continued)
Government grants and subsidies Operating grants
Government grants and subsidies (continued) Expanded Public Works Programme Integrated Grant
Government grants and subsidies (continued) Fezile Dabi District Municipality Grant
Revenue
Other income
Employee related costs
Employee related costs (continued)
Remuneration of Councillors
Remuneration of Councillors (continued)
Depreciation and amortisation
Bulk purchases (continued)
Contracted services
General expenses
Cash generated from operations
Operating lease payments represent rents payable by the municipality for certain of its motor vehicles (government garage). Operating lease payments represent rents payable by the entity for the rental of property located in Abrahamsrust.
Contingencies Contingent liabilities
The municipality operated three landfills without the required licenses in violation of the National Environmental Management: Waste Act, 2008 (Act No. 59 of 2008). Waste Act, 2008 a fine of R10 million or imprisonment for a period not exceeding 10 years can be imposed on any person found guilty of the offence. Furthermore, the municipality may be subject to legal action by other institutions or members of the public as unauthorized landfills are operated which may pose an environmental, health or safety risk to the community.
Related parties
Prior period errors
Prior period errors (continued)
Prior period errors (continued) 4.Write off Grants
During the preparation of the 2013/2014 financial statements, additional unauthorized expenses related to the previous year were identified. This error has resulted in the underestimation of last year's unauthorized expenditure by an amount of R25 406. The municipality has started a detailed investigation of last year's payments to ensure that they are all fruitless and wasteful.
During the finalization of the 2013/2014 financial statements, it was found that the infrastructure commitments for 2012/2013 were underestimated. These have been corrected and the 2012/2013 amounts in note 40 have been restated accordingly.
Prior period errors (continued) Statement of
Comparative figures
Risk management Financial risk management
Risk management (continued) Liquidity risk
Going concern
Events after the reporting date
Deviation from supply chain management regulations
Budget differences
Unauthorised expenditure
Fruitless and wasteful expenditure
Fruitless and wasteful expenditure (continued) Details of fruitless and wasteful expenditure – current year
Fruitless and wasteful expenditure (continued) Details of fruitless and wasteful expenditure - prior year
Fruitless and wasteful expenditure (continued) Auditor General - Payment for assurance
Additional disclosure in terms of Municipal Finance Management Act Contributions to organised local government
Additional disclosure in terms of Municipal Finance Management Act (continued) Councillors' arrear consumer accounts
Changes in accounting policy
In-kind donations and assistance Other projects
Schedule of external loans as at 30 June 2014
Analysis of property, plant and equipment as at 30 June 2014
Analysis of property, plant and equipment as at 30 June 2013
