Audit Committee Report

The accountant is required by the Municipal Financial Management Act (Act 56 of 2003) to keep adequate accounts and is responsible for the content and integrity of the annual accounts and associated financial information included in this report. The accountant is of the opinion, based on the management's information and explanations, that the internal control system provides reasonable assurance that the accounts can be used as a basis for the preparation of the annual accounts. Although the accountant is primarily responsible for the municipality's financial affairs, they are supported by the municipality's external auditors.

Risk assessments must be made with due consideration of the municipality's strategy and approved in a timely manner. The review of the annual financial statements for the 2014/15 financial year was carried out on August 24, 2015 by the audit and performance committee. The commission notes that the municipality's annual financial statements comply with the GRAP reporting standards in all material respects.

The audit committee reports that it has fulfilled its responsibilities arising from section 38(10)(1) of the WOFB and Treasury Regulation 3.1. The audit committee is satisfied with the content and quality of monthly and quarterly reports prepared and issued by the accounting officer of the municipality during the year under review.

Statement of Financial Position as at 30 June 2015

Statement of Financial Performance

Statement of Changes in Net Assets

Cash Flow Statement

Statement of Comparison of Budget and Actual Amounts

Accounting Policies

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)
Property, plant and equipment
Property, plant and equipment (continued)
Intangible assets
Intangible assets (continued) An intangible asset is recognised when
Heritage assets
Heritage assets (continued) Impairment
Financial instruments
Financial instruments (continued) Initial recognition
Financial instruments (continued) Presentation
Leases
Inventories
Inventories (continued)
Impairment of cash-generating assets
Impairment of non-cash-generating assets
Impairment of non-cash-generating assets (continued)
Impairment of non-cash-generating assets (continued) Value in use
Employee benefits
Employee benefits (continued) Short-term employee benefits
Provisions and contingencies Provisions are recognised when
Provisions and contingencies (continued)
Revenue from exchange transactions
Revenue from non-exchange transactions
Revenue from non-exchange transactions (continued)
Revenue from non-exchange transactions (continued) Gifts and donations, including goods in-kind
Borrowing costs
Comparative figures
Unauthorised expenditure Unauthorised expenditure means
Fruitless and wasteful expenditure
Irregular expenditure
Irregular expenditure (continued)
Budget information
Events after reporting date
Expenditure
Expenditure (continued)

Provisions are assessed at the reporting date and the amount of a provision is the present value of the expenditure expected to be required to settle the obligation. The impact of the periodic settlement of the rebate is recognized in the statement of financial results as a financial expense as it occurs. Investment property is recognized as an asset when it is probable that the future economic benefits or service potential associated with the investment property will flow to the municipality and the cost or fair value of the investment property can be measured reliably.

If the fair value of the acquired item could not be determined, the deemed cost is the carrying amount of the asset or assets given up. If a replacement cost is included in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is no longer recognised. Property, plant and equipment are derecognised when the asset is disposed of or when no further economic benefits or service potential are expected from using the asset.

The municipality recognizes a heritage asset as an asset if it is probable that future economic benefits or service potential associated with the asset will flow to the municipality, and the asset's cost price or fair value can be measured reliably. The municipality recognizes a financial asset or a financial liability in its statement of financial position when the municipality becomes a party to the contractual provisions of the instrument. Depreciation (Amortization) is the systematic allocation of an asset's depreciable amount over its useful life.

If such a sign exists, the municipality assesses the recoverable value of the service of the asset. The value in use of non-performing assets is the present value of the remaining useful potential of the non-performing assets. The present value of the remaining useful potential of a non-monetary asset is determined as the depreciated replacement value of the asset.

The amount of a provision is the best estimate of the expenditure expected to be required to settle the current liability at the reporting date. Revenue from a non-exchange transaction is measured by the amount of the increase in net assets recognized by the municipality. When a liability is subsequently reduced, because the taxable event occurs or a condition is satisfied, the amount of the reduction in the liability is recognized as income.

Assets resulting from fines are valued at the best estimate of the inflow of funds to the municipality. Gifts and gifts, including goods in kind, are recognized as assets and income when it is probable that the future economic benefits or service potential will flow to the municipality and the fair value of the asset can be measured reliably.

Notes to the Annual Financial Statements

Inventories

Consumer debtors Gross balances

Cash and cash equivalents Cash and cash equivalents consist of

Investment property

Property, plant and equipment

Property, plant and equipment (continued) Reconciliation of property, plant and equipment - 2015

Property, plant and equipment (continued) Reconciliation of property, plant and equipment - 2014

Intangible assets

Intangible assets (continued) Reconciliation of intangible assets - 2014

Heritage assets

Other financial liabilities At amortised cost

Long-term liabilities Annuity loans

Payables from exchange transactions

Consumer deposits

Employee benefit obligations Defined benefit plan

Employee benefit obligations (continued)

Unspent conditional grants and receipts

Provisions

Revaluation reserve

Service charges

Investment revenue Interest revenue

Property rates Rates received

Government grants and subsidies Operating grants

The purpose of the grant is to facilitate the planning, acceleration and implementation of various projects that ensure water supply for communities identified as not receiving basic water supplies. The purpose of the grant is to promote and support reforms in financial management by building capacity in municipalities to implement the Municipal Financial Management Act. The purpose of the grant is to incentivize municipalities to expand job creation through the use of labour-intensive delivery methods in the identified focus areas, in accordance with EPWP guidelines.

The purpose of the grant is to facilitate the planning, acceleration and implementation of various projects that will ensure water availability for the community.

Revenue

Revenue (continued)

Employee related costs

Remuneration of councillors

Finance costs

Bulk purchases

Contracted services

General expenses

Cash generated from operations

Commitments

Prior period errors

Statement of Financial Position

Prior period errors (continued) Non-Current Assets
Prior period errors (continued)
Prior period errors (continued) Cash flow statement
Financial Instruments
Risk management (continued) Credit risk
Going concern
Events after the reporting date
Unauthorised expenditure
Unauthorised expenditure (continued)
Fruitless and wasteful expenditure
Irregular expenditure
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
New standards and interpretations

Standards and interpretations issued, but not yet effective

Contingent liabilities
Related parties

The accountant is fully responsible for the establishment and control of the municipal risk management framework. Municipal risk management policies are established to identify and analyze the risks faced by the municipality, to determine appropriate risk limits and controls, and to monitor risks and respect the limits. In general, financial assets and liabilities are created through day-to-day operational activities and are not held to manage the risks faced by the municipality in carrying out its activities.

The Financial Services Department monitors and controls financial risks related to business operations with internal policies and procedures. Internal audit, responsible for implementing the control framework and monitoring and responding to potential risks, regularly reports to the municipality's audit committee, an independent body that monitors the effectiveness of the internal audit function. Liquidity risk is the risk that the municipality will have problems fulfilling its obligations in relation to its financial obligations, which it settles by handing over money or another financial asset.

The municipality manages the liquidity risk through an ongoing review of future engagements and credit facilities. Credit risk is the risk of financial loss for the municipality if a customer or counterparty to a Financial Instrument does not fulfill its contractual obligations and arises primarily from the municipality's receivables from customers and investment securities. The municipality only deposits cash in major banks with high creditworthiness and limits exposure to a single counterparty.

Otherwise, if there is no independent assessment, the risk control assesses the customer's credit quality, taking into account its financial position, past experience and other factors. Market risk is the risk that changes in market prices, such as exchange rates, interest rates and share prices, affect the municipality's income or the value of its holdings of Financial Instruments. There have been no changes in the municipality's exposure to market risks or the way in which it manages and measures the risk.

Whether the municipality can maintain its continuity depends on a number of factors. Chief among these is that the Accounting Officer continues to secure funding for ongoing operations for the Municipality and that the subordination agreement referred to in Note XX to these financial statements remains in effect for as long as it is necessary to restore the solvency of the Municipality. Grantor controls a significant residual interest in an asset 01 April 2016 The impact of the change is not material.