Legislation governing the municipality's operations Constitution of the Republic of South Africa (Act 108 of 1996) Local Government: Municipal Financial Management Act (Act no.56 of 2003) Local Government: Municipal Systems Act (Act 32 of 2000) Local Government: Municipal Structures Act (Act 198 of Division 01) Act 19 of Revenue 19 of 01 (Act 19 of Revenue 01). Appendix E: Actual versus Budget (Acquisition of Property, Plant and Equipment) 95 Appendix F: Disclosure of Grants and Subsidies in terms of the Municipal Finances.
Presentation of annual financial statements
Significant judgements and sources of estimation uncertainty
- Provisions
- Useful lives of property, plant, equipment and intangible assets
- Defined benefit plan liabilities
- Revenue recognition
- Financial assets and liabilities
New standards and interpretations
Service concession arrangements: Grantor
Separate financial statements
Consolidated financial statements
No significant impact on the municipality's financial statements is expected, as the municipality does not expect such funds to become part of the district mandate. The purpose is to provide guidelines for the treatment of charges in the financial statements of the entity paying the charge.
Segmental reporting (Municipalities and municipal entities are not required to apply)
Financial instruments
Derecognition is the removal of a previously recognized financial asset or financial liability from an entity's statement of financial position. Transaction costs are additional costs directly attributable to the purchase, issuance or disposal of a financial asset or liability.
Employee benefits
- Short-term employee benefits
- Defined contribution plans
- Defined benefit plans
The carrying amount of the asset is reduced directly or through the use of an allowance account. The present value of the defined benefit obligation is calculated using the projected unit credit method, including actuarial assumptions and a discount rate based on the government bond rate.
Provisions
The defined benefit obligation is the sum of the present value of the defined benefit obligation and unrecognized actuarial gains and losses, less unrecognized past service cost. According to the rules of the Seniority Scheme, which the municipality has established and operates, an employee (who falls under the current Terms of Service) is entitled to a cash payment calculated according to the rules of the scheme after 45 years of service.
Property, plant and equipment
The municipality does not recognize the costs of daily servicing of the tangible fixed asset in the book value of the tangible fixed asset. Each part of a tangible fixed asset, the purchase value of which is significant in relation to the total purchase value of the asset, is depreciated separately.
Heritage assets
The gain or loss arising from the derecognition of an item of property, plant and equipment is included in surplus or deficit when the asset is derecognised. Transfers to inheritance are only made if the asset meets the definition of inheritance.
Intangible assets
Transfers from inheritance are only made when a particular asset no longer meets the definition of inheritance. Intangible assets are derecognised when the asset is disposed of or when no further economic benefits or service potential are expected from its use.
Investments in financial assets - shares
The amortization period and the amortization method for intangible assets are reviewed at each reporting date. The gain or loss is the difference between the net sale proceeds, if any, and the carrying amount.
Impairment of non-cash-generating assets
Regardless of whether there is an indication of impairment, the municipality also annually tests a non-cash-generating intangible asset with an undefinable useful life or a non-cash-generating intangible asset that is not yet available for use for impairment by comparing its carrying amount with its recoverable amount. If an intangible asset was initially recognized in the current accounting period, the intangible asset is tested for impairment before the end of the current accounting period.
Leases
- Finance leases - The municipality as a lessee
- Operating leases - The municipality as a lessee
Inventories
When inventories are sold, the carrying amounts of those inventories are recognized as an expense in the period in which the related revenue is recognized. The amount of any inventory write-down to net realizable value or current replacement value and any inventory losses are recognized as an expense in the period in which the write-off or loss occurs.
Tax Tax Expense
If there is no related revenue, the costs are recognized when the goods are distributed or related services are performed. The amount of any reversal of any write-down of inventories arising from an increase in net realizable value or current replacement costs is recognized as a reduction in the amount of inventories recognized as a cost in the income statement in the period in which the reversal occurs.
Revenue from exchange transactions
Adjustments to provisional consumption estimates take place in the billing period in which meter readings are included. Service costs with regard to household waste are processed monthly in arrears and on a transaction basis by applying the approved rate per consumer who uses the landfill.
Revenue from non-exchange transactions
Income from non-exchange business is measured in the amount of the increase in net assets recognized by the municipality. When the liability is subsequently reduced because a taxable event occurs or a condition is met, the amount of the reduction in the liability is recognized as revenue.
Grants in aid
When the municipality recognizes an asset as a result of a non-exchange transaction, it also recognizes revenue equal to the amount of the asset measured at fair value at the date of acquisition, unless it is also required to recognize a liability. If a liability has to be recognized, it will be measured as the best estimate of the amount required to settle the liability at the reporting date and the amount of the increase in net assets, if any, recognized as revenue.
Borrowing costs
Budget information
Unauthorised expenditure
Fruitless and wasteful expenditure
Irregular expenditure
Commitments
Related parties
Close family members of a person are considered those family members who can be expected to influence or be influenced by that management in their relations with the municipality. Only transactions with related parties that are inconsistent or not in the ordinary course of business are explained.
Comparative figures
Contingent assets and contingent liabilities
Going concern assumption
Events after reporting date
Inventories
Receivables from exchange transactions - consumer debtors Gross balances
Category C Poor customers, customers with debts older than 60 days, no payments in the last 6 months and inactive accounts.
Receivables from exchange transaction - VAT
Receivables from non exchange transactions
Long term receivables
Cash and cash equivalents Cash and cash equivalents consist of
Detailed bank reconciliations in support of the cash book balance are available at the municipality's registered office.
Property, plant and equipment
The project has been temporarily halted due to the contractor's performance and the business rescue process. A register containing the information required in accordance with Section 63 of the Municipal Financial Management Act (Act No. 56 of 2003) is available for inspection at the municipality's registered office. No assets have been pledged as collateral, nor have restrictions been placed on assets under the municipality's control, and the stated additions include accruals.
Intangible assets
Investments in municipal entities
Investments in financial assets - shares Name of entity Listed /
Long term liabilities At amortised cost
Payables from exchange transactions
Consumer deposits
Defined employee benefit obligations Defined benefit plan
The future medical benefits are projected in accordance with the health care cost inflation rate and discounted at the gross discount rate. The net discount rate therefore depends on the ratio between the gross discount rate and the health care cost inflation rate respectively. The net discount rate therefore depends on the ratio between the gross discount rate and the salary inflation rate respectively.
Provisions
Revenue from exchange transactions - Service charges
Revenue from exchange transactions - Interest received
The Department of Transport grant is being used to coordinate Rural Road Asset Management Systems and collect data on roads, bridges and traffic on municipal road networks in line with the Road Infrastructure Strategic Framework for South Africa. The grant received from the Department of Sport and Recreation is used to develop sports codes within the district. The grant received from the Department of Tourism Economic Development and Environmental Affairs is for the development of the environmental framework plan and essential oils programs.
Unspent transfers and subsidies
Employee related costs
During the year, an acting allowance of R56 817 was paid to an incumbent for duties in relation to the Deputy Municipal Manager: Technical Services post. During the year, an acting allowance of R30 945 was paid to an incumbent for the fulfillment of the duties in relation to the Deputy Municipal Manager Corporate Services Department. During the year an acting allowance of R25 872 was paid to an incumbent for duties in relation to the Deputy Municipal Manager: Planning and Economic Development position.
Remuneration of councillors
Depreciation, amortisation and impairment
Finance costs
Bulk purchases
Contracted services Outsourced Services
Transfers and subsidies Other subsidies
Cash generated from operations
Operating leases - as lessee (expense) Minimum lease payments due
Deviation from supply chain management regulations
Awards to close family members of persons in the service of the state
Contingent liabilities
Ex-employee 1 - legal action pending
Consulting engineers 1 - legal matter pending
Contractor 1 - legal matter pending
Service provider 1 - legal action pending
Employees 2 & 3 - legal matter finalised
Employee 9 - legal matter finalised This matter has been settled out of court
Employee 10 - legal matter finalised This matter has been settled out of court
Employee 11 - legal matter finalised This matter has been settled out of court
Service provider 2 - legal action pending
Debtor 1 - legal action pending
Public member 1 - legal action pending
In the year under review, the municipality raised a dispute with the wholesale water service provider regarding the fee applied to the municipality's account. The dispute arose because of the department that charges the municipality for the water extracted from the extraction points under the control of the municipality, when water was not available due to the ongoing drought in the region. In the year under review, the municipality was contacted by a bulk water service provider regarding a water intake point for which the service provider had not charged the municipality.
Related parties
The uThungulu Financing Partnership was a partnership between King Cetshwayo District Council, NIB9810 Trust and Nedcor. The uThungulu Financing Partnership was formed to facilitate the purchase of the King Cetshwayo House to provide offices for the King Cetshwayo District council. To finance the purchase of the King Cetshwayo home, the partnership entered into a loan agreement with Nedcor.
Prior-year adjustments
Budget and Actual amount variances
The deviation is attributable to the timing of the finalization of the dissolution of the Uthungulu House Development Trust, the exact timing of which is difficult to accurately estimate. The final distribution will be received at the dissolution of the Uthungulu House Development Trust. The variance is attributable to an increase in capital project spending towards the latter part of the year, related accruals, which are difficult to estimate accurately.
Unauthorised, Fruitless, Wasteful and Irregular expenditure
Water distribution losses
Risk management Capital risk management
The financial situation of these debtors is assessed on an ongoing basis and is shown in these financial statements in a net amount without provision for impairment. The annual financial statements are prepared based on the accounting policies of the operating company. This basis assumes that funds will be available to fund future operations and that the realization of funds and the settlement of liabilities, contingent liabilities and commitments will occur in the ordinary course of business, subject to the receipt of equity interests.
Events after the reporting date
