The Auditor General is responsible for the independent review and reporting of the Municipality's financial statements. The financial statements have been examined by the external auditors of the Municipality and their report is presented on page xxxx.
Presentation of Financial Statements
- Significant judgements and sources of estimation uncertainty
- Significant judgements and sources of estimation uncertainty (continued) Useful lives and residual values of property, plant and equipment
- Investment property
- Investment property (continued) Fair value
- Property, plant and equipment
- Property, plant and equipment (continued)
- Financial instruments
- Financial instruments (continued)
- Financial instruments (continued) Derecognition
- Leases
- Inventories
- Inventories (continued)
- Impairment of cash-generating assets
- Impairment of non-cash-generating assets
- Employee benefits Short-term employee benefits
- Employee benefits (continued) Defined benefit plans
- Provisions and contingencies
- Provisions and contingencies (continued)
- Revenue from exchange transactions
- Revenue from exchange transactions (continued) Rendering of services
- Revenue from non-exchange transactions
- Revenue from non-exchange transactions (continued) Measurement
- Revenue from non-exchange transactions (continued) Indigent subsidy
- Comparative figures and prior period errors
- Unauthorised expenditure Unauthorised expenditure means
- Fruitless and wasteful expenditure
- Irregular expenditure
- Budget information
- Related parties
- Going concern
- Commitments
- Events after reporting date
Until the disposal of the investment property, the municipality uses the purchase value model (in accordance with the accounting policy for tangible fixed assets). If the cost of replacement is recognized in the book value of the tangible fixed asset, the recognition of the book value of the replaced part is eliminated. The book value of the asset is reduced using an impairment account.
New standards and interpretations
Standards and interpretations issued, but not yet effective
Segment Reporting
Related parties disclosures
Service Concession Arrangement: Grantor
Standards and interpretations issued, but not yet effective GRAP 108: Statutory Receivables
The objective of this standard is to describe the accounting requirements for the recognition, measurement, presentation and disclosure of legal accounts receivable. In addition, it covers definitions, recognition, non-recognition, measurement, presentation and disclosure, transitional provisions, and effective date. When this standard becomes effective, it will have an effect on the recognition, measurement, presentation and disclosure of legal receivables.
The date of implementation of the standard has not yet been determined by the Minister of Finance. The municipality expects to adopt the standard for the first time when the minister determines the date of implementation of the standard. The objective of this standard is to outline the principles that an entity must use to assess whether it is a party to a principal-agent arrangement and whether it is a principal or an agent in carrying out transactions within the meaning of such an arrangement.
Compliance with this standard would have had an effect on the disclosure, as recognition and measurement of income, costs, assets and/or liabilities are dealt with by other applicable standards in GRAP. The municipality expects to adopt the standard for the first time when the minister has set the effective date for the standard.
Consolidation – Special Purpose Entities
Jointly Controlled Entities – Non-Monetary Contributions
Property, plant and equipment
Property, plant and equipment (continued) Reconciliation of property, plant and equipment - 2014
Investment property
Inventories
Trade and other receivables from non-exchange transactions
VAT receivable
In the event of a member's death in service or death on retirement, the survivors may continue membership of the medical scheme. Eligible employees are entitled to receive a post-paid grant of 60% of the contribution if they are a member of a medical scheme at retirement. The total liability has decreased by 11% since the last actuarial valuation (performed as of June 30, 2014), as a result of changes in the post-employment medical benefit participants, such as the active employees on medical assistance having decreased by 6, and the possibility of cheaper medical assistance contributions from active employees would have reduced the liability.
No long-term assets have been set aside outside the balance sheet regarding the municipality's post-retirement insurance. The recognition of service is calculated from the later of the date of employment and July 1, 1986. The total obligation has increased by 17.43% since the last actuarial assessment (performed as of June 30, 2014) due to changes in participants, salary increases and changes in resignations and early hiring.
There are currently no long-term assets set aside off balance sheet in respect of the Municipality's long service award liability. Sensitivity Analysis - Post-Retirement Health Care Benefits Below is the summary of the results of sensitivity analysis.
Trade and other payables from exchange transactions
The municipality received three loans from the Development Bank of Southern Africa (DBSA) to finance infrastructural expenditure and one is currently being paid by the District Municipality of Dr. KK, so a loan account was created. Upon termination of the service with the Municipality, no interest accrues in favor of the consumer.
Unspent conditional grants and receipts
Provision for rehabilitation of landfill sites
According to the Municipal Property Rates Act, discounts and exemptions from property rates are given in Act 6 of 2004. In terms of the constitution, this grant is used to subsidize the provision of basic services to poor community members. One of the main purposes of the grant is to fully subsidize the capital costs of providing basic services to poor households.
The purpose of the donation is to maintain and operate the local library for the benefit of the community. The grant is based on the business plan that the municipality submits to the district municipality. The grant is received by the Ministry of Local Self-Government and Traditional Affairs as a Provincial Infrastructure Grant (PIG).
The subsidy is received from Rijkswaterstaat for creating employment opportunities for the unemployed and thus enabling them to participate in economic activity and resulting in poverty reduction. The grant was received from the Department of Local Government and Traditional Affairs as a Disaster Management Grant.
Interest revenue Interest revenue
This grant was the Provincial Infrastructure Grant received for the Wastewater Treatment Plant last year. This grant was used last year to reinforce the municipality's fire service with new fire engines.
Fair value adjustments
Remuneration of councillors
Depreciation and amortisation
Finance costs
All leases have fixed or variable repayments and in certain cases conditional rent is payable, in accordance with the terms of the lease agreements. The Municipality's obligation in terms of operating leases is secured by the lessor's levy on the leased assets. The Municipality has not defaulted on any of the interest or capital repayment of the operating leases.
All risks and rewards of ownership remain with the lessor upon expiration of the lease and there is no option to purchase the leased assets.
Related parties Section 57 Managers
Comparative figures
The municipality's liquidity risk is a result of the funds available to cover future obligations. The municipality manages the liquidity risk through an ongoing assessment of future commitments and credit facilities. The table below analyzes the municipality's financial liabilities and net settled derivative financial liabilities in relevant maturity bands based on the period remaining on the statement of financial position to the contractual maturity date.
Credit risk is the risk of financial loss for the Municipality if customers or parties to financial instruments fail to fulfill their contractual obligations. Individual risk limits are set based on internal or external assessments in accordance with the limits set by the municipality. Since the Municipality has no significant interest-bearing assets, the Municipality's income and operating cash flows are essentially independent of changes in market interest rates.
The ability of the Municipality to continue as a going concern is dependent on a number of factors. It is anticipated that these measures will help to improve the collection rate of the municipality.
Events after the reporting date
The financial statements are prepared based on the accounting policies of the operating company. This basis assumes that assets will be available to finance future operations and that the realization of assets and the settlement of liabilities, contingent liabilities and assumed liabilities will occur in the ordinary course of business. The most important of them is that the accountant continues to obtain funds for the ongoing operations of the municipality and collects and collects revenues for the services rendered.
Cash/Cost Coverage Ratio indicates the Municipality's ability to meet at least its monthly fixed operating obligations from cash and short-term investment during that month without collecting any additional income. The municipality has requested the services of the debt collection and credit control companies to ensure that the collection rate of the municipality is brought to an acceptable level in accordance with Circular 71 of the National Treasury. Strict measures will be imposed on all debtors who default on their accounts, this will be done in accordance with the Council's Policy on Debt Collection and Credit Control as well as measures that will be enforced by service providers as appointed by the council to assist in this regard.
In the long term, the National Treasury will also be directed to assist the municipality with the development of a financial recovery plan to help the municipality deal with all other revenue related issues as well as capacities within the Budget and Treasury Office.
Unauthorised expenditure
Fruitless and wasteful expenditure
The firm TM Consulting was appointed to assist with the review of the Annual Financial Statements.
Additional disclosure in terms of Municipal Finance Management Act Contributions to organised local government
27636 issued on May 30, 2005 states that a supply chain management policy must provide for the procurement of goods and services in the form of written/verbal offers, formal written offers and a competitive bidding process, depending on the specified thresholds. Various goods were procured during the financial year under review and the process followed in procuring these goods deviated from the provisions of section 12 (1) as stated above. The reasons for the deviations were documented and reported to the accounting officer, who processed them and subsequently approved the deviations from the normal supply chain management regulation.
The reasons for deviations are mainly exceptional cases and sole suppliers.
Auditors' remuneration
Last year's balance of tangible fixed assets has been adjusted due to the unbundling of infrastructure assets and correction of other errors identified in the current year. The write-down of handwritten fines by debtors was not erroneously recognized in the prior period amounting to R 774805. The increase in VAT receivables in FY 2013/2014 occurred when accruals had to be increased under trade and other payables due to payments made in FY 2014/2015 even though the services were rendered or goods were received in the prior periods.
These expenses were never accrued in prior periods, so expenses and accruals were also recalculated due to the effect of understatement in prior periods. The decrease in VAT receivables in the 2012/2013 financial year was due to uncalculated VAT from the revenues achieved. In the current year, payments related to expenses in previous periods were made.
In the previous year it was identified that accruals amounting to R620 491 were incorrectly processed to VAT debtors. In the previous year, it was identified that invoices amounting to R3 558 500 in relation to water purchases were wrongly not recorded.
