I am responsible for the preparation of these annual accounts, which are set out on pages 5 to 72 in terms of section 126(1) of the Municipal Finance Management Act (Act 56 of 2003), which I have signed on behalf of the municipality. I confirm that the salaries, allowances and benefits of councillors, possible loans to councilors and possible payments to councilors for the loss of office, as disclosed in note 33 of these annual financial statements, are within the upper limits of the framework provided for in Article 219 of the Constitution, read with the Act on Remuneration of Public Servants and with the determination of the Minister of Provinces and Local Government in accordance with this Act.
Appropriation Statement
- Presentation currency
- Consolidation Basis of consolidation
- Consolidation (continued)
- Significant judgements and sources of estimation uncertainty
- Property, plant and equipment
A summary of the significant accounting policies, which have been consistently applied in the preparation of these consolidated annual financial statements, is disclosed below. These consolidated annual financial statements are presented in South African rand, which is the functional currency of the economic entity. Consolidated consolidated annual financial statements are the consolidated annual financial statements of the economic entity presented as those of a single entity.
The income and expenses of the controlled entity are based on the values of the assets and liabilities recognized in the consolidated financial statements of the controlled entity at the acquisition date. The consolidated financial statements of the controlling entity and the entities over which it exercises control in the preparation of the consolidated financial statements have been prepared on the same date. Where necessary, adjustments are made to the consolidated financial statements of the audited entities.
The management of the municipality is satisfied that recognition of the income in the current year is appropriate. 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.
Accounting Policies
- Property, plant and equipment (continued)
- Intangible assets
- Intangible assets (continued)
- Financial instruments
- Financial instruments (continued) Classification
- Financial instruments (continued)
- Financial instruments (continued) Derecognition
- Tax Value added tax
- Leases
- Inventories
- Share capital / contributed capital
- Employee benefits
- Employee benefits (continued) Short-term employee benefits
- Employee benefits (continued)
- Provisions and contingencies Provisions are recognised when
- Provisions and contingencies (continued)
- Commitments
- Revenue from exchange transactions
- Revenue from non-exchange transactions
- Revenue from non-exchange transactions (continued)
- Investment income
- Borrowing costs
- Comparative figures
- Unauthorised expenditure Unauthorised expenditure means
- Fruitless and wasteful expenditure
- Irregular expenditure
- Related parties
- Events after reporting date
- Events after reporting date (continued)
An entity recognizes a financial asset or a financial liability in its statement of financial position when the entity becomes a party to the contractual provisions of the instrument. The carrying amount of the asset is reduced directly OR through the use of an allowance account. Changes in the carrying amount of the provision for impairment are recognized in surplus or deficit for the year.
Upon derecognition of a financial asset in its entirety, the difference between the accounting value and the sum of the consideration received is recognized in profit or loss. Finance leases are recognized as assets and liabilities in the balance sheet with amounts equal to the fair value of the leased or, if lower, the present value of the minimum lease payments. The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease agreement.
Short-term employee benefits are employee benefits (other than termination benefits) payable within twelve months of the end of the period in which the employees render the related service. The contributions of the municipality to the defined contribution funds are determined according to the rules of those plans. The present value of the defined benefit obligation is calculated using the projected unit credit method, taking into account actuarial assumptions and an appropriate discount rate.
Current service cost is the increase in the present value of the defined benefit obligation as a result of employee service in the current period. Past service cost is the change in the present value of the defined benefit obligation for employee service in prior periods resulting in the current period from the introduction of, or changes in, post-retirement benefits or other long-term employee benefits. The amount of a provision is the best estimate of the expenditure expected to be necessary to settle the current obligation at the reporting date.
If the effect of the time value of money is material, the amount of a provision is the present value of the expenditure expected to be required to settle the obligation. Revenue is measured at the fair value of the consideration received or receivable, less trade discounts and volume discounts. Receipts from conditional grants, donations and financing are recognized as revenue insofar as the municipality has met the criteria, conditions or obligations included in the agreement.
If the payment is to a financier, it is recorded as a part of the creditor, but if it is a share of the municipality, it is recognized as interest earned in the financial statement. Expenses are classified according to the nature of the expenses and, if recovered, are subsequently accounted for as income in the income statement.
Notes to the Consolidated Annual Financial Statements
New standards and interpretations
- Standards and interpretations issued, but not yet effective
Receivables from non-exchange transactions
Trade and other receivable from exchange transactions Gross balances
Trade and other receivable from exchange transactions (continued) Reconciliation of allowance for impairment
Property, plant and equipment
Property, plant and equipment (continued)
The projects have not had any changes in the current financial year as a result of a downward adjustment of the project allocation in order to control accruals.
Property, plant and equipment (continued) Other information
Intangible assets
Intangible assets (continued)
Investment in entity Residual interest at cost
Borrowings At amortised cost
Borrowings (continued) Non-current liabilities
Finance lease obligation
Payables from exchange transactions
Provisions
To what extent the actual responsibility of the municipality in the future differs from these results will depend on the extent to which the actual experience differs from the assumptions made. The assumption that tends to have the greatest impact on the results is the rate of inflation of health care costs relative to the discount rate. Lowering the expected average retirement age by one year; and. v) A 10% reduction in the assumed proportion of working members who continue to receive the subsidy after retirement. The following table summarizes the results of the sensitivity analysis.
Note: The post-retirement mortality adjustment assumes that someone aged 70 will experience the same mortality as someone aged 69. The liability under this scenario is expected to increase as members are expected to live longer. For example, the table above shows that if health inflation is 1% higher than the long-term assumption, the liability will be 7% higher than shown.
Provisions (continued)
The assumptions that have the greatest influence on the results are: i) the assumption of the general wage inflation rate; ii) discount rate assumption; iii). Average retirement age of employees; and. iv) Assumed attrition rates. Two-year reduction and increase in the assumed average retirement age of employees; and (iv) a 50% reduction in assumed churn rates.
Government grants and subsidies Operating grants
Government grants and subsidies (continued) Local Government Sector Education Training Authority
The grant will be spent in accordance with the signed business plan and financing agreement of Harry Gwala District Municipality for the implementation of the RASET program.
Government grants and subsidies (continued) District Growth Summit CoGTA
Revenue
Contracted services Outsourced Services
Depreciation and amortisation
Employee related costs
Employee related costs (continued)
Finance costs
Operational costs
Remuneration of councillors
Matter currently pending as we await a condonation application to be filed for the late delivery of the Plaintiff's Answering Affidavit in the application to condone his failure to comply with section 3(2)(a) of Act 40 of 2002. This is related to a claim by the National Treasury for Harry Gwala District Municipality to repay the amount 13/41/121/041/131/120 years if the municipality fails to provide the project closing reports and the proof of expenditure.
Contingencies (continued)
Related parties
The economic entity's liquidity risk is a result of the funds available to cover future obligations. The financial unit manages the liquidity risk through an ongoing review of future obligations and credit facilities. Credit risk mainly consists of liquid stocks, cash, derivative financial instruments and trade receivables.
Except as detailed below, the carrying amount of financial assets recorded in the Annual Financial Statements, which is net of impairment losses, without regard to the value of any collateral received. Since the entity has no significant interest-bearing assets, the entity's income and operating cash flows are essentially independent of changes in market interest rates. The consolidated annual financial statements have been prepared on the basis of accounting policies applicable to a going concern.
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 annual financial statements are prepared based on the accounting policies of the operating company. A municipality's ability to continue as a going concern depends on a number of factors.
The most important of these is that the accounting officer continues to procure funds for ongoing operations for the municipality that will remain in place for as long as necessary to restore the municipality's solvency.
Unauthorised expenditure
According to Article 36 of the Municipal Supply Chain Management Regulation, any deviation from the Supply Chain Management Policy must be approved/approved by the District Municipal Council.
FINANCIAL SUSTAINABILITY
Prior - year adjustments
Prior - year adjustments (continued)
