It is the responsibility of the accounting officer to ensure that the financial statements fairly reflect the state of affairs of the municipality as at the end of the financial year and the results of its operations and cash flow for the period then ended. The accounting officer recognizes that he is ultimately responsible for the system of internal financial control established by the municipality and places great importance on maintaining a strong control environment. These controls are monitored throughout the municipality and all employees are expected to maintain the highest ethical standards to ensure that the municipality's business is conducted in a manner that is above reproach in all reasonable circumstances.
The focus of risk management in the municipality is on the identification, assessment, management and monitoring of all known forms of risk across the municipality. While operational risk cannot be fully eliminated, the municipality seeks to minimize it by ensuring that appropriate infrastructure, controls, systems and ethical behavior are applied and managed within predetermined procedures and constraints. The accounting officer has reviewed the municipality's cash flow forecast for the year to 30 June 2016 and, in the light of this review and the current financial position, is satisfied that the municipality has sufficient resources or has access to sufficient resources to continue in operational existence for the foreseeable future.
The municipality is entirely dependent on the national and provincial government for continued funding of operations. The financial statements are prepared on the basis that the municipality is a going concern and that the national and provincial government have no intention or need to liquidate or substantially reduce the scale of the municipality. The external auditors are responsible for independently checking and reporting on the municipality's financial statements.
The annual accounts have been audited by the external auditor of the municipality and their report is included on page 4.
Presentation of Financial Statements
Going concern assumption
Significant judgements and sources of estimation uncertainty
Accounting Policies
- Significant judgements and sources of estimation uncertainty (continued) Useful lives of waste and water network and other assets
- Investment property
- Investment property (continued) Fair value
- 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
- Heritage assets (continued) Recognition
- Investments in controlled entities
- Financial instruments
- Financial instruments (continued)
- Leases
- Leases (continued) Finance leases - lessee
- Inventories
- Impairment of cash-generating assets
- Impairment of cash-generating assets (continued)
- Impairment of non-cash-generating assets
- Share capital / contributed capital
- Employee benefits
- Provisions and contingencies Provisions are recognised when
- Provisions and contingencies (continued)
- Revenue from exchange transactions
- Revenue from exchange transactions (continued) Measurement
- Revenue from non-exchange transactions
- Revenue from non-exchange transactions (continued)
- Borrowing costs 1.20 Revaluation reserve
- Budget information
- Related parties
The company uses the purchase value model (in accordance with the accounting policy Tangible fixed assets) until the disposal of the investment property. If the fair value of the acquired object could not be determined, its purchase value is the book value of the given asset(s). 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.
Each part of a tangible fixed asset with a cost price that is significant in relation to the total cost price of the item is depreciated separately. Tangible fixed assets cease to exist when the asset is disposed of or when no further economic benefits or service potential are expected from the use of the asset. The gain or loss that occurs when a tangible fixed asset ceases to be recognized is calculated as the difference between the net sales proceeds, if any, and the accounting value of the asset.
Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. Value in use of a cash-generating asset is the present value of the future cash flows expected to be obtained from an asset or cash-generating unit. Value in use of a non-cash generating asset is the present value of the asset's remaining service potential.
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 cost or fair value of the asset can be reliably measured. The discount rate used in calculating the present value of the minimum rental payments is the. Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life.
The amount of the provision is the best estimate of the expenditure expected to be required to settle the present obligation at the reporting date. Revenue is measured at the fair value of the consideration received or receivable, less trade discounts and volume rebates. Revenue from services is recognized based on the degree of completion of the transaction at the reporting date.
Royalties are recognized as earned in accordance with the substance of the relevant agreements. The municipality assesses the degree of certainty associated with the flow of future economic benefits or employment potential based on the available evidence.
Notes to the Financial Statements
- Trade and other receivables from exchange transactions (continued) Electricity
- Investment property
- Property, plant and equipment
- Intangible assets
- Heritage assets
- Investments in controlled entities
- Other financial liabilities At amortised cost
- Finance lease obligation Minimum lease payments due
- Payables from exchange transactions
- Provisions
- Rental of facilities and equipment Premises
- Employee related costs (continued)
- Administrative expenditure
- Depreciation and amortisation
- Finance costs
- General expenses
- Employee benefit obligations
- Consumer debtors disclosure Less: Allowance for impairment
- Revenue
- Fines
- Government grants and subsidies Operating grants
- Impairment of assets Impairments
- Bulk purchases
- Auditors' remuneration
- Operating lease
- Risk management Financial risk management
- Going concern
- Unauthorised expenditure
- Fruitless and wasteful expenditure
The credit quality of cash at banks and short-term deposits, excluding cash that is neither overdue nor impaired, can be assessed by reference to foreign credit ratings (if available) or historical information regarding counterparty default rates. Although credit quality can be assessed, the municipality has not applied any method to assess credit quality. A register containing the information required by section 63 of the Municipal Finance Management Act is available for inspection at the municipality's registered office.
The nature and extent of government grants recognized in the financial statements and an indication of other forms of government assistance from which the municipality directly benefited; and unfulfilled conditions and other contingencies attached to government aid that have been recognised. Describe the events and circumstances that led to the recognition or reversal of the impairment loss. The recoverable amount or [recoverable service amount] of the asset is based on its fair value less costs to sell or [its value in use.].
The municipality's liquidity risk is the result of funds available to cover future commitments. The Municipality manages liquidity risk through a continuous review of future commitments and credit facilities. Credit risk mainly consists of cash deposits, cash equivalents, derivative financial instruments and trade debtors.
The municipality deposits cash only with major banks with high credit quality and limits exposure to any counterparty. Otherwise, if there is no independent assessment, the risk control assesses the customer's credit quality taking into account his financial situation, past experience and other factors. Individual risk limits are determined on the basis of internal or external assessments in accordance with the limits set by the board of directors.
The financial statements have been prepared on the basis of accounting principles applicable to going concern. This basis assumes that resources will be available to fund future operations and that the realization of assets and settlement of liabilities, contingent liabilities and commitments will occur in the ordinary course of business.
