In accordance with the Municipal Finance Management Act (Act 56 of 2003), the accountant must keep appropriate accounting records and is responsible for the content and integrity of the annual accounts and related financial information included in this report. The accountant is obliged to ensure that the annual financial statements fairly show the state of the municipality at the end of the financial year and the results of its operations and cash flows for the period ended at that time. The accountant acknowledges that she is ultimately responsible for the internal financial control system established by the municipality and attaches great importance to maintaining a strong control environment.
To enable the accountant to fulfill these obligations, the accountant establishes standards of internal control aimed at reducing the risk of error or deficit in a cost-effective manner. The focus of risk management in the municipality is to identify, assess, manage and monitor all known forms of risk across the municipality. Although the Accounts Officer is primarily responsible for the municipality's finances, she is supported by the municipality's finance manager.
The Accounting Officer is of the opinion, based on the information and disclosures provided by management, that the system of internal control provides reasonable assurance that the financial records can be relied upon in the preparation of the financial statements. For the continued financing of the business operations, the municipality is largely dependent on the grants awarded through the Income Distribution Act (Dora). The financial statements have been prepared on the basis that the Municipality is a going concern and that the Municipality of Umzumbe has neither the intention nor the need to liquidate the Municipality or materially reduce the size of the Municipality.
The accounting officer has reviewed the municipality's cash flow forecast for the year to 30 June 2019 and, in the light of this review and the current financial position, she is satisfied that the municipality has sufficient resources or has access to sufficient resources to remain in operation for the foreseeable future.
Statement of Comparison of Budget and Actual Amounts
Accounting Policies
Presentation of Annual Financial Statements
- Property, plant and equipment
- Property, plant and equipment (continued)
- Intangible Assets
- Intangible Assets (continued)
- Financial Instruments
- Financial Instruments (continued)
- Leases
- Employee Benefits Short-Term Employee Benefits
- Provisions and Contingencies Provisions are recognised when
- Provisions and Contingencies (continued)
- Revenue
- Comparative Figures
- Unauthorised expenditure Unauthorised expenditure means
- Unauthorised expenditure (continued)
- Fruitless and wasteful expenditure
- Irregular expenditure
- Use of estimates
- Related parties
- Events after the reporting date
- Value Added Tax (VAT)
- Commitments
The cost of an item of property, plant and equipment is the purchase price and other costs attributable to bringing the asset to the location and condition necessary for it to be able to function in the manner intended by management. 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. Cost recognition in the carrying amount of an item of property, plant and equipment ceases when the item is in the location and condition necessary for it to be able to function in the manner intended by management.
The main inspection costs, which are a condition for the continued use of an item of long-term tangible assets and which meet the recognition criteria above, are included as a replacement in the cost of the item of long-term tangible assets. The depreciation charge for each period is recognized in surplus or deficit, unless it is included in the carrying amount of another asset. The municipality separately discloses the expenses for the repair and maintenance of property, facilities and equipment in the notes to the financial statements (see note 2).
The municipality provides relevant information regarding assets under construction or development in the notes to the accounts (see note 2). The municipality provides relevant information regarding assets under construction or development in the notes to the accounts (see note 3). Such assets are presented as a receivable with an amount equal to the net investment in the lease.
Finance income is recognized based on a pattern that reflects a constant periodic return on the municipality's net investment in the finance lease. Finance leases are recognized as assets and liabilities in the balance sheet at amounts equal to the fair value of the leased asset or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor is recognized in the balance sheet as a finance lease liability.
The municipality provides pension benefits to its employees in the form of a contribution-based scheme. All expenses relating to unauthorized expenses are recognized as an expense in the income statement in the year in which the expenses are incurred. The expense is classified in accordance with the nature of the expense, and if they are recovered, they are subsequently booked as income in the income statement.
All expenses related to fruitless and wasteful expenses are recognized as an expense in the statement of financial performance in the year in which the expense is incurred. Events after the reporting date that are classified as corrective events are accounted for in the Annual Financial Statements.
Notes to the Annual Financial Statements
- Property, plant and equipment
- Property, plant and equipment (continued) Reconciliation of property, plant and equipment - 2018
- Property, plant and equipment (continued) Reconciliation of property, plant and equipment - 2017
- Intangible Assets
- Receivables from exchange transactions
- VAT receivable
- Trade and other receivables from non exchange transactions Gross balances
- Trade and other receivables from non exchange transactions (continued) Residential
- Cash and Cash Equivalents Cash and cash equivalents consist of
- Unspent Conditional Grants and Receipts
- Provisions
- Operating lease asset (liability)
- Trade and Other Payables
- Government grants and subsidies Operating grants
- Government grants and subsidies (continued) Conditions still to be met - remain liabilities (see note 8)
- Investment revenue Interest revenue
- Other income
- Contracted services Outsourced Services
- General expenses
- Employee related costs
- Employee related costs (continued)
- Remuneration of councillors
- Depreciation, amortisation and Impairment
- Cash generated from operations
- Commitments
- Unauthorised expenditure
- Fruitless and wasteful expenditure
- Effects of correction and reclassification of prior year errors on financial statements
- Contingencies Contingent Liabilities
- Risk management Liquidity risk
- Going concern
- Additional disclosure in terms of Municipal Finance Management Act Contribution to Local Government Associations
- Multi employer retirement benefit
- Related Party Transactions Related party balances
- and 44 of SCM Regulations Awards to suppliers in the service of state
- Section 36 deviations
The impairment of the above-mentioned assets is the result of a conditional assessment made during the physical verification of the assets. The reservation represents an estimate of the awards to which municipal employees on June 30, 2018 could be entitled in the future, based on the actuarial valuation performed on that day. The latest actuarial valuations of the plan's assets and the present value of the unfunded defined benefit liability were carried out on 30 June 2018 by a member of the South African Actuarial Society.
The present value of the defined benefit obligation and related current service costs and past service costs were measured using the projected credit unit method. The municipality has applied for the transfer of its disaster management grant of R3 950 495 to the national and provincial coffers. The municipality has not completed any assessment of the position of the employees as prescribed under the collective wage and salary agreement between SALGA, IMATU and SAMWU - 27 July 2012. As a result, the municipality cannot measure with sufficient reliability the amount of such liability for both the year ends of 30 June 2018 and 30 June 2017.
Some employees have addressed a dispute between themselves and the municipality regarding their wages to the labor court. The municipality's liquidity risk is the result of available funds to cover future obligations. The municipality manages liquidity risk by constantly reviewing future liabilities and loans.
There is insufficient information available to use defined benefit accounting for the pension and pension funds for the following reasons:-. i) The assets of each fund are held in one portfolio and are not theoretically allocated to each of the participating employers. ii) A set of accounts is prepared for each fund and accounts are not prepared for each participating employer. iii). The same contribution rate applies to all participating employers, and no account is taken of differences in the membership distribution of the participating employers. The municipality's only obligation with regard to the pension schemes is to make the stated contributions.
Where councilors/employees leave the plans before full establishment of the contributions, the contributions payable by the municipality are reduced by the amount of forfeited contributions. The retirement funds were valued using the Discounted Cash Flow method of valuation. For both the Superannuation and Retirement Funds, valuations using the Termination Method Approach are also included.
The valuation carried out revealed that the fair value of the Fund's adjusted net assets on the valuation date amounted to R 2 551.9 million. As reported by the Actuaries, the Fund was in a sound financial condition as at 30 June 2015, in that the assets of the Fund were sufficient to fully cover the accrued service obligations, including the recommended contingency reserves.
