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. The accountant is of the opinion, based on the management's information and explanations, that the internal control system provides reasonable assurance that the accounts can be used as a basis for the preparation of the annual accounts.
The Accounting Officer has reviewed the City's cash flow forecast for the year to 30 June 2016 and, in light of this review and its current financial position, is satisfied that the City has or has sufficient resources to continue its operational existence for the near future. 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.
Although the Accounting Officer is primarily responsible for the financial affairs of the municipality, she is supported by the financial director of the municipality.
Statement of Comparison of Budget and Actual Amounts
The accounting policies on pages 11 to 19 and the notes on pages 20 to 42 form an integral part of the financial statements.
Accounting Policies
Presentation of Annual Financial Statements
- Property, plant and equipment
- Property, plant and equipment (continued)
- Intangible Assets
- Intangible Assets (continued)
- Financial Instruments
- Leases
- Leases (continued)
- Employee Benefits Short-Term Employee Benefits
- Employee Benefits (continued)
- Provisions and Contingencies Provisions are recognised when
- Revenue
- Revenue (continued)
- Comparative Figures
- Unauthorised expenditure Unauthorised expenditure means
- Fruitless and wasteful expenditure
- Irregular expenditure
- Use of estimates
- Related parties
- Events after the reporting date
- Value Added Tax (VAT)
- Commitments
These financial statements are presented in South African rand, the functional currency of the municipality. 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 operate in the manner intended by management. If the fair value of the acquired item could not be determined, the deemed cost is the carrying amount of the asset (or assets) given up.
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.
Any part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the asset is depreciated separately. The depreciation expense for each period is accounted for as a surplus or deficit unless it is included in the carrying amount of another asset. Property, plant and equipment are derecognised when the asset is disposed of or when no further economic benefits or service potential are expected from using the asset.
The gain or loss resulting from derecognition of an item of property, plant and equipment is determined as the difference between the net sales proceeds, if any, and the carrying amount of the asset. The carrying amount of the asset is reduced through the use of a provision, and the amount of the shortfall is recognized as a surplus or shortfall within operating expenses. 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 amount of a provision is the best estimate of the expenditure expected to be required to settle the present obligation at the reporting date. All expenditure related to unauthorized expenditure is recognized as an expense in the statement of financial results in the year in which the expenditure is incurred.
The expense is classified in accordance with the nature of the expense, and where it is recovered, it is subsequently accounted for as income in the statement of financial performance. All expenses related to fruitless and wasteful expenses are recognized as an expense in the statement of financial performance in the year the expense is incurred.
Notes to the Annual Financial Statements
Property, plant and equipment
Property, plant and equipment (continued) Reconciliation of property, plant and equipment - 2015
Property, plant and equipment (continued) Reconciliation of property, plant and equipment - 2014
Intangible Assets
Receivables from exchange transactions
VAT receivable
Trade and other receivables from non exchange transactions Gross balances
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 Grant Realised
Government grants and subsidies (continued)
Government grants and subsidies (continued) Municipal Infrastructure Grant
Investment revenue Interest revenue
Other income
Employee related costs
Employee related costs (continued)
Remuneration of councillors
Depreciation, amortisation and Impairment
Cash generated from operations
Commitments
Unauthorised expenditure
Irregular expenditure
Effects of Correction of Prior Year Errors on Financial Statements Errors have been identified related to the incorrect recording of accruals.
Effects of correction of prior year errors on financial statements Errors relating to the incorrect capturing of accruals were identified
Contingent liability Inicidents
Risk management Liquidity risk
Going concern
Additional disclosure in terms of Municipal Finance Management Act Contribution to Local Government Associations
Multi employer retirement benefit
The "Deficit Elimination Scheme" in terms of Section 18 of the Pension Fund Act was implemented with effect from 1 August 2012 for a period of 8 years. The fund is effectively closed to new members, and it is therefore assumed for the valuation that no new members will join the fund. At present, however, members of the three Natal Joint Funds are allowed to transfer between the funds and this flow of members may affect the rate of contribution to be paid to the Fund.
The Fund is intended to merge with the Pension Fund in the short term. The contribution percentage of the members (13.75%) and the municipalities (15.00%) is sufficient to finance future payments from the fund. As reported by the actuaries, the fund was in sound financial condition as at 30 June 2011.
Related Party Transactions Section 45 and 44 of SCM Regulations
Section 36 deviations
