The accounting officer is required by the Municipal Financial Management Act (Act 56 of 2003) to maintain adequate accounting records and is responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is the responsibility of the accounting officer to ensure that the annual 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. I am responsible for the preparation of these annual financial statements, which are set out on pages 6 to 70, in terms of Section 126(1) of the Municipal Financial Management Act and which I signed on behalf of the Municipality.
Presentation of Annual Financial Statements
- Presentation currency
- Significant judgements and sources of estimation uncertainty
- Significant judgements and sources of estimation uncertainty (continued) Provisions
- Going concern assumption
- Comparative figures
- Property, plant and equipment Initial Recognition
- Property, plant and equipment (continued)
- Heritage assets Initial recognition
- Heritage assets (continued) Derecognition
- Intangible assets Initial recognition
- Intangible assets (continued)
- Inventories Initial recognition
- Financial instruments Initial recognition
- Financial instruments (continued) Derecognition
- Trade and other receivables
- Trade payables and borrowings
- Cash and cash equivalents
- Unauthorised expenditure
- Irregular expenditure
- Fruitless and wasteful expenditure
- Leases
- Provisions and contingencies
- Revenue from exchange transactions
- Revenue from exchange transactions (continued)
- Revenue from non-exchange transactions
- Grants, transfer and donations
- Employee benefits
- Employee benefits (continued)
- Budget information
- Commitments
- Non-cash-generating assets
- Impairment of cash-generating assets
- Standards and interpretations effective and adopted in the current year
Any changes are recognized as a change in accounting estimate in the Statement of Financial Performance. Differences that arise on the valuation of inventory are recognized in the Statement of Financial Performance in the year in which they arise. Contributions are recognized in the Statement of Financial Performance in the period in which the service is provided by the employees concerned.
In the current year, the municipality has adopted the following standards and interpretations which are in force for the current financial year and which are relevant to its operations:
New standards and interpretations (continued)
The municipality has approved the change for the first time in the 2018/2019 annual financial statements.
Standards and Interpretations early adopted
Following the global financial crisis, a number of concerns were raised regarding the accounting of financial instruments. This included that (a) information on credit losses and defaults on financial assets was received too late to enable proper decision-making, (b) using fair value in certain cases was inappropriate, and (c) some of the existing accounting requirements were seen as too rule-based. The IASB issued the IFRS® Standard on Financial Instruments (IFRS 9) in 2009 to address many of the concerns raised.
Revisions were also made to IAS® on Financial Instruments: Presentation and the IFRS Standard® on Financial Instruments: Disclosure. The IPSASB issued revised International Public Sector Accounting Standards in June 2018 to align them with the equivalent IFRS standards. The amendments lead to better information available to make decisions about financial assets and their recoverability, and more transparent information about financial liabilities.
The date of entry into force of the amendment has not yet been determined by the Minister of Finance. For the first time, the municipality adopted the amendment prematurely, when the minister determines the date of entry into force of the amendment.
The amendments add examples of possible ways of classifying explanations to clarify that comprehensibility and comparability must be taken into account when determining the order of explanations, and to demonstrate that explanations do not need to be presented in the order specified in GRAP 1. Remove guidance and examples related to the identification of significant accounting policies that were perceived as potentially unhelpful. The municipality adopted the explanation for the first time in the financial statements for the year 2018/2019.
Separate Financial Statements
Consolidated Financial Statements
The amendments to this Interpretation of the GRAP Standard clarify that an entity must also consider other factors in assessing the probability of future economic benefits or service potential for the entity. Entities are also uncertain about the extent to which factors other than the uncertainty of revenue collection should be considered when determining the probability of inflow of future economic benefits or service potential on initial revenue recognition. For example, in providing certain goods or services, or when charging non-exchange income, the amount of income charged may be reduced or otherwise modified in certain circumstances.
These circumstances include, for example, where the Company provides rebates, discounts or similar reductions based on meeting certain criteria or as a result of adjustments to revenue already recognized following the outcome of any review, appeal or objection. It is agreed that, on initial recognition of revenue, a company considers the revenue to which it is entitled after its obligation to collect all revenue to which it is owed by law or similar means. In addition, an entity considers other factors that will affect the probable accrual of future economic benefits or service potential, based on past experience and current facts and circumstances existing at initial recognition.
The municipality adopted the interpretation early for the first time in the 2018/2019 financial statements.
Related parties
Cash and cash equivalents
Trade receivable from exchange transaction Gross balances
Other receivables from exchange transactions
Receivables from non-exchange transactions
Other receivables from non-exchange transactions
Property, plant and equipment
Property, plant and equipment (continued)
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. Part of Repairs and Maintenance as disclosed in Note 36 is an amount of R spent on building and equipment facilities. Heritage assets under construction or development The carrying value of heritage assets where construction or development has stopped either during the current or previous reporting period(s).
Payables from exchange transactions
Unspent conditional grants and receipts
Rental deposits held
Employee benefit obligations
- Post retirement medical benefit plan
- Multi-employer pension funds
Sufficient information is not available to use defined benefit accounting for pension and pension funds, for the following reasons:. i) The assets of each fund are held in a portfolio and are not notional allocated to each of the participating employers. ii) A set of financial statements is drawn up for each fund and financial statements are not drawn up for each participating employer. iii). The same contribution rate applies to all participating employers and disregards differences in the membership distribution of participating employers. The municipality's only obligation in relation to pension benefit plans is to make specified contributions.
If councillors/staff withdraw from the plans before the contributions are fully collected, the contributions paid by the municipality will be reduced by the amount of the contributions withdrawn. The total expenditure recognized in the statement of financial performance represents the contributions paid into these plans by the municipality at the rates specified in the rules of the plans. However, if the market for these bonds is not important, the market yields of government bonds that are consistent with the estimated term of the post-employment obligations should be used.
Wage Inflation Rate: This assumption is necessary to reflect the estimated growth in the wages of the eligible employees until retirement. General wage inflation: This assumption is more stable relative to consumer price index (CPI) growth than in absolute terms. It should be noted that the valuation method and assumptions do not affect the final cost of the LSA - this is determined by actual experience and by the benefits delivered.
The discount rate is 8.95%, which represents the nine-year average zero-coupon yield curve of government bonds, which is consistent with the nine-year weighted average of the liability's cash flows.
Accumulated surplus
The method and assumptions affect how the past service obligation and future service costs are recognized over time. Discount rate: GRAP 25 stipulates that the choice of this rate should be derived from high quality corporate bond yields.
Other income
Interest, dividends and Rent on Land
Fines, Penalties and Forfeits
Employee related costs
Remuneration of councillors
Depreciation and amortisation
Bulk purchases
General expenses
Loss on donated assets
Proceeds from Insurance claims
Auditors' remuneration
Cash generated from operations
The municipality was sued by the plaintiff in relation to a balance for the service provided by the plaintiff for a water supply scheme and a central tourism program. The Zululand District Municipality is counterclaiming on the issue of compliance with the balance for the service provided by the plaintiff for a water supply and tourism scheme referred to above. The municipality is being sued by one party regarding a balance due for service performed by the plaintiff for a water supply scheme and a central tourism program.
The plaintiff is suing the council from Magistrate Court for alleged services. The council is defending the case and has filed a notice of intent to defend and plead this case. Liquidity risk is the risk that the municipality will encounter difficulties in meeting the obligations associated with its financial obligations that are settled through cash delivery.
The municipality's approach to liquidity management is to ensure, to the greatest extent possible, that it always has sufficient liquidity to meet its obligations when due, both under normal and stressed conditions, without incurring unacceptable losses or risking damage to the municipality's reputation. Liquidity risk is managed by ensuring that all assets are reinvested at maturity at competitive interest rates in relation to cash flow requirements. The municipality has agreed a payment plan with the respective creditor to settle its long-term obligations.
The capital structure of the municipality consists of accumulated surplus as disclosed in the statement of changes in net assets.
Going concern
Commitments are managed by ensuring that all contractual payments are met on time and, if necessary, additional new arrangements are established at competitive rates to ensure cash flow requirements are met.
Additional disclosure in terms of Municipal Finance Management Act Contributions to organised local government
Budget differences
The annual accounts for the entire state are prepared on an accrual basis using a classification based on the nature of expenses in the income statement. The annual accounts differ from the budget, which is approved on a cash basis, and which deals only with the public sector, excluding state-owned enterprises and certain other non-market public entities and activities. The amounts in the annual accounts have been reworked from the accrual basis to the liquidity basis and reclassified according to functional classification to be on the same basis as the finally approved budget.
Also, adjustments have been made to amounts in the annual financial statements for timing differences related to continuing appropriation and differences in covered entities (government business enterprises) to express actual amounts on a basis comparable to the final approved budget. The changes between the approved and the final budget are the result of changes in the general parameters of the budget.
Irregular expenditure
Water losses
Municipal Manager Chief Financial Officer Director: Planning Services Director: Technical Services Director: Corporate Services Director: Community Services.
Events after the reporting date
Prior period errors
Statement of Financial Position
Property, plant and equipment
Prior period errors (continued)
- Payables from exchange transactions
Statement of Financial Performance
Analysis of property, plant and equipment as at 30 June 2018
Analysis of property, plant and equipment as at 30 June 2011
Cost/Revaluation Accumulated Depreciation
Segmental Statement of Financial Performance for the year ended
