The accounting officer is required by the Municipal Finance 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 accounting officer's responsibility to ensure that the annual financial statements present fairly the state of affairs of the municipality at the end of the financial year and the results of its operations and cash flows for the period then ended. The external auditors have been engaged to express an independent opinion on the annual financial statements and have been given unrestricted access to all financial and related data.
The annual financial statements have been prepared in accordance with the Standards of Generally Accepted Accounting Practice (GRAP), including any interpretations, guidelines and instructions issued by the Accounting Standards Board. The accountant recognizes that he is ultimately responsible for the internal financial control system established by the business entity and attaches great importance to maintaining a strong control environment. In order for the accountant to fulfill these responsibilities, the accountant establishes internal control standards aimed at reducing the risk of error or deficiency in a cost-effective manner.
Based on information and explanations from management, the accountant believes that the system of internal controls provides reasonable assurance that the accounting records can be relied upon when preparing the annual financial statements. The accountant has reviewed the entity's cash flow forecast for the year to 30 June 2020 and, based on this review and the current financial position, is satisfied that the entity has or has access to adequate resources to continue as a going concern for the foreseeable future. External auditors are responsible for the independent review and reporting of the annual financial statements of the economic entity.
The annual financial statements have been examined by the Auditor-General of South Africa and their report is presented to the Speaker and Council after completion of the audit.
Presentation of Annual Financial Statements
- Property, plant and equipment
- Property, plant and equipment (continued)
- Intangible assets
- Intangible assets (continued)
- Heritage assets
- Heritage assets (continued)
- Financial instruments
- Inventories
- Impairment of cash-generating assets
- Impairment of cash-generating assets (continued)
- Impairment of non-cash-generating assets
- Impairment of non-cash-generating assets (continued)
- Provisions and contingencies Provisions are recognised when
- Provisions and contingencies (continued)
- Revenue from exchange transactions
- Revenue from non-exchange transactions
- Revenue from non-exchange transactions (continued)
- Investment income
- Borrowing costs
- Revaluation reserve
- Use of Estimates
Depreciation is the systematic allocation of an asset's depreciable amount over its useful life. The value in use of a non-cash-generating asset is the present value of the asset's remaining service potential. Depreciation (Amortization) is the systematic allocation of an asset's depreciable amount over its useful life.
If any such indication exists, the economic entity estimates the recoverable amount of the asset. If the recoverable amount of a cash-generating asset is less than its carrying amount, the asset's carrying amount is reduced to its recoverable amount. If any such indication exists, the economic entity estimates the recoverable service value of the asset.
If the recoverable amount of a non-cash-generating asset is less than its carrying amount, the asset's carrying amount is reduced to its recoverable amount. 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.
New standards and interpretations
Standards and interpretations effective and adopted in the current year
Cash and cash equivalents (continued)
Consumer debtors (continued) Included in above is receivables from
Consumer debtors (continued)
Receivables from exchange transactions
Inventories
Property, plant and equipment
Property, plant and equipment (continued)
A register containing the information required by section 63 of the Municipal Financial Management Act is available for inspection at the registered office of the municipality.
Intangible assets
Intangible assets (continued)
Heritage assets
Heritage assets (continued)
Unspent conditional grants and receipts
Unspent conditional grants and receipts (continued)
Payables from exchange transactions
Other financial liabilities At amortised cost
VAT payable
Provisions
Service charges
Other income
Interest from Outstanding Debtors
Government grants and subsidies Operating grants
Government grants and subsidies (continued)
Government grants and subsidies (continued) Finance Management Grant
Fines, Penalties and Forfeits
Employee related costs
Employee related costs (continued)
Council appointed S Mkhize as Acting SEM: Community Services from August 2018 to December 2018 Award of SEM: Community Services. Council appointed S Ntuli as Acting SEM: Community Services from December 2018 to January 2019 Remuneration of SEM: Community.
Remuneration of councillors
Remuneration of councillors (continued) In-kind benefits
Depreciation and amortisation
Bulk purchases
Contracted services Outsourced Services
Contracted services (continued) Contractors
General expenses
Employee benefit obligations Defined benefit plan
Employee benefit obligations (continued) Defined contribution plan
Auditors' remuneration
Cash generated from operations
Commitments
Contingencies
Events after the reporting date
Water Losses
Fruitless and wasteful expenditure
Irregular expenditure
Unauthorised expenditure
Additional disclosure in terms of Municipal Finance Management Act Contributions to organised local government
Additional disclosure in terms of Municipal Finance Management Act (continued) Councillors' arrear consumer accounts
Deviation from supply chain management regulations
Budget differences
Prior period errors
Statement of Financial Position
Prior period errors (continued) Net Assets
- Consumer Debtors
- Receivables from exchange transactions
- Receivables from non-exchange transactions
- Inventories
- VAT receivable
- Prepayments
A data cleanup exercise has been performed to clear all suspense accounts due to the mSCOA implementation. The accounting change of government contributions and subsidies was incorrectly processed in the financial system last year.
Prior period errors (continued)
- Property, plant and equipment
- Intangible assets
- Heritage assets
- Unspent conditional grants and receipts
- Provisions
- Consumer deposits
Prior period errors (continued) 14 Other Financial Liabilities
- Provisions
- Other Financial Liabilities
- Revaluation reserve
- Accumulated surplus
Statement of Financial Performance
- Service charges
- Rental of facilities and equipment
- Other Income
- Interest received - investment
- Interest Received from Debtors
- Government grants & sudsidies
- Fine, Penalties and Forfeits
- Employee related costs
- Renumeration of councillors
- Depreciation and amortisation
- Impairment of non cash generating assets
- Finance costs
- Debt impairment
- Bulk purchases
- Contracted services
- Grants and subsidies paid
- General Expenses
- Prior period errors (continued) 37 Actuarial Gains / (Losses)
- Reconciliation between budget and statement of financial performance
- Reconciliation between budget and cash flow statement
- Utilisation of Long-term liabilities reconciliation
- Other revenue
- Operating surplus (deficit) (continued)
- Revenue
- Revaluation reserve
- Impairment of assets Impairments
- Risk management
- Risk management (continued) Market risk
- Going concern
- Actual operating expenditure versus budgeted operating expenditure
The municipality signed an agreement in 2008 for the transfer of 80 schemes of sale / rental housing units to the municipality. Accounting transactions for government grants and subsidies were incorrectly processed last year in the financial system. Refer to the note, Change in accounting policy for details on the change in measurement basis.
Sufficient cash is set aside to ensure that long-term liabilities can be settled on the maturity date. The entity's activities expose it to a number of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The entity's overall risk management program focuses on the unpredictability of financial markets and aims to minimize potential negative effects on the entity's financial performance.
Due to the dynamic nature of the underlying business, economic entity treasury maintains funding flexibility by maintaining availability under committed lines of credit. The liquidity risk of the economic entity is a result of the resources available to cover future obligations. The economic entity manages the liquidity risk through an ongoing assessment of future obligations and credit facilities.
Since the economic entity does not have significant interest-bearing assets, the economic entity's revenues and operating cash flows are largely independent of changes in market interest rates. Loans granted at variable interest rates expose the economic entity to cash flow interest rate risk. Loans granted at fixed interest rates expose the economic entity to fair value interest rate risk.
The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis assumes that funds will be available to finance future operations and that the realization of assets and settlement of liabilities, contingent liabilities and obligations will occur in the ordinary course of business. Refer to Appendix E1 for the comparison of actual operating expenses versus budgeted operating expenses as well as the reasons for variances.
