The accountant is obliged to ensure that the 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 recognizes that she is ultimately responsible for the internal financial control system established by the municipality and places great importance on maintaining a strong control environment. The accountant has reviewed the municipality's cash flow forecast for the year to 30 June 2016 and, based on this review and the current financial position, is satisfied that the municipality has or has access to adequate resources to continue its operational existence for the foreseeable future.
The municipality is completely dependent on the income from services, tariffs and subsidies for the funding of its operations. In preparing the annual accounts, it has been assumed that the municipality is a going concern and that the Board has neither the intention nor the necessity to liquidate or materially curtail the municipality. While the accounting officer is primarily responsible for the financial affairs of the municipality, the accounting officer is supported by the audit committee of the municipality, internal and external auditors.
The external auditors are responsible for independently reviewing and reporting the annual accounts of the municipality. The annual accounts have been audited by the external auditor of the municipality and their report has been presented separately.
Statement of Comparison of Budget and Actual Amounts
Appropriation Statement
Accounting Policies
Presentation of Financial Statements
- Presentation currency
- Going concern assumption
- Significant judgements and sources of estimation uncertainty
- Investment property
- Investment property (continued)
- Property, plant and equipment
- Property, plant and equipment (continued)
- Property, plant and equipment (continued) Assets Under Construction
- Intangible assets
- Intangible assets (continued)
- Heritage assets
- Heritage assets (continued)
- Financial instruments Classification
- Financial instruments (continued) Initial recognition
- Leases
- Impairment of cash-generating assets
- Impairment of non-cash-generating assets
- Employee benefits
- Employee benefits (continued)
- Provisions and contingencies (continued)
- Commitments
- Revenue from exchange transactions
- Revenue from exchange transactions (continued) Rendering of services
- Revenue from non-exchange transactions
- Revenue from non-exchange transactions (continued)
- Revenue from non-exchange transactions (continued) Gifts and donations, including goods in-kind
- Investment income
- Comparative figures
- Unauthorised expenditure Unauthorised expenditure means
- Fruitless and wasteful expenditure
- Irregular expenditure
- Irregular expenditure (continued)
- Budget information
- Related parties
- Events after reporting date
- Events after reporting date (continued)
- Gratuities
- Offsetting
Investment properties are recognized as an asset when it is probable that the future economic benefits or service potential associated with the investment property will flow to the municipality, and the cost price or fair value of the investment property can be measured reliably. If a replacement part is recognized in the accounting value of the investment property, the accounting value of the replaced part ceases. If the acquired item's fair value could not be determined, its estimated cost price is the accounting value of the given asset(s).
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. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is written off separately. Items of property, plant and equipment are derecognised when the asset is disposed of or when no further economic benefits or service potential are expected from the use of the asset.
The purchase value of a tangible fixed asset that is under construction on the reporting date is recognized as an asset if: a) it is likely that future economic benefits or service potential related to the object(s) will flow to the municipality, and. The value in use of an unprofitable asset is the present value of the remaining useful potential of the asset. A municipality recognizes a heritage asset as an asset if it is likely that future economic benefits or service potential related to the asset will flow to the municipality, and the purchase or fair value of the asset can be reliably measured.
Financial instruments are recognized for the first time when the municipality becomes a party to the instrument's contractual provisions. Depreciation (Amortization) is the systematic allocation of an asset's depreciable amount over its useful life. Current service cost is the increase in the present value of the defined benefit obligation as a result of employee service in the current period.
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 from services is recognized based on the degree of completion of the transaction at the reporting date. Income from non-exchange business is measured in the amount of the increase in net assets recognized by the municipality.
Assets arising from fines are measured at the best estimate of the supply of resources to the municipality. Gifts and donations, including in kind, are recognized as assets and revenue when it is probable that the future financial benefits or service potential will flow to the municipality and the fair value of the assets can be measured reliably.
Notes to the Financial Statements
- New standards and interpretations
- Standards and interpretations issued, but not yet effective
- Investment property
- Property, plant and equipment
- Property, plant and equipment (continued) Reconciliation of property, plant and equipment - 2016
- Property, plant and equipment (continued) Reconciliation of Work-in-Progress 2016
- Intangible assets
- Heritage assets
- Heritage assets (continued)
- Other financial assets At amortised cost
- Employee benefit obligations
- Employee benefit obligations (continued)
- Financial asset
- VAT receivable
- Consumer debtors Gross balances
- Consumer debtors (continued) Reconciliation of allowance for impairment
- Receivables from non-exchange transactions Gross balances
- Receivables from non-exchange transactions (continued) Rates
- Unspent conditional grants and receipts
- Unspent conditional grants and receipts (continued) Movement during the year
- Provisions
A register containing the information required under Section 63 of the Act on Municipal Financial Management is available for inspection at the municipality's registered office. There is a register that contains the information required in accordance with Section 63 of the Municipal Financial Management Act. The Housing Department granted Emadlangeni Municipality a loan to finance the housing sales scheme initiated by the municipality, the loan was terminated on 1 April 1998 and transferred to the Housing Development Fund in accordance with Housing Act no.
The original contract states that residents who have benefited from the housing program will pay a deposit of R300, the capital is to be paid to Emadlangeni Municipality with 360 months along with interest at 13.5% per annum. The monthly payments are set at 11% of the buyer's salary. The buyer has a purchase option after 3 years or once 10% of the capital amount has been paid and the buyer provides. The congregation provides certain post-retirement health care benefits by funding the medical contributions of certain retired members of the congregation. Other pensioners are not entitled to this benefit.
According to the rules of the Medical Fund, with which the municipality is associated, a member is entitled to remain a continuing member of such a medical fund upon retirement and the municipality is liable for a certain portion of the medical fund membership fee. No other post-retirement benefits are provided to these retirees. The Project Unit Credit funding method was used to determine the completed service obligations at the valuation date and the projected annual expenditure in the year following the valuation date. The schemes cannot be broken down per municipality, as they are considered multi-employer schemes and are therefore treated as fixed contribution schemes by the municipality.
The provision is increased for the rehabilitation of waste landfill to its original condition once the site has reached the end of its useful life. The leave pay provision is accrued at the employment conditions rate and is accumulated to a maximum of 48 days per employee. A long service award is awarded to municipal employees after completion of fixed periods of continuous service with the municipality.
The determination represents an estimate of the awards to which employees employed by the municipality may be entitled in the future, based on an actuarial valuation that has been carried out. The most recent present value of the defined benefit obligation was performed on 30 June 2016. The present value of the defined benefit obligation and the related current service costs were measured using the Projected Unit Credit Method.
Valuation Assumptions
- Provisions (continued)
- Payables from exchange transactions
- Consumer deposits
- Revenue
- Revenue (continued)
- Property rates Rates received
- Government grants and subsidies Operating grants
- Government grants and subsidies (continued) Conditions still to be met - remain liabilities (see note 15)
- Government grants and subsidies (continued) Library Grant
- Government grants and subsidies (continued)
- Employee related costs
- Employee related costs (continued)
- Remuneration of councillors
- Repairs and Maintenance
- Impairment of assets Impairments
- Finance costs
- Debt impairment
- Contracted services
- General expenses
- Auditors remuneration and Audit Committee
- Operating lease
- Cash generated from operations
- Contingencies
- Related parties
- Prior period errors
- Risk management Financial risk management
- Going concern
- Events after the reporting date
- Unauthorised expenditure
- Fruitless and wasteful expenditure
- Irregular expenditure
- Additional disclosure in terms of Municipal Finance Management Act Contributions to organised local government
- Actual capital expenditure versus budgeted capital expenditure
- Deviation from supply chain management regulations
- Assets subject to restrictions
- Electricity Losses
- Electricity Losses (continued)
The municipality obtained a loan from the Development Bank of Southern Africa (DBSA) to finance the construction of the municipal head offices. Based on the allocations set out in the Revenue Sharing Act (Act No. 10 of 2014), no significant changes in the level of government grant funding are expected over the next three fiscal years. Upon meeting certain requirements, the municipal manager is not entitled to any other allowances or benefits, except telephone allowance and performance allowance.
The Chief Financial Officer is not entitled to any allowances or benefits other than telephone allowance and performance bonus for meeting specified requirements. No bonuses were awarded in the 2015/16 financial year. The Director of Community Services is not entitled to any benefits or benefits other than telephone allowance and performance bonus for meeting specified requirements. The Chair is part-time and is provided with an office and secretarial support at the Council's expense. The Mayor may use vehicles owned by the Council for official duties.
The municipality has low-cost houses and flats that are rented out to the public and staff. Rental rents are based on a percentage of the tenant's income levels or at a rate below market value. Should the litigation and claims against the municipality be successful, the value of the total estimated liability of all the cases is approximately R.
Remuneration of key employees and councilors is disclosed in notes 25 and 26. At the time of closing the annual financial statements, there appears to be no related party relationship at the end of the year. Due to its operation, the municipality is exposed to various financial risks: market risk (including interest rate risk, interest rate risk and price risk), credit risk and liquidity risk. The municipality's liquidity risk is the result of available funds to cover future obligations.
The municipality manages the liquidity risk through an ongoing review of future engagements and credit facilities. The municipality only deposits cash in major banks with high creditworthiness and limits exposure to a single counterparty. As the municipality has no significant interest-bearing assets, the municipality's income and operating cash flows are essentially independent of changes in market interest rates.
The municipality received additional MIG and Small Town Rehabilitation grants after the adjustment budget was completed. The annual accounts have been prepared on the basis of a classification according to the nature of the expenses in the annual accounts.
