Accounting Officers are required by the Municipal Finance Management Act (Law 56 of 2003) to keep adequate records and are responsible for the content and integrity of the annual accounts and related financial information included in this report. It is the responsibility of the accounting officers to ensure that the annual accounts give a true and fair view of the position of the municipality at the end of the financial year and its results. Accounting officers believe, 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.
The audit committee consists of the following members and should meet 4 times a year according to its approved terms of reference. The audit committee reports that it has fulfilled its obligations under section 166 (2)(a) of the MFMA. The Audit Committee agrees and accepts the report of the Auditor General of South Africa on the annual accounts and is of the opinion that the audited annual accounts should be accepted and read together with the report of the Auditor General of South Africa.
The accounting officers are not aware of any matter or circumstance that has arisen since the end of the financial year. Standard bank was appointed as the primary banker of the municipality during the year for a period of five years 6.
Consolidated Statement of Comparison of Budget and Actual Amounts
Presentation of Annual Financial Statements
- Presentation currency
- Going concern assumption
- Materiality
- Significant judgements and sources of estimation uncertainty
- Significant judgements and sources of estimation uncertainty (continued) Useful lives of waste and water network and other assets
- Property, plant and equipment
A summary of the significant accounting policies that have been consistently applied in the preparation of these annual financial statements is disclosed below. Materiality depends on the nature or extent of the omission or misstatement, judged in light of the surrounding circumstances. Actual results in the future may differ from these estimates, which may be material to the annual financial statements.
The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. 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 a replacement cost is included in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is no longer recognised.
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.
Accounting Policies
- Property, plant and equipment (continued)
- Financial instruments
- Financial instruments (continued)
- Financial instruments (continued) Classification
- Leases
- Inventories
- Inventories (continued)
- Cash and cash equivalents
- Impairment of cash-generating assets
- Employee benefits Short-term employee benefits
- Employee benefits (continued) Defined contribution plans
- Provisions and contingencies Provisions are recognised when
- Provisions and contingencies (continued)
- Commitments
- Revenue from exchange transactions
- Revenue from non-exchange transactions
- Borrowing costs
- Comparative figures
- Unauthorised expenditure Unauthorised expenditure means
- Fruitless and wasteful expenditure
- Fruitless and wasteful expenditure (continued)
- Irregular expenditure
- Budget information
- Related parties
- Events after reporting date
The effective interest rate is the rate that accurately discounts the estimated future cash payments or receipts over the expected life of the financial instrument or, when appropriate, a shorter period to the net book value of the financial asset or financial liability. An incremental cost is one that would not have arisen if the company had not acquired, issued or disposed of the financial instrument. An entity recognizes a financial asset or a financial liability in its statement of financial position when the entity becomes a party to the contractual terms of the instrument.
The entity initially measures a financial asset and financial liability at its fair value plus transaction costs that are directly attributable to the acquisition or issuance of the financial asset or financial liability. If there is objective evidence that an impairment loss has been incurred on financial assets measured at amortized cost, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced directly OR through the use of an allowance account.
The reversal does not result in a carrying amount of the financial asset that exceeds what the amortized cost would have been if the impairment had not been recognized at the date the impairment is reversed. Commercial return implies that the positive cash flows are expected to be significantly higher than the cost of the asset. Depreciation (Depreciation) is the systematic distribution of the depreciable amount of an asset over its useful life.
The amount recognized in the balance sheet represents the present value of the defined benefit obligation, adjusted for unrecognized actuarial gains and losses and unrecognized past service cost, less the fair value of plan assets. 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. If the effect of the time value of money is material, the amount of a provision is the present value of the expenditure expected to be required to settle the obligation.
Revenue is measured at the fair value of the consideration received or receivable, less trade discounts and volume rebates. Based on the available evidence, the municipality assesses the degree of certainty of the flow of future economic benefits or service potential. Expenses are classified according to the nature of the expenses and, if recovered, are subsequently accounted for as income in the income statement.
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. Irregular expenses incurred and identified during the current financial year and which were approved before the end of the year and/or before the closing of the annual accounts must also be properly recorded in the register of irregular expenses.
Consolidated Notes to the Annual Financial Statements
New standards and interpretations
- Standards and interpretations issued, but not yet effective
Property, plant and equipment
Property, plant and equipment (continued) Reconciliation of property, plant and equipment - 2019
Property, plant and equipment (continued) Reconciliation of property, plant and equipment - 2018
Property, plant and equipment (continued)
Intangible assets
Operating lease liability
Inventories
Receivables from non-exchange transactions
Receivables from exchange transactions Gross balances
Receivables from exchange transactions (continued) Reconciliation of allowance for impairment
- Borrowings At amortised cost
- Borrowings (continued) Current liabilities
- Provisions
- Payables from exchange transactions
- Revenue
- Service charges
- Investment revenue Interest revenue
- Government grants and subsidies Operating grants
- Government grants and subsidies (continued)
- Employee related costs
- Employee related costs (continued)
- Remuneration of councillors (continued) Executive Mayor: Cllr Ramaila KS
- Impairment of assets Impairments
- Finance costs
- Debt impairment
- Bulk purchases
- Contracted services
- General expenses
- Cash generated from operations
- Financial instruments disclosure (continued)
- Commitments
- Contingencies
- Related parties
- Prior period errors
- Prior period errors (continued)
- Comparative figures
- Risk management Financial risk management
- Risk management (continued) Liquidity risk
- 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
- Additional disclosure in terms of Municipal Finance Management Act (continued) Councillors' arrear consumer accounts
- Deviation from supply chain management regulations
- Budget differences
- Budget differences (continued)
The provision is the value of the long service award liability expected to be paid in accordance with current municipal arrangements and subject to the terms of service approved by the SALGBC. Commercial lease payments represent the rents that the municipality pays for some of its commercial real estate. There is a legal proceeding against the municipality due to a dispute with the awarding of contracts, payment to contractors and dismissed workers in the amount of R R.
According to the entity's legal advisers, it is likely that the proceedings will result in the recovery of the full amount, but that recovery is virtually certain. Receivable from exchange business: correction of customer invoices that were billed at incorrect rates and readings. Tangible fixed assets: correction made in previous years that were not capitalized.
Cash and cash equivalents: Correction of ELE removed in system, but no postings have been made in general ledger. Barter Accounts Payable (Prepayment): Correction of customer bills that were billed with incorrect rates and readings. Interest Received - Accounts Receivable: Correction of customer accounts that were billed with incorrect rates and readings.
Depreciation: Capitalization of projects completed in the previous year and recognition of an asset not in the asset register. General Expenses: ELE correction cleared in system but no entries made in general ledger. Irregular Expenditure: The correction of an amount wrongly written off by the Council as irrecoverable without carrying out an investigation.
Fruitless and wasteful expenditure: correction of sums wrongly written off as irrecoverable by the Council without carrying out an enquiry. The municipality'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 municipality's liquidity risk is a result of the funds available to cover future obligations.
The municipality manages liquidity risk by constantly reviewing future liabilities and loans. The municipality deviated from its normal supply chain process with transactions worth R572 408.
