Although the accounting officer is primarily responsible for the financial affairs of the municipality, they are supported by the municipality's external auditors. The municipality is a local authority that provides municipal services and maintains the best interest of the community in the Setsoto Municipal area. The operating results and state of affairs of the municipality are detailed in full in the attached financial statements.
Accounting Officer
Auditors
Presentation of Financial Statements
Presentation currency
Significant judgements and sources of estimation uncertainty
Significant judgements and sources of estimation uncertainty (continued) Impairment testing
Significant judgements and sources of estimation uncertainty (continued) GRAP 24: Presentation of budget information
Investment property
Property, plant and equipment
Property, plant and equipment (continued) Property, plant and equipment is initially measured at cost
Property, plant and equipment (continued)
Intangible assets
Intangible assets (continued)
Heritage assets
Heritage assets (continued)
Financial instruments
Financial instruments (continued)
Financial instruments (continued) Loans to (from) municipal entities
Financial instruments (continued) Fixed and Negotiable Deposits
Leases
Leases (continued) Operating leases - lessee
Inventories
Housing development fund
Revaluation reserve
Investments
Conditional grants and receipts
Related parties
Related parties (continued)
Commitments
Impairment of cash-generating assets
Impairment of non-cash-generating assets
Impairment of non-cash-generating assets (continued) Recognition and measurement
Employee benefits
Employee benefits (continued) Short-term employee benefits
Employee benefits (continued)
Current service cost is the increase in the present value of the defined benefit obligation resulting from the employee's service in the current period. In measuring the defined benefit liability, the entity recognizes the past service cost as an expense in the reporting period in which the scheme is changed. An entity uses the projected entity credit method to determine the present value of its defined benefit obligations and the related current service cost and, when applicable, past service cost.
Employee benefits (continued) Actuarial assumptions
Employee benefits (continued) Termination benefits
Provisions and contingencies Provisions are recognised when
Provisions and contingencies (continued)
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) Transfers
Borrowing costs
Comparative figures
Unauthorised expenditure Unauthorised expenditure means
Fruitless and wasteful expenditure
Irregular expenditure
Irregular expenditure (continued)
Use of estimates
Value Added Tax (VAT)
Budget information
Budget information (continued)
Events after the reporting date
Standards and interpretations issued, but not yet effective
New standards and interpretations (continued)
Inventories
Other financial assets Designated at fair value
Financial assets measured at fair value require disclosure of a fair value hierarchy that reflects the importance of the inputs used to perform the measurements.
Consumer debtors disclosure Gross balances
When determining a consumer debtor's ability to recover, the municipality takes into account any change in the consumer debtor's credit quality from the date the credit was originally granted until the reporting date. In addition, the municipality has also placed great emphasis on verifying the poor status of consumers. The concentration of credit risk is limited as a result of the fact that the customer base is spread over a large number of consumers and is not concentrated in any particular sector or geographical area.
Accordingly, management believes that no further credit provision is necessary beyond the Impairment Allowance. In determining the collectability of debtors, the municipality has placed a strong emphasis on verifying the needy status of consumers. For all outstanding consumer credits, a provision has been made for impairment of consumer debtors based on the payment ratio over 12 months per service type.
Receivables from non-exchange transactions
Cash and cash equivalents Cash and cash equivalents consist of
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 property, plant and equipment - 2015
Assets were also found that had been omitted from last year's asset register and were subsequently added, which also resulted in a change from the previous period's figures. 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
Heritage assets
Borrowings At amortised cost
Finance lease obligation
Payables from exchange transactions
The average credit period for purchases is 30 days from receipt of invoice as determined by the MFMA. No interest is charged during the first 30 days from the date of receipt of the invoice. After that, interest is charged according to the credit policy of the various individual creditors the municipality has to deal with.
The municipality has a financial risk policy to ensure that all debts are paid within the credit time frame. The municipality's management is of the opinion that the accounting value of creditors approximates their fair value.
VAT payable
Consumer deposits
Unspent conditional grants and receipts
The actuarial valuation of the liabilities from the jubilee awards was performed by an independent company. The primary purpose of this valuation is to enable the municipality to meet the requirements of GRAP 25. The liability amounts are calculated in accordance with GRAP 25 and can therefore be used in the preparation of the municipality's annual financial statements.
The award for jubilee service is awarded to municipal employees after they have completed continuous service at the municipality. The reservation represents an estimate of the awards to which municipal employees could be entitled in the future. The difference between the assumptions drives the valuation and it is very important to monitor how this difference changes from one valuation to the next.
The two most important financial variables used in our estimation are the discount rate and wage inflation. We use the nominal and real zero curves at 30 June 2016 provided by the JSE to determine our discount rates and CPI assumptions at each relevant time period. The net effective discount rate is different for each respective time period of different yield curve durations and therefore the net discount rate is based on the relationship between the discount rate (based on the yield curve) for each respective time period and wage inflation (based on the yield curve) for each respective time period.
Our assumed wage inflation rate was set as the assumed CPI plus 1%.
Enviromental Rehabilitation (Landfill Sites)
These plans are governed by the Pension Fund Act, 1956 (Act No. 24 of 1956) and include defined contribution plans. The assets of each fund are held in a portfolio and are not notional allocated to each of the participating employers;. A set of financial statements is compiled for all funds and not for each participating employer; and - The same contribution rate applies to all participating employers and no consideration is given to differences in the membership distribution of participating employers.
The fund's estimated liabilities are R1 308m, which are adequately funded by assets of R1 531m. The liability amounts are calculated in accordance with GRAP 25 and the associated guide on actuarial practice (APN 301) of the Actuarial Society of South Africa and can therefore be used in the preparation of the municipality's annual accounts. Where there is not a deep market for government bonds with a sufficiently long maturity to match the estimated maturity of all the benefit payments, a company uses current market rates at the appropriate maturity to discount shorter payments and estimates the discount rate for longer maturities by extrapolating current market rates along the yield curve."
The medical aid contribution inflation rate was determined by reference to the past relationship between the discount rate (based on the yield curve) for each relevant time period and the inflation (based on the yield curve) of the medical aid contribution for each relevant time period. This resulted in a higher net effective discount rate and therefore an overall decrease in the liability of approximately R1,450,000.Membership changes – During the past financial year there have been various changes in membership data.
An increase in membership, along with other minor changes, resulted in an overall increase in liability of around R247,000.
Service charges
Other income
Interim valuations are processed annually and take into account changes in the value of individual properties due to conversions and subdivisions. According to the constitution, this grant is used to subsidize the provision of basic services to poor members of the community. In accordance with MFMA circular no. 48, all conditional allocations (other than interest earned) that are not spent at the end of the year must be returned to the National Revenue Fund, unless the receiving officer concerned can demonstrate to the satisfaction of the National Treasury that the unused allocation is for identifiable projects.
The grant is used to supplement municipal capital budgets to clear backlogs in municipal infrastructure used to provide basic services for the benefit of poor households. The grants were used to build roads and sewage infrastructure as part of upgrading informal settlement areas. The purpose of the award is to help municipalities build internal capacity to perform their functions and stabilize institutional and management systems as required in the Local Government and Municipal Systems Act.
The purpose of the grant is to promote and support financial management reforms and implementation of the MFMA. This grant was used to mitigate water loss and help with water shortages in Clocolan, Marquard and Senekal during droughts. SETA will ensure that skills requirements in the sector are identified and that adequate and appropriate skills are delivered directly to council staff.
Based on the allocations set out in the Division of Revenue Act, (Act 10 of 2014), no significant changes in the level of government grants are expected over the next 3 fiscal years.
Revenue
Each is provided with an office and secretarial support at the expense of the Council.
Depreciation and amortisation
During the current year, the municipality has initiated a process to assess the condition of the road. During the period ending 30 June 2014, the local municipality of Setsoto changed its accounting policy whereby traffic offense revenue included under fines is now recognized on an accrual basis instead of on a cash basis. The reason for the change in accounting practices is a result of an accounting guidance issued by the National Treasury, which will have an impact on the application of GRAP 23 in the 2013 financial year.
Describe the events and circumstances that led to the recognition or reversal of the impairment loss.
Debt impairment
Bulk purchases
Contracted services
General expenses
This dedicated expenditure relates to property and will be financed by available bank facilities, retained surpluses, rights issue of shares, issue of debentures, mortgage facilities, existing cash resources, internally generated funds, etc. The IT Specialist has close family ties to the management of ERB Marketing who maintain the Council's website. The owner of Itumeleng Building and Training has close relations with the: Manager Human Resources.
The owner of Lira Transport has close family relations with the asset agent stationed in Marquand. No transactions have taken place between the company and senior employees or their close family members during the reporting period, apart from paid salaries. Detailed information on remuneration appears in note 29 for key management and note 30 for councillors.
Comparative figures
Comparative figures (continued) Statement of financial position - extract
Unauthorised expenditure
Unauthorised expenditure (continued) Overspending of expenditure
Fruitless and wasteful expenditure
Irregular expenditure
Additional disclosure in terms of Municipal Finance Management Act Contributions to organised local government (SALGA)
Additional disclosure in terms of Municipal Finance Management Act (continued) Pension and Medical Aid Deductions
Additional disclosure in terms of Municipal Finance Management Act (continued) Councillors' arrear consumer accounts
Additional disclosure in terms of Municipal Finance Management Act (continued)
Deviation from supply chain management regulations
In-kind donations and assistance Assets donated
In-kind donations and assistance (continued)
Events after the reporting date
Risk management (continued) Credit risk
Going concern
Prior period errors Asset Register
Prior period errors (continued)
Contingencies
Operating lease
Operating lease (continued) Operating leases - as lessor (income)
Changes in accounting policy
Accumulated surplus Changes to Accumulated Surplus
Cost/Revaluation Accumulated depreciation
Rand Rand Rand Rand Rand Rand Rand Rand Rand Rand Rand Rand Rand. Rand Rand Rand Rand Rand Rand Rand Rand Rand Rand Rand Rand Rand.
