VC Shangase Member of the Executive Committee MI Tshaba Member of the Executive Committee MP Busane Member of the Executive Committee RM Cele Member of the Executive Committee ML Sibiya Member of the Executive Committee SB Sibisi (District Councilor). The Accounting Officer is required by the Municipal Finance Management Act (Law 56 of 2003) to keep adequate records and is 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 Officer to ensure that the financial statements give a true and fair view of 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 accountant recognizes that he is ultimately responsible for the system of internal financial control established by the municipality and attaches great importance to maintaining a strong control environment. Based on the information and explanations of the management, the accountant believes that the system of internal controls provides reasonable assurance that the accounting records can be relied upon in the preparation of the annual financial statements. 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 operating for the foreseeable future.
As an Accounting Officer, I am responsible for the preparation of these annual financial statements, which are set out on pages 5 to 44, in terms of Section 126(1) of the Municipal Financial Management Act and which I signed on behalf of the Municipality. . I certify that the salaries, allowances and benefits of Councilors, loans made to Councilors, if any, and payments made to Councilors for loss of office, if any, as disclosed in note 18 of these annual financial statements are within the upper limits of the intended framework in Section 219 of the Constitution, read together with the Remuneration of Public Officers Act and the Minister of Provincial and Local Government's determination in accordance with this Act.
Statement of Comparison of Budget and Actual Amounts
Presentation of Annual Financial Statements
- Presentation currency
- Comparative figures
- Standards, amendments to standards and interpretations issued but not yet effective
- Going concern assumption
The annual accounts have been prepared in accordance with the General Recognized Accounting Practice (GRAP), issued by the Council for Annual Reporting in accordance with Article 122, paragraph 3, of the Municipal Finance Management Act (Law 56 of 2003). These financial statements have been prepared on an accrual basis and are in accordance with the historical cost convention as the basis of valuation, unless stated otherwise. Below is a summary of the significant accounting policies that have been consistently applied in preparing these financial statements.
These annual financial statements are presented in South African rand, which is the functional currency of the municipality. Where accounting errors are identified in the current year, the correction is made retroactively as far as practicable, and the previous year/comparisons are restated accordingly. Where there has been a change in accounting policy in the correct year, the adjustment is made retrospectively as far as is practicable, and the previous year/comparisons are restated accordingly. No significant impact is expected as this Standard is not yet effective for the municipality.
Expected impact: Immediate for tangible fixed assets (The standard is not yet valid for the municipality. Expected date when the standard will come into force: July 1, 2016). These annual financial statements are prepared based on the expectation that the municipality will operate as a going concern for at least the next 12 months.
Accounting Policies
- Property, plant and equipment
- Property, plant and equipment (continued) Infrastructure
- Intangible assets
- Intangible assets (continued)
- Financial instruments
- Financial instruments (continued)
- Taxation
- Leases
- Leases (continued) Municipality as Lessee
- Impairment of assets
- Provisions and contingencies
- Unauthorised expenditure Unauthorised expenditure means
- Fruitless and wasteful expenditure
- Irregular expenditure
- Irregular expenditure (continued)
- Capital commitments
- Revenue
- Events after reporting date
- Budget information
- Employee benefits Provident fund contribution
- Related parties
- Significant judgements and sources of estimation uncertainty
- Significant judgements and sources of estimation uncertainty (continued) Impairment testing
- Receivables from exchange transactions
- VAT receivable
- Consumer debtors Gross balances
Items of property, plant and equipment are derecognised when the asset is sold or when no further economic benefits or service potential are expected from the use of the asset. Financial instruments are initially recognized when the municipality becomes a party to the contractual provisions of the instruments. For financial instruments that are not at fair value through surplus or deficit, transaction costs are included in the initial measurement of the instrument.
An impairment loss on trade receivables is recognized by reducing the amount of trade receivables through a provision, and the amount of the loss is recognized in the statement of financial results within operating expenses. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. Assets subject to finance leases are recognized initially at the fair value of the asset or the present value of the minimum lease payments, whichever is lower.
When discounting the lease payments, the municipality uses the interest rate that exactly discounts the lease payments and the unguaranteed residual value to the fair value of the asset plus any direct costs incurred. The leased asset is depreciated over the useful life of the asset or the lease term, whichever is shorter. Impairment is a loss of the future economic benefits or service potential of an asset in addition to systematically recognizing the loss of the asset's future economic benefits or service potential through depreciation (amortization).
Depreciation (amortization) is the systematic distribution of the depreciable amount of an asset over its useful life. Impairment is the loss of future economic benefits or service potential of an asset, in addition to the systematic recognition of a loss of future economic benefits or service potential of an asset through depreciation. Expenses are classified according to the nature of the expenses and, if recovered, are subsequently accounted for as income in the income statement.
Income from the lease of buildings and equipment is recognized on a straight-line basis over the term of the lease agreement. Material differences related to basis, time or entity are disclosed in the notes to the annual financial statements. The municipality and its employees contribute to an insurance fund that takes care of most of the staff.
Notes to the Annual Financial Statements
Consumer debtors (continued)
Consumer debtors (continued) Reconciliation of allowance for impairment
Cash and cash equivalents Cash and cash equivalents consist of
Property, plant and equipment
Property, plant and equipment (continued) Reconciliation of property, plant and equipment - 2016
Intangible assets
Finance lease obligation Minimum lease payments due
Operating lease liability Minimum lease payments due
Payables from exchange transactions
Unspent conditional grants and receipts
Provisions
Property rates Rates received
Government grants and subsidies Operating grants
General expenses
Employee related costs
Employee related costs (continued)
Debt impairment
Finance costs
Contracted services
Commitments
Related parties Related party balances
Taxation
Prior period errors (continued)
Prior period errors (continued) Accumulated surplus
Events after the reporting date
Fruitless and wasteful expenditure
Unauthorised expenditure
Additional disclosure in terms of Municipal Finance Management Act Contributions to organised local government
Employee benefit obligations Defined benefit plan
A summary of the current service cost and interest cost for the current and future financial years is shown below. Actuarial loss/(gains) arise from three components: the effects of changes in net discount rates, membership and wages. Current Service, Interest Costs and Actuarial Loss/(Gain). i) Current service cost reflects the additional liability expected to accrue in connection with the service of members in service during the corresponding year. ii) Interest cost represents the calculation of interest on the calculated liability, allowing the granting of benefits, during the corresponding year.
Financial instruments disclosure Fair Value
Credit risk mainly consists of liquid stocks, cash, derivative financial instruments and trade receivables. Otherwise, if there is no independent assessment, the risk control assesses the customer's credit quality, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board.
Risk management (continued)
Change in estimate Property, plant and equipment
Operating lease commitments (lessor)
Appendix B (Unaudited Supplementary Schedules)
Analysis of property, plant and equipment as at 30 June 2016
Analysis of property, plant and equipment as at 30 June 2015
