The accounting officer is required by the Municipal Financial Management Act (Act 56 of 2003) to maintain adequate accounting records and is responsible for the content and integrity of the unaudited annual financial statements and related financial information included in this report. It is the responsibility of the accounting officer to ensure that the unaudited annual financial statements fairly reflect the state of affairs of the municipality as at the end of the financial year and the results of its operations and cash flow for the period then ended. The accounting officer recognizes that he is ultimately responsible for the system of internal financial control established by the municipality and places great importance on maintaining a strong control environment.
The external auditor is responsible for the independent review and reporting on the unaudited annual financial statements of the municipality. The unaudited annual financial statements were reviewed by the municipality's external auditor and their report is presented on page 6. The results of operations and the state of the municipality can be seen in full from the attached unaudited annual financial statements and, in our opinion, do not require any further comment.
The accounting officer is not aware of any matter or circumstance that has arisen since the end of the financial year. The accounting officer discusses the responsibilities of management in this respect, at Council meetings and monitors the municipality's compliance with the code on a three monthly basis.
Lekwa Local Municipality
Statement of Changes in Net Assets
Cash Flow Statement
Statement of Comparison of Budget and Actual Amounts
Appropriation Statement
Accounting Policies
Presentation of Unaudited Annual Financial Statements
- Presentation currency
- Going concern assumption
- Significant judgements and sources of estimation uncertainty
- Significant judgements and sources of estimation uncertainty (continued) Impairment testing
- Investment property
- Property, plant and equipment
- Property, plant and equipment (continued)
- Financial instruments
- Financial instruments (continued)
- Financial instruments (continued) Classification
- Leases
- Inventories
- Impairment of cash-generating assets
- Impairment of cash-generating assets (continued) Basis for estimates of future cash flows
- Impairment of cash-generating assets (continued) Reversal of impairment loss
- Employee benefits
- Employee benefits (continued) Post-employment benefits
- Provisions and contingencies Provisions are recognised when
- Provisions and contingencies (continued)
- Revenue from exchange transactions
- Revenue from exchange transactions (continued) Interest, royalties and dividends
- Revenue from non-exchange transactions
- Revenue from non-exchange transactions (continued) Measurement
- Revenue from non-exchange transactions (continued) Taxes
- Investment income
- Borrowing costs
- Comparative figures
- Unauthorised expenditure Unauthorised expenditure means
- Fruitless and wasteful expenditure
- Irregular expenditure
- Segmental information
- Budget information (continued)
- Related parties
The fair value of financial instruments traded in active markets (such as trading securities and available-for-sale securities) is based on published market prices at the end of the reporting period. The fair value of interest rate swaps is calculated as the present value of estimated future cash flows. An investment property is recognized as an asset when it is probable that future economic benefits or potential services related to the investment property will flow to the municipality, and the purchase or fair value of the investment property can be reliably measured.
If a replacement part is recognized in the carrying amount of the investment property, the carrying amount of the replaced part is derecognised. If the acquired item's fair value was not determinable, the deemed cost is the carrying amount of the asset(s) given up. 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.
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. Depreciation (amortization) is the systematic distribution of the depreciable amount of an asset over its useful life. The value in use of a cash-generating asset is the present value of the estimated future cash flows expected to result from the continued use of the asset and its disposal at the end of its useful life.
An impairment loss is recognized for a cash-generating unit if the recoverable amount of the unit is less than the unit's carrying amount. A reversal of an impairment loss for a cash-generating unit is allocated to the unit's cash-generating assets pro rata with the carrying amount of those assets. 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.
Service revenue is recognized by reference to the stage of completion of the transaction at the reporting date. Royalties are recognized when earned in accordance with the substance of the respective agreements. Revenue from a non-exchange transaction is measured by 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 economic benefits or service potential will flow to the municipality and the fair value of the assets can be measured reliably.
Notes to the Unaudited 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 - 2014
Property, plant and equipment (continued) Reconciliation of property, plant and equipment - 2013
Property, plant and equipment (continued) Reconciliation of Work-in-Progress 2014
Employee benefit obligations Defined benefit plan
Employee benefit obligations (continued)
Inventories
Receivables from non-exchange transactions
Consumer debtors Gross balances
Consumer debtors (continued) Electricity
Consumer debtors (continued) Consumer debtors impaired
Cash and cash equivalents Cash and cash equivalents consist of
Unspent conditional grants and receipts
Unspent conditional grants and receipts (continued) Movement during the year
Other financial liabilities At amortised cost
Provisions
Provisions (continued)
Payables from exchange transactions
VAT payable
Consumer deposits
Financial instruments disclosure Categories of financial instruments
Property rates Rates received
Service charges
Government grants and subsidies
Government grants and subsidies (continued)
The Department of Energy, Eskom and the South African Association of Local Authorities briefed the Committee on the current state of the Integrated National Electrification Programme, the challenges it has faced and challenges specific to municipalities. Eskom funded 42 infrastructure projects, mainly in KwaZulu-Natal and the Eastern Cape, while municipalities funded 45 projects. Specific interventions would be implemented to combat 'island' formations in KwaZulu-Natal, with leading interventions in Engcobo, Umsingi, Maluti-a-Phofung, Masibambisane Rural Development Initiative and King Sabata Dalindyebo municipality where infrastructure was severely lacking.
Based on the grants that appear in the Revenue Distribution Act (Act No. 2 of 2013), no significant changes are expected in the level of state subsidy grants over the next 3 financial years.
Other revenue
Other income
General expenses
Employee related costs
Employee related costs (continued) Remuneration of Senior Manager: Internal Audit
Debt impairment
Depreciation and amortisation
Contracted services
Bulk purchases
Commitments
Contingencies
Contingencies (continued)
DLOVA MOLOTO ATTORNEYS GERRIT NEL INC
- Related parties
- Related parties (continued)
- Prior period errors
- Prior period errors (continued) Liabilities
- Prior period errors (continued)
- Prior period errors (continued) Expenditure
- Risk management Financial risk management
- Going concern
- Unauthorised expenditure
- Fruitless and wasteful expenditure
- Irregular expenditure
- Reconciliation between budget and cash flow statement
- Reconciliation between budget and cash flow statement (continued) Investing activities
- 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) During the year the above Councillors’ had arrear accounts
- Utilisation of Long-term liabilities reconciliation
Amounts related to capital and operating expenditures for projects that were improperly shown as work in progress in prior years. Tangible fixed assets - 4 road sections were not recorded in the asset register during the assumption of estimated costs in accordance with Directive 7. Depreciation - The effect of the calculated depreciation of roads, as well as capitalized work in progress.
Repairs and maintenance - Work in progress on expensed assets that did not constitute a capital project. General expenses - Accruals for 2013 not included, errors in previous periods on work in progress, reclassification of other expenses. Credit risk is defined as the risk that one party to a financial instrument defaults on their obligation, thereby causing the other party to suffer a financial loss.
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices. It consists of three types of risks, which are currency risk, interest rate risk and other price risk. Interest rate risk is defined as the risk that the fair value or future cash flows associated with a financial instrument will change in amount as a result of market interest rate changes.
Potential concentrations of credit risk and interest rate risk consist primarily of fixed deposit investments, long-term debtors, consumer debtors, other debtors, short-term investment deposits and bank and cash balances. Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices (other than those arising from interest rate or currency risk, if these changes are caused by specific individual financial factors the instrument or its issuer, or factors affecting all similar financial instruments traded on the market Provision of additional explanatory information regarding the Municipal Finance Management Act (continued) Pension deductions and medical aid Pension and medical aid deductions.
Additional explanation Municipal Finance Management Act (continued) Overdue consumer bills for council members Overdue consumer bills for council members. Further explanation Municipal Financial Management Act (continued) The above council members had overdue accounts during the year under review. According to Article 36 of the Municipal Supply Chain Management Regulations, any deviation from the Supply Chain Management Policy must be approved/approved by the Accounting Officer and noted by the Board.
Analysis of property, plant and equipment as at 30 June 2014
Lekwa Local Municipality Lekwa Local Municipality
Analysis of property, plant and equipment as at 30 June 2013