DC43 Harry Gwala AFS 2019-20 unaudited

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Harry Gwala District Municipality
(Registration number DC 43)
Annual financial statements
for the year ended 30 June 2020
Harry Gwala District Municipality
(Registration number DC 43)
Annual Financial Statements for the year ended 30 June 2020
General Information
Legal form of entity Municipality in terms of section 1 of the Local Government: Municipal
Structures Act (Act 117 of 1998) read with section 155 (1) of the
Constitution of the republic of South Africa (Act 108 of 1996)
Nature of business and principal activities The provision of services (water and sanitation) to communities in a
sustainable manner, to promote social and economic development;
and to promote a safe and healthy environment.
Council
Executive Mayor ZD Nxumalo
Deputy Mayor NH Maphasa-Duma
Speaker TN Jojozi
Member of the Executive Committee BP Nzimande
Member of the Executive Committee N Mavuka
Member of the Executive Committee LA Zondi
Chief Whip WB Dlamini
Councillors NW Dladla
SS Mavuma
TG Soni
V Xotongo
VW Zaza
ZS Nyide
ZC Khumalo
ZR Tshazi
SJ Phakathi
SN Madziba
BC Mncwabe
SV Zulu
B Sibeni
BZ Magaqa
BL Marnce
ZP Gcume
L Nzimande
MSD Mdunge
KM Mkhize
Grading of local authority Grade 4
Chief Finance Officer (CFO) Mr M Mkatu
Accounting Officer Mrs AN Dlamini
Business address 40 Main Street
Ixopo
3276
Postal address Private Bag X501
Ixopo
3276
Bankers First National Bank
Auditors Auditor General South Africa
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Harry Gwala District Municipality
(Registration number DC 43)
Annual Financial Statements for the year ended 30 June 2020
General Information
Level of assurance These annual financial statements have been audited in compliance
with the applicable requirements of the Companies Act 71 of 2008.
Preparer The annual financial statements were internally compiled by:
Mr T Guma
Deputy Chief Financial Officer
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Harry Gwala District Municipality
(Registration number DC 43)
Annual Financial Statements for the year ended 30 June 2020
Index
The reports and statements set out below comprise the annual financial statements presented to the provincial legislature:
Page
Accounting Officer's Responsibilities and Approval 4
Statement of Financial Position 5
Statement of Financial Performance 6
Statement of Changes in Net Assets 7
Cash Flow Statement 8
Statement of Comparison of Budget and Actual Amounts 9 - 10
Accounting Policies 11 - 29
Notes to the Annual Financial Statements 30 - 66
COID Compensation for Occupational Injuries and Diseases
CRR Capital Replacement Reserve
DBSA Development Bank of South Africa
GRAP Generally Recognised Accounting Practice
HDF Housing Development Fund
IAS International Accounting Standards
IMFO Institute of Municipal Finance Officers
IPSAS International Public Sector Accounting Standards
ME's Municipal Entities
MEC Member of the Executive Council
MFMA Municipal Finance Management Act
MIG Municipal Infrastructure Grant (Previously CMIP)
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Harry Gwala District Municipality
(Registration number DC 43)
Annual Financial Statements for the year ended 30 June 2020
Accounting Officer's Responsibilities and Approval
The accounting officeris required by the Municipal Finance Management Act (Act 56 of 2003), to maintain adequate
accounting records and is responsible for the content and integrity of the annual financial statements and related financial
information included in this report. It is the responsibility of the accounting officer to ensure that the annual financial statements
fairly present the state of affairs of the municipality as at the end of the financial year and the results of its operations and cash
flows for the period then ended. The external auditors are engaged to express an independent opinion on the annual financial
statements and was given unrestricted access to all financial records and related data.
The annual financial statements have been prepared in accordance with Standards of Generally Recognised Accounting
Practice (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board.
The accounting officeracknowledges that sheis ultimately responsible for the system of internal financial control established
by the municipality and place considerable importance on maintaining a strong control environment. To enable the accounting
officer to meet these responsibilities, the accounting officer sets standards for internal control aimed at reducing the risk of
error or deficit in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly
defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk.
These controls are monitored throughout the municipality and all employees are required to maintain the highest ethical
standards in ensuring the municipality’s business is conducted in a manner that in all reasonable circumstances is above
reproach. The focus of risk management in the municipality is on identifying, assessing, managing and monitoring all known
forms of risk across the municipality. While operating risk cannot be fully eliminated, the municipality endeavours to minimise it
by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within
predetermined procedures and constraints.
The accounting officeris of the opinion, based on the information and explanations given by management, that the system of
internal control provides reasonable assurance that the financial records may be relied on for the preparation of the annual
financial statements. However, any system of internal financial control can provide only reasonable, and not absolute,
assurance against material misstatement or deficit.
The accounting officerhas reviewed the municipality’s cash flow forecast for the year to 30 June 2021 and, in the light of this
review and the current financial position, sheis satisfied that the municipality has or has access to adequate resources to
continue in operational existence for the foreseeable future.
Although the accounting officer are primarily responsible for the financial affairs of the municipality, they are supported by the
municipality's external auditors.
The external auditorsare responsible for independently reviewing and reporting on the municipality's annual financial
statements.
The annual financial statements set out on pages 5 to 66, which have been prepared on the going concern basis, were
approved by the accounting officer on 30 October 2020 and were signed on its behalf by:
Mrs AN Dlamini
Municipal Manager
Friday, 30 October 2020
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Harry Gwala District Municipality
(Registration number DC 43)
Annual Financial Statements for the year ended 30 June 2020
Statement of Financial Position as at 30 June 2020
Figures in Rand Notes 2020 2019
Restated*
Assets
Current Assets
Inventories 3 267 013 247 710
Receivables from non-exchange transactions 4 3 878 721 6 658 497
VAT receivable 5 6 757 010 11 145 580
Consumer debtors 6 31 028 737 26 933 367
Cash and cash equivalents 7 40 670 866 58 362 814
82 602 347 103 347 968
Non-Current Assets
Property, plant and equipment 8 2 340 494 072 2 174 636 590
Intangible assets 9 875 303 1 197 027
Investments in controlled entities 10 100 100
2 341 369 475 2 175 833 717
Total Assets 2 423 971 822 2 279 181 685
Liabilities
Current Liabilities
Borrowings 11 4 555 057 4 101 623
Finance lease obligation 12 5 348 935 8 426 135
Payables from exchange transactions 13 100 899 484 95 871 418
Consumer deposits 14 1 863 257 1 768 018
Employee benefit obligation 15 770 000 318 714
Unspent conditional grants and receipts 16 15 486 481 44 396 884
128 923 214 154 882 792
Non-Current Liabilities
Borrowings 11 - 4 555 057
Finance lease obligation 12 4 904 225 8 985 901
Employee benefit obligation 15 17 708 999 18 621 498
Long terrm payables from exchange transactions 17 11 661 265 11 661 265
34 274 489 43 823 721
Total Liabilities 163 197 703 198 706 513
Net Assets 2 260 774 119 2 080 475 172
Accumulated surplus 2 260 774 119 2 080 475 172
* See Note 40
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Harry Gwala District Municipality
(Registration number DC 43)
Annual Financial Statements for the year ended 30 June 2020
Statement of Financial Performance
Figures in Rand Notes 2020 2019
Restated*
Revenue
Revenue from exchange transactions
Service charges 18 70 462 645 58 420 643
Other income 19 1 353 425 743 465
Interest received 20 18 828 904 19 757 937
Total revenue from exchange transactions 90 644 974 78 922 045
Revenue from non-exchange transactions
Transfer revenue
Government grants & subsidies 21 643 187 263 658 444 867
Public contributions and donations 22 5 863 241 13 424 405
Total revenue from non-exchange transactions 649 050 504 671 869 272
Total revenue 23 739 695 478 750 791 317
Expenditure
Bulk purchases 24 22 832 763 17 975 968
Contracted services 25 142 268 802 142 729 733
Debt Impairment 26 43 060 458 19 110 917
Depreciation and amortisation 27 70 918 931 66 993 428
Employee related costs 28 194 229 571 181 161 151
Finance costs 29 4 283 737 3 752 248
Inventory Consumed 30 5 399 724 31 005 899
Operational costs 31 55 850 240 50 004 083
Remuneration of councillors 32 7 701 853 6 952 424
Transfer payments 33 14 000 000 14 000 000
Total expenditure 560 546 079 533 685 851
Operating surplus 179 149 399 217 105 466
Loss on disposal of assets and liabilities (1 652 682) (8 948 027)
Actuarial gains/losses 15 3 828 225 7 466 339
Impairment loss 34 (1 025 548) (2 750 050)
1 149 995 (4 231 738)
Surplus for the year 180 299 394 212 873 728
* See Note 40
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Harry Gwala District Municipality
(Registration number DC 43)
Annual Financial Statements for the year ended 30 June 2020
Statement of Changes in Net Assets
Accumulated Total net
Figures in Rand surplus assets
Balance at 01 July 2018 1 867 601 444 1 867 601 444
Changes in net assets
Surplus for the year 212 873 728 212 873 728
Total changes 212 873 728 212 873 728
Restated* Balance at 01 July 2019 2 080 474 725 2 080 474 725
Changes in net assets
Surplus for the year 180 299 394 180 299 394
Total changes 180 299 394 180 299 394
Balance at 30 June 2020 2 260 774 119 2 260 774 119
Note(s)
* See Note 40
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Harry Gwala District Municipality
(Registration number DC 43)
Annual Financial Statements for the year ended 30 June 2020
Cash Flow Statement
Figures in Rand Note(s) 2020 2019
Restated*
Cash flows from operating activities
Receipts
Water, sanitation and other receipts 40 072 465 44 595 527
Grants 614 276 860 641 826 131
Interest income 6 196 457 9 839 028
660 545 782 696 260 686
Payments
Employee costs (198 564 412) (182 497 514)
Suppliers (230 851 301) (280 824 161)
Finance costs (4 283 737) (3 752 248)
(433 699 450) (467 073 923)
Net cash flows from operating activities 36 226 846 332 229 186 763
Cash flows from investing activities
Purchase of property, plant and equipment 8 (233 043 490) (256 582 632)
Proceeds from sale of property, plant and equipment 8 1 061 621 -
Net cash flows from investing activities (231 981 869) (256 582 632)
Cash flows from financing activities
Repayment of borrowings (4 101 623) (6 159 439)
Movement in long terrm payables from exchange transactions - 731 037
Finance lease payments (8 454 788) (5 774 946)
Net cash flows from financing activities (12 556 411) (11 203 348)
Net increase/(decrease) in cash and cash equivalents (17 691 948) (38 599 217)
Cash and cash equivalents at the beginning of the year 58 362 814 96 962 031
Cash and cash equivalents at the end of the year 7 40 670 866 58 362 814
* See Note 40
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Harry Gwala District Municipality
(Registration number DC 43)
Annual Financial Statements for the year ended 30 June 2020
Statement of Comparison of Budget and Actual Amounts
Budget on Accrual Basis
Approved Adjustments Final Budget Actual amounts Difference Note
budget on comparable between final Reference
basis budget and
Figures in Rand actual
Statement of Financial Performance
Revenue
Revenue from exchange
transactions
Service charges 88 392 069 (21 326 819) 67 065 250 70 462 645 3 397 395 51
Other income 766 415 - 766 415 1 353 425 587 010 51
Interest received 20 289 011 (3 553 751) 16 735 260 18 828 904 2 093 644 51
Total revenue from exchange 109 447 495 (24 880 570) 84 566 925 90 644 974 6 078 049
transactions
Revenue from non-exchange
transactions
Transfer revenue
Government grants & subsidies 641 842 000 15 597 000 657 439 000 643 187 263 (14 251 737) 51
Public contributions and - - - 5 863 241 5 863 241 51
donations
Total revenue from non- 641 842 000 15 597 000 657 439 000 649 050 504 (8 388 496)
exchange transactions
Total revenue 751 289 495 (9 283 570) 742 005 925 739 695 478 (2 310 447)
Expenditure
Employee costs (195 622 807) (1 433 782) (197 056 589) (194 229 571) 2 827 018 51
Remuneration of councillors (7 574 057) - (7 574 057) (7 701 853) (127 796) 51
Transfer payments (14 000 000) - (14 000 000) (14 000 000) - 51
Depreciation and amortisation (37 492 494) (42 217 629) (79 710 123) (70 918 931) 8 791 192 51
Impairment loss - - - (1 025 548) (1 025 548) 51
Finance costs (3 510 082) (658 266) (4 168 348) (4 283 737) (115 389) 51
Debt Impairment (25 315 400) - (25 315 400) (43 060 458) (17 745 058) 51
Bulk purchases (15 000 000) (8 134 419) (23 134 419) (22 832 763) 301 656 51
Contracted Services (100 121 547) (60 670 451) (160 791 998) (142 268 802) 18 523 196 51
Inventory Consumed (15 163 359) 6 868 481 (8 294 878) (5 399 724) 2 895 154 51
Operational costs (54 090 706) (2 756 782) (56 847 488) (55 850 240) 997 248 51
Total expenditure (467 890 452) (109 002 848) (576 893 300) (561 571 627) 15 321 673
Operating surplus 283 399 043 (118 286 418) 165 112 625 178 123 851 13 011 226
Loss on disposal of assets - - - (1 652 682) (1 652 682) 51
Actuarial gains/losses - - - 3 828 225 3 828 225 51
- - - 2 175 543 2 175 543
Surplus before taxation 283 399 043 (118 286 418) 165 112 625 180 299 394 15 186 769
Actual Amount on Comparable 283 399 043 (118 286 418) 165 112 625 180 299 394 15 186 769
Basis as Presented in the
Budget and Actual
Comparative Statement
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