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City of Ekurhuleni Metropolitan Municipality Consolidated Annual Financial Statements for the year ended 30 June 2020 City of Ekurhuleni Metropolitan Municipality Consolidated Annual Financial Statements for the year ended 30 June 2020 General Information Legal form of entity City Legislation governing the entity's operations Municipal Finance Management Act (Act No. 56 of 2003) Mayoral Committee Executive Mayor Clr M Masina Speaker Clr P Khumalo Chief Whip Chief Whip: Clr J Dlabathi Members of Mayoral Committee MMC: Finance, ICT and Economic Development: Clr D Xhakaza MMC: Health & Social Development : Clr N Nkozi MMC: Human Settlement: Clr L Mpya MMC: Environmental and Waste Management Services: Clr K Mabaso MMC: City Planning: Clr N Shongwe MMC: Corporate and Shared Services: Clr D Mlambo MMC: Water, Sanitation and Energy: Clr T Nketle MMC: Community Safety: Clr F Mmoko MMC: Infrastructure Services: Clr M Madihlaba MMC: Transport Planning: Clr P Nkunjana Grading of local authority The City is a category A grade 6 local authority in teams of item 4 of the Government Notice R1227 of 18 December 2007 published in terms of the Remuneration of Public Office Bearers act, 1998. City Manager Dr. I Mashazi 011 999 0760 [email protected] Group Chief Financial Officer (GCFO) Mr. K Lerutla 011 999 1310 [email protected] Registered office Corner of Rose and Cross Streets Germiston 1400 Business address Corner of Rose and Cross Streets Germiston 1400 Postal address Private Bag X69 Germiston 1400 Primary banker Nedbank Auditors Auditor-General of South Africa 1 City of Ekurhuleni Metropolitan Municipality Consolidated Annual Financial Statements for the year ended 30 June 2020 Index The reports and statements set out below comprise the consolidated annual financial statements presented to the provincial legislature: Index Page Accounting Officer's Responsibilities and Approval 3 Statement of Financial Position 4 Statement of Financial Performance 5 Statement of Changes in Net Assets 6 Cash Flow Statement 7 Statement of Comparison of Budget and Actual Amounts 8 - 16 Accounting Policies 17 - 39 Notes to the Consolidated Annual Financial Statements 39 - 108 Abbreviations COID Compensation for Occupational Injuries and Diseases CRR Capital Replacement Reserve DBSA Development Bank of South Africa SA GAAP South African Statements of Generally Accepted Accounting Practice GRAP Generally Recognised Accounting Practice GAMAP Generally Accepted Municipal 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) 2 City of Ekurhuleni Metropolitan Municipality Consolidated Annual Financial Statements for the year ended 30 June 2020 Statement of Financial Position as at 30 June 2020 Economic entity Controlling entity Figures in Rand Note(s) 2020 2019 2020 2019 Restated Restated Assets Current Assets Inventories 10 1,282,576,038 1,362,383,465 1,282,574,238 1,362,355,865 Other investments 8 1,863,869,374 182,769,051 1,857,475,861 174,554,132 Receivables from non exchange transactions 13 5,113,059 567,792,348 5,113,059 567,792,348 Receivables from exchange transactions 11&14 6,203,913,993 5,469,592,614 6,143,392,185 5,455,699,832 Statutory receivables 12 863,950,242 - 863,950,242 - Cash and cash equivalents 15 1,669,450,886 3,528,975,859 1,644,224,891 3,430,881,904 11,888,873,592 11,111,513,337 11,796,730,476 10,991,284,081 Non-Current Assets Investment property 3 727,222,016 703,111,957 530,824,142 502,247,151 Property, plant and equipment 4 59,396,758,967 57,318,749,104 57,147,985,682 55,126,113,172 Intangible assets 5 1,229,176,264 1,000,311,272 1,220,131,682 990,116,508 Heritage assets 6 66,085,061 69,001,911 66,085,061 69,001,911 Investments in controlled entities 7 - - 106 106 Other investments 8 616,146,743 1,915,108,684 616,146,743 1,915,108,684 Long term receivables 9 15,421,679 13,611,830 3,345,200 3,329,215 62,050,810,730 61,019,894,758 59,584,518,616 58,605,916,747 Total Assets 73,939,684,322 72,131,408,095 71,381,249,092 69,597,200,828 Liabilities Current Liabilities Short term portion of long term liabilities 16 2,392,202,405 615,039,329 2,338,021,378 557,145,611 Current tax payable 1,424,346 5,002,730 - - Finance lease obligation 1,018,717 119,466 - - Trade and other payables from exchange 20 8,587,371,635 7,616,413,658 8,546,868,461 7,511,193,793 transactions Deposits 21 935,100,451 916,990,548 935,100,451 916,990,548 Unspent conditional grants and receipts 22 492,860,020 980,713,929 492,860,020 959,851,222 Provisions 19 609,548,695 606,547,670 576,744,106 572,902,650 13,019,526,269 10,740,827,330 12,889,594,416 10,518,083,824 Non-Current Liabilities Long term liabilities 16 8,016,646,206 8,567,648,829 7,624,921,670 8,124,203,045 Finance lease obligation 1,453,346 - - - Retirement benefit obligation 17 2,169,927,581 2,095,861,581 2,130,088,581 2,058,871,581 Deferred tax 18 38,111,808 41,654,198 - - Provisions 19 980,007,571 886,968,478 979,441,554 885,299,632 11,206,146,512 11,592,133,086 10,734,451,805 11,068,374,258 Total Liabilities 24,225,672,781 22,332,960,416 23,624,046,221 21,586,458,082 Net Assets 49,714,011,541 49,798,447,679 47,757,202,871 48,010,742,746 Accumulated surplus 49,659,978,220 49,749,903,581 47,757,202,871 48,010,742,746 49,659,978,220 49,749,903,581 47,757,202,871 48,010,742,746 Non-controlling interest 54,033,321 48,544,098 - - Total Net Assets 49,714,011,541 49,798,447,679 47,757,202,871 48,010,742,746 4 City of Ekurhuleni Metropolitan Municipality Consolidated Annual Financial Statements for the year ended 30 June 2020 Statement of Financial Performance Economic entity Controlling entity Figures in Rand Note(s) 2020 2019 2020 2019 Restated Restated Revenue Revenue from exchange transactions Service charges 23&25 22,966,739,278 21,085,905,201 23,096,231,665 21,153,924,617 Rendering of services 6,062,941 9,893,165 - - Rental of facilities and equipment 26 126,220,796 116,417,877 84,099,157 76,002,723 Interest earned on outstanding debtors 23 354,577,088 393,388,972 354,577,088 393,388,972 Income from agency services 2357 246,003,581 305,156,458 246,003,581 305,156,458 Licences and permits 23 32,915,237 43,989,029 32,915,237 43,989,029 Other income 29 405,694,679 287,126,423 154,054,203 235,914,589 Interest revenue 28 314,579,940 399,384,251 306,732,178 393,246,152 Gains on sale of assets 23 18,079,942 - 18,039,993 - Dividends received 28 97,074 181,971 - - Total revenue from exchange transactions 24,470,970,556 22,641,443,347 24,292,653,102 22,601,622,540 Revenue from non-exchange transactions Taxation revenue Property rates 24 5,668,546,859 5,395,430,732 5,668,546,859 5,395,430,732 Property rates - penalties and collection charges 24 83,401,449 83,532,438 83,401,449 83,532,438 Transfer revenue Government grants & subsidies 27 8,433,298,699 7,729,503,915 8,402,560,341 7,724,271,767 Public contributions and donations 143,384,792 29,628,665 143,384,792 29,628,665 Fines 23 720,757,605 820,850,338 720,757,605 820,850,338 Total revenue from non-exchange transactions 15,049,389,404 14,058,946,088 15,018,651,046 14,053,713,940 Total revenue 23 39,520,359,960 36,700,389,435 39,311,304,148 36,655,336,480 Expenditure Employee related costs 30 (9,177,663,139) (8,665,638,923) (8,769,926,678) (8,280,628,317) Remuneration of councillors 31 (141,224,613) (137,853,886) (141,224,613) (137,935,967) Depreciation and amortisation 32 (2,713,882,126) (2,426,558,950) (2,613,405,797) (2,345,909,609) Impairment and derecognition loss 33 (44,729,420) (100,383,994) (43,793,819) (93,738,466) Finance costs 34 (1,239,295,022) (947,361,940) (1,187,412,121) (891,518,673) Debt impairment 35 (3,729,847,278) (4,147,665,975) (3,702,413,924) (4,136,551,991) Collection costs (114,868,883) (127,898,248) (114,868,883) (127,898,248) Bulk purchases 36 (15,160,539,606) (13,327,440,091) (15,932,324,318) (14,021,782,715) Contracted services 38 (2,527,603,236) (2,469,896,901) (2,527,617,945) (2,469,896,901) Grants and subsidies paid 39 (1,277,348,901) (1,623,085,474) (1,490,674,297) (1,808,075,875) Loss on disposal of capital assets - (20,380,608) - (14,596,043) General expenses 40 (3,473,024,174) (3,598,916,891) (3,041,181,627) (3,280,959,279) Total expenditure (39,600,026,398) (37,593,081,881) (39,564,844,022) (37,609,492,084) Deficit before taxation (79,666,438) (892,692,446) (253,539,874) (954,155,604) Taxation 4,769,697 14,179,836 - - Deficit for the year (84,436,135) (906,872,282) (253,539,874) (954,155,604) .0 Owners of the controlling entity (89,925,359) (907,354,013) (253,539,874) (954,155,604) Non-controlling interest 5,489,224 481,731 - - (84,436,135) (906,872,282) (253,539,874) (954,155,604) 5 City of Ekurhuleni Metropolitan Municipality Consolidated Annual Financial Statements for the year ended 30 June 2020 Statement of Changes in Net Assets Accumulated Total attributable Non-controlling Total net assets surplus to owners of the interest economic entity / Figures in Rand controlling entity Economic entity Opening balance as previously reported 50,703,350,863 50,703,350,863 48,211,114 50,751,561,977 Corrections of errors* (46,093,269) (46,093,269) (148,748) (46,242,017) Balance at 01 July 2018 as restated 50,657,257,594 50,657,257,594 48,062,366 50,705,319,960 Deficit for the year as restated (907,354,013) (907,354,013) 481,731 (906,872,282) Total changes (907,354,013) (907,354,013) 481,731 (906,872,282) Restated Balance at 01 July 2019 49,749,903,579 49,749,903,579 48,544,098 49,798,447,677 Deficit for the year (89,925,359) (89,925,359) 5,489,224 (84,436,135) Total changes (89,925,359) (89,925,359) 5,489,224 (84,436,135) Balance at 30 June 2020 49,659,978,220 49,659,978,220 54,033,321 49,714,011,541 * Prior perior error Note 56 Controlling entity Opening balance as previously reported 49,015,487,733 49,015,487,733 - 49,015,487,733 Correction of errors (50,589,385) (50,589,385) - (50,589,385) Restated* Balance at 01 July 2018 48,964,898,350 48,964,898,350 - 48,964,898,350 Deficit for the year as restated (954,155,604) (954,155,604) - (954,155,604) Total changes (954,155,604) (954,155,604) - (954,155,604) Balance at 01 July 2019 48,010,742,745 48,010,742,745 - 48,010,742,745 Deficit for the year (253,539,874) (253,539,874) - (253,539,874) Total changes (253,539,874) (253,539,874) - (253,539,874) Balance at 30 June 2020 47,757,202,871 47,757,202,871 - 47,757,202,871 *Prior perior error Note 56 6 City of Ekurhuleni Metropolitan Municipality Consolidated Annual Financial Statements for the year ended 30 June 2020 Cash Flow Statement Economic entity Controlling entity Figures in Rand Note(s) 2020 2019 2020 2019 Restated Restated Cash flows from operating activities Receipts on: Property rates 5,160,537,398 5,554,632,496 3,508,234,590 3,902,329,664 Income from rendering of services 19,788,904,896 18,127,609,755 21,304,416,193 19,193,651,433 Grants - operational 5,944,710,250 6,045,125,033 5,934,834,599 6,039,892,885 Grants - capital 2,000,734,540 2,067,209,453 2,000,734,540 2,067,209,453 Interest income 314,579,940 399,384,251 306,732,178 786,635,124 Dividends received 97,074 181,971 - - Other receipts 1,057,502,343 1,484,587,709 1,079,943,623 1,554,217,697 34,267,066,441 33,678,730,668 34,134,895,723 33,543,936,256 Payments to: Employees (9,534,703,050) (8,789,514,101) (9,129,815,589) (8,428,033,593) Suppliers (20,110,401,614) (19,461,072,810) (20,385,667,595) (19,787,359,316) Finance costs (949,413,724) (651,394,987) (897,530,823) (616,152,368) Other payments (1,388,087,182) (1,411,776,508) (1,582,328,574) (1,588,092,554) Taxes on surpluses (11,890,471) (48,756,227) - - (31,994,496,041) (30,362,514,633) (31,995,342,581) (30,419,637,831) Net cash flows from operating activities 41 2,272,570,400 3,316,216,035 2,139,553,142 3,124,298,425 Cash flows from investing activities Purchase of property, plant and equipment (PPE) 4 (4,659,596,840) (5,873,695,870) (4,507,730,216) (5,713,632,916) Purchase of investment property 3 (38,829,032) (13,563,059) (38,829,032) (13,563,059) Purchase of intangible assets 5 (277,335,069) (263,268,738) (277,269,527) (258,397,644) Increase/decrease in investments (382,138,382) 83,329,679 (383,959,789) 83,123,862 Increase in long term receivables (1,809,849) (6,854,215) (15,985) (11,391) Net cash flows from investing activities (5,359,709,172) (6,074,052,203) (5,207,804,548) (5,902,481,148) Cash flows from financing activities Long-term liabilities raised 1,650,000,000 3,000,241,002 1,650,000,000 3,000,000,000 Repayment of long term liabilities (423,839,547) (371,476,273) (368,405,608) (318,729,157) Finance lease raised/(payments) 1,453,346 (238,933) - - Net cash flows from financing activities 1,227,613,799 2,628,525,796 1,281,594,392 2,681,270,843 Net decrease in cash and cash equivalents (1,859,524,973) (129,310,372) (1,786,657,014) (96,911,880) Cash and cash equivalents at the beginning of the 3,528,975,859 3,658,286,231 3,430,881,905 3,527,793,784 year Cash and cash equivalents at the end of the 15 1,669,450,886 3,528,975,859 1,644,224,891 3,430,881,904 year 7 City of Ekurhuleni Metropolitan Municipality Consolidated Annual Financial Statements for the year ended 30 June 2020 Statement of Comparison of Budget and Actual Amounts Budget on Accrual Basis Approved budget Adjustments Final Budget Actual amounts Difference Reference on comparable between final basis budget and Figures in Rand actual Economic entity Statement of Financial Performance Revenue Revenue from exchange transactions Service charges 24,308,838,802 (872,684,088) 23,436,154,714 22,966,739,278 (469,415,436) 59 Rendering of services 35,196,227 - 35,196,227 6,062,941 (29,133,286) 59 Rental of facilities and equipment 136,271,005 (12,806,344) 123,464,661 126,220,796 2,756,135 59 Interest earned on outstanding debtors 501,785,790 - 501,785,790 354,577,088 (147,208,702) 59 Income from agency services 305,764,329 (56,473,421) 249,290,908 246,003,581 (3,287,327) 59 Licences and permits 54,329,293 441,636 54,770,929 32,915,237 (21,855,692) 59 Other income 282,758,388 29,738,182 312,496,570 405,694,679 93,198,109 59 Interest revenue 438,737,190 30,005 438,767,195 314,579,940 (124,187,255) 59 Dividends received - - - 97,074 97,074 59 Total revenue from exchange transactions 26,063,681,024 (911,754,030) 25,151,926,994 24,452,890,614 (699,036,380) Revenue from non-exchange transactions Taxation revenue Property rates 6,140,478,219 - 6,140,478,219 5,668,546,859 (471,931,360) 59 Property rates - penalties and collection charges 55,402,125 - 55,402,125 83,401,449 27,999,324 59 Transfer revenue Government grants & subsidies 8,514,123,180 429,210,669 8,943,333,849 8,433,298,699 (510,035,150) 59 Public contributions and donations - - - 143,384,792 143,384,792 59 Fines 363,795,955 434,396,805 798,192,760 720,757,605 (77,435,155) 59 Total revenue from non-exchange transactions 15,073,799,479 863,607,474 15,937,406,953 15,049,389,404 (888,017,549) Total revenue 41,137,480,503 (48,146,556) 41,089,333,947 39,502,280,018 (1,587,053,929) Expenditure Employee related costs (9,808,773,369) 335,339,775 (9,473,433,594) (9,177,663,139) 295,770,455 59 Remuneration of councillors (139,695,066) (3,100,000) (142,795,066) (141,224,613) 1,570,453 59 8 City of Ekurhuleni Metropolitan Municipality Consolidated Annual Financial Statements for the year ended 30 June 2020 Statement of Comparison of Budget and Actual Amounts (Appropriation Statement) Budget on Accrual Basis Approved budget Adjustments Final Budget Actual amounts Difference Reference on comparable between final basis budget and Figures in Rand actual Depreciation, amortisation and impairment (2,202,788,615) (1,130,000) (2,203,918,615) (2,758,627,531) (554,708,916) 59 Finance costs (1,096,076,483) 227,022,398 (869,054,085) (1,239,295,022) (370,240,937) 59 Debt Impairment (1,579,646,271) (1,409,567,030) (2,989,213,301) (3,729,847,278) (740,633,977) 59 Collection costs (185,291,842) 54,311,856 (130,979,986) (114,868,883) 16,111,103 59 Bulk purchases (15,703,689,808) 620,651,699 (15,083,038,109)(15,160,539,606) (77,501,497) 59 Contracted services (2,319,474,030) (683,927,039) (3,003,401,069) (2,527,603,236) 475,797,833 59 Grants and subsidies paid (1,418,337,420) 24,258,496 (1,394,078,924) (1,277,348,901) 116,730,023 59 General expenses (3,883,456,068) 322,915,892 (3,560,540,176) (3,473,008,189) 87,531,987 59 Total expenditure (38,337,228,972) (513,223,953)(38,850,452,925)(39,600,026,398) (749,573,473) Operating deficit 2,800,251,531 (561,370,509) 2,238,881,022 (97,746,380) (2,336,627,402) Gains on sale of assets (15,307,321) - (15,307,321) 18,079,942 33,387,263 59 Deficit before taxation 2,784,944,210 (561,370,509) 2,223,573,701 (79,666,438) (2,303,240,139) Taxation - - - 4,769,697 4,769,697 59 Actual Amount on Comparable Basis as Presented in the Budget and Actual Comparative 2,784,944,210 (561,370,509) 2,223,573,701 (84,436,135) (2,308,009,836) Statement Reconciliation 9