FS196 Mantsopa AFS 2019-20 unaudited

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MANTSOPA LOCAL MUNICIPALITY
(Registration number FS196)
Annual Financial Statements
for the year ended 30 June 2020
Mantsopa Local Municipality
(Registration number FS196)
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 (electricity, water, sanitation and refuse) to
communities in a sustainable manner, to promote social and economic
development; and to promote a safe and healthy environment.
Mayoral committee
Mayor ME Tsoene
Speaker MJ Moduka
Councillors YJ Jacobs
T Halse
MP Nakalebe
SJ Moses (Ceased April 2020)
RT Mpakathe
NJ Thaisi
DT Molefe
KI Tigeli
SQ Gaba
LP Moletsane
GM Seoe
BM Sani
BE Meya
DJ Hattingh
BA Maboza
SJ Nkiane
Grading of local authority Grade 3
Chief Finance Officer (CFO) Mr. S Nyapholi
Accounting Officer Mr. T.P Masejane
Registered office No 38 Joubert Street
Ladybrand
Free State
9745
Business address No 38 Joubert Street
Ladybrand
Free State
9745
Postal address Mantsopa Local Municipality
PO Box 64
Ladybrand
Free State
9745
Bankers ABSA Bank Limited
Auditors Auditor General of South Africa
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Mantsopa Local Municipality
(Registration number FS196)
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 3
Accounting Officer's Report 4 - 5
Statement of Financial Position 6
Statement of Financial Performance 7
Statement of Changes in Net Assets 8
Cash Flow Statement 9
Statement of Comparison of Budget and Actual Amounts 10 - 17
Accounting Policies 18 - 43
Notes to the Annual Financial Statements 44 - 84
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)
iGRAP Interpretations of Standards of GRAP
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Mantsopa Local Municipality
(Registration number FS196)
Annual Financial Statements for the year ended 30 June 2020
Accounting Officer's Responsibilities and Approval
The accounting officer is 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 prepared as required in terms of Section 122 of the Municipal Finance Management Act (No.
56 of 2003) and in accordance with the South African Standards of Generally Recognized Accounting Practices (GRAP),
including any interpretations of such Statements issued by the Accounting Practices Board, and in accordance with the
prescribed framework by National Treasury.
The annual financial statements are based upon appropriate accounting policies consistently applied and supported by
reasonable and prudent judgements and estimates.
The accounting officeracknowledges that heis 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 officer is 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 officer has 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, he is satisfied that the municipality has or has access to adequate resources to
continue in operational existence for the foreseeable future.
The municipality is wholly dependent on the municipality for continued funding of operations. The annual financial statements
are prepared on the basis that the municipality is a going concern and that the municipality has neither the intention nor the
need to liquidate or curtail materially the scale of the municipality.
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 auditors are responsible for independently reviewing and reporting on the municipality's annual financial
statements. The annual financial statements have been examined by the municipality's external auditors and their report is
presented on page 4.
The annual financial statements set out on page 4, which have been prepared on the going concern basis, were approved by
the accounting officer on 04 December 2020 and were signed on:
Mr. T.P Masejane
Accounting Officer
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Mantsopa Local Municipality
(Registration number FS196)
Annual Financial Statements for the year ended 30 June 2020
Accounting Officer's Report
The accounting officersubmitshis report for the year ended 30 June 2020.
1. Review of activities
Main business and operations
The municipality is engaged in the provision of services (electricity, water, sanitation and refuse) to communities in a
sustainable manner, to promote social and economic development; and to promote a safe and healthy environment.
The municipality's jurisdiction areas are:- Ladybrand, Hob House, Tweespruit, Thaba-Phatswa and Excelsior.
The operating results and state of affairs of the municipality are fully set out in the attached annual financial statements and
do not in our opinion require any further comment.
Net deficit of the municipality was R185,923,957 (2019: deficitR19,090,792).
2. Going concern
We draw attention to the fact that at 30 June 2020, the municipality had an accumulated surplus of R696,367,418 .
The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This
basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of
liabilities, contingent obligations and commitments will occur in the ordinary course of business.
3. Accounting Officer's interest in contracts
The Accounting Officer does not have an interest in contracts.
4. Accounting policies
The annual financial statements prepared in accordance with the South African Statements of Generally Accepted Accounting
Practice (GAAP), including any interpretations of such Statements issued by the Accounting Practices Board, and in
accordance with the prescribed Standards of Generally Recognised Accounting Practices (GRAP) issued by the Accounting
Standards Board as the prescribed framework by National Treasury.
5. Retirement benefit obligation
Management performed an actuarial valuation of the Employee Benefits of the employer's liability arising from the
postretirement healthcare subsidy ("PRHS") payable to current and retired employees.
The valuation is in line with the requirements of GRAP 25 and the municipality has determined the items required for disclosure
in terms of this standard.
6. Accounting Officer
The accounting officer of the municipality during the year and to the date of this report is as follows:
Name Nationality
Mr. T.P Masejane South African
7. Corporate governance
General
The accounting officer is committed to business integrity, transparency and professionalism in all its activities. As part of this
commitment, the accounting officer supports the highest standards of corporate governance and the ongoing development of
best practice.
Internal audit
The municipality has a fully functional Internal Audit Unit. This is in compliance with the Municipal Finance Management Act,
2003.
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Mantsopa Local Municipality
(Registration number FS196)
Annual Financial Statements for the year ended 30 June 2020
Accounting Officer's Report
8. Auditors
Auditor General of South Africa will continue in office for the next financial period.
9. Non-compliance with applicable legislation
In terms of section 65 (2)(e) of the Municipal Finance Act (No. 56 of 2003), all money owing by the municipality be paid within
30 days of receiving the relevant invoice or statement. Due to cash flow constraints, the municipality, could not settle all money
owing within the prescribed period.
In terms of section 126 (1)(a) of the Municipal Finance Act (No. 56 of 2003), the accounting officer of a municipality must
prepare the annual financial statements within 2 months after the end of the financial year. The municipality did not compy with
this requirement due to mScoa implementation and COVID related matters.
In terms of section 71 (1) of the Municipal Finance Act (No. 56 of 2003), the accounting officer of a municipality must by no
later than 10 working days after the end of each month submit to the mayor of the municipality and the relevant provincial
treasury a statement in the prescribed format on the state of the municipality's budget reflecting the following particulars for that
month and for the financial year up to the end of that month. During the financial year, the municipality did not comply with the
required legislation as reports were submitted late.
Mr. T.P Masejane
Accounting Officer
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Mantsopa Local Municipality
(Registration number FS196)
Annual Financial Statements for the year ended 30 June 2020
Statement of Financial Position as at 30 June 2020
Figures in Rand Note(s) 2020 2019
Restated*
Assets
Current Assets
Inventories 7 5,181,956 7,804,231
Other financial assets 5 6,324 6,256
Receivables from exchange transactions 8&11 58,771,158 95,628,800
Receivables from non-exchange transactions 9&11 4,054,279 18,665,294
VAT receivable 10 30,295,270 34,648,396
Cash and cash equivalents 12 2,516,570 42,502
100,825,557 156,795,479
Non-Current Assets
Investment property 3 63,655,336 71,825,304
Property, plant and equipment 4 932,726,932 983,545,480
Other financial assets 5 1,553,762 1,593,852
997,936,030 1,056,964,636
Total Assets 1,098,761,587 1,213,760,115
Liabilities
Current Liabilities
Other financial liabilities 14 1,840,245 1,509,404
Payables from exchange transactions 16 333,321,657 272,075,218
Consumer deposits 17 2,484,927 2,437,864
Employee benefit obligation 6 804,343 -
Unspent conditional grants and receipts 13 8,690,038 -
347,141,210 276,022,486
Non-Current Liabilities
Other financial liabilities 14 5,361,554 5,270,822
Employee benefit obligation 6 20,676,273 27,220,309
Provisions 15 29,215,132 22,955,118
55,252,959 55,446,249
Total Liabilities 402,394,169 331,468,735
Net Assets 696,367,418 882,291,380
Accumulated surplus 696,367,418 882,291,380
The accounting policies on pages 18 to 43 and the notes on pages 44 to 84 form an integral part of the annual financial
statements.
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Mantsopa Local Municipality
(Registration number FS196)
Annual Financial Statements for the year ended 30 June 2020
Statement of Financial Performance
Figures in Rand Note(s) 2020 2019
Restated*
Revenue
Revenue from exchange transactions
Service charges 19 112,918,237 107,511,943
Rental of facilities and equipment 20 1,267,920 1,393,318
Other income 23 1,437,369 1,067,954
Interest received - investment 24 22,889,746 31,709,501
Actuarial gains 6 8,567,061 5,693,000
Total revenue from exchange transactions 147,080,333 147,375,716
Revenue from non-exchange transactions
Taxation revenue
Property rates 25 20,176,912 14,610,586
Interest - Taxation revenue 22 1,974,879 2,932,443
Transfer revenue
Government grants & subsidies 26 112,101,962 143,676,252
Fines, Penalties and Forfeits 21 319,531 366,350
Total revenue from non-exchange transactions 134,573,284 161,585,631
Total revenue 18 281,653,617 308,961,347
Expenditure
Employee related costs 27 (101,355,229) (91,765,089)
Remuneration of councillors 28 (6,777,234) (6,688,499)
Depreciation and amortisation 29 (31,431,924) (32,692,587)
Reversal of impairments 30 (40,055,680) (311,176)
Finance costs 31 (23,252,941) (23,841,553)
Debt Impairment 32 (152,783,593) (79,690,489)
Bulk purchases 33 (49,546,251) (44,426,391)
Loss on disposal of assets and liabilities (1,079,805) (2,503,515)
Fair value adjustments (33,766) (60,590)
General Expenses 34 (61,261,151) (46,072,250)
Total expenditure (467,577,574) (328,052,139)
Deficit for the year (187,898,836) (22,023,235)
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Mantsopa Local Municipality
(Registration number FS196)
Annual Financial Statements for the year ended 30 June 2020
Statement of Changes in Net Assets
Accumulated Total net
Figures in Rand surplus assets
Opening balance as previously reported 899,675,923 899,675,923
Adjustments
Prior year adjustments 1,706,249 1,706,249
Balance at 01 July 2018 as restated* 901,382,172 901,382,172
Changes in net assets
Surplus for the year (19,090,792) (19,090,792)
Total changes (19,090,792) (19,090,792)
Opening balance as previously reported 858,456,801 858,456,801
Adjustments
Prior year adjustments 23,834,574 23,834,574
Balance at 01 July 2019 as restated* 882,291,375 882,291,375
Changes in net assets
Surplus for the year (185,923,957) (185,923,957)
Total changes (185,923,957) (185,923,957)
Balance at 30 June 2020 696,367,418 696,367,418
Note - Refer to note 43 for prior period corrections
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Mantsopa Local Municipality
(Registration number FS196)
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
Taxation 18,351,011 10,336,452
Municipal services 24,960,678 12,631,524
Grants 120,792,000 143,330,243
Interest income 22,889,746 31,709,501
186,993,435 198,007,720
Payments
Employee costs (105,305,086) (95,208,280)
Suppliers (43,018,933) (39,141,974)
Finance costs (23,252,941) (23,841,553)
(171,576,960) (158,191,807)
Net cash flows from operating activities 38 15,416,475 39,815,913
Cash flows from investing activities
Purchase of property, plant and equipment 4 (20,989,505) (58,941,199)
Proceeds from sale of property, plant and equipment 4 7,619,269 15,167,136
Proceeds from sale of financial assets 6,256 6,198
Net cash flows from investing activities (13,363,980) (43,767,865)
Cash flows from financing activities
Repayment of other financial liabilities 421,573 463,820
Net cash flows from financing activities 421,573 463,820
Net increase/(decrease) in cash and cash equivalents 2,474,068 (3,488,132)
Cash and cash equivalents at the beginning of the year 42,502 3,530,634
Cash and cash equivalents at the end of the year 12 2,516,570 42,502
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