KZN435 Umzimkhulu AFS _2018-19 audited

2.2 MB·Zulu

Umzimkhulu Local Municipality
Annual Financial Statements
For the year ended 30 June 2019
Umzimkhulu Local Municipality
(Registration number KZN435)
Annual Financial Statements for the year ended 30 June 2019
General Information
Legal form of entity Local 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 public services to communities in a sustainable
manner, to promote social and economic development and to promote
a safe and healthy environment
Legislation governing the municipality's operations Constitution of the Republic of South Africa (Act 108 of 1998) Local
Government: Municipality Finance Management Act (Act no.56 of
2003)
Local Government: Municipal Systems Act (Act 32 of 2000)
Local Goverment: Municipal Structures Act (Act 117 of 1998)
Municipal Property Rates Act (Act no 6 of 2004)
Division of Revenue Act (Act 1 of 2007)
Mayoral Committee
Mayor Cllr M B Mpabanga
Deputy Mayor Cllr S Nkala
Speaker Vacant
Chief Whip Cllr X Tshazi
Members of the Executive Committee Cllr J Msiya
Members of the Executive Committee Cllr T Machi
Members of the Executive Committee Cllr B Lukakayi
Members of the Executive Committee Cllr B Z Magaqa
Members of the Executive Committee Vacant
Members of the Executive Committee Vacant
Accounting Officer Mr Z.S Sikhosana
Chief Finance Officer (CFO) Mrs T.J Ngcemu
Grading of local authority 3
Attorneys Matthew Francis
Bankers First National Bank
Auditors Auditor-General of South Africa
Registered office and business address 169 Main Street
Umzimkhulu
3297
Postal address P O Box 53
Umzimkhulu
3297
Telephone number 039 259 5000
Fax number 039 259 0427
Email address [email protected]
1
Umzimkhulu Local Municipality
(Registration number KZN435)
Annual Financial Statements for the year ended 30 June 2019
Index
The reports and statements set out below comprise the annual financial statements presented to the provincial legislature:
Page
Approval of Annual Financial Statements 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 8 - 10
Summary of Significant Accounting Policies 11 - 35
Notes to the Annual Financial Statements 36 - 72
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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Umzimkhulu Local Municipality
(Registration number KZN435)
Annual Financial Statements for the year ended 30 June 2019
Approval of the Annual Financial Statements
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
statements and related financial information included in this report. It is my responsibility, as the Accounting Officer to ensure
that these financial statements fairly present the state of the 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 annual financial statements were prepared in accordance with Standards of Generally Recognised Accounting Practice
(GRAP) as well as relevant interpretations, guidelines and directives issued by the Accounting Standards Board. The annual
financial statements are based upon appropriate accounting policies consistently applied and supported by reasonable and
prudent judgements and estimates.
I acknowledge that Iam 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 me to meet these responsibilities, I
have set 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 annual annual financial statements are prepared on the basis that the municipality is a going concern and that the
Umzimkhulu Municipality has neither the intention nor the need to liquidate or curtail materially the scale of the municipality.
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 annual financial statements set out on pages 4 to 72, which have been prepared on the going concern basis, were
approved by the Accounting Officer on 31 August 2019
Mr Z S Sikhosana
Accounting Officer
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Umzimkhulu Local Municipality
(Registration number KZN435)
Annual Financial Statements for the year ended 30 June 2019
Statement of Financial Position as at 30 June 2019
Figures in Rands Note(s) 2019 2018
Restated*
Assets
Current Assets
Cash and cash equivalents 2 182,834,446 206,384,337
Receivables from exchange transactions 3 1,883,197 2,031,912
Receivables from non-exchange transactions 4 3,126,776 3,280,072
VAT receivable 5 3,491,482 -
191,335,901 211,696,321
Non-Current Assets
Investment property 6 31,139,309 31,194,596
Property, plant and equipment 7 435,001,776 413,230,166
Intangible assets 8 844,142 1,105,362
Heritage assets 9 255,000 255,000
467,240,227 445,785,124
Total Assets 658,576,128 657,481,445
Liabilities
Current Liabilities
Payables from exchange transactions 10 20,413,495 14,534,529
Unspent conditional grants and receipts 11 18,229,751 19,250,259
Unspent Agents funds 12 - 22,676,710
VAT Payable 13 - 1,175,775
Short-term Employee benefits obligation 196,077 -
38,839,323 57,637,273
Non-Current Liabilities
Employee benefits obligation 14 2,136,907 2,207,227
Provisions 15 4,202,863 3,021,121
6,339,770 5,228,348
Total Liabilities 45,179,093 62,865,621
Net Assets 613,397,035 594,615,824
Housing Development Fund 16 23,586,445 21,119,440
Accumulated Surplus 17 589,810,590 573,496,384
Total Net Assets 613,397,035 594,615,824
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Umzimkhulu Local Municipality
(Registration number KZN435)
Annual Financial Statements for the year ended 30 June 2019
Statement of Financial Performance
Figures in Rands Note(s) 2019 2018
Restated*
Revenue
Revenue from exchange transactions
Interest received- trading 395,572 279,630
Interest received - investment 18 14,016,481 13,233,980
Rental of facilities and equipment 19 1,268,036 1,288,801
Service charges 20 2,810,944 2,711,293
Other income 21 803,244 1,304,708
Agency services 22 592,485 571,356
Licences and permits 67,350 -
Total revenue from exchange transactions 19,954,112 19,389,768
Revenue from non-exchange transactions
Property rates 23 7,301,201 8,767,163
Transfer revenue
Government grants and subsidies 24 227,625,422 210,841,337
Public contributions and donations 26,087 4,348
Fines, Penalties and Forfeits 841,705 694,958
Learners and licences 656,584 546,938
Total revenue from non-exchange transactions 236,450,999 220,854,744
Total revenue 25 256,405,111 240,244,512
Expenditure
Employee related costs 26 (90,975,241) (80,692,074)
Remuneration of councillors 27 (13,997,427) (14,527,608)
Debt Impairment 28 (3,238,647) (3,558,153)
Depreciation and amortisation 29 (46,667,957) (46,689,626)
Finance costs 30 (1,699,458) (1,107,054)
General expenses 31 (47,477,379) (39,238,388)
Lease rentals on operating lease (392,057) (383,765)
Contracted services 32 (36,218,292) (30,895,780)
Transfers and subsidies (238,500) (411,475)
Total expenditure (240,904,958) (217,503,923)
Surplus for the year from continuing operations 15,500,153 22,740,589
Gain on provisions 814,053 275,704
Surplus for the year 16,314,206 23,016,293
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Umzimkhulu Local Municipality
(Registration number KZN435)
Annual Financial Statements for the year ended 30 June 2019
Statement of Changes in Net Assets
Housing Accumulated Total net
Development Surplus assets
Figures in Rands Fund
Opening balance as previously reported 19,215,795 546,914,925 566,130,720
Adjustments
Prior year adjustments - 3,901,976 3,901,976
Balance at 01 July 2017 as restated* 19,215,795 550,816,901 570,032,696
Changes in net assets
Interest on Housing Development Fund 1,903,645 - 1,903,645
Net income (losses) recognised directly in net assets 1,903,645 - 1,903,645
Surplus for the year - 23,422,981 23,422,981
Total recognised income and expenses for the year 1,903,645 23,422,981 25,326,626
Total changes 1,903,645 23,422,981 25,326,626
Opening balance as previously reported 21,119,440 574,168,060 595,287,500
Adjustments
Correction of prior period errors - (671,676) (671,676)
Restated* Balance at 01 July 2018 as restated* 21,119,440 573,496,384 594,615,824
Changes in net assets
Surplus for the year - 16,314,206 16,314,206
Interest on Housing Development Fund 2,467,005 - 2,467,005
Total changes 2,467,005 16,314,206 18,781,211
Balance at 30 June 2019 23,586,445 589,810,590 613,397,035
Note(s) 16
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Umzimkhulu Local Municipality
(Registration number KZN435)
Annual Financial Statements for the year ended 30 June 2019
Cash Flow Statement
Figures in Rands Note(s) 2019 2018
Restated*
Cash flows from operating activities
Receipts
Receipts from ratepayers and other services 15,233,879 15,256,998
Government Grants and subsidies 226,604,914 211,057,664
Interest income 7,829,298 13,233,980
249,668,091 239,548,642
Payments
Employee costs (104,550,080) (95,832,422)
Suppliers and other payments (83,080,346) (70,633,637)
(187,630,426) (166,466,059)
Net cash flows from operating activities 34 62,037,665 73,082,583
Cash flows from investing activities
Purchase of property, plant and equipment 7 (64,336,506) (42,343,733)
Purchase of other intangible assets 8 (394,840) (803,745)
Sale of asset 1,000,000 -
Net cash flows from investing activities (63,731,346) (43,147,478)
Cash flows from financing activities
Electrification Receipts 15,000,000 19,000,000
Housing development and electrification fund proceeds paid (36,856,210) (18,048,620)
Net cash flows from financing activities (21,856,210) 951,380
Net increase/(decrease) in cash and cash equivalents (23,549,891) 30,886,485
Cash and cash equivalents at the beginning of the year 206,384,337 175,497,852
Cash and cash equivalents at the end of the year 2 182,834,446 206,384,337
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Umzimkhulu Local Municipality
(Registration number KZN435)
Annual Financial Statements for the year ended 30 June 2019
Statement of Comparison of Budget and Actual Amounts
Figures in Rands
Original Budget Final Shifting of Virement Final budget Actual Unauthorised Variance Actual Actual
Approved adjustments adjustments funds (i.t.o. (i.t.o. council outcome expenditure outcome outcome
Budget (i.t.o. s28 and budget s31 of the approved as % of as % of
s31 of the MFMA) policy) final original
MFMA) budget budget
2019
Financial Performance
Property rates 9,797,634 (2,075,708) 7,721,926 - 7,721,926 7,301,201 (420,725) 95 % 75 %
Service charges- refuse 2,915,327 (61,715) 2,853,612 - 2,853,612 2,810,944 (42,668) 99 % 96 %
Rental of facilities and 592,146 (48,146) 544,000 - 544,000 1,268,036 724,036 233 % 214 %
equipment
Interest earned-external 10,496,458 4,447,417 14,943,875 - 14,943,875 14,016,481 (927,394) 94 % 134 %
investement
Interest earned- 308,000 40,000 348,000 - 348,000 395,572 47,572 114 % 128 %
outstanding debtors
Fines, penulties, and 295,000 113,000 408,000 - 408,000 841,705 433,705 206 % 285 %
fofeit
Licences and permirts 1,127,000 (1,077,000) 50,000 - 50,000 67,350 17,350 135 % 6 %
Agency services - 1,200,000 1,200,000 - 1,200,000 592,485 (607,515) 49 % DIV/0 %
Transfers and subsidies 174,931,002 7,000 174,938,002 - 174,938,002 174,923,000 (15,002) 100 % 100 %
Other revenue 1,664,628 807,620 2,472,248 - 2,472,248 2,625,915 153,667 106 % 158 %
Total revenue 202,127,195 3,352,468 205,479,663 - 205,479,663 204,842,689 (636,974) 100 % 101 %
(excluding capital
transfers and
contributions)
Employee related costs (90,961,335) (5,004,886) (95,966,221) - - (95,966,221) (90,975,241) - 4,990,980 95 % 100 %
Remuneration of (15,364,828) 457,202 (14,907,626) - - (14,907,626) (13,997,427) - 910,199 94 % 91 %
councillors
Debt impairment (3,800,000) - (3,800,000) (3,800,000) (3,238,647) - 561,353 85 % 85 %
Depreciation and asset (50,637,824) (1,683,645) (52,321,469) (52,321,469) (46,667,957) - 5,653,512 89 % 92 %
impairment
Other materials (5,490,000) 790,000 (4,700,000) - (103,874) (4,803,874) (1,684,150) - 3,119,724 35 % 31 %
Contracted services (50,908,700) 2,319,442 (48,589,258) - 2,520,722 (46,068,536) (32,203,311) - 13,865,225 70 % 63 %
Transfers and subsidies (1,550,000) 5,000,000 3,450,000 - (195,000) 3,255,000 (238,500) - (3,493,500) (7)% 15 %
Other expenditure (39,878,900) (8,622,121) (48,501,021) - (2,221,845) (50,722,866) (48,327,610) - 2,395,256 95 % 121 %
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Umzimkhulu Local Municipality
(Registration number KZN435)
Annual Financial Statements for the year ended 30 June 2019
Statement of Comparison of Budget and Actual Amounts
Figures in Rands
Original Budget Final Shifting of Virement Final budget Actual Unauthorised Variance Actual Actual
budget adjustments adjustments funds (i.t.o. (i.t.o. council outcome expenditure outcome outcome
(i.t.o. s28 and budget s31 of the approved as % of as % of
s31 of the MFMA) policy) final original
MFMA) budget budget
Total expenditure (258,591,587) (6,744,008) (265,335,595) - 3 (265,335,592) (237,332,843) - 28,002,749 89 % 92 %
Surplus/(Deficit) (56,464,392) (3,391,540) (59,855,932) - (59,855,929) (32,490,154) 27,365,775 54 % 58 %
Transfers and subsidies- 50,386,000 500,000 50,886,000 - 50,886,000 33,452,662 (17,433,338) 66 % 66 %
capital
Surplus (Deficit) after (6,078,392) (2,891,540) (8,969,932) - (8,969,929) 962,508 9,932,437 (11)% (16)%
capital transfers and
contributions
Surplus/(Deficit) for the (6,078,392) (2,891,540) (8,969,932) - (8,969,929) 962,508 9,932,437 (11)% (16)%
year
Capital expenditure and funds sources
Total capital expenditure 91,750,007 3,789,102 95,539,109 - 95,539,109 68,770,618 (26,768,491) 72 % 75 %
Funded by:
National government 42,536,000 - 42,536,000 - 42,536,000 33,098,069 (9,437,931) 78 % 78 %
Provincial government 17,974,006 (9,624,006) 8,350,000 - 8,350,000 354,593 (7,995,407) 4 % 2 %
Internally generated - 44,653,109 44,653,109 - 44,653,109 35,317,956 (9,335,153) 79 % DIV/0 %
funds
Total Capital funding 60,510,006 35,029,103 95,539,109 - 95,539,109 68,770,618 (26,768,491) 72 % 114 %
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