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KHAl-MA MUNICIPALITY AUDITED FINANCIAL STATEMENTS 30 JUNE 2016 Index General Information 1 -2 Approval of the Financial Statements 3 Report of the Auditor General 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 - Statement of Financial Position 9 Statement of Comparison of Budget and Actual Amounts - Statement of Financial Performance 10 Statement of Comparison of Budget and Actual Amounts - Cash Flow Statement 11 Accounting Policies 12 - 48 Notes to the Financial Statements 48 - 89 APPENDICES A Schedule of External Loans 90 B Segmental Statement of Financial Performance - GFS Classifications 91 C Segmental Statement of Financial Performance - Municipal Votes 92 D Segmental Analysis of Property, Plant and Equipment - GFS Classifications 93 E Disclosure of Grants and Subsidies In Terms of Section 123 of MFMA, 56 of 2003 94 F Appropriation Statement 95 - 100 KHAl-MA MUNICIPALITY FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 GENERAL INFORMATION NATURE OF BUSINESS Khai-Ma Municipality is a local municipality performing the functions as set out in the Constitution. (Act no 105 of 1996) COUNTRY OF ORIGIN AND LEGAL FORM South African Category B Municipality (Local Municipality) as defined by the Municipal Structures Act. (Act no 117 of 1998) JURISDICTION The Khai-Ma Municipality includes the areas of Pofadder, Aggeneys, Pella, Witbank and Onseepkans. MUNICIPAL MANAGER OJ Isaacs CHIEF FINANCIAL OFFICER PJ van der Merwe REGISTERED OFFICE P.O. Box 108 Pofadder 8890 AUDITORS The Auditor-General Private Bag X5013 Kimberley 8300 PRINCIPLE BANKERS The Standard Bank of S.A. Ltd ATTORNEYS Van der Merwe/Miller Ing. Page 1 RELEVANT LEGISLATION Municipal Finance Management Act (Act no 56 of 2003) Division of Revenue Act The Income Tax Act Value Added Tax Act Municipal Structures Act (Act no 117 of 1998) Municipal Systems Act (Act no 32 of 2000) Municipal Planning and Performance Management Regulations Water Services Act (Act no 108 of 1997) Housing Act (Act no 107 of 1997) Municipal Property Rates Act (Act no 6 of 2004) Electricity Act (Act no 41 of 1987) Skills Development Levies Act (Act no 9 of 1999) Employment Equity Act (Act no 55 of 1998) Unemployment Insurance Act (Act no 30 of 1966) Basic Conditions of Employment Act (Act no 75 of 1997) Supply Chain Management Regulations, 2005 Collective Agreements Infrastructure Grants SALBC Leave Regulations Municipal Budget and Reporting Regulations MEMBERS OF THE COUNCIL WARD COUNCILLOR 1 AJ Josop (Mayor) (resigned 09/08/2016) 1 A Rooi (appointed 19/08/2016) 2 HJ Raman (resigned 09/08/2016) 2 E Cloete (appointed 10/08/2016) 3 PA van Heerden (elected Mayor 19/08/2016) 4 ST Sasson 4 S Quincy (appointed 19/08/2016) Proportional LH van Rooi (resigned 29/01/2016) Proportional S Brandt (appointed 19/08/2016) Proportional SM Magerman Proportional L van Wyk (appointed 19/08/2016) Proportional S April Page 2 KHAl-MA MUNICIPALITY APPROVAL OF FINANCIAL STATEMENTS I am responsible for the preparation of these annual financial statements year ended 30 June 2016, which are set out on pages 5 to 89 in terms of Section 126 (1) of the Municipal Finance Management Act and which I have signed on behalf of the Municipality. The annual financial statements have been prepared in accordance with GRAP. I acknowledge that I am ultimately responsible for the system of internal financial control and that the system of internal control provides reasonable assurance that the financial records can be relied on. I have reviewed the Municipality's cash flow forecast for the year to 30 June 2016 and am satisfied that the Municipality can continue in operational existence for the foreseeable future. The external auditors are responsible for independently reviewing and reporting on the Municipality's financial statements. I certify that the remuneration of Councillors and in-kind benefits are within the upper limits of the framework envisaged in Section 219 of the Constitution, read with the Remuneration of Public 9,!f~ers Act and the Minister of Provincial and Local Government's ".'_•c7 daoce Act d~/tion with this OJ Isaacs Date Municipal Manager Page 3 KHAl-MA MUNICIPALITY STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2016 Notes 2016 2015 R R NET ASSETS AND LIABILITIES Net Assets 86 914 307 91744097 Housing Development Fund 2 16 155 16 155 Revaluation Reserve 2 29 835 480 29 969 903 Accumulated Surplus/(Deficit) 57 062 672 61758039 Non-Current Liabilities 9 583 300 8 177 586 Long-term Liabilities 3 - - Non-current Provisions 4 4 090 652 3 341 830 Non-current Employee Benefits 5 5 492 649 4 835 757 Current Liabilities 23 679 148 18167 803 Consumer Deposits 6 95 542 86 586 Provisions 4 1 106 050 - Current Employee Benefits 7 1 647 802 1 335 685 Payables from exchange transactions 8 16 552 274 12 629 453 Unspent Conditional Government Grants and Receipts 9 4 170 767 4 008 038 Operating Lease Liability 18 106 713 97 498 Current Portion of Long-term Liabilities 3 - 10 544 Total Net Assets and Liabilities 120 176 755 118 089 486 ASSETS Non-Current Assets 113 898 512 110 827 722 Property, Plant and Equipment 12 112 274 356 109 143 165 Investment Property 13 1 519 196 1524888 Intangible Assets 14 104 960 159 669 Current Assets 6 278 243 7 261 764 Inventory 15 456 198 572 546 Receivables from exchange transactions 16 1 445 037 1 738 878 Receivables from non-exchange transactions 17 517 868 1948777 Taxes 10.3 2 328 598 2 211 192 Cash and Cash Equivalents 19.1 1 530 543 790 370 Total Assets 120 176 755 118 089 486 Page 5 KHAl-MA MUNICIPALITY STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2016 Notes 2016 2015 R R REVENUE Revenue from Non-exchange Transactions 27 850 874 39 610 398 Taxation Revenue 3 203 758 3 000 272 Property Rates 20 I 3 203 758 I I 3 000 272 I Transfer Revenue 24 050 671 35 267 743 Government Grants and Subsidies -Capital 21 I 6 004 193 ~ 15 571 249 [ Government Grants and Subsidies -Operating 21 18 046 478 19 696 494 Other Revenue 596 445 1 342 383 Fines 23 755 2 800 Actuarial Gains 5 14 584 652 251 Other 25 558105 687 332 Revenue from Exchange Transactions 18 619 975 15 577 996 Service Charges 22 16 157 230 13 866 379 Rental of Facilities and Equipment 141 404 303 786 Interest Earned - external investments 23 312 840 182 655 Interest Earned -outstanding receivables 24 1 594 138 857 968 Licences and Permits 34 911 22 461 Income for Agency Services 193 249 163 672 Other Income 25 186 202 181 074 Total Revenue 46 470 849 55 188 393 EXPENDITURE Employee related costs 26 (12 613 646) (11 769 056) Remuneration of Councillors 27 (2 041 639) (2 063 376) Debt Impairment 28 (7 695 564) (7 336 829) Depreciation and Amortisation 29 (3 014 179) (2 524 200) Actuarial Losses 5 (147 852) Finance Costs 30 (1 353 581) (1 268 212) Bulk Purchases 31 (10 133 215) (8 998 924) Contracted Services (20 470) (278 948) Grants and Subsidies Paid (507 569) (359 400) General Expenses 32 (13 762 060) (9 527 062) Total Expenditure (51 289 775) (44126 006) Operating Surplus for the Year (4 818 926) 11 062 387 Gains/(Loss) on Sale of Assets 33 (10 864) 92 521 (Impairment loss)/Reversal of impairment loss 34 (900) NET SURPLUS/(DEFICIT) FOR THE YEAR (4 829 790) 11154 009 Page 6 KHAl-MA MUNICIPALITY STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED 30 JUNE 2016 Housing Accumulated Development Revaluation Surplus/ Fund Reserve (Deficil) Total R R R R Balance at 1 July 2014 16155 30 195 402 50 464 968 80 676 525 Correction of Error -Note 35.5 (86436) (86 436) Restated balance 16155 30 195 402 50 378 532 80 590 089 Net Surplus/(Deficit) for the year 11154 009 11154009 Net Surplus/(Deficit) previously reported 11355988 11355988 Effects of Correction of Errors -Note 35.6 (201 980) (201 980) Offsetting of depreciation (225 499) 225 499 Restated balance at 30 June 2015 16155 29 969 903 61758039 91 744 097 Net Surplus/(Deficit) for the year (4 829 790) (4 829 790) Offsetting of depreciation (134 423) 134 423 Balance at 30 June 2016 16155 29 835 480 57 062 672 86 914 307 Page 7 KHAl-MA MUNICIPALITY CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2016 2016 2015 Notes R R CASH FLOW FROM OPERATING ACTIVITIES Cash receipts Taxation 4 207 616 1 561 320 Service Charges 10 776 697 8 958 521 Government -Operating 15025401 14 384 875 Government -Capital 9 188 000 15 571 249 Interest 312 840 182 655 Other Revenue 1 146 841 1 232 353 Cash payments Employee costs (14 257 151) (13 261 172) Suppliers (20 501 556) (17 456 608) Finance costs (626 420) (563 119) Net Cash from Operating Activities 36 5 272 269 10 610 073 CASH FLOW FROM INVESTING ACTIVITIES Purchase of Property, Plant and Equipment (4 511 730) (17 619 402) Purchase of Intangible Assets (18 780) (6 240) Net Cash from Investing Activities (4 530 510) (17 625 642) CASH FLOW FROM FINANCING ACTIVITIES Borrowing - Long term/Refinancing Repayment of Borrowing (10 544) (23 450) lncrease/(Decrease) in Consumer Deposits 8 956 9 176 Net Cash from Financing Activities (1 587) (14 274) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 740 172 (7 029 843) Cash and Cash Equivalents at the beginning of the year 790 370 7 820 213 Cash and Cash Equivalents at the end of the year 37 1 530 543 790 370 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 740 173 (7 029 843) Page 8 KHAl·MA MUNICIPALITY STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2016 Actual Final Outcome as Original Budget Adjustment Shifting of Actual 'lo of Final Notes Budget Adjustments Budget Funds Virement Final Budget Outcome Budget (i.t.o. s28 and (i.t.o. Council s31 of the (i.t.o. s31 of approved by· MFMA) theMFMA) law) 2016 R R R R R R R 'lo ASSETS Current Assets Cash 1 367 253 (617 870) 749 382 749 382 44 009 -94.13% Call Investment Deposits 400 000 400 000 400 000 1486534 271.63% Consumer Debtors 5 928 680 (4 633 445) 1295235 1295235 1602923 23.76% Other Debtors 688 342 3 621 043 4 309 385 4 309 385 2 688 580 -37.61% Current Portion of long-term receivables Inventory 1 294 767 (1265770) 28 998 28998 456198 1473.22% Total Current Assets 39.2.1 9 679 042 (2 896041) 6 783 000 6 783 000 6 278 243 -7.44% Non-Current Assets Long-term receivables Investments Investment Property 306 230 1 188 658 1494888 1494888 1519196 1.63% Investment in Associates Property, Plant and Equipment 115 575 362 (1567500) 114 007 862 114 007 862 112 274 356 ·1.52% Agricultural Assets Biological Assets Intangible Assets 225 327 (65 658) 159 669 159 669 104960 -34.26% Other Non-Current Assets Total Non-Current Assets 39.2.2 116 106 919 (444 500) 115 662 419 115662419 113 898 512 ·1.53% TOTAL ASSETS 125 785 961 (3 340 541) 122 445 41g 122445419 120 176 755 ·1.85% LIABILITIES Current Liabilities Bank Overdraft Borrowing Consumer Deposits 112 250 (25 664) 86 586 86 586 95 542 10.34% Trade and Other Payables 8 143 057 2 040 964 10 184 021 10 184 021 20 829 753 104.53% Provisions 2 430 964 (1200681) 1230284 1230284 2 753 852 123.84% Total Current Liabilities 39.2.3 10 686 272 814619 11500891 11500891 23 679 148 105.89% Non-Current Liabilities Borrowing Provisions 9 537 503 1128180 10 665 683 10 665 683 9 583 300 ·10.15% Total Non-Current Liabilities 39.2.4 9 537 503 1128180 10 665 683 10 665 683 9 583 300 -10.15% TOTAL LIABILITIES 20 223 775 1 942 799 22 166 575 22 166 575 33 262 449 50.06% = NET ASSETS Accumulated Surplus/(Deficit) 75 846 705 (5 305 880) 70 540 825 70 540 825 57 062 672 -19.11% Reserves 29 715 481 22 539 29 738 020 29 738 020 29 851 635 0.38% Minorities' Interests TOTAL NET ASSETS 39.2.5 105 562 186 (5 283 341) 100 278 845 100 278 845 86 914 307 -13.33% Page9