NC081 Mier AFS 2012-13 audited

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MIER LOCAL MUNICIPALITY
ANNUAL FINANCIAL STATEMENTS
for the year ended 30 June 2013
Approval of annual financial statements
I am responsible for the preparation of these annual financial statements, which are set out on pages 9 to 91, in
terms of Section 126(1) of the Municipal Finance Management Act and which I have signed on behalf of the
Municipality.
I certify that the salaries, allowances and benefits of Councillors, loans made to Councillors, if any, and
payments made to Councillors for loss of office, if any, as disclosed in Note 27 of these annual financial
statements are within the upper limits of the framework envisaged in Section 219 of the Constitution, read with
the Remuneration of Public Officer Bearers Act and the Minister of Provincial and Local Government’s
determination in accordance with this Act.
__________________________________________________________________
Municipal Manager:
30 August 2013
MIER LOCAL MUNICIPALITY
INDEX TO THE ANNUAL FINANCIAL STATEMENTS
for the year ended 30 June 2013
Description Page
Report of the Chief Financial Officer 1
Statement of Financial Position 9
Statement of Financial Performance 10
Statement of Changes in Net Assets 11
Cash Flow Statement 12
Budget Statement 13
Accounting Policies 16
Notes to the Financial Statements 46
The following does not form part of the Annual Financial Statements:
Appendix A 95
Appendix B 96
Appendix C 99
Appendix D 100
Appendix E(1) 101
Appendix E(2) 102
Appendix E(3) 103
Appendix E(4) 104
Appendix E(5) 105
Appendix F 106
Appendix G 107
MIER LOCAL MUNICIPALITY
ANNUAL FINANCIAL STATEMENTS
for the year ended 30 June 2013
REPORT OF THE CHIEF FINANCIAL OFFICER
1 INTRODUCTION
It gives me great pleasure to present the Annual Financial Statements of Mier Local Municipality at 30 June 2013.
TheseAnnualFinancialStatementshavebeenpreparedinaccordancewithGenerallyRecognisedAccountingPractice(GRAP),issued
bytheAccountingStandardsBoard(ASB)inaccordancewithSection122(3)oftheMunicipalFinanceManagementAct,(ActNo56of
2003). The standards and pronouncements that form the GRAPReporting Framework for the2011/12 financial period is set outin
Directive 5 issued by the ASB on 11 March 2009.
TheStatementofFinancialPositionat30June2013indicatesanincreaseinNetAssets,andanincreaseinbothNon-currentLiabilities
and Current Liabilities.
Theincrease inNetAssetsisascribed primarilytotheincrease inAccumulated Surplusas aresult ofthesurplus generated onthe
operatingaccount. TheincreaseinNon-currentLiabilitiesisprimarilyasaresultoftheincreasesinRetirementBenefitLiabilitiesand
Long-service Benefits. TheincreaseinCurrentLiabilitiesisprimarilyasaresultoftheincreaseinCreditorsandUnspentConditional
Grants.
2 KEY FINANCIAL INDICATORS
Thefollowingindicatorsareself-explanatory. Thepercentagesofexpenditurecategoriesarewellwithinacceptablenormsandindicate
good governance of the funds of the municipality.
2.1 Financial Statement Ratios:
INDICATOR 2013 2012
Surplus / (Deficit) before Appropriations (8 278 604) (1 538 192)
Surplus / (Deficit) at the end of the Year 315 264 849 3 23 543 453
Expenditure Categories as a percentage of Total Expenses:
Employee Related Costs 17.66% 22.22%
Remuneration of Councillors 4.06% 4.92%
Depreciation and Amortisation 22.62% 27.87%
Impairment Losses 6.41% 10.44%
Repairs and Maintenance 0.28% 1.90%
Interest Paid 0.16% 0.19%
Contracted Services 0.87% 0.22%
General Expenses 25.98% 32.23%
Current Ratio:
Trade Creditors Days 274 204
Debtors from Exchange Transactions Days 38 36
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2 KEY FINANCIAL INDICATORS (continue)
2.2 Performance Indicators:
INDICATOR 2013 2012
Borrowing Management:
Capital Charges to Operating Expenditure 0.16% 0.43%
Capital Charges to Own Revenue 1.18% 2.23%
Borrowed Funding to Own Capital Expenditure 0.00% 0.00%
Borrowing to Total Capital Assets 0.03% 0.12%
Safety of Capital:
Gearing 0.03% 0.13%
Liquidity:
Current Ratio 0.63 0.29
Liquidity Ratio 0.21 0.00
Capital Expenditure Management:
Capital Expenditure on Infrastructure to Total Capital Expenditure 9.92% 14.17%
Capital Funding from Borrowings to Capital Grants, Subsidies & Donations 0.00% 0.00%
Revenue Management:
Current Debtors Collection Rate 17.00% 51.89%
Outstanding Debtors to Revenue 38.30% 12.75%
Creditors Management:
Creditors to Cash and Investments 169.08% 88737.25%
Financial Viability:
Debt Coverage 105.53 35.18
Outstanding Service Debtors to Revenue 130.90% 44.54%
Cost Coverage 0.16 0.00
3 OPERATING RESULTS
Details of the operating results per segmental classification of expenditure are included in Appendix "D".
DetailsoftheoperatingresultspersegmentalclassificationofexpenditureareincludedinAppendix"D",whilstoperationalresultsper
categoryofexpenditure,togetherwithanexplanationofsignificantvariancesofmorethan10%frombudget,areincludedinAppendix"E
(1)".
TheservicesofferedbyMierLocalMunicipalitycangenerallybeclassifiedasRatesandGeneral,EconomicandTradingServicesand
are discussed in more detail below:
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3 OPERATING RESULTS (continue)
The overall operating results for the year ended 30 June 2013 are as follows:
Actual Actual Percentage Budgeted Variance actual/
DETAILS 2012/13 2011/12 Variance 2012/13 budgeted
R R % R %
Income:
Opening surplus / (deficit) 323 543 453 320 103 928 1.07 - 100.00
Operating income for the year 32 214 227 30 257 257 6.47 38 186 000 ( 15.64)
355 757 680 350 361 184 1.54 38 186 000 831.64
Expenditure:
Operating expenditure for the year 40 492 831 31 795 449 27.35 26 733 000 51.47
Sundry transfers - (4 977 718) (100.00) - -
Closing surplus / (deficit) 315 264 849 323 543 453 ( 2.56) 11 453 000 2 652.68
355 757 680 350 361 184 1.54 38 186 000 831.64
- - -
3.1 Rates and General Services:
Rates and General Services are all types of services rendered by the municipality, excluding those listed below. The main income
sources are Assessment Rates and Sundry Fees levied.
Actual Actual Percentage Budgeted Variance actual/
DETAILS 2012/13 2011/12 Variance 2012/13 budgeted
R R % R %
Income 44 602 495 30 257 257 47.41 38 185 900 16.80
Expenditure 32 326 489 31 795 449 1.67 26 867 710 20.32
Surplus / (Deficit) 12 276 006 (1 538 192) (898.08) 11 318 190 8.46
Surplus / (Deficit) as % of total income 27.52% (5.08)% 29.64%
Variance from 2011/12 actual:
The47.41%increaseonlastyear'sactualrevenueisprimarilyasaresultoftheFloodDisasterGrantbeingincludedinrevenue. The
1.67% increase on last year's actual expenditure is primarily as a result of the Flood Disaster Grant expenditure.
Variance from 2012/13 budget:
The-16.80%decreaseonthereportingyearsbudgetisprimarilyasaresultofgrantsnotbudgetedfor,beingreceived. The-20.32%
decrease on last year's actual expenditure is primarily as a result of grants being spent, which were not budgeted for.
3.2 Waste Management Services:
Waste ManagementServices areservices renderedbythemunicipalityforthecollection,disposalandpurifyingofwaste(refuseand
sewerage). Income is mainly generated from the levying of fees and tariffs determined by the council.
Actual Actual Percentage Budgeted Variance actual/
DETAILS 2012/13 2011/12 Variance 2012/13 budgeted
R R % R %
Income 8 598 131 7 077 532 21.48 9 618 897 ( 10.61)
Expenditure 11 561 234 10 447 372 10.66 9 793 614 18.05
Surplus / (Deficit) (2 963 104) (3 369 841) (12.07) (174 717) 1 595.94
Surplus / (Deficit) as % of total income (34.46)% (47.61)% (1.82)%
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3 OPERATING RESULTS (continue)
3.3 Electricity Services:
The municipality does not provide any Electricity services as all are done by Eskom Ltd.
3.4 Water Services:
Water is pumped from boreholes and distributed to the consumers by the municipality.
Actual Actual Percentage Budgeted Variance actual/
DETAILS 2012/13 2011/12 Variance 2012/13 budgeted
R R % R %
Income 1 059 248 1 191 275 (11.08) 1 652 044 ( 35.88)
Expenditure 5 895 785 5 409 539 8.99 2 428 333 142.79
Surplus / (Deficit) (4 836 537) (4 218 264) 14.66 (776 289) 523.03
Surplus / (Deficit) as % of total income (456.60)% (354.10)% (46.99)%
4 FINANCING OF CAPITAL EXPENDITURE
TheexpenditureonAssetsduringtheyearamountedtoR5004093(2011/12:R9919910). FulldetailsofAssetsaredisclosedinNotes
8, 9, 10, N/A and Appendices "B, C and E (2)" to the Annual Financial Statements.
The capital expenditure of R5 004 093 was financed as follows:
Actual Actual Percentage Budgeted Variance actual/
DETAILS 2012/13 2011/12 Variance 2012/13 budgeted
R R % R %
Grants and Subsidies 5 004 093 9 919 910 (49.56) 11 318 190 ( 55.79)
5 004 093 9 919 910 (49.56) 11 318 190 ( 55.79)
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4 FINANCING OF CAPITAL EXPENDITURE (continue)
Source of funding as a percentage of Total Capital Expenditure:
DETAILS 2013 2012
Grants and Subsidies 100.00% 100.00%
100.00% 100.00%
CapitalAssetsarefundedtoagreatextentfromgrantsandsubsidiesasthemunicipalitydoesnothavethefinancialresourcestofinance
infrastructure capital expenditure from its own funds.
5 RECONCILIATION OF BUDGET TO ACTUAL
5.1 Operating Budget:
DETAILS 2013 2012
Variance per Category:
Budgeted surplus before appropriations 11 453 000 1 6 008 209
Revenue variances (5 971 773) (7 203 707)
Expenditure variances:
Employee Related Costs 1 85 284 399 856
Remuneration of Councilors 98 279 101 082
Collection Costs - -
Depreciation and Amortisation (9 159 451) (8 862 784)
Impairment Losses (656 315) (2 601 671)
Repairs and Maintenance (113 224) 242 413
Interest Paid (12 974) 333 840
Bulk Purchases - -
Contracted Services (134 877) ( 68 768)
Grants and Subsidies Paid - -
General Expenses 4 909 143 113 338
Loss on disposal of Property, Plant and Equipment (22 479) -
Actual surplus before appropriations 5 74 613 (1 538 192)
8 853 217 0
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5 RECONCILIATION OF BUDGET TO ACTUAL (continue)
DETAILS 2013 2012
Variance per Service Segment:
Budgeted surplus before appropriations 11 453 000 1 6 008 209
Executive and Council 3 55 278 (255 833)
Finance and Administration 7 004 798 (10 801 809)
Community and Social Services 4 61 987 -
Technical Services (6 864 247) (6 488 760)
Actual surplus before appropriations 12 410 816 (1 538 192)
20 689 420 -
DetailsoftheoperatingresultspersegmentalclassificationofexpenditureareincludedinAppendix"D",whilstoperationalresultsper
category of expenditure, together with a criptic explanation of significant variances of more than 10% from budget, are included in
Appendix "E (1)".
5.2 Capital Budget:
Actual Actual Variance actual Budgeted Variance actual/
DETAILS 2012/13 2011/12 2012/13 / 2011/12 2012/13 budgeted
R R R R R
Technical Services 5 004 093 9 919 910 (4 915 817) 11 318 190 (6 314 097)
5 004 093 9 919 910 (4 915 817) 11 318 190 (6 314 097)
DetailsoftheresultspersegmentalclassificationofcapitalexpenditureareincludedinAppendix"C",togetherwithacripticexplanation
of significant variances of more than 10% from budget, are included in Appendix "E (2)".
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6 ACCUMULATED SURPLUS
ThebalanceoftheAccumulatedSurplusasat30June2013amountedtoR315264849(30June2012:R323543453)andismadeup
as follows:
Accumulated Surplus 3 15 264 849
3 15 264 849
Refer to Note 19 and the Statement of Change in Net Assets for more detail.
7 LONG-TERM LIABILITIES
The outstanding amount of Long-term Liabilities as at 30 June 2013 was R111 116 (30 June 2012: R425 814).
LoanstotheamountofR0(2011/12:R0)wastakenupduringthefinancialyeartoenablethemunicipalitytofinancepartofitscapital
requirements for the year.
Refer to Note 16 and Appendix "A" for more detail.
8 NON-CURRENT PROVISIONS
Non-current Provisions amounted R15 965 632 as at 30 June 2013 (30 June 2012: R17 608 477) and is made up as follows:
Provision for Long-term Service 161 684
Provision for Rehabilitation of Land-fill Sites 1 5 803 948
1 5 965 632
Theseprovisionsaremadeinordertoenablethemunicipalitytobeinapositiontofulfillitsknownlegalobligationswhentheybecome
due and payable.
Refer to Note 17 for more detail.
9 CURRENT LIABILITIES
Current Liabilities amounted R23 622 234 as at 30 June 2013 (30 June 2012: R16 708 222) and is made up as follows:
Provisions Note 12 2 567 519
Payables Note 13 8 336 998
Unspent Conditional Grants and Receipts Note 15 1 0 980 549
Current Portion of Long-term Liabilities Note 16 898 199
2 2 923 335
CurrentLiabilitiesarethoseliabilitiesofthemunicipalitydueandpayableintheshort-term(lessthan12months). Thereisnoknown
reason as to why the municipality will not be able to meet its obligations.
Refer to the indicated Notes for more detail.
10 PROPERTY, PLANT AND EQUIPMENT
The net value of Property, Plant and Equipment was R337 224 773 as at 30 June 2013 (30 June 2012: R342 503 416).
Refer to Note 8 and Appendices "B, C and E (2)" for more detail.
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11 INTANGIBLE ASSETS
The net value of Intangible Assets were R365 110 as at 30 June 2013 (30 June 2012: R817 278).
IntangibleAssetsareassetswhichcannotphysicallybeidentifiedandverifiedandareinrespectofcomputersoftwareobtainedbythe
municipality in order to be able to fulfil its duties as far as service delivery is concerned.
Refer to Note 9 and Appendix "B" for more detail.
12 INVESTMENT PROPERTY
The net value of Investment Properties were R8 565 376 as at 30 June 2013 (30 June 2012: R6 938 432).
InvestmentPropertyispropertyheldtoearnrentalsorforcapitalappreciationorboth,ratherthanforuseintheproductionorsupplyof
goods or services or for administrative purposes; or sale in the ordinary course of operations.
Refer to Note 10 and Appendix "B" for more detail.
13 CURRENT ASSETS
Current Assets amounted R14 954 287 as at 30 June 2013 (30 June 2012: R4 810 458) and is made up as follows:
Inventories Note 2 716 616
Receivables from Exchange Transactions Note 3 399 383
Receivables from Non-exchange Transactions Note 4 5 476 895
VAT Receivable Note 5 3 430 501
Cash and Cash Equivalents Note 6 4 930 892
Operating Lease Assets Note 7 -
1 4 954 287
The increase in the amount for Current Assets is mainly due to the increased amount held in Bank and Cash Equivalents.
The substantial increase is due to the provision for consumption of metered services from the last reading date to 30 June 2008.
Council'sCreditControlPolicywillhavetobeappliedstrictlyandadheredtoinallcircumstancesinordertorecovermoniesduetothe
municipality. The non-collection of debt also has a negative impact on the municipality's cashflow.
Refer to the indicated Notes for more detail.
14 INTER-GOVERNMENTAL GRANTS
Themunicipalityisdependentonfinancialaidfromothergovernmentspherestofinanceitsannualcapitalprogramme. Operatinggrants
are utilised to finance indigent assistance and provision of free basic services.
Refer to Notes 15 and 21, and Appendix "F" for more detail.
15 EVENTS AFTER THE REPORTING DATE
Full details of all known events, if any, after the reporting date are disclosed in Note 49.
16 EXPRESSION OF APPRECIATION
We are grateful to the Mayor, Councillors, the Municipal Manager and Heads of Departments for the support extended during the
financial year. A special word of thanks to all staff in the Finance Department, for without their assistance these Annual Financial
Statements would not have been possible.
CHIEF FINANCIAL OFFICER
31 August 2013
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