ELIAS MOTSOALEDI LOCAL MUNICIPALITY ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 Elias motsoaledi local municipality Annual Financial Statements for the year ended 30 June 2010 General Information Legal form of entity Local municipality Mayor Mr. LM Seloane Councillors Mr. R Alberts Ms. TS Mahlangu Mr. PM Maroga Mr. EM Masemola Ms. AB Mahlangu Mr. PS Madilaba Mr. JP Kotze Mr. ST Madisa Mr. MM Maepa Mr. JJ Mahlangu Mr. MA Maleka Mr. MF Mahlangu Mr. PK Malemo Mr. AL Masile Ms. MG Mathabathe Mr. TK Mashegoane Ms. RS Matimatjatji Mr. CD Matsepe Mr. MP Modiga Mr. MP Mokgabudi Mr. LJ Mtshweni Mr. T Simelane Ms. HM Motau Ms. DD Makua Ms. WM Matemane Ms. DS Mamaila Ms. MG Phetla 1 Elias motsoaledi local municipality Annual Financial Statements for the year ended 30 June 2010 General Information Ms. MS Mashilo Mr. TP Fenyane Ms. TS Matsepe Ms. VP Madondo Mr. EK Pholototho Mr. CT Mahlanga Ms. PW Mashu Ms. NC Mathebe Mr. MM Chego Mr. L R Mogale Ms. SL Skosana Mr. LH Tshoma Mr. MJ Kabini Ms. MN Malatji Mr. KW Magaga Mr. KT Ramaube Ms. MK Tshoshane Ms. MS Tshoma Mr. SI Modiga Mr. GD Colett Mr. MP Malatsi Ms. M M Madihlaba Mr. NE Maepa Mr. MJ Mohlala Mr. SD Mabowa Mr. MJ Thokoane Mr. DL Tala Mr. MW Ramphisa Grading of local authority Medium capacity municipality Chief Finance Officer (CFO) Me. MN Rampedi Accounting Officer Mr LJ Kabini Business address Civic Centre Groblersdal 0470 Postal address PO Box 48 Groblersdal 0470 Bankers ABSA Bank Limited Auditors Auditor General 2 Elias motsoaledi local municipality Annual Financial Statements for the year ended 30 June 2010 Index The reports and statements set out below comprise the annual financial statements presented to the provincial legislature: Index Page Accounting Officer's Responsibilities and Approval 4 Accounting Officer's Report 5 Statement of Financial Position 6 Statement of Financial Performance 7 Statement of Changes in Net Assets 8 Cash Flow Statement 9 Accounting Policies 10 - 25 Notes to the Annual Financial Statements 26 - 49 Appendixes: Appendix B: Analysis of Property, Plant and Equipment 49 Appendix F: Disclosure of Grants and Subsidies in terms of the Municipal Finance 52 Management Act 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) 3 Elias motsoaledi local municipality Annual Financial Statements for the year ended 30 June 2010 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 have been prepared in accordance with Standards of Generally Recognised Accounting Practices (GRAP). 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 2011 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. Although the accounting officer is primarily responsible for the financial affairs of the municipality. The annual financial statements set out on pages 5 to 49, which have been prepared on the going concern basis, were approved by the accounting officer on 31 August 2010 and were signed on its behalf by: Mr LJ Kabini Municipal Manager 31 August 2010 4 Elias motsoaledi local municipality Annual Financial Statements for the year ended 30 June 2010 Accounting Officer's Report The accounting officersubmitshis report for the year ended 30 June 2010. 1. Review of activities Main business and operations Net surplus of the municipality was R75 173 507 (2009: deficitR19 894 223). 2. Going concern 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. Subsequent events The accounting officeris not aware of any matter or circumstance arising since the end of the financial year. 4. Accounting policies The annual financial statements prepared 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. Accounting Officer The accounting officer of the municipality during the year and to the date of this report is as follows: Name Mr LJ Kabini 6. Bankers The municipality banks primarily with ABSA Bank Limited. 7. Auditors The Auditor General will continue in office for the next financial period. 8. Public Private Partnership In accordance with the Public Private Partnership agreement, the Contractor shall open a separate account with a bank registered in the Republic of South Africa, for the purpose of administering and separate safekeeping of:  moneys deposited as excess surpluses;  any foreign exchange rate amounts;  any service credits; and  any penalties for later service commence mental text. 5 Elias motsoaledi local municipality Annual Financial Statements for the year ended 30 June 2010 Statement of Financial Position Figures in Rand Note(s) 2010 2009 Restated Assets Current Assets Inventories 5 1 671 786 1 104 583 Trade and other receivables from exchange transactions 6 446 101 999 429 279 336 VAT receivable 7 6 139 147 1 988 572 Consumer debtors 8 6 938 167 6 388 701 Cash and cash equivalents 9 50 737 002 62 792 741 511 588 101 501 553 933 Non-Current Assets Investment property 3 1 836 000 1 836 000 Property, plant and equipment 4 527 742 058 485 568 874 529 578 058 487 404 874 Total Assets 1 041 166 159 988 958 807 Liabilities Current Liabilities Trade and other payables from exchange transactions 12 16 628 465 9 627 426 Consumer deposits 13 2 805 377 2 378 206 Unspent conditional grants and receipts 11 693 298 7 091 415 Provisions - 1 578 280 Bank overdraft 9 - 22 417 967 20 127 140 43 093 294 Non-Current Liabilities Other financial liabilities 10 2 038 407 2 038 407 Total Liabilities 22 165 547 45 131 701 Net Assets 1 019 000 612 943 827 106 Net Assets Accumulated surplus 1 019 000 612 943 827 106 6 Elias motsoaledi local municipality Annual Financial Statements for the year ended 30 June 2010 Statement of Financial Performance Figures in Rand Note(s) 2010 2009 Restated Revenue Fines 658 290 946 969 Government grants & subsidies 17 141 587 665 84 335 939 Interest received - investment 24 6 558 629 8 836 035 Licences and permits 3 238 635 7 023 154 Other income 4 311 065 1 780 769 Property rates 15 10 735 965 6 066 574 Rental of facilities and equipment 1 383 717 600 578 Service charges 16 33 598 508 24 347 453 Total Revenue 202 072 474 133 937 471 Expenditure Bulk purchases 29 (20 606 485) (12 621 894) Debt impairment 23 (4 839 680) (2 462 570) Depreciation and amortisation 25 (19 443 904) (56 998 560) Finance costs 26 (9 579) (345 568) General Expenses 19 (24 797 391) (22 364 153) Grants and subsidies paid 28 (2 594 684) (427 970) Personnel 21 (37 946 074) (32 723 646) Remuneration of councillors 22 (11 456 657) (10 545 931) Repairs and maintenance (5 204 513) (15 341 402) Total Expenditure (126 898 967) (153 831 694) Surplus/(deficit) for the year 75 173 507 (19 894 223) 7 Elias motsoaledi local municipality Annual Financial Statements for the year ended 30 June 2010 Statement of Changes in Net Assets Accumulated Total net Figures in Rand surplus assets Opening balance as previously reported 906 262 279 906 262 279 Adjustments Prior year adjustments - refer to note 33 for more detail 57 459 050 57 459 050 Balance at 01 July 2009 as restated 963 721 329 963 721 329 Changes in net assets Surplus for the year (19 894 223) (19 894 223) Total changes (19 894 223) (19 894 223) Opening balance as previously reported 559 076 314 559 076 314 Adjustments Prior year adjustments 384 750 791 384 750 791 Balance at 01 July 2009 as restated 943 827 105 943 827 105 Changes in net assets Surplus for the year 75 173 507 75 173 507 Total changes 75 173 507 75 173 507 Balance at 30 June 2010 1 019 000 612 1 019 000 612 Note(s) 8 Elias motsoaledi local municipality Annual Financial Statements for the year ended 30 June 2010 Cash Flow Statement Figures in Rand Note(s) 2010 2009 Cash flows from operating activities Receipts Cash received from Consumers, Goverment and other sources of revenue 179 810 865 137 905 732 Interest income 6 558 629 8 836 035 186 369 494 146 741 767 Payments Cash paid to suppliers, employees and other related services (114 380 593) (89 687 451) Finance costs (9 579) (345 568) (114 390 172) (90 033 019) Net cash flows from operating activities 30 71 979 322 56 708 748 Cash flows from investing activities Purchase of property, plant and equipment 4 (61 617 092) (106 390 912) Cash flows from financing activities Repayment of other financial liabilities - (50 557) Net cash flows from financing activities - (50 557) Net increase/(decrease) in cash and cash equivalents 10 362 230 (49 732 721) Cash and cash equivalents at the beginning of the year 40 374 774 90 107 494 Cash and cash equivalents at the end of the year 9 50 737 004 40 374 773 9