KAI !GARIB LOCAL MUNICIPALITY (Demarcation code NC082) UNAUDITED ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Kai !Garib Local Municipality (Registration number NC082) Unaudited Annual Financial Statements for the year ended 30 June 2020 Index The reports and statements set out below comprise the unaudited annual financial statements presented to the provincial legislature: Page General Information 3 Members of the Municipal Council 4 Accounting Officer's Responsibilities and Approval 5 - 6 Accounting Officer's Report 7 - 9 Certification of Remuneration of Councillors 10 Statement of Financial Position as at 30 June 2020 11 Statement of Financial Performance for the year ended 30 June 2020 12 Statement of Changes in Net Assets for the year ended 30 June 2020 13 Accounting Policies 14 - 28 Notes to the Unaudited Annual Financial Statements 29 - 57 1 Kai !Garib Local Municipality (Registration number NC082) Unaudited Annual Financial Statements for the year ended 30 June 2020 Index Abbreviations ASB Accounting Standards Board CIGFARO Chartered Institute of Government Finance, Audit and Risk Officers CPI Consumer Price Index DORA Division of Revenue Act DWS Department of Water Affairs and Sanitation DBSA Development Bank of South Africa EPWP Expanded Public Works Programme FMG Finance Management Grant GRAP Generally Recognized Accounting Practice GLCCM General Landfill Closure Costing Model HDF Housing Development Fund IAS International Accounting Standards IPSAS International Public Sector Accounting Standards INEP Intergrated National Electrification Programme LG SETA Local Government Sector Education Training Programme LSA Long Service Awards MEC Member of the Executive Council ME's Municipal Entities MFMA Municipal Finance Management Act MIG Municipal Infrastructure Grant MLCCM Municipal Landfill Closure Costing Model mSCOA Municipal Standard Chart of Accounts MSIG Municipal Systems Improvement Grant PAYE Pay As You Earn PEMA Post-employment Medical Aid Subsidy Liability PPP's Public Private Partnerships SA GAAP South African Statements of Generally Accepted Accounting Practice SDL Skills Development Levy UIF Unemployment Insurance Fund VAT Value Added Taxation WCA Workers Compensation Administration Relevant Legislation Constitution of the Republic of South Africa (Act no 108 of 1996) 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) 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) 2 Kai !Garib Local Municipality (Registration number NC082) Unaudited Annual Financial Statements for the year ended 30 June 2020 General Information Legal form of entity South African Category B Municipality (Local Municipality) as defined by the Municipal Structures Act (Act no 117 of 1998) Nature of business and principal activities Kai !Garib Local Municipality is local municipality performing functions as set out in the Constitution (Act no 105 of 1996) Vision statement Creating an economically viable and fully developed Municipality, which enhances the standard of living of all the inhabitants/community of Kai !Garib through good governance, excellent service delivery and sustainable development Mision statement Provision of transparent, accountable and sustainable service delivery Demarcation code NC082 Grading of local authority Low capacity municipality Accounting Officer Dr. J. Mac Kay (Acting) Chief Finance Officer (CFO) Mrs. A.F. Beukes Registered office 164 11th Avenue Kakamas 8870 Postal address Private Bag X 6 Kakamas 8870 Bankers ABSA Bank Limited Standard Bank Limited Auditors Auditor General of South Africa Attorneys Matthews and Partners Inc Level of assurance These unaudited annual financial statements will be audited in compliance with the applicable requirements of the Municipal Finance Management Act, No. 56 of 2003. Preparer The unaudited annual financial statements were internally compiled by Wim Scheepers, the municipality's Budget and Reporting Manager Telephone number (054) 431 6300 Fax number (054) 431 6301 Email address [email protected] Website www.kaigarib.gov.za 3 Kai !Garib Local Municipality (Registration number NC082) Unaudited Annual Financial Statements for the year ended 30 June 2020 Members of the Municipal Council Mayor Cllr. M.M. Louw Speaker Cllr. D.W. Fienies Ward councillors Cllr. D. Jaar ANC Cllr. B.B. Kordom ANC Cllr. B.M. Bock ANC Cllr. P.A. Thomas ANC Cllr. M.A. Papier ANC Cllr. V.W. Sacco ANC Cllr. N.J. Snyers ANC Cllr. D.W. Fienies ANC Cllr. E.E. Frits ANC Cllr. W.D. Klim ANC Proportional members Cllr. C. Markgraaf DA Cllr. J.M. de Klerk DA Cllr. C.F.P. Bezuidenhoudt DA Cllr. C. Kruger DA Cllr. M.Y. April DA Cllr. E.K. Strauss DF Cllr. R. van Rooyen DF Cllr. C. April EFF Council committees Executive committee Chairperson: Cllr. M.M. Louw Members: Cllr. W.D. Klim Cllr. C. Markgraaf Socio-economic development committee Chairperson: Cllr. D.R. Jaar Members: Cllr. B.B. Kordom Cllr. M.A. Papier Cllr. C. April Cllr. C. Kruger Institutional development committee Chairperson: Cllr. V.W.W. Sacco Members: Cllr. B.M. Bock Cllr. N.J. Snyers Cllr. J.M. de Klerk Cllr. E.K. Strauss Infrastructure development committee Chairperson: Cllr. B.B. Kordom Members: Cllr. E.E. Fritz Cllr. P.A. Thomas Cllr. R. van Rooyen Cllr. C.F.P. Bezuidenhoudt Municipal public account committee Chairperson: Cllr. B.M. Bock Members: Cllr. V.W.W. Sacco Cllr. D.R. Jaar Cllr. E.K. Strauss Cllr. M.Y. April 4 Accounting Officer's Responsibilities and Approval The accounting officers are required by the Municipal Finance Management Act (Act 56 of 2003), to maintain adequate accounting records and are responsible for the content and integrity of the unaudited annual financial statements and related financial information included in this report. It is the responsibility of the accounting officers to ensure that the unaudited 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 unaudited annual financial statements and was given unrestricted access to all financial records and related data. The unaudited annual financial statements have been prepared in accordance with Standards of Generally Recognised Accounting Practice (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board. The unaudited annual financial statements are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. The accounting officers acknowledge that they are 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 officers 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 officers are 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 unaudited annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or deficit. The unaudited 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. The ability of the municipality to continue as a going concern is dependent on a number of factors. The most significant of these is that the accounting officer continue to procure funding for the ongoing operations for the municipality and that the municipality is very reliant on grants from National Treasury. Funding will be received from National Treasury as long as the municipality comply with all legislation requirements. The collection of outstanding consumer debtor accounts and effective service delivery is also a priority of the municipality. 5 The external auditors are responsible for independently reviewing and reporting on the municipality's unaudited annual financial statements. The unaudited annual financial statements have been examined by the municipality's external auditors and their report will be presented after the annual auditing process. The unaudited annual financial statements set out on pages 7 to 57, which have been prepared on the going concern basis, were approved by the accounting officer and were signed by him. Dr. J. Mac Kay (Acting) Municipal Manager (Accounting Officer) Kai !Garib Local Municipality 31 October 2020 6 Accounting Officer's Report The accounting officerssubmittheir report for the year ended 30 June 2020. 1. Review of activities Main business and operations The municipality is engaged in kai !garib local municipality is local municipality performing functions as set out in the constitution (act no 105 of 1996) and operates principally in South Africa and [state other countries]. The operating results and state of affairs of the municipality are fully set out in the attached unaudited annual financial statements and do not in our opinion require any further comment. 2. Going concern We draw attention to the fact that at 30 June 2020, the municipality had an accumulated surplus (deficit) of R 259,815,593 and that the municipality's total liabilities exceed its assets by R259,815,593. The unaudited 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. The ability of the municipality to continue as a going concern is dependent on a number of factors. The most significant of these is that the accounting officers continue to procure funding for the ongoing operations for the municipality and that the subordination agreement referred to in note XX of these unaudited annual financial statements will remain in force for so long as it takes to restore the solvency of the municipality. 3. Subsequent events The accounting officersare not aware of any matter or circumstance arising since the end of the financial year. 4. Accounting Officers' interest in contracts Describe. 5. Accounting policies The following International Financial Reporting Standards were applied prior to the commencement dates in the current year: Details to be input here... The impact on the results of the municipality in adopting the above policies is reflected in note - to the unaudited annual financial statements. The unaudited 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. 7 6. Accounting Officer The accounting officers of the municipality during the year and to the date of this report are as follows: Name Changes Dr. J. Mac Kay (Acting) Mr. I.G.A. de Waal Resigned 31 July 2020 7. Corporate governance General The accounting officer are 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. The municipality confirms and acknowledges its responsibility to total compliance with the Code of Corporate Practices and Conduct ("the Code") laid out in the King Report on Corporate Governance for South Africa 2002. The accounting officer discuss the responsibilities of management in this respect, at Board meetings and monitor the municipality's compliance with the code on a three monthly basis. The salient features of the municipality's adoption of the Code is outlined below: Audit committee The audit committee was established with effect from 1 July 2014. The chairperson of the audit committee is Mr. H.C. Ogu, who is an independent audit committee member. Other independent members of the audit committee are, Me. M.Venter and Me. A. Viljoen. Internal audit The municipality established an internal audit unit on 1 April 2014. Since the establishment of the internal audit unit ZF Mgcawu District Municipality assists the municipality with their internal audit functions as required by legislation. 8. Bankers The municipality's primary bank accounts are with ABSA Bank Limited and Standard Bank Limited and will continue to bank with them in the new financial year. 9. Auditors Auditor General of South Africa will continue in office for the next financial period. 10. Public Private Partnership The municipality did not enter into any Public Private Partnerships for the financial year under review, nor does it have any existing PPP's 11. 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. 8 12. Municipal jurisdiction Kai !Garib Municipality have the following surrounding towns under its jurisdiction:  Kakamas  Keimoes  Kenhardt  Alheit  Augrabies  Blaauwskop  Bloemsmond  Cillie  Currieskamp  Lennertsville  Lutzburg  Mactaggerscamp  Marchand  Riemvasmaak  Soverby  Vredesvallei  Eksteenskuil The unaudited annual financial statements set out on pages 7 to 57, which have been prepared on the going concern basis, were approved by the accounting officer on 31 October 2020 and were signed on its behalf by: Dr. J. Mac Kay (Acting) Municipal Manager (Accounting Officer) Kai !Garib Local Municipality 31 October 2020 9