CHRIS HANI DISTRICT MUNICIPALITY Financial statements for the year ended 30 June 2016 CHRIS HANI DISTRICT MUNICIPALITY Financial Statements for the year ended 30 June 2016 General Information Nature of business and principal activities Chris Hani District Municipality is a South African Category C Municipality (District Municipality) as defined by the Municipal Structures Act. (Act no 117 of 1998) The municipality's operations are governed by: - Municipal Finance Management act 56 of 2003 - Municipal Structure Act 117 of 1998 - Municipal Systems Act 32 of 2000 and various other acts and regulations Mayoral committee Executive Mayor M.C. Koyo Portfolio Heads N.G. Xoseni: Speaker L. Nkwentsha - Gunuza : Chief Whip W.T. Bikwana: Finance N.G. Magwashu: Health and Community Services S.D. Plata : Technical Services Z.R. Shweni : Integrated Planning and Econimic Development L.E. Noqha : SPU & HIV & AIDS Co-Ordinating Committee M.R. Xuma : Corporate Services Councillors V.A. Bokuva N. Goniwe M. Jentile L. Jiyose N. Makanda N. Nyukwana K. Vimbayo M. Bennett M.N. Bula Z.C. Deliwe S.R.Dyanti F. Erasmus W. Gela D. Kalolo T. Kulashe S.Liwani K. Mdleleni Z. Madyolo P.P. Mandile S. Mbolo A.Z. Mdwayingana S. Myataza N.S. Ndlebe H. Nobongoza N.P. Nquma S. Ntakana N. Klaas N. Radzilani N. Roskruge R.W. Venske LE. Gubhula N. Matiwane S. Twani 1 CHRIS HANI DISTRICT MUNICIPALITY Financial Statements for the year ended 30 June 2016 General Information Grading of local authority Grade 5 Accounting Officer M. A. Mene Registered office 15 Bells Road Queenstown 5320 Bankers First National Bank Limited Auditors Auditor-General South Africa 2 CHRIS HANI DISTRICT MUNICIPALITY Financial Statements for the year ended 30 June 2016 Index The reports and statements set out below comprise the financial statements presented to the provincial legislature: Index Page Accounting Officer's Responsibilities and Approval 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 9 Accounting Policies 10 - 40 Notes to the Financial Statements 41 - 87 Abbreviations CRR Capital Replacement Reserve DBSA Development Bank of South Africa GRAP Generally Recognised Accounting Practice HDF Housing Development Fund IAS International Accounting Standards 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 CHRIS HANI DISTRICT MUNICIPALITY Financial Statements for the year ended 30 June 2016 Accounting Officer's Responsibilities and Approval The accounting officeris 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 financial statements and related financial information included in this report. It is the responsibility of the accounting officer to ensure that the 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 financial statements and was given unrestricted access to all financial records and related data. The 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 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 officeris 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 financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or deficit. The accounting officerhas reviewed the municipality’s cash flow forecast for the year to 30 June 2016 and, in the light of this review and the current financial position, heis satisfied that the municipality has or has access to adequate resources to continue in operational existence for the foreseeable future. Although the accounting officer are primarily responsible for the financial affairs of the municipality, they are supported by the municipality's external auditors. The financial statements set out on pages 5 to 87, which have been prepared on the going concern basis, were approved by the accounting officer on 31 August 2016 and were signed on its behalf by: M.A.Mene Accounting Officer 4 CHRIS HANI DISTRICT MUNICIPALITY Financial Statements for the year ended 30 June 2016 Statement of Financial Position as at 30 June 2016 Figures in Rand Note(s) 2016 2015 Restated* Assets Current Assets Inventories 9 7,066,006 7,977,093 Receivables from non-exchange transactions 10 28,723,988 17,761,650 VAT receivable 11 76,073,387 31,131,737 Prepayments 8 10,449,832 25,801,373 Receivables from exchange transactions 12 111,349,407 336,194,940 Cash and cash equivalents 13 358,170,563 394,054,314 591,833,183 812,921,107 Non-Current Assets Property, plant and equipment 3 3,829,134,754 3,367,735,368 Intangible assets 4 389,530 546,467 Non - current Investments 5 1,500,000 1,500,000 3,831,024,284 3,369,781,835 Total Assets 4,422,857,467 4,182,702,942 Liabilities Current Liabilities Operating lease liability 6 50,732 14,011 Payables from exchange transactions 18 138,486,441 130,184,764 Employee benefit obligation 7&16&17 8,686,392 9,746,097 Unspent conditional grants and receipts 15 81,293,691 44,737,365 Bank overdraft 13 - 42,480,556 228,517,256 227,162,793 Non-Current Liabilities Employee benefit obligation 7 43,242,664 37,297,419 Total Liabilities 271,759,920 264,460,212 Net Assets 4,151,097,547 3,918,242,730 Accumulated surplus 14 4,151,097,547 3,918,242,730 * See Note 43 5 CHRIS HANI DISTRICT MUNICIPALITY Financial Statements for the year ended 30 June 2016 Statement of Financial Performance Figures in Rand Note(s) 2016 2015 Restated* Revenue Revenue from exchange transactions Service charges 21 335,759,616 185,225,386 Other income 23 76,287,909 70,044,345 Interest received - investment 29 37,939,612 26,116,489 Total revenue from exchange transactions 449,987,137 281,386,220 Revenue from non-exchange transactions Transfer revenue Government grants & subsidies 22 1,204,426,120 1,104,305,428 Transfer of Water and Sanitation services 40 - 449,141,147 Total revenue from non-exchange transactions 1,204,426,120 1,553,446,575 Total revenue 20 1,654,413,257 1,834,832,795 Expenditure Employee related costs 26 (237,460,873) (210,046,925) Remuneration of councillors 27 (9,630,879) (7,718,320) Depreciation and amortisation 30 (158,076,997) (122,207,064) Finance costs 31 (734,792) (381,440) Debt Impairment 28 (522,558,497) (341,464,519) Repairs and maintenance 34 (51,076,779) (13,127,361) Bulk purchases 36 (22,585,217) (14,344,034) Contracted services 33 (11,382,977) (13,064,696) Grants and subsidies paid 35 (248,839,820) (217,193,433) General Expenses 24 (157,651,057) (125,793,645) Total expenditure (1,419,997,888)(1,065,341,437) Operating surplus 25 234,415,369 769,491,358 Loss on disposal of assets and liabilities (1,560,555) - Surplus for the year 232,854,814 769,491,358 * See Note 43 6 CHRIS HANI DISTRICT MUNICIPALITY Financial Statements for the year ended 30 June 2016 Statement of Changes in Net Assets Accumulated Total net Figures in Rand surplus assets Opening balance as previously reported 3,554,394,191 3,554,394,191 Adjustments Prior year adjustments (405,642,816) (405,642,816) Balance at 01 July 2014 as restated* 3,148,751,375 3,148,751,375 Changes in net assets Surplus for the year 769,491,358 769,491,358 Total changes 769,491,358 769,491,358 Balance at 01 July 2015 as restated* 3,918,242,733 3,918,242,733 Changes in net assets Surplus for the year 232,854,814 232,854,814 Total changes 232,854,814 232,854,814 Balance at 30 June 2016 4,151,097,547 4,151,097,547 Note(s) * See Note 43 7 CHRIS HANI DISTRICT MUNICIPALITY Financial Statements for the year ended 30 June 2016 Cash Flow Statement Figures in Rand Note(s) 2016 2015 Restated* Cash flows from operating activities Receipts Sale of goods and services 74,693,201 48,106,293 Grants 1,204,426,120 1,104,305,428 Interest income 37,939,612 26,116,489 1,317,058,933 1,178,528,210 Payments Employee costs (247,091,752) (217,765,245) Suppliers (441,792,302) (373,173,511) Finance costs (734,792) (381,440) (689,618,846) (591,320,196) Net cash flows from operating activities 37 627,440,087 587,208,014 Cash flows from investing activities Purchase of property, plant and equipment 3 (620,880,003) (598,424,528) Cash flows from financing activities Finance lease payments 36,721 35,506 Net increase/(decrease) in cash and cash equivalents 6,596,805 (11,181,008) Cash and cash equivalents at the beginning of the year 351,573,758 362,754,756 Cash and cash equivalents at the end of the year 13 358,170,563 351,573,748 * See Note 43 8 CHRIS HANI DISTRICT MUNICIPALITY Financial Statements for the year ended 30 June 2016 Statement of Comparison of Budget and Actual Amounts Budget on Cash Basis Approved Adjustments Final Budget Actual amounts Difference Reference budget on comparable between final basis budget and Figures in Rand actual Statement of Financial Performance Revenue Revenue from exchange transactions Service charges 222,367,000 (62,000,000) 160,367,000 335,759,616 175,392,616 1 Rental of facilities and equipment 954,513 (954,513) - - - Other income - (rollup) 45,859,000 954,558 46,813,558 76,287,909 29,474,351 2 Interest received - investment 28,988,000 281 28,988,281 37,939,612 8,951,331 3 Total revenue from exchange 298,168,513 (61,999,674) 236,168,839 449,987,137 213,818,298 transactions Revenue from non-exchange transactions Transfer revenue Government grants & subsidies 1,238,131,000 129,754,000 1,367,885,000 1,204,426,120 (163,458,880) 4 Total revenue 1,536,299,513 67,754,326 1,604,053,839 1,654,413,257 50,359,418 Expenditure Personnel (259,220,000) (7,269,458) (266,489,458) (237,460,873) 29,028,585 5 Remuneration of councillors (10,923,000) 1,213,161 (9,709,839) (9,630,879) 78,960 6 Depreciation and amortisation (115,434,000) (28,273,500) (143,707,500) (158,076,997) (14,369,497) 7 Debt impairment (100,065,000) (247,000,000) (347,065,000) (522,558,497) (175,493,497) 8 Finance costs - (1,319,758) (1,319,758) (734,792) 584,966 9 Repairs and maintenance (31,716,000) (20,946,604) (52,662,604) (51,076,779) 1,585,825 10 Bulk purchases (25,822,000) 5,231,719 (20,590,281) (22,585,217) (1,994,936) 11 Contracted Services (20,672,000) 8,400,989 (12,271,011) (11,382,977) 888,034 12 Government grants and (20,658,000) (262,912,164) (283,570,164) (248,839,820) 34,730,344 13 subsidies General Expenses (377,236,000) 199,334,789 (177,901,211) (157,651,057) 20,250,154 14 Total expenditure (961,746,000) (353,540,826)(1,315,286,826)(1,419,997,888) (104,711,062) Operating surplus 574,553,513 (285,786,500) 288,767,013 234,415,369 (54,351,644) Profit on disposal of assets and 2,500,000 (1,500,000) 1,000,000 14,798 (985,202) liabilities Loss on disposal of assets - - - (701,594) (701,594) 2,500,000 (1,500,000) 1,000,000 (686,796) (1,686,796) Surplus before taxation 577,053,513 (287,286,500) 289,767,013 233,728,573 (56,038,440) Actual Amount on Comparable 577,053,513 (287,286,500) 289,767,013 233,728,573 (56,038,440) Basis as Presented in the Budget and Actual Comparative Statement 9