Chris Hani District Municipality Annual Financial Statements for the year ended June 30, 2020 Chris Hani District Municipality Annual Financial Statements for the year ended June 30, 2020 General Information Legal form of entity District Municipality DC 13 Nature of business and principal activities Chris Hani District Municipality is a South African Category C Municipal (District Municipality) as defined by the Municipal Structure 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. Division of Revenue Act 2018-19 The Constitution of South Africa Mayoral committee Executive Mayor Cllr: W. Gela Cllr: N. September-Caba: Deputy Executive Mayor Cllr: M.C. Koyo: Speaker Cllr: M. Papiyana: Former Chief Whip - Resigned April 2020 Cllr: T. Bikwana: Chief Whip: From April 2020 Cllr: N. Goniwe: Portfolio Head - Health & Community Services: From July 2019 - Feb 2020 Cllr: T. Bobo: Portfolio Head - Health & Community Services: From March 2020 Cllr: S. Mbotshane: Portfolio Head - Integrated Planning & Economic Development Cllr: M. Jack: Portfolio Head - Budget & Treasury Cllr: N. Matiwane: Portfolio Head - Special Programmes Unit: Resigned in March 2020 Cllr: N. Mgidi: Portfolio Head - Special Programmes Unit: From April 2020 Cllr: S. Nxozi: Portfolio Head - Corporate Services Cllr: L. Bonga - Tyali: Portfolio Head - Engineering Councillors Cllr: M. Desha Cllr: M. Xhelisilo Cllr: K. Mjezu Cllr: S. Tame Cllr: E.G. Bomela Cllr: B. Ntsere Cllr: M. Adonisi Cllr: N. Mtyobile Cllr: F.A.N. Hendricks Cllr: E.L. Gubula Cllr: S.E. Mvana Cllr: N.A. Dayisi Cllr: S. Myataza Cllr: Z. Qayiya Cllr: Z.N.E. Ralane Cllr: S.B. Nxawe Cllr: N.C. Lali Cllr: J.Cengani Cllr: Z.R. Shweni Cllr: M. Kondile 1 Chris Hani District Municipality Annual Financial Statements for the year ended June 30, 2020 General Information Cllr: K. Bizana Cllr: Z. Deliwe Cllr: R. Venske Cllr: S. Zangqa Cllr: N. Koni Cllr: M. Adonis Cllr: Y. Zicina Cllr: N. Ndlebe Cllr: Z.N. Njoli Cllr: N. Nkotha Grading of local authority Grade 5 Accounting Officer Mr. G. Mashiyi Chief Finance Officer (CFO) Mr. M. Dyushu Registered office 15 Bells Road Queenstown 5320 Bankers First National Bank Limited Auditors Auditor General South Africa 2 Chris Hani District Municipality Annual Financial Statements for the year ended June 30, 2020 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 - 39 Notes to the Annual Financial Statements 40 - 76 COID Compensation for Occupational Injuries and Diseases DBSA Development Bank of Southern 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 Annual Financial Statements for the year ended June 30, 2020 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 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 were 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 Practice (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board. The annual financial statements are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. As 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 accounting officer to meet these responsibilities, accounting officer set 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. 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. Accounting officerhas reviewed the municipality’s cash flow forecast for the year to June 30, 2021 and, in light of this review and the current financial position, heis satisfied that the municipality has access to adequate resources to continue in operational existence for the foreseeable future. Improved revenue collection through implementation of data cleansing and meter audit projects would ensure decrease in outstanding debtors and increase in cash reserves available to fund budgeted expenditure. Although the accounting officer primarily responsible for the financial affairs of the municipality, I am supported by the municipality's external auditors. The annual financial statements set out on pages 5 to 71, which have been prepared on a going concern basis, were approved by the accounting officer on June 30, 2020 and were signed on its behalf by: Mr. G. Mashiyi Municipal Manager 4 Chris Hani District Municipality Annual Financial Statements for the year ended June 30, 2020 Statement of Financial Position as at June 30, 2020 2020 2019 Restated* Note(s) R R Assets Current Assets Inventories 8 17,063,194 11,790,363 Receivables from non-exchange transactions 9 35,966,392 31,512,864 VAT receivable 10 51,882,222 77,220,343 Prepayments 7 315,675 2,383,988 Receivable from exchange transactions 11 315,327,009 329,589,654 Cash and cash equivalents 12 42,247,058 377,919,326 462,801,550 830,416,538 Non-Current Assets Property, plant and equipment 3 4,267,364,560 4,091,094,293 Intangible assets 4 728,301 1,489,707 Investments in controlled entities 5 1,500,000 1,500,000 4,269,592,861 4,094,084,000 Total Assets 4,732,394,411 4,924,500,538 Liabilities Current Liabilities Operating lease liability 6 1,291,772 600,219 Payables from exchange transactions 15 321,781,197 315,100,030 Consumer deposits 14 507,696 441,108 Employee benefit obligation 13 4,174,994 5,294,974 Unspent conditional grants and receipts 16 78,635,298 300,501,657 406,390,957 621,937,988 Non-Current Liabilities Employee benefit obligation 13 63,435,951 65,893,340 Total Liabilities 469,826,908 687,831,328 Net Assets 4,262,567,503 4,236,669,210 Accumulated surplus 17 4,262,567,503 4,236,669,210 * See Note 43 5 Chris Hani District Municipality Annual Financial Statements for the year ended June 30, 2020 Statement of Financial Performance 2020 2019 Restated* Note(s) R R Revenue Revenue from exchange transactions Service charges 19 300,505,479 305,466,551 Other income 20 2,020,782 746,616 Interest income 21 78,495,610 74,351,178 Total revenue from exchange transactions 381,021,871 380,564,345 Revenue from non-exchange transactions Transfer revenue Government grants & subsidies 22 1,042,665,648 916,690,873 Total revenue 18 1,423,687,519 1,297,255,218 Expenditure Employee related costs 23 (351,060,602) (342,135,085) Remuneration of councillors 24 (12,225,799) (11,665,226) Depreciation and amortisation 25 (157,673,500) (152,641,733) Impairment loss/ Reversal of impairments (73,768) - Finance costs 26 (88,047) (266,610) Debt Impairment 27 (278,891,121) (173,390,698) Bulk purchases 28 (16,046,762) (19,156,293) Contracted services 29 (269,184,905) (248,548,416) Transfers and Subsidies 30 (34,038,080) (29,339,125) General Expenses 31 (152,711,022) (205,957,875) Total expenditure (1,271,993,606) (1,183,101,061) Operating surplus 151,693,913 114,154,157 Loss on disposal of assets and liabilities (312,667) (155,654) Actuarial gains / losses 13 8,986,709 (1,632,651) 8,674,042 (1,788,305) Surplus for the year 160,367,955 112,365,852 * See Note 43 6 Chris Hani District Municipality Annual Financial Statements for the year ended June 30, 2020 Statement of Changes in Net Assets Accumulated Total net surplus assets R R Balance at 01 July 2018 Restated** 3,987,938,273 3,987,938,273 Changes in net assets Prior period error 107,482,145 107,482,145 Net income (losses) recognised directly in net assets 107,482,145 107,482,145 Surplus for the year 112,365,851 112,365,851 Total recognised income and expenses for the year 219,847,996 219,847,996 Total changes 219,847,996 219,847,996 Opening balance as previously reported 4,204,870,009 4,204,870,009 Adjustments Prior year adjustments 31,141,241 31,141,241 Restated* Balance at July 1, 2019 as restated* 4,236,011,250 4,236,011,250 Changes in net assets Surplus for the year 160,367,955 160,367,955 Total changes 160,367,955 160,367,955 Balance at June 30, 2020 4,262,567,503 4,262,567,503 Note(s) * See Note 43 7 Chris Hani District Municipality Annual Financial Statements for the year ended June 30, 2020 Cash Flow Statement 2020 2019 Restated* Note(s) R R Cash flows from operating activities Receipts Sale of goods and services 397,522,962 42,438,884 Grants 820,799,289 1,102,943,514 Interest income 20,714,310 74,351,178 1,239,036,561 1,219,733,576 Payments Employee costs (357,877,061) (350,904,576) Suppliers (469,814,142) (324,878,034) Finance cost (88,047) (266,610) (827,779,250) (676,049,220) Net cash flows from operating activities 33 411,257,311 543,684,356 Cash flows from investing activities Purchase of property, plant and equipment 3 (333,992,147) (329,066,175) Prior year other movements 3 - (97,759,797) Proceeds from sale assets 4 423,348 - Net cash flows from investing activities (333,568,799) (426,825,972) Net increase/(decrease) in cash and cash equivalents (335,672,268) 117,073,434 Cash and cash equivalents at the beginning of the year 377,919,326 260,845,892 Cash and cash equivalents at the end of the year 12 42,247,058 377,919,326 * See Note 43 8 Chris Hani District Municipality Annual Financial Statements for the year ended June 30, 2020 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 actual R R R R R Statement of Financial Performance Revenue Revenue from exchange transactions Service charges 244,461,000 59,071,000 303,532,000 300,505,479 (3,026,521) Note47 (1) Other income 290,534,476 76,830,921 367,365,397 2,020,782 (365,344,615) Note 47 (2) Interest income 68,902,000 62,588,000 131,490,000 78,495,610 (52,994,390) Note 47 (3) Gains on disposal of assets 200,000,000 - 200,000,000 - (200,000,000) Total revenue from exchange 803,897,476 198,489,921 1,002,387,397 381,021,871 (621,365,526) transactions Revenue from non-exchange transactions Transfer revenue Government grants & subsidies 1,057,826,000 83,335,347 1,141,161,347 1,042,665,648 (98,495,699) Note 47 (4) Total revenue 1,861,723,476 281,825,268 2,143,548,744 1,423,687,519 (719,861,225) Expenditure Employee Related Costs (337,874,359) 19,267,612 (318,606,747) (351,060,602) (32,453,855) Note 47 (1) Remuneration of councillors (13,902,286) 3,793,836 (10,108,450) (12,225,799) (2,117,349) Note 47 (2) Depreciation and amortisation (140,000,000) (15,000,000) (155,000,000) (157,673,500) (2,673,500) Note 47 (3) Debt Impairment (200,000,000) 70,265,000 (129,735,000) (278,112,811) (148,377,811) Note 47 (9) Finance costs 40,000 - 40,000 (88,047) (128,047) Note 47 (4) Bulk purchases (26,138,516) 10,333,000 (15,805,516) (16,046,762) (241,246) Note 47 (5) Contracted services (405,548,948) 55,858,847 (349,690,101) (269,184,905) 80,505,196 Note 47 (6) Transfer and Subsidies 31,638,081 - 31,638,081 (34,038,080) (65,676,161) Note 47 (7) General Expenses 202,287,257 (67,702,621) 134,584,636 (153,563,100) (288,147,736) Note 47 (8) Total expenditure (889,498,771) 76,815,674 (812,683,097)(1,271,993,606) (459,310,509) Operating surplus 972,224,705 358,640,942 1,330,865,647 151,693,913(1,179,171,734) Loss on disposal of assets and - - - (312,667) (312,667) Note 47 liabilities Actuarial gain - - - 8,986,709 8,986,709 - - - 8,674,042 8,674,042 Surplus before taxation 972,224,705 358,640,942 1,330,865,647 160,367,955(1,170,497,692) Actual Amount on Comparable 972,224,705 358,640,942 1,330,865,647 160,367,955(1,170,497,692) Basis as Presented in the Budget and Actual Comparative Statement 9