Annual financial statements for the year ended 30 June 2020 King Cetshwayo District Municipality Annual Financial Statements for the year ended 30 June 2020 GENERAL INFORMATION Legal form of entity Municipality in terms of section 1 of the Local Government: Municipal Structures Act (Act 117 of 1998) read with section 155 (1) of the Constitution of the Republic of South Africa (Act 108 of 1996) Nature of business and principal activities The provision of services (water, sanitation & waste management) to communities in a sustainable manner, to promote social and economic development; and to promote a safe and healthy environment Legislation governing the municipality's operations Constitution of the Republic of South Africa (Act 108 of 1996) Local Government: Municipal Finance Management Act (Act 56 of 2003) Local Government: Municipal Systems Act (Act 32 of 2000) Local Government: Municipal Structures Act (Act 117 of 1998) Division of Revenue Act (Act 1 of 2007) Mayor NNP Mkhulisi Municipal Manager MTB Ndlovu Registered office King Cetshwayo District Municipality Krugerrand, CBD RICHARDS BAY 3900 Business address King Cetshwayo District Municipality Krugerrand, CBD RICHARDS BAY 3900 Postal address Private Bag X1025 RICHARDS BAY 3900 Bankers Nedbank Limited Auditors Auditor-General of South Africa Senior Legal Advisor G Dlamini Municipal demarcation code DC 28 Members of the audit committee M Ncube - Chairperson RL Monyokolo P Mbanjwa 1 King Cetshwayo District Municipality Annual Financial Statements for the year ended 30 June 2020 INDEX AND LIST OF ABBREVIATIONS The reports and statements set out below comprise the annual financial statements presented to the Council: Page Statement of Municipal Manager's Responsibility 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 - 11 Accounting Policies 12 - 25 Notes to the Annual Financial Statements 26 - 87 The following supplementary information does not form part of the annual financial statements and is unaudited: Appendix A: Schedule of External Loans 88 Appendix B: Analysis of Property, Plant and Equipment 89 Appendix C: Segmental analysis of Property, Plant and Equipment 90 Appendix D: Segmental Statement of Financial Performance 91 Appendix E: Actual versus Budget (Acquisition of Property, Plant and Equipment) 92 Appendix F: Disclosure of Grants and Subsidies in terms of the Municipal Finance 93 Management Act Appendix G: Appropriation Statement (Reconciliation: Budget and in year 94 performance) 2 King Cetshwayo District Municipality Annual Financial Statements for the year ended 30 June 2020 INDEX AND LIST OF ABBREVIATIONS MFMA Municipal Finance Management Act (Act No. 56 of 2003) GRAP Generally Recognised Accounting Practice IPSAS International Public Sector Accounting Standards MDRG Municipal Disaster Relief Grant EQS Equitable Share WSIG Water Services Infrastructure Grant RUL Remaining Useful Lives RBIG Regional Bulk Infrastructure Grant MIG Municipal Infrastructure Grant EPWP Expanded Public Works Programme RRAMS Rural Roads Asset Management Systems MPAC Municipal Public Accounts Committee FMG Finance Management Grant LGSETA Local Government Sector Education Training Authority AUC Assets Under Construction SARS South African Revenue Services VAT Value Added Tax Act (Act No. 89 of 1991) DWS Department of Water and Sanitation 3 King Cetshwayo District Municipality Annual Financial Statements for the year ended 30 June 2020 STATEMENT OF MUNICIPAL MANAGER'S RESPONSIBILITY I am responsible for the preparation of these annual financial statements, which are set out on pages 4 to 94, in terms of Section 126(1) of the Municipal Finance Management Act (Act no. 56 of 2003), read together with exemption notice no. 851 (Gazette No. 43582) and which I have signed on behalf of the municipality. I certify that the salaries, allowances and benefits of Councillors as disclosed in note 25 and 38 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 Office Bearers Act (Act no. 20 of 1998) and the Minister of Provincial and Local Government determination in accordance with this Act. The King Cetshwayo District Municipality, situated in the central business district, Richards Bay, is a category C municipality established in terms of Section 12(1) of the Municipal Structures Act, 1998 (Act no. 117 of 1998). As required by Section 45 of the Municipal Systems Act and Section 121(4)(a) and (b) of the Municipal Finance Management Act (Act no. 56 of 2003), the annual financial statements were submitted to the Auditor General South Africa (AGSA) on 30 October 2020. MTB Ndlovu Municipal Manager Richards Bay Friday, 30 October 2020 4 King Cetshwayo District Municipality Annual Financial Statements for the year ended 30 June 2020 STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020 Figures in Rand Note(s) 2020 2019 Restated* Assets Current Assets Inventories 2 13 089 304 10 515 341 Receivables from exchange transactions - consumer debtors 3 47 519 289 39 447 515 Receivables from exchange transactions - VAT 4 84 572 080 47 347 498 Receivables from non exchange transactions 5 15 775 982 16 635 507 Current portion of long term receivables from exchange transactions 6 49 193 53 188 Cash and cash equivalents 7 507 309 434 495 583 295 Investments in municipal entities 11 760 849 - Investments in financial assets - shares 12 66 955 - 669 143 086 609 582 344 Non-Current Assets Long term receivables from exchange transactions 6 66 063 116 181 Property, plant and equipment 8 2 593 299 248 2 402 474 083 Intangible assets 9 7 975 090 3 909 045 Heritage assets 10 700 000 700 000 Investments in municipal entities 11 - 726 877 Investments financial assets - shares 12 - 88 789 2 602 040 401 2 408 014 975 Total Assets 3 271 183 487 3 017 597 319 Liabilities Current Liabilities Current portion of long term liabilities 13 7 528 864 6 669 522 Payables exchange transactions 14 359 730 672 235 175 358 Consumer deposits 15 10 100 052 10 058 400 Defined employee benefit obligations 16 801 000 1 166 000 Unspent transfers and subsidies 17 53 794 242 92 895 169 Provisions 18 7 180 037 1 591 182 439 134 867 347 555 631 Non-Current Liabilities Long term liabilities 13 24 334 928 31 863 792 Defined employee benefit obligations 16 37 825 000 35 465 876 Provisions 18 71 695 225 75 155 263 133 855 153 142 484 931 Total Liabilities 572 990 020 490 040 562 Net Assets 2 698 193 467 2 527 556 757 Accumulated surplus 2 698 193 467 2 527 556 758 * See Note 40 5 King Cetshwayo District Municipality Annual Financial Statements for the year ended 30 June 2020 STATEMENT OF FINANCIAL PERFORMANCE Figures in Rand Note(s) 2020 2019 Restated* Revenue Revenue from exchange transactions Service charges 19 87 487 893 87 183 142 Rental income 20 53 565 56 506 Interest received 21 42 110 793 40 968 329 Other income 22 1 383 624 2 239 135 Gain on disposal of property, plant and equipment 8 - 254 956 Fair value adjustments in investments 11&12 13 138 47 933 Total revenue from exchange transactions 131 049 013 130 750 001 Revenue from non exchange transactions Transfers and subsidies 23 930 770 863 775 078 089 Donations 8&2 11 056 791 - Total revenue from non exchange transactions 941 827 654 775 078 089 Total revenue 1 072 876 667 905 828 090 Expenditure Employee related costs 24 (233 451 489) (225 009 660) Remuneration of councillors 25 (12 962 831) (11 679 483) Depreciation, amortisation and impairment 26 (102 831 596) (77 846 457) Finance costs 27 (4 580 961) (5 322 141) Debt impairment 3 (6 259 592) (8 753 607) Bulk purchases 28 (75 545 639) (39 704 190) Transfers and subsidies 29 (2 000 000) (19 355 000) Contracted services 30 (352 248 652) (357 988 648) Operational costs 31 (111 916 198) (118 243 458) Loss on disposal of property, plant and equipment 8 (6 877 522) - Total expenditure (908 674 480) (863 902 644) Surplus for the year 164 202 187 41 925 446 * See Note 40 6 King Cetshwayo District Municipality Annual Financial Statements for the year ended 30 June 2020 STATEMENT OF CHANGES IN NET ASSETS Accumulated Total net Figures in Rand surplus assets Balance as at 01 July 2018 2 484 435 224 2 484 435 224 Aggregated effect of prior year adjustment on assets - refer to note 40 1 196 088 1 196 088 Balance as at 01 July 2018 - restated 2 485 631 312 2 485 631 312 Surplus for the year - restated refer to note 40 41 925 446 41 925 446 41 925 446 41 925 446 Balance as at 01 July 2019 - restated 2 527 556 749 2 527 556 749 Surplus for the year 164 202 187 164 202 187 Gain from transfer of functions between entities under common control - refer to note 6 434 531 6 434 531 44 170 636 718 170 636 718 Balance at 30 June 2020 2 698 193 467 2 698 193 467 * See Note 40 7 King Cetshwayo District Municipality Annual Financial Statements for the year ended 30 June 2020 CASH FLOW STATEMENT Figures in Rand Note(s) 2020 2019 Restated* Cash flows from operating activities Receipts Receipts from consumers and other 86 552 761 79 556 614 Transfers and subsidies 891 669 934 866 329 625 Interest income 42 110 793 40 968 329 1 020 333 488 986 854 568 Payments Employee costs 24&25 (246 414 320) (236 689 143) Suppliers (527 871 229) (531 154 152) Transfers and subsidies 29 (2 000 000) (19 355 000) (776 285 549) (787 198 295) Net cash flows from operating activities 32 244 047 939 199 656 273 Cash flows from investing activities Payment for property, plant, equipment and intangibles (222 298 451) (192 106 654) Insurance proceeds and proceeds from the sale of property, plant and 31 304 950 089 equipment Transfer of functions between entities under common control 44 1 141 717 - Repayment of home loans (non-current/current receivables) 6 54 113 51 344 Net cash flows from investing activities (221 071 317) (191 105 221) Cash flows from financing activities Repayment of long term liabilities (6 669 522) (5 928 342) Finance costs (4 580 961) (5 322 141) Net cash flows from financing activities (11 250 483) (11 250 483) Net increase /(decrease) in cash and cash equivalents 11 726 139 (2 699 431) Cash and cash equivalents at the beginning of the year 495 583 295 498 282 726 Cash and cash equivalents at the end of the year 7 507 309 434 495 583 295 * See Note 40 8 King Cetshwayo District Municipality Annual Financial Statements for the year ended 30 June 2020 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS Budget on Accrual Basis Approved Adjustments Final Budget Actual Difference Reference budget amounts on between final comparable budget and Figures in Rand basis actual Statement of Financial Performance Revenue Revenue from exchange transactions Service charges 92 472 273 400 000 92 872 273 87 487 893 (5 384 380) Rental income 111 370 - 111 370 53 565 (57 805) Interest received 32 410 284 6 676 042 39 086 326 42 110 793 3 024 467 Other income 1 205 827 1 640 461 2 846 288 1 383 624 (1 462 664) 39.1 Total revenue from exchange 126 199 754 8 716 503 134 916 257 131 035 875 (3 880 382) transactions Revenue from non exchange transactions Transfer revenue Transfers and subsidies 888 733 000 95 743 607 984 476 607 930 770 863 (53 705 744) Donations - - - 11 056 791 11 056 791 39.2 Total revenue from non- 888 733 000 95 743 607 984 476 607 941 827 654 (42 648 953) exchange transactions Total revenue 1 014 932 754 104 460 110 1 119 392 864 1 072 863 529 (46 529 335) Expenditure Employee related costs (233 958 756) (5 947 605) (239 906 361) (233 451 489) 6 454 872 Remuneration of councillors (13 696 734) 733 899 (12 962 835) (12 962 831) 4 Depreciation, amortisation (101 758 715) - (101 758 715) (102 831 596) (1 072 881) and impairment Finance costs (4 580 963) - (4 580 963) (4 580 961) 2 Debt impairment (7 611 741) 1 346 104 (6 265 637) (6 259 592) 6 045 Bulk purchases (34 380 972) (31 370 985) (65 751 957) (75 545 639) (9 793 682) 39.3 Transfers and subsidies (5 942 500) 3 942 500 (2 000 000) (2 000 000) - Contracted services (250 087 185) (111 484 445) (361 571 630) (352 248 652) 9 322 978 Operational costs (145 599 838) 31 256 013 (114 343 825) (111 916 198) 2 427 627 Total expenditure (797 617 404) (111 524 519) (909 141 923) (901 796 958) 7 344 965 Operating surplus/(loss) 217 315 350 (7 064 409) 210 250 941 171 066 571 (39 184 370) Loss on disposal of property, - - - (6 877 522) (6 877 522) plant and equipment Fair value adjustments in - - - 13 138 13 138 investments - - - (6 864 384) (6 864 384) Surplus 217 315 350 (7 064 409) 210 250 941 164 202 187 (46 048 754) 9