GERT SIBANDE DISTRICT MUNICIPALITY Unaudited Annual financial statements for the year ended 30 June 2020 GERT SIBANDE DISTRICT MUNICIPALITY Unaudited Annual Financial Statements for the year ended 30 June 2020 General Information Legal form of entity District Municipality Nature of business and principal activities A Category C Municipality established in terms of the Structures Act 117 of 1998 which execute some of the functions of Local Government (DC30) and Section 155(c) of the Constitution of the Republic of South Africa, 1996. Speaker Nkosi JM Executive Mayor Chirwa MG Chief Whip Nkosi SGT Mayoral Committee Buthelezi BM Dhlamini ES Maboea SA Masina LL Nhlapo NS Nhlengethwa DG Sekhonde BG Councillors Jordaan (Botha) C Brussow JLI De Ville JR De Vries GR Dlamini LBR Greyling GS Jouibert LK Karim LS Khumalo MJ Khumalo MS Kubheka MN Maboa-Boltman NF Madonsela ME Mahlangu BD Makhubu ML Malatsi PV Mathebula SB Mazibuko KD Mbhele JS Mlotshwa TL Mkhaliphi BJ Mkwanazi CB Mtshali BH Motha VM Motloung ME Ngubeni A Ngwenya M Ngxonono TY Nkosi BG Nkosi DP Nkosi KP Nkosi MS Nkosi VL Nyembe F Sebolela JD Sibanyoni SI Sibeko PT Simelane XI Zulu TSM Grading of local authority 3 Chief Finance Officer (CFO) Buthelezi ZR Accounting Officer Habile CA 1 GERT SIBANDE DISTRICT MUNICIPALITY Unaudited Annual Financial Statements for the year ended 30 June 2020 General Information Registered office Cnr Joubert & Oosthuise Street Ermelo Mpumalanga 2351 Business address Cnr Joubert & Oosthuise Street Ermelo Mpumalanga 2351 Postal address PO Box 1748 Ermelo Mpumalanga 2350 Bankers First National Bank Auditor Auditor General Of South Africa Attorneys Panel of attorneys Contact details Telephone: +27 (17) 811 7000 Fax: +27 (17) 811 1207 www.gsibande.gov.za 2 GERT SIBANDE DISTRICT MUNICIPALITY 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 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 - 34 Notes to the Unaudited Annual Financial Statements 35 - 62 COGTA Mpumalanga Provincial Department of Co-operative Governmance and Traditional Affairs CIGFARO Chartered Institute of Government Finance Audit and Risk Officers DWS Departmant of Water and Sanitation EPWP Expanded Public Works Programme GRAP Generally Recognised Accounting Practice GSDM Gert ibande District Municipality MFMA Municipal Finance Management Act mSCOA Municipal Standard Chart of Accounting MPAC Municipal Public Accounts Committee MEC Member of the Executive Council SALGA South African Local Government Association 3 GERT SIBANDE DISTRICT MUNICIPALITY Unaudited Annual Financial Statements for the year ended 30 June 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 unaudited annual financial statements and related financial information included in this report. It is the responsibility of the accounting officer 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 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 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 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 accounting officerhas reviewed the municipality’s cash flow forecast for the year to 30 June 2021 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. This is despite the fact that for the financial year ending 30 June 2020 the municipality had a deficit of R176 million due to once-of tranfer of inventory to local municipality of R153 million. Although the accounting officer is primarily responsible for the financial affairs of the municipality, they are supported by the municipality's internal auditors. I am responsible for the preparations of these unaudited annual financial statements set out on pages 4 to 62, in terms of Section 126(1) of the Local Government: Municipal Financial Act and which I have signed by the on behalf of the municiplaity on 02 October 2020. Habile CA Municipal Manager 4 GERT SIBANDE DISTRICT MUNICIPALITY Unaudited 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 Cash and cash equivalents 3 155 140 134 189 917 092 Inventories 4 690 464 154 106 189 Receivables from exchange transactions 5 393 019 259 015 Receivables from non-exchange transactions 6 1 952 985 68 099 VAT receivable 7 23 989 019 12 533 192 182 165 621 356 883 587 Non-Current Assets Heritage assets 8 159 250 159 250 Intangible assets 9 100 772 19 329 Property, plant and equipment 10 305 184 282 315 822 986 Receivables from non-exchange transactions 6 1 477 705 1 604 028 306 922 009 317 605 593 Total Assets 489 087 630 674 489 180 Liabilities Current Liabilities Retirement benefit Obligation 11 99 002 148 222 Consumer deposits 12 46 734 21 140 Finance lease obligation 13 55 411 1 361 803 Long service provision 16 669 000 307 937 Payables from exchange transactions 14 74 547 585 92 148 793 Provision for bonus 15 4 098 409 3 697 495 Payables from non-exchange transactions 17 10 194 764 754 893 Unspent conditional grants and receipts 18 69 468 199 882 89 780 373 98 640 165 Non-Current Liabilities Retirement benefit Obligation 11 729 000 1 703 034 Long service provision 16 6 231 000 5 611 902 6 960 000 7 314 936 Total Liabilities 96 740 373 105 955 101 Net Assets 392 347 257 568 534 079 Accumulated surplus 392 347 257 568 534 035 * See Note 41 5 GERT SIBANDE DISTRICT MUNICIPALITY Unaudited 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 Gain on disposal of assets and liabilities 210 852 - Interest received - investment 19 16 039 126 19 732 638 Other income 20 2 871 934 2 518 708 Rendering of services 995 486 584 844 Service charges 21 103 255 4 204 Total revenue from exchange transactions 20 220 653 22 840 394 Revenue from non-exchange transactions Transfers & subsidies received 22 307 601 414 499 268 080 Total revenue 327 822 067 522 108 474 Expenditure Depreciation and amortisation 23 (23 714 261) (20 366 328) Employee related costs 24 (173 340 664) (154 723 384) Finance costs 25 (710 808) (673 790) Impairment loss 26 (26 941) - Lease 27 (198 000) (175 961) Loss on disposal of assets and liabilities - (5 049) Operating costs 28 (66 645 975) (68 694 713) Remuneration of councillors 29 (13 634 813) (12 761 632) Transfers and Subsidies 30 (225 737 383) (178 241 001) Total expenditure (504 008 845) (435 641 858) (Deficit) surplus for the year (176 186 778) 86 466 616 * See Note 41 6 GERT SIBANDE DISTRICT MUNICIPALITY Unaudited 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 at 01 July 2018 482 067 419 482 067 419 Changes in net assets Surplus for the year 86 466 616 86 466 616 Total changes 86 466 616 86 466 616 Restated* Balance at 01 July 2019 568 534 035 568 534 035 Changes in net assets Surplus for the year (176 186 778) (176 186 778) Total changes (176 186 778) (176 186 778) Balance at 30 June 2020 392 347 257 392 347 257 Note(s) * See Note 41 7 GERT SIBANDE DISTRICT MUNICIPALITY Unaudited 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 Sale of goods and services (1 789 312) 3 622 199 Grants 307 471 000 495 445 702 Interest income 16 039 126 19 732 638 Other receipts 3 893 014 2 539 848 325 613 828 521 340 387 Payments Employee costs (186 617 713) (164 479 524) Suppliers 66 954 591 (102 480 536) Finance costs (643 580) (437 835) Grants Paid (225 737 385) (178 363 264) (346 044 087) (445 761 159) Net cash flows from operating activities 32 (20 430 259) 75 579 228 Cash flows from investing activities Purchase of property, plant and equipment 10 (13 091 852) (32 047 087) Proceeds from sale of property, plant and equipment 10 210 854 (5 049) Purchase of other intangible assets 9 (92 082) - Proceeds from sale of other intangible assets 9 1 - Net cash flows from investing activities (12 973 079) (32 052 136) Cash flows from financing activities Finance lease payments (1 373 620) (1 372 400) Net increase/(decrease) in cash and cash equivalents (34 776 958) 42 154 692 Cash and cash equivalents at the beginning of the year 189 917 092 147 762 400 Cash and cash equivalents at the end of the year 3 155 140 134 189 917 092 * See Note 41 8 GERT SIBANDE DISTRICT MUNICIPALITY Unaudited Annual Financial Statements for the year ended 30 June 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 Figures in Rand actual Statement of Financial Performance Revenue Revenue from exchange transactions Service charges 2 471 920 - 2 471 920 103 255 (2 368 665) Note 37(1) Rendering of services 449 440 - 449 440 995 486 546 046 Note 37(2) Other income - (rollup) 4 280 870 1 680 000 5 960 870 2 871 934 (3 088 936) Note 37(3) Interest received - investment 19 887 720 - 19 887 720 16 039 126 (3 848 594) Note 37(4) Gains on disposal of assets - - - 210 852 210 852 Total revenue from exchange 27 089 950 1 680 000 28 769 950 20 220 653 (8 549 297) transactions Revenue from non-exchange transactions Transfer revenue Government grants & subsidies 309 871 000 (2 200 000) 307 671 000 307 601 414 (69 586) Note 37(5) Total revenue 336 960 950 (520 000) 336 440 950 327 822 067 (8 618 883) Expenditure Personnel (178 248 358) 1 131 957 (177 116 401) (173 340 664) 3 775 737 Note 37(6) Remuneration of councillors (14 274 435) - (14 274 435) (13 634 813) 639 622 Note 37(7) Depreciation and amortisation (22 492 270) - (22 492 270) (23 714 261) (1 221 991) Note 37(8) Impairment loss/ Reversal of - - - (26 941) (26 941) impairments Finance costs - - - (710 808) (710 808) Included in operating cost Lease rentals on operating lease - - - (198 000) (198 000) Included in operating cost Transfers and Subsidies (76 241 390) (152 299 913) (228 541 303) (225 737 383) 2 803 920 Note 37(9) Operating Expenses (66 125 467) (5 749 253) (71 874 720) (66 645 975) 5 228 745 Note 37(10) Total expenditure (357 381 920) (156 917 209) (514 299 129) (504 008 845) 10 290 284 Deficit before taxation (20 420 970) (157 437 209) (177 858 179) (176 186 778) 1 671 401 Actual Amount on Comparable (20 420 970) (157 437 209) (177 858 179) (176 186 778) 1 671 401 Basis as Presented in the Budget and Actual Comparative Statement 9