City of Ekurhuleni Metropolitan Municipality Annual Financial Statements for the year ended 30 June 2020 City of Ekurhuleni Metropolitan Municipality Annual Financial Statements for the year ended 30 June 2020 General Information Legal form of entity City Legislation governing the entity's operations Municipal Finance Management Act (Act No. 56 of 2003) Mayoral Committee Executive Mayor Clr M Masina Speaker Clr P Khumalo Chief Whip Chief Whip: Clr J Dlabathi Members of Mayoral Committee MMC: Finance, ICT and Economic Development: Clr D Xhakaza MMC: Health & Social Development : Clr N Nkozi MMC: Human Settlement: Clr L Mpya MMC: Environmental and Waste Management Services: Clr K Mabaso MMC: City Planning: Clr N Shongwe MMC: Corporate and Shared Services: Clr D Mlambo MMC: Water, Sanitation and Energy: Clr T Nketle MMC: Community Safety: Clr F Mmoko MMC: Infrastructure Services: Clr M Madihlaba MMC: Transport Planning: Clr P Nkunjana Grading of local authority The City is a category A grade 6 local authority in teams of item 4 of the Government Notice R1227 of 18 December 2007 published in terms of the Remuneration of Public Office Bearers act, 1998. City Manager Dr. I Mashazi 011 999 0760 [email protected] Group Chief Financial Officer (GCFO) Mr. K Lerutla 011 999 1310 [email protected] Registered office Corner of Rose and Cross Streets Germiston 1400 Business address Corner of Rose and Cross Streets Germiston 1400 Postal address Private Bag X69 Germiston 1400 Primary banker Nedbank Auditors Auditor-General of South Africa 1 City of Ekurhuleni Metropolitan Municipality Annual Financial Statements for the year ended 30 June 2020 Index The reports and statements set out below comprise the annual financial statements presented to the provincial legislature: Page Accounting Officer's Responsibilities and Approval 3 Statement of Financial Position 4 Statement of Financial Performance 5 Statement of Changes in Net Assets 6 Cash Flow Statement 7 Statement of Comparision of Budget and Actual Amounts (Appropriation Statement) 8 - 10 Accounting Policies 11 - 31 Notes to the Annual Financial Statements 31 - 88 2 City of Ekurhuleni Metropolitan 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 10 1,282,574,238 1,362,355,865 Other investments 8 1,857,475,861 174,554,132 Receivables from non exchange transactions 13 5,113,059 567,792,348 Receivables from exchange transactions 11&14 6,143,392,185 5,455,699,832 Statutory receivables 12 863,950,242 - Cash and cash equivalents 15 1,644,224,892 3,430,881,905 11,796,730,477 10,991,284,082 Non-Current Assets Investment property 3 530,824,142 502,247,151 Property, plant and equipment 4 57,147,985,682 55,126,113,172 Intangible assets 5 1,220,131,682 990,116,508 Heritage assets 6 66,085,061 69,001,911 Investments in controlled entities 7 106 106 Other investments 8 616,146,743 1,915,108,684 Long term receivables 9 3,345,200 3,329,215 59,584,518,616 58,605,916,747 Total Assets 71,381,249,093 69,597,200,829 Liabilities Current Liabilities Short term portion of long term liabilities 16 2,338,021,378 557,145,611 Trade and other payables from exchange transactions 19 8,546,868,462 7,511,193,794 Deposits 20 935,100,451 916,990,548 Unspent conditional grants and receipts 21 492,860,020 959,851,222 Provisions 18 576,744,106 572,902,650 12,889,594,417 10,518,083,825 Non-Current Liabilities Long term liabilities 16 7,624,921,670 8,124,203,045 Retirement benefit obligation 17 2,130,088,581 2,058,871,581 Provisions 18 979,441,554 885,299,632 10,734,451,805 11,068,374,258 Total Liabilities 23,624,046,222 21,586,458,083 Net Assets 47,757,202,871 48,010,742,746 Accumulated surplus 47,757,202,871 48,010,742,746 4 City of Ekurhuleni Metropolitan 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 22&24 23,096,231,665 21,153,924,617 Rental of facilities and equipment 25 84,099,157 76,002,723 Interest earned on outstanding debtors 22 354,577,088 393,388,972 Income from agency services 2256 246,003,581 305,156,458 Licences and permits 22 32,915,237 43,989,029 Other income 28 154,054,203 235,914,589 Interest revenue 27 306,732,178 393,246,152 Gains on sale of assets 22 18,039,993 - Total revenue from exchange transactions 24,292,653,102 22,601,622,540 Revenue from non-exchange transactions Taxation revenue Property rates 23 5,668,546,859 5,395,430,732 Property rates - penalties and collection charges 23 83,401,449 83,532,438 Transfer revenue Government grants & subsidies 26 8,402,560,341 7,724,271,767 Public contributions and donations 143,384,792 29,628,665 Fines 22 720,757,605 820,850,338 Total revenue from non-exchange transactions 15,018,651,046 14,053,713,940 Total revenue 22 39,311,304,148 36,655,336,480 Expenditure Employee related costs 29 (8,769,926,678) (8,280,628,317) Remuneration of councillors 30 (141,224,613) (137,935,967) Depreciation and amortisation 31 (2,613,405,797) (2,345,909,609) Impairment and derecognition loss 32 (43,793,819) (93,738,466) Finance costs 33 (1,187,412,121) (891,518,673) Debt impairment 34 (3,702,413,924) (4,136,551,991) Collection costs (114,868,883) (127,898,248) Bulk purchases 35 (15,932,324,318) (14,021,782,715) Contracted services 37 (2,527,617,945) (2,469,896,901) Grants and subsidies paid 38 (1,490,674,297) (1,808,075,875) Loss on disposal of capital assets - (14,596,043) General expenses 39 (3,041,181,627) (3,280,959,279) Total expenditure (39,564,844,022) (37,609,492,084) Deficit for the year (253,539,874) (954,155,604) 5 City of Ekurhuleni Metropolitan Municipality Annual Financial Statements for the year ended 30 June 2020 Statement of Changes in Net Assets Accumulated Total net assets Figures in Rand surplus Opening balance as previously reported 49,015,487,733 49,015,487,733 Correction of errors (50,589,385) (50,589,385) Restated* Balance at 01 July 2018 48,964,898,350 48,964,898,350 Changes in net assets Deficit for the year (954,155,604) (954,155,604) Total changes (954,155,604) (954,155,604) Balance at 01 July 2019 48,010,742,745 48,010,742,745 Changes in net assets Surplus for the year (253,539,874) (253,539,874) Total changes (253,539,874) (253,539,874) Balance at 30 June 2020 47,757,202,871 47,757,202,871 6 City of Ekurhuleni Metropolitan 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 on: Property rates 3,508,234,590 3,902,329,664 Income from rendering of services 21,304,416,193 19,193,651,433 Grants - operational 5,934,834,599 6,039,892,885 Grants - capital 2,000,734,540 2,067,209,453 Interest income 306,732,178 786,635,124 Other receipts 1,079,943,623 1,554,217,697 34,134,895,723 33,543,936,256 Payments to: Employees (9,129,815,589) (8,428,033,593) Suppliers (20,385,667,595) (19,787,359,316) Finance costs (897,530,823) (616,152,368) Other payments (1,582,328,573) (1,588,092,553) (31,995,342,580) (30,419,637,830) Net cash flows from operating activities 40 2,139,553,143 3,124,298,426 Cash flows from investing activities Purchase of property, plant and equipment (PPE) 4 (4,507,730,216) (5,713,632,916) Purchase of investment property 3 (38,829,032) (13,563,059) Purchase of intangible assets 5 (277,269,527) (258,397,644) Decrease in investments (383,959,789) 83,123,862 Increase in long term receivables (15,985) (11,391) Net cash flows from investing activities (5,207,804,548) (5,902,481,148) Cash flows from financing activities Long-term liabilities raised 1,650,000,000 3,000,000,000 Repayment of long term liabilities (368,405,608) (318,729,157) Net cash flows from financing activities 1,281,594,392 2,681,270,843 Net decrease in cash and cash equivalents (1,786,657,013) (96,911,879) Cash and cash equivalents at the beginning of the year 3,430,881,905 3,527,793,784 Cash and cash equivalents at the end of the year 15 1,644,224,892 3,430,881,905 7 City of Ekurhuleni Metropolitan Municipality Annual Financial Statements for the year ended 30 June 2020 Statement of Comparison of Budget and Actual Amounts Budget on Accrual Basis Approved budget Adjustments Final Budget Actual amounts Difference Reference on comparable between final basis budget and Figures in Rand actual Statement of Financial Performance Revenue Revenue from exchange transactions Service charges 24,549,978,488 (872,864,297) 23,677,114,191 23,096,231,665 (580,882,526) 58 Rental of facilities and equipment 89,450,572 (8,606,344) 80,844,228 84,099,157 3,254,929 58 Interest earned on outstanding 500,463,108 - 500,463,108 354,577,088 (145,886,020) 58 debtors Income from agency services 305,764,329 (56,473,421) 249,290,908 246,003,581 (3,287,327) 58 Licences and permits 54,329,293 441,636 54,770,929 32,915,237 (21,855,692) 58 Other income 175,280,129 (2,950,000) 172,330,129 154,054,203 (18,275,926) 58 Interest revenue 434,099,216 - 434,099,216 306,732,178 (127,367,038) 58 Total revenue from exchange 26,109,365,135 (940,452,426) 25,168,912,709 24,274,613,109 (894,299,600) transactions Revenue from non-exchange transactions Taxation revenue Property rates 6,140,478,219 - 6,140,478,219 5,668,546,859 (471,931,360) 58 Property rates - penalties and 55,402,125 - 55,402,125 83,401,449 27,999,324 58 collection charges Transfer revenue Government grants & subsidies 8,497,563,754 408,347,962 8,905,911,716 8,402,560,341 (503,351,375) 58 Public contributions and donations - - - 143,384,792 143,384,792 58 Fines 363,795,955 434,396,805 798,192,760 720,757,605 (77,435,155) 58 Total revenue from non-exchange 15,057,240,053 842,744,767 15,899,984,820 15,018,651,046 (881,333,774) transactions Total revenue 41,166,605,188 (97,707,659) 41,068,897,529 39,293,264,155 (1,775,633,374) Expenditure Employee related cost (9,373,707,111) 336,719,421 (9,036,987,690) (8,769,926,678) 267,061,012 58 Remuneration of councillors (139,695,066) (3,100,000) (142,795,066) (141,224,613) 1,570,453 58 Depreciation and amortisation (2,119,771,357) - (2,119,771,357) (2,613,405,797) (493,634,440) 58 Impairment and derecognition loss - - - (43,793,819) (43,793,819) 58 Finance costs (1,039,013,274) 227,000,000 (812,013,274) (1,187,412,121) (375,398,847) 58 Debt Impairment (1,571,974,175) (1,408,283,344) (2,980,257,519) (3,702,413,924) (722,156,405) 58 Collection costs (181,011,406) 54,296,218 (126,715,188) (114,868,883) 11,846,305 58 Bulk purchases (16,554,571,360) 620,651,699 (15,933,919,661)(15,932,324,318) 1,595,343 58 Contracted Services (2,309,345,648) (648,047,559) (2,957,393,207) (2,527,617,945) 429,775,262 58 Grants and Subsidies (1,646,010,271) 27,662,975 (1,618,347,296) (1,490,674,297) 127,672,999 58 General Expenses (3,592,661,960) 329,425,218 (3,263,236,742) (3,041,181,627) 222,055,115 58 Total expenditure (38,527,761,628) (463,675,372)(38,991,437,000)(39,564,844,022) (573,407,022) Operating deficit 2,638,843,560 (561,383,031) 2,077,460,529 (271,579,867) (2,349,040,396) Loss on disposal of capital assets (15,307,321) - (15,307,321) 18,039,993 33,347,314 58 Deficit before taxation 2,623,536,239 (561,383,031) 2,062,153,208 (253,539,874) (2,315,693,082) Actual Amount on Comparable 2,623,536,239 (561,383,031) 2,062,153,208 (253,539,874) (2,315,693,082) Basis as Presented in the Budget and Actual Comparative Statement 8 City of Ekurhuleni Metropolitan Municipality Annual Financial Statements for the year ended 30 June 2020 Statement of Comparison of Budget and Actual Amounts (Appropriation Statement) Figures in Rand Original budget Budget Final Shifting of Virement (i.t.o. Final budget Actual outcomeUnauthorised Variance Actual Actual adjustments adjustments funds (i.t.o. s31 council expenditure outcome outcome (i.t.o. s28 and budget of the MFMA) approved as % of as % of s31 of the policy) final original MFMA) budget budget 2020 Financial Performance Property rates 6,195,880,344 - 6,195,880,344 - 6,195,880,344 5,751,948,308 (443,932,036) 93% 93% Service charges 24,549,978,488 (873,003,508) 23,676,974,980 - 23,676,974,980 23,096,231,665 (580,743,315) 98% 94% Investment revenue 434,099,216 - 434,099,216 - 434,099,216 306,732,178 (127,367,038) 71% 71% Transfers recognised - 5,874,142,146 969,730,993 6,843,873,139 - 6,843,873,139 6,386,562,658 (457,310,481) 93% 109% operational Other own revenue 1,489,083,386 366,947,887 1,856,031,273 - 1,856,031,273 1,610,446,864 (245,584,409) 87% 108% Total revenue (excluding 38,543,183,580 463,675,372 39,006,858,952 - 39,006,858,952 37,151,921,673 (1,854,937,279) 95% 96% capital transfers and contributions) Employee costs (9,373,707,111) 336,718,826 (9,036,988,285) - 595 (9,036,987,690) (8,769,926,678) - 267,061,012 97% 94% Remuneration of councillors (139,695,066) (3,100,000) (142,795,066) - - (142,795,066) (141,224,613) - 1,570,453 99% 101% Debt impairment (1,571,974,175) (1,408,283,344) (2,980,257,519) (2,980,257,519) (3,702,413,924) - (722,156,405) 124% 236% Depreciation and asset (2,119,771,357) - (2,119,771,357) (2,119,771,357) (2,657,199,616) - (537,428,259) 125% 125% impairment Finance charges (1,039,013,274) 227,000,000 (812,013,274) - - (812,013,274) (1,187,412,121) - (375,398,847) 146% 114% Materials and bulk purchases (16,554,571,360) 620,651,699 (15,933,919,661) - - (15,933,919,661)(15,932,324,318) - 1,595,343 100% 96% Transfers and grants (1,646,010,271) 28,333,619 (1,617,676,652) - (670,644) (1,618,347,296) (1,490,674,297) - 127,672,999 92% 91% Other expenditure (6,098,326,335) (264,996,172) (6,363,322,507) - 670,049 (6,362,652,458) (5,683,668,455) - 678,984,003 89% 93% Total expenditure (38,543,068,949) (463,675,372)(39,006,744,321) - - (39,006,744,321)(39,564,844,022) - (558,099,701) 101% 103% Surplus/(Deficit) 114,631 - 114,631 - 114,631 (2,412,922,349) (2,413,036,980(2),104,947)%(2,104,947)% Transfers recognised - capital 2,623,421,608 (561,383,031) 2,062,038,577 - 2,062,038,577 2,015,997,683 (46,040,894) 98% 77% Contributions recognised - - - - - - 143,384,792 143,384,792 -% -% capital and contributed assets Surplus (Deficit) after 2,623,536,239 (561,383,031) 2,062,153,208 - 2,062,153,208 (253,539,874) (2,315,693,082) (12)% (10)% capital transfers and contributions Surplus/(Deficit) for the 2,623,536,239 (561,383,031) 2,062,153,208 - 2,062,153,208 (253,539,874) (2,315,693,082) (12)% (10)% year 9