KAROO HOOGLAND LOCAL MUNICIPALITY STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2015 Notes 2015 2014 R R NET ASSETS AND LIABILITIES Net Assets 273 197 345 277 788 031 Accumulated Surplus/(Deficit) 273 197 345 277 788 031 Non-Current Liabilities 14 630 937 13 910 472 Long-term Liabilities 2 2 529 318 2 701 696 Employee benefits 3 4 329 000 3 823 000 Non-Current Provisions 4 7 772 619 7 385 776 Current Liabilities 32 591 569 30 263 576 Consumer Deposits 5 168 100 284 575 Current Employee benefits 6 1 558 688 1 824 130 Provisions 4 21 835 207 20 748 470 Trade and other payables 7 7 963 433 6 204 978 Unspent Conditional Government Grants and Receipts 8 771 177 930 902 Current Portion of Long-term Liabilities 2 294 965 270 521 Total Net Assets and Liabilities 320 419 852 321 962 079 ASSETS Non-Current Assets 310 812 594 312 826 247 Property, Plant and Equipment 10 281 533 225 282 295 837 Investment Property 11 25 252 145 25 602 580 Intangible Assets 12 308 994 319 981 Capitalised restoration cost 4.1 243 537 1 265 335 Long-Term Receivables 13 3 474 691 3 342 514 Current Assets 9 607 258 9 135 833 Inventory 14 7 900 21 890 Trade Receivables from exchange transactions 15 5 175 731 4 739 099 Other Receivables from non-exchange transactions 16 1 220 788 1 156 924 Taxes 9.3 284 367 68 737 Cash and Cash Equivalents 17 2 918 473 3 149 182 Total Assets 320 419 853 321 962 080 Page 8 KAROO HOOGLAND LOCAL MUNICIPALITY STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2015 2015 2014 Notes (Actual) (Actual) R R REVENUE Revenue from Non-exchange Transactions 35 281 976 33 576 667 Taxation Revenue 4 780 315 4 565 586 Property taxes 18 4 563 285 4 303 445 Property Rates - penalties imposed and collection charges 18 217 030 262 140 Transfer Revenue 30 469 596 29 005 563 Government Grants and Subsidies - Capital 19 11 972 787 11 494 212 Government Grants and Subsidies - Operating 19 18 495 973 17 509 866 Public Contributions and Donations 20 835 1 485 Other Revenue 32 066 5 519 Actuarial Gains 26 456 - Fines 5 610 5 519 Revenue from Exchange Transactions 16 270 605 14 066 419 Service Charges 21 13 472 679 12 106 329 Rental of Facilities and Equipment 688 612 695 194 Interest Earned - external investments 197 300 146 147 Interest Earned - outstanding debtors 915 447 525 780 Licences and Permits - 78 792 Agency Services 216 998 220 798 Other Income 22 779 569 293 380 Total Revenue 51 552 581 47 643 086 EXPENDITURE Employee related costs 23 17 132 072 17 140 952 Remuneration of Councillors 24 1 905 710 1 691 001 Debt Impairment 25 1 531 993 120 865 Depreciation and Amortisation 26 11 269 202 10 802 884 Repairs and Maintenance 3 076 273 772 000 Actuarial losses 3 25 754 - Finance Charges 27 2 039 900 1 753 475 Bulk Purchases 28 6 488 302 6 541 859 Grants and Subsidies Paid 29 - 2 900 Other Operating Grant Expenditure 30 3 076 031 6 223 968 General Expenses 31 8 152 898 2 728 257 Total Expenditure 54 698 134 47 778 160 Operating Surplus / (deficit) for the Year (3 145 553) (135 074) Gain / (Loss) on disposal of Property, Plant and Equipment (1 443 773) 234 907 NET SURPLUS/(DEFICIT) FOR THE YEAR (4 589 326) 99 833 Page 9 KAROO HOOGLAND LOCAL MUNICIPALITY STATEMENT OF CHANGES IN NET SURPLUS FOR THE YEAR ENDED 30 JUNE 2015 Accumulated Total Surplus/ (Deficit) Balance 1 July 2013 as previously reported 176 528 161 176 528 161 Adjustments to opening balance. Refer to note 49.16 101 160 037 101 160 037 Restated opening balance 1 July 2013 277 688 198 277 688 198 Restated deficit for the year. Refer to note 49.17 99 833 9 9 833 Balance 30 June 2014 277 788 031 277 788 031 - Net deficit for the year (4 589 326) (4 589 326) Balance 30 June 2015 2 73 197 345 273 198 705 Page 10 Karoo Hoogland Municipality Statement of Cash Flows for the year ended 30 June 2015 Note 2015 2014 R R CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts 48 746 035 48 550 380 Rate payers and other 17 742 258 18 473 253 Government grants 29 891 030 29 930 980 9 15 447 Interest 1 97 300 146 147 Payments ( 37 859 362) 36 624 423 Suppliers and employees ( 35 819 463) 36 117 819 Finance charges (2 039 900) 5 06 604 Net cash from operating activities 32 10 886 673 11 925 957 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment ( 10 699 523) ( 10 278 809) Purchase of intangible assets (21 271) - Net cash from investing activities ( 10 720 794) ( 10 278 809) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of long term liabilities (147 934) (83 226) Decrease in long term receivables (132 178) 9 41 398 Increase in consumer deposits (116 475) (14 375) Net cash from financing activities (396 587) 8 43 796 Net increase/(decrease) in cash and cash equivalents (230 709) 2 490 944 Cash and cash equivalents in the beginning of the year 3 149 182 6 58 238 Cash and cash equivalents at the end of the year 2 918 473 3 149 182 Page 11 KAROO HOOGLAND LOCAL MUNICIPALITY REVENUE AND EXPENDITURE ACTUAL VERSUS BUDGET FOR THE YEAR ENDED 30 JUNE 2015 2015 2015 2015 Actual (R) Budget (R) Variance (R) REVENUE Property Rates 4 563 285 4 861 787 ( 298 502) Government Grants and Subsidies 30 468 761 28 607 149 1 861 612 Public Contributions and Donations 835 - 8 35 Fines 5 610 6 100 (490) Actuarial Gains 26 456 - 26 456 Property Rates - Penalties & Collection Charges 217 030 - 217 030 Service Charges 13 472 679 14 090 665 ( 617 986) Rental of Facilities and Equipment 688 612 461 300 227 312 Interest Earned - External Investments 197 300 55 000 142 300 Interest Earned - Outstanding Debtors 915 447 764 670 150 777 Agency Services 216 998 203 000 13 998 Other Revenue 779 569 136 876 642 693 - Total Revenue 51 552 581 49 186 547 2 366 034 EXPENDITURE Employee Related Costs 17 132 072 18 157 194 ( 1 025 122) Remuneration of Councillors 1 905 710 1 972 994 (67 284) Depreciation and Amortisation 11 269 202 14 652 800 ( 3 383 598) Debt Impairment 1 531 993 - 1 531 993 Repair and Maintenance 3 076 273 1 169 700 1 906 573 Finance Charges 2 039 900 293 500 1 746 400 Actuarial Losses 25 754 - 25 754 Bulk Purchases 6 488 302 6 800 000 ( 311 698) Operating Grant Expenditure 3 076 031 2 734 000 342 031 General Expenses 8 152 898 7 532 198 620 700 Total Expenditure 54 698 134 53 312 386 1 385 748 SURPLUS / (DEFICIT) FOR THE YEAR (3 145 553) (4 125 839) 3 751 782 Capital expenditure 10 720 794 9 490 000 1 230 794 Explanations for variances are included in note 50. Page 12 Karoo Hoogland Municipality Notes to the Financial Statements for the year ended 30 June 2015 2015 2014 R R 2 LONG TERM LIABILITIES Annuity Loans - At amortised cost 2 626 694 2 791 719 Less : Current portion transferred to current liabilities (173 141) (165 024) 2 453 553 2 626 694 Capitalised lease liability at amortised cost 197 589 180 498 Less : Current portion transferred to current liabilities (121 824) (105 496) 75 764 75 002 Total liabilities at amortised cost 2 824 283 2 972 217 Less : Current portion transferred to current liabilities (294 965) (270 521) Total Long term liabilities at amortised cost 2 529 318 2 701 696 A cession over the income stream of the Municiplaity is pledge as security, covering the instalments plus interest and collection charges outstanding at any time during the term of the DBSA loan. Refer below for maturity dates of long term liabilities The obligations under the maturity loans are scheduled as follows: Minimum payments Within one year 300 915 300 915 Within two years 300 915 300 915 Within five years 1 504 577 1 504 577 More than 5 years 1 353 784 1 654 720 3 460 191 3 761 127 Less: Future finance obligations (833 497) (969 408) Present value of annuity obligations 2 626 694 2 791 719 Annuity loans at amortised cost is calculated at 5% -10.5% interest rate, with a maturity date of 31 December 2026 The obligations under the lease liability are scheduled as follows: Minimum payments Within one year 157 701 139 595 Within two years 85 242 80 228 Within five years - 7 770 242 943 227 593 Less: Future finance obligations (45 354) (47 096) 197 589 180 498 Leases are secured by property, plant and equipment 3 EMPLOYEE BENEFITS Post Retirement Benefits - Refer to Note 2 854 000 2 612 000 Long Service Awards - Refer to Note 3.2 1 475 000 1 211 000 Total Non-current Employee Benefit Liabilities 4 329 000 3 823 000 Post Retirement Benefits Balance 1 July 2 816 000 2 780 000 Interest for the year 262 000 191 000 Contribution for the year 39 000 42 000 Change in accounting estimate - Refer to note 48 201 000 Less : Expenditure for the year (226 544) (197 000) Actuarial Loss/(Gain) (26 456) - Total post retirement benefits 30 June 3 065 000 2 816 000 Less: Transfer of Current Portion - Note 6 (211 000) (204 000) Balance 30 June 2 854 000 2 612 000 Page 37 Karoo Hoogland Municipality Notes to the Financial Statements for the year ended 30 June 2015 2015 2014 R R 3 EMPLOYEE BENEFITS (CONTINUE) Long Service Awards Balance 1 July 1 315 000 1 215 000 Interest for the year 103 000 88 000 Contribution for the year 130 000 111 000 Change in accounting estimate - Refer to note 48 (25 000) Less : Expenditure for the year (35 754) (99 000) Actuarial Loss/(Gain) 25 754 - Total long service 30 June 1 513 000 1 315 000 Less: Transfer of Current Portion - Note 6 (38 000) (104 000) Balance 30 June 1 475 000 1 211 000 TOTAL NON-CURRENT EMPLOYEE BENEFITS Balance 1 July 4 131 000 3 995 000 Interest for the year 365 000 279 000 Contribution for the year 169 000 153 000 Change in accounting estimate - Refer to note 48 176 000 Less : Expenditure for the year (262 298) (296 000) Actuarial Loss/(Gain) (702) - Total employee benefits 30 June 4 578 000 4 131 000 Less: Transfer of Current Portion - Note 6 (249 000) (308 000) Balance 30 June 4 329 000 3 823 000 Post Retirement medical aid benefits The Post Retirement Benefit Plan is a defined benefit plan, of which the members are made up as follows: In-service (employee) members 7 7 Continuation members (e.g. Retirees, widows, orphans) 4 5 Total Members 11 12 The liability in respect of past service has been estimated to be as In-service members 866 000 611 000 Continuation members 2 199 000 2 169 000 Total Liability 3 065 000 2 780 000 The liability in respect of periods commencing prior the comparative year has been estimated as follows: 2014 2013 R R Members 2 780 000 2 722 090 Total liability 2 780 000 2 722 090 The municipality makes monthly contributions for health care arrangements to the following medical aid schemes: Bonitas Fedhealth Hosmed Key Health LA Health Samwumed Page 38 Karoo Hoogland Municipality Notes to the Financial Statements for the year ended 30 June 2015 3 Employment benefits (Continued) The future service cost for the ensuing year is estimated to be R47 000 and the interest cost for the next year is estimated to be R273 000. Sensitivity analysis on future service cost and interest cost Percent Service Interest Total Percent Change Cost Cost Cost Change % R R R % Central assumption 47 000 273 000 320 000 Health care inflation 1% 59 000 307 000 366 000 14% Health care inflation -1% 37 000 245 000 282 000 -12% Mortality rates 20% 42 000 247 000 289 000 -10% Mortality rates -20% 53 000 307 000 360 000 13% Sensitivity analysis on the accrued liability Percent In service Continue Total Percent Change members members liability Change % R R R % Central assumptions 866 000 2 199 000 3 065 000 Health care inflation 1% 967 434 2 456 566 3 424 000 12% Health care inflation -1% 780 671 1 982 329 2 763 000 -10% Mortality rates 20% 786 040 1 995 960 2 782 000 -9% Mortality rates -20% 969 411 2 461 589 3 431 000 12% 2015 2014 Key actuarial assumptions applied: % % Rate of interest Discount rate 7 7 Health care cost assumption rate 6 6 Net effective discount rate 0.94 0.94 The discount rate used is a composite of all government bonds and is calculated using a technique known as "bootstrapping". Mortality rates The PA 90 ultimate table, rated down by 1 year was used by the actuaries. Normal retirement age It is assumed that in-service members will retire at the age of 65, which then implicitly allows for expected rates of early and ill-health retirements. Page 38 Karoo Hoogland Municipality Notes to the Financial Statements for the year ended 30 June 2015 3 Employment benefits (Continued) The amounts recognised in the Statement of Financial position are as follows: 2015 2014 R R Present value of fund obligations 3 065 000 2 780 000 Total liability 3 065 000 2 780 000 The fund is wholly unfunded. The municipality has elected to recognise the full amount in the defined benefit liability immediately as per IAS 19, Employee Benefits, paragraph 155(a) and GRAP 25. 2015 2014 Reconciliation of present value of fund obligation R R Present value of fund obligation at the beginning of the year 2 816 000 2 780 000 Amount expensed for the year 2 75 456 36 000 Change in accounting estimate - Refer to note 48 2 01 000 Contribution for the year 3 9 000 42 000 Interest cost 2 62 000 191 000 Expenditure for the year (226 544) (197 000) Actuarial (gains)/losses (26 456) - Present value of fund obligation at the end of the year 3 065 000 2 816 000 Less: Transfer to current portion - Note 6 (211 000) (204 000) Balance 30 June 2 854 000 2 612 000 3.2 Long service awards The long service awards plans are defined benefit plans. As at year end, 78 (2014 = 108) employees were eligible for long service awards. The current service cost for the ensuing year is estimated to be R143 000 (2014 = R130 000), whereas the interest cost for the next year is estimated to be R141 000 (2013 = R103 000) 2015 2014 Key actuarial assumptions applied: % % Rate of interest Discount rate 7.96 7 Health care cost assumption rate 5.5 5.5 Consumer price index (CPI) 6.33 6.33 Net effective discount rate 0.59 1.42 The discount rate used is a composite of all government bonds and is calculated using a technique known as "bootstrapping". Page 39 Karoo Hoogland Municipality Notes to the Financial Statements for the year ended 30 June 2015 2015 2014 R R 3 Employment benefits (Continued) Sensitivity analysis on the future service cost and interest cost Percent Current Interest Total Percent Change Service Cost Expense Change % R R R % Central assumptions 1 43 000 141 000 284 000 Normal salary inflation +1% 1 55 000 153 000 308 000 8% Normal salary inflation -1% 1 32 000 131 000 263 000 -7% Withdrawal rates 20% 1 32 000 132 000 264 000 -7% Withdrawal rates -20% 1 56 000 152 000 308 000 8% The amounts recognised in the Statement of Financial Position are as follows: 2015 2014 R R Present value of fund obligations 1 513 000 1 315 000 Net liability 1 513 000 1 315 000 2015 2014 Reconciliation of present value of fund obligation R R Present value of fund obligation at the beginning of the year 1 315 000 1 215 000 Amount expensed for the year 172 246 100 000 Change in accounting estimate - Refer to note 48 ( 25 000) Contribution for the year 130 000 1 11 000 Interest cost 103 000 8 8 000 Expenditure for the year ( 35 754) (99 000) Actuarial (gains)/losses 25 754 - Present value of fund obligation at the end of the year 1 513 000 1 315 000 Less: Transfer to current portion - Note 6 ( 38 000) (104 000) Balance 30 June 1 475 000 1 211 000 The liability in respect of periods commencing prior to the 2014 2013 comparative year has been estimated as follows: R R Members 1 215 000 724 082 Total liability 1 215 000 7 24 082 No experience adjustments were estimated. Page 40