Msukaligwa Local Municipality Annual Financial Statements for the year ended 30 June 2020

Msukaligwa Local Municipality (Registration number MP302) Annual Financial Statements for the year ended 30 June 2020

General Information

Legal form of entity Local Municipality

Mayoral committee

Executive Mayor Cllr. B.J. Mkhaliphi Speaker Cllr. M.P. Nkosi Chief Whip Cllr. P.E. Mashiane MMC - Corporate Services Cllr. J.A. Bal

MMC - Technical Services Clir. E.C. Msezane MMC - Community and Social Services Clir. T.A. Mnisi MMC - Finance Clir. B.J. Mkhaliphi MMC - Planning Economic Development Clir. J.S. Bongwe Councillors Clir. T.C. Motha

Clir. Z. Breydenbach Clir. G.S. Greyling Clir. B.I. Jiyane

Clir. F.J. Mabasa Clir. B.I. Mabuza Clir. M.E. Madonsela Clir. L.S. Mahlangu Clir. L.A. Maseko Clir. M.Z.M. Mashiane Clir. P.E. Mashiane Clir. V.V. Mazibuko Clir. L.D. Mndebele Clir. T.J. Madlala Clir. P.F. Moloyi

Clir. B.N.N. Ndlovu Clir. D.M. Nkambule Clir. T. Nkosi

Clir. Z.J. Nkosi

Clir. J.J. Nzimande Clir. P.T. Sibeko Clir. B.J.M. Sithole Clir. H.F. Swart

Clir. D.J. Litau

Clir. M.R. Yende Clir. Z.K. Dhludhlu Clir. J.D.A. Blignaut Clir. M.J. Blose

Clir. L.N.V. Kubheka Cllir. D. Mabunda Clir. N.H. Magagula Cllr. M. Sibeko

Msukaligwa Local Municipality

(Registration number MP302)

Annual Financial Statements for the year ended 30 June 2020

General Information

Grading of local authority Accounting Officer Chief Finance Officer (CFO)

Acting Chief Finance Officer (ACFO)

Registered office

Business address

Postal address

Bankers

Auditors

Attorneys

Rounding Website

Contact number

4 GJ Majola Ms. M.M.P. Matsheka - on suspension

Mr. S Phiri

Civic Centre

C/o Kerk and Taute Street Ermelo

2350

Civic Centre

C/o Kerk and Taute Street Ermelo

2350

PO Box 48 Ermelo 2350

First National Bank Limited Standard Bank Limited

Auditor-General of South Africa Registered Auditors

TMN Kgomo & Associates Mhlongo Khumalo Attorney Gildenhuys Malatji Attorneys Mohlala Attorneys Sefalafala Attorneys

Julie Mahommed Attorneys Marivate Attorneys

L Guzana Inc

Madonsela Mthunzi Inc

All amounts have been rounded to the nearest R1 www.msukaligwa.gov.za

Tel: 017 8611 Msuka (086 116 7852) Fax: 017 801 3851

Msukaligwa Local Municipality (Registration number MP302)

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:

Abbreviations

Accounting Officer's Responsibilities and Approval Audit Committee Report

Accounting Office's Report

Statement of Financial Position

Statement of Financial Performance

Statement of Changes in Net Assets

Cash Flow Statement

Statement of Comparison of Budget and Actual Amounts Appropriation Statement

Accounting Policies

Notes to the Annual Financial Statements

Page

4

10 11 12 13 14-16 17-19 20 - 52

53 - 107

Msukaligwa Local Municipality (Registration number MP302) Annual Financial Statements for the year ended 30 June 2020

Abbreviations

AGSA Auditor-General of South Africa

CRR Capital Replacement Reserve

COID Compensation for Occupational Injuries and Diseases DBSA Development Bank of South Africa

GRAP Generally Recognised Accounting Practice

HDF Housing Development Fund

IAS International Accounting Standards

IMFO Institute of Municipal Finance Officers

IPSAS International Public Sector Accounting Standards MEC Member of the Executive Council

MFMA Municipal Finance Management Act

MIG Municipal Infrastructure Grant (Previously CMIP) Mscoa Municipal Standard Chart of Accounts

SA GAAP South African Statements of Generally Accepted Accounting Practice

Msukaligwa Local Municipality (Registration number MP302) Annual Financial Statements for the year ended 30 June 2020

Accounting Officer's Responsibilities and Approval

The accounting officer is required by the Municipal Finance Management Act (Act 56 of 2003), to maintain adequate accounting records and are 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 officers 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 was 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.

The accounting officer acknowledge that they is 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 officers to meet these responsibilities, the accounting officer 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 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.

The accounting officer has 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, they are satisfied that the municipality has or has access to adequate resources to continue in operational existence for the foreseeable future.

The municipality is wholly dependent on the Municipality for continued funding of operations. The annual financial statements are prepared on the basis that the municipality is a going concern and that the Municipality has neither the intention nor the need to liquidate or curtail materially the scale of the municipality.

Although the accounting officer is primarily responsible for the financial affairs of the municipality, they are supported by the municipality's internal auditors.

The annual financial statements set out on page 9, which have been prepared on the going concern basis, were approved by

the accounting officer on 31 October 2020 in line with the extension granted by the Minister of Finance Government gazette number 43582 dated 5 August 2020 and were signed on its behalf by:

Municipal Manager

Ermelo Saturday, 31 October 2020

Msukaligwa Local Municipality (Registration number MP302) Annual Financial Statements for the year ended 30 June 2020

Audit Committee Report

1. Audit committee members and attendance

The Audit committee consists of the members listed hereunder and should meet four times a year, as per its approved terms of reference. During the current year eight number of meetings were held.

Name of member Number of meetings attended N. Marobane 8 B.P. Mosomane 8 F. Mudau 7

2. Audit committee responsibility The Audit committee reports that it has complied with its responsibilities arising from section 166(2)(a) of the MFMA.

The Audit committee also reports that it has adopted appropriate formal terms of reference as its audit committee charter, has regulated its affairs in compliance with this charter and has discharged all its responsibilities as contained therein.

3. The effectiveness of internal control

The system of internal controls applied by the municipality over financial and risk management is effective, efficient and transparent. In line with the MFMA and the King IV report on Corporate Governance requirements, Internal audit provides the audit committee and management with assurance that the internal controls are appropriate and effective. This is achieved by means of the risk management process, as well as the identification of corrective actions and suggested enhancements to the controls and processes. From the various reports of the Internal auditors, the Audit report on the annual financial statements, and the management report of the Auditor-General South Africa, it was noted that no matters were reported that indicate any material deficiencies in the system of internal control or any deviation therefrom. Accordingly, we can report that the system of internal controls over financial reporting for the period under review was efficient and effective.

The quality of in year management and monthly/quarterly reports submitted in terms of the MFMA and the Division of Revenue Act.

The Audit committee is satisfied with the content and quality of monthly and quarterly report prepared and issued by the Accounting Officer of the municipality during the year under review.

4. internal audit

The Audit committee is satisfied that the internal audit function is operating effectively and that it has addressed the risks pertinent to the municipality and its audits.

Msukaligwa Local Municipality (Registration number MP302) Annual Financial Statements for the year ended 30 June 2020

Accounting Office's Report

The accounting officers submit their report for the year ended 30 June 2020.

1. Review of activities

Main business and operations

Net surplus of the municipality was R 1 400 857 (2019: deficit R 406 407 849).

2. Going concern

The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. The Provincial Executive of the Mpumalanga Provincial Government intervened in the municipality in terms of section 139(1)(b) of the Constitution and Section 139(5) of the Constitution read with Section 139 of the Municipal Finance Management Act (MFMA) (Act No. 56 of 2003).

As part of the intervention by the Provincial Executive, the Municipal Financial Recovery Services unit within the Provincial Treasury has been requested to assist with the development of a financial recovery plan for Msukaligwa Local Municipality. The financial recovery plan was developed, approved and implemented in the current financial year under review and has been monitored on a monthly basis.

The primary responsibility to avoid, identify and resolve financial problems rests with the Msukaligwa Council and the Plan must be monitored by Council, the Executive Mayor and the Municipal Manager to ensure successful implementation, and places significant implementation responsibility on the Municipal Manager, Chief Financial Officer and other senior managers.

The Municipality should move away from short term and reactionary planning to a long term stable and sustainable framework, hence the Municipality must prioritise the development of a long term spatial and financial plan that is realistic and achievable and based on sound socio-economic analysis. The financial indicators issued in MFMA Circular 71 should also be used as a basis for such a long-term financial plan.

3. Subsequent events

The accounting officer is not aware of any matter or circumstance arising since the end of the financial year.

4. Accounting Officers' interest in contracts

The accounting officer does not have any direct or indirect interest's in contracts.

5. Accounting policies

The annual financial statements prepared in accordance with Standards of Generally Recognised Accounting Practices (GRAP), including any interpretations of such Statements issued by the Accounting Practices Board, and in accordance with the prescribed Standards of Generally Recognised Accounting Practices (GRAP) issued by the Accounting Standards Board as the prescribed framework by National Treasury.

6. Accounting Officer

The accounting officer of the municipality during the year and to the date of this report is as follows:

Name Ms. G.J. Majola

Msukaligwa Local Municipality (Registration number MP302) Annual Financial Statements for the year ended 30 June 2020

Accounting Office's Report

7. Corporate governance

General

The accounting officer is committed to business integrity, transparency and professionalism in all its activities. As part of this commitment, the accounting officer supports the highest standards of corporate governance and the ongoing development of best practice.

The municipality confirms and acknowledges its responsibilities in lieu of the MFMA, MSA and related Regulations as issued from time to time by National Treasury. We further note responsibilities with regards to the requirements of King IV. The accounting officer discuss the responsibilities of management in this respect, at Council meetings and monitor the entity's compliance with the code on a three monthly basis.

The salient features of the entity's adoption of the Code is outlined below:

Audit and risk committee

In the year under review, the audit committee was established, and the audit committee members appointed are as follows:

Audit Committee members:

Position Name Date appointed Chairperson N. Marobane 31/07/2018 Members: P.B. Mosomane 31/07/2018

F. Mudau 31/07/2018 Risk Committee member: Position Name Date appointed Chairperson F. Mkhabela 31/07/2018 Performance Audit Committee members: Position Name Date appointed Chairperson N. Marobane 31/07/2018 Members: P.B. Mosomane 31/07/2018

F. Mudau 31/07/2018

In terms of Section 166 of the Municipal Finance Management Act, (Act 56 of 2003), the municipality, must appoint members of the Audit Committee. Not withstanding that councillors appointed by the parent municipality constituted the municipal Audit Committees, National Treasury policy requires that municipalities should appoint further members of the entity’s audit committees who are not councillors of the municipality onto the audit committee.

Internal audit

The municipality has a fully functional Internal Audit Unit. This is in compliance with the Municipal Finance Management Act, 2003.

The Internal Audit Function must apply to IIA Standards during the course of implementation of their work. Reports are submitted quarterly to the ARC for consideration and approval.

8. Bankers

The municipality changed bank accounts during the year from Standard Bank Limited to First National Bank Limited which is used for daily operations as well as investing of grant funding.

9. Auditors

Auditor-General of South Africa will continue in office for the next financial period.

Msukaligwa Local Municipality (Registration number MP302) Annual Financial Statements for the year ended 30 June 2020

Accounting Office's Report

10. Public Private Partnership

In accordance with the PPP agreement, the Contractor shall open a separate account with a bank registered in the Republic of South Africa, for the purpose of administering and separate safekeeping of:

moneys deposited as excess surpluses;

any foreign exchange rate amounts;

any service credits; and

any penalties for later service commence mental text.

The municipality has no PPP agreements.

The annual financial statements set out from page 9, which have been prepared on the going concern basis, were approved by the accounting officer on 31 October 2020 and were signed on its behalf by:

Municipal Manager

Msukaligwa Local Municipality

(Registration number MP302)

Annual Financial Statements for the year ended 30 June 2020

Statement of Financial Position as at 30 June 2020

Figures in Rand

Assets

Current Assets

Inventories

Receivables from exchange transactions Receivables from non-exchange transactions VAT receivable

Cash and cash equivalents

Non-Current Assets Investment property

Property, plant and equipment Heritage assets

Total Assets

Liabilities

Current Liabilities

Finance lease obligation

Payables from exchange transactions Consumer deposits

Employee benefit obligation Unspent conditional grants and receipts

Non-Current Liabilities Finance lease obligation Employee benefit obligation Landfill Site Provision

Total Liabilities Net Assets

Accumulated surplus

* See Note 51

10

Note(s)

7 8&11 9&11

10 12

A

13 16 17

14

13

15

2020 2019 Restated*

17 217 334 9 760 212 83 922 928 78 991 710 29 247 213 29 775 257 162 495610 129 851 546 22 025 012 22 727 255

314 908 097 271 105 980

117018813 117 580 121 2 333 364 231 2 361 848 804 192 195 192 195

2 450 575 239 2 479 621 120 2 765 483 336 2 750 727 100

2 517 437 -

1 122 215 278 1 070 875 616 16 933 577 16 120 144

3 583 000 3 569 383

16 696 658 5 169 641

1161 945 950 1 095 734 784

1 279 349 - 59 030 000 61 189 588 59 518 621 61 610 395

119 827970 122799 983 1 281 773 920 1 218 534 767 1 483 709 416 1 532 192 333 1 483 709 416 1 532 192 333

Msukaligwa Local Municipality (Registration number MP302) 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

Rental of facilities and equipment Agency services

Other income

Interest earned

Total revenue from exchange transactions

Revenue from non-exchange transactions

Taxation revenue Property rates

Transfer revenue

Government grants & subsidies Fines

Donations received

Total revenue from non-exchange transactions Total revenue

Expenditure

Employee related costs Remuneration of councillors Repairs and Maintenance Depreciation

Finance costs

Debt Impairment

Bulk purchases

Contracted services General Expenses

Total expenditure Operating surplus (deficit)

Loss on disposal of assets and liabilities Fair value adjustments

Actuarial gain

(Impairment loss)/Reversal of impairments Inventories (losses)/gains

Surplus (deficit) for the year

* See Note 51 11

18 19 21 22 23

24

25 20 26

27 28 29 4 30 31 32 33 34

363 516 361 2 892 409

7 767 956 15 808 231 39 755 456

429 740 413

115 906 363

296 801 924 5 751 059 2 675 968

421 135 314 850 875 727

(235 666 695 (15 651 343 (41 783 789

(125 006 552 (30 925 412 (73 202 037

(216 536 367 (58 092 598 (47 775 582)

©aa wre ve Ye rer wa

319 831 756 2 068 262

9 813 696 18 611 930 33 311 041

383 636 685

108 686 659

246 144 895 6 783 051 10 124 629

371 739 234 755 375 919

(211 447 691 (15 145 232 (27 981 713

(125 037 190 (37 240 985

(105 431 824

(524 248 675 (49 203 931 (72 856 802)

wero Tr DS SYS DS

(844 640 375)(1 168 594 043)

6 235 352 (11 327 569) 819 502

7 626 181 (4 542 627) 2 590 018

(4 834 495)

1 400 857

(413 218 124) (5 563 832) 4 005 640 6 312 813 1 262 867 792 787

6 810 275 (406 407 849)

Msukaligwa Local Municipality (Registration number MP302) Annual Financial Statements for the year ended 30 June 2020

Statement of Changes in Net Assets

Figures in Rand

Opening balance as previously reported Adjustments Correction of errors

Balance at 01 July 2018 as restated* Changes in net assets Surplus for the year

Total changes

Opening balance as previously reported Adjustments

Correction of errors

Prior year adjustments

Restated* Balance at 01 July 2019 as restated* Changes in net assets Surplus for the year

Total changes Balance at 30 June 2020

Note(s)

* See Note 51

12

Accumulated Total net surplus assets

1 831 591 655 1 831 591 655

107008 527 107 008 527 1 938 600 182 1 938 600 182

(406 407 849) (406 407 849) (406 407 849) (406 407 849) 1 883 989 588 1883 989 588 (39 715481) (39715 481) (361 965 548) (361 965 548) 1 482 308 559 1 482 308 559

1 400 857 1 400 857 1 400 857 1 400 857 1 483 709 416 1 483 709 416

Msukaligwa Local Municipality (Registration number MP302) Annual Financial Statements for the year ended 30 June 2020

Cash Flow Statement

Figures in Rand

Cash flows from operating activities

Receipts Property rates Services Grants

Interest income Other receipts

Payments Employee costs Suppliers Finance costs

Net cash flows from operating activities

Cash flows from investing activities

Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Purchase of investment property

Net cash flows from investing activities Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

Cash and cash equivalents at the end of the year

* See Note 51

13

Note(s)

36

AAR

12

2020 2019 Restated* 84 234 484 82 575 027

404 412073 241 207 472 296 801924 210 946 586

1 845 430 - 188 567026 221 977 311

975 860 937 756 706 396

(251 318 038 (537 187 316

(210 021 218) (629 127 439) (30 925 412 >

(819 430 766) (839 148 657) 156 430 171 (82 442 261)

a a

(118 040 059) (107 197 257) 559 523 1 250 183 ` (5 975)

(117 480 536) (105 953 049)

(2 508 920) 22 091 444 24 533 932 2 442 488

22 025 012 24 533 932

Msukaligwa Local Municipality

(Registration number MP302)

Annual Financial Statements for the year ended 30 June 2020

Statement of Comparison of Budget and Actual Amounts

Budget on Cash Basis

Figures in Rand

Approved budget

Statement of Financial Performance

Revenue

Revenue from exchange transactions

Service charges

Rental of facilities and equipment

Agency services Other income Interest received - investment

Total revenue from exchange transactions

Revenue from non-exchange transactions

Taxation revenue Property rates

Transfer revenue

Government grants & subsidies Fines, Penalties and Forfeits Donations

Total revenue from non- exchange transactions

Total revenue

Expenditure

Employee related costs Remuneration of councillors Repairs and maintenance Depreciation and amortisation Impairment loss/ Reversal of impairments

Finance costs

Debt Impairment

Bulk purchases

Contracted Services General Expenses

Total expenditure

Operating surplus

Loss on disposal of assets and liabilities

Fair value adjustments Actuarial gains/losses Inventories losses

Surplus before taxation

378 375 887 2 295 797

4 178 044 22 769 117 33 663 844

441 282 689

115 048 024

310 662 000 4 046 999

429 757 023

871 039 712

(234 577 509 (16 317 244 (39 159 052 (84 416 664

wna w

(80 178 742) (302 138 241) (94 814 373) (51 733 465) (903 335 290)

(32 295 578)

(32 295 578)

Adjustments

(19 227 724) 359 148 163 1 026 751 3 322 548 : 4178 044

35 350 225 58 119 342 2 930 067 36 593 911 20079 319 461 362 008 784 247 115832 271

10 867 380 321529 380 (3 297 207) 749 792 8354420 438 111 443 28 433 739 899 473 451

11 313 808 (223 263 701) - (16 317 244) 10403976 (28 755 076) (39 583 336) (124 000 000)

(47 059 347) (280 000 000)

33 119 395 22 138 241

Final Budget Actual amounts on comparable between final

basis

363 516 361 2 892 409

7 767 956 15 808 231 39 755 456

429 740 413

115 906 363

296 801 924 5 751 059 2 675 968

421 135 314

850 875 727

(235 666 695) (15 651 343) (41 783 789)

(125 006 552) (4 542 627)

(30 925 412) (73 202 037) (216 536 367) (58 092 598) (47 775 582)

1 692 725 (11 327 569)

819 502 7 626 181 2 590 018

(291 868)

2926 383 (91 887 990) (3986 185) (55 719 650) 36 332 282 (867 003 008) (849 183 002) 64766021 32470443 64766021 32470443

14

1 400 857

Difference

budget and actual

4 368 198 (430 139)

3 589 912 (42 311 111) 3 161 545

(31 621 595)

74 092

(24 727 456) 5 001 267 2 675 968

(16 976 129)

(48 597 724)

(12 402 994) 665 901

(13 028 713)

(1 006 552)

(4 542 627)

(30 925 412) (26 142 690) 63 463 633 33 795 392 7 944 068

17 820 006

(30 777 718) (11 327 569)

819 502 7 626 181 2 590 018

(291 868) (31 069 586)

Reference

49 50 - 2.3

50 - 2.4 50 - 2.5

50 - 4.1

50 - 4.3

50 - 4.6 50 - 4.7 50 - 4.8 50 - 4.9

50 - 4.12

50 - 4.14 50 - 4.14

Msukaligwa Local Municipality (Registration number MP302) 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

Actual Amount on Comparable (32295578) 64766021 32 470 443 1400 857 (31069 586) Basis as Presented in the

Budget and Actual

Comparative Statement

Reconciliation Statement of Financial Position

Assets

Current Assets

Inventories 13 212 704 - 13 212 704 17 217 334 4 004 630 Receivables from exchange 86 985 559 - 86985559 82921830 (4063729) transactions Receivables from non-exchange 17 765579 - 17765579 29247213 11 481 634 50 - 1.3 transactions VAT receivable - - - 162495610 162 495 610 50 - 1.4 Cash and cash equivalents 1 032 570 - 1032 570 22025012 20992 442 118 996 412 - 118996412 313906999 194910 587 Non-Current Assets Investment property 29 105 967 - 29105967 117018813 87912 846 50 - 1.6 Property, plant and equipment 1 935 012 287 - 1935 012 287 2 333 364 231 398 351 944 50 - 1.7 Heritage assets - - - 192 195 192 195 50 - 1.8 1 964 118 254 - 1964 118 254 2 450 575239 486 456 985 Total Assets 2 083 114 666 - 2 083 114 666 2 764 482 238 681 367 572 Liabilities Current Liabilities Finance lease obligation - - - 2 517 437 2 517 437 50 - 1.9 Payables from exchange 998 574 932 - 998574932 1122215279 123 640 347 50- 1.11 transactions Consumer deposits 14 485 105 - 14485105 16 933 577 2 448 472 Employee benefit obligation - - - 3 583 000 3 583 000 Unspent conditional grants and - - - 16696658 16 696 658 50 - 3.2 receipts 1 013 060 037 - 1013 060 037 1161945951 148 885 914 Non-Current Liabilities Finance lease obligation - - - 1 279 349 1 279 349 50 - 1.9 Employee benefit obligation - - - 59030000 59 030 000 Landfill Site Provision 57 405 590 - 57 405 590 59 518 621 2 113 031 57 405 590 - 57 405 590 119 827 970 62 422 380 Total Liabilities 1 070 465 627 - 1070 465 627 1 281 773921 211 308 294 Net Assets 1 012 649 039 - 1012 649 039 1 482 708 317 470 059 278

15

Msukaligwa Local Municipality (Registration number MP302) 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 Net Assets Net Assets Attributable to Owners of Controlling Entity Reserves Accumulated surplus 1 012 649 039 - 1012 649 039 1 482 708 317 470059 278 50 - 1.16

Cash Flow Statement

Cash flows from operating activities

Receipts

Property rates 88 410 488 = 88 410 488 - (88 410 488)

Services 300 369 114 - 300369 114 - (300 369 114) 50 - 5.2

Grants 310 662 000 - 310662 000 - (310 662 000) 50 - 5.3

Interest income 2 673 650 - 2 673 650 - (2673650) 50-54

Other receipts 97 222 299 - 97 222 299 - (97222299) 50-55 799 337 551 - 799 337 551 - (799 337 551)

Payments

Suppliers and Employee costs (738 739 884) - (738 739 884) - 738739 884

Net cash flows from operating 60 597 667 - 60 597 667 - (60 597 667)

activities

Cash flows from investing activities

Purchase of property, plant and (130 074 500) - (130 074 500) - 130074 500 50 - 5.7

equipment

Net increase/(decrease) incash (69 476 833) - (69 476 833) - 69476 833

and cash equivalents

Cash and cash equivalents at 2 442 488 - 2 442 488 - (2 442 488)

the beginning of the year

Cash and cash equivalents at (67 034 345) - (67 034 345) - 67 034 345

the end of the year

The accounting policies on pages 20 to 52 and the notes on pages 53 to 107 form an integral part of the annual financial statements.

16

Msukaligwa Local Municipality (Registration number MP302) Annual Financial Statements for the year ended 30 June 2020

Appropriation Statement

Figures in Rand

2020

Financial Performance Property rates

Service charges Investment revenue Transfers recognised - operational

Other own revenue

Total revenue (excluding capital transfers and contributions)

Employee costs Remuneration of councillors

Debt impairment Depreciation and asset impairment

Finance charges Materials and bulk purchases

Other expenditure

Total expenditure Surplus/(Deficit)

Original budget

115 048 024 378 375 887 1 800 000 180 587 500 65 153 801

740 965 212

(234 577 509) (16 317 244)

(84 416 664)

(341 297 293)

(226 726 580) (903 335 290) (162 370 078)

Budget

Final

adjustments adjustments (i.t.o. S28 and budget

s31 of the MFMA)

- (341 297 293)

115 048 024 378 375 887

1 800 000 180 587 500

65 153 801 740 965 212

(234 577 509) (16 317 244)

(84 416 664)

(226 726 580) (903 335 290) (162 370 078)

Shifting of funds (i.t.o. s31 of the MFMA)

Virement (i.t.o. council approved policy)

17

Final budget Actual

115 048 024 378 375 887

1 800 000 180 587 500

65 153 801

740 965 212

outcome

115 906 363 363 516 361

39 755 456 178 761 865

45 931 324 743 871 369

(234 577 509) (235 666 695)

(16 317 244)

(15 651 343)

(73 202 037)

(84 416 664) (129 549 179)

(30 925 412)

(341 297 293) (216 536 367)

(226 726 580) (158 979 538) (903 335 290) (860 510 571) (162 370 078) (116 639 202)

Unauthorised Variance

expenditure

858 339 (14 859 526) 37 955 456 (1 825 635) (19 222 477)

2 906 157

(1 089 186) 665 901

(73 202 037) (45 132 515)

(30 925 412) 124 760 926 67 747 042 42 824 719 45 730 876

Actual outcome as % of final budget

~i

95 % 72 %

Actual outcome as % of original budget

~i

95 % 72 %

Msukaligwa Local Municipality (Registration number MP302) Annual Financial Statements for the year ended 30 June 2020

Appropriation Statement

Figures in Rand

Original Budget Final budget adjustments adjustments (i.t.o. S28 and budget s31 of the MFMA) Transfers recognised - 130 074 500 - 130 074 500

capital

Surplus (Deficit) after capital transfers and contributions

(32 295 578) f

Surplus/(Deficit) for the (32 295 578) - (32 295 578) year

Capital expenditure and funds sources

Total capital expenditure 195149001 (38596705) 156 552 296 Sources of capital

funds

Transfers recognised - 190 149001 (50075001) 140074 000 capital

Internally generated 5 000 000 11 478 000 16 478 000 funds

Total sources of capital 195149001 (38597001) 156 552 000

funds

(32 295 578)

Shifting of funds (i.t.o. s31 of the MFMA)

Virement (i.t.o. council approved policy)

18

Final budget Actual

outcome 130 074 500 118 040 059 (32 295 578) 1 400 857 (32 295 578) 1 400 857 156 552 296 112 951 699 140 074 000 - 16 478 000 - 156 552 000 -

Unauthorised Variance

expenditure

Actual Actual outcome outcome as%of as %of final original budget budget

a

(12 034 441) ¢

33 696 435 (4)% (4)%

33 696 435 (4)% (4)%

(43 600 597)

~“ em

(140 074 000)

(16 478 000)

(156 552 000) -% -%

Msukaligwa Local Municipality

(Registration number MP302)

Annual Financial Statements for the year ended 30 June 2020

Appropriation Statement

Figures in Rand

Original budget Cash flows Net cash from (used) 60 597 667 operating

Net cash from (used) (130 074 500) investing

Net increase/(decrease) (69 476 833) in cash and cash

equivalents

Cash and cash 2 442 488 equivalents at the

beginning of the year

Cash and cash (67 034 345) equivalents at year end

Final Shifting of Virement Final budget Actual Unauthorised adjustments adjustments funds (i.t.o. (i.t-o. council outcome expenditure (i.t.o. S28 and budget s31 of the approved

MFMA) policy) - 60 597 667 - 60 597 667 156 430 171 - (130 074 500) - (130 074 500) (117 480 536) - (69 476 833) - (69 476 833) 38949 635 - 2 442 488 - 2 442 488 22 727 255 - (67 034 345) - (67 034345) 61 676 890

19

Variance

95 832 504

12 593 964

108 426 468

20 284 767

(128 711 235)

Actual Actual outcome outcome

as % of final budget

A

(56)%

(92)%

as % of original budget

A

(56)%

(92)%

Msukaligwa Local Municipality

(Registration number MP302)

Annual Financial Statements for the year ended 30 June 2020

Accounting Policies

Figures in Rand Note(s) 2020 2019

1. Presentation of Annual Financial Statements

The annual financial statements have been prepared in accordance with the Standards of Generally Recognised Accounting Practice (GRAP), issued by the Accounting Standards Board in accordance with Section 122(3) of the Municipal Finance Management Act (Act 56 of 2003).

These annual financial statements have been prepared on an accrual basis of accounting and are in accordance with historical cost convention as the basis of measurement, unless specified otherwise. They are presented in South African Rand.

In the absence of an issued and effective Standard of GRAP, accounting policies for material transactions, events or conditions were developed in accordance with paragraphs 8, 10 and 11 of GRAP 3 as read with Directive 5.

Assets, liabilities, revenues and expenses were not offset, except where offsetting is either required or permitted by a Standard of GRAP.

A summary of the significant accounting policies, which have been consistently applied in the preparation of these annual financial statements, are disclosed below.

These accounting policies are consistent with the previous period.

1.1 Presentation currency

These annual financial statements are presented in South African Rand, which is the functional currency of the municipality. 1.2 Going concern assumption

These annual financial statements have been prepared based on the expectation that the municipality will continue to operate as a going concern for at least the next 12 months.

1.3 Significant judgements and sources of estimation uncertainty

In preparing the annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the annual financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the annual financial statements.

Trade receivables / Held to maturity investments and/or loans and receivables

The municipality assesses its trade receivables, held to maturity investments and loans and receivables for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in surplus or deficit, the surplus makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset.

The impairment for trade receivables, held to maturity investments and loans and receivables is calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry-specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period.

Fair value estimation

The fair value of financial instruments traded in active markets (such as trading and available-for-sale securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the municipality is the current bid price.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values.

The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the municipality for similar financial instruments.

20

Msukaligwa Local Municipality (Registration number MP302) Annual Financial Statements for the year ended 30 June 2020