FS184 Matjhabeng AFS 2019-20 unaudited

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Matjhabeng Local Municipality
Annual Financial Statements
for the year ended 30 June 2020
Matjhabeng Local Municipality
(Registration number FS 184)
Annual Financial Statements for the year ended 30 June 2020
General Information
Legal form of entity Local Municipality
Nature of business and principal activities Providing municipal services, infrastructure development and
furthering the interest of the local community in the Matjhabeng area,
Free State Province.
The following is included in the scope of operation Area FS184, as a high capacity local municipality, as demarcated by
the Demarcation Board and indicated on the demarcated map
published for FS184.
Executive Mayor Speelman NW
Members of the Mayoral Committee Speelman NW - Executive Major
Direko DR - Spatial planning and land use management.
Kabi M - Policy and planning
Khalipha TD - Human Settlement
Lushaba TB - Community Services
Manese SD - Finance
Mawela VE - Corporate Services
Morris VR - Public Safety
Radebe MC - Local Economic Development
Radebe ML - Integrated Development Planning
Tshopo ME - Technical Services / Infrastructure
Councillors Refer to councillors note
Grading of local authority Local High Capacity Municipality (Grade 5)
Chief Finance Officer (CFO) Panyani T
Accounting Officer (MM) Tindleni Z
Registered office Civic Centre
319 Stateway
Welkom
Free State
9460
Postal address P O Box 708
Welkom
Free State
9460
Bankers ABSA Bank Limited
Attorneys Full list available at the municipal offices in Welkom
Enabling legislation Constitution of the Republic of South Africa, 1996 (Act No. 108 of
1996)
Municipal Finance Management Act, 2003 (Act No. 56 of 2003)
Municipal Property Rates Act, 2004 (Act No. 6 of 2004)
Municipal Structures Act, 1998 (Act No. 117 of 1998)
Municipal Systems Act, 2000 (Act No. 32 of 2000)
Website www.matjhabeng.co.za
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Matjhabeng Local Municipality
(Registration number FS 184)
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
Accounting officer's Report 4
Statement of Financial Position 5
Statement of Financial Performance 6
Statement of Changes in Net Assets 7
Statement of Comparison of Budget and Actual Amounts 9 - 10
Accounting Policies 11 - 34
Notes to the Annual Financial Statements 35 - 83
COID Compensation for Occupational Injuries and Diseases
GRAP Generally Recognised Accounting Practice
IAS International Accounting Standards
IPSAS International Public Sector Accounting Standards
ME's Municipal Entities
MEC Member of the Executive Council
MFMA Municipal Finance Management Act
MIG Municipal Infrastructure Grant (Previously CMIP)
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Matjhabeng Local Municipality
(Registration number FS 184)
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 is 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 officer 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 acknowledges that he 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
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 is 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, he is satisfied that the municipality has or has access to adequate resources to
continue in operational existence for the foreseeable future.
The annual financial statements set out on pages 4 to 83, which have been prepared on the going concern basis, were
approved by the accounting officer on 31 October 2020.
Tindleni Z
Accounting Officer
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Matjhabeng Local Municipality
(Registration number FS 184)
Annual Financial Statements for the year ended 30 June 2020
Accounting officer's Report
The accounting officer submits his report for the year ended 30 June 2020.
1. Review of activities
Main business and operations
2. Going concern
We draw attention to the fact that at 30 June 2020, the municipality had an accumulated defecit of R (1,355,680,091) and that
the municipality's total liabilities exceed its total assets by R(1,355,680,091).
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 ability of the municipality to continue as a going concern is dependent on a number of factors. The most significant of
these is that the accounting officer continues to procure funding for the on-going operations for the municipality.
3. Accounting Officer
The accounting officer of the municipality during the year and to date of this report was follows:
Tindleni Z
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Matjhabeng Local Municipality
(Registration number FS 184)
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 11,243,871 12,698,240
Other receivables 11 21,422,584 23,806,277
Receivables from non-exchange transactions 12 173,406,667 147,744,755
VAT receivable 13 627,234,606 508,790,831
Receivables from exchange transactions 14 931,666,834 840,615,370
Cash and cash equivalents 15 58,495,420 763,086
1,823,469,982 1,534,418,559
Non-Current Assets
Investment property 3 1,045,584,956 995,681,135
Property, plant and equipment 4 3,963,561,296 4,066,400,549
Heritage assets 5 7,104,349 7,104,349
Other financial assets 6 304,555 318,288
Receivables from non-exchange transactions (non-current) 8 48,443 16,515
Receivables from exchange transactions (non-current) 9 389,458 408,807
5,016,993,057 5,069,929,643
Total Assets 6,840,463,039 6,604,348,202
Liabilities
Current Liabilities
Employee benefit obligation 7 19,104,033 20,569,575
Unspent conditional grants and receipts 16 34,669,221 12,023,556
Payables from exchange transactions 18 7,698,410,207 6,151,273,387
Consumer deposits 19 34,658,882 34,563,882
7,786,842,343 6,218,430,400
Non-Current Liabilities
Employee benefit obligation 7 371,361,016 427,520,978
Provisions 17 37,939,770 45,810,444
409,300,786 473,331,422
Total Liabilities 8,196,143,129 6,691,761,822
Net Assets (1,355,680,090) (87,413,620)
Accumulated surplus / (deficit) (1,355,680,091) (87,413,618)
* See Note 45
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Matjhabeng Local Municipality
(Registration number FS 184)
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 20 1,283,071,845 1,115,263,946
Rental of facilities and equipment 21 13,748,446 15,357,879
Commissions received 22 13,548,143 12,021,040
Other income 23 8,185,839 18,162,225
Interest received 24 229,317,416 205,940,675
Dividends received 24 21,446 20,400
Total revenue from exchange transactions 1,547,893,135 1,366,766,165
Revenue from non-exchange transactions
Taxation revenue
Property rates 25 401,915,359 376,083,038
Transfer revenue
Government grants & subsidies 26 644,348,668 614,588,576
Fines, Penalties and Forfeits 38 4,265,607 8,877,833
Total revenue from non-exchange transactions 1,050,529,634 999,549,447
Total revenue 2,598,422,769 2,366,315,612
Expenditure
Employee related costs 27 (767,387,398) (726,307,686)
Remuneration of councillors 28 (33,697,331) (32,962,554)
Depreciation and amortisation 29 (204,532,238) (212,794,964)
Finance costs 31 (326,869,337) (324,320,285)
Debt Impairment 32 (684,012,154) (554,662,155)
Bulk purchases 33 (1,201,804,097)(1,052,109,336)
Contracted services 34 (294,956,745) (253,733,941)
General Expenses 35 (373,175,886) (305,810,651)
Repairs and maintenance 39 (88,755,028) (135,808,561)
Total expenditure (3,975,190,214)(3,598,510,133)
Operating deficit (1,376,767,445)(1,232,194,521)
Actuarial gains 7 106,523,027 52,175,859
Impairment loss 30 (47,912,144) (315,745,851)
Fair value adjustments 36 49,890,088 47,545,780
108,500,971 (216,024,212)
Deficit for the year (1,268,266,474)(1,448,218,733)
* See Note 45
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Matjhabeng Local Municipality
(Registration number FS 184)
Annual Financial Statements for the year ended 30 June 2020
Statement of Changes in Net Assets
Accumulated Total net
surplus / assets
Figures in Rand (deficit)
Balance at 01 July 2018 1,360,805,115 1,360,805,115
Changes in net assets
Deficit for the year (1,448,218,733)(1,448,218,733)
Total changes (1,448,218,733)(1,448,218,733)
Restated* Balance at 01 July 2019 (87,413,617) (87,413,617)
Changes in net assets
Deficit for the year (1,268,266,474)(1,268,266,474)
Total changes (1,268,266,474)(1,268,266,474)
Balance at 30 June 2020 (1,355,680,091)(1,355,680,091)
* See Note 45
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Matjhabeng Local Municipality
(Registration number FS 184)
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
Cash receipts from customers 1,105,710,813 984,194,836
Grants 666,994,333 603,306,790
Interest income 2,106,916 8,666,992
Dividends received 21,446 20,400
Other receipts 42,131,728 63,129,229
1,816,965,236 1,659,318,247
Payments
Employee costs (749,393,073) (696,138,612)
Suppliers (879,156,929) (819,572,038)
Finance costs 104,974,125 (8,065,596)
(1,523,575,877)(1,523,776,246)
Net cash flows from operating activities 40 293,389,359 135,542,001
Cash flows from investing activities
Purchase of property, plant and equipment 4 (110,113,326) (132,180,406)
Cash flows from financing activities
Employee benefit obligation payments (20,569,574) (13,380,796)
Net increase/(decrease) in cash and cash equivalents 162,706,459 (10,019,201)
Cash and cash equivalents at the beginning of the year 763,086 3,058,139
Cash and cash equivalents at the end of the year 15 163,469,545 (6,961,062)
* See Note 45
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Matjhabeng Local Municipality
(Registration number FS 184)
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 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 1,365,050,546 - 1,365,050,546 1,283,071,845 (81,978,701)
Rental of facilities and equipment 22,323,600 - 22,323,600 13,748,446 (8,575,154) Note 1
Commission received - - - 13,548,143 13,548,143 Note 2
Other income 237,192,789 - 237,192,789 8,185,839 (229,006,950) Note 3
Interest received - trading 220,682,619 - 220,682,619 229,317,416 8,634,797
Dividends received 21,522 - 21,522 21,446 (76)
Total revenue from exchange 1,845,271,076 - 1,845,271,076 1,547,893,135 (297,377,941)
transactions
Revenue from non-exchange
transactions
Taxation revenue
Property rates 376,695,687 - 376,695,687 401,915,359 25,219,672
Transfer revenue
Government grants & subsidies 685,544,000 - 685,544,000 644,348,668 (41,195,332)
Fines 22,483,622 - 22,483,622 4,265,607 (18,218,015) Note 4
Total revenue from non- 1,084,723,309 - 1,084,723,309 1,050,529,634 (34,193,675)
exchange transactions
Total revenue 2,929,994,385 - 2,929,994,385 2,598,422,769 (331,571,616)
Expenditure
Employee related cost (785,036,022) - (785,036,022) (767,387,398) 17,648,624 Note 5
Remuneration of councillors (33,753,672) - (33,753,672) (33,697,331) 56,341
Depreciation and amortisation (116,298,126) - (116,298,126) (204,532,238) (88,234,112) Note 6
Impairment loss - - - (47,912,144) (47,912,144)
Finance costs (141,185,794) - (141,185,794) (326,869,337) (185,683,543) Note 7
Debt impairment (584,895,295) - (584,895,295) (684,012,154) (99,116,859) Note 8
Bulk purchases (330,080,033) - (330,080,033)(1,201,804,097) (871,724,064) Note 9
Contracted services (528,434,177) - (528,434,177) (294,956,745) 233,477,432 Note 10
General expenses (436,420,267) - (436,420,267) (373,175,886) 63,244,381 Note 11
Repairs and maintenance - - - (88,755,028) (88,755,028)
Total expenditure (2,956,103,386) -(2,956,103,386)(4,023,102,358)(1,066,998,972)
Operating deficit (26,109,001) - (26,109,001)(1,424,679,589)(1,398,570,588)
Gain on disposal of assets and 53,000,000 - 53,000,000 - (53,000,000) Note 12
liabilities
Fair value adjustments - - - 49,890,088 49,890,088 Note 13
Actuarial gains/losses - - - 106,523,027 106,523,027 Note 14
53,000,000 - 53,000,000 156,413,115 103,413,115
Deficit before taxation 26,890,999 - 26,890,999(1,268,266,474)(1,295,157,473)
Actual Amount on Comparable 26,890,999 - 26,890,999(1,268,266,474)(1,295,157,473)
Basis as Presented in the
Budget and Actual
Comparative Statement
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