Table Of ContentNquthu Local Municipality
(Registration numbert KZN242)
Annual Financial Statements
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for the year ended 30 June, 2020
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Nquthu Local Municipality
(Registration number KZN242)
Annual Financial Statements for the year ended 30 June, 2020
General Information
Legal form of entity Municipality in terms of section 1 of the Local Government: Municipal
Structures Act (Act 117 of 1998) read with section 155 (1) of the
Constitution of the Repulic of South Africa (Act 108 of 1996)
Nature of business and principal activities Local Municipality
Accounting Officers Mr. BP Gumbi
New
Registered office Municipal Building
83/11 Mdlalose Street
Nquthu
3135
Business address Municipal Building
83/11 Mdlalose Street
Nquthu
3135
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Postal address Private Bag X 5521
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Nquthu
3a135
Bankers ABSA South Africa
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Auditors Auditor General
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Attorneys BMM Inc.
Rafiq Khan Inc.
Executive Committee Cllr. IL Shabalala (Mayor)
Cllr. NM Zungu (Deputy Mayor)
Cllr. ME Mnguni (Chairperson)
Cllr. PP Ntombela
Cllr. MR Ngobese
Cllr. LS Hoffman
Cllr. LC Moloi
1 - 31 October, 2020 - 9:48 AM
Nquthu Local Municipality
(Registration number KZN242)
Annual Financial Statements for the year ended 30 June, 2020
General Information
Ordinary Councilors Cllr. Z Sithole
Cllr. RS Langa
Cllr. EM Mkhwanazi
Cllr. SM Kunene
Cllr. MSK Gumbi
Cllr. NM Buthelezi
Cllr. SM Buthelezi
Cllr. SP Khumalo
Cllr. FA Hlatshwayo
Cllr. JN Khoza
Cllr. JZ Ndima
Cllr. SD Masimula
Cllr. GF Molefe
Cllr. SMC Zikode
Cllr. CT Buthelezi
Cllr. CN Xulu
Cllr. MN Khanye
Cllr. NS Mkhize
Cllr. TJ Motloung
Cllr. BI Zwane
Cllr. HM Shelembe
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Cllr. NG Mdlalose
Cllr.f TA Dlamini
Cllr. ET Nhlebela
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Cllr. SG Kunene
Chief Financial Officer Mr. WS Mpanza
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2 - 31 October, 2020 - 9:48 AM
Nquthu Local Municipality
(Registration number KZN242)
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 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 - 13
Accounting Policies 14 - 28
Notes to the Annual Financial Statements 29 - 64
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COID Compensation for Occupfational Injuries and Diseases
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CRR Capital Replacement Reserve
DBSA Development Bank of South Africa
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SA GAAP South African Statements of Generally Accepted Accounting Practice
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GRAP Generally Recognised Accounting Practice
GAMAP Generally Accepted Municipal Accounting Practice
HDF Housing Development Fund
IAS International Accounting Standards
IMFO Institute of Municipal Finance Officers
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)
3 - 31 October, 2020 - 9:48 AM
Nquthu Local Municipality
(Registration number KZN242)
Annual Financial Statements for the year ended 30 June, 2020
Accounting Officer's Responsibilities and Approval
The accounting officersare 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 officersacknowledge that theyare 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
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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 andf ethical behaviour are applied and managed within
predetermined procedures and constraints.
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The accounting officersare 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
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financial statements. However, any system of internal financial control can provide only reasonable, and not absolute,
assurance against material misstatement or deficit.
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The accounting officershave 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, theyare satisfied that the municipality has or has access to adequate resources to
continue in operational existence for the foreseeable future.
The municipality's operations depend on a number of sources of revenue ranging from National Government to its own sources
and donations 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, he is supported by the
municipality's external auditors.
The external auditorsare responsible for independently reviewing and reporting on the municipality's annual financial
statements. The annual financial statements have been examined by the municipality's external auditors and their report is
presented on page 5.
The annual financial statements set out on page 5, 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:
Accounting Officer
4 - 31 October, 2020 - 9:48 AM
Nquthu Local Municipality
(Registration number KZN242)
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
Assets
Current Assets
Inventories 30.20 8 763,301 874,272
Receivables from exchange transactions 31.20.15 9 6,347,632 3,538,358
Receivables from non-exchange transactions 33.20.15 10 53,606,070 39,407,425
VAT receivable 31.20.15.00111 6,640,443 6,160,302
Prepayments 27.20.15 745,382 745,382
Cash and cash equivalents 32.20 12 291,642,207 246,870,454
359,745,035 297,596,193
Non-Current Assets
Investment property 21.20 3 749,053 749,053
Property, plant and equipment 20.20 4 417,492,063 346,266,029
Intangible assets 23.40 5 82,520 82,520
Heritage assets 28.20 6 78,888 78,888
418,402,524 347,176,490
Total Assets t 778,147,559 644,772,683
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Liabilities
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Current Liabilities
Payables from exchange transactions 51.20.25 16 45,061,644 20,958,887
Consumer deposits r 51.20.25.00117 1,161,472 492,075
Employee benefit obligation 43.50.25 7 - 365,934
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Unspent conditional grants and receipts 43.20.25 14 1,599,193 1,973,004
Provisions 52.20.25 15 9,254,405 6,590,366
57,076,714 30,380,266
Non-Current Liabilities
Employee benefit obligation 43.50.20 7 5,119,597 5,537,248
Provisions 52.20.20 15 951,498 895,099
6,071,095 6,432,347
Total Liabilities 63,147,809 36,812,613
Net Assets 714,999,750 607,960,070
Reserves
Housing Development Fund 40.48 120,032 120,032
Accumulated surplus 40.40.00 714,879,718 609,597,301
Total Net Assets 714,999,750 609,717,333
5 - 31 October, 2020 - 9:48 AM
Nquthu Local Municipality
(Registration number KZN242)
Annual Financial Statements for the year ended 30 June, 2020
Statement of Financial Performance
Figures in Rand Note(s) 2020 2019
Revenue
Revenue from exchange transactions
Service charges 19 17,435,015 15,935,101
Rental of facilities and equipment 797,326 566,912
Interest received (trading) 470,363 439,877
Miscellaneous other revenue 543,782 621,563
Commissions received 396,411 146,352
Interest received - investment 21 19,269,960 19,045,646
Actuarial gains 1,964,749 -
Total revenue from exchange transactions 40,877,606 36,755,451
Revenue from non-exchange transactions
Taxation revenue
Property rates 22 40,675,054 36,992,498
Property rates - penalties imposed 22 3,216,574 2,108,428
Licences and Permits (Non-exchange) 973,573 884,420
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Transfer revenue
Government grants & subsidies f 23 184,420,065 179,283,736
Fines, Penalties and Forfeits 448,500 755,800
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Total revenue from non-exchange transactions 229,733,766 220,024,882
Total revenue 18 270,611,372 256,780,333
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Expenditure D
Employee related costs 24 (72,602,308) (63,336,559)
Remuneration of councillors 25 (12,818,502) (11,224,160)
Depreciation and amortisation 26 - (18,281,273)
Reversal of impairments (Impairment loss) 27 - (229,836)
Finance costs (618,055) (253,428)
Lease rentals on operating lease (221,574) (234,183)
Debt Impairment 28 - (5,825,093)
Bulk purchases 29 (22,711,969) (19,006,399)
Contracted services 30 (10,766,141) (6,309,120)
Transfers and Subsidies (5,090,914) -
Loss on disposal of assets and liabilities - (239,085)
Actuarial losses - (3,102,829)
General Expenses 31 (42,069,404) (49,552,297)
Total expenditure (166,898,867) (177,594,262)
Surplus for the year 103,712,505 79,186,071
6 - 31 October, 2020 - 9:48 AM
Nquthu Local Municipality
(Registration number KZN242)
Annual Financial Statements for the year ended 30 June, 2020
Statement of Changes in Net Assets
Housing Accumulated Total net
Development surplus assets
Figures in Rand Fund
Opening balance as previously reported 112,725 530,573,844 530,686,569
Adjustments
Correction of errors - (162,614) (162,614)
Balance at 1 July, 2018 as restated* 112,725 530,411,230 530,523,955
Changes in net assets
Surplus for the year 7,307 79,186,071 79,193,378
Total changes 7,307 79,186,071 79,193,378
Opening balance as previously reported 120,032 612,697,333 612,817,365
Adjustments
Correction of errors - 227,146 227,146
Balance at 1 July, 2019 as restated* 120,032 612,924,479 613,044,511
Changes in net assets
Surplus for the year - 103,712,505 103,712,505
Still to be reconciled - (1,757,266) (1,757,266)
Total changes - 101,955,239 101,955,239
Balance at 30 June, 2020 t120,032 714,879,718 714,999,750
Note(s) f
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7 - 31 October, 2020 - 9:48 AM
Nquthu Local Municipality
(Registration number KZN242)
Annual Financial Statements for the year ended 30 June, 2020
Cash Flow Statement
Figures in Rand Note(s) 2020 2019
Cash flows from operating activities
Receipts
Sale of goods and services - 13,583,630
Grants - 179,770,363
Interest income 19,269,960 19,045,646
Other receipts - 15,467,475
19,269,960 227,867,114
Payments
Employee costs - (73,454,649)
Suppliers - (64,809,701)
Finance costs (618,055) (253,428)
(618,055) (138,517,778)
Undefined difference compared to the cash generated from operations note 94,018,708 (2,877,753)
Net cash flows from operating activities t 34 112,670,613 86,471,583
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Cash flows from investing activities
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Purchase of property, plant and equipment 4 (71,226,034) (72,951,139)
Proceeds from sale of property, plant and equipment r 4 - 2,185,609
Net cash flows from investing activities (71,226,034) (70,765,530)
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Net increase/(decrease) in cash and cash equivalents 41,444,579 15,706,053
Cash and cash equivalents at the beginning of the year 246,870,454 231,170,485
Cash and cash equivalents at the end of the year 12 288,315,033 246,876,538
8 - 31 October, 2020 - 9:48 AM
Nquthu Local Municipality
(Registration number KZN242)
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 14,976,306 8,025,386 23,001,692 17,435,015 (5,566,677)
Rental of facilities and 559,158 547,196 1,106,354 797,326 (309,028)
equipment
Interest received 810,084 669,585 1,479,669 470,363 (1,009,306)
(trading)
Miscellaneous other 258,789 379,899 638,688 543,782 (94,906)
revenue
Commissions received 143,082 888 143,970 396,411 252,441
Other income - (rollup) 371,415 - 371,415 - (371,415)
Interest received - 20,100,000 - 20,100,000 19,269,960 (830,040)
investment
Total revenue from 37,218,834 9,622,954 46,841,788 38,912,857 (7,928,931)
exchange
transactions
Revenue from non-
exchange
transactions
Taxation revenue
Property rates 33,271,583 3,043,858 36,315,441 40,675,054 4,359,613
Property rates - - - - 3,216,574 3,216,574
penalties imposed
Licences and Permits 994,056 - 994,056 973,573 (20,483)
(Non-exchange)
Transfer revenue
Government grants & 196,640,938 137,590 196,778,528 184,420,065 (12,358,463)
subsidies
Fines, Penalties and 3,445,239 - 3,445,239 448,500 (2,996,739)
Forfeits
Total revenue from 234,351,816 3,181,448 237,533,264 229,733,766 (7,799,498)
non-exchange
transactions
Total revenue 271,570,650 12,804,402 284,375,052 268,646,623 (15,728,429)
Expenditure
Personnel (81,809,434) 124,305 (81,685,129) (72,602,308) 9,082,821
Remuneration of (12,306,683) - (12,306,683) (12,818,502) (511,819)
councillors
Depreciation and (18,827,232) - (18,827,232) - 18,827,232
amortisation
Finance costs - - - (618,055) (618,055)
Lease rentals on (449,988) - (449,988) (221,574) 228,414
operating lease
Debt Impairment (7,355,111) - (7,355,111) - 7,355,111
9 - 31 October, 2020 - 9:48 AM
