Table Of ContentDr Pixley Ka Isaka Seme Local Municipality
(Registration number MP304)
Annual Financial Statements
for the year ended 30 June 2020
Dr Pixley Ka Isaka Seme Local Municipality
(Registration number MP304)
Annual Financial Statements for the year ended 30 June 2020
General Information
Legal form of entity Local Municipality
Nature of business and principal activities The main business operations of the municipality is to engage in local
governance activities, which includes planning and promotion of
integrated development planning, land, economic and
environmentaldevelopment and supplying services to the community.
Executive Mayor PV Malatsi
Speaker IL Mkhwanazi
Chief Whip GO Ngwenya
Mayoral committee: Corporate and Community Services TV Hlakutse
Mayoral committee: Infrastructure and Planning Services LM Nkomo
Councillors MA Dlangamandla
OT Shabangu
SN Nxumalo
L De Jager
BJ Mhlanga
TP Dakile
BG Mavuso
V Vilakazi
FE Mahlaba
TE Manana
BS Mavuso
NLP Moloi
GR Nkambule
XI Simelane
TA Mazibuko
PJ Maseko
Grading of local authority 3
Accounting Officer LB Tshabalala
Chief Financial Officer (CFO) M Phetla - from 1 July 2019 - 2 June 2020
Business address Dr Nelson Mandela and Adelaide Tambo Street
Volksrust
2470
Postal address Private bag X 9011
Volksrust
2470
Bankers First National Bank
Auditors Auditor General of South Africa
Registered Auditors
Attorneys Coetzee, Spoelstra and Van Zyl
Mjali and Zimema Attorneys
TMN Kgomo and Associates
Telephone and fax (017) 734 - 6100 (Telephone)
086 630 2209 (Fax)
E mail [email protected]
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Dr Pixley Ka Isaka Seme Local Municipality
(Registration number MP304)
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 - 5
Statement of Financial Position 6
Statement of Financial Performance 7
Statement of Changes in Net Assets 8
Cash Flow Statement 9
Statement of Comparison of Budget and Actual Amounts 10 - 11
Appropriation Statement 12 - 11
Accounting Policies 12 - 35
Notes to the Annual Financial Statements 36 - 76
COID Compensation for Occupational Injuries and Diseases
CRR Capital Replacement Reserve
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
ME's Municipal Entities
MMC Member of the Mayoral Committee
MFMA Municipal Finance Management Act
MIG Municipal Infrastructure Grant (Previously CMIP)
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Dr Pixley Ka Isaka Seme Local Municipality
(Registration number MP304)
Annual Financial Statements for the year ended 30 June 2020
Accounting Officer's Responsibilities and Approval
The accounting officeris 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 officeracknowledges that heis 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 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 officeris 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 officerhas 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, heis satisfied that the municipality has or has access to adequate resources to
continue in operational existence for the foreseeable future.
Although the accounting officer are primarily responsible for the financial affairs of the municipality, they are 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 4.
The annual financial statements set out on page 4, which have been prepared on the going concern basis, were approved by
the accounting officer on 31 October 2020
Accounting Officer
LB Tshabalala
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Dr Pixley Ka Isaka Seme Local Municipality
(Registration number MP304)
Annual Financial Statements for the year ended 30 June 2020
Accounting Officer's Report
The accounting officersubmitshis report for the year ended 30 June 2020.
1. Review of activities
Main business and operations
The municipality is engaged in providing municipal services and maintaining the best interests of the local community and
operates principally in South Africa.
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.
3. Subsequent events
The accounting officeris not aware of any matter or circumstance arising since the end of the financial year.
4. Accounting policies
The annual financial statements prepared in accordance with the South African Statements of Generally Accepted Accounting
Practice (GAAP), 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.
5. Accounting Officer
The accounting officer of the municipality during the year and to the date of this report is as follows:
Name Nationality
LB Tshabalala South African
6. Corporate governance
General
The accounting officeris 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 responsibility to total compliance with the Code of Corporate Practices and
Conduct ("the Code") laid out in the King Report on Corporate Governance for South Africa 2002. The accounting officer
discuss the responsibilities of management in this respect, at Council meetings and monitor the municipality's compliance with
the code on a three monthly basis.
Audit and risk committee
For the first 3 months of the current financial year the audit committee members were Mr I Mpatlanyane(Chairperson), Mr T
Baloyi, Mr M Mahonga and Mr M Mathamaha.
7. Auditors
Auditor General of South Africa will continue in office for the next financial period.
8. Non-compliance with applicable legislation
We are not aware of any non-compliance with regulations and applicable legislations.
The annual financial statements set out on page 4, which have been prepared on the going concern basis, were approved by
the accounting officer on 30 October 2020 and were signed on its behalf by:
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Dr Pixley Ka Isaka Seme Local Municipality
(Registration number MP304)
Annual Financial Statements for the year ended 30 June 2020
Accounting Officer's Report
Accounting Officer
LB Tshabalala
5
Dr Pixley Ka Isaka Seme Local Municipality
(Registration number MP304)
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 9 1,649,410 1,795,130
Financial assets 7 606,672 747,861
Receivables from exchange transactions 10 1,554,434 1,554,434
Receivables from non-exchange transactions 11 370,376 302,983
Consumer debtors 12 115,113,152 77,056,209
Cash and cash equivalents 13 109,462,355 102,654,204
228,756,399 184,110,821
Non-Current Assets
Investment property 3 105,361,173 106,733,899
Property, plant and equipment 4 693,705,365 661,751,921
Heritage assets 6 3,485,999 3,485,999
802,552,537 771,971,819
Total Assets 1,031,308,936 956,082,640
Liabilities
Current Liabilities
Finance lease obligation 14 80,092 126,680
Payables from exchange transactions 17 138,191,962 116,202,395
VAT payable 18 17,786,404 18,183,701
Consumer deposits 19 2,057,545 1,984,843
Employee benefit obligation 8 1,428,000 1,684,867
Unspent grants and receipts 15 4,613,004 6,359,911
Provisions 16 - 3,028,334
164,157,007 147,570,731
Non-Current Liabilities
Finance lease obligation 14 - 80,092
Employee benefit obligation 8 25,423,000 26,393,243
Provisions 16 63,876,943 28,385,920
89,299,943 54,859,255
Total Liabilities 253,456,950 202,429,986
Net Assets 777,851,986 753,652,654
Accumulated surplus 777,851,986 753,652,654
* See Note 46 & 45
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Dr Pixley Ka Isaka Seme Local Municipality
(Registration number MP304)
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 20 127,295,266 103,066,399
Rental from fixed assets 21 1,953,272 1,610,440
Agency fees 23 6,327,949 7,879,435
Operational revenue 25 269,359 364,091
Interest, Dividend and Rent on Land 26 67,104,023 54,853,745
Gain on disposal of assets 189,348 1,732,964
Actuarial gains 3,342,668 -
Total revenue from exchange transactions 206,481,885 169,507,074
Revenue from non-exchange transactions
Taxation revenue
Property rates 27 55,965,309 37,931,238
Transfer revenue
Government grants & subsidies 28 181,729,304 174,000,065
Levies - 127,286
Public contributions and donations 29 946,320 9,953,731
Fines, Penalties and Forfeits 22 458,607 517,018
Total revenue from non-exchange transactions 239,099,540 222,529,338
Total revenue 445,581,425 392,036,412
Expenditure
Employee related costs 30 (89,265,102) (81,926,780)
Remuneration of councillors 31 (8,892,008) (8,645,293)
Inventory Consumed 32 (10,346,210) (1,371,134)
Depreciation and amortisation 33 (43,263,199) (41,686,762)
Finance costs 34 (5,542,745) (3,802,831)
Lease rentals on operating lease 24 - (19,729)
Debt Impairment 35 (106,644,902) (84,474,444)
Bulk purchases 36 (85,570,840) (66,592,219)
Contracted services 37 (24,743,674) (26,450,715)
Actuarial losses - (1,232,848)
Inventories losses/write-downs - (1,134,298)
Operational costs 38 (47,110,583) (42,923,016)
Total expenditure (421,379,263) (360,260,069)
Surplus for the year 24,202,162 31,776,343
* See Note 46 & 45
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Dr Pixley Ka Isaka Seme Local Municipality
(Registration number MP304)
Annual Financial Statements for the year ended 30 June 2020
Statement of Changes in Net Assets
Accumulated Total net
Figures in Rand surplus assets
Balance at 01 July 2018 721,876,311 721,876,311
Changes in net assets
Surplus for the year 31,776,343 31,776,343
Total changes 31,776,343 31,776,343
Opening balance as previously reported 751,119,142 751,119,142
Adjustments
Prior year adjustments 2,530,682 2,530,682
Restated* Balance at 01 July 2019 as restated* 753,649,824 753,649,824
Changes in net assets
Surplus for the year 24,202,162 24,202,162
Total changes 24,202,162 24,202,162
Balance at 30 June 2020 777,851,986 777,851,986
Note(s)
* See Note 46 & 45
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