Xhariep District Municipality (Registration number


Apr 1, 2018 - Auditor General of South Africa ... Appendix G(1): Budgeted Financial Performance (revenue and ... South African Statements of Generally Accepted Accounting Practice ... framework, effective accounting procedures and adequate ... The financial statements set out on pages 5 to 57, which have been ...

Xhariep District Municipality (Registration number DC16) Financial statements for the year ended June 30, 2017

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

General Information Legal form of entity

South African Category C Municipality as defined by the Municipal Structures Act (Act no 117 of 1998).

Nature of business and principal activities Xhariep District Municipality is a district municipality perfoming the function as set out in the constitution (Act no 105 of 1996). The Xhariep District Municipality includes the municipal areas of Mohokare Local Municipality, Letsemeng Local Municipality and Kopanong Local Municipality. Mayoral committee Executive Mayor

Cllr MJ Sehanka

Speaker Councillors

Cllr NS Mqungquthu Cllr AJ van Rensburg Cllr MG Ntwanambi Cllr B Smit Cllr TS Tseuoa Cllr C Burger Cllr MJ Phaliso Cllr TD Mochechepa Cllr ML Mogapi Cllr J Moitse Cllr AN November Cllr JM Moeketsi Cllr IS Riddle The Following Councillors Term Ended on the 2nd August 2016. Cllr GM Modise Cllr TE Mokhele Cllr NS Jafta Cllr PM Dibe Cllr MJ Mohapi Cllr NI Mehlomakulu Cllr NC Spochter Cllr H Shebe Cllr SA Sola Cllr JJ Makitle Cllr MJ Mothupi Cllr AV Mona Cllr ML Sehloho

Accounting Officer

LY Moletsane

Chief Finance Officer (CFO)

MWK Morufane Acting Chief Financial Officer

Registered office

20 Louw Street Trompsburg 9913

1

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

General Information Postal address

P.O Box 136 Trompsburg 9913

Bankers

ABSA Bank Limited

Auditors

Auditor General of South Africa

Attorneys

PM Venter Mthembu Attorneys Friday Management Solutions

Telephone

051 713 9300

Fax

051 713 0461

Wesite address

www.xhariep.fs.gov.za

2

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Index The reports and statements set out below comprise the financial statements presented to the provincial legislature: Page Accounting Officer's Responsibilities and Approval

4

Accounting Officer's Report

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 - 12

Accounting Policies

13 - 27

Notes to the Financial Statements

28 - 57

Appendixes: Appendix A: Schedule of External loans

58

Appendix F: Disclosure of Grants and Subsidies in terms of the Municipal Finance Management Act

61

Appendix G(1): Budgeted Financial Performance (revenue and expenditure by standard classification)

62

SA GAAP

South African Statements of Generally Accepted Accounting Practice

GRAP

Generally Recognised Accounting Practice

IAS

International Accounting Standards

IMFO

Institute of Municipal Finance Officers

IPSAS

International Public Sector Accounting Standards

MSIG

Municipal Systems Infrastructure Grant

MFMA

Municipal Finance Management Act

FMG

Financial Management Grant

EPWP

Expanded Public Works Programme

RRAMS

Rural Roads Asset Management Grant

3

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

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 financial statements and related financial information included in this report. It is the responsibility of the accounting officer to ensure that the 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 financial statements and was given unrestricted access to all financial records and related data. The 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 financial statements are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. The accounting officer acknowledges that she 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 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 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 June 30, 2017 and, in the light of this review and the current financial position, she is 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 Division of Revenue Allocations and the Provincial Department for continued funding of operations. The 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 are primarily responsible for the financial affairs of the municipality, they are supported by the municipality's external auditors. The external auditors are responsible for independently reviewing and reporting on the municipality's financial statements. The financial statements have been examined by the municipality's external auditors. The financial statements set out on pages 5 to 57, which have been prepared on the going concern basis, were approved by the accounting officer on November 30, 2017 and were signed on its behalf by:

LY Moletsane Accounting Officer

4

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Accounting Officer's Report The accounting officer submits her report for the year ended June 30, 2017. 1.

Incorporation

The municipality was incorporated on 06 December 2001 and obtained its certificate to commence business on the same day. 2.

Review of activities

Main business and operations The municipality is engaged in providing services and operates principally in South Africa. The operating result and state of affairs of the municipality are fully set out in the attached financial statements and do ot in our opinion require any further comment. 3.

Going concern

We draw attention to the fact that at June 30, 2017, the municipality had accumulated surplus of R104,052 and that the municipality's total assets exceed its liabilities by R 104,052. The 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. 4.

Subsequent events

The accounting officer is not aware of any matter or circumstance arising since the end of the financial year. 5.

Accounting policies

The financial statements prepared in accordance with the Generally Recognised Accounting Practice (GRAP), including any interpretations of such Statements issued by the Accounting Practices 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 LY Moletsane

Nationality RSA

5

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Statement of Financial Position as at June 30, 2017 Figures in Rand

Note(s)

2017

2016

60,117 660,630 1,969,975 1,888,698

48,099 578,904 1,012,214 593,205

4,579,420

2,232,422

13,957,589 2,120,927

16,704,039 -

16,078,516

16,704,039

16,078,516 4,579,420 20,657,936

16,704,039 2,232,422 18,936,461

440,905 17,370,748 1,026,452 183,000

422,629 10,412,943 933,530 173,000

19,021,105

11,942,102

38,779 1,494,000

479,684 1,307,999

1,532,779

1,787,683

1,532,779 19,021,105 20,553,884

1,787,683 11,942,102 13,729,785

20,657,936 (20,553,884) 104,052

18,936,461 (13,729,785) 5,206,676

Assets Current Assets Inventories Receivables from exchange transactions VAT receivable Cash and cash equivalents

6 7 8 9

Non-Current Assets Property, plant and equipment Intangible assets

4 5

Non-Current Assets Current Assets Total Assets Liabilities Current Liabilities Finance lease obligation Payables from exchange transactions Unspent conditional grants and receipts Provisions

10 13 11 12

Non-Current Liabilities Finance lease obligation Provisions

10 12

Non-Current Liabilities Current Liabilities Total Liabilities Assets Liabilities Net Assets Accumulated surplus

104,052

* See Note 2 & 34

6

5,206,676

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Statement of Financial Performance Figures in Rand

Note(s)

2017

2016

Revenue Revenue from exchange transactions Interest received - investment Other income Fees earned Rental of facilities and equipment

18 17 16 15

421,997 226,530 20,986 431,015

317,558 112,961 16,175 435,684

1,100,528

882,378

52,170,584 39,253

52,175,536 258,250 130,135

Total revenue from non-exchange transactions

52,209,837

52,563,921

Total revenue

1,100,528 52,209,837 53,310,365

882,378 52,563,921 53,446,299

(36,819,319) (3,960,804) (1,904,843) (1,038,459) (518,144) (1,439,954) (112,677) (12,827,126)

(34,811,050) (4,045,049) (2,254,188) (35,530) (399,800) (104,613) (1,184,104) (2,896,757) (298,070) (14,596,156)

Total expenditure

(58,621,326)

(60,625,317)

Total revenue Total expenditure Operating deficit Actuarial gains/losses (Loss) gain on assets

53,310,365 (58,621,326) (5,310,961) 223,762 (15,425)

53,446,299 (60,625,317) (7,179,018) 308,923 (134,042)

Total revenue from exchange transactions Revenue from non-exchange transactions Transfer revenue Government grants & subsidies Public contributions and donations LG SETA Income

19 20

14

Expenditure Employee related costs Remuneration of councillors Depreciation and amortisation Impairment loss/ Reversal of impairments Finance costs Lease rentals on operating lease Debt Impairment Donation and transfers Repairs and maintenance General Expenses

21 22 23 24 25 26

27

28

208,337 Operating surplus/deficit Deficit before taxation Deficit for the year

208,337 (5,102,624) (5,102,624)

* See Note 2 & 34

7

174,881 174,881 (7,004,137) (7,004,137)

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Statement of Changes in Net Assets Accumulated surplus

Figures in Rand

Total net assets

Opening balance as previously reported Adjustments Prior year adjustments

12,017,228

12,017,228

193,585

193,585

Balance at July 1, 2015 as restated* Changes in net assets Deficit for the year

12,210,813

12,210,813

(7,004,137)

(7,004,137)

Total changes

(7,004,137)

(7,004,137)

Restated* Balance at July 1, 2016 Changes in net assets Deficit for the year

5,206,676

5,206,676

(5,102,624)

(5,102,624)

Total changes

(5,102,624)

(5,102,624)

Balance at June 30, 2017

104,052

* See Note 2 & 34

8

104,052

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Cash Flow Statement Figures in Rand

Note(s)

2017

2016

Cash flows from operating activities Receipts Sale of goods and services Grants Interest income

Payments Employee costs Suppliers Finance costs

Total receipts Total payments Net cash flows from operating activities

30

(360,956) 52,302,759 421,997

1,454,487 51,838,132 317,558

52,363,800

53,610,177

(40,360,359) (7,433,971) (518,144)

(38,511,176) (15,495,472) (399,800)

(48,312,474)

(54,406,448)

52,363,800 (48,312,474) 4,051,326

53,610,177 (54,406,448) (796,271)

(212,275) (2,120,927)

(424,354) 35,000 -

(2,333,202)

(389,354)

Cash flows from investing activities 4 4

Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Purchase of intangible assets Net cash flows from investing activities Cash flows from financing activities Finance lease payments

(422,629)

Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year

1,295,495 593,205 9

Cash and cash equivalents at the end of the year

* See Note 2 & 34

9

1,888,700

45,629 (1,139,996) 1,733,202 593,206

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Statement of Comparison of Budget and Actual Amounts Budget on Cash Basis Approved budget

Adjustments

Final Budget Actual amounts Difference on comparable between final basis budget and actual

Figures in Rand

Reference

Statement of Financial Performance Revenue Revenue from exchange transactions Rental of facilities and equipment Fees earned Other income Interest received - investment Total revenue from exchange transactions

463,403

-

463,403

431,015

(32,388)

Note 47

110,713 -

-

110,713 -

20,986 226,530 421,997

(89,727) 226,530 421,997

Note 47 Note 47 Note 47

574,116

-

574,116

1,100,528

526,412

52,044,000 -

-

52,044,000 -

52,170,584 39,253

126,584 39,253

52,044,000

-

52,044,000

52,209,837

165,837

574,116

-

574,116

1,100,528

526,412

Note 46

52,044,000

-

52,044,000

52,209,837

165,837

Note 46

52,618,116

-

52,618,116

53,310,365

692,249

Revenue from non-exchange transactions Transfer revenue Government grants & subsidies LG SETA income Total revenue from nonexchange transactions 'Total revenue from exchange transactions' 'Total revenue from nonexchange transactions' Total revenue Expenditure Personnel Remuneration of councillors Depreciation and amortisation Impairment loss/ Reversal of impairments Finance costs Debt Impairment Repairs and maintenance General Expenses

(37,944,956) (3,958,736) (1,800,000) -

345,046 (342,617) -

(37,599,910) (4,301,353) (1,800,000) -

(36,819,319) (3,960,804) (1,904,843) (1,038,459)

780,591 340,549 (104,843) (1,038,459)

Note 47 Note 47 Note 47 Note 47

(30,795) (110,000) (10,573,630)

(40,000) 10,000 27,571

(70,795) (100,000) (10,546,059)

(518,144) (1,439,954) (112,677) (12,827,126)

(447,349) (1,439,954) (12,677) (2,281,067)

Note 47 Note 47 Note 47 Note 47

Total expenditure

(54,418,117)

-

(54,418,117)

(58,621,326)

(4,203,209)

Operating deficit Actuarial gains/losses (loss) Gain on Assets

52,618,116 (54,418,117) (1,800,001) -

-

52,618,116 (54,418,117) (1,800,001) -

53,310,365 (58,621,326) (5,310,961) 223,762 (15,425)

692,249 (4,203,209) (3,510,960) 223,762 (15,425)

-

Deficit before taxation Deficit before taxation Taxation

Note 47 Note 47

(1,800,001) (1,800,001) (1,800,001) -

10

(1,800,001) (1,800,001) (1,800,001) -

208,337 (5,310,961) 208,337 (5,102,624) (5,102,624) -

208,337 (3,510,960) 208,337 (3,302,623) (3,302,623) -

Note 47

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Statement of Comparison of Budget and Actual Amounts Budget on Cash Basis Approved budget

Adjustments

Final Budget Actual amounts Difference on comparable between final basis budget and actual

Figures in Rand Actual Amount on Comparable Basis as Presented in the Budget and Actual Comparative Statement

(1,800,001)

-

Reconciliation

11

(1,800,001)

(5,102,624)

(3,302,623)

Reference

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Statement of Comparison of Budget and Actual Amounts Budget on Cash Basis Approved budget

Adjustments

Final Budget Actual amounts Difference on comparable between final basis budget and actual

Figures in Rand

Reference

Statement of Financial Position Assets Current Assets Inventories Receivables from exchange transactions VAT receivable Cash and cash equivalents

Non-Current Assets Property, plant and equipment Intangible assets Non-Current Assets Current Assets Total Assets

20,000 560,000

-

20,000 560,000

60,117 660,630

40,117 100,630

Note 47 Note 47

2,000,000

-

2,000,000

1,969,975 1,888,698

1,969,975 (111,302)

Note 47 Note 47

2,580,000

-

2,580,000

4,579,420

1,999,420

17,918,308 -

60,994 -

17,979,302 -

13,957,589 2,120,927

(4,021,713) 2,120,927

17,918,308

60,994

17,979,302

16,078,516

(1,900,786)

2,580,000 17,918,308 20,498,308

60,994 60,994

2,580,000 17,979,302 20,559,302

4,579,420 16,078,516 20,657,936

1,999,420 (1,900,786) 98,634

Note 46 Note 46

9,000,000

-

9,000,000

440,905 17,370,748

440,905 8,370,748

Note 47 Note 47

-

-

-

1,026,452

1,026,452

Note 47

200,000

-

200,000

183,000

9,200,000

-

9,200,000

19,021,105

9,821,105

1,200,000

-

1,200,000

38,779 1,494,000

38,779 294,000

1,200,000

-

1,200,000

1,532,779

332,779

9,200,000 1,200,000 10,400,000

-

9,200,000 1,200,000 10,400,000

19,021,105 1,532,779 20,553,884

9,821,105 332,779 10,153,884

20,657,936 (20,553,884) 104,052

98,634 (10,153,884) (10,055,250)

Note 47 Note 47

Liabilities Current Liabilities Finance lease obligation Payables from exchange transactions Unspent conditional grants and receipts Provisions

Non-Current Liabilities Finance lease obligation Provisions

Total Liabilities Assets Liabilities Net Assets

20,498,308 (10,400,000) 10,098,308

60,994 60,994

20,559,302 (10,400,000) 10,159,302

10,098,308

60,994

10,159,302

(17,000)

Note 47

Note 47 Note 47

Net Assets Net Assets Attributable to Owners of Controlling Entity Reserves Accumulated surplus

12

104,052

(10,055,250)

Note 47

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Accounting Policies 1.

Presentation of Financial Statements

The 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 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. 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 financial statements, are disclosed below. These accounting policies are consistent with the previous period. 1.1 Presentation currency These financial statements are presented in South African Rand, which is the functional currency of the municipality. 1.2 Going concern assumption These 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 financial statements, management is required to make estimates and assumptions that affect the amounts represented in the 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 financial statements. Significant judgements include: 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. Provisions Provisions were raised and management determined an estimate based on the information available. Additional disclosure of these estimates of provisions are included in note 12 - Provisions. Effective interest rate and deferred payment terms The municipality used the prime interest rate adjusted for rates by main supplier or discount before future cash flows. Useful lives and residual values The municipality's management determine the useful lives and the related depreciation changes for property, plant and equipment. This estimate is based on industry norms. Management will increase the depreciation charge where useful lives are less than prevoiusly estimated useful lives

13

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Accounting Policies 1.3 Significant judgements and sources of estimation uncertainty (continued) Long Service Bonus The present value of the long service bonus obligation depends on a number of factors that are deteremined on an acturial basis using a number of assumptions. The assumptions used in determining the net cost( income) include the discount rate. Any changes in these assumption will impact on the carrying amount of long service bonus obligations. The municipality determines the appropriate discount rate at end of each year. This is the interest rate that should be used to determine the present value of the estimated future cash outlflows expected to be required to settle the long service bonus obligation. In determing the appropriate discount rate, the municipality consider the interest rates of high-quality corporate bonds that are denominated in the currency in which the beneefit will be paid. and that have term to maturity approximating the terms of the related pension liability. Leave and Bonus Provisions The municipality used the leave and bonus paid date to estimate the provisions respectively. 1.4 Property, plant and equipment Property, plant and equipment are tangible non-current assets (including infrastructure assets) that are held for use in the production or supply of goods or services, rental to others, or for administrative purposes, and are expected to be used during more than one period. The cost of an item of property, plant and equipment is recognised as an asset when:  it is probable that future economic benefits or service potential associated with the item will flow to the municipality; and  the cost of the item can be measured reliably. Property, plant and equipment is initially measured at cost. Where an item of property, plant and equipment is acquired in exchange for a non-monetary asset or monetary assets, or a combination of monetary and non-monetary assets, the asset acquired is initially measured at fair value (the cost). If the acquired item's fair value was not determinable, it's deemed cost is the carrying amount of the asset(s) given up. When significant components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Recognition of costs in the carrying amount of an item of property, plant and equipment ceases when the item is in the location and condition necessary for it to be capable of operating in the manner intended by management. Major spare parts and stand by equipment which are expected to be used for more than one period are included in property, plant and equipment. In addition, spare parts and stand by equipment which can only be used in connection with an item of property, plant and equipment are accounted for as property, plant and equipment. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately. Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. Subsequent to initial recognition, items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Where the municipality replaces parts of an asset, it derecognises the part of the asset being replaced and capitalises the new component. Subsequent expenditure incurred on an asset is capitalised when it increases the capacity or future economic benefits associated with the asset. Property, plant and equipment are depreciated on the straight line basis over their expected useful lives to their estimated residual value. Land is not depreciated and depreciation commence when the asset is ready for intended use.

14

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Accounting Policies 1.4 Property, plant and equipment (continued) Subsequent to initial recognition, property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease. Components of assets that are significant in relation to the whole asset and that have different useful lives are depreciated separately. The useful lives of items of property, plant and equipment have been assessed as follows: Item

Depreciation method

Average useful life

Buildings Security System Plant and machinery Furniture and fixtures Motor vehicles Office equipment Computer equipment Finance lease assets

Straight line Straight line Straight line Straight line Straight line Straight line Straight line Straight line

25-30 years 5-10 years 3-15 years 3-15 years 4-7 years 5-10 years 3-10 years The shorter of asset's useful life or the lease term.

The residual value, and the useful life and depreciation method of each asset are reviewed at the end of each reporting date. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate. Reviewing the useful life of an asset on an annual basis does not require the entity to amend the previous estimate unless expectations differ from the previous estimate. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. The depreciation charge for each period is recognised in surplus or deficit unless it is included in the carrying amount of another asset. Items of property, plant and equipment are derecognised when the asset is disposed of or when there are no further economic benefits or service potential expected from the use of the asset. The gain or loss arising from the derecognition of an item of property, plant and equipment is included in surplus or deficit when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item. No items of property, plant and equipment are pledged as security for liabilities. 1.5 Intangible assets An asset is identifiable if it either:  is separable, i.e. is capable of being separated or divided from an entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, identifiable assets or liability, regardless of whether the entity intends to do so; or  arises from binding arrangements (including rights from contracts), regardless of whether those rights are transferable or separable from the municipality or from other rights and obligations. An intangible asset is recognised when:  it is probable that the expected future economic benefits or service potential that are attributable to the asset will flow to the municipality; and  the cost or fair value of the asset can be measured reliably. The municipality assesses the probability of expected future economic benefits or service potential using reasonable and supportable assumptions that represent management’s best estimate of the set of economic conditions that will exist over the useful life of the asset. Intangible assets are carried at cost less any accumulated amortisation and any impairment losses. 15

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Accounting Policies 1.5 Intangible assets (continued) An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows or service potential. Amortisation is not provided for these intangible assets, but they are tested for impairment annually and whenever there is an indication that the asset may be impaired. For all other intangible assets amortisation is provided on a straight line basis over their useful life. The amortisation period and the amortisation method for intangible assets are reviewed at each reporting date. Reassessing the useful life of an intangible asset with a finite useful life after it was classified as indefinite is an indicator that the asset may be impaired. As a result the asset is tested for impairment and the remaining carrying amount is amortised over its useful life. Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are not recognised as intangible assets. Internally generated goodwill is not recognised as an intangible asset. Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows: Item Computer software

Useful life 3 years

1.6 Financial instruments Classification The municipality classifies financial assets and financial liabilities into the following categories -Held-to maturity investment -Loans and receivables -Available -for sale finacial assets -Financial liabilities measured at amortised cost Classification depends on the purpose for which the financial instrument were obtained/ incurred and takes place at initial recognation. Classification is re-assessed on an annual basis, except for derivatives and financial assets designated as at fair value through surplus or deficit, which shall not be classified out be classified out of the fair value through surplus or deficit category Initial recognition and Measurement The municipality recognises a financial asset or a financial liability in its statement of financial position when the municipality becomes a party to the contractual provisions of the instrument. The municipality classifies financial instruments, or their components parts, on intial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial intrument are measured initially at fair value,except for equity investment for which a fair value is not determinable, which are measured at cost and are classified as available-for-sale financial assets. For financial instruments which are not at fair value through surplus or deficit, transaction costs are included in the initail measurement of the instrument.

16

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Accounting Policies 1.6 Financial instruments (continued) Subsequent measurement of financial assets and financial liabilities Loans and receivable are subsequently measured at amortised cost, using the effective interest method, less accumulated impairment losses. Held-to-maturity investments are subsequently measured at amortised cost, using the effective interest method, less accumulated impairment losses. Available-for-sale financial asset are subsequenlty measured at fair value. This excludes equity investments for which a fair value is not determinable, which are measured at cost less accumulated impairment losses. Gains and losses arising from changes in fair value are recognised in equity until the asset is disposed of or determined to be impaired. Interest on available -for-sale financial assets calculated using the effective interest method is recognised in surplus or deficit as part of other income. Dividends or similar distributions received on available -for-sale equity instruments are recognised in surplus or deficit as part of other income when the municipality's right to receive payment is established. Changes in fair value of available -for sale financial assets denominated in foreign currency are analysed between translation difference resulting from changes in amortised cost and other changes in the carrying amount. Translation difference on monetary items are recognised in surplus or deficit, while translation difference on non-monetrary items are recognised in equity. Financial liabilities at amortised cost are subsequently measured at amortised cost, using the effective interest method Fair value determination The fair value oof quoted investment are based on current bid prices. If the market for a financial asset is not active(and for unlisted securities), the municipality establishes fair value by using valuation techniques. These includes the use of recent arms's length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of marrket inputs and relying as little as possible on entity-specific inputs. Bank overdraft and borrowings Bank overdrafts and borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceed( net of transaction cost) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the municipality's accounting policy for borrowing costs. Gains and losses A gain or loss arising from a change in a financial asset or financial liability is recognised as follows. -A gain or loss on a financial asset or financial liability classified as ar fair value thruogh surplus or deficit is recognised in surplus or deficit; -A gain or loss on an available-for-sale financial asset is recongised directly in net assets, through the statement of changes in net asset, until the financial asset is derecognised, at which time the cumulative gain or loss previously recognised in net asset is recognised in surplus or defict; and - For financial assets and financial liabilities carried at amortised cost, a gain or loss is recognised in surplus or deficit when the financial asset or financial liabilities is derecon=gnised or impaired, and through the amortisation process Impairment of financial assets

17

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Accounting Policies 1.6 Financial instruments (continued) At each of the reporting period the municipality assesses all financial assets, other than those at fair value through surplus or deficit, to determine whether there is objective evedence that a financial asset or group of financial asset has been impaired. For amounts due to the municipality, significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default of payment are all considered indicators of impairment. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator of impairment. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in surplus or deficit - is removed from equity as a reclassification adjustment and recognised in surplus or defici Impairment losses are recognised in surplus or deficit Impairment losses are reversed when an increase in the financial asset's recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the financial asset at the date that the impairment is reversed shall not exceed what the carrying amount would have been had the impairment not been recognised. Reversals of impairment losses are recognised in surplus or deficit except for equity investments classified as available-forsale. Impairment losses are also not subsequently reversed for available-for-sale equity investments which are held at cost because fair value was not determinable. Where financial assets are impaired through use of an allowance account, the amount of the loss is recognised in surplus or deficit within operating expenses. When such assets are written off, the write off is made against the relevant allowance account. Subsequent recoveries of amounts previously written off are credited against operating expenses. Receivables from exchange transactions Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in surplus or deficit when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the deficit is recognised in surplus or deficit within operating expenses. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in surplus or deficit. Payables from exchange transactions Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

18

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Accounting Policies 1.6 Financial instruments (continued) Cash and cash equivalents Cash and cash equivalents comprise cash on hand (including petty cash) and cash with banks (including call deposits).Cash equivalents are short-term highly liquid investments, readily convertible to a known amount of cash ,that are held with registered banking institutions with maturities of three months or less and are subject to an insignificant risk of change in value. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand on call with banks, net of bank overdrafts. The municipality categorises cash and cash equivalents as financial assets: loan and receivable. Bank overdraft and borrowings Bank overdrafts and borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the municipality’s accounting policy for borrowing costs. Investment Investments, which include listed government bonds, unlisted municipal bonds, fixed deposits and short-term deposits invested in registered commercial banks, are categorised as either held-to-maturity where the criteria for that categorisation are met, or as loans and receivables, and are measured at amortised cost. Where investments have been impaired, the carrying value is adjusted by the impairment loss, which is recognised as an expense in the period that the impairment is identified. Impairments are calculated as being the difference between the carrying amount and the present value of the expected future cash flows flowing from the instrument. On disposal of an investment, the difference between the net disposal proceeds and the carrying amount is charged or credited to the Statement of Financial Performance. Held to maturity These financial assets are initially measured at fair value plus direct transaction costs. At subsequent reporting dates these are measured at amortised cost using the effective interest rate method, less any impairment loss recognised to reflect irrecoverable amounts. An impairment loss is recognised in surplus or deficit when there is objective evidence that the asset is impaired, and is measured as the difference between the investment’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. Impairment losses are reversed in subsequent periods when an increase in the investment’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the investment at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised. Financial assets that the municipality has the positive intention and ability to hold to maturity are classified as held to maturity. Financial liabilities Financial liabilities are classified according to the substance of contractual agreements entered into. Trade and other payables are stated at their nominal value. Equity instruments are recorded at the amount received, net of direct issue costs. Financial liabilities at amortised cost are subsequently measured at amortised cost, using the effective interest method. Financial liabilities consist of trade payables and borrowings. They are categorized as financial liabilities held at amortised cost, and are subsequently measured at amortised cost which is the initial carrying amount, less repayments, plus interest. 1.7 Leases A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership. When a lease includes both land and buildings elements, the entity assesses the classification of each element separately. 19

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Accounting Policies 1.7 Leases (continued) Finance leases - lessor The municipality recognises finance lease receivables as assets on the statement of financial position. Such assets are presented as a receivable at an amount equal to the net investment in the lease. Finance revenue is recognised based on a pattern reflecting a constant periodic rate of return on the municipality’s net investment in the finance lease. Finance leases - lessee Finance leases are recognised as assets and liabilities in the statement of financial position at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease. Minimum lease payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of on the remaining balance of the liability. Any contingent rents are expensed in the period in which they are incurred. Operating leases - lessor Operating lease revenue is recognised as revenue on a straight-line basis over the lease term. Initial direct costs incurred in negotiating and arranging operating leases are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as the lease revenue. The aggregate cost of incentives is recognised as a reduction of rental revenue over the lease term on a straight-line basis. The aggregate benefit of incentives is recognised as a reduction of rental expense over the lease term on a straight-line basis. Income for leases is disclosed under revenue in statement of financial performance. Operating lease payment are recognised as as expenses on a straight-line basis over the lease term. The difference between the amount recognised as an expense and the contractual payment are recognised as either a pre-paid expense asset or liability depending on whether the payment exceeds the expense or vice versa. Operating leases - lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset or liability. 1.8 Inventories Inventories are initially measured at cost except where inventories are acquired through a non-exchange transaction, then their costs are their fair value as at the date of acquisition. Subsequently inventories are measured at the lower of cost and net realisable value. Inventories are measured at the lower of cost and current replacement cost where they are held for;  distribution at no charge or for a nominal charge; or  consumption in the production process of goods to be distributed at no charge or for a nominal charge. Net realisable value is the estimated selling price in the ordinary course of operations less the estimated costs of completion and the estimated costs necessary to make the sale, exchange or distribution. Current replacement cost is the cost the municipality incurs to acquire the asset on the reporting date.

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Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Accounting Policies 1.8 Inventories (continued) The cost of inventories comprises of all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The cost of inventories of items that are not ordinarily interchangeable and goods or services produced and segregated for specific projects is assigned using specific identification of the individual costs. The cost of inventories is assigned using the first-in, first-out (FIFO) formula. The same cost formula is used for all inventories having a similar nature and use to the municipality. When inventories are sold, the carrying amounts of those inventories are recognised as an expense in the period in which the related revenue is recognised. If there is no related revenue, the expenses are recognised when the goods are distributed, or related services are rendered. The amount of any write-down of inventories to net realisable value or current replacement cost and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value or current replacement cost, are recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs. 1.9 Employee benefits Short-term employee benefits The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacation leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the service is rendered and are not discounted. The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the absence occurs. The expected cost of surplus sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance.Liabilities for short-term employee benefits that are upaid at year-end are measured at the undiscounted amount that the municipality experts to pay in exchange for that service and had accumulated at the reporting date. Defined contribution plans The municipality contribution to the defined contribution funds are established in terms of the rules governing those plans. Contributions are recognised in surplus or defict in the period in which the service is rendered by the revant employees unless another standard requires or permints the inclusion of contribution in the cost of an asset. Prepaid contribution are recognised as an asset to the extent that a cash refund or a reduction in future payment is available. Payments to defined contribution retirement benefit plan ae charged as an expense as they fall due. Payments made to industry-managed (or state plans) retirement benefit schemes are dealt with as defined contribution plans where the municipality’s obligation under the schemes is equivalent to those arising in a defined contribution retirement benefit plan. 1.10 Provisions and contingencies Provisions are recognised when:  the municipality has a present obligation as a result of a past event;  it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation; and  a reliable estimate can be made of the obligation. The amount of a provision is the best estimate of the expenditure expected to be required to settle the present obligation at the reporting date. Where the effect of time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation. The discount rate is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. 21

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Accounting Policies 1.10 Provisions and contingencies (continued) Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement is recognised when, and only when, it is virtually certain that reimbursement will be received if the municipality settles the obligation. The reimbursement is treated as a separate asset. The amount recognised for the reimbursement does not exceed the amount of the provision. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Provisions are reversed if it is no longer probable that an outflow of resources embodying economic benefits or service potential will be required, to settle the obligation. Where discounting is used, the carrying amount of a provision increases in each period to reflect the passage of time. This increase is recognised as an interest expense. A provision is used only for expenditures for which the provision was originally recognised. Provisions are not recognised for future operating deficits. If an entity has a contract that is onerous, the present obligation (net of recoveries) under the contract is recognised and measured as a provision. A constructive obligation to restructure arises only when an entity:  has a detailed formal plan for the restructuring, identifying at least: the activity/operating unit or part of a activity/operating unit concerned; the principal locations affected; the location, function, and approximate number of employees who will be compensated for services being terminated; the expenditures that will be undertaken; and when the plan will be implemented; and  has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it. Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 32. 1.11 Commitments Items are classified as commitments when an entity has committed itself to future transactions that will normally result in the outflow of cash. Disclosures are required in respect of unrecognised contractual commitments. Commitments for which disclosure is necessary to achieve a fair presentation should be disclosed in a note to the financial statements, if both the following criteria are met:  Contracts should be non-cancellable or only cancellable at significant cost (for example, contracts for computer or building maintenance services); and  Contracts should relate to something other than the routine, steady, state business of the entity – therefore salary commitments relating to employment contracts or social security benefit commitments are excluded. 1.12 Revenue from exchange transactions Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net assets, other than increases relating to contributions from owners. An exchange transaction is one in which the municipality receives assets or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of goods, services or use of assets) to the other party in exchange. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Measurement Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and volume rebates. 22

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Accounting Policies 1.12 Revenue from exchange transactions (continued) Sale of goods Revenue from the sale of goods is recognised when all the following conditions have been satisfied:  the municipality has transferred to the purchaser the significant risks and rewards of ownership of the goods;  the municipality retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;  the amount of revenue can be measured reliably;  it is probable that the economic benefits or service potential associated with the transaction will flow to the municipality; and  the costs incurred or to be incurred in respect of the transaction can be measured reliably. Rendering of services When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the reporting date. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied:  the amount of revenue can be measured reliably;  it is probable that the economic benefits or service potential associated with the transaction will flow to the municipality;  the stage of completion of the transaction at the reporting date can be measured reliably; and  the costs incurred for the transaction and the costs to complete the transaction can be measured reliably. When services are performed by an indeterminate number of acts over a specified time frame, revenue is recognised on a straight line basis over the specified time frame unless there is evidence that some other method better represents the stage of completion. When a specific act is much more significant than any other acts, the recognition of revenue is postponed until the significant act is executed. When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable. Service revenue is recognised by reference to the stage of completion of the transaction at the reporting date. Stage of completion is determined by services performed to date as a percentage of total services to be performed. Interest, royalties and dividends Revenue arising from the use by others of entity assets yielding interest, royalties and dividends or similar distributions is recognised when:  It is probable that the economic benefits or service potential associated with the transaction will flow to the municipality, and  The amount of the revenue can be measured reliably. Interest is recognised, in surplus or deficit, using the effective interest rate method. Service fees included in the price of the product are recognised as revenue over the period during which the service is performed. 1.13 Revenue from non-exchange transactions Non-exchange transactions are defined as transactions where the entity receives value from another entity without directly giving approximately equal value in exchange. Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net assets, other than increases relating to contributions from owners. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Measurement Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and volume rebates. 23

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Accounting Policies 1.13 Revenue from non-exchange transactions (continued) Rates, including collection charges and penalties interest Revenue from rates, including collection charges and penalty interest, is recognised when:  it is probable that the economic benefits or service potential associated with the transaction will flow to the municipality;  the amount of the revenue can be measured reliably; and  there has been compliance with the relevant legal requirements. Changes to property values during a reporting period are valued by a suitably qualified valuator and adjustments are made to rates revenue, based on a time proportion basis. Adjustments to rates revenue already recognised are processed or additional rates revenue is recognised. Government grants Government grants are recognised as revenue when:  it is probable that the economic benefits or service potential associated with the transaction will flow to the municipality,  the amount of the revenue can be measured reliably, and  to the extent that there has been compliance with any restrictions associated with the grant. Revenue received from conditional grants,donations and funding are recognised as revenue to the extent that the municipality has complied with any criteria, conditions or obligation embodied in the agreement. To the extent that the criteria, conditions or obligation have not met, a liability is recognised. The municipality assesses the degree of certainty attached to the flow of future economic benefits or service potential on the basis of the available evidence. Certain grants payable by one level of government to another are subject to the availability of funds. Revenue from these grants is only recognised when it is probable that the economic benefits or service potential associated with the transaction will flow to the entity. An announcement at the beginning of a financial year that grants may be available for qualifying entities in accordance with an agreed programme may not be sufficient evidence of the probability of the flow. Revenue is then only recognised once evidence of the probability of the flow becomes available. Restrictions on government grants may result in such revenue being recognised on a time proportion basis. Where there is no restriction on the period, such revenue is recognised on receipt or when the Act becomes effective, which-ever is earlier. When government remit grants on a re-imbursement basis, revenue is recognised when the qualifying expense has been incurred and to the extent that any other restrictions have been complied with. Other grants and donations Other grants and donations are recognised as revenue when:  it is probable that the economic benefits or service potential associated with the transaction will flow to the municipality;  the amount of the revenue can be measured reliably; and  to the extent that there has been compliance with any restrictions associated with the grant. If goods in-kind are received without conditions attached, revenue is recognised immediately. If conditions are attached, a liability is recognised, which is reduced and revenue recognised as the conditions are satisfied. 1.14 Investment income Investment income is recognised on a time-proportion basis using the effective interest method. 1.15 Borrowing costs Borrowing costs are interest and other expenses incurred by an entity in connection with the borrowing of funds. Borrowing costs are recognised as an expense in the period in which they are incurred.

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Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Accounting Policies 1.16 Comparative figures Where necessary, comparative figures have been reclassified to conform to changes in presentation in the current year. 1.17 Unauthorised expenditure Unauthorised expenditure means:  overspending of a vote or a main division within a vote; and  expenditure not in accordance with the purpose of a vote or, in the case of a main division, not in accordance with the purpose of the main division. All expenditure relating to unauthorised expenditure is recognised as an expense in the statement of financial performance in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and where recovered, it is subsequently accounted for as revenue in the statement of financial performance.Detailed disclosures were made in the notes to the financial statements as required by the MFMA 1.18 Fruitless and wasteful expenditure Fruitless expenditure means expenditure which was made in vain and would have been avoided had reasonable care been exercised. All expenditure relating to fruitless and wasteful expenditure is recognised as an expense in the statement of financial performance in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and where recovered, it is subsequently accounted for as revenue in the statement of financial performance. Detailed disclosure were made in the notes to the financial statement as required by the MFMA. 1.19 Irregular expenditure Irregular expenditure that was incurred and identified during the current financial and which was condoned before year end and/or before finalisation of the financial statements must also be recorded appropriately in the irregular expenditure register. In such an instance, no further action is also required with the exception of updating the note to the financial statements. Irregular expenditure that was incurred and identified during the current financial year and for which condonement is being awaited at year end must be recorded in the irregular expenditure register. No further action is required with the exception of updating the note to the financial statements. Where irregular expenditure was incurred in the previous financial year and is only condoned in the following financial year, the register and the disclosure note to the financial statements must be updated with the amount condoned. Irregular expenditure that was incurred and identified during the current financial year and which was not condoned by the National Treasury or the relevant authority must be recorded appropriately in the irregular expenditure register. If liability for the irregular expenditure can be attributed to a person, a debt account must be created if such a person is liable in law. Immediate steps must thereafter be taken to recover the amount from the person concerned. If recovery is not possible, the accounting officer or accounting authority may write off the amount as debt impairment and disclose such in the relevant note to the financial statements. The irregular expenditure register must also be updated accordingly. If the irregular expenditure has not been condoned and no person is liable in law, the expenditure related thereto must remain against the relevant programme/expenditure item, be disclosed as such in the note to the financial statements and updated accordingly in the irregular expenditure register. Irregular expenditure is expenditure that is contrary to the Municipal Finance Management Act (Act No.56 of 2003), the Municipal Systems Act (Act No.32 of 2000), and the Public Office Bearers Act (Act No. 20 of 1998) or is in contravention of the economic entity’s supply chain management policy. Irregular expenditure excludes unauthorised expenditure. Irregular expenditure is accounted for as expenditure in the Statement of Financial Performance and where recovered, it is subsequently accounted for as revenue in the Statement of Financial Performance. Detailed disclosure were made in the notes to the financial statements as required by the MFMA. 1.20 Budget information Municipality are typically subject to budgetary limits in the form of appropriations or budget authorisations (or equivalent), which is given effect through authorising legislation, appropriation or similar.

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Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Accounting Policies 1.20 Budget information (continued) General purpose financial reporting by municipality shall provide information on whether resources were obtained and used in accordance with the legally adopted budget. The approved budget is prepared on a cash basis and presented by economic classification linked to performance outcome objectives. The approved budget covers the fiscal period from 7/1/2016 to 6/30/2017. The budget for the economic entity includes all the entities approved budgets under its control. The financial statements and the budget are on the same basis of accounting therefore a comparison with the budgeted amounts for the reporting period have been included in the Statement of comparison of budget and actual amounts. The Statement of comparative and actual information has been included in the financial statements as the recommended disclosure when the financial statements and the budget are on the same basis of accounting as determined by National Treasury. The financial statements and the budget are not on the same basis of accounting therefore a reconciliation between the statement of financial performance and the budget have been included in the financial statements. Refer to note 45. Comparative information is not required. 1.21 Related parties The municipality operates in an economic sector currently dominated by entities directly or indirectly owned by the South African Government. As a consequence of the constitutional independence of the three spheres of government in South Africa, only entities within the national sphere of government are considered to be related parties. Management are those persons responsible for planning, directing and controlling the activities of the municipality, including those charged with the governance of the municipality in accordance with legislation, in instances where they are required to perform such functions. Close members of the family of a person are considered to be those family members who may be expected to influence, or be influenced by, that management in their dealings with the municipality. Only transactions with related parties not at arm’s length or not in the ordinary course of business are disclosed. 1.22 Events after reporting date Events after reporting date are those events, both favourable and unfavourable, that occur between the reporting date and the date when the financial statements are authorised for issue. Two types of events can be identified:  those that provide evidence of conditions that existed at the reporting date (adjusting events after the reporting date); and  those that are indicative of conditions that arose after the reporting date (non-adjusting events after the reporting date). The municipality will adjust the amount recognised in the financial statements to reflect adjusting events after the reporting date once the event occurred. The municipality will disclose the nature of the event and an estimate of its financial effect or a statement that such estimate cannot be made in respect of all material non-adjusting events, where non-disclosure could influence the economic decisions of users taken on the basis of the financial statements.

26

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Accounting Policies 1.23 Use of Estimates The preparation of annual financial statement in conformity with Standards of GRAP required the use of certain critical accounting estimates. Italso requires management to exercise its judgement in the process of applying the municipality the municipality's accounting policies. The areas involved a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the annual financial statement are disclosed in the relevant sections of the annual financial statements. Although these estimates are based on management's best knowledge of current events and action they may undertake in the future, actual result ultimately may differ from those estimates. 1.24 Going concern These annual financial statement have been prepareed on the assumption that the municipality will continue to operate as a going concern for at least the 12 months. The municipality cannot continue to operate without receiving governement grants. However the going concern assumption is based on the fact that according to DoRA the municipality will continue to receive government grant for the next three years. The municipality experienced financial constranaints from the month of October 2016, November 2016, February 2017 and March 2017. An overdraft facility was obtained through ABSA Bank Limited to be able to cover the operational expenditure for the said months.

27

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand 2.

2017

2016

Accounting Policies, Changes in Accounting Estimates and Errors

The financial statements have been prepared in accordance with Standards of Generally Recognised Accounting Practice on a basis consistent with the prior year except for the adoption of the following new or revised standards.Accouniting Policies, Changes in Accounting Estimates and Errors is applied in selecting and applying accounting policies, accounting for changes in estimates and reflecting corrections of prior period errors. The standard requires compliance with any specific GRAP standards applying to a transaction, event or condition, and provides guidance on developing accounting policies for other items that result in relevant and reliable infromation. Changes in accounting policies and corrections of errors are generally retrospectively accounted for, whereas changes in accounting estimates are generally accounting for on a prospective basis. Taxation The charge for the current tax is based on the results for the year, as adjusted for the items that are exempt or disallowed. It is calculated using the tax rates that have been enacted or substantively enacted by the Income Tax Act, VAT Act and other South African legislated Tax requirements. The Municipality is registered on the payment basis for VAT purposes. This means that VAT is only declared once cash is received or actual payments are made. Impairment of Assets The municipality assesses at each reporting date whether there is any indication that an asset may be impaired. If any such indication exists, the municipality estimates the recoverable service amount of the asset. Irrespective of whether there is any indication of impairment, the municipality also: '- tests intangible assets with an indefinite useful life or intangible assets not yet available for use for impairment annually by comparing its carrying amount with its recoverable amount. This impairment test is performed during the annual period and at the same time every period. If there is any indication that an asset may be impaired, the recoverable service amount is estimated for the individual asset. If it is not possible to estimate the recoverable service amount of the individual asset, the recoverable service amount of the cash-generating unit to which the asset belongs is determined. The recoverable service amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. If the recoverable service amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable service amount. That reduction is an impairment loss. An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in surplus or deficit. Any impairment loss of a revalued asset is treated as a revaluation decrease. An impairment loss is recognised for cash-generating units if the recoverable service amount of the unit is less than the carrying amount of the unit. The impairment loss is allocated to reduce the carrying amount of the assets of the unit as follows: '- to the assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit. A municipality assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets may no longer exist or may have decreased. If any such indication exists, the recoverable service amounts of those assets are estimated. The increased carrying amount of an asset attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation is recognised immediately in surplus or deficit. Any reversal of an impairment loss of a revalued asset is treated as a revaluation increase. 28

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand 2.

2017

2016

Accounting Policies, Changes in Accounting Estimates and Errors (continued)

Offsetting Assets, liabilities, revenue and expenses have not been offset except when offsetting is required or permitted by a Standard of GRAP. Presentation of currency These annual financial statements are presented in South African Rand. All figures presented in the annual financial statements have been rounded to the nearest Rand. 3.

New standards and interpretations

3.1 Standards and interpretations issued, but not yet effective The municipality has not applied the following standards and interpretations, which have been published and are mandatory for the municipality’s accounting periods beginning on or after July 1, 2017 or later periods: Standard/ Interpretation: 

GRAP 34: Separate Financial Statements

Effective date: Years beginning on or after No Effective date yet



GRAP 35: Consolidated Financial Statements

No Effective date yet



GRAP 36: Investments in Associates and Joint Ventures

No Effective date yet



GRAP 37: Joint Arrangements

No Effective date yet



GRAP 38: Disclosure of Interests in Other Entities

No Effective date yet



GRAP 110: Living and Non-living Resources

No Effective date yet



GRAP 12 (as amended 2016): Inventories

April 1, 2018



GRAP 27 (as amended 2016): Agriculture

April 1, 2018



GRAP 31 (as amended 2016): Intangible Assets

April 1, 2018



GRAP 103 (as amended 2016): Heritage Assets

April 1, 2018



GRAP 110 (as amended 2016): Living and Non-living Resources IGRAP 18: Interpretation of the Standard of GRAP on Recognition and Derecogntion of Land Directive 12: The Selection of an Appropriate Reporting Framework by Public Entities GRAP 26 (as amended 2016): Impairment of cashgenerating assets GRAP 21 (as amended 2016): Impairment of non-cashgenerating assets GRAP 18 (as amended 2016): Segment Reporting

April 1, 2018

GRAP 17 (as amended 2016): Property, Plant and Equipment GRAP 16 (as amended 2016): Investment Property

April 1, 2018

GRAP 106 (as amended 2016): Transfers of functions between entities not under common control

April 1, 2018

       

April 1, 2019 April 1, 2018 April 1, 2018 April 1, 2018 April 1, 2018

April 1, 2018

29

Expected impact: Unlikely there will be a material impact Unlikely there will be a material impact Unlikely there will be a material impact Unlikely there will be a material impact Unlikely there will be a material impact Unlikely there will be a material impact Unlikely there will be a material impact Unlikely there will be a material impact Unlikely there will be a material impact Unlikely there will be a material impact Unlikely there will be a material impact Unlikely there will be a material impact Unlikely there will be a material impact Unlikely there will be a material impact Unlikely there will be a material impact Unlikely there will be a material impact Unlikely there will be a material impact Unlikely there will be a material impact Unlikely there will be a material impact

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand 3.

2017

2016

New standards and interpretations (continued)

The aggregate impact of the initial application of the statements and interpretations on the municipality's financial statements is expected to be as follows:

30

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand 4.

Property, plant and equipment 2017 Cost / Valuation

2016

Accumulated Carrying value depreciation and accumulated impairment

Cost / Valuation

Accumulated Carrying value depreciation and accumulated impairment

Buildings Leasehold property Plant and machinery Furniture and fixtures Motor vehicles Office equipment IT equipment Ancillary fleet equipment and security

16,748,905 1,290,741 2,107,870 1,948,475 701,147 1,387,173 1,694,276 2,791,492

(6,462,412) (851,138) (2,107,848) (1,054,052) (286,229) (974,195) (1,091,302) (1,885,314)

10,286,493 439,603 22 894,423 414,918 412,978 602,974 906,178

16,748,905 1,290,741 2,107,870 1,990,362 701,147 1,389,676 1,563,753 2,791,492

(5,904,115) (420,891) (1,120,933) (953,356) (186,065) (812,922) (981,568) (1,500,057)

10,844,790 869,850 986,937 1,037,006 515,082 576,754 582,185 1,291,435

Total

28,670,079

(14,712,490)

13,957,589

28,583,946

(11,879,907)

16,704,039

Reconciliation of property, plant and equipment - 2017

Buildings Leasehold property Plant and machinery Furniture and fixtures Motor vehicles Office equipment IT equipment Ancillary fleet equipment and security

Opening balance 10,844,790 869,850 986,937 1,037,006 515,082 576,754 582,185 1,291,435 16,704,039

31

Additions

Disposals

Depreciation

Impairment loss

Total

212,275 -

(9,670) (1,659) (4,095) -

(558,297) (430,247) (132,890) (100,164) (162,117) (187,391) (333,736)

(986,915) (23) (51,521)

10,286,493 439,603 22 894,423 414,918 412,978 602,974 906,178

212,275

(15,424)

(1,904,842)

(1,038,459)

13,957,589

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand 4.

Property, plant and equipment (continued)

Reconciliation of property, plant and equipment - 2016

Buildings Leasehold property Plant and machinery Furniture and fixtures Motor vehicles Office equipment IT equipment Infrastructure(WIP) Ancillary fleet equipment and security

Opening balance 11,403,087 995,521 1,251,240 1,182,088 690,346 753,546 816,435 2,896,757 1,646,184 21,635,204

Additions

Disposals

Transfers

Depreciation

Impairment loss

Total

404,662 19,692 -

(110,912) (8) (54,176) (1,212) (2,361) -

(2,896,757) -

(558,297) (419,421) (264,303) (136,580) (121,088) (172,101) (232,949) (349,823)

(8,494) (3,479) (18,632) (4,926)

10,844,790 869,850 986,937 1,037,006 515,082 576,754 582,185 1,291,435

424,354

(168,669)

(2,896,757)

(2,254,562)

(35,531)

16,704,039

A register containing the information required by section 63 of the Municipal Finance Management Act is available for inspection at the registered office of the municipality.

32

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand 5.

2017

2016

Intangible assets 2017 Cost / Valuation

Computer software

2016

Accumulated Carrying value amortisation and accumulated impairment

2,120,927

-

Cost / Valuation

2,120,927

Accumulated Carrying value amortisation and accumulated impairment -

-

Additions

Total

-

Reconciliation of intangible assets - 2017 Opening balance Computer software 6.

-

2,120,927

2,120,927

Inventories

Stationery Cleaning Material

None of the inventory has been pledged as security.

33

36,818 23,299

27,794 20,305

60,117

48,099

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand 7.

2017

2016

Receivables from exchange transactions

Trade debtors Prepaid expenses Other debtors

Trade debtors Current (0-30days) 31-60 days 61-90 days 91-120 days 121-150 days 151-180 days +180 days Less Provisions

384,535 23,156 252,939

328,287 2,337 248,280

660,630

578,904

R 288,203 173,425 40,946 105,589 133,413 106,976 3,079,513 (3,543,530)

R 341,904 101,936 97,951 99,927 96,651 141,257 1,552,237 (2,103,576)

384,535 Summary of debtor by Customer Classification as at 30 june 2017

Other

Current (0-30 days) 31-60 days 61-90 days 91-120 days 121-365 days

56,344 250,000

Subtotal Less: provision for doubtful debts

306,344 306,344

Summary of debtor by Customer Classification as at 30 june 2016

Other

Current (0-30 days) 31-60 days 61-90 days 91-120 days 121 -365 days

250,000 -

Subtotal Less: Provision for doubtfuk debts

250,000 250,000

National and Provincial Goverment 231,859 173,425 40,946 105,589 3,069,902 3,621,721 (3,543,530) 78,191 National and Provincial Government 91,904 101,936 97,951 99,827 1,790,245 2,181,863 (2,103,576) 78,287

328,287 Total 288,203 173,425 40,946 105,589 3,319,902 3,928,065 (3,543,530) 384,535 Total 341,904 101,936 97,951 99,827 1,790,245 2,431,863 (2,103,576) 328,287

None of the debtors have been pledged as security during the current year. 8.

VAT receivable

VAT

1,969,975

1,012,214

The Municipality is registered on the payment basis for VAT purposes. This means that VAT is only declared once cash is received or actual payments are made. 9.

Cash and cash equivalents

Cash and cash equivalents consist of:

34

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand 9.

2017

2016

Cash and cash equivalents (continued)

Cash on hand Bank balances Short-term deposits

506 1,885,808 2,384

383 163,113 429,709

1,888,698

593,205

The municipality had the following bank accounts `

Account number / description ABSA BANK - (405 362 8182) ABSA BANK - (929 706 7856) NEDBANK (03/7662022528/000015/14) ABSA BANK (930 967 2913)

Bank statement balances Cash book balances June 30, 2017 June 30, 2016 June 30, 2015 June 30, 2017 June 30, 2016 June 30, 2015 1,885,808 163,118 978,975 1,885,808 163,118 978,975 1,077 1,077 752,203 752,203 2,384

429,709

-

2,384

429,709

-

1,888,192

592,827

1,732,255

1,888,192

592,827

1,732,255

Minimum lease payments due - within one year - in second to fifth year inclusive

469,119 39,458

497,417 508,577

less: future finance charges

508,577 (28,893)

1,005,994 (103,681)

Present value of minimum lease payments

479,684

902,313

Present value of minimum lease payments due - within one year - in second to fifth year inclusive

440,907 38,777

422,629 479,684

479,684

902,313

38,779 440,905

479,684 422,629

479,684

902,313

87,690 938,762

75,679 36,080 87,690 22,666 711,415 -

1,026,452

933,530

Total 10. Finance lease obligation

Non-current liabilities Current liabilities

The municipality is currently leasing printers and telephone system under finance lease. The average lease term for the lease is 3 years and the interest is link to prime. 11. Unspent conditional grants and receipts Unspent conditional grants and receipts comprises of: Unspent conditional grants and receipts Financial Management Grant Thetha Provincial Infrastructure Grant Expanded Public Works Programme Motheo Disestablishment Grant Rural Roads Assets Management Systems

35

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

2016

11. Unspent conditional grants and receipts (continued) Movement during the year Balance at the beginning of the year Additions during the year Income recognition during the year Withheld by treasury Reclassified as creditors

933,530 52,840,655 (51,901,894) (98,344) (747,495)

1,401,067 52,273,881 (52,175,537) (565,881) -

1,026,452 The nature and extent of government grants recognised in the financial statements and an indication of other forms of government assistance from which the municipality has directly benefited; and Unfulfilled conditions and other contingencies attaching to government assistance that has been recognised. See note 19 for reconciliation of grants from National/Provincial Government.

36

933,530

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

2016

12. Provisions Reconciliation of provisions - 2017 Opening Balance Non current long service provision Current long service provision

Additions

Utilised during the year

Total

1,307,999 173,000

186,001 46,237

(36,237)

1,494,000 183,000

1,480,999

232,238

(36,237)

1,677,000

Reconciliation of provisions - 2016 Opening Balance Non current long service provision Current long service provision

Additions

Utilised during the year

Total

1,347,000 98,000

(39,001) 134,077

(59,077)

1,307,999 173,000

1,445,000

95,076

(59,077)

1,480,999

Non-current liabilities Current liabilities

1,494,000 183,000

1,307,999 173,000

1,677,000

1,480,999

The long service awards liability arises fromXhariep DistrictMunicipality being a party to the collective agreement on condition of service for the Free State Division of SALGBC. This agreement is effective from 1 July 2010. The long service awards plan is a defined benefit plan. At period end 69 employees were eligible for long service bonuses The current service cost for the ensuring year is estimated to be R298 000( June 2016 R266 000) whereas the interest cost for the ensuring year is estimated to be R158 000(June 2016 R138 000). Present value of the unfunded obligation Present value of unfunded obligation at year end

1,677,000

1,481,000

Reconciliation of nfunded obligation: Present value of unfunded obligation at the begining of the year Current service costs long service awards paid Interest costs Acturial(gains)loss

1,481,000 298,000 (36,237) 158,000 (223,763)

1,445,000 266,000 (59,077) 138,000 (308,923)

1,677,000

1,481,000

The expected value of each employee's long service awards is projected to the next interval by allowing for future salary growth. Long service benefits are awarded in the form of leave days and a percentage of salary. The average leave has been cobverted into a percentage of the employee's annual salary. The conversion is based on a 250 working days year and therefore the benefits awarded can be expressed as follows: Completed Years of Service 5 37

Long Service Long Service Total Long Formula used Leave Award Bonus Award ( Service benefit to calculate (working Days) % of Annual Award ( % of Total Long Salary) Annual Salary) Service Benefit Award 5 2% 4% (5/250 + 2%)

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

2016

12. Provisions (continued) 10 15 20 25,30,35,40 and 45

10 15 15 15

3% 4% 5% 6%

7% 10% 11% 12%

(10/250 + 3%) (15/250 + 4%) (15/250 + 5%) (15/250 +6%)

The calculated award values are then discouted at the assumed discount interest rate to the date of calculation. We also allowed for mortality, retirement and withdrawal. Financial variables The two most important financial variables used in the valuation are the discount rate and salary inflation. The following variables have been assumed for the following values: Financial Variable

Assumed Assumed Value at 30-06- Value at 30-062017(Current 2016 Valuation) (preceding Valuation) Yield Curve ield Curve Difference Difference Between between nominal and nominal and real yield curve real yield curve Equal to CPI Equal to CPI +1% +1% Yield Curve Yield Curve Based** Based**

Discount Rate CPI( Consumer Price Inflation)

Normal Salary Increase Rate Net Effective discount Rate

** The Net effective Discount Rate is different for each relevant time period of the yield curves various durations and therefore the Net Effective Discount Rate is based on the relationship between the (yeild curve based) DIscount Rate for eash relevant time period and the (yield curve based) Salary inflation for each relevant time period. 13. Payables from exchange transactions Trade payables Staff bonuses accrual Staff leave accrual Salary control Retention Other creditors

6,064,315 793,790 2,292,974 5,317,523 135,359 2,766,787

4,051,218 683,822 2,599,508 1,395,117 135,359 1,547,919

17,370,748

10,412,943

431,015 20,986 226,530 421,997 52,170,584 39,253

435,684 16,175 112,961 317,558 52,175,536 258,250 130,135

53,310,365

53,446,299

14. Revenue Rental of facilities and equipment Fees earned Other income Interest received - investment Government grants & subsidies Public contributions and donations LG SETA income

38

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

2016

14. Revenue (continued) The amount included in revenue arising from exchanges of goods or services are as follows: Rental of facilities and equipment Other income Other income - (rollup) Interest received - investment

The amount included in revenue arising from non-exchange transactions is as follows: Taxation revenue Transfer revenue Government grants & subsidies Public contributions and donations LG SETA income

431,015 20,986 226,530 421,997

435,684 16,175 112,961 317,558

1,100,528

882,378

52,170,584 39,253

52,175,536 258,250 130,135

52,209,837

52,563,921

431,015

435,684

15. Rental of facilities and equipment Premises Rental income

The municipality lease part of the municipality building to Kopanong local municipality. The lease is accounted using the straight-line basis over the term of the lease agreement. 16. Fees earned Fees

20,986

16,175

226,530

112,961

97,406 324,591

182,607 134,951

421,997

317,558

17. Other income Other income 18. Investment revenue Interest revenue Bank Interest charged on trade and other receivables

39

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

2016

19. Government grants and subsidies Operating grants Equitable share Municipal System Improvement Grant Financial Managemnt Grant Expanded Public Works Programme Rural Roads Asset Management Systems Provincial Financial Assistance Grant

29,738,345 1,250,000 1,053,000 2,279,239 17,850,000

30,090,881 930,000 1,174,321 1,088,335 1,892,000 16,999,999

52,170,584

52,175,536

Equitable Share In terms of the Constitution, this grant is used to subsidise the provision of basic services to indigent community members. Municipal System Improvement Grant Balance unspent at beginning of year Current-year receipts Conditions met - transferred to revenue Withheld by treasury/Roll-over not approved

-

182,544 930,000 (930,000) (182,544)

-

-

The purpose of the grant is to assist municipalities in building in house capacity to perfom thier function and stabilise institutional and governance system as required in the Local Government System Act of 2000. As of the 2016/17 financial year the grant was changed from being a direct grant to being inderect grant meaning that the grant as allocated in the DORA will not be transfer directly to the municipality but the Cogta will run projects with the money for the benefit of the municipality. Financial Management Grant Balance unspent at beginning of year Current-year receipts Conditions met - transferred to revenue Withheld by Treasury /Roll-over not Approved

75,679 1,250,000 (1,250,000) (75,679)

1,250,000 (1,174,321) -

-

75,679

The purpose of the grant is to promote and support reform to financial management and implemetation of the Municpal Financial Management Act (MFMA) THETA Balance unspent at beginning of year Reclassified as creditors

36,080 (36,080)

36,080 -

-

36,080

87,690

87,690

This grant has been reclassified as a creditor as it is now payable back to the SETA Provicial Infrastructure Grant Balance unspent at beginning of year Conditions still to be met - remain liabilities (see note 11). Expanded Public Works Programme 40

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

2016

19. Government grants and subsidies (continued) Balance unspent at beginning of year Current-year receipts Conditions met - transferred to revenue Withhel by Treasury/Roll-over not approved

22,666 1,053,000 (1,053,000) (22,666) -

1,111,000 (1,088,334) 22,666

The purpose of the grant is to expand job creation programs in the district Motheo Disestablishment Grant Balance unspent at beginning of year Reclassified as creditors

711,415 (711,415) -

711,415 711,415

The grant has been reclassified as a creditor as it is now payable back to Maguang Metro. Rural Road Asset Management Balance unspent at beginning of year Current-year receipts Conditions met - transferred to revenue Withheld by Treasury/roll-over not approved

3,218,000 (2,279,238) 938,762

383,338 1,892,000 (1,892,000) (383,338) -

The purpose of the grant is to assist the municipality monitor the conditions of the municipal roads. Provincial Financial Assistance Grant The municipality receives financial assistance from the Provincial Cogta to help with operational activities. 20. Public contributions and donations Donations

-

41

258,250

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

2016

21. Employee related costs Basic Medical aid - company contributions UIF SDL Other payroll levies Leave pay provision charge Defined contribution plans Long-service awards 13th Cheques Travelling Allowance Housing benefits and allowances Cellphone allowance long term service fees

24,292,775 1,623,498 138,796 315,003 7,373 786,133 3,406,424 1,923,106 3,552,416 189,479 286,316 298,000

23,189,879 1,632,838 142,976 300,491 7,309 779,858 3,242,943 1,523,855 3,256,740 181,269 286,892 266,000

36,819,319

34,811,050

1,468,960 84,000 176,404 43,253 9,600 295,922 21,510

1,195,674 84,000 32,322 9,600 13,488

2,099,649

1,335,084

4,467

-

361,708

216,555

-

130,178 28,011 30,801 1,600 1,556

-

192,146

-

16,199

Remuneration of Municipal Manager (MM Kubeka) Annual Remuneration Car Allowance 13th Cheque Contributions to UIF, Medical and Pension Funds Telephone allowance Leave days payout Other

Remuneration of Chief Finance Officer (SJ Matobako) Acting allowance Mr SJ Matobako was acting as the Chief Financial Officer from the 1 June 2017. Remuneration of Chief Financial Officer (MC Mogoale) Acting allowance Mr MC Mogoale has acted from the 1 July 2016 till 31 May 2017. Remuneration of Director Corporate Services (M Khapha) Annual Remuneration Car Allowance Contributions to UIF, Medical and Pension Funds Telephone Other

Mr M Khapha was appointed as Director Corporate Services from 1 August 2015 to 30 September 2015. Remuneration of Director Corporate Services (M Khapha) Annual Remuneration Mr M Khapha acted as Director Corporate Services for one month in July 2015. 42

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

2016

21. Employee related costs (continued) Remuneration of Director Planning and Development (MS Mohale) Annual Remuneration Car Allowance 13th Cheque Contributions to UIF, Medical and Pension Funds Telephone allowance Leave days payout Other

43

1,162,086 110,911 114,649 35,682 9,600 242,245 17,260

929,199 150,469 33,529 9,600 10,988

1,692,433

1,133,785

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

2016

22. Remuneration of councillors Executive Mayor Mayoral Committee Members Speaker Councillors

Executive Mayor (Cllr MG Ntwanambi)* Annual remuneration Contribution to UIF, Medical and Pension Funds Telephone allowance Housing allowance Other

Executive Mayor (Cllr MJ Sehanka)* Annual remunerations Contribution to UIF,Medical and Pension Funds Telephone allowance Other

Speaker (Cllr MJ Sehanka)** Annual remuration Contribution to UIF, Medical and Pension Funds Other

Speaker (Cllr NS Mqungquthu)** Annual Remuneration Contribution t UIF, Medical and Pension Funds Other

Cllr GM Modise(MMC) Annual Remuneration Car Allowance Contribution to UIF, Medical and Pension Funds Telephone allowance Other

Cllr TE Mokhele Annual Remuneration Car Allowance Contribution to UIF, Medical and Pension Funds Telephone allowance Other

Cllr NS Jafta Annual Remuneration 44

788,139 1,470,058 609,135 1,093,472

789,043 1,342,995 400,443 1,512,568

3,960,804

4,045,049

61,963 6,544 2,244 13,000 1,103

523,489 85,086 20,868 156,000 3,600

84,854

789,043

611,335 65,171 17,100 9,680

-

703,286

-

36,119 6,083 880

323,271 73,572 3,600

43,082

400,443

512,999 28,205 24,849

-

566,053

-

57,930 3,200 2,244 1,018

530,110 38,400 5,859 20,868 3,600

64,392

598,837

21,168 3,400 2,244 661

187,681 40,800 2,700 22,607 3,900

27,473

257,688

20,341

178,300

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

22. Remuneration of councillors (continued) Contribution to UIF, Medical and Pension fund Telephone allowance Other

Cllr PM Dibe Annual Remuneration Contribution to UIF, Medical and Pension fund Sitting allowance Other

Cllr MJ Mohapi Annual Remuneration Car allowance Contribution to UIF, Medical and Pension fund Telephone allowance Other

Cllr NI Mehlomakulu (MMC) Annual Remuneration Car allowance Contribution to UIF, Medical and Pension fund Other

Cllr NC Spochter Annual Remuneration Car allowance Contribution to UIF, Medical and Pension fund

Cllr H Shebe Annual Remuneration Contribution to UIF, Medical and Pension fund

Cllr SA Sola Annual Remuneration Contribution to UIF, Medical and Pension fund

Cllr JJ Makitle Annual Remuneration Contribution to UIF, Medical and Pension fund

Cllr MJ Mothupi Annual Remuneration Car allowance Contribution to UIF, Medical and Pension fund 45

2016

4,227 2,244 617

52,268 20,868 3,600

27,429

255,036

962 11

429 136 12,077 -

973

12,642

16,494 3,410 4,663 2,244 628

132,421 40,925 57,416 20,868 3,600

27,439

255,230

30,372 5,116 3,014 387

263,151 61,387 33,494 3,600

38,889

361,632

1,564 17

19,436 211 -

1,581

19,647

1,564 17

19,435 208

1,581

19,643

8,524 87

81,729 832

8,611

82,561

8,524 87

80,365 811

8,611

81,176

16,494 3,410 4,663

132,421 40,925 57,471

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

22. Remuneration of councillors (continued) Telephone allowance Other

Cllr AJ van Rensburg Annual Remuneration Car allowance Contribution to UIF, Medical and Pension fund Telephone allowance Other

Cllr AV Mona(MMC) Annual Remuneration Car allowance Contribution to UIF, Medical and Pension fund Telephone allowance Housing allowance Other

Cllr ML Sehloho Annual Remuneration Contribution to UIF, Medical and Pension fund

Cllr MG Ntwanambi( MMC) Annual Remuneration Contribution to UIF, Medical and Pension fund Telephone allowance Other

Cllr B Smit Annual Remuneration Telephone allowance Other

Cllr TS Tseuoa Annual Remuneration Contribution to UIF, Medical and Pension fund Telephone allowance Other

Cllr C Burger Annual Remuneration Telephone allowance Other

46

2016

2,244 629

20,868 3,600

27,440

255,285

233,223 3,410 653 19,344 5,025

187,556 40,925 2,459 20,868 3,600

261,655

255,408

24,515 5,116 4,396 2,244 4,100 751

191,781 61,387 55,690 20,868 49,200 3,600

41,122

382,526

1,564 16

18,071 181

1,580

18,252

425,476 61,795 17,100 6,552

-

510,923

-

13,498 8,550 232

-

22,280

-

201,738 11,098 17,100 4,820

-

234,756

-

13,498 8,550 231

-

22,279

-

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

22. Remuneration of councillors (continued) Cllr JK Sebeco(MMC) Annual Remuneration Telephone allowance Other

Cllr MJ Phaliso Annual Remuneration Telephone allowance Other

Cllr TD Mochechepa Annual Remuneration Telephone allowance Other

Cllr ML Mogapi Annual Remuneration Contribution to UIF, Medical and Pension fund Telephone allowance Other

Cllr J Moitse Annual Remuneration Telephone allowance Other

Cllr AN November Annual Remuneration Telephone allowance Other

Cllr JM Moeketsi Annual Remuneration Telephone allowance Other

Cllr IS Riddle Annual Remuneration Telephone allowance Other

2016

487,271 17,100 7,785

-

512,156

-

13,498 8,550 232

-

22,280

-

293,483 8,550 3,028

-

305,061

-

193,990 18,504 17,100 4,678

-

234,272

-

48,781 8,550 597

-

57,928

-

13,498 8,550 230

-

22,278

-

48,781 8,550 590

-

57,921

-

13,498 8,550 231

-

22,279

-

* Cllr MG Ntwanambi was Executive Mayor of the district up to the 3 August 2016 and Cllr MJ Sehanka has been the Executive Mayor from the 4 August to date. 47

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

2016

22. Remuneration of councillors (continued) ** Cllr MJ Sehanka was Speaker of the district up to the 3 August 2016 and Cllr NS Mqungquthu has been the Speaker from the 4 August to date. 23. Depreciation and amortisation Property, plant and equipment

1,904,843

2,254,188

1,038,459 1,038,459 -

35,530 35,530 -

517,768 376

399,800 -

518,144

399,800

1,439,954 -

1,160,677 23,427

1,439,954

1,184,104

24. Impairment of assets Impairments Property, plant and equipment

25. Finance costs Bank Other interest paid

26. Debt impairment Contributions to debt impairment provision Bad debts written off

48

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

2016

27. General expenses Advertising Auditors remuneration Accommodation Audit Committee remuneration Bank charges Consulting and professional fees Consumables Entertainment Fines and penalties Insurance Conferences and seminars Computer licences and software Levies Motor vehicle expenses Fuel and oil Postage and courier Printing and stationery Software expenses Subscriptions and membership fees Telephone and fax Transport and freight Training Travel - local Refuse Water and electricity Settlement cost EPWP incentive Other expenses Property rates

113,800 2,128,145 677,295 51,434 105,915 1,769,377 30,521 658,273 184,725 19,146 184,883 352,830 1,117 141,667 1,991 340,204 351,281 543,365 387,682 10,400 73,843 2,202,075 2,409 373,383 1,078,287 799,397 243,681

138,819 2,034,689 120,471 101,845 64,377 3,416,346 15,580 65,851 279,911 499,139 356,646 234,688 1,020 139,589 2,772 106,816 1,159,927 367,136 34,680 312,317 2,807,297 1,391 363,032 602,112 1,089,918 128,485 151,302

12,827,126

14,596,156

28. Gains or losses on assets Losses on asset disposal Proceeds from sale of assets

(15,425) -

(168,669) 34,627

(15,425)

(134,042)

29. Auditors' remuneration Fees

2,128,145

49

2,034,689

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

2016

30. Cash generated from (used in) operations Deficit Adjustments for: Depreciation and amortisation Gain on sale of assets and liabilities Impairment deficit Debt impairment Movements in provisions Transfer of asset Changes in working capital: Inventories Receivables from exchange transactions Payables from exchange transactions VAT Unspent conditional grants and receipts

(5,102,624)

(7,004,137)

1,904,843 15,425 1,038,459 1,439,954 196,001 -

2,254,188 134,042 35,530 1,184,104 36,000 2,896,757

(12,018) (1,521,680) 6,957,805 (957,761) 92,922

33,306 (1,372,623) 654,163 819,936 (467,537)

4,051,326

(796,271)

31. Commitments Authorised operational expenditure Approved and Contracted for  Current Expenditure

11,006,546

1,631,905

Total operational commitments Already contracted for but not provided for

11,006,546

1,631,905

This committed expenditure relates to property and will be financed by available bank facilities, retained surpluses, rights issue of shares, issue of debentures, mortgage facilities, existing cash resources, funds internally generated, etc. 32. Contingencies 30 June 2017 The Municipality had no contingent liabilities at the reporting date. Contingent assets 30 June 2017 The Municipality had no contigent asset at the reporting date. 33. Related parties `

Relationships Accounting Officer Compensation to Councillors and key management

Refer to accounting officer's report. Refer to employee related cost and remuneration of councillors note 21 & 22.

Related party transactions The municipality had no related party transaction and balances at period end. The municipality had various process in placed to identify and note any related party balance and transactions. This range from disclse on the bid document to maintenance of confict register.

50

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

2016

34. Prior period errors Prior Period error - Overstatement of of Debtors It was noted during the preparation of the financial statement that IEC debtor was over invoiced. This error happened at the beginning of lease( 2012/13 financial year) by IEC of one of the parking bays. The effect of this error amount to R688 in the statament of financial position. Prior period error - Overstatement of the finance lease liability It was noted that an error was made during the calculation of the present value of the lease payment at the begining of the finance lease period. The effect of this error amount to R 9032.2 in the statement of financial position Prior period error- Overstatement of the unspent grants It was noted that expense which where incur during 2011/12 financial year relating to PIG was not accounted as revenue as it met the condition at the time. This resulted in the unspend grant to be overstated over the past few years. Prior period error - Account Payables It was noted that the creditor for year was understated due to some invoices not being recorded Prior period error - VAT It was noted that some of expenses have not been recorded due some invoices not being recorded Prior period error - General expenses It was noted that the following general expenses where not recorded being , water and eletricity, Property rates, Sewerage and internet services Prior period Error - General Expenses It was noted that the audit committee fees where incorrectly classified in the financial statements as part of the employee cost this has been corrected by moving them to the general expenses The correction of the error(s) results in adjustments as follows: Statement of financial position Receivables from exchange transactions Finance lease liability Unspent grant Account Payables Opening Accumulated Surplus or Deficit VAT

-

(688) 10,392 116,504 (68,733) (124,848) 1,219

Statement of Financial Performance Water and electricity Property rates Sewerage Internet services Finance cost Employee cost Audit committtee

-

(35) 59,629 647 7,273 (1,360) (101,845) 101,845

51

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

2016

35. Risk management Liquidity risk The municipality’s risk to liquidity is a result of the funds available to cover future commitments. The municipality manages liquidity risk through an ongoing review of future commitments and credit facilities. Credit risk Credit risk consists mainly of cash deposits, cash equivalents, derivative financial instruments and trade debtors. The municipality only deposits cash with major banks with high quality credit standing and limits exposure to any one counter-party. `

Financial instrument ABSA Bank: Current Account Receivable from exchange transaction ABSA Investment

2017 1,885,808 3,828,164 2,384

2016 163,113 2,432,547 429,709

Market risk Interest rate risk The municipality's interest risk arises from short term loans and investment. These are issued at variable rate and expose the Municipality to cash flow interest rate risk. Financiall instructments that are issued at fixed rates expose the municipality to fair value interest rate risk. 36. Going concern We draw attention to the fact that at June 30, 2017, the municipality had accumulated surplus of R104,052 and that the municipality's total assets exceed its liabilities by R104,052. The Municipality has been facing by financial difficulties over the past three(3) years. This was due to the funding and allocation of the municipality being cut and some of the debtors not paying the amount due to the municipality. The result of this was a huge increase in the payable from exchange transaction amounting to 66% as compared to the prior year. The change in the MSIG from being a direct grant to an indirect grant resulted in the municipality not receiving some of budget income which also increases the pressure on the municipality. The non-payment of the debt owed to the municipality resulted in the provision for impairment of R3 543 530 funds which could assist in decrease the creditors balance at year end. The municipality has a deficit for the year amounting to R5,102,624 during the current financial year. Impairment of assets amounting to R1,038,459 and debt impairment amounting to R1,439,954 both contributed 49% of the R5,102,624 deficit .The Municipality had a total assets amounting to R20,657,936 and total liabilities amounting to R20,553,874 this resulted in a accumulated surplus of R104,052. The Municipality’s current liabilities amount to R19,021,085 and the current assets amounted to R4,579,420 the effect being a net current liability position of R14,441,675. However the ability of the municipality to continue as a going concern is dependent on the fact the majority of the municipalities funding is from grant funding which is guaranteed to be received as allocated in the DORA. Also this funding is expected to increase in the next financial years as shown in the DORA this will assist the municipality in incurring what we budget properly in our expenditures The 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. 37. Events after the reporting date At the time of preparing and submitting the Annual Financial Statement there were no subsequent event to disclose.

52

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

2016

38. Unauthorised expenditure Opening balance Unauthorised expenditure current year/period

17,072,230 5,237,820

14,274,609 2,797,621

22,310,050

17,072,230

892,287 870,415

451,656 440,631

1,762,702

892,287

867,681 2,448 285

390,611 4,036 45,985

870,414

440,632

34,030,527 1,509,550 -

29,848,528 3,907,145 274,854

35,540,077

34,030,527

1,509,550 34,030,527

4,181,999 29,848,528

35,540,077

34,030,527

39. Fruitless and wasteful expenditure Opening balance Fruitless and wasteful expenditure current year

Reconciliation of fruitless and wasteful expenditure Interest and penalties for late payment of suppliers Accommodation bookings legal cost

40. Irregular expenditure Opening balance Add: Irregular Expenditure - current year Less: Irregular Expenditure for prior year identified during the current year.

Analysis of expenditure awaiting condonation per age classification Current year Prior years

Details of irregular expenditure – current year Disciplinary steps taken/criminal proceedings Overpayment of the acting allowance was identified during the year and still to be investigated Tender prcess not followed as required by SCM The expenditure was identified during the current policy financial year and still need to be investigated Insufficient quotation obtained as required by The expenditure was identified during the current SCM policy financial year and still need to be investigated Non compliance with the MFMA and MSA

312,572 981,161 215,817 1,509,550

41. Interest income Interest charged on trade and other receivables Bank

324,591 97,406

134,951 182,607

421,997

317,558

39,253

130,135

42. LG SETA Income LG SETA income

53

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand 43. Pension and Medical Aid Contributions Opening balance Current year subscription /Fee Amount paid - Current year

685,168 8,016,514 (8,027,842)

7,994,497 (7,309,329)

673,840

685,168

502,213 2,524,165 (1,464,170)

2,057,259 2,397,729 (3,952,775)

44. Audit fees Opening Balance Current year subcription/ fees Amount paid-current year

1,562,208

502,213

45. VAT Opening balance Current year subcription/fee Amount Received -current year

1,012,214 1,144,973 (187,212)

1,593,805 1,116,629 (1,698,220)

1,969,975

1,012,214

(585,765) (8,615,931) 4,683,011

(753,583) (7,646,297) 7,814,115

(4,518,685)

(585,765)

46. PAYE,UIF and SDL Opening balance Current year subcription/fee Amount paid- Current year

47. Budget differences Material differences between budget and actual amounts The excess of actual expenditure over the final budget above 5% is deemed to be material and are priovided reasons on the differences. Statement of Financial Performance: Rental of Facilities and Equipment The municipality had less rental of the side hall and other facilities that expected Fees Earned Due to less tender advertised. Other Income Due to high refund made from Stellenbosch University for a project that was cancelled Interest Income Due to high outstanding amount from Kopanong Local Municipality Government Grants and Subsidies 54

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

2016

47. Budget differences (continued) MSIG grant was changed from a direct grant to an indirect grant this resulted in the MSIG not being received by the municipality LG SETA Income The municipality were not informed if they were ging to receive from LG SETA as we did not have any training budget on the skills development plan Employee Related Cost The cost is lower thn budget due to the fact tha we did not have director in other departments during the financial year Remuneration of Councillors The different was due to the adjustment of the salaries as a result of the upper limits during the year and more councillors as part-time than full time. Depreciation The depreciation was less than budgeted this was due to the changes made to the asset register towards the end of the previous financial year Impairment Asset The municipality did not budget to impair any asset during the financial year due to unexpected matters in assets Finance Costs The municipality had overdrafts during the financial year which resulted in the high finance cost Repairs and Maintenance No major repairs and maintenance were done by the municipality General Expense

55

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

2016

47. Budget differences (continued) Due to high auditor's remuneration, levies, software expenses (mSCOA), printing and stationery and other expenses Statement of Financial Position Inventory The municipality planned to have fully issued the inventory it have and purchased during the financial year however due to the lack of funds the municipilty only was able to purchase most of the inventory towards year end this resulted in the having a closing balance at year end. Receivable from exhange transactions The municipality planned to recover all the debtors during the financial year however we had problem again to recover the money due to the municipality. VAT receivable The municipality due to the cash flow problems hope to have received all the amount due to it by SARS how ever as at yearend the amount was not received due to not yet having paid some of the creditors. Cash and Cash equivalents The balance at year end is less due to the fact that we did not receive the MSIG during the current financial year. Property Plant and equipment The PPE is less then what was budget as we did not have enough funds to purchase additional assets and high rate of the depreciation recorded. Intangible Asset The municipality did not have intangible assets during the budget as we where not sure as to how account for it during the budget stage and it only become clear toward the end of the financial year Payable from exchange transactions The payable from exchange transactions are increased due to the fact that we could not pay suppliers due to lack of money. Unspent conditional grants and receipts The municipality did not plan to have unspent conditional grrants during the financial year however during the Provision The provision is highly depended on the information provided during the acturial valuation the estimate was the best we can based on histrorical information we had. Accumulated surplus Accumulated has decreased due to the losses which the municipality has been reporting at year end.

56

Xhariep District Municipality (Registration number DC16) Financial Statements for the year ended June 30, 2017

Notes to the Financial Statements Figures in Rand

2017

2016

48. Non compliance with law and regulations During the financial year the municipalit had the following non complaince with laws and regulations Regulation 44 of the Municipal supply chain management regulation and/ or section 44 of supply chain management policy of Xhariep District where MBD4's ( Declaration of interest) where not obtained from supplier Regulation 43 of the Municipal supply chain management regulations and/ or section 43 of supply chain management policy of xhariep district municipality where suppliers/ service providers did not submit tax clearance certificates prior to awarding National Treasury circular 81 awarding of business to a supplier/ service provider not on the National Treasury Central Supplier Database(CSD) as required Regulation 19 of the Municipal suplly chain management regulation and/ or section 19 of Supply chain management policy of xhariep district municipality where tender process was not followed on transaction above R200 000.00 (Vat included) Section 6(1) of the Preferential Procurement Regulations Framework Act no 5 of 2000 where preferential preference poiint system was not apllied to transaction above R30 000.00 but below R200 000( vat included) General conditions of contracts applicable to goods and services where a contract was extended above the mini threhold of 15% Setion62(1)(d) of the municipal finance management act no 56 of 2003 where Unauthorised and fruitless expenditure where incurred Section 65(2)(e) of the municipal finance management act no 56 of 2003 where payment where not made within thirty (30) days Section 71(1) monthly budget statements where the municipality did not submit within 10 working days after the end of each month monthly statements

57

Xhariep District Municipality Appendix A ( Unaudited) June 2017

Schedule of external loans as at 30 June 2017 Loan Number

Redeemable Balance at Thursday, June 30, 2016 Rand

Received during the period Rand

Redeemed Balance at written off Friday, June during the 30, 2017 period Rand

Rand

Carrying Value of Property, Plant & Equip Rand

Other Costs in accordance with the MFMA Rand

Loan Stock -

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Structured loans

Funding facility

Development Bank of South Africa

Page 58

Xhariep District Municipality Appendix A ( Unaudited) June 2017

Schedule of external loans as at 30 June 2017 Loan Number

Redeemable Balance at Thursday, June 30, 2016 Rand

Received during the period Rand

Redeemed Balance at written off Friday, June during the 30, 2017 period Rand

Rand

Carrying Value of Property, Plant & Equip Rand

Other Costs in accordance with the MFMA Rand

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Bonds

Other loans

Lease liability

Annuity loans

Page 59

Xhariep District Municipality Appendix A ( Unaudited) June 2017

Schedule of external loans as at 30 June 2017 Loan Number

Redeemable Balance at Thursday, June 30, 2016 Rand

Received during the period Rand

Redeemed Balance at written off Friday, June during the 30, 2017 period Rand

Rand

Carrying Value of Property, Plant & Equip Rand

Other Costs in accordance with the MFMA Rand

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Government loans

Total external loans Loan Stock Structured loans Funding facility Development Bank of South Africa Bonds Other loans Lease liability Annuity loans Government loans

Page 60

Xhariep District Municipality Appendix F (Unaudited) Disclosures of Grants and Subsidies in terms of Section 123 MFMA, 56 of 2003

June 2017

Name of Grants

Name of organ of state or municipal entity

Quarterly Receipts

Sep COGTA Provincial Financial Government Assistance Grant Grant Equitable share National Government Grant Financial National Management Government Grant Grant MSIG Grant National Government Grants EPWP Grant National Government RAMMS Grant National Government Grants

Dec -

12,391,000 1,250,000 264,000 13,905,000

Quarterly Expenditure

Mar -

9,814,000

7,435,000

Jun 17,850,000

Sep

Dec -

Grants and Subsidies del

Mar -

-

-

9,913,000

9,913,000

9,913,000

224,933

168,368

275,923

Jun 17,850,000 -

-

-

-

-

-

-

-

-

-

-

-

-

473,000

316,000

-

-

-

1,961,000

1,257,000

-

-

-

12,248,000

9,008,000

17,850,000

10,137,933

10,081,368

Note: A municipality should provide additional information on how a grant was spent per Vote. This excludes allocations from the Equitable Share.

Section 5 - Page 61 - November 30, 2017 - 4:00 PM

580,777

415,509

1,863,729

10,604,432

20,294,506

Sep

Dec -

-

-

-

1,041,000 1,041,000

76,000 -

23,000 -

99,000

Xhariep District Municipality0 Appendix G1 (Unaudited) Budgeted Financial Performance (revenue and expenditure by standard classification) for the year ended June 30, 2017 2017/2016 Original Budget

Rand

Budget Final Adjustments adjustments (i.t.o. s28 and budget s31 of the MFMA) Rand

Rand

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

Virement Final Budget (i.t.o. Council approved policy) Rand

Rand

2016/2015 Actual Outcome

Unauthorised expenditure

Rand

Rand

Variance of Actual Actual Reported Expenditure Balance to be Actual Outcome as % Outcome as % unauthorised authorised in recovered Outcome of Final of Original expenditure terms of against Budget Budget section 32 of Adjustments MFMA Budget Rand Rand Rand Rand Rand Rand

Restated Audited Outcome

Rand

Revenue - Standard Governance and administration Executive and council Budget and treasury office Corporate services Economic and environmental services Planning and development

40,240,093 11,949,106 12,093,401 16,197,586 12,378,022

(1,654,466) (454,531) (681,373) (518,562) 1,654,466

38,585,627 11,494,575 11,412,028 15,679,024 14,032,488

-

38,585,627 11,494,575 11,412,028 15,679,024 14,032,488

38,925,959 11,671,964 11,340,161 15,913,834 14,608,167

340,332 177,389 (71,867) 234,810 575,679

101 102 99 101 104

12,378,022

1,654,466

14,032,488

-

14,032,488

14,608,167

575,679

Total Revenue - Standard

52,618,115

52,618,115

-

52,618,115

53,534,126

916,011

-

Page 62

% % % % %

97 98 94 98 118

% % % % %

41,897,773 8,216,396 14,280,475 19,400,902 11,548,527

104 %

118 %

11,548,527

102 %

102 %

53,446,300

Xhariep District Municipality Appendix G1 (Unaudited) Budgeted Financial Performance (revenue and expenditure by standard classification) for the year ended June 30, 2017 2017/2016 Original Budget

Rand

Budget Final Adjustments adjustments (i.t.o. s28 and budget s31 of the MFMA) Rand

Rand

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

Virement Final Budget (i.t.o. Council approved policy) Rand

Rand

2016/2015 Actual Outcome

Unauthorised expenditure

Rand

Rand

Variance of Actual Actual Reported Expenditure Balance to be Actual Outcome as % Outcome as % unauthorised authorised in recovered Outcome of Final of Original expenditure terms of against Budget Budget section 32 of Adjustments MFMA Budget Rand Rand Rand Rand Rand Rand

Restated Audited Outcome

Rand

Expenditure - Standard Governance and administration Executive and council Budget and treasury office Corporate services Economic and environmental services Planning and development

42,040,093 13,749,106 12,093,401 16,197,586 12,378,022

(1,654,466) (454,531) (681,373) (518,562) 1,654,466

40,385,627 13,294,575 11,412,028 15,679,024 14,032,488

-

-

40,385,627 13,294,575 11,412,028 15,679,024 14,032,488

45,035,395 17,177,455 12,268,442 15,589,498 13,087,393

-

12,378,022

1,654,466

14,032,488

-

-

14,032,488

13,087,393

-

Total Expenditure - Standard

54,418,115

-

54,418,115

-

-

54,418,115

58,122,788

-

Surplus/(Deficit) for the year

(1,800,000)

-

(1,800,000)

-

(1,800,000)

(4,588,662)

Page 63

4,649,768 3,882,880 856,414 (89,526) (945,095) (945,095)

112 129 108 99 93

% % % % %

107 125 101 96 106

% % % % %

-

-

-

-

93 %

106 %

-

-

-

-

3,704,673

107 %

107 %

-

-

-

-

(2,788,662)

255 %

255 %

53,446,300

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