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Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

General Information 




Legal form of entity 


Nature of business and principal activities 


The following is inciuded in the scope of operation 


Grading of local authority 

Executive Mayor 

Members of the Mayoral Committe 


An organ of state within the local sphere of governmenf*e^cising 
executive and legislative authority. 

Providing municipal services, infrastructure develo^ent Md 
furthering the interest of the local community in the matjiiabeng area, 
Free State Province. 

Area FS184, as a high capacity local municipality, as demarcated by 
the Demarcation Board and indicated in the“demarcation map 
published for FS184. 


Local high capacity municipality 


Cr\ 


Councillors 


Ngangelizwe S 

Ngangelizwe S - Executive Mav£ r 
Mbana M A - Finance # 

Menyatso K J - Technical^wice*/ infrastructure 
Mfebe M S E - Corposate 'Services 
Motshabi M P - Coimmunity Services 
Ntsebeng MFI - Human Settlements 
Radebe M L - Social Services 
Rubulana L - Local Economic Development 
Sephiri M J - Public Safety 
Taliwe F E - Policy and Planning 
Tlhone M L - Special Programmes 
Badenhorst MJM 
Banyane ME 
^Beffefe R 
^^Botha PF 


Q 





r^ 







Chaka CP 
bali VN 
De Villiers MT 
Fanie DS 
Fourie JJC 
Kabi M 
Khalipha TD 
Kockera SC 
Mabote TL 
Madumise MM 
Mafa D 
Mafongosi ZV 
Makgowe PV 
Malefane DE 
Marais JS 

Masienyane MD (MPAC chair) 

Matlebe MM (Resigned 30/09/2015) 

Mbambo AX 

Meli TS 

Mholo PP 

Mlangeni G 

Mokhomo HA 

Mokotedi TG 


1 -31 August2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements forthe year ended 30 June 2016 

General Information 




signedfSI 


^V&elir 

d 



Accounting Officer 


Chief Finance Officer (GFO) 


& 


Registered office 







Postal ad'i^ess 

o 




Molelekoa PA 
Molelekoa PMI 
Molete TN 
Molupe RT 
Monjovo NE 
Morris VR 
Mosala MS 
Mothege MA 
Mphikeleli MA 
Naude ZHJ 
Nqobo ME (New) 

Ntlele Kl 
Ntsebeng MH 
Petleki Kl 
Phetise ME 
Pina NJ 
Qwesha GL 
Radebe MC 
Riet Ml 
Sifatya Z 
Smit DC (ResignedfSI /03/201 6) 
Speelman NW 
Stofile B (Speaker) 

Styger A 
|5^ard SDM 
Thatejjig MJ 
^l^lingoane TJ 
^e KR 
^satsa SJ 
Tsubane ME 
Tsubella KS 

Twala MJ (Council Whip) 
Twanana M 
Van Rooyen KV 
Van Rooyen MS 
Van Schalkwyk HCT 
Vanga NM 

Lepheana MF 

Tsoaeli ET 

Civic Centre 
319 Stateway 
Welkom 
Free State 
9460 

PO Box 708 
Welkom 
Free State 
9460 


d 


r^ 

cy 


2-31 August 2016 -04:52 PM 



Matjhabeng Local Municipality 

Financial Statements forthe year ended 30 June 2016 

General Information 

Bankers 

Attorneys 

Auditors Auditor-General of South Africa 

Enabling iegisiation Constitution of the Republic of South Africa, 1996 (Act No. 108 of 

1996) 

Municipal Finance Management Act, 2003 (Act No. 56 of 2003) 
Municipal Property Rates Act, 2004 (Act No. 6 of 2004) 

Municipal Structures Act, 1998 (Act No. 117 of 1998) 

Municipal Systems Act, 2000 (Act No. 32 of 2000) 


Website www.matjhabeng.fs.gov.za 



ABSA Bank Limited 
First National Bank 




A full list of attorneys used during the year is available at the municipal 
offices. 


3-31 August 2016 -04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

index 




The reports and statements set out below comprise the financial statements presented to the council: 

lndex 

Accounting Officer's Responsibilities and Approval 
Audit Committee Report 
Accounting Officer's Report 
Statement of Financial Position 
Statement of Financial Performance 
Statement of Changes in Net Assets 
Accounting Policies 
Notes to the Financial Statements 
Abbreviations 
COID 
CRR 
DBSA 
SA GAAP 
GRAP 
GAMAP 
HDF 
lAS 
IMFO 
IPSAS 
ME's 
MEC 
MFMA 
MIG 


Pag^ 












Compensation for Occupational lnjj!jj^e*!j;^ Diseases 
Capital Replacement Reserve 

_ T 

Development Bank of South^ffea 

A I 

South African Statements ofGei^ally Accepted Accounting Practice 

Generally Recognised Accounting Practice 

Generally Accepted Municipal Accounting Practice 

Housing Development Fund 

International Accounting Standards 

Institute of Municipal Finance Officers 

International Public Sector Accounting Standards 

Municipal Entities 

Member of the Executive Council 

T 

liyiQnicipal Finance Management Act 
Municipal Infrastructure Grant (Previously CMIP) 







4-31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Accounting Officer's Responsibilities and Approval 






The accounting officer is required by the Municipal Finance Management Act (Act 56 of 2003), to maintain adequat^ 
accounting records and is responsible for the content and integrity of the financial statements and related finan cialiiiijifo Trnation 
included in this report. It is the responsibility of the accounting officer to ensure that the financial statements faiijly pr^gntThe 
state of affairs of the municipality as at the end of the financial year and the results of its operations and cash fl^s for the 
period then ended. The external auditors are engaged to express an independent opinion on the financial stateiroijiis^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 ^colSrTfing Practice 
(GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Boaiu^/ 


The financial statements are based upon appropriate accounting policies consistently applied andfsupi^Rted by reasonable 
and prudent judgements and estimates. 

The accounting officer acknowledges that he is ultimately responsible for the system of internal financial control established by 
the municipality and place considerable importance on maintaining a strong control environment. To enable the accounting 
officer to meet these responsibilities, the 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. Flowever, 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 ffow_forecast for the year to 30 June 201 7 and, in the light of this 
review and the current financial position, he is satisfied that the municipality has or has access to adequate resources to 
continue in operational existence for the foreseeable future. 







5-31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Audit Committee Report 




6-31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Accounting Officer's Report 


The accounting officer submits his report for the year ended 30 June 2016. 

1 . Review of activities 
Main business and operations 



The municipality is engaged in providing municipal services, infrastructure development and furthering tiji^i ntere st of the 
local community in the matjhabeng area, free state province. and operates principally in South Africa. 

The operating results and state of affairs of the municipality are fully set out in the attached financial^Eatements and do not 
in our opinion require any further comment. 

2. Going concern 

We draw attention to the fact that at 30 June 2016, the municipality had accumulated deficits of R 4,200,622,838 and that the 
municipality's total liabilities exceed its assets by R 4,200,622,838. 

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. 

The ability of the municipality to continue as a going concern is dependent on a number of factors. The most significant of 
these is that the accounting officer continue to procure funding for the ongoing operations for the municipality. 

3. Subsequent events 

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

4. Accounting Officer 

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


Name 

Lepheana MF 


•.o 












7-31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Statement of Financial Position as at 30 June 2016 


l^stated** 


Figures in Rand 


Note(s) 


2016 


Assets 

Current Assets 


o 


Other financial assets 

6 

- 

18,862,179 

Inventories 

10 

9,59"^^,^ 

9,414,254 

Other receivables 

11 

28,^g|i3^ 

18,753,346 

Receivables from non-exchange transactions 

12 

1.5.4..640..55T7 

161,926,055 

VAT receivable 

13 

123,462,600 

120,315,800 

Receivables from exchange transactions 

14 

872,007,231 

743,597,219 

Cash and cash equivalents 

15 

11,520,330 

1,536,132 


Non-Current Assets 
Investment property 
Property, plant and equipment 
Fleritage assets 
Other financial assets 

Receivables from non-exchange transactions 
Receivables from exchange transactions 

Total Assets 

Liabilities 

Current Liabilities 
Bank overdraft 

Unspent conditional grants and receipts 
Provisions 

Payables from exchange transactions 
Consumer deposits 


O' 


<5 


Non-Current Liabilities 
Employee benefit obligation 
Provisions 



Total Liabilities 
Net Assets 

Accumulated surplus 









o 


1 , 199 , 864,599 1 , 074 , 404,985 


433,740,723 433,740,723 

5,433,335,701 5,354,538,795 
7,104,349 7,104,349 

330,990 339,207 

511,134 

4,060,246 350,382 

5 , 879 , 083,143 5 , 796 , 073,456 
7 , 078 , 947,742 6 , 870 , 478,441 


15 

2,603,485 

1,569,372 

16 

1,004,295 

6,024,486 

17 

1,512,262 

1,118,490 

18 

2,437,110,277 

2,247,112,381 

19 

36,177,187 

35,269,819 


2 , 478 , 407,506 

2 , 291 , 094,548 

7 

349,773,365 

349,773,364 

17 

50,144,032 

49,025,542 


399 , 917,397 

398 , 798,906 


2 , 878 , 324,903 

2 , 689 , 893,454 


4 , 200 , 622,839 

4 , 180 , 584,987 


4,200,622,838 

4,180,584,990 


I Note 43 


8-31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Statement of Financial Performance 


l^stated** 


Figures in Rand 


Note(s) 


2016 


Revenue 

Revenue from exchange transactions 

Service charges 

Rental of facilities and equipment 

Commissions received 

Other income 

Interest received 

Dividends received 

Licences and permits 

Total revenue from exchange transactions 

Revenue from non-exchange transactions 

Taxation revenue 

Property rates 

Transfer revenue 

Government grants & subsidies 
Fines 

Total revenue from non-exchange transactions 
Total revenue 

Expenditure 

Employee related costs 
Remuneration of councillors 
Depreciation and amortisation 
Finance costs 
Debt Impairment 
Repairs and maintenance 
Bulk purchases 
Contracted services 
General Expenses 

Total expenditure 

Operating surplus (deficit) 

Actuarial gain on employee benefits 
Fair value adjustments ^ 

Gain (loss) on disposal of assets anafe^ities 


Surplus (deficit) for the yea^ 



20 

21 

22 

23 

24 
24 
27 


o 


999,096,131 
1 1 ,20'?, 532 
llj^l^ 
25^ .2m 
153986,405 
17,251 
67,371 


962,917,970 

9,665,238 

9,778,521 

15,599,000 

107,151,515 

14,608 

48,905 



1 , 200 , 141,157 1 , 105 , 175,757 


262,455,047 194,086,901 


26 

527,662,693 

586,347,372 

'53 

10,592,300 

11,631,450 


800 , 710,040 

792 , 065,723 


2 , 000 , 851,197 

1 , 897 , 241,480 

28 

(598,808,795) 

(546,265,099) 

29 

(27,189,599) 

(25,449,280) 

30 

- 

(260,345,609) 

31 

(28,148,060) 

(174,860,380) 

32 

(378,091,853) 

(73,512,082) 


(46,044,560) 

(26,882,267) 

33 

(593,692,660) 

(740,428,422) 

34 

(120,337,772) 

(100,063,466) 

35 

(191,170,818) 

(206,232,700) 


[ 1 , 983 , 484 , 1 17 )[ 

2 , 154 , 039 , 305 ) 


17 , 367,080 

( 256 , 797 , 825 ) 

7 

- 

3,339,864 

36 

(8,217) 

17,125 

54 

1,448,982 

(40,423,875) 


1 , 440,765 

( 37 , 066 , 886 ) 


18 , 807,845 ( 293 , 864 , 711 ) 


9-31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Statement of Changes in Net Assets 




Accumulated TdfarnM 


Figures in Rand 


surplus 


kassets 


Balance atOI July2014 

Changes in net assets 
Surplus for the year 

Total changes 

Restated* Balance at 01 July 2015 

Changes in net assets 
Surplus for the year 

Total changes 

Balance at 30 June 2016 

Note(s) 


4,474,449,702^4^444^702 




(293,864,712) (293*864,712) 
(293,864,712) (293,864,712) 

4,181,814,994 4,181,814,994 

18,807,844 18,807,844 

18,807,844 18,807,844 

4,200,622,838 4,200,622,838 






<5 





I Note 43 


10-31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Accounting Policies 


1 . Presentation of Financial Statements 



The financial statements have been prepared in accordance with the Standards of Generally Recognised Accounting'^actice 
(GRAP), issued by the Accounting Standards Board in accordance with Section 122(3) of the Municipal Financ^^anafement 
Act (Act 56 of 2003). 


These financial statements have been prepared on an accrual basis of accounting and are in accordane^ithhistorical cost 
convention as the basis of measurement, unless specified otherwise. They are presented in South Afriran|Para. 

Assets, liabilities, revenues and expenses were not offset, except where offsetting is either required^Tpermitted 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 and in some cases additional information was included in 
the accounting policies. 


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 
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.a'nd/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. 

Allowance for slow moving, damaged and obsolete stock 

An allowance for stock to write stock down to the lower of cost or net realisable value. Management have made estimates of 
the selling price and direct cost to sell on certain inventory items. The write down is included in the operation surplus note. 

Fair value estimation 

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. 
The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the 
current market interest rate that is available to the municipality for similar financial instruments. 


The municipality used the prime interest rate at year end to discount future cash flows. 




O' 


11-31 August 2016 -04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 



The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value- 
in-use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is 
reasonably possible that the [name a key assumption] assumption may change which may then impact our estimations and 
may then require a material adjustment to the carrying value of goodwill and tangible assets. 

The municipality reviews and tests the carrying value of assets when events or changes in circumstances suggest that the 
carrying amount may not be recoverable. In addition, goodwill is tested on an annual basis for impairment. Assets are grouped 
at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there 
are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of 
assets. Expected future cash flows used to determine the value in use of goodwill and tangible assets are inherently uncertain 
and could materially change over time. They are significantly affected by a number of factors including [list entity specific 
variables, i.e. production estimates, supply demandj, together with economic factors such as [list economic factors such as 
exchange rates inflation interestj. 

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 17 - Provisions. 

Useful lives of waste and water network and other assets 

The municipality's management determines the estimated useful lives and related depreciation charges for Property, plant and 
equipment. This estimate is based on industry norm. Management will increase the depreciation charge where useful lives are 
less than previously estimated useful lives. 

Employee benefit obligation 

The present value of the post retirement obligation depends on a number of factors that are determined on an actuarial basis 
using a number of assumptions. The assumptions used in determining the net cost include the discount rate. Any changes in 
these assumptions will impact on the carrying amount of post retirement obligations. 

The municipality determines the appropriate discount rate at the end of each year. This is the interest rate that should be used 
to determine the present value of estimated future cash outflows expected to be required to settle the obligations. In 
determining the appropriate discount rate, the municipality considers the interest rates of high-quality corporate bonds that are 
denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the 
related pension liability. 

Other key assumptions for pension obligations are based on current market conditions. Additional information is disclosed in 
Note 7. 

Provision for impairment of receivables 

On consumer receivables an impairment loss is recognised in surplus and deficit when there is objective evidence that it is 
impaired. 

1 .4 Investment property 

Investment property is property (land or a building - or part of a building - or both) held to earn rentals or for capital appreciation 
or both, rather than for: 

• use in the production or supply of goods or services or for 

• administrative purposes, or 

• sale in the ordinary course of operations. 

Owner-occupied property is property held for use in the production or supply of goods or services or for administrative 
purposes. 

Investment property is recognised as an asset when, it is probable that the future economic benefits or service potential that 
are associated with the investment property will flow to the municipality, and the cost or fair value of the investment property 
can be measured reliably. 


12-31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Accounting Policies 




1 .4 Investment property (continued) 

Investment property is initially recognised at cost. Transaction costs are included in the initial measurement. 




Where investment property is acquired through a non-exchange transaction, its cost is its fair value as at the date of 
acquisition. 

Costs include costs incurred initially and costs incurred subsequently to add to, or to replace a part of, or service a property. If a 
replacement part is recognised in the carrying amount of the investment property, the carrying amount of'the replaced part is 
derecognised. 


sb 


Cost model 

Investment property is carried at cost less accumulated depreciation and any accumulated impairment losses. 

Depreciation is provided to write down the cost, less estimated residual value by equal installments over the useful life of the 
property, which is as follows: 


Item 

Property - land 
Property - buildings 


Useful 

indefinitei 
5-30 


ul life#^"^ 
inite^L j 
year^^^^F 


Investment property is derecognised on disposal or when the investment proper!y»is permanently withdrawn from use and no 
future economic benefits or service potential are expected from its disposal. * 

Gains or losses arising from the retirement or disposal of investment property is the difference between the net disposal 
proceeds and the carrying amount of the asset and is recognised in surplus or deficit in the period of retirement or disposal. 

Compensation from third parties for investment property that was impaired, lost or given up is recognised in surplus or deficit 
when the compensation becomes receivable. 

1 .5 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 equipmm^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. 

The cost of an item of property, plant and equipment is the purchase price and other costs attributable to bring the asset to the 
location and condition necessary for it to be capable of operating in the manner intended by management. Trade discounts and 
rebates are deducted in arriving at the cost. 

Where an asset is acquired through a non-exchange transaction, its cost is its fair value as at date of acquisition. 

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. 

Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred 
subsequentl)r to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of 
property_^pldnt and equipment, the carrying amount of the replaced part is derecognised. 


o 


13-31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Accounting Policies 






1 .5 Property, plant and equipment (continued) 

The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is locateJTs ai?k 
included in the cost of property, plant and equipment, where the entity is obligated to incur such expenditure, and wherj the 
obligation arises as a result of acquiring the asset or using it for purposes other than the production of inventoriesl 


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. 

Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses. 

Property, plant and equipment are depreciated on the straight line basis over their expected useful lives to their estimated 
residual value. 

The useful lives of items of property, plant and equipment have been assessed as follows; 


Item 

Depreciation method 

Average useful life 

Land 

Straight line 

Indefinite 

Furniture and fixtures 

Straight line 

5 - 7 years 

Transport assets 

Straight line 

4-15 years 

Office equipment 

Straight line 

5 - 7 years 

IT equipment 

Straight line 

3-10 years 

Infrastructure 

Straight line 

5-100 years 

Othee equipment 

Straight line 

2 - 20 years 

Landfill rehabilitation asset 

Straight line 

8 - 20 years 


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. 

♦ * 

Depreciation commences when the asset is ready^for itSjintended use and ceases when the asset is derecognised. 

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 tfie 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. 

1 .6 Site restoration and dismantling cost 

The municipality has an obligation to dismantle, remove and restore items of property, plant and equipment. Such 
obligations are referred to as ‘decommissioning, restoration and similar liabilities’. The cost of an item of property, plant and 
equipment includes the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is 
located, the obligation for which an municipality incurs either when the item is acquired or as a consequence of having used 
the item during a particular period for purposes other than to produce inventories during that period. 

If the related asset is measured using the cost model: 

(a) subject to (b), changes in the liability are added to, or deducted from, the cost of the related asset in the current 
period; 

(b) if a decrease in the liability exceeds the carrying amount of the asset, the excess is recognised immediately in 
surplus or deficit; and 

(c) if the adjustment results in an addition to the cost of an asset, the municipality considers whether this is an 
indication that the new carrying amount of the asset may not be fully recoverable. If it is such an indication, the 
asset is tested for impairment by estimating its recoverable amount or recoverable service amount, and any 
impairment loss is recognised in accordance with the accounting policy on impairment of cash-generating assets 
and/or impairment of non-cash-generating assets. 


14-31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Accounting Policies 




1 .7 Heritage assets 




Heritage assets are assets that have a cultural, environmental, historical, natural, scientific, technological or artistic si^ificance 


and are held indefinitely for the benefit of present and future generations. 

Recognition 


The municipality recognises a heritage asset as an asset if it is probable that future economic benefits or service potential 
associated with the asset will flow to the municipality, and the cost or fair value of the asset can be measured reliably. 


Initiai measurement 

Heritage assets are measured at cost. 




Where a heritage asset is acquired through a non-exchange transaction, its cost is measured atj^fair value as at the date of 
acquisition. 


n rS 

tiomtiliiat irmav he 


o 


Subsequent measurement 

After recognition as an asset, a class of heritage assets is carried at its cost less^^y acc^mulated impairment losses. 

Impairment 


The municipality assess at each reporting date whether there is an indication'tljjat irmay be impaired. If any such indication 
exists, the municipality estimates the recoverable amount or the recoverable s^ice amount of the heritage asset. 


Derecognition 




The municipality derecognises heritage asset on disposal, or when no future economic benefits or service potential are 
expected from its use or disposal. 

The gain or loss arising from the derecognition of a heritage asset is determined as the difference between the net disposal 
proceeds, if any, and the carrying amount of the heritage asset. Such difference is recognised in surplus or deficit when the 
heritage asset is derecognised. 


1.8 Financial instruments 


o 


A financial instrument is any contract that givesjjsèTO.ta financial asset of one entity and a financial liability or a residual 
interest of another entity. 


vesjase tqta fi 


The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is 
measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective 
interest method of any difference between that initial amount and the maturity amount, and minus any reduction (directly or 
through the use of an allowance account) for impairment or uncollectibility. 

The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability (or group of 
financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period. The 
effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of 
the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial 
liability. When calculating the effective interest rate, an entity shall estimate cash flows considering all contractual terms of the 
financial instrument (for example, prepayment, call and similar options) but shall not consider future credit losses. The 
calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective 
interest rate (see the Standard of GRAP on Revenue from Exchange Transactions), transaction costs, and all other premiums 
or discounts. There is a presumption that the cash flows and the expected life of a group of similar financial instruments can be 
estimated reliably. However, in those rare cases when it is not possible to reliably estimate the cash flows or the expected life 
of a financial instrument (or group of financial instruments), the entity shall use the contractual cash flows over the full 
contractual term of the financial instrument (or group of financial instruments). 

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. 


A financial asset is: 
• cash; 


15-31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Accounting Policies 




1 .8 Financial instruments (continued) 

• a residual interest of another entity; or 

• a contractual right to: 

receive cash or another financial asset from another entity; or 
exchange financial assets or financial liabilities with another entity under conditions that are pot^tta!.li;f 
favourable to the entity. 


(T 


A financial liability is any liability that is a contractual obligation to: 

• deliver cash or another financial asset to another entity; or 

• exchange financial assets or financial liabilities under conditions that are potentially unfavourable to the entity. 

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in 
market interest rates. 

Liquidity risk is the risk encountered by an entity in the event of difficulty in meeting obligations associated with financial 
liabilities that are settled by delivering cash or another financial asset. 

Loan commitment is a firm commitment to provide credit under pre-specified terms and conditions. 

Loans payable are financial liabilities, other than short-term payables on normal credit terms. 

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in 
market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk. 

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in 
market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors 
specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the 
market. 

A financial asset is past due when a counterparty has failed to make a payment when contractually due. 

Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or 
financial liability. An incremental cost is one that would not have been incurred if the entity had not acquired, issued or 
disposed of the financial instrument. 

Financial instruments at amortised cost are non-derivative financial assets or non-derivative financial liabilities that have fixed 
or determinable payments, excluding those instruments that: 

• the entity designates at fair value at initial recognition; or 

• are held for trading. 

Financial instruments at cost are investments in residual interests that do not have a quoted market price in an active market, 
and whose fair value cannot be reliably measured. 

Financial instruments at fair value comprise financial assets or financial liabilities that are: 

• combined instruments that are designated at fair value; 

• instruments held for trading. A financial instrument is held for trading if: 

it is acquired or incurred principally for the purpose of selling or repurchasing it in the near-term; or 
on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for 
which there is evidence of a recent actual pattern of short term profit-taking; 

non-derivative financial assets or financial liabilities with fixed or determinable payments that are designated at 
fair value at initial recognition; and 

financial instruments that do not meet the definition of financial instruments at amortised cost or financial 
instruraents aUcost. 


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O 


16-31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Accounting Policies 




1 .8 Financial instruments (continued) 


Classification 


CV 


The entity has the following types of financial assets (classes and category) as reflected on the face of the statemejjvÈief 
financial position or in the notes thereto: 


Class 

Other financial assets 
Other receivables 

Receivables from non-exchange transactions 
Receivables from exchange transactions 
Cash and cash equivalents 




Category _ 

Financial asset measured at fair value 
Financial asset measured at amortised cost 
Financial asset measured at amortised cost 
Financial asset measured at amortised cost 
Financial asset measured at amortised cost 


The entity has the following types of financial liabilities (classes and category) as reflected on the face of the statement of 
financial position or in the notes thereto: 


Class 

Payables from exchange transactions 
Consumer deposits 

Unspent conditional grants and receipts 
Bank overdraft 

Initial recognition 


Category “ 

Financial liability measured at amortised cost 
Financial liability measured at amortised cost 
Financial liability measured at amortised cost 
Financial liability measured at amortised cost 


The entity recognises a financial asset or a financial liability in its statement of financial position when the entity becomes a 
party to the contractual provisions of the instrument. 

The entity recognises financial assets using trade date accounting. 

Initial measurement of financial assets and financial liabilities 

The entity measures a financial asset and financial liability initially at its fair value plus transaction costs that are directly 
attributable to the acquisition or issue of the financial asset or financial liability. 











17-31 August 2016 - 04:52 PM 




• Financial instruments at amortised cost. 

• Financial instruments at cost. 

All financial assets measured at amortised cost, or cost, are subject to an impairment review. 

Fair value measurement considerations 

The best evidence of fair value is quoted prices in an active market. If the market for a financial insffftjment is not active, the 
entity establishes fair value by using a valuation technique. The objective of using a valuation technique is to establish what the 
transaction price would have been on the measurement date in an arm’s length exchange motivated by normal operating 
considerations. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing 
parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash flow 
analysis and option pricing models. If there is a valuation technique commonly used by market participants to price the 
instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market 
transactions, the entity uses that technique. The chosen valuation technique makes maximum use of market inputs and relies 
as little as possible on entity-specific inputs. It incorporates all factors that market participants would consider in setting a price 
and is consistent with accepted economic methodologies for pricing financial instruments. Periodically, an municipality 
calibrates the valuation technique and tests it for validity using prices from any observable current market transactions in the 
same instrument (i.e. without modification or repackaging) or based on any available observable market data. 

The fair value of a financial liability with a demand feature (e.g. a demand deposit) is not less than the amount payable on 
demand, discounted from the first date that the amount could be required to be paid. 

Reclassification 

The entity does not reclassify a financial instrument while it is issued or held unless it is: 

• combined instrument that is required to be measured at fair value; or 

• an investment in a residual interest that meets the requirements for reclassification. 

Where the entity cannot reliably measure the fair value of an embedded derivative that has been separated from a host 
contract that is a financial instrument at a subsequent reporting date, it measures the combined instrument at fair value. This 
requires a reclassification of the instrument from amortised cost or cost to fair value. 

If fair value can no longer be measured reliably for an investment in a residual interest measured at fair value, the entity 
reclassifies the investment from fair value to cost. The carrying amount at the date that fair value is no longer available 
becomes the cost. 

If a reliable measure becomes available for an investment in a residual interest for which a measure was previously not 
available, and the instrument would have been required to be measured at fair value, the entity reclassifies the instrument from 
cost to fair value. 

Gains and losses 

A gain or loss arising from a change in the fair value of a financial asset or financial liability measured at fair value is 
recognised in surplus or deficit. 

For financial assets and financial liabilities measured at amortised cost or cost, a gain or loss is recognised in surplus or deficit 
when the financial asset or financial liability is derecognised or impaired, or through the amortisation process. 

Impairment and uncollectibility of financial assets 



The entity assess at the end of each reporting period whether there is any objective evidence that a financial asset or group of 
financial assets is impaired. 

Financial assets measured at amortised cost: 


18-31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 



If there is objective evidence that an impairment loss on financial assets measured at amortised cost has been incurred, the 
amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated 
future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original 
effective interest rate. The carrying amount of the asset is reduced directly OR through the use of an allowance account. The 
amount of the loss is recognised in surplus or deficit. 

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an 
event occurring after the impairment was recognised, the previously recognised impairment loss is reversed directly OR by 
adjusting an allowance account. The reversal does not result in a carrying amount of the financial asset that exceecls what the 
amortised cost would have been had the impairment not been recognised at the date the impairment is reversed. The amount 
of the reversal is recognised in surplus or deficit. 

Financial assets measured at cost: 

If there is objective evidence that an impairment loss has been incurred on an investment in a residual interest that is not 
measured at fair value because its fair value cannot be measured reliably, the amount of the impairment loss is measured as 
the difference between the carrying amount of the financial asset and the presentjfJalu^ of estimated future cash flows 
discounted at the current market rate of return for a similar financial asset. Such^iffiipairment losses are not reversed. 



19-31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Accounting Policies 


1 .8 Financial instruments (continued) 

Derecognition 

Financial assets 



The entity derecognises financial assets using trade date accounting. 




The entity derecognises a financial asset only when: 

• the contractual rights to the cash flows from the financial asset expire, are settled or waivecir 

• the entity transfers to another party substantially all of the risks and rewards of ownership of the financial asset; or 

• the entity, despite having retained some significant risks and rewards of ownership of the financial asset, has 
transferred control of the asset to another party and the other party has the practical ability to sell the asset in its 
entirety to an unrelated third party, and is able to exercise that ability unilaterally and without needing to impose 
additional restrictions on the transfer. In this case, the entity : 

derecognise the asset; and 

recognise separately any rights and obligations created or retained in the transfer. 

The carrying amounts of the transferred asset are allocated between the rights or obligations retained and those transferred on 
the basis of their relative fair values at the transfer date. Newly created rights and obligations are measured at their fair values 
at that date. Any difference between the consideration received and the amounts recognised and derecognised is recognised 
in surplus or deficit in the period of the transfer. 

If the entity transfers a financial asset in a transfer that qualifies for derecognition in its entirety and retains the right to service 
the financial asset for a fee, it recognise either a servicing asset or a servicing liability for that servicing contract. If the fee to be 
received is not expected to compensate the entity adequately for performing the servicing, a servicing liability for the servicing 
obligation is recognised at its fair value. If the fee to be received is expected to be more than adequate compensation for the 
servicing, a servicing asset is recognised for the servicing right at an amount determined on the basis of an allocation of the 
carrying amount of the larger financial asset. 

If, as a result of a transfer, a financial asset is derecognised in its entirety but the transfer results in the entity obtaining a new 
financial asset or assuming a new financial liability, or a servicing liability, the entity recognise the new financial asset, financial 
liability or servicing liability at fair value. 

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the 
consideration received is recognised in surplus or deficit. 

If the transferred asset is part of a larger financial asset and the part transferred qualifies for derecognition in its entirety, the 
previous carrying amount of the larger financial asset is allocated between the part that continues to be recognised and the part 
that is derecognised, based on the relative fair values of those parts, on the date of the transfer. For this purpose, a retained 
servicing asset is treated as a part that continues to be recognised. The difference between the carrying amount allocated to 
the part derecognised and the sum of the consideration received for the part derecognised is recognised in surplus or deficit. 

If a transfer does not result in derecognition because the entity has retained substantially all the risks and rewards of ownership 
of the transferred asset, the entity continue to recognise the transferred asset in its entirety and recognise a financial liability for 
the consideration received. In subsequent periods, the entity recognises any revenue on the transferred asset and any expense 
incurred on the financial liability. Neither the asset, and the associated liability nor the revenue, and the associated expenses 
are offset. 

Financial liabilities 

The entity removes a financial liability (or a part of a financial liability) from its statement of financial position when it is 
extinguished — i.e. when the obligation specified in the contract is discharged, cancelled, expires or waived. 

An exchange between an existing borrower and lender of debt instruments with substantially different terms is accounted for as 
having extinquishgd.the original financial liability and a new financial liability is recognised. Similarly, a substantial modification 
of the terms of an exišting financial liability or a part of it is accounted for as having extinguished the original financial liability 
and havinglfecognised a new financial liability. 




inglfecogt 

d 


20 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Accounting Policies 




1 .8 Financial instruments (continued) 

The difference between the carrying amount of a financial liability (or part of a financial liability) extinguished or transferred to 
another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in 
surplus or deficit. Any liabilities that are waived, forgiven or assumed by another entity by way of a non-exchange transaction 
are accounted for in accordance with the Standard of GRAP on Revenue from Non-exchange Transactions (Taxes and 
Transfers). 




Presentation _ 

Interest relating to a financial instrument or a component that is a financial liability is recognised a^^^n'^e or expense in 
surplus or deficit. 

Dividends or similar distributions relating to a financial instrument or a component that is a financial liability is recognised as 
revenue or expense in surplus or deficit. 

Losses and gains relating to a financial instrument or a component that is a financial liability is recognised as revenue or 
expense in surplus or deficit. 

Distributions to holders of residual interests are debited by the entity directly to net assets, net of any related income tax benefit 
[where applicable]. Transaction costs incurred on residual interests is accounted for as a deduction from net assets, net of any 
related income tax benefit [where applicablej. 

A financial asset and a financial liability are only offset and the net amount presented in the statement of financial position 
when the entity currently has a legally enforceable right to set off the recognised amounts and intends either to settle on a net 
basis, or to realise the asset and settle the liability simultaneously. 

In accounting for a transfer of a financial asset that does not qualify for derecognition, the entity does not offset the transferred 
asset and the associated liability. 

1.9 Tax 

Value added tax (VAT) 

The municipality accounts for VAT on the cash basis. The municipality is liable to account for VAT at the standard rate 
(14%) in terms of section 7 (1 ) (a) of the VAT Act in respect of the supply of goods or services, except where the supplies 
are specifically zero-rated in terms of section 1 1 , exempted in terms of section 1 2 of the VAT Act or are scoped out for VAT 
purposes. The municipality accounts for VAT on a monthly basis. 

1.10 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. 

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 . 

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. 




o 


21 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 



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. 
Income for leases is disclosed under revenue in statement of financial performance. 

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. 

1.11 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. 

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. 

1.12 Impairment of cash-generating assets 

Cash-generating assets are those assets held by the municipality with the primary objective of generating a commercial return. 
When an asset is deployed in a manner consistent with that adopted by a profit-orientated entity, it generates a commercial 
return. 

Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition 
of the loss of the asset’s future economic benefits or service potential through depreciation (amortisation). 

Carrying amount is the amount at which an asset is recognised in the statement of financial position after deducting any 
accumulated depreciation and accumulated impairment losses thereon. 


22 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Accounting Policies 


1.12 Impairment of cash-generating assets (continued) 

A cash-generating unit is the smallest identifiable group of assets held with the primary objective of generating a commercial 
return that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or 
groups of assets. 



Identification 


The municipality assesses at each reporting date whetherthere is any indication that a cash-generating assetmay be 
impaired. If any such indication exists, the municipality estimates the recoverable amount of the asset. 

Recognition and measurement (individual asset) 

If the recoverable amount of a cash-generating asset is less than its carrying amount, the c anvjD d amount of the asset is 
reduced to its recoverable amount. This reduction is an impairment loss. 


An impairment loss is recognised immediately in surplus or deficit. 


jO 


Any impairment loss of a revalued cash-generating asset is treated as a revaluationo^nease. 

'^L * 

When the amount estimated for an impairment loss is greater than the carrying>a™,U|jjjL# the cash-generating asset to which it 
relates, the municipality recognises a liability only to the extent that is a requifi^ent irrt^Standard of GRAP. 


After the recognition of an impairment loss, the depreciation (amortisation) charge for the cash-generating asset is adjusted in 
future periods to allocate the cash-generating asset’s revised carrying a'qji^unt^jp^s its residual value (if any), on a systematic 
basis over its remaining useful life. 


Cash-generating units 


I I y II ly a'jJhlVUI II, IC 

\/pr;^hlp^imr>i int 


If there is any indication that an asset may be impaired, the recoverabl^^ount is estimated for the individual asset. If it is not 
possible to estimate the recoverable amount of the individual asset, the municipality determines the recoverable amount of the 
cash-generating unit to which the asset belongs (the asset’s cash-generating unit). 

If an active market exists for the output produced by an asset or group of assets, that asset or group of assets is identified as a 
cash-generating unit, even if some or all of the output is used internally. If the cash inflows generated by any asset or cash- 
generating unit are affected by internal transfer pricing, the municipality use management's best estimate of future price(s) that 
could be achieved in arm's length transactions in estimating: 

• the future cash inflows used to determine the asset's or cash-generating unit's value in use; and 

• the future cash outflows used to determine the value in use of any other assets or cash-generating units that are 
affected by the internal transfer pricing. 

Cash-generating units are identified consistently from period to period for the same asset or types of assets, unless a change 
is justified. 

The carrying amount of a cash-generating unit is determined on a basis consistent with the way the recoverable amount of the 
cash-generating unit is determined. 

An impairment loss is recognised for a cash-generating unit if the recoverable amount of the unit is less than the carrying 
amount of the unit. The impairment is allocated to reduce the carrying amount of the cash-generating assets of the unit on a 
pro rata basis, based on the carrying amount of each asset in the unit. These reductions in carrying amounts are treated as 
impairment losses on individual assets. 

In allocating an impairment loss, the entity does not reduce the carrying amount of an asset below the highest of: 

• its fair value less costs to sell (if determinable); 

• its value in use (if determinable); and 

• zero. 


The amount of the impairment loss that would otherwise have been allocated to the asset is allocated pro rata to the other 
cash-generating assets of the unit. 

Where a non-cash-generating asset contributes to a cash-generating unit, a proportion of the carrying amount of that non- 
cash-generating asset is allocated to the carrying amount of the cash-generating unit prior to estimation of the recoverable 
amount of the cash-generating unit. 


23 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 





The municipality assess at each reporting date whether there is any indication that an impairment loss recognised in prior 
periods for a cash-generating asset may no longer exist or may have decreased. If any such indication exists, the entity 
estimates the recoverable amount of that asset. 

An impairment loss recognised in prior periods for a cash-generating asset is reversed if there has been a change in the 
estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. The carrying 
amount of the asset is increased to its recoverable amount. The increase is a reversal of an impairment loss. 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 (net of depreciation or amortisation) had no impairment loss been recognised for the asset in prior 
periods. 

A reversal of an impairment loss for a cash-generating asset is recognised immediately in surplus or deficit. 

After a reversal of an impairment loss is recognised, the depreciation (amortisation) charge for the cash-generating asset is 
adjusted in future periods to allocate the cash-generating asset's revised carrying amount, less its residual value (if any), on a 
systematic basis over its remaining useful life. 

A reversal of an impairment loss for a cash-generating unit is allocated to the cash-generating assets of the unit pro rata with 
the carrying amounts of those assets. These increases in carrying amounts are treated as reversals of impairment losses for 
individual assets. No part of the amount of such a reversal is allocated to a non-cash-generating asset contributing service 
potential to a cash-generating unit. 

In allocating a reversal of an impairment loss for a cash-generating unit, the carrying amount of an asset is not increased above 
the lower of: 

• its recoverable amount (if determinable); and 

• the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss 
been recognised for the asset in prior periods. 

The amount of the reversal of the impairment loss that would otherwise have been allocated to the asset is allocated pro rata to 
the other assets of the unit. 


Redesignation 


vO 


The redesignation of assets from a cash-generatin^sset to a non-cash-generating asset or from a non-cash-generating asset 
to a cash-generating asset only occur when there is clear evidence that such a redesignation is appropriate. 

1.13 Impairment of non-cash-generating assets 

Cash-generating assets are those assets held by the municipality with the primary objective of generating a commercial return. 
When an asset is deployed in a manner consistent with that adopted by a profit-orientated entity, it generates a commercial 
return. 

Non-cash-generating assets are assets other than cash-generating assets. 

Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition 
of the loss of the asset’s future economic benefits or service potential through depreciation (amortisation). 

Carrying amount is the amount at which an asset is recognised in the statement of financial position after deducting any 
accumulated depreciation and accumulated impairment losses thereon. 

A cash-generating unit is the smallest identifiable group of assets held with the primary objective of generating a commercial 
return that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or 
groups of assets. 

Costs of disposal are incremental costs directly attributable to the disposal of an asset, excluding finance costs and income tax 
expense. 

Depreciation (Amortisation) is the systematic allocation of the depreciable amount of an asset over its useful life. 


24 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Accounting Policies 




1.13 Impairment of non-cash-generating assets (continued) 




Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm’s length transaction between 
knowledgeable, willing parties, less the costs of disposal. 

Recoverable service amount is the higher of a non-cash-generating asset’s fair value less costs to sell and its value in use. 
Useful life is either: 

(a) the period of time over which an asset is expected to be used by the municipality; or 

(b) the number of production or similar units expected to be obtained from the asset by the municipality. 

Recognition and measurement 

If the recoverable service amount of a non-cash-generating asset is less than its carrying aiT ^uim ltffiVe carrying amount of the 
asset is reduced to its recoverable service amount. This reduction is an impairment loss. 


An impairment loss is recognised immediately in surplus or deficit. 


D 


Any impairment loss of a revalued non-cash-generating asset is treated as a rev^atio^i^ecrease. 

When the amount estimated for an impairment loss is greater than the carrvinaTa^ iiijiUe T the non-cash-generating asset to 
which it relates, the municipality recognises a liability only to the extent that is>aj;equirSijj^nt in the Standards of GRAP. 


After the recognition of an impairment loss, the depreciation (amortisation) chaTjge for the non-cash-generating asset is 
adjusted in future periods to allocate the non-cash-generating asset’s rq^ed c^rying amount, less its residual value (if any), 
on a systematic basis over its remaining useful life. 


Reversal of an impairment loss 


O 


The municipality assess at each reporting date whether there is any indication that an impairment loss recognised in prior 
periods for a non-cash-generating asset may no longer exi^e^ay have decreased. If any such indication exists, the 
municipality estimates the recoverable service amount of^j^t^s^ 

An impairment loss recognised in prior periods for a non-cash-generating asset is reversed if there has been a change in the 
estimates used to determine the asset’s recoverable service|amount since the last impairment loss was recognised. The 
carrying amount of the asset is increased to its recoverable |ervice amount. The increase is a reversal of an impairment loss. 
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 (net of depreciation or amortisation) had no impairment loss been recognised for the 
asset in prior periods. 

A reversal of an impairment loss for a non-cash-generating asset is recognised immediately in surplus or deficit. 

Any reversal of an impairment loss of a revalued-non-cash-generating asset is treated as a revaluation increase. 

After a reversal of an impairment loss is recognised, the depreciation (amortisation) charge for the non-cash-generating asset 
is adjusted in future periods to allocate the non-cash-generating asset’s revised carrying amount, less its residual value (if any), 
on a systematic basis over its remaining useful life. 

1.14 Employee benefits 

Employee benefits are all forms of consideration given by an entity in exchange for service rendered by employees. 

A qualifying insurance policy is an insurance policy issued by an insurer that is not a related party (as defined in the Standard 
of GRAP on Related Party Disclosures) of the reporting entity, if the proceeds of the policy can be used only to pay or fund 
employee benefits under a defined benefit plan and are not available to the reporting entity’s own creditors (even in liquidation) 
and cannot be paid to the reporting entity, unless either: 

• the proceeds represent surplus assets that are not needed for the policy to meet all the related employee benefit 
obligations; or 

• the proceeds are returned to the reporting entity to reimburse it for employee benefits already paid. 

Termination benefits are employee benefits payable as a result of either: 

• an entity’s decision to terminate an employee’s employment before the normal retirement date; or 

• an employee’s decision to accept voluntary redundancy in exchange for those benefits. 


25 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Accounting Policies 


1.14 Employee benefits (continued) 

Other long-term employee benefits are employee benefits (otherthan post-employment benefits and termination 
are not due to be settled within twelve months after the end of the period in which the employees render the related se^ice. 

Vested employee benefits are employee benefits that are not conditional on future employment. 

Composite social security programmes are established by legislation and operate as multi-employer plans to provide post- 
employment benefits as well as to provide benefits that are not consideration in exchange for service rendered by employees. 

A constructive obligation is an obligation that derives from an entity's actions where by an established pattern of past practice, 
published policies or a sufficiently specific current statement, the entity has indicated to other parties that it will accept certain 
responsibilities and as a result, the entity has created a valid expectation on the part of those other parties that it will discharge 
those responsibilities. 

Short-term employee benefits 

Short-term employee benefits are employee benefits (other than termination benefits) that are due to be settled within twelve 
months after the end of the period in which the employees render the related service. 

Short-term employee benefits include items such as: 

• wages, salaries and social security contributions; 

• short-term compensated absences (such as paid annual leave and paid sick leave) where the compensation for the 
absences is due to be settled within twelve months after the end of the reporting period in which the employees 
render the related employee service; 

• bonus, incentive and performance related payments payable within twelve months after the end of the reporting 
period in which the employees render the related service; and 

• non-monetary benefits (for example, medical care, and free or subsidised goods or services such as housing, cars 
and cellphones) for current employees. 

When an employee has rendered service to the entity during a reporting period, the entity recognise the undiscounted amount 
of short-term employee benefits expected to be paid in exchange for that service: 

• as a liability (accrued expense), after deducting any amount already paid. If the amount already paid exceeds the 
undiscounted amount of the benefits, the entity recognise that excess as an asset (prepaid expense) to the extent 
that the prepayment will lead to, for example, a reduction in future payments or a cash refund; and 

• as an expense, unless another Standard requires or permits the inclusion of the benefits in the cost of an asset. 

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 entity measure the expected 
cost of accumulating compensated absences as the additional amount that the entity expects to pay as a result of the unused 
entitlement that has accumulated at the reporting date. 

The entity recognise the expected cost of bonus, incentive and performance related payments when the entity has a present 
legal or constructive obligation to make such payments as a result of past events and a reliable estimate of the obligation can 
be made. A present obligation exists when the entity has no realistic alternative but to make the payments. 

Post-employment benefits 

Post-employment benefits are employee benefits (other than termination benefits) which are payable after the completion of 
employment. 

Post-employment benefit plans are formal or informal arrangements under which an entity provides post-employment benefits 
for one or more employees. 

Multi-employer plans are defined contribution plans (other than state plans and composite social security programmes) or 
defined benefit plans (other than state plans) that pool the assets contributed by various entities that are not under common 
control and use those assets to provide benefits to employees of more than one entity, on the basis that contribution and 
benefit levels are determined without regard to the identity of the entity that employs the employees concerned. 




26 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Accounting Policies 




1.14 Employee benefits (continued) 
Other long term employee benefit 


nf thp'lr 


The municipality has an obligation to provide long service benefits to all of its employees. According to the rules of thenong 
service benefit scheme, which the municipality instituted and operates, an employee (who is on the current conditions of 
service), is entitled to a cash allowance, calculated in terms of the rules of the scheme, after 10, 15, 20, 25 and 30 years of 
continued service. The municipality’s liability is based on an actuarial valuation. The projected unit credit method has been 
used to value the liabilities. Actuarial gains and losses on the long benefits are accounted for through the statement of financial 
performance. 

1.15 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 sèfvice 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 beiCtequired-to settle the present obligation at the 
reporting date. ; 

Where the effect of time value of money is material, the amount of a provisiqn 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. 

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. 

A contingent liability is: 

- a possible obligation that arises from past events, and whose existence will be confirmed only by the occurrence or non- 
occurrence of one or more uncertain future events not wholly within the control of the entity; or 

- a present obligation that arises from past events but is not recognised because: 

(i) it is not probable that an outflow of resources embodying economic benefits or service potential will be required to settle the 
obligation; or 

(ii) the amount of the obligation cannot be measured with sufficient reliability. 

Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 41. 

Decommissioning, restoration and similar liability 

Changes in the measurement of an existing decommissioning, restoration and similar liability that result from changes in the 
estimated timing or amount of the outflow of resources embodying economic benefits or service potential required to settle the 
obligation, or a chang.ejn the discount rate, is accounted for as follows: 

The adjusted depreciable amount of the asset is depreciated over its useful life. Therefore, once the related asset has reached 
the end of its useful life, all subsequent changes in the liability is recognised in surplus or deficit as they occur. This applies 
under bothfihe cost model and the revaluation model. 


thfihe 
u chiOd i?i:' 

o 


The Dei:iodicl3nwindina of the discount is recognised in surplus or deficit as a finance cost as it occurs. 


27 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Accounting Policies 




1.16 Commitments 




Items are classified as commitments when an entity has committed itself to future transactions that will normall sulHjn 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. 

1.17 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. 

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 




28 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Accounting Policies 




1.17 Revenue from exchange transactions (continued) 
Interest, royalties and dividends 


CV 

rinmtiian? ii 


Revenue arising from the use by others of entity assets yielding interest, royalties and dividends or similar distrieiitiaiiis is 
recognised when: 

• It is probable that the economic benefits or service potential associated with the transaction ^il'i*flojw 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. 


0 


Dividends or similar distributions are recognised, in surplus or deficit, when the municipality’spightjo receive payment has 
been established. 1 ■ 

Service fees included in the price of the product are recognised as revenue over the period during which the service is 
performed. 

1.18 Revenuefrom non-exchange transactions 

Revenue comprises gross inflows of economic benefits or service potential received and receivable by an municipality, which 
represents an increase in net assets, other than increases relating to contributions from owners. 

Control of an asset arise when the municipality can use or otherwise benefit from the asset in pursuit of its objectives and can 
exclude or otherwise regulate the access of others to that benefit. 

Exchange transactions are transactions in which one entity receives assets or services, or has liabilities extinguished, and 
directly gives approximately equal value (primarily in the form of cash, goods, services, or use of assets) to another entity in 
exchange. 

Expenses paid through the tax system are amounts that are available to beneficiaries regardless of whether or not they pay 
taxes. 

Fines are economic benefits or service potential received or receivable by entities, as determined by a court or other law 
enforcement body, as a consequence of the breach of laws or regulations. 

Non-exchange transactions are transactions tl^t are not exchange transactions. In a non-exchange transaction, an 
municipality either receives value from another municipality without directly giving approximately equal value in exchange, or 
gives value to another municipality without directly receiving approximately equal value in exchange. 

Stipulations on transferred assets are terms in laws or regulation, or a binding arrangement, imposed upon the use of a 
transferred asset by entities external to the reporting municipality. 

Tax expenditures are preferential provisions of the tax law that provide certain taxpayers with concessions that are not available 
to others. 

The taxable event is the event that the government, legislature or other authority has determined will be subject to taxation. 

Taxes are economic benefits or service potential compulsorily paid or payable to entities, in accordance with laws and or 
regulations, established to provide revenue to government. Taxes do not include fines or other penalties imposed for breaches 
of the law. ^ 


Recognition 


>N 

;ol!irces fiiom a 


An inflow of resojrces fr^ a non-exchange transaction recognised as an asset is recognised as revenue, except to the extent 
that a liability is ai^^^^^nised in respect of the same inflow. 

As the muijjTcipality satisfies a present obligation recognised as a liability in respect of an inflow of resources from a non- 
exchange*t^saction recognised as an asset, it reduces the carrying amount of the liability recognised and recognises an 
amoun|,Q^iwejjjue equal to that reduction. 


O 


29 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 



Revenue from a non-exchange transaction is measured at the amount of the increase in net assets recognised by the 
municipality. 

When, as a result of a non-exchange transaction, the municipality recognises an asset, it also recognises revenue equivalent 
to the amount of the asset measured at its fair value as at the date of acquisition, unless it is also required to recognise a 
liability. Where a liability is required to be recognised it will be measured as the best estimate of the amount required to settle 
the obligation at the reporting date, and the amount of the increase in net assets, if any, recognised as revenue. When a 
liability is subsequently reduced, because the taxable event occurs or a condition is satisfied, the amount of the reduction in the 
liability is recognised as revenue. 

Taxes 

The municipality recognises an asset in respect of taxes when the taxable event occurs and the asset recognition criteria are 
met. 

Resources arising from taxes satisfy the definition of an asset when the municipality controls the resources as a result of a past 
event (the taxable event) and expects to receive future economic benefits or service potential from those resources. Resources 
arising from taxes satisfy the criteria for recognition as an asset when it is probable that the inflow of resources will occur and 
their fair value can be reliably measured. The degree of probability attached to the inflow of resources is determined on the 
basis of evidence available at the time of initial recognition, which includes, but is not limited to, disclosure of the taxable event 
by the taxpayer. 

The municipality analyses the taxation laws to determine what the taxable events are for the various taxes levied. 

The taxable event for property tax is the passing of the date on which the tax is levied, or the period for which the tax is levied, if 
the tax is levied on a periodic basis. 

Taxation revenue is determined at a gross amount. It is not reduced for expenses paid through the tax system. 

Fines 

Fines are recognised as revenue when the receivable meets the definition of an asset and satisfies the criteria for recognition 
as an asset. 

Assets arising from fines are measured at the best estimate of the inflow of resources to the municipality. 

Where the municipality collects fines in the capacity of an agent, the fine will not be revenue of the collecting entity. 

1.19 Investment income 

Investment income is recognised on a time-proportion basis using the effective interest method. 

1 .20 Borrowing costs 

Borrowing costs are recognised as an expense in the period in which they are incurred. 

1 .21 Comparative figures 

Where necessary, comparative figures have been reclassified to conform to changes in presentation in the current year. 

1.22 Unauthorised expenditure 

Unauthorised expenditure means: 

• overspending of a vote or a main division within a vote; and 

• ■ emenditure not in accordance with the purpose of a vote or, in the case of a main division, not in accordance with 

C n^ipurpose of the main division. 

> 


30 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Accounting Policies 



1.22 Unauthorised expenditure (continued) 


All expenditure relating to unauthorised expenditure is recognised as an expense in the statement of financial f^erfornrance in 
the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense^nd 
where recovered, it is subsequently accounted for as revenue in the statement of financial performance. * 


1 .23 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. 

1.24 Irregular expenditure 

Irregular expenditure as defined in section 1 of the PFMA is expenditure other than unauthorised expenditure, incurred in 
contravention of or that is not in accordance with a requirement of any applicable legislation, including - 

(a) this Act; or 

(b) the State Tender Board Act, 1968 (Act No. 86 of 1968), or any regulations made in terms of the Act; or 

(c) any provincial legislation providing for procurement procedures in that provincial government. 

National Treasury practice note no. 4 of 2008/2009 which was issued in terms of sections 76(1) to 76(4) of the PFMA requires 
the following (effective from 1 April 2008): 

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. 

1.25 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. 

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. 


31 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Accounting Policies 




1.25 Budget information (continued) 

The approved budget covers the fiscal period from 2015/07/01 to 2016/06/30. 


Cl 


The financial statements and the budget are on the same basis of accounting therefore a comparison with the budggited 
amounts for the reporting period have been included in the Statement of comparison of budget and actual amounts. 


1 .26 Related parties 


So 


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 local 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 .27 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. 

1.28 Consumer deposits 

Consumer deposits are subsequently recorded in accordance with the accounting policy of Trade and other payables. 

1.29 Unspent conditional grants and receipts 

Revenue received from conditional grants, donations and funding are recognised as revenue to the extent that the municipality 
has complied with any of the criteria, conditions or obligations embodied in the agreement. To the extent that the criteria, 
conditions or obligations have not been met a liability is recognised. 











32 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 




Figures in Rand 


2016 


2. New standards and interpretations 

2.1 Standards and interpretations effective and adopted in the current year 


o 


In the current year, the municipality has adopted the following standards and interpretations that are effective for the current 
financial year and that are relevant to its operations: 


GRAP 105: Transfers of functions between entities under common control 


. I I I V » 


The objective of this Standard is to establish accounting principles for the acquirer and transferor in a transfer of functions 
between entities under common control. It requires an acquirer and a transferor that prepares and presents financial 
statements under the accrual basis of accounting to apply this Standard to a transaction or event that meets the definition 
of a transfer of functions. It includes a diagram and requires that entities consider the diagram in determining whether this 
Standard should be applied in accounting for a transaction or event that involves a transfer of functions or merger. 

It furthermore covers Definitions, Identifying the acquirer and transferor, Determining the transfer date, Assets acquired or 
transferred and liabilities assumed or relinquished, Accounting by the acquirer andj tc atjsferor. Disclosure, Transitional 
provisions as well as the Effective date of the standard. 


The effective date of the standard is for years beginning on or after 01 April 2^^^ 

The municipality has adopted the standard for the first time in the 201 6 fin^Gial sfatements. 


_ : _ X i _ 


The impact of the amendment is not material. 

GRAP 106: Transfers of functions between entities not under common control 

The objective of this Standard is to establish accounting principles for the acquirer in a transfer of functions between entities 
not under common control. It requires an entity that prepares and presents financial statements under the accrual basis of 
accounting to apply this Standard to a transaction or other event-that meets the definition of a transfer of functions. It 
includes a diagram and requires that entities consider the diagram in determining whether this Standard should be applied 
in accounting for a transaction or event that involves a transfer of functions or merger. 

It furthermore covers Definitions, Identifying a transfer of functions between entities not under common control, The 
acquisition method, Recognising and measuring the difference between the assets acquired and liabilities assumed and the 
consideration transferred, Measurement period, Determining what is part of a transfer of functions, Subsequent 
measurement and accounting, Disclosure, Transitional provisions as well as the Effective date of the standard. 

The effective date of the standard is for years beginning on or after 01 April 201 5. 

The municipality has adopted the standard for th^e first time in the 201 6 financial statements. 

The impact of the amendment is not material. 

GRAP 107: Mergers 

The objective of this Standard is to establish accounting principles for the acquirer in a transfer of functions between entities 
not under common control. It requires an entity that prepares and presents financial statements under the accrual basis of 
accounting to apply this Standard to a transaction or other event that meets the definition of a transfer of functions. It 
includes a diagram and requires that entities consider the diagram in determining whether this Standard should be applied 
in accounting for a transaction or event that involves a transfer of functions or merger. 

It furthermore covers Definitions, Identifying a transfer of functions between entities not under common control, The 
acquisition method, Recognising and measuring the difference between the assets acquired and liabilities assumed and the 
consideration transferred, Measurement period, Determining what is part of a transfer of functions, Subsequent 
measurement and accounting, Disclosure, Transitional provisions as well as the Effective date of the standard. 

The effective date of the standard is for years beginning on or after 01 April 201 5. 

The municipality has adopted the standard for the first time in the 201 6 financial statements. 

The impact of the amendment is not material. 


33 - 31 August 2016 - 04:52 PM 




Matjhabeng Local Municipality 

Financial Statements forthe year ended 30 June 2016 


Notes to the Financial Statements 



2. New standards and interpretations (continued) 
2.2 Standards and Interpretations early adopted 


o 


The municipality has chosen to early adopt the following standards and interpretations: 

DIRECTIVE 1 1 : Changes in measurement bases following the initial adoption of Standards of GR^R 

The objective of this Directive is to permit an entity to change its measurement bases following the initial adoption of 
Standards of GRAP. The change is based on the principles in the Standard of GRAP on Accounting Policies, Changes in 
Accounting Estimates and Errors. This Directive should therefore be read in conjunction with the Standard of GRAP on 
Accounting Policies, Changes in Accounting Estimates and Errors. 

In applying paragraph 13(b) of the Standard of GRAP on Accounting Policies, Changes in Accounting Estimates and Errors, 
this Directive allows an entity, that has initially adopted the fair value model for investment property or the revaluation model 
for property, plant and equipment, intangible assets or heritage assets, to change its accounting policy on a once-off basis 
to the cost model when the entity elects to change its accounting policy following the initial adoption of these Standards of 
GRAP. The once-off change will be allowed when the entity made an inappropriate accounting policy choice on the initial 
adoption of the Standards of GRAP. — 

Subsequent to the application of this Directive, an entity will be allowed to change its accounting policy in future periods 
subject to it meeting the requirements in the Standard of GRAP on Accounting Policies, Changes in Accounting Estimates 
and Errors. 

The effective date of the standard is for years beginning on or after 01 April 2016. 

The municipality has early adopted the standard for the first time in the 2016 financial statements. 

The impact of the standard is not material. 


2.3 Standards and interpretations issued, but not yet effective 


The municipality has not applied the following standards and interpretations, an effective date has not yet been set by the 
Minister of Finance. 


GRAP 20: Reiated parties 

The objective of this standard is to ensure that a reporting entity’s financial statements contain the disclosures necessary to 
draw attention to the possibility that its financial position and surplus or deficit may have been affected by the existence of 
related parties and by transactions and outstanding balances with such parties. 

An entity that prepares and presents financial statements under the accrual basis of accounting (in this standard referred to 
as the reporting entity) shall apply this standard in: 

• identifying related party relationships and transactions; 

• identifying outstanding balances, including commitments, between an entity and its related parties; 

• identifying the circumstances in which disclosure of the items in (a) and (b) is required; and 

• determining the disclosures to be made about those items. 

This standard requires disclosure of related party relationships, transactions and outstanding balances, including 
commitments, in the consolidated and separate financial statements of the reporting entity in accordance with the Standard 
of GRAP on Consolidated and Separate Financial Statements. This standard also applies to individual financial statements. 

Disclosure of related party transactions, outstanding balances, including commitments, and relationships with related 
parties may affect users’ assessments of the financial position and performance of the reporting entity and its ability to 
deliver agreed services, including assessments of the risks and opportunities facing the entity. This disclosure also ensures 
that the reporting entity is transparent about its dealings with related parties. 

The standard states that a related party is a person or an entity with the ability to control or jointly control the other party, or 
exercise significant influence over the other party, or vice versa, or an entity that is subject to common control, or joint 
control. As a minimum, the following are regarded as related parties of the reporting entity: 


34 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements forthe year ended 30 June 2016 


Notes to the Financial Statements 





o 


d Tgijjit itv. coi 


2. New standards and interpretations (continued) 

• A person or a close member of that person’s family is related to the reporting entity if that person: 

has control or joint control over the reporting entity; 
has significant influence over the reporting entity; 
is a member of the management of the entity or its controlling entity. 

• An entity is related to the reporting entity if any of the following conditions apply: 

the entity is a member of the same economic entity (which means that each controllingT^t'rfy, Sbntrolled 
entity and fellow controlled entity is related to the others); 

one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of 
an economic entity of which the other entity is a member); 
both entities are joint ventures of the same third party; 

one entity is a joint venture of a third entity and the other entity is an associate of the third entity; 
the entity is a post-employment benefit plan for the benefit of employees of either the entity or an entity 
related to the entity. If the reporting entity is itself such a plan, the sponsoring employers are related to the entity; 
the entity is controlled or jointly controlled by a person identified in (a); and 

a person identified in (a)(i) has significant influence over that entity or is a member of the management of 
that entity (or its controlling entity). 

The standard furthermore states that related party transaction is a transfer of rgse^es, services or obligations between the 
reporting entity and a related party, regardless of whether a price is charged. 


The standard elaborates on the definitions and identification of: 

• Close member of the family of a person; 

• Management; 

• Related parties; 

• Remuneration; and 

• Significant influence 




The standard sets out the requirements, inter alia, for the disclosure 

• Control; 

• Related party transactions; and 

• Remuneration of management 






The effective date is not yet gazetted by the Mniister|ōf Fina^ce. 

The municipality expects to adopt the standard for the first time when the Minister set the effective date for the standard. 
The impact of this standard is currently being assessed. 

GRAP32: Service Concession Arrangements: Grantor 

The objective of this Standard is: to prescribe the accounting for service concession arrangements by the grantor, a public 
sector entity. 

It furthermore covers: Definitions, recognition and measurement of a service concession asset, recognition and 
measurement of liabilities, other liabilities, contingent liabilities, and contingent assets, other revenues, presentation and 
disclosure, transitional provisions, as well as the effective date. 


The effective date of the^t^dard is not yet set by the Minister of Finance. 

♦ 

The municipality^xpe*(^to adopt the standard for the first time when the Minister set the effective date for the standard. 
The impact of this'^stanidard is currently being assessed. 

GRAP108: Statutory Receivables 

The objective of this Standard is: to prescribe accounting requirements for the recognition, measurement, presentation and 
disclosure of statutory receivables. 

It furthermore covers: Definitions, recognition, derecognition, measurement, presentation and disclosure, transitional 
provisions, as well as the effective date. 


35 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements forthe year ended 30 June 2016 


Notes to the Financial Statements 



2. New standards and interpretations (continued) 

The effective date of the standard is not yet set by the Minister of Finance. 


o 


The municipality expects to adopt the standard for the first time when the Minister set the effective date ta ^ he standard. 


The impact of this standard is currently being assessed. 

GRAP 109: Accounting by Principals and Agents 


( 7 ) 


This Interpretation of the Standards of GRAP provides guidance to outline principles to be used.bv^tineiiititv to assess 
whether it is party to a principal-agent arrangement, and whether it is a principal or an agent^in ujji^.^taking transactions in 
terms of such an arrangement. 


The effective date of the standard is not yet set by the Minister of Finance. 

The municipality expects to adopt the standard for the first time when the Minister setitji^ fifLe€tive date for the standard. 
It is unlikely that the standard will have a material impact on the municipality's fjna^ial sratements. 

3. Investment property 


luin 

o 

ler sp,the'ef|fectiv 


Investment property 



2016 


2015 

Cost / 

Accumulated Carrying value 

Cost / 

Accumulated Carrying vaiue 

Valuation 

depreciation 

Valuation 

depreciation 


and 


and 


accumulated 


accumulated 


impairment 


impairment 

502,979,732 

(69,239,009) 433,740,723 

502,979,732 

(69,239,009) 433,740,723 


Reconciliation of investment property - 2016 


Investment property 

Reconciliation of investment property^O 


Investment property 

Pledged as security 


s ^ur. itv/fo 


Opening 

balance 

440,432,702 


Opening Total 

balance 

433,740,723 433,740,723 


Depreciation Total 

(6,691,979) 433,740,723 


No property was pledged^ sg ^u^ v/for any financial liability. 
There are no contractualiobliigations on investment property. 


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. 






36 - 31 August 2016 - 04:52 PM 




Land 

Furniture and fixtures 
Transport assets 
Office equipment 
IT equipment 
Infrastructure 

Other property, plant and equipment 
Capital work in progress 
Landfill rehabilitation assets 

Total 

Reconciliation of property, plant and equipment - 2016 


Land 

Furniture and fixtures 
Motor vehicles 
Office equipment 
IT equipment 
Infrastructure 

Other property, plant and eq 
Artwork 

Other property, plant and ei 





2016 



2015 


Cost / 
Valuation 

Accumulated Carryina value 
depreciation 
and 

accumulated 1 1 

impairm^ni^^^^^ 

Cost / 
Valuation 

Accumulated Carrying value 
depreciation 
and 

accumulated 

impairment 

223,069,176 ^ -1223,069,176 

11,635,474 (19,02^47;r (7,391,973) 

118,987,820 (71,530,762) 47,457,058 

4,995,842 (6,055,308) (1,059,466) 

1^28,304 (8,692,583) 1,935,721 

8,3^,21 5?S55 :3,775,928,896) 4,494,286,459 
1^616,868 (21,679,563) (3,062,695) 

610l®S2-,978 - 610,332,978 

^ 81,1^,953 (14,186,510) 67,768,443 

223,069,176 - 223,069,176 

11,543,891 (18,935,864) (7,391,973) 

117,582,423 (70,125,366) 47,457,057 

4,947,036 (6,006,503) (1,059,467) 

10,495,649 (8,559,929) 1,935,720 

8,083,548,349 [3,592,639,485) 4,490,908,864 
18,335,899 (21,398,593) (3,062,694) 

534,913,669 - 534,913,669 

81,954,953 (14,186,510) 67,768,443 

350, 436, 770 [3,91 7,1 01 ,069) 5,433,335,701 

9,086,391 ,045 [3,731 ,852,250) 5,354,538,795 



Opening 

Difference 

Additions 

Total 


balance 

223,069,176 

(7,391,973) 

47,457,058 

(1,059,466) 

1,935,721 

4,490,908,863 

(3,062,694) 

534,913,669 

67,768,443 


3,377,595 


(3,377,596) 78,796,905 


223,069,176 

(7,391,973) 

47,457,058 

(1,059,466) 

1,935,721 

4,494,286,459 

(3,062,694) 

610,332,978 

67,768,443 


5,354,538,797 (3,377,595) 82,174,500 5,433,335,702 


37 - 31 August 2016 - 04:52 PM 


Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 



Figures in Rand 


f 


Property, plant and equipment (continued) 


Reconciliation of property, plant and equipment - 2015 



C>^ 



Opening 

Difference 

Additions 

'Disposals 

Transfers Total 


balance 





Land 

223,069,176 

- 

- 

- 

- 223,069,176 

Furniture and fixtures 

12,942,990 

- 

(91 ,583) 

(20,243,380) 

(7,391,973) 

Motor vehicles 

49,158,671 


(1,405,396) 

(296,217) 

47,457,058 

Office equipment 

4,068,986 

V ■ ) 

(48,805) 

(5,079,647) 

(1,059,466) 

IT equipment 

5,194,815 


(132,655) 

(3,126,440) 

1,935,721 

Infrastructure 

4,580,431,197 

(155,953,366) 

66,431,032 

- 

- 4,490,908,863 

Other property, plant and equipment 

9,499,267 

1 

(280,969) 

(12,280,993) 

(3,062,694) 

Artwork 

524,675,579 

16,933,001 

167,276,132 

- 

(173,971,043) 534,913,669 

Other property, plant and equipment # 1 

74,861,698 

(72,153,642) 

- 

- 

65,060,387 67,768,443 


5,483,902,379 

(211,174,005) 

231,747,756 

(41 ,026,677) 

(1 08,91 0,656) 5,354,538,797 


Pledged as security 

None of these assets were pledged as security. 

Reconciliation of Work-in-Progress 2016 
Reconciliation of Work-in-Progress 2015 


A register containing the information required by sec^ion 
inspection at the registered office of the municipalit 


Deemed cost 








Cv 

!Ction ^pfThe l\Jm 


>\0 






icipal Finance Management Act is available for 


38 - 31 August 2016 - 04:52 PM 


Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 




Figures in Rand 


2016 


Heritage assets 


r\ 


Historical buildings 
Mayoral chains 

Total 



2016 


2015 


Cost / 
Valuation 

Accumuiated Carrying vaiue 
impairment 
losses 

Cost / Accurnuiated Carrying vaiue 

Valuation impairn^tv 

lossp's J 

4,747,835 

- 

4,747,835 

4,747,835 

2,356,514 f X 1 ■ 

4,747,835 

2,356,514 

- 

2,356,514 

2,356,514 

7,104,349 

- 

7,104,349 

7,104,3^ 

7,104,349 


Reconciliation of heritage assets 2016 


Historical buildings 
Mayoral chains 


Reconciliation of heritage assets 2015 


Historical buildings 
Mayoral chains 


Piedged as security 

None of these assets were pledged as security. 




<5 


cr 


Opening 

baiance 

4,747,835 

2,356,514 


Total 

4,747,835 

2,356,514 


7,104,349 7,104,349 


Opening 

baiance 

4,747,835 

2,356,514 


Total 

4,747,835 

2,356,514 


7,104,349 7,104,349 


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. 

6. Other financial assets 


Designated at fair vaiue 

Unlisted shares 

The unlisted shares consist of 17,238 (2015:17,238) equity shares in Senwes Limited 
and 26,435 (2015:26,435) equity shares in Senwesbel Limited. 

At amortised cost 

RMB Asset Management (Guaranteed Investment Trust) 

The maturity date of the investment was 19 October 2015 with a guaranteed amount of 
R19,191 ,692. The investment was withdrawn on 07 April 2016. The guaranteed 
amount is valued at purchase yield on the assumption that it is held to maturity. 

Interest is earned at a guaranteed rate of 15.6% (2015:15.6%) per annum. 

Total other financial assets 


330,990 


339,207 


18,862,179 


330,990 19,201,386 


Non-current assets 

Designated at fair value 

Current assets 

At amortised cost 


330,990 


339,207 


18,862,179 


39 - 31 August 2016 - 04:52 PM 





Other financial assets (continued) 


Financial assets at fair value 


Fair value hierarchy of financial assets at fair value 


o 


For financial assets recognised at fair value, disclosure is required of a fair value hierarchy which reflects tne significance of the 
inputs used to make the measurements. The fair value hierarchy have the following levels: 

Level 1 represents those assets which are measured using unadjusted quoted prices in active markets for identical assets. 

Level 2 applies inputs other than quoted prices that are observable for the assets either directly (i.e. as prices) or indirectly (i.e. 
derived from prices). a 


Level 3 applies inputs which are not based on observable market data. 

Level 1 

Class 1 - Unlisted shares 

Renegotiated terms 




330,990 


339,207 


None of the financial assets that are fully performing have been renegotiated in the last year. 

Financial assets pledged as collateral 

Collateral j 


Carrying value of financial assets pledged as collateral for liabilities or coSrtingent 
liabilities 





40 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 



The municipality has a post-employment medical aid fund for its pensioners. The post-retirement medical aid benefits are in 
accordance with Resolution 8 of the South African Local Government Bargaining Council (SALGBC), signed on 17 January 
2003, which states that an employee who retires from employment with an employer and who immediately prior to his or her 
retirement, enjoyed the benefit of the subsidy of his or her medical aid contributions by his or her employer, will continue to 
receive a subsidy calculated as follows: 

- If the employee is 55 years or older on 1 July 2003, his or her subsidy from the employer as at the date of retirement will be 

60% to a maximum amount of the norm of the cost of his or her medical aid scheme contributions as at the day immediately 
prior to the date of his or her retirement; - 

- If the employee is 50 years or older on 1 July 2003, his or her subsidy will be 50% to a maximum amount of the norm of the 
cost of his or her medical scheme contributions as at the day immediately prior to the date of his or her retirement. The 
members are made up out of in-service members XXX (2014: 1 ,399) and continuation members XXX (2014: 218). 

The municipality makes monthly contributions for health care arrangements to thj^ollowing medical aid schemes: 

- Bonitas 

- Discovery 

- Hosmed 

- Key-health 

- LA Health 

- Samwumed 

Long service benefits 

The municipality's liability for long-service benefits relating to vested 1^|E benefits to which employees may become entitled 
upon completion of five years service and every five years thereafter. ThCTfe leave benefits are in accordance paragraph 1 1 of 
the South African Local Government Bargaining Council (^^Wl^) collective agreement on conditions of service for the Free 
State division of SALGBC which was signed on July 201 ( 

In accordance with South African Local Government Bai 
201 1 with an effective date of 1 March 2011), specific bonu 
in the following scales: 




lin^PCouncil (SALBGC) is sued circular 1 of 201 1 (issued 27 June 
is is payable to employees for long service. Bonuses are payable 


Years of service completed 

> 1 0 Years 

> 1 5 Years 

> 20 Years 

> 25 Years 

> 30 Years 

> 35 Years 


Percentage of annual salary as bonus 
3% 

4% 

5% 

6% 

6% 

6% 


Additional leave days 
1 0 days 
1 0 days 
1 5 days 
1 5 days 
1 5 days 
1 5 days 


The amounts recognised in the statement of financial position are as follows: 
Carrying value = 

Present value of the empk>e^^rft obligations-wholly unfunded 

Undefined Difference ~ 


ference m 


(349,773,365) 


(349,773,364) 


(349,773,365) (349,773,364) 


These obligations are not aiunded arrangement, i.e. no separate assets have been set aside currently to meet these 
obligations. 


Changes in the present value of the defined benefit obligation are as follows: 

Opening balance 

Net expense recognised in the statement of financial performance 


349,773,364 322,410,090 

27,363,274 

349,773,364 349,773,364 


41 - 31 August 2016 - 04:52 PM 


Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 

Figures in Rand 


7. Employee benefit obligations (continued) 

Net expense recognised in the statement of financial performance 

Service cost 
Interest cost 
Actuarial (gains) losses 
Expected benefits paid 



27,363,274 


Calculation of actuarial gains and losses 

Actuarial (gains) losses - Obligation 

Key assumptions used 

Assumptions used at the reporting date: 


< 5 ^ 


(3,339,864) 


Discount rates used 


9.00 

Medical aid inflation rates 


8.00 

Net discount rate 

-% 

0.93 

Continuation percentage 


90.00 


Benefit levels, for active members the projected contributions were usecf^t retirement for their current scheme option and for 
pensioner members their current scheme option as at 2015.] l 1 

Retirement age, it has been assumed that both male and female membenS|retire at age 63. No allowance has been made for 
early retirement either due to ill health or at the option of the member. 

Continuation on medical aid at retirement, it was assumed that all surviving members to retirement will continue their medical 
aid membership in retirement. , 

Pre-retirement, mortality of continuation members and withdrawal rates are in accordance with SA56-62 male and female 
tables. 

Post-retirement, mortality of continuation members and withdrawal rates are in accordance with PA(90) ultimate male and 
female tables with a 2 year reduction in age, assuming that there is a 4 year age difference between male and female spouse. 

The valuation is based on the Projected Unit Credit valuation method. 

Other assumptions 

Assumed healthcare cost trends rates have a significant effect on the amounts recognised in surplus or deficit. A one 
percentage point change in assumed healthcare cost trends rates would have the following effects: 


Employee benefit obligati^ 
Service and inter.est costs'^ 




One One 

percentage percentage 
point increasepoint 

decrease 

1 1 

1 1 


The municipality expects to pay benefits of R XXXX towards post-retirement medical aid and R XXXX towards long service 
benefits to its employee benefits in the next financial year. 


Amounts for the current and previous four years are as follows: 


/ ^ 

^ E^pl( 


Q 


2016 

R 


E^ployee*benefit obligation 


2015 2014 2013 2012 

R R R R 

(349,773,364) (322,410,090) (305,077,529) (245,392,909) 


42 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 





The municipality makes provision for post-retirement benefits to all employees and councilors, who belongjto different defined 
retirement contribution plans which are administrated by various pension, provident and annuity funds^ 

These plans are subject to the Pension Fund Act, 1956 (Act No. 24 of 1956) and include defined C Qmt'iijb utiQiiii^ans. 

The municipality is under no obligation to cover any unfunded benefits. The only obligation of the ^n icii^litv is to make the 
specified contributions. 




The following plans are multi-employer funds and are defined contribution plans: 

- South African Local Authorities Pension Fund (SALA) 

- Free State Municipal Pension Fund (FSMPF) 

- Municipal Councilors Pension Fund (MCPF) 

Sufficient information was not available to use defined benefit accounting for thejSnds a^d it was accounted for as defined 
contribution plans due to the following reasons: 

- The assets of each fund are held in one portfolio and are not notionally allocated to each of the participating employers; 

- One set of financial statements are compiled for all the funds and not for each participating employer; and 

- The same rate of contribution applies to all participating employers and no regard is paid to differences in the membership 
distribution ofthe participating employers. 

This is in line with the exemption in GRAP 25 paragraph 31 which states that where information required for proper defined 
benefitaccounting is not available in respect of multi-employer and state plans, these should be accounted for as defined 
contribution plans. 


The amount recognised as an expense for defined contributi^plans is 

8. Receivables from non-exchange transactions 


Non current arrangements - rates 
Allowance for impairment 




27,363,274 


2,491,696 

(1,980,562) 



511,134 


Receivables from non-exchange transactions'pledged as security: 

None of the consumer receivables were pledged as security. 

Renegotiated terms: 

None of the receivables that are fully performing have been renegotiated in the last year. 

Fair value of receivables: 

The carrying value of the consumer receivables recorded at amortised cost approximate their fair values. 

9. Receivables from exchange transactions 


Non current arrangements - services 
Allowance for impairment 


20,257,060 21,059,890 

(16,196,814) (20,709,508) 


4,060,246 


350,382 






43 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 




Figures in Rand 


2016 


o 


9. Receivables from exchange transactions (continued) 

Receivables from non-exchange transactions pledged as security: 

None of the consumer receivables were pledged as security. 

Renegotiated terms: 

None of the receivables that are fully performing have been renegotiated in the last year 

Fair value of receivables 

The carrying value of the consumer receivables recorded at amortised cost approximate theirAfalr values. 

10. Inventories 


Q) 


Consumable stores 

Water in reservoirs and pipelines 


Stock losses due to theft (case number 596/06/2016) 

Inventories recognised as an expense during the year - Water 
Inventories recognised as an expense during the year - Refer to n^e 35.' 

Inventory pledged as security 
None of the inventory was pledged as security for any financial liability of the municipality. 

1 1 . Other receivables 



Accrued interest 

Consumer deposits receivable 

Deposits 

Other receivables 

Salary error suspense account 

Traffic fines receivable 





9d 


7,499,133 

2,095,518 

7,318,736 

2,095,518 

9,594,651 

9,414,254 

81,239 

- 

430,828,678 

399,000,441 

106,572 

5,884,740 

9,850 

4,710,014 

12,904 

17,915,150 

5,038,282 

9,850 

3,515,567 

10,189,647 

28,639,230 

18,753,346 


Other receivables pledged as secum^^^ 

V r 

None of the other receivables weje ple^gsd as security during the year. 

f \ 

Fair value of other receivables J 

The carrying value of co^ujjiier deposits approximate their fair values. 

Other receivabl&s pS^j^ue but not impaired 

None of the other receivables are considered to be impaired. 






44 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 




Figures in Rand 


2016 


12. Receivables from non-exchange transactions 

Consumer receivables - rates 

Allowance for impairment - rates 

Less: Non-current consumer receivables (arrangements) 

Allowance for impairment - arrangements 


Receivables from non-exchange transactions pledged as security 
None of the consumer receivables were pledged as security. 

Credit quality of receivables from non-exchange transactions 


iO X.284 * 

in\ o 


304.278,800 V284# I93,1 16 
(1 49, 1 27,1 09) 267, 061 ) 

(2,49.1.,696) 

1 ,980,562 

154 , 640,557 161 , 926,055 


rs 


9d 


The credit quality of other receivables from non-exchange transactions that are neither past nor due nor impaired can be 
assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates. 


None of the financial assets that are fully performing have been renegotiated in the last year. 
The carrying value of consumer deposits approximate their fair values. 

Receivables from non-exchange transactions past due but not impaired" 

The ageing of amounts past due but not impaired is as follows: 


1 month past due 

2 months past due 

3 months past due 

Rates aging 

Current (0-30 days) 

31-60 days 
61-90 days 
91-r days 

Less: Allowance for impairment 


O' 


aaired^L 

<5 



je'transact 


13. VAT receivable 

VAT 

1 4. Receivables from exchan^trans^ctions 


8,443,858 

5,027,868 

20,993,303 


20,396,614 13,788,969 

12,175,846 8,156,426 

11,269,804 7,184,257 

260,436,536 255,063,464 

(149,127,109) (122,267,061) 

155 , 151,691 161 , 926,055 


123,462,600 120,315,800 


Gross balances 

Electricity 
Water 

Sewerage ^ 

Refuse 

Other receivabl^ 

Unmetered constimPion -'Water 
Unmetered consumption - electricity 
Less: Non-current cqnsumer receivables (Arrangements) 
Payments received in advance 


217,087,181 

845,907,960 

315,954,686 

213,684,745 

139,842,953 

44,359,766 

65,283,840 

(20,257,060) 


228,538,495 

794.540.710 
279,258,716 

189.906.711 
56,006,736 
35,286,038 
66,226,665 
(21,059,890) 

(124,663,935) 



45 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 




Figures in Rand 


2016 


14. Receivables from exchange transactions (continued) 

Less: Allowance for impairment 

Electricity 

Water 

Sewerage 

Refuse 

Other receivables 

Less: Non-current consumer receivables (Arrangements) 


Net balance 

Electricity 

Water 

Sewerage 

Refuse 

Other receivables 

Unmetered consumption - water 

Unmetered consumption - electricity 

Non-current consumer receivables (Arrangements) 

Payments received in advance 


Electricity 

Current (0 -30 days) 
31-60 days 
61-90 days 
91-r days 
Less: Impairment 


(107.695,432) 

(472,847,464) 

(194,155,182) 

(133,942,834) 

(57,412,743) 

16,196,814 


o 


'(-75,035,288) 

(418,471,187) 

(136,759,238) 

(95,288,227) 

(55,598,595) 

20,709,508 


Water 

Current (0 -30 days) 
31-60 days 
61-90 days 
91-r days 
Less: Impairment 




/ 

<5 



Sewerage 

Current (0 -30 days) 
31-60 days 
61-90 days 
91-r days 
Less: Impairment 


Refuse 

Current (0 -30 days) 
31-60 days 
61-90 davs 
91-r daysJ. 

Less: lmpai™ent 

o 






( 949 , 856 , 841 ) 

( 760 , 443 , 027 ) 

«^9,391,749 

1 373,060,496 

121,799,504 
79,741,911 
82,430,211 
44,359,766 
65,283,840 
(4,060,246) 

153,503,207 

376,069,523 

142,499,478 

94,618,484 

408,141 

35,286,038 

66,226,665 

(350,382) 

(124,663,935) 

872 , 007,231 

743 , 597,219 

36,294,677 

14,550,075 

6,983,545 

159,258,884 

(107,695,432) 

73,844,824 

17,712,096 

7,964,863 

129,016,712 

(75,035,288) 

109 , 391,749 

153 , 503,207 

53,473,992 

33,175,663 

21,276,106 

737,982,200 

(472,847,464) 

66,546,240 

36,332,623 

22,257,429 

669,404,418 

(418,471,187) 

373 , 060,497 

376 , 069,523 

11,311,220 

8,829,417 

8,206,870 

287,607,179 

(194,155,182) 

10,725,313 

9,053,253 

7,831,605 

251,648,506 

(121,944,636) 

121 , 799,504 

157 , 314,041 

6,927,306 

5,306,232 

5,027,914 

196,423,293 

(133,942,834) 

6,487,255 

5,050,179 

4,690,941 

173,678,336 

(84,502,983) 

79 , 741,911 

105 , 403,728 


46 - 31 August 2016 - 04:52 PM 




14. Receivabies from exchange transactions (continued) 
Other 

Current (0 -30 days) 

31-60 days 
61-90 days 
91-r days 
Less: Impairment 


3,572,846 


Q 

3 ^^580,121 


3,344,486 3,087,982 

2,886,997 3,251,404 

130,038,625 109,719,091 

(57,412,743) (54,218,383) 


Unmetered consumption - water 

Current (0 -30 days) 

Unmetered consumption - electricity 

Current (0 -30 days) 




/ 

<5 


82,430,211 

64,420,215 

" Jt4,359,766 

35,286,038 

1 

65,283,840 

66,226,665 



47 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 

Figures in Rand 


2016 




14. Receivabies from exchange transactions (continued) 
Summary of receivables by customer classification 


O 


Consumers 

Current (0 -30 days) 

31-60 days 
61-90 days 
91-r days 

Less: Allowance for impairment 


Business, industrial and commercial 

Current (0 -30 days) 

31-60 days 
61-90 days 
91-r days 

Less: Allowance for impairment 


National and provincial government 

Current (0 -30 days) 

31-60 days 
61-90 days 
91-r days 

Less: Allowance for impairment 


79,005,751 62,302,916 

54,850,684 48,381,987 

39,260,011 32,979,223 

1,389,090,723 1,020,813,715 


Indigents 

Current (0 -30 days) 

31-60 days 
61-90 days 
91-r days 

Less: Allowance for impairment 


Farms and agriculture 

Current (0 -30 days) 

31-60 days 
61 - 90 days 
91-rdays ^ 

Less: Allowancetqwmpairment 





e TQijim pair 

o 


Consumer receivables past due but not impaired 

The ageing of amounts past due but not impaired is as follows: 

1 month past due 

2 months past due 

3 months past due 


1,562,207,169 

(^^6:324,686) 

1,164,477,841 

(489,916,759) 

§p5,882,483 

674,561,082 



1 

31,279,626 

14,093,803 

9,271,877 

314,384,152 

29,769,887 

14,164,406 

9,422,022 

252,184,480 

369,029,458 

(170,972,496) 

305,540,795 

(109,829,170) 

198,056,962 

195,711,625 

7,893,944 

5,858,899 

4,685,234 

20,949,651 

8,255,756 

5,615,972 

3,398,569 

142,851,229 

39,387,728 

160,121,526 

(59,136,025) 

39,387,728 

100,985,501 

26,454 

87,306 

41,379 

2,559,767 

8,906,424 

9,191,220 

5,363,401 

123,933,496 

2,714,906 

(2,714,906) 

147,394,541 

(147,394,541) 

- 

- 

2,962,810 

2,491,026 

2,392,735 

44,761,283 

(35,168,677) 

2,105,876 

2,038,974 

2,017,283 

48,747,647 

(23,924,416) 

17,439,177 

30,985,364 

8,443,858 

5,027,868 

20,993,303 

40,879,048 

27,542,242 

822,507,422 


48 - 31 August 2016 - 04:52 PM 




Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 




Figures in Rand 


2016 


14. Receivables from exchange transactions (continued) 

Reconciliation of allowance for impairment 

Balance at beginning of the year 

Contributions to allowance 

Debt impairment written off against allowance 


Consumer receivables pledged as security 

None of the consumer receivables were pledged as security. 

Credit quality of consumer debtors 


O 

C n C V7'H»--70 C 


(903,41 g.SOS^ClVSS.OOS.O1 1 ) 
378,091,853 (73,512,082) 

166,330,683 955,095,498 

(1,115,180,765) (903,419,595) 


rs^ 


The credit quality of consumer debtors that are neither past nor due nor impaired can be assessed by reference to external 
credit ratings (if available) or to historical information about counterparty default rates^ 


None of the financial assets that are fully performing have been renegotiated ii;^fh^|last ^ar. 
The carrying value of consumer deposits approximate their fair values. 

15. Cash and cash equivalents 


Cash and cash equivalents consist of: 

Cash on hand and advances 
Short-term deposits 
Collections account 
Bank overdraft 


Current assets 
Current liabilities 


<5 



CA 


9,474 

9,474 

10,637,028 

741,082 

873,828 

785,576 

(2,603,485) 

(1,569,372) 

8,916,845 

(33,240) 

11,520,330 

1,536,132 

(2,603,485) 

(1,569,372) 

8,916,845 

(33,240) 


No restrictions have been imposed on the municipality in terms of the availability of its cash and cash equivalents for use. 


The total amount of undrawn facilities available for future operating activities and commitments are as follows: 


ACB mag tape debit facility 
Flousing guarantee 
Fleet card 




2 , 000,000 

500,000 

60,000 


2 , 000,000 

500,000 

60,000 


Credit quality of cash at ban,K and short term deposits, excluding cash on hand 


The credit quality of cash at bank and short term deposits, excluding cash on hand that are neither past due nor impaired can 
be assessed by reference to external credit ratings or historical information about counterparty default rates. 


Cash and cash equivalents pledged as collateral 

None of the cash ^dieash equivalents were pledged as collateral. 






49 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 





Account number / description 


Bank statement balances 


Cash book balances 



30 June 2016 

30 June 2015 

30 June 2014 

30 June 2016 

30 June 2015 

30 June 2014 

ABSA Primary Cheque account 
Acc no (40-5370-5465) 

(482,599) 

2,187,120 

1,275,549 

(836,542) 

(775,550) 

1,853,697 

ABSA Market Cheque account 
Acc no (40-5644-3399) 

918,032 

1,497,072 

2,116,003 

(1,766,943) 

(793,822) 

(913,370) 

FNB Collections Cheque 
account 

873,828 

785,576 

701,726 

873,828 

785,576 

700,915 

Acc No (542-3117-3409) 

ABSA Savings account 

9,870,795 

1,000 

1,000 

9,870,795 

1,000 

1,000 

Acc no (90-9461-7107) 

ABSA Savings account 

1,000 

1,201 

1,000 


1,201 

1,000 

Acc no (91-0668-4115) 

ABSA Savings account 

1,000 

1,011 

1,000, 

J^^l ,000 

1,011 

1,000 

Acc no (91-1114-1338) 

ABSA Savings account 

1,000 

1,077 

1,000 

1 .000 

1,077 

1,000 

Acc no (91-0668-4238) 

ABSA Savings account 

_ 

_ 

50 

% 

_ 

50 


Acc no (91-0653-8138) 
ABSA Savings account 
Acc no (91-0668-4157) 
ABSA Savings account 
Acc no (91-2351-5666) 
FNB Call account 
Acc no (614-0400-1177) 
FNB Call account 
Acc no (620-0350-3019) 

Total 


1,000 

1,000 

5,140 

756,093 



709T079^ 


1,000 

1,000 

5,140 

756,093 


1,001 

1,002 

5,074 

709,079 


1,000 

1,002 

5,074 

709,079 


11,946,289 


5,190,213 


4,813,483 


8,907,371 


(63,351) 2,361,447 


16. Unspent conditional grants and receipts 
Unspent conditional grants and receipts comprises of: 

Unspent conditional grants and receipts 

Integrated national electrification programme (INEP) 

Energy efficiency and demand side management programme (EEDSM) 
Extended public work programme (EPWP) 

Sector education and training authority*^^TA) 


ear^^ 


Movement during the year 

Unspent at the beginning oU^'Bfcear 
Additions during the year “ 
Income recognition during the year 


600,001 

404,294 

1,018,931 

1,936,848 

743,889 

2,324,817 

1 ,004,295 

6,024,485 

6,024,486 

522,142,502 

(527,162,693) 

7,347,170 

585,024,688 

(586,347,372) 

1 ,004,295 

6,024,486 


The nature and extent of government grants recognised in the financial statements are 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 26 for reconciliation of grants from National/Provincial Government. 

These amounts are invested in a ring-fenced investment until utilised. 


50 - 31 August 2016 - 04:52 PM 




Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 





Rehabilitation of landfill sites 

Reconciliation of provisions - 2015 

Rehabilitation of landfill sites 

Non-current liabilities 
Current liabilities 

Rehabilitation of landfiil sites 


50,144,032 


1?5i1t2:262 51,656,294 


Opening 
Baiance_ 

49,363,059 


-0 


Discounting 

780,973 


Total 

50,144,032 



50,144,032 

1,512,262 


49,025,542 

1,118,490 


51,656,294 50,144,032 


The provision for rehabilitation of landfill sites relates to the legal obligation to rehabilitate landfill sites to a condition whereby it 
complies to the permit requirements issued in terms of the Mineral and Petroleum Resources Development Act, 2002 (Act No. 
28 of 2002). 

Management has included the best estimated amount as the actual amount is uncertain. The payment of total closure and 
rehabilitation dates are uncertain. 

The provision has been determined by an independent firm-of eonsultants through investigation to determine the best 
estimated rehabilitation costs for the waste disposal sites at the end of its useful life. 

The discount rate used for the landfill sites is based on a risk free rate which is in line with the useful life of the landfill sites. 
The municipality has five active landfill sites, as per the asset register: 


Landfill 

Allanridge 

Henneman (Phomolong) 
Odendaalsrus 
Virginia (Transfer Station) 
Bronville (Welkom) 


9d 


Estimated useful life 

9 years (2014: 10 years) 
1 2 years (2014: 13 years) 
24 years (2014: 25 years) 
1 2 years (2014: 13 years) 
6years(2014: 7 years) 


There were no landfill sites develo'ped, planned, rehabilitated or closed during the current or prior year. 

Discount rate assumptions (Additional information to the prior year financial statements) 

The key assumptions us^ in the valuation, with the prior years’ assumptions shown for comparison, are summarised below: 

♦ o 

Discount rate (Dj)^ « 

Consumer price inflation (C) 



30 June 2016 

30 June 2015 

30 June 2014 


8.51 % 

9.08 % 

8.76 % 


6.82 % 

6.70 % 

5.58 % 

■1) 

1 .58 % 

2.23 % 

3.02 % 


Movement in the closing balance of the provision 
Active landfili sites 


Allanridge 

Henneman (Phomolong) 


Opening 

balance 

4,833,489 

8,056,132 


Movement 
during the 
year 

145,770 

242,960 


Closing 

balance 

4,979,259 

8,299,092 


51 - 31 August 2016 - 04:52 PM 




Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 

Figures in Rand 


17. Provisions (continued) 

Odendaalsrus 
Virginia (Transfer Station) 
Bronville (Welkom) 


2016 




12,649,264 

2,050,839 

22,554,308 


381,4811 

61,850 

680,201 




,©30,745 
2,^12,689 
^,234,509 


50,144,032 1,512,262 51,656,294 


18. Payables from exchange transactions 

Accrued bonus 
Accrued leave pay 

Deposits received - Flalls and facilities 
Eskom 

Payments received in advance from consumer receivables 

Salary control accounts 

Sedibeng Water Board 

Sundry payables 

Trade payables 


Fair value of trade and other payables 

The carrying value of consumer deposits approximate their fair values. 

19. Consumer deposits 

Electricity and water 
Key deposits 



r i 

r8, 3^,031 

©'4T9i77,157 
31,904 
9,760,862 
1^37,909,845 
26,684,174 
1,502,021,591 
669 

177,334,044 


9,092,246 

53,604,855 

20,463 

619,760,862 

31,562,545 

24,472,852 

1,226,858,308 

281,740,250 


2,437,110,277 2,247,112,381 


36,173,545 

3,642 


35,266,177 

3,642 


36,177,187 35,269,819 


Guarantees held in lieu of electricity and water deposits amounted to R 6,040,465 (2015: R 2,792,366) 

Deposits are paid by consumers on application for new electricity and water connections. The deposits are repaid when the 
electricity and water connections are terminated. In cases where consumers default on their accounts, the municipality can 
utilise the deposit as payment for the outstanding account balance. 

No interest is paid to consumers on deposits held. 

The carrying value of consumer deposit a, aB pro^mate their fair values. 

20. Service charges 

Sale of electricity 
Sale of water 

Sewerage and sanitation cha%es 
Refuse removal 

Less: Income foregone ^ndigp,gits 

♦ 


492,202,494 

345,375,383 

128,256,386 

78,928,071 

(45,666,204) 


479,770,228 

291,603,849 

119,016,747 

72,527,147 


999,096,130 962,917,971 



21 . Rental of fa€ilities atid equipment 


Premises 

Premises 


Facilities and equipment 

Rental of facilities 


10,882,992 


9,386,493 


326,540 

278,744 

1 1 ,209,532 

9,665,237 


52 - 31 August 2016 - 04:52 PM 




Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 




Figures in Rand 


2016 


22. Commission received 

Commissions received 

23. Other income 

Connection fees 
Disconnection fees 
Meter fees 
Monitoring fees 
Services rendered 
Sundry income 
Sundry services 


24. Interest and dividends received 

Dividend revenue 

Unlisted shares - Local 

Interest revenue 

Bank and investments 

Interest charged on consumer receivables 

Interest on Sedibeng Water written off 


25. Property rates 

Rates received 

Commercial 

Residential 

Small holdings and farms 
State 

Less: Income foregone - indigents 


/ 


O' 





So 

Included in property rates are inc^e f^eijie. Income forgone can be defined as any in' 
by law to levy, but which has subl^uentl^een forgone by way of rebate or remission. 

r^ 

6 


11,122,174 


o 


■778,521 


Valuations 

Commercial 
Residential 
Small holdings and farm? 
State 
Exempted 






834,970 

786,379 

15,595,105 

7,473,626 

1,905,176 

1,240,770 

942,173 

972,548 

2,414,801 

2,523,756 

^ ^,160,162 

1,357,527 

^^1,789,906 

1,244,394 

1 25,642,293 

15,599,000 

17,251 

14,608 

3,230,005 

4,351,619 

123,822,672 

102,799,896 

25,933,728 

- 

152,986,405 

107,151,515 

153,003,656 

107,166,123 

169,549,572 

68,780,684 

83,795,254 

51,777,106 

8,208,120 

43,773,341 

1,179,009 

29,755,770 

(276,908) 

- 

262,455,047 

194,086,901 

lat the municipality is entitled to 


2,345,932,900 

- 

11,065,242,201 

- 

2,904,799,620 

- 

1,362,493,600 

- 

1,348,750,275 

- 

19,027,218,596 


Valuations on land and buildings are performed every four years. The last general valuation roll came into effect on 1 July 
2015, and is based on market-related values. Supplementary valuations are processed when completed by the valuer annually, 
to take into account changes to individual property values due to alterations and subdivisions. 

The first R 75,000 of the valuation of residential property is exempted from rates. 


53 - 31 August 2016 - 04:52 PM 




Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 




Figures in Rand 


2016 


26. Government grants and subsidies 

Operating grants 

Equitable share 

Extended public works program (EPWP) 
Finance management grant (FMG) 

Municipal systems improvement grant (MSIG) 
Provincial Treasury (audit fees) 

Sector education and training authority (SETA) 


Capitai grants 

Energy efficiency and demand side management programme (EEDSM) 
Integrated national electrification program (INEP) 

Municipal infrastructure grant (MIG) 


Conditionai and Unconditional 


Included in above are the following grants and subsidies received: 


402,908,668 

1.072.000 

1.675.000 
930,000 

. 500,000 

f 3,330,319 


o 


416,018,000 
395,111 
1,600,000 
934,000 

312,059 


Conditional grants received 
Unconditional grants received 


Equitable Share 

Current-year receipts 

Conditions met - transferred to revenue 



qj10^41 5,987 419,259,170 


2,595,706 


114,651,000 


5,908,767 

3,872,824 

157,306,611 


117,246,706 167,088,202 

527,662,693 586,347,372 


124,754,025 

402,908,668 


170,329,372 

416,018,000 


527,662,693 586,347,372 


402,908,668 416,018,000 

(402,908,668) (416,018,000) 


In terms of the Constitution, this grant is used to subsidise the provision of basic services to indigent community members. 

f 


Municipal infrastructure grant (MIG) ^ « 


Balance unspent at beginning of year 
Current-year receipts 
Conditions met - transferred to revenue 


\ffinue 

rV 


1,060,611 
114,651,000 156,246,000 

(114,651,000) (157,306,611) 


Conditions still to be met - remain liabilities (see note 16). 

* In terms of the MFMA Circular No. 48, all conditional allocations (excluding interest earned thereon) that at year-end are not 
utilised must revert back to National Revenue Fund unless the relevant receiving officer can prove to the satisfaction of the 
National Treasury that the unspent allocation is committed to identifiable projects. 

This grant is used to supplement municipal capital budgets to eradicate backlogs in municipal infrastructure utilised in providing 
basic services for the benefit of poor households. 


Finance Management Grant (FMG) 

Current-year receipts 

Conditions met - transferred to revenue 


1,675,000 

(1,675,000) 


1,600,000 

(1,600,000) 


54 - 31 August 2016 - 04:52 PM 




Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 




Figures in Rand 


2016 


r\ 

A4J.I K ill=l 


26. Government grants and subsidies (continued) 

The purpose of this grant is to promote and support reforms to financial management and the implementation ol| |^e I^ MA. 

Municipal systems improvement grant (MSiG) 


Current-year receipts 

Conditions met - transferred to revenue 



^9.0.0:000; 

l^3Of0.0O) 


934,000 

(934,000) 




The purpose of this grant is to assist municipalities in building in-house capacity to perform tTCir^’Bigtions and stabilise 
institutional and governance systems as required in the Local Government and the Municip^S^eJis Act, 2000 (Act N 
2000 ). 

Integrated national electrification program (INEP) 


Balance unspent at beginning of year 

Current-year receipts 

Conditions met - transferred to revenue 

Grants withheld by National Treasury through equitable share* 


/ 


1,018,931 

600,000 

(1,018,930) 


691,755 

4,200,000 

(3,872,824) 


600,001 


1,018,931 


Conditions still to be met - remain liabilities (see note 16). 

This grant is used to address the electrification backlog of permanently occupied residential dwellings, the installation of bulk 
infrastructure and rehabilitation of electrification infrastructure. 

* In terms of the MFMA Circular No. 48, all conditional allocations (excluding interest earned thereon) that at year-end are not 
utilised must revert back to National Revenue Fund unless the relevant receiving officer can prove to the satisfaction of the 
National Treasury that the unspent allocation is committed to identifiable projects. 

Energy efficiency and demand side manag^ent^ragr^me (EEDSM) 



Balance unspent at beginning of year 
Current-year receipts 
Conditions met - transferred to revenue ' 

Grants withheld by National Treasury through equitable share* 


1,936,848 

3,000,000 

(2,595,706) 

(1,936,848) 


3,845,615 

4,000,000 

(5,908,767) 


404,294 


1 ,936,848 


Conditions still to be met - remain liabilities (see note 16). 

The purpose of this grant is to assist the municipalities to reduce their energy consumption through deployment of electricity 
and other energy saving measures. 

* In terms of the MFMA Circular No. 48, all conditional allocations (excluding interest earned thereon) that at year-end are not 
utilised must revert back to National Revenue Fund unless the relevant receiving officer can prove to the satisfaction of the 
National Treasury that the unspent allocation is committed to identifiable projects. 


Expanded public works programme (EPWP) 

Balance unspent at beginning of year 

Current-year receipts 

Conditions met - transferred to revenue 

Grants withheld by National Treasury through equitable share* 


Conditions still to be met - remain liabilities (see note 16). 


743,889 

1,072,000 

(1,072,000) 

(743,889) 


1,139,000 

(395,111) 


743,889 


55-31 August 2016 -04:52 PM 




Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 





The purpose of this grant is to subsidise municipalities to expand on work creation efforts through the use of labour intensive 
delivery methods in identified focus areas. 

* In terms of the MFMA Circular No. 48, all conditional allocations (excluding interest earned thereon) that at year-end are not 
utilised must revert back to National Revenue Fund unless the relevant receiving officer can prove to the satisfaction of the 
National Treasury that the unspent allocation is committed to identifiable projects. 


Sector education and training authority (SETA) 

Balance unspent at beginning of year 

Current-year receipts 

Conditions met - transferred to revenue 


324,817 
005,502 
(3,330,319) 


Conditions still to be met - remain liabilities (see note 16). 

The purpose of this grant is to do skills development among employees and jfflprove tljg^auditing skills for municipalities. 

Provinciai Treasury 


Current-year receipts 

Conditions met - transferred to revenue 


improve 

■Q 

^ 4-u.,^ A ■ iQ:4- 


1,749,189 

887,687 

(312,059) 


2,324,817 


500,000 

(500,000) 


Provincial Treasury paid audit fees on behalf of the municip^y to the Audiitor General. 

Changes in level of government grants 


O 


Based on the allocations set out in the Division of R^^ue Act, 2014 (Act No. 10 of 2014), no significant changes in the level 
of government grant funding are expected over the fofthcoming 3 financial years. 


27. Licences and permits 

Licences and permits 







67,371 


48,905 







o 


56-31 August 2016 -04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 


Remuneration of municipal manager - Ramathebane G 

Annual Remuneration 

Contributions to UIF, Medical and Pension Funds 


Remuneration of municipal manager - Lepheana MF 

Annual Remuneration 

Contributions to UIF, Medical and Pension Funds 


Remuneration of chief financial officer - Tsoaeli 

Annual Remuneration 
Car Allowance 
Contributions to UIF, Medical and Pension Funds 


Remuneration of director infrastructure - Tlhabane HB 

Annual Remuneration 
Car Allowance 

Contributions to UIF, Medical and Pension Funds 


of 2 months. 

V ^ 

Remuneration of director corporate services - Lepheana MF 

A — 

Annual Remuneration 

Contributions to UIF, Medical and Pension Funds 


Remuneration of director corporate services - Wetes 

Annual Remuneration 




Figures in Rand 

2016 


28. Employee related costs 


Basic salaries 

342,152,912 

317,750,533 

Bonuses 

23,495,894 

21,221,455 

Pension 

47,253,894 

44,178,451 

Other long term employee benefits 

2,282,578 

4,195,887 

Employee benefits - medical aid 

8,032,390 

9,511,550 

Group life insurance 

1 ,353,647 

1,248,962 

Flousing allowances 

3,676,556 

5,581,889 

Leave pay provision charge 

17,771,803 

8,936,014 

Medical aid 

_ 38,472,070 

34,415,811 

Other allowances 

^ 19,598,254 

17,141,638 

Overtime payments 

^^J60,41 8,452 

49,850,513 

Transport allowance 

^^^«^30,859,660 

29,055,401 

UIF 

f ^ 3,440,683 

3,176,995 



598,808,793 

546,265,099 

- 

120,967 

301,946 

- 

422,913 

1,745,493 

43,846 

812,843 

14,450 

1 ,789,339 

827,293 

1,005,997 

363,894 

182,864 

933,674 

363,894 

173,475 

1 ,552,755 

1,471,043 

899,424 

240,000 

28,277 

148,336 

40,000 

4,595 

1,167,701 

192,931 

rior financial year is for a period 

- 

782,534 

1,041 

- 

783,575 

994,699 

251,260 


57 - 31 August 2016 - 04:52 PM 




Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 





The Director Corporate Services was appointed in April 2015, thus the remuneration reflected in the Dri^rfi riatiic ial year is for a 
period of 3 months. 


Remuneration director strategic support services - Makhubu S 

Annual Remuneration 

Contributions to UIF, Medical and Pension Funds 


Remuneration director strategic support services - Makofane TB 

Annual Remuneration 

Contributions to UIF, Medical and Pension Funds 



lor ii iiaiiic i 

( 7 ) 

^ ^1j!i1(56 

o 


i1j!i1(56,31 8 
24,913 


702,486 

892 


'1,181,231 


703,378 


475,174 

7,153 


482,327 


The Director Strategic Support Services was appointed in February 2015, thus^tke remuneration reflected in the prior financial 
year is for a period of 5 months. 


Remuneration of director community services - Mogopodi MR 


Annual Remuneration 
Car Allowance 

Contributions to UIF, Medical and Pension Funds 






989,446 

143,319 

171,094 


889,492 

143,319 

162,516 


1,303,859 1,195,327 



Remuneration director local economic development - Msweli XF 


Annual Remuneration 
Car Allowance 
Contributions to UIF, Medical and Pension Funds 


29. Remuneration of councillors 


1,152,104 

132,000 

47,731 


1,084,299 

132,000 

45,201 


Executive Major 
Councillors 




1,331,835 1,261,500 


963,732 901,590 

26,225,867 24,547,690 

27,189,599 25,449,280 


Reclassification of amounts: Prior year 

The following acc^nf^ljjver^combined as disclosed in the prior year financial statements; Mayoral Committee Members, 
Councillors - Parptime, Spmker as one individual account namely other Councillors. 


rilhUU, 

o 






58 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 



The Mayoral Committee Members are full-time employees of the municipality. Each is provided with an Qfifiice and secretarial 
support at the cost of the Council. 


The Executive Mayor has use of separate Council owned vehicle for official duties, one full time dri^gt^d gibodyguard. 
The Speaker has use of separate Council owned vehicle for official duties and a part time driver. 


1 1 ujiiii.L rt; ai iv. 

Go 

u[i v.er»an d r ' — '■ 

e> 


Details of remuneration for the year ended 30 June 
2016 

Name of councillor 


Badenhorst MJ 
Banyane ME 
Beneke R 
Botha PF 
Chaka CP 
Dali VN 
De Villiers MT 
Fanie DS 
Fourie JJC 
Kabi M 
Khalipha TD 
Kockera SC 
Mabote TL 
Madumise MM 
Mafa DM 
Mafongosi ZV 
Makgowe PV 
Malefane DE 
Marais JS 
Masienyane MD 
Mbambo AX 
Mbana AM 
Meli TS 
Menyatso KJ 
Mfebe MSE 
Mholo PP 
Mlangeni MG 
Mokhomo FIA 
Mokotedi TG 
Molelekoa PMI 
Molelekoa PA 
Molete TN 
Molupe RT 
Monjovo NE 
Morris VR 
Mosala MS 
Mothege MA 
Motshabi MP 
MphikelelijMA 
Naude FIJj 
Ngangelizw^ 


Annual Car allowance Contributions 


remuneration 






C6 


O 



ijyiA 

:wetG 


M NtseE 


Nqeolromiw 
NtlelfKI '1 
Ntse^ngMR 




o 



9d 


to UIF, 
medical and 
pension funds 


30 June 2016 
Total 


202,865 

69,471 

26,415 

298,751 

202,865 ~ 

69,471 

26,415 

298,751 

202,865 

69,471 

26,415 

298,751 

187,839 

69,471 

41,441 

298,751 

202,865 

69,471 

26,415 

298,751 

187,839 

69,471 

41,441 

298,751 

202,865 

69,471 

26,415 

298,751 

202,865 

69,471 

26,415 

298,751 

202,865 

69,471 

26,415 

298,751 

187,839 

69,471 

41,441 

298,751 

187,839 

69,471 

41,441 

298,751 

187,839 

69,471 

41,441 

298,751 

202,865 

69,471 

26,415 

298,751 

202,865 

69,471 

26,415 

298,751 

187,839 

69,471 

41,441 

298,751 

202,865 

69,471 

26,415 

298,751 

187,839 

69,471 

41,441 

298,751 

202,865 

69,471 

26,415 

298,751 

229,280 

69,471 

- 

298,751 

428,361 

161,335 

76,512 

666,208 

187,839 

69,471 

41,441 

298,751 

458,540 

172,858 

80,903 

712,301 

187,839 

69,471 

41,441 

298,751 

461,044 

172,858 

78,399 

712,301 

458,540 

172,858 

80,903 

712,301 

202,865 

69,471 

26,415 

298,751 

202,865 

69,471 

26,415 

298,751 

187,839 

69,471 

41,441 

298,751 

202,865 

69,471 

26,415 

298,751 

202,865 

69,471 

26,415 

298,751 

187,839 

69,471 

41,441 

298,751 

202,865 

69,471 

26,415 

298,751 

187,839 

69,471 

41,441 

298,751 

187,839 

69,471 

41,441 

298,751 

187,839 

69,471 

41,441 

298,751 

202,865 

69,471 

26,415 

298,751 

202,865 

69,471 

26,415 

298,751 

473,566 

172,858 

65,877 

712,301 

202,865 

69,471 

26,415 

298,751 

202,865 

69,471 

26,415 

298,751 

630,392 

230,478 

102,862 

963,732 

151,957 

52,103 

20,003 

224,063 

202,865 

69,471 

26,415 

298,751 

458,540 

172,858 

80,903 

712,301 


59 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 

Figures in Rand 


2016 




29. Remuneration of councillors (continued) 

Petleki Kl 
Phetise ME 
Pina NJ 
Qwesha GL 
Radebe MC 
Radebe ML 
Riet Ml 
Rubulana L 
Sephiri MJ 
Sifatya Z 
Speelman NW 
Stofile B 
Styger A 
Taliwe FE 
Taljaard SDM 
Thateng MJ 
Thelingoane TJ 
Tlake KR 
Tlhone ML 
Tsatsa SJ 
Tsubane ME 
Tsubella KS 
Twala MJ 
Van Rooyen MS 
Van Rooyen KV 
Van Schalkwyk FICT 
Vanga NM 


187,839 

187,839 

202,865 

187,839 

187,839 

458,540 

202,865 

473,566 

458,540 

202,865 

202,865 

488,720 

202,865 

473,566 

187,839 

202,865 

202,865 

187,839 

567,700 

187,839 

187,839 

233,270 

473,566 

202,865 

202,865 

202,865 

187,839 


69,471 

69,471 

69,471 

69,471 

69,471 

172,858 

69,471 

172,858 

172,858 

69 , 4 ^ 

69,4flj 

184,382 

69,471 

172,858 

69,471 

69,471 

69,471 

69,471 

48,000 

69,471 

69,471 

34,800 

172,858 

69,471 

69,471 

69,471 

69,471 



41,4411 

41,441 

26,415 

41,441 

41,441 

80,903 

26,415 

65,877 

80,903 

26,415 

26,415 

85,295 

26,415 

65,877 

41,441 

26,415 

26,415 

41,441 

96,601 

41,441 

41,441 

30,681 

65,877 

26,415 

26,415 

26,415 

41,441 


\C ^ 98 , 
i V^ ^ 98, 

r\r\r\ 


|98,751 

|98,751 

298,751 

298,751 

298,751 

712,301 

298,751 

712,301 

712,301 

298,751 

298,751 

758,397 

298,751 

712,301 

298,751 

298,751 

298,751 

298,751 

712,301 

298,751 

298,751 

298,751 

712,301 

298,751 

298,751 

298,751 

298,751 


Property, plant and equipment 
Investment property 


31 . Finance costs 





Details of remuneration for the year ended 30 June 
2015 

Name of councillor 


Badenhorst MJ 
Banyane ME 


30. Depreciation and amortisation 


Employee benefitp 
Trade and otherjpSySSl^ 
Bank V F 

Provisions 


32. Debt impairment 

Contributions to bad debt provision 


17,986,800 

6,260,583 2,930,384 

27,177,767 

Annual 

Car allowance Contributions 

30 June 2015 

remuneration 

to UIF, 

Total 


medical and 



pension funds 


- 

96,882 

96,882 

- 

1 

1 

- 

96,883 

96,883 


; 

253,653,630 

6,691,979 

- 

260,345,609 

26,521,262 

114,537 

1,512,262 

28,406,622 

147,211,207 

(1,538,421) 

780,973 

28,148,061 

174,860,381 

378,091,853 

73,512,082 


60 - 31 August 2016 - 04:52 PM 




Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 




Figures in Rand 


2016 


33. Bulk purchases 

Electricity 

Water 


34. Contracted services 

Legal services 
Meter reading services 
Professional services 
Security services 
Valuation services 


35. General expenses 

Advertising 
Audit fees 
Bank charges 
Cleaning 

Community development and training 

Conferences and seminars 

Donations 

Entertainment 

Insurance 

License fees 

Marketing 

Medical expenses 

Motor vehicle expenses 

Operating cost of equipment 

Pest control 

Printing and stationery 

Skills development levies 

Subscriptions and membership fees 

Subsistence and travel 

Sundry expenses 

Telephone and fax 

Training 

Utilities (Water and electricity) 
Uniforms 
Assets expensed 
Work in progress to be cleared 
Chemicals '/ 


o 


162,863,982 341 '427,981 


O' 


<5 





36. Fair value adjustrhents 

Other financial assets 

• Other financial assets (Designated as at FV through P&L 

37. Auditors' remiineration 


Fees 




o 




430,828,678 

399,000,441 

593,692,660 

740,428,422 

21,060,203 
, 1 7., 325, 564 

^^38, 381, 452 
^ /36,094,364 
7,476,188 

17,845,448 

17,683,977 

28,834,306 

27,740,100 

7,959,635 

1 120,337,771 

100,063,466 

5,156,036 

4,107,147 

7,171,040 

5,564,863 

2,965,664 

2,857,784 

1,135,518 

841,354 

1,486,191 

4,022,238 

32,500 

49,593 

- 

112,200 

471,405 

1,124,815 

34,327,170 

29,050,115 

5,238,851 

2,706,817 

25,500 

52,412 

220 

44,336 

33,137,273 

40,841,592 

13,345,194 

25,035,381 

132,552 

102,807 

2,294,774 

2,039,439 

5,260,263 

4,898,497 

6,230,417 

30,612,652 

3,377,330 

3,360,053 

662,434 

958,314 

14,196,390 

13,349,156 

2,149,585 

2,108,892 

27,276,067 

30,165,942 

9,036,132 

1,514,415 

961,245 

506,924 

15,110,966 

- 

(9,900) 

204,962 

191,170,817 

206,232,700 

(8,217) 

17,125 

7,171,040 

5,564,863 


61 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 




2016 



18,807,844 

(293f864,712) 

- 

260,345,609 

(1,448,982) 

40,423,875 

8,217 

(17,125) 

aZ8j09 1,853 

73,512,082 

t/ % 1 

27,363,274 

,5Jp,262 

780,973 

(180,397) 

(428,960) 

^ 7(9,885,884) 

(7,555,066) 

«(506,501,864) 

(348,262,390) 

\ 7,285,498 

(72,657,925) 

' 189,997,896 

577,520,119 

(3,146,800) 

(101,953,032) 

(5,020,191) 

(1,322,685) 

907,368 

(352,002) 


Figures in Rand 


38. Cash generated from operations 

Surplus (deficit) 

Adjustments for: 

Depreciation and amortisation 
(Loss) gain on sale of assets and liabilities 
Fair value adjustments 
Debt impairment 

Movements in retirement benefit assets and liabilities 
Movements in provisions 
Changes in working capital: 

Inventories 
Other receivables 
Consumer debtors 

Other receivables from non-exchange transactions 

Payables from exchange transactions 

VAT 

Unspent conditional grants and receipts 
Consumer deposits 


39. Financial instruments disclosure 


Categories of financial instruments 


2016 


Financial assets 


Other receivables 

Receivables from non-exchange transactions 
Receivables from exchange transactions . 

Cash and cash equivalents ^ 

Other financial assets 

Receivables from non-exchange transactions (non-current) 
Receivables from exchange transactions (ndtii-cuiirenit) 


O' 




96 


Financial liabilities 


Payables from exchange transactions 
Consumer deposits 

Unspent conditional grants and receipts 
Cash and cash equivalents (bank overdraft) 


2015 


N 


^ 70,426,821 

153,532,035 

V 

r 

At fair value At cost 

Total 

28,639,230 

28,639,230 

- 154,640,557 

154,640,557 

- 872,007,231 

872,007,231 

11,520,330 

11,520,330 

330,990 

330,990 

511,134 

511,134 

4,060,246 

4,060,246 

330,990 1,071,378,728 

1,071,709,718 

At cost 

Total 

2,437,110,277 

2,437,110,277 

36,177,187 

36,177,187 

1,004,295 

1,004,295 

2,603,485 

2,603,485 

2,476,895,244 

2,476,895,244 




Financial assetsl 


Other receivables 

Receivables from non-exchange transactions 
Receivables from exchange transactions 
Cash and cash equivalents 
Other financial assets 


At fair value 


19,201,386 


At cost 

18,753,346 

161,926,055 

743,597,219 

1,536,132 


Total 

18,753,346 

161,926,055 

743,597,219 

1,536,132 

19,201,386 


62 - 31 August 2016 - 04:52 PM 




Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 

Figures in Rand 


Financial instruments disclosure (continued) 

Receivables from exchange transactions (non-current) 


Financial liabilities 


Payables from exchange transactions 
Consumer deposits 

Unspent conditional grants and receipts 
Cash and cash equivalents (bank overdraft) 


40. Commitments 
Authorised capital expenditure 

Already contracted for but not provided for 

• Property, plant and equipment 

Total capital commitments 

Already contracted for but not provided for 

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. 


138,279 

26,459 

164,738 


Leases are negotiated for an average term of three years and rentals are fixed for the three years. No contingent rent is 
payable. 

Operating leases - as lessor (income) 


Certain of the municipality's equipment is held to generate rental income. Rental of equipment is expected to generate rental 
yields of -% on an onqoinqibasis. Lease agreements are non-cancellable and have terms from 3 to 6 years. There are no 



Operating leases - as lessee (expense) 

Minimum lease payments due 

- within one year 

- in second to fifth year inclusive 


The municipality has operating lease agreements^fowhe following classes of assets: 

- Motor vehicles f 

- Software licenses 


o 


/ 


At cost Total 

2,247,112,381 2,247,112,381 
35,269,819 35,269,819 

6,024,486 6,024,486 

1,569,372 1,569,372 

'^89,976,058 2,289,976,058 


52,774,117 


52,774,117 




63 - 31 August 2016 - 04:52 PM 




64 - 31 August 2016 - 04:52 PM 




Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 




Figures in Rand 


2016 


o 


160,628 


41. Contingencies (continued) 

On 23 April 2013, the municipality was served with summons by the plaintiff. Plaintiff 
alleges that he rendered professional services to the municipality during 2012 on the 
municipality's special request and instance. The matter has been set down for 28-29 
October 2014. 

Mr. J J Human 

Mr. Human was appointed as an audit committee member for the municipality. He 
further indicated that subsequent to his appointment he attended several meetings as 
scheduled. He was paid R 1 1 ,855 for all sittings as well as travel costs however there 
are still amounts outstanding. On 29 April 2013 Mr. Human issued summons against 
the municipality. 

Dumansi Trading 

Served with Summons demanding payment of R 209,247 (two hundred and nine 
thousand, two hundred and forty six rand and seventy one cents). The amount claitiiii^dj 
is alleged to be for Cession Agreement entered into the Municipality and Patsa Cjjil 
Works. 


De Bruin Trust 

On the 30th July 2014, Municipality was served with a letter of demand togefRfe^ifTi 
Summons ,claiming payment in the sum of R305,663 (three hundred anMjye tl^sand 
, six hundred and sixty two rand and fifty nine cents) alleged to be pai^ijiji£nfffQ|j(6ession 
Agreement entered into. 



Contingent assets 


'c; fjomupi 11’'!,^ 



19,422 

- 

209,247 

- 

305,663 


Subsequent to the disciplinary hearing in respect of the fruitless and wasteful expenditure referred to in Note 49, civil 
proceedings have commenced against the employees concerned to recover an amount of R -. According to Council's legal 
advisors, it is probable that the proceedings will result inthe recovery of the full amount but this recovery is virtually certain. 


42. Related parties 
Relationships 

Members of key management 
Members of the council 


•.o 



...^forjt"'^' 

7 


Refer to note 28 
Refer to note 29 


Related party balances 

No related party balances were identlfjedTorgte# current and prior reporting period. 

Related party transactions 


Key management and Councillors receive and pay for services on the same terms and conditions as other rate payers. These 
transactions are recorded at arm's length. 

43. Prior period^rror^^^ 

Property, Plant atiid Etteiipm^nt were depreciated at the tax rates. The useful lives and residual values were not appropriately 
considered. (Give the nature of the error.) 

The correction of the error(s) results in adjustments as follows: 

Statement of financial position 

Property, plant and equipment 1 1 

Cash flow statement 


65-31 August 2016 -04:52 PM 




Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 




Figures in Rand 


2016 


o 


44. Comparative figures 

No comparative figures have been presented as these are the first financial statements of the municipality. 

The reporting period is longer/shorter than a year, therefore comparative amounts are not comparable toJbe current balances. 
Certain comparative figures have been reclassified. 

The effects of the reclassification are as follows: 

45. Risk management 
Financiai risk management 


tqJhe curt 

9d 


This note presents information about the municipality's exposure to each of the financi#risk^elow and the municipality's 
objectives, policies and processes for measuring and managing financial risks. The Council has overall responsibility for the 
establishment and oversight of the municipality's risk management framework. 

Liquidity risk 




The municipality’s risk to liquidity is a result of the funds available to cover futni^^mmitiiiiients. The municipality manages 
liquidity risk through an ongoing review of future commitments and credit f^ilitie^ f 


At 30 June 2016 

Payables from exchange transactions 
Consumer deposits 

Unspent conditional grants and receipts 
Bank overdraft 

At 30 June 2015 

Payables from exchange transactions 
Consumer deposits 

Unspent conditional grants and receipts 
Bank overdraft 

Credit risk 


9 0 


Less than 1 
year 

2,437,110,277 
36,177,187 
1,004,295 
2,603,485 


Between 1 
and 2 years 


Between 2 
and 5 years 


Over 5 years 


o 



'uess than 1 
year 

2,247,112,381 
35,269,819 
6,024,486 
1,569,372 


Between 1 
and 2 years 


Between 2 
and 5 years 


Over 5 years 




Credit risk consists mainly of cash deposits, casfrequivalents, derivative financial instruments and trade debtors. The 
municipality only deposits cash with major bSnfè with high quality credit standing and limits exposure to any one counter-party. 

Receivables comprise of a widespread customer base. Management evaluated credit risk relating to customers on an ongoing 
basis. If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control 
assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. 
Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilisation of 
credit limits is regularly monitored. Sales to retail customers are settled in cash or using major credit cards. Credit guarantee 
insurance is purchased when deemed appropriate. 


Financial assets exposed to credit risk at year end were as follows: 

Financial instrument 

Other financial assets 
Other receivables 

Receivables from non-exchange transactions 
Receivables from exchange transactions 
Cash and cash equivalents 

Receivables from non-exchange transactions (non-current) 
Receivables from exchange transactions (non-current) 

Market risk 


2016 

330,990 

28,639,230 

154,640,557 

872,007,231 

11,520,330 

511,134 

4,060,246 


2015 

19,201,386 

18,753,346 

161,926,055 

743,597,219 

1,536,132 

350,382 


66 - 31 August 2016 - 04:52 PM 




Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 





As the municipality has no significant interest-bearing assets, the municipality’s income and operating c ash flows are 
substantially independent of changes in market interest rates. 


46. Going concern 




IIUVVC 


We draw attention to the fact that at 30 June 2016, the municipality had accumulated deficits of R 4,200,622,838 and that the 
municipality's total liabilities exceed its assets by R 4,200,622,838. 

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. 

The ability of the municipality to continue as a going concern is dependent on a nupiber of factors. The most significant of 
these is that the accounting officer continue to procure funding for the ongoing opfrations for the municipality. 

47. Events after the reporting date 

No significant events occurred after the reporting date. 

48. Unauthorised expenditure 


Opening balance 

Unauthorised expenditure current year 


<3 


3,698,128,927 

443,303,655 


- 4,141,432,582 


Unauthorised expenditure relate to expenditure incurred tfjjat wer^iiot budgeted for per department vote (budget 
overspending). 

49. Fruitless and wasteful expenditure 


Opening balance 
Fruitless and wasteful expenditure current 


sO 

ent yej^ ^ 


337,705,181 

151,822,061 


489,527,242 


Detail of fruitless and wasteful exDe nditu ire qurrent year 

Auditor General 


Fruitless and wasteful expenditurff 


tur^ii^i^dain 


167,470 


interest charged for late payment to suppliers. 


The fruitless and wasteful expenditure are not recoverable, no criminal or disciplinary steps were taken as a result of the 
expenditure and were written off inJJ^p year incurred. 

50. Irregular expenditure 


:> 


Opening balance 
Irregular expenditure current year 


Analysis of expenditure awaiting condonation per age classification 
Details.oi irregular expenditure - current year 


484,659,738 

226,054,096 


710,713,834 




lllA|Wf| II I C 

O 


67 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 




Figures in Rand 


2016 


o 


50. Irregular expenditure (continued) 

Details of irregular expenditure condoned 

51 . Additional disclosure in terms of Municipal Finance Management Act 
Contributions to organised local government 

Current year subscription / fee 

Being the subscription fee to the South African Local Government Association (SALGA). 

Material losses 


Q) 


6,423,460 


Distribution losses - Electricity 
Distribution losses - Water 


There were no material losses through criminal conduct. 

Audit fees 

Opening balance 
Current year audit fees 
Interest charged 
Amount paid - current year 
Amount paid - previous years 
Audit fees paid on behalf of Treasury 


/ 


PAYE, UIF and SDL 


Opening balance 
Current year payroll deductions and council contributiorTs 
Amount paid - current year 1 

r 


O' 




Amount paid - previous years 


ctions^^ 


Pension and Medical Aid Dedu 


Opening balance ^ 

Current year payroll deductiojs and ^ouncil contributions 
Amount paid - current year 
Amount paid - previous years 


N 




VAT 

VAT receivable 

VAT outpu^ayables and VAT input receivables are shown in note 13. 


0 

80,767,714 

125,272,583 

- 

206,040,297 

3,359,918 

6,191,168 

8,174,985 

7,657,003 

167,470 

- 

(8,355,653) 

(10,488,253) 

(1,319,558) 

- 

(500,000) 

- 

1,527,162 

3,359,918 

6,516,447 

6,079,578 

85,579,624 

77,431,139 

(77,749,996) 

(70,914,692) 

(6,516,447) 

(6,079,578) 

7,829,628 

6,516,447 


10,042,532 

- 

132,993,960 

- 

(121,720,063) 

- 

(10,042,532) 

- 

11,273,897 

123,462,600 

120,315,800 




ru^ avab 

d 


68 - 31 August 2016 - 04:52 PM 



Matjhabeng Local Municipality 

Financial Statements for the year ended 30 June 201 6 

Notes to the Financial Statements 




Figures in Rand 


2016 


51 . Additional disclosure in terms of Municipal Finance Management Act (continued) 
Councillors' arrear consumer accounts 

The following Councillors had arrear accounts outstanding for more than 90 days at 30 June 2016: 


o 


30 June 2016 


Banyane ME 
Kockera SC 
Mabote TL 
Madumise MM 
Mlangeni MG 
Molelekoa PA 
Molelekoa PMI 
Ntlele Kl 
Phetise ME 
Qwesha GL 
Riet Ml 
Tlhone ML 
Tsubane ME 
Twala MJ 


30 June 2015 


Banyane M E 
Kabi M 
Kockera S C 
Mabote T L 
Madumise M M 
Mholo P P 
Mlangeni M G 
Ntlele K I 
Phetise M E 
Pina M J 
Qwesha S W 
Speelman N W 
Tsubane M E 




<5 



r^ 

r^ 


Outstanding 
more than 90 
days 
R 

6,254 

174,066 

16,861 

15,357 

3.337 
72 

4,004 

17,241 

7,218 

4,823 

8.919 
19,524 
57,564 
97,021 

432,261 

Outstanding 
more than 90 
days 
R 

4.919 

5,427 

134,362 

12,716 

6.974 

4,098 

6.337 
22,931 
10,518 

1,034 

1.975 
34,044 
55,330 

300,665 


52. Deviation from supply chainimanagement regulations 

Paragraph 12(1)(d)(i) of Government gazette No. 27636 issued on 30 May 2005 states that a supply chain management policy 
must provide for the procurement of goods and services by way of a competitive bidding process. 

Paragraph 36 of the same gazette states that the accounting officer may dispense with the official procurement process in 
certain circumstances, provided that he records the reasons for any deviations and reports them to the next meeting of the 
accounting officer and includes a note to the financial statements. 


53. Fines 


Traffic fines 


10,592,300 11,631,450 


69 - 31 August 2016 - 04:52 PM 







70 - 31 August 2016 - 04:52 PM