Skip to main content

Full text of "WC044 George AFS 2018-19 unaudited"

See other formats


GEORGE LOCAL MUNICIPALITY 
ANNUAL FINANCIAL STATEMENTS 
FOR THE YEAR ENDED 30 JUNE 2019 









George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

General Information 


Mayoral committee 

Executive Mayor 
Deputy Executive Mayor 
Speaker 
Chief Whip 
Councillors 
Ward 
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 
11 
12 

13 

14 

15 

16 

17 

18 

19 

20 


21 

22 

23 

24 

25 

26 
27 


MG Naik 
C Clarke 
G Pretorius 
M Barnardt 


J Safers 
DL Cronje 

E Brown (Appointed November 2018) 

EP De Villiers (Resigned August 2018) 

M Barnardt 
P Louw 
HH Ingo 
S Rooiland 
AD Willemse 
S Dlikilile 
BH Henge 
Cl Lesele 
B Plata 
LK Langa 
EC Bussack 
NF Mdaka 
CPI Noble 
V Muller 

D Gultig (Appointed April 2019) 

J van der Westhuizen (Resigned January 2019) 

S Snyman 

R Windwaai (Appointed July 2019) 

M DraghoenderfMoves to another political party and becomes 
a PR councillor) 

NR James 
G Pretorius 
GJ Stander 
MP Daniels 
JD Esau 
J Von Brandis 
BM Cornelius 


1 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

GENERAL INFORMATION 


Proportionally elected councillors 


L Arries (Resigned May 2019) 

JP Buys 
CM Clarke 
M Draghoender 
J Du Toit 
RG Figland 
J Fry 

V Gericke 
WT Harris 

N Jantjies-Gushman 
A Kiwit (Resigned November 2018) 

1C Kritzinger 
H Loft 
N Mbete 

K Mkondo (Appointed January 2019) 
MG Naik 
J Ncamazana 
P Nosana 
MM Nyakati 

B Petrus (Resigned April 2018) 

I Stemela 
EH Stroebel 
T Teyisi 

GJ Van Niekerk 
LD Van Wyk 
PJ Van der Hoven 
DJ Wessels 
CT Williams 


2 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 



GENERAL INFORMATION 

Auditor 

The Auditor General of South Africa 

Bankers 

ABSA Bank Limited 

Registered office 

Civic Centre 

York Street 77 

George 

6530 

Postal address 

PO Box 19 

George 

6530 

Accounting Officer 

T Botha 

Chief Finance Officer (CFO) 

K Jordaan 

Website 

www.george.gov.za 

E-mail 

post@george.gov.za 


3 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Index 


Index Page 

Accounting Officer's Approval of the Financial Statements 5 

Statement of Financial Position 6 

Statement of Financial Performance 7 

Statement of Changes in Net Assets 8 

Cash Flow Statement 9 

Statement of Comparison of Budget and Actual Amounts 10-11 

Appropriation Statement 12-15 

Accounting Policies 16-43 

Notes to the Annual Financial Statements 44 - 115 

Abbreviations 


CIGFARO 

COID 

CRR 

DBSA 

GIPTN 

GRAP 

HDF 

IPSAS 

ME's 

MEC 

MFMA 

MIG 

MLTF 


Chartered Institute of Government Finance Audit and Risk Officers 

Compensation for Occupational Injuries and Diseases 

Capital Replacement Reserve 

Development Bank of South Africa 

George Integrated Public Transport Network 

Generally Recognised Accounting Practice 

Flousing Development Fund 

International Public Sector Accounting Standards 

Municipal Entities 

Member of the Executive Council 

Municipal Finance Management Act 

Municipal Infrastructure Grant (Previously CMIP) 

Municipal Land Transport Fund 


4 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Officer's Approval of the Financial Statements 


The Accounting Officer is responsible for the preparation and fair presentation of the annual financial statements of 
the municipality for the year ending 30 June 2019, comprising of the Statement of Financial Position as at 30 June 
2019, the Statement of Financial Performance for the year ended 30 June 2019, the Statement of Changes in Net 
Assets and the Cash Flow Statement, for the year then ended, and the notes to the financial statements, which 
include a summary of significant accounting policies and other explanatory notes. 

The Accounting Officer’s responsibility includes: designing, implementing and maintaining internal control relevant to 
the preparation and fair presentation of these financial statements that are free from material misstatement, 
whether due to fraud or error: selecting and applying appropriate accounting policies; and making accounting 
estimates that are reasonable in the circumstances. 

The Accounting Officer’s responsibility also includes maintaining adequate accounting records and an effective 
system of risk management as well as preparation of the supplementary schedules included in these financial 
statements. 

The Accounting Officer has made an assessment of the municipality's ability to continue as a going concern and 
has no reason to believe that the municipality will not be a going concern in the year ahead. 

The annual financial statements have been prepared in accordance with Standards of Generally Recognised 
Accounting Practice (GRAP) including any interpretations, guidelines and directives issued by the Accounting 
Standards Board. 

I am responsible for the preparation of these Financial Statements in terms of Section 126(1) of the Municipal Finance 
Management Act which I have signed on behalf of the municipality. 

I certify that the remuneration of Councillors and in-kind benefits are within the upper limits of the framework 
envisaged in Section 219 of the Constitution, read with the Remuneration of Public Office Bearers Act and the 
Minister of Provincial and Local Government's determination in accordance with this Act. Refer to note 30 for the 
disclosure of Councillor remuneration. 



30 August 2019 


George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Statement of Financial Position as at 30 June 2019 


Figures in Rand 

Note(s) 

2019 

2018 

Assets 




Current Assets 

Inventories 

2 

126,566,459 

142,330,943 

Receivables from exchange transactions 

3 

111,798,090 

88,880,663 

Receivables from non-exchange transactions 

4 

48,247,354 

38,268,554 

Prepayments 

5 

22,105,394 

13,071,612 

VAT receivable 

6 

4,256,357 

3,310,255 

Loans and receivables 

7 

228,676 

161,391 

Cash and cash equivalents 

8 

562,603,736 

875,806,066 

617,784,461 

903,807,879 

Non-Current Assets 

Property, plant and equipment 

9 

2,970,101,870 

2,871,374,678 

Intangible assets 

10 

2,136,778 

1,355,437 

Heritage assets 

11 

4,236,000 

4,236,000 

Investment property 

12 

151,982,744 

152,151,814 

Prepayments 

5 

1,870,856 

- 

Loans and receivables 

7 

507,608 

3,130,835,856 

681,180 

3,029,799,109 

Total Assets 


4,006,641,922 

3,933,606,988 

Current Liabilities 

Loans and borrowings 

13 

33,223,320 

39,621,253 

Finance lease obligation 

14 

2,412,747 

4,717,554 

Payables from exchange transactions 

15 

222,473,760 

233,235,909 

Consumer deposits 

16 

27,596,642 

27,168,038 

Employee benefit obligation 

17 

58,911,246 

55,172,826 

Provisions 

18 

13,611,170 

2,388,295 

Unspent conditional grants and receipts 

19 

33,285,833 

391,514,718 

75,143,780 

437,447,655 

Non-Current Liabilities 

Loans and borrowings 

13 

256,997,622 

290,220,942 

Finance lease obligation 

14 

1,025,266 

3,435,551 

Employee benefit obligation 

17 

161,761,655 

145,423,283 

Provisions 

18 

108,605,758 

90,453,253 

Payables from exchange transactions 

15 

4,620,168 

533,010,469 

2,796,362 

532,329,391 

Total Liabilities 


924,525,187 

969,777,046 

Net Assets 


3,082,116,735 

2,963,829,942 

Net Assets 

Housing development fund 

20 

61,588,902 

62,941,145 

Accumulated surplus 


3,020,527,833 

2,900,888,797 

Total Net Assets 


3,082,116,735 

2,963,829,942 


6 































George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Statement of Financial Performance 


Figures in Rand 

Note(s) 

2019 

2018 

Revenue 




Revenue from exchange transactions 

Service charges - Electricity 

21 

623,449,586 

603,331,974 

Service charges - Water 

21 

129,255,985 

117,656,763 

Service charges - Sewerage and sanitation charges 

21 

98,989,249 

87,951,733 

Service charges - Refuse removal 

21 

81,726,654 

69,777,667 

Rental of facilities and equipment 


3,130,158 

3,271,235 

Income from agency services 

22 

11,140,288 

11,257,883 

Licences and permits 


2,322,083 

2,741,849 

Sale of erven 


16,237,315 

9,041,869 

GIPTN Fare Revenue 

23 

44,197,337 

39,419,283 

Other income 

24 

32,529,036 

41,410,859 

Interest received - Outstanding Debtors 

25 

4,079,780 

4,676,862 

Interest received - External Investments 

25 

46,245,723 

50,165,612 

Total revenue from exchange transactions 

Revenue from non-exchange transactions 


1,093,303,194 

1,040,703,589 

Taxation revenue 

Property rates 

26 

270,172,862 

235,053,760 

Transfer revenue 

Government grants & subsidies - Operating 

27 

452,232,725 

402,554,545 

Government grants & subsidies - Capital 

27 

122,153,099 

202,852,847 

Fines, penalties and forfeits 

28 

94,581,388 

81,503,236 

Total revenue from non-exchange transactions 


939,140,074 

921,964,388 

Total revenue 


2,032,443,268 

1,962,667,977 

Expenditure 

Employee related costs 

29 

518,622,973 

468,427,937 

Remuneration of Councillors 

30 

22,017,242 

21,519,465 

Depreciation and amortisation 

31 

142,899,550 

161,537,374 

Impairment loss 

32 

97,354,417 

111,775,999 

Finance costs 

33 

42,264,372 

44,140,410 

Bulk purchases 

34 

428,852,191 

397,810,247 

Contracted services 

35 

430,073,297 

404,753,232 

Grants and subsidies paid 

36 

65,525,472 

56,384,007 

Cost of housing sold 


16,195,879 

7,566,330 

Loss on disposal of assets 

37 

709,406 

2,762,626 

Inventories losses/write-downs 

38 

7,835,664 

- 

Other materials / Inventory 

39 

33,542,766 

31,268,648 

General Expenses 

40 

119,270,250 

76,355,120 

Total expenditure 


1,925,163,479 

1,784,301,395 

Surplus for the year 


107,279,789 

178,366,582 


7 





















George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Statement of Changes in Net Assets 


Figures in Rand 

Housing 

Development 

Fund 

Accumulated 

surplus 

Total net 
assets 

Opening balance as previously reported 

Adjustments: 

63,214,982 

2,721,022,129 

2,784,237,111 

Prior year adjustments - Refer to Note 46 

- 

1,226,249 

1,226,249 

Balance at 01 July 2016 as restated 

Changes in net assets: 

63,214,982 

2,722,248,378 

2,785,463,360 

Surplus for the year 

- 

178,366,582 

178,366,582 

Transfer to/(from) the Housing Development Fund 

(273,837) 

273,837 

- 

Total changes 

(273,837) 

178,640,419 

178,366,582 

Balance at 01 July 2018 

Changes in net assets 

62,941,145 

2,900,888,797 

2,963,829,942 

Surplus for the year 

- 

107,279,789 

107,279,789 

Transfer to/(from) the Housing Development Fund 

(1,352,243) 

1,352,243 

- 

Transfer of grant funding to cash back GIPTN Compensation 
Provision - Refer to note 19 

“ 

11,007,004 

11,007,004 

Total changes 

(1,352,243) 

119,639,036 

118,286,793 

Balance at 30 June 2019 

Note(s) 

61,588,902 

20 

3,020,527,833 

3,082,116,735 


8 























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Cash Flow Statement 


Figures in Rand 

Note(s) 

2019 

2018 

Cash flows from operating activities 




Receipts 

Taxation 


278,519,137 

244,205,691 

Sale of goods and services 


941,562,253 

889,113,034 

Grants 


538,879,884 

600,769,491 

Interest income 


46,245,723 

50,165,612 

Other receipts 


50,419,970 

57,687,725 


1,855,626,967 1,841,941,553 


Payments 




Employee costs 


(520,563,423) 

(477,762,791) 

Suppliers 


(1,060,726,388) 

(918,463,742) 

Finance costs 


(41,631,380) 

(43,153,884) 



(1,622,921,191) 

(1,439,380,417) 

Net cash flows from operating activities 

41 

232,705,776 

402,561,136 

Cash flows from investing activities 




Purchase of property, plant and equipment 

9 

(242,064,594) 

(267,337,144) 

Proceeds on disposal of property, plant and equipment 

9 

220,055 

2,284,522 

Purchase of intangible assets 

10 

(1,171,355) 

(638,570) 

Proceeds from loans and receivables 


98,730 

54,718 

Net cash flows from investing activities 


(242,917,164) 

(265,636,474) 

Cash flows from financing activities 




Repayment of loans and borrowings 

13 

(39,621,253) 

(18,985,435) 

Repayment of finance lease liabilities 


(5,348,084) 

(5,595,533) 

Net cash flows from financing activities 


(44,969,337) 

(24,580,968) 

Net increase/(decrease) in cash and cash equivalents 


(55,180,725) 

112,343,694 

Cash and cash equivalents at the beginning of the year 


617,784,461 

505,440,767 

Cash and cash equivalents at the end of the year 

8 

562,603,736 

617,784,461 


9 



























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Statement of Comparison of Budget and Actual Amounts 


Budget on Accrual Basis 


Approved 

Adjustments Final Budget Actual 

Difference Reference 


budget 

amounts on 

between final 



comparable 

budget and 

Figures in Rand 


basis 

actual 


Financial Performance 







Revenue 







Revenue by source 

Property rates 

254,955,490 

5,149,540 

260,105,030 

270,172,862 

10,067,832 

Difference 
less than 10% 

Service charges 

949,026,230 

(8,827,222) 

940,199,008 

933,421,474 

(6,777,534) 

Difference 
less than 10% 

Investment revenue 

44,415,665 

5,456,501 

49,872,166 

46,245,723 

(3,626,443) 

Difference 
less than 10% 

Transfers recognised - 

473,230,342 

11,769,813 

485,000,155 

452,162,990 

(32,837,165) 

Difference 

operational 






less than 10% 

Other own revenue 

196,947,116 

(8,935,128) 

188,011,988 

208,217,390 

20,205,402 

56.1 

Total Revenue (excluding 
capital transfers and 
contributions) 

1,918,574,843 

4,613,504 

1,923,188,347 

1,910,220,439 

(12,967,908) 


Expenditure by type 

Employee costs 

538,850,547 

21,158,587 

560,009,134 

518,622,973 

(41,386,161) 

Difference 
less than 10% 

Remuneration of Councillors 

18,649,070 

2,900,000 

21,549,070 

22,017,242 

468,172 

Difference 
less than 10% 

Debt impairment 

67,986,870 

- 

67,986,870 

97,354,417 

29,367,547 

56.2 

Depreciation and asset 
impairment 

162,428,729 

- 

162,428,729 

142,899,550 

(19,529,179) 

56.3 

Finance charges 

32,340,016 

- 

32,340,016 

42,264,372 

9,924,356 

56.4 

Materials and bulk purchases 

478,468,890 

(7,307,247) 

471,161,643 

486,426,501 

15,264,858 

Difference 
less than 10% 

Transfers and grants 

212,000 

67,517,369 

67,729,369 

65,525,472 

(2,203,897) 

Difference 
less than 10% 

Other expenditure 

657,259,246 

(77,286,884) 

579,972,362 

550,052,953 

(29,919,409) 

Difference 
less than 10% 

Total expenditure 

1,956,195,368 

6,981,825 

1,963,177,193 

1,925,163,480 

(38,013,713) 


Surplus / (Deficit) 

(37,620,525) 

(2,368,321) 

(39,988,846) 

(14,943,041) 

25,045,805 


Transfers recognised - capital 

175,957,898 

(39,778,015) 

136,179,883 

122,222,830 

(13,957,053) 

56.5 

Surplus for the year 

138,337,373 

(42,146,336) 

96,191,037 

107,279,789 

11,088,752 



10 












George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Statement of Comparison of Budget and Actual Amounts 


Budget on Accrual Basis 


Approved 

Adjustments Final Budget Actual 

Difference Reference 


budget 

amounts on 

between final 



comparable 

budget and 

Figures in Rand 


basis 

actual 


Capital expenditure 
Capital expenditure by vote 


Executive and Council 

978,500 

- 

978,500 

563,767 

(414,733) 

56.6 

Finance and administration 

10,448,500 

(132,323) 

10,316,177 

8,928,430 

(1,387,747) 

56.7 

Internal audit 

100,000 

- 

100,000 

67,297 

(32,703) 

56.8 

Community and social 

6,027,555 

223,704 

6,251,259 

3,402,841 

(2,848,418) 

56.9 

services 

Sport and recreation 

13,009,681 

3,023,152 

16,032,833 

4,777,038 

(11,255,795) 

56.10 

Public safety 

11,172,500 

934,494 

12,106,994 

9,022,168 

(3,084,826) 

56.11 

Flousing 

1,376,500 

(88,712) 

1,287,788 

532,310 

(755,478) 

56.12 

Health 

350,000 

- 

350,000 

255,361 

(94,639) 

56.13 

Planning and development 

1,618,000 

(955,000) 

663,000 

534,718 

(128,282) 

56.14 

Road transport 

121,619,301 

(10,466,865) 

111,152,436 

90,478,971 

(20,673,465) 

56.15 

Energy sources 

49,412,110 

3,451,208 

52,863,318 

46,329,659 

(6,533,659) 

56.16 

Water management 

63,862,491 

(29,232,123) 

34,630,368 

18,067,322 

(16,563,046) 

56.17 

Waste water management 

138,709,027 

(72,369,468) 

66,339,559 

48,725,754 

(17,613,805) 

56.18 

Waste management 

10,164,000 

10,505,470 

20,669,470 

11,401,953 

(9,267,517) 

56.19 

Other 

262,500 

- 

262,500 

148,359 

(114,141) 

56.20 


429,110,665 

(95,106,463) 

334,004,202 

243,235,948 

(90,768,254) 



Sources of Capital Funds 

Other transfers and grants 
Borrowings 

Internally generated funds 

186,705,211 
81,544,397 
160,861,057 

(50,639,000) 

(56,536,394) 

12,068,931 

136,066,211 

25,008,003 

172,929,988 

113,832,965 
18,776,017 

110,626,967 

(22,233,246) 

(6,231,986) 

(62,303,021) 



429,110,665 

(95,106,463) 

334,004,202 

243,235,949 

(90,768,253) 


Capitalisation consist of the 
following: 

Property, plant and 
equipment additions 
Intangible assets 




242,064,594 

1,171,355 


9 

10 












o 

CM 

0 

c 

D 

>* O 

CO 

o 0 

Q-Y 

U 2 
•— o 
C 0 

D >■ 

«r 0 


O 

O 

o 


<D £ 

O o 

<1) u 


o 

D 

C 

C 

< 


C 

0 

E 

0 ) 

o 

c 

O 


a 

o 

q. 

a 

< 


0 

o i o g g. 

3 ofe?-6,-o 

u 3 </> -c 3 

< o o o a 

<u 

a I o % 

3 06? 

< O 3 :§ -Q 


0 

o 

c 

o 

o 

> 

"S ^ 

.2 D 


i: C 
=> 0 
o a 
c x 
:d 0 


0 

ol 

= o 

O 3 

< o 


0 

Ut 

73 

3 

XI 

a 

C 


c 

0 <j 

E 

0 


> !=. 


M- 6 

O *: 
0» =• 
C on 

H -q 


u 

3 "D 

O <u 


IS 

a o 
a a 


a> 


t: x 
■C § CO < 

OO W < 


t/> 

C 

<D 

^ai 

— ^ O) 

O .2, T3 
C "O D 

il O U 

T3 

C 

C O 

0) CO 

0) £ ^ M- < 

°> 3 O ° § 

d *-o £ 

CO O C3- t/i < 


C ® 
;§)-u 

o 5 


"O 

c 

o 


D 

O) 


^ ^ 


NO CX) M" M) 
CD CN CD CN 


nO 

o 


^ ^ ^ ^ 

xr o co co ■— 

O CN CN CN I— 


CM xT CO LO 
CO CO M" M) 

co lo xr ^ 
N N o' N 
nO N CN CO 
O N nO CO 
CD MD co CM 

r— ' ' ' ' CO 


O CO MO lo 
CO O MD LO 
CD CD — — 

LO o' cm' o' 

O O X O 
^ r-■ CO CD 

o' o' o' LO 
NO M- M- CO 
CM O xT 




o 

CO 



CO 

o 



o 

o 



LO 

CN 



o 

CN 



o' 

o' 



NO 

xr 



CM 

CN 



O 

oT 



xr 

CM 



LO 

CM 



CN 

X 



xr 

CM 




co 



LO 

cd 



o 

o 



On 

CO 



xr 

CM 



LO 

NO 



LO 

CM 



On 

o 



xr 

CN 



LO 

xr 



CM 

CN 


0 




U 




C 




a 




E 


oo 


o 

oo 

0 

0 

U) 


0 


b 


Q- 

o 

o 


O 

X 

o 


’u 

t: 

0 


0 

u 

On 

O 

i— 

a 

c 

a 

o 

0 

CN 

LL. 

Q_ 

oo 


CM O 

x o 
CO o 

o' LO 
NT CO 
xr 


xr x 


LO CM 
nO xT 


-C c 


~G 

a) 

<£) 

‘c 

O) 

o 

u 

0 


CM 

O 

NT 

lo' 

O 

CM 

o' 

CM 


o 

o 


O 

On 


CO 

co 

o 


o 

co' 

co 


IX 

co 

oo' 

00 

00 

CN 

On 


co 

00 

O 


co 

co 


co 

CM 

lo' 

CO 

On 

co' 


IX 

xT 

On 

NO 

CN 


0 

D 

c 

0 

> 

0 


0) _c 

o 6 


S ?So 

II 5 5 

_ >■*— *r 

— t/> ^ 

o y c c 

°l2 ° 



O 

O 


6$ 


6$ 



6? 6? 


oo 

CO 

co 

,— 

CM 

co 

xr 

00 

,— 

xr 

CO 

CO 

o 

o 

CN 

co 

On 






o' 








CO 





6$ 



6? 6? 


CM 

co 

CO 

,— 

CO 

X 

LO 

00 

o 

xr 

co 

CO 

o 

On 

CN 

ON 









CM 

X 

CN~ 

NO 

co 

FT 

ST 

CO 

X 

xr 

X 

LO 

LO 

CN 

o 

r— 

■— 

LO 


CO 

CO 

CO 

xr 

X 

co' 

lx 

CN 

xf 

xf 

cd 

CN 

cd 

X) 

NO 

CM 

CM 

NO 

o 

1— 


xr 

CO 

LO 

On 

CM 

CM 

CN 

o 


CN 

CN 

CN 

id 

cm' 

On' 

oo' 


CM 

1— 


1— 

■ 

CM_ 









w 

CM 

X 

, 

NO 

co 

, 

, 

CO 

X 

xr 


LO 

LO 



co 


LO 


CO 

co 



On 

co' 

x' 


xf 

xf 




X) 

NO 


CM 

NO 



CN 

xr 

CO 


On 

CM 



o 


On' 


CN 

LO 



LO 


CM 



' 



LO 

CM 

X 

o 

CM 


CM 

CO 

o 

xr 

1— 

LO 

X 

o 

X 

LO 

00 

CM 

xr 

LO 

CO 

LO 

xr 

CN 


lx 

xf 

CN 

xf 

NO 

LO 

cm' 

co' 

1— 

O 

On 

NO 

CM 

CM 

lo 

NO 

CD 

co 

co 

CM 

xr 

LO 

o 

«— 

cm' 

x' 

cm' 

cm' 

NO 

LO 

o' 

id 

CM 

CN 

xr 

xr 

CO 

NO 

LO 

CN 



■— 


xr 


LO 

On 









o 

o 

CN 

NO 

CO 

CN 

CM 

CO 

X 

X 

CM 

1— 

xr 

NO 

NO 

On 

o 

CO 

X 

o 

NO 

CO 

co 

«— 

CN 

NO 

co' 

o' 


CN 

cm' 

x' 

xr 

oo 

CM 

xr 

NO 

CM 

X 

X 

LO 

CN 

xr 

CO 

•—■ 

X 

CN 

r— 

r— ' 

IX 

cm' 

cm' 

r 

IX 

CN 

cd 

CM 

NO 

NO 

CO 

X 

NO 

X 

NO 



■— 


xr 


LO 

On 



CM O 
lo x 
xT CD 
CO On 
LO xT 
■— xr 
rx' o' 
lo CM 
LO 


o 

o 

o 

o' 

o 


CO CO 
co' —' 


CO NO 

co' co' 
co ■— 

LO 



O On 
X CM 

CO IX 

no' co' 

CO CM 
cn xr 
x cm' 

NO NO 


£ £= 

8 -j? 

0 2 g 
^ 0 = 
o D ° 


-i— ~o 

c c 
0 o 
E c 
. 1 = o 

O H= 

a o 
E O 
— 0 


CO CN 
CN CO 
CO xf 
xr' co' 
•— CM 

co oo 


co co 


NO 

o 

lo' 

NO 

co 

co' 


NO o 

■— CN 

O CO 

o' co' 
xr no 

CO Xj- 

cm' co' 

CO X 
xT 


0 n 
2>-o 
c 
o 


x o 

xr CO 

xr o' 
— o 

On CO 

cd co 
no oo 

LO 


LO 

x xr 
xr xr 

cm' co' 

O LO 
x xr 
cd co' 

NO NO 


O NO 

o xr 

O CM 

cm' On 

•— LO 
CM CM 


X 

LO 

NO 


c . _ 

a £ d _q a 
E 0 o 0 0 

LU (J Q Q 


0 <-> 

E ^ 

t CJ 

v £ 

EirS 


y a 0 

® u ? 
o 


T3 
c 
0 
a 

t/> X 

0 


c 
o 

"O 
c 
o 


0 
s 

— u 


o 


■Q 

c 

Q) 

a 

X 

0 

o 

o 


0 

o 


_D 

a 

D 

00 


CM 

















o 

CM 

0 

c 

D 

>* O 

CO 

o 0 

Q-c 

U 2 
•— o 
C 0 

D >■ 

«r 0 


O 

O 

o 


<D £ 

O o 

<1) u 


o 

D 

C 

C 

< 


c 

a> 

E 

0 


oo 

c 

O 


a 

o 

q. 

a 

< 


0 

o i ° g g. 

u 3 U) -c 3 

< o o o a 
<u 

a I o g, 

3 06? 

< O 3 £ -Q 


0 

o 

c 

o 

o 

> 

"S ^ 

5 


±: C 
=> 0 
o a 
c x 

ID 0 


0) 

o I 

^ u 

u "5 

< o 


a) 

O) 

"O 

D 

12 

O 

C 


c w 

d) o 

E 

<D 


> w 


u 
D T3 
O d) 


IS 

a o 
o a 


o 

0)s 


0 


I-SO | 

!c § co < 

(/) M- W C 


c 

d) 

— 12 D) 

O .E, "O 
CTJ D 
iZ □ _Q 


(A 


~o 

c 


_ o 

£ 00 


0 
O) S 


r- w 

E CN 

±: co 


■o 

D 

CO 


C ® 

f-g 1 

o 5 


T3 

c 

o 


D 

O) 


O 

s O 


o 

CN 


co 

LO 

o 

IV 

LO 

CN 


CO 

oo 

00 

CN 

tv 

MD 

co 


co 

rv 

rv 

CN 

CO 


co 

CN 

00 

IV 

LO 

CN 

LO 

rv 


~G 

CD 

(A 

'c 

CD 

O 

O 

CD 


00 

iv 


CN 


CN 

LO 

IV 

00 

00 

o 




lv 

CO 

o 


NO 

On 


NO 

CO 

co 

NO - 

CN 

^r 


co 

IV 

co 

IV 

co 

CO 

00 

co 


£ o 

<A ±1 

c a 
o O 

h= CJ 


d) 

a 


_D 

0- o 

D 0 

CO >N 





6$ 


V 

,— 

CO 

CN 

IV 

LO 

NO 

CM 

NO 

LO 

6$ 



6$ 


CO 


LO 


CO 

V 

oo 

IV 

NO 

IV 

co 

^o 


—- 

CO 

LO 


co 

CM 

LO 

CM 

CM 

On 

O 

CM 

CO' 

co' 

P 

CO' 

00 

NO 

CO 

CO 

O 

NO 

IV 

CM 

CM 

CO 

hN 

o' 

cm' 

NO 

cm' 

o' 

CN 

CM 


NO 

On 



<D 

y 

D 

o 


~o 

c 

D 

M— 

■O 

c 

o 

0 

_D 

*■5 

c 

CD 

a 

x 

(D 


a 

o 

U 


CM 

O 

CM 

O 

o 

CO 

CO 


00 

NO 

NO 

o 

LO 

CN 


LO 

NO 

NO 


CN 

CM 

^r 


CM 

NO 

NO 

o 

NO 

CO 


o 

o 

o 

CN 

CO 

NO 

o 

LO 


LO 

o 

iv 

no' 

oo 


T3 

C 1 

3 "O 

n 0 
o 


O 0 

■ 5 . .2 

o '~o 
o C 
0 
a 

X 

0 


c 

CD 

o 


u u 

M- 0 


CO CO 
o CO 
O On 
CO On' 
O CM 
O On 

lo' cm' 
cm rv 


On co 
CO CN 

no' co' 

CO NO 

LO o 
no' cm' 
LO ■— 


iv iv 
On LO 

co o 

■M- NO 

LO oo 

—' o' 
oo no 


“O 

0 

o 

0 

c 

0 

CD 


CD 


0 O 


o 

o 


CO 
0 
u 

Scat 
o O O o 

co i— O co 


o 

C oo 
C P 


a 

o 

u 


0 

y 

D 

o 

*/> 


_ CO 

S? 

° 

















o 

CM 

(D 

c 

D 

>* O 

CO 

o 0 

Q-Y 

U 2 
•— o 
C 0 

D >■ 

«r 0 


O 

O 

o 


<D £ 

O o 
<1) u 


o 

D 

C 

C 

< 


c 

a> 

E 

0 


oo 

c 

O 


a 

o 

q. 

a 

< 


0 

o i o g g. 

3 ofe?-6,-o 

y 3 </> •= 3 

< o o o a 
<u 

a I o % 

3 06? 

< O 3 :§ -Q 


<1> 

o 

c 

o 

o 

> 

"S ^ 

.2 D 


i: C 
=> d> 
o a 
c x 
:d <D 


<1> 

ol 

2 u 

a "5 

< o 


d) 

O) 

"O 

D 

O 

c 


c w 
d) o 

E 

d> 


> w 


u 
D T3 
O d) 


IS 

a o 
a a 


c 

d> 

— « o» 
a .E, 73 

C 73 3 

iZ O -Q 


C ® 

f-g 1 

O 5 


■o 

c 

o 

CkC 


D 

O) 






















George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Appropriation Statement 

Figures in Rand 


2018 

Financial Performance 

Property rates 

Service charges 

Investment revenue 

Transfers recognised - operational 

Other own revenue 

Total revenue (excluding capital transfers and 
contributions) 

Employee costs 
Remuneration of councillors 
Debt impairment 

Depreciation and asset impairment 

Finance charges 

Bulk purchases 

Other Materials 

Transfers and grants 

Other expenditure 

Total expenditure 

Surplus/(Deficit) 

Transfers recognised - capital 

Surplus (Deficit) after capital transfers and contributions 
Surplus/(Deficit) for the year 

Capital expenditure and funds sources 

Total capital expenditure 

Sources of capital funds 

Transfers recognised - capital 
Borrowing 

Internally generated funds 

Total sources of capital funds 

Cash flows 

Net cash from (used) operating 
Net cash from (used) investing 
Net cash from (used) financing 

Net increase/(decrease) in cash and cash equivalents 

Cash and cash equivalents at the beginning of the year 

Cash and cash equivalents at year end 


Reported Expenditure Balance to be Restated 

unauthorised authorised in recovered audited 

expenditure terms of outcome 

section 32 of 

MFMA 


235,053,760 

878,718,137 

54,842,474 

402,554,545 

188,646,214 


1,759,815,130 

(47,637,439) - (47,637,439) 

(5,027,981) - (5,027,981) 

(6,030,588) - (6,030,588) 

(468,427,937) 
(21,519,465) 
(111,775,999) 
(161,537,374) 
(44,140,410) 
(397,810,247) 
(38,834,978) 
(56,384,007) 
(483,870,978) 

(58,696,008) - (58,696,008);!,784,301,395) 


(24,486,265) 


202,852,847 


178,366,582 


178,366,582 


269,131,364 



196,287,730 

19,525,259 

53,318,375 


269,131,364 




402,561,136 

(265,636,474) 

(24,580,968) 


112,343,694 


505,440,767 


617,784,461 


15 



























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


George Municipality is a local government institution in George, Western Cape. The addresses of its registered 
office and principal place of business are disclosed under General Information. Refer to page 3. 

The accounting policies for the municipality are: 

1. Presentation of Annual Financial Statements 

The annual financial statements have been prepared in accordance with the Municipal Finance Management 
Act (MFMA) and effective Standards of Generally Recognised Accounting Practice (GRAP) including any 
interpretations, guidelines and directives issued by the Accounting Standards Board in accordance with Section 
122(3) of the Municipal Finance Management Act (Act 56 of 2003). 

These annual financial statements have been prepared on an accrual basis of accounting and are in 
accordance with historical cost convention as the basis of measurement, unless specified otherwise. 

In the absence of an issued and effective Standard of GRAP, accounting policies for material transactions, 
events or conditions were developed in accordance with paragraphs 8, 10 and 11 of GRAP 3. 

Assets, liabilities, revenues and expenses were not offset, except where offsetting is either required or permitted 
by a Standard of GRAP. 

A summary of the significant accounting policies, which have been consistently applied in the preparation of 
these annual financial statements, are disclosed below. 

These accounting policies are consistent with the previous period unless explicitly stated otherwise. The 
details of changes in accounting policies are explained in the relevant notes to the financial statements. 

The municipality resolved to formulate an accounting policy based on the following GRAP standards which 
have been issued but are not yet effective: 

Standard Description Effective Date 

(Year starting on) 

GRAP 20 Related Party Disclosure 1 April 2019 

The following GRAP standards have been issued but are not yet effective and have not been early adopted by 
the municipality: 


Standard 

Description 

Effective Date 

(Year starting on 

GRAP 18 

Segment Reporting 

Presentation of the financial statements will be affected by 
this standard. 

1 April 2020 

GRAP 32 

Service Concession Arrangements: Grantor 

No significant impact is expected. 

1 April 2019 

GRAP 34 

Separate Financial Statements 

No significant impact is expected. 

Unknown 

GRAP 35 

Consolidated Financial Statements 

No significant impact is expected. 

Unknown 

GRAP 36 

Investments in Associates and Joint Ventures 

No significant impact is expected. 

Unknown 

GRAP 37 

Joint Arrangements 

No significant impact is expected. 

Unknown 


16 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


Standard 

Description 

Effective Date 

(Year starting on 

GRAP 38 

Disclosure of interest in Other Entities 

No significant impact is expected. 

Unknown 

GRAP 108 

Statutory Receivables 

Disclosure of information in the notes to the financial statements 
will be affected. 

1 April 2019 

GRAP 109 

Accounting by Principals and Agents 

Disclosure of information in the notes to the financial statements 
will be affected. 

1 April 2019 

GRAP 110 

Living and non-living resources 

No significant impact is expected. 

1 April 2020 

IGRAP 17 

Service Concession Arrangements Where a Grantor Controls 
a Significant Residual Interest in an Asset 

No significant impact is expected. 

1 April 2019 

IGRAP 18 

Recognition and derecognition of land 

No significant impact is expected. 

1 April 2019 

IGRAP19 

Liabilities to pay levies 

No significant impact is expected. 

1 April 2019 

IGRAP20 

Accounting for Adjustments to Revenue 

No significant impact is expected. 

Unknown 

Guideline 

Accounting for Arrangements Undertaken in terms of the 

National Housing Program 

No significant impact is expected. 

1 April 2019 


1.1 Presentation currency 

These annual financial statements are presented in South African Rand, which is the functional currency of the 
municipality. 

1.2 Going concern assumption 

These annual financial statements have been prepared on a going concern basis. 

1.3 Materiality 

Material omissions or misstatements of items are material if they could, individually or collectively, influence the 
decision or assessments of users made on the basis of the financial statements. Materiality depends on the 
nature or size of the omission or misstatements judged in the surrounding circumstances. The nature or size of 
the information item, or a combination of both, could be the determining factor. In general, materiality is 
determined as \% of total expenditure. This indicator is from management's perspective and does not 
necessarily correlate with the auditors' materiality. 

1.4 Significant judgements and sources of estimation uncertainty 

In preparing the annual financial statements in conformity with GRAP, management is required to make 
estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, 
income and expenditure. The estimates and associated assumptions are based on historical experience and 
various other factors that are believed to be reasonable under the circumstances, the results of which form the 
basis making the judgements about carrying values of assets and liabilities that are not readily apparent from 
other sources. Actual results may vary from these estimates. 


17 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.4 Significant judgements and sources of estimation uncertainty (continued) 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting 
estimates are recognised in the period in which the estimate is revised if the revision affects only that period or 
in the period of the revision and future periods if the revision affects both current and future periods. 

Significant judgements include: 

Property, plant and equipment 

The useful lives of property, plant and equipment are based on management's estimation. Infrastructure's useful 
lives are based on technical estimates of the practical useful lives for the different infrastructure types, given 
engineering technical knowledge of the infrastructure types and service requirements. For other assets and 
buildings management considers the impact of technology, availability of capital funding, service requirements 
and required return on assets to determine the optimum useful life expectation, where appropriate. The 
estimation of residual values of assets is also based on management’s judgement whether the assets will be sold 
or used to the end of their useful lives, and in what condition they will be at that time. 

Intangible assets 

The useful lives of intangible assets are based on management’s estimation. Management considers the impact 
of technology, availability of capital funding, service requirements and required return on assets to determine 
the optimum useful life expectation, where appropriate. 

Investment property 

The useful lives of investment property are based on management’s estimation. Management considers the 
impact of technology, availability of capital funding, service requirements and required return on assets to 
determine the optimum useful life expectation, where appropriate. The estimation of residual values of assets is 
also based on management's judgement whether the assets will be sold or used to the end of their economic 
lives, and in what condition they will be at that time. 

Provisions and Contingent Liabilities 

Management judgement is required when recognising and measuring provisions and when measuring 
contingent liabilities. Provisions are discounted where the effect of discounting is material. Additional disclosures 
of these estimates of provisions are included in notes 18 and 44. 

Post retirement medical obligations, long service awards and ex gratia gratuities 

The cost of post retirement medical obligations, long service awards and ex-gratia gratuities are determined 
using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected 
rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the long¬ 
term nature of these plans, such estimates are subject to significant uncertainty. 

Other key assumptions for pension obligations are based on current market conditions. Additional information is 
disclosed in Note 17. 

Impairment of receivables 

The calculation in respect of the impairment of debtors is based on an assessment of the extent to which 
debtors have defaulted on payments already due, and an assessment of their ability to make payments based 
on their creditworthiness. This was performed per service-identifiable categories across all classes of debtors. 


18 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.5 Property, plant and equipment 
Recognition and measurement 

Property, plant and equipment is recognised as an asset when it is probable that future economic benefits or 
service potential associated with the item will flow to the municipality and the cost of the item can be 
measured reliably. 

Items of property, plant and equipment are stated at historical cost less accumulated depreciation and 
accumulated impairment losses, where applicable. 

Property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and 
equipment comprises its purchase price, including import duties and non-refundable purchase taxes, and other 
directly attributable costs incurred in the acquisition, establishment and installation of such assets so as to bring 
them to a working condition for their intended use. 

The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly 
attributable to bringing the assets to a working condition for their intended use, and the costs of dismantling 
and removing the items and restoring the site on which they are located. Trade discounts and rebates are 
deducted in arriving at the cost. 

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. 

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 assets acquired are 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. 

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

Major spare parts and servicing equipment qualify as property, plant and equipment when the municipality 
expects to use them during more than one period. Similarly, if the major spare parts and servicing equipment 
can be used only in connection with an item of property, plant and equipment, they are accounted for as 
property, plant and equipment. 

The cost of day-to-day servicing of property, plant and equipment is recognised in surplus or deficit as incurred. 

Leased assets 

Leases in terms of which the municipality assumes substantially all the risks and rewards of ownership are 
classified as finance leases. Vehicles and office equipment acquired by way of finance leases are measured 
upon initial recognition at an amount equal to the lower of their fair value and the present value of the 
minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the 
accounting policy applicable to the asset. 

Leased assets are depreciated over the lesser of the useful life or lease term. 

Subsequent costs 

Subsequent expenditure relating to property, plant and equipment is capitalised if it is probable that future 
economic benefits or potential service delivery of the asset are enhanced in excess of the originally assessed 
standard of performance. If expenditure only restores the originally best estimate of the expected useful life of 
the asset, then it is regarded as repairs and maintenance and is expensed. 

Depreciation 

Depreciation is recognised in surplus or deficit on a straight-line basis over the estimated useful life of each item 
of property, plant and equipment. 


19 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.5 Property, plant and equipment (continued) 

Depreciation begins when an asset is available for use, i.e. when it is in the location and condition necessary for 
it to be capable of operating in the manner intended by management, and ceases when the asset is 
derecognised. Components of assets that are significant in relation to the whole asset and that have different 
useful lives are depreciated separately. The estimated useful lives, residual values and depreciation method are 
reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. 

The depreciation rates are initially based on the following originally estimated useful lives and thereafter on the 
estimated remaining useful lives as at year-end. The municipality assesses at each reporting date whether there 
is any indication that the municipality expectations about the residual value and the useful life of an asset have 
changed since the preceding reporting date. If any such indication exists, the municipality revises the expected 
useful life and/or residual value accordingly. The change is accounted for as a change in an accounting 
estimate. 


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


Item 

Average useful life in years 

Infrastructure 

• Electricity 

20-30 

• Roads and paving 

10-30 

• Water 

15-20 

• Gas 

20 

• Sewerage 

3-30 

• Security measures 

3- 15 

Community 

• Buildings 

3-30 

• Recreational facilities 

20 

Other 

• Office equipment 

5- 10 

• Furniture and fittings 

7-10 

• Bins and containers 

5- 10 

• Emergency equipment 

5- 15 

• Motor vehicles 

5-20 

• Watercraft 

15 

• Plant and equipment 

5- 15 

Other - GIPTN buses 

• Buses 

6-12 

Land and buildings 

• Buildings 

30 

• Land 

Indefinite 


Reviewing the useful life of an asset on an annual basis does not require the municipality to amend the previous 
estimate unless expectations differ from the previous estimate. 

The depreciation charge for each period is recognised in surplus or deficit unless it is included in the carrying 
amount of another asset. 

Items of property,plant and equipment are derecognised when the asset is disposed of or when there are no 
further economic benefits or service potential expected from the use of the asset. 

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in surplus 
or deficit when the item is derecognised. The gain or loss arising from the derecognition of an item of property, 
plant and equipment is determined as the difference between the net disposal proceeds, if any, and the 
carrying amount of the item. 


20 





George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.5 Property, plant and equipment (continued) 

Assets which the municipality holds for rentals to others and subsequently routinely sell as part of the ordinary 
course of activities, are transferred to inventories when the rentals end and the assets are available-for-sale. 
Proceeds from sales of these assets are recognised as revenue. All cash flows on these assets are included in 
cash flows from operating activities in the municipality. 

Property, plant and equipment are not used as security unless stated otherwise in the notes. 

1.6 Investment property 
Initial Recognition 

Investment property shall be recognised as an asset when, and only 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. 

Investment property includes property (land or a building, or part of a building, or both land and buildings held 
under a finance lease) held to earn rentals and/or for capital appreciation, rather than held to meet service 
delivery objectives, the production or supply of goods or services, or the sale of an asset in the ordinary course 
of operations. Property with a currently undetermined use is also classified as investment property. 

At initial recognition, the Municipality measures investment property at cost including transaction costs once it 
meets the definition of investment property. However, where an investment property was acquired through a 
non-exchange transaction (i.e. where it acquired the investment property for no or a nominal value), its cost is 
its fair value as at the date of acquisition. The cost of self-constructed investment property is measured at cost. 

Transfers are made to or from investment property only when there is a change in use. For a transfer from 
investment property to owner occupied property, the deemed cost for subsequent accounting is the fair value 
at the date of change in use. If owner occupied property becomes an investment property, the Municipality 
accounts for such property in accordance with the policy stated under property, plant and equipment up to 
the date of change in use. 

Investment property is measured at cost less accumulated depreciation and accumulated impairment losses. 
Investment property acquired at no or nominal consideration is initially recognised at fair value and 
subsequently carried at the initially determined fair value less accumulated depreciation and accumulated 
impairment losses. 

Subsequent Measurement 

Subsequent to initial recognition, items of investment property are measured at cost less accumulated 
depreciation and impairment losses. Land is not depreciated as it is deemed to have an indefinite useful life. 

Depreciation 

Depreciation is calculated on the depreciable amount, using the straight-line method over the estimated useful 
lives of the assets. Depreciation of an asset begins when it is available for use, i.e. when it is in the location and 
condition necessary for it to be capable of operating in the manner intended by management. Components of 
assets that are significant in relation to the whole asset and that have different useful lives are depreciated 
separately. The municipality assesses at each reporting date whether there is any indication that the 
municipality expectations about the residual value and the useful life of an asset have changed since the 
preceding reporting date. If any such indication exists, the municipality revises the expected useful life and/or 
residual value accordingly. The change is accounted for as a change in an accounting estimate. 

Investment Property Years 

30 

Indefinite 


Buildings 

Land 


21 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.6 Investment property (continued) 

Derecognition 

Investment property is derecognised when it is disposed or when there are no further economic benefits or 
service potential expected from the use of the investment property. The gain or loss arising on the disposal or 
retirement of an item of investment property is determined as the difference between the sales proceeds and 
the carrying value and is recognised in the Statement of Financial Performance. 

Investment property is not used as security unless stated otherwise in the notes. 

1.7 Heritage assets 

Fleritage assets are assets that have a cultural, environmental, historical, natural, scientific, technological or 
artistic significance and are held indefinitely for the benefit of present and future generations. 

Class of heritage assets means a grouping of heritage assets of a similar nature or function in a municipality’s 
operations that is shown as a single item for the purpose of disclosure in the annual financial statements. 

Fleritage assets are not used as security unless stated otherwise in the notes. 

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. 

Initial measurement 

Fleritage assets are measured at cost less any accumulated impairment loss. 

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

Subsequent measurement 

After recognition as an asset, a class of heritage assets is carried at its cost less any accumulated impairment 
losses. 

Impairment 

The municipality assess at each reporting date whether there is an indication that the heritage assets may be 
impaired. If any such indication exists, the municipality estimates the recoverable amount or the recoverable 
service amount of the heritage asset. 

Transfers 

Transfers from heritage assets are only made when the particular asset no longer meets the definition of a 
heritage asset. 

Transfers to heritage assets are only made when the asset meets the definition of a heritage asset. 

Derecognition 

The municipality derecognises a 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. 


22 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.8 Intangible assets 

An intangible asset is an identifiable non-monetary asset without physical substance. 

An asset meets the identifiable criteria in the definition of an intangible asset when it: 

• is separable, i.e. is capable of being separated or divided from the municipality and sold, transferred, 
licensed, rented or exchanged, either individually or together with a related contract, asset or liability; 
or 

• arises from contractual rights (including rights arising from binding arrangements) or other legal rights 
(excluding rights granted by statute), regardless of whether those rights are transferable or separable 
from the municipality or from other rights and obligations. 

The Municipality recognises an intangible asset in its Statement of Financial Position only when it is probable that 
the expected future economic benefits or service potential that are attributable to the asset will flow to the 
Municipality and the cost or fair value of the asset can be measured reliably. 

Intangible assets are carried at cost less any accumulated amortisation and any impairment losses. 

Intangible assets are initially recognised at cost. 

Where an intangible asset 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. 

Where an intangible asset is acquired by the Municipality for no or nominal consideration (i.e. a non-exchange 
transaction), the cost is deemed to be equal to the fair value of that asset on the date acquired. 

Intangible assets are not used as security unless stated otherwise in the notes. 

Subsequent measurement 

After the initial measurement of intangible assets, subsequent expenditure is only capitalised if future economic 
benefits or service potential over the total life of the intangible assets, in excess of the most recently assessed 
standard of performance of the existing intangible assets, will flow to the municipality. 

Intangible assets consist of computer software and amortisation is charged on a straight-line basis over their 
useful lives, which is estimated to be between 5 to 10 years. (2018: 5 to 10 years). Where intangible assets are 
deemed to have an indefinite useful life, such intangible assets are not amortised. The municipality assesses at 
each reporting date whether there is any indication that the municipality expectations about the residual value 
and the useful life of an asset have changed since the preceding reporting date. If any such indication exists, 
the municipality revises the expected useful life and/or residual value accordingly. The change is accounted for 
as a change in an accounting estimate. 

Where items of intangible assets have been impaired, the carrying value is adjusted by the impairment loss, 
which is recognised as an expense in the period that the impairment is identified. The impairment loss is the 
difference between the carrying amount and the recoverable amount or recoverable service amount. 

Amortisation methods and useful lives are reviewed annually at the end of the financial year. Any adjustments 
arising from the annual review are applied prospectively. 

Derecognition 

Intangible assets are derecognised when the asset is disposed or when there are no further economic benefits 
or service potential expected from the use of the asset. The gain or loss arising on the disposal or retirement of 
an intangible asset is determined as the difference between the sales proceeds and the carrying value and is 
recognised in the Statement of Financial Performance. 


23 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.9 Financial instruments 

A financial instrument is any contract that gives rise to a financial asset in one municipality and a financial 
liability or a residual interest of another entity. 

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, the municipality 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, 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, 
ttowever, 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 municipality shall use the contractual cash flows over 
the full contractual term of the financial instrument (or group of financial instruments). 

A financial asset is: 

• cash; 

• a residual interest of another entity; or 

• a contractual right to: 

receive cash or another financial asset from another entity; or 

exchange of financial assets or financial liabilities with another entity under conditions that are 
potentially favourable to the municipality. 

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

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

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

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

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 
municipality had not acquired, issued or disposed of the financial instrument. 

Classification 

The municipality has the following types of financial assets as reflected on the face of the Statement of 
Financial Position or in the notes thereto: 


Class 

Trade receivables from exchange transactions 

Trade and other receivables from non-exchange 

transactions 

Loans and receivables 

Cash and cash equivalents 


Category 

Financial asset measured at amortised cost 
Financial asset measured at amortised cost 

Financial asset measured at amortised cost 
Financial asset measured at amortised cost 


24 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.9 Financial instruments (continued) 

The municipality has the following types of financial liabilities as reflected on the face of the Statement of 
Financial Position or in the notes thereto: 


Class Category 

Loans and borrowings Financial liability measured at amortised cost 

Trade and other payables from exchange transactions Financial liability measured at amortised cost 

Consumer deposits Financial liability measured at amortised cost 

Initial recognition 

The municipality recognises a financial asset or a financial liability in its Statement of Financial Position when the 
municipality becomes a party to the contractual provisions of the instrument. 

The municipality recognises financial assets using trade date accounting. 

Initial measurement of financial assets and financial liabilities 

The municipality 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 in the case of a 
financial asset or financial liability not subsequently measured at fair value. 

Subsequent measurement of financial assets and financial liabilities 

The municipality measures all financial assets and financial liabilities after initial recognition using the following 
categories: 

• Financial instruments at amortised cost. 

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

Gains and losses 

For financial assets and financial liabilities measured at amortised 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 municipality assesses at the end of each reporting period whether there is any objective evidence that a 
financial asset or group of financial assets is impaired. 

For amounts due from debtors carried at amortised cost, the Municipality first assesses whether objective 
evidence of impairment exists individually for financial assets that are individually significant, or collectively for 
financial assets that are not individually significant. Objective evidence of impairment includes significant 
financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation 
and default or delinquency in payments (more than 90 days overdue). If the Municipality determines that no 
objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it 
includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses 
them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or 
continues to be, recognised are not included in a collective assessment of impairment. 

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 
through the use of an allowance account. The amount of the loss is recognised in surplus or deficit. 


25 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.9 Financial instruments (continued) 

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 by adjusting an allowance account. The reversal does not result in a carrying amount of the 
financial asset that exceeds 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. 

Derecognition 

Financial assets 

The municipality derecognises a financial asset only when: 

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

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

• the municipality, 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 municipality: 

derecognises the asset; and 

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

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. 

Financial liabilities 

The municipality 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 extinguished the original financial liability and a new financial liability is recognised. 
Similarly, a substantial modification of the terms of an existing financial liability or a part of it is accounted for as 
having extinguished the original financial liability and having recognised a new financial liability. 

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 
municipality 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 as revenue or 
expense in surplus or deficit. 

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

A financial asset and a financial liability are only offset and the net amount presented in the Statement of 
Financial Position when the municipality 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 municipality does 
not offset the transferred asset and the associated liability. 

Financial instruments are not used as security unless stated otherwise in the notes. 


26 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.10 Cash and cash equivalents 

Cash includes cash on hand and cash with banks. Cash equivalents are short-term highly liquid investments 
that are held with registered banking institutions with maturities of three months or less and are subject to an 
insignificant risk of change in value. 

For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held 
on call with banks and investments in financial instruments, net of bank overdrafts. 

Bank overdrafts are recorded based on the facility utilised. Finance charges on bank overdrafts are expensed 
as incurred. 

1.11 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 land and buildings elements, the municipality assesses the classification of each element 
separately. 

The Municipality as Lessor 

Under a finance lease, the Municipality recognises the lease payments to be received in terms of a lease 
agreement as an asset (receivable). The receivable is calculated as the sum of all the minimum lease 
payments to be received, plus any unguaranteed residual accruing to the Municipality, discounted at the 
interest rate implicit in the lease. The receivable is reduced by the capital portion of the lease installments 
received, with the interest portion being recognised as interest revenue on a time proportionate basis. The 
accounting policies relating to derecognition and impairment of financial instruments are applied to lease 
receivables. 

Payments received under operating leases are recognised in surplus or deficit on a straight-line basis over the 
term of the lease. The difference between the straight-lined revenue and actual payments received will give 
rise to an asset. 

The Municipality as Lessee 

Under a finance lease, property, plant and equipment or intangible assets, except intangible assets such as 
licensing agreements, subject to finance lease agreements are initially recognised at the lower of the asset’s 
fair value and the present value of the minimum lease payments as determined at the inception of the lease. 
The corresponding liabilities are initially recognised at the inception of the lease and are measured at the lower 
of the asset's fair value or the sum of the minimum lease payments due in terms of the lease agreement, 
discounted for the effect of interest. In discounting the lease payments, the Municipality uses the interest rate 
that exactly discounts the lease payments and unguaranteed residual value to the fair value of the asset plus 
any direct costs incurred. 

Subsequent to initial recognition, the leased assets are accounted for in accordance with the stated 
accounting policies applicable to property, plant and equipment or intangibles. The lease liability is reduced 
by the lease payments, which are allocated between the lease finance cost and the capital repayment using 
the effective interest rate method. Lease finance costs are expensed when incurred. The accounting policies 
relating to derecognition of financial instruments are applied to lease payables. 

Payments made under operating leases are recognised in surplus or deficit on a straight-line basis over the term 
of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the 
term of the lease. 


27 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.12 Inventories 

Inventories, consisting of consumable stores, raw materials and properties held for sale are valued at the lower 
of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of 
business, less the estimated costs of completion and the estimated costs necessary to make the sale. In general, 
the basis of determining cost is the weighted average cost of commodities. If inventories are to be distributed 
at no charge or for a nominal charge they are valued at the lower of cost and current replacement cost. 

Water inventory is being measured by multiplying the cost per kilo-litre of purified water by the amount of water 
in storage. 

Unsold properties held for sale are valued at the lower of cost and net realisable value. Direct costs are 
accumulated for each separately identifiable development. Costs also include a proportion of overhead costs. 
The net realisable value for this class of inventory is assessed each year by comparing the current book value to 
recent sales of properties in each area. 

Cost of inventory comprises all costs of purchase, cost of conversion and other cost incurred in bringing the 
inventory to its present location and condition. 

Where inventory is acquired by the Municipality for no or nominal consideration (i.e. a non-exchange 
transaction), the cost is deemed to be equal to the fair value of the item on the date acquired. 

Inventories are initially measured at cost except where inventories are acquired through a non-exchange 
transaction and 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. 

Current replacement cost is the cost the municipality incurs to acquire the asset on the reporting date. 

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. 

Erven used for housing developments are properties that were part of the commonage when the municipality 
was established and the municipality received these properties at no or nominal consideration. The value of 
these properties is deemed to be equal to their fair value on the date of acquisition. 

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. 

Inventory is not used as security unless stated otherwise in the notes. 

1.13 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). 


28 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.13 Impairment of cash-generating assets (continued) 

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. 

Recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its 
value in use. 

Identification 

When the carrying amount of a cash-generating asset exceeds its recoverable amount, it is impaired. 

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

Irrespective of whether there is any indication of impairment, the municipality also tests a cash-generating asset 
with an indefinite useful life or a cash-generating asset not yet available for use for impairment annually by 
comparing its carrying amount with its recoverable amount. This impairment test is performed annually. If an 
asset was initially recognised during the current reporting period, that asset was tested for impairment before 
the end of the current reporting period. 

Value in use 

Value in use of a cash-generating asset is the present value of the estimated future cash flows expected to be 
derived from the continuing use of an asset and from its disposal at the end of its useful life. 

When estimating the value in use of an asset, the municipality estimates the future cash inflows and outflows to 
be derived from continuing use of the asset and from its ultimate disposal and the municipality applies the 
appropriate discount rate to those future cash flows. 

Recognition and measurement (individual asset) 

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

An impairment loss is recognised immediately in the Statement of Financial Performance. 

When the amount estimated for an impairment loss is greater than the carrying amount of the cash-generating 
asset to which it relates, the municipality recognises a liability only to the extent that is required in the 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 amount, less its 
residual value (if any), on a systematic basis over its remaining useful life. 


29 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.13 Impairment of cash-generating assets (continued) 

Reversal of impairment loss 

The municipality assesses 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 municipality 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 the Statement of 
Financial Performance. 

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. 

1.14 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). 

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. 


30 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


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

Identification 

When the carrying amount of a non-cash-generating asset exceeds its recoverable service amount, it is 
impaired. 

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

Value in use 

Value in use of non-cash-generating assets is the present value of the non-cash-generating assets remaining 
service potential. 

The present value of the remaining service potential of a non-cash-generating assets is determined using the 
following approach: 

Depreciated replacement cost approach 

The present value of the remaining service potential of a non-cash-generating asset is determined as the 
depreciated replacement cost of the asset. The replacement cost of an asset is the cost to replace the asset's 
gross service potential. This cost is depreciated to reflect the asset in its used condition. An asset may be 
replaced either through reproduction (replication) of the existing asset or through replacement of its gross 
service potential. The depreciated replacement cost is measured as the reproduction or replacement cost of 
the asset, whichever is lower, less accumulated depreciation calculated on the basis of such cost, to reflect the 
already consumed or expired service potential of the asset. 

The replacement cost and reproduction cost of an asset is determined on an "optimised” basis. The rationale is 
that the municipality would not replace or reproduce the asset with a like asset if the asset to be replaced or 
reproduced is an overdesigned or overcapacity asset. Overdesigned assets contain features which are 
unnecessary for the goods or services the asset provides. Overcapacity assets are assets that have a greater 
capacity than is necessary to meet the demand for goods or services the asset provides. The determination of 
the replacement cost or reproduction cost of an asset on an optimised basis thus reflects the service potential 
required of the asset. 

Recognition and measurement 

If the recoverable service amount of a non-cash-generating asset is less than its carrying amount, the 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 the Statement of Financial Performance. 

When the amount estimated for an impairment loss is greater than the carrying amount of the non-cash- 
generating asset to which it relates, the municipality recognises a liability only to the extent that is a requirement 
in the Standards of GRAP. 

After the recognition of an impairment loss, 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. 


31 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


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

Reversal of an impairment loss 

The municipality assesses 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 exist or may have decreased. If any 
such indication exists, the municipality estimates the recoverable service amount of that asset. 

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 service 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. 

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. 

Redesignation 

The redesignation of assets from a cash-generating asset 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. 

1.15 Employee benefits 

Employee benefits are all forms of consideration given by a municipality in exchange for services rendered by 
employees. 

Short-term employee benefits 

Remuneration to employees is recognised in the Statement of Financial Performance as the services are 
rendered, except for non-accumulating benefits which are only recognised when the specific event occurs. 

The costs of all short-term employee benefits such as leave pay and bonuses, are recognised during the period 
in which the employee renders the related service. The municipality recognises the expected cost of 
performance bonuses only when the municipality has a present legal or constructive obligation to make such 
payment and a reliable estimate can be made. 

Long-service award 

Long service awards are provided to employees who achieve certain pre-determined milestones of service 
within the municipality. The municipality’s obligation is valued by independent qualified actuaries at year-end 
and the corresponding liability is raised. Payments set-off against the liability, including notional interest, 
resulting from the valuation by the actuaries, are charged against the Statement of Financial Performance. 

Actuarial gains and losses arising from the experience adjustments and changes in actuarial assumptions are 
charged or credited to the Statement of Financial Performance in the period that it occurs. 

Accrued leave pay 

Liabilities for annual leave are recognised as they accrue to employees. The liability is based on the total 
amount of leave days due to employees at year end and also on the total remuneration package of the 
employee. 


32 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.15 Employee benefits (continued) 

Staff Bonuses 

Liabilities for staff bonuses are recognised as they accrue to employees. The liability at year end is based on 
bonuses accrued at year end for each employee. 

Post-employment benefits 

Post-employment benefits are benefits paid for current employees to provide for their retirement. 

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

The Municipality provides post retirement benefits for its employees. Council pays 70 % as contributions and the 
remaining 30% are paid by the members. 

These obligations are valued periodically by independent qualified actuaries. 

Multi-employer Defined Benefit and Defined Contribution Plans 

The municipality classifies a multi-employer plan as a defined contribution plan or a defined benefit plan under 
the terms of the plan (including any constructive obligation that goes beyond the formal terms). 

Where a plan is a defined contribution plan, the municipality accounts for it in the same way as for any other 
defined contribution plan. 

Where a plan is a defined benefit plan, the municipality accounts for its proportionate share of the defined 
benefit obligation, plan assets and cost associated with the plan in the same way as for any other defined 
benefit plan. 

The municipality contributes to various National- and Provincial-administered plans on behalf of its qualifying 
employees. These funds are multi-employer funds (refer to Note 17 of the Financial Statements for details) 

Post-employment benefits: Defined contribution plans 

Defined contribution plans are post-employment benefit plans under which the municipality pays fixed 
contributions into a separate entity. The municipality has no legal or constructive obligation to pay further 
contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee 
service in the current and prior periods. 

The municipality’s contributions to the defined contribution funds are established in terms of the rules governing 
those plans. Contributions are recognised in the Statement of Financial Performance in the period in which the 
service is rendered by the relevant employees. The municipality has no further payment obligations once the 
contributions have been paid. 

Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. 

Payments made to industry-managed (or state plans) retirement benefit schemes are dealt with as defined 
contribution plans where the municipality’s obligation under the schemes is equivalent to those arising in a 
defined contribution retirement benefit plan. 


33 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.15 Employee benefits (continued) 

Post-employment benefits: Defined benefit plans 

Defined benefit plans are post-employment benefit plans other than defined contribution plans. It defines an 
amount of benefit that an employee will receive on retirement. The municipality’s net obligation in respect of 
defined benefit plans is calculated separately for each plan by estimating the amount of future benefits that 
employees have earned in return for their service in the current and prior periods. The benefit is discounted to 
determine its present value. Any unrecognised past service cost and the fair value of any plan assets are 
deducted. 

Actuarial gains and losses comprise of adjustments (the effects of differences between the previous actuarial 
assumptions and what has actually occurred) and the effects of changes in actuarial assumptions. In 
measuring its defined benefit liability the municipality recognises actuarial gains and losses in surplus or deficit in 
the reporting period in which they occur. 

Assets held by a long-term employee benefit fund are assets (other than non-transferable financial instruments 
issued by the reporting municipality) that are held by an entity (a fund) that is legally separate from the 
reporting municipality and exists solely to pay or fund employee benefits and are available to be used only to 
pay or fund employee benefits, are not available to the reporting municipality’s own creditors (even in 
liquidation), and cannot be returned to the reporting municipality, unless either: 

• the remaining assets of the fund are sufficient to meet all the related employee benefit obligations of the 
plan or the reporting municipality; or 

• the assets are returned to the reporting municipality to reimburse it for employee benefits already paid. 

Current service cost is the increase in the present value of the defined benefit obligation resulting from 
employee service in the current period. 

Interest cost is the increase during a period in the present value of a defined benefit obligation which arises 
because the benefits are one period closer to settlement. 

Past service cost is the change in the present value of the defined benefit obligation for employee service in 
prior periods, resulting in the current period from the introduction of, or changes to, post-employment benefits 
or other long-term employee benefits. Past service cost may be either positive (when benefits are introduced or 
changed so that the present value of the defined benefit obligation increases) or negative (when existing 
benefits are changed so that the present value of the defined benefit obligation decreases). In measuring its 
defined benefit liability the municipality recognises past service cost as an expense in the reporting period in 
which the plan is amended. 

Plan assets comprise assets held by a long-term employee benefit fund and qualifying insurance policies. 

The present value of a defined benefit obligation is the present value, without deducting any plan assets, of 
expected future payments required to settle the obligation resulting from employee service in the current and 
prior periods. 

The return on plan assets is interest, dividends and other revenue derived from the plan assets, together with 
realised and unrealised gains or losses on the plan assets, less any costs of administering the plan (other than 
those included in the actuarial assumptions used to measure the defined benefit obligation) and less any tax 
payable by the plan itself. 

The municipality accounts not only for its legal obligation under the formal terms of a defined benefit plan, but 
also for any constructive obligation that arises from the municipality’s informal practices. Informal practices give 
rise to a constructive obligation where the municipality has no realistic alternative but to pay employee 
benefits. An example of a constructive obligation is where a change in the municipality's informal practices 
would cause unacceptable damage to its relationship with employees. 

The amount recognised as a defined benefit liability is the net total of the following amounts: 

• the present value of the defined benefit obligation at the reporting date; 


34 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.15 Employee benefits (continued) 

• minus the fair value at the reporting date of plan assets (if any) out of which the obligations are to be 
settled directly; 

• plus any liability that may arise as a result of a minimum funding requirement 

The amount determined as a defined benefit liability may be negative (an asset). The municipality measures the 
resulting asset at the lower of: 

• the amount determined above; and 

• the present value of any economic benefits available in the form of refunds from the plan or reductions in 

future contributions to the plan. The present value of these economic benefits is determined using a 

discount rate which reflects the time value of money. 

Any adjustments arising from the limit above are recognised in surplus or deficit. 

The municipality determines the present value of defined benefit obligations and the fair value of any plan 
assets with sufficient regularity such that the amounts recognised in the annual financial statements do not 
differ materially from the amounts that would be determined at the reporting date. 

The municipality recognises the net total of the following amounts in surplus or deficit, except to the extent that 
another Standard requires or permits their inclusion in the cost of an asset: 

• current service cost; 

• interest cost; 

• the expected return on any plan assets and on any reimbursement rights; 

• actuarial gains and losses; 

• past service cost; 

• the effect of any curtailments or settlements; and 

• the effect of applying the limit on a defined benefit asset (negative defined benefit liability). 

The municipality uses the Projected Unit Credit Method to determine the present value of its defined benefit 
obligations and the related current service cost and, where applicable, past service cost. The Projected Unit 
Credit Method (sometimes known as the accrued benefit method pro-rated on service or as the benefit/years 
of service method) sees each period of service as giving rise to an additional unit of benefit entitlement and 
measures each unit separately to build up the final obligation. 

In determining the present value of its defined benefit obligations and the related current service cost and, 
where applicable, past service cost, a municipality shall attribute benefit to periods of service under the plan's 
benefit formula. However, if an employee's service in later years will lead to a materially higher level of benefit 
than in earlier years, a municipality shall attribute benefit on a straight-line basis from: 

• the date when service by the employee first leads to benefits under the plan (whether or not the benefits 
are conditional on further service); until 

• the date when further service by the employee will lead to no material amount of further benefits under 
the plan, other than from further salary increases. 

Actuarial valuations are conducted on an annual basis by independent actuaries separately for each plan. The 
results of the valuation are updated for any material transactions and other material changes in circumstances 
(including changes in market prices and interest rates) up to the reporting date. 

The municipality recognises gains or losses on the curtailment or settlement of a defined benefit plan when the 
curtailment or settlement occurs. The gain or loss on a curtailment or settlement comprises: 

• any resulting change in the present value of the defined benefit obligation; and 

• any resulting change in the fair value of the plan assets. 

Before determining the effect of a curtailment or settlement, the municipality re-measures the obligation (and 
the related plan assets, if any) using current actuarial assumptions (including current market interest rates and 
other current market prices). 


35 





George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.15 Employee benefits (continued) 

When it is virtually certain that another party will reimburse some or all of the expenditure required to settle a 
defined benefit obligation, the right to reimbursement is recognised as a separate asset. The asset is measured 
at fair value. In all other respects, the asset is treated in the same way as plan assets. In surplus or deficit, the 
expense relating to a defined benefit plan is presented as the net of the amount recognised for a 
reimbursement. 

The municipality offsets an asset relating to one plan against a liability relating to another plan when the 
municipality has a legally enforceable right to use a surplus in one plan to settle obligations under the other 
plan and intends either to settle the obligations on a net basis, or to realise the surplus in one plan and settle its 
obligation under the other plan simultaneously. 

Other post retirement obligations 

The municipality provides certain post-retirement medical benefits by funding the medical aid contributions of 
certain retired members of the municipality. According to the rules of the Medical Aid Funds, with which the 
municipality is associated, a member (who is on the current Conditions of Service), on retirement, is entitled to 
remain a continued member of the Medical Aid Fund, in which case the municipality is liable for a certain 
portion of the medical aid membership fee. 

The Municipality provides post-retirement medical benefits by subsidising the medical aid contributions of 
certain retired staff according to the rules of the medical aid funds. Council pays 70% as contribution and the 
remaining 30% is paid by the members. The entitlement to these benefits is usually conditional on the employee 
remaining in service up to retirement age and the completion of a minimum service period. The present value 
of the defined benefit liability is actuarially determined on an annual basis (using a discount rate applicable to 
high quality government bonds). The plan is unfunded. 

These contributions are charged to the Statement of Financial Performance when employees have rendered 
the service entitling them to the contribution. The liability was calculated by means of the projected unit credit 
actuarial valuation method. The liability in respect of current pensioners is regarded as fully accrued, and is 
therefore not split between a past (or accrued) and future in-service element. The liability is recognised at the 
fair value of the obligation. Payments made by the Municipality are set-off against the liability, including 
notional interest, resulting from the valuation by the actuaries and are charged against the Statement of 
Financial Performance as employee benefits upon valuation. 

Actuarial gains and losses arising from the experience adjustments and changes in actuarial assumptions, are 
charged or credited to the Statement of Financial Performance in the period that they occur. These obligations 
are valued periodically by independent qualified actuaries. 

1.16 Provisions, contingent liabilities and contingent assets 

Provisions are recognised when the Municipality has a present legal or constructive obligation as a result of past 
events, it is possible that an outflow of resource embodying economic benefits will be required to settle the 
obligation and a reliable estimate of the provision can be made. Provisions are reviewed at reporting date and 
adjusted to reflect the current best estimate of the expenditure required to settle the present obligation. If it is 
no longer probable that an outflow of resources embodying economic benefits or service potential will be 
required to settle the obligation, the provision shall be reversed. 

Where the effect is material, non-current provisions are discounted to their present value using a discount rate 
that reflects the market’s current assessment of the time value of money, adjusted for risks specific to the liability 
(for example in the case of obligations for the rehabilitation of land). 

Future events that may affect the amount required to settle an obligation are reflected in the amount of a 
provision where there is sufficient objective evidence that they will occur. Gains from the expected disposal of 
assets are not taken into account in measuring a provision. Provisions are not recognised for future operating 
losses. The present obligation under an onerous contract is recognised and measured as a provision. 

Provisions shall be reviewed at each reporting date and adjusted to reflect the current best estimate. 


36 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.16 Provisions, contingent liabilities and contingent assets (continued) 

The municipality does not recognise a contingent liability or contingent asset. A contingent liability is disclosed 
unless the possibility of an outflow of resources embodying economic benefits or service potential is remote. A 
contingent asset is disclosed where an inflow of economic benefits is probable. 

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 municipality. A contingent liability could also be a present obligation that arises from past events, but is 
not recognised because it is not probable that an outflow of resources embodying economic benefits will be 
required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability. 

Management judgement is required when recognising and measuring contingent liabilities. 

1.17 Unspent conditional government grants and receipts 

Conditional government grants are subject to specific conditions. If these specific conditions are not met, the 
monies received are repayable. 

A liability for unspent conditional grants is recognised only to the extent that the conditions attached to the 
grant have not been satisfied and are separately reflected on the Statement of Financial Position. They 
represent unspent government grants, subsidies and contributions from the public. 

This liability always has to be asset-backed. The following provisions are set for the creation and utilisation of this 
creditor: 

• Unspent conditional grants are recognised as a liability when the grant is received. 

• When grant conditions are met an amount equal to the conditions met is transferred to revenue in the 
Statement of Financial Performance. 

• The cash which backs up the creditor is invested as individual investment or part of the operating account 
of the municipality until it is utilised. 

• Interest earned on the investment is treated in accordance with grant conditions. If it is payable to the 
funder it is recorded as part of the creditor. If it is the municipality's interest it is recognised as interest 
earned in the Statement of Financial Performance. 

1.18 Conditional government grants and subsidies receivables 

Conditional government grants and subsidies receivable are assets in terms of GRAP that are separately 
reflected on the Statement of Financial Position. The asset is recognised when the municipality has an 
enforceable right to receive the grant or if it is virtually certain that it will be received based on that grant 
conditions have been met. They represent unpaid government grants, subsidies and contributions from the 
public. 

The following provision is set for the creation and utilisation of the grants as receivables: 

• Unpaid conditional grants are recognised as an asset when the grant is receivable. 

1.19 Grant-in-aid 

The municipality transfers money to individuals, organisations and other sectors of government from time to time 
in accordance with Section 67 of the MFMA. When making these transfers, the municipality does not: 

• receive any goods or services directly in return, as would be expected in a purchase or sale transaction; 

• expect to be repaid in future; or 

• expect a financial return, as would be expected from an investment. 

These transfers are recognised in the Statement of Financial Performance as expenses in the period that the 
events giving rise to the transfer occurred. 


37 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.20 Revenue 

Revenue includes rates levied, grants from other tiers of government and revenue from trading activities and 
other services provided. Revenue is recognised when it is probable that future economic benefits or service 
potential will flow to the municipality and these benefits can be reliably measured, except when specifically 
stated otherwise. 

Revenue from the sale of goods in the ordinary course of the municipality’s activities is measured at the fair 
value of the consideration received or receivable, net of value-added tax, estimated returns, rebates and 
discounts. Revenue from the rendering of services is recognised in surplus or deficit in proportion to the stage of 
completion of the transaction at the reporting date. 

Revenue from Exchange Transactions 

Service Charges 

Service charges relating to electricity and water are based on consumption. Meters are read on a monthly 
basis and are recognised as revenue when invoiced. Provisional estimates of consumption, based on the 
consumption history, are made monthly when meter readings have not been performed. The provisional 
estimates of consumption are recognised as revenue when invoiced, except at year-end when estimates of 
consumption up to year-end are recorded as revenue without being invoiced. Adjustments to provisional 
estimates of consumption are made in the invoicing period in which meters have been read. These 
adjustments are recognised as revenue in the invoicing period. In respect of estimates of consumption 
between the last reading date and the reporting date, an accrual is made based on the average monthly 
consumption of consumers. 

Service charges relating to refuse removal are recognised on a monthly basis in arrears by applying the 
approved tariff to each property that has improvements. Tariffs are determined per category of property 
usage, and are levied monthly based on the number of refuse containers on each property, regardless of 
whether or not all containers are emptied during the month. 

Service charges from sewerage and sanitation are based on the number of sewerage connections on each 
developed property using the tariffs approved by Council and are levied monthly. 

In circumstances where services cannot readily be measured and quantified, a flat rate service charge is levied 
monthly on such properties. 

Pre-paid electricity 

Revenue from the sale of electricity prepaid units is recognised when the risks and rewards of ownership has 
passed to the buyer. At year-end the recognition is based on an estimate of the prepaid electricity consumed 
as at the reporting date. The consumption of pre-paid electricity is measured by using a trend analysis and 
other historical data about electricity usage. 

Interest earned and rentals received 

Interest income is recognised in the Statement of Financial Performance as it accrues, using the effective 
interest rate method. Rental income is recognised on a straight-line basis over the lease term. Interest may be 
transferred from the Accumulated Surplus to the Flousing Development Fund. 

Tariff Charges 

Revenue arising from the application of the approved tariff of charges is recognised when the service is 
rendered by applying the relevant approved tariff. This includes the issuing of licences and permits. 


38 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.20 Revenue (continued) 

Agency commission 

Commission for agency services is recognised on a monthly basis once the income collected on behalf of the 
principles has been quantified. The income recognised is in terms of the agency agreement. 

Housing rental and instalments 

Finance income from the sale of housing by way of instalment sales agreements or finance leases is recognised 
as it accrues in surplus or deficit using the effective interest method. 

Sale of goods 

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership are 
transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of 
the goods can be estimated reliably, there is no continuing managerial involvement with the goods, and the 
amount of revenue can be measured reliably. 

GIPTN Fare Revenue 

Bus tickets are sold as single journey tickets or multi journey tickets. Single journey tickets buy the ticket holder a 
one hour passage on any of the buses from the time the ticket is cancelled by the bus driver. Multi journey 
tickets range from two to forty hourly passages. Tickets are recognised as fare revenue when the passenger 
boards the busses and unused tickets on year end is recognised as a liability. 

Revenue from non-exchange transactions 

Rates and taxes 

Revenue from property rates is recognised when the legal entitlement to this revenue arises. Collection charges 
are recognised when such amounts are legally enforceable. Penalty interest on unpaid rates is recognised 
using the effective interest method. A composite rating system charging different rate tariffs is employed. 
Rebates are granted to certain categories of ratepayers and are deducted from revenue. 

Fines 

Fine revenue constitutes both spot fines and summonses. Fine revenue is recognised on the date which the 
offense occurred. In cases where fines and summonses are issued by another government institution, revenue 
will only be recognised when monies are received, as the municipality does not have any control over fines 
issued by other government institution/departments. 

Donations and Contributions 

Donations are recognised on a cash receipt basis or where the donation is in the form of property, plant and 
equipment, at the fair value of the property, plant and equipment received or receivable. Contributed 
property, plant and equipment are recognised when the risks and rewards of ownership have transferred to the 
municipality. 

Revenue from recovery of unauthorised, irregular, fruitless and wasteful expenditure 

Revenue from the recovery of unauthorised, irregular, fruitless and wasteful expenditure is based on legislated 
procedures, including those set out in the Municipal Finance Management Act (Act No.56 of 2003) and is 
recognised when the recovery thereof from the responsible Councillors or officials is virtually certain. 

Unconditional grant 

An unconditional grant is recognised in the Statement of Financial Performance when the grant is receivable. 


39 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.20 Revenue (continued) 

Conditional grants and receipts 

Income 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. 

Grants that compensate the municipality for expenses incurred are recognised in the Statement of Financial 
Performance on a systematic basis in the same periods in which the expenses are recognised. 

Government grants that are receivable as compensation for expenses or losses already incurred or for the 
purpose of giving immediate financial support to the municipality with no future related costs are recognised in 
the Statement of Financial Performance in the period in which they become receivable. 

Interest earned on investments is treated in accordance with grant conditions. If it is payable to the grantor it is 
recorded as part of the liability and if not it is recognised as interest earned in the Statement of Financial 
Performance. 

1.21 Borrowing costs 

Borrowing costs are interest and other expenses incurred by an entity in connection with the borrowing of 
funds. 

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

1.22 Value Added Tax 

Revenue, expenses and assets are recognised net of the amounts of Value Added Tax. The net amount of 
Value Added Tax recoverable from, or payable to, the taxation authority is included as part of receivables or 
payables in the Statement of Financial Position. 

The municipality accounts for Value Added Tax on the payment basis. The municipality is liable to account for 
Value Added Tax at the standard rate (14% up to 31 March 2018 and 15% from 1 April 2018) in terms of section 
7(1) 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 11, exempted in terms of section 12 or are out of scope for VAT purposes. The timing of 
payments to or from the South African Revenue Service is the last day of each of the twelve months of the 
financial year. 

1.23 Housing Development Fund 

The Flousing Development Fund was established in terms of the Flousing Act, (Act No. 107 of 1997). Loans from 
National and Provincial government used to finance housing selling schemes undertaken by the municipality 
were extinguished on 1 April 1998 and transferred to a Flousing Development Fund. Flousing selling schemes 
both complete and in progress as at 1 April 1998, were also transferred to the Flousing Development Fund. In 
terms of the Flousing Act, all proceeds from housing developments, which include rental income and sales of 
houses, must be paid into the Flousing Development Fund. Monies standing to the credit of the Flousing 
Development Fund can be used only to finance housing developments within the municipal area subject to the 
approval of the Provincial MEC responsible for housing. 


40 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.24 Municipal Land Transport Fund 

The municipality, jointly with the Provincial Government of the Western Cape via its Department of Transport 
and Public Works, has implemented the George Integrated Public Transport Network for the delivery of public 
transport services in the George municipal area. 

The National Land Transport Act, (Act No. 5 of 2009) requires that a municipality establishing an integrated 
public transport network must establish a Municipal Land Transport Fund in terms of Section 27 of the Act. 
Money appropriated by the Minister and / or MEC for the Fund, user charges collected and interest on invested 
cash balances belonging to the Fund, should be paid into the fund. The fund is utilised to defray the costs of the 
functions in terms of its integrated transport plan. 

The Municipal Land Transport Fund was established on 8 December 2014, which is the date the transport service 
commenced. 

The Municipal Land Transport Fund is treated as a ring fenced cost centre within the municipality. Refer to note 
55 for more detail. 

1.25 Capital commitments 

Capital commitments disclosed in the financial statements represent the balance committed to capital projects 
on reporting date that will be incurred in the period subsequent to the specific reporting date. 

1.26 Events after reporting date 

Events after the reporting date that are classified as adjusting events are accounted for in the financial 
statements. The events after the reporting date that are classified as non-adjusting events after the reporting 
date are disclosed in the notes to the financial statements. 

1.27 Related parties 

Parties are considered to be related if one party has the ability to control the other party or exercise significant 
influence over the other party in making financial and operating decisions or if the related party entity and 
another entity are subject to common control. 

Related parties include: 

• Entities that directly, or indirectly through one or more intermediaries, control, or are controlled by the 
reporting entity; 

• Individuals owning, directly or indirectly, an interest in the reporting entity that gives them significant 
influence over the entity, and close members of the family of any such individual; 

• Key management personnel, and close members of the family of key management personnel; and 

• Entities in which a substantial ownership interest is held, directly or indirectly, by any person described in the 
2nd and 3rd bullet, or over which such a person is able to exercise significant influence. 

Key management personnel include: 

• All directors or members of the governing body of the entity, being the Executive Mayor, Deputy Mayor, 
Speaker and members of the Mayoral Committee. 

• Other persons having the authority and responsibility for planning, directing and controlling the activities of 
the reporting entity being the Municipal Manager, Chief Financial Officer and all other managers reporting 
directly to the Municipal Manager or as designated by the Municipal Manager. 

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 members of management in their dealings with the municipality. 

All transactions with related parties are disclosed. 


41 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.28 Budget information 

The Municipality is subject to budgetary limits in the form of a Council approved budget, which is given effect 
through authorising legislation. 

General purpose financial reporting by the municipality shall provide information on whether resources were 
obtained and used in accordance with the legally adopted budget. 

The approved budget is prepared on an accrual basis. The approved budget covers the fiscal period from 
2018/07/01 to 2019/06/30. 

The annual financial statements and the budget are on the same basis of accounting except for certain 
accounting entries (e.g. movement in legal provisions) therefore a reconciliation between the Statement of 
Financial Performance and the budget has been included in the annual financial statements. Refer to the 
Statement of Comparison of Budget and Actual Amounts. 

Explanations for differences between the approved and final budget are included in the Notes to the Financial 
Statements. Material differences are being defined by Management as 10% of a specific line-item or amounts 
greater than R250,000. Explanations for material differences between the final budget amounts and actual 
amounts are included in the Notes to the Financial Statements - Refer to note 56. 

1.29 Unauthorised expenditure 

Unauthorised expenditure is expenditure that has not been budgeted, expenditure that is not in terms of the 
conditions of an allocation received from another sphere of government, municipality or organ of state and 
expenditure in the form of a grant that is not permitted in terms of the Municipal Finance Management Act (Act 
No.56 of 2003). Unauthorised expenditure is accounted for as an expense in the Statement of Financial 
Performance in the year that the expense was incurred and where recovered, it is subsequently accounted for 
as revenue in the Statement of Financial Performance. Unauthorised expenditure is submitted to Council after 
year end for authorisation. 

1.30 Fruitless and wasteful expenditure 

Fruitless and wasteful 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. 

1.31 Irregular expenditure 

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), the Public Office Bearers Act, and (Act. No. 20 of 1998) or 
is in contravention of the Municipality’s Supply Chain Management Policy. Irregular expenditure excludes 
unauthorised expenditure. Irregular expenditure is accounted for as expenditure (measured at actual cost 
incurred) in the Statement of Financial Performance and where recovered, it is subsequently accounted for as 
revenue in the Statement of Financial Performance. 

1.32 Comparative information 
Prior year comparatives 

When the presentation or classification of items in the financial statements is amended, comparative amounts 
are restated or reclassified except to the extent that it is impracticable to determine either the period-specific 
effects or the cumulative effect of the amendment. The nature and reason for the restatement or 
reclassification is disclosed in note 46. 


42 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.33 Change in accounting policies, estimates and errors 

Changes in accounting policies that are effected by management are applied retrospectively except to the 
extent that it is impracticable to determine the period-specific effects or the cumulative effect of the change in 
policy. In such cases the municipality shall restate the opening balances of assets, liabilities and net assets for 
the earliest period for which retrospective restatement is practicable. 

Changes in accounting estimates are applied prospectively. Details of changes in estimates are disclosed in 
the notes to the financial statements where applicable. 

Correction of errors is applied retrospectively in the period in which the error has occurred except to the extent 
that it is impracticable to determine the period-specific effects or the cumulative effect of the error. In such 
cases the municipality shall restate the opening balances of assets, liabilities and net assets for the earliest 
period for which retrospective restatement is practicable. Refer to note 46 of the financial statements for 
details of corrections of errors recorded during the period under review. 


43 




George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

2. Inventories 

Consumable stores - at cost 

8,076,473 

5,825,317 

GIPTN Smart Cards for electronic fare revenue system 

1,153,232 

- 

Maintenance materials, chemicals and water reserve - at cost 

10,188,656 

7,045,176 

Purified water 

987,644 

381,735 

Property Developments - at cost 

141,633 

141,633 

Unsold Properties Field for Resale - at net realisable value 

106,018,821 

128,937,081 


126,566,459 

142,330,943 


The cost of inventories recognised as an expense in the Statement of Financial Performance for stock issues was 
R22,226,974 (2018: R 19,630,111) and R7,835,664 (2018: RNil) in respect of inventory written down to net realisable 
value. Refer to note 38 for details of items written down to net realisable value. 

Erven used for housing developments are measured as per accounting policy 1.12. 

3. Trade receivables from exchange transactions 


Service debtors 101,991,908 84,030,719 

Other exchange receivables 9,806,182 4,849,944 


Prepaid electricity 

8,784,631 


3,948,348 

Rental debtors 

428,367 


582,006 

GIPTN fare revenue 

593,184 


319,590 


Service debtors consist of the following: 

111,798,090 

88,880,663 

Gross balances 

Electricity 

66,020,632 

66,461,649 

Water 

107,290,372 

88,028,362 

Sewerage 

28,808,007 

27,214,558 

Refuse 

24,374,699 

22,019,207 

Flousing loan instalments 

483,739 

532,119 

Flousing rental 

227,192 

125,702 

Other consumer debtors 

11,487,950 

9,842,857 


238,692,591 

214,224,454 

Less: Allowance for impairment 

Electricity 

7,483,126 

7,841,490 

Water 

85,210,770 

78,501,700 

Sewerage 

18,338,308 

19,451,156 

Refuse 

15,085,642 

15,235,911 

Flousing loan instalments 

443,807 

464,208 

Flousing rental 

169,172 

81,012 

Other consumer debtors 

9,969,858 

8,618,258 


136,700,683 

130,193,735 


44 























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

3. Trade receivables from exchange transactions (continued) 



Net balance 

Electricity 

58,537,506 

58,620,159 

Water 

22,079,602 

9,526,662 

Sewerage 

10,469,699 

7,763,402 

Refuse 

9,289,057 

6,783,296 

ttousing loan instalments 

39,932 

67,911 

ttousing rental 

58,020 

44,690 

Other consumer debtors 

1,518,092 

1,224,599 

The ageing of trade receivables from exchange transactions consist 
of the following: 

101,991,908 

84,030,719 

Electricity 

Current (0 -30 days) 

55,008,877 

54,456,897 

31-60 days 

2,842,267 

2,782,782 

61-90 days 

888,118 

811,367 

91-120 days 

461,549 

564,310 

121 - 365 days 

6,819,821 

7,846,293 

Less: Allowance for impairment 

(7,483,126) 

(7,841,490) 


58,537,506 

58,620,159 

Water 

Current (0 -30 days) 

20,969,096 

15,284,256 

31-60 days 

3,967,463 

2,365,063 

61-90 days 

3,141,752 

1,757,145 

91-120 days 

2,904,045 

2,083,927 

121 - 365 days 

76,308,016 

66,537,971 

Less: Allowance for impairment 

(85,210,770) 

(78,501,700) 


22,079,602 

9,526,662 

Sewerage 

Current (0 -30 days) 

10,119,385 

8,691,957 

31-60 days 

1,593,300 

1,599,180 

61-90 days 

1,034,108 

968,133 

91-120 days 

762,905 

739,859 

121 - 365 days 

15,298,309 

15,215,429 

Less: Allowance for impairment 

(18,338,308) 

(19,451,156) 


10,469,699 

7,763,402 

Refuse 

Current (0 -30 days) 

8,855,725 

7,497,938 

31-60 days 

1,521,762 

1,394,624 

61-90 days 

991,074 

882,848 

91-120 days 

749,649 

671,517 

121 - 365 days 

12,256,489 

11,572,280 

Less: Allowance for impairment 

(15,085,642) 

(15,235,911) 


9,289,057 

6,783,296 


45 

























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

3. Trade receivables from exchange transactions (continued) 



Housing loans instalments 

Current (0 -30 days) 

25,822 

31,854 

31-60 days 

8,360 

7,470 

61-90 days 

6,117 

6,465 

91-120 days 

4,484 

5,781 

121 - 365 days 

438,956 

480,549 

Less: Allowance for impairment 

(443,807) 

(464,208) 


39,932 

67,911 

Housing rental 

Current (0 -30 days) 

47,708 

41,945 

31-60 days 

23,268 

15,754 

61-90 days 

14,675 

11,278 

91-120 days 

13,119 

10,369 

121 - 365 days 

128,422 

46,356 

Less: Allowance for impairment 

(169,172) 

(81,012) 


58,020 

44,690 

Other consumer debtors 

Current (0 -30 days) 

1,609,637 

1,106,093 

31-60 days 

65,668 

689,269 

61-90 days 

660,286 

330,608 

91-120 days 

347,209 

251,273 

121 - 365 days 

8,805,150 

7,465,614 

Less: Allowance for impairment 

(9,969,858) 

(8,618,258) 

Summary of debtors by customer classification 

1,518,092 

1,224,599 

Residential 

Current (0 -30 days) 

43,391,156 

35,252,281 

31-60 days 

7,611,797 

6,995,454 

61-90 days 

5,744,255 

3,968,960 

91-120 days 

4,810,639 

3,693,845 

121 - 365 days 

112,464,173 

101,064,350 

Less: Allowance for impairment 

(128,668,520) 

(122,347,439) 


45,353,500 

28,627,451 

Industrial/ commercial 

Current (0 -30 days) 

49,706,253 

48,543,474 

31-60 days 

1,787,097 

1,296,852 

61-90 days 

858,331 

427,515 

91-120 days 

391,113 

275,901 

121 - 365 days 

7,366,424 

7,251,830 

Less: Allowance for impairment 

(8,032,163) 

(7,846,296) 


52,077,055 

49,949,276 


46 

























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 



2019 

2018 

3. Trade receivables from exchange transactions (continued) 




National and provincial government 

Current (0 -30 days) 



3,538,841 

3,315,187 

31-60 days 



623,192 

561,837 

61-90 days 



133,544 

371,368 

91-120 days 



41,208 

357,289 

121 - 365 days 



224,565 

848,311 




4,561,350 

5,453,992 

Total 

Current (0 -30 days) 



96,636,250 

87,110,942 

31-60 days 



10,022,086 

8,854,143 

61-90 days 



6,736,130 

4,767,843 

91-120 days 



5,242,960 

4,327,035 

121 - 365 days 



120,055,165 

109,164,491 




238,692,591 

214,224,454 

Less: Allowance for impairment 



(136,700,683) 

(130,193,735) 




101,991,908 

84,030,719 

Reconciliation of allowance for impairment for receivables from exchange transactions 


2019 

Balance at 

Impairment 

Amounts 

Balance at 


the beginning 

losses 

written off as 

the end of the 


of the year 

recognised 

uncollectible 

year 

Electricity 

7,841,490 

(156,328) 

(202,036) 

7,483,126 

Water 

78,501,700 

14,977,139 

(8,268,069) 

85,210,770 

Sewerage 

19,451,156 

2,039,540 

(3,152,388) 

18,338,308 

Refuse 

15,235,911 

3,496,719 

(3,646,988) 

15,085,642 

ttousing loan instalments 

464,208 

40,321 

(60,722) 

443,807 

ttousing rentals 

81,012 

93,625 

(5,465) 

169,172 

Other consumer debtors 

8,618,258 

1,508,453 

(156,853) 

9,969,858 


130,193,735 

21,999,469 

(15,492,521) 

136,700,683 

2018 

Balance at 

Impairment 

Amounts 

Balance at 


the beginning 

losses 

written off as 

the end of the 


of the year 

recognised 

uncollectible 

year 

Electricity 

4,898,562 

3,096,820 

(153,892) 

7,841,490 

Water 

72,276,943 

21,364,592 

(15,139,835) 

78,501,700 

Sewerage 

21,057,171 

6,523,987 

(8,130,002) 

19,451,156 

Refuse 

16,659,163 

5,623,265 

(7,046,517) 

15,235,911 

Housing loan instalments 

492,394 

(28,186) 

- 

464,208 

Housing rentals 

356,895 

(275,883) 

- 

81,012 

Other consumer debtors 

1,085,477 

7,586,805 

(54,024) 

8,618,258 


116,826,605 

43,891,400 

(30,524,270) 

130,193,735 

Total debtors past due but not impaired 



2019 

2018 

31-60 days 



6,072,280 

5,713,532 

61 90 days 



2,508,681 

2,113,685 

91-120 days 



1,359,475 

1,675,502 

121 - 365 days 



4,777,069 

7,997,057 




14,717,505 

17,499,776 


47 



































George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


3. Trade receivables from exchange transactions (continued) 

Credit quality of consumer debtors 

Consumer debtors are payable within 30 days. This credit period granted is considered to be consistent with the 
terms used in the public sector, through established practices and legislation. Discounting of trade and other 
receivables on initial recognition is not deemed necessary. 

Concentrations of credit risk with respect to trade receivables are limited due to the municipality's large 
number of customers. The municipality's historical experience in collection of trade receivables falls within 
recorded allowances. Due to these factors, management believes that no additional risk beyond amounts 
provided for collection losses is inherent in the municipality's trade receivables. 

4. Receivables from non-exchange transactions 


Taxation receivables 


Net Rates 

20,651,942 

18,278,162 

Gross rates 

Allowance for impairment on rates 

37,313,793 

(16,661,851) 


33,259,057 

(14,980,895) 

Transfer receivables 

Net Fines 

15,403,819 

11,200,392 

Fines 

Allowance for impairment on fines 

154,590,020 

(139,186,201) 


114,369,809 
(103,169,417) 

Conditional government grants and subsidies receivable (Refer note 

19) 

8,989,361 

4,196,365 

Other receivables 

3,202,232 

4,593,635 

Sundry receivables 

Allowance for impairment on sundry receivables 

Non-cash portion of Flousing Development Fund 

Operating lease receivables 

3,244,660 

(792,583) 

631,853 

118,302 


4,685,783 

(792,583) 

588,291 

112,144 


48,247,354 38,268,554 


The ageing of trade receivables from non-exchange transactions 


Rates 

Current (0 -30 days) 

31-60 days 
61-90 days 
91-120 days 
121 - 365 days 

Less: Allowance for impairment 


17,999,883 

2,848,737 

1,334,694 

984,427 

14,146,052 

(16,661,851) 

20,651,942 


15,145,343 
2,714,141 
1,363,984 
920,608 
13,114,981 
(14,980,895) 

18,278,162 


48 



















George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

4. Receivables from non-exchange transactions (continued) 

Summary of Rates by customer classification 



Residential consumers 

Current (0 -30 days) 

15,177,077 

12,802,387 

31-60 days 

2,424,948 

2,272,672 

61-90 days 

1,177,952 

1,250,176 

91-120 days 

910,326 

843,605 

121 - 365 days 

12,490,646 

11,352,907 

Less: Allowance for impairment 

(14,935,784) 

(13,314,417) 


17,245,165 

15,207,330 

Industrial / commercial 

Current (0 -30 days) 

2,708,250 

2,166,537 

31-60 days 

419,335 

385,515 

61-90 days 

156,686 

106,077 

91-120 days 

74,044 

69,208 

121 - 365 days 

1,608,987 

1,628,092 

Less:Allowance for impairment 

(1,726,067) 

(1,666,477) 


3,241,235 

2,688,952 

National and provincial government and other 

Current (0 -30 days) 

114,556 

1 76,420 

31-60 days 

4,454 

55,954 

61-90 days 

56 

7,731 

91-120 days 

57 

7,794 

121 - 365 days 

46,419 

133,981 

Less:Allowance for impairment 

- 

- 


165,542 

381,880 

Total of rates by customer classification 

Fines 

20,651,942 

18,278,162 

The ageing of fines is as follows: 

Current (0 - 30 days) 

11,073,250 

5,278,650 

31-60 days 

7,229,650 

6,310,350 

61-90 days 

6,340,450 

6,307,820 

91-120 days 

5,666,821 

5,859,354 

121 - 365 days 

124,279,849 

90,613,635 


154,590,020 

114,369,809 

Less: Allowance for impairment 

(139,186,201) 

(103,169,417) 


15,403,819 

11,200,392 


49 



























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


4. Receivables from non-exchange transactions (continued) 

Reconciliation of provision for impairment of receivables from non-exchange transactions 


2019 

Taxation receivables (Gross Rates) 
Transfer receivables (Fines) 

Other receivables 

Balance at 
the beginning 
of the year 

14,980,895 

103,169,417 

792,583 

Impairment 

losses 

recognised / 
(reversed) 

2,271,082 

77,386,826 

Amounts 
written off as 
uncollectible 

(590,126) 

(41,370,042) 

Balance at 
the end of the 
year 

16,661,851 

139,186,201 

792,583 


118,942,895 

79,657,908 

(41,960,168) 

156,640,635 

2018 

Balance at 

Impairment 

Amounts 

Balance at 


the beginning 

losses 

written off as 

the end of the 


of the year 

recognised / 
(reversed) 

uncollectible 

year 

Taxation receivables (Gross Rates) 

11,568,264 

7,016,969 

(3,604,338) 

14,980,895 

Transfer receivables (Fines) 

76,452,758 

65,577,830 

(38,861,171) 

103,169,417 

Other receivables 

802,713 

- 

(10,130) 

792,583 


88,823,735 

72,594,799 

(42,475,639) 

118,942,895 


The impairment allowance was calculated after grouping all the financial assets of similar nature and risk ratings 
and by calculating the historical payment ratios for the groupings and by assuming that the future payment 
ratios would be similar to the historical payment ratios. The impairment allowance on Taxation Receivables and 
Other Receivables exists predominantly due to the possibility that these debts will not be recovered. Taxation 
Receivables and Other Receivables were assessed individually and grouped together as financial assets with 
similar credit risk characteristics and collectively assessed for impairment. Accordingly, management believes 
no further credit provisions are required in excess of the present allowance for doubtful debts. 


Credit quality of trade receivables from non-exchange transactions 

Taxation debtors are payable within 30 days. This credit period granted is considered to be consistent with the 
terms used in the public sector, through established practices and legislation. Discounting of trade and other 
receivables on initial recognition is not deemed necessary. 

Concentrations of credit risk with respect to taxation debtors are limited due to the municipality's large number 
of customers. The municipality's historical experience in collection of non-exchange receivables falls within 
recorded allowances. Due to these factors, management believes that no additional risk beyond amounts 
provided tor collection losses is inherent in the municipality’s trade receivables. 


50 





















George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


4. Receivables from non-exchange transactions (continued) 

Operating lease asset 

Opening balance 112,144 125,925 

Straight lining adjustment in the Statement of Financial Performance 6,159 (13,781) 

118,303 112,144 


Operating leases - as lessor (income) 

Minimum lease payments receivable 

-within one year 

-in second to fifth year inclusive 

-later than five years 


804,205 614,631 

2,718,104 2,086,511 

331,677 

3,522,309 3,032,819 


Operating leases relate to property owned by the municipality with lease terms of between 5 and 20 years, with 
an option to extend for a further 10 years. All operating lease contracts contain market review clauses in the 
event that the lessee exercises its option to renew. The lessee does not have an option to purchase the property 
at the expiry of the lease period. 

The municipality has operating lease agreements for the following classes of assets, which are only significant 
collectively: 

•Municipal buildings 
• Vacant land 

No restrictions have been imposed on the municipality in terms of the operating lease agreements. 

5. Prepayments 

Prepayments consist of the following: 


SALGA 

5,050,239 

4,504,678 

Mercedes-Benz South Africa Ltd for maintenance of buses 

18,926,011 

8,566,934 


23,976,250 

13,071,612 

Non-current assets 

1,870,856 

_ 

Current assets 

22,105,394 

13,071,612 


23,976,250 

13,071,612 


SALGA 

SALGA membership fees for the 2019/2020 financial year were paid in May 2019 and the municipality received 
a 5% discount for early settlement. 

Mercedes-Benz South Africa Ltd 

The municipality entered into a five year maintenance plan for the GIPTN buses which is paid in annual 
installments. A portion of the maintenance payment falls within the 2019/2020 and 2020/2021 years and are 
treated as prepayments. 


51 





















George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


6. VAT receivable / (payable) 

VAT receivable from SARS 
VAT input provision 
VAT output provision 


5,713,426 

9,244,797 

(10,701,866) 

4,256,357 


3,488,724 

9,910,471 

(10,088,940) 

3,310,255 


VAT is payable to SARS on the payment basis. Only once payment is received from customers, VAT is paid over 
to SARS. No interest is payable to SARS if the VAT is paid over timeously, but interest for late payments is charged 
according to SARS policies. The municipality has financial risk policies in place to ensure that payments are 
effected before the due date. 

7. Loans and receivables 


As at 30 June 2019 


ttousing scheme loans 
Sale of erven loans 
Actaris meter debt 


As at 30 June 2018 


Housing scheme loans 
Sale of erven loans 
Actaris meter debt 


Gross 

balance 

Impairment 

allowance 

Net balance 

Transferred to 
current assets 

Non-current 

434.170 
71,340 

250.170 

(19,396) 

414,774 
71,340 
250,170 

(82,285) 

(71,340) 

(75,051) 

332,489 

175,119 

755,680 

(19,396) 

736,284 

(228,676) 

507,608 

Gross 

balance 

Impairment 

allowance 

Net balance 

Transferred to 
current assets 

Non-current 

535,156 

96,402 

250,338 

(39,326) 

495,831 

96,402 

250,338 

(80,574) 

(5,715) 

(75,102) 

415,257 

90,687 

175,236 

881,896 

(39,326) 

842,571 

(161,391) 

681,180 


Loans and receivables are not secured. 

Housing scheme loans 

No housing loans may be granted to officials and the public. The outstanding amount is in respect of loans 
granted before 1 July 2005 and will be recovered over the remaining period of the loan agreements. The 
interest rate applicable to the loans is 13.5%. 

Sale of erven loans 

As from 1 July 2006 no loan agreements are entered into for the sale of erven. The outstanding loans will be 
recovered over the remaining period of the individual loan agreements entered into. The interest rates 
applicable to the loans varies between 11.0% and 14.5%. 

Actaris meter costs 

Arrear amounts on services are capitalised on completion of a formal agreement. These arrear amounts are 
then paid to the municipality in monthly instalments over a period not exceeding 60 months. No interest is 
charged on these amounts where the stipulations of the agreement are adhered to. 

The management of the municipality is of the opinion that the carrying value of loans and receivables 
recorded at amortised cost in the Financial Statements approximate their fair values. 

The fair value of loans and receivables was determined after considering the standard terms and conditions of 
agreements entered into between the municipality and other parties as well as the current payment ratios of 
the municipality's loans and receivables. 


52 





























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


7. Loans and receivables (continued) 

The provision for doubtful debts on loans and receivables exists due to the possibility that not all these debts will 
be recovered. Loans and receivables were assessed individually and grouped together at the Statement of 
Financial Position date as financial assets with similar credit risk characteristics and collectively assessed for 
impairment. 

Reconciliation of impairment allowance 


2019 


Flousing scheme loans 


Balance at 

Impairment 

Amounts 

Balance at 

beginning of 

losses 

written off as 

end of the 

year 


uncollectible 

year 

39,327 

(19,931) 

- 

19,39< 


2018 


Flousing scheme loans 


Balance at 
beginning of 
the year 

334,687 


Impairment 

losses 

(295,360) 


Amounts 
written off as 
uncollectible 


Balance at 
end of the 
year 

39,327 


53 













George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 


2019 

2018 

8. Cash and cash equivalents 




Cash and cash equivalents consist of: 




Cash on hand 

Bank balances 

Short-term deposits 


23,420 

562,580,316 

22,900 

167,761,561 

450,000,000 



562,603,736 

617,784,461 

Cash and cash equivalents pledged as collateral 




No cash and cash equivalents were pledged as security for financial liabilities. 



The balance of unspent conditional grants as per note 19 can only be used for the purpose as set out in the 
different grant conditions and is not available to the municipality to use in its normal business operations. The 
same applies to the cash portion of the Housing Development Fund as per note 20. This balance can only be 
used for the purpose of the Housing Development Fund. 

The municipality had the following bank accounts: 


Cash book balances 



30 June 2019 

30 June 2018 

ABSA BANK - Cheque Account - 102 222 0981 


562,580,316 

167,761,561 

Nedbank Fixed Deposit 


- 

200,000,000 

Standard Bank Fixed Deposit 


- 

250,000,000 

Cash on hand 


23,420 

22,900 

Total 


562,603,736 

617,784,461 

The bank balances at year end were: 




ABSA BANK - Cheque Account - 102 222 0981 

ABSA - George Charitable Relief Fund -914 955 4208 

Nedbank Fixed Deposit 

Standard Bank Fixed Deposit 


Bank balances 

30 June 2019 30 June 2018 

559,161,827 213,605,128 

1,000 1,000 
200,000,000 
250,000,000 



559,162,827 

663,606,128 

Credit quality of cash at bank 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. 

The credit rating was obtained from Moody's Investor Services Inc. 
revised, and the bank financial strength ratings have been withdrawn. 
Credit Assessment. 

Moody’s rating methodology has been 
This has been replaced with the Baseline 

Credit rating of financial institutions 

Baa3 


559,162,827 

663,606,128 


54 





















to 





CN 

c 


o 

CD 


CN 

0 

E 


c 

3 

CD 




>■ 

O 

CO 

o 

• ^B 

"O 

tn 

o 

CD 

— 

a 

~o 

c 

o 

o 

0 

o 

• ^B 

b 

c 

£ 

3 

0 

> 

0 

_c 

O 

c 

• ^B 

u_ 

__ 



O 

o 

O 

o 

c/0 

3 

o 

c 

0 

C 

_ 1 

E 

c 

CD 

0 

< 

O) 

o 

oo 

CD 

O 

CD 

O 

'o 

£ 

o 

c 

o 

O 


iH 

to 


O 

O 


D 

C 

o 


C 

< 

z 



/It 




,— 

co 

co 

co 

oo 

LO 

00 


,— 

O 

•o 

o 

CN 

N" 






CN 

NO 

CO 

N* 

co 

CN 

hN 


LO 

i— 

N- 

LO 

r\ 

co 


D 




N- 

LO 

CN 

co 

cq 

r\ 

o 


-— 

CN 

LO 

CN 


CN 


o 




00 

lo' 

co' 

K 

co' 

NO 


n 

o' 


o' 

o' 

co' 

CN 


> 




CN 

N- 

■n- 

CN 

r\ 

r\ 

hN 

U 

r\ 

CN 

NO 

LO 

o 

CN 


Q) 




LO 

LO 

■—- 

o 

co 

•— 

CO 

O 

r\ 

CN 

CO 

r\ 

o 



C 




r—' 

r—' 

no' 

lo' 

no' 

o' 

r—' 

I— 

o' 

CN 

co' 


hC 

no' 






CN 

oo 

CO 

1— 

lo 

NO 

hN 


CN 


1— 

LO 

LO 







CN 


1— 

1— 


1— 

00 


CN 

LO 

1— 

i— 


■— 


o 





— 





CN 



—' 






u 











c 

i 

LO" 

LO* 

co 

oT 














o 


oo 

CO 

LO 

^r 

CN 






i 

CN~ 

nT 

nT 

co 

CO 




NO 

CN 

LO 

i\ 

r\ 


T3 c 


~o 



00 

LO 

CN 

o 

CN 


o 


N-' 

no' 

lo' 

i— 

co' 

00 

n 


QJ 

n 

c 

0 


CN 

CN 

o 

lo' 

LO 

co' 

co 

co' 

hv 

co' 

LO 

o 

u 

0 


LO 

co 

CN 

r\ 

CN 

LO 

NO 

oo 

NO 


— O 



c 


NO 

CN 

o 

o 

oo 

>o 



co' 

hC 

lo' 

CN 

co' 

o 

d -r; 

"O 

3 

c 


CN 

CN 

CN 

CN 

o 

o 

Q. 


o 

■ 

i— 


>— 

CN 

c u 
12 

c 

D 

E 

D 

o 


O 

'N- 

CO 

o' 

o 

o' 

NO 

N- 

oo' 

o 

0 

o 


— 






o a 


O 

U 

o 

Q. 


o 


>— 

* 

■ 

cq 


.—« 

.—. 

.—. 


-—- 



u a> 
< 


£ 


' 


— 





o 

N- 

CN 

i— 

LO 

1 





~— 






co 

CN 

CN 

r\ 

r\ 

CO 

o 

NO 

CO 



o 

o 


_D 

o 

> 

O) 

c 

'>> 

o 

U 


c 

o 


“D 

0 


**« 


o. 

a> 

TJ 


C 

d) 

^ E 

| *5 

3 P 

o c 

o “ 


o 

o 


c 

0) 

E 

a 

*D 

C7 

0 

"D 

C 

o 

c 

o 

a 

5 

a 

o 


cn r\ co cn 
o o cn cn co 

no ■— u-> co lo 

cn •—‘ lo co hC 

o r\ CM On no 

cn o co lo r\ 

N" CO O CN On 

N - r\ co N- lo 


,— 

CN 

CO 

co 

CO 

CO 

o 

LO 

■— 


r\ 

r\ 

CN 

00 

>— 

00 


hv 

NO 

LO 

NO 

o' 

no' 

r— ' 

lo' 

CN 

o' 

rC 

r\ 

CN 

CO 

i\ 

o 

NO 

nO 

hs. 

N" 

CN 

o 

NO 

CN 

o 

o' 

no' 


lo' 

CN 

NO 

o' 

CN 

■— 

On 

co 

On 

o 

CN 

CN 


> — 

CN 


CN 



CN 







CN 









0 


CN 

no' 

CN 

__ 

o 

O 

CN 

NO 

co 

On 

*4— 

IS) 

CN 

xr 

NO 

o 

NO 

LO 

CN 

LO 

CN 

CO 

CN 

CN 


L. 

■- 




N" 

CO 

CN 

On 

1— 

LO 

CN 

D 



■— 

CO 

co' 


CO' 

lo' 

CN 

o' 

LO 




CN 

CN 

CN 

i— 

N" 

O 

oo 

nO 

CO 






LO 

co 

N- 

co 

O 

CN 

^r 






r—' 

r—' 

K 

lo' 

K 

NO 

CN 


o' 

i 

cT 

c\T 

CN 

CN 

>— 

>— 

CN 

o 

IN 


LO 


NO 

r\ 

On 

LO 

CN 

CN 


CN 

*—^ 

tS) 

o 


NO 

CN 


CN 






D 



CN 

o' 








o 

NO 


i— 

o 








a 

LO 


co 

! , 

__ 

O 

NO 

O 

On 

N- 

o 






LO 



LO 

r\ 

CO 

hs 

Q 





>— 

CN 

LO 

CN 

i\ 

On 

CO 






o' 


o' 

o' 

co' 

CN 







r\ 

CN 

NO 

LO 

o 

CN 

o 


1 


CN 

nO 

r\ 

CN 

co 


o 

■N- 

»“ 

</) 


o 

co 

o 

o' 

CN 

co' 


hC 

O' 

o' 

c 


LO 

NO 


CN 

l\ 

■— 

LO 

LO 

N- 

IN 

o 


CN 

LO 

l< 

On 

LO 

' 

' 


1 

On 



co 

CN 

NO 


“O 

T3 

< 


U) QJ 

.E o 
c c 

(D o 

5- ° 

O -o 


In. xj- xf 

N - ' ■—' •—' 
CN <— CO 


•— CO CO CO CO LO 

CN NO CO t CO CN 

lo cn co co r\ 

CO LO co IN CO NO 

(N N” N - On K K 

LO LO ^ O CO ■—■ 
NO LO NO o 

CN CO CO ■— LO NO 

On N - '- '- •— 


oo D 
O) CO 

E Z 




D 

CO 


~G 

c 

o 


O 


^UOOO 


o 

CN 


c 

0) 

E 

£. 

‘d 

a 

0) 

"D 

C 

D 

C 

o 

a 

<D 

a 

o 

a 

* 4 — 

o 

c 

o 


u 

c 

o 

u 

0) 

QS 


oo D 

O) co 

c 


> £ 


D 

CO 


o 


"O 

c 

o 


0) 0) 0) 


£ (J O O O 


LO 

LO 


2,871,374,678 242,064,594 (984,684) - (142,352,718)2,970,101,870 














to 





CN 

c 


o 

a) 


CN 

0 

E 


c 

3 

CD 





O 

CO 

D 

• ^B 

~o 

to 

o 

0 

— 

a 

“O 

c 

a 

u 

0 

u 

• ^B 

b 

c 

£ 

3 

£ 

0 

> 

0 

_c 

a 

c 

• ^B 

u_ 

__ 

i- 


O 

o 

O 

o 

00 

3 

o 

C 

0 

C 

_l 

E 

C 

<D 

0 

< 

O) 

o 

oo 

<D 

O 

0 

O 

'o 

£ 

o 

c 

o 

O 


iH 

to 


D 

O 


D 

C 

o 


C 

< 

z 


~o 

0 

D 

C 

C 

o 

o 

c 

d) 

E 

a 

*3 

C7 

0) 

“O 

c 

o 

c 

o 


> M 


0 

a 

o 



__ 

CO 

CO 

CO 

co 

LO 

00 





CN 

NO 

CO 

N- 

co 

CN 






p 

LO 

CN 

p 

p 

p 

o 




n 

co 

LO' 

co' 

hb 

co' 

no' 





U 

CN 


N" 

CN 

r\ 


rv 




O 

LO 

LO 

■—- 

O 

p 

1 — 

co 




I— 

,—! 

,—' 

no' 

LO' 

no' 

o' 






CN 

CO 

CO 

i— 

lo 

NO 

hN 





CN 

p 

■— 

-— 


1 — 

00 











CN 




. 

i 

CN 

1 

l 

i 

1 

On 




c 


LO 





LO 




0 o 


CO 





CO 




F M 











n ^ 
O > 


CN 





CN 





NO 





NO 




a 0 


1 — 





•“ 




E L " 











c 

, 

FT 

o' 

ET 

bp 

o' 

CO 




o 


CN 

LO 

CN 

O 

CN 

NO 






p 

CD 

p 

CN 

p 

p 




JO 


r—' 

N-' 

co' 

co' 

co' 

NO 




u 

0 


co 

LO 

LO 

CN 

r\ 

LO 





p 

CN 

■—- 

p 

p 

NO 






,—! 

Os' 

co' 

CN 


o' 




Q- 


CN 

— 

1 — 

— 

1 — 

NO 




0 


i— 


■- 


■ 





Q 

, 

7 

co 

, 

co 


1 







o 


o 






to 



CN 


CN 






0 



no' 


no' 






*t 7 » 



co 


oo 






C 



CD 


p 






o 



no' 


p' 






1 ^ 












CO 

i 

1 

oT 

1 

i 

fb' 



r\ 

to 

O 

CO 

o 

CN 



CN 



LO 



'— 

' " 



p 

hb 



LO 

oo' 


00 

N"' 

LO 




NO 



o 


o 

p 

a 

CO 






On 


CN 

NO 

to 

N~' 









' 

a 












NO 

co 


o 

LO 

, 

co 




to 

NO 

LO 


o 

CN 


On 



NO 

CO 

C 

CN 

r\ 

p 

CN 

p 


rv 



O 

co 

no' 

CN 

CO' 

1 — 


CN 



p 


NO 

co 

CO 


NO 


On 





CO 

co 

CN 


On 


r- 


On 

CN 

■D 

< 

CN 

N-' 

CN 

CN 

o' 

CN 


o' 

Cv 

CN 


o 

CN 

CN 

no' 

CN 


co 

CO 

_ 

n- 

LO 

LO 

NO 

00 



O) 0 

00 

N- 

O 

CN 

O 

■— 


0 



LO 

p 

i— 

p 

p 

CO 

o 




.E o 

LO 

CO' 

N"' 

CN 

no' 

o' 

lo' 




c £ 

o 

NO 

CO 

NO 

CN 

LO 

CN 

n 



(U D 

LO 

NO 

p 

p 

p 

p 


D 



5 - ° 

co' 

no' 

CN 

hb 

CN 

N" 

lo' 

■— 



O -Q 

CN 

co 

CN 

co 

NO 

r\ 

NO 

"q 



On 

CO 





rv 






— 





CN 

o 

c 




00 


o 

CN 


c 

0 

E 

£. 

*3 

a 

0 

"D 

C 

o 

c 

o 


0 

a 

o 


c 

o 


T3 

c 

O 


0 

D -g' 

?! 


<~n D 
G) CD 

si 

m O 


0 0 0 
£ 6 £ £ £ 
£ CJ O O O 


o 

0 

"O 

0 

b 


no 


o 

c 


0 

Y 

~6 

0 

o 

oo 

0 


o 

0 

>N 

b 

a 

0 


3 

U 

0 


O 

"O 

0 

U) 

~o 

0 


o 

c 


D 

u 

0 


o 

"O 

0 

O) 

“O 

0 

a 

o 

c 

oo 

o 

£ 

C 

0 

E 

a 

'd 

a 

0 

“O 

c 

o 

c 

D 

Q. 


0 

a 

o 

Q_ 


C 

3 

o 

E 

o 

O) 

c 

’> 

b 

u 


a 

0 

0 

u 

c 

o 

c 


o 

0 

3 * 

3 


0 

O 


0 

> 


o 

0 

0 

u 

c 

o 

c 


0 

“O 


o 

n- 


o 

c 


0 

Y 


nO 

LO 









George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

9. Property, plant and equipment (continued) 



Property, plant and equipment in the process of being constructed or developed 


Land 

32,900 

32,900 

Infrastructure 

391,122,505 

338,985,478 

Community 

13,640,155 

12,352,433 

Other 

12,828,246 

11,076,180 

Other - buildings 

8,019,931 

7,373,120 


425,643,737 

369,820,111 

The carrying value of work in progress which is taking longer than expected to complete or have 

been delayed 

can be classified as follows: 



Reason for delay 

Construction delays 

14,087,975 


Funding 

17,013,514 


Other 

3,663,578 


Tender/ SCM delay 

3,955,474 



38,720,541 


Expenditure incurred to repair and maintain property, plant and equipment 



Repairs and maintenance expenditure for the year was R127,124,774 (2018: 

R 124,493,030). 



10. Intangible assets 

2019 



2018 


Cost Accumulated 

Carrying 

Cost 

Accumulated 

Carrying 

amortisation 

value 


amortisation 

value 

and 



and 


accumulated 



accumulated 


impairment 



impairment 


Computer software 3,814,072 (1,677,294) 

2,136,778 

2,642,718 

(1,287,281) 

1,355,437 

Reconciliation of intangible assets - 2019 






Opening 

Additions 

Amortisation 

Total 


balance 




Computer software 

1,355,437 

1,171,355 

(390,014) 

2,136,778 

Reconciliation of intangible assets - 2018 






Opening 

Additions 

Amortisation 

Total 


balance 




Computer software 

1,433,212 

638,570 

(716,345) 

1,355,437 


57 

















George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


11. Heritage assets 



2019 



2018 


Cost 

Accumulated 

impairment 

losses 

Carrying 

value 

Cost 

Accumulated 

impairment 

losses 

Carrying 

value 


Historical monuments 4,236,000 

and open areas 

4,236,000 

4,236,000 

' 

4,236,000 

Reconciliation of heritage assets - 2019 

Historical monuments and open areas 

Opening 

balance 

4,236,000 

Additions 

Impairment 

losses 

recognised 

Total 

4,236,000 

Reconciliation of heritage assets - 2018 

Historical monuments and open areas 

Opening 

balance 

4,236,000 

Additions 

Impairment 

losses 

recognised 

Total 

4,236,000 


Details of heritage assets 


Wilderness Commonage 
Old uniondale fort 


4,050,000 

186,000 

4,236,000 


4,050,000 

186,000 

4,236,000 


Wilderness Commonage: This piece of land has a cultural and historical value due to being a stopover or 
resting place for ox-wagons travelling to Cape Town. 

Old Uniondale Fort: During the Anglo Boer War, Uniondale was protected by six British forts of which one has 
been restored to its original state. 

Expenditure incurred to repair and maintain heritage assets 

No costs were incurred to repair and maintain heritage assets during the year (2018: RNil). 


58 














George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 



2019 

2018 

12. Investment property 

2019 



2018 


Cost Accumulated 

Carrying 

Cost 

Accumulated 

Carrying 

depreciation 

value 


depreciation 

value 

and 



and 


accumulated 



accumulated 


impairment 



impairment 


Land 149,777,700 

149,777,700 

149,777,700 

- 

149,777,700 

Buildings 5,206,973 (3,001,929) 

2,205,044 

5,206,973 

(2,832,859) 

2,374,114 

Total 154,984,673 (3,001,929) 

151,982,744 

154,984,673 

(2,832,859) 

152,151,814 

Reconciliation of investment property - 2019 


Opening 

balance 

Depreciation 

Total 

Land 


149,777,700 

- 

149,777,700 

Buildings 


2,374,115 

(169,071) 

2,205,044 



152,151,815 

(169,071) 

151,982,744 

Reconciliation of investment property - 2018 

Opening 

balance 

Additions 

Depreciation 

Total 

Land 

149,777,700 

- 

- 

149,777,700 

Buildings 

2,310,705 

225,000 

(161,590) 

2,374,115 


152,088,405 

225,000 

(161,590) 

152,151,815 

Investment property was not pledged as security for financial liabilities. 




Other disclosure 





Included in the surplus for the year are the following: 





Total rental income from investment property 



1,297,855 

706,622 

Repairs and maintenance of investment property 



329,609 

176,353 

Repairs and maintenance incurred during the year were for the Gwaiing Resort and for the Skatelab Building. 


59 














George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


13. Loans and borrowings 
At amortised cost 


Annuity loans 

290,040,098 

329,480,507 

Other loans 

180,844 

361,688 


290,220,942 

329,842,195 

Non-current liabilities 



Annuity loans 

256,997,622 

290,040,098 

Other loans 

- 

180,844 


256,997,622 

290,220,942 

Current liabilities 



Annuity loans 

33,042,476 

39,440,409 

Other loans 

180,844 

180,844 


33,223,320 

39,621,253 


Annuity loans 

Annuity loans are repaid over periods varying from 1 years to 10 years (2018: 1 years to 11 years) and at interest 
rates varying from 6.75% to 12,665% (2018: 6.75% to 12,665%) per annum. Annuity loans are not secured. 

Other loans 

Other loans were used for the phased electrification of dwellings in the greater George area not yet electrified. 
Other loans are repaid over a period of 1 year (2018: 1 year to 2 years) and at interest rates varying from 7,835% 
to 12% (2018: 7,835% and 12%) per annum. Other loans are not secured. 

14. Finance lease obligation 

Minimum lease payments due 


- within one year 

- in second to fifth year inclusive 

2,668,569 

1,164,655 

5,349,633 

3,833,223 

less: future finance charges 

3,833,224 

(395,211) 

9,182,856 

(1,029,751) 

Present value of minimum lease payments 

3,438,013 

8,153,105 

Present value of minimum lease payments due 

- within one year 

- in second to fifth year inclusive 

2,412,747 

1,025,266 

4,717,554 

3,435,551 


3,438,013 

8,153,105 

Non-current liabilities 

Current liabilities 

1,025,266 

2,412,747 

3,435,551 

4,717,554 


3,438,013 

8,153,105 


The municipality entered into hire purchase agreements for vehicle acquisitions. The average lease term is 5 
years and the average effective borrowing rate is 8.84% (2018: 8.84%). Interest rates are fixed at the contract 
date and all leases have fixed repayment terms. 

The municipality's obligations under finance leases are secured by the lessor's charge over the leased assets. 
Refer note 9 for more detail. 


60 































George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

15. Payables from exchange transactions 



Current liabilities 

Trade payables 

122,514,295 

152,917,114 

Payments received in advance 

21,415,653 

16,376,677 

Retentions 

31,653,782 

26,483,599 

GIPTN compensation liability 

3,620,667 

3,615,887 

Other payables 

25,028,783 

19,393,918 

Sundry Deposits 

9,829,408 

9,166,218 

Unidentified deposits 

8,411,172 

5,282,496 


222,473,760 

233,235,909 

Non-current liabilities 

GIPTN compensation liability 

4,620,168 

2,796,362 

Total 

227,093,928 

236,032,271 


The average credit period on purchases is 30 days from the receipt of the statement, as determined by the 
MFMA. No interest is charged for the first 30 days from the date of receipt of the statement. Thereafter interest is 
charged in accordance with the credit policies of the various individual creditors that the municipality deals 
with. The municipality has financial risk policies in place to ensure that all payables are paid within credit 
timeframe. 

The management of the municipality is of the opinion that the carrying value of trade and other payables 
approximate their fair values. The fair value of trade and other payables was determined after considering the 
standard terms and conditions of agreements entered into between the municipality and other parties. 


George Integrated Public Transport Network (GIPTN) compensation liability 

The public transport bus services commenced during the 2015 financial year. Taxi operators who signed buy-in 
agreements started receiving their monthly buy-in payments with the relinquishment of the taxi operator 
licences. The accrual was transferred from Provisions and is split between current and non-current based on the 
expected payments to be made as determined in the signed contracts. Refer to note 18 for more detail. 


Balance at beginning of the year 

6,412,249 

8,893,803 

Transferred from Provisions 

6,179,455 

595,468 

Change in liability due to inflation and discounting rates 

(387,385) 

629,475 

Paid during the year 

(3,963,484) 

(3,706,497) 


8,240,835 

6,412,249 

Non-current liabilities 

4,620,168 

2,796,362 

Current liabilities 

3,620,667 

3,615,887 


8,240,835 

6,412,249 


61 





















George Local Municipality 



Annual Financial Statements for the year ended 30 June 2019 



Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

16. 

Consumer deposits 




Electricity and water 

27,596,642 

27,168,038 


Guarantees held in lieu of electricity and water deposits 

19,773,982 

18,433,832 


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


Guarantees are given by business consumers on application for new water and electricity connections instead 
of deposits. In cases where consumers default on their accounts, the municipality can request the guarantee 


amounts from the consumers' bank as payment for the outstanding accounts. 



17. 

Employee benefit obligations 




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




Non-current liabilities 

Post-Retirement Medical Aid benefits liability 

136,697,358 

124,210,257 


Ex-gratia pension benefits liability 

1,507,666 

1,415,860 


Long service awards 

23,556,631 

19,797,166 



161,761,655 

145,423,283 


Current liabilities 

Post-Retirement Medical Aid benefits liability 

5,980,043 

5,367,866 


Ex-gratia pension benefits liability 

251,598 

248,958 


Long service awards 

2,586,095 

3,573,533 


Staff leave 

37,844,668 

35,681,280 


Staff annual bonus 

12,248,842 

10,301,189 



58,911,246 

55,172,826 


Total liabilities 

Post-Retirement Medical Aid benefits liability 

142,677,401 

129,578,123 


Ex-gratia pension benefits liability 

1,759,264 

1,664,818 


Long service awards 

26,142,726 

23,370,699 


Staff leave 

37,844,668 

35,681,280 


Staff annual bonus 

12,248,842 

10,301,189 



220,672,901 

200,596,109 


Post-retirement medical aid benefit liability 

The municipality provides certain post-retirement medical benefits by funding the medical aid contributions of 
qualifying retired members of the municipality. According to the rules of the Medical Aid Funds, with which the 
municipality is associated, a member (who is on the current Conditions of Service) is entitled to remain a 
continuation member of such medical aid fund on retirement, in which case the municipality is liable for a 
certain portion of the medical aid membership fee. The municipality operates an unfunded defined benefit 
plan for these qualifying employees. 

The most recent actuarial valuations of the present value of the defined benefit obligation were carried out at 
30 June 2019. The present value of the defined benefit obligation, and the related current service cost and past 
service cost, were measured using the Projected Unit Credit Method. 


62 





















George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

17. Employee benefit obligations (continued) 

In-service (Employees) members 

587 

554 

In-service (Employees) non-members 

690 

691 

Continuation members (Retirees, widowers and orphans) 

135 

128 


1,412 

1,373 

In-service members 

71,183,564 

65,392,181 

Continuation members 

71,493,837 

64,185,942 


142,677,401 

129,578,123 


The municipality makes monthly contributions for health care arrangements to the following medical aid 
schemes: 

• Bonitas 

• LA Health 

• Hosmed 

• Key Health 

• Samwumed 

The Current-service cost for the year ending 30 June 2020 is estimated to be R5,471,843 (2019: R4,925,534) 
whereas the interest cost for the same year is estimated to be R13,067,016 (2018: R12,124,239). 

The principal assumptions used for the purposes of the actuarial valuations were as follows: 


i) Rate of interest 

Discount rate 9.35% 9.55% 

Health care cost inflation rate 6.82 % 7.36 % 

Net effective discount rate 2.37 % 2.04 % 

Expected retirement age - females 62 62 

Expected retirement age - males 62 62 


Discount rate: GRAP 25 stipulates that the choice of this rate should be derived from government bond yields 
consistent with the estimated term of the post-employment liabilities. However, where there is no deep market 
in government bonds with a sufficiently long maturity to match the estimated term of all the benefit payments, 
current market rates of the appropriate term should be used to discount shorter term payments, and the 
discount rate for longer maturities should be estimated by extrapolating current market rates along the yield 
curve. Consequently, a discount rate of 9.35% per annum has been used. The corresponding index-linked yield 
at this term is 3.35%. These rates do not reflect any adjustment for taxation. These rates were deduced from the 
interest rate data obtained from the Johannesburg Stock Exchange after the market close on 28 June 2019. 

ii) Mortality rates 

Pre-retirement: SA 85 - 90 mortality table 

Post-retirement: PA (90 - 1) table with a 1% mortality improvement p.a. from 2010 

iii) Normal retirement age 

The normal retirement age for employees of the municipality was assumed to be 62 years where data was 
unavailable. 

The amounts recognised in the Statement of Financial Position are as follows: 


63 














George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

17. Employee benefit obligations (continued) 



Present value of fund obligations 

Fair value plan assets 

142,677,401 

129,578,123 


142,677,401 

129,578,123 

Amounts recognised in the Statement of Financial Performance are as follows: 



Current service cost 

Interest cost 

Recognised actuarial losses / (gains) 

4,925,534 

12,124,239 

1,417,371 

4,541,531 

11,625,744 
(5,198,472) 

Total included in employee related cost - refer to note 29 

18,467,144 

10,968,803 

The movement in the defined benefit obligation over the year is as follows: 



Balance at the beginning of the year 

- Current service cost 

- Interest cost 
-Actuarial losses (gains) 

- Benefits paid 

129,578,123 

4,925,534 

12,124,239 

1,417,371 

(5,367,866) 

123,586,646 

4,541,531 

11,625,744 

(5,198,472) 

(4,977,326) 

Balance at the end of the year 

142,677,401 

129,578,123 


The table below summarises the accrued liabilities and the plan assets for the current period and the previous 
four periods (R millions). 


Liability History 

Accrued liability 

Fair value of plan 
asset 

30 June 2015 

134.044 

30 June 2016 

126.256 

30 June 2017 

123.587 

30 June 2018 

129.578 

30 June 2019 

142.677 

Surplus / (Deficit) 

(134.044) 

(126.256) 

(123.587) 

(129.578) 

(142.677) 


The table below summarises the experience adjustments for the current period and the previous four periods. 
Experience adjustments are the effects of differences between the previous actuarial assumptions and what 
has actually occurred (R millions). 


Experience 

adjustments 

30 June 2015 

30 June 2016 

30 June 2017 

30 June 2018 

30 June 2019 

Liabilities: (Gain) / Loss 

5.507 

(4.381) 

(1.791) 

2.128 

2.694 

Assets: Gain / (Loss) 

- 

- 

- 

- 

- 


5.507 

(4.381) 

(1.791) 

2.128 

2.694 


64 





































George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


17. Employee benefit obligations (continued) 

The effect of a 1% movement in the assumed rate of health care cost inflation is as follows: 

Increase 

745,300 
5,685,000 

(1,125,500) 
(8,230,000) 


Effect on the current service cost and interest cost 
Effect on the defined benefit obligation 

Decrease 

Effect on the current service cost and interest cost 
Effect on the defined benefit obligation 


867,300 

7,689,000 

(1,272,800) 

(10,616,000) 


Ex-gratia pension liability 

The Ex-gratia pension benefit plan is a defined benefit plan. As at 30 June 2019 2 employees and 13 pensioners 
were eligible for payments in terms of this plan. 

The Municipality provides pension benefits to all employees that are not members of the Pension or Provident 
Funds who have completed at least 10 years of service at the Council and have reached the age of 60. The 
benefit is calculated according to the average annual salary earned during the last year of service multiplied 
by number of years of service, divided by 60. 

The Current-service cost for the year ending 30 June 2020 is estimated to be Rnil (2018: Rnil) whereas the interest 
cost for the same year is estimated to be R121,370 (2019: R126,354). 

Pensioners 
Eligible employees 

15 16 


13 14 

2 2 


The principal assumptions used for the purposes of the actuarial valuations were as follows: 

i) Rate of interest 

Discount rate 7.42% 8.19% 

Pension increase rate 2.01 % 2.19% 

Net effective discount rate 5.31 % 5.57% 

Discount Rate: GRAP 25 stipulates that the choice of this rate should be derived from government bond yields 
consistent with the estimated term of the employee benefit liabilities. Flowever, where there is no deep market 
in government bonds with a sufficiently long maturity to match the estimated term of all the benefit payments, 
current market rates of the appropriate term should be used to discount shorter term payments, and the 
discount rate for longer maturities should be estimated by extrapolating current market rates along the yield 
curve. Consequently, a discount rate of 7.42% per annum has been used. The corresponding index-linked yield 
at this term is 2.80%. These rates do not reflect any adjustment for taxation. These rates were deduced from the 
interest rate data obtained from the Johannesburg Stock Exchange after the market close on 28 June 2019. 

Expected retirement age 62 62 

ii) Mortality rates 

Pre-retirement: SA 85 - 90 mortality table 

Post-retirement: PA (90- 1) table with a 1% mortality improvement p.a. from 2010 

iii) Normal retirement age 

The normal retirement age for employees of the municipality was assumed to be 62 years where data was 
unavailable. 


65 









George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


17. Employee benefit obligations (continued) 

The amounts recognised in the Statement of Financial Position are as follows: 


Present value of fund obligations 

1,759,264 

1,664,818 

Fair value of plan assets 

- 

- 


1,759,264 

1,664,818 

The amounts recognised in the Statement of Financial Performance are as follows: 

Interest cost 

126,354 

1 76,034 

Recognised actuarial losses / (gains) 

217,050 

(530,113) 

Total included in employee related cost - refer to note 29 

343,404 

(354,079) 

The movement in the defined benefit obligation over the year is as follows: 

Balance at the beginning of the year 

1,664,818 

2,295,611 

- Interest cost 

126,354 

1 76,034 

-Actuarial losses (gains) 

217,050 

(530,113) 

- Benefits paid 

(248,958) 

(276,714) 


1,759,264 

1,664,818 


The table below summarises the accrued liabilities and the plan assets for the current period and the previous 
four periods: 


Liability History 

30 June 2015 

30 June 2016 

30 June 2017 

30 June 2018 

30 June 2019 

Accrued liability 

2,681,298 

2,679,172 

2,295,611 

1,664,818 

1,759,264 

Fair value of plan 
assets 

“ 

“ 

“ 

“ 

“ 

Surplus / (Deficit) 

(2,681,298) 

(2,679,172) 

(2,295,611) 

(1,664,818) 

(1,759,264) 

The table below summarises the experience adjustments 

for the current 

period and the 

previous periods. 

Experience adjustments are the effects of 
has actually occurred. 

differences between the previous actuarial assumptions and what 

Experience 

adjustment 

30 June 2015 

30 June 2016 

30 June 2017 

30 June 2018 

30 June 2019 

Liabilities: (Gain) / Loss 

85,984 

416,614 

95,982 

(526,983) 

83,875 

Assets: Gain / (Loss) 

- 

- 

- 

- 

- 


85,984 

416,614 

95,982 

(526,983) 

83,875 


66 





































George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


17. Employee benefit obligations (continued) 

The effect of a 1% movement in the assumed pension increase rate is as follows: 

Increase 


Effect on interest cost 

8,538 

13,421 

Effect on defined benefit obligation 

106,464 

104,240 

Decrease 



Effect on interest cost 

(7,752) 

(12,084) 

Effect on defined benefit obligation 

(96,938) 

(94,659) 


Long service awards 

The municipality's obligation for Long Service Awards is a defined benefit plan. This plan is wholly unfunded as 
no contributions are made by the municipality into funds that are legally separate from the municipality and 
from which the employee benefits are paid (each subsequent financial year's expected payments of long 
service bonuses are budgeted for). 

The municipality, in substance, underwrites the actuarial and investment risks associated with the plan. 
Consequently, the expense recognised for the defined benefit plan is the full additional liability accrued due to 
additional benefit entitlement. The municipality's net obligation in respect of the defined benefit long service 
allowances is the present value of the defined benefit obligation less the fair value of any plan assets, together 
with adjustments for unrecognised actuarial gains or losses and past service cost. The present value of the 
defined benefit obligation is determined by discounting the estimated future cash outflows of the benefits that 
will be paid to employees and using suitable interest rates. 

The calculation is performed by registered actuaries using the projected unit credit method. The most recent 
actuarial valuations of the present value of the defined benefit obligation were carried out at 30 June 2019. 

At year end, 1,277 (2018: 1,245) employees were eligible for Long-service Awards. The future service cost for the 
ensuing year is estimated to be R2,165,741 (2019: Rl,743,927), whereas the interest cost for the ensuing year is 
estimated to be R2,039,762 (2019: R 1,846,394). 

The principal assumptions used for the purposes of the actuarial valuations were as follows: 


i) Rate of interest 


Discount rate 

8.20 % 

8.54 % 

Benefit inflation rate 

5.58 % 

6.15 % 

Net effective discount rate 

2.48 % 

2.25 % 

Expected retirement age 

62 

62 


Discount Rate: GRAP 25 stipulates that the choice of this rate should be derived from government bond yields 
consistent with the estimated term of the employee benefit liabilities. However, where there is no deep market 
in government bonds with a sufficiently long maturity to match the estimated term of all the benefit payments, 
current market rates of the appropriate term should be used to discount shorter term payments, and the 
discount rate for longer maturities should be estimated by extrapolating current market rates along the yield 
curve. Consequently, a discount rate of 8.20% per annum has been used. The first step in the derivation of this 
yield is to calculate the liability-weighted average of the yields corresponding to the actual terms until payment 
of long service awards, for each employee. The 8.20% is then derived as the liability-weighted average of the 
yields derived in the first step. The corresponding liability-weighted index-linked yield is 2.98%. These rates do not 
reflect any adjustment for taxation. These rates were deduced from the interest rate data obtained from the JSE 
after the market close on 28 June 2019. 


67 





George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


17. Employee benefit obligations (continued) 

ii) Mortality rates: 

Pre-retirement: SA 85 - 90 mortality table 
Withdrawal from service: Detailed sample rates used 

iii) Normal retirement age 

The normal retirement age for employees of the municipality was assumed to be 62 years where data was 
unavailable. 


The amounts recognised in the Statement of Financial Position are as follows: 


Present value of projected fund obligations 

Plan assets 

26,142,726 

23,370,699 


26,142,726 

23,370,699 

Amounts recognised in the Statement of Financial Performance are as follows: 
Net current service cost and actuarial losses (gains) included in the 
long service awards expense 

Interest cost 

4,499,166 

1,846,394 

2,715,415 

1,701,781 

Total included in employee related cost - refer to note 29 

6,345,560 

4,417,196 

The movement in the defined benefit obligation over the year is as follows: 
Balance at the beginning of the year 

- Net current service cost and actuarial losses (gains) included in the 
long service awards expense 

- Interest cost 

- Benefits paid 

23,370,699 

4,499,166 

1,846,394 

(3,573,533) 

21,334,639 

2,715,415 

1,701,781 

(2,381,136) 


26,142,726 

23,370,699 


The table below summarises the accrued liabilities and the plan assets for the current period and the previous 
four periods: 


Liability History 

30 June 2015 

30 June 2016 

30 June 2017 

30 June 2018 

30 June 2019 

Accrued Liability 

19,674,941 

20,800,828 

21,334,639 

23,370,699 

26,142,726 

Fair value of plan 
assets 

“ 

“ 

“ 

“ 

“ 

Surplus / (Deficit) 

(19,674,941) 

(20,800,828) 

(21,334,639) 

(23,370,699) 

(26,142,726) 

The table below summarises the experience adjustments for the current and previous four periods. Experience 

adjustments are the effects of differences between the previous actuarial assumptions and what has actually 
occurred: 

Experience 

adjustment 

30 June 2015 

30 June 2016 

30 June 2017 

30 June 2018 

30 June 2019 

Liabilities: (Gain) / Loss 

908,105 

852,348 

729,329 

1,486,754 

1,418,184 

Assets: Gain / (Loss) 

- 

- 

- 

- 

- 


908,105 

852,348 

729,329 

1,486,754 

1,418,184 


68 





































George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


17. Employee benefit obligations (continued) 

The effect of a 1% movement in the assumed salary inflation rate is as follows: 


Increase 

Effect on the current service cost and interest cost 
Effect on the defined benefit obligation 

Decrease 

Effect on the current service cost and interest cost 
Effect on the defined benefit obligation 

Multi-employer retirement benefit information 


278,100 
1,823,000 

(248,900) 

(1,627,000) 


242,500 
1,485,000 

(217,500) 

(1,342,000) 


Employees belong to a variety of approved Pension and Provident Funds as described below. These schemes 
are subject to either a tri-annual, bi-annual or annual actuarial valuation, details which are provided below. 

SALA Pension Fund and the South African Municipal Workers Union Pension Fund are defined benefit plans, 
whereas the LA Retirement Fund and the Municipal Councillors Pension Fund are defined contribution plans. All 
of these afore-mentioned funds are multi-employer plans. Sufficient information is not available to use defined 
benefit accounting for the pension and retirement funds 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 is compiled for each fund and financial statements are not drafted for each 
participating employer. 

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

The only obligation of the municipality with respect to the retirement benefit plans is to make the specified 
contributions. Where Councillors / employees leave the plans prior to full vesting of the contributions, the 
contributions payable by the municipality are reduced by the amount of forfeited contributions. 

The total expense recognised in the Statement of Financial Performance of R46,995,037 for employees and 
R731,784 for Councillors represents contributions payable to these plans by the municipality at rates specified in 
the rules of the plans. 

LA Retirement Fund 


The LA Retirement Fund's contribution rate payable is 9% by the members and 18% by Council. The valuation of 
30 June 2018 showed that the funding level is 100%. 

SALA Pension Fund 


The contribution rate paid by the members 8.60% and Council 19.18% is sufficient to fund the benefits accruing 
from the fund in the future. 

At the valuation date of 1 July 2015 the SALA Pension Fund was 100% funded and revealed that the fund was 
certified to be in a sound financial position. 


69 





George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


17. Employee benefit obligations (continued) 

Municipal Councillors Pension Fund 

The fund was placed under curatorship on 19 December 2017. The appointed curators was given full legal 
powers and responsibilities to implement necessary mechanisms and remedial actions which will ensure the 
recoverability and where possible long-run sustainability of the fund for the benefit of its members. The 
appointed curators reports their progress to The Registrar of Pension Funds on a continuous basis. On year end, 
the fund was still under curatorship. 

The Municipal Councillors Pension Fund operates as a defined contribution scheme. The contribution rate paid 
by the members (13,75%) and Council (15%) is sufficient to fund the benefits accruing from the fund in the 
future. 

South African Municipal Workers Union Pension Fund 

The financial statements of the fund on 30 June 2017 contains a report by the actuarial valuator stating that the 
last actuarial valuation was performed on 30 June 2014 and fund was in sound financial position of that date. 

The contribution rate paid by the members of 9% and Council of 18% is sufficient to fund the benefits accruing 
from the fund in the future. 

Staff leave 

The movement on the leave provision consists of the following: 


Opening balance 

35,681,280 

30,914,992 

Payments 

(1,143,094) 

(5,140,217) 

Additional provision 

3,306,482 

9,906,505 


37,844,668 

35,681,280 

Staff annual bonus 



The movement on the annual bonus provision consist of the following: 



Opening balance 

10,301,189 

10,279,611 

Payments 

(10,301,189) 

(10,279,611) 

Additional bonus accrual recognised during the year 

12,248,842 

10,301,189 


12,248,842 

10,301,189 


70 













George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


18. Provisions 

Reconciliation of provisions - 2019 



Opening 

Additions 

Utilised during 

Change in 

Transferred to 

Total 


Balance 


the year 

discount 

Trade and 






factor 

Other 

Payables 


Rehabilitation of landfill 
site 

25,358,680 

31,038,854 

(738,366) 

2,003,963 


57,663,131 

Compensation Liability 
GIPTN 

67,482,868 

5,427,300 

(2,764,659) 

587,743 

(6,179,455) 

64,553,797 


92,841,548 

36,466,154 

(3,503,025) 

2,591,706 

(6,179,455) 

122,216,928 

Reconciliation of provisions 

- 2018 







Opening 

Additions 

Utilised during 

Change in 

Transferred to 

Total 


Balance 


the year 

discount 

Trade and 






factor 

Other 

payables 


Rehabilitation of landfill 
site 

21,653,095 

3,849,593 

(1,811,621) 

1,667,613 

“ 

25,358,680 

Compensation Liability 
GIPTN 

63,166,902 

5,263,264 

“ 

(351,830) 

(595,468) 

67,482,868 


84,819,997 

9,112,857 

(1,811,621) 

1,315,783 

(595,468) 

92,841,548 

Current liabilities consist of 





2019 

2018 

Rehabilitation of landfill site 





12,539,187 

2,228,709 

Compensation Liability GIPTN 




1,071,983 

159,586 






13,611,170 

2,388,295 

Non-current liabilities 




108,605,758 

90,453,253 

Current liabilities 





13,611,170 

2,388,295 





122,216,928 

92,841,548 


Rehabilitation of landfill site 

The provision is made in terms of the municipality's licensing stipulations on the landfill waste sites. The landfill 
sites have reached full capacity and the municipality obtained closure licences during the 2015 financial year 
for both the George and Uniondale landfill sites. The closure licences requires that the rehabilitation commence 
within five years after of the date of issue of the licence and the rehabilitation should be completed within 
three to five years after the rehabilitation commencement date. 

During the year Delta Built Environment Consultants (Pty) Ltd visited the George landfill site and Aurecon South 
Africa (Pty) Ltd visited the Uniondale landfill site to assist the municipality with their rehabilitation plans so that the 
municipality can keep to the deadlines as stipulated in the closure licences. 

The cost as at 30 June 2019 has been escalated annually with the Construction Input Price Index rate until the 
estimated time of closure and discounted to present value using South African Government Bond rates of 
between 6.3 % and 7.235% depending on the estimated time of closure. 

The movement on each of the landfill site's provisions is: 


71 

















George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


18. Provisions (continued) 



Opening 

Additions / 

Utilised during 

Unwinding of 

Total 


balance 

Reversal 

the year 

discount 


George 

21,224,492 

27,383,852 

(694,470) 

1,681,555 

49,595,429 

Uniondale 

4,134,188 

3,655,002 

(43,896) 

322,408 

8,067,702 


25,358,680 

31,038,854 

(738,366) 

2,003,963 

57,663,131 


Compensation Liability: George Integrated Public Transport Network 

The George Integrated Public Transport Network (GIPTN) has been developed by the municipality and the 
Provincial Government of the Western Cape to transform the road-based public transport sector through the 
establishment of a high quality, flexible and integrated public transport network. 

An operating company was established and the current taxi owners form part of the operating company and 
operate the buses in the network. According to the signed operator's agreement, the taxi owners have to 
relinquish their existing taxi operators' licences to receive the compensation. 

The bus services started operating during December 2014 and are rolled out in phases. 

The provision for the compensation is based on the signed agreements with each of the taxi operators. Based 
on these agreements, 229 (2018: 229) licences were subject to the buy-in option, while 278 (2018: 278) licences 
were subject to the election of the buy-out option. The buy-in provision for operators who started receiving their 
monthly buy-in amounts was transferred to Trade and other payables. Refer to note 15. 

The undiscounted provision for compensation before any payouts over the five years covered by the 
compensation agreement is R75,438,195 (2018: R80,606,087). A discount rate of 6.790% (2018: 7.820%) (an 
average of the 2 and 5 year Government Bond rates) was used to discount the provision. 

The municipality expects to pay the buy-out options between November 2019 and October 2021 as the next 
phases are rolled out and the buy-in options within 5 years from the roll out dates. 


72 















George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 


2018 

19. Conditional government grants and subsidies 

Unspent conditional government grants and subsidies 

33,285,833 


75,143,780 

National Government Grants 

20,237,833 


27,448,316 

Provincial Government Grants 

5,343,973 


39,991,437 

Other 

7,704,027 


7,704,027 

Less: Conditional government grants and subsidies receivable - Note 4 

(8,989,361) 


(4,196,365) 

National Government Grants 

(262,147) 


(262,147) 

Provincial Government Grants 

(6,153,816) 


(1,360,820) 

Other 

(2,573,398) 

24,296,472 


(2,573,398) 

70,947,415 

The amount of unspent conditional grants and receipts is held in the operating bank account of the 
municipality until utilised. 

The total grants recognised in the Statement of Financial Performance are (Refer to note 27): 

Unconditional Grants 

Grants 

Conditional Grants 

137,401,000 


122,613,000 

Grants and Donations 

435,939,404 


481,983,708 

Subsidies 

1,045,420 


810,684 

Total Government Grants and Subsidies 

574,385,824 


605,407,392 

Government grants & subsidies - Operating 

452,232,725 


402,554,545 

Government grants & subsidies - Capital 

Details of the different grants are set out below. 

Unconditional Grants 

122,153,099 

574,385,824 


202,852,847 

605,407,392 

19.1 Equitable share 

Grants received 

137,401,000 


122,613,000 

Conditions met - Operating 

(137,401,000) 

(122,613,000) 

Conditions met - Capital 

- 


- 

Conditions still to be met/(Grant expenditure to be recovered) 

- 


- 


The Equitable Share is the unconditional share of the revenue raised nationally and is being allocated in terms 
of Section 214 of the Constitution (Act 108 of 1996) to the municipality by the National Treasury. 

Conditional Grants 

19.2 National: Finance Management Grant (FMG) 

Opening balance 

Grants received 1,550,000 1,550,000 

Conditions met - Operating (1,550,000) (1,550,000) 

Conditions still to be met/(Grant expenditure to be recovered) 


The Financial Management Grant is paid by National Treasury to municipalities to help implement the financial 
reforms required by the Municipal Finance Management Act (MFMA), 2003. The FMG Grant also pays for the 
cost of the Financial Management Internship Program (e.g. salary costs of the Financial Management Interns). 


73 



































George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

19. Conditional government grants and subsidies (continued) 



19.3 National: Infrastructure Skills Development 

Opening balance 

Grants received 

Conditions met - Operating 

Conditions met - Capital 

6,000,000 

(4,934,286) 

(102,790) 

4,600,000 

(4,392,999) 

(207,001) 

Conditions still to be met/(Grant expenditure to be recovered) 

962,924 

- 

The Infrastructure Skills Development Grant is given to strengthen the capacity of local 
effectively and efficiently deliver quality infrastructure, by increasing the pool of skills available 
lifelong learning and the transfer of knowledge to municipalities. 

government to 
and to facilitate 

19.4 National: Energy Efficiency and Demand Side Management 

Grant 

Opening balance 

Grants received 

Conditions met - Operating 

Conditions met - Capital 

1,154,822 

7,000,000 

(378,238) 

(7,602,420) 

7,000,000 

(5,845,178) 

Conditions still to be met/(Grant expenditure to be recovered) 

174,164 

1,154,822 

The Energy Efficiency and Demand Side Management Grant is given to municipalities to implement energy 
efficiency and demand side management (EEDSM) initiatives within municipal infrastructure in order to reduce 
electricity consumption and improve energy efficiency. 

19.5 National: Municipal Infrastructure Grant (MIG) 

Opening balance 

Grants received 

Conditions met - Operating 

Conditions met - Capital 

39,338,000 

(1,531,873) 

(35,595,160) 

40,764,000 

(2,038,200) 

(38,725,800) 

Conditions still to be met/(Grant expenditure to be recovered) 

2,210,967 

- 


The grant was utilised to construct water and sewerage infrastructure and also to upgrade sport facilities, with 
the main focus on the historically disadvantaged areas. 

19.6 National: Municipal Infrastructure Grant (MIG) - Special Sport 
Allocation 

Opening balance 


Grants received 

8,550,000 

- 

Conditions met - Capital 

(563,287) 

- 

Conditions still to be met/(Grant expenditure to be recovered) 

7,986,713 

- 

19.7 National: Regional Bulk Infrastructure Grant (RBIG) 

Opening balance 

9,807,616 

10,659,331 

Grants received 

- 

- 

Conditions met - Capital 

(3,089,776) 

(851,715) 

Conditions still to be met/(Grant expenditure to be recovered) 

6,717,840 

9,807,616 


The grant was allocated to the municipality to construct bulk infrastructure for water and waste water. The 
remainder of this grant is specifically for raising the dam wall of the Garden Route dam. The licence was issued 
by the Department of Water Affairs. 


74 

























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

19. Conditional government grants and subsidies (continued) 



19.8 National: Integrated National Electrification Grant 

Opening balance 

4,776,725 

(3,017,189) 

Grants received 

13,000,000 

18,048,000 

Conditions met - Capital 

(16,475,935) 

(10,254,086) 

Conditions still to be met/(Grant expenditure to be recovered) 

1,300,790 

4,776,725 

The National Electrification Grant was used to upgrade the sub-station and electrification network. 


19.9 National: Expanded Public Works Program Grant (EPWP) 

Opening balance 

- 

- 

Grants received 

5,466,000 

4,001,000 

Conditions met - Operating 

(5,466,000) 

(4,001,000) 

Conditions still to be met/(Grant expenditure to be recovered) 

- 

- 

The Expanded Public Works Program Grant was used to increase 
programs that increase job creation and skills development. 

labour employment through infrastructure 

19.10 National: Lawaaikamp Sports Grounds (Lotto) 

Opening balance 

(262,147) 

(262,147) 

Grants received 

- 

- 

Conditions met - Capital 

- 

- 

Conditions still to be met/(Grant expenditure to be recovered) 

(262,147) 

(262,147) 

The National Lottery has given this grant to the municipality specifically for the upgrading of the Lawaaikamp 
Sports Grounds. 

19.11 National: Public Transport Grant 

Opening balance 

11,709,152 

25,253,405 

Grants received 

167,675,000 

210,362,000 

Conditions met - Operating 

(114,836,159) 

(124,764,718) 

Conditions met - Capital 

(52,656,553) 

(99,141,534) 

Conditions met - Cash back of non-current provision 

(11,007,004) 

- 

Conditions still to be met/(Grant expenditure to be recovered) 

884,436 

11,709,153 


This grant's purpose is to provide supplementary operational funding to municipalities operating approved 
Integrated Public Transport Network services and to provide improved public transport network services that are 
formal, scheduled and well managed, as well as to provide funding for accelerated planning, construction and 
improvement of public and non-motorised transport infrastructure. 

The municipality applied for roll over funding to cash back the GIPTN Compensation Provision since the cash 
available for the payment of compensation is less than the balance of the provision. The cash back transaction 
of the non-current provision is reflected in the Statement of Changes in Net Assets. 


75 





















George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

19. Conditional government grants and subsidies (continued) 



19.12 Provincial: Western Cape Financial Management Support 

Grant 

Opening balance 

Grants received 

Conditions met - Operating 

755,000 

(755,000) 

255,000 

(255,000) 

Conditions still to be met/(Grant expenditure to be recovered) 

- 

- 

The Financial Management Support Grant is given by the Western Cape Provincial Treasury to provide financial 
assistance to municipalities to improve overall financial governance within municipalities inclusive of optimising 
and administration of revenue, improving credibility and responsiveness of municipal budgets, improving of 
municipal audit outcomes and addressing institutional challenges. 

19.13 Provincial: Western Cape Financial Management Capacity 

Building Grant 

Opening balance 

Grants received 

Conditions met - Operating 

80,000 

360,000 

(440,000) 

240,000 

(160,000) 

Conditions still to be met/(Grant expenditure to be recovered) 

- 

80,000 

This grant is given to develop financial human capacity within municipal areas to enable a sustainable local 
financial skills pipeline that is responsive to municipalities' requirements to enable sound and sustainable 
financial management and good financial governance. 

19.14 Provincial: Integrated Public Transport Network Grant 

Grants received 

Conditions met - Operating 

Conditions met - Capital 

101,086,000 

(101,237,380) 

98,544,000 

(95,545,129) 

(2,998,871) 

Conditions still to be met/(Grant expenditure to be recovered) 

(151,380) 

- 

The Integrated Public Transport Network Operations grant is given to the municipality to implement a public 
transport service as contemplated in the George Integrated Public Transport Network (GIPTN). This grant will 
fund the shortfall in operational cost and provide for the additional operational support to underwrite the 
consequences of significantly impaired operating conditions and magnified transformation obligations. This 
grant will also enhance infrastructure for public transport services provided by the municipality 

19.15 Provincial: Fire Services Capacity Building Grant 

Opening balance 

Grants received 

Conditions met - Operating 

Conditions met - Capital 

Conditions still to be met/(Grant expenditure to be recovered) 

188,529 

(69,733) 

(107,374) 

11,422 

800,000 

(611,471) 

188,529 

This grant is given to the municipality to provide financial assistance to 
communication, mobilisation systems and fire services. 

ensure functional 

emergency 

19.16 Provincial: Integrated Transport Planning Grant 

Opening balance 

Grants received 

Conditions met - Operating 

600,000 

600,000 

(6,506) 

600,000 

Conditions still to be met/(Grant expenditure to be recovered) 

1,193,494 

600,000 


76 

























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


19. Conditional government grants and subsidies (continued) 

This grant is given for the review and update municipal Integrated Transport Plans in terms of the National Land 
Transport Act, 2009 (Act No. 5 of 2009). 


19.17 Provincial: Human Settlements Operating Grants 

Opening balance 

Grants received 

Conditions met - Operating 

Transfer from Human Settlements Capital Grant 


37,084,094 

33,896,366 

(67,902,213) 

530,000 


29,594,131 

44,252,104 

(36,762,141) 


Conditions still to be met/(Grant expenditure to be recovered) 


3,608,247 37,084,094 


This grant is given to provide funding for the creation of sustainable human settlements. The outcome of this 
grant is to provide top structures and basic social and economic amenities that contributes to the 
establishment of sustainable human settlements. 


19.18 Provincial: Human Settlements Capital Grant 

Opening balance 
Grants received 
Conditions met - Capital 

Transfer to Human Settlements Operating Grant 


1,941,185 

(5,959,804) 

(530,000) 


8,468,250 

36,948,703 

(43,475,768) 


Conditions still to be met/(Grant expenditure to be recovered) 


(4,548,619) 1,941,185 


This grant is given to provide funding for the creation of sustainable human settlements. The outcome of this 
grant is to provide basic infrastructure that contributes to the establishment of sustainable human settlements. 


19.19 Provincial: Sport / Recreational Facilities 

Opening balance 
Grants received 
Conditions met - Operating 


228,000 


54,000 

(54,000) 


Conditions still to be met/(Grant expenditure to be recovered) 


228,000 


This grant is given by Provincial Treasury to initiate and support socially cohesive sport and recreation structures 
and/or activities. 

19.20 Provincial: Proclaimed Roads 

Opening balance 

Grants received 5,168,098 441,000 

Conditions met - Operating (5,168,098) (441,000) 

Conditions still to be met/(Grant expenditure to be recovered) 


This grant is given by Provincial Treasury to financially assist municipalities with the maintenance/construction of 
proclaimed municipal main roads, where the municipality is the Road Authority (Section 50 of Ordinance 19 of 
1976). 


19.21 Provincial: Thembalethu & Pacaltsdorp sport fields (YDVS) 

Opening balance 
Grants received 
Transfers 

Conditions still to be met/(Grant expenditure to be recovered) 


(1,360,820) (1,360,820) 

(92,998) 

(1,453,818) (1,360,820) 


This grant was utilised to upgrade the Thembalethu and Pacaltsdorp sport fields. 


77 

























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

19. Conditional government grants and subsidies (continued) 



19.22 Provincial: Electricity Master Plan Operations 

Opening balance 


230,000 

Conditions met - Operating 

- 

(230,000) 

Conditions still to be met/(Grant expenditure to be recovered) 

- 

- 

This grant was given by Provincial Treasury to the municipality to provide financial assistance to ensure effective 
functioning of municipal electrical infrastructure and to maximise the provision of basic electricity to citizens. 

19.23 Provincial: Library Services 

Opening balance 


741,423 

Grants received 

9,239,000 

8,635,000 

Conditions met - Operating 

(9,239,000) 

(8,635,000) 

Conditions met - Capital 

- 

(741,423) 

Conditions still to be met/(Grant expenditure to be recovered) 

- 

- 

This grant is to be used for the transformation of urban and rural community library infrastructure, facilities and 

services (primarily targeting previously disadvantaged communities) through 
provincial level in support of local government and national initiatives. 

a recapitalised 

program at 

19.24 Provincial: Community Development Workers' Operational 

Grant 

Opening balance 

52,629 

34,303 

Grants received 

- 

93,000 

Conditions met - Operating 

(15,124) 

(74,674) 

Conditions still to be met/(Grant expenditure to be recovered) 

37,505 

52,629 

This grant is for financial assistance to Municipalities to cover the operational expenses i.r.o the functions of the 

community development workers including the supervisors and regional organisers 



19.25 Provincial: Thembalethu Thusong Service Centre 

Opening balance 



Grants received 

200,000 

212,000 

Conditions met - Operating 

(200,000) 

(212,000) 

Conditions still to be met/(Grant expenditure to be recovered) 

- 

- 

This grant is given to provide financial assistance to Municipalities, ensuring the financial sustainability of the 

Thusong Service Centres. 



19.26 Provincial: Local Government Graduate Internship Grant 

Opening balance 

45,000 

60,000 

Grants received 

72,000 

- 

Conditions met - Operating 

(56,695) 

(15,000) 

Repayment of grant 

(45,000) 

- 


15,305 

45,000 


The Local Government Graduate Internship Grant is given to the municipality to provide financial assistance to 
the municipality in support of capacity building for the future by means of a graduate internship program. 


78 

























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

19. Conditional government grants and subsidies (continued) 

19.27 Provincial: Municipal Service Delivery and Capacity Building 

Grant 

Opening balance 



Grants received 

250,000 

- 

Conditions met - Operating 

- 

- 

Conditions met - Capital 

- 

- 



250,000 

- 

The Municipal Service Delivery and Capacity Building Grant is given to the 

municipality to strengthen and 

improve municipal service delivery and capacity building to enable municipalities to manage their own affairs, 
to exercise their own powers and to perform their functions as prescribed by local government legislation. 

19.28 Other: Eden District Municipality Electrification Grant 

Opening balance 

200,000 

200,000 

Grants received 

- 

- 

Conditions met - Capital 

- 

- 

Conditions still to be met/(Grant expenditure to be recovered) 

200,000 

200,000 

The Eden District Municipality grant was given for electrification of certain areas. 



19.29 Other: Eden District Municipality Emergency Relief Funds 

Opening balance 

(2,573,398) 

(2,573,398) 

Grants received 

- 

- 

Conditions met - Capital 

- 

- 

Conditions still to be met/(Grant expenditure to be recovered) 

(2,573,398) 

(2,573,398) 

This grant was given to reimburse municipalities for flood damage incurred by the municipality. 


19.30 Other: SANRAL N2 /York Bridge 

Opening balance 

7,504,027 

7,504,027 

Grants received 

- 

- 

Conditions met - Capital 

- 

- 

Conditions still to be met/(Grant expenditure to be recovered) 

7,504,027 

7,504,027 

This grant was utilised to widen the N2/York Street bridge and to add a pedestrian crossing to the bridge. 

19.31 Other: LG Seta 

Opening balance 



Grants received 

1,045,420 

810,684 

Conditions met - Operating 

(1,045,420) 

(810,684) 

Conditions still to be met/(Grant expenditure to be recovered) 

- 

- 


These amounts were received from LG Seta based on the municipality's workplace skills plan. 


79 

























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


19. Conditional government grants and subsidies (continued) 


Total Grants 


Opening balance 

Grants received 

Conditions met - Operating 

Conditions met - Capital 

Conditions met - Cash back of non-current provision 

Repayment of grant funding received 

Transfers 

70,947,414 

538,879,884 

(452,232,725) 

(122,153,099) 

(11,007,004) 
(45,000) 
(92,998) 

75,585,316 

600,769,491 

(402,554,545) 

(202,852,847) 

Conditions still to be met/(Grant expenditure to be recovered) 

24,296,472 

70,947,415 

Housing development fund 



Unappropriated surplus 

Loans extinguished by Government on 1 April 1998 

8,205,659 

53,383,243 

9,557,902 

53,383,243 


61,588,902 

62,941,145 

The housing development fund is represented by the following assets and liabilities 


Flousing selling scheme loans 

Inventory 

Trade and other receivables from exchange transactions 

Trade and other receivables from non-exchange transactions 

Bank and cash 

Trade and other payables from exchange transactions 

414,774 

141,633 

710,915 

631,853 

60,321,580 

(631,853) 

535,157 

141,633 

657,716 

588,291 

61,606,639 

(588,291) 

Total Housing Development Fund Assets and Liabilities 

61,588,902 

62,941,145 

Service charges 



Electricity 

Water 

Sewerage and sanitation charges 

Refuse removal 

623,449,586 

129,255,985 

98,989,249 

81,726,654 

603,331,974 

117,656,763 

87,951,733 

69,777,667 


933,421,474 

878,718,137 

The amounts disclosed above for revenue from service charges are in respect of services rendered which are 
billed to the consumers on a monthly basis according to the approved tariffs. 

Income from agency services 



Provincial vehicle registrations 

11,140,288 

11,257,883 

GIPTN Fare Revenue 



GIPTN Fare Revenue 

44,197,337 

39,419,283 


Fare revenue is recognised in accordance with accounting policy 1.20. 


80 

























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

24. Other income 

Building plan fees and related income 

8,262,037 

7,479,252 

Camping fees 

845,963 

830,580 

Cemetery fees 

1,330,019 

1,302,138 

Collection charges 

4,012,764 

4,115,013 

Development charges 

13,260,028 

23,426,428 

Insurance claims received 

394,252 

826,047 

Land usage application fees 

633,111 

612,707 

Public contributions for donated asset additions 

- 

225,000 

Rates clearance certificates for property transfers 

830,085 

760,123 

Sundry income 

2,960,777 

1,833,571 


32,529,036 

41,410,859 


The amounts disclosed above for Other Income are in respect of services rendered, other than described in 
notes 21, 26 and 28 which are billed to or paid for by the users of the services as required according to 
approved tariffs. 

Refer to note 52 for details of the public contributions for donated asset additions. 

25. Interest received 


Outstanding debtors 


Trade receivables 

4,024,916 

4,607,646 

Art. 185(a) arrangements 

- 

516 

Land sales 

2,730 

3,068 

Selling schemes 

52,134 

65,632 


4,079,780 

4,676,862 

External Investments 

Bank accounts 

42,302,898 

14,445,220 

Short term investments 

3,942,825 

35,720,392 


46,245,723 

50,165,612 

50,325,503 

54,842,474 


81 



















George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 


2019 

2018 

26. Property rates 




Rates received 




Agriculture 


3,798,867 

3,487,250 

Commercial 


68,325,640 

56,066,392 

Formal and informal settlements 


14,315,373 

39,765 

Industrial 


14,799,926 

13,922,937 

Public service infrastructure 


76,848 

15,582 

Public benefit organisations 


273,748 

276,723 

Residential 


168,347,246 

172,761,136 

State-owned 


14,711,199 

10,117,437 

Vacant land 


18,544,888 

17,935,333 

Less: Income forgone 


(26,869,731) 

(32,234,615) 

Less: Impermissible rates 


(6,151,142) 

(7,334,180) 



270,172,862 

235,053,760 

Valuations 




Agriculture 


2,439,231,000 

1,946,902,000 

Churches & parks 


347,906,000 

356,254,300 

Commercial 


7,335,702,000 

5,771,653,390 

Formal and informal settlements 


2,287,946,000 

1,603,700 

Industrial 


1,689,371,000 

1,515,837,600 

Municipal (non-taxable valuations) 


1,344,722,000 

1,065,362,050 

Public service infrastructure 


85,897,000 

26,125,500 

Public benefit organisations 


1 79,035,000 

145,069,800 

Residential 


27,234,558,000 

23,757,737,810 

State-owned 


1,701,643,000 

1,300,859,000 

Vacant land 


1,998,391,000 

1,963,212,200 



46,644,402,000 

37,850,617,350 

Assessment rates are levied on the total value of property of which the valuation must be performed every four 
years in terms of the Municipal Property Rates Act. Interim valuations are processed on a monthly basis to take 

into account changes in individual property value due 

to alterations, completions, consolidations and 

subdivisions. 




Uniform rates of 0,6300 (2018: 0,7264) cents in the Rand 

on total 

valuations were applied 

to determine 

assessment rates. Business tariffs are levied at 0,8889 (2018: 
Mining erven, and this was applicable for all Areas. 

0,9170) 

for Commercial, Industrial, 

, Business and 

A rebate of 20% (2018: 40%) was allowed on rural residential properties, whilst rebates of 20% - 40% (2018: 20% - 

40%) were applied to pensioners, based on the annual income of the ratepayer. 


Rates are levied monthly on property owners and are payable by the 15th of each month. Owners are allowed 
to pay the 12 monthly instalments annually by 30 September each year. Interest is levied at the prime rate on 

outstanding rates amounts. 




The current General Valuation came into effect on 1 July 2018. 




82 













George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


27. Government grants and subsidies 


Operating grants 


National: Equitable Share 

137,401,000 

122,613,000 

National: Financial Management Grant (FMG) 

1,550,000 

1,550,000 

National: Infrastructure Skills Development 

4,934,286 

4,392,999 

National: Municipal Infrastructure Grant (MIG) 

1,531,873 

2,038,200 

National: Expanded Public Works Program Grant 

5,466,000 

4,001,000 

National: Public Transport Grant 

114,836,159 

124,764,718 

Provincial: Western Cape Financial Management Support Grant 

755,000 

255,000 

Provincial: Western Cape Financial Management Capacity Building 

Grant 

440,000 

160,000 

Provincial: Integrated Public Transport Network Grant 

101,237,380 

95,545,129 

Provincial: Integrated Transport Planning Grant 

6,506 

- 

Provincial: Fluman Settlements Operating Grant 

67,902,213 

36,762,141 

Provincial: Proclaimed Roads 

5,168,098 

441,000 

Provincial: Electricity Master Plan Operations Grant 

- 

230,000 

Provincial: Library Services Grant 

9,239,000 

8,635,000 

Provincial: Community Development Workers Grant 

15,124 

74,674 

Provincial: Thusong Centre Grant 

200,000 

212,000 

Provincial: Sport / Recreational Facilities Grant 

- 

54,000 

Provincial: Local Government Graduate Internship Grant 

56,695 

15,000 

Other: LG Seta 

1,045,420 

810,684 

Provincial: Fire Services Grant 

69,733 

- 

National: Energy Efficiency and Demand Side Management Grant 

378,238 

- 


452,232,725 

402,554,545 

Capital grants 

National: Infrastructure Skills Development 

102,790 

207,001 

National: Electricity Demand Side Management Grant 

7,602,420 

5,845,178 

National: Municipal Infrastructure Grant (MIG) 

35,595,160 

38,725,800 

National: Regional Bulk Infrastructure Grant (RBIG) 

3,089,776 

851,715 

National: Integrated National Electrification Grant 

16,475,935 

10,254,086 

National: Public Transport Grant 

52,656,553 

99,141,534 

National: Municipal Infrastructure Grant - Special Sport Allocation 

563,287 

- 

Provincial: Integrated Public Transport Network Grant 

- 

2,998,871 

Provincial: Human Settlements Capital Grant 

5,959,804 

43,475,768 

Provincial: Library Services Grant 

- 

741,423 

Provincial: Fire Services Capacity Building Grant 

107,374 

611,471 


122,153,099 

202,852,847 


574,385,824 

605,407,392 

Revenue recognised per vote as required by Section 123 (c) of the MFMA 

Civil Engineering Services 

124,579,045 

157,080,221 

Community Services 

54,917,232 

43,536,724 

Corporate Services 

3,307,238 

1,431,049 

Electro-technical Services 

45,047,956 

35,665,063 

Financial Services 

3,965,000 

3,276,253 

Human Settlements 

69,633,713 

37,218,964 

Office of the Municipal Manager 

- 

1,959,962 

Planning and Development 

1,282,436 

1,015,789 

Protection Services 

271,653,204 

324,223,367 


574,385,824 

605,407,392 


83 



















George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

28. Fines, penalties and forfeits 



Property rates penalties 

1,360,769 

1,314,207 

GIPTN Bus operator penalties 

256,483 

1,882,793 

Other fines 

727,749 

646,402 

Traffic fines 

92,236,387 

77,659,834 


94,581,388 

81,503,236 

29. Employee related costs 



Basic 

338,829,813 

315,370,029 

Housing benefits and allowances 

2,124,680 

1,934,438 

Long-service awards 

4,671,102 

2,386,268 

Medical aid - company contributions 

20,470,264 

18,466,983 

Other payroll levies 

4,951,919 

3,971,379 

Overtime payments 

41,737,218 

36,523,289 

Employee benefit obligations 

20,652,365 

12,329,888 

- Current service cost 

4,920,957 


4,554,914 

- Interest cost 

14,096,987 


13,503,559 

- Actuarial (gains) / losses recognised 

1,634,421 


(5,728,585) 

Travel, motor car, accommodation, subsistence and other 

32,200,228 

30,056,694 

allowances 



UIF 

3,109,596 

3,068,543 

Pension 

46,995,037 

41,534,131 

Subsistence and Travelling Allowance 

2,880,751 

2,786,295 


518,622,973 

468,427,937 


Employee related cost for Section 56 and 57 employees was disclosed separately from other employees in the 
financial statements of the previous year. The disclosure above was amended to include the remuneration of 
the Section 56 and 57 employees as well as other employees. 

The organisational structure of the municipality was reviewed and Council adopted the new structure in August 
2017. The remuneration disclosed below in the current year is for eight directorates and the prior year was for six 
directorates up to August 2017 and eight directorates after that. 

Included in the balances above is the following: 

Remuneration of Municipal Manager 


Annual remuneration 

1,674,017 

1,589,002 

Contributions to UIF, Medical and Pension Funds 

26,786 

24,771 

Performance bonus 

225,617 

50,208 


1,926,420 

1,663,981 

Remuneration of Director Financial Services 

Annual remuneration 

1,091,668 

1,105,432 

Car allowance 

60,000 

60,000 

Contributions to UIF, Medical and Pension Funds 

239,142 

239,936 

Acting expense 

10,295 

3,500 


1,401,105 

1,408,868 


84 























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

29. Employee related costs (continued) 



Remuneration of Director Corporate Services 

Annual remuneration 

747,466 

1 7,348 

Car allowance 

108,000 

- 

Contributions to UIF, Medical and Pension Funds 

1 73,073 

- 

Acting expense 

12,292 

71,169 


1,040,831 88,517 


Remuneration of Director Human Settlement, Land Affairs & Planning 


Annual Remuneration 

- 

378,843 

Car Allowance 

- 

16,000 

Contributions to UIF, Medical and Pension Funds 

- 

49,286 

Acting expense 

18,350 

4,961 


18,350 

449,090 

Remuneration of Director Human Settlements 

Annual remuneration 

1,338,223 

740,909 

Performance bonus 

84,536 

- 

Contributions to UIF, Medical and Pension Funds 

52,587 

28,893 

Acting expense 

16,119 

- 


1,491,465 

769,802 

Remuneration of Director Civil Engineering Services 

Annual remuneration 

1,207,460 

875,744 

Performance bonus 

77,328 

- 

Contributions to UIF, Medical and Pension Funds 

2,230 

1,668 

Acting expense 

- 

88,857 


1,287,018 

966,269 

Remuneration of Director Electro- Technical Services 

Annual Remuneration 

_ 

16,545 

Acting expenses 

- 

96,203 


- 

112,748 

Remuneration Director Community Services 

Annual remuneration 

1,111,782 

1,053,811 

Car allowance 

60,000 

60,000 

Performance bonus 

118,737 

122,961 

Contributions to UIF, Medical and Pension Funds 

219,028 

207,717 

Acting expense 

3,290 

2,927 


1,512,837 

1,447,416 


85 





























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

29. Employee related costs (continued) 



Remuneration of Director Protection Services 



Annual remuneration 

1,026,086 

566,875 

Car allowance 

96,000 

56,000 

Performance bonus 

69,165 

- 

Contributions to UIF, Medical and Pension Funds 

268,724 

146,928 

Acting expense 

30,373 

1 6,058 


1,490,348 

785,861 

30. Remuneration of Councillors 



Basic Salaries 



Executive Mayor 

582,466 

561,851 

Deputy Executive Mayor 

448,418 

508,632 

Speaker 

584,439 

558,835 

Chief Whip 

483,452 

462,273 

Mayoral Committee Members 

4,899,749 

4,927,521 

Councillors 

7,116,644 

6,879,211 

Allowance and contributions 



Car allowance 

4,759,950 

4,565,904 

Cellphone allowance 

2,127,577 

2,152,770 

Contributions to medical aid 

282,763 

250,668 

Contributions to pension fund 

731,784 

651,800 


22,017,242 

21,519,465 

The remuneration of Councillors and in-kind benefits are within the upper limits of the framework envisaged in 

Section 219 of the Constitution, read with the Remuneration of Public Office Bearers Act and the Minister of 

Provincial and Local Government's determination 

in accordance with this Act. Refer to 

page 5 for the 

certification by the Accounting Officer. 



Remuneration for the Executive Mayor, Deputy Executive Mayor, Speaker and Chief Whip are: 


Executive Mayor 



Basic Salary 

582,466 

561,851 

Car allowance 

214,868 

206,604 

Cellphone allowance 

40,800 

40,800 

Contributions to medical aid and pension fund 

62,137 

57,960 


900,271 

867,215 

Deputy Executive Mayor 



Basic Salary 

448,418 

508,632 

Car allowance 

171,894 

124,552 

Cellphone allowance 

40,800 

40,800 

Contributions to medical aid and pension fund 

67,263 

24,825 


728,375 

698,809 

Speaker 



Basic Salary 

584,439 

558,835 

Car allowance 

103,136 

99,169 

Cellphone allowance 

40,800 

40,800 


728,375 

698,804 


86 

























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

30. Remuneration of Councillors (continued) 



Chief Whip 

Basic Salary 

483,452 

462,344 

Car allowance 

161,151 

154,953 

Cellphone allowance 

40,800 

40,800 


685,403 658,097 


In-kind benefits 

The Councillors occupying the positions of Executive Mayor, Deputy Executive Mayor, Speaker, Chief Whip and 
Executive Mayoral Committee Members of the municipality serve in a full-time capacity. They are provided with 
office accommodation and secretarial support at the expense of the municipality in order to enable them to 
perform their official duties. 

The Executive Mayor and Deputy Executive Mayor have use of a Council owned vehicle for official duties. 


Remuneration per councillor: 


LH Arries 

594,979 

642,428 

M Barnardt 

685,403 

658,026 

EL Brown 

190,986 

- 

N Bungane 

208,527 

302,329 

N Bungane (Mayco Member as from 31 /I /2019) 

260,891 

- 

EC Bussack 

685,403 

660,611 

JP Buys 

312,790 

302,329 

CM Clarke 

728,375 

455,837 

BM Cornelius 

312,790 

523,797 

DL Cronje 

685,403 

660,611 

MP Daniels 

312,790 

302,329 

EP de Villiers 

114,234 

660,611 

S Dlikilile 

312,790 

302,329 

M Draghoender 

312,790 

520,640 

J Du Toit 

312,790 

302,328 

JD Esau 

312,790 

302,329 

R Figland 

685,403 

391,899 

J Fry 

312,791 

302,329 

V Gericke 

312,790 

302,329 

D Gultig 

70,247 

- 

GN Jantjies-Gushman 

312,790 

302,329 

WT Harris 

312,790 

302,329 

HH Ingo 

312,790 

302,329 

NR James 

312,789 

302,329 

A Kiwit 

121,034 

302,329 

1C Kritzinger 

685,403 

682,944 

K Langa 

312,790 

302,329 

C Lesele 

312,790 

302,329 

HJ Loft 

312,790 

302,329 

P Louw 

312,790 

302,329 

NF Mdaka 

312,790 

302,329 

KJ Mkondo 

155,010 

- 

B Mooi 

312,790 

302,329 

V Muller 

312,790 

302,329 

MG Naik 

900,271 

867,214 

J Ncamazana 

312,790 

302,329 

GC Niehaus 

- 

382,963 

C Noble 

685,403 

660,611 


87 









George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

30. Remuneration of Councillors (continued) 



PP Nosana 

312,790 

302,329 

MM Nyakathi 

685,403 

658,026 

B Petrus 

234,592 

302,329 

B Petrus (Section 79 Chairman 22/3 - 24/4/2019) 

47,678 

- 

B Plata 

312,790 

302,329 

G Pretorius 

728,375 

698,804 

S Rooiland 

312,790 

302,329 

J Safers 

312,790 

302,329 

S Snyman 

685,403 

440,416 

GJ Stander 

312,790 

520,153 

1 Stemela 

312,790 

302,329 

E Stroebel 

312,790 

302,329 

T Teyisi 

312,790 

302,329 

PJ van der Hoven 

312,790 

302,329 

J van der Westhuizen 

173,155 

55,309 

G van Niekerk 

312,790 

302,329 

LD van Wyk 

312,790 

302,329 

J von Brandis 

685,403 

438,770 

D Wessels 

312,790 

302,329 

A Willemse 

685,403 

660,611 

CT Williams 

312,790 

302,329 


22,017,244 

21,519,466 

31. Depreciation and amortisation 



Property, plant and equipment 

142,340,465 

160,659,439 

Intangible assets 

390,014 

716,345 

Investment property 

169,071 

161,590 


142,899,550 

161,537,374 

32. Impairment of assets 



Impairments 



Trade receivables from exchange transactions 

17,688,952 

39,392,811 

Trade and other receivables from non-exchange transactions 

79,657,908 

72,594,799 

Loans and receivables 

7,557 

(211,611) 


97,354,417 

111,775,999 

33. Finance costs 



Loans and borrowings 

33,875,117 

36,065,224 

Finance leases 

632,992 

986,526 

Provision for rehabilitation of landfill site 

2,003,963 

1,667,683 

Provision for Compensation Liability GIPTN 

5,752,300 

5,420,977 


42,264,372 

44,140,410 

Refer to note 18 for detail on the discounting of the provisions for the rehabilitation of the landfill site and the 

GIPTN Compensation Liability. 




88 





















George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

34. Bulk purchases 



Electricity 

426,307,944 

396,388,765 

Water 

2,544,247 

1,421,482 


428,852,191 

397,810,247 

Bulk purchases are the cost of commodities not generated 

by the municipality, which 

the municipality 

distributes in the municipal area for resale to the consumers. Electricity is purchased from Eskom. Water was 

purchased from Haarlem Irrigation Board during the year. 



35. Contracted services 



Consultants and professional services 



Business and Advisory 



Accounting and Auditing 

1,102,178 

771,473 

Air Pollution 

211,345 

3,500 

Audit Committee 

162,790 

155,456 

Board Member 

20,448 

- 

Communications 

3,896,014 

3,149,170 

Human Resources 

1,115,953 

2,296,791 

Project Management 

406,871 

79,331 

Quality Control 

263,001 

306,904 

Valuer and Assessors 

1,580,307 

3,292,080 

Infrastructure and Planning 



Engineering 

4,966,928 

3,195,680 

Town Planner 

1,456,455 

445,000 

Other 

102,257 

108,133 

Other 



Laboratory Services 

107,301 

107,678 

Legal Cost 

9,787,891 

8,316,980 

Contractors 



Artists and Performers 

567,883 

475,105 

Audio-visual Services 

331,442 

505,956 

Building 

73,406,722 

43,160,682 

Catering Services 

2,080,542 

1,926,539 

Electrical 

8,077,040 

6,434,253 

Employee Wellness 

336,180 

202,814 

Event Promoters 

11,382,990 

9,389,507 

Fire Protection 

251,216 

110,567 

First Aid 

429,805 

474,385 

Haulage 

1,755,077 

1,893,734 

Inspection Fees 

107,262 

210,568 

Maintenance of Buildings and Facilities 

12,547,885 

13,692,354 

Maintenance of Equipment 

6,850,737 

7,219,325 

Maintenance of Unspecified Assets 

72,207,452 

103,757,704 

Management of Informal Settlements 

4,858,750 

2,949,475 

Prepaid Electricity Vendors 

18,885,262 

18,583,924 

Safeguard and Security 

1,164,513 

1,102,292 

Traffic and Street Lights 

554,168 

160,580 

Other 

87,865 

77,656 


89 









George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

35. 

Contracted services (continued) 




Outsourced Services 




Business and Advisory 

Accounting and Auditing 

417,665 

287,144 


Business and Financial Management 

823,873 

705,444 


Communications 

1,681,505 

8,630,674 


htuman Resources 

96,614 

312,942 


Organisational 

2,076,596 

1,794,489 


Quality Control 

- 

56,541 


Other 

Administrative and Support Staff 

1,311,688 

834,175 


Animal Care 

2,584,265 

2,211,184 


Clearing and Grass Cutting Services 

2,707,273 

3,163,760 


Illegal Dumping 

- 

635,576 


Internal Auditors 

3,482,240 

3,185,812 


Meter Management 

1,911,184 

2,006,948 


Refuse Removal 

4,868,650 

5,271,374 


Security Services 

20,987,505 

17,198,874 


Sewerage Services 

1,291,807 

1,184,296 


Traffic Fines Management 

3,374,099 

2,074,059 


Transport Services 

140,957,846 

120,246,453 


Other 

437,957 

397,891 



430,073,297 

404,753,232 


The prior year figures were reclassified to provide more information on the type of contracted services incurred. 


The prior year balances were restated. Refer to note 46 for more detail. 



36. 

Grants and subsidies paid 




Other subsidies 

Bursary Grants 

577,851 

67,855 


Merit Grants and Donations 

39,835 

5,500 


Provincial Department of Transport 

64,907,786 

56,310,652 



65,525,472 

56,384,007 


The Bursary grants are in respect of providing bursaries for further tertiary education. 



Merit Grants and Donations are given to schools and non-profit organisations in the community. 



The municipality receives a grant from the National Department of Transport to fund expenditure of the GIPTN 
bus service. A portion of this grant is paid over to the Provincial Department of Transport for expenditure they 
procure on behalf of the municipality in terms of section 17(2) of the The Division of Revenue Act (2019). 


The prior year balances were restated. Refer to note 46 for more detail. 



37. 

Loss on disposal of assets 




Property, plant and equipment 

(764,629) 

(2,624,035) 


Inventory 

55,223 

(138,591) 



(709,406) 

(2,762,626) 


90 

















George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

38. Inventories losses/write downs 



Net realisable value adjustments: 



GIPTN Smart Cards for electronic fare revenue system 

917,768 

- 

Unsold properties held for resale 

6,917,896 

- 


7,835,664 

- 

Refer to note 2 for details of inventories held by the municipality. 



39. Other materials / Inventory 



Fuel 

13,351,999 

10,500,851 

Chemicals 

13,926,591 

15,870,720 

Other 

6,264,176 

4,897,077 


33,542,766 

31,268,648 

40. General expenses 



Advertising, publicity and marketing 

3,235,156 

2,815,228 

Auditors remuneration 

5,696,439 

4,284,907 

Bank charges 

2,789,800 

2,363,698 

Bargaining Council 

4,919,188 

4,519,903 

Commission Third Party Vendors 

2,398,960 

2,626,036 

Contribution to the rehabilitation of the landfill sites provision 

31,038,854 

(58,703) 

External computer services 

7,678,847 

7,461,087 

Insurance 

8,367,447 

6,099,561 

Learnerships and interns 

1,382,526 

1,150,334 

Lease rentals on operating leases 

5,486,431 

4,448,595 

Other general expenses 

6,367,413 

5,481,177 

Postage, courier and delivery services 

1,800,513 

1,713,271 

Printing and publications 

3,262,797 

3,101,267 

Refuse 

7,025,637 

5,435,006 

Skills Development Levy 

5,004,693 

4,611,975 

Telephone and fax 

2,393,282 

2,276,945 

Travel - local 

14,590,449 

13,416,196 

Uniforms 

3,071,305 

2,113,107 

Vehicle Tracking 

326,929 

260,944 

Workmen's Compensation Fund 

2,433,584 

2,234,586 


119,270,250 

76,355,120 

The prior year figure of lease rental on operating leases was reclassified 

as car rental was 

moved to travel 

expenses. 



The prior year balances were restated. Refer to note 46 for more detail. 




91 

















George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

41. Cash generated from operations 



Surplus for the year 

107,279,789 

178,366,582 

Adjustments for: 



Depreciation and amortisation 

142,899,550 

161,537,374 

Loss on sale of assets and liabilities 

709,406 

2,762,626 

Donated asset receipts included in other income 

- 

(225,000) 

Net realisable value adjustment of inventory 

7,835,664 

- 

Finance costs - Finance leases 

632,992 

986,526 

Impairment of assets 

97,354,416 

111,775,999 

Movements in bonus provision 

1,947,653 

21,578 

Movements in provisions 

32,890,656 

8,211,313 

Provisions utilised during the year 

(3,503,025) 

(1,811,621) 

Movement in Employee benefit asset and liabilities - Medical Aid, 

25,156,108 

15,031,920 

Pension and Long Service Awards 



Movement in Employee benefit asset and liabilities - Staff leave 

2,163,388 

4,766,287 

Benefits paid in terms of employee benefits obligations 

(9,190,357) 

(7,635,176) 

Unspent conditional grants received 

538,879,884 

600,769,491 

Payments from unspent conditional grants 

(574,430,820) 

(605,407,392) 

Non-cash movements in unspent conditional grants 

(92,998) 

- 

Changes in working capital: 



(Increase) / Decrease in Inventories 

7,984,043 

9,733,418 

Receivables from exchange transactions 

(40,606,379) 

(39,522,657) 

Other receivables from non-exchange transactions 

(84,843,711) 

(73,120,409) 

(Increase) / Decrease in Prepayments 

(10,904,638) 

(1,103,776) 

Increase / (Decrease) in Trade and other payables from exchange 

(8,938,351) 

36,734,002 

transactions 



(Increase) / Decrease in VAT 

(946,099) 

(3,655,822) 

Increase / (Decrease) in Consumer deposits 

428,605 

4,345,873 


232,705,776 

402,561,136 


92 









George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

42. 

Commitments 




Authorised capital expenditure 




Already contracted for but not provided for 

• Infrastructure 

80,294,899 

58,897,169 


• Community 

720,652 

- 


• Other 

1,690,860 

- 



82,706,411 

58,897,169 


Operating leases - as lessee (expense) 




Minimum lease payments due 

- within one year 

1,518,361 

975,661 


- in second to fifth year inclusive 

520,501 

47,339 



2,038,862 

1,023,000 


Operating leases relate to property, plant and equipment with lease terms not longer than 5 years with an 
option to extend for a further period. All operating lease contracts contain market review clauses in the event 
that the municipality exercises its option to renew. The municipality does not have an option to purchase the 


leased asset at the expiry of the lease period. 



43. 

Financial instruments disclosure 




Categories of financial instruments 




2019 




Financial assets 

Loans and receivables 

ttousing Scheme Loans 

414,774 

495,831 


Sale of Erven Loans 

71,340 

96,402 


Actaris Meter Debt 

250,170 

250,338 


Trade and other receivables from exchange transactions 

Service debtors 

101,991,908 

84,030,719 


Other debtors 

9,806,182 

4,849,944 


Other receivables from non-exchange transactions 

Other debtors 

2,452,077 

3,893,200 


Cash and cash equivalents 

Cash and cash equivalents 

562,603,736 

617,784,461 



677,590,187 

711,400,895 


Financial liabilities 

Loans and borrowings 

Annuity loans 

290,040,098 

329,480,507 


Other loans 

180,844 

361,688 


Finance lease obligations 

Finance lease obligation 

Consumer deposits 

3,438,013 

8,153,105 


Electricity and water deposits 

Payables 

27,596,642 

27,168,038 


Trade payables 

197,267,103 

214,373,098 



518,522,700 

579,536,436 


93 





















George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


44. Contingencies 


Compensation for damages 


Magnolia Ridge Properties 77 (Pty) Ltd 

350,000 

700,000 

Cape Estates Properties Outeniqua (Pty) Ltd (formerly Reigate 
Development Projects (Pty) Ltd) 

2,500,000 

2,000,000 

Mr Greyling 

- 

752,000 

Southern Cape Brick 

120,000 

1,000,000 

Acme Tool Hire 

1,963,793 

1,963,793 

Coastal Armature Winders and Supplies 

200,000 

500,000 

N Landu 

2,307,000 

2,307,000 


7,440,793 

9,222,793 


Magnolia Ridge Properties 77 (Pty) Ltd: Claimant brought a review application against the George Municipality 
regarding a decision made to claimant's application for and uses of erven 25538 and 25541 which was refused. 
The company appealed against the decision and the appeal was dismissed by the Appeal Authority after 
which the company lodged a revised application which was heard in the High Court of South Africa but the 
High Court referred the matter back to the Appeals Authority for consideration. There was an oral hearing on 1 
April 2019 at the offices of the municipality and at this hearing, written and oral submissions were made. After 
the hearing, the Appeals Authority met with independent technical advisors for assistance and advice. The 
Appeals Authority dismissed the appeal in May 2019. The municipality paid R503,399 for legal costs in this matter. 
Magnolia Ridge Properties 77 (Pty) Ltd indicated that they intend to take the decision under review. To date the 
municipality did not receive any further communication from them on this matter. 

Magnolia Ridge Properties 77 (Pty) Ltd also lodged an further application to change the zoning of erf 25541 in 
March 2019 for setting aside the decision of the Appeals Authority against the refusal of the company's request 
for rectification of a reported error on the municipality's zoning scheme map. The company requested an order 
that the entire extent of the property be rezoned and a cost order was also requested against the municipality. 
The municipality indicated that they would oppose this matter and filed the necessary documentation in June 
2019. The matter is currently pending a court date and the cost exposure for the municipality will be 
approximately R350,000 if the company is successful. 

Cape Estates Properties Outeniqua (Pty) Ltd (formerly Reigate Development Projects (Pty) Ltd): The municipality 
was successful in an arbitration process relating to the services agreement on the Welgelegen Estate property 
development. The company has noted an appeal against the arbitration award and the hearing is set for 
October 2019. If the appeal is upheld, the municipality will be liable for payment of legal costs of the appellant 
which can amount to R2,500,000. 

Mr Greyling: The individual is claiming R752,000 as a result of injuries sustained when he fell at a Go George bus 
stop. The municipality's insurance accepted responsibility for the matter and therefore has no financial 
implications for the municipality. 

Southern Cape Brick: The municipality instituted a claim against Southern Cape Brick for illegal mining activities 
in Thembalethu. The company is busy with closure proceedings with the municipality monitoring the process. 
Possible legal costs payable by the municipality could be R 120,000. 

Acme Tool Hire: A summons amounting to R1,963,793 was issued against the municipality for lost equipment. This 
matter was referred was referred to Goussard Attorneys. The attorneys filed documentation against the 
summons after which the company has to resubmit their claim against that municipality and the attorneys 
responded on the new documentation submitted. Extensive consultations were held with the various role 
players in this matter. Charges are limited by not using the services of an attorney at this time. The matter is still in 
progress. 

Coastal Armature Winders and Supplies: The applicant took the municipality to court for the setting aside of a 
tender award. In the current application, the municipality only faces a possible court order for cost, which 
depending on how the other parties involved conduct the matter, might easily amount to as much as R200 000. 
The matter will be heard in court during September 2019. 


94 









George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


44. Contingencies (continued) 

N Landu: Acting on behalf of a minor, S Landu, he instituted a claim for damages of R2,307,000 against the 
municipality as a result of an incident when the minor's hand was injured when the rear loading mechanism of 
one of the municipality's refuse compactors allegedly closed on the minor's left hand. The municipality's 
attorneys indicated that the facts barely support a positive defence and the municipality will probably be liable 
but the matter will be referred to the municipality's insurance. 

45. Related parties 

Relationships 

Councillors 


Directors 

Directorate Financial Services 
Directorate Corporate Services 
Directorate Ftuman Settlements 
Directorate Planning and Development 
Directorate Civil Engineering Services 
Directorate Electro Technical Services 
Directorate Community Services 
Directorate Protection Services 
Municipal Manager 

Related party transactions 

The services rendered to related parties are charged at approved tariffs that were advertised to the public. No 
bad debts were written off or recognised in respect of amounts owed by related parties. 

The amounts outstanding are unsecured and will be settled in cash. Consumer deposits were received from 
Councillors, the municipal manager and Section 57 personnel. No expense has been recognised in the period 
for bad or doubtful debts in respect of the amounts owed by related parties. 

Compensation of related parties 

Compensation of Key Management Personnel and Councillors is set out in notes 29 and 30 to the Annual 
Financial Statements. 

GIPTN Compensation Liability 

I Stemela will be receiving another compensation payment of R200,000 with the roll out of the next phases of 
the George Integrated Public Transport Network. Refer to note 18 for more detail on the provision. 

Payments made to related parties 

Refer to note 53 for details of payments made to entities with persons in service of the state. 


Details of councillors are listed as part of General 
Information. Refer to page 1. 


K Jordaan (contract terminated on 8 July 2019) 
S James 
C Lubbe 
D Power - Acting 
R Wesso 

P Gerber - Acting 
W Flendricks 
S Erasmus 
T Botha 


95 





George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 



2019 

2018 

46. Prior period errors and reclassifications 

2018 

Reclassifi- 

Prior year 

2018 restated 

STATEMENT OF FINANCIAL POSITION 

previously 

reported 

cation 

error 


Assets 

Current Assets 

Inventories 

142,330,943 



142,330,943 

Trade receivables from exchange 
transactions 

88,880,663 

" 

- 

88,880,663 

Trade and other receivables from 

38,268,554 

- 

- 

38,268,554 

non-exchange transactions 

Prepayments 

13,071,612 



13,071,612 

VAT receivable 

3,310,255 

- 

- 

3,310,255 

Loans and receivables 

161,391 

- 

- 

161,391 

Cash and cash equivalents 

617,784,461 

- 

- 

617,784,461 


903,807,879 

- 

- 

903,807,879 

Non-current Assets 

Property, plant and equipment 

2,866,512,969 


4,861,709 

2,871,374,678 

Intangible assets 

1,355,437 

- 

- 

1,355,437 

Heritage assets 

4,236,000 

- 

- 

4,236,000 

Investment property 

152,151,814 

- 

- 

152,151,814 

Loans and receivables 

681,180 

- 

- 

681,180 


3,024,937,400 

- 

4,861,709 

3,029,799,109 

Total Assets 

3,928,745,279 

- 

4,861,709 

3,933,606,988 

Liabilities 

Current Liabilities 

Loans and borrowings 

39,621,253 



39,621,253 

Finance lease obligation 

4,717,554 

- 

- 

4,717,554 

Trade and other payables from 

233,235,909 

- 

- 

233,235,909 

exchange transactions 

Consumer deposits 

27,168,038 



27,168,038 

Employee benefits 

55,172,826 

- 

- 

55,172,826 

Provisions 

2,388,295 

- 

- 

2,388,295 

Unspent conditional grants and 
receipts 

75,143,780 

“ 

“ 

75,143,780 


437,447,655 

- 

- 

437,447,655 

Non-Current Liabilities 

Loans and borrowings 

290,220,942 



290,220,942 

Finance lease obligation 

3,435,551 

- 

- 

3,435,551 

Employee benefits 

145,423,283 

- 

- 

145,423,283 

Provisions 

90,453,253 

- 

- 

90,453,253 

Trade and other payables from 
exchange transactions 

2,796,362 

“ 

“ 

2,796,362 


532,329,391 

- 

- 

532,329,391 

Total Liabilities 

969,777,046 

- 

- 

969,777,046 

Total Net Assets 

2,958,968,233 

- 

4,861,709 

2,963,829,942 


96 

















































George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


46. Prior period errors and reclassifications (continued) 


Net Assets 

ttousing development fund 
Accumulated surplus 

62,941,145 

2,896,027,088 

- 

4,861,709 

62,941,145 

2,900,888,797 


2,958,968,233 

- 

4,861,709 

2,963,829,942 

STATEMENT OF FINANCIAL 
PERFORMANCE 

2018 

Reclassifi- 

Prior year 

2018 restated 

Revenue from exchange 

previously 

reported 

1,040,703,589 

cation 

error 

1,040,703,589 


transactions 

Service charges - Electricity 
Service charges - Water 
Service charges - Sewerage and 
sanitation charges 
Service charges - Refuse removal 
Rental revenue 
Income from agency services 
Licences and permits 
Sale of erven 
GIPTN Fare Revenue 
Other income 
Interest received - External 
Investments 

Interest received - Outstanding 
debtors 

Revenue from non-exchange 921,964,388 - - 921,964,388 

transactions 

Property rates 

Government grants and subsidies - 
Operating 

Government grants and subsidies - 
Capital 

Fines, penalties and forfeits 

1,962,667,977 - - 1,962,667,977 


235,053,760 


- 

402,554,545 


- 

202,852,847 


- 

81,503,236 


_ 


- 


235,053,760 

- 


402,554,545 

- 


202,852,847 

_ 


81,503,236 


603,331,974 
117,656,763 
87,951,733 

69,777,667 
3,271,235 
11,257,883 
2,741,849 
9,041,869 
39,419,283 
41,410,859 
50,165,612 

4,676,862 



603,331,974 
117,656,763 
87,951,733 

69,777,667 
3,271,235 
11,257,883 
2,741,849 
9,041,869 
39,419,283 
41,410,859 
50,165,612 

4,676,862 


97 





























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 



2019 

2018 

46. Prior period errors and reclassifications (continued) 





2018 

previously 

reported 

Reclassifi¬ 

cation 

Prior year 
error 

2018 restated 

Expenditure 

Employee related cost 

468,427,937 

- 

- 

468,427,937 

Remuneration of councillors 

21,519,465 

- 

- 

21,519,465 

Depreciation and amortisation 

165,172,834 

- 

(3,635,460) 

161,537,374 

Impairment losses 

111,775,999 

- 

- 

111,775,999 

Finance cost 

44,140,410 

- 

- 

44,140,410 

Bulk purchases 

397,810,247 

- 

- 

397,810,247 

Contracted services 

448,955,634 

(44,202,402) 

- 

404,753,232 

Grants and subsidies paid 

73,355 

56,310,652 

- 

56,384,007 

Cost of erven sold 

7,566,330 

- 

- 

7,566,330 

Loss on disposal of assets 

2,762,626 

- 

- 

2,762,626 

Other materials / Inventory 

31,268,648 

- 

- 

31,268,648 

General Expenses 

88,463,370 

(12,108,250) 

- 

76,355,120 


1,787,936,855 

- 

(3,635,460) 

1,784,301,395 

Surplus / (Deficit) for the year 

174,731,122 

- 

3,635,460 

178,366,582 

CASH FLOW STATEMENT 

2018 

previously 

reported 

Reclassifi¬ 

cation 

Prior year 
error 

2018 restated 

Net cash from operating activities 

402,561,136 

- 


402,561,136 

Net cash from investing activities 

(265,636,474) 

- 

- 

(265,636,474) 

Net cash from financing activities 

(24,580,968) 

- 

- 

(24,580,968) 

Total cash movement for the year 

112,343,694 

- 

- 

112,343,694 

Cash and cash equivalents at the 
beginning of the year 

505,440,767 

“ 

- 

505,440,767 


617,784,461 

- 

- 

617,784,461 


98 





























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


46. Prior period errors and reclassifications (continued) 

46.1 Reclasification: Grants received from the National Transport Department paid over to the Provincial 
Transport Department 

The municipality receives a grant from the National Department of Transport to fund expenditure of the GIPTN 
bus service. A portion of this grant is paid over to the Provincial Department of Transport for expenditure they 
procure on behalf of the municipality. In the prior year, these payments were shown as part of general 
expenses and contracted services and are reclassified to grants and subsidies paid as they are payment in 
terms of section 17(2) of the The Division of Revenue Act (2019). 

The effect of this correction is as follows: 


(Increase) / Decrease in Contracted Services 44,202,402 

(Increase) / Decrease in General Expenses 12,108,250 

(Increase) / Decrease in Grants and Subsidies Paid (56,310,652) 

Increase / (Decrease) in Accumulated surplus for the year ended 30 June 2018 


46.2 Property, plant and equipment item incorrectly classified as infrastructure 

The GIPTN Transport Hub was incorrectly classified as an infrastructure asset and depreciated over three years. 
The municipality corrected the error and the GIPTN Transport Hub is classified as a community building and 
depreciated over thirty years. 

The effect of this correction is as follows: 


Increase / (Decrease) in Property, Plant and Equipment 4,861,709 

(Increase) / Decrease in General Expenses 3,635,460 

Increase / (Decrease) in Accumulated surplus for the year ended 30 June 2017 1,226,249 


Increase / (Decrease) in Accumulated surplus for the year ended 30 June 2018 4,861,709 


47. Risk management 

Financial risk management 

The municipality’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value 
interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. 

The municipality’s Treasury function provides services to the business, co-ordinates access to domestic markets, 
monitors and manages the financial risks relating to the operations of the municipality through internal risk 
reports which analyse exposures by degree and magnitude of risks. These risks include market risk (including 
interest rate risk and price risk), credit risk and liquidity risk. 

The municipality seeks to minimise the effects of these risks in accordance with its policies approved by the 
Council. The policies provide written principles on interest rate risk, credit risk and in the investment of excess 
liquidity. Compliance with policies and exposure limits is reviewed by the Director Financial Services on a 
continuous basis. The municipality does not enter into or trade in financial instruments, including derivative 
financial instruments, for speculative purposes. 

The Treasury function reports periodically to the municipality’s finance committee, that monitors risks and 
policies implemented to mitigate risk exposures. 


99 









George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 


47. Risk management (continued) 

Liquidity risk 

Liquidity risk is the risk that the municipality will encounter difficulty in raising funds to meet commitments 
associated with financial liabilities. 

Ultimate responsibility for liquidity risk management rests with the Council, which has built an appropriate 
liquidity risk management framework for the management of the municipality's short, medium and long-term 
funding and liquidity management requirements. The municipality manages liquidity risk by maintaining 
adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and 
actual cash flows and matching the maturity profiles of financial assets and liabilities. 

Liquidity risk is managed by ensuring that all assets are reinvested at maturity at competitive interest rates in 
relation to cash flow requirements. Liabilities are managed by ensuring that all contractual payments are met 
on a timely basis and, if required, additional new arrangements are established at competitive rates to ensure 
that cash flow requirements are met. 

The table below analyses the municipality's financial liabilities into relevant maturity groupings based on the 
remaining period at the Statement of Financial Position to the contractual maturity date. The amounts disclosed 
in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying 
balances as the impact of discounting is not significant. 


At 30 June 2019 

Less than 1 
year 

Between 1 
and 2 years 

Between 2 
and 5 years 

Over 5 years 

Loans and borrowings 

63,187,807 

60,547,506 

159,879,730 

157,090,899 

Finance lease obligations 

2,668,569 

558,419 

606,236 

- 

Consumer deposits 

27,596,642 

- 

- 

- 

Trade and other payables 

192,797,238 

1,433,837 

4,177,034 

4,862 

At 30 June 2018 

Less than 1 
year 

Between 1 
and 2 years 

Between 2 
and 5 years 

Over 5 years 

Loans and borrowings 

73,490,648 

63,187,807 

1 70,544,003 

184,524,442 

Finance lease obligations 

5,349,633 

2,668,569 

1,164,654 

- 

Consumer deposits 

27,168,038 

- 

- 

- 

Trade and other payables 

192,399,661 

2,584,831 

645,144 

- 


Interest rate risk 

The municipality is exposed to interest rate risk due to the movements in long-term and short term interest rates. 

Interest rate risk is defined as the risk that the fair value or future cash flows associated with a financial 
instrument will fluctuate in amount as a result of market interest changes. 

The municipality's policy is to minimise interest rate cash flow risk exposures on long-term financing. Longer-term 
borrowings and finance leases are therefore usually at fixed rates. 

This risk is managed on an ongoing basis. 

Credit risk 

Credit risk is the risk that a counter party to a financial or non-financial asset will fail to discharge an obligation 
and cause the municipality to incur financial loss. 

Potential concentrations of credit rate risk consist mainly of investments, loans and receivables, trade 
receivables, other receivables, short-term investment deposits and cash and cash equivalents. 


100 





George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 


47. Risk management (continued) 

The municipality limits its counterparty exposures from its money market investment operations by only dealing 
with well-established financial institutions of high credit standing. The credit exposure to any single counterparty 
is managed by setting transaction/ exposure limits, which are included in the municipality's Investment Policy. 

Trade receivables comprise of a large number of ratepayers, dispersed across different industries and 
geographical areas. Ongoing credit evaluations are performed on the financial condition of these customers. 
Trade receivables are presented net of an allowance for impairment and where appropriate, credit limits are 
adjusted. 

Credit risk pertaining to trade and other debtors is considered to be moderate due the diversified nature of 
debtors and immaterial nature of individual balances. In the case of consumer debtors the municipality 
effectively has the right to terminate services to customers but in practice this is difficult to apply. 

In the case of customers whose accounts become in arrears, it is endeavoured to collect such accounts by 
"levying of penalty charges", "demand for payment", "restriction of services" and, as a last resort, "handed over 
for collection", whichever procedure is applicable in terms of Council's Credit Control and Debt Collection 
Policy. 

Non-current Receivables and Other Receivables are collectively evaluated annually at reporting date for 
impairment or discounting. A report on the various categories of customers is drafted to substantiate such 
evaluation and subsequent impairment / discount, where applicable. 

The municipality only deposits with major banks with high quality credit standing. No cash and cash equivalents 
were pledged as security for financial liabilities and no restrictions were placed on the use of any cash and 
cash equivalents for the period under review. Although the credit risk pertaining to cash and cash equivalents is 
considered to be low, the maximum exposure is disclosed below. 

The maximum credit and interest risk exposure in respect of the relevant financial instruments is as follows: 

Financial instruments 2019 2018 

Loans and receivables 736,284 842,571 

Receivables from exchange transactions 111,798,090 88,880,663 

Receivables from non-exchange transactions 2,452,077 3,893,200 

Cash and cash equivalents 562,603,736 617,784,461 

677,590,187 711,400,895 


The method for determining the credit quality of the different financial instruments is disclosed in their individual 
notes. 

Consumer deposits and guarantees held in lieu of service accounts are disclosed in note 16. 

Receivables from non-exchange transactions was restated to only include financial instruments as disclosed in 
note 43. 

Price risk 

The effect of any price risk in the foreseeable future is regarded as minimal given the fact that amounts 
receivable from the municipality's customers are levied in terms of the relevant statutes. It is not anticipated that 
given the nature of the municipality’s business that changes in market prices will have a material impact on the 
trading results of the municipality. 

There has been no change, since the previous financial year, to the municipality’s exposure to market risks or 
the manner in which it manages and measures the risk. 


101 









George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

48. Unauthorised expenditure 



Depreciation 

Opening balance 

Unauthorised expenditure current year 

Approved by Council 

5,027,981 

5,027,981 


5,027,981 

5,027,981 

Unauthorised expenditure for the year ending 30 June 2019 will be presented to the Council 
be authorised. 

after year end to 

Impairment losses 



Reconciliation of unauthorised expenditure 

Opening balance 

Unauthorised expenditure current year 

Approved by Council 

64,445,714 

29,367,547 

51,865,079 

47,637,439 

(35,056,804) 


93,813,261 

64,445,714 


Unauthorised expenditure consist out of in increase in the debt impairment provision of traffic fines and 
consumer debtors being more than budgeted. 

Unauthorised expenditure for the year ending 30 June 2019 will be presented to the Council after year end to 
be condoned. 

Finance charges 


Reconciliation of unauthorised expenditure 

Opening balance 

6,030,588 

9,399,471 

Unauthorised expenditure current year 

9,924,356 

6,030,588 

Approved by Council 

- 

(9,399,471) 


15,954,944 

6,030,588 


The unauthorised expenditure relates to the interest charge on the provision for the rehabilitation of the landfill 
sites and the provision for the GIPTN Compensation Liability not being budgeted for. Refer to note 18 for more 
detail. 

Unauthorised expenditure for the year ending 30 June 2019 will be presented to the Council after year end for 
approval. 

Materials & bulk purchases 

Reconciliation of unauthorised expenditure 

Opening balance 

Unauthorised expenditure current year 
Approved by Council 

15,264,858 


15,264,858 


5,801,824 


(5,801,824) 


The unauthorised expenditure relates to the cost of erven sold during the financial year that was not provided 
for in the budget. 

Unauthorised expenditure for the year ending 30 June 2019 will be presented to the Council after year end for 
approval. 


102 





















George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


48. Unauthorised expenditure (continued) 
Remuneration of councillors 

Reconciliation of unauthorised expenditure 

Opening balance 


Unauthorised expenditure current year 

468,172 

- 

Approved by Council 

- 

- 


468,172 

- 

Unauthorised expenditure for the year ending 30 June 2019 will be presented to the Council after year end for 

approval. 



Loss on disposal of PPE 



Reconciliation of unauthorised expenditure 

Opening balance 


97,823 

Unauthorised expenditure current year 

- 

- 

Approved by Council 

- 

(97,823) 


- 

- 

Capital expenditure 



Reconciliation of unauthorised expenditure 

Opening balance 


2,350,696 

Unauthorised expenditure current year 

- 

- 

Approved by Council 

- 

(2,350,696) 


- 

- 


103 

















George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

49. Irregular expenditure 



Opening balance 

11,846,408 

124,830 

Add: Irregular Expenditure - current year 

256,831,885 

11,721,578 

Add: Irregular Expenditure - identified in current year for prior years 

357,664,632 

- 

Less: Amounts ratified by council 

(124,830) 

- 


626,218,095 

11,846,408 

The irregular expenditure above as well as the items below will be referred to 

a Section 32 committee for a 

recommendation to Council. 



Details of irregular expenditure 



Identified during 30 June 2016 financial year 

Procurement of goods and services in the upgrading of various sport 


78,760 

facilities during 30 June 2015 financial year - Ratified by Council 
during the year 

Overpayment of telephone allowance and petrol advance for 


46,070 

previous mayor - Ratified by Council during the year 

Identified during 30 June 2018 financial year 

3 quotations not obtained 

595,608 

595,608 

PPPFA Points Sytem 

795,687 

795,687 

Deviations not valid 

4,464,284 

4,464,284 

Declaration of interest (MBD4) not obtained 

509,607 

509,607 

Unfair awarding of points to the winning bidder during functionality 
test 

5,356,392 

5,356,392 

Identified during 30 June 2019 financial year 

Section 80 committee / councillors involved in tender process - 

256,831,885 


2018/2019 expenditure 

Section 80 committee / councillors involved in tender process - 

205,631,880 


2017/2018 expenditure 

Section 80 committee / councilors involved in tender process - 

96,681,562 


2016/2017 expenditure 

Section 80 committee / councillors involved in tender process - 

38,486,287 


2015/2016 expenditure 

Section 80 committee / councillors involved in tender process - 
2014/2015 expenditure 

10,712,824 

- 


620,066,016 

11,846,408 


Section 80 committee / councillors involved in tender process: 

Section 44 of the MSA outlines the functions and powers of the executive committee. None of these powers 
and functions include a role in individual procurement transactions. Section 56 of the MSA outlines the powers 
and functions of the executive mayor. None of these powers and functions include a role in individual 
procurement transactions. MFMA Section 117 states that: "Councillors barred from serving on municipal tender 
committees. No councillor of any municipality may be a member of a municipal bid committee or any other 
committee evaluating or approving tenders, quotations, contracts or other bids, nor attend any such meeting 
as an observer.” A section 80 committee operates as per mandate from the executive mayor or executive 
committee - and such mandate shall not include involvement in tender processes as this is not within the scope 
of the powers and functions of the executive committee or executive mayor. Instances where the section 80 
committees were involved in tender processes were identified but could not be quantified in the prior year 
financial statements. Related tenders and expenditure were identified and disclosed in the table above. 


104 














George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

50. 

Fruitless and wasteful expenditure 




Opening balance 

687,271 

687,271 


Less: Amounts ratified by Council 

(168,368) 

- 



518,903 

687,271 


Fruitless and wasteful expenditure consist out of the following: 

Interest paid on incorrect submission of the Value Added Tax return 


22,193 


at SARS - Ratified by Council during the year 

Procurement of goods and services in the upgrading of various sport 
facilities - Ratified by Council during the year 

- 

103,063 


Misuse of a 3G data card - Ratified by Council during the year 

- 

43,112 


GO George bus tickets: Cost price of old bus tickets destroyed after 
bus tariff increase 

518,903 

518,903 



518,903 

687,271 


The fruitless and wasteful expenditure of 30 June 2019 is being referred to 
recommendation to Council. 

a Section 32 

committee for a 

51. 

Material losses 




Electricity distribution 

Units purchased (KWh) 

473,073,479 

470,867,215 


Units lost during distribution 

25,502,732 

35,741,355 


Percentage lost during distribution 

5.39 

7.59 


Water distribution 

Kilolitres purified 

10,699,744 

11,187,913 


Kilolitres lost during distribution 

1,152,503 

3,025,560 


Percentage lost during distribution 

10.77 

27.04 

52. 

In-kind donations and assistance 




The following assets have been donated to the municipality and form part of the asset additions for the year: 


Investment property 

Skatelab building 

- 

225,000 


105 















George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 


Figures in Rand 

2019 

2018 

53. Additional disclosure in terms of Municipal Finance Management Act 



Contributions to organised local government 



Opening balance 

Current year fee 

Amount paid - current year 

(4,504,678) 

4,504,678 

(5,050,239) 

(3,923,844) 

3,923,844 

(4,504,678) 

Prepayment - Refer to note 5 

(5,050,239) 

(4,504,678) 

The municipality pays the SALGA membership fees annually in May for the following financial year in order to 
receive a 5 % discount. Refer to note 5 for more detail. 

Audit fees 



Current year subscription / fee 

Amount paid - current year 

5,696,439 

(5,696,439) 

4,284,907 

(4,284,907) 


- 

- 

PAYE and UIF 



Current year subscription / fee 

Amount paid - current year 

76,250,538 

(76,250,538) 

66,952,257 

(66,952,257) 


- 

- 

Pension and Medical Aid Deductions 



Current year subscription / fee 

Amount paid - current year 

105,680,208 

(105,680,208) 

93,269,333 

(93,269,333) 


- 

- 

VAT 



VAT receivable / (payable) 

4,256,357 

3,310,255 


VAT output payables and VAT input receivables are shown in note 6. 

All VAT returns have been submitted by the due date throughout the year. 


106 























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


53. 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 any point in time during the 
year ended 30 June 2019: 


30 June 2019 

Outstanding 

Outstanding 

Total 


less than 90 

more than 90 

R 


days 

days 



R 

R 


CH Noble 

3,138 

33,778 

36,916 

30 June 2018 

Outstanding 

Outstanding 

Total 


less than 90 

more than 90 

R 


days 

days 



R 

R 



Supply chain management regulations 

In terms of section 36 of the Municipal Supply Chain Management Regulations any deviation from the Supply 
Chain Management Policy needs to be approved by the Accounting Officer and noted by Council. Deviations 
from the Supply Chain Management processes were identified for the following categories and have been 
approved by the Accounting Officer and reported to Council. 


2019 



Less than 

Between 

Between 

More than 


R30,000 

R30,001 and 

R200,001 and 

R2,000,000 



R200,000 

R2,000,000 


Office of the Municipal Manager 

82,329 

1,353,316 

477,480 

- 

Civil Engineering Services 

367,867 

2,659,010 

2,398,768 

- 

Community Services 

418,453 

155,557 

235,753 

- 

Corporate Services 

114,529 

292,324 

- 

- 

Electro-technical Services 

352,407 

1,307,096 

1,452,751 

- 

Financial Services 

66,261 

261,079 

- 

- 

Human Settlement 

24,337 

- 

- 

- 

Planning and Development 

104,883 

131,093 

- 

- 

Protection Services 

248,496 

1,282,954 

481,488 

- 


1,779,562 

7,442,429 

5,046,240 

- 


107 



















George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


53. Additional disclosure in terms of Municipal Finance Management Act (continued) 


2018 



Less than 

Between 

Between 

More than 


R30,000 

R30,001 and 

R200,001 and 

R2,000,000 



R200,000 

R2,000,000 


Office of the Municipal Manager 

554,395 

1,907,705 

805,392 

- 

Civil Engineering Services 

510,326 

6,363,727 

13,009,524 

- 

Community Services 

802,881 

1,923,357 

4,849,325 

- 

Corporate Services 

155,466 

294,670 

1,343,989 

2,223,989 

Electro-technical Services 

491,256 

919,751 

1,056,743 

2,300,000 

Financial Services 

72,913 

955,003 

2,037,918 

- 

Human Settlement 

18,608 

94,034 

- 

- 

Planning and Development 

190,556 

200,084 

500,000 

- 

Protection Services 

185,783 

796,793 

387,780 

- 


2,982,184 

13,455,124 

23,990,671 

4,523,989 


Included in the deviations listed above are unvalid deviations as disclosed in note 49 Irregular expenditure. 
The major deviations were as follows: 

2019 


Awarded 

Amount 

Reason / Explanation 

KBK Power Solutions 

1,452,751 

Sole Supplier 

Chlorcape 

1,357,920 

Impossible to follow the official procurement process. Awaiting BAC final 
approval of tender. 

Eden FM 

477,479 

Sole Supplier 

Metsi Chem iKapa 

476,238 

Impossible to follow the official procurement process. Awaiting BAC final 
approval of tender 

East Coast Irrigation 

294,360 

Impossible to follow the official procurement process. Work needs to be 
done by contractor on site, as the work is directly linked. 

Group Editors 

281,388 

Impossible to follow the official procurement process. Only local paper. 

Huber Technology 

270,250 

Sole Supplier of Huber equipment 

Arena Group 

235,753 

Emergency 

Algoa 

200,100 

Sole Supplier 


5,046,239 


2018 


Awarded 

Amount 

Reason / Explanation 

Metsi Chem iKapa 

7,192,317 

Impossible to follow the official procurement process, Sole supplier in the 
Western Cape.Received direct quotes from three suppliers.Tender is in 
the final stage. 

Chlorcape 

5,772,686 

Impossible to follow the official procurement process, Sole supplier in the 
Western Cape.Received direct quotes from three suppliers.Tender is in 
the final stage. 

Microsoft 

4,245,097 

Sole supplier- Software licenses,Enterprise agreement & Azure Commit. 

Numecento 

3,525,379 

Impossible to follow the official procurement process, Service providers 
on year tender did not have the equipment available for the War on 
Waste project: Hiring of TLB's and Trucks. 

Powerrec TRF 

2,300,000 

Emergency: Rewinding of bonar long transformer 


108 



































George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


5 3. Additional disclosure in terms of Municipal Finance Management Act (continued) 


Awarded 

Amount 

Reason / Explanation 

Mr Noodles 

1,206,576 

Impossible to follow the official procurement process. Emergency service 
providers on year tender did not have the equipment available.War on 
Waste project and bulldozer for refuse site:Hiring of Trucks and bulldozers. 

Ultra Water 

782,952 

Impossible to follow the official procurement process, Sole supplier in the 
Western Cape.Received direct quotes from three suppliers.Tender is in 
the final stage. 

Almex Transport solutions 

772,188 

Sole supplier for the fare collection and ticket validation systems. 

ESRI SA 

620,206 

Exceptional case and impractical to follow the official procurement 
process.ESRI is the current supplier of the enterprise wide GIS solution- GIS 
development and maintenance 

A Bruinders 

500,000 

Acquisition of repair workers to historical building- Repairs and restoration 
of the heritage building in Pacaltsdorp. 

Adenco Construction 

435,784 

Impossible to follow the official procurement process. Contractor on site 
need to repair work on 66Kv line. 

Elements Consulting 
Engineers 

362,296 

Impossible to follow the official procurement process.Elements were 
appointed for the design of phase 2 in the construction monitoring of 
Ballots Bay to Glenwood 66Kv line. 

First Technology 

294,670 

Impossible to follow the official procurement process. First technology 
was appointed by Microsoft as their solutions partner for Business support. 

Reinhausen SA 

258,662 

Emergency.Repairs to OLTC situated at Protea sub station. 

Outeniqua plastics 

234,749 

Impossible to follow the official procurement process. Tender is in the 
final stage of evaluation.Direct negotiations with suppliers for black 
refuse bags. 

Eden FAM 

220,833 

Sole supplier, of radio talk slots and adverts. 

Business Engineering 

220,000 

Sole supplier of the Collaborator system support service. 

RAW projects 

216,602 

Impossible to follow the official procurement process.Formal process 
were followed without any success- Specialised trailers. 

Fluber Technology 

216,545 

Sole supplier of Fluber equipment 

JPCE (Pty) Ltd 

215,346 

Emergency. Waste diversion feasibility study 

Brasika Consulting 

200,151 

Impossible to follow the official process.Adv Venter has previously 
provided professional services to the municipality including governance 
arrangements relating to the IGA and FA-Legal advice:Review of existing 
contracts with DTPW in relation to GIPTN 


29,793,039 


Purchases from persons in service of the state 

The municipality made the following payments to companies / persons in service of the state: 


Company 

Name 

Related Person 

Company 

Capacity 

Capacity at 
State/Municipality 

Relationship 



WTW Civil (Pty) 
Ltd 

DL Wasserman 

Director 

Various 

Interest in 
related 
companies: 
Africa 

Resurfacing 
& Asphalt 
and Supa 
Asphalt 

28,829,379 


SMEC South 
Africa (Pty) Ltd 

M Phosa 

Member 

Finance - Mpumalanga 
Provincial Government 

Spouse 

6,884,592 

6,012,271 


109 



































George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


5 3. Additional disclosure in terms of Municipal Finance Management Act (continued) 


Company 

Name 

Related Person 

Company 

Capacity 

Capacity at 
State/Municipality 

Relationship 



Aurecon SA 

Various 

Various 

Various 

Various 

9,814,947 

8,242,802 


ZB Ebrahim 

Non-Executive 

Director 

Social Flousing 
Regulatory 

Various 



Moreki 

Distributors 

MD Moreki 

Director 

Palm Springs 

Magistrates Court 

Spouse 

6,802,938 

4,439,775 

Delacom 

VV Zwane 

Director 

Social Worker 

Spouse 

3,934,743 

1,299,040 

Willvest Twenty 
Three (Pty) Ltd 
t/a Urhwebo 
E-transand 

Various 

Various 

Various 

Various 

3,870,771 

18,591,438 

GLS 

Consulting 

Various 

Various 

Various 

Various 

2,429,024 

- 

iKapa 

Reticulation 
and flow CC 

SFA Davids 

Director 

Western Cape 

Education Department 
- Teacher 

Spouse 

2,179,490 

2,518,219 

Minolta SA: 
George 

KR Mthimunye 

Non-Executive 

director 

Mintek 

Various 

2,098,423 

1,997,473 

Raubenhei- 
mers Attorneys 

WM Luttig 

Director 

Teacher 

Spouse 

2,012,807 

1,115,135 

ISHS 

CM Willems 

Director 

Teacher 

Parent 

1,405,294 

1,339,416 

Royal 

Haskoning 

DHV 

JD van Eeden 

Member 

Councillor - Langeberg 

Department of Water 
Affairs 

Brother 

Nephew 

1,242,677 

4,147,731 

Trentyre 

NP Mona 

A Sing 

Member 

Non-Executive 

Director 

SA Forestry Company 

DBSA 

Not 

Indicated 

Not 

Indicated 

1,122,087 

1,266,357 

Elster Kent 
Metering 

NY Nkabinde 

Director 

Competition 

Commissioner 

Not 

Indicated 

952,718 

351,507 

Genela 
Security 
Training and 
Projects (Pty) 
Ltd 

Morton Gericke 

Not Indicated 

Councillor - George 
Municipality 

Brother 

925,292 


Conlog 

L Moodley 

Commercial 

Director 

Provincial Health 
Department of KZN - 
Director of Informatics - 
GIS 

Spouse 

781,080 

904,366 


L Gaxeni 

Quality 

Manager 

Eskom KZN - Deductor 
Manager 

Spouse 



Adenco 

Construction 

V Machimana 

DCC Jackson 

Director 

Director 

Department of Health 

Teacher 

Parent 

Parent 

705,141 

687,847 

Tuinigua 

Consulting 

Engineers 

E Huistra 

Member 

WC Education 

Spouse 

674,908 

1 60,338 

2 Brothers 
Enterprise 

J Booysen 

Owner 

George Municipality - 
Cleaner/Tea Lady 

Sister-In-Law 

567,473 

309,500 





































George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


5 3. Additional disclosure in terms of Municipal Finance Management Act (continued) 


Company 

Name 

Related Person 

Company 

Capacity 

Capacity at 
State/Municipality 

Relationship 



First 

Technology 
Western Cape 

A Sharp 

Director 

Various 

Various 

358,090 


Total Client 
Services 

V Zitumane 

BKD Mafu 

Member 

Non-executive 

director 

EC Parks & Tourism 

EC Liquor Board 

Not 

Indicated 

Not 

Indicated 

274,275 

258,638 

SMS ICT 

Choice (Pty) 
Ltd 

Similingene 
Sydwell Maqula 

Director 

Eastern Cape - 
Department of Human 
Settlements (Director) 

Spouse 

268,536 

390,467 

Bearing 

Warehouse 

FC Zeelie 

Member 

Department of 
Agriculture 

Spouse 

194,278 

232,569 

DFN 

Construction 

DF Noemdoe 

Owner 

George Municipality 
Planning Department 

Brother 

1 73,868 

203,397 




Department of Justice 

Sister 



Seebosrand 

Catering 

ME Classen 

Owner 

Official at George 
Municipality 

Daughter 

168,978 

79,304 

Misizipa 

General 

Grading 

S Toto 

Director 

George Municipality - 
Youth Office 

Fromer- 
Girlfriend 
(Mother of 
his Son) 

145,230 


Max21st 
Century 
Projects & 
Events 

M Meas 

Director 

Former employee of 
George Municipality 

Not 

Indicated 

125,727 


CSM 

Consulting 

Services 

CAJ Vancoillie 

Not Indicated 

Western Cape 

Provincial Government 
Department of 
Environmental Affairs 
and Development 
Planning (Chief Town & 
Regional Planner) 

Son 

124,460 

43,958 

Wolfe Pack 
Race 

K Langeveldt 

Owner 

Official at George 
Municipality 

Official at George 
Municipality 

Spouse 

Brother 

105,756 

207,543 

Inca Portfolio 
Managers 

M Mokoene 

Non-Executive 

Director 

Gautrain Management 
Agency 

Not 

Indicated 

101,080 

93,720 

Avela General 
Service and 
Construction 

Nimrod 

Nongogo 

Phelo Nongogo 

Owner 

Owners 

Department of Health: 
Ambulance Assistant 

Department of Health: 
Admin Clerk 

Son 

Daughter 

53,588 

46,203 

A Louw t/a 
Goossen 
Clough & 

Louw 

A Louw 

Director 

Western Cape 

Education Department 

Spouse 

32,509 

14,854 

On Target 

Shooting 

Range 

DJ van Rooyen 

Director 

South African Police 
Service 

Not 

Indicated 

25,800 



























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


5 3. Additional disclosure in terms of Municipal Finance Management Act (continued) 


Company 

Name 

Related 

Person 

Company 

Capacity 

Capacity at 
State/Municipality 

Relationship 



Omnisolar 

JE Albert 

Member 

Not Indicated 

Spouse 

10,326 

14,884 

Jaji Bee 
Relocation 
and Floney 
Farming 

QJ Jaji 

Owner 

Official at George 
Municipality 

Daughter 

3,600 

13,800 

Old Mutual 
Investments 

DL Cronje 


Councillor of George 
Municipality 

Son 

Investments 

- 

ABSA Bank 

M Ramos 

LL Von Zeuner 

CEO 

Director 

SA Politician 

Department of Health 

Spouse 

Brother 


5,725,430 

Servelec (Pty) 
Ltd 

W Louw 

Proposals 

Manager 

SARS Port Elizabeth - 
Debtors Clerk 

Spouse 

- 

318,606 

PNB Civils 

P Barnardo 

Director 

Former Employee at 
Mossel Bay Municipality 


- 

205,991 

Gibb (Pty) Ltd 

Various 

Various 

Various 

Various 

- 

199,500 

Zuksem 

Projects 01 
(Pty) Ltd 

BM Bokwe 

Owner 

Official at George 
Municipality 

Business 

Partner 


133,990 

Montidox CC 

N Beja 

Director 

Department of Health 

Spouse 

- 

129,978 

Nikwe 

Enterprise (Pty) 
Ltd 

M Olivier 

Owner 

Admin Officer: Housing 

Spouse 


2,800 


79,399,885 61,698,847 


54. Utilisation of Long-term liabilities reconciliation 


Long-term liabilities raised 


290,220,942 329,842,195 


Long-term liabilities have been utilized in accordance with the Municipal Finance Management Act. Sufficient 
cash has been set aside to ensure that long-term liabilities can be repaid on redemption date. Refer to note 13 
for detail of long-term liabilities. 

55. Municipal Land Transport Fund 


Included in the Accumulated surplus is the Municipal Land Transport Fund for the George Integrated Public 
Transport Network as required by the National Land Transport Act, (Act No. 5 of 2009). Refer to accounting 
policy 1.24 for more information on the fund. 

The transactions for the year were: 


Opening balance 
National grants 
Provincial grants 
Fare revenue 
Other income 
Interest received 
Less:Expenses 


19,633,908 
114,836,159 
101,243,886 
44,197,337 
256,681 

(259,629,399) 

20,538,572 


10,054,101 
124,764,718 
95,545,129 
39,419,283 
1,883,825 
348,600 
(252,381,748) 

19,633,908 


112 






























George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


56. Budget differences 

56.1 Other own revenue 

The variance of 1 1% between the actual and budget amounts received consist out of the following items: 

Traffic fines issued was 30% more than budgeted for. There was also a substantial decrease in the rental from 
facilities due to the Victoria Bay Kiosk and flats which were handed over to the Garden Route District 
Municipality. The number of motor vehicle registrations increased and there was therefore an increase in the 
agency fees received. The actual amount received was 32% more than the budget. 

56.2 Debt impairment 

The difference between the final adjustments budget and the actual amounts is 43%. The differences consist of 
an increase in the impairment provision of traffic fines issued 

56.3 Depreciation and asset impairments 

The difference between the final adjustments budget and the actual amounts is 12%. The decrease in 
depreciation is a result of the useful lives of assets that has been reviewed and subsequently spreading the 
depreciation over a longer life span. 

56.4 Finance charges 

The difference between the final adjustments budget and the actual amounts is 31%. The differences consist 
the interest on the provisions for the rehabilitation of the landfill site and GIPTN compensation provision. Refer to 
note 18 for detail. 


113 





George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


56. Budget differences (continued) 

56.5 Transfers recognised - capital 

The variance of 10% between the actual amount spent is linked to the underspending of capital projects listed 
in the points below. 

56.6 Capital - Executive and council 

The difference between the final adjustments budget and the actual amounts is 42% and is a result of saving on 
the procurement of furniture and office equipment. 

56.7 Capital - Finance and administration 

The difference between the final adjustments budget and the actual amounts is 13% and relates to the 
Pacaltsdorp Community Hall tender that was advertised in May and could not be completed due to time 
constraints. The Department has requested to roll-over the project to the next financial year. 

56.8 Capital - Internal audit 

The difference between the final adjustments budget and the actual amounts is 33% and relates to saving on 
the procurement of furniture and office equipment as vacancies was not filled at the end of the year. 

56.9 Capital - Community and social services 

The difference between the final adjustments budget and the actual amounts is 46% and consist of the 
palisade fence at Uniondale Community Hall that was not completed as well as the Pacaltsdorp Community 
Hall tender that was advertised in May and could not be completed due to time constraints. The Department 
has requested to roll-over these projects. 

56.10 Capital - Sport and recreation 

The difference between the final adjustments budget and the actual amounts is 70% since the tartan track 
project could not be completed (MIG funding) and a roll-over will be requested. 

56.11 Capital - Public safety 

The difference between the final adjustments budget and the actual amounts is 25%. A fire truck has been 
ordered but the tanker can only be delivered within 12 weeks and must be rolled-over to the next financial year 
since delivery will only take place after year end. 

56.12 Capital - Housing 

The difference between the final adjustments budget and the actual amounts is 59%. and relates to burglar 
bars at the Lawaaikamp Creche. A contractor was appointed in March 2019. The contractor cancelled and 
the new tender closed 29 April 2019. 50% of work was completed at year end and the remainder of funds to 
be rolled-over to complete the project. 

56.13 Capital - Health 

The difference between the final adjustments budget and the actual amounts is 27%. All the projects for the 
year was completed and the underspending is due to various savings on the projects. 

56.14 Capital - Planning and development 

The difference between the final adjustments budget and the actual amounts is 19% and consist mainly out of 
the savings on a bakkie that was purchased. 


114 





George Local Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 2019 2018 


56. Budget differences (continued) 

56.15 Capital - Road transport 

The difference between the final adjustments budget and the actual amounts is 19% and relates to the 
Thembalethu UISP Project. Termination of contract notices were issued to the contractors since community 
disruptions were experienced. Project will be rolled-over to the next financial year. 

Optic bus camera equipment project was not completed and will be rolled-over to the next financial year. 

56.16 Capital - Energy sources 

The difference between the final adjustments budget and the actual amounts is 12% and relates to the 
refurbishment of an existing 10MVA transformer where the contractor has been appointed but the project will 
only be completed in the next financial year. Electrification of Golden Valley project experienced delays due 
to the building of houses. 

56.17 Capital - Water management 

The difference between the final adjustments budget and the actual amounts is 48% and relates mainly to two 
projects that were not completed and rolled-over into the next financial year. The first is the Thembalethu UISP 
Project where termination of contract notices were issued to the contractors since community disruptions were 
experienced. Pacaltsdorp (Erf 325 East) Link was not completed. 

56.18 Capital - Waste water management 

The difference between the final adjustments budget and the actual amounts is 27% and relates to a delay in 
the appointment of a contractor to work on the Outeniqua waste water treatment works. 

56.19 Capital - Waste management 

The difference between the final adjustments budget and the actual amounts is 45%. The rehabilitation of 
landfill sites expenditure was journalised to the provision as it not capital in nature. Transfer facility at Uniondale 
is also still in progress as the completion milestones was not reached and will be completed after year end. 

56.20 Capital - Other 

The difference between the final adjustments budget and the actual amounts is 43% and relates to billboards at 
the Tourism Offices. A request for quotations was issued in May 2019 but the processes could not be completed 
by the end of June. The project will be rolled over to the next financial year. 


115