Skip to main content

Full text of "WC048 Knysna AFS 2018-19 unaudited"

See other formats


Annual Financial Statements 
for the year ended 30 June 2019 






Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 


General Information 


Mayoral committee 


Previous 

M Willemse (from 6 June 2018) 

E Van Aswegen (from 6 June 2018 to 11 
June 2019) 

GR Wolmarans (to 30 May 2019) 

L Davis 

(Chairperson: Technical Services Committee) 

Executive Councillor V Waxa 

(Chairperson: Planning and Integrated 
Human Settlements) (from 31 October 2017 ) 

Executive Councillor S Arends 

(Chairperson. Community Services 
Committee) (from 31 October 2017) 

Executive Councillor ACF Weideman 

(Chairperson. Finance Governance and 
Economic Development) (from 31 October 


Executive Mayor 
Deputy Executive Mayor 

Speaker 

Executive Councillor 


Current 
M Willemse 

A Tsengwa (from 11 June 2019) 

TM Gombo (from 30 May 2019) 

L Davis 

(Chairperson: Technical Services 
Committee) (to 21 May 2019) vacant as at 
30 June 2019 

M Wasserman 

(Chairperson: Planning and Integrated 
Human Settlements) (from January 2019 
to 20 May 2019) vacant as at 30 June 
2019 

M Salaze 

(Chairperson: Community Services 
Committee) 

P Myers 

(Chairperson: Finance Governance and 
Economic Development) 


Councillors 

Ward 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 
11 

Proportional 

Proportional 

Proportional 

Proportional 

Proportional 

Proportional 

Proportional 

Proportional 

Proportional 

Proportional 


Current 
L Davis 

ACF Weideman 
MD Skosana 
S Ngqezu 
Vacant 

EO van Aswegen 
MG Matiwane 
T Matika 
MS Willemse 
PJ Myers 
D Pofadder 
CD Groutz 
TM Gombo 
SI Kwinana 
MN Naki 
MW Salaze 
NA Tswenga 
L Tyokolo 
I Uys 

GR Wolmarans 
M Wasserman 


1 



Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

General Information 


Civic Centre 
Clyde Street 
Knysna 
6570 

PO Box 21 
Knysna 
6570 

Nedbank Corporate 
P O Box 472 Knysna 6570 

Auditor-General of South Africa 
Private Bag X96 
Bellville 
7535 

www.knysna.gov.za 

Tel: 044 - 302 6300 
Fax: 044-302 6333 

Greater Knysna areas which includes: 

Knysna 
Sedgefield 
Rheenendal 
Karatara 
Brenton 
Belvidere 
Knoetzie 

Relevant legislation Constitution of the Republic of South Africa (Act no 108 of 1996) 

Municipal Finance Management Act (Act no 56 of 2003) 

Division of Revenue Act 

The Income Tax Act 58 of 1962 

Value Added Tax Act 89 of 1991 

Municipal Structures Act (Act no 117 of 1998) 

Municipal Systems Act (Act no 32 of 2000) 

Water Services Act (Act no 108 of 1997) 

Flousing Act (Act no 107 of 1997) 

Municipal Property Rates Act (Act no 6 of 2004) 

Electricity Act (Act no 41 of 1987) 

Skills Development Levies Act (Act no 9 of 1999) 

Employment Equity Act (Act no 55 of 1998) 

Unemployment Insurance Act (Act no 30 of 1966) 

Basic Conditions of Employment Act (Act no 75 of 1997) 


Registered office 

Postal address 

Bankers 

Auditors 

Website 

Contact numbers 

Jurisdiction 


2 




Annual Financial Statements for the year ended 30 June 2019 

Index 


Page 

Accounting Officer's Responsibilities and Approval 4 

Statement of Financial Position 5 

Statement of Financial Performance 6 

Statement of Changes in Net Assets 7 

Cash Flow Statement 8 

Statement of Comparison of Budget and Actual Amounts 9-12 

Accounting Policies 16-39 

Notes to the Annual Financial Statements 40-105 


The following supplementary information does not form part of the annual financial statements and is unaudited: 


Appendix A: Schedule of External loans 


106 


Appendix B: Disclosure of Grants and Subsidies in terms of Section 123 of MFMA, 56 of 107 

2003 


Appendix C: National Treasury Appropriation Statements 


108-112 


COID 

Compensation for Occupational Injuries and Diseases 

CRR 

Capital Replacement Reserve 

DBSA 

Development Bank of South Africa 

GRAP 

Generally Recognised Accounting Practice 

HDF 

Housing Development Fund 

IAS 

International Accounting Standards 

IPSAS 

International Public Sector Accounting Standards 

ME’s 

Municipal Entities 

MEC 

Member of the Executive Council 

MFMA 

Municipal Finance Management Act 

MIG 

Municipal Infrastructure Grant (Previously CMIP) 


Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Officer's Responsibilities and Approval 


The accounting officer is required by the Municipal Finance Management Act (Act 56 of 2003), to maintain adequate 
accounting records and is responsible for the content and integrity of the annual financial statements and related financial 
information included in this report. It is the responsibility of the accounting officer to ensure that the annual financial 
statements fairly present the state of financial affairs of the municipality as at the end of the financial year and the results 
of its operations and cash flows for the period then ended. The external auditors are engaged to express an independent 
opinion on the annual financial statements and was given unrestricted access to all financial records and related data. 

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

The annual financial statements are based upon appropriate accounting policies consistently applied and supported by 
reasonable and prudent judgements and estimates. 

The accounting officer acknowledges that he is ultimately responsible for the system of internal financial control 
established by the municipality and place considerable importance on maintaining a strong control environment. To meet 
these responsibilities, the accounting officer sets standards for internal control aimed at reducing the risk of error or deficit 
in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined 
framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. 
These controls are monitored throughout the municipality and all employees are required to maintain the highest ethical 
standards in ensuring the municipality’s business is conducted in a manner that in all reasonable circumstances is above 
reproach. The focus of risk management in the municipality is on identifying, assessing, managing and monitoring all 
known forms of risk across the municipality. While operating risk cannot be fully eliminated, the municipality endeavours 
to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and 
managed within predetermined procedures and constraints. 

The accounting officer is of the opinion, based on the information and explanations given by management, that the 
system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of 
the annual financial statements. However, any system of internal financial control can provide only reasonable, and not 
absolute, assurance against material misstatement. 

The accounting officer has reviewed the municipality's cash flow forecast for the year to 30 June 2020 and, in the light of 
this review and the current financial position, he is satisfied that the municipality has or has access to adequate resources 
to continue in operational existence for the foreseeable future. 

The annual financial statements are prepared on the basis that the municipality is a going concern and that the Knysna 
Municipality has neither the intention nor the need to liquidate or curtail materially the scale of the municipality. 

The external auditors are responsible for independently auditing and reporting on the municipality's annual financial 
statements. 

The annual financial statements set out on pages 5 to 105, which have been prepared on the going concern basis, were 



4 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Statement of Financial Position as at 30 June 2019 

___ 2018 
Restated* 

Note(s) R R 


Assets 


Current Assets 


Inventories 

3 

10,290,526 

5,518,580 

Receivables from exchange transactions 

5 

54,282,984 

52,249,963 

Receivables from non-exchange transactions 

6 

82,332,431 

70,922,311 

VAT receivable 

7 

19,744,003 

27,346,514 

Prepayments 


2,739,496 

2,647,978 

Unpaid conditional grants and receipts 

8 

30,775,924 

14,981,801 

Cash and cash equivalents 

9 

71,709,029 

271,874,393 

79,877,042 

253,644,189 

Non-Current Assets 

Long-term investments and receivables 

4 

34,498,131 

32,365,128 

Investment property 

10 

78,997,263 

76,911,187 

Property, plant and equipment 

11 

1,135,598,684 

1,013,116,140 

Intangible assets 

12 

135,688 

154,106 

Heritage assets 

13 

18,173,998 

17,435,046 

Operating lease asset 

14 

2,060,278 

1,269,464,042 

1,913,910 

1,141,895,517 

Total Assets 


1,541,338,435 

1,395,439,706 

Liabilities 




Current Liabilities 

Unspent conditional grants and receipts 

8 

32,585,851 

10,314,802 

Long-term liabilities 

15 

23,762,198 

18,938,995 

Finance lease obligation 

16 

905,263 

740,842 

Payables from exchange transactions 

17 

111,786,241 

91,771,037 

Consumer deposits 

18 

12,924,361 

12,388,076 

Employee benefit obligation 

19 

32,992,053 

29,643,171 

Provisions 

20 

5,880,000 

220,835,967 

2,022,602 

165,819,525 

Non-Current Liabilities 

Long-term liabilities 

15 

173,816,114 

136,080,282 

Finance lease obligation 

16 

410,994 

1,197,857 

Operating lease liability 

14 

109,445 

5,975 

Employee benefit obligation 

19 

101,441,582 

100,910,131 

Provisions 

20 

8,254,850 

284,032,985 

10,951,327 

249,145,572 

Total Liabilities 


504,868,952 

414,965,097 

Net Assets 


1,036,469,483 

980,474,609 

Reserves 

Capital Replacement Reserve 


45,500,000 

40,500,000 

Accumulated surplus 


990,969,483 

939,974,609 

Total Net Assets 


1,036,469,483 

980,474,609 


See Note 45 


5 







Knysna municipality 

Annual Financial Statements for the year ended 30 June 2019 

Statement of Financial Performance 

2019 2018 

Restated* 

Note(s) R R 


Revenue 


Revenue from exchange transactions 


Service charges 

21 

362,102,813 

335,108,770 

Sales of goods and rendering of services 


5,076,246 

5,204,047 

Rental of facilities and equipment 

22 

5,600,926 

4,510,121 

interest received - outstanding debtors 


11,837,866 

10,544,572 

Interest received - external investments 


9,443,215 

10,301,782 

Agency services 


3,297,253 

3,095,516 

Licences and permits 


1,586,556 

1,671,679 

Third Party Payments (Insurance Claims) 


4,005,366 

4,113,929 

Operational revenue 

23 

1,574,080 

1,008,441 

Total revenue from exchange transactions 

Revenue from non-exchange transactions 


404,524,321 

375,558,857 

Taxation revenue 

Property rates 

24 

215,548,591 

203,443,082 

Transfer revenue 

Government grants and subsidies 

25 

187,150,401 

170,935,590 

Fines, penalties and forfeits 

26 

121,653,768 

92,713,639 

Public contributions and donations 

27 

1,214,566 

1,337,190 

Total revenue from non-exchange transactions 


525,567,325 

468,429,501 

Total revenue 


930,091,647 

843,988,358 

Expenditure 

Employee related costs 

28 

245,685,762 

226,731,358 

Remuneration of councillors 

29 

8,569,575 

8,468,978 

Bad debts written off 


18,238,510 

197,105 

Debt Impairment 

30 

117,797,141 

109,994,826 

Depreciation and amortisation 

31 

32,604,365 

29,533,521 

Impairment of assets / (Reversal of impairments) 

32 

(8,487,969) 

713,733 

Finance costs 

33 

25,036,158 

25,556,649 

Lease rentals on operating lease 

34 

10,248,334 

10,013,494 

Bulk purchases 

35 

169,553,269 

154,943,871 

Contracted services 

36 

177,700,900 

123,059,076 

Transfers and Subsidies 

37 

4,151,165 

4,722,784 

Inventory Consumed 

38 

43,089,810 

49,309,630 

Operational costs 

39 

39,293,348 

40,051,412 

Total expenditure 


883,480,368 

783,296,437 

Operating surplus 


46,611,279 

60,691,921 

Profit/(loss) on disposal of assets and liabilities 


(491,249) 

(123,836) 

Actuarial gains/(losses) 

19 

9,508,014 

10,425,152 

Inventories surplus (losses/write-downs) 


366,836 

9,383,601 

(35,988) 

10,265,328 

Surplus for the year 


55,994,880 

70,957,249 


See Note 45 


6 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Statement of Changes in Net Assets 


c: 45 
_ 0 

a S 

O nj 


•a 

0 

0 w 
C P- 


Q4 


04 


CD 


J§ 

a. 8 ® i 
® .2 8 
° Q-cc: 

CD 

04 


o 

x— 

o 

CD 1 

CD 

CO 

o « 

o 

CO 

'sf 

CM 

CO 

'Cf 

M* 

o 

CO 

CO 

CO 

X— 

CM 

CO 

CM 

CM 

CO 

CO 

oo 


o" 

I s -" 

h«r 

I s -" 

I s -" 


M*" 

M-" 

CD 

CO 

CO 

T* 

LO 

LO 

I s - 

CD 

CD 

CO 

I s — 

h- 

lO 

CD 

CD 


CD 

CD 

Tf 

O) 

o> 

CD 

o" 

o" 

o' 

LO" 

LO" 

CD 

CD 


o 

I s - 

I s - 

CO 

LO 

LO 

CO 

CO 


CD 



CD 












T“ 










X— 

x— 

v- 

CD t- 

CO 

co 

O O 

O 

CO 

I s - 

CM 

CD 

M- CO 

x— 

o 

CO o 

00 

CO 

m- 

CM 

CO 

CM CO 

CD 

CD 

00 o 

CO 

Tf 

CD 

I s -" 

CO 

h-~ CD" 

h-~ 


xf o" 

M*" 

<d" 

CM 

CO 

CO 

LO M" 

o 

i-- 

CD O 

CD 

CO 

CD 

r^~ 

CO 

CD CD 

CO 

<D 

CD O 

CD 

OT 

CM" 

cd" 

CM 

o" co" 

I s -" 

CD 

LO" LO" 

o" 

o' 

CD 


r- 

I s - 

CD 

CO 

LO s ~* 

LO 

CD 

CO 


CO 



<D 



CD 

CD 

1 

CD 

l x— 

V“ 

O 

1 o 

O 

O 

CO 


CD 

CO 

CO 

O 

o 

O 

O 

CD 


CO 

CO 

CO 


o 

O 


o" 


o 

oi 

CD" 

o' 

o" 

o" 

o" 

LO 


in 

■sr 

M" 

o 

o 

o 

O 

00 


00 

CO 

CO 

LO 

o 

o 

in 

co" 


co 

co" 

co" 

o" 

to" 

LO" 

io 

CO 


CO 








I s - 


■a 

0 

t 

o 

CL 

0 

l— 

>> 

0 

Z 3 

O 

> 

0 


LO 

'nT 

0 

o 

c 


0 

04 


0 

E 

0 

o 

J3 

CL 

0 

04 


o 

CM 

3 


0 

£ 

0 

0 

0 

04 


0 

E 

0 

o 

_ro 

CL 

0 

04 


0 u. 

>> 0 .O 


42 o 
«= c 
0 o 

-E o 
0 0 
w .E, b 

CL X3 O 

O < O 


"O 

T~ 

o 


Cl 

0 

O 

E 

o 


CL 

, 0 
to o 

0 c 

>, c 


0 O 


CD 


0 


0 -a 
0 0 

0 0 
- 0 


DO O 04 H 


0 

0 

O) 

C 

0 


« g £■ 

* — O 


0 0 
—j M— 
0 

0* c 

—j i_ 

w H 


0 

0 

O) 

c 

0 

x: 

o 

*0 

O 


o 

CM 

0 

C 


o 

CO 


0 

a 

c 

iS 

0 

DO 


See Note 45 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Cash Flow Statement 



Note(s) 

2019 

R 

2018 

Restated* 

R 

Cash flows from operating activities 




Receipts 

Taxation and fines revenue 

Sale of goods and services 

Grants and conditional receipts 

Interest income 

Other income 


222,975,881 

344,198,184 

193,627,325 

9,443,215 

16,019,574 

208,522,002 

315,681,162 

178,709,395 

10,301,782 

15,056,959 



786,264,179 

728,271,300 

Payments 

Employee costs 

Suppliers 

Finance costs 


(240,861,054) 

(430,364,605) 

(14,366,287) 

(231,917,389) 

(392,674,302) 

(14,854,445) 



(685,591,946) 

(639,446,136) 

Net cash flows from operating activities 

40 

100,672,233 

88,825,164 

Cash flows from investing activities 




Purchase of property, plant and equipment 

Proceeds from sale of Property, plant and equipment 

Movement in Long-term investments and receivables 

11 . 
11 

4 

(148,506,148) 

29,738 

(2,133,003) 

(126,117,587) 

(2,015,781) 

Net cash flows from investing activities 


(150,609,413) 

(128,133,368) 

Cash flows from financing activities 




Proceeds from long-term liabilities 

Repayment of long-term liabilities 

Finance lease payments 

15 

60,238,000 

(17,678,965) 

(789,868) 

25,424,087 

(13,828,163) 

(623,617) 

Net cash flows from financing activities 


41,769,167 

10,972,307 

Net increase/(decrease) in cash and cash equivalents 

Cash and cash equivalents at the beginning of the year 


(8,168,013) 

79,877,042 

(28,335,897) 

108,212,939 

Cash and cash equivalents at the end of the year 

9 

71,709,029 

79,877,042 


See Note 45 


8 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Statement of Comparison of Budget and Actual Amounts 


Budget on Accrual Basis 



Approved 

budget 

R 

Adjustments 

R 

Final Budget Actual amounts 
on comparable 
basis 

R R 

Difference 
between final 
budget and 
actual 

R 

Reference 

Statement of Financial Performance 

Revenue 






Revenue by source 

Property rates 

215,403,157 

300,000 

215,703,157 

215,548,591 

(154,566) 

Difference 
below R 1 mil 

Service charges 

386,212,113 

8,600,000 

394,812,113 

362,102,813 

(32,709,300) Difference less 
than 10% 

Investment revenue 

23,833,804 

- 

23,833,804 

21,281,081 

(2,552,723) 

54.1 

Transfers recognised - 
operational 

153,822,304 

18,205,217 

172,027,521 

137,293,674 

(34,733,847) 

54.2 

Other own revenue 

135,277,822 

(700,000) 

134,577,822 

144,401,502 

9,823,680 

54.3 

Total Revenue (excluding 
capital transfers and 
contributions) 

914,549,200 

26,405,217 

940,954,417 

880,627,661 

(60,326,756) 


Expenditure by type 

Employee costs 

(254,199,498) 

3,382,871 

(250,816,627) 

(236,177,748) 

14,638,879 Difference less 

than 

Remuneration of councillors 

(8,652,500) 

(698,950) 

(9,351,450) 

(8,569,575) 

781,875 

Difference 
below R 1 mil 

Debt impairment 

(108,874,932) 

24,000,000 

(84,874,932) 

(117,797,141) 

(32,922,209) 

54.4 

Depreciation & asset impairment 

(31,510,869) 

(714,695) 

(32,225,564) 

(24,116,396) 

8,109,168 

54.5 

Finance costs 

(14,395,110) 

217,546 

(14,177,564) 

(25,036,158) 

(10,858,594) 

54.6 

Materials and bulk purchases 

(227,443,744) 

9,248,315 

(218,195,429) 

(212,643,079) 

5,552,350 Difference less 
than 10% 

Transfers and grants 

(3,150,000) 

(544,400) 

(3,694,400) 

(4,151,165) 

(456,765) 

Difference 
below R 1 mil 

Contracted services 

(172,444,828) 

(43,896,394) 

(216,341,222) 

(177,700,900) 

38,640,322 

54.7 

Other expenditure 

(57,594,123) 

(32,553,023) 

(90,147,146) 

(68,297,346) 

21,849,800 

54.8 

Total expenditure 

(878,265,604) 

(41,558,730) 

(919,824,334) 

(874,489,508) 

45,334,826 


Surplus / (Deficit) 

36,283,596 

(15,153,513) 

21,130,083 

6,138,153 

(14,991,930) 


Transfers recognised - capital 

53,359,696 

20,593,167 

73,952,863 

49,856,727 

(24,096,136) 

54.2 

Surplus after capital transfers 
& contributions 

89,643,292 

5,439,654 

95,082,946 

55,994,880 

(39,088,066) 


Surplus for the year 

89,643,292 

5,439,654 

95,082,946 

55,994,880 

(39,088,066) 



9 


Knysrta 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 amounts 

Difference Reference 


budget 


on comparable 

between final 




basis 

budget and 





actual 


R 

R 

R R 

R 


Statement of Financial Position 
Assets 


Current Assets 


Cash 

72,169,000 

(31,073,000) 

41,096,000 

71,709,029 

30,613,029 

54.9 

Consumer debtors 

56,107,000 

(665,000) 

55,442,000 

53,332,532 

(2,109,468) Difference less 







than 10% 

Other debtors 

124,731,000 

(2,068,000) 

122,663,000 

136,542,306 

13,879,306 

54.10 

Current portion of long-term 

8,000 

(8,000) 

- 

- 

- 

Difference 

receivables 






below R 1 mil 

Inventory 

9,093,000 

(3,243,000) 

5,850,000 

10,290,526 

4,440,526 

54.11 


262,108,000 

(37,057,000) 

225,051,000 

271,874,393 

46,823,393 


Non-Current Assets 

Long-term receivables 

7,000 

- 

7,000 

- 

(7,000) 

Difference 
below R 1 mil 

Investments 

30,343,000 

2,015,000 

32,358,000 

34,498,131 

2,140,131 | 

Difference less 







than 10% 

Investment property 

77,004,000 

(89,000) 

76,915,000 

78,997,263 

2,082,263 Difference less 







than 10% 

Property, plant and equipment 

1,184,208,000 

8,852,000 1,193,060,000 

1,135,598,684 

(57,461,316) Difference less 







than 10% 

Intangible 

157,000 

(3,000) 

154,000 

135,688 

(18,312) 

Difference 
below R 1 mil 

Other non-current assets 

19,188,000 

161,000 

19,349,000 

20,234,276 

885,276 

Difference 
below R 1 mil 


1,310,907,000 

10,936,000 ' 

1,321,843,000 

1,269,464,042 

(52,378,958) 


Total Assets 

1,573,015,000 

(26,121,000) 1,546,894,000 1,541,338,435 

(5,555,565) 


Liabilities 







Current Liabilities 

Borrowing 

14,947,000 

4,733,000 

19,680,000 

24,667,461 

4,987,461 

54.12 

Consumer deposits 

12,793,000 

388,000 

13,181,000 

12,924,361 

(256,639) 

Difference 
below R 1 mil 

Trade and other payables 

119,696,000 

(15,984,000) 

103,712,000 

144,372,092 

40,660,092 

54.13 

Provisions 

29,715,000 

5,505,000 

35,220,000 

38,872,053 

3,652,053 

Difference 
below R 1 mil 


177,151,000 

(5,358,000) 

171,793,000 

220,835,967 

49,042,967 


Non-Current Liabilities 
Borrowing 

183,101,000 

10,991,000 

194,092,000 

174,336,553 

(19,755,447) 

54.12 

Provisions 

145,722,000 

(28,820,000) 

116,902,000 

109,696,432 

(7,205,568) 

54.14 


328,823,000 

(17,829,000) 

310,994,000 

284,032,985 

(26,961,015) 


Total Liabilities 

505,974,000 

(23,187,000) 

482,787,000 

504,868,952 

22,081,952 


Net Assets 

1,067,041,000 

(2,934,000)1,064,107,000 

1,036,469,483 

(27,637,517) 



Community wealth/equity 

Accumulated Surplus/(Deficit) 1,021,410,000 2 , 197,000 1.023,607,000 990,969,483 (32,637,517) Difference less 

than 10% 


10 



Knysna 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 amounts 

Difference 

Reference 


budget 



on comparable 

between final 






basis 

budget and 







actual 



R 

R 

R 

R 

R 


Reserves 

45,631,000 

(5,131,000) 

40,500,000 

45,500,000 

5,000,000 

54.15 

Total community wealth/equity 1,067,041,000 

(2,934,000) 1,064,107,000 1,036,469,483 

(27,637,517) 


Cash Flow Statement 







Cash flows from operating activities 






Receipts 







Ratepayers and other 

609,914,631 

7,057,000 

616,971,631 

586,879,819 

(30,091,812)Difference less 







than 10% 

Government grants and 
conditional receipts 

207,182,000 

38,798,384 

245,980,384 

193,164,315 

(52,816,069) 

54.16 

Interest 

22,022,733 

- 

22,022,733 

9,443,215 

(12,579,518) 

54.17 


839,119,364 

45,855,384 

884,974,748 

789,487,349 

(95,487,399) 


Payments 

Suppliers and employees 

(704,174,182) 

(51,332,044) 

(755,506,226) 

(670,833,942) 

84,672,284 

54.18 

Finance charges 

(14,395,110) 

217,546 

(14,177,564) 

(14,366,285) 

(188,721) 

Difference 
below R 1 mil 

Transfers and Grants 

(3,150,000) 

(544,400) 

(3,694,400) 

(4,151,165) 

(456,765) 

Difference 
below R 1 mil 


(721,719,292) 

(51,658,898) (773,378,190) 

(689,351,392) 

84,026,798 


Net cash flows from operating 
activities 

117,400,072 

(5,803,514) 

111,596,558 

100,135,957 

(11,460,601) 


Cash flows from investing activities 






Receipts 

Proceeds on disposal of assets 

1,000,000 

- 

1,000,000 

29,739 

(970,261) 

Difference 
below R 1 mil 

Decrease (increase) in non- 
current investments 

“ 

" 


(2,133,003) 

(2,133,003) 

54.19 


1,000,000 

- 

1,000,000 

(2,103,264) 

(3,103,264) 


Payments 

Capital assets 

(147,686,683) 

(61,292,274) 

(208,978,957) 

(148,506,148) 

60,472,809 

54.20 

Net cash flows from investing 
activities 

(146,686,683) 

(61,292,274) 

(207,978,957) 

(150,609,412) 

57,369,545 



11 




Knysrta Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Statement of Comparison of Budget and Actual Amounts 

Budget on Accrual Basis 

Approved 
budget 


R 


Cash flows from financing activities 
Receipts 


Borrowing long term/refinancing 

50,195,720 

23,112,094 

73,307,814 

60,238,000 

(13,069,814) 

54.21 

Increase (decrease) in consumer 

769,527 

23,310 

792,837 

536,285 

(256,552) 

Difference 

deposits 






below R 1 mil 


50,965,247 

23,135,404 

74,100,651 

60,774,285 

(13,326,366) 


Payments 

Repayment of borrowing 

(16,736,440) 

236,668 

(16,499,772) 

(18,468,834) 

(1,969,062) 

54.21 

Net cash flows from financing 
activities 

34,228,807 

23,372,072 

57,600,879 

42,305,451 

(15,295,428) 


Net increase/(decrease) in cash 
held 

4,942,196 

(43,723,716) 

(38,781,520) 

(8,168,004) 

30,613,516 


Cash/cash equivalents at the 
year begin: 

67,226,556 

12,650,486 

79,877,042 

79,877,042 

" 


Cash and cash equivalents at 
the end of the year 

72,168,752 

(31,073,230) 

41,095,522 

71,709,038 

30,613,516 



Adjustments Final Budget Actual amounts Difference Reference 

on comparable between final 
basis budget and 
actual 

R R R R 


12 






o 

CM 

0 

C 


O 

CO 

"D 

0 

*a 


re 

0 

0 


£ 

CD 



c 

& 

cs 1 


Q. a) 

to 

O 0 

E 

^ re 

O 

3 w 

MM 

is re 

eSi o 

.2 

m %z 

fS ra 

a 


o 

m 

fc=n 


a 

C i 

a 


< 


0 

P *tr {« •<-* 

g g.|.E race 

5 42 S' ora 

o 3 („ -c 3 

Q ^ Q ^ 


0 

p **— 

ts o ° 

3 p: 


0 

_ O) 0 - 
. . re T3 

o 3 W C 3 

< o ra c J2 


o 

o 

c 

.2 

*n 

re 

> 

T3 

S £ 

■§s 

JP XJ 

t; c 
re q_ 

-3 x 

13 a 


0 

- E 
re o 

3 o 
-*-> 

o □ 
< o 


0 

o 

TJ 

3 

-P 

"re 

c 


01 


vc 


01 


01 


01 


o 

c 

^ 3 U 

c o 0 

I « g-5 

I 9 D.= 

1 ““ 4J Q 

> d. ra a. 


»- o 
O ° ® 

ra—,5 _ K 

c .. h- <r 

jjjj-3 

p C T7 |x, 

W 5 i» S 


42 

c 

<a 

E « 

+■• m 

■= 2> ra 
g ,5 ,-d 

.5-0 3 
LL ra J2 


on 


421 
S»j 
£ N ±i re 

oj j oS 

T3 3 O "= 

3 


JZ W * CO tj; 


re 

c 0 
&-o 

L- 3 

O JQ 


VC 


o 

CM 



CO CD 
CD CD 


M - CM 
03 CD 


03 lO 

n* I s - 
co co 
co" x-~ 
co co 

CO h- 

^F 


CO LO 
XT F'- 
h- LO_ 
fC 03 
r- co 

T- IO 

co" co" 
CO ' 
CM 


O 
CM IO 
CO G3_ 
o" co" 
03 03 
° <£, 
co" 


CO o 

03 O 
rf LO 
03” CM" 

cd in 

x-_ <q 

\F co" 

LO ^ 
CM 


00 h" 

o r- 


03 LO 
CO h- 


03 CO 
O CD 
CM v-^ 
CM~ CD 
CM O 
03 v” 

cm" co" 

CO 


M- CO 
h- 03 


I s - CD 


M" O 
03 LO 
LO CO 

co" cm" 

LO LO 
CO LO 
o” LO" 


T- CD 
•M- 03 
x- CO 

rC cd" 

03 T— 

x-_ 

|C tF 
t- CM 


CM -M- 
CO CD 
03 LO 


00 03 
LO h- 

cd" co" 

CO M" 

° <9. 
to" cm" 

CM r- 
*-^CM 


M- 03 
CD CM 
LO \f 
h-T lo" 

h- 03 

X— T~ 

co" 



O LO 
O 03 
O CD 

o" X*" 

o V- 
ON 

MF 

CM 


CM 03 
CO CD 
03 00 

nF o" 

x— 

co_LO 

co" T-~ 

O CO 


cd r- 
cm 

LO h- 


CM co 
lo" 


o \r 

V- xj- 
x- 

lo" co" 
03 -sr 
CO NT 

r^" 

v- CM 
'-'CM 


0 re 

- I § 

ra rn ro 3 


"5 c w 


3 
0 .Q 

E>-o 

^ c 
re 


CM 

CO 


O*' 

CM 


LO 

CD 

N-_ 

cd" 

lo 

MT 


LO 

CD 


O 

O 

■ST 

CD 

CD 

CO 


O 

O 

NT 

■xf 

03 

CO 

co" 


O 

O 

•sr 

'sF 

LO 


O 

O 

o 

o" 

to 


-a 

c 

re 


0 2 £ ■•*= o O m 

0 0 O a-re C m — « 2 

oSilK-q|S| 


C 3 O • 0 <4_j r~ •— <— 

g-EiSo.gi.2f 

E0Q (D(y (D.Ei53__ 
LLI VC oQQ otLl-S a_H- cd 


to 42 
c c 
re re : 


*o 

c 

0 

a 

I 

re 

■«-< 

o 


O h- 


3 

CL 

L_ 

3 

w 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 


C 

© 

E 

3 

G3 

co 

e 

o 

.S 

Q, 

o 

s_ 

s. 

a, 

< 


© 

— E o o 

re o u c SLfY 
XS *3 5 s 05*0 
o 3 W C 3 

< O re O -£2 

o 

C **- 

"re o ° Si. (Y 

3 0^-3 5 )U1 
° re tj 

« 3 « C 3 

< o re i*= xj 


© 

o 

c 

.5 

'u 

re 

> 

~u 

S £ 
oi 

x: T3 
c 

2 ® 
re cl 

J= x 

D re 


re 

- E 
re o 

3 Q 

< O 


re 

© 

TJ 

3 

X2 

"re 

c 


C£ 


CC 


cr 


a: 


u. 


o 

c 

3T3 

core 

oi o >c 

|o|I 

s~ a o 
> 53* re a. 


H-. O 

°^; re 
0^,53 ^ 

E tn 

c-S ° 1 

^ c rr u. 

«5 


B 

C 

re 

E ^ 

•*-• © 

-« D) 

g.= T3 

.= ■0 3 
LL re X2 

a? 

o°o J2 

*. EN6 
Q) (A 

u >« • o 

■n 3 O _ as; 

CD (s=.«)E 


EC 


EC 


_or 

< 


re 

c re 

:s§ 

6 5 



n° 

o'- 

•*P 

o'. 


nP 

CO 

CM 

CM 


© 

05 

CO 

to 


© 

*>P 


so 

o'* 


sP 

O' 

h*. 

05 

© 


O 

co 

to 

m 


h- 






S' 

to 

to* 



CO 

to 

to 


in 


o 

o 


00 

CO 

co" 

ocf 


CD 

© 

CO 

© 


in 

o_ 

© 

© 


00 

■Nf 

of 

of 


cm" 


CO 

© 


CO 


























:■■■•■' ■. : ; ■ 









.i 

h- 

o 

o 


© 

CM 

© 

© 


in 

h- 

W 

© 


T“* 

co" 




co" 

m 

05 

© 


CD 

CO 

0> 

05 


CO 

of 

in 

in 


©" 

M* 

in 

© 







r “ 

CO 

© 

to 


CO 

CO 


M!■ 


1— 

CO 

© 

© 


o_ 

CM" 

CM 

cm" 


co" 

to 

© 

© 


CM 

0> 

o 

©^ 


in 

co“ 

in 

in 


cm" 

N- 

© 

© 







CM 

. ■ 




11111 

i 

CO 

t 

to 

■ 

© 


l 

CO 

CO 




T — 

CO 

05 

©^ 


o 

of 

cm 

cm" 


co" 

to 

© 

« 


CM 

05 

© 

o 


in 

co“ 

in 

in 


cm" 

h- 

05 

© 


x— 





CM 

h- 


'tt 


CO 

CD 

to 

to 


o 

T - 

to 

to 


in 

co" 

at 

of 


x-x 

O) 

© 

© 


00 

to 




h- 

o' 

to 

in 


V-’ 

CM 



1/3 

CO 




re 





o 





&M 


CD 

CM 

CM 

3 

o 

o 

05 

Oi 

© 

(0 

T" 

CD 

CM 

CM 


in 

05" 

CO 

© 

05 

■Q 


to 




■sr 

CO 

to 

to 

3 

h- 

co" 

of 

of 

(*- 

o" 

to 

© 

« 

TJ 

in 




C 

■*~* 




re 





£ 


Is 



3 


Q. 

’H 1 


•5 



re 

‘o 

o 

•O 


o 

i3 TJ W 


c 


TJ 

© *3 C E 

q 4S re ,2 

re u. 

Q S 

re 

Q. 

to a) 

Transfers 

recognise 

T!* 2 ' 3 
3 SSS 

n. •- <2 ■£< 
£r n> e c 
= it: 2 o 
(/} n t o 

5 -j* re 

U) >» 

3 © 

!r 

5s 

re 

1 

a 

re 

O 

l- 3 

CO = 
a-g 

3 g. 
° ® 






J— O m 

ns o „ c SicC 

3 M vj ■" OJ LL - 

3 3^ D) *o 

o 3 w -C 3 

< o ra o -Q 


3 Os=~ D) [ 

43 £ ns T3 
o 3 OT C 3 
< O cfl S3 jQ 


o;-| 
c *- , 

£5 °: 

2gS! 

to £ <0 i 


a 

c 

o 

E ~ 

P Q) 

— C/> 05 
5 .2, -a 
.£■0 3 

LL flj -Q 


O CO r 

■m E ^ ^ ^ir: 

ci> 4-^ w tf. ^ 

o»^o| 

■a 3 o S 

CD n c. m S 







Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


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 as read with Directive 5. 

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 any 
changes in accounting policies are explained in the relevant notes to the financial statements. 

1.1 Presentation currency 

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

1.2 Going concern assumption 

These annual financial statements have been prepared based on the expectation that the municipality will continue to 
operate as a going concern for at least the next 12 months. 

1.3 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. Materiality is determined as 1% of total expenditure. This 
materiality is from management’s perspective and does not necessarily correlate with the external auditor's materiality. 

1.4 Significant judgements and sources of estimation uncertainty 

In preparing the annual annual financial statements in conformity with GRAP, management is required to make estimates 
and assumptions that affect the amounts represented in the annual financial statements and related disclosures. Use of 
available information and the application of judgement is inherent in the formation of estimates. Actual results in the future 
could differ from these estimates which may be material to the annual financial statements. Significant judgements 
include: 

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. 


16 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.4 Significant judgements and sources of estimation uncertainty (continued) 

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. 

Management referred to the following when making assumptions regarding useful lives and residual values of property, 
plant and equipment: 

• The useful life of movable assets was determined using the age of similar assets available for sale in the active 
market. Discussions with people within the specific industry were also held to determine useful lives. 

• Local Government Industry Guides were used to assist with the deemed cost and useful life of infrastructure assets. 

• The Municipality referred to buildings in other municipal areas to determine the useful life of buildings. The 
Municipality also consulted with engineers to support the useful life of buildings, with specific reference to the 
structural design of buildings. 

Componentisation of Infrastructure assets 

All infrastructure assets are unbundled into their significant components in order to depreciate all major components over 
the expected useful lives. The cost of each component is estimated based on the current market price of each 
component, depreciated for age and condition and recalculated to cost at the acquisition date if known or to the date of 
initially adopting the standards of GRAP. 

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. 

Reference was made to intangibles used within the Municipality and other municipalities to determine the useful life of the 
assets. 

Post-retirement medical obligations, long service awards and ex-gratia pension benefits 

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 19. 


17 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.4 Significant judgements and sources of estimation uncertainty (continued) 

Provisions 

Management judgement is required when recognising and measuring provisions and when measuring contingent 
liabilities. Provisions are discounted where the time value effect is material. Additional disclosure of these estimates of 
provisions and contingent liabilities are included in note 20 - Provisions and note 43 - Contingencies. 

Provision for Landfill Sites 

The provision for rehabilitation of the landfill site is recognised as and when the environmental liability arises. The 
provision is calculated by a qualified environmental engineer. The provision represents the net present value at the 
reporting date of the expected future cash flows to rehabilitate the landfill site. To the extent that the obligations relate to 
an asset, it is capitalised as part of the cost of those assets. Any subsequent changes to an obligation that did not relate 
to the initial related asset are recognised in the Statement of Financial Performance. 

Management referred to the following when making assumptions regarding provisions: 

• Professional engineers are utilised annually to determine the cost of rehabilitation of landfill sites as well as the 
remaining useful life of each specific landfill site. 

• Interest rates linked to appropriate government bond rates were used to calculate the effect of time value of money. 


Pre-paid electricity estimation 

Pre-paid electricity is only recognised as income once the electricity is consumed. The pre-paid electricity balance 
(included under payables) represents the best estimate of electricity sold at year-end that is still unused. The average pre¬ 
paid electricity sold per day during the year under review is used and the estimate is calculated using between 5 and 10 
days’ worth of unused electricity. 

1.5 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 entity, and 

• the cost 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. 


18 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.5 Investment property (continued) 

Subsequent Measurement - Cost model 

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. 

Cost model 

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

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

Item Useful life 

Property - land indefinite 

Property - buildings 100 years 

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

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

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

The municipality separately discloses expenditure to repair and maintain investment property in the notes to the annual 
financial statements (refer to note 10). 

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

1.6 Property, plant and equipment 
Initial recognition 

Property, plant and equipment are tangible non-current assets (including infrastructure assets) that are held for use in the 
production or supply of goods or services, rental to others, or for administrative purposes, and are expected to be used 
during more than one period. 

The cost of an item of property, plant and equipment is recognised as an asset when: 

• it is probable that future economic benefits or service potential associated with the item will flow to the 
municipality; and 

« the cost of the item can be measured reliably. 

Property, plant and equipment is initially measured at cost. 

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

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

Where an item of property, plant and equipment is acquired in exchange for a non-monetary asset or monetary assets, or 
a combination of monetary and non-monetary assets, the asset acquired is initially measured at fair value (the cost). If the 
acquired item's fair value was not determinable, it's deemed cost is the carrying amount of the asset(s) given up. 

When significant components of an item of property, plant and equipment have different useful lives, they are accounted 
for as separate items (major components) of property, plant and equipment. 

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

19 



Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.6 Property, plant and equipment (continued) 

Recognition of costs in the carrying amount of an item of property, plant and equipment ceases when the item is in the 
location and condition necessary for it to be capable of operating in the manner intended by management. 

Major spare parts and 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. 

Subsequent Measurement - Cost Model 

Subsequent to initial recognition, items of Property, plant and equipment are carried at cost less accumulated 
depreciation and any impairment losses. 

Where the Municipality replaces parts of an asset, it derecognises the part of the asset being replaced and capitalises the 
new component. Subsequent expenditure incurred on an asset is capitalised when it increases the capacity or future 
economic benefits or service potential associated with the asset, 

Depreciation and impairment 

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. 

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


ILeiri 

Land 

Buildings 

Infrastructure - Sewerage 
Infrastructure - Electricity 
Infrastructure - Water 
Infrastructure - Roads 
Infrastructure - Security measures 
Community asset 
Leased assets 

Other assets - Bins and containers 

Other assets - Other 

Other assets - Office Equipment 

Other assets - Vehicles and specialised vehicles 


Depieolation method Average useful life 


None 

Indefinite 

Straight line 

100 years 

Straight line 

10-100 years 

Straight line 

10-100 years 

Straight line 

10-182 years 

Straight line 

10-102 years 

Straight line 

5-80 years 

Straight line 

5-100 years 

Straight line 

2-6 years 

Straight line 

15 years 

Straight line 

3-100 years 

Straight line 

2-35 years 

Straight line 

7-50 years 


The residual value, and the useful life and depreciation method of each asset are assessed based on the occurrence of 
certain indicators, if the expectations differ from previous estimates, the change is accounted for as a change in 
accounting estimate. 

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item 
is depreciated separately. 

The depreciation charge for each period is recognised in the Statement of Financial Performance unless it is included in 
the carrying amount of another asset. 

Property, plant and equipment are reviewed for any indication of impairment. If any such indication exists, the accounting 
policy as disclosed under 1.14 or 1.15 (which ever is relevant) is applied. 

An impairment is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that 
would have been determined had no impairment been recognised. A reversal of an impairment is recognised in the 
Statement of Financial Performance. 

De-recognition 

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. 


20 






'i 


Annual Financial Statements for the year ended 30 June 2019 


Accounting Policies 


1.6 Property, plant and equipment (continued) 

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

1.7 Intangible assets 
Initial Recognition 

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

An asset meets the identifiability criterion 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, identifiable assets or liability, 
regardless of whether the entity intends to do so; or 

• arises from binding arrangements (including rights from contracts), regardless of whether those rights are 
transferable or separable from the municipality or from other rights and obligations. 

An intangible asset is recognised when: 

• it is probable that the expected future economic benefits or service potential that are attributable to the asset will 
flow to the municipality; and 

• the cost of the asset can be measured reliably. 

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

Expenditure on research (or on the research phase of an internal project) is recognised as an expense when it is incurred. 

An intangible asset arising from development (or from the development phase of an internal project) is recognised 
when: 

• it is technically feasible to complete the asset so that it will be available for use or sale. 

• there is an intention to complete and use or sell it. 

• there is an ability to use or sell it. 

• it will generate probable future economic benefits or service potential. 

• there are available technical, financial and other resources to complete the development and to use or sell the 
asset. 

• the expenditure attributable to the asset during its development can be measured reliably. 

Intangible assets are initially recognised at cost. 

Subsequent Measurement - Cost model 

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

The cost of an intangible asset is amortised over the useful life where that useful life is finite. Where the useful life is 
indefinite, the asset is not amortised but is subject to an annual impairment test. 

Amortisation 

Amortisation is charged so as to write-off the cost of intangible assets over its estimated useful lives using the straight line 
method. Amortisation of an asset begins when it is available for use, i.e. when it is in the 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 amortised separately. The estimated useful lives, residual values and 
amortisation method are assessed based on the occurrence of certain indicators, with the effect of any changes in 
estimate accounted for on a prospective basis. 

The annual amortisation rates are based on the following estimated useful lives: 


Item 

Computer software and website 


21 


Useful life 

5-10 years 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.7 Intangible assets (continued) 

Derecognition 

Intangible assets are derecognised: 

° on disposal; or 

• when no future economic benefits or service potential are expected from its use or disposal. 

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. 

1.8 Heritage assets 

Heritage 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. 

The municipality separately discloses expenditure to repair and maintain heritage assets in the notes to the financial 
statements (refer to note 13). 

Initial 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 of the asset can be measured reliably. 

Initial measurement 

Heritage assets are initially measured at cost. 

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 - Cost model 

After recognition as an asset, a class of heritage assets is carried at cost less any accumulated impairment losses. 
Heritage assets are not depreciated. 

Derecognition 

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

The gain or loss arising on the disposal or retirement of a heritage asset is determined as the difference between the 
sales proceeds and the carrying value of the heritage asset and is recognised in the Statement of Financial Performance. 


22 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.9 Financial instruments 

Financial instruments recognised on the Statement of Financial Position include receivables, cash and cash equivalents, 
annuity loans and payables and non-current investments. 

Classification 

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


Class Category 

Long-term investments and receivables Financial asset measured at amortised cost 

Receivables from exchange transactions Financial asset measured at amortised cost 

Cash and cash equivalents Financial asset measured at amortised cost 

The entity has the following types of financial liabilities (classes and category) as reflected on the face of the statement of 

financial position or in the notes thereto: 


Class Category 

Long-term liabilities Financial liability measured at amortised cost 

Trade and other payables from exchange transactions 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 entity 
becomes a party to the contractual provisions of the instrument. 

The entity recognises financial assets using trade date accounting. 

Initial measurement of financial assets and financial liabilities 

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

Subsequent measurement of financial assets and financial liabilities 

The entity 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. 

Receivables 

Receivables are classified as financial assets at amortised cost, and are initially measured at fair value and subsequently 
measured at amortised cost using the effective interest rate method. 

For amounts due from receivable 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 at the end of each reporting period. 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. 


23 






IKnysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.9 Financial instruments (continued) 

If there is objective evidence that an impairment loss 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 
expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of 
an allowance account and the amount of the loss is recognised in surplus or deficit. Interest income continues to be 
accrued on the reduced carrying amount based on the original effective interest rate of the asset. Loans together with the 
associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been 
realised or has been transferred to the municipality. If, in a subsequent year, the amount of the estimated impairment loss 
increases or decreases because of an event occurring after the impairment was recognised, the previously recognised 
impairment loss is increased or reduced by adjusting the allowance account. If a previous write-off is later recovered, the 
recovery is recognised in the surplus or deficit. 

The present value of the estimated future cash flows is discounted at the original effective interest rate, if material. If a 
loan has a variable interest rate, the discount rate for measuring any impairment loss is the original effective interest rate. 

Payables and long term liabilities 

Financial liabilities consist of payables and long term liabilities. They are categorised as financial liabilities held at 
amortised cost, and are initially recognised at fair value and subsequently measured at amortised cost using an effective 
interest rate, which is the initial carrying amount, less repayments, plus interest. 

Cash and cash equivalents 

Cash and Cash Equivalents are initially measured at fair value. Cash includes cash on hand (including petty cash) and 
cash with banks. Cash equivalents are short-term highly liquid investments, readily convertible into known amounts of 
cash that are held with registered banking institutions with maturities of three months or less and are subject to an 
insignificant risk of change in value. For the purposes of the cash flow statement, cash and cash equivalents comprise 
cash on hand, highly liquid deposits and net of bank overdrafts. The Municipality categorises cash and cash equivalents 
as financial assets carried at amortised cost. 

Non-Current Investments 

Investments which include fixed deposits invested in registered commercial banks, are stated at amortised cost. 

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. 

Derecognition 

Financial assets 

The entity derecognises a financial asset only when: 

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

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

• the entity, despite having retained some significant risks and rewards of ownership of the financial asset, has 

transferred control of the asset to another party and the other party has the practical ability to sell the asset in its 

entirety to an unrelated third party, and is able to exercise that ability unilaterally and without needing to impose 
additional restrictions on the transfer. In this case, the entity: 

- derecognise the asset; and 

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

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. 

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the 
original carrying amount of the asset and the maximum amount of consideration that the Municipality could be required to 
repay. 


24 



Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.9 Financial instruments (continued) 

Financial liabilities 

A financial liability (or a part of a financial liability) is derecognised 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. 

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the 
terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of 
the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is 
recognised in the Statement of Financial Performance. 

The difference between the carrying amount of a financial liability (or part of a financial liability) extinguished or transferred 
to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is 
recognised in surplus or deficit. Any liabilities that are waived, forgiven or assumed by another entity by way of a non¬ 
exchange transaction are accounted for in accordance note 1.24 

Offsetting of financial instruments 

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

1.10 Statutory receivables 
Identification 

Statutory receivables are receivables that arise from legislation, supporting regulations, or similar means, and require 
settlement by another entity in cash or another financial asset. Statutory receivables can arise from both exchange and 
non-exchange transactions. 

Initial Recognition 

Statutory receivables are recognised when the related revenue is recognised or when the receivable meets the definition 
of an asset when it is probable that the future economic benefits or service potential associated with the asset will flow to 
the entity and the transaction amount can be measured reliably. 

Initial measurement 

The municipality initially measures statutory receivables at their transaction amount. 

Subsequent measurement 

The municipality measures statutory receivables after initial recognition using the cost method. Under the cost method, 
the initial measurement of the receivable is changed subsequent to initial recognition to reflect any: 

• interest or other charges that may have accrued on the receivable (where applicable); 

8 impairment losses; and 

» amounts derecognised. 

Impairment losses 

The municipality assesses at each reporting date whether there is any indication that a statutory receivable, or a group of 
statutory receivables, may be impaired. 

If there is an indication that a statutory receivable, or a group of statutory receivables, may be impaired, the municipality 
measures the impairment loss as the difference between the estimated future cash flows and the carrying amount. Where 
the carrying amount is higher than the estimated future cash flows, the carrying amount of the statutory receivable, or 
group of statutory receivables, is reduced through the use of an allowance account. The amount of the losses are 
recognised in surplus or deficit. 

In estimating the future cash flows, the municipality considers both the amount and timing of the cash flows that it will 
receive in future. Consequently, where the effect of the time value of money is material, the entity discounts the estimated 
future cash flows using a rate that reflects the current risk free rate and, if applicable, any risks specific to the statutory 
receivable, or group of statutory receivables, for which the future cash flow estimates have not been adjusted. 

25 




Knysna Municipality 

Annua! Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.10 Statutory receivables (continued) 

An impairment loss recognised in prior periods for a statutory receivable is revised if there has been a change in the 
estimates used since the last impairment loss was recognised, or to reflect the effect of discounting the estimated cash 
flows. 

Any previously recognised impairment loss is adjusted by adjusting the allowance account. The adjustment does not 
result in the carrying amount of the statutory receivable or group of statutory receivables exceeding what the carrying 
amount of the receivable(s) would have been had the impairment loss not been recognised at the date the impairment is 
revised. The amount of any adjustment is recognised in surplus or deficit. 

Derecognition 

The municipality derecognises a statutory receivable, or a part thereof, when: 

» the rights to the cash flows from the receivable are settled, expire or are waived; 

« the municipality transfers to another party substantially all of the risks and rewards of ownership of the receivable; or 

• the municipality, despite having retained some significant risks and rewards of ownership of the receivable, has 

transferred control of the receivable to another party and the other party has the practical ability to sell the receivable 
in its entirety to an unrelated third party, and is able to exercise that ability unilaterally and without needing to impose 
additional restrictions on the transfer. In this case, the entity: 
derecognise the receivable; and 

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

1.11 Taxes-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. 

From 1 April 2018 value added tax is levied at the standard rate of 15% on the supply of goods and services. 

Value added tax is recognised on the payments basis. 

1.12 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. 

Finance leases - lessee 

Finance leases are recognised as assets and liabilities in the statement of financial position at amounts equal to the fair 
value of the leased assets or, if lower, the present value of the minimum lease payments. The corresponding liability to 
the lessor is included in the statement of financial position as a finance lease obligation. 

The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the 
lease. 

Minimum lease payments are apportioned between the finance charge and reduction of the outstanding liability. The 
finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of return on the 
remaining balance of the liability. The accounting policies relating to de-recognition of financial instruments are applied to 
lease payables. 

Any contingent rents are expensed in the period in which they are incurred. 

Operating leases - lessor 

Operating lease revenue is recognised as revenue on a straight-line basis over the lease term. The difference between 
the straight-lined revenue and actual payments received will give rise to an asset or liability. 

The aggregate cost of incentives is recognised as a reduction of rental revenue over the lease term on a straight-line 
basis. 


26 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.12 Leases (continued) 

Operating leases - lessee 

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference 
between the amounts recognised as an expense and the contractual payments are recognised as an operating lease 
asset or liability. 

The aggregate benefit of incentives is recognised as a reduction of rental expense over the lease term on a straight-line 
basis. 

1.13 Inventories 

Initial measurement 

Inventories comprise of current assets held for sale, consumption or distribution during the ordinary course of business. 
Inventories are recognised as an asset if, and only if, it is probable that future economic benefits or service potential 
associated with the item will flow to the Municipality, and the cost of the inventories can be measured reliably. 

Inventories are initially measured at cost except where inventories are acquired through a non-exchange transaction, then 
their costs are their fair value as at the date of acquisition. 

Cost generally refers to the purchase price, plus non-recoverable taxes, transport costs and any other costs in bringing 
the inventories to their current location and condition. Where inventory is manufactured, constructed or produced, the 
cost includes the cost of labour, materials and overheads used during the manufacturing process. 

Subsequent measurement 

Inventories, consisting of consumable stores, maintenance materials and water are subsequently measured at the lower 
of cost and net realisable value. 

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

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. 

The cost of inventories is assigned using the weighted average cost formula. The same cost formula is used for all 
inventories having a similar nature and use to the municipality. 

When inventories are sold, the carrying amounts of those inventories are recognised as an expense in the period in which 
the related revenue is recognised. If there is no related revenue, the expenses are recognised when the goods are 
distributed, or related services are rendered. The amount of any write-down of inventories to net realisable value or 
current replacement cost and all losses of inventories are recognised as an expense in the period the write-down or loss 
occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value or 
current replacement cost, are recognised as a reduction in the amount of inventories recognised as an expense in the 
period in which the reversal occurs. 

The carrying amount of inventories is recognised as an expense in the period that the inventory was sold, distributed, 
written off or consumed, unless that cost qualifies for capitalisation to the cost of another asset. 

1.14 Impairment of cash-generating assets 

Cash-generating assets are assets managed with the objective of generating a commercial return. An asset generates a 
commercial return when it is deployed in a manner consistent with that adopted by a profit-oriented entity. 

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). 

A cash-generating unit is the smallest identifiable group of assets managed with the 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. 


27 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.14 Impairment of cash-generating assets (continued) 

Recoverable amount of an asset or a cash-generating unit is the higher 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. 

In assessing whether there is any indication that an asset may be impaired, the Municipality considers the following 
indications: 

(a) External sources of information 

• During the period, an asset's market value has declined significantly more than would be expected as a result of the 
passage of time or normal use. 

• Significant changes with an adverse effect on the Municipality have taken place during the period, or will take place 
in the near future, in the technological, market, economic or legal environment in which the Municipality operates or 
in the market to which an asset is dedicated. 

• Market interest rates or other market rates of return on investments have increased during the period, and those 
increases are likely to affect the discount rate used in calculating an asset's value in use and decrease the asset's 
recoverable amount materially. 

(b) Internal sources of information 

• Evidence is available of obsolescence or physical damage of an asset. 

» Significant changes with an adverse effect on the Municipality have taken place during the period, or are expected to 
take place in the near future, ,in the extent to which, or manner in which, an asset is used or is expected to be used, 
These changes include the asset becoming idle, plans to discontinue or restructure the operation to which an asset 
belongs, plans to dispose of an asset before the previously expected date, and reassessing the useful life of an 
asset as finite rather than indefinite. 

° Evidence is available from internal reporting that indicates that the economic performance of an asset is, or will be, 
worse than expected. 

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. 

Discount rate 

The discount rate is a pre-tax rate that reflects current market assessments of the time value of money, represented by 
the current risk-free rate of interest and the risks specific to the asset for which the future cash flow estimates have not 
been adjusted. 

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 surplus or deficit. 

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 a requirement 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. 


28 



Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.14 Impairment of cash-generating assets (continued) 

Reversal of impairment loss 

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

An impairment loss recognised in prior periods for a cash-generating asset is reversed if there has been a change in the 
estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. The carrying 
amount of the asset is increased to its recoverable amount. The increase is a reversal of an impairment loss. The 
increased carrying amount of an asset attributable to a reversal of an impairment loss does not exceed the carrying 
amount that would have been determined (net of depreciation or amortisation) had no impairment loss been recognised 
for the asset in prior periods. 

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

In assessing whether there is any indication that an asset may be impaired, the Municipality considers the following 
indications: 

(a) External sources of information 

• Cessation, or near cessation, of the demand or need for services provided by the asset. 

• Significant long-term changes with an adverse effect on the Municipality have taken place during the period or will 
take place in the near future, in the technological, legal or government policy environment in which the Municipality 
operates. 

(b) Internal sources of information 

• Evidence is available of physical damage of an asset. 

• Significant long-term changes with an adverse effect on the Municipality have taken place during the period, or are 
expected to take place in the near future, in the extent to which, or manner in which, an asset is used or is expected 
to be used. These changes include the asset becoming idle, plans to discontinue or restructure the operation to 
which an asset belongs, or plans to dispose of an asset before the previously expected date. 

• A decision to halt the construction of the asset before it is complete or in a usable condition. 

« Evidence is available from internal reporting that indicates that the service performance of an asset is, or will be, 
significantly worse than expected. 


29 



Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


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

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 
approaches, depending on the nature of the asset in question: 

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. 

Restoration cost approach 

Restoration cost is the cost of restoring the service potential of an asset to its pre-impaired level. The present value of the 
remaining service potential of the asset is determined by subtracting the estimated restoration cost of the asset from the 
current cost of replacing the remaining service potential of the asset before impairment. The latter cost is determined as 
the depreciated reproduction or replacement cost of the asset, whichever is lower. 

Service units approach 

The present value of the remaining service potential of the asset is determined by reducing the current cost of the 
remaining service potential of the asset before impairment, to conform to the reduced number of service units expected 
from the asset in its impaired state. The current cost of replacing the remaining service potential of the asset before 
impairment is determined as the depreciated reproduction or replacement cost of the asset before impairment, whichever 
is lower. 

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 surplus or deficit. 

Reversal of an impairment loss 

The municipality assess at each reporting date whether there is any indication that an impairment loss recognised in prior 
periods for a non-cash-generating asset may no longer 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. 

1.16 Share capital / contributed capital 

An equity instrument is any contract that evidences a residual interest in the assets of an municipality after deducting all 
of its liabilities. 


30 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.17 Employee benefits 

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

Short-term employee benefits 

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

Short-term employee benefits include items such as: 

• wages, salaries and social security contributions; 

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

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

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

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

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

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

The expected cost of compensated absences is recognised as an expense as the employees render services that 
increase their entitlement or, in the case of non-accumulating absences, when the absence occurs. The entity measure 
the expected cost of accumulating compensated absences as the additional amount that the entity expects to pay as a 
result of the unused entitlement that has accumulated at the reporting date. 

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

Long service awards 

Long service awards are provided to employees who achieve certain pre-determined milestones of service within the 
Municipality. The Municipality’s obligation under these plans is valued by independent qualified actuaries annually and the 
corresponding liability is raised. Payments are set-off against the liability, including notional interest, resulting from the 
valuation by the actuaries and are recognised in the Statement of Financial Performance as employee benefits upon 
valuation. 

Actuarial gains and losses arising from the experience adjustments and changes in actuarial assumptions, is recognised 
in the Statement of Financial Performance in the period that it occurs. 

Accrual for staff leave 

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. 

Accumulating leave is carried forward and can be used in future periods if the current period’s entitlement is not used in 
full. All unused leave will be paid out to the specific employee at the end of that employee’s employment term. 

Accumulated leave is vesting. 


31 



Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.17 Employee benefits (continued) 

Staff bonuses accrued 

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

Provision for performance bonuses 

A provision, in respect of the liability relating to the anticipated costs of performance bonuses payable to Section 57 
employees, is recognised as it accrues to Section 57 employees. The Municipality’s performance bonus provisions are 
based on the employment contract stipulations as well as previous performance bonus payment trends. 

Post-employment benefits 

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

Post-retirement medical obligations 

The Municipality provides post-retirement medical benefits by subsidizing 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 in accordance with GRAP 25 - “Employee Benefits” (using a discount rate applicable to high 
quality government bonds). The plan is unfunded. 

These contributions are recognised in 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 present value of the defined 
benefit obligation at the reporting date, 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 minimum funding requirements. 
Payments made by the Municipality are set-off against the liability, including notional interest, resulting from the valuation 
by the actuaries and are recognised in the Statement of Financial Performance as employee benefits upon valuation. 

Actuarial gains and losses arising from the experience adjustments and changes in actuarial assumptions, is recognised 
in the Statement of Financial Performance in the period that it occurs. These obligations are valued annually by 
independent qualified actuaries. 

Ex gratia gratuities 

Ex gratia gratuities are provided to employees that were not previously members of a pension fund. The Municipality’s 
obligation under these plans is valued by independent qualified actuaries and the corresponding liability is raised. 
Payments made by the Municipality are set-off against the liability, including notional interest, resulting from the valuation 
by the actuaries and are recognised in the Statement of Financial Performance as employee benefits upon valuation. 

Actuarial gains and losses arising from the experience adjustments and changes in actuarial assumptions, is recognised 
in the Statement of Financial Performance in the period that it occurs. These obligations are valued periodically, unless 
circumstances change significantly in which case it is done annually, by independent qualified actuaries. 

Pension and retirement fund obligations 

The Municipality provides retirement benefits for its employees and councillors. Defined contribution plans are post¬ 
employment benefit plans under which the Municipality pays fixed contributions into a separate entity (a fund) and will 
have 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 contributions to fund obligations for 
the payment of retirement benefits are recognised in the Statement of Financial Performance in the year they become 
payable. The defined benefit funds, which are administered on a provincial basis, are actuarially valued tri-annually on 
the projected unit credit method basis. Deficits identified are recovered through lump sum payments or increased future 
contributions on a proportional basis to all participating municipalities. The contributions and lump sum payments are 
recognised in the Statement of Financial Performance in the year they become payable. 


32 




Knysrta Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.17 Employee benefits (continued) 

Post-employment benefits: Defined contribution plans 

When an employee has rendered service to the entity during a reporting period, the entity recognises the contribution 
payable to a defined contribution plan in exchange for that service: 

» as a liability (accrued expense), after deducting any contribution already paid. If the contribution already paid 
exceeds the contribution due for service before the reporting date, the entity recognise that excess as an asset 
(prepaid expense) to the extent that the prepayment will lead to, for example, a reduction in future payments or a 
cash refund; and 

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

Post-employment benefits: Defined benefit plans 

Defined benefit plans are post-employment benefit plans other than defined contribution plans. 

Actuarial gains and losses comprise experience 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 entity recognise actuarial gains and losses in surplus or deficit in the reporting period in which 
they occur. 

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 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; 

• 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 entity 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 entity 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). 

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. 

1.18 Unspent conditional grants and receipts 

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

A liability for unspent conditional grants and receipts 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. 

Unspent conditional grants and receipts are not considered to be financial instruments as there are no amount to be 
settled through cash or another financial instrument as required per GRAP 104. Once the conditional grant becomes 
repayable to the donor due to conditions not met, the remaining portion of the unspent conditional grant is reclassified as 
payables, which is considered to be a financial instrument. 

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

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


33 



Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.18 Unspent conditional grants and receipts (continued) 

« 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 liability is invested as individual investment or part of the operating account of the 
Municipality until it is utilised. 

0 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 liability. If it is the Municipality’s interest it is recognised as interest earned in the Statement 
of Financial Performance. 

1.19 Unpaid conditional grants and receipts 

Unpaid conditional grants 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. 

1.20 Provisions and contingencies 
Provisions 

Provisions are recognised when: 

• the municipality has a present obligation as a result of a past event; 

• it is probable that an outflow of resources embodying economic benefits or service potential will be required to 
settle the obligation; and 

• a reliable estimate can be made of the obligation. 

The amount of a provision is the best estimate of the expenditure expected to be required to settle the present obligation 
at the reporting date. 

Where the effect of time value of money is material, the amount of a provision is the present value of the expenditures 
expected to be required to settle the obligation. 

The discount rate is a pre-tax rate that reflects current market assessments of the time value of money and the risks 
specific to the liability. 

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Provisions are reversed if 
it is no longer probable that an outflow of resources embodying economic benefits or service potential will be required, to 
settle the obligation. 

Where discounting is used, the carrying amount of a provision increases in each period to reflect the passage of time. 
This increase is recognised as an finance cost. 

A provision is used only for expenditures for which the provision was originally recognised. 

Provisions are not recognised for deficits arising from future operating activities. 

If an entity has a contract that is onerous, the present obligation (net of recoveries) under the contract is recognised and 
measured as a provision. 


34 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.20 Provisions and contingencies (continued) 

Contingent liabilities and contingent assets 

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. 

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

Contingent assets and contingent liabilities are not recognised. A contingent liability is disclosed unless the probability of 
an outflow of resources embodying economic benefits or service potential is remote. A contingent asset is disclosed 
where the inflow of economic benefits or service potential is probable. Contingencies are disclosed in note 43. 

Management judgement is required when recognising and measuring contingent liabilities. 

1.21 Commitments 

Items are classified as commitments when an entity has committed itself to future transactions that will normally result in 
the outflow of cash. 

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

1.22 Internal reserves 

Capital replacement reserve (CRR) 

In order to finance the provision of infrastructure and other items of property, plant and equipment from internal sources, 
amounts are transferred from the accumulated surplus to the CRR. The cash in the CRR can only be utilized to finance 
items of property, plant and equipment. The CRR is reduced and the accumulated surplus is credited by a corresponding 
amount when the amounts in the CRR are utilized. 

1.23 Revenue from exchange transactions 

Revenue from exchange transactions refers to revenue that accrued to the Municipality directly in return for services 
rendered or goods sold, the value of which approximates the consideration received or receivable. 

At the time of initial recognition the full amount of revenue is recognised where the Municipality has an enforceable legal 
obligation to collect, unless the individual collectibility is considered to be improbable. If the Municipality does not 
successfully enforce its obligation to collect the revenue this would give rise to an impairment of the receivable and a 
separate expense to be recognised. 

Measurement 

The amount of revenue arising on a transaction is usually determined by agreement between the Municipality and the 
purchaser or user of the asset or service. It is measured at the fair value of the consideration received or receivable taking 
into account the amount of any trade discounts and volume rebates allowed by the Municipality. 

Sale of goods 

Revenue from the sale of goods is recognised when all the following conditions have been satisfied: 

° the municipality has transferred to the purchaser the significant risks and rewards of ownership of the goods; 

• the municipality retains neither continuing managerial involvement to the degree usually associated with 
ownership nor effective control over the goods sold; 

• the amount of revenue can be measured reliably; 

• it is probable that the economic benefits or service potential associated with the transaction will flow to the 
municipality; and 

• the costs incurred or to be incurred in respect of the transaction can be measured reliably. 


35 


Krtysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.23 Revenue from exchange transactions (continued) 

Service charges 

Service charges relating to electricity and water are based on consumption and a basic charge as per Council resolution. 
Meters are read on a monthly basis and are recognised as revenue when invoiced. Where the Municipality was unable to 
take the actual month’s reading of certain consumers, a provisional estimate of consumption for that month will be created 
based on past patterns. The provisional estimates of consumption are recognised as revenue when 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. 

Service charges relating to refuse removal are recognised on an annual basis in advance by applying the approved tariff 
to each property that has improvements. Tariffs are determined per category of property usage. 

Service charges from sanitation (sewerage) are recognised on an annual basis in advance by applying the approved tariff 
to each property that has improvements. 

Pre-paid electricity 

Revenue from the sale of electricity prepaid meter cards is initially recognised at the point of sale. It is estimated that pre¬ 
paid electricity is consumed within 5 to 7 days after date of purchase. Subsequently, the pre-paid electricity sold, but not 
consumed yet at year-end is disclosed under Payables from Exchange Transactions in the Statement of Financial 
Position in order to only recognise pre-paid electricity consumed. 

Interest earned 

Interest revenue is recognised in surplus and deficit as it accrues, using the effective interest rate method. 

Rentals received 

Revenue from the rental of facilities and equipment is recognised on a straight-line basis over the term of the lease 
agreement. 

Tariff charges 

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

Agency services 

Revenue arising out of situations where the Municipality acts as an agent on behalf of another entity (the principal) is 
limited to the amount of any fee or commission payable to the municipality as compensation for executing the agreed 
services. 

Third party payments 

Revenue from third parties i.e. insurance payments for assets impaired, are recognised when it can be measured reliably 
and it is probable that inflow will occur and it is not being offset against the related expenses of repairs or renewals of the 
impaired assets. 

1.24 Revenue from non-exchange transactions 

Revenue from non-exchange transactions refers to transactions where the Municipality received value from another entity 
without directly giving approximately equal value in exchange. Revenue from non-exchange transactions is generally 
recognised to the extent that the related receipt or receivable qualifies for recognition as an asset and there is no liability 
to repay the amount. 


36 







Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.24 Revenue from non-exchange transactions (continued) 

Measurement 

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

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

Rates and taxes 

Revenue from property rates is recognised when the legal entitlement to this revenue arises. At the time of initial 
recognition the full amount of revenue is recognised, if the Municipality does not enforce its obligation to collect the 
revenue, this would be considered as a subsequent event. Collection charges are recognised when such amounts are 
legally enforceable. Rebates and discounts are offset against the related revenue, as there is no intention of collecting 
this revenue. 

Penalty interest on unpaid rates is recognised on a time proportionate basis. 

Rates are levied monthly and payable by the last day of the following month. Interest is levied at the prime rate plus one 
percent on outstanding monthly installments. 

Fines 

Fine Revenue constitutes both spot fines and summonses. Fine revenue is recognised when the offence occurs to the 
extent that the municipality expects legal entitlement. 

Public donations and contributions 

Revenue from public contributions and donations is recognised when all conditions associated with the contribution have 
been met or where the contribution is to finance property, plant and equipment, when such items of property, plant and 
equipment qualifies for recognition and first becomes available for use by the Municipality. Where public contributions 
have been received, but the Municipality has not met the related conditions, it is recognised as an unspent public 
contribution (liability). 

Contributed property, plant and equipment is recognised when such items of property, plant and equipment qualifies for 
recognition and become available for use by the Municipality. 

Revenue from recovery of unauthorised, irregular and 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 grants 

Grants without any conditions attached are recognised as revenue when the grant is receivable. 

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. 

The liability is transferred to revenue as and when the conditions attached to the grant are met. 


37 









Krtysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.24 Revenue from non-exchange transactions (continued) 

Other receipts 

All unclaimed deposits are initially recognised as a liability. After 12 months all unclaimed deposits into the Municipality’s 
bank account will be treated as revenue. Historical patterns have indicated that minimal unidentified deposits are 
reclaimed after a period of twelve months. This assessment is performed annually at 30 June. Therefore the substance of 
these transactions indicate that even though the prescription period for unclaimed monies is legally three years, it is 
reasonable to recognise all unclaimed monies older than twelve months as revenue. 

1.25 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. 

1.26 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 a form of a 
grant that is not permitted in terms of the Municipal Finance Management Act (Act No. 56 of 2003). 

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

1.27 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. 

1.28 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), and the Public Office Bearers Act (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 recorded in the notes to the financial statements when confirmed. The amount recorded is equal 
to the value of the irregular expenditure incurred, unless it is impractical to determine, in which case reasons therefore 
must be provided in the notes. 

irregular expenditure receivables are measured at the amount that is expected to be recovered and are de-recognised 
when settled or written-off as irrecoverable. 

1.29 Budget information 

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

The approved budget is prepared on a accrual basis and presented by functional classification linked to performance 
outcome objectives. 

The approved budget covers the fiscal period from 01/07/2018 to 30/06/2019. 

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


38 





Knysna (Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Accounting Policies 


1.29 Budget information (continued) 

Explanations for material variances between the final budget amounts and comparable actual amounts are included the 
Notes to the Financial Statements. Material variances are being defined by Management as 10% of a specific line-item 
with a minimum threshold of R1 million. 

Explanations for variances between the approved and final budget are included in the Notes to the Financial Statements 
as well as the Statements of Comparison of Budget and Actual Amounts. 

1.30 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. 

The Municipality previously resolved to adopt the disclosure requirements as per GRAP 20 - “Related Party Disclosures’’. 

A related party is a person or entity: 

• with the ability to control or jointly 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. 

Remuneration of management includes remuneration derived for services provided to the Municipality in their capacity as 
members of the management team or employees. Benefits derived directly or indirectly from the Municipality for services 
in any capacity other than as an employee or a member of management do not meet the definition of remuneration. 
Remuneration of management excludes any consideration provided solely as a reimbursement for expenditure incurred 
by those persons for the benefit of the Municipality. 

1.31 Events after reporting date 

Events after reporting date are those events, both favourable and unfavourable, that occur between the reporting date 
and the date when the financial statements are authorised for issue. Two types of events can be identified: 

• those that provide evidence of conditions that existed at the reporting date (adjusting events after the reporting date); 
and 

• those that are indicative of conditions that arose after the reporting date (non-adjusting events after the reporting 
date). 

The municipality will adjust the amount recognised in the financial statements to reflect adjusting events after the 
reporting date once the event occurred. 

The municipality will disclose the nature of the event and an estimate of its financial effect or a statement that such 
estimate cannot be made in respect of all material non-adjusting events, where non-disclosure could influence the 
economic decisions of users taken on the basis of the financial statements. 


39 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


2. New standards and interpretations 


2.1 Standards and interpretations issued not yet effective 


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


Standard/ Interpretation: 


• GRAP 34: Separate Financial Statements 

• GRAP 35: Consolidated Financial Statements 

• GRAP 36: Investments in Associates and Joint Ventures 

• GRAP 37: Joint Arrangements 

• GRAP 38: Disclosure of Interests in Other Entities 

• Guideline: Accounting for Arrangements Undertaken i.t.o 
the National Housing Programme 

• GRAP 110 (as amended 2016): Living and Non-living 
Resources 

• GRAP 18 (as amended 2016): Segment Reporting 


» GFtAP 20: Related parties 


• GRAP 32: Service Concession Arrangements: Grantor 

• GRAP 108: Statutory Receivables 


• GRAP 109: Accounting by Principals and Agents 


• 1GRAP 17: Service Concession Arrangements where a 
Grantor Controls a Significant Residual Interest in an Asset 

• IGRAP 18: Interpretation of the Standard of GFtAP on 
Recognition and Derecognition of Land 

• IGRAP 19: Liabilities to Pay Levies 

• IGRAP 20: Accounting for adjustments to revenue 


Effective date: 

Years beginning on or 
after 

Expected impact: 

Unknown 

Unlikely there will be a 
material impact 

Unknown 

Unlikely there will be a 
material impact 

Unknown 

Unlikely there will be a 
material impact 

Unknown 

Unlikely there will be a 
material impact 

Unknown 

Unlikely there will be a 
material impact 

Unknown 

Unlikely there will be a 
material impact 

01 April 2020 

Unlikely there will be a 
material impact 

01 April 2020 

Not expected to impact 
results but may result in 
additional disclosure 

01 April 2019 

Not expected to impact 
results but may result in 
additional disclosure 

01 April 2019 

Unlikely there will be a 
material impact 

01 April 2019 

Not expected to impact 
results but may result in 
additional disclosure 

01 April 2019 

Not expected to impact 
results but may result in 
additional disclosure 

01 April 2019 

Unlikely there will be a 
material impact 

01 April 2019 

Unlikely there will be a 
material impact 

01 April 2019 

Unlikely there will be a 
material impact 

01 April 2020 

Unlikely there will be a 
material impact 


40 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Motes to the Annual Financial Statements 


2019 2018 

R R 


3. Inventories 


Consumable stores 

1,808,950 

2,270,191 

Maintenance materials 

7,578,046 

2,604,034 

Water 

903,530 

644,355 


10,290,526 

5,518,580 

Dormant and slow moving stock at year-end 

55,817 

34,839 

Inventories recognised as an expense during the year - warehouse inventory 

23,638,655 

13,986,889 

Consumable stores materials surplusses identified during the annual stores count 

Inventory pledged as security 

No inventory assets were pledged as security for liabilities. 

Long-term investments and receivables 

448,834 

104,993 

At amortised cost 

Fixed Deposits 

34,491,331 

32,358,328 

Staff Housing Loans 

3,866 

3,866 

Old Age Homes / Creche 

426,245 

426,245 

Sundry deposits 

6,800 

6,800 

Eastford Ridge Public Contributions 

4,386 

4,386 


34,932,628 

32,799,625 

Impairments 

(434,497) 

(434,497) 


34,498,131 

32,365,128 

Non-current assets 

At amortised cost 

34,498,131 

32,365,128 


Fixed Deposits 

Included in Non-Current Investments is the Investec Fixed Deposit (Acc 021941420) of R 34,491,331 (2018: 
R 32,358,328) which have been pledged to DBSA as guarantees on external loans taken up. Refer to note 15. These 
loans are non-current and consequently it is highly unlikely that the Investment will be redeemable in the following 
financial year. 

Investments are made in terms of the municipality's Cash Management and Investment Policy, as required by means of 
Regulation R 308 of 1 April 2005 gazetted in the Government Gazette No 27431 of 1 April 2005 and issued by the 
Minister of Finance. 

Staff Housing Loans 

Staff housing loans are no longer granted. The outstanding amount relates to prior years and is impaired. 


41 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Motes to the Annual Financial Statements 


2019 2018 

R R 


4. Long-term investments and receivables (continued) 

Old Age Homes / Creche 

New loans are not granted to organisations. The loans are repayable over periods up to forty years at a rate of 1% per 
annum, with the last loan redeemable in 2032. 

Eastford Ridge Public Contributions 

The Home Owners Associations in Eastford agreed with the municipality to contribute an amount towards the cost of 
building a new road to their developments. The asset vests in the municipality. The agreement provides for a total cost to 
be contributed by the Associations over a period of maximum 3 years. The amounts stated above represents the balance 
of the contributions. 

Financial assets at amortised cost impaired 

The allowance for impairment on financial assets exists due to the possibility that not all these debts will be recovered. 
Financial assets and amortised cost 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. 

As of 30 June 2019, financial assets of R 434,497 (2018: R 434,497) were impaired and provided for. 

Reconciliation of provision for impairment of financial assets at amortised cost 


Opening balance 

434,497 

426,245 

Provision for impairment 

. - 

8,252 

Receivables from exchange transactions 

434,497 

434,497 

Gross balances 

Electricity 

36,533,909 

36,223,811 

Water 

69,863,145 

72,067,943 

Sewerage 

36,798,697 

24,816,273 

Refuse 

33,621,304 

26,300,178 

Housing rental 

6,961,093 

6,878,261 

Other (Sundry amounts) 

7,700,968 

6,696,620 


191,479,116 

172,983,086 

Less: Allowance for impairment 

Electricity 

(7,432,808) 

(8,377,319) 

Water 

(56,239,141) 

(55,443,812) 

Sewerage 

(31,457,539) 

(21,829,379) 

Refuse 

(29,483,506) 

(23,414,986) 

Housing rental 

(5,832,622) 

(5,768,149) 

Other (Sundry amounts) 

(6,750,516) 

(5,899,478) 


(137,196,132) 

(120,733,123) 

Net balance 

Electricity 

29,101,101 

27,846,492 

Water 

13,624,004 

16,624,131 

Sewerage 

5,341,158 

2,986,894 

Refuse 

4,137,798 

2,885,192 

Housing rental 

1,128,471 

1,110,112 

Other (Sundry amounts) 

950,452 

797,142 


54,282,984 

52,249,963 


42 







Krsysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


5. Receivables from exchange transactions (continued) 


Electricity 


Current (0 -30 days) 

20,175,738 

22,071,984 

31 - 60 days 

3,476,285 

3,143,575 

61 - 90 days 

1,293,352 

1,398,477 

91+ days 

11,588,534 

9,609,776 

Allowance for impairment 

(7,432,808) 

(8,377,320) 


29,101,101 

27,846,492 

Water 

Current (0 -30 days) 

9,978,493 

8,823,674 

31 - 60 days 

3,254,682 

2,887,850 

61 - 90 days 

2,200,330 

2,582,746 

91+ days 

54,429,640 

57,773,673 

Allowance for impairment 

(56,239,141) 

(55,443,812) 


13,624,004 

16,624,131 

Sewerage 

Current (0 -30 days) 

2,219,352 

1,387,682 

31-60 days 

975,951 

400,833 

61 - 90 days 

851,516 

701,089 

91+ days 

32,751,878 

22,326,669 

Allowance for impairment 

(31,457,539) 

(21,829,379) 


5,341,158 

2,986,894 

Refuse 

Current (0 -30 days) 

1,779,439 

1,471,812 

31-60 days 

722,230 

561,450 

61-90 days 

598,785 

521,729 

91+ days 

30,520,850 

23,745,188 

Allowance for impairment 

(29,483,506) 

(23,414,987) 


4,137,798 

2,885,192 

Housing rental 

Current (0 -30 days) 

428,500 

440,204 

31-60 days 

71,468 

193,857 

61 - 90 days 

59,797 

117,410 

91+ days 

6,401,328 

6,126,790 

Allowance for impairment 

(5,832,622) 

(5,768,149) 


1,128,471 

1,110,112 


43 






Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


5. Receivables from exchange transactions (continued) 


Other (sundry) 


Current (0 -30 days) 

543,180 

381,708 

31 - 60 days 

191,490 

119,811 

61 - 90 days 

103,002 

167,500 

91+ days 

6,863,296 

6,027,600 

Allowance for impairment 

(6,750,516) 

(5,899,477) 


950,452 

797,142 

Total 

Current (0 -30 days) 

35,124,702 

34,577,064 

31 - 60 days 

8,692,106 

7,307,376 

61 - 90 days 

5,106,782 

5,488,951 

91+ days 

142,555,526 

125,609,696 

Allowance for impairment 

(137,196,132) 

(120,733,124) 


54,282,984 

52,249,963 


Summary of debtors by customer classification 


30 June 2019 

Residential, 

Other debtors 

National and 

Total 


Industrial & 


Provincial 



Commercial 


Government 


Total receivables 

185,684,237 

2,667,697 

3,127,182 

191,479,116 

Less: Allowance for impairment 

(135,476,972) 

(1,719,160) 

- 

(137,196,132) 


50,207,265 

948,537 

3,127,182 

54,282,984 

30 June 2018 

Residential, 

Other debtors 

National and 

Total 


Industrial & 


Provincial 



Commercial 


Government 


Total receivables 

167,897,118 

2,372,298 

2,713,670 

172,983,086 

Less: Allowance for impairment 

(119,085,272) 

(1,647,851) 

- 

(120,733,123) 


48,811,846 

724,447 

2,713,670 

52,249,963 


Credit quality of receivables from exchange transactions 

Consumer debtors are payable within 30 days. This credit period is considered to be consistent with the terms used in 
the public sector, through established practices and legislation. 

Concentrations of credit risk with respect to trade receivables are limited due to the customer base being large and 
unrelated. The municipality's historical experience in collection of receivables transactions falls within recorded 
allowances. Accordingly, management believes no further credit provisions are required in excess of the present 
allowance for doubtful debts. 

Receivables from exchange transactions past due but not impaired 

All services are payable within 30 days from the invoice date. At 30 June 2019, R 17,685,452 (2018: R 18,754,278) were 
past due but not impaired. 

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

1 month past due 

2 months past due 


44 


6,785,371 

10,900,081 


5,600,206 

13,154,072 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


5. Receivables from exchange transactions (continued) 

Receivables from exchange transactions impaired 

As of 30 June 2019, consumer debtors of R 137,196,132 (2018: R 120,733,123) were impaired and provided for. 

Reconciliation of allowance for impairment of receivables from exchange transactions 


Opening balance 

(120,733,123) 

(86,456,582) 

Allowance for impairment 

(16,463,009) 

(34,276,541) 

Receivables from non-exchange transactions 

(137,196,132) 

(120,733,123) 

Gross balances 

Rates 

75,319,205 

64,305,965 

Fines 

143,326,222 

120,815,791 

Miscellaneous 

2,311,850 

2,191,632 


220,957,277 

187,313,388 

Less: Allowance for impairment 

Rates 

(18,634,939) 

(18,851,183) 

Fines 

(119,989,907) 

(97,539,894) 


(138,624,846) 

(116,391,077) 

Net balance 

Rates 

56,684,266 

45,454,782 

Fines 

23,336,315 

23,275,897 

Miscellaneous 

2,311,850 

2,191,632 

Ageing of receivables from non-exchange transactions: 

82,332,431 

70,922,311 

Rates 

Current (0-30 days) 

16,568,356 

12,906,621 

31 - 60 days 

4,735,309 

3,598,562 

61-90 days 

2,053,430 

2,093,060 

91+ days 

51,962,110 

45,707,722 


75,319,205 

64,305,965 

Less: Allowance for impairment 

(18,634,939) 

(18,851,183) 


56,684,266 

45,454,782 

Fines and Other 

Current (0-30 days) 

9,741,400 

8,242,382 

31 - 60 days 

6,966,300 

6,844,650 

61 - 90 days 

8,006,100 

5,540,650 

91+ days 

120,924,272 

102,379,741 


145,638,072 

123,007,423 

Less: Allowance for impairment 

(119,989,907) 

(97,539,894) 


25,648,165 

25,467,529 


45 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


6. Receivables from non-exchange transactions (continued) 

Credit quality of receivables from non-exchange transactions 

Consumer debtors are payable within 30 days. This credit period is considered to be consistent with the terms used in 
the public sector, through established practices and legislation. 

Concentrations of credit risk with respect to trade receivables are limited due to the customer base being large and 
unrelated. The municipality's historical experience in collection of trade receivables falls within recorded allowances. 
Accordingly, management believes no further credit provisions are required in excess of the present allowance for 
doubtful debts. 

Receivables from non-exchange transactions impaired 

As of 30 June 2019, other receivables from non-exchange transactions of R 138,624,846 (2018: R 116,391,075) were 
impaired and provided for. 

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

Opening balance 116,391,075 123,930,367 

Provision for impairment 102,936,575 77,991,357 

Amounts written off as uncollectible (80,702,804) (85,53o'649) 

138,624,846 116,391,075 


In terms of the requirements of GRAP 23 and IGRAP1, all fines issued during the year less any cancellations or 
reductions identified are recognised as revenue. The outstanding fine receivable balance at year end is reduced to its 
recoverable amount by recognising a provision for impairment against the receivable raised. The provision for impairment 
is based on current and past collection rates applicable to fines. Any fine reductions or cancellations subsequent to the 
financial year-end is recorded as a write off against the provision raised. 

All Non-Government debtors were either specifically impaired or subject to collective impairment. 

Debts are required to be settled after 30 days. Interest is charged on all classes of receivables except fines and other 
receivables at prime +1 %. 

7. VAT receivable 


VAT 

19,744,003 

27,346,514 

VAT payable 

Less: Contribution to provision for impairment of trade receivables from exchange 
transactions 

(20,512,350) 

14,512,292 

(16,503,281) 

12,898,799 

VAT receivable 

18,656,113 

13,285,119 

Subtotal 

12,656,055 

9,680,637 

VAT receivable / (payable) to the Receiver of Revenue - Refer to note 51 

7,087,948 

17,665,878 


19,744,003 

27,346,515 


VAT is payable on the payment basis. Only once payment is received from debtors is VAT paid over to SARS. 


46 



Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


8. Unspent conditional grants and receipts 


Unspent Grants and receipts 


National Government Grants 

24,231,541 

36,663 

Provincial Government Grants 

4,395,175 

6,318,420 

Unspent public contributions and donations: Knysna Fire Disaster Relief Fund 

3,959,135 

3,959,719 


32,585,851 

10,314,802 

Less: Unpaid Grants 

Provincial Government Grants 

30,775,924 

14,981,801 

Net unspent/(unpaid) conditional grants and receipts 

Unspent and unpaid conditional grants and receipts comprises of: 

1,809,927 

(4,666,999) 

Unspent conditional grants and receipts 

National: Municipal Infrastructure Grant (MIG) 

8,458,344 

_ 

National: Municipal Systems Improvement Grant (MS1G) 

56,884 

. 

National: Integrated National Electrification Program Grant (INEP) 

1,013,656 

- 

National: Neighbourhood Development Partnership Grant (NDPG) 

14,702,657 

36,663 

Provincial: integrated Housing and Human Settlement Grant (IHHS) 

(30,775,924) 

(14,981,801) 

Provincial: Other Provincial Grants 

4,395,175 

6,318,420 

Unspent public contributions and donations: Knysna Fire Disaster Relief Fund 

3,959,135 

3,959,719 


1,809,927 

(4,666,999) 


Unspent grants can mainly be attributed to projects that are work in progress on the relevant financial year-ends. 

Also refer to appendix "B" for a reconciliation of grants from other sources. The Unspent Grants are cash-backed by term 
deposits. The municipality complied with the conditions attached to all grants received to the extent of revenue 
recognised. 


47 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Motes to the Annual Financial Statements 


2019 2018 

R R 


8. Unspent conditional grants and receipts (continued) 

Equitable share 

Current year receipts 78,338,000 70,834,564 

Conditions met - transferred to revenue - operating (78,338,000) (70,834,564) 


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. 

National: Financial Management Grant (FMG) 

Current year receipts 1,550,000 1,550,000 

Conditions met - transferred to revenue - operating (1,550,000) (1,550,000) 


The FMG grant is a conditional grant to promote and support reforms in financial management by building capacity in 
municipalities to implement the Municipal Finance Management Act (MFMA). 

National: Municipal Infrastructure Grant (MIG) 

Current year receipts 

Conditions met - transferred to revenue - operating 
Conditions met - transferred to revenue - capital 

8,458,344 


24,594,000 25,408,000 

(2,115,967) (3,632,724) 

(14,019,689) (21,775,276) 


The MIG grant is a conditional grant to provide specific capital finance for eradicating basic municipal infrastructure 
backlogs for poor households, micro enterprises and social institutions servicing poor communities. 

National: Energy Efficiency and Demand Side Management Grant (EEDSMG) 

Current year receipts 6,000,000 

Conditions met-transferred to revenue-operating (25,250) 

Conditions met - transferred to revenue - capital (5,917,866) 

56,884 ~ 


The EEDSM grant is a conditional grant to focus on the determination of energy consumption baseline, supply and 
installation of energy efficient technologies within Municipal facilities. 

National: Integrated National Electrification Program Grant (INEP) 


Opening balance 
Current year receipts 

Conditions met - transferred to revenue - operating 
Conditions met - transferred to revenue - capital 
Adjustments 


283,670 

7,000,000 3,000,000 

(761,307) (381,711) 

(5,225,037) (2,618,289) 

(283,670) 


1,013,656 


The INEP grant is a conditional grant to provide capital subsidies to municipalities to address the electrification backlog of 
occupied residential dwellings and the installation of bulk infrastructure. 


48 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


8. Unspent conditional grants and receipts (continued) 
National: Extended Public Works Program (EPWP) 


Current year receipts 1,187,000 1,415,000 

Conditions met - transferred to revenue - operating (1,187,000) (1,415,000) 



- 

- 

The EPWP grant is a conditional grant to incentivise municipalities to expand work creation efforts through the use of 
labour intensive delivery methods in the identified focus areas in compliance with the EPWP guidelines. 

National: Neighbourhood Development Partnership Grant (NDPG) 

Opening balance 

Current year receipts 

Conditions met - transferred to revenue - capital 

Adjustments 

36,663 

23,000,000 

(8,334,006) 

45,894 

8,909,000 

(8,872,337) 

(45,894) 


14,702,657 

36,663 

The NDPG grant is a conditional grant is to fund, support and facilitate the planning and development of neighbourhood 
development programmes and projects that will be catalysts for further development in these areas. 

Provincial: Integrated Housing and Human Settlement Grant (IHHS) 



Opening balance 

Current year receipts 

Conditions met - transferred to revenue - operating 

Conditions met - transferred to revenue - capital 

(14,981,799) 

34,823,791 

(40,647,529) 

(9,970,387) 

(17,338,737) 

47,023,615 

(18,215,105) 

(26,451,574) 


(30,775,924) 

(14,981,801) 

The housing allocation is a conditional grant to support the creation of sustainable human settlements that enables and 
improve quality of household life, provision of basic infrastructure, top structures and basic social and economic 
amenities. 

Provincial: Other Provincial Grants 



Opening balance 

Current year receipts 

Conditions met - transferred to revenue - operating 

Conditions met - transferred to revenue - capital 

Adjustment 

6,318,420 

17,270,000 

(12,660,786) 

(6,397,578) 

(134,881) 

3,327,265 

18,155,000 

(10,061,634) 

(5,102,211) 


4,395,175 

6,318,420 


The other provincial grants is mainly allocated to provide financial assistance to municipalities to improve overall financial 
governance within municipalities, improving credibility and responsiveness of municipal budgets, improving audit 
outcomes and addressing institutional challenges, to cover operational and capital costs pertaining to the line functions of 
CDW's, to ensure functional and compliant performance management systems. The unspent portion relates to conditions 
not yet met at year-end. 


49 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


8. Unspent conditional grants and receipts (continued) 

Unspent public contributions and receipts: Knysna Fire Disaster Relief Fund 


Opening balance 
Current year receipts 

Conditions met - transferred to revenue - Public contributions and donations 


3,959,719 1,241,107 

2,719,809 
(584) (1,197) 

3,959,135 3,959,719 


The Knysna Fire Disaster Relief Fund was established in terms of Section 12 of the MFMA for the purpose of collection 
and allocation of funds donated in support of the devastating fires that have ravaged the greater Knysna area. 

This fund is intended to address the short, medium and long-term needs and reconstruction requirements of Knysna for 
the benefit of all residents, communities, businesses and visitors. The donated monies is to be utilised to address 
humanitarian relief, trauma counselling, public works employment as part of the clean-up process, environmental 
management to, among other things, prevent mud slides and ensure rehabilitation, infrastructure, business support, 
economic development and reconstruction. 

Applications for allocations from this fund will be evaluated by a working committee, established to assist the accounting 
officer. 

This unspent public contributions and receipts is cash-backed by a separate bank account as stipulated in Sections 12(2) 
and (3) of the MFMA. Refer to note 9. 


Total Grants and receipts 

Opening balance 
Current year receipts 

Conditions met - transferred to revenue - operating 
Conditions met - transferred to revenue - capital 

Conditions met - transferred to revenue - Public contributions and donations 
Adjustments 


(4,666,999) 

193,792,791 

(137,315,839) 

(49,864,563) 

(584) 

(134,881) 


(12,440,801) 

179,014,988 

(106,090,738) 

(64,819,687) 

(1,197) 

(329,564) 


1,809,925 (4,666,999) 


Changes in levels of government grants 

Based on the allocations set out in the Division of Revenue Act, no significant changes in the level of operating 
government grant funding are expected over the forthcoming 3 financial years. Capital grants are allocated annually in 
the Division of Revenue Act, and can change significantly. 

9. Cash and cash equivalents 

Cash and cash equivalents consist of: 

Short-term deposits 
Bank balances 
Cash on hand 

71,709,029 79,877,042 


24,204,718 20,911,889 

47,494,761 58,955,203 

9,550 9,950 


Facilities 

A standing overdraft facility of R 5mil is part of the agreement with Nedbank Limited. 


50 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


9. Cash and cash equivalents (continued) 

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. 

Credit rating 

P-3 (Nedbank, ABSA, Standard Bank and Investec) 71,699,479 79,867,092 

Cash and cash equivalents pledged as collateral 


Cash and cash equivalents to an amount of R 32,585,851 (2018: R 10,314,802) are held to fund the Unspent Conditional 
Grants. Refer to note 8. 


Call Investment Deposits of R 11,856,922 (2018: R 11,118,139) have been pledged to DBSA as guarantees on external 
loans taken up. Refer to note 15. 


Guarantees Issued 


156,100 156,100 


The municipality had the following bank accounts 


Account number / Bank statement balances Cash book balances 

description 



30 June 2019 

30 June 2018 

30 June 2017 

30 June 2019 

30 June 2018 

30 June 2017 

Nedbank - Primary bank 
account - 162 656 1826 

60,240,941 

70,091,946 

60,954,822 

43,437,200 

54,841,041 

52,838,919 

Nedbank - Secondary 
account - 162 656 1834 

113,936 

216,687 

279,589 

98,114 

154,076 

(24,457) 

Nedbank - Tertiary account 
(SARS VAT receipts) -162 
657 1139 

312 

367 

154 

312 

367 

154 

Nedbank - Knysna Fire 
Disaster Relief Fund -114 

3,959,135 

3,959,719 

1,241,108 

3,959,135 

3,959,719 

1,241,108 

792 0699 







Total 

64,314,324 

74,268,719 

62,475,673 

47,494,761 

58,955,203 

54,055,724 


Call Investment Deposits consist of the following accounts: 

Nedbank - 03/7881531940/54 - Ceded DBSA 

Nedbank - 03/7881068957/10 

Nedbank - 03/7881150963/01 

ABSA-9328139285 

Standard Bank - 288567420-020 

Investec-021941-501 


11,856,922 11,118,139 

61,285 57,466 

7,167,354 

9,735,778 

5,118,617 

540 506 


24,204,718 20,911,889 


51 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 

2018 

R 

R 


10. Investment property 



2019 


2018 

Cost 

Accumulated Carrying value 

Cost 

Accumulated Carrying value 


depreciation 


depreciation 


and 


and 


accumulated 


accumulated 


impairment 


impairment 


Investment property 

173,343,900 

(94,346,637) 

78,997,263 

173,343,900 

(96,432,713) 

76,911,187 

Reconciliation of investment property - 2019 





Investment property 

Opening 

balance 

76,911,187 

Additions 

Disposals 

Reversal of 
impairments 
2,242,608 

Depreciation 

(156,532) 

Total 

78,997,263 

Reconciliation of investment property - 2018 (Restated) 





Investment property 


Opening 

balance 

77,064,520 

Additions 

Disposals 

Depreciation 

(153,333) 

Total 

76,911,187 


Investment property in the process of being constructed or developed 

No investment property is in the process of being constructed or developed. 

Amounts recognised in surplus or deficit 


Rental revenue from Investment property 

4,169,184 

3,398,169 

From Investment property that generated rental revenue 

Repairs and maintenance - Contracted services 

85,362 

224,693 

Repairs and maintenance - Inventory consumed 

189,454 

1,284 

Operational costs 

31,691 

3,432 


306,507 

229,409 


Other 

The ownership of Erf 216/54 Brenton with a fair value of R10,831,000 is the subject of a legal dispute and according to 
the legal opinion obtained by the Municipality, ownership of this property vests with the Municipality. There are no other 
restrictions on the realisability of Investment Property or the remittance of revenue and proceeds of disposal. 

There are no contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or 
enhancements. 


52 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand _ 



0 


LO *c- O 

"St 

o 


3 


n- r~- m- 

to 

"Cf 


CO 


CD M- 05 

o 

T— 


> 


co' rC co 

co" 

CD 


CD 


CO CM 05 

o 



C 


co 05 sr 

a 

T™ 


> 


CM CM M" CO 

CO 


u. 


I s - CM LO 

co 

T— 


(0 


h- 


o 


o 









X—V 



TJ — 


CD CM 05 

X— 

00 


w {— 

B o 

CO 


05 co 

CM 

CM 

CO 

£ 

. 0 

v- O 05_ 

T“ 

CO 


*rr 0 

4 l 

co" co" co" 

■sT 

'sf 

o 

9 o 

CO CD O 

co 

^r 

CM 

£ 0 

£ co 

M- CO -M- 

05 



3 

O Q- 
U 0 

< XI 

(0 g_ 
E 

o" co" o 
CO CO ^T- 
t^CM 

05* 

CO. 

cxT 

05 




T- co 05 

to 

CO 




h- o t- 


CD 




03 LO 05 

\— 



+-» 


T~" LO~ cm" 

CD 

O 


If) 


N O) O 

05 

CD 


o 

O 


r^- o>_ 

05 

CO 



C0~ V-" M 7 

cm" 

CM 




LO 05 CQ 

o 





CO 05 


to 






T" 


0 


N O) O 

CO 



3 


to LO CO 

o 

00 


0 


to CM CO 

o 

CO 


> 


CO" h-" CM” 

to" 

co" 


O) 


O 03 O 

o 

05 


C 


x-_ C0_ lO 


in 




cor-'iC 

cm" 

u> 


L. 


pv. t- r*- 

co 

co 


0 


v- 03 


V" 


o 




T" 


T3 c 

0 > o 
CO '■+£ 
— 0 


(Dx^T^ 

CO* 

r* 


■*-* 

t— 05 CO 

CO 

CM 

05 

c 

m 

lO v- 05 



x— 

1 I 

•a E 

ID CM O0 M - 

CO 

o 

=2 O 

05 03 05 

CM 

05 

CM 

1 e 

O CL 
O 0 

< -o 

s& 

CO t-_ CM_ 

to" co" v-“ 

C0_ 

■sf 

CO 


E 

N 0 f- 


CM 


^CM ^ 


J£5^ 




CO O t- 

T- 

U5 




t"- LO 05 

05 

O 




OtN 

h- 

r- 


-*-» 


G> 05" CO" 

05" 

to" 


CD 


05 CO 05 

CM 

05 


O 

o 


M* O h- 

05 

CM 



co" V-' co" 

co" 

cT 




LO T- CO 

O 

CD 




CO -V- 

T— 

CD 




f— 


T- 


£ 

. 9 * 

*5 

o* 

0) 

TJ 

E 

0 

4-» 

£ 

0 

a. 

5s 

t: 

0 

Q. 

O 


0) 
CD 
c n 

0 


: o 
: O O 


0 

-4-* 

o 

h- 



00 

to 


3 

O* 

<D 

T5 

C 

<0 


JS 

a. 


o 

a. 

o 

La 

Q. 

■+- 

O 


o 

£ 

O 

u 

<D 

a: 


<0 

o> 

£ 

"5 2. 

•O £ 
£ O 
ns tcs : 
TJ 2 
C © 

0 Q- 
_j O 


to 

CD 


(0 

CD 

05 

2 

Q. 

C 


0 £ 

CL-g 

o§ 


£ jo 

3 


C 

.2 

To 

o 

ll 

g o 

2 o 

G? "D 

_ co 

c 


2 

5 T3 

o 2 

3 is 

To co 
to £= 
4= c 


c 

« _ o 
-boro 

S -3 I 

i a) £ 
JE iU c 


SI 

w -o 
S5 ro 
4= o 

.s or 


.1 S 

0 ^ 

II 

CO o 

cn in 


0 

0 h= 

3 t> 

O 3 

p ■* = * 

4= CD 
CD CO 
CO w_ 

4= c 

C — 

CD 

0 CL O 
4-5 ry i— 

sg n °- 
5 « c 

E fe ^ 

o co o 


« 

CD 

0 







Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 


D) 

C 

<D 

fc = 

OJ CO 

O > 


re 

a 

£ 

T3 

C 

re 

c 

o 


o 

£ 

CL 

0 

Q 

TJ 

0 

+■* 

_re 

3 

E 

3 

O 

o 

<L. 



0 

h- N CO 

CO 

LO CO CD CM CD 

xf 


to 

x— (35 XT 

O 

O LO N- LO x- 


O) 0 

CO 


O 

CD O CM N- O 


C O 

cm" 

cm in in 

LO 

O XfCO CD CM 

CO 

s c 

0 

co ire co 

O 

CO CD N- CM O 


0 JS 

IO 

CD CD CO 

XT" 

t- N D CO xf 

u> 


n 


cm" 

CD" LO O N- X- 


LJ _q 

n 


CO 

x- CO 

CO 












x— 












■p" 

si 





N 

CO 

O 

S .b= 





CO 

LL nj 





CM 

O CL 






- E 






*"**■» M— 

a> 

CD CO * 

■ 

1 1 1 1 1 

CD 

c 0 c 

CO 

LO CO 



N 

0 re 0 

w 

x- CO 



N 

F <2 E 

0" 

0 0 



CD 


CO 

V- CM 



CO 

io !> S 

X- 




N 

0.0)0- 





IO 

EKE 












1 C 

N 

n 1 * 

0 

OOOO 1 

N 


CO 

CO 

CM 

CM CD N N 

O 

’2 

<0 

CD 

CM 

CO CD N xf 

CD 

re re 



O 

a> co cd co 

O 




N- 

CD CM O CD 

N 

a. £ 



CD 

CO Xf U) T- 

0) 

CO CL 






h 0 

a Q 












c 

CO 

x- n 1 

O 

M ‘ M- CO * 

N 

0 

n 

0 n 

CO 

O M- CD CD 

O 

‘■s 0 

T- 

O x- 

CO 

00 N O CM 

xf 

.5 CD 

CO 

to x- 

0 

CD x- x- 00 

CD 


r- 

xf N 

x— 

O N N LO 

CM 


0 

N CM 

00 

cm xr cd xr 

Xf 

CL O 

X“ 


CO 

•c- V- x__ CM 

CM 

0 





CO 

a 







1 

1 1 1 

■ 

1 1 1 1 1 


< -S 





N 

CO 

O" 






CO 

0 ij. 





CM 

— -re 






re 








,— 


— 



CO 

Xf CO X- 


1 1 1 N N 

1 


xf 

CO CD LO 


CO CO 


1— 4 -j 

CD 

cm x— n 


a 0 



cd 

r- CD CD 


cd" cd" 



00 

CO X— X— 


xf xf 


f — c 

2 0 


CD xf O 

cm" CO 


xf M- 

co" co" 


H* 0 








,—, 


,-„ ,-, ,-, ,-„ 



0 

O * « 

xf 

LO LO N N 1 

Xf 


CM 

CM 

N 

CO CO N CM 

<D 

re 

T— 

x— 

N 

x- N x- N 

CO 


T- 

x— 

O 

CD CO N O 



CM 

CM 

n 

CD CD N CO 

CD 

Q. 



Xf 

O) Xf LO Xf 

xf 

a 



w 




ID 

CM CM CM 

CO 

N CM x- CD CD 

CD 


rr 

in co x- 

CO 

CD CO N CD x- 

IO 

c 

CO 

ICON 

CO 

xf 03 00 xr- O 

T— 

0 

CO 

CD CD CM 

0 

0D O LO CO CM 

CO 

-■tf 

CM 

CD CM CO 

X— 

O O O CD O 

to 

"O 

CO 

00 CO CD 

Xf 

xf N x— N xf 

CO 

~o 

CO 

O CM O 

co" 

X“ X— T— X— 

m 

< 

04 




Xf 








0 

CD CD LO 

xf 

N O CD x- N 

0 


X* 

O xf CO 

IO 

CM xf h- N C^) 

Xf 

O) (D 

<J> 

N N xf 

O 

O O CD O O 

T“ 

C 0 

CO 

CO O CD 

co" 

CD CO v- CO CD 

to 

c E 

CT> 

CO CD M- 

0 

Ifl N r r xf 

X“ 

0 J5 

xf 

N XT CM 

0 

O LO CD CO M- 

X“ 

CL co 

xf 

XT CNN 

CO 

CD CD x~ LO CO 

CO 


U) 

CO X- 

CO 

x- CO 

x— 








_ 




x— 


■a 

o 

3 

c 

'-H 

c 

o 

o 


c 

0) 

E 

D. 

■5 

O’ 

0) 

"O 

c 

re 

«*-» 

c 

-5 

CL 


0 

Q. 

o 




re 

CD O 


* $ 


£ s 

C r u a 
3 3 ^ C 

ee“^ 

I E o| 

o o q. *2 


c 

0 

E 

Q. 

'3 

O' 

- 0 

9 8 

If 

a- 

2 § 

0 0 


0 

E 

.9* 

TJ fl) HI 
C « ‘ 

ca 


O O 1 


3 5 

1 f I 

■*-* O zj 
O O LL 


{/) 05 

(0 o 

c-t Q. 

S 8..S 
■g 8* 
ro 2 -5 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

Figures in Rand 


•o 

re 

3 

C 

■M 

c 

o 

o 


c 

re 

E 

Q. 

'5 

cr 

<i> 

XJ 

c 

re 

■*-* 

n 

re 


re 

Q. 

O 


TJ 

O 


w 
01 
a: 


o 

CM 


c 

0 

E 

a 

3 

or 

0 

■a 

c 

re 

-*-• 

c 

re 

CL 


0 

CL 

O 


c 

o 


o 

c 

o 

0 

0 

a: 





10 

r— 

co 

X — 

»r 

CM 

CD 

CD CD 

in 

CD 

CD CO 

O 

03 CD 

L0 

xf 

03 O 

h- x— 






CO 

O CM 

N* 

CM 

CM 

10 CD 

00 

a) 

h- CD 

xfr 

O M- 

00 

10 

cm xr 

r- 

CD 



03 0 
E O 

CO 

o> 

CM 

10 


M" ^ 

03 CO 

o 

LC3 

LO 10 

03 


XT 

o 

o o 

CO o 

o 



CO 

<0 

h- 

'sf 


CD 

CO 

■»— M" 

h- 

M* M" M" 

CO 

CD O 

03 

CD 

03 CO 

X- CD 

03 

O) 


'§ « 

CO 

LO 

03 

C3 

CM 

If) 

CD 

CM M' 

CD CD 

CD 10 

03 

CO CD Nf 

O 

lo r- 


xf 

c 


CO 

r-~ 

O 

00 

<y> 

00 CO 

O 10 

CM CM 

CD 03 


r^- m- 

CM 

O 

O to 

CO CD 

xr 

& 

0 

oS 

CM 

LO 

CO 

O 

CM 

03 


CD CD 


x— 

CM CD 


M- CM 


to 

CD CD 

x— LO 

CD 

3 

I s - 

CM 

CD 

x— 

CM 

00 


O M- 


CM 

O [0 

t0 

CO X- 


CD 


x- CD 


re 



T“ 

v~ 




x— 


X — V— 



CM 








o 
























I 

1 

« 

l 

<D 

I 

t 

1 1 

CD 

t 

i i 

■ 

1 I 

i 

i 

t 1 

i i 

1 



™ m 





CD 




p> 
















h- 




I s — 












2 E 





CD 




CD* 










•2 











x~* 











a; ca 









h- 










E 


CD E 





' ' 




'— 










0 


— E 



















F 





















JL. 





















re 


c 


1 

1 

1 


* 

* 

1 1 

* 

1 

1 1 

1 

1 * 

1 

1 

1 1 

i l 

1 

a. 


0 



















£ 


E 

i_ 



















u 

c 

re 


CO 

CL 

E 



















c 


, c 

1 

1 

i 

l 

03 

l 

i 

1 CD 

i 

i 

x— * 

i 

1 1 

i 

00 

CO CO 

CM 1 

1 



' o 





CO 



CM 



M- 




CM 

d- 

h- 









00 



CO 



O 




03 

CM LO 

O 




y> o 

n P 





CM 



co" 



co" 




10 

X- o 

xf 








03 



CM 



CO 




x— 

X- CO 

CM 


2 






CM 






CM 




U7 

CD 

CO 


Q. 


0 Q. 















CM 




0 

Q 


r> 0 

Q Q 





















jmm. 


V 



,— 

^— s 

✓—'* ^—% 



,— s 


^^ _ 



,—. ,— 

___ 


0 


c 

CO 


00 


00 

LO 

r^- 

CO O CD 

03 

CD 1 

<r~ 

O x- 


xt 

03 CD xs- 10 

• 


o 

T- 


V* 


CO 

O 

CO 

CO 03 

O) 

O 

03 

■M" 

o 


CD 

00 CD 

x- CM 


re 


0 

.2 p 

CO 


CD 


T- 

CM CM 

h- LO 

CM 

CM 


CO 

h- x— 


o 

O CM 

U3 CM 


3 




r^- 


M- 

x— 

03 

O CD 

LO 


CD 

o 

X- 03 


CM 

CD x- 

CO CD 


E 





•M- 


•D- 

O CD 

10 LO 


X— 

M" 

xt 

O CD 


CO 

CO CD 

CD M- 



P r 

in 


LO 


C3 

CD 

' ' 

CO 10 


CD 

ID 

03 

r- cm 


CD 

O CM 

xr x- 




CL O 





x— 

10 





co' 




10 

X— x— 

t- CM 









CM 











>—'■ •* 



«L 


Q 






















• 

1 

1 

1 

CD 

i 

i 

i i 

CD 

i 

t i 

i 

1 t 

i 

i 

i 1 

i i 

1 



™ m 





CD 




C3 
















r-> 




r^- 












2= E 





CD 




CD~ 





















x— 












K ^ 









r- 












2=3 

re 





















o -o 



00 

(X) 


r- 

• 

03 x- 


CM 

O 03 


LO 1 

10 


1 CM 

* CD 

00 





00 

CO 


CM 


CM CO 


CD 

O CD 


03 

(73 


CO 

CD 




, 0 . 



NT 

•sJ* 


CD 


h- CM 


CM 

CD M- 


o 

O 


XJ- 

CO 

CD 



.0 0 



O 

03 


CD 


CO CD 


M- CD CD 


CD 

CD 


CM 

CM 

LO 






v— 

x— 


N- 


03 03 


03 

CD 


O 

O 



CM 

CO 



c p 



CM 

CM 


CD 


CD r^- 


00 

CO CD 


10 

U) 


X— 

CO 

03 



2 o 






CD 


CD CD 


x— 

M- h- 


x— 

x— 







f— o 








V“ 



CM 


















, — ^ 







„ _ _ 

_ _ __ 










03 



• O 

• 


03 1 




CO 

cd xr 

CO 1 

1 



0 





o 



CM 



00 




CM 

03 r-- 

LO 




re 





CO 



h- 



00 




o 

m- xr o 




0 








r^- 



CD 




CO 

CD CM 

CM 









CD 



CD 



03 




03 

LO CO 

CD 









CD 



‘—' 



CM 




10 

" CD 

CO 







































CM 

X— 





Q 
















' ^ 







I 

r- 

r-- 

■<* 

LO 


CO CM 

t 

10 

x- CM 

CO 

'tf in -tf 

CO 

O CO 

CD O 

h- 




CO 


CD 

03 

CO 

CD 


CM 


x— 

cd 


CM 03 

CM 

O' 

CD CM 

h- 10 CD 



E 

o 


^ 10 

M- 

aj 

CM 

M* CO 


o 

CD M- 

CO 

CO M* 

O 

CO 

03 x- 

CO 00 O! 



O 

IT) 


10 

03 

CD 

r- 

CO 

03 0 


r- 

x- 00 

CO 

CO CD 

O 

CD 

xf CM 

xr oo 

05 



±; 

00 


o 


03 

CM 

x— 

CM CO 


o 

M- 00 

r* 

I s - xf 

03 

CO 

03 CM 

co co xr 



T3 

CO 


r— 

r- 

CM 

UJ 

M- 

CM LO 


X— 

CD O 

CM 

O 10 

10 

CO 

CD CD 

CM CD 

xr 

CO 


< 





03 

CD 


M* CO 


X— 

x- h- 

CO 

x— 

M- 

CO 

x- CM 

CD L0 CD 

o 






03 

T— 





CM M- 




r- 




o 
























CD 

v- 

CO CM 

10 

LD 

03 

CM 

CO 

LO 

03 O 

00 

O CM 

CO 

O 

cd r- 

CM O 

CO 



CD G) 

to 

LO 

03 

X— 

V" 

UJ 

0J 

03 M" 

r- 

M" 

M- O 

CO 

CD 10 

UJ 

h- 

D- CO 

O 00 

xr 



O) 

03 

10 

■sr 

03 


M" 

L0 CM 

CD 

UJ 

03 CD 

M- 

10 CD 

U3 

10 

CD L0 

r- lo 

CO 

O) 



CD 

CD 

a> 


crT 

CD 

O) 

o 

CM 

O 

CD CM 

xr* 

10 CD 

CM 

O 

CM x- 

co r**- 

LO 

c 


0 re 
a. re 

to 

10 

x— 

r- 

x~ 

U3 

x— 

M" CD 

xj- 

O 

CM O 

CM 

O 10 

CD 

LD 

03 O 

LO co 

CO 

;>< 

0 

CO 

h»_ 

CD 

CM 

<0 

CJ3_ 

CD 

CM h- CM 

O) 

LO 

CM 

03 x- 

x— 

CO 

h- x- 

00 03 

03 



O -o 

to 

to" 

cc) 

CD* 

i/T 

M" 


O CD 


00 

CM 03 

03 

CM CM xr 

CM 

LO 10 

03 O 


re 


CD 

CM 

C3 


M- 



O CM 


x— 

CD 10 

M - 

CD x-* 


LD 


CD 


oj> 


r* 




CO 



x- X- 



x— 









c 

o 


w 

ro 

c 

2l 

'5 -5 

■° TO 

■a e 

c o 
re *■♦= 
_ re 

11 


o> 

o 


£ J* 
<D t 
Q- 5 
o§ 


o 

w w 3 

r— >— 

-t-< ■+-» >*~l 


s; e 
3 | 
« o 
E o 

« "2 


*i £ c =j 


= UJ 


— .2 
o ro 
S E 

C 


CD 

i_ 

3 

O 

3 

CQ 

CO 

si 

■t 0) 
12 xj 
2 to 
fc o 
£ IT 


PS5 


= o t 
o 2 2 ■ 
2 to 2 
»St' 
r* c - 
*♦— — 

c: l_ - 

— 0 o 
5 co ra 
.2 re > 
v- > > 

(0 > r- 

co o .2 
oo co oo 


w 

<0 

0 


« C 

0 

(0 o 

§5 


o 

.TO 


i2 8 
0 ^ 
OT ■•= . 
« o 
(0 CO 


CO 


t/3 
to 
W P 
p 13) 
P 


CO 


C I ® Q. 

I i-f 

E E o| 

O O CL§ 

OOW5 


0 

E 

a. 

*3 

cr 

c 0 
0 0 

Eg 

3 o' "5 

» 2 § 
0 0 

13 
- E E 

*» O 3 

OOlL 


0 

(0 

re 

u. 

0 


3 

®i2 % 
*0 0 0 
c Kl J- 
m CO O) 

Si® 2 

c'-t; a. 

1 &J= 

3 c -K 
re to o 


912,839,882 129,764,484 (2,932,632) - 713,733 (29,364,391) 2,808,797 - (713,733)1,013,116,140 








Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Motes to the Annual Financial Statements 


2019 2018 

R R 


11. Property, plant and equipment (continued) 

Assets subject to finance lease and pledged as security 


Furniture and office equipment 

1,211,114 

1,867,538 

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



Cumulative expenditure recognised in the carrying value of property, plant 
and equipment 

Buildings 

Infrastructure 

Community 

Other property, plant and equipment 

10,985,242 

117,592,724 

14,865,446 

1,402,019 

10,834,521 

58,954,563 

7,249,485 

3,449,037 


144,845,431 

80,487,606 

Completed infrastructure of R 15 213 432 was incorrectly disclosed as work-in-progress in the previous financial year. 
The amount disclosed in the previous year financial statements of R 95 688 255 was restated to R 80 487 606. 

Carrying value of property, plant and equipment that is taking a significantly 
longer period of time to complete than expected 

Knysna Cemetery professional fees - Community asset 

Still in progress of land identification. 

20,285 

20,285 


20,285 

20,285 

Carrying value of property, plant and equipment where construction or 
development has been halted either during the current or previous 
reporting period(s) 

Greensite development and tipsite establishment - Infrastructure 

This project is not completed due to the funds that were reallocated. 

No impairment loss has been recognised as the project will continue as and when 
funding becomes available. 

198,140 

198,140 


198,140 

198,140 

Expenditure incurred to repair and maintain property, plant and equipment 



Included in Statement of Financial Performance 

Contracted services 

Inventory consumed 

Operational costs 

44,118,565 

12,547,486 

5,016,425 

46,413,342 

10,771,887 

2,324,757 


61,682,476 

59,509,986 


56 




Knysna Municipality 

Annua! Financial Statements for the year ended 30 June 2019 


Motes t© the Annual Financial Statements 





2019 

R 

2018 

R 

12. Intangible assets 








2019 


2018 



Cost/ 

Valuation 

Accumulated Carrying value 
amortisation 
and 

accumulated 

impairment 

Cost/ 

Valuation 

Accumulated 

amortisation 

and 

accumulated 

impairment 

Carrying value 

Computer software and 
website 

184,239 

(48,551) 135,688 

238,247 

(84,141) 

154,106 


Reconciliation of intangible assets - 2019 


Opening Additions Amortisation Total 
balance 

Computer software and website 154,106 - (18,418) 135,688 


Reconciliation of intangible assets - 2018 

Opening Additions Amortisation Total 
balance 

Computer software and website 169,904 - (15,798) 154,106 

Pledged as security 

There are no intangible assets pledged as security for liabilities. 

Intangible assets in the process of being constructed or developed 
No intangible assets in the process of being constructed or developed. 

Restricted title 

There are no intangible assets whose title is restricted. 

Other information 

No intangible assets were assessed having an indefinite useful life. 

There are no contractual commitments for the acquisition of intangible assets. 


57 



Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


13. Heritage assets 



2019 


2018 

Cost 

Accumulated Carrying value 

Cost 

Accumulated Carrying value 


impairment 


impairment 


losses 


losses 


Land of historical 
significance and 
conservation areas 

26,709,000 

(11,263,000) 

15,446,000 

26,709,000 

(11,998,000) 

14,711,000 

Historical buildings 

2,393,952 

(10,000) 

2,383,952 

2,393,952 

(13,952) 

2,380,000 

Works of art 

83,550 

- 

83,550 

83,550 

- 

83,550 

Historical monuments 

18,871 

- 

18,871 

18,871 

- 

18,871 

Book collection of historical 
significance 

241,625 

" 

241,625 

241,625 

“ 

241,625 

Total 

29,446,998 

(11,273,000) 

18,173,998 

29,446,998 

(12,011,952) 

17,435,046 


Reconciliation of heritage assets 2019 


Works of art 
Historical monuments 

Land of historical significance and conservation areas 
Historical buildings 

Book collection of historical significance 


Opening 

balance 

83.550 

18,871 

14,711,000 

2,380,000 

241,625 

17,435,046 


Reversal of 
impairment 


735,000. 
3,952 


738,952 


Total 

83,550 

18,871 

15,446,000 

2,383,952 

241,625 

18,173,998 


Reconciliation of heritage assets 2018 


Works of art 
Historical monuments 

Land of historical significance and conservation areas 
Historical buildings 

Book collection of historical significance 


Opening Total 

balance 

83,550 83,550 

18,871 18,871 

14,711,000 14,711,000 

2,380,000 2,380,000 

241,625 241,625 

17,435,046 17,435,046 


Details of heritage assets 

Heritage assets consist mainly of land, historical buildings and monuments older than 50 years. 

There are no restrictions on the realisability of Heritage Assets or the remittance of revenue and proceeds of disposal. 

There are no contractual obligations to purchase, construct or develop heritage assets or for repairs, maintenance or 
enhancements. 

There are no heritage assets pledged as security for liabilities. 

There are no third party payments received for losses and impairments incurred. 


58 







Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annua! Financial Statements 


2019 2018 

R R 


13. Heritage assets (continued) 

Heritage assets used for more than one purpose 

The following heritage assets are used by the entity for more than one purpose: 


Erf 475 Knysna: Heritage tourism building 

2,927,000 

2,822,000 

Erf 1003 Knysna: Old goal heritage building, museum and municipal offices 

3,900,000 

3,900,000 

Heritage assets in the process of being constructed or developed 

No heritage assets is in the process of being constructed or developed. 

Expenditure incurred to repair and maintain heritage assets 

Expenditure incurred to repair and maintain heritage assets included in 
Statement of Financial Performance 

6,827,000 

6,722,000 

Contracted services 

77,820 

89,509 

Inventory Consumed 

24,393 

906 


102,213 

90,415 

Operating lease asset (liability) 

Non-current assets 

2,060,278 

1,913,910 

Non-current liabilities 

(109,445) 

(5,975) 


1,950,833 

1,907,935 


Refer to note 42 for additional disclosure relating to the operating lease asset and accrual. 


59 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 



2019 

R 

2018 

R 

15. Long-term liabilities 



At amortised cost 

Annuity loans 

197,578,312 

154,308,757 

Local registered stock 

- 

710,520 


197,578,312 

155,019,277 

Total long-term liabilities 

197,578,312 

155,019,277 


Annuity loans 

Annuity loans bear interest at rates between 7.93% and 11.69% per annum. Investec Fixed Deposit (Acc 021941420) of 
R 34,491,331 and the Call Investment Deposit of R11,856,922 have been pledged to DBSA as guarantees for external 
loans taken up. Refer to notes 4 and 9. 

Local registered stock 

The City of Tswane is the holder of the registered stock. The stock bears interest at 16.45% per annum. Interest 
associated with stock is paid on an annual basis and the face value of the stock will be fully redeemed on 31 December 
2018. 

Non-current liabilities 


At amortised cost 

173,816,114 

136,080,282 

Current liabilities 

At amortised cost 

23,762,198 

18,938,995 

Finance lease obligation 



Minimum lease payments due 

- within one year 

- in second to fifth year inclusive 

1,016,796 

423,665 

937,025 

1,310,888 

less: future finance charges 

1,440,461 

(124,204) 

2,247,913 

(309,214) 

Present value of minimum lease payments 

1,316,257 

1,938,699 

Present value of minimum lease payments due 

-within one year 
- in second to fifth year inclusive 

905,263 

410,994 

740,843 

1,197,856 


1,316,257 

1,938,699 

Non-current liabilities 

Current liabilities 

410,994 

905,263 

1,197,857 

740,842 


1,316,257 

1,938,699 


It is municipality policy to lease certain office equipment under finance leases. The office equipment is leased from 
Konica Minolta and Bytes. 

The average lease term was 2-3 years and the effective borrowing rate was 10.50% to 12.50%. 

Interest rates are fixed at the contract date. All leases have fixed repayments and no arrangements have been entered 
into for contingent rent. 

The maturity date of the leases is 30 November 2020. 


60 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


16. Finance lease obligation (continued) 

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

11 . 

17. Payables from exchange transactions 


Accrued Interest on Loans 

1,764,525 

1,835,709 

Trade payables 

72,400,901 

56,226,503 

Payments received in advanced 

14,867,255 

14,038,210 

Retentions 

10,431,498 

11,287,029 

Hoarding fees 

9,508,770 

8,161,766 

Other payables 

2,604,322 

128,545 

Deposits: Other 

208,970 

93,275 


111,786,241 91,771,037 


Payables are being paid within 30 days as prescribed by the MFMA. 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 payables on initial recognition is not deemed necessary. 

All payables are unsecured. 

Included in other payables is unidentified traffic fines paid as well as group scheme accruals . 

Other deposits include Hall and Tender Deposits. 

18. Consumer deposits 

Electricity 
Water 

Other deposits 
Town Hall rental 

12,924,361 12,388,076 


7,091,672 6,980,046 

5,560,497 5,154,784 

166,272 132,148 

105,920 121,098 


61 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


19. Employee benefit obligations 

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


Non-current liabilities 


Post-Retirement Medical Aid benefits liability 

87,477,761 

88,750,641 

Ex-gratia pension benefits liability 

87,610 

109,076 

Long service awards 

13,876,211 

12,050,414 


101,441,582 

100,910,131 

Current liabilities 

Post-Retirement Medical Aid benefits liability 

3,541,072 

3,215,370 

Ex-gratia pension benefits liability 

11,052 

21,360 

Long service awards 

1,030,118 

1,800,714 

Performance bonus 

2,740,141 

2,164,054 

Staff annual bonus 

5,869,179 

5,414,475 

Staff leave 

19,800,491 

17,027,198 


32,992,053 

29,643,171 

Total liabilities 

Post-Retirement Medical Aid benefits liability 

91,018,833 

91,966,011 

Ex-gratia pension benefits liability 

98,662 

130,436 

Long service awards 

14,906,329 

13,851,128 

Performance bonus 

2,740,141 

2,164,054 

Staff annual bonus 

5,869,179 

5,414,475 

Staff leave 

19,800,491 

17,027,198 


134,433,635 

130,553,302 

Post-retirement medical aid benefit liability 

The Post-retirement benefit plan is a wholly unfunded defined benefit plan, 

of which the members are made up as follows: 

In-service (Employees) members 

347 

362 

In-service (Employees) non-members 

319 

293 

Continuation members 

63 

61 

Total members 

729 

716 

In-service members 

44,503,502 

50,908,093 

Continuation members 

45,790,064 

39,600,913 

Non-members 

725,267 

1,457,005 

Total unfunded liability 

91,018,833 

91,966,011 


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

• Bonitas 

8 LA Health 
8 Hosmed 

* Keyhealth 

8 Samwumed 

The Current-service cost for the year ending 30 June 2020 is estimated to be R 3 024 003 (2019: R 3 665 472} whereas 
the interest cost for the same year is estimated to be R 8 366 279 (2019: R8 641 764). 


62 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Motes to the Annual Financial Statements 


2019 2018 

R R 


19. Employee benefit obligations (continued) 

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


i) Rate of interest 


Discount rate 

9.37 % 

9.56 % 

Health care cost inflation rate 

6.84 % 

7.36 % 

Net effective discount rate 

2.37 % 

2.06 % 

Expected retirement age - females 

62 

63 

Expected retirement age - males 

62 

63 

The discount rate used is a composite of all government bonds and 

is calculated using a technique known as 

"bootstrapping". 



The discount rate was determined by deducing from the yield curve from 

the Bond Exchange of South Africa after the 

market closed at the reporting date. 




ii) Mortality rates 

Pre-retirement: SA 85-90 mortality table 

Post-retirement: PA (90) -1 ultimate mortality table 

iii) Normal retirement age 

It has been assumed that in-service members will retire at age 62, which then implicitly allows for expected rates of early 
and ill-health retirement. 

iv) Actuarial Valuation Method 

The Projected Unit Credit Method has been used to value the liabilities. 

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


Present value of unfunded obligations 91,018,833 91,966,011 


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

Current service cost 

3,665,472 

3,794,512 

Interest cost 

8,641,764 

8,834,390 

Recognised actuarial losses / (gains) 

(9,872,405) 

(10,716,922) 


2,434,831 

1,911,980 

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

Balance at the beginning of the year 

91,966,011 

93,082,249 

- Current service cost 

3,665,472 

3,794,512 

- Interest cost 

8,641,764 

8,834,390 

- Actuarial losses / (gains) 

(9,872,405) 

(10,716,922) 

- Benefits paid 

(3,382,009) 

(3,028,218) 

Balance at the end of the year 

91,018,833 

91,966,011 


63 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

IMotes to the Annual Financial Statements 


2019 2018 

R R 


19. Employee benefit obligations (continued) 

The table below summarises the accrued liabilities 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 84,282,126 90,279,930 93,082,249 91,966,011 91,018,833 

(84,282,126) (90,279,930) (93,082,249) (91,966,011) (91,018,833) 


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. 


Experience adjustments 

30 June 2015 

30 June 2016 

30 June 2017 

30 June 2018 

30 June 2019 

Liabilities: (Gain) / Loss 

(6,370,000) 

(3,138,000) 

5,862,000 

(3,507,000) 

(382,000) 


(6,370,000) 

(3,138,000) 

5,862,000 

(3,507,000) 

(382,000) 


Sensitivity analysis on the accrued 

Change 

In-service 

Continuation 

Total 

% change 

liability 

Central assumptions 


45,229,000 

45,790,000 

91,019,000 


Health care inflation 

1 % 

55,720,000 

50,454,000 

106,174,000 

17 % 

Health care inflation 

(1)% 

37,087,000 

41,757,000 

78,844,000 

(13)% 

Discount rate 

1 % 

37,317,000 

41,877,000 

79,194,000 

(13)% 

Discount rate 

(1)% 

55,552,000 

50,383,000 

105,935,000 

16 % 

Post-retirement mortality 

-1 year 

46,523,000 

47,450,000 

93,973,000 

3% 

Average retirement age 

-1 year 

48,909,000 

45,790,000 

94,699,000 

4% 

Continuation of membership at 
retirement 

(10)% 

38,657,000 

45,790,000 

84,447,000 

(7)% 

Sensitivity analysis on current- 

Change Current-service 

Interest cost 

Total 

% change 

service and interest cost 


cost 




Central assumptions 


3,665,500 

8,641,800 

12,307,300 


Health care inflation 

1 % 

4,602,700 

10,143,200 

14,745,900 

20% 

Health care inflation 

(1)% 

2,943,900 

7,432,500 

10,376,400 

(16)% 

Discount rate 

1 % 

2,989,300 

8,244,400 

11,233,700 

(9)% 

Discount rate 

(1)% 

4,549,000 

9,065,900 

13,614,900 

11 % 

Post-retirement mortality 

-1 year 

3,778,900 

8,940,500 

12,719,400 

3% 

Average retirement age 

-1 year 

3,959,900 

9,076,900 

13,036,800 

6% 

Continuation of membership at 

(10)% 

3,186,700 

8,050,200 

11,236,900 

(9)% 


retirement 

Ex-gratia pension liability 

The Ex-gratia pension benefit plan is a defined benefit plan. As at 30 June 2019, 1 pensioners (2018: 4) were eligible for 
payments in terms of this plan. In-Service members are not eligible. 

There is no future-service costs as there are no current in-service members eligible for ex-gratia payments, whereas the 
interest cost for the year ending 30 June 2020 is estimated to be R 6 918 (2019: R9 597). 

Pensioners 1 4 


The principal assumptions used for the purposes of the actuarial valuations were as follows: 
i) Rate of interest 

Discount rate 7.42 % 8.00 % 

The discount rate used is a composite of all government bonds and is calculated using a technique is known as 
"bootstrapping". 


64 







Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Motes to the Annual Financial Statements 


2019 2018 

R R 


19. Employee benefit obligations (continued) 

The discount rate was determined by deducing from the yield curve from the Bond Exchange of South Africa after the 
market closed at the reporting date. 

ii) Post-retirement: PA (90) -1 ultimate mortality table 

iii) Actuarial valuation method 

The Projected Unit Credit Method has been used to value the liabilities. 


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

Post-Retirement Housing Subsidy obligation 98,662 130,436 


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

Interest cost 

9,597 

9,819 

Recognised actuarial losses / (gains) 

(21,729) 

6,064 


(12,132) 

15,883 

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

Balance at the beginning of the year 

130,436 

135,913 

Interest: Ex-Gratia 

(5,948) 

9,819 

- Actuarial losses / (gains) 

(21,729) 

6,064 

Ex-Gratia:Exp in Year 

(19,642) 

(21,360) 


83,117 

130,438 


The table below summarises the accrued liabilities 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 

183,383 

172,862 

135,913 

130,436 

98,662 

Surplus / (Deficit) 

(183,383) 

(172,862) 

(135,913) 

(130,436) 

(98,662) 


The table below summarises the experience adjustments for the current period and the previous 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 

(30,590) 

11,693 

(23,010) 

7,276 

(30,379) 


(30,590) 

11,693 

(23,010) 

7,276 

(30,379) 

Sensitivity analysis on the unfunded accrued liability 


Change 

Total liability 

% change 

Central assumptions 




98,662 


Discount rate 



1 % 

92,721 

(6)% 

Discount rate 



(1)% 

105,353 

7 % 

Post-retirement mortality 



-1 year 

101,102 

2% 

Sensitivity analysis on the interest cost 



Change 

Interest cost 

% change 

Central assumptions 




9,597 


Discount rate 



1 % 

10,203 

6% 

Discount rate 



(1)% 

8,913 

(7)% 

Post-retirement mortality 



-1 year 

9,933 

4% 


65 





2019 2018 

R R 


19. Employee benefit obligations (continued) 

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. 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, 666 (2018: 655) employees were eligible for Long-services awards. 

The future service cost for the ensuing year is estimated to be R 1 300 226 (2019: R 1,106,763), whereas the interest 
cost for the ensuing year is estimated to be R 1 187 988 (2019: R 1,117,960). 

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

i) Rate of interest 

Discount rate 8.25 % 8.62 % 

General salary inflation (long-term) 5.60 % 6.21 % 

Net effective discount rate 2.51 % 2.27 % 

The discount rate used is a composite of all government bonds and is calculated using a technique is known as 
"bootstrapping". 

The discount rate was determined by deducing from the yield curve from the Bond Exchange of South Africa after the 
market closed at the reporting date. 

ii) Mortality rates 

Pre-retirement: SA 85-90 (mixed) ultimate mortality table 

iii) Normal retirement age 

It has been assumed that in-service members will retire at the average age of 62. 

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


Unfunded Long-Service Awards obligation 14,906,329 13,851,128 


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

Interest cost 

Recognised actuarial losses / (gains) 

1,106,763 

1,117,959 

386,120 

1,051,393 

1,024,342 

285,706 


2,610,842 

2,361,441 


66 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


19. Employee benefit obligations (continued) 


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 

- Recognised actuarial losses / (gains) 

Long Service: Exp in Year 


13,851,128 

1,106,763 

1,117,959 

386,121 

(1,555,643) 


12,601,048 

1,051,393 

1,024,342 

285,706 

(1,111,361) 


14,906,328 13,851,128 


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


Liability History 

Accrued Liability 


30 June 2015 30 June 2016 30 June 2017 30 June 2018 30 June 2019 
11,616,858 12,282,188 12,601,046 13,851,126 14,906,329 


Surplus / (Deficit) 


(11,616,858) (12,282,188) (12,601,046) (13,851,126) (14,906,329) 


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 

213,298 

(410,700) 

(201,648) 

507,158 

299,587 


213,298 

(410,700) 

(201,648) 

507,158 

299,587 


Sensitivity analysis on the unfunded accrued liability 

Central assumptions 

Change 

Liability 

14,905,000 

% change 

General salary inflation 

1 % 

15,986,000 

7 % 

General salary inflation 

(1)% 

13,931,000 

(7)% 

Discount rate 

1 % 

13,902,000 

(7)% 

Discount rate 

(1)% 

16,038,000 

8 % 

Average retirement age 

-2 years 

13,177,000 

(12)% 

Average retirement age 

+2 years 

16,649,000 

12 % 

Withdrawal rates 

(50)% 

17,273,000 

16 % 


Sensitivity analysis on current- 

Change Current-service 

Interest cost 

Total 

% change 

service and interest costs 


cost 




Central assumptions 


1,106,800 

1,118,000 

2,224,800 


General salary inflation 

1 % 

1,206,000 

1,202,300 

2,408,300 

8 % 

General salary inflation 

(1)% 

1,018,700 

1,042,000 

2,060,700 

(7)% 

Discount rate 

1 % 

1,026,000 

1,160,600 

2,186,600 

(2)% 

Discount rate 

(1)% 

1,199,000 

1,066,300 

2,265,300 

2 % 

Average retirement age 

-2 years 

991,300 

981,100 

1,972,400 

(11)% 

Average retirement age 

+2 years 

1,218,700 

1,250,000 

2,468,700 

11 % 

Withdrawal rates 

(50)% 

1,455,700 

1,352,700 

2,808,400 

26 % 


67 



Knysna (Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


19. Employee benefit obligations (continued) 

Multi-employer retirement benefit information 

Both tho Capo Joint Pension Fund and Capo Retirement Fund ore multi-employer plans. This means that there are 
multiple local authorities that participate in these funds. In terms of GRAP 25. multi-employer plans are defined as 
defined benefit plans. GRAP 25 also states that when sufficient information is not available to use defined benefit 
accounting for a multi-employer plan, an entity will account for the plan as if it were a defined contribution plan. 

The Municipality requested detailed employee and pensioner information as well as information on the Municipality’s 
share of the Pension and Retirement Funds’ assets from the fund administrator. The fund administrator confirmed that 
assets of the Pension and Retirement Funds are not split per participating employer. Therefore, the Municipality is unable 
to determine the value of the plan assets as defined in GRAP 25. 

As part of the Municipality's process to value the defined benefit liabilities, the Municipality requested pensioner data from 
the fund administrator. The fund administrator claims that the pensioner data is confidential and was not willing to share 
the information with the Municipality. Without detailed pensioner data the Municipality was unable to calculate a reliable 
estimate of the accrued liability in respect of pensioners who qualify for a defined benefit pension. 

Therefore, although the Cape Joint Retirement Fund is a Multi Employer fund defined as a defined benefit plan, it will be 
accounted for as a defined contribution plan. 

LA Retirement Fund (previously the Cape Joint Defined Contribution Fund) 

The Cape Joint Defined Benefit Fund's contribution rate payable is 9% by the members and 18% by Council. The last 
actuarial valuation performed for the year ended 30 June 2016 revealed that the fund is in a sound financial position with 
a funding level of 103%. 

Contributions paid recognised in the Statements of Financial Performance 420,548 438,568 


Consolidated Retirement Fund for local government 

The contribution rate payable is 9% by members and 18% by Council. The last actuarial valuation performed for the year 
ended 30 June 2016 revealed that the fund is in a sound financial position with a funding level of 118%. 

Contributions paid recognised in the Statements of Financial Performance 22,110,610 20,456,412 


Absa Prudential Fund of Funds 

Contributions are made to the Absa Prudential Fund of Funds. The fund is managed according to the guidelines as set 
out in regulation 28 of the Pension Funds Act 1956 and is suitable for retirement funds investments.. 

Contributions paid recognised in the Statements of Financial Performance 28,436 85,307 


Municipal Councillors Pension Fund 

Council contribute to the Municipal Council Pension Fund which is a defined contribution fund. The retirement benefit 
fund is subject to the Pension Fund Act, 1956, with pension being calculated on the pensionable remuneration paid. 
Current contributions by Council are charged against expenditure on the basis of current service costs. 


68 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


19. Employee benefit obligations (continued) 

Performance bonuses 

The movement on the performance bonus obligation consist of the following: 

Balance at the beginning of the year 2.164,055 1,700,118 

Additional performance bonus accrual recognised during the year 576,087 463,937 

2,740,142 2,164,055 


Performance bonuses are paid to the municipal Manager and section 56 Directors after an evaluation of performance by 
the council. 

Staff annual bonus 

The movement on the annual bonus accrual consist of the following 

Balance at the beginning of the year 
Payments 

Additional bonus accrual recognised during the year 


5,414,475 4,987,328 

(10,268,801) (9,419,710) 

10,723,505 9,846,857 

5,869,179 5,414,475 


Annual bonuses are paid to all staff during November of each year. There is no possibility of reimbursement. 

Staff leave 

The movement on the leave accrual consist of the following: 

Balance at the beginning of the year 
Payments 

Additional staff leave accrual recognised during the year 

19,800,495 17,027,202 


17,027,202 15,320,295 

(1,461,828) (1,522,128) 
4,235,121 3,229,035 


Staff leave accrues to employees according to a collective agreement. Provision is made for the full cost of accrued leave 
at reporting date. This provision will be realised as employees take leave or resign. There is no possibility of 
reimbursement. 

20. Provisions 

Reconciliation of provisions -2019 



Opening 

Utilised during 

Unwinding of 

iGrap2 

Total 


Balance 

the year 

discount 

Adjustment 


Landfill site 

12,973,929 

- 

900,550 

260,371 

14,134,850 


Reconciliation of provisions - 2018 


Landfill site 


Opening Utilised during Unwinding of 
Balance the year discount 
11,839,510 (412,964) 833,650 


iGrap2 

Adjustment 

713,733 


Total 

12,973,929 


Non-current liabilities 
Current liabilities 

14,134,850 12,973,929 


8,254,850 10,951,327 
5,880,000 2,022,602 


69 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

2019 2018 


20. Provisions (continued) 

Landfill sites 

The provision is for the rehabilitation of 2 landfill sites and 2 refuse transfer stations. The municipality discontinued 
dumping waste within the municipal area and transport all waste to the Petro SA waste disposal site in Mossel Bay. 

Rehabilitation cost was estimated using criteria for closure detailed in the Minimum Requirement for Waste Disposal by 
Landfill. Provision is made in terms of the municipality's licensing stipulations on the landfill waste sites, for the estimated 
cost of rehabilitating the waste sites. The provision has been determined on the basis of a recent independent study. The 
cost factors derived from the study by Aurecon South Africa (Pty) Ltd have been applied. 

It is estimated that the rehabilitation process will be finalised in 2021 for the respective landfill sites. 

The increase in the provision of the landfill site in the 2019 financial year is due to a new calculation obtained from 
engineers who calculated the estimate costs to rehabilitate the landfill site. The change in discount rates also impacted 
the IGRAP 2 adjustment. 

The contribution to the provision is based on the average Consumer Price Index which is calculated at 4.64% (2018: 
4.53%). 

The cost as at 30 June 2018 has been escalated annually with the average Consumer Price Index until the estimated time 
of closure and discounted to present value using the relevant South African Government Bond rates. All other 
adjustments are in line with the provisions of IGRAP 2. 

21. Service charges 


Sale of electricity 

241,187,384 

226,407,354 

Sale of water 

68,834,711 

70,460,158 

Sewerage and sanitation charges 

29,980,266 

16,981,363 

Refuse removal 

22,100,452 

21,259,895 


362,102,813 

335,108,770 

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. 

Rental of facilities and equipment 

Premises 

Hire of halls 

145,421 

135,312 

Investment property 

4,169,184 

3,398,169 


4,314,605 

3,533,481 

Facilities and equipment 

Rental of equipment 

46,762 

48,831 

Bulk containers 

539,934 

452,550 

Caravan park 

699,625 

475,259 


1,286,321 

976,640 


5,600,926 

4,510,121 


70 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


23. Operational revenue 


Collection charges 

138,293 

187,958 

Incidental cash surpluses 

2,995 

883 

Merchandising, jobbing and contracts 

175,835 

141,468 

Request for information - Municipal information and statistics 

450,223 

19,489 

Skills development levy refund 

429,005 

353,467 

Sundries 

377,729 

305,176 


1,574,080 

1,008,441 

Property rates 



Rates received 



Rateable Land and Buildings 



Residential 

166,983,216 

166,550,360 

Commercial 

20,126,562 

26,710,045 

State 

6,406,448 

(184,614) 

Agricultural / Rural 

882,784 

1,170,208 

Accommodation 

25,636,158 

22,998,574 

Church 

158,051 

1,741,002 

Light Industrial 

3,865,470 

4,634,441 

Other - Pensioners etc. 

1,827,477 

1,989,614 

Rebates 



Less: Income forgone / Rebates 

(10,337,575) 

(22,166,548) 


215,548,591 

203,443,082 

Valuations (R'000) 



Residential 

22,170,833 

21,794,246 

Commercial 

2,104,677 

2,259,637 

State 

616,299 

570,656 

Municipal 

395,517 

376,602 

Agricultural / Rural 

527,831 

670,031 

Accommodation 

2,020,831 

1,875,581 

Church 

111,143 

114,743 

Light industrial 

276,496 

300,666 

Other - Pensioners etc. 

289,190 

240,510 

Public benefit and - infrastructure 

76,814 

28,952 


28,589,631 

28,231,624 


Assessment Rates are levied on the fair market value basis. The last valuation came into effect on 1 July 2017. 
Revaluations will be undertaken in terms of the Municipal Property Rates Act. Interim valuations are processed to take 
into account changes in individual property values due to alterations and subdivisions and also to accommodate growth in 
the rate base due mostly to private development. 

A rate in the Rand for domestic properties of R 0.0072969 was charged on the total market value. Businesses were 
charged at a rate of R 0.0145948 on the total market value. 

Properties used for domestic purposes and consisting of both land and improvements are subject to a R 100 000 
valuation reduction. There are also different rebates and phased in tariffs for different sectors of the community. Interest 
on arrear accounts is charged at bank rate plus one percent. 

Rates are levied monthly and payable by the last day of the following month. Interest is levied at the prime rate plus one 
percent on outstanding monthly installments. 


71 



Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Motes to the Annual Financial Statements 


2019 2018 

R R 


25. Government grants and subsidies 


Operating grants 


Equitable share 

National: Financial Management Grant (FMG) 

National: Municipal Infrastructure Grant (MIG) 

National: Energy Efficiency and Demand Side Management Grant (EEDSMG) 

National: Integrated National Electrification Program Grant (INEP) 

National: Extended Public Works Program (EPWP) 

Provincial: Integrated Housing and Human Settlement Grant (IHHS) 

Provincial: Other Provincial Grants 

78,338,000 

1,550,000 

2,123,803 

25,250 

761,307 

1,187,000 

40,647,529 

12,660,785 

70,834,564 

1,550,000 

3,632,722 

381,711 

1,415,000 

18,215,104 

10,086,802 


137,293,674 

106,115,903 

Capital grants 

National: Municipal Infrastructure Grant (MIG) 

National: Energy Effeciency and Demand Side Management Grant (EEDSMG) 
National: Integrated National Electrification Program Grant (INEP) 

Provincial: Integrated Housing and Human Settlement Grant (IHHS) 

Provincial: Other Provincial Grants 

National: Neighbourhood Development Partnership Grant (NDPG) 

14,011,853 

5,917,866 

5,225,037 

9,970,387 

6,397,578 

8,334,006 

21,775,277 

2,618,289 

26,451,573 

5,102,211 

8,872,337 


49,856,727 

64,819,687 


187,150,401 

170,935,590 

Conditional and Unconditional 



Included in above are the following grants and subsidies recognised: 



Conditional grants received 

Unconditional grants received 

108,812,401 

78,338,000 

100,101,026 

70,834,564 


187,150,401 

170,935,590 

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

Equitable share 

78,338,000 

70,834,564 

Community Services 

Electricity 

Finance 

Planning 

Technical 

24,332,166 

11,929,459 

3,738,215 

51,804,917 

17,007,644 

19,688,879 

3,000,000 

3,906,036 

46,081,677 

27,424,434 


187,150,401 

170,935,590 

Grants received per directorate during the year(Excluding equitable share) 
Community services 

Electricity 

Finance 

Planning 

Technical 

38,211,000 

13,000,000 

3,609,000 

36,010,791 

24,594,000 

20,944,000 

3,000,000 

4,070,000 

48,438,615 

29,008,000 


115,424,791 

105,460,615 


72 



Knysrta Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


26. Fines, penalties and forfeits 


Traffic fines 

116,246,149 

88,074,336 

Property rates penalties 

4,916,947 

4,579,522 

Other fines 

490,672 

59,781 


121,653,768 

92,713,639 

Public contributions and donations 



Contributed property, plant and equipment 

992,584 

1,333,600 

Knysna fire disaster relief fund 

584 

1,197 

General public - Mayoral golf day 

190,000 

- 

General public - Millwood museum 

1,398 

2,393 

Public contributions and donations 6 

30,000 

- 


1,214,566 

1,337,190 

Conditions still to be met - remain liabilities (see note 8) 



Employee related costs 



Salaries and Wages 

144,191,841 

133,329,933 

Contributions for UIF, Pensions and Medical Aids 

40,145,501 

37,620,530 

Travel, motorcar, accommodation, subsistence and other allowances 

15,478,865 

12,417,559 

Housing benefits and allowances 

2,543,123 

2,818,999 

Overtime payments 

23,019,482 

22,158,613 

Performance bonuses 

640,596 

508,937 

Bonus 

10,658,996 

9,801,857 

Leave pay provision charge 

4,235,123 

3,229,025 

Contribution to provision - Long-service awards 

1,106,763 

1,051,393 

Contribution to provision - Post Retirement Medical 

3,665,472 

3,794,512 


245,685,762 

226,731,358 


73 




Knysrta Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 



2019 

R 

2018 

R 

Employee related costs (continued) 

Remuneration of the Municipal Manager: 

Remuneration of Municipal Manager - SW Vatala (April 2019 - June 2019) 



Annual Remuneration 

204,464 

_ 

Car Allowance 

66,000 

.. 

Housing Allowance 

18,000 

_ 

Scarcity allowance 

67,443 

- 

Contributions to UIF, Medical and Pension Funds 

58,844 

- 

Remuneration of the previous Municipal Manager-JB Douglas (August 

2018-January 2019) 

414,751 


Annual Remuneration 

575,000 

_ 

Telephone allowance 

10,000 


Contributions to UIF, Medical and Pension Funds 

6,594 

- 

Remuneration of previous Municipal Manager - KAM Chetty (July 2017 - 
August 2018) 

591,594 


Annual Remuneration 

157,975 

947,850 

Car Allowance 

15,000 

90,000 

Telephone allowance 

12,000 

72,000 

Contributions to UIF, Medical and Pension.Funds 

35,909 

199,184 

Remuneration of the Acting Municipal Manager - M Boyce (July 2018 - 
August 2018) 

220,884 

1,309,034 

Acting Allowance 

Remuneration of the Acting Municipal Manager - P Hariparsad (January 

2019 - February 2019) 

4,985 


Acting Allowance 

Remuneration of the Acting Municipal Manager - POB Makoma (February 

2019-March 2019) 

10,724 


Acting Allowance 

15,283 

- 


74 




Knysna Municipality 

Annua! Financial Statements for the year ended 30 June 2019 

Motes to the Annual Financial Statements 


2019 2018 

R R 


28. Employee related costs (continued) 


Remuneration of the Director Financial Services: 

Remuneration of the Director Financial Services - Mr M Memani 


Annual Remuneration 

809,119 

714,153 

Car Allowance 

120,000 

148,173 

Bonuses 

188,374 

45,000 

Telephone allowance 

22,792 

22,702 

Contributions to UIF, Medical and Pension Funds 

182,032 

158,379 

Scarcity Allowance 

206,562 

- 

Remuneration of the Director Planning and Development: 

Remuneration of the Director Planning and Development - Ms M 

Boyce (February 2017 - 30 June 2019) 

1,528,879 

1,088,407 

Annual Remuneration 

882,423 

820,859 

Car Allowance 

60,000 

60,000 

Scarcity Allowance 

206,562 

- 

Contributions to UIF, Medical and Pension Funds 

231,748 

204,550 

Telephone allowance 

22,792 

22,702 


1,403,525 

1,108,111 

Remuneration of the Acting Director Planning and Development - E Phillips 
(August 2018 - September 2018) 



Acting Allowance 

Remuneration of the Director Technical Services: 

Remuneration of the Director Technical Services - P Hariparsad (From 

October 2018) 

4,916 


Annual Remuneration 

709,943 

- 

Car Allowance 

117,000 

- 

Scarcity Allowance 

165,389 

- 

Contributions to UIF, Medical and Pension Funds 

31,399 

- 

Remuneration of the previous Director Technical Services - Mr M Rhode 
(July 2017-May 2018) 

1,023,731 


Annual remuneration 

- 

1,178,630 

Car allowance 

- 

57,200 

Contributions to UIF, Medical and Pension Funds 

- 

1,785 

Telephone allowance 


21,699 

Remuneration of the previous Director Technical Services - Mr S Maree 
(June 2018 - September 2018) 


1,259,314 

Acting Allowance 

Remuneration of the acting Director Technical Services - R Parry (June 2018 
-September 2018) 


32,841 


71,618 

- 


75 





Knysna {Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


28. Employee related costs (continued) 

Remuneration of the Director Corporate Services: 


Remuneration of the Director Corporate Services - POB Makoma 
(September 2018 - 30 June 2019) 


Annual Remuneration 

684,440 

- 

Car Allowance 

78,440 

_ 

Scarcity Allowance 

183,765 

- 

Contributions to UIF, Medical and Pension Funds 

186,142 



1,132,787 

- 

Remuneration of the Acting Director Corporate services - M Memani (July 

2018-August2018) 

Acting Allowance 

13,436 


Remuneration of the Director Corporate services - C Mattheus (July 2017 - 
September 2017) 

Acting Allowance 


38,063 

Remuneration of the Director Corporate services - M Paulsen (September 

2017-February 2018) 

Acting Allowance 


47,643 


76 





Krtysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


28. Employee related costs (continued) 

Remuneration of the Director Community Services 


Remuneration of the Director Community Services - G Boshoff (October 
2018-March 2019) 


Annual Remuneration 

432,329 

- 

Car Allowance 

27,083 

- 

Contributions to UIF, Medical and Pension Funds 

17,843 

- 


477,255 

- 

Remuneration of the Director Community Services - Mr D Adonis (July 2017 
-August 2017) 

Annual Remuneration 


147,062 

Car Allowance 

- 

16,000 

Contributions to UIF, Medical and Pension Funds 

- 

34,653 

Telephone allowance 

- 

3,741 


- 

201,456 

Remuneration of the Acting Director Community Services - E Phillips 
(March 2019-June 2019) 

Acting allowance 

5,843 


Remuneration of the Acting Director Community Services - X Frans (July 

2018 - September 2018) 

Acting allowance 

70,940 


Remuneration of the Acting Director Community Services - Mr S Langlands 
(August 2017 - November 2017) 

Acting allowance 


68,343 

Remuneration of the Acting Director Community Services - Mr R Meyer (July 

2017 - October 2017) and (March 2018 to June 2018) 

Acting allowance 

22,419 

182,478 


77 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Motes to the Annual Financial Statements 


2019 2018 

R R 


29. Remuneration of councillors 


Councillor - S Arends 

35,639 

614,733 

Councillor - CD Croutz 

298,752 

292,677 

Councillor - L Davis 

428,923 

614,733 

Councillor - TM Gombo 

401,698 

359,284 

Councillor - SI Kwinana 

293,952 

292,677 

Councillor - MG Matiwane 

299,752 

292,677 

Councillor - MV Molosi 

29,947 

292,677 

Councillor - PJ Myers 

655,684 

414,754 

Councillor - MN Naki 

297,952 

292,677 

Councillor - D Pofadder 

298,752 

293,439 

Councillor - MW Salaze 

655,684 

292,677 

Councillor - MD Skosana 

298,752 

292,677 

Councillor - ER Bouw- Spies 

279,746 

800,445 

Councillor - NA Tsengwa 

316,576 

292,677 

Councillor - L Tyokolo 

293,952 

292,677 

Councillor - EO Van Aswegen 

677,876 

318,333 

Councillor-VWaxa 

122,007 

505,278 

Councillor - ACF Weideman 

298,752 

614,732 

Councillor - M Willemse 

866,349 

328,946 

Councillor - GR Wolmarans 

665,646 

677,531 

Councillor - MH Young 

123,636 

292,677 

Councillor - IS Uys 

265,078 

. 

Councillor-TC Matika 

201,739 

_ 

Councillor - ML Wasserman 

349,683 

- 

Councillor - SS Ngqezu 

113,048 

- 


8,569,575 8,468,978 


2019 - Remuneration paid to 

Annual 

Car 

Telephone 

Medical Aid 

Pension 

Total 

councillors can be 

Remunera¬ 

Allowance 

Allowance 




summarised as follows 

tion 






Executive Mayor 

620,812 

206,937 

38,600 

. 

. 

866,349 

Executive deputy mayor 

487,011 

158,197 

36,000 

- 

4,762 

685,970 

Speaker 

490,079 

165,550 

36,000 

1,348 

5,223 

698,200 

Mayoral Committee Members 

1,744,478 

201,930 

142,900 

14,373 

121,446 

2,225,127 

Councillors 

3,116,772 

348,516 

474,392 

61,325 

92,924 

4,093,929 


6,459,152 

1,081,130 

727,892 

77,046 

224,355 

8,569,575 

2018 - Remuneration paid to 

Annual 

Car 

Telephone 

Medical Aid 

Pension 

Total 

councillors can be 

Remunera¬ 

Allowance 

Allowance 




summarised as follows 

tion 






Executive Mayor 

563,642 

198,978 

40,800 

33,294 

_ 

836,714 

Executive deputy mayor 

233,810 

10,612 

15,662 

_ 

- 

260,084 

Speaker 

477,548 

159,183 

40,800 

- 

- 

677,531 

Mayoral Committee Members 

1,853,366 

223,400 

184,187 

40,110 

236,810 

2,537,873 

Councillors 

3,131,114 

350,887 

579,360 

20,647 

74,768 

4,156,776 


6,259,480 

943,060 

860,809 

94,051 

311,578 

8,468,978 


30. Debt impairment 


Impairment of Long-term investments and receivables 
Receivables from exchange transactions - Refer to note 5 
Receivables from non-exchange transactions - Refer to note 6 
Contributions from Value Added Tax - Refer to note 7 


16,463,009 

102,936,575 

(1,602,443) 

117,797,141 


8,252 

34,276,541 

77,991,357 

(2,281,324) 

109,994,826 


78 



Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 



2019 

R 

2018 

R 

Depreciation and amortisation 

Property, plant and equipment 

32,429,415 

29,364,389 

Investment property 

156,532 

153,333 

Intangible assets 

18,418 

15,799 

Impairment of assets 

32,604,365 

29,533,521 

Impairments 

Property, plant and equipment 

260,370 

713,733 

Reversal of Impairments 

Property, plant and equipment 

(5,766,779) 

_ 

Investment property 

(2,242,608) 

- 

Heritage assets 

(738,952) 

- 


(8,748,339) 

- 

Total impairment losses (recognised) reversed 

(8,487,969) 

713,733 


The recoverable amount of previously impaired Property, Plant and Equipment, Investment properties and Heritage 
assets increased due to a 5% improvement in property market valuations. This resulted in the reversal of previously 
expensed impairment losses. 


Impairment losses recognised 
Property, plant and equipment 


Other assets - Tip sites 

260,370 

713,733 

The recoverable amount of the asset was based on its value in use. 

The impairment loss recognised for Property, Plant and Equipment in the relates to rehabilitation cost associated with 
landfill sites capitalised in terms of IGRAP 2. The portion being impaired relates to the fact that all landfill sites in the 
municipality already reaching the end of its useful life. No further economic benefits is expected from these assets 
capitalised. 

Finance costs 



Annuity loans 

Stock loans 

Finance leases 

Ex-Gratia Pension Funds 

Landfill Sites 

Long Service Awards 

Post Retirement Medical Benefits 

Other 

14,088,782 

238,617 

9,597 

900,550 

1,117,959 

8,641,763 

38,890 

14,542,745 

116,881 

162,927 

9,819 

833,651 

1,024,342 

8,834,390 

31,894 


25,036,158 

25,556,649 

Lease rentals from operating leases 



Premises 

Machinery and equipment operational hire charges 

5,850,013 

4,398,321 

5,024,236 

4,989,258 


10,248,334 

10,013,494 


79 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 




2019 

R 

2018 

R 

35. 

Bulk purchases 




Electricity 

169,553,269 

154,943,871 

36. 

Contracted services 




Consultants and Professional Services 




Business and Advisory: Project Management 

2,462,122 

3,583,555 


Business and Advisory: Business and Financial Services 

7,555,283 

2,939,143 


Business and Advisory: Valuer and Assessors 

403,232 

275,480 


Business and Advisory: Other 

6,942,513 

1,658,077 


Infrastructure and Planning: Engineering 

9,187,589 

5,412,477 


Infrastructure and Planning: Other 

2,710,363 

498,825 


Legal costs 

6,439,111 

2,803,699 


Other 

17,348 

55,869 


Contractors 




Building 

36,596,734 

16,064,518 


Electrical 

4,121,633 

1,045,547 


Tourism 

3,002,164 

3,501,144 


Maintenance 

39,621,873 

44,589,318 


Management of Informal Settlements 

7,054,451 

7,863,196 


Prepaid Electricity Vendors 

7,031,512 

6,211,340 


Sewerage Services 

1,454,349 

500,583 


Other 

6,088,819 

2,154,213 


Outsourced Services 




Administrative and Support Staff 

5,058,571 

2,439,869 


Business and Advisory 

2,315,699 

2,540,660 


Clearing and Grass Cutting Services 

2,584,993 

975,317 


Internal Auditors 

1,811,133 

1,652,436 


Meter Management 

2,070,727 

731,347 


Refuse Removal 

6,259,292 

5,966,907 


Security Services 

8,490,579 

4,757,034 


Traffic Fines Management 

2,520,439 

2,868,526 


Alien Vegetation Control 

879,542 

398,498 


Litter Picking and Street Cleaning 

3,167,893 

27,900 


Other 

1,852,936 

1,543,598 



177,700,900 

123,059,076 

37. 

Transfers and subsidies 




Other subsidies 




Grants-in-aid and donations 

2,252,304 

2,684,314 


Bursaries 

489,215 

191,210 


Social relief 

1,409,646 

1,847,260 



4,151,165 

4,722,784 

38. 

Inventory consumed 




Consumables - Standard rated 

16,040,124 

16,235,993 


Consumables - Zero rated 

9,040,392 

7,231,044 


Materials and supplies 

18,009,294 

25,842,593 



43,089,810 

49,309,630 


80 




Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 

2019 2018 

R R 


39. Operational costs 


Advertising and media 

1,946,973 

1,897,707 

Auditors remuneration 

4,677,252 

5,185,425 

Bank charges 

1,810,723 

1,679,826 

Commission paid 

314,949 

482,955 

Clearing of alien vegetation 

112,887 

780,367 

Delivery expenses 

1,451,881 

1,290,122 

Entertainment 

14,994 

52,790 

Hire 

2,130,925 

2,696,169 

IT expenses 

5,759,195 

5,724,279 

Insurance 

3,750,275 

4,453,967 

Levies 

2,449,382 

2,201,515 

Other expenses 

4,703,098 

2,703,672 

Printing, publications and books 

587,588 

1,075,282 

Staff related (recruitment, training, etc.) 

2,598,153 

2,564,598 

Subscriptions and membership fees 

4,748,581 

4,954,843 

Title deed search fees 

94,296 

502,348 

Travel - local 

2,142,196 

1,805,547 


39,293,348 

40,051,412 


Other expenses largely include costs incurred relating to the Youth Advisory Centre and for ward committee support. 

40. Cash generated from operations 

Surplus 

Adjustments for: 

Depreciation and amortisation 
Loss / (gain) on sale of assets and liabilities 
Impairment loss 
Debt impairment 

Movements in operating lease assets and accruals 
Movements in employee benefit obligations 
Movements in provisions (excluding IGRAP2 adjustment) 

Bad debts written off 
Public contributions and donations 

Government grants and conditional public contributions received 
Government grants recognised 

Changes in working capital: 

Inventories 

Receivables from exchange transactions 
Other receivables from non-exchange transactions 
Prepayments 

Payables from exchange transactions 
VAT 

Consumer deposits 


55,994,880 70,957,249 


32,604,365 

491,249 

(8,487,969) 

117,797,141 

(42,898) 

3,880,333 

900,550 

18,238,510 

(992,584) 

193,627,325 

(187,150,400) 

(4,771,940) 

(35,355,027) 

(114,346,699) 

(91,518) 

20,238,119 

7,602,511 

536,285 

100,672,233 


29,533,521 

123,836 

713,733 

109,994,826 

(155,456) 

2,726,352 

420,687 

197,105 

(1,333,600) 

178,709,395 

(170,935,591) 

2,574,134 

(36,486,607) 

(86,819,602) 

(2,647,978) 

10,758 

(9,845,048) 

1,087,450 

88,825,164 


81 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


41. Financial instruments disclosure 
Categories of financial instruments 
2019 

Financial assets 


Long-term investments and receivables 

At amortised 
cost 

Total 

Fixed deposits 

34,491,331 

34,491,331 

Sundry deposits 

Receivables from exchange transactions 

6,800 

6,800 

Service debtors 

52,204,061 

52,204,061 

Housing rentals 

1,128,471 

1,128,471 

Other debtors 

950,452 

950,452 

Cash and cash equivalents 

71,709,029 

71,709,029 

Financial liabilities 

160,490,144 

160,490,144 

Other financial liabilities 

At amortised 
cost 

Total 

Annuity loans 

197,578,312 

197,578,312 

Trade and other payables from exchange transactions (Excl payments received in 
advance) 

96,918,986 

96,918,986 

Consumer deposits 

12,924,361 

12,924,361 

Finance lease obligation 

1,316,257 

1,316,257 

2018 

Financial assets 

308,737,916 

308,737,916 

Long-term investments and receivables 

At amortised 
cost 

Total 

Fixed deposits 

32,358,328 

32,358,328 

Sundry deposits 

6,800 

6,800 

Receivables from exchange transactions 

_ 

_ 

Service debtors 

50,342,709 

50,342,709 

Housing rentals 

1,110,112 

1,110,112 

Other debtors 

797,142 

797,142 

Cash and cash equivalents 

79,877,042 

79,877,042 


164,492,133 

164,492,133 


82 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 



2019 

2018 


R 

R 

Financial instruments disclosure (continued) 



Financial liabilities 

At amortised 

Total 


cost 


Other financial liabilities 

Annuity loans 

154,308,757 

154,308,757 

Local registered stock 

710,520 

710,520 

Trade and other payables from exchange transactions (Excl payments received in 

77,732,827 

77,732,827 

advance) 

Consumer deposits 

12,388,076 

12,388,076 

Finance lease obligation 

1,938,699 

1,938,699 


247,078,879 

247,078,879 

The disclosure of the previous year was corrected to include the consumer deposits and finance lease obligation as part 

of the financial liabilities disclosure. 



42. Commitments 



Authorised capital expenditure 



Already contracted for but not provided for 

• Infrastructure 

97,247,366 

81,002,602 

• Community 

27,691,021 

9,706,332 

• Other Assets 

3,572,713 

- 


128,511,100 

90,708,934 

This expenditure will be financed from: 

External loans 

25,728,304 

64,695,784 

Government grants 

101,305,288 

2,346,598 

Own resources 

1,477,508 

23,666,552 


128,511,100 

90,708,934 

The unspent amount on capital tenders awarded as at 30 June 2018 was incorrectly disclosed as part of the capital 
commitments in the previous year financial statements, Consequently the comparative disclosure for capital commitments 

was amended from the previous year disclosure. 



The commitments are disclosed VAT exclusive. 



Operating leases - as lessee (expense) 



Minimum lease payments due 
- within one year 

3,102,435 

3,453,147 

- in second to fifth year inclusive 

- 

2,955,018 


3,102,435 

6,408,165 


The municipality also leases printers from Konica Minolta and Bytes, refer to note 16 
The municipality did not pay any contingent rent during the year. 

The municipality does not engage in any sub-lease arrangements. 

Operating leases comparative figures are restated. In accordance with GRAP 3 tho comparative disclosure was corrected 
to restate the minimum lease payments of R 309,706 as previously reported to the correct previous year minimum lease 
payments of R 6,408,165. 


63 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


42. Commitments (continued) 

Operating leases - as lessor (income) 

Minimum lease payments due 

- within one year 507,821 573,626 

- in second to fifth year inclusive 531,316 873,511 

-later than five years 11,127,024 11,263^325 

12,166,161 12,710,462 


This lease income was determined from contracts that have a specific conditional contractual income. The leases are in 
respect of land and buildings being leased for periods ranging until 2088. 

The municipality does not engage in any sub-lease arrangements. The municipality did not receive any contingent rent 
during the year. 


84 



Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


43. Contingencies 

Contingent liabilities 

The municipality is currently engaged in litigation which could result in damages / costs being awarded against Council if 
claimants are successful in their actions. The following are the estimates: 


Claims against council 

PL Bruwer vs The RAF and KM (Case no. 72310/2012}. The municipality is the 
second respondent in a claim for personal injury due to a road accident. 

Thabo Pitsi Mabula vs KM and 1 other (Case no. 21933/16). This is a High Court 
litigious matter. Status: Plaintiff appointed an attorney of record. 

KM vs Brenton Haven - Claim in terms of Services Agreement for municipal 
services provided, (excluding interest) 

KM vs Erf 4970, Sedgefield Objections against approval of building plans 
Garth Bock vs KM - Alleged breach of contract in respect of the upgrading of the 
ablution facilities at the Hornlee Sportsgrounds (Damages claim) 

Thabo Pitsi Mabula vs KM and 1 other (Case no. 21937/16). This is a High Court 
litigious matter. Status: Plaintiff proceedings to trial. 

Pierpont vs Knysna Municipality - This matter is pending and instructions are 
awaited from the Municipality 

KM vs Erf 13193, Thesen Island Review Application i.t.o Rule 53. Review of Land 
Use Planning Approval of Departures and Approval of Building Plans. 

Aubrey Tsengwa vs KM and two others (LAC Case no. CA1/2016). This is a 
labour courtmatter against the Knysna Municipality. Status: Matter taken on. 
appeal after KM was successful in opposing the Labour Court proceedings. 

RDH Gebert & 8 others / Yo-Art Properties (Pty) Ltd vs Knysna Municipality- is 
pending and it is unclear whether it will proceed or not. Amount claimed in the 
Summons in the High Court matter. 

RDH Gebert & 8 others / Yo-Art Properties (Pty) Ltd vs Knysna Municipality- This 
matter is pending and it is unclear whether it will proceed or not. Amount claimed 
in the Summons in the Regional Court matter. 

Dr N Greve vs. M Mueller and KM (Interdict) - Dr Greve, as Applicant, sought an 
order interdicting the First Respondent form operating a guest house with the 
necessary consent. 

Dr N Greve vs. M Mueller and KM (Review) - Dr Greve has sought to review the 
decision of KM in respect of their having granted the Second respondent consent 
to operate a guest house at his property. 

Entsha Henra vs KM - The claimant had instituted arbitration proceedings 
seeking payments from KM in respect of time related vis-a vis works attended by 
them Tenders T15 and T18 of 2015 

KM vs Ballack (Erf 4) - KM filed an application in the CT high court seeking an 
order against the owners of Erf 4, Knysna to demolish certain unlawful structures. 
Thabo Pitsi Mabula vs KM and two others (LC Case no. 955/2015). This is a 
labour court matter against the KM. 

Elegant Line Trading 329 CC vs KM - The plaintiff instituted action against KM 

claiming repayment for a payment that plaintiff had to make to obtain rates 

clearance certificate. Knysna Magistrates Court case no 912/16 

Rotter vs KM - The plaintiff instituted action against KM for damages together with 

interest and costs resultant form injuries suffered after a manhole cover 

collapsed, 

Gerald John and May vs Knysna Municipality - Matter has been settled and an 
order of the Court was agreed between the parties. Estimated settlement amount 
for legal fees. 

KM vs Erf 3651, Sedgefield Demolition and/or removal of an illegal cellular 
communications base station and mast from Erf 3651, Sedgefield 
KM vs M & N Pako Ref VC1517 Eviction of defendants from Hlalani 
KM vs Collin Williams Ref: VC1538 Eviction from Oupad 


1,000,000 

1,000,000 

20,500,000 

20,500,000 

906,987 

- 

20,000 

184,905 

104,905 

21,400,000 

21,400,000 

- 

100,000 

150,000 

1,000,000 

1,000,000 

. 

2,607,000 

339,332 

230,000 

220,000 

- 

295,000 

35,000 

35,000 

15,000 

15,000 

1,000,000 

1,000,000 

- 

133,922 

565,000 

465,000 

- 

50,000 

500,000 

- 

20,000 

_ 

30,000 

- 


85 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 




rJilillMIJTTF 




2019 2018 

R R 


43. Contingencies (continued) 

Trackstar Trading Pty Ltd vs Knysna Municipality. KM refusal of Trackstar's LUPO 
application for rezoning, sub-division and departure 

Leisure Isle Residents Association vs Knysna Municipality. KM responsible for 
repair and maintenance of the sea walls surrounding the suburb 
KM vs Great Cormorant 169 Outstanding rates and taxes 
D Adonis and 5 others vs Knysna Municipality (Labour court matter). Potential 
legal cost estimation for outstanding bonuses claimed against the municipality. 
KM vs Radie Dippenaar Outstanding Medical Subscriptions 
KM vs Erf 426 Boggomsbaai CC REF ES1179 Outstanding rates and taxes 
KM vs Erf 426 Boggomsbaai CC REF ES1396 

KM vs Fish Eagle Property Holdings (Pty) Ltd Ref ES1444 Long Outstanding debt 

KM vs Marina REF: ESI645 Outstanding rates and taxes 

KM vs CF & LM Guthrie Outstanding rates and taxes 

KM vs John Mettelerkamp and Others 

KM vs Dorothy Harker and other Eviction 

KM vs Myles Betrand Dent 

KM vs Pezula HOA (Noetzie) - Dispute re ownership and control over public road 


900,000 370,000 

100,000 

135,000 

1,200,000 400,000 

120,000 

158,980 

20,000 

4,000 

65,000 

65,000 

15,000 

150,000 

70,000 

30,000 

50,489,872 50,135,159 


86 






Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 



2019 

R 

2018 

R 

44. Related parties 



Relationships 

Councillors 

Refer to the General information 


Municipal Manager 

Refer to the General information 


Members of key management 

Director Community Services 

Director Corporate Services 

Director Financial Services 

Director Planning and Development 
Director Technical Services 



Related party transactions 


Year ended 30 June 2019 Rates levied Service Other charges Outstanding 

charges levied levied balance at year 

end 


Councillors 

Municipal Manager and Section 56 Personnel 

64,105 

8,222 

207,015 

23,103 

20,480 

58,618 

47,480 


72,327 

230,118 

79,098 

47,480 

Year ended 30 June 2018 

Rates levied 

Service 

Other charges 

Outstanding 



charges levied 

levied 

balance at year 





end 

Councillors 

59,193 

157,973 

3,600 

69,656 

Municipal Manager and Section 56 Personnel 

18,094 

. 20,162 

- 

879 


77,287 

178,135 

3,600 

70,535 


Key Management and Councillors receive and pay for services on the same terms and conditions as other ratepayers / 
residents. All transactions are at arm's length. 

The rates, service charges and other charges are in accordance with approved tariffs that were advertised to the public. 
No bad debt expenses have been recognised in respect of amounts owed by related parties. 

Related Party Loans 

Since 1 July 2004 loans to councillors and senior management employees are not permitted. Loans granted prior to this 
date, together with the conditions, are disclosed in note 4 to the Annual Financial Statements. 

Compensation of key management personnel 

The compensation of key management personnel is set out in note 28 to the Annual Financial Statements. 

Other Supply Chain Transactions 

The following purchases were made during the year where Councillors or Staff have an interest: 


Councillor/Staff member 

Relationship 

Entity 

2019 

2018 

Mr. R Bouwer (Stores Clerk) 

Father-in-law 

JC Terblance t/a P&H 
Services 

753,308 

243,244 

Ms. L Grobler (Customer care admin 
assistant) 

Spouse 

Q&E Carpet Cleaners 
Knysna 

- 

1,037 

Ms. S Mtwa (Chief clerk: Administration) 

Mother 

LT Mtwa 

4,250 

- 

Ms. E Van den Berg (Accountant - Meter 
reading) 

Spouse 

J T van den Berg 

" 

600 

Ms. TS Guzana-Tsese (Senior Clerk: Records) 

Spouse 

Tsese Transport and 
Shuttle Services 

7,300 

6,000 

Mr N Siyona (Supervisor: Roads) 

Wife 

Nokamboze 

1,850 

- 

Ms. N Mlisana ( Procurement Clerk) 

Brother 

Mtimkulu: S 

91,300 

6,600 


87 





Knysrta Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Motes to the Annual Financial Statements 


2019 2018 

R R 


44. Related parties (continued) 


Councillor/Staff member 

Relationship 

Entity 

2019 

2018 

Mr. C Hardnick (Senior Supervisor - Parks) 

Brother 

FK Hardnick 

11,000 

27,000 

Mr. FE Fredericks (Senior Fireman) 

Father 

D Fredericks 

- 

5,880 

Ms. L Plaatjies (Network and system 
administrator) 

Brother-in-law 

MM Jantjies 
(Transport) 

4,996 

25,895 

Mr. AP Goosen (Supervisor - Sewerage) 

Brother 

BB carwash 

- 

665 

Ms. S Fourie (SCM clerk) 

Uncle 

Julyan D 

5,700 

49,500 

Ms. LV Bruiners (Motor vehicle registration 
clerk) 

Brother 

Witbooi C 

8,228 

12,004 

Mr. JN Williams (Senior Supervisor: Public 
Works) 

Spouse 

Hosteleria La Flora 
(Pty) Ltd 

2,850 


Mr. MJ Kalani 

Business 

Partner 

Mosdell Pama & Cox 

1,093,734 

272,312 

Mr. S Mzondi (Traffic Officer) 

Brother 

African Compass 

Trading 3 

1,373,170 

346,200 

Mr. E Phillips (Manager: IDP) 

Spouse 

Phillip: M 

11,296 

- 

Mr. A Bans (Superintendent - Traffic) 

Son 

Tolo & Miles 

1,732,334 

2,752,397 

Mr. Johannes Harker 

Son 

CA Harker T/A CA 
grasscutters 

3,000 


Mr. S Hendricks (Pre-paid water clerk: Public 
Works) 

Son 

Hendricks 

Construction 

44,385 

" 

Ms. NV Dyani (General assistant) 

Spouse 

Siskonke CX 
Construction (Pty) Ltd 

950 

2,740 

Mr. ME Gqotholo (Artisan: Electrician) 

Spouse 

Ambesa G 

Enterprises (Pty) Ltd 

“ 

33,075 

Ms. C Bezuidenhout (Chief Clerk: 

Procurement) 

Spouse 

W Bezuidenhout 


12,950 

Ms. E Petersen 

Brother in Law Thomas McCarthy 

67,055 

102,190 

Ms. M Sass (Senior Clerk: Administration) and 
Mr. J Sass (General assistant) 

Uncle 

DJ Sass Construction 

749,138 

2,116,695 

Ms. C Stroebel (Corporate: Receptionist 

Mother 

Stroebel: BC 

169,892 

176,519 

Mr. ET Prins (Member of the audit committee) 

Company 

secretary 

G7 Construction (Pty) 

Ltd 

“ 

6,800 

Mr. JN Williams (Senior Supervisor: Public 
Works) 

Spouse 

N Williams 

- 

8,755 

Mr. MWL Spies (Senior Fireman) 

Spouse 

M and M Spies 

Funeral Directors (Pty) 
Ltd 

6,135,736 

3,000 

6,212,058 


88 





Krtysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Motes to the Annual Financial Statements 





2019 

2018 




R 

R 

45. Prior period adjustments 

2018 

Reclass if i- 

Adjustments 

2018 

STATEMENT OF FINANCIAL POSITION 

previously 

reported 

cations 

of errors 

restated 

Assets 

Current Assets 

Inventories 

5,518,580 



5,518,580 

Receivables from exchange transactions (note 45.4) 

52,099,027 

- 

150,935 

52,249,962 

Receivables from non-exchange transactions 

70,922,311 

- 

- 

70,922,311 

Unpaid conditional grants and receipts 

14,981,801 

- 

- 

14,981,801 

VAT receivable (note 45.5) 

17,452,161 

- 

9,894,354 

27,346,515 

Prepayments 

2,647,978 

- 

- 

2,647,978 

Cash and cash equivalents 

79,877,042 

- 

- 

79,877,042 


243,498,900 

- 

10,045,289 

253,544,189 

Non-current Assets 

Property, plant and equipment (note 45.2) 

1,012,762,822 


353,319 

1,013,116,141 

Investment property (note 45.1) 

76,914,687 

- 

(3,500) 

76,911,187 

Intangible assets 

154,106 

- 

- 

154,106 

Heritage assets 

17,435,046 

- 

- 

17,435,046 

Long term investments and receivables 

32,365,128 

- 

- 

32,365,128 

Operating lease asset 

1,913,910 

- 

- 

1,913,910 


1,141,545,699 

- 

349,819 

1,141,895,518 

Total Assets 

1,385,044,599 

_ 

10,395,108 

1,395,439,707 

Liabilities 

Current Liabilities 

Long-term liabilities 

18,938,995 



18,938,995 

Finance lease obligation 

740,842 

- 

- 

740,842 

Payables from exchange transactions (note 45.3) 

92,827,537 

- 

(1,056,503) 

91,771,034 

Consumer deposits 

12,388,076 

- 

- 

12,388,076 

Employee benefit obligation 

29,643,171 

- 

- 

29,643,171 

Provisions 

2,022,602 

- 

- 

2,022,602 

Unspent conditional grants and receipts 

10,314,802 

- 

- 

10,314,802 


166,876,025 

- 

(1,056,503) 

165,819,522 

Non-Current Liabilities 

Long-term liabilities 

136,080,282 



136,080,282 

Finance lease obligation 

1,197,857 

- 

- 

1,197,857 

Operating lease liability 

5,975 

- 

- 

5,975 

Employee benefit obligation 

100,910,131 

- 

- 

100,910,131 

Provisions 

10,951,327 

- 

- 

10,951,327 


249,145,572 

- 

- 

249,145,572 

Total Liabilities 

416,021,597 

• 

(1,056,503) 

414,965,094 

Total Net Assets 

969,023,002 

_ 

11,451,611 

980,474,613 

STATEMENT OF FINANCIAL POSITION 

2018 

Reclassifi 

Adjustments 

2018 

(CONTINUED) 

previously 

-cations 

of errors 

restated 


reported 




Net Assets 

Capital Replacement Reserve 

40,500,000 



40,500,000 

Accumulated surplus (Note 45) 

928,523,002 

- 

11,451,611 

939,974,613 


969,023,002 

- 

11,451,611 

980,474,613 


STATEMENT OF FINANCIAL PERFORMANCE 


89 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Notes to the Annual Financial Statements 





2019 

R 

2018 

R 

45. Prior period adjustments (continued) 


2018 

Reclassifi 

Adjustments 

2018 


previously 

reported 

-cations 

of errors 

restated 

Revenue from exchange transactions 

375,561,250 

- 

(2,393) 

375,558,857 

Service charges 

335,108,770 

- 

- 

335,108,770 

Rental of facilities and equipment 

4,510,121 

- 

- 

4,510,121 

Interest received - outstanding debtors 

10,544,572 

- 

- 

10,544,572 

Interest received - external investments 

10,301,782 

- 

- 

10,301,782 

Agency services 

3,095,516 

- 

- 

3,095,516 

Licences and permits 

1,671,679 

- 

- 

1,671,679 

Third party payments (Insurance claims) 

4,113,929 

- 

- 

4,113,929 

Operational revenue 

1,010,834 

- 

(2,393) 

1,008,441 

Sales of goods and rendering of services 

5,204,047 

- 

- 

5,204,047 

Revenue from non-exchange transactions 

478,852,260 

- 

2,393 

478,854,653 

Property rates 

203,443,082 

- 

- 

203,443,082 

Government grants and subsidies 

170,935,590 

- 

- 

170,935,590 

Public contributions and donations 

1,334,797 

- 

2,393 

1,337,190 

Fines, penalties and forfeits 

92,713,639 

- 

- 

92,713,639 

Actuarial Gains 

10,425,152 

- 

- 

10,425,152 


854,413,510 

- 

- 

854,413,510 

Expenditure 

Employee related cost 

226,731,358 

- 

- 

226,731,358 

Remuneration of councillors 

8,468,978 

- 


8,468,978 

Loss on disposal of assets 

123,836 

- 

- 

123,836 

Depreciation and amortisation (note 45.2) 

29,048,559 

- 

484,962 

29,533,521 

Impairment of assets 

713,733 

- 

- 

713,733 

Debt impairment 

109,994,826 

- 

- 

109,994,826 

Finance cost 

25,556,649 

- 

- 

25,556,649 

Lease rental on operating lease 

10,013,494 

- 

- 

10,013,494 

Bulk purchases (note 45.5) 

156,923,413 

- 

(1,979,543) 

154,943,870 

Contracted services (note 45.2,45.3 & 45.5) 

121,658,320 

- 

1,400,756 

123,059,076 

Transfers and subsidies 

4,722,784 

- 

- 

4,722,784 

Bad debt written off 

197,105 

- 

- 

197,105 

Operational costs (note 45.3 & 45.5) 

42,239,106 

- 

(2,187,695) 

40,051,411 

Inventory consumed (note 45.3 & 45.5) 

48,742,499 

- 

567,131 

49,309,630 

Inventory losses/write-downs 

35,988 

- 

- 

35,988 


785,170,648 

- 

(1,714,389) 

783,456,259 

Surplus / (Deficit) for the year 

69,242,862 

- 

1,714,389 

70,957,251 

CASH FLOW STATEMENT 

2018 

Reclassifi- 

Adjustments 

2018 


previously 

reported 

cations 

of errors 

restated 

Net cash from operating activities 

88,727,164 

- 

98,000 

88,825,164 

Net cash from investing activities 

(128,035,368) 

- 

(98,000) 

(128,133,368) 

Net cash from financing activities 

10,972,307 

- 

- 

10,972,307 

Total cash movement for the year 

(28,335,897) 

- 

- 

(28,335,897) 

Cash and cash equivalents at the beginning of the 
year 

108,212,939 


” 

108,212,939 


79,877,042 

- 

- 

79,877,042 


45.1 Corrections to Investment property 

The following retrospective restatements were made to Investment Property: 

• Overstatement of Investment property to the value of R 3 500 due to a previous subdivision not recognised. 


90 






Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Motes to the Annual Financial Statements 


2019 2018 

R R 


45. Prior period adjustments (continued) 


45.2 Corrections to Property, plant and equipment 

The following retrospective restatements were made to Property, plant and equipment: 

• Capital expenditure retention to the value of R 12 783 was incorrectly not recognised in the previous financial year. 

• Disposal of land amounting to R 12 000 not recognised previously. 

• Previous demolishment of community facility to the value of R 149 522 not recognised. 

• Containers to the value of R 85 217 incorrectly expensed as contracted services in the previous year. 

• Property under municipal control (roads and public open space) of R 62 000 previously not recognised. 

• Infrastructure to the value of R 15 213 432 completed in the previous year incorrectly recognised as part of work-in- 
progress. This resulted in the depreciation of R 287 659 incorrectly not recognised in the previous year. 

• Solid waste infrastructure to the value of R 531 948 not in use was incorrectly recognised in the previous year. 

• Prior period change in useful life estimates of other assets corrected, resulting in an increase of R 1 174 448 to the 
carrying value of Property, plant and equipment. 

45.3 Corrections to Payables from exchange transactions 

The following retrospective restatements were made to Payables from exchange transactions: 

• Increase due to a retention of R 12 783 incorrectly not recognised in the previous year. 

• Other payables accounts incorrectly not cleared resulting in an increase to the value of R 452 668. 

» Decrease of R 1 7 44 885 due to provincial traffic fines incorrectly recognised as part of unallocated deposits. 

• Debtors amounting to R 222 931 incorrectly recognised as part of payables in the previous year. 

45.4 Corrections to Receivables from exchange transactions 

The following retrospective restatements were made to Receivables from exchange transactions: 

• Overstatement of receivables from exchange transactions by R 71 996 due to other payables incorrectly not cleared 
previously. 

45.5 Corrections to VAT receivable 

The following retrospective restatements were made to VAT receivable: 

• Input VAT to the value of R 9 894 354 incorrectly not previously claimed 


The effect of these prior period error corrections per line item are as follows: 

Investment property 

Balance previously reported 
Previous subdivision not recognised 

Restated balance as at 30 June 2018 


76,914,687 

(3,500) 

76,911,187 


91 






Knysrta Municipality 

Annual Financial Statements for the year ended 30 June 2019 




2019 2018 

R R 


45. Prior period adjustments (continued) 


1,012,762,822 

12,783 

( 12 , 000 ) 

(168,000) 

16,799 

1,679 

85,217 

62,000 

(3,541) 

(164,637) 

(119,481) 

(668,133) 

129,549 

6,635 

1,380,066 

(205,617) 

1,013,116,141 


Receivables from exchange transactions 
Balance previously reported 

Other payables incorrectly not cleared - Undefined deposits 
Debtors incorrectly recognised as part of payables 

Restated balance as at 30 June 2018 


Accumulated surplus / (Deficit) opening balance 

Balance previously reported 1 July 2017 862,929,471 

Previous subdivision of Investment Property not recognised (3,500) 

Disposal of land in previous years not recognised (12,000) 

Derecognition of Community facility demolished (151,201) 

Recognition of municipal property - roads and public open space portions - Land - Cost - Opening 62,000 

balance 

Derecognition of solid waste infrastructure not in use (538,583) 

VAT not recognised in the previous year - previously not claimed 7,216,424 

Provincial fines amounts receipted not included in revenue in prior years 1,744,885 

Prior period change in useful life estimates of other assets 1,380,066 

Other payables incorrectly not cleared - Advertising recoveries 39,130 

Restated balance as at 1 July 2017 872,666,692 


VAT Receivable 

Balance previously reported after reclassifications 

VAT not recognised in the previous year - previously not claimed 

Restated balance as at 30 June 2018 


17,452,161 

9,894,354 

27,346,515 


52,099,027 

(71,996) 

222,931 

52,249,962 


Property, plant and equipment 
Balance previously reported 

Capital expenditure and retention incorrectly not recognised in the in the previous year - Community 
assets - Work in progress - Additions 2018 

Disposal of land in previous years not recognised - Operational Land - Cost - Opening balance 
Derecognition of Community facility demolished - Community assets - Community Facilities - Cost - 
Opening balance 

Derecognition of Community facility demolished - Community assets - Community Facilities - 
Accumulated depreciation - Opening balance 

Derecognition of Community facility demolished - Community assets - Community Facilities - 
Accumulated depreciation - Depreciation charge 2018 

Containers incorrectly recognised as contracted services expenditure in the previous year - Other 
assets - Machinery and equipment - Cost - Additions 2018 

Recognition of municipal property - roads and public open space portions - Land - Cost - Opening 
balance 

Depreciation not charged on completed infrastructure projects - Electrical infrastructure - 
accumulated depreciation - depreciation charge 2018 

Depreciation not charged on completed infrastructure projects - Sanitation infrastructure - 
accumulated depreciation - depreciation charge 2018 

Depreciation not charged on completed infrastructure projects - Water infrastructure - accumulated 
depreciation - depreciation charge 2018 

Derecognition of solid waste infrastructure not in use - Cost opening balance 
Derecognition of solid waste infrastructure not in use - Accumulated depreciation opening balance 
Derecognition of solid waste infrastructure not in use - Accumulated depreciation - Depreciation 
charge 2018 

Prior period change in useful life estimates of other assets - Accumulated depreciation opening 
balance 

Prior period change in useful life estimates of other assets - Depreciation charge 2018 

Restated balance as at 30 June 2018 


92 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


45. Prior period adjustments (continued) 


Payables from exchange transactions - Other payables 

Balance previously reported 92,827,537 

Capital expenditure and retention incorrectly not recognised in the in the previous year - Community 12,783 

assets - Work in progress - Additions 2018 

Other payables incorrectly not cleared - Advertising recoveries (217,401) 

Other payables incorrectly not cleared - Expense not recognised 789,165 

Other payables incorrectly not cleared - Undefined deposits (119,096) 

Debtors incorrectly recognised as part of payables 222,931 

Provincial traffic fines incorrectly not previously recognised - receipts recognised as unallocated (1,744,885) 

deposits 

Restated balance as at 30 June 2018 91,771,034 


Bulk purchases 

Balance previously reported 156,923,413 

VAT not recognised in the previous year - previously not claimed (1,979,543) 


Restated balance as at 30 June 2018 


154,943,870 


Inventory Consumed 

Balance previously reported 48,742,499 

Other payables incorrectly not cleared - Expense not recognised 789,165 

VAT not recognised in the previous year - previously not claimed (222,034) 


Restated balance as at 30 June 2018 


49,309,630 


Depreciation and amortisation 

Balance previously reported 29,048,559 

Derecognition of Community facilities - Community assets - Community Facilities - Accumulated (1,679) 

depreciation - Depreciation charge 2018 

Depreciation not charged on completed infrastructure projects 287,659 

Derecognition of solid waste infrastructure not in use (6,635) 

Prior period change in useful life estimates of other assets - Depreciation 205,617 


Restated balance as at 30 June 2018 29,533,521 


Contracted services 

Balance previously reported after reclassifications 121,658,320 

Contracted services: contractors expenditure recognised as infrastructure work in progress (85,217) 

Other payables incorrectly not cleared - Undefined deposits (47,100) 

Refuse removal outsourced services incorrectly recognised as operational cost 1,941,247 

VAT not recognised in the previous year - previously not claimed (408,174) 

Restated balance as at 30 June 2018 123,059,076 


Operational costs 

Balance previously reported after reclassifications 42,239,106 

Other payables incorrectly not cleared - Advertising recoveries (178,272) 

Refuse removal outsourced services incorrectly recognised as operational cost (1,941,247) 

VAT not recognised in the previous year - previously not claimed (68,176) 


Restated balance as at 30 June 2018 40,051,411 


93 






Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

IMotes to the Annual Financial Statements 


2019 2018 

R R 


46. 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 overall risk management programme focuses on the unpredictability of financial markets and seeks to 
minimise potential adverse effects on the municipality's financial performance. 

Liquidity risk 

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


Prudent liquidity risk management includes maintaining sufficient cash and marketable securities, the availability of 
funding from an adequate amount of committed credit facilities. 

The financial liabilities of the municipality are backed by appropriate assets and it has adequate liquid resources. The 
Council monitors the cash projections and ensures that borrowing facilities are available to meet its cash requirements. 


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 only due within 12 months equal their carrying balances as the impact of 
discounting is not significant. 


At 30 June 2019 
Long term liabilities: 

Annuity loans and local registered stock 
Consumer Deposits 
Trade and other payables 
Finance lease obligation 


Less than 1 Between 1 and Between 2 and Over 5 years 
year 2 years 5 years 

43,332,425 36,661,195 93,590,294 122,603,264 

12,924,361 

96,918,986 

1,016,796 423,665 


At 30 June 2018 
Long term liabilities: 

Annuity loans and local registered stock 
Consumer Deposits 
Trade and other payables 
Finance lease obligation 


Less than 1 Between 1 and Between 2 and Over 5 years 
year 2 years 5 years 

35,099,845 104,826,152 87,080,709 9,542,034 

12,388,076 

77,732,827 

937,025 1,310,888 


Credit risk 


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

Credit risk arises mainly from cash and cash equivalents, instruments and deposits with banks and financial institutions, 
as well as credit exposures to consumer and grant debtors. 

For banks and financial institutions, only reputable independently rated parties are accepted. Grants are receivable from 
higher order levels of government. 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, This increases the credit risk in respect of consumer debtors. 
The risk of non- payment is managed on an ongoing basis and where practical, services are terminated and procedures 
applied to recover outstanding amounts owing and an appropriate level of impairment provision for default is maintained. 

Credit risk consist mainly of cash deposits, cash equivalents, trade and other receivables and unpaid conditional grants 
and subsidies. 


94 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


46. Risk management (continued) 

Trade and other receivables are disclosed net after provisions are made for impairment and bad debts. Trade debtors 
comprise of a large number of ratepayers, dispersed across different sectors and geographical areas. Ongoing credit 
evaluations are performed on the financial condition of these debtors. Credit risk pertaining to trade and other receivables 
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 debtors whose accounts become in arrears, Council endeavours 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. 

All rates and services are payable within 30 days from invoice date. Refer to notes 6 and 5 for all balances outstanding 
longer than 30 days. These balances represent all debtors at year end which defaulted on their credit terms. 

The entity only deposits cash 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 are considered to be low, the 
maximum exposure are disclosed below. 


The risk pertaining to unpaid conditional grants and subsidies are considered to be very low. Amounts are receivable from 
national and provincial government and there is no expectation of counter party default. 


Other Financial Assets and Other Debtors are individually evaluated annually at reporting date for impairment or 
discounting. A report on the various categories of debtors is drafted to substantiate such evaluation and subsequent 
impairment / discounting, where applicable. 

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


Financial instrument 
Receivables from exchange transactions 
Cash and cash equivalents 
Long-term investments and receivables 


2019 2018 

54,282,984 52,249,963 

71,709,029 79,877,042 

34,498,131 32,365,128 

160,490,144 164,492,133 


Market risk 
Interest rate risk 

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

This risk is managed on an ongoing basis by comparison between current market related rates and historical rates and 
adjustments made where considered necessary. 

As the municipality has significant interest-bearing liabilities, the entity's income and operating cash flows are 
substantially dependent on changes in market interest rates. 

The municipality did not hedge against any interest rate risks during the current year. 

The potential impact on the entity's surplus for the year due to changes in interest rates are as follows: 

1% (2018: 1%) Increase in interest rates (922,928) (435,347) 

1% (2018:1%) Decrease in interest rates 922,928 435^347 


95 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


47. Unauthorised expenditure 

Reconciliation of unauthorised expenditure 

Opening balance 9,208,835 

Unauthorised expenditure current year - 9,208,835 

Approved by Council (9,208,835) 

Unauthorised expenditure awaiting authorisation - 9,208,835 


The unauthorised expenditure relates to over expenditure of approved budgets per vote in total. 


Budget Comparison by Municipal Vote in total 

2019 

2019 

2019 2019 


(Actual) 

(Budget) 

(Variance) (Unauthorised) 

Community services 

278,316,647 

291,101,894 

(12,785,247) 

Corporate services 

39,543,772 

43,631,807 

(4,088,035) 

Electrical services 

238,135,126 

246,072,874 

(7,937,748) 

Executive and Council 

24,626,139 

43,498,855 

(18,872,716) 

Financial services 

83,108,683 

86,394,179 

(3,285,496) 

Planning and development 

91,967,325 

125,923,219 

(33,955,894) 

Technical services 

269,174,951 

300,182,651 

(31,007,700) 


1,024,872,643 

1,136,805,479 

(111,932,836) 

Budget Comparison by Municipal Vote - 

2019 

2019 

2019 2019 

Operating Expenditure 

(Actual) 

(Budget) 

(Variance) (Unauthorised) 

Community services 

248,580,969 

244,813,397 

3,767,572 

Corporate services 

39,452,485 

43,176,807 

(3,724,322) 

Electrical services 

212,878,622 

216,143,676 

(3,265,054) 

Executive and Council 

22,763,546 

39,568,855 

(16,805,309) 

Financial services 

81,040,068 

84,234,179 

(3,194,111) 

Planning and development 

82,809,723 

110,690,152 

(27,880,429) 

Technical services 

187,681,072 

185,655,397 

2,025,675 


875,206,485 

924,282,463 

(49,075,978) 

Budget Comparison by Municipal Vote - Capital 

2019 

2019 

2019 2019 

Expenditure 

(Actual) 

(Budget) 

(Variance) (Unauthorised) 

Community services 

29,735,678 

46,288,497 

(16,552,819) 

Corporate services 

91,287 

455,000 

(363,713) 

Electrical services 

25,256,504 

29,929,198 

(4,672,694) 

Executive and Council 

1,862,593 

3,930,000 

(2,067,407) 

Financial services 

2,068,615 

2,160,000 

(91,385) 

Planning and development 

9,157,602 

15,233,067 

(6,075,465) 

Technical services 

81,493,879 

114,527,254 

(33,033,375) 


149,666,158 

212,523,016 

(62,856,858) 


Although community and technical services are overspent on operating expenditure, there is no unauthorised expenditure 
in terms of the MFMA definition of vote. 


96 







Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


48. Fruitless and wasteful expenditure 


Reconciliation of fruitless and wasteful expenditure 
Opening balance 

Restatement of previous fruitless and wasteful 
Fruitless and wasteful expenditure - current year 
Amounts deemed irrecoverable - approved after year end 

Fruitless and wasteful expenditure awaiting investigation 


199,850 123,897 

75,269 
684 

(146,633) 

53,217 199,850 


woHL C t ar9eS °P N ® dfI ® et services °f R 26 050 were incorrectly recognised in the previous year the amount for the 
amounteeftoFMM 5 aJ ™i Th », w ? fa,tes M «4n«*i report* in JpiX,“l?»S 

and wSfS expire Jr SS" ' hd CU,ren, W reSU ' ,inS 2018 


A full investigation was conducted by MPAC. After having considered the report on the investigation MPAC resolved and 
made recommendation to council. Council resolved on the matters of fruitless and wasteful expenditure The accountino 

™ nagement u " 8r! of r “ < ” y - x ss? 


49. 


Details of current year fruitless and wasteful expenditure 

Interest on Telkom account 


Irregular expenditure 

Reconciliation of irregular expenditure 

Opening balance 

Irregular expenditure written off by council 
Irregular Expenditure - current year 

Irregular expenditure amounts recoverable approved after year end 


Disciplinary 2019 2018 

steps 

None . 684 


30,580,381 

11,683,763 

(28,374,324) 

_ 

4,677,360 

18,896,618 

(4,243,162) 

- 

2,640,255 

30,580,381 


™ Ular * eXP H nd ', tUre ° f R 361 895 Was not disc,osed in the Previous financial year. In accordance with GRAP 3 the 
comparative disclosure was corrected to restate the total irregular expenditure of R 30 218 486 as previously reported to 

the correct previous year irregular expenditure of R 30 580 381. p y P rtea to 


midi ?Zf St ' 9atl °2 < r onducted b V MPAC - After havin 9 considered the report on the investigation, MPAC resolved and 
made recommendation to council. Council resolved on the matters of irregular expenditure. The accountino officer was 
instructed to ensure consequence management. Letters of recovery and intention to proceed with disciplinary action have 

SmP '° y “ S - Ten,ier eXPend " U,e ““ etiin8 * hS a « rded M approvalcurrently 


97 







Knysrta Municipality 

Annual Financial Statements for the year ended 30 June 2019 


Motes to the Annual Financial Statements 


49. Irregular expenditure (continued) 

Details of irregular expenditure - current year 
Previous tender lapsed 

Extension of rental contract not in line with the regulations 
Extension of tender contract value not approved by the BAC 
Work performed outside of the tender scope 
Splitting of quotations 

Appointment in contravention with section 66 (3) of the MSA 

Expenditure exceeding award without authorisation 

Incorrect SCM processes followed 

Reasons for deviation not in line with regulation 36 

Valid deviation but requested after the fact 

Deviation requested after the fact 

Should have been treated as donation 

Telkom account & Internet cost for Knysna Municipality but name 
was not yet changed from Knysna Tourism 
Minor breach of SCM connectivity between bank and card machine 
Application for deviation: impractical not done timeously 
Splitting of orders 

Approval for additional work requested after the fact 

Use of quotation less than R2000 while there was a valid tender for 

repairs and maintenance of vehicles 

Service provider was engaged outside SCM process 

Tender expenditure exceeding the awarded amount without prior 

approval 


50. Material losses 

Electricity distribution losses 

Units purchased (Mwh) 

Units lost during distribution (Mwh) 

Percentage lost during distribution 

Water distribution losses 

Mega litres purified 

Mega litres lost during distribution 

Percentage lost during distribution 

There is no possibility of recovering any of the material losses. 

51. Additional disclosure in terms of Municipal Finance Management Act 

Contributions to organised local government MFMA 125 (1) - SALGA contributions 

Opening balance 

Current year subscription / fee 

Amount paid - current year 


2019 

2018 

R 

R 


2019 

2018 

- 

4,596,227 

- 

3,747,973 

- 

1,344,349 

- 

269,374 

- 

190,904 

- 

72,116 

- 

29,431 

- 

2,570,903 

- 

5,713,446 

33,792 

- 

2,822,360 

- 

30,000 

- 

7,380 

- 

2,398 

_ 

1,800 

- 

15,681 

- 

48,550 

- 

3,940 

- 

20,189 

_ 

1,691,280 , 

361,895 

4,677,370 

18,896,618 


178,816 

179,158 

13,818 

15,914 

7.73 % 

8.88 % 


3,361 

5,073 

895 

1,463 

’6.63 % 

28.84 % 


273,627 

273,627 

2,288,398 

2,171,537 

(2,288,398) 

(2,171,537) 

273,627 

273,627 


5,328,473 

5,093,437 

(5,328,473) 

(5,093,437) 

- 

- 


Audit fees-MFMA 125 (1) 

Current year subscription / fee 
Amount paid - current year 


98 



Knysna Punicspa lity 

Annual Financial Statements for the year ended 30 June 2019 

Motes to the Annual Financial Statements 


2019 2018 

R R 


51. Additional disclosure in terms of Municipal Finance Management Act (continued) 
PAYE and UIF - MFMA 125 (1) 


Opening balance 

Current year subscription / fee 

Amount paid - current year 

29,359 

34,759,802 

(34,752,277) 

29,359 

33,385,102 

(33,385,102) 


36,884 

29,359 

Pension and Medical Aid Deductions - MFMA 125 (1) 



Current year subscription / fee 

Amount paid - current year 

53,834,686 

(53,834,686) 

50,959,867 

(50,959,867) 


- 

- 

VAT-MFMA 125 (1) 



Opening balance 

Amount received - prior year 

Amount received - current year 

Amount claimed - prior year 

Corrections 

7,771,523 

(8,579,676) 

(78,624,673) 

86,520,773 

2,970,544 

(3,993,740) 

(53,242,219) 

61,822,130 

214,808 


7,087,947 

7,771,523 


VAT output payables and VAT input receivables are shown in note 7. 

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


99 


Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


51. Additional disclosure in terms of Municipal Finance Management Act (continued) 
Councillors' arrear consumer accounts - MFMA 124 (1) 

The following Councillors had arrear accounts outstanding for more than 90 days at 30 June 2019: 


30 June 2019 

Outstanding 

Total 


more than 90 
days 

R 

R 

Arends S 

11,591 

11,591 

Bouw-Spies E 

6,860 

6,860 

Gombo E 

3,756 

3,756 

Matika T 

4,306 

4,306 

Ngqezu S 

13,003 

13,003 

Pofadder D 

9,264 

9,264 

Tswenga N A 

3,651 

3,651 

Waxa V 

1,462 

1,462 


53,893 

53,893 

30 June 2018 

Outstanding 

Total 


more than 90 
days 

R 

R 

Bouw-Spies E 

640 

640 

Gombo E 

13,685 

13,685 

Pofadder D 

21,027 

21,027 

Tswenga N A 

11,811 

11,811 

Waxa V 

1,872 

1,872 


49,035 

49,035 

During the year the following Councillors’ had arrear accounts outstanding for more than 90 days: 


30 June 2019 

Highest 

Aging 


outstanding 

amount 

(in days) 

Arends S 

10,535 

>150 days 

Bouw-Spies E 

3,954 

>150 days 

Gombo E 

3,756 

>150 days 

Matika T 

4,306 

>150 days 

Ngqezu S 

13,003 

>150 days 

Pofadder D 

7,477 

>150 days 

Tswenga N A 

3,651 

>150 days 

Waxa V 

975 

>150 days 


47,657 

- 

30 June 2018 

Highest 

Aging 


outstanding 

amount 

(in days) 

Bouw-Spies E 

91 

>150 days 

Gombo E 

8,900 

>150 days 

Pofadder D 

14,923 

>150 days 

Tswenga N A 

6,909 

>150 days 

Waxa V 

1,872 

>150 days 


32,695 

- 


100 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


51. Additional disclosure in terms of Municipal Finance Management Act (continued) 
Supply chain management regulations 


In terms of section 36 of the Municipal Supply Chain Management Regulations any deviation from the Supply Chain 
Sunnlv e chrin P ML Cy needS \° b ® a PP roved/condoned b y the Accounting Officer and noted by Council. Deviationsfrom the 

i<ten,i “ ,or ,he ° a “ 90 ™* and hava toaa »»»» 


Emergency - par 36 (1)(a) i 

Single source or sole provider - par 36 (1)(a) ii 

Impractical - par 36 (1)(a) v 


52. Private Public Partnerships 

Council has not entered into any private public partnerships during the financial year. 

53. Statutory receivables 


413,596 2,100,944 

462,951 1,086,515 

9,174,827 15,7 13,412 

10,051,374 18,900,871 


In accordance with the principles of GRAP 108, Statutory receivables of the municipality are classified as follows: 


Taxes 

VAT Receivable 
Receivables from 
Rates 
Fines 


Non-exchange transactions 


19,744,003 17,452,161 

56,684,266 45,454,782 

23,336,315 23,275,89 7 

99,764,584 86,182,840 


101 



Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

_______ R _ R 

54. Budget differences 

Material differences between budget and actual amounts 
Statement of Financial Performance: 

54.1 Investment revenue 

The lower interest revenue is mainly due to the lower interest rates on investments in the current year. 

54.2 Transfers recognised - operational and capital 

Conditional grant revenue recognition is based on conditions met for the expenditure against each grant and the followinq 
grants were received and rolled-over however not fully spent against total allocation, hence: 

^ der expenditure on operating Human Settlement grant from various project due to delays experienced 
e , C ° ntractor t0 com . mence the Project. Project is underway and will continue implementation in 2019-20 budqet. 

2) Title deeds restoration included in the roll-over adjustments budget however not fully spent 

3) Fire truck disaster grant rolled-over but not fully spent. Delivery of fire trucks took place July 2019 and funds will be 
rolled over to 19-20 budget. 

54.3 Other own revenue 

Actual revenue from fines was more than expected. 

54.4 Debt impairment 

The variance relates to the increase in provision of fines. 

54.5 Depreciation & asset impairment 

The variance is due to the reversal of the impairment of assets.. 

54.G Finance costs 

This is due to finance cost on employee benefit obligations per the actuary report being higher than anticipated. 

54.7 Contracted Services 

Contracted services under spent by R30 million mainly as a result of the following: 

1) R11 million from various Human settlement projects. 

2) Underspending of TRP grant, Electricity Repairs and Maintenance programs as well as various LED projects. 

54.8 Other Expenditure 

This variance is due to the approved water debt write off. 

Statement of Financial Position: 

54.9 Cash 

Cash was reduced to accommodate additional capital projects requirements funded through internal funds. 

54.10 Other debtors 

Actual revenue from fines was more than expected. 

54.11 Inventory 

More stock on hand at year end than anticipated. 


102 







Knygna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


R 


R 


54. Budget differences (continued) 

54.12 Borrowing 

Borrowing increases in order to accelerate projects that were budgeted as multiyear but can be comDleted and nr 
tracked within the current financial year as well as approved roll-over projects. completed and or fast 

54.13 Trade and other payables 


Increase in payables and the unspent conditional grant at year end. 

54.14 Provisions 

This is due to finance cost on employee benefit obligations per the actuary report being higher than anticipated. 

54.15 Reserves 

This is due to the yearly contribution to Capital Replacement Reserve. 

Cash Flow Statement 


54.16 Government grants and conditional receipts 
Underspending on grants. 

54.17 Interest received 

The difference is the non-cash interest on debtors that was included in the budgeted amount. 

54.18 Suppliers and employees 

Underspending on operating and capital projects and savings on budgeted employee cost. 

54.19 Non-current Investment 

An increase in fixed deposits at year-end.. 

54.20 Capital assets 
Underspending in capital projects. 

54.21 Borrowings 

The draw down was less due to projects not completed by year end. 


103 



Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Notes to the Annual Financial Statements 


2019 2018 

R R 


54. Budget differences (continued) 

Differences between budget and actual amounts basis of preparation and presentation 

Differences were identified between the disclosure requirements in terms of GRAP and the reporting requirements in 
terms of National Treasury budget formats. 

The following items are affected by these classification differences: 

Statement of Financial Position 

Consumer debtors in budget statements consist of service charges (water, sewerage, electricity, refuse and housing 
rentals) a 


Other debtors in the budgeted statements consist of other debtors as disclosed in receivables from exchange 
transactions, receivables from non-exchange transactions, VAT receivable, prepayments and unpaid conditional grants. 

The budget formats does not allow for various sundry debtor balances to be disclosed separately. For this reason afore 
mentioned are all incorporated under other debtors. 

Long Term Receivables in budget statements also includes the Non-Current Operating Lease Asset. 

Included in Trade and other payables per budget statement are Payables from Exchange Transactions Unspent 
Conditional Government Grants and Receipts and VAT payable (if applicable). ' ’ 1 

Employee benefits and Provisions (current and non-current) are disclosed separately in the financial statements while 
these figures are aggregated in the budget statements as provisions. 

Long term liabilities, Finance lease obligation and Operating lease liabilities are disclosed separately in the financial 
statements. The budget formats does not provide for Finance and Operating lease liabilities. Finance and Operating 
lease liabilities are disclosed as part of Borrowings in the budget statements. 

Other non-current assets included the Heritage assets in the budget statement but is separately disclosed in the financial 
statements.. 

All other items are disclosed on a comparable basis. 

Statement of Financial Performance 

The statement of financial performance is comparable on a line by line basis except for the following items: 

The budget statements does not provide for all the different revenue classifications per statement of financial 
performance. For this reason, all line items not specifically catered for is incorporated under the line item Other own 
revenue in the budget statement. Other own revenue per budget statement consist out of the following line items: Public 
Contributions and donations, Third Party Payments, Sale of goods and rendering of services, rental of facilities and 
equipment, Agency services, Licences and permits, Fines, penalties and forfeits, profit / loss on disposal of assets 
inventory adjustments and Operational revenue. 

Employee related cost and actuarial gains and losses are aggregated in the budgeted statements, but disclosed 
separately in the statement of financial performance. 


Depreciation and amortisation, Impairment losses and fair value adjustments on Investment property are disclosed 
separately in the financial statements while these figures are aggregated in the budget statements. 

Debt impairment and bad debt written off are aggregated in the budgeted statements, but disclosed separately in the 
statement of financial performance. 


Inventory consumed and bulk purchases as separately disclosed in the statement of financial performance is presented 
as materials and bulk purchases in the budgeted statements. 


104 





Knysna Municipality 

Annual Financial Statements for the year ended 30 June 2019 

Motes to the Annual Financial Statements 


2019 2018 

R R 


54. Budget differences (continued) 

The budget statements does not provide for all the different expenditure classifications per statement of financial 
performance. For this reason, all line items not specifically catered for are incorporated under the line item Other 
Expenditure in the budget statements. Other Expenditure per budget statement consist of the followinq line items - 
Operational costs, Lease rentals on operating leases. 

All other items are disclosed on a comparable basis. 

Cash Flow Statement 

The Cash Flow Statement is presented on a comparable basis, except for the following item: 

The movement in Consumer deposits are disclosed as part of the financing activities for budget purposes while it is 
disclosed as part of operating activities in the financial statements. 

Changes from the approved budget to the final budget 

Revenue 

Total adjustments are mainly as a result of the following: 

» The Transfers recognised - operational: an additional amount was budgeted for: 

- Increase was mainly as a result of the roll-over of operational grants not fully spent in 2017-18 to 2018-19 These 
grants were: the Title deeds Restoration, Disaster grant for the Fire trucks acquisition, as well as Housinq Hornlee 
Project. 

Expenditure 

Total adjustments are mainly as a result of the following: 


Contracted Services were increased due to: 

- R 6.9 million moved from Other Materials to Contracted Services relating to Housing project 

- R6 million rolled-over from 18-19 financial year for the Title Deeds restoration project. 

- Security Services for Councilors. 

- Additional R 2 million for legal costs to deal with high court matters. 

- R 6 million for appointment of Red Ants for the removal of illegal land invasion. 

- R 2.5 million for Data cleansing project which was not fully funded by Province on capacity building grant.. 

- R2.8 million requested for the Business Process project implemented by PwC as the capacity building grant was 


• Other Expenditure was increased due to: 

- the water debt write off to the value of R 24 million, 

- increase in audit fees to the amount of R 4 million 

• Debt Impairment decrease mainly due to the water debt write off to the value of R 24 million. 

Capital budget 


Total adjustments are mainly as a result of the following: 

• Additional NDGP funding for the multi-purpose centre at White location. 

• Additional funding for the upgrading of the Khayalethu library. 

* Additional funding for the upgrade of the Knysna waterworks due to the project performing better than 
anticipated. 

0 Provincial funding for the bulk water pipe project. 

* Increase in funding for the water management devices to improve water losses. 


105 



APPENDIX A-Unaudited 
KNYSNA MUNICIPALITY 



TOTAL EXTERNAL LOANS 




























CO 

o 

o 

CM 


u_ 

O 


CO 

in 


< 

5 

LL 

s 


UL 

o 


co 

CM 


a 

z 

< 


co 

i- 

z 

< 

o' 

a 


CO 

UJ 

a: 

3 

co 

O 


a 

co 

a 



107 












Appendix C - Unaudited 
Knysna Municipality 

National Treasury Appropriation Statements for the year ended 30 June 2019 
Revenue and Expenditure (Standard Classification) 


Description 

R.000 

2018/2019 

2017/2018 

Original Budget 

Budget 
Adjustments 
(i.t.o. MFMA s28) 

Final adjustments 
budget 

Actual 

Outcome 

Variance of Actual 
Outcome against 
Adjustments Budget 

Actual 
Outcome 
as % of 
Final 
Budget 

Actual 

Outcome as 

%of 

Original 

Budget 

Restated 

Audited 

Outcome 

Revenue - Standard 









Governance and administration 

259,538 

6,479 

266,017 

262,436 

-3,581 

99% 

101% 

248,704 

Executive and council 

13,401 

30 

13,431 

12,623 

-808 

94% 

94% 

13,277 

Finance and administration 

246,137 

6,449 

252,586 

249,813 

-2,773 

99% 

101% 

235,427 

Internal audit 

- 

- 

. 

- 

. 

. 

. 

. 

Community and public safety 

82,004 

19,392 

101,396 

190,457 

89,061 

188% 

232% 

62,899 

Community and social services 

14,927 

4,385 

19,312 

19,146 

-166 

99% 

128% 

12,076 

Sport and recreation 

2,024 

- 

2,024 

2,794 

770 

138% 

138% 

1,123 

Public safety 

81 

5,000 

5,081 

117,914 

112,833 

2321% 

145573% 

2,462 

Housing 

64,972 

10,007 

74,979 

50,603 

-24,376 

67% 

78% 

47,238 

Health 

- 

- 

- 

_ 

. 

_ 

_ 

_ 

Economic and environmental services 

128,614 

11,000 

139,614 

9,645 

-129,969 

7% 

7% 

99,413 

Planning and development 

16,358 

11,000 

27,358 

4,634 

-22,724 

17% 

28% 

6,152 

Road transport 

112,256 

. 

112,256 

5,011 

-107,245 

4% 

4% 

93,261 

Environmental protection 

- 

. 

- 

- 

- 

- 

- 

. 

Trading services 

497,754 

10,127 

507,881 

467,427 

-40,454 

92% 

94% 

434,499 

Energy sources 

290,125 

1,000 

291,125 

275,324 

-15,801 

95% 

95% 

240,935 

Water management 

116,878 

- 

116,878 

104,636 

-12,242 

90% 

90% 

118,712 

Waste water management 

45,557 

5,727 

51,284 

47,752 

-3,532 

93% 

105% 

36,336 

Waste management 

45,194 

3,400 

48,594 

39,715 

-8,879 

82% 

88% 

38,516 

Other 

- 

- 

- 

. 

_ 

. 

_ 

- 

Total Revenue - Standard 

967,910 

46,998 

1,014,908 

929,965 

-84,943 

92% 

96% 

845,516 

Expenditure - Standard 









Governance and administration 

169,155 

18,674 

187,829 

171,966 

-15,863 

92% 

102% 

140,617 

Executive and council 

31,055 

-9,111 

21,944 

22,781 

837 

104% 

73% 

30,870 

Finance and administration 

132,662 

27,303 

159,965 

149,185 

-10,780 

93% 

112% 

105,846 

Internal audit 

5,438 

482 

5,920 

- 

-5,920 

0% 

0% 

3,900 

Community and public safety 

145,566 

20,606 

166,172 

260,816 

94,644 

157% 

179% 

109,097 

Community and social services 

28,166 

1,608 

29,774 

25,671 

-4,103 

86% 

91% 

23,010 

Sport and recreation 

17,982 

390 

18,372 

16,968 

-1,404 

92% 

94% 

15,073 

Public safety 

25,971 

9,721 

35,692 

157,471 

121,779 

441% 

606% 

31,501 

Housing 

68,612 

8,267 

76,879 

55,110 

-21,769 

72% 

80% 

39,465 

Health 

4,835 

620 

5,455 

5,596 

141 

103% 

116% 

47 

Economic and environmental services 

188,708 

5,953 

194,661 

75,389 

-119,272 

39% 

40% 

175,316 

Planning and development 

29,149 

1,348 

30,497 

16,542 

-13,955 

54% 

57% 

27,796 

Road transport 

153,054 

4,229 

157,283 

54,442 

-102,841 

35% 

36% 

143,785 

Environmental protection 

6,505 

376 

6,881 

4,405 

-2,476 

64% 

68% 

3,735 

Trading services 

374,835 

-3,673 

371,162 

365,799 

-5,363 

99% 

98% 

351,244 

Energy sources 

215,027 

-4,010 

211,017 

209,588 

-1,429 

99% 

97% 

175,010 

Water management 

55,248 

1,798 

57,046 

72,131 

15,085 

126% 

131% 

83,045 

Waste water management 

54,693 

-1,819 

52,874 

51,030 

-1,844 

97% 

93% 

47,081 

Waste management 

49,867 

358 

50,225 

33,050 

-17,175 

66% 

66% 

46,108 

Other 

- 

- 

. 

. 

0 

. 

. 

_ 

Total Expenditure - Standard 

878,264 

41,560 

919,824 

873,970 

■45,854 

95% 

100% 

776,273 

Surplus for the year 

89,646 

5,438 

95,084 

55,995 

-39,089 


62% 

69,243 


108 













Appendix C - Unaudited 
Knysna Municipality 

National Treasury Appropriation Statements for the year ended 30 June 2019 
Revenue and Expenditure (Municipal Vote Classification) 


Description 

2018/2019 

2017/2018 

R,000 

Original 

Budget 

Budget 
Adjustments 
(i.t.o. MFMA 
s28) 

Final 

adjustments 

budget 

Actual 

Outcome 

Variance of 
Actual 
Outcome 
against 
Adjustments 
Budget 

Actual 
Outcome as 
% of Final 
Budget 

Actual 
Outcome 
as % of 
Original 
Budget 

Restated 

Audited 

Outcome 

Revenue bv Vote 









Vote 1 - Executive and Council 

13,401 

30 

13,431 

12,624 

-807 

94% 

94% 

13,278 

Vote 2 - Corporate Services 

4,417 

5,059 

9,476 

3,990 

-5,486 

42% 

90% 

2,940 

Vote 3 - Financial Services 

237,581 

1,390 

238,971 

236,828 

-2,143 

99% 

100% 

223,594 

Vote 4 - Strategic Services 

- 

0 

- 

- 

- 

- 

- 

- 

Vote 5 - Planning and Development 

81,330 

21,008 

102,337 

63,578 

-38,759 

62% 

78% 

59,985 

Vote 6 - Community Services 

177,306 

13,544 

190,850 

185,171 

-5,678 

97% 

104% 

147,483 

Vote 7 - Electrical Services 

290,125 

1,000 

291,125 

275,362 

-15,763 

95% 

95% 

242,387 

Vote 8 - Technical Services 

163,750 

4,968 

168,718 

152,413 

-16,305 

90% 

93% 

154,321 

Total Revenue by Vote 


46,998 




92% 



Expenditure bv Vote to be appropriated 









Vote 1 - Executive and Council 

37,828 

-8,685 

29,144 

22,781 

-6,362 

78% 

60% 

37,765 

Vote 2 - Corporate Services 

38,411 

10,580 

48,991 

39,438 

-9,552 

81% 

103% 

30,529 

Vote 3 - Financial Services 

72,095 

12,299 

84,393 

79,455 

-4,938 

94% 

110% 

58,867 

Vote 4 - Strategic Services 

- 

0 

- 

- 

- 

- 

- 

- 

Vote 5 - Planning and Development 

101,277 

9,470 

110,747 

82,800 

-27,947 

75% 

82% 

60,176 

Vote 6 - Community Services 

230,468 

14,147 

244,615 

248,981 

4,366 

102% 

108% 

211,765 

Vote 7 - Electrical Services 

219,254 

-2,973 

216,281 

212,866 

-3,416 

98% 

97% 

197,655 

Vote 8 - Technical Services 

178,933 

6,720 

185,653 

187,652 

1,998 

101% 

105% 

175,416 

Total Expenditure by Vote 



919,824 

873,973 

-45,851 



IPiKZZXEZ] 

Surplus for the year 


5,440 

95,083 



59% 


wmsm 


109 



























Appendix C - Unaudited 
Knysna Municipality 

National Treasury Appropriation Statements for the year ended 30 June 2019 

Revenue and Expenditure 


Description 

2018/2019 

2017/2018 


Original Budget 

Budget 

Final 

Actual 

Variance of 

Actual 

Actual 

Restated 



Adjustments 

adjustments 

Outcome 

Actual Outcome 

Outcome 

Outcome 

Audited 

R,000 


(i.t.o. MFMA 

budget after 


against 

as % of 

as % of 

Outcome 



s28) 

virements 


Adjustments 

Final 

Original 







Budget 

Budget 

Budget 


Revenue By Source 









Property rates 

215,403 

300 

215,703 

215,549 

-155 

100% 


203,443 

Service charges 

386,212 

8,600 

394,812 


-32,709 

92% 

94% 

335,109 

Rental of facilities and equipment 

6,657 

- 

6,657 

5,601 


84% 

84% 

HljftggE 

Interest earned - external investments 

11,760 

- 

11,760 

9,443 

-2,317 

80% 

80% 


Interest earned - outstanding debtors 

12,074 

- 

12,074 

11,838 

-236 

98% 

98% 

10,545 

Dividends received 

- 

- 

_ 

_ 

«. 

_ 

„ 

_ 

Fines, penalties and forfeits 

110,597 

- 

110,597 

121,654 

11,057 

110% 

110% 

92,714 

Licences and permits 

1,572 

- 

1,572 

1,587 

15 

101% 

101% 

1,672 

Agency services 

2,909 

- 

2,909 

3,297 

388 

113% 

113% 

3,096 

Transfers recognised - operational 

153,822 

18,205 

172,028 

137,294 

-34,734 

80% 

89% 

106,116 

Other revenue 

12,543 

-700 

11,843 

11,746 

-97 

99% 

94% 

11,664 

Gains on disposal of PPE 

1,000 

- 

1,000 

_ 

-1,000 

_ 

_ 

„ 

Total Revenue (excluding capital 
transfers and contributions) 







96% 

779,169 










Employee related costs 

254,199 

-3,383 

250,817 

236,178 

-14,639 

94% 

93% 

226,731 

Remuneration of councillors 

8,653 

699 

9,351 

8,570 

-782 

92% 

99% 

8,469 

Debt impairment 

108,875 

-24,000 

84,875 

117,797 

32,922 

139% 

108% 

109,995 

Depreciation & asset impairment 

31,511 

715 

32,226 

24,116 

-8,109 

75% 

77% 

30,247 

Finance charges 

14,395 

-218 

14,178 


10,859 

177% 

174% 

25,557 

Bulk purchases 

177,274 

-7,946 

169,328 

169,553 

225 

100% 

96% 

154,944 

Other materials 

50,169 

-1,302 

48,867 

43,090 

-5,777 

88% 

86% 

49,310 

Contracted services 

172,445 

43,896 

216,341 


-38,640 

82% 

103% 

121,118 

Transfers and subsidies 

3,150 

544 

3,694 

4,151 

457 

112% 

132% 


Other expenditure 

57,594 

32,553 

90,147 

67,780 

-22,367 

75% 

118% 


Loss on disposal of PPE 


- 

- 

- 

- 

_ 

_ 

_ 

Total Expenditure 





-45,852 


-5% 

783,296 

Surplus/(Deficit) 





-14,992 


17% 

4,128 

Transfers recognised - capital 



73,953 

49,857 

-24,096 

67.4% 

93.4% 

64,820 

Contributions recognised - capital 



- 

_ 

_ 

_ 

- 

_ 

Contributed assets 



- 

- 

- 

_ 

_ 

_ 

Surplus for the year 

89,643 

5,440 

95,083 

55,995 

-39,088 



60,692 


no 
























































Appendix C - Unaudited 
Knysna Municipality 

National Treasury Appropriation Statements for the year ended 30 June 2019 
Capital Expenditure by Vote, Standard Classification and Funding 


Description 

2018/2019 | 

2017/2018 

R,000 

Original Budget 

Budget 

Adjustments {i.t.o. 
MFMA s28) 

Final adjustments 
budget 

Actual 

Outcome 

Variance of 
Actual Outcome 
against 
Adjustments 
Budget 

Actual 

Outcome 
as % of 
Final 
Budget 

Actual 
Outcome 
as % of 
Original 
Budget 

Restated 

Audited 

Outcome 

Capital expenditure - Vote 


















Vote 1 - Executive and Council 

- 

- 

- 

- 

- 

- 

- 

- 

Vote 2 - Corporate Services 

1,000 

-600 

400 

- 

-400 

- 

- 

- 

Vote 3 - Financial Services 

1,150 

-154 

996 

309 

-687 

31% 

27% 

1,688 

Vote 4 - Strategic Services 

- 


- 

- 

- 

- 

■ 

“ 

Vote 5 - Planning and Development 

- 

4,158 

4,158 

5,095 

937 

123% 

- 

23,020 

Vote 6 - Community Services 

17,351 

14,181 

31,532 

14,811 

-16,721 

47% 

85% 

12,410 

Vote 7 - Electrical Services 

11,300 

3,285 

14,585 

13,980 

-605 

96% 

124% 

12,533 

Vote 8 - Technical Services 

58,960 

15,677 

74,637 

69,533 

-5,104 

93% 

118% 

38,224 

Vote 9 - Community & Social Services 

- 

- 

- 

- 

- 

- 

- 

- 

Vote 10 - Sport & Recreation 

- 

- 

- 

- 

- 

- 

- 

- 

Vote 11 - Public Safety 

- 

- 

- 

- 

- 

- 

■ 

- 

Vote 12 - Electricity 

- 

- 

- 

- 

- 

- 

- 

- 

Vote 13 - Waste Management 

- 

- 

- 

- 

“ 

- 

- 

- 

Vote 14 - Water 

- 

- 

- 

- 

- 

- 

- 

- 

Vote 15 - Other 

- 

- 

- 

- 

- 

- 

- 

- 

Capita! multi-year expenditure 

89,761 

36,547 

126,308 

103,727 

-22,581 

82% 

116% 

87,876 

Sinale-vear expenditure 









Vote 1 - Executive and Council 

- 

3,930 

3,930 

1,863 

-2,067 

47% 

- 

1,451 

Vote 2 - Corporate Services 

56 

55 

111 

91 

-20 

82% 

163% 

10 

Vote 3 - Financial Services 

1,000 

164 

1,164 

1,760 

596 

151% 

176% 

2,968 

Vote 4 - Strategic Services 

- 

- 

- 

- 

- 

- 

- 

- 

Vote 5 - Planning and Development 

10,140 

936 

11,076 

4,062 

-7,014 

37% 

40% 

495 

Vote 6 - Community Services 

3,690 

11,066 

14,756 

14,924 

168 

101% 

404% 

10,037 

Vote 7 - Electrical Services 

15,294 

50 

15,344 

11,277 

-4,067 

73% 

74% 

12,523 

Vote 8 - Technical Services 

30,801 

9,089 

39,890 

11,961 

-27,929 

30% 

39% 

14,306 

Vote 9 - Community & Social Services 

- 

- 

- 

- 

- 


- 

- 

Vote 10 - Sport & Recreation 

- 

- 

- 

- 

- 


- 

- 

Vote 11 - Public Safety 

- 

- 

- 

- 

- 


- 

“ 

Vote 12 - Electricity 

- 

- 

- 

- 

- 


- 

- 

Vote 13 - Waste Management 

- 

- 

- 

- 

- 


- 

- 

Vote 14 - Water 

- 

- 

- 

- 

- 


- 

- 

Vote 15-Other 

- 

- 

- 

- 

- 

- 

- 

- 

Capital single-year expenditure 

60,981 

25,290 

86,271 

45,939 

-40,332 

53% 

75% 


Total Capital Expenditure - Vote 

150,742 

61,837 

212,579 

149,666 

-62,913 

70% 

99% 


Capital Expenditure - Standard 









Governance and administration 

3,346 

3,539 

6,885 

5,416 

-1,469 

79% 

162% 

8,387 

Executive and council 

- 

3,930 

3,930 

1,863 

-2,067 

47% 

- 

1,451 

Finance administration 

3,346 

-391 

2,955 

3,553 

598 

120% 

106% 

6,936 

Internal audit 

- 

- 

- 

- 

- 

- 

- 

- 

Community and public safety 

£9,511 

£8,001 

67,872 

32,701 

26,171 

67% 

111% 

41,000 

Community and social services 

17,451 

22,770 

40,221 

18,460 

-21,761 

46% 

106% 

12,766 

Sport and recreation 

1,400 

1,298 

2,698 

3,637 

939 

135% 

260% 

2,410 

Public safety 

660 

-600 

60 

1,453 

1,393 

2422% 

220% 

2,318 

Housing 

10,000 

4,893 

14,893 

9,151 

-5,742 

61% 

92% 

23,507 

Health 

- 

- 

- 

- 

- 

- 

- 

- 

Economic and environmental services 

19,350 

-15,500 

3,850 

2,773 

-1,077 

72% 

14% 

5,083 

Planning and development 

250 

500 

750 

- 

-750 

- 

0% 

- 

Road transport 

19,100 

-16,000 

3,100 

2,773 

-327 

89% 

15% 

5,083 

Environmental protection 

- 

- 

- 

- 

- 

- 

- 

‘ 

Trading services 

98,535 

45,382 

143,917 

108,776 

-35,141 

76% 

110% 

75,197 

Energy sources 

26,594 

3,335 

29,929 

25,257 

4,672 

84% 

95% 

25,056 

Water management 

42,919 

35,702 

78,621 

57,834 

-20,787 

74% 

135% 

34,002 

Waste water management 

27,492 

4,565 

32,057 

22,481 

-9,576 

70% 

82% 

12,958 

Waste management 

1,530 

1,780 

3,310 

3,205 

-105 

97% 

210% 

3,180 

Other 

- 

- 

- 

- 

- 

- 

- 

- 

Total Capital Expenditure - Standard 

150,742 

61,782 

212,524 

149,666 

-62,858 

70% 

99% 

129,666 

Funded by: 









National Government 

42,056 

9,565 

51,621 

35,732 

-15,889 

69% 

85% 

31,681 

Provincial Government 

11,360 

14,972 

26,332 

16,848 

-9,484 

64% 

148% 

27,644 

District Municipality 

- 

- 

- 

- 

- 

- 

" 

- 

Other transfers and grants 

- 

- 

- 

- 

- 

- 

- 

- 

Transfers recognised - capital 

53,416 

24,537 

77,953 

52,580 


67% 

98% 

59,324 

Public contributions & donations 

- 

- 

- 

1,160 


- 

- 

1,334 

Borrowing 

52,196 

21,112 

73,308 

49,950 


68% 

96% 

22,701 

Internally generated funds 

45,130 

16,132 

61,262 

45,977 


75% 

102% 

46,308 

Total Capital Funding 


61,781 



-62,856 

70% 

99% 

129,666 


m 




















Appendix C - Unaudited 
Knysna Municipality 

National Treasury Appropriation Statements for the year ended 30 June 2019 

Cash Flows 


Description 



2018/2019 




2017/2018 

R,000 

Original Budget 

Budget 

Adjustments 

(i.t.o. MFMA 
s28) 

Final 

adjustments 

budget 

Actual 

Outcome 

Variance of 
Actual 
Outcome 
against 
Adjustments 
Budget 

Actual 
Outcome as 
% of Final 
Budget 

Actual 
Outcome 
as % of 
Original 
Budget 

Restated 

Audited 

Outcome 

CASH FLOW FROM OPERATING 
ACTIVITIES 

Receipts 

Ratepayers and other 

609,915 

7,057 

616,972 

582,657 

-34,315 

94.44% 

95.53% 

538,173 

Government 

207,182 

38,799 

245,981 

193,627 

-52,354 

78.72% 

93.46% 


Interest 

22,023 

- 

22,023 

9,443 

-12,580 

42.88% 

42.88% 


Payments 

Suppliers and employees 

-704,174 

-51,332 

-755,506 

-667,074 

88,432 

88.29% 

94.73% 

-619,967 

Finance charges 

-14,395 

217 

-14,178 

-14,366 

-188 

101.33% 

99.80% 

-14,854 

Transfers and Grants 

-3,150 

-544 

-3,694 

-4,151 

-457 

112.37% 

131.78% 

-4,723 

NET CASH FROM/(USED) OPERATING 
ACTIVITIES 



111,598 

100,136 

-11,462 

89.73% 

85.29% 

87,640 

CASH FLOWS FROM INVESTING 
ACTIVITIES 

Receipts 

Proceeds on disposal of PPE 

1,000 


1,000.00 

30.00 

-970 

3.00% 

3.00% 


Decrease (Increase) in non-current 
debtors 






0.00% 

0.00% 


Decrease (increase) other non-current 
receivables 






0.00% 

0.00% 


Decrease (increase) in non-current 
investments 

_ 

_ 

. 

-2,133 

-2,133 

0.00% 

0.00% 

-2,016 

Payments 

Capital assets 

-147,687 

-61,292 

-208,979 

-148,506 

60,473 

71.06% 

100.55% 

-126,020 

NET CASH FROM/fUSED) INVESTING 
ACTIVITIES 

-146,687 



-150,609 

57,370 

93.82% 

102.67% 


CASH FLOWS FROM FINANCING 
ACTIVITIES 

Receipts 

Borrowing long term/refinancing 

50,196 

23,112 

73,308 

60,238 

-13,070 

82.17% 

120.01% 


Increase (decrease) in consumer 
deposits 

770 

23 

793 

536 

-257 

67.59% 

69.61% 

1,087 

Payments 

Repayment of borrowing 

-16,736 

236 

-16,500 

-18,469 

-1,969 

111.93% 

110.35% 

-25,601 

NET CASH FROM/(USED) FINANCING 
ACTIVITIES 





-15,296 

73.44% 

123.59% 


NET INCREASE/ (DECREASE) IN CASH 
HELD 

4,944 

-43,724 

-38,780 


30,612 

21.06% 

-165.21% 


Cash/cash equivalents at the year 
begin: 

67,227 

12,650 

79,877 

79,877 


100.00% 

118.82% 

108,213 

Cash/cash equivalents at the year end: 

72,169 

-31,073 

41,096 

71,709 

30,613 

174.49% 

99.36% 

79,877 


112