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
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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
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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
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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
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o'
a
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UJ
a:
3
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a
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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
