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Emnambithi / Ladysmith 
Municipality 


Annual Financial Statements 
30 June 2013 


Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

General Information 


Legal form of entity 
Members of the Council 
Mayor 

Deputy Mayor 
Speaker 
Chief Whip 

Member of the Executive Committee 


Accounting Officer 
Chief Financial Officer 
Grading of local authority 
Registered office 


Postal address 

Bankers 

Auditors 


Local Municipality 


Mr M V Madlala 
Ms S R Mfusi 
Ms Z B Rasool 
MrT WNgubane 
Ms T Hadebe 
Mr P J Hurter 
Mr T P Makhaza 
Mr M J Buthelezi 
Ms M N Mlotshwa 
MrT Msomi 
Mr S J Sithebe 

Mr M P Khathide 

Mr R A Jhetam (Acting) 

4 

221 Murchison Street 

Lister Clarence Building 

Ladysmith 

Tel: 036-6372231 

Fax: 036-6311400 

E-mail: mm@ladvsmith.co.za 

PO Box 29 
Ladysmith 
Kwazulu-Natal 
3370 

ABSA - Public Sector Banking 
Auditor-General 




Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Index 

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


Index Page 

Accounting Officer's Responsibilities and Approval 1 

Statement of Financial Position 2 

Statement of Financial Performance 3 

Statement of Changes in Net Assets 4 

Cash Flow Statement 5 

Accounting Policies 6-19 

Notes to the Annual Financial Statements 20- 51 

Appendices: 

Appendix A: Schedule of External Loans 52 

Appendix B: Analysis of Property, Plant and Equipment 53 

Appendix C: Statement of Budget and Actual Information 54 

Appendix D: Disclosures of Grants and Subsidies 55 




Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

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 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. 

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

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

The Accounting Officer has reviewed the municipality's cash flow forecast for the year to 30 June 2013 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 municipality is wholly dependent on the income from services, rates and grants for continued funding of operations. The annual 
financial statements are prepared on the basis that the municipality is a going concern and that the Emnambithi / Ladysmith 
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 reviewing and reporting on the municipality's annual financial statements. 

The annual financial statements set out on pages 1 to 55, which have been prepared on the going concern basis, were approved by 
the Accounting Officer on 30 August 201 3 and were signed on its behalf by : 

I certify that the salaries, allowances and benefits of Councillors as disclosed in note 24 of these annual financial statements are 
within the upper limits of the framework envisaged in Section 219 of the Constitution, read with the Remuneration of Public Officer 
Bearers Act and the Minister of Provincial and Local Government’s determination in accordance with this Act. 



30 August 2013 


Page 1 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 


Statement of Financial Position 



Note(s) 

2013 

R 

2012 

Restated 

R 

Assets 




Current Assets 

Inventories 

15 

32,296,944 

13,041,943 

Trade and Other Receivables from Exchange Transactions 

16 

22,366,249 

20,905,918 

Other Receivables from Non-Exchange Transactions 

17 

36,622,768 

27,780,732 

VAT Receivable 

9 

14,478,867 

2,524,923 

Current Portion of Non-Current Receivables 

14 

2,233 

4,095 

Short-Term Investments 

13 

80,955,967 

70,739,034 

Call Investment Deposits 

18 

95,301,130 

282,024,158 

117,044,589 

252,041,235 

Non-Current Assets 

Property, Plant and Equipment 

10 

803,921,386 

752,867,276 

intangible Assets 

11 

242,760 

158,238 

Investment Property 

12 

63,543,469 

58,158,103 

Non-Current Receivables from Exchange Transactions 

14 

19,186 

867,726,800 

21,418 

811,205,036 

Total Assets 

- 

1,149,750,958 

1,063,246,271 

Current Liabilities 

Consumer Deposits 

4 

8,045,469 

7,919,239 

Provisions 

5 

21,460,673 

19,276,296 

Trade and Other Payables from Exchange Transactions 

7 

71,152,032 

73,871,403 

Unspent Conditional Grants and Receipts 

8 

35,869,358 

56,321,412 

Cash and Cash Equivalents 

19 

29,314,433 

4,616,678 

Current Portion of Finance Lease Obligation 

3 

18,901 

74,246 

Current Portion of Long-term Loans 

2 

228,970 

166,089,836 

1,410,178 

163,489,451 

Non-Current Liabilities 

Long-term Loans 

2 

4,961,135 

5,190,105 

Finance Lease Obligation 

3 

26,139 

73,200 

Retirement Benefit Obligations 

6 

34,592,500 

39,579,775 

32,932,000 

38,195,305 

Total Liabilities 


205,669,611 

201,684,757 

Net Assets 


944,081,347 

861,561,514 

Net Assets 

Housing Development Fund 

1 

26,333,857 

25,033,273 

Accumulated Surplus 


917,747,490 

836,528,241 

Total Net Assets 


944,081,347 

861,561,514 


Page 2 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 


Statement of Financial Performance 


Actual 



Approved 


Final 

Difference 

Restated 


Actual 

Budget 

Adjustments 

Budget 

between Final 

2012 


2013 

2013 

2013 

2013 

Budget and 







Actual 

R 

Note(s) 

R 

R 

R 

R 

R 


Revenue 

Revenue from non-exchange transactions 


99,278,609 

Property Rates 

20 

112,765,228 

113,545,733 

- 

113,545,733 

(780,505) 

9,171,484 

Property Rates - Penalties & Collection Charges 


4,106,159 

10,501,970 

- 

10,501,970 

(6,395,811) 

3,386,165 

Fines 


5,980,091 

6,463,670 

- 

6,463,670 

(483,579) 

6,150,917 

Licences and Permits 


6,572,089 

6,484,260 

- 

6,484,260 

87,829 

148,125,131 

Government Grants and Subsidies 

22 

194,784,702 

182,811,000 

7,065,000 

189,876,000 

4,908,702 

9,550,335 

Government Grants - Low Cost Housing 

22 

11,759,115 

- 

- 

■ 

11,759,115 


Revenue from exchange transactions 







208,586,770 

Service Charges 

21 

232,535,667 

240,145,674 

(12,157,844) 

227,987,830 

4,547,837 

7,409,732 

Interest Earned - External Investments 


8,631,950 

3,399,300 

3,600,700 

7,000,000 

1,631,950 

628,385 

Interest Earned - Outstanding Receivables 


882,852 

1,932,428 

- 

1,932,428 

(1 ,049,576) 

38,703,274 

Other Income 

34 

26,095,010 

61,751,090 

(26,583,447) 

35,167,643 

(9,072,633) 

530,990,801 

Total Revenue 


604,112,862 

627,035,125 

(28,075,591) 

598,959,534 

5,153,328 


Expenditure 







122,725,971 

Employee Related Costs 

23 

132,108,363 

135,094,735 

18,808,126 

153,902,861 

(21,794,498) 

12,164,110 

Remuneration of Councillors 

24 

13,131,617 

13,584,699 

- 

13,584,699 

(453,082) 

15,324,891 

Bad Debts 


9,816,435 

8,666,143 

- 

8,666,143 

1,150,292 

13,613,089 

Indigency 


21,008,689 

19,576,950 

(4,480,000) 

15,096,950 

5,911,739 

69,066,939 

Depreciation and Amortisation Expense 


57,656,139 

95,535,277 

(1,410,178) 

94,125,099 

(36,468,960) 

31,968,690 

Repairs and Maintenance 


36,807,966 

42,820,443 

(1,804,685) 

41,015,758 

(4,207,792) 

681,942 

Finance Costs 

25 

555,517 

544,661 

- 

544,661 

10,856 

141,131,571 

Bulk Purchases 

26 

154,749,980 

167,753,000 

(16,065,924) 

151,687,076 

3,062,904 

4,906,147 

Grants / Subsidies and Rebates Paid 

27 

1,272,856 

6,308,000 

748,048 

7,056,048 

(5,783,192) 

4,913,427 

Grant Expenses 


9,450,229 

3,991 ,000 

5,192,000 

9,183,000 

267,229 

9,550,335 

Grants Expenses - Low Cost Housing 

22 

11,759,115 

- 

- 

- 

11,759,115 

88,415,217 

General Expenses 

28 

101 ,125,937 

158,753,983 

(44,814,03 5) 

113,939,948 

(12,814,011) 

514,462,329 

Total Expenditure 


549,442,842 

652,628,891 

(43,826,648) 

608,802,243 

(59,359,401) 


Other Gains / Losses 







(3,520,698) 

Gain / (Loss) on sale/disposal of assets 


(2,376,407) 

- 

- 

* 


3,462,188 

Gain / (Loss) on fair value adjustment 


28,203,866 

- 

- 

- 


- 

Gain / (Loss) on revaluation of assets 


- 

- 

* 



- 

Inventories : Write-down to net realisable value 


* 

- 

- 

- 


(88,686) 

Impairment Loss / Reversal of impairment loss 


(1,915,495) 





16,381,277 

Surplus / (Deficit) for the year 


78,581,983 

(25,593,766) 

15,751,057 

(9,842,709) 

64,512,729 


Page 3 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 


Statement of Changes in Net Assets 



Housing 

Development 

Fund 

R 

Accumulated 

Surplus 

R 

Total Net 

Assets 

R 

Opening balance as previously reported 

20,333,587 

781,679,913 

802,013,500 

Surplus for the year 

- 

8,497,130 

8,497,130 

Correction of Error: Reversal of Interest Raised on Trade Receivables 

- 

-5,545,050 

-5,545,050 

Prior Year Adjustment: Unidentified Bank Deposits up to 30 June 2010 

- 

4,684,294 

4,684,294 

Prior Year Adjustment: Unclaimed Payments to Employees / Creditors 

- 

21,249 

21,249 

Prior Year Adjustment: PPE (Movables) - Cost 

- 

12,803,552 

12,803,552 

Prior Year Adjustment: PPE (Movables) - Accumulated Depreciation 

- 

4,508,584 

4,508,584 

Prior Year Adjustment: Assets Held for Sale Cancelled 

- 

1,120,000 

1,120,000 

Prior Year Adjustment: PPE (Infrastructure Assets) 

- 

14,361,404 

14,361,404 

Prior Year Adjustment: Long Service Awards 

- 

-5,948,840 

-5,948,840 

Other Transfers to Internal Funds 

- 

790,459 

790,459 

Transfer to Self-Insurance Fund 

- 

1,519,263 

1,519,263 

Transfer to Housing Operating Account 

2,458,671 

- 

2,458,671 

Balance at 1 July 2011 as restated 

22,792,257 

818,491,959 

841,284,216 

Surplus for the year 

- 

16,381,277 

16,381,277 

Prior Year Adjustment: Unidentified Deposits Appropriated 

- 

347,892 

347,892 

Prior Year Adjustment: Unclaimed Payments to Employees / Creditors 

- 

52,305 

52,305 

Other Transfers to Internal Funds 

- 

-75,333 

-75,333 

Transfer to Self-Insurance Fund 

- 

1,330,142 

1,330,142 

Transfer to Housing Development Fund 

2,241,015 

- 

2,241,015 

Balance at 1 July 2012 

25,033,273 

836,528,241 

861,561,514 

Surplus for the year 

- 

78,581,983 

78,581,983 

Prior Year Adjustment: Unclaimed Payments to Employees / Creditors 

- 

299,437 

299,437 

Other Transfers to Internal Funds 

- 

-81,522 

-81,522 

Transfer to Self-Insurance Fund 

- 

2,419,351 

2,419,351 

T ransfer to Housing Development Fund 

1,300,584 

- 

1,300,584 

Balance at 30 June 2013 

26,333,856 

917,747,490 

944,081,347 


Page 4 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Cash Flow Statement 

2013 2012 

Note(s) R R 


Cash flows from operating activities 
Receipts 

Sale of goods and services 
Grants 

Interest received 
Other receipts 


314,932,304 

183,428,925 

9,514,801 

38,647,189 

546,523,220 


304,639,561 

168,973,968 

8,038,117 

68,585,176 

550,236,822 


Payments 
Employee costs 
Suppliers 
Interest paid 
Other payments 

Net cash flows from operating activities 



-172,579,971 

-268,620,209 

-555,517 

-30,512,549 

-1 53,599,466 
-235,227,431 
-681 ,942 
-43,927,322 


-472,268,246 

-433,436,161 


29 

74,254,974 

116,800,661 


Cash flows from investing activities 

Purchase of property, plant and equipment 
Purchase of investment property 
Purchase of intangible assets 
Proceeds on sale of assets 

Net cash flows from investing activities 


-113,694,463 -75,899,024 

-352,047 -19,930 

5,079,838 1,530,446 

-108,966,672 -74,388,508 


Cash flows from financing activities 


New loans raised/(repaid) 

-1,410,178 

-1,283,771 

Finance lease raised/(repaid) 

-102,406 

“ 

Net cash flows from financing activities 

-1,512,583 

-1,283,771 


Net increase / (decrease) in cash and cash equivalents 


-36,224,281 

41,128,382 

Cash and cash equivalents at the beginning of the year 




- Short-Term Investments 


70,739,034 

53,955,064 

- Call Investment Deposits 


117,044,589 

82,997,183 

- Cash and cash equivalents 


-4,616,678 

5,086,316 


— 

183,166,946 

142,038,563 

Cash and cash equivalents at the end of the year 




- Short-Term Investments 

13 

80,955,967 

70,739,034 

- Call Investment Deposits 

18 

95,301,130 

117,044,589 

- Cash and Cash Equivalents 

19 

-29,314,433 

-4,616,678 



146,942,664 

183,166,946 


Page 5 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Acco unting Policies 


1 . BASIS OF PREPARATION 

1 .1 BASIS OF PRESENTATION 

The annual financial statements have been prepared on an accrual basis of accounting 
and are in accordance with historical cost conventions as the basis of measurement, 
except where specified otherwise. 

These annual financial statements have been prepared in accordance with Generally 
Recognised Accounting Practice (GRAP), issued by the Accounting Standards Board in 
accordance with Section 1 22(3) of the Municipal Finance Management Act, (Act No 56 of 
2003). 

The principle accounting policies adopted in the preparation of these annual financial 
statements are set out below. 

Assets, liabilities, revenues and expenses have not been offset except when offsetting is 
required or permitted by a Standard of GRAP. 

The accounting policies applied are consistent with those used to present the previous 
year’s financial statements, unless explicitly stated. The details of any changes in 
accounting policies are explained in the relevant policy. 

1.2 PRESENTATION CURRENCY 

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

1 .3 GOING CONCERN ASSUMPTION 

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

1.4 COMPARATIVE INFORMATION 

Budget information in accordance with GRAP 1 and 24, has been provided in a separate 
disclosure note and annexure to these financial statements and forms part of the audited 
annual financial statements. 

When the presentation or classification of items in the annual financial statements is 
amended, prior period comparative amounts are restated. The nature and reason for the 
reclassification is disclosed. Where accounting errors have been identified in the current 
year, the correction is made retrospectively as far as is practicable, and the prior year 
comparatives are restated accordingly. Where there has been a change in accounting 
policy in the current year, the adjustment is made retrospectively as far as is practicable, 
and the prior year comparatives are restated accordingly. 

1.5 STANDARDS, AMENDMENTS TO STANDARDS AND INTERPRETATIONS ISSUED 
BUT NOT YET EFFECTIVE 

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

GRAP 18: Segment Reporting - issued March 2005: 

Compliance with this standard would have had an effect on the presentation only. 
Financial information would have been reported by segments. The disclosure of this 
information will assist users of the financial statements to better understand the entity's 
past performance and to identify the resources allocated to support the major activities of 
the entity. 


Page 6 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

A cc ounting Policies 


GRAP 25: Employee Benefits - issued December 2009: 

Compliance with this standard would not have a significant impact on the financial 
position, financial performance or cash flows of the municipality. 

GRAP 26: Impairment of Non-Cash Generating Assets - issued March 2009: 
Compliance with this standard would not have a significant impact on the financial 
position, financial performance or cash flows of the municipality. 


2. HOUSING DEVELOPMENT FUND 

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


3. INTERNAL RESERVES 

3.1 Self insurance reserve 

The municipality has a Self-Insurance Reserve to set aside amounts to offset potential 
losses or claims that cannot be insured externally (excess payments). Premiums are 
charged to the respective services taking into account claims history and replacement 
values of the insured assets. The balance of the self-insurance fund is ring-fenced within 
the accumulated surplus/(deficit). 

The Council determines annually the amount to contribute to the Self Insurance Reserve. 

Claims not fully covered by external insurance are financed from the insurance reserve 
by transferring a corresponding amount from the self-insurance reserve to the 
accumulated surplus. 

The municipality operates a self-insurance scheme under the Self-Insurance Reserve, 
which has a policy that is aligned with the practice in the Insurance Industry. The balance 
of the Self-Insurance Reserve is determined based on surpluses accumulated since 
inception. 

These surpluses arise from the differences between premiums charged against claims 
paid and various administrative expenditure incurred. 

At the end of each financial year the surplus as computed per above is transferred from 
accumulated surplus to Self-Insurance Reserve. 

The balance of the self-insurance fund is fully cash backed and is invested in a separate 
call account. 


Page 7 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Accounting Policies _ _ 


4. PROPERTY, PLANT AND EQUIPMENT 

4.1 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 
year. Items of property, plant and equipment are initially recognised as assets on 
acquisition date and are initially recorded 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 the municipality. Trade discounts and rebates are deducted in arriving at the cost. The 
cost includes the necessary costs of dismantling and removing the asset and restoring 
the site on which it is located. 

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

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

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. 

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. 


4.2 SUBSEQUENT MEASUREMENT - COST MODEL 

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

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

4.3 DEPRECIATION AND IMPAIRMENT 

Depreciation is calculated on cost less residual value, using the straight-line method over 
the estimated useful lives of the assets. Components of assets that are significant in 
relation to the whole asset and that have different useful lives are depreciated separately. 
Land is not depreciated as it is deemed to have an indefinite useful life. 


Page 8 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Acc oun ting P olicies 


The annual depreciation rates are based on the following estimated average asset lives:- 


DETAILS 

YEARS 

DETAILS 

YEARS 





Infrastructure 


Other 


Roads and Paving 

5-100 

Buildings 

10-50 

Pedestrian Malls 

20 

Specialised Vehicles 

3-20 

Electricity 

10-50 

Other Vehicles 

3-20 

Water 

10-100 

Office Equipment 

5-7 

Sanitation 

10-100 

Furniture and Fittings 

10 

Housing 

30 

Watercraft 

15 

Stormwater 

25 - 120 

Bins and Containers 

5-10 

Community 


Specialised Plant and Equipment 

5-15 

Buildings ^ 

10-50 

Other Items of Plant and 
Equipment 

5-15 

Recreational Facilities 

10-100 

Landfill sites 

15 

Security 

3-5 








The residual value, the useful life of an asset and the depreciation method is reviewed 
annually and any changes are recognised as a change in accounting estimate in the 
Statement of Financial Performance. 

The municipality tests for impairment where there is an indication that an asset may be 
impaired. An assessment of whether there is an indication of possible impairment is done 
at each reporting date. Where the carrying amount of an item of property, plant and 
equipment is greater than the estimated recoverable amount (or recoverable service 
amount), it is written down immediately to its recoverable amount (or recoverable service 
amount) and an impairment loss is charged to the Statement of Financial Performance. 

4.4 DERECOGNITION 

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

4.5 INCOMPLETE CONSTRUCTION WORK 

Incomplete construction work is stated at historical cost. Depreciation only commences 
when the asset is available for use. 


5. INVESTMENT PROPERTY 

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

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

• administrative purposes, or 

• sale in the ordinary course of operations. 

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


Page 9 




Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

A ccoun tin g Polic ies 


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

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

Where investment property is acquired at no cost or for a nominal cost, its cost is its fair value as 
at the date of acquisition. 

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

5.1 FAIR VALUE 

Subsequent to initial measurement investment property is measured at fair value. 

The fair value of investment property reflects market conditions at the reporting date. 

A gain or loss arising from a change in fair value is included in net surplus or deficit for 
the period in which it arises. 

If the fair value of investment property under construction is not determinable, it is 
measured at cost until the earlier of the date it becomes determinable or construction is 
complete. 


6. INTANGIBLE ASSETS 

An asset is identified as an intangible asset when it: 

• is capable of being separated or divided from an entity and sold, transferred, 
licensed, rented or exchanged, either individually or together with a related 
contract, assets or liability; or 

• arises from contractual rights or other legal rights, regardless whether those 
rights are transferable or separate from the municipality or from other rights and 
obligations. 

An intangible asset is recognised when: 

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

• the cost or fair value of the asset can be measured reliably. 

Intangible assets are initially recognised at cost. 

An intangible asset acquired at no or nominal cost, the cost shall be its fair value as at 
the date of acquisition. 

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. 


Page 10 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Accounting Policies 


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

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

An intangible asset is regarded as having an indefinite useful life when, based on all 
relevant factors, there is no foreseeable limit to the period over which the asset is 
expected to generate net cash inflows or service potential. Amortisation is not provided 
for these intangible assets, but they are tested for impairment annually and whenever 
there is an indication that the asset may be impaired. For all other intangible assets 
amortisation is provided on a straight line basis over their useful life. 

The amortisation period and the amortisation method for intangible assets are reviewed 
at each reporting date. 

Reassessing the useful life of an intangible asset with a finite useful life after it was 
classified as indefinite is an indicator that the asset may be impaired. As a result the 
asset is tested for impairment and the remaining carrying amount is amortised over its 
useful life. 

Internally generated brands, mastheads, publishing titles, customer lists and items similar 
in substance are not recognised as intangible assets. 

Amortisation is provided to write down the intangible assets, on a straight line basis, to 
their residual values as follows: 

Item Useful life 

Servitudes indefinite 

Software 3 years 


7. IMPAIRMENT OF ASSETS 

7.1 CASH GENERATING ASSETS 

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

If there is any indication that an asset may be impaired, the recoverable amount is 
estimated for the individual asset. If it is not possible to estimate the recoverable amount 
of the individual asset, the recoverable amount of the cash-generating unit to which the 
asset belongs is determined. 

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

If the recoverable amount of an asset is less than its carrying amount, the carrying 
amount of the asset is reduced to its recoverable amount. That reduction is an 
impairment loss. 

An impairment loss of assets carried at cost less any accumulated depreciation or 
amortization is recognized immediately in surplus or deficit. 


Page 1 1 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Acco untin g Policie s 


An impairment loss is recognized for cash-generating units if the recoverable amount of 
the unit is less than the carrying amount of the unit. The impairment loss is allocated to 
reduce the carrying amount of the assets of the unit as follows: 

To the assets of the unit, pro-rata on the basis of the carrying 
amount of each asset in the unit. 

The municipality assesses at each reporting date whether there is any indication that an 
impairment loss recognized in prior periods for assets may no longer exist or may have 
decreased. If any such indication exists, the recoverable amounts of those assets are 
estimated. 

The increased carrying amount of an asset attributable to a reversal of an impairment 
loss does not exceed the carrying amount that would have been determined had no 
impairment loss been recognized for the asset in prior periods. 

A reversal of an impairment loss of assets carried at cost less accumulated depreciation 
or amortization is recognized immediately in surplus or deficit. 

7.2 NON-CASH GENERATING ASSETS 

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

If there is any indication that an asset may be impaired, the recoverable service amount 
is estimated for the individual asset. If it is not possible to estimate the recoverable 
service amount of the individual asset, the recoverable service amount of the cash- 
generating unit to which the asset belongs is determined. 

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

If the recoverable service amount of an asset is less than its carrying amount, the 
carrying amount of the asset is reduced to its recoverable service amount. That reduction 
is an impairment loss. 

An impairment loss of assets carried at cost less any accumulated depreciation or 
amortization is recognized immediately in surplus or deficit. 

An impairment loss is recognized for non-cash generating units if the recoverable service 
amount of the unit is less than the carrying amount of the unit. The impairment loss is 
allocated to reduce the carrying amount of the assets of the unit as follows: 

To the assets of the unit, pro-rata on the basis of the carrying 
amount of each asset in the unit. 

The municipality assesses at each reporting date whether there is any indication that an 
impairment loss recognized in prior periods for assets may no longer exist or may have 
decreased. If any such indication exists, the recoverable service amounts of those assets 
are estimated. 

The increased carrying amount of an asset attributable to a reversal of an impairment 
loss does not exceed the carrying amount that would have been determined had no 
impairment loss been recognized for the asset in prior periods. 


Page 12 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Accounting Policies 

A reversal of an impairment loss of assets carried at cost less accumulated depreciation 
or amortization is recognized immediately in surplus or deficit. 


8. INVENTORIES 

8.1 INITIAL RECOGNITION 

Inventories comprise current assets held for sale, consumption or distribution during the 
ordinary course of business. Inventories are initially recognised at cost. Cost generally 
refers to the purchase price, plus 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. 

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

8.2 SUBSEQUENT MEASUREMENT 

Inventories, consisting of consumable stores, raw materials, work-in-progress and 
finished goods, are valued at the lower of cost and net realisable value unless they are to 
be distributed at no or nominal charge, in which case they are measured at the lower of 
cost and current replacement cost. Redundant and slow-moving inventories are identified 
and written down in this way. Differences arising on the valuation of inventory are 
recognised in the Statement of Financial Performance in the year in which they arose. 
The amount of any reversal of any write-down of inventories arising from an increase in 
net realisable value or current replacement cost is 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. 

In general, the basis of allocating cost to inventory items is the weighted average method. 


9. FINANCIAL INSTRUMENTS 

9.1 INITIAL RECOGNITION 

Financial instruments are initially recognised at fair value. 

9.2 SUBSEQUENT MEASUREMENT 

Financial Assets are categorised according to their nature as either financial assets affair 
value through profit or loss, held-to maturity, loans and receivables, or available for sale. 

Financial liabilities are categorised as either at fair value through profit or loss or financial 
liabilities carried at amortised cost ("other"). The subsequent measurement of financial 
assets and liabilities depends on this categorisation and, in the absence of an approved 
GRAP Standard on Financial Instruments, is in accordance with IAS 39. 

9.2.1 INVESTMENTS 

Investments, which include listed government bonds, unlisted municipal bonds, 
fixed deposits and short-term deposits invested in registered commercial banks, 
are categorised as either held-to-maturity where the criteria for that 


Page 13 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Acco untin g Polic ies 


categorisation are met, or as loans and receivables, and are measured at 
amortised cost. 

Where investments have been impaired, the carrying value is adjusted by the 
impairment loss, which is recognised as an expense in the period that the 
impairment is identified. Impairments are calculated as being the difference 
between the carrying amount and the present value of the expected future cash 
flows flowing from the instrument. On disposal of an investment, the difference 
between the net disposal proceeds and the carrying amount is charged or 
credited to the Statement of Financial Performance. 

9.2.2 TRADE AND OTHER RECEIVABLES 

Trade and other receivables are categorised as financial assets: loans and 
receivables and are initially recognised at fair value and subsequently carried at 
amortised cost. Amortised cost refers to the initial carrying amount, plus interest, 
less repayments and impairments. An estimate is made for doubtful receivables 
based on a review of all outstanding amounts at year-end. Significant financial 
difficulties of the debtor, probability that the debtor will enter bankruptcy or 
financial reorganisation, and default or delinquency in payments (more than 30 
days overdue) are considered indicators that the trade receivable is impaired. 
Impairments are determined by discounting expected future cash flows to their 
present value. Amounts that are receivable within 12 months from the reporting 
date are classified as current. 

An impairment of trade receivables is accounted for by reducing the carrying 
amount of trade receivables through the use of an allowance account, and the 
amount of the loss is recognised in the Statement of Financial Performance 
within operating expenses. When a trade receivable is uncollectible, it is written 
off. Subsequent recoveries of amounts previously written off are credited against 
operating expenses in the Statement of Financial Performance. 

9.2.3 TRADE PAYABLES AND BORROWINGS 

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

9.2.4 CASH AND CASH EQUIVALENTS 

Cash includes cash on hand (including petty cash) and cash with banks 
(including call deposits). 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 four months or less and are 
subject to an insignificant risk of change in value. For the purposes of the cash 
flow statement, cash and cash equivalents comprise cash on hand, deposits held 
on call with banks, net of bank overdrafts. The municipality categorises cash and 
cash equivalents as financial assets: loans and receivables. 


10. UNAUTHORISED EXPENDITURE 

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


Page 14 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Accoun ting Policies 


1 1 . IRREGULAR EXPENDITURE 

Irregular expenditure is expenditure that is contrary to the Municipal Finance Management Act 
(Act No. 56 of 2003), the Municipal Systems Act (Act No.32 of 2000), the Public Office Bearers 
Act (Act No. 20 of 1998) or is in contravention of the Municipality’s supply chain management 
policy. Irregular expenditure excludes unauthorised expenditure. Irregular expenditure is 
accounted for as expenditure in the Statement of Financial Performance and where recovered, it 
is subsequently accounted for as revenue in the Statement of Financial Performance. 


12. FRUITLESS AND WASTEFUL EXPENDITURE 

Fruitless and wasteful expenditure is expenditure that was made in vain and would have been 
avoided had reasonable care been exercised. Fruitless and wasteful expenditure is accounted for 
as expenditure in the Statement of Financial Performance and where recovered, it is 
subsequently accounted for as revenue in the Statement of Financial Performance. 


13. PROVISIONS 

Provisions are recognised when the municipality has a present or constructive obligation as a 
result of past events, it is probable that an outflow of resources embodying economic benefits will 
be required to settle the obligation and a reliable estimate of the provision can be made. 
Provisions are reviewed at reporting date and adjusted to reflect the current best estimate. Where 
the effect is material, non-current provisions are discounted to their present value using a pre-tax 
discount rate that reflects the market's current assessment of the time value of money, adjusted 
for risks specific to the liability (for example in the case of obligations for the rehabilitation of 
land). 

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

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


14. LEASES 

14.1 MUNICIPALITY AS LESSEE 

Leases are classified as finance leases where substantially all the risks and rewards 
associated with ownership of an asset are transferred to the municipality. Property, plant 
and equipment or intangible assets subject to finance lease agreements are initially 
recognised at the lower of the asset's fair value and the present value of the minimum 
lease payments. The corresponding liabilities are initially recognised at the inception of 
the lease and are measured as the sum of the minimum lease payments due in terms of 
the lease agreement, discounted for the effect of interest. In discounting the lease 
payments, the municipality uses the interest rate that exactly discounts the lease 
payments and unguaranteed residual value to the fair value of the asset plus any direct 
costs incurred. 

Subsequent to initial recognition, the leased assets are accounted for in accordance with 
the stated accounting policies applicable to property, plant, equipment or intangibles. The 


Page 1 5 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 


Notes to the Annual Financial Statements 


2013 


2012 

Restated 

R 


17. Other Receivables from Non-Exchange Transactions 


As at 30 June 2013 


Gross 

Balances 


Provision for 
Bad Debts 


Net Balance 


Rates 

79,791,768 

(63,510,662) 

16,281,106 

Vat Service Debtors 

5,306,316 

- 

5,306,316 

Service Debtors - Conversion Debt 

4,683 

(4,683) 

(0) 

Legal Fees - Debtors 

2,230,764 

(2,201,140) 

29,624 

Credit Control Costs - Debtors 

93,282 

(58,050) 

35,232 

Sundry Debtors 

19,593,021 

(4,622,532) 

14,970,490 

— 

107,019,834 

(70,397,066) 

36,622,768 

As at 30 June 2012 




Rates 

75,572,384 

(63,674,617) 

11,897,766 

Vat Service Debtors 

4,636,135 

- 

4,636,135 

Service Debtors - Conversion Debt 

6,320 

(6,320) 

- 

Legal Fees - Debtors 

2,705,303 

(2,672,454) 

32,849 

Credit Control Costs - Debtors 

90,565 

(32,657) 

57,908 

Sundry Debtors 

14,427,792 

(3,271 ,717) 

11,156,075 

— 

97,438,498 

(69,657,766) 

27,780,732 

Rates : Aqeinq 




Current (0 - 30 days) 


82,484 

653,720 

31 - 60 Days 


2,806,204 

2,036,006 

61 - 90 Days 


1,573,507 

1,168,335 

91 - 120 Days 


1,325,553 

1,275,358 

121+ Days 


74,004,021 

70,438,965 


— 

79,791,768 

75,572,384 

Reconciliation of the doubtful debt provision 




Balance at beginning of the year 


69,657,766 

58,842,560 

Contributions to provision 


4,822,005 

10,815,206 

Additional provision for impairment 


- 

- 

Doubtful debts written off against provision 


(4,082,704) 

- 

Reversal of provision 


- 

- 


— 

70,397,066 

69,657,766 

Trade and other receivables from non-exchanae transactions impaired 




As of 30 June 2013, trade and other receivables of R86 595 688 (2012: R 80 901 812) were impaired and provided for. 


The amount of the provision was R70 397 066 as of 30 June 2013 (2012: R69 657 766). 



The ageing of these receivables is as follows: 




31 - 60 Days 


2,235,924 

1,730,435 

61 - 90 Days 


1,253,737 

992,988 

91 - 120 Days 


1,056,172 

1,083,948 

121+ Days 


65,851,234 

65,850,395 



70,397,066 

69,657,766 

The fair value of trade and other receivables from non-exchange transactions approximates their carrying amounts. 


All Debtors with the exclusion of Vat Service Debtors are individually evaluated annually at balance sheet date for impairment. 

A report on the various categories of debtors is drafted to substantiate such evaluation and subsequent impairment, where 


applicable. Evaluation of impairment includes all debt passed 30 days, and considers past and current payment patterns. 


Page 31 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Notes to the Annual Financial Statements 

2013 2012 

Restated 

R R 


18. Call Investment Deposits 

The Municipality has the following call investment bank accounts 

General Call Account 
ABSA Bank - Public Sector Banking 
Account Number 9207051716 
Bank statement balance at end of period 

Department of Housing Grants Call Accoun t 
ABSA Bank - Public Sector Banking 
Account Number 9207052314 
Bank statement balance at end of period 

Grant Funds Cali Account 
ABSA Bank - Public Sector Banking 
Account Number 9207054081 
Bank statement balance at end of period 

Aloe and Bern Tea Call Accoun t 
ABSA Bank - Public Sector Banking 
Account Number 9207054934 
Bank statement balance at end of period 

Valuations Call Account 
ABSA Bank - Public Sector Banking 
Account Number 9216278503 
Bank statement balance at end of period 

Depreciation Call Account 
ABSA Bank - Public Sector Banking 
Account Number 9216278799 
Bank statement balance at end of period 

Small Town Rehabilitation Grant Call Accoun t 
ABSA Bank - Public Sector Banking 
Account Number 9236394943 
Bank statement balance at end of period 

Ladysmith Black Mambazo Call Account 
ABSA Bank - Public Sector Banking 
Account Number 236410696 
Bank statement balance at end of period 

Self-Insurance Fund Call Accoun t 
ABSA Bank - Public Sector Banking 
Account Number 9251267674 
Bank statement balance at end of period 

Neighbourhood Development Partnership Grant Call Accoun t 

ABSA Bank - Public Sector Banking 

Account Number 9265577031 

Bank statement balance at end of period 

Housing Operating Call Accoun t 
ABSA Bank - Public Sector Banking 
Account Number 9274469611 
Bank statement balance at end of period 

Housing Capacity Fund Call Accoun t 
ABSA Bank - Public Sector Banking 
Account Number 9285122301 
Bank statement balance at end of period 


16,898,742 20,084,812 


19,654,690 40,195,077 


13,985,151 24,610,811 


173,615 210,174 


11,389 10,880 


7,860,827 7,509,413 


2,157,287 10,874,131 


1,972,581 1,806,312 


6,389,805 4,353,041 


8,953,544 7,389,939 


17,242,498 


1,000 

95,301,130 117,044,589 


Page 32 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Notes to the Annual Financial Statements 

~ " 2013 2012 

Restated 

R R 


19. Cash and Cash Equivalents 

The Municipality has the following bank account :- 
Current Account (Primary Bank Account ) 


ABSA Bank - Public Sector Banking 

Account Number 4071756088 


Cash book balance at beginning of year 
Cash book balance at end of period 

Bank statement balance at beginning of year 
Bank statement balance at end of period 


20. Property Rates 

Actual 

Residential 

Commercial 

State 

Total Assessment Rates 


Valuations 

Residential 

Commercial 

State 

Total Property Valuations 


(4,616,678) 

5,086,316 

(29,314,433) 

(4,616,678) 

12,127,770 

10,294,546 

13,278,136 

12,127,770 


56,279,337 

50,456,335 

35,670,083 

31,545,533 

20,815,808 

17,276,742 

112,765,228 

99,278,609 

R'000 

R'000 

6,386,222 

6,233,230 

1,561,674 

1,712,522 

884,690 

884,690 

8,832,586 

8,830,442 


Valuation on land and buildings is performed every five years. The last valuation came into effect on 1 July 2008. Supplementary 
valuations are processed on a ad-hoc basis to take into account changes in individual property values due to change in use, 
alterations, consolidations and subdivisions. 

The following property allocation factors are applied to the various categories of property to determine assessment rates less the 
impermissible valuation allowed : 


Category 

Rate 

Impermissible 

Valuation 

Residential Property 

R 0.0129 

R 15 000 

Industrial/Commercial/Business 

R 0.0231 

R 15 000 

Agricultural 

R 0.0032 

R 15 000 

Vacant Land 

R 0.0535 

R 0 

Game Hunting / Eco-Tourism 

R 0.0097 

R 15 000 

State 

R 0.0238 

R 15 000 

Industrial Estate 

R 0.0179 

R 15 000 


Rates are levied on a monthly basis on property owners with the final date of payment being 30 June 2013 (2012: 30 June 2012). 
Interest at 18% per annum (2012: 18%) is levied on outstanding rates as well as a 10% (2012: 10%) collection charge two months 
after final date of payment. 


Page 33 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 


Notes to the Annual Financial Statements 



2013 

R 

2012 

Restated 

R 

21. Service Charges 

Sale of electricity 

216,813,018 

193,945,782 

Refuse removal 

15,722,649 

14,640,988 


232,535,667 

208,586,770 

22. Government Grants and Subsidies 

Equitable share 

103,921 ,090 

93,368,000 

Municipal Infrastructure Grant (MIG) 

32,199,649 

19,218,611 

Dept of Housing 

11,759,115 

9,550,335 

Museum Subsidy 

134,000 

125,000 

Financial Management Grant 

1,500,000 

1,450,000 

Municipal Systems Improvement Grant 

800,000 

790,000 

Department of Mineral & Energy (DME) 

- 

3,529,940 

Integrated National Electricity Programme (INEP) 

10,425,677 

3,003,158 

Neighbourhood Development Programme (NDPG) 

22,444,538 

15,777,237 

Small Town Rehabilitation (STR) 

15,130,272 

9,966,423 

Other Grants 

8,229,475 

896,761 


206,543,817 

157,675,466 


22.1 Equitable Share 

In terms of the Constitution, this grant is used to subsidise the provision of basic services to indigent community members. All 
registered indigents and automatic indigents, whose Property Valuation is R 80 000 and less, receive a 100% credit for their 
Property Rates and their monthly services account. 


22.2 Municipal Infrastructure Grant (MIG) 

Balance unspent at beginning of year 
Balance overspent at beginning of year (Debtor Raised) 
Transfer amount from Other Grants Incorrectly Disclosed 
Current year receipts 

Conditions met - transferred to revenue (Other) 

Funds not yet received - spending in advance (Debtor Raised) 
Conditions still to be met - transferred to liabilities 


(2,647,920) 

(881,139) 

30,758,000 

(32,199,649) 

4,955,196 

(15,513) 


(8,785,309) 

25,356,000 

(19,218,611) 

2,647,920 


This grant was used to construct roads and bridges, sportsfields and streetlighting as part of the upgrading of informal settlement 
areas (included in the votes in Appendix B). No funds have been withheld. 


22.3 Department of Housing 

23,211,525 27,313,863 

6,136,766 5,447,997 

(11,759,115) (9,550,335) 

17,589,176 23,211,525 


This grant was used to construct houses as part of the upgrading of informal settlement areas. 


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


22.4 Museum subsidy 
Balance unspent at beginning of year 

Current year receipts 134,000 125,000 

Conditions met - transferred to revenue (134,000) (125,000) 

Conditions still to be met - transferred to liabilities 2 I- 


This grant was used to subsidise expenses incurred solely for the museums. 


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Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Notes to the Annual Financial Statements 

2013 2012 

Restated 

R R 


22.5 Financial Management Grant (FMG) 

Balance unspent at beginning of year 

Current year receipts 1 ,500,000 1 ,450,000 

Conditions met - transferred to revenue (1,500,000) (1,450,000) 

Conditions still to be met - transferred to liabilities - - 


This grant was used for Interns' salaries to advance the implementation of the MFMA, training of officials to meet the minimum 
competency requirements, and Asset Management. 

22.6 Municipal Systems Improvement Grant (MSIG) 

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


This grant was used for systems to comply with the MPRA and Audit Outcomes i.t.o. GRAP. 


22.7 Department of Minerals and Energy (DME) Grant 

Balance unspent at beginning of year 

Balance overspent at beginning of year (Debtor Raised) 

Current year receipts 

Conditions met - transferred to revenue 

Funds not yet received - spending in advance (Debtor Raised) 

Conditions still to be met - transferred to liabilities 


This grant was used for electricity connections to households in various areas. 


22.8 Integrated National Electricity Programme Grant (INEP) 

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


This grant was used for electricity connections to households in various areas. 


22.9 Neighbourhood Development Partnership Grant (NDPG) 

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


7,602,003 8,729,241 

15,000,000 14,650,000 

(22,444,538) (15,777,237) 

157,465 7,602,003 


10,472,362 5,475,520 

8 , 000,000 

(10,425,677) (3,003,158) 

46,684 10,472,362 


(46,684) 


3,483,256 


(3,529,940) 

46,684 


(46,684) 


800,000 790,000 

(800,000) (790,000) 


This grant is used for the upgrading of rural areas in terms of infrastructure development which includes streetlighting, pavements, 
taxi ranks, bridges, etc. 


Page 35 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 


Notes to the Annual Financial Statements 

2013 2012 

Restated 

R R 


22.10 Small Town Rehabilitation Programme Grant (STRP) 

Balance unspent at beginning of year 7,728,025 1,694,449 

Current year receipts 7,000,000 1 6,000,000 

Conditions met - transferred to revenue (15,130,272) (9,966,423) 

Funds not yet received - spending in advance (Debtor Raised) 402,247 

Conditions still to be met - transferred to liabilities - 7,728,025 


This grant was used for the upgrading of the CBD roads, town beautification, sidewalks, parks and informal trader shelters. 


22.11 Other Grants 



Balance unspent at beginning of year 

7,307,496 

4,417,286 

Transfer amount to MIG incorrectly disclosed 

881,139 

- 

Current year receipts 

18,179,069 

3,786,971 

Conditions met - transferred to revenue (Other) 

(8,229,475) 

(896,761) 

Conditions still to be met - transferred to liabilities 

18,138,229 

7,307,496 


22.12 Changes in levels of government grants 

Based on the allocations set out in the Division of Revenue Act, (Act 1 of 2005), no significant changes in the level of government 
grant funding are expected over the forthcoming 3 financial years. 


Page 36 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Notes to the Annual Financial Statements 

2013 2012 

Restated 

R R 


23. Employee Related Costs 


Employee related costs - Salaries and Allowances 

95,791,765 

86,427,028 

Employee related costs - Contributions for UIF, pensions, medical aids and group life 

20,374,742 

18,147,302 

Travel allowances 

6,712,532 

5,914,874 

Housing benefits and allowances 

604,253 

596,691 

Overtime & standby payments 

8,312,417 

8,725,375 

Performance bonus 

300,660 

136,598 

Job Creation 

27,351,985 

21,487,488 

Less : Employee costs to Property, Plant and Equipment and other expenses 

There were no advances or loans to employees. 

(27,339,991) 

132 , 108,363 

(17,630,101) 

123 , 805,255 

Remuneration of Municipal Manager : Mr M P Khathide 

Annual Remuneration 

1,067,583 

412,254 

Performance Bonus 

1 , 067,583 

412,254 


Mr M P Khathide was appointed in the post of Municipal Manager on 1 September 2012, and acted in the post for the period 
1 February 201 2 to 31 August 2013 


Remuneration of Municipal Manager : Mr N J Mdakane 
Annual Remuneration 
Performance Bonus 


Mr N J Mdakane resigned on 31 January 2012 


Remuneration of the Chief Financial Officer : Mr R A Jhetam (Acting) 
Annual Remuneration 
Performance Bonus 


Mr R A Jhetam was appointed to act in the post of Chief Financial Officer on 1 December 2012 


Remuneration of the Chief Financial Officer : Ms A R Ngwenya 
Annual Remuneration 
Performance Bonus 


Ms A R Ngwenya resigned on 30 November 2012 


Remuneration of the Executive Manager: Corporate Services : MrS N Kunene 
Annual Remuneration 
Performance Bonus 


Mr S N Kunene was appointed in the post of Executive Manager: Corporate Services on 1 March 2013 


Remuneration of the Executive Manager: Corporate Services : Mr H A van Zyl (Acting) 

Annual Remuneration 569,729 203,772 

Performance Bonus ; ^ 

569,729 203,772 


Mr H A van Zyl was appointed to act in the post of Executive Manager: Corporate Services from 1 April 201 2 to 28 February 201 3 


283,928 

283,928 


372,686 848,640 

110,323 64,000 

483,009 912,640 


543,164 

543/164 


562,448 

44,924 72,598 

44,924 635,046 


Page 37 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Notes to the Annual Financial Statements 

2013 2012 

Restated 

R R 


Remuneration of the Executive Manager: Corporate Services : Ms PS Mntaka (Acting) 
Annual Remuneration 
Performance Bonus 


67,573 

67,573 


Ms P S Mntaka was appointed to act in the post of Executive Manager: Corporate Services from 1 March 2012 to 31 March 2012 


Remuneration of the Executive Manager: Governance & Transformation : Mr R G Reddy 
Annual Remuneration 

Performance Bonus 


43,577 

43,577 


545,865 

61,619 

607,484 


Mr R G Reddy's contract ended on 28 February 2012 (This post was since changed to Executive Manager: Corporate Services) 


Remuneration of the Executive Manager: Community Services : Mr P B B Simelane 

Annual Remuneration 283,928 

Performance Bonus l 

283,928 


Mr P B B Simelane was appointed in the post of Executive Manager: Community Services on 1 March 2013 


Remuneration of the Executive Manager: Community Services : Mr P S Mkhize (Acting) 
Annual Remuneration 

Performance Bonus _ 


526,591 

526,591 


Mr P S Mkhize was appointed to act in the post of Executive Manager: Community Services - 1 August 2012 to 28 February 2013 

Remuneration of the Executive Manager: Development, Planning & Human Settlement : Mr P S Mkhize 
Annual Remuneration 283,928 

Performance Bonus 

283,928 


Mr P S Mkhize was appointed in the post of Executive Manager: Development, Planning & Human Settlement on 1 March 2013 


Remuneration of the Executive Manager: Development, Planning & Human Settlement : Ms P S Mntaka (Acting) 
Annual Remuneration 493,532 

Performance Bonus : 

493,532 


Ms P S Mntaka was appointed to act in the post of Executive Manager: Economic Development for the period 1 August 2012 
to 28 February 2013 


Remuneration of the Executive Manager: 
Annual Remuneration 
Performance Bonus 


infrastructure & Services : Mr A Sompersadh (Acting) 

755,419 


755,419 


Mr A Sompersadh was appointed to act in the post of Executive Manager: Infrastructure & Services on 1 September 2012 


Remuneration of the Executive Manager: Infrastructure & Services : Mr S Mathew 
Annual Remuneration 
Performance Bonus 


150,634 850,187 

101,837 L 

252,470 850,187 


Mr S Mathew's contract ended on 31 August 2012 


Page 38 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Notes to the Annual Financial Statements 


Remuneration of the Chief Operations Officer : Mr S E Hlomuka 
Annual Remuneration 
Other Alowances 


Mr S E Hlomuka was appointed in the post of Chief Operations Officer on 1 June 2013 


24. Remuneration of Councillors 

Mayor 

Deputy Mayor 
Speaker 
Chief Whip 

EXCO Committee Members 
Councillors 


In-kind Benefits 


cost of the Council. 


The Mayor and the Deputy Mayor each have two full-time bodyguards. 


25. Finance Costs 

Long-term liabilities 
Finance Lease Obligations 
Other interest paid 


2013 

R 

2012 

Restated 

R 

37,486 


20,909 

- 

58,395 

- 

680,847 

652,710 

552,987 

527,386 

550,942 

525,946 

519,647 

- 

1,814,100 

1,642,962 

9,013,094 

8,815,106 

13,131,617 

12,164,110 

office and secretarial support at the 

jfficial duties. 

544,661 

671 ,068 

5,239 

- 

5,617 

10,873 

555,517 

681,942 


Page 39 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Notes to the Annual Financial Statements 

2013 2012 

Restated 

R R 


26. Bulk Purchases 


Electricity 



154,749,980 

141,131,571 



154,749,980 

141,131,571 

Distribution Losses : Electricity 

2013 

Kwh 

2012 

Kwh 



Value of Purchases at Purchase Price 

Less : Sales at Purchase Price 

253,237,927 

(226,334,076) 

259,253,693 

(232,435,814) 

109,806,112 

(98,140,374) 

106,294,014 

(95,298,684) 

Total Losses 

26,903,851 

26,817,879 

11,665,738 

10,995,330 

Technical Losses 

Non-Technical Losses 

12,661,896 

14,241,955 

12,962,685 

13,855,195 

5,490,305 

6,175,432 

5,314,701 

5,680,630 

Total Losses 

26,903,851 

26,817,880 

11,665,738 

10,995,331 

Percentage of Total Loss 

10.62% 

10.34% 



The value of loss is calculated using the bulk purchase price. 




27. Grants / Subsidies and Rebates Paid 





Grants paid to students 

Grants paid to other 

Rates Rebates 



289,600 

6,192 

977,064 

191,394 

6,000 

4,708,753 



1,272,856 

4,906,147 


Page 40 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 


Notes to the Annual Financial Statements 



2013 

R 

2012 

Restated 

R 

28. General Expenses 



Included in general expenses are the following: 

Advertising 

1 ,503,030 

814,463 

Aloe & Berg Tea Project 

- 

172,648 

Asset Management 

705,464 

2,677,604 

Audit Fees 

2,089,375 

2,333,755 

Bank Charges 

438,132 

357,894 

Bulk Discounts 

437,035 

358,154 

COID - Workmen's Compensation 

1,220,545 

963,800 

Commercialisation of Agricultural Projects 

458,327 

215,105 

Conferences & Delegations 

1 ,776,566 

2,060,288 

Connections for KWh Meters 

21,717 

782,203 

Consultants 

5,308,738 

- 

Co-operative Development 

46,334 

82,538 

Development Plans 

175,259 

735,338 

Disconnections & Reconnections 

1 ,678,058 

455,678 

Electricity 

3,384,012 

2,620,154 

Electricity - Streetlighting 

1,250,570 

1,495,532 

Emergency Relief Fund 

2,198,130 

822,784 

Entertainment Expenses 

174,051 

113,199 

Events / Programmes 

2,086,531 

2,339,804 

Free Basic Alternative Energy 

909,954 

908,078 

Insurance 

3,138,242 

2,481,735 

Leave Provision 

5,023,170 

3,320,718 

Legal Expenses 

425,060 

604,779 

Licence Fees 

408,621 

240,710 

Local Economic Development 

420,672 

369,486 

Long Service Awards Provision 

2,064,136 

1,298,001 

Materials & Sundries 

987,788 

628,764 

Pauper Burials 

87,217 

101,000 

Performance Management 

41,500 

103,749 

Post Retirement Medical Aid Provision 

3,402,706 

4,033,432 

Postage 

985,357 

924,843 

Printing & Stationery 

1,874,255 

1,560,401 

Project Development 

325,978 

337,019 

Protective Clothing 

846,326 

818,509 

Public Meetings 

209,496 

213,584 

Rates 

264,559 

231,343 

Refurbishment - NER Requirements 

9,661 ,068 

353,018 

Rent - Buildings / Offices 

93,686 

147,600 

SARS - Skills Development Levy 

1,540,408 

1,346,385 

Security Services 

3,637,742 

2,680,454 

Siyazenzela Project 

2,583,734 

2,268,434 

Software Database 

679,025 

535,000 

Sport & Recreation 

925,021 

1,127,179 

Subscriptions & Membership 

1,405,448 

806,425 

Swimming Pool Costs 

216,468 

488,587 

Tampered Meters 

68,645 

104,529 

Telephone / Cellphone Cost 

3,316,274 

3,090,834 

Third Party Payments 

462,190 

430,419 

Trade Mission 

7,766 

102,652 

Training Staff 

1,658,537 

1,083,055 

Valuation Costs 

4,120,152 

314,093 

Vehicle / Transport Costs 

12,923,800 

25,622,891 

Ward Committees 

1 ,891 ,406 

551 ,857 

Water / Sanitation 

1,094,121 

1,205,849 

Youth Development Programme 

193,263 

529,636 

Zibambele EPW Pilot Project 

990,153 

799,448 

Other 

7,290,124 

7,249,783 


101,125,937 88,415,217 


Page 41 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Notes to the Annual Financial Statements 

2013 2012 

Restated 

R R 


29. Cash Generated By Operations 


Surplus/(Deficit) for the year 

78,581 ,983 

16,381,277 

Adjustment for:- 



Adjustments in Respect of Previous Years & Appropriations 

2,777,923 

14,299,583 

Depreciation / Amortisation 

57,656,139 

69,066,939 

Loss on disposal of assets 

(2,376,407) 

(3,520,698) 

Contribution to doubtful debt provision 

9,816,435 

8,666,143 

Contribution to long service sawards provision 

2,064,136 

1,298,001 

Contribution to landfill site rehabilitation 

825,826 

7,460,039 

Contribution to retirement benefit obligation 

1,660,500 

(4,756,249) 

Gain on fair value adjustment and impairment 

(26,288,371) 

(3,373,502) 

Operating surplus before working capital changes: 

124,718,164 

105,521,533 

(lncrease)/decrease in inventories 

(19,255,000) 

(1,116,962) 

(lncrease)/decrease in exchange debtors 

(11,276,766) 

(13,634,503) 

(lncrease)/decrease in non-exchange debtors 

(8,842,036) 

11,586,818 

(lncrease)/decrease in non-current receivables 

1,862 

14,879 

(Decrease)/increase in unspent conditional grants and receipts 

(20,452,053) 

5,207,797 

(Decrease)/increase in creditors 

(2,719,370) 

10,568,172 

(Decrease)/increase in deposits 

126,230 

454,286 

(lncrease)/decrease in VAT Receivable 

11,953,944 

(1,801,360) 

74,254,974 

116,800,661 


Page 42 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Notes to the Annual Financial Statements 

2013 2012 

Restated 

R R 


30. Correction of Error 

During the year the Municipality conducted a verification and condition assessment on Property, Plant and Equipment, 
Investment Property, and inventory - Held For Sale. 

During this exercise the munclpality found assets that were not on the current register or had been captured incorrectly. 

Long service awards were recognised due to the materiality, and the valuation was conducted by actuarial 
consultants. 

The Municipality rectified this retrospectively. 

The cumulative effect on the 2012 Opening Balances are as follows : 

Statement of Financial Position 


PPE - Infrastructure Assets (14,361 ,404) 

PPE - Other Assets (17,312,136) 

Inventory - Held For Sale Assets (1,120,000) 

Provisions 5,948,840 

Accumulated Surplus 26,844,701 


The cumulative effect on the comparative amounts for 2012 are as follows : 


Statement of Financial Position 

PPE - Other Assets (10,224,492) 

Investment Property (1,222,103) 

Provisions (218,717) 

Statement of Financial Performance 

Depreciation 1 0,224,492 

General Expenses 1,298,001 

Employee Related Costs (1,079,284) 

Other Income 1,222,103 


31. Unauthorised, Irregular, Fruitless and Wasteful Expenditure 


31.1 Unauthorised Expenditure 


Opening balance 

- 

18,623,733 

Unauthorised expenditure current year 

- 

- 

Approved by council or condoned 

- 

(18,623,733) 

Transfer to receivables for recovery - not condoned 

- 

- 

Unauthorised expenditure awaiting authorisation 

- 

■ 

Unauthorised expenditure is related to the actual expenditure exceeding budgeted expenditure on the Statement of Financial 
Performance. 

31.2 Irregular Expenditure 

Opening balance 

11,888,759 

286,651 

Irregular expenditure current year 

26,437,841 

18,449,191 

Approved / Condoned 

(30,603,705) 

(6,847,083) 

Transfer to receivables for recovery - not condoned 

- 

- 

Irregular expenditure awaiting authorisation 

7,722,895 

H, 888,755" 

Irregular expenditure is related to the non-adherence of Supply Chain Management procedures. 

- Non-compliance with the PPPFA Regulation 

3,465,381 

11,704,497 

- Persons in the service of the state 

28,050 

184,262 

- Non-compliance with the SCM Regulations 

4,229,464 

7,722,895 

^,888,759 


The amount of R 7 722 895 for irregular expenditure was submitted to Council in July 2013. 


Page 43 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Notes to the Annual Financial Statements 

2013 2012 

Restated 

R R 


31.3 Fruitless and Wasteful Expenditure 


Opening balance 

Fruitless and Wasteful expenditure current year 
Approved by council or condoned 
Transfer to receivables for recovery - not condoned 
Fruitless and Wasteful expenditure awaiting authorisation 


118,153 107,280 

19,938 10,873 

(48,616) 

89,475 118,153" 


Fruitless and Wasteful expenditure is related to expenditure that was made in vain and would have been avoided had reasonable 
care been exercised. 


32. Additional Disclosures in Terms of Municipal Finance Management Act 
32.1 Contributions to organised local government 
Opening balance 

Council subscriptions 1 ,388,248 804,425 

Amount paid - current year (1 ,388,248) (804,425) 

Amount paid - previous years : l- 

Balance unpaid (included in creditors) ; L 


32.2 Audit Fees 


Opening balance 
Current year audit fee 
Amount paid - current year 
Amount paid - previous years 

Balance unpaid (Included In creditors) 


2,543,143 2,534,771 

(2,543,143) (2,534,771) 


32.3 VAT 

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


32.4 PAYE. SDL and UIF 


Opening balance 
Current year payroll deductions 
Amount paid - current year 
Amount paid - previous years 

Balance unpaid (included In creditors) 


19,127,147 17,700,755 

(19,127,147) (17,700,755) 


32.5 Pension and Medicai Aid Deductions 


Opening balance 

Current year payroll deductions and Council Contributions 
Amount paid - current year 
Amount paid - previous years 

Balance unpaid (included in creditors) 


29,860,233 26,857,120 

(29,860,233) (26,857,120) 


Page 44 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Notes to the Annual Financial Statements 

‘ ' 2013 2012 

Restated 

R R 


33. Capital Commitments 

33.1 Commitments in respect of capital expenditure: 

- Approved but not yet contracted for 

Infrastructure 

Community 

Other 

- Approved and contracted for 

Infrastructure 

Community 

Other 


This expenditure will be financed from: 

- External Loans 

- Government Grants 

- Own Resources 


- 

27,591,000 

- 

2,000,000 

11,198,944 

12,400,000 

66,111,326 

21,156,002 

17,960,318 

30,142,479 

7,179,411 

6,024,867 

102,450,000 

99,314,347 


37,900,000 

57,049,000 

64,550,000 

42,265,347 

102,450,000 

99,314,347 


33.2 Operating leases 

At the reporting date, outstanding commitments under 
operating leases fall due as follows: 

Operating leases - as lessee 

Within one year 

In the second to fifth year inclusive 
After five years 


178,103 144,000 

178,103 144,000 


Operating Leases consists of the following: 

Operating lease payments represent rentals payable by the municipality for certain of its office properties. 

Leases are negotiated for an average term of five years and rentals have an escalation per annum. No contingent rent is payable. 


Operating leases - as lessor 

Minimum lease payments due 

Within one year 

In the second to fifth year inclusive 
After five years 


287,624 328,388 

1,281,627 1,480,677 

611,981 553,704 

2,181,232 2,362,768 


Operating Leases consists of the following: 

Certain of the municipality’s property is held to provide a service to the community to assist with local economic and social 
development. Lease agreements are cancellable if agreed by both parties. Most leases have an indefinite term. 


Page 45 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Notes to the Annual Financial Statements 

2013 2012 

Restated 

R R 


34. Other Income 


Included in other income are the following: 

Actuarial Gain - Post Retirement Benefits 

Discounts Received 

Fees : Brigade Service 

Fees : Building Plans 

Fees : Burial 

Fees : Camping 

Fees : Hiring 

Fees : Sewerage Plans 

Hire : Agra Crescent Hall 

Hire : Town Hall 

Legal Fees 

Notice Processing Cost 
Rates Clearance Certificates 
Reconnection Fees : Non Payment 
Refund Skills Development Levy 
Rental Income - Housing 
Rental Income - Sundries 
Revenue - Third Party Payments 
Sundries 
Vehicle Income 
Other 


35. Self-Insurance Fund 

Opening balance 
Contributions / Interest 
Insurance Claims processed 


223,915 

456,955 

103,439 

142,551 

49,003 

383,324 

183,371 

106,133 

68,416 

(307,163) 

929.044 
157,653 

3,153 

732,969 

277.045 
765,229 
533,563 
935,877 

3,903,702 

16,446,831 


26,095,010 


7,168,000 
135,628 
287,997 
114,390 
131,083 
55,789 
284,568 
187,869 
100,439 
79,969 
189,453 
793,307 
189,361 
41,709 
775,165 
416,523 
751,531 
476,504 
734,538 
20,167,770 
5,621 ,681 

38,703,274 


4,209,198 2,879,056 

3,593,766 1,912,326 

(1,174,416) (582,185) 

6,628,548 4,209,198 


The Municipality has a Self-Insurance Fund to set aside amounts to offset potential losses or claims, which fall under a stop loss 
determined and calculated by Council's insurance broker based on the insurance risk carried by the Municipality. The funds are 
kept in a separate call account, and interest earned is credited to the fund. 


Page 46 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Notes to the Annual Financial Statements 

2013 2012 

Restated 

R R 


36. Retirement Benefit Information 
Defined Contribution Plan 

The following are defined contribution plans. These are not treated as defined benefit plans as defined by IAS 19, but are 
accounted for as defined contribution plans. This is in line with the exemption in IAS 1 9 par.30 which states that where information 
required for proper defined benefit plan accounting is not available in respect of multi-employer and state plans, these should be 
accounted for as defined contribution plans. This municipality has been unsuccessful in obtaining the necessary information to 
support proper defined benefit plan accounting due to restrictions imposed by the multi-employer plan. It is therefore deemed 
impracticable to obtain this information at a suitable level of detail. 

Natal Joint Municipal Pension Fund (Superannuation) 

The latest interim actuarial valuation of the NJMP Superannuation Fund as at 31 March 2012 disclosed that the Fund's financial 
position has improved from the previous statutory valuation. The fund disclosed a surplus of R 134,9 million. 

The total rate of contribution by the municipality, including the surcharge, is 31 ,13% (21 ,63% plus the surcharge of 9,5%) of 
pensionable salaries payable for a period of 8 years with effect from 1 July 2012. 

Natal Joint Municipal Pension Fund (Retirement) 

The latest statutory actuarial valuation of the NJMP Retirement Fund (defined benefit) as at 31 March 2012 disclosed a deficit in 
the fund of R 83,6 million. 

The total rate of contribution by the municipality, including the surcharge, is 34,22% (18,37% plus the surcharge of 17,5% less 
1 ,65%) of pensionable salaries payable with effect from 1 July 2012. The repayment period has been extended from 5 - 8 years 
from 2010. 

Natal Joint Municipal Provident Fund 

The latest statutory actuarial valuation of the NJMP Provident Fund (defined contribution) as at 31 March 2012 disclosed a deficit 
in the fund of R 83,5 million. 


37. Councillor's Arrear Consumer Accounts 

The following Councillor(s) had arrear accounts over 90 days during the financial 
year as follows: 

B B Biyela 16,317 

38. Related Parties 

38.1 Transactions with Related Parties 

S Mahraj - Chief Internal Auditor 28,050 

The above employee is related to the owner of Maharaj's Driving school, of which the municipality conducted business with during 
the financial year. 

38.2 Key Management Personnel Compensation 

Compensation of Key Management Personnel and Councillors is set out in Notes 23 and 24 respectively to the Annual Financial 
Statements. 


Page 47 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Notes to the Annual Financial Statements 

2013 2012 

Restated 

R R 


39. Risk Management 

Financial Risk Management 

The municipality 's activities exposes 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 program focuses on the unpredictability of financial markets and seeks to minimise 
potential adverse effects of the municipality's financial performance. 

Liquidity Risk 

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through 
an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the 
underlying businesses, municipality treasury maintains flexibility in funding by maintaining availability under committed credit lines. 

The municipality’s risk to liquidity is a result of the funds available to cover future commitments. The municipality manages liquidity 
risk through an ongoing review of future commitments and credit facilities. Cash Flow forecasts are prepared and utilised borrowing 
facilities are monitored. 

Interest Rate Risk 

The municipality’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the municipality 
to cash flow interest rate risk. 

Credit risk 

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

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

Credit guarantee insurance is purchased when deemed appropriate. 


Page 48 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Notes to the Annual Financial Statements 

2013 2012 

Restated 

R R 


40. Contingent Liabilities 

The Municipality identified the following contingent liabilities: 


40.1 Claim for Damages 


The municipality is being sued for breach of contract. The municipality is contesting the 
claim. 

The amount does not include legal fees. 

Case No. 424/2011 

42,294 

42,294 

The municipality is being sued for damages. The municipality is contesting the claim. 

The amount does not include legal fees. 

Letter of Demand 

■ 

18,970 

The municipality is being sued for damages. The municipality is contesting the claim. 

The amount does not include legal fees. 

Case No. 207/2012 

~ 

28,916 

The municipality is being sued for damages. The municipality is contesting the claim. 

The amount does not include legal fees. 

Case No. 591/2012 

■ 

14,576 

The municipality is being sued for damages. The municipality is contesting the claim. 

The amount does not include legal fees. 

Case No. 173/2012 

~ 

100,000 

The municipality is being sued for damages. The amount does not include legal fees. 

The suit relates to the appointment of a service provider for a 3 year period for a Parking 
Management System in the Ladysmith CBD. The municipality is contesting the claim. 

Case No. 5386/2012 

15,820,976 

15,820,976 

The municipality is being sued for a restitution claim alternatively damages for the sale of 

- 

313,400 


property. The municipality is contesting the claim. The amount does not include legal fees. 
Case No. 7241/2011 


15,863,270 16,339,132 


Page 49 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Notes to the Annual Financial Statements 

” 2013 2012 

Restated 

R R 


40.2 Other Claims 

Reported for the Financial Year Ending 30 June 2013 

All claims reported in the previous financial year have either been dismissed / withdrawn or settled. There are no other claims 
against the Municipality as at 30 June 2013. 

Reported for the Financial Year Ending 30 June 2012 

The municipality has a notice of motion to demolish a water pressure tower structure on a ratepayer's property. 

The municipality is contesting the motion. The cost is unknown at the reporting date. 

Case No. 5728/2009 

The municipality is being sued for the release of an impounded bus. The municipality is contesting the suit. 

The cost is unknown at the reporting date. 

Case No. 1200/2011 

The municipality is being sued for damages for the disconnection of electricity. The municipality is contesting the claim. 

The amount is unknown at the reporting date. 

Letter of Demand 

The municipality has a notice of motion which is being contested in the High Court in Pietermaritzburg for outstanding payment. 
The amount is unknown at the reporting date. 

Case No. 1008/2012 

The municipality has been served a notice of eviction. The municipality is contesting the notice. 

The amount is unknown at the reporting date. 

Case No. 1787/2009 

The municipality is being sued in the High Court for a valuation of property dispute. The municipality is contesting the suit. 

The amount is unknown at the reporting date. 

Case No. 6047/2011 


41. Budget Information 

The budget is approved on an accrual basis by nature and vote classification. The approved budget covers the period from 1 July 
201 2 to 30 June 2013. 

The budget and accounting bases are the same, both are on the accrual basis. The financial statements are prepared using a 
classification on the nature of income and expenses in the statement of financial performance. 

Refer to Appendix C for more detail on budget and actual information with an explanation of material differences between the final 
budget and actual amounts by nature classification. 


42. Impairment of Assets 

Impairment Losses Recognised 
Property, Plant and Equipment 
Intangible Assets 
Investment Property 


Impairment losses on property, plant and equipment exist predominantly due to technological obsolescence of information 
technology equipment. The remainder of impaired items of property, plant and equipment have been physically damaged, stolen or 
have become redundant and idle. 


1,915,495 88,686 

1,915)495 88,686 


Page 50 



Emnambithi / Ladysmith Municipality 

Annual Financial Statements for the year ended 30 June 2013 

Notes to the Annual Financial Statements 

2013 2012 

Restated 

R R 


43. Change in Estimate 

The remaining useful life of the infrastructure and immovable assets were reviewed during the current year. 

During the review certain assets had the remaining useful life revised. The effect of this revision has decreased the depreciation 
charges for the current and future periods. 


44. Key Sources of Estimation Uncertainty and Judgements 

The following areas involve a significant degree of estimation uncertainty: 

Useful lives and residual values of property, plant, and equipment 
Recoverable amounts of property, plant and equipment 

Provision for rehabilitation of landfill site (discount rate, no. of years, amount of cash flows) 

Present value of post retirement benefit obligation 

Present value of long service awards 

Provision for doubtful debts 

Impairment of assets 


752,867,276 

13.934.566 
34,592,500 

7,526,107 

82.505.567 
1,915,495 


721,120,625 

13,108,739 

32,932,000 

6,167,557 

78,798,654 

88,686 


The following areas involved judgements, apart from those involving estimations disclosed above, that management has made in the 
process of applying the municipality's accounting policies and that have the most significant effect on the amounts recognised in 
the financial statements. 

Impairment of assets 1,915,495 

Provisions 96,440,133 


88,686 

91,907,393 


Page 51 



Emnambithi / Ladysmith Municipality 













Carrying 

Value 

183,542,769 

311,911,627 

5,855,106 

14,853,628 

86,549,202 

602.712.332 

26,954,954 

37,626,679 

64.581.632 

15,277,000 

10,874 

15.287.874 

23,547,711 

-1,410,922 

8,532,952 

46,856,951 

19,242,257 

96.768.948 

248.600 

248.600 

10.017.000 

14.305.000 

24.322.000 

803,921,386 


Closing 

in 05 1 1 1 co 

r- to a 

a, ^ « 

is- a 

5 't to cJ 

« w 

ED 

74.190 

74.190 

1 1 1 

602,400 

19,534 

9,982 

631.916 

1 1 

2,944,409 

Impairment 

Additions 

1,811,789 

1. All. 789 

74,190 

7A 190 

1 1 1 

19,534 

9,982 

29.616 


1,915,495 

Opening 

Balance 

426,515 

A9K KIR 

i i 


602,400 

kh 2 ann 

1 

1,028,915 

Emnambithi / Ladysmith Municipality 

APPENDIX B 

ANALYSIS OF PROPERTY, PLANT AND EQUIPMENT AS AT 30 JUNE 2013 

Closing 

Balance 

114,383,406 
485,581,000 
3,659,387 
436,709 
90,742,238 
coji ono 7to 

T- O T 
- M CO II 

ftfi 

s' s' s 

> T 

14,638 

1 A KM 

78,993,408 

11,195,288 

4,930,334 

22,171,471 

6,997,221 

<IOA 2R7 7 99 

in u 
o c 

T- 7 

to" u 

T- 7 
T- 7 

ll' to 

5 

i 

i 

Depreciation 
Disposals / 1 

Write-Off 

-563,722 

-63,927 

07 ccn 

> 

4 

? 


-236,424 

-138,262 

-2,683,070 

-63,416 

7 'CO't 470 

■ 

ill CM 

CM 

OO 

< 

CO 

Accumulated 

Additions 

6,485,881 

27,662,364 

628,622 

3,733,712 

2 £ $ $ 

9 in CD 7 

5 CD ■<-' r 

S NOI 

□ CD CM C 

0 

' ' 

n 

s 

n 

2,160,307 

1,478,203 

3,678,911 

2,400,313 

9 co e 

9 U) II 

- co e 

" cd o 

- CO Cl 

r>" 

' ' ' ? 

0 CO 

s' 

s' 

Opening 

Balance 

108,461,247 

457,918,635 

3,094,692 

436,709 

87,008,526 

3 (D CO C 

O CD 

o N i 

2 S' S' f 

n CD in i 

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CD 

Closing 

Balance 

298,352,689 

799,304,416 

9,514,493 

15,290,337 

177,291,440 

1,193, 

110,185,167 

104,133,267 

15,277,000 

25,512 

S88SS ■ 

in cd cm 

m co" co" CO oo" cd' 

a 7 o S CM CO 

0 1- CO 7 O CM 

O co CD" co" CD CO 

r- O v CO CM 

AA1 ,000,000 

364,705 

0 OOOt- 

§88 S 

1 s' s' a 8 

o o co co 

o" tt 7 in 

^ ^ CM g 

7* 

Disposals / 1 

Write-Off 

-911,854 

-156,423 

^ i i 

N 

I 

7 

1 1 1 

-539,948 

-254,851 

-5,098,101 

-123,889 

D ' 

» 

D 

3 

4 

-7,085,067 

Cost 

Under 1 

Construction 

11,247,609 

10,164,450 

-695,951 

-3,486 

20,712,621 

-12,184,762 

-1,311,418 

s 

i— 

n" 

9 

CO 

7 

1,572,512 

N ' 

i“ 

n 

N 

n 

r- 

8,788,953 

Additions 1 

10,065,846 

37,588,650 

353,532 

1,690,742 

4,328,083 

54,026,852 

30,997,665 

6.655,794 

37,653,458 

3,856,294 

798,744 

840,307 

4,138,667 

3,591,187 

13,225,200 

104.905,510 

o 

c 

c 

s 

o 

Balance 

277,951,088 

751,551,316 

9,317,384 

14,295,546 

172,966,843 

1,226,082,178 

91,372,264 

98.788,891 

190,161,156 

15,277,000 

25,512 

15,302*512 

97,714,713 

9,545,105 

12,887,812 

69,987,856 

22,772,180 

212.907,665 

364,705 

364,705 

10.017.000 

14.305.000 

24.322.000 

1,669,140,215 


Infrastructure 

Electricity 

Roads 

Public Safety 

Solid Waste 

Stormwater 

Community Assets 

Land & Buildings 

Recreation Facilities 

Heritage Assets 

Buildings 

Other 

Other Assets 

Land & Buildings 

Office Equipment 

Furniture & Fittings 

Motor Vehicles 

Plant & Equipment 

Other 

Leased Assets 

Office Equipment 

Land Assets 

Land with Buildings 

Vacant Land 

Total 


Page 53 



Emnambithi / Ladysmith Municipality 
APPENDIX C 




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Page 55