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City of Tshwane Metropolitan Municipality CITY OF TSHWANE METROPOLITAN MUNICIPALITY Annual Financial Statements for the year ended 30 June 2018 City of Tshwane Metropolitan Municipality Annual Financial Statements for the year ended 30 June 2018 General Information Legal form of entity Category A municipality in terms of section 1 of the Local Government Municipal Structures Act, 1998 (Act 117 of 1998) read with section 155(1) of the Constitution of the Republic of South Africa, 1996 Nature of business and principal activities The principal activities of the City of Tshwane Metropolitan Municipality are to: • Provide democratic and accountable government to the local communities; • Ensure sustainable services delivery to communities; • Promote social and economic development; • Provide local communities equitable access to the municipal services; • Promote and undertake development in the municipality; • Promote a safe and healthy environment; and • Encourage the involvement of communities in local government affairs Executive Mayor Solly Msimanga Speaker Rachel Mathebe Chief Whip Christiaan van den Heever Mayoral committee Members Mare-Lise Fourie (Ms) (MMC: Finance) Sakkie du Plooy (MMC: Health) Mike Mkhari (MMC: Agriculture and Environmental Management) Anniruth Kissoonduth (Derrick) (MMC: Community Safety) Darryl Moss (MMC: Utility Services) Cilliers Brink (MMC: Human Capital Management and Shared Services) Ntsiki Mokhotho (Ms) (MMC: Community and Social Development Services) Randall Williams (MMC: Economic Development and Spatial Planning) Mandla Nkomo (MMC: Housing and Human Settlement) Sheila Lynn Senkubuge (Ms) (MMC: Roads and Transport) Grading of local authority Category A Grade 6 urban municipality (demarcation code - TSH) Accounting Officer Dr Moeketsi Mosola Telephone: 012 358 4901 Chief Financial Officer (CFO) Umar Banda CA (SA) Telephone: 012 358 8100 Registered office Tshwane House 320 Madiba Street PRETORIA 0002 Postal address PO Box 408 PRETORIA 0002 Bankers ABSA Auditors Auditor-General South Africa (AGSA) Legislation governing the Municipality's operations Local Government: Municipal Finance Management Act (Act 56 of 2003) Local Government: Municipal Systems Act (Act 32 of 2000) Local Government: Municipal Structures Act (Act 117 of 1998) Housing Act (Act 107 of 1997) Constitution of the Republic of South Africa, 1996 Property Rates Act (Act 6 of 2004) Division of Revenue Act (Act 3 of 2016) 1 City of Tshwane Metropolitan Municipality Annual Financial Statements for the year ended 30 June 2018 General Information Entities to be consolidated at year end Consistent with the prior financial year the following municipal entities will be included in the Consolidated Annual Financial Statements: Housing Company Tshwane NPC (Registration nr 2001/029821/08) Tshwane Economic Development Agency Soc Ltd (TEDA) (Registration nr 2006/019396/07) Metsweding Economic Development Agency (MEDA) - Council decision of 25 Entities dormant August 2011 to disestablish MEDA. All operations were taken over by the Municipality on 1 July 2011. (Final deregistration 26 August 2016). Sandspruit Works Association Soc Ltd (Registration nr 1999/019160/08). Was disestablished on 30 June 2017 in terms of Council Resolution of 27 October 2016. Currently in the process of being deregistered. 2 City of Tshwane Metropolitan Municipality Annual Financial Statements for the year ended 30 June 2018 Index The reports and statements set out below comprise the annual financial statements presented to the Council: Page Accounting Officer's Responsibilities and Approval 5 Statement of Financial Position 6 Statement of Financial Performance 7 Statement of Changes in Net Assets 8 Cash Flow Statement 9 Statement of comparison of budget and actual amounts 10 - 12 Accounting Policies (Summary of significant accounting policies) 13 - 39 Notes to the Annual Financial Statements 40 - 151 Appendixes: Appendix A: Schedule of External Loans 152 Appendix B: Analysis of Property, Plant and Equipment 154 Appendix C: Budgeted Financial Performance (Revenue and Expenditure by Standard Classification) 156 Appendix D: Budgeted Financial Performance (Revenue and Expenditure by Municipal Vote) 158 Appendix E: Budgeted Financial Performance (Revenue and Expenditure) 160 Appendix F: Budgeted Capital Expenditure by Vote, Standard Classification and Funding 162 Appendix G: Budgeted Cash Flows 164 Appendix H: Disclosure of Grants and Subsidies paid in terms of the MFMA 165 3 City of Tshwane Metropolitan Municipality Annual Financial Statements for the year ended 30 June 2018 Index Abbreviations AGSA Auditor-General South Africa AARTO Administrative Adjudication of Road Traffic Offences CFO Chief Financial Officer COGTA Department of Co-operative Governance and Traditional Affairs COID Compensation for Occupational Injuries and Diseases COO Chief Operations Officer DBSA Development Bank of South Africa DME Department of Mineral and Energy DoRA Division of Revenue Act DPSA Department of Public Service and Administration EPWP Expanded Public Works Program FMG Finance Management Grant GAAP Generally Accepted Accounting Practice GDoT Gauteng Department of Transport GLGH Gauteng Local Government and Housing GRAP Generally Recognised Accounting Practice GSO Governance and Support Officer HCT Housing Company Tshwane IAS International Accounting Standards IASB International Accounting Standard Board IPSAS International Public Sector Accounting Standard MEC Member of the Executive Council MEDA Metsweding Economic Development Agency MFMA Municipal Financial Management Act MIG Municipal Infrastructure Grant MPRA Municipal Property Rates Act NDPG Neighbourhood Development Partnership Grant PTNOG Public Transport Network Operating Grant RTMC Road Traffic Management Corporation SALGA South African Local Government Association TEDA Tshwane Economic Development Agency UIF Unemployment Insurance Fund USDG Urban Settlement Development Grant VAT Value Added Tax 4 City of Tshwane Metropolitan Municipality Annual Financial Statements for the year ended 30 June 2018 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 Auditor- General are engaged to express an independent opinion on the annual financial statements and was given unrestricted access to all financial records and related data. The annual financial statements have been prepared in accordance with Standards of Generally Recognised Accounting Practice (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board and as required by the Local Government: Municipal Finance Management Act, 2003. The annual financial statements are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. The accounting officer acknowledges that he is ultimately responsible for the system of internal financial control established by the municipality and place considerable importance on maintaining a strong control environment. To 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 loss. The accounting officer has reviewed the municipality’s cash flow forecast for the year to 30 June 2019 and, in the light of this review and the current financial position, he is satisfied that the municipality has adequate resources or has access to such resources to continue operating for the foreseeable future. Although the accounting officer is primarily responsible for the financial affairs of the municipality, they are supported by the municipality's internal auditors. The annual financial statements set out on pages 6 to 151, which have been prepared on a going concern basis,
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