BUFFALO CITY METROPOLITAN MUNICIPALITY Audited Consolidated Annual Financial Statements for the year ended 30 June 2020 BUFFALO CITY METROPOLITAN MUNICIPALITY Audited Consolidated Annual Financial Statements for the year ended 30 June 2020 General Information Legal form of Entity Municipality Nature of business and principal activities Local Government Jurisdiction The demarcation board has determined that Buffalo City Metropolitan Municipality (BUF) includes the towns of East London, Bisho, King William's Town, Berlin as well as the townships of Mdantsane, Gompo, Zwelitsha, Dimbaza, Phakamisa, Ndevana, Ilitha, Ginsberg and the surrounding rural areas. Mayoral committee Executive Mayor Councillor X.A. Pakati Deputy Mayor Councillor Z.P. Matana - IDP Organisational Performance Management Councillors Councillor N.M. Mhlola - Human Settlements Councillor P. Nazo-Makatala - Spatial Planning & Development Councillor H.E. Neale-May - Finance Councillor N.P. Peter - Municipal Services Councillor M. Vaaiboom - Economic Development & Agencies Councillor X. Witbooi - Institutional Operations and Civic Relations Councillor A.O. Mnyute - Health, Public Safety and Emergency Services Councillor B. Sauli - Corporate Services Councillor S.N. Toni - Infrastructure Services Grading of local authority Grade 6 Municipality City Manager / Accounting Officer Mr. A. Sihlahla Chief Financial Officer (CFO) Mr. N. Sigcau Business address Trust Centre Oxford Street East London 5201 Postal address PO Box 134 East London 5200 Bankers Standard Bank Auditors Auditor General of South Africa Members of Audit Committee Ms. R. Shaw (Chairperson) - appointment 03 July 2017 Ms. Y. Roboji (Member) - appointment 03 July 2017 Mr. P. Ntuli (Member) - appointment 03 July 2017 Mr. S. Sokutu (Member) - appointment 03 July 2017 Ms. P. Mzizi (Member) - appointment 03 July 2017 Mr. T. Zororo (Member) - appointment 03 July 2017 1 BUFFALO CITY METROPOLITAN MUNICIPALITY Audited Consolidated Annual Financial Statements for the year ended 30 June 2020 General Information Legislation Governing the Municipality The Constitution of the Republic of South Africa, 1996 The Local Government: Municipal Structures Act, 1998 (Act 117 of 1998) The Local Government: Municipal Systems Act, 2000 (Act 32 of 2000) The Local Government: Municipal Finance Management Act, 2003 (Act 56 of 2003) Local Government: Municipal Property Rates Act, 2004 (Act 6 of 2004) Municipal Fiscal Powers and Functions Act, 2007 (Act 12 of 2007) Local Government: Municipal Demarcation Act, 1998 (Act 27 of 1998) Intergovernmental Relations Framework Act, 2005 (Act 13 of 2005) Division of Revenue Act (Act 1 of 2007) 2 BUFFALO CITY METROPOLITAN MUNICIPALITY Audited Consolidated Annual Financial Statements for the year ended 30 June 2020 Index The reports and statements set out below comprise the audited consolidated annual financial statements presented to the provincial legislature: Page Accounting Officer's Responsibilities and Approval 4 Statement of Financial Position 5 Statement of Financial Performance 6 Statement of Changes in Net Assets 7 Cash Flow Statement 8 Statement of Comparison of Budget and Actual Amounts 9 - 17 Accounting Policies 18 - 49 Notes to the Audited Consolidated Annual Financial Statements 50 - 136 BCMDA Buffalo City Metropolitan Development Agency DBSA Development Bank of South Africa GRAP Generally Recognised Accounting Practice FMG Finance Management Grant IAS International Accounting Standards IPSAS International Public Sector Accounting Standards MEC Member of the Executive Council MFMA Municipal Finance Management Act MIG Municipal Infrastructure Grant (Previously CMIP) 3 BUFFALO CITY METROPOLITAN MUNICIPALITY Audited Consolidated Annual Financial Statements for the year ended 30 June 2020 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 audited consolidated annual financial statements and related financial information included in this report. It is the responsibility of the accounting officer to ensure that the audited consolidated annual financial statements fairly present the state of affairs of the entity 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 audited consolidated annual financial statements and was given unrestricted access to all financial records and related data. The audited consolidated 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. The audited consolidated 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 economic entity 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 loss 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 economic entity and all employees are required to maintain the highest ethical standards in ensuring the economic entity’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the economic entity is on identifying, assessing, managing and monitoring all known forms of risk across the economic entity. While operating risk cannot be fully eliminated, the economic entity 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 audited consolidated 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 economic entity’s cash flow forecast for the year to 30 June 2021 and, in the light of this review and the current financial position, he is satisfied that the economic entity has or has access to adequate resources to continue in operational existence for the foreseeable future. Although the accounting officer are primarily responsible for the financial affairs of the entity, they are supported by the economic entity's internal auditors. The audited consolidated annual financial statements set out on page 5, which have been prepared on the going concern basis, were approved by the accounting officer on 30 November 2020. Mr. A. Sihlahla City Manager 4 BUFFALO CITY METROPOLITAN MUNICIPALITY Audited Consolidated Annual Financial Statements for the year ended 30 June 2020 Statement of Financial Position as at 30 June 2020 Economic entity Controlling entity Figures in Rand Note(s) 2020 2019 2020 2019 Restated* Restated* Assets Current Assets Inventories 10 32 832 319 34 438 728 32 771 613 34 403 310 Receivables from exchange transactions - BCMDA 11 60 710 347 035 - - Receivables from non-exchange transactions 12 540 501 300 434 333 661 540 501 300 434 333 661 VAT receivable 13 4 588 458 102 438 184 4 090 392 102 131 858 Receivables from exchange transactions 14 1 347 270 204 1 154 134 313 1 347 270 204 1 154 134 313 Cash and cash equivalents 15 1 373 710 707 1 171 632 915 1 357 577 980 1 167 645 512 3 298 963 698 2 897 324 836 3 282 211 489 2 892 648 654 Non-Current Assets Investment property 3 406 525 752 402 532 000 406 525 752 402 532 000 Property, plant and equipment 4 19 251 388 772 19 720 315 025 19 250 004 650 19 720 007 389 Intangible assets 5 14 974 783 19 903 241 13 563 427 18 103 059 Heritage assets 6 50 513 440 50 513 440 50 513 440 50 513 440 Investments in associates 7 702 798 644 597 392 286 702 798 644 597 392 286 20 426 201 391 20 790 655 992 20 423 405 913 20 788 548 174 Total Assets 23 725 165 089 23 687 980 828 23 705 617 402 23 681 196 828 Liabilities Current Liabilities Borrowings 18 54 395 605 57 973 556 54 395 605 57 973 556 Operating lease liability 8 51 545 - - - Trade payables from exchange transactions 22 1 212 933 095 1 118 287 600 1 211 088 682 1 117 554 265 Consumer deposits 23 70 143 449 64 109 019 70 143 449 64 109 019 Employee benefit obligation 9 50 982 000 49 252 390 50 982 000 49 252 390 Unspent conditional grants and receipts 17 531 506 569 210 610 282 527 613 203 207 656 749 Provisions 19 378 296 343 246 000 151 376 858 651 244 971 179 2 298 308 606 1 746 232 998 2 291 081 590 1 741 517 158 Non-Current Liabilities Borrowings 18 233 184 927 287 580 532 233 184 927 287 580 532 Employee benefit obligation 9 633 835 000 679 562 697 633 835 000 679 562 697 Provisions 19 10 952 089