Traditional Levies and Trust Account. 2014/15 Financial Year

Transcription

1 Traditional Levies and Trust Account 2014/15 Financial Year

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3 Traditional Levies and Trust Account Annual Report for the year ended 31 March

4 General Information Country of Incorporation Nature of business and principal activities Department Accounting Authority Registered office Postal address Bankers South Africa Traditional Levies and Trust Account Department of Co- operative Governance and Traditional Affairs Ms N.D. Qhobosheane Head of Department Department of Co- operative Governance and Traditional Affairs Natalia Building 303 Langalibalele Street Pietermaritzburg 3200 Private Bag X9078 Pietermaritzburg 3200 ABSA Bank Limited Ithala Bank 2

5 General Information The reports and statements set out below comprise the annual financial statements presented to the provincial legislature: Index Page Foreword by MEC Ms Nomusa Dube-Ncube 4 Accounting Authority s Report by HOD: Ms D. N. Qhobosheane 6 Report of the Auditor General 8 Statement of Financial Position 11 Statement of Financial Performance 12 Statement of Changes in Net Assets 13 Cash Flow Statement 14 Accounting Policies 15 Notes to the Annual Financial Statements 21 The following supplementary information does not form part of the annual financial statements and is unaudited: Local Houses of Tradtional Leaders 32 Abbreviations COID CRR DBSA SA GAAP GRAP GAMAP HDF IAS IMFO IPSAS ME s MEC MFMA MIG Compensation for Occupational Injuries and Diseases Capital Replacement Reserve Development Bank of South Africa South African Statements of Generally Accepted Accounting Practice Generally Recognised Accounting Practice Generally Accepted Municipal Accounting Practice Housing Development Fund International Accounting Standards Institute of Municipal Finance Officers International Public Sector Accounting Standards Municipal Entities Member of the Executive Council Municipal Finance Management Act Municipal Infrastructure Grant (Previously CMIP) 3

6 Foreword The institution of traditional leadership is one of the key pillars that support the building of better communities. As Africans, we have a rich heritage that is defined by the role of men and women who within the confines of their communities and through selfsacrifice and perseverance lead by example and with distinction and always put their communities first. As a department whose role is to work together with the institution of traditional leadership in our province, we work hard to ensure that this time honoured institution remains relevant by continuing to lead our communities. The 300 odd Traditional Councils that currently serve our communities are a symbol of our tireless efforts to strengthen this institution as most of our communities are held together by men and women who participate in these councils and deal with the day-to-day issues that arise in them. The recent audit outcomes from the Auditor General for the financial year 2013/2014 have been a great indication of what can be achieved with hard work. This achievement did not happen on its own but required officials in all business units within the department, under the sterling leadership of Traditional Affairs, to work hard and smart. Proper record keeping is an important aspect of financial management and our Traditional Councils are required to maintain the highest of standards when it comes to record keeping. Gradually we are observing encouraging trends of improvement in the governance of traditional institutions, while we have not yet reach our clean audit goal in this aspect of our work, we are encouraged that the basics are now in place and there is now strong adherence to the injunctions of our Public Finance Management Act. The institution of traditional leadership is expected to comply with the obtaining laws of the land, and they are expected to adhere to obligatory standards in the conduct of traditional leadership Through our collective efforts, the dignity of the institution of traditional leadership is rapidly being restored. Traditional leadership has been at the forefront of our government s efforts to reduce poverty, inequality and underdevelopment. With the advent of democracy our government has not only formalized the role of traditional leaders in our governance structures and development programmes but has extended its targeted assistance to the capacity-building needs of individual amakhosi and the day-to-day operations of the traditional councils. We have also instilled in our cherished institution of traditional leadership a fresh spirit of financial accountability which is a prerequisite for meaningful co-operation between the traditional structures and local government within our democratic dispensation. It is in line with this mandate that I hereby present to the KwaZulu-Natal Provincial Legislature the general report summarizing the results of the audit outcomes of the Traditional Levies and Trust Account for the financial year ended 31 March

7 Foreword As a department we will continue to champion the cause of the institution of traditional leadership and its significance in our modern society. Our roots as Africans are found within this institution whose role has moulded and shaped us as Africans. But unless we can make these institutions fully accountable to the public, we will not ensure that they remain relevant to the fast-modernising society we all are striving to create around us. I wish to thank the traditional leaders, traditional council members and traditional council secretaries for their diligent efforts towards fulfilling the Department s vision of sound financial management within the traditional councils operating environment. Ms Nomusa Dube: MPL MEC for Co-operative Governance and Traditional Affairs 5

8 Accounting Authority s Report 1. Review of activities Main business and operations: The Traditional Levies and Trust Account operates as a bank account within which the financial operations of the traditional councils, in the province of KwaZulu-Natal, are managed. The traditional councils collect monies, which are voluntary in nature, from the communities residing within their respective boundaries, deposit monies collected and honour their obligations through this bank account. In turn the Traditional Levies and Trust Account is managed by the Department of Local Government and Traditional Affairs, in terms of the KwaZulu Natal Traditional Leadership and Governance Act No: 5 (2005). A number of challenges exist as far as the completeness of revenue is concerned. One of the main root causes for this challenge is the fact that the traditional councils revenue system is not regulated and dependent on voluntary receipts as a main stream of income. The department has developed an internal control system to ensure that a sound financial management environment prevails. Due to the fact that the levies that are collected from the traditional communities are voluntary in nature, an accrual basis of accounting could not be utilised as the revenue is dependent on the actual receipt recorded. Hence it was impractical to project completeness of revenue that is disclosed in the financial statements. The department has invested R25 million with Ithala Limited and the total cash and cash equivalent of R1,3 million is banked with ABSA Bank. Interest received from these investments is capitalized with the intention of distributing them annually to the respective traditional councils. The department has generated and maintained a GRAP 17 compliant Property, plant and equipment register and the resultant effect was to account for such in terms of GRAP 3. The department is still faced with challenges to ensure that all assets are bar-coded and those of a fixed nature are accounted for in the financial year ending 2014/2015. The Traditional Levies and Trust Account s financial statements have been prepared on the basis of Generally Recognised Accounting Practice. 2. Asset Management During the current financial year, the department visited all traditional councils within Kwazulu - Natal Province to physically verify the existence of traditional councils assets and recording thereof into the movable asset register. The department also conducted a revaluation exercise on all traditional administrative centres owned by respective traditional councils. The revaluation was conducted by an independent qualified property valuer. The department invested in a Pastel Accounting Software, introduced by an Electronic Funds Transfer System through the KZN Provinical Office thus eliminating manual accounting system. The Intangible Assets have been recognised in terms of GRAP 31 standard. 6

9 Accounting Authority s Report This exercise also extended into the umzimkulu tribal authorities, of which a separate set of financial systems have been compiled. The asset register gearing ratio process was guided by the provisions of GRAP 17 and 3 KZN Provincial Treasury Regulations on assets. 3. Point of Sale In terms of prior year s audit opinion issued, the Traditional Levies and Trust Account s revenue completeness assertion could not be verified because of the sources of revenue are voluntary in nature. However, the traditional councils are still using a manual receipt system and manual cash book recording system and as a result thereof risks associated with financial fraud, receipt manipulation and cash book reconciliatin errors is inherently high. During the 2014/2015 financial year, the department will review the manual receipts and cash book recording systems in order to ensure that all associated risks are mitigated or eliminated ie the introduction of Point of Sale at a traditional council level and capacitation of traditional council secretaries. 4. Events after reporting date The revaluation exercise of traditional administrative centres were finalized in May 2015 but because of its significance, the Property, plant and equipment balance disclosed in the annual financial statements includes the revaluation costs. 5. SCOPA Ongoing reports have been submitted to SCOPA. 6. Prior year s modification to the audit report Prior year errors have been prepared and forms part of the notes to the annual financial statements in compliance with GRAP Approval The annual financial statements have been approved by the accounting authority. Ms. D. N. Qhobosheane 7

10 Report of the Auditor General Report of the auditor-general to the KwaZulu-Natal Provincial Legislature on the Traditional Levies and Trust Account Report on the financial statements Introduction 1. I have audited the financial statements of the Traditional Levies and Trust Account set out on pages 11 to 31, which comprise the statement of financial position as at 31 March 2015, the statement of financial performance, the statement of changes in net assets, and cash flow statement for the year then ended, as well as the notes, comprising a summary of significant accounting policies and other explanatory information. Accounting authority s responsibility for the financial statements 2. The accounting authority is responsible for the preparation and fair presentation of these financial statements in accordance with the South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and the requirements of the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA) and, the KwaZulu-Natal Traditional Leadership and Governance Act, 2005 (Act No. 5 of 2005) (KZNTLGA) and for such internal control as the accounting authority determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor-general s responsibility 3. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with International Standards on Auditing. Those standards require that I comply with ethical requirements, and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. 4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 5. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my qualified audit opinion. Basis for qualified opinion Revenue 6. I was unable to obtain sufficient appropriate audit evidence on revenue from exchange transactions, as the entity did not have an adequate system of control over revenue on which I could rely for the purpose of my audit. I could not confirm whether all revenue was recorded by alternative means. Consequently, I was unable to determine whether any adjustment to revenue from exchange transactions stated at R9,91 million (2014: R9,05 million) in the financial statements was necessary. 8

11 Report of the Auditor General Qualified opinion 7. In my opinion, except for the possible effects of the matter described in the basis for qualified opinion paragraph, the financial statements present fairly, in all material respects, the financial position of the Traditional Levies and Trust Account as at 31 March 2015 and its financial performance and cash flows for the year then ended, in accordance with the SA Standards of GRAP, and the requirements of the PFMA and the KZNTLGA. Emphasis of matters 8. I draw attention to the matters below. Significant uncertainty 9. As disclosed in note 18 to the financial statements, the entity has not included the financial analysis of 10 tribal authorities from umzimkhulu, due to the issue of establishment and recognition of traditional councils and leadership not being finalised, as contemplated in section 6 of the KZNTLGA. Restatement of corresponding figures 10. As disclosed in note 13 to the financial statements, the corresponding figures for 31 March 2014 have been restated as a result of an error discovered during 2015 in the financial statements of the Traditional Levies and Trust Account at, and for the year ended, 31 March Report on other legal and regulatory requirements 11. In accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA) and the general notice issued in terms thereof, I have a responsibility to report findings on the reported performance information against predetermined objectives for selected objectives presented in the annual performance report, compliance with legislation and internal control. The objective of my tests was to identify reportable findings as described under each subheading but not to gather evidence to express assurance on these matters. Accordingly, I do not express an opinion or conclusion on these matters. Predetermined objectives 12. I did not audit performance against predetermined objectives, as the entity is not required to prepare a report on its performance against predetermined objectives and the entity-specific legislation does not require the reporting on performance against predetermined objectives. This is reported under programme four: traditional institutional management in the Department of Cooperative Governance and Traditional Affairs. Compliance with legislation 13. I performed procedures to obtain evidence that the entity had complied with applicable legislation regarding financial matters, financial management and other related matters. My findings on material non-compliance with specific matters in key legislation, as set out in the general notice issued in terms of the PAA, are as follows: Financial statements 14. The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework or supported by full and proper records as required by section 55(1)(a) and (b) of the PFMA. Material misstatements of revenue, non-current assets, current liabilities and disclosure items identified by the auditors in the submitted financial statements were subsequently corrected. However, the lack of sufficient and appropriate supporting documentation, the status of the accounting records as well as internal controls which had not been adequately established and/ or implemented, resulted in the financial statements receiving a qualified audit opinion. 9

12 Report of the Auditor General Revenue management 15. The accounting authority was unable to take effective and appropriate steps to collect all money due and banking it promptly, as required by section 51(1)(b)(i) of the PFMA and treasury regulations (a) and (e). Internal control 16. I considered internal control relevant to my audit of the financial statements and compliance with legislation. The matters reported below are limited to the significant internal control deficiencies that resulted in the basis for qualified opinion and the findings on compliance with legislation included in this report. Financial and performance management 17. Management was not able to implement adequate systems over the collection and recording of revenue. Further, material adjustments were required to the financial statements, primarily due to a thorough review of the financial statements not being performed by management. Pietermaritzburg 29 July

13 Statement of Financial Position as at 31 March 2015 Figures in Rand Note(s) Restated* ASSETS Current Assets Receivables from exchange transactions Cash and cash equivalents Non-Current Assets Property, plant and equipment Intangible assets Investments Total Assets LIABILITIES Current Liabilities Sundry Creditors Total Liabilities Net Assets Revaluation reserve Accumulated surplus Total Net Assets

14 Statement of Performance as at 31 March 2015 Figures in Rand Note(s) Restated* Revenue Revenue from exchange transactions Levies Cultural Activities Customary fees Land Utilization Legal Fees earned Other Miscellaneous other revenue Rental income Royalties received Stock Permit Total revenue from exchange transactions Revenue from non-exchange transactions Transfer revenue Government grants & subsidies Fines Investments at the bank Total revenue from non-exchange transactions Total revenue Expenditure Employee related costs 10 ( ) ( ) Depreciation and amortisation 11 ( ) ( ) Debt Impairment (60 728) - Transfers and Subsidies 9 ( ) ( ) General Expenses 12 ( ) ( ) Total expenditure ( ) ( ) Loss on disposal of assets and liabilities (35 257) ( ) Surplus (deficit) for the year ( ) 12

15 Statement of Changes in Net Assets Figures in Rand Revaluation Accumulated Total net reserve surplus Assets Balance at 01 April Changes in net assets Surplus for the year - ( ) ( ) Amortisation of revaluation reserves ( ) Total changes ( ) ( ) Opening balance as previously reported Adjustments Prior year adjustments Restated* Balance at 01 April 2014 as restated* Changes in net assets Revaluation of Buildings Ammortization of Revaluation reserve ( ) Net income (losses) recognised directly in net assets Surplus for the year Total recognised income and expenses for the year Total changes Balance at 31 March Note(s) 13

16 Cash Flow Statement Figures in Rand Note(s) Restated* Cash flows from operating activities Receipts Sale of goods and services Interest income Other receipts Payments Employee costs ( ) ( ) Suppliers ( ) ( ) Other payments ( ) ( ) Net cash flows from operating activities Cash flows from investing activities (Increase) / Decrease in investments ( ) ( ) Net increase/(decrease) in cash and cash equivalents ( ) Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year

17 Accounting Policies 1. Presentation of Annual Financial Statements The annual financial statements have been prepared in accordance with the Standards of Generally Recognised Accounting Practice (GRAP), issued by the Accounting Standards Board. These annual financial statements have been prepared on an accrual basis of accounting and are in accordance with historical cost convention as the basis of measurement, unless specified otherwise. The principal, accounting policies adopted in the preparation of these annual fianancial 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. 1.1 Presentation currency These annual financial statements are presented in South African Rand, which is the functional currency of the Traditional Levies and Trust Account. 1.2 Going concern assumption These annual financial statements have been prepared on the assumption that all traditional councils will continue to operate as a going concern for at least the next 12 months. 1.3 Comparative figures 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 it is practicle, 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 it is practicable, and the prior year co-operatives are restated accordingly. 1.4 Property, plant and equipment Property, plant and equipment are tangible non-current assets that are held for use in the supply of services, or for administrative purposes, and are expected to be used during more than one year. Items of property, plant and equipment acquired after the valuation date 31 March 2012, are initially recognised as an asset on acquisition date and are 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 it to be operating in the manner intended by the traditional council. Where significant components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. Where an asset is acquired by the traditional council, before the valuation date 31 March 2012 and for no nominal consideration, the cost is deemed to be equal to the fair value of the asset on the date acquired and as determined through the valuation process. 15

18 Accounting Policies Depreciation / Amorisation and Impairments Assets acquired before revaluation date (31 March 2011) Depreciation is calculated on the depreciable amount, using the straight - line method over the estimated remaining useful lives of the assets as at the revaluation date. Moveable assets without source documents but acquired before 31 March 2012 were revalued during the financial year ended 2012 and brought into the asset register for the first time at revalued cost less deemed accumulated depreciation. The useful life of these assets were revised to reflect a one year extention for each category. Appropriate adjustments and disclosures have been made in the financial year ended 31 March

19 Accounting Policies 1.4 Property, plant and equipment (continued) Item Old Policy New Policy Since 01/04/2010 Land infinite infinite infinite Buildings years Computer Equipment 3.5 years 4.5 years 3 years Furniture 5 years 6 years 5 years Intangible years Office Equipment 5 years 6 years 5 years Office Safes years Generators Solar Panels 5 years 25 years Cash drawers and Till Machines n/a 61:39 61:39 Office safes Assets acquired after revaluation date (01 April 2012 onwards) These assets are initially recognised in terms of GRAP 17 paragraph 07 and measure the cost in compliance with GRAP 17 paragraph 17. After initial recognition, these assets are carried at the initial cost less accumulated depreciation and impairment loss GRAP 17(33). GRAP 17 Property, Plant and Equipment - Revised Version March Derecognition Items of property, plant and equipment are derecognised when an asset is disposed of or when there are no further economic benefits or service potential expected from the use of the asset. 1.5 Investment property Initial recognition Investment property includes property held to earn rentals and/or for capital appreciation, rather than held to meet service delivery objectives, the production of goods, or the sale of an asset in the ordinary course of operations. At initial recognition, the traditional council measures investment property at cost including transaction costs once it meet the definition of investment property. Subsequent Measurement - Cost model Investment property is measured using the cost model. Under the cost model Investment property is carried at cost less accumulated depreciation and any accumulated impairment losses. 17

20 Accounting Policies Subsequent Measurement - Fair value Investment property is measured using the fair value model. Under the fair value model, of Investment property is carried at it fair market value at the reporting date. 1.6 Financial instruments Initial recognition Financial instruments are initially recognised at the fair value. Subsequent measurement of financial assets and financial liabilities Financial Assets are categorised according to their nature as either financial assets at fair value through profit or loss, held - to maturity, loans and receivable, or available for sale. Investments Investments, which include listed government bonds, unlisted municipal bonds, fixed deposits and short - term deposits invested in registered commercial banks. 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. An impairment of trade receivable is accounted for by reducing the carrying amount of trade receivables through the use of an allowance account, and the amount of loss is recognised in the Statement of Financial Performance within operating expenses. Trade Payables and Borrowings Financial liabilities consists of trade payables and borrowings. They are categorised as financial liabilities held at amortised cost. Cash and cash equivalents Cash includes cash on hand (including petty cash) and cash with banks (including all deposits). 1.7 Unauthorised expenditure Unauthorised expenditure is expenditure that has not been budgeted for. 1.8 Fruitless and wasteful expenditure Fruitless expenditure is the expenditure that was made in vain and would have been avoided had reasonable care been exercised. 18

21 Accounting Policies 1.9 Irregular expenditure Irregular expenditure is expenditure that is contrary to the Public Finance Management Act, the Public Office Bearers Act (Act No. 20 of 1998) or is in contravention of the approved supply chain management policy Intangible assets Intangible asset are initially measured at cost and amortised over two years Provisions and contingencies Provisions are recognised when: the traditional council has a present or constructive obligation as a result of a past events; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation Revenue from exchange transactions Revenue from exchange transactions refers to the revenue that accrued to the traditional council directly in return for services rendered / goods sold, the value of which approximates the consideration received or receivable. Revenue from the provision of services and sale of goods is recognised when substantially all the risk and rewards are passed to the consumer. Revenue arising out of situations where the traditional council acts on behalf of a third party is limited to the amount of any fee or commission payable to the traditional council as compensation for executing the agreed services Revenue from non-exchange transactions Revenue from non - exchange transactions refers to transactions where the traditional council receive revenue without directly giving approximately equal value in exchange. Revenue from spot fines and summonses are recognised when payment is received, together with an estimate of spot fines and summonses that will be received based on past experience of amounts collected. Voluntary revenue from public contributions and donations are recognised when all conditions associated with the contribution have been met. Contributed property, plant and equipment is recognised when such items of property, plant and equipment qualifies for recognition and becomeavailable for use by the traditional council. Revenue from the recovery of shortages, unauthorised, irregular, fruitless and wasteful expenditure is based on legislated procedures are recognised when the recovery thereof from the responsible officials is virtually. 19

22 Accounting Policies Recognition An inflow of resources from a non-exchange transaction recognised as an asset is recognised as revenue, except to the extent that a liability is also recognised in respect of the same inflow. As the entity satisfies a present obligation recognised as a liability in respect of an inflow of resources from a non-exchange transaction recognised as an asset, it reduces the carrying amount of the liability recognised and recognises an amount of revenue equal to that reduction. Measurement Revenue from a non-exchange transaction is measured at the amount of the increase in net assets recognised by the entity. When, as a result of a non-exchange transaction, the entity recognises an asset, it also recognises revenue equivalent to the amount of the asset measured at its fair value as at the date of acquisition, unless it is also required to recognise a liability. Where a liability is required to be recognised it will be measured as the best estimate of the amount required to settle the obligation at the reporting date, and the amount of the increase in net assets, if any, recognised as revenue. When a liability is subsequently reduced, because the taxable event occurs or a condition is satisfied, the amount of the reduction in the liability is recognised as revenue. Transfers Apart from Services in kind, which are not recognised, the entity recognises an asset in respect of transfers when the transferred resources meet the definition of an asset and satisfy the criteria for recognition as an asset. The entity recognises an asset in respect of transfers when the transferred resources meet the definition of an asset and satisfy the criteria for recognition as an asset. Transferred assets are measured at their fair value as at the date of acquisition Grants, Transfers and Donations Grants, transfers and donations received or receivable are recognised when the resources that have been transferred meet the criteria for recognition as an asset. 20

23 Notes to the Annual Financial Statements 2. New standards and interpretations 2.1 Standards and Interpretations early adopted The Traditional Levies and Trust Account has chosen to early adopt the following standards and interpretations: Standard/ Interpretation: Effective date: Years beginning on or after GRAP32: Service Concession Arrangements: Grantor 01 April Standards and interpretations issued, but not yet effective The Traditional Levies and Trust Account has not applied the following standards and interpretations, which have been published and are mandatory for the Traditional Levies and Trust Account s accounting periods beginning on or after 01 April 2015 or later periods: Standard/ Interpretation: Effective date: Years beginning on or after GRAP 18: Segment Reporting 01 April 2015 GRAP 105: Transfers of functions between entities under common control GRAP 106: Transfers of functions between entities not under common control 01 April April 2015 GRAP 107: Mergers 01 April 2015 GRAP108: Statutory Receivables 01 April Standards and interpretations not yet effective or relevant The following standards and interpretations have been published and are mandatory for the Traditional Levies and Trust Account s accounting periods beginning on or after 01 April 2015 or later periods but are not relevant to its operations: Standard/ Interpretation: Effective date: Years beginning on or after GRAP 20: Related parties 01 April

24 Notes to the Annual Financial Statements Figures in Rand Cash and cash equivalents Cash and cash equivalents consist of: Bank balances Current assets The Traditional Levies and Trust Account has the following bank account: Current Account (Primary Bank Account) Cash Book balance at begining of year Cash book balance at end of year Bank statement balance at begining of year Bank statement balance at end of the year Receivables from exchange transactions Trade debtors Reconciliation of provision for impairment of trade and other receivables Opening balance Current year debtor movement (24 400) Current year provision Prior year adjustment 5. Investments (60 727) - - (12 000) All investments are with Ithala Development Finance Corporation. Other investment Fixed deposits

25 Notes to the Annual Financial Statements Figures in Rand Property, plant and equipment Cost/ Valuation Accumulated depreciation and accumulated impaiment Carrying value Cost/ Valuation Accumulated depreciation adn accumulated impairment Carrying value Buildings ( ) ( ) Furniture and fixtures ( ) ( ) Office equipment ( ) ( ) IT equipment ( ) ( ) Safes (77 297) (37 404) Total ( ) ( ) Reconciliation of property, plant and equipment Opening balance Additions Disposals Revaluations Depreciation Total Buildings ( ) Furniture and fixtures (35 043) - ( ) Office equipment (104) - (86 390) IT equipment (110) - ( ) Safes (39 893) (35 257) ( ) Property, plant and equipment (continued) Reconciliation of property, plant and equipment Opening balance Additions Disposals Depreciation Total Buildings ( ) Furniture and fixtures ( ) ( ) Office equipment (99 249) IT equipment ( ) Safes (37 404) ( ) ( )

26 Notes to the Annual Financial Statements Figures in Rand Revaluations The effective date of the revaluations was 31 March Revaluations were performed by independent valuer, Ms NR Shangase [Professional Valuer 4905/8], who is not connected to the entity. Land and buildings are re-valued independently every year. The valuation was performed using the depreciation replacement cost method applied to the subject property. These assumptions were based on current market conditions. 7. Sundry Creditors Trade payables Accruals Deposits not yet allocated Revenue Levies Legal Fees earned Royalties received Rental income Other Miscellaneous other revenue Customary fees Cultural Activities Stock permits Land Utilization Government grants & subsidies Fines Investments at the bank

27 Notes to the Annual Financial Statements Figures in Rand Revenue (continued) The amount included in revenue arising from exchanges of goods or services are as follows: Levies Legal Fees earned Royalties received Rental income Other Miscellaneous other revenue Customary fees Cultural Activities Stock permit Land Utilization The amount included in revenue arising from non-exchange transactions is as follows: Taxation revenue Transfer revenue Government grants & subsidies Fines Investments at the bank Transfers and Subsidies Non exchange transactions Employee costs - - Goods and Services - - Administrative fees Catering: Departmental activities Communication (G&S) Consultants: Business and advisory services Legal services Contractors Consumable supplies

28 Notes to the Annual Financial Statements Figures in Rand Transfers and Subsidies (continued) Consumable: Stationery, printing and office supplies Operating leases Property payments Travel and subsistence Operating payments Venues and facilities Rental and hiring Assets less than the capitalized threshhold Computer services Consultants: Infrastructure and planning Transfers and subsidies of capital in nature amounting to R (2014: R ) were received from the department of Cooperative Governance and Traditional Affairs. 10. Employee related costs Basic Bonus UIF Depreciation and amortisation Property, plant and equipment Intangible assets Prior year depreciation on Property, plant and equipment was adjusted during the current financial year, refer to Note 13 below. 26

29 Notes to the Annual Financial Statements Figures in Rand General expenses Bank charges Cleaning Consulting and professional fees Donations Entertainment Fuel and oil Postage and courier Printing and stationery Travel - local Water Reimbursements Renovations Asset Expensed Development Programmes Bursaries Cultural Activities Other expenses Prior period errors In 2015, after the entity s 2014 financial statements were approved for issue, the entity discovered that the Department of Cooperative Governance and Traditional Affairs had changed its accounting policy on Related Party Transactions and with effect from the current year Transfers and Subsidies were recognised. The R is a recognition of Transfers and Subsidies not recognised in the 2014 financial year. The R779, relates to prior understatement correction of Furniture and Fixtures (R406,795.00), IT Equipment (R310,771.00) and Safes (R65,504.00) and overstatements of Office Equipment (-R4,033.00). The correction of the error(s) resulted in adjustments as follows: Statement of financial position Debtor recovery - (12 000) Property,plant and equipment adjustment Opening Accumulated Surplus or Deficit - ( ) 27

30 Notes to the Annual Financial Statements Figures in Rand Statement of Financial Performance Transfers and subsidies In - ( ) Transfers and subsidies Out Statement of Comparison of Budget and Actual 2015 Budget Actual Variance Total Revenue Total Expenditure ( ) ( ) ( ) ( ) Budget Actual Variance Total Revenue Total Expenditure ( ) ( ) ( ) 15. Risk management Liquidity risk, Interest rate risk and Credit risk The entity has exposure to the following risks from its use of financial istruments: credit risk liquidity risk market risk ( ) ( ) This note presents information about the entity s exposure to each of the above risks and processes for measuring and managing risks. Management has overall responsibility for the establishment and oversight of the entity s risk management framework. Liquidity risk Item Note Trade and other payables Liquidity risk is the risk that the entity s will not be able to meet its financial obligations as they fall due. The entity s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses of risking damages to the entity s reputation. 28

31 Notes to the Annual Financial Statements Item Note Market risk Market risk is the risk that changes in interest rates and fuel price might affect entity s operations. The entity s interest rate risk is at an acceptable level because there are no borrowings or overdrafts at the year end. Currency risk The entity is not exposed to currency risk as purchases and borrowings are not denominated in a currency other than the respective functional currencies of the entity. Credit risk Credit risk is the risk of financial loss to the entity if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from entity s receivables from customers. The entity is not exposed to credit risk as there are no borrowings or overdrafts at year end. The entity has established a provision for impairment that represents an estimate of incurred losses in respect of trade and other receivables and investments. The main components of this provision are a specific loss compent that relates to individually significant exposures. The carrying amount of the financial assets represent the maximum credit exposure. The maxium exposure to credit risk at reporting date was: Financial instruments Investments Loans and receivables (SPO) Cash and cash equivalents

32 Notes to the Annual Financial Statements Figures in Rand Intangible assets Cost/ Valuation Accumulated depreciation and accumulated impaiment Carrying value Cost/ Valuation Accumulated depreciation adn accumulated impairment Carrying value Computer software, other ( ) ( ) Reconciliation of intangible assets Opening balance Amortisation Total Computer software, other ( ) Reconciliation of intangible assets Opening balance Additions Amortisation Total Computer software, other ( ) Related parties The Traditional Levies and Trust Account is effectively a bank account which is managed by the department on behalf of the respective traditional councils. In terms of the KwaZulu Natal Traditional Leadership and Governance Act No. 5 of 2005, the Provinicial Department may provide support to the various institutions of traditional leadership. The administrative support provided by the Provincial Department, through the utilization of its internal human resources, for the benefit of the Institution of Traditional Leadership gives rise to a Related Party Transaction. Related party balances The following three traditional leadership structures are considered to be related parties: Provincial House of traditional leaders (PHTL - KZN) - - Local House of traditional leaders(district Level - KZN) - - Department of Cooperative Governance and Traditional Affairs (CoGTA) Analysis: Transactions absorbed in Programme 4: Compensation of employees

33 Notes to the Annual Financial Statements Figures in Rand Significant uncertainity The Traditional Levies and Trust Account is a consolidation of the financial operations of 294 Traditional Councils in Kwazulu Natal. There is uncertainty regarding the legal status of the Trust Fund as it has not been registered as a public entity nor has the Trust been formed in terms of section 47(1) (c)of the KZNTLGA to administer the operations of the Traditional Councils. 19. umzimkhulu traditional accounts The entity has not included the financial analysis of the 10 tribal authorities from umzimkulu due to an ongoing process dealing with ubukhosi and the recognition thereof in terms of section 6 of KwaZulu - Natal Traditional Leadership and Governance Act No. 5 of The financial statements for umzimkhulu Tribal Authorities are attached as Annexure A of this report. 20. Changes in accounting policy The useful life of assets per Accounting Policy Note 2.4. were revised during the financial year ended 31 March 2012 and necessary adjustments were made in terms of GRAP 3 i.e. for the 31 March 2012 and each prior year to the extent that such an adjustment was practical. New policy has been applied during the current financial year. 21. Fruitless and wasteful expenditure Fruitless and wasteful expenditure Fruitless and wasteful expenditure relate to interest incurred and paid for on ESKOM invoices and other miscellaneous expenses 31

34 Local house of Traditional Leaders Local house of Traditional Leaders 1. Name Local House Contact Number Thandekile Conco Ilembe Tel: (KwaDukuza) Fax: Cell: Zethu Dlamini Harry Gwala Tel: (Ixopo) Fax: Cell Zimbili Maphanga Umgungundlovu Tel: (Pmb) Fax: Cell: Khulekani Buthelezi (Acting Dep. Manager) Umkhanyakude Tel: (Umkhuze) Fax: Cell: Vuyiswa Myezo Ugu Tel: (Port Shepstone) Fax: Cell: Bheki Mkize Ethekwini Tel: (Pinetown) Fax: Cell: Sheila Mhlanga Umzinyathi Tel: (Dundee) Fax: Cell: Mbuso Sikakane Uthungulu Tel: /7 (Eshowe) Fax: Cel: Nozipho Msimango (Acting Dep Manager) Uthukela Tel: (Ladysmith) Fax: Cell: Bonisile Mthembu Zululand Tel: (Ulundi) Fax: Cell: Sandile Nyembe Amajuba Tel: (Newcastle) Fax: Cell: * See Note 19 & 13 The supplementary information presented does not form part of the annual financial statements and is unaudited. 32

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