annual report 2010 - 2011 - Intsika Yethu Municipality

Intsika Yethu Municipality
Annual Financial Statements for the year ended 30 June 2011
Notes to the Annual Financial Statements
Figures in Rand 2011 2010
31. Risk management
Financial risk management
The municipality’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate
risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.
Liquidity risk
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.
The information below analyses the municipality’s financial liabilities and net-settled derivative financial liabilities into relevant
maturity groupings based on the remaining period at the statement of financial position to the contractual maturity date. The
amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their
carrying balances as the impact of discounting is not significant.
Later than one month and not later than one year (2011: R349,092) and Later than one year and not later than twenty years
(2011: R9 343 428)
Later than one month and not later than one year (2010: R121,795) and Later than one year and not later than twenty years
(2010: R3,524,429)
Interest rate risk
As the municipality has no significant interest-bearing assets, the municipality's income and operating cash flows are
substantially independent of changes in market interest rates.
The municipality's interest rate risk arises from long term borrowings. Borrowings issued at fixed rates exposes the municipality
to fair value interest rate risk.
At year end, financial instruments exposed to interest rate risk were as follows:
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Financial instrument 2011 2010
Call deposits 2 405 299 2 399 860
Development Bank of South Africa - Interest on a Loan 349 092 121 795
32. Going concern
We draw attention to the fact that at 30 June 2011, the municipality had accumulated surplus of R 14 014 134 and that the
municipality's total liabilities exceed its assets by R 66 452 219.
The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This
basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of
liabilities, contingent obligations and commitments will occur in the ordinary course of business.
33. Additional disclosure in terms of Municipal Finance Management Act
Contributions to organised local government
Current year subscription / fee 617 798 212 435
Amount paid - current year (617 798) (130 834)
Audit fees
- 81 601
Amount paid - current year 1 371 936 1 276 749
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