Page1 Country of incorporation and domicile South Africa Nature of business and principal activities Electricity distribution Chief Executive Officer (CEO) MP Seboka Chief Finance Officer (CFO) TJ Ramulondi Directors Mr. LM Mbali (Chairperson) Ms. FP Zitha (Deputy Chairperson) Prof. L de Jager Mr. MK Moroka Mr. N Mokhesi Mr. SG Xulu Mr. SM Zimu Mr. TJ Mongake Registered office Fort Street Oranjesig Bloemfontein 9324 Business address 30 Rhodes Avenue Bloemfontein 9324 Postal address Private Bag X14 Brandhof Bloemfontein 9324 Controlling entity Mangaung Metropolitan Municipality incorporated in South Africa Bankers ABSA Auditors Auditor-General of South Africa Company Secretary LR Bomela Company registration number 2003/011612/07 Attorneys Bokwa Attorneys Cengcani & Associates Mabalane Seobe Inc. Phatshoane Henney Inc. Qwelani & Theron Eugene Attorneys
Transcript
Page1
Country of incorporation and domicile South Africa
Nature of business and principal activities Electricity distribution
Chief Executive Officer (CEO) MP Seboka
Chief Finance Officer (CFO) TJ Ramulondi
Directors Mr. LM Mbali (Chairperson)
Ms. FP Zitha (Deputy Chairperson)
Prof. L de Jager
Mr. MK Moroka
Mr. N Mokhesi
Mr. SG Xulu
Mr. SM Zimu
Mr. TJ Mongake
Registered office Fort Street
Oranjesig
Bloemfontein
9324
Business address 30 Rhodes Avenue
Bloemfontein
9324
Postal address Private Bag X14
Brandhof
Bloemfontein
9324
Controlling entity Mangaung Metropolitan
Municipality
incorporated in South Africa
Bankers ABSA
Auditors Auditor-General of South Africa
Company Secretary LR Bomela
Company registration number 2003/011612/07
Attorneys Bokwa Attorneys
Cengcani & Associates
Mabalane Seobe Inc.
Phatshoane Henney Inc.
Qwelani & Theron
Eugene Attorneys
Page2
Company Secretary’s Certificate to the Shareholder of Centlec (SOC) Ltd
In accordance with the provisions of the Companies Act 71 of 2008, I, L Bomela, the Company
Secretary of Centlec State Owned Company Ltd, hereby certify that:
In respect of the reporting period ended 30 June 2013, the Company has lodged with the
Commissioner of the Companies and Intellectual Property Commission (CIPC), all returns and notices
prescribed by the Act and that all such returns and notices are true, correct and up to date.
COMPANY SECRETARY OF CENTLEC (SOC) LTD
Date: 31/01/2014
L BOMELA
Page3
CHIEF EXECUTIVE OFFICER’S QUALITY CERTIFICATION
I, MP Seboka, Chief Executive Officer of Centlec State Owned Company Ltd, hereby certify that:
The Annual Report for the period of 2012/2013 financial year has been prepared in accordance with
the Municipal Finance Management Act and regulations made under that Act.
MP SEBOKA
CHIEF EXECUTIVE OFFICER OF CENTLEC (SOC) LTD
Date:
31/01/2014
Page4
TABLE OF CONTENTS PAGE
General Information…………………………………………………………………………………………1-6
Statement of comparison of budget and actual amounts 105
Notes to the Annual Financial Statements (including Accounting Policies 112
Disclosure notes to the Annual Financial 194
Report of the Auditor-General 195
CHAPTER 7
List of Contact details………………………………………………………………………………… 205
Page5
ABBREVIATIONS/ACRONYMS
Abbreviation/Acronym Explanation
MMM Mangaung Metropolitan Municipality
EDI Electricity Distribution Industry
SDBIP Service Delivery and Budget Implementation
Plan
KPI Key Performance Indicator
NERSA National Electricity Regulator of South Africa
IDP Integrated Development programme
SOC State Owned Company
CIPCC Companies and Intellectual Property commission
AG Auditor General
CEO Chief Executive Officer
CFO Chief Financial Officer
COO Chief Operations Officer
EM Executive Manager
Page6
Legislation covering financial and administrative management
a) Basic conditions of employment Act 1997
b) Labour relation Act 1995
c) South African Bargaining Council Main Collective Agreement 2007/2012
d) Occupational Health and Safety Act, No 181 of 1993.
e) Companies Act, 71 of 2008, (Chapter 8)
f) Municipal Finance Management Act, 56 of 2003.
g) Municipal Systems Act, No. 32 of 2000.
h) Value added Tax Act 1991.
i) Electricity Regulations No 4 of 2006
j) Nationally Energy Regulator Act No 40 of 2004
k) King III Corporate governance
l) NRS048 – 2:2003 Second Edition Electricity Supply – Quality of Supply
m) NRS047 – 1:2005 Third Edition Electricity supply quality of service
n) Supply Chain management: A guide for accounting officers of Municipalities and Municipal
Entities October 2005.
Page7
CHAPTER 1
GENERAL INFORMATION
SCOPE OF REPORT
This annual report covers Centlec`s governance, financial, service delivery performance, and
environmental, broader economic and overall sustainability performance information for the
financial year 2012/13. It provides an account of the company’s progress as at the end of June 2013
and offers a forward-looking perspective in terms of future plans and value generating strategies.
COMPANY PROFILE
Centlec (SOC) Ltd is accountable for providing electricity services to all its customers. As the
electricity distribution service provider of the Mangaung Metro Municipality (MMM), Centlec`s core
competency is to purchase, distribute and sell electricity within its geographical footprint.
Centlec (SOC) Ltd ―Centlec‖ was established as a municipal entity wholly owned by Mangaung
Metropolitan Municipality ―MMM‖ in terms of the Municipal Systems Act, 32 of 2000 ―Systems Act‖
and the Companies Act, 71 of 2008 ―Companies Act‖.
Centlec is accountable to provide network services to all its customers, which include:
Electricity Distribution/Energy Services: Centlec distributes electricity to Mangaung,
Kopanong, Naledi, Mantsopa and Mohokare. Centlec purchases most of its energy from
Eskom at 20 supply points in 18 towns in the Southern Free State and Mangaung Metro-
politan Municipality (MMM).
Construction of Electrical Networks: All new electrification networks, upgrading of existing
networks is handled by the Centlec design and development sections and where
additional capacity is required it is done through the tender process and appointment of
private companies .
Operation, Maintenance and Extension of Networks: The maintenance of electricity
distribution networks forms a large part of Centlec operations. A 24 hour standby service
ensures that customers are not inconvenienced by long power outages.
Page8
On-going evaluation is performed on existing networks to detect any overloading or
failure and this is addressed with upgrading and/ or extension of the particular network.
Metering, Pre-payment Vending and Billing Services: Modern metering systems are
employed to meter the various categories of customers. Prepayment and credit
metering systems are in use. Extensive pre-payment vending facilities are available to
customers to ensure convenience and availability at all times. Credit meter reading and
billing is done in-house from 1 July 2011. Billing is not yet at the desired level and Centlec is
working constantly to improve and expand it by means of implementing new technology
and cleaning the data to reflect the true status.
Today, Centlec has approximately 180 000 customers; ranging from domestic to commercial
and industrial properties.
Customer base:
Tariff Group - 2011-2012 (Baseline) Number of Consumers
MMM Kopanong Naledi Mohokare
Inclining block Tariff 133,912 5289 3,625 3,421
Flat Rate Business 14,566 334 145 166
Homeflex 8 5 1 2
Commflex 6 1 0 0
Bulk Residential 2 25 0 0 0
Bulk Residential 3 120 23 2 4
Elecflex 1 5 0 0 0
Elecflex 2 284 0 0 0
Elecflex 3 450 5 3 3
Departmental 225 170 39 47
Sports Stadiums on ToU 5 0 0 0
Total 145,316 6,661 3,743 3,544
Page9
VISION
To become the electricity supplier of choice in the area of distribution
MISSION
To become the consolidation hub for municipalities in THE FREE STATE, whilst increasing the
shareholder value by strengthening Centlec’s strategic and operational capacity in the coming five
years.
VALUES
Integrity - A value that requires us to conduct ourselves in all our relationships, both internally
and externally, in an honest, truthful, and straightforward way.
Customer focus - The existence of Centlec is premised on the existence of its customers
Hence the question that should be asked by everyone at Centlec is, ―What is right for the
customer?‖
Results - Centlec believes in results, not excuses. Good explanations for failure are not a
legitimate replacement for the desired result.
Page10
OR
GA
NIS
ATI
ON
AL
STR
UC
UTR
E
Bo
ard
of
Dire
cto
rs
Ch
ief
Exe
cu
tive
Off
ice
MP S
EB
OK
A
Off
ice
of
Co
mp
an
y
Se
cre
tary
LR B
OM
ELA
Co
rpo
rate
Se
rvic
es
De
pa
rtm
en
t
LP M
OFO
KEN
G (
AC
TIN
G)
Fin
an
ce
De
pa
rtm
en
t
TJ R
AM
ULO
ND
I
En
gin
ee
rin
g W
ire
s
De
pa
rtm
en
t
AN
MG
OQ
I
En
gin
ee
rin
g R
eta
il
De
pa
rtm
en
t
MA
E P
OB
E
Ch
ief
Op
era
tin
g O
ffic
er
LG K
RIT
ZIN
GER
Page11
OVERVIEW BY THE CHAIRPERSON
Centlec (SOC) Ltd ―Centlec‖ was established as a municipal entity wholly owned by Mangaung
Metropolitan Municipality ―MMM‖ in terms of the Municipal Systems Act, 32 of 2000 ―Systems Act‖
and the Companies Act, 71 of 2008 ―Companies Act‖.
The strategic intent for establishment of Centlec was and still is in line with the National
Government’s initiatives to restructure the Electricity Distribution Industry.
Centlec is therefore, strategically poised to become the consolidation hub of electricity distribution
for municipalities in the Free State.
In order to realise the above and other strategic objectives, the company’s strategic focus is
described in its vision as:
―To become the electricity supplier of choice in the area of distribution”
We therefore believe that this vision is consistent with the broader service delivery objective of the
Metro and informs the way will continue to deliver into the future. Centlec
To achieve the vision as mentioned above, Centlec performs within the Metro environment and is
guided by the Metro’s Integrated Development plan (IDP) programmes. For the year under
consideration, the following issues were considered:
• Focus on infrastructure required for a basic level of service: (this also takes into account regular
maintenance of existing infrastructure to ensure sustainable service delivery).
• Consistent provision of Free Basic Electricity to the poor: (i.e. ensure provision of free basic
electricity to indigent households);
Growing the economy of the Metro: (i.e. create an environment where business can thrive
through the provision of electrical infrastructure.
• Efficient use of funds (i.e. Funds must be used to provide the greatest possible improvement in
access to basic services at the lowest possible cost).
Page12
Performance monitoring and governance issues are continuously being discussed between the
Metro and Centlec. For the year under review, the following can be highlighted:
To ensure that both the Metro and Centlec comply with applicable legislation;
To ensure that Centlec is managed responsibly and transparently and meets its statutory,
contractual and compliance obligations;
To ensure that the Board of Directors and Chief Executive Officer are allowed to fulfil their
responsibilities without undue interference.
To establish a performance framework that considers service delivery and compliance
environments
To contribute towards a better audit outcome for both Centlec and the Metro.
Our primary objective remains that of ensuring sustainable, uninterrupted electricity service provision
throughout our area of supply in order to realise this goal. Our focus in the new financial year is to
formulate a business strategy that will set the new focus about the future of the entity within the
industry that we are operating in. Secondly, our focus will also be on issues regarding performance
as per the IDP programmes, while obtaining improved audit outcome, as well as replacing an aging
fleet of vehicles. Thirdly, the Board of Directors, will continue to ensure that all our governance
structures and systems are improved so as to ensure that we are able to provide coherent corporate
governance and conduct effective oversight over the affairs of the entity.
In conclusion, I would like to thank my fellow Board Members for their focused leadership. It is only
through committed and decisive leadership that the vision of this entity can be realised. I would also
like to thank the executive managers and all the staff members of the entity for their dedication and
commitment. It is through their determination to serve that we are able to continue to render
services to the community.
My sincere gratitude to our key stakeholders, all the Southern Free State Municipalities for their
participation and engagement in issues pertaining to electricity supply in their respective
municipalities.
Finally, I acknowledge and appreciate our relationships and liaisons with our parent municipality,
Mangaung Metropolitan at both administrative and political spheres in furtherance of the course to
the existence of Centlec.
Chairperson of the Board
M L Mbali
Page13
CHIEF EXECUTIVE OFFICER’S OVERVIEW
The financial position of Centlec remains very robust given the prevailing economic climate that is
persisting over the years. The company instituted revenue protection strategies that included the
following:
The conversion of most customers from rotational meters to prepaid meters which contributed to
the improved revenue collection.
The vigorous debt collection activities including termination of supply to defaulting customers, as
well as engaging the services of professional debt collectors.
Improved meter reading and billing in lieu of estimates.
Implementation of the Geographical Meter Management system that increased the accuracy
of the meter auditing programmes, as well the locating of a meter to an ERF house number and
eventually determine if a particular meter has been purchasing electricity.
Improved cost management within operations.
This good financial standing of the company is however facing challenges regarding long term
sustainability, when one considers the ever diminishing gap between the cost of doing business and
revenue generated from operations:
Electricity theft - many municipal entities in the EDI environment face the age old problem of
electricity theft, and Centlec is not immune to it. For the year under review this amounts to 11.1%
of revenue. This threatens the financial sustainability of the company and hampers service
delivery of the Metro.
Data purification – the company has a history of long term outstanding debt that still captures
accounts that need to be verified. The data purification exercise, when complete will provide an
accurate account of the company’s debt position.
Regarding operations of the company one of the highlights was the filling of leadership positions that
were vacant for some time. These were the positions of CEO, COO, CFO and Executive Manager
Page14
Engineering Wires during the year under review. The ―switching on‖ of Khotsong by the Deputy
Minister of Department of Energy, Me Barbara Thompson, accompanied by the honourable
Executive Mayor of MMM Clr Thabo Manyoni, was one of the highlights regarding a successful
electrification projects completed in the Metro by Centlec.
Centlec received a disclaimer for the 2011/2012 financial year from the Auditor General. This opinion
led to the establishment of a comprehensive audit action plan with an extensive follow up
mechanism on the action plan. The progress on the action plan was regularly discussed at the Audit
Steering Committee meetings.
The strong challenge that persists to face Centlec operationally is the lack of human resources, both
in number and in the skills mix. This has been highlighted by both the AG and NERSA audit reports.
Going forward into the 2013/2014 financial year, the company is aiming at completing the following
activities:
Successful implementation of the in house developed vending system, which will go long
way in enhancing the company’s revenue.
The formulation of the business strategy which will culminate in re-establishing an
organisational structure that will assist the company in fulfilling its strategy, as well as
facilitating in transfer and placement of the seconded staff from the Metro to Centlec.
Replacement of aging fleet of vehicles to support service delivery.
Investment in Electrical Infrastructure.
In conclusion, Centlec strives to operate within the vision of the Mangaung Metro Municipality, while
maintaining operations efficiency, better audit outcome and legal compliance.
I would like to thank the Council, the Board of Directors, Executive Mayor City Manager, Chairperson
of the Board, Executive team and all the Centlec staff for continued leadership and support
throughout the past year.
Chief Executive Officer
MP SEBOKA
Page15
CHAPTER 2
2. GOVERNANCE
2.1 Board of Directors
During the year under review the board was chaired by Non-executive Director Mr M.Mbali, the
board has met regularly and retains full control of the company. The board remains accountable to
the Mangaung Metropolitan Municipality (the company’s sole shareholder) and its stakeholders, the
residents of Mangaung.
Non-executive directors contribute an independent view to matters under consideration and add to
the depth of experience of the board. The roles of Chairperson and Chief Financial Officer of the
company are separated, with responsibilities divided between them. The Chairperson has no
executive functions. Members of the board have unlimited access to the Company Secretary, who
acts as an advisor to the board and its committees on matters including compliance with company
rules and procedures, statutory regulations and best corporate practices.
The board or any of its members may, in appropriate circumstances and at the expense of the
company, obtain the advice of independent professionals. A director and peer review as well as a
board evaluation are undertaken on an annual basis.
2.2 Board Members as at 30 June 2013
SURNAME & INITIALS DESIGNATION Race Gender
M Mbali Chairperson African Male
F Zitha Deputy Chair African Female
Prof. L De Jager Non-Executive Director White Female
T Mokhesi Non-Executive Director African Male
S Xulu Non-Executive Director African Male
S Zimu Non-Executive Director African Male
TJ Mongake Non-Executive Director African Male
K Moroka Non-Executive Director African Male
*There were changes in board composition for the year 2012/13
Page16
2.3 Duties of directors.
Section 93H of the Municipal System Act 32 of 2000:
(1) The board of directors of a municipal entity must:
(a) Provide effective, transparent, accountable and coherent corporate governance and conduct
effective oversight of the affairs of the municipal entity;
(b) Ensure that it and the municipal entity comply with all applicable legislation and agreements;
(c) Communicate openly and promptly with the parent municipality of the municipal entity; and
(d) Deal with the parent municipality of the municipal entity in good faith.
3. Statement of Compliance
The board of directors and executives recognise and are committed to the principles of openness,
integrity and accountability advocated by the King III code on corporate governance. Through this
process, the shareholder and other stakeholders are assured that the company is being ethically
managed according to prudent risk parameters in compliance with generally accepted corporate
practices. The monitoring of the company’s compliance with King III forms part of the mandate of
the Audit & Risk Committee. The company has complied with the code in all material respects
during the year under review.
The board held both ordinary and special meetings during the period under review as follows in
which a number of decisions were taken:
TYPE OF
MEETING
DATE VENUE
Ordinary 21 July 2012 Windmill Casino, Bloemfontein
Special 24 August 2012 Protea Willow Lake Hotel, Bloemfontein
Special 21 January 2013 Centlec (SOC) Ltd, Executive Boardroom,
Bloemfontein
Ordinary 01 February
2013
Protea Willow Lake Hotel, Bloemfontein
Special 01 March 2013 Mangaung Metro Municipality, Committee
Room A, Bloemfontein
Special 15 March 2013 Mangaung Metro Municipality, Committee
Room A, Bloemfontein
Ordinary 08 June 2013 Mangaung Metro Municipality, Committee
Room A, Bloemfontein
Page17
4. BOARD COMMITTEES
The board had the following committees during the period under review.
4.1 FINANCE COMMITTEE as at 30 June 2013
SURNAME & INITIALS DESIGNATION
N Mokhesi Chairperson
T J Mongake Member
F Zitha Member
Chief Executive Invitee
Chief Financial Officer Invitee
Chief Operations Officer Invitee
EM: Corporate Services Invitee
EM: Engineering Invitee
4.2 Human Resources & Remuneration Committee as at 30 June 2013.
SURNAME & INITIALS DESIGNATION
F Zitha Chairperson
S Xulu Member
S Zimu Member
T J Mongake Member
M Mbali Member
K Moroka Member
Chief Executive Invitee
Chief Financial Officer Invitee
Chief Operations Officer Invitee
EM: Corporate Services Invitee
EM: Engineering (Retail) Invitee
EM: Engineering (Wires)
Invitee
Page18
4.3 Social Responsibility & Ethics Committee
SURNAME & INITIALS DESIGNATION
K M Moroka Chairperson
T J Mongake Member
Prof L De Jager Member
Chief Executive Invitee
Chief Financial Officer Invitee
Chief Operations Officer Invitee
4.4 Information Technology Governance Committee
SURNAME & INITIALS DESIGNATION
S Xulu Chairperson
S Zimu Member
K M Moroka Member
L De Jager Member
Chief Executive Officer Invitee
Chief Financial Officer Invitee
Chief Operations Officer Invitee
EM: Engineering (Retail) Invitee
4.5 Engineering Committee
SURNAME & INITIALS DESIGNATION
S Zimu Chairperson
S Xulu Member
N Mokhesi Member
Prof L De Jager Member
Chief Executive Officer Invitee
Chief Financial Officer Invitee
Chief Operations Officer Invitee
EM: Engineering (Retail) Invitee
EM: Engineering (Wires) Invitee
Page19
5. Meetings of Board Committees
The respective committees held meetings as follows during the period under review:
COMMITTEE NO. OF
MEETINGS
DATES OF MEETINGS
IT Governance 2 17 August 2012
29 April 2013
Engineering 1 17 August 2012
HR & Remuneration 3 18 August 2012
28 February 2013
31 May 2013
Audit & Risk 1 23 August 2012
1 7 June 2013
1 25 June 2013
Social Responsibility & Ethics 1 18 November 2012
Finance 3 17 August 2012
12 March 2013
12 May 2013
6. Board decision-Making
During the period under review, the board has taken a number of decisions for implementation.
Decisions were taken from duly constituted meetings in line with legislation and such decisions were
minute d, the records of which are available in the office of the Company Secretary.
7. Administrative Governance
The functional areas of Centlec’s administration are divided into the Office of the Chief Executive
Officer, Finance, Corporate Services, Engineering Services -Wires and Engineering Service - Retail.
The entire administration is under the leadership of the Chief Executive Officer of who is accountable
to the board of directors.
Page20
8. The Executive Management
The Chief Executive Officer, together with his senior managers, constitutes the executive
management team of the entity. The following individuals were part of the executive management
team of the entity for the period under review:
NAME DESIGNATION Race Gender
Seboka MP Chief Executive A M
Ramulondi TJ Chief Financial Officer A M
Kritzinger LG Chief Operations Officer W M
Bomela LR Company Secretary A M
Mgoqi AN EM: Engineering Wires A M
Pobe MAE EM: Engineering Retail A M
Mofokeng LP Acting EM: Corporate Services A F
*Changes in the composition of management during the current year:
1. Mr L.R Bomela – was Acting Chief Executive Officer till the 1 January 2013.
2. Mr. M.P. Seboka – was appointed Chief Executive Officer as from 1 February 2013.
3. Mr.Mike Matsimela - was Acting as Chief Financial Officer till end November 2012, he
returned to his position.
4. Mr.Ramulondi was appointed Chief Financial Officer as from 1 December 2012.
5. Mr. L.Kritzinger - was Acting Chief Operations officer till his permanent appointment on
1 November 2012.
6. Mr. Mgoqi was Acting as Executive Manger Engineering wires till his permanent appointment
on the 1 June 2013.
7. Mr. M.W Seoke – resigned as Executive Manager Corporate services at end October 2012.
8. Me. LP. Mofokeng was appointed as Acting Executive Manager; Corporate Services as from
1 November 2012.
Page21
The Executive committee held various meetings for the year under review.
Type of
Meeting
Date Particulars of
Representative(s)
Ordinary 21 July 2012 Kadimo Masekoane
Special 24 August 2012 None
Special 21 January 2013 None
Ordinary 01 February 2013 None
Special 01 March 2013 None
Special 15 March 2013 Kevin Dolphin
Ordinary 08 June 2013 None
Municipal representatives
Section 93D(1) of Municipal System Act provides that the council of a parent municipality must
designate a councillor or an official of the parent municipality or both as the representative(s) of the
parent municipality to represent the parent municipality as a non-participating observer in the
meetings of the board of directors of the municipal entity and to attend shareholder meetings and
to exercise the parent municipality's rights and responsibilities as a shareholder, together with such
other councillors or officials that the council may designate as representatives.
In line with this legislative requirement, the following persons were designated as representatives in
the meetings of the board as follows:
Type of
Meeting
Date Particulars of
Representative(s)
Ordinary 21 July 2012 Kadimo Masekoane
Special 24 August 2012 None
Special 21 January 2013 None
Ordinary 01 February 2013 None
Special 01 March 2013 None
Special 15 March 2013 Kevin Dolphin
Ordinary 08 June 2013 None
Page22
9. Internal Audit
The internal audit function of the entity is outsourced to Price Waterhouse Coopers (PWC) for the
year 2012/13.
The internal audit plan was prepared for the period under review was prepared for consideration
and approval by the Audit committee. In line with MFMA, the plan is risk based and determined the
priorities of the internal audit activities for the period under review.
For the period under review, the Internal Audit Unit prepared the following reports for submission to
the Audit Committee.
Other than reports prepared for consideration by the Audit Committee, the unit also prepared the
following reports for consideration by management during the period under review:
Title of the Report Date of the Report
Auditor-General Drivers of Internal
Control Dashboard Report for the period
1 July 2012 to 30 September 2012
17 October 2012
Auditor-General Drivers of Internal
Control Dashboard Report for the period
1 October 2012 to 31 December 2012
18 March 2013
Auditor-General Drivers of Internal
Control Dashboard Report for the period
1 January 2013 to 31 March 2013
7 July 2013
Auditor-General Drivers of Internal
Control Dashboard Report for the period
1 April 2013 to 30 June 2013
10 July 2013
Type of Report Date of the Report
Asset Verification Audit Report 27 November 2012
Internal Audit Progress Report for the
2011/12 financial year
05 December 2012
Business Risk Identification Report 05 December 2012
IT Risk Assessment 18 April 2013
Occupational Health & Safety Audit
Report
24 April 2013
Bank and Cash Management Audit
Report
02 July 2013
Page23
10. Supply Chain Management
All the bid committees as per the National Treasury Guideline has been established by the Chief
Executive Officer, and convened regularly to perform their functions.
Bid Specification Committee.
Bid Evaluation Committee.
Bid Adjudication Committee.
11. Policies
Various policies were submitted to board and council for approval, below is a table that outlines
the approved policies for the financial year under review.
No. APPROVED POLICIES BOARD COUNCIL
1 VAT Policy 15 March 2013 30 May 2013
2 SCM Policy 15 March 2013 30 May 2013
3 Asset Management Policy 15 March 2013 30 May 2013
4 Budget & Reporting Policy 15 March 2013 30 May 2013
5 Debt Collection Policy 15 March 2013 30 May 2013
6 Credit Control Policy 15 March 2013 30 May 2013
7 Banking & Investment Policy 15 March 2013 30 May 2013
8 Bad Debts Policy 15 March 2013 30 May 2013
9 Tariffs Policy 15 March 2013 30 May 2013
10 Revenue Policy 13 June 2012
11 Consumer Deposit Policy 13 June 2012
12 Irregular, Fruitless & Wasteful Expenditure Policy 13 June 2012
13 Electricity Connection & Disconnection Policy 13 June 2012
14 Estimation of Electricity Consumption by Consumer and
Streetlights Policy
13 June 2012
15 Disaster Recovery Policy 13 June 2012
16 Information Technology & Security Policy 13 June 2012
17 Contract Management Policy 13 June 2012
18 Number of meters per Erf / Stand Policy 13 June 2012
19 Cell Phone Policy 1 March 2013
20 Legal Aid to employees and concession of action Policy Due for
approval
Due for
approval
21 Recruitment, Selection, Appointment, Demotion and
Transfer Policy
Due for
approval
Due for
approval
22 Relocation Policy Due for
approval
Due for
approval
23 Labour Relations Policy Due for
approval
Due for
approval
24 Remuneration Policy Due for
approval
Due for
approval
25 Employee Benefit Schemes Policy Due for
approval
Due for
approval
Page24
Page25
26 Leave Policy Due for
approval
Due for
approval
27 Occupational Health and Employee Wellness and
Workplace Safety Policy
Due for
approval
Due for
approval
28 Training and Development Policy Due for
approval
Due for
approval
29 Career Opportunities, Succession Planning and Rapid
Progression Policy
Due for
approval
Due for
approval
30 Use of Municipal Equipment and Vehicles Policy Due for
approval
Due for
approval
31 Private Work Policy Due for
approval
Due for
approval
32 Subsistence & Travelling Allowance Policy Due for
approval
Due for
approval
33 Employment Equity Due for
Approval
Due for
Approval
34 Retention and Scare Skills Policy Due for
Approval
Due for
Approval
No. APPROVED POLICIES BOARD COUNCIL
Page 26
12
. Pu
blic
atio
n o
f in
form
atio
n o
f th
e e
ntity
’s w
eb
site
s
The
en
tity
’s w
eb
site
ha
s b
ee
n f
un
ctio
na
l a
nd
ac
ce
ssib
le d
urin
g t
he
pe
rio
d u
nd
er
revie
w.
Do
cu
me
nts
to
be
pu
blish
ed
on
th
e e
ntity
’s w
eb
site
Pu
blish
ed
/ N
ot
pu
blish
ed
Cu
rre
nt
an
nu
al a
nd
ad
just
me
nts
bu
dg
ets
an
d a
ll b
ud
ge
t-re
late
d d
oc
um
en
ts
No
t P
ub
lish
ed
All
cu
rre
nt
bu
dg
et-
rela
ted
po
licie
s N
ot
Pu
blis
he
d
The
pre
vio
us
an
nu
al re
po
rt (
2011/1
2)
No
t P
ub
lish
ed
All
cu
rre
nt
pe
rfo
rma
nc
e a
gre
em
en
ts r
eq
uire
d in
te
rms
of
sec
tio
n 5
7(1
)(b
) o
f th
e
Mu
nic
ipa
l Syst
em
s A
ct
an
d r
esu
ltin
g s
co
rec
ard
s
No
t P
ub
lish
ed
All
serv
ice
de
live
ry a
gre
em
en
ts
No
t P
ub
lish
ed
All
lon
g-t
erm
bo
rro
win
g c
on
tra
cts
N
ot
Pu
blis
he
d
All
sup
ply
ch
ain
ma
na
ge
me
nt
co
ntr
ac
ts a
bo
ve
R 1
00
000
(V
AT
inc
lud
ed
)
Pu
blis
he
d
An
in
form
atio
n st
ate
me
nt
co
nta
inin
g a
lis
t o
f a
sse
ts o
ve
r a
p
resc
rib
ed
va
lue
tha
t h
ave
be
en
dis
po
sed
-off
in t
erm
s o
f se
ctio
n 1
4 (
2)
or
(4).
No
t P
ub
lish
ed
Co
ntr
ac
ts
ag
ree
d
in
20
12/1
3
to
wh
ich
su
bse
ctio
n
(1)
of
sec
tio
n
33
a
pp
ly,
sub
jec
t to
su
bse
ctio
n (
3)
of
tha
t se
ctio
n
Pu
blis
he
d
Pu
blic
-priva
te p
art
ne
rsh
ip a
gre
em
en
ts r
efe
rre
d t
o in
se
ctio
n 1
20.
No
t P
ub
lish
ed
All
qu
art
erly r
ep
ort
s ta
ble
d in
th
e b
oa
rd a
nd
co
un
cil
of
the
pa
ren
t m
un
icip
alit
y
in t
erm
s o
f se
ctio
n 5
2 (
d)
du
rin
g 2
012
/13
No
t P
ub
lish
ed
Page 27
Page27
CHAPTER 3
1. INFORMATION ON PREDETERMINED OBJECTIVES
The parent municipality must ensure that the annual performance objectives and indicators for the
municipal entity are established in agreement with the municipal entity and included in the
municipal entity’s multi-year business plan in accordance with section 87(5)(d) of the MFMA.
2. OBJECTIVES AND STRATEGIES
In line with section 87(5)(d) Centlec developed an multi –year business plan which reflected the
objectives for the financial year 2012/18.
Therefore, the developmental strategies as espoused in this Business Plan, are directly linked to a
specific developmental needs and objectives which must be measured in the organizational
Performance Management System (PMS), and give effect to Service Delivery and Budget
Implementation Plan (SDBIP) targets/ goals.
Page 28
3.
Pre
-De
term
ine
d o
bje
ctiv
es
3.1
Off
ice
of
Ch
ief
Exe
cu
tive
Se
cti
on
93
J o
f M
un
icip
al S
yst
em
s A
ct
32 o
f 2000.
Ap
po
intm
en
t o
f c
hie
f e
xe
cu
tive
off
ice
r.—
The
c
hie
f e
xe
cu
tive
off
ice
r o
f a
mu
nic
ipa
l e
ntity
is
ac
co
un
tab
le t
o t
he
bo
ard
of
dire
cto
rs f
or
the
ma
na
ge
me
nt
of
the
mu
nic
ipa
l e
ntity
.
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e
Str
ate
gy
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e a
s
at
30 J
un
e 2
013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E R
ef. N
o.
Str
ate
gic
lea
de
rsh
ip a
nd
ma
na
ge
me
nt
for
the
en
tity
.
The
Org
an
isa
tio
na
l
SD
BIP
str
ea
mlin
ed
an
d li
nke
d t
o
pe
rfo
rma
nc
e
ma
na
ge
me
nt
an
d
pla
ns
SD
BIP
lin
ke
d t
o
pe
rfo
rma
nc
e
ag
ree
me
nts
,
an
nu
al a
nd
mid
-
ye
ar
rep
ort
s
co
mp
iled
De
ve
lop
me
nt
of
an
nu
al
rep
ort
De
ve
lop
me
nt
of
an
nu
al r
ep
ort
60
%
This
ha
s n
ot
be
en
tho
rou
gh
ly
ac
hie
ve
d d
ue
to la
ck o
f
pro
pe
r
pe
rfo
rma
nc
e
ma
na
ge
me
nt
syst
em
an
d
mo
nito
rin
g a
nd
eva
lua
tio
n
syst
em
s
A d
eta
iled
pe
rfo
rma
nc
e
ma
na
ge
me
nt
syst
em
will
be
de
ve
lop
ed
in
the
ne
xt
fin
an
cia
l ye
ar
wh
ich
will
en
sure
th
e
pe
rfo
rma
nc
e
pla
ns
are
stre
am
line
d
an
d li
nke
d t
o
SD
BIP
an
d t
he
is p
rop
er
an
d
eff
ec
tive
mo
nito
rin
g
an
d
eva
lua
tio
n.
OC
E0
01
%
imp
lem
en
tatio
n
of
SD
BIP
10
0%
imp
lem
en
tatio
n
of
SD
BIP
10
0%
1
00
%
80
%
20
%, th
e
mo
nito
rin
g a
nd
eva
lua
tio
n
ne
ed
s to
be
imp
rove
d.
Mo
nito
rin
g a
nd
eva
lua
tio
n
OC
E0
02
Page 29
Co
mp
ariso
n o
f a
ll
ac
tua
l pro
jec
t
imp
ac
ts a
ga
inst
the
ag
ree
d
stra
teg
ic p
lan
s
Qu
art
erly,
mid
-
ye
ar
an
d a
nn
ua
l
rep
ort
s
Re
po
rt
pro
du
ce
d
ea
ch
qu
art
er
Re
po
rt
pro
du
ce
d e
ac
h
qu
art
er
Fu
lly
Ac
hie
ve
d:
Qu
art
erly
rep
ort
s a
nd
,
mid
-ye
ar
an
d
an
nu
al r
ep
ort
s
pro
du
ce
d a
nd
sub
mitte
d.
No
ne
N
on
e
OC
E0
03
All
turn
aro
un
d
pro
gra
mm
es
an
d
pro
jec
ts a
re
imp
lem
en
ted
Re
po
rt o
n t
he
de
ve
lop
ed
turn
aro
un
d
stra
teg
y
Imp
lem
en
tatio
n p
rog
ress
rep
ort
Imp
lem
en
tatio
n
pro
gre
ss r
ep
ort
Pa
rtly
Ac
hie
ve
d:
Pro
jec
ts w
ere
imp
lem
en
ted
.
Pro
jec
ts w
ere
imp
lem
en
ted
,
ho
we
ve
r th
ey
wa
s n
o
turn
aro
un
d
stra
teg
y in
pla
ce
ag
ain
st
wh
ich
pro
jec
ts
co
uld
be
alig
ne
d a
nd
me
asu
red
Bu
sin
ess
stra
teg
y is
be
ing
de
ve
lop
ed
as
a t
oo
l to
en
sure
imp
rove
me
nt
in s
erv
ice
de
live
ry.
OC
E0
04
Inte
rna
l au
dit
rep
ort
s is
sue
d t
o
Au
dit C
om
mitte
e
Au
dite
d
pe
rfo
rma
nc
e
info
rma
tio
n a
s p
er
sec
tio
n 4
5(a
) o
f
the
Syst
em
s A
ct.
Fo
ur
inte
rna
l
au
dit r
ep
ort
s
Fo
ur
inte
rna
l
au
dit r
ep
ort
s
Fu
lly
Ac
hie
ve
d:
Fiv
e (
5)
Inte
rna
l
au
dit r
ep
ort
s
issu
ed
to
Au
dit
Co
mm
itte
e
No
ne
N
on
e
OC
E0
05
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e
Str
ate
gy
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e a
s
at
30 J
un
e 2
013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E R
ef. N
o.
Page 30
Page30
3.2 Office of Company Secretary
Section 88 of Companies Act No 71 of 2008. Duties of company secretary.—
(1) A company’s secretary is accountable to the company’s board.
(2) A company secretary’s duties include, but are not restricted to—
(a)Providing the directors of the company collectively and individually with guidance as to
their duties, responsibilities and powers;
(b) Making the directors aware of any law relevant to or affecting the company; (c)
Reporting to the company’s board any failure on the part of the company or a director to
Comply with the Memorandum of Incorporation or rules of the company or this Act;
(d) Ensuring that minutes of all shareholders meetings, board meetings and the meetings of
any committees of the directors, or of the company’s audit committee, are properly
recorded in accordance with this Act;
(e)Certifying in the company’s annual financial statements whether the company has filed
required returns and notices in terms of this Act, and whether all such returns and notices
appear to be true, correct and up to date;
(f) Ensuring that a copy of the company’s annual financial statements is sent, in accordance
with this Act, to every person who is entitled to it;
(g)Carrying out the functions of a person designated in terms of section 33 (3).
Page 31
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e S
tra
teg
y
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e a
s a
t
30 J
un
e 2
013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E R
ef.
No
.
En
sure
ad
min
istr
atio
n
co
mp
lian
ce
with
leg
isla
tio
n.
Su
bm
issi
on
of
An
nu
al R
etu
rns
to
the
Re
gis
tra
r o
f
Co
mp
an
ies
as
req
uire
d b
y t
he
Co
mp
an
ies
Ac
t.
Pro
of
of
sub
mis
sio
n
fro
m t
he
CIP
RO
1 (
on
e)
1 (
on
e)
10
0%
N
on
e
No
ne
C
SES0
01
Est
ab
lish
an
d
ma
inta
in a
re
gis
ter
of
inte
rest
of
dire
cto
rs.
Pro
of
of
reg
iste
r N
on
e
1 (
on
e)
33
%
Re
gis
ter
of
reg
iste
r o
f
inte
rest
of
dire
cto
rs n
ot
fully
est
ab
lish
ed
,
A d
eta
iled
reg
iste
r o
f
inte
rest
s o
f
dire
cto
rs w
ill b
e
est
ab
lish
an
d
ma
inta
in
eff
ec
tive
fro
m
20
13
/14
fin
an
cia
l ye
ar
an
d u
pd
ate
d
reg
ula
rly
the
rea
fte
r.
CSES0
02
Up
da
te a
nd
ma
inta
in t
he
Co
mp
an
y R
eg
iste
r
Co
mp
an
y R
eg
iste
r
No
ne
1
(o
ne
) 1
00
%
No
ne
N
on
e
CSES0
03
Ma
inta
in a
nd
up
da
te s
tatu
tory
rec
ord
s o
f th
e
Co
mp
an
y
Ke
ep
an
d m
ain
tain
the
Co
mp
an
y’s
Art
icle
s o
f
Ass
oc
iatio
n,
up
da
te f
orm
CM
29
an
d o
the
r st
atu
tory
form
s sh
ou
ld t
he
re
be
a c
ha
ng
e
Pro
of
of
do
cu
me
nts
ke
pt
No
ne
1
(o
ne
) 1
00
%
No
ne
N
on
e
CSES0
04
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e S
tra
teg
y
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e a
s a
t
30 J
un
e 2
013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E R
ef.
No
.
Page 32
du
rin
g f
ina
nc
ial
ye
ar
Ke
ep
pro
pe
r
min
ute
bo
oks
in
the
ma
nn
er
pro
vid
ed
fo
r in
th
e
Co
mp
an
ies
Ac
t
an
d e
nsu
re t
ha
t a
ll
min
ute
s o
f th
e
Bo
ard
an
d B
oa
rd
Co
mm
itte
es
are
pro
pe
rly r
ec
ord
ed
an
d p
ast
ed
in
th
e
min
ute
bo
oks
Pro
of
of
min
ute
bo
oks
an
d
min
ute
s p
ast
ed
the
rein
No
ne
1
00
% C
om
plia
nt
min
ute
bo
oks
thro
ug
h t
he
fin
an
cia
l ye
ar
10
0%
N
on
e
No
ne
C
SES0
05
En
sure
th
at
the
sha
reh
old
ers
co
mp
ac
t is
dra
fte
d a
nd
tha
t SD
As
with
So
uth
ern
Fre
e
Sta
te
Mu
nic
ipa
litie
s
are
re
vis
ed
Dra
ft t
he
sha
reh
old
ers
co
mp
ac
t, t
ab
le it
for
co
nsi
de
ratio
n
by t
he
Bo
ard
an
d
the
pa
ren
t
mu
nic
ipa
lity;
Pro
of
of
dra
ft o
r
sig
ne
d
ag
ree
me
nts
1 (
on
e)
sig
ne
d
ag
ree
me
nt
1 (
on
e)
50
%
Dra
ft t
he
sha
reh
old
ers
co
mp
ac
t n
o
ye
t si
gn
ed
.
The
sha
reh
old
ers
’
co
mp
ac
t is
to
be
ta
ble
d t
o
the
bo
ard
an
d
the
pa
ren
t
mu
nic
ipa
lity f
or
co
nsi
de
ratio
n
an
d s
ign
ed
in
the
201
3/1
4
fin
an
cia
l ye
ar.
CSES0
06
Re
vis
e t
he
SD
A w
ith
Ko
pa
no
ng
to
en
sure
co
mp
lian
ce
with
MFM
A;
On
ce
in
thre
e y
ea
r
circ
le
Re
vis
ed
th
e S
DA
with
Ko
pa
no
ng
LM
0%
SD
A w
ith
Ko
pa
no
ng
no
t
revis
ed
SD
As
with
all
So
uth
ern
Fre
e
Sta
te
mu
nic
ipa
litie
s
will
be
re
vis
ed
an
d s
ign
ed
in
the
201
3/1
4
fin
an
cia
l ye
ar.
No
ne
Re
vis
e t
he
SD
A w
ith
Na
led
i to
en
sure
co
mp
lian
ce
with
the
MFM
A
On
ce
in
thre
e y
ea
r
circ
le
Re
vis
e t
he
SD
A
with
Na
led
i L
M
0%
SD
A w
ith
Na
led
i n
ot
revis
ed
SD
As
with
all
So
uth
ern
Fre
e
Sta
te
mu
nic
ipa
litie
s
will
be
re
vis
ed
CSES007
Fin
aliz
e n
ew
SD
A
On
ce
in
Fin
aliz
ed
ne
w S
DA
0
%
SD
A w
ith
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e S
tra
teg
y
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e a
s a
t
30 J
un
e 2
013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E R
ef.
No
.
Page 33
with
Mo
ho
ka
re
thre
e y
ea
r
circ
le
with
Mo
ho
ka
re
Mo
ho
ka
re n
ot
revis
ed
an
d s
ign
ed
thro
ug
h t
he
off
ice
of
the
CEO
in
th
e
20
13
/14
fin
an
cia
l ye
ar.
Me
etin
gs
ma
na
ge
me
nt
Fo
rmu
late
me
etin
g
ag
en
da
s w
ith
Ch
ief
Exe
cu
tive
an
d o
r C
ha
irp
ers
on
Pro
of
of
bo
ard
pa
cks,
circ
ula
tio
n
of
min
ute
s,
no
tic
es,
co
mm
un
ica
tio
n o
f
reso
lutio
ns
No
ne
B
oa
rd p
ac
ks,
circ
ula
tio
n o
f
min
ute
s, n
otic
es,
co
mm
un
ica
tio
n o
f
reso
lutio
ns
pe
r
me
etin
g
10
0%
N
on
e
No
ne
C
SES0
05
Tim
eo
us
serv
ice
of
no
tic
es
of
me
etin
gs
No
ne
N
on
e
No
ne
Pre
pa
ratio
n o
f
do
cu
me
nts
to
serv
e b
efo
re
me
etin
gs
an
d
circ
ula
tio
n t
he
reo
f
to m
em
be
rs
No
ne
N
on
e
No
ne
Min
utin
g o
f
pro
ce
ed
ing
s a
nd
reso
lutio
ns
take
n in
ea
ch
me
etin
g
No
ne
N
on
e
No
ne
Tim
eo
us
circ
ula
tio
n
of
min
ute
s
No
ne
N
on
e
No
ne
To e
nsu
re t
ha
t
co
rpo
rate
stra
teg
ies
are
ca
rrie
d o
ut
tim
eo
usl
y a
nd
cle
arly
co
mm
un
ica
tin
g
the
Bo
ard
’s
de
cis
ion
s a
nd
inst
ruc
tio
ns
to
rele
va
nt
sta
ke
ho
lde
rs
No
ne
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e S
tra
teg
y
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e a
s a
t
30 J
un
e 2
013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E R
ef.
No
.
Page 34
En
sure
ma
na
ge
me
nt
of
all
do
cu
me
nta
tio
ns
reg
ard
ing
Bo
ard
an
d c
om
mitte
es
ac
tivitie
s fo
r e
asy
ac
ce
ss o
n r
eq
ue
st
No
ne
1
00
%
No
ne
N
on
e
CSES0
06
En
sure
qu
oru
ms
for
me
etin
gs
No
ne
N
on
e
No
ne
En
sure
so
un
d
ma
na
ge
me
nt
of
the
bu
dg
et
vo
tes
allo
ca
ted
to t
he
off
ice
Mo
nth
ly r
ep
ort
s o
n
ma
na
ge
me
nt
of
the
bu
dg
et
vo
tes
allo
ca
ted
to
th
e
off
ice
Re
po
rte
d
inc
ide
nc
es
of
irre
gu
lar,
un
au
tho
rize
d,
fru
itle
ss a
nd
wa
ste
ful
exp
en
ditu
re.
10
0%
Co
mp
lian
t
No
un
au
tho
rize
d,
Irre
gu
lar
an
d
fru
itle
ss &
wa
ste
ful
exp
en
ditu
re
inc
urr
ed
10
0%
N
on
e
No
ne
C
SES0
07
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e S
tra
teg
y
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e a
s a
t
30 J
un
e 2
013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E R
ef.
No
.
Page 35
Page35
3.3 Department of Engineering Wires
The Wires component of Centlec is divided into Distribution and Design & Development.
Distribution covers the High Voltage Section, Medium Voltage Section, Low Voltage Section, Street
lighting Section, Street lighting Section and Regional Services.
The High Voltage Section is responsible for the infrastructure at the 132kV, 33kV and 11kV voltage
levels consisting of overhead as well as underground networks. The functional area includes aspects
such as routine and preventative maintenance of the said networks.
The Medium Voltage Section is responsible for all the substation equipment on the respective
voltage levels. The functional area includes aspects such as new construction of capital projects as
well as routine and preventative maintenance of the said networks. Low Voltage Section is
responsible for all the 400V and 230V networks and includes both overhead and underground
networks. The functional area includes aspects such as new constructions of capital projects as well
as routine and preventative maintenance.
The Streetlight/Public lighting section is responsible for all the street and area lighting. The functional
area includes aspects such as new construction of capital projects as well as routine and preventa-
tive maintenance.
Page 36
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012
– 3
0 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e
Str
ate
gy
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
20
11/1
2)
An
nu
al Ta
rge
t
20
12/1
3
Ac
tua
l
Pe
rfo
rma
nc
e
as
at
30 J
un
e
20
13
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E
Re
f. N
o.
Pro
vid
e a
cc
ess
to e
lec
tric
ity
17
0 1
30
ho
use
ho
lds
ha
ve
ac
ce
ss
to e
lec
tric
ity
Nu
mb
er
of
ho
use
ho
lds
with
ac
ce
ss
to e
lec
tric
ity
17
0 1
30
ho
use
ho
lds
ha
ve
ac
ce
ss
to e
lec
tric
ity
17
0 1
30
ho
use
ho
lds
ha
ve
ac
ce
ss
to e
lec
tric
ity
10
0%
N
on
e
No
ne
EN
W001
4 0
39
ho
use
ho
lds
in
pro
cla
ime
d
site
s h
ave
ac
ce
ss t
o
ele
ctr
icity
Inst
alle
d
pre
pa
id
me
ters
in
all
pro
cla
ime
d
site
s
Se
rvic
e 3
8
22
4
ho
use
ho
lds
tha
t a
re
be
low
ba
sic
leve
l o
f
serv
ice
Se
rvic
e t
he
rem
ain
de
r o
f
ho
use
ho
lds
tha
t a
re
be
low
ba
sic
leve
l o
f
serv
ice
10
0%
N
on
e
No
ne
EN
W002
1 5
93 R
DP
ho
use
s’
ele
ctr
icity
co
nn
ec
tio
ns
shifte
d
Nu
mb
er
of
RD
P
ho
use
ho
lds
wh
ose
ele
ctr
icity
co
nn
ec
tio
n
shifte
d
1 5
93 R
DP
ho
use
s’
ele
ctr
icity
co
nn
ec
tio
ns
shifte
d
1000 R
DP
ho
use
s’
ele
ctr
icity
co
nn
ec
tio
ns
shifte
d
0%
593 R
DP
ho
use
s. O
nly
1 0
00 f
ully
co
mp
lete
d
RD
P h
ou
ses
The
ta
rge
t c
ou
ld
no
t b
e f
ully
ac
hie
ve
d d
ue
to
the
no
n-
sub
mis
sio
n in
term
s o
f th
e
un
co
mp
lete
d
RD
P h
ou
ses
fro
m
MM
M-H
um
an
Se
ttle
me
nt
Dire
cto
rate
(Cu
sto
dia
n o
f th
e
BN
G H
ou
ses)
EN
W003
All
pu
blic
req
uirin
g n
ew
100%
of
cu
sto
me
rs
100%
of
ne
w
an
d
100%
of
ne
w
an
d
10
0%
N
on
e
No
ne
EN
W004
Page 37
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012
– 3
0 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e
Str
ate
gy
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
20
11/1
2)
An
nu
al Ta
rge
t
20
12/1
3
Ac
tua
l
Pe
rfo
rma
nc
e
as
at
30 J
un
e
20
13
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E
Re
f. N
o.
an
d u
pg
rad
ed
co
nn
ec
tio
ns
are
pro
vid
ed
with
co
nn
ec
tio
ns
pro
vid
ed
with
ele
ctr
icity
co
nn
ec
tio
ns
up
gra
din
g
cu
sto
me
rs
pro
vid
ed
with
ele
ctr
icity
co
nn
ec
tio
ns
up
gra
din
g
cu
sto
me
rs
pro
vid
ed
with
ele
ctr
icity
co
nn
ec
tio
ns
To im
pro
ve
th
e
relia
bili
ty o
f th
e
Ne
two
rk
a)
De
ve
lop
,
fin
aliz
e a
nd
imp
lem
en
t
an
in
fra
-
stru
ctu
re
de
ve
lop
-
me
nt
an
d
ma
inte
-
na
nc
e
pla
n.
100%
of
bu
dg
et
No
ne
In
fra
stru
ctu
re
Ma
ste
r P
lan
10
0%
N
on
e
No
ne
EN
W005
b)
De
ve
lop
Bo
tsh
ab
elo
Ma
ste
r
pla
n a
nd
est
ab
lish
132/1
1kV
Blo
ck F
dis
trib
utio
n
ce
ntr
e
Co
nsu
lta
nts
ha
ve
be
en
ap
po
inte
d
No
ne
1
00
%
80
%.
The
Ma
ste
r
pla
n h
as
no
t
be
en
de
ve
lop
ed
an
d t
he
dis
trib
utio
n
ce
ntr
e is
als
o
no
t fu
lly
co
mp
lete
d.
The
pro
jec
t is
mu
ltiy
ea
r a
nd
will
be
im
ple
me
nte
d
in t
he
2013/1
4
fin
an
cia
l ye
ar
EN
W006
Page 38
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012
– 3
0 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e
Str
ate
gy
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
20
11/1
2)
An
nu
al Ta
rge
t
20
12/1
3
Ac
tua
l
Pe
rfo
rma
nc
e
as
at
30 J
un
e
20
13
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E
Re
f. N
o.
c)
Nu
mb
er
of
hig
h m
ast
ligh
ts
inst
alle
d in
info
rma
l
sett
lem
en
ts
26
N
on
e
26
6
9%
8 h
igh
ma
st
ligh
ts
Pro
vis
ion
wa
s o
nly
ma
de
fo
r 1
8 h
igh
ma
st lig
ht
to b
e
inst
alle
d in
info
rma
l
sett
lem
en
ts
EN
W007
d)
Est
ab
lish
132/1
1kV
Clo
ve
r
Dis
trib
utio
n
ce
ntr
e
Co
nsu
lta
nts
an
d t
he
co
ntr
ac
tors
ha
ve
be
en
ap
po
inte
d
No
ne
1
00
%
10
0%
N
on
e
No
ne
EN
W008
e)
Est
ab
lish
132/1
1kV
Vis
ta P
ark
Dis
trib
utio
n
ce
ntr
e
Co
nsu
lta
nts
an
d t
he
co
ntr
ac
tors
ha
ve
be
en
ap
po
inte
d
No
ne
1
00
%
10
0%
N
on
e
No
ne
EN
W009
f)
Up
gra
de
132/1
1kV
Sh
an
no
n A
Dis
trib
utio
n
Ce
ntr
e
Co
nsu
lta
nts
an
d t
he
co
ntr
ac
tors
ha
ve
be
en
ap
po
inte
d
No
ne
1
00
%
65
%
35
%
The
pro
jec
t is
a
mu
lti-ye
ar
an
d w
ill
be
co
mp
lete
d in
2013/1
4 f
ina
nc
ial
ye
ar
EN
W010
g)
Up
gra
de
132/1
1kV
Me
ritin
g
Dis
trib
utio
n
Ce
ntr
e
Co
nsu
lta
nts
an
d t
he
co
ntr
ac
tors
ha
ve
be
en
ap
po
inte
d
No
ne
1
00
%
65%
. 3
5%
Th
e p
roje
ct
is a
mu
lti-ye
ar
an
d w
ill
be
co
mp
lete
d in
2013/1
4 f
ina
nc
ial
ye
ar
EN
W011
Page 39
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012
– 3
0 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e
Str
ate
gy
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
20
11/1
2)
An
nu
al Ta
rge
t
20
12/1
3
Ac
tua
l
Pe
rfo
rma
nc
e
as
at
30 J
un
e
20
13
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E
Re
f. N
o.
h)
Imp
lem
en
t
Dig
sile
nt
(Ne
two
rk
Mo
nito
rin
g)
10
0%
1
00
%
10
0%
1
00
%
0%
EN
W012
i)
Sp
en
d a
t
lea
st 9
0%
Exp
en
ditu
re
on
Ca
pita
l
Bu
dg
et.
Ba
selin
e 9
0%
B
ase
line
90%
1
00
%
85
%
10
– 1
5%
on
ca
pita
l
exp
en
ditu
re
Pro
cu
rem
en
t p
lan
will
be
de
ve
lop
ed
to e
nsu
re t
ime
ou
s
pla
nn
ing
an
d
imp
lem
en
tatio
n
of
ca
pita
l
pro
jec
ts.
EN
W013
j)
Re
ga
in
Esk
om
cu
sto
me
rs
in
CEN
TLEC
’s
are
a o
f
sup
ply
.
No
ne
N
on
e
No
ne
0
%
Pe
rfo
rma
nc
e
targ
ets
we
re
ne
ve
r se
t fo
r
the
in
dic
ato
r
If t
his
KP
I is
pu
rsu
ed
,
pe
rfo
rma
nc
e
targ
ets
will
be
se
t
an
d a
pp
rop
ria
te
reso
urc
es
allo
ca
ted
EN
W014
To S
tre
ng
the
n
the
Str
ate
gic
Op
era
tio
na
l
Ca
pa
city o
f
Ce
ntle
c a
nd
the
re
liab
ility
of
the
ne
two
rk
a)
Re
me
dia
l
wo
rk o
n t
he
11kV
ove
rhe
ad
ne
two
rks
(km
)
Ba
selin
e 7
48
B
ase
line
748
6
72
5
9%
399 k
m
Se
rvic
e p
rovid
er
mu
st b
e
ap
po
inte
d.
Ad
ditio
na
l fle
et
ne
ed
to
be
pro
cu
red
in
ord
er
to im
pro
ve
pe
rfo
rma
nc
e.
EN
W015
Page 40
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012
– 3
0 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e
Str
ate
gy
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
20
11/1
2)
An
nu
al Ta
rge
t
20
12/1
3
Ac
tua
l
Pe
rfo
rma
nc
e
as
at
30 J
un
e
20
13
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E
Re
f. N
o.
b)
Re
me
dia
l
wo
rk o
n t
he
33 a
nd
132kV
ove
rhe
ad
ne
two
rks
(km
)
Ba
selin
e 4
40
B
ase
line
440
4
40
3
6%
282 k
m
Se
rvic
e p
rovid
er
mu
st b
e
ap
po
inte
d.
Ad
ditio
na
l fle
et
ne
ed
to
be
pro
cu
red
in
ord
er
to im
pro
ve
pe
rfo
rma
nc
e.
EN
W016
Ro
utin
e
Ma
inte
na
nc
e:
Ove
rhe
ad
Ne
two
rk
a)
Britt
le O
/H
Co
nn
ec
tio
ns
Ba
selin
e 9
60
6
00
6
00
5
0%
. 300 k
m
Se
rvic
e p
rovid
er
mu
st b
e
ap
po
inte
d.
Ad
ditio
na
l fle
et
ne
ed
to
be
pro
cu
red
in
ord
er
to im
pro
ve
pe
rfo
rma
nc
e.
EN
W017
Str
ee
tlig
ht
Ma
inte
na
nc
e
a)
Ro
utin
e
Ma
inte
na
n
ce
:
Str
ee
tlig
hts
Ba
selin
e 1
5
98
0
12
00
0
12
00
0
10
0%
N
on
e
No
ne
EN
W018
b)
Ro
utin
e
Ma
inte
na
n
ce
of
De
co
rative
fig
ure
s
Ba
selin
e 5
00
B
ase
line
500
1
25
1
00
%
No
ne
N
on
e
EN
W019
Page 41
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012
– 3
0 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e
Str
ate
gy
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
20
11/1
2)
An
nu
al Ta
rge
t
20
12/1
3
Ac
tua
l
Pe
rfo
rma
nc
e
as
at
30 J
un
e
20
13
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E
Re
f. N
o.
MV
Ne
two
rk
a)
Ro
utin
e
insp
ec
tio
n
an
d
ma
inte
na
n
ce
on
33kV
line
s a
nd
11kV
lin
es
(km
)
Ba
selin
e 4
00
B
ase
line
400
1
00
Fu
lly
Ac
hie
ve
d:
82
5
km
’s o
f ro
utin
e
insp
ec
tio
n
an
d
ma
inte
na
nc
e
on
33kV
lin
es
an
d 1
1kV
lin
es
insp
ec
ted
.
No
ne
N
on
e
EN
W020
b)
Insp
ec
t,
ma
inta
ine
d
an
d
rep
lac
ed
TFR
Ba
selin
e 2
5
Ba
selin
e 2
5
25
Fu
lly
Ac
hie
ve
d:
32
km
of
TFR
insp
ec
ted
,
ma
inta
ine
d
an
d r
ep
lac
ed
No
ne
N
on
e
EN
W021
LV N
etw
ork
a
) R
ou
tin
e
ma
inte
na
n
ce
of
LV
line
s (k
m)
Ba
selin
e 5
00
B
ase
line
500
5
00
Fu
lly
Ac
hie
ve
d:
53
6
km
of
LV lin
es
ma
inta
ine
d.
No
ne
N
on
e
EN
W022
Page 42
Page42
3.4 Finance department
Section 81 of municipal Finance management Act 56 of 2003; Role of chief financial officer.—(1) the
chief financial officer of a municipality.
(a) is administratively in charge of the budget and treasury office;
(b) Must advise the accounting officer on the exercise of powers and duties assigned to the
accounting officer in terms of this Act;
(c) Must assist the accounting officer in the administration of the municipality’s bank accounts and in
the preparation and implementation of the municipality’s budget;
(d) Must advise senior managers and other senior officials in the exercise of powers and duties
assigned to them in terms of section 78 or delegated to them in terms of section 79; and
(e) Must perform such budgeting, accounting, analysis, financial reporting, cash management,
debt management, supply chain management, financial management, review and other duties as
may in terms of section 79 be delegated by the accounting officer to the chief financial officer.
Page 43
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e S
tra
teg
y
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e a
s
at
30 J
un
e 2
013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E R
ef.
No
.
To e
nsu
re
ac
ce
ss t
o
ele
ctr
icity
Ind
ige
nt
ho
use
ho
lds
ha
ve
ac
ce
ss t
o F
ree
Ba
sic
Ele
ctr
icity (
FB
E)
Nu
mb
er
of
reg
iste
red
ind
ige
nt
ho
use
ho
lds
wh
o h
ave
ac
ce
ss t
o F
BE
10
0%
ind
ige
nt
ho
use
ho
lds
ha
ve
ac
ce
ss
to F
ree
Ba
sic
Ele
ctr
icity
(FB
E)
10
0%
ind
ige
nt
ho
use
ho
lds
ha
ve
ac
ce
ss t
o
Fre
e B
asi
c
Ele
ctr
icity (
FB
E)
Fu
lly
Ac
hie
ve
d:
10
0%
(a
s p
er
ap
pro
ve
d
reg
iste
r)
ind
ige
nt
ho
use
ho
lds
ha
ve
ac
ce
ss t
o
Fre
e B
asi
c
Ele
ctr
icity (
FB
E)
No
ne
N
on
e
FIN
00
1
To e
nsu
re t
ha
t
the
org
an
iza
tio
n’s
fin
an
ce
s a
re
ma
na
ge
d in
a
sust
ain
ab
le
ma
nn
er
an
d
me
et
the
ne
ed
s
of
the
co
mm
un
ity
95
-10
0%
of
ca
pita
l
bu
dg
et
spe
nt
on
ca
pita
l pro
jec
ts in
line
with
th
e ID
P
% o
f c
ap
ita
l
bu
dg
et
ac
tua
lly s
pe
nt
on
ca
pita
l
pro
jec
ts in
lin
e
with
th
e ID
P
95
– 1
00
%
ca
pita
l
exp
en
ditu
re
95
– 1
00
%
ca
pita
l
exp
en
ditu
re
Pa
rtly
Ac
hie
ve
d: 8
5%
ca
pita
l
exp
en
ditu
re
10
– 1
5%
on
ca
pita
l
exp
en
ditu
re
Pro
cu
rem
en
t
pla
n w
ill b
e
de
ve
lop
ed
to
en
sure
tim
eo
us
pla
nn
ing
an
d
imp
lem
en
tatio
n
of
ca
pita
l
pro
jec
ts.
FIN
00
2
Sa
larie
s b
ud
ge
t n
ot
exc
ee
din
g 3
0%
of
the
op
era
tin
g
Sa
larie
s
bu
dg
et
as
a
% o
f
30
%
30
%
100%
: Sa
larie
s
bu
dg
et
no
t
exc
ee
din
g 3
0%
No
ne
N
on
e
FIN
00
3
Page 44
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e S
tra
teg
y
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e a
s
at
30 J
un
e 2
013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E R
ef.
No
.
bu
dg
et
op
era
tin
g
exp
en
ditu
re
of
the
op
era
tin
g
bu
dg
et
Bu
dg
et
no
t
ove
rsp
en
t
Bu
dg
et
rep
ort
with
no
ove
rsp
en
t lin
e
ite
ms
10
0%
exp
en
ditu
re
with
in t
he
bu
dg
et
10
0%
exp
en
ditu
re
with
in t
he
bu
dg
et
100%
: B
ud
ge
t
no
t o
ve
rsp
en
t
(i.e
. 1
00
%
exp
en
ditu
re
with
in t
he
bu
dg
et)
No
ne
N
on
e
FIN
00
4
All
qu
alif
ica
tio
ns
ad
dre
sse
d e
xc
ep
t
on
pro
pe
rty, p
lan
t
an
d e
qu
ipm
en
t.
Un
qu
alif
ied
au
dit r
ep
ort
Ad
dre
ss a
ll
20
11
/12
au
dit
issu
es
an
d
MFM
A
co
mp
lian
ce
an
d r
ep
ort
ing
Ad
dre
ss a
ll
20
11
/12
au
dit
issu
es
an
d
MFM
A
co
mp
lian
ce
an
d r
ep
ort
ing
Fu
lly
Ac
hie
ve
d:
all
20
11
/12
au
dit is
sue
s a
nd
MFM
A
co
mp
lian
ce
an
d r
ep
ort
ing
ad
dre
sse
d
No
ne
N
on
e
FIN
00
5
Ma
inta
in p
osi
tive
ca
sh f
low
rep
rese
nte
d b
y n
et
ca
sh f
low
fro
m
op
era
tin
g a
ctivitie
s
Bu
dg
ete
d
ca
sh f
low
ve
rsu
s a
ctu
al
ca
sh f
low
rep
ort
s
Po
sitive
ca
sh
flo
w m
on
thly
thro
ug
ho
ut
the
ye
ar
Po
sitive
ca
sh
flo
w m
on
thly
thro
ug
ho
ut
the
ye
ar
Fu
lly
Ac
hie
ve
d:
10
0%
po
sitive
ca
sh f
low
No
ne
N
on
e
FIN
00
6
Page 45
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e S
tra
teg
y
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e a
s
at
30 J
un
e 2
013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E R
ef.
No
.
aft
er
ca
pita
l
exp
en
ditu
re
Co
mp
lian
t fin
an
cia
l
po
licie
s
Re
gis
ter
of
Fin
an
cia
l
po
licie
s
revie
we
d
an
nu
al
6 p
olic
ies
revie
we
d
6 p
olic
ies
revie
we
d
Fu
lly
Ac
hie
ve
d:
Six
(6
) P
olic
ies
revie
we
d a
nd
ap
pro
ve
d b
y
Bo
ard
in
Ma
y
20
13
.
No
ne
N
on
e
FIN
00
7
All
risk
of
aw
ard
ing
of
ten
de
rs t
o
em
plo
ye
es
of
the
sta
te is
elim
ina
ted
No
bid
aw
ard
ed
to
the
em
plo
ye
e
of
the
sta
te
All
resp
on
sive
bid
s
eva
lua
ted
an
d c
he
cke
d
with
CIP
C
an
d d
eta
ils
reg
iste
red
All
resp
on
sive
an
d c
he
cke
d
with
CIP
RC
an
d d
eta
ils
reg
iste
red
Fu
lly
Ac
hie
ve
d:
All
resp
on
sive
an
d c
he
cke
d
with
CIP
C a
nd
de
tails
reg
iste
red
.
No
ne
N
on
e
FIN
00
8
Bu
dg
etin
g a
nd
Co
ntr
ols
En
sure
imp
rove
me
nt
on
eff
icie
nt
an
d
eff
ec
tive
ne
ss o
n
bu
dg
etin
g p
roc
ess
Imp
rove
d
an
d e
ffic
ien
t
bu
dg
etin
g
pro
ce
ss
%
imp
rove
me
nt
10
0%
imp
rove
me
nt
Fu
lly
Ac
hie
ve
d:
10
0%
imp
rove
me
nt
on
eff
icie
nt
an
d
eff
ec
tive
ne
ss
on
bu
dg
etin
g
No
ne
N
on
e
FIN
00
9
Page 46
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e S
tra
teg
y
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e a
s
at
30 J
un
e 2
013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E R
ef.
No
.
pro
ce
ss
Mo
nito
r
eff
ec
tive
ne
ss a
nd
eff
icie
nc
y o
f
org
an
iza
tio
n a
ga
inst
set
bu
dg
et
Mo
nth
ly
bu
dg
et
sta
tem
en
ts
(MFM
A
sec
.87
)
10
0%
1
00
%
Fu
lly
Ac
hie
ve
d:
10
0%
(eff
ec
tive
ne
ss
an
d e
ffic
ien
cy
of
org
an
iza
tio
n
mo
nito
red
ag
ain
st s
et
bu
dg
et
thro
ug
h
mo
nth
ly
bu
dg
et
sta
tem
en
ts
(MFM
A s
ec
.87
)
No
ne
N
on
e
FIN
01
0
Re
ve
nu
e
Ma
na
ge
me
nt
Co
ntin
uo
us
imp
rove
me
nt
on
de
bt
co
llec
tio
ns
Ac
tua
l de
bt
co
llec
ted
ag
ain
st
bu
dg
ete
d
de
bt
reve
nu
e
50
% -
80
%
50
% -
80
%
Fu
lly
Ac
hie
ve
d:
50
% -
96
%
ac
tua
l de
bt
co
llec
ted
ag
ain
st
bu
dg
ete
d d
eb
t
reve
nu
e
No
ne
N
on
e
FIN
01
1
Re
co
ve
r th
e
ou
tsta
nd
ing
50
% o
f
de
bts
an
d c
on
tin
ue
rec
ove
rin
g 8
0%
of
cu
rre
nt
de
bts
Page 47
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e S
tra
teg
y
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e a
s
at
30 J
un
e 2
013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E R
ef.
No
.
Exp
en
ditu
re
Ma
na
ge
me
nt
En
sure
eff
icie
nt
ma
na
ge
me
nt
of
exp
en
ditu
re
Mo
nth
ly
exp
en
ditu
re
rep
ort
s th
at
refle
ct
co
mp
lian
ce
with
se
ctio
n
99
(2)
12
Mo
nth
ly
exp
en
ditu
re
rep
ort
s th
at
refle
ct
co
mp
lian
ce
with
se
ctio
n
99
(2)
12
Mo
nth
ly
exp
en
ditu
re
rep
ort
s th
at
refle
ct
co
mp
lian
ce
with
se
ctio
n
99
(2)
Pa
rtly
Ac
hie
ve
d:
Twe
lve
(1
2)
Mo
nth
ly
exp
en
ditu
re
rep
ort
s th
at
refle
ct
co
mp
lian
ce
with
se
ctio
n
99
(2)
So
me
of
the
exp
en
ditu
re d
id
no
t fu
lly c
om
ply
with
s9
9(2
)
Use
r
de
pa
rtm
en
ts
are
to
be
en
co
ura
ge
d t
o
ap
pro
ve
invo
ice
s
tim
eo
usl
y a
fte
r
rec
eip
t th
ere
of.
FIN
01
2
En
sure
th
at
en
tity
’s
exp
en
ditu
re
syst
em
co
mp
lies
with
sec
tio
n 9
9(2
)
Take
re
aso
na
ble
ste
ps
to e
nsu
re t
ha
t
irre
gu
lar,
wa
ste
ful
exp
en
ditu
re a
nd
oth
er
loss
es
are
pre
ve
nte
d.
Gra
du
al
de
cre
ase
in
irre
gu
lar,
fru
itle
ss a
nd
wa
ste
ful
exp
en
ditu
re
ye
ar
on
ye
ar
% o
f
Re
gis
tere
d
irre
gu
lar,
fru
itle
ss &
wa
ste
ful
exp
en
ditu
re
90
% r
ed
uc
tio
n
in ir
reg
ula
r,
fru
itle
ss &
wa
ste
ful
exp
en
ditu
re
Fu
lly
Ac
hie
ve
d:
90
% r
ed
uc
tio
n
in ir
reg
ula
r,
fru
itle
ss &
wa
ste
ful
exp
en
ditu
re
No
ne
N
on
e
FIN
01
3
En
sure
th
at
all
exp
en
ditu
re is
in
ac
co
rda
nc
e w
ith
the
en
titie
s p
olic
ies.
Mo
nth
ly
exp
en
ditu
re
rep
ort
s th
at
refle
ct
12
Mo
nth
ly
exp
en
ditu
re
rep
ort
s th
at
refle
ct
12
Mo
nth
ly
exp
en
ditu
re
rep
ort
s th
at
refle
ct
Pa
rtly
Ac
hie
ve
d:
Twe
lve
(1
2)
Mo
nth
ly
So
me
of
the
exp
en
ditu
re d
id
no
t fu
lly w
ith
po
licie
s a
s th
ere
Use
r
de
pa
rtm
en
ts
are
to
be
en
co
ura
ge
d t
o
FIN
01
4
Page 48
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e S
tra
teg
y
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e a
s
at
30 J
un
e 2
013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E R
ef.
No
.
co
mp
lian
ce
with
th
e
en
titie
s
exp
en
ditu
re
po
licy
co
mp
lian
ce
with
exp
en
ditu
re
po
licy
co
mp
lian
ce
with
exp
en
ditu
re
po
licy
exp
en
ditu
re
rep
ort
s th
at
refle
ct
co
mp
lian
ce
with
se
ctio
n
99
(2)
we
re a
lso
inst
an
ce
s o
f
fru
itle
ss &
wa
ste
ful
exp
en
ditu
re.
ap
pro
ve
invo
ice
s
tim
eo
usl
y a
fte
r
rec
eip
t th
ere
of
so a
s to
avo
id
inc
urr
en
ce
of
fru
itle
ss &
wa
ste
ful
exp
en
ditu
re.
Tariff
De
term
ina
tio
n
En
sure
tim
eo
us
ap
pro
va
l of
tariff
s b
y
NER
SA
.
NER
SA
ap
pro
va
l
ob
tain
ed
prio
r b
ud
ge
t
ap
pro
va
l
NER
SA
ap
pro
va
l
ob
tain
ed
prio
r b
ud
ge
t
ap
pro
va
l
NER
SA
ap
pro
va
l
ob
tain
ed
prio
r
bu
dg
et
ap
pro
va
l
Fu
lly
Ac
hie
ve
d:
NER
SA
ap
pro
va
l wa
s
ob
tain
ed
prio
r
bu
dg
et
ap
pro
va
l
No
ne
N
on
e
FIN
01
5
En
sure
sta
ke
ho
lde
r
pa
rtic
ipa
tio
n in
ta
riff
de
sig
n p
roc
ess
.
Su
bm
issi
on
of
pro
po
sed
tariff
s to
Ma
ng
au
ng
Me
tro
fo
r
pu
blic
Pro
po
sed
tariff
s
sub
mitte
d t
o
Ma
ng
au
ng
Me
tro
fo
r
pu
blic
Pro
po
sed
ta
riff
s
sub
mitte
d t
o
Ma
ng
au
ng
Me
tro
fo
r
pu
blic
pa
rtic
ipa
tio
n.
Fu
lly
Ac
hie
ve
d:
Pro
po
sed
ta
riff
s
sub
mitte
d t
o
Ma
ng
au
ng
Me
tro
fo
r p
ub
lic
pa
rtic
ipa
tio
n.
No
ne
N
on
e
FIN
01
6
Page 49
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e S
tra
teg
y
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e a
s
at
30 J
un
e 2
013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E R
ef.
No
.
pa
rtic
ipa
tio
n.
pa
rtic
ipa
tio
n.
Ass
et
Ma
na
ge
me
nt
Co
ntin
uo
us
imp
rove
me
nt
on
ass
et
ma
na
ge
me
nt
an
d c
on
tro
l th
rou
gh
the
ass
et
ma
na
ge
me
nt
syst
em
GR
AP
Co
mp
lian
t
Ass
et
Re
gis
ter
-
10
0%
GR
AP
Co
mp
lian
t
Ass
et
Re
gis
ter
Pa
rtly
Ac
hie
ve
d:
90
%
GR
AP
Co
mp
lian
t
Ass
et
Re
gis
ter
10
% o
f th
e w
ork
still
WIP
.
Fin
aliz
atio
n o
f a
co
mp
lian
t A
sse
t
Re
gis
ter
wa
s
un
de
rwa
y a
nd
will
be
fu
lly
(10
0%
)
co
mp
lian
t b
y
20
13
/14
fin
an
cia
l ye
ar.
FIN
01
7
En
sure
eff
ec
tive
imp
lem
en
tatio
n o
f
the
ass
et
ma
inte
na
nc
e.
Co
ntin
uo
us
up
da
te
of
ass
et
reg
iste
r
Dis
po
se id
en
tifie
d
ab
solu
te a
sse
ts a
s
pe
r p
olic
y.
Su
pp
ly C
ha
in
Ma
na
ge
me
nt
En
sure
co
st
eff
ec
tive
, fa
ir,
co
mp
etitive
,
eq
uita
ble
an
d
Re
du
ctio
n in
inc
ide
nts
of
no
n-
co
mp
lian
ce
% o
f
reg
iste
red
inc
ide
nt
of
no
n-
90
% r
ed
uc
tio
n
in in
cid
en
ts o
f
no
n-
co
mp
lian
ce
Pa
rtly
Ac
hie
ve
d:
75
%
red
uc
tio
n in
inc
ide
nts
of
15
%
Tra
inin
g
inte
rve
ntio
n w
ill
be
fa
cili
tate
d
for
the
SC
M
FIN
01
8
Page 50
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e S
tra
teg
y
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e a
s
at
30 J
un
e 2
013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E R
ef.
No
.
tra
nsp
are
nt
pro
cu
rem
en
t o
f
go
od
s a
nd
se
rvic
es
with
th
e
pre
scrib
ed
reg
ula
tio
ns
an
d p
olic
y
ye
ar
on
ye
ar
co
mp
lian
ce
with
th
e
pre
scrib
ed
reg
ula
tio
ns
an
d p
olic
y
ye
ar
on
ye
ar
with
th
e
pre
scrib
ed
reg
ula
tio
ns
an
d p
olic
y
ye
ar
on
ye
ar
no
n-
co
mp
lian
ce
with
th
e
pre
scrib
ed
reg
ula
tio
ns
an
d
po
licy y
ea
r o
n
ye
ar
off
icia
ls t
o
imp
rove
th
eir
un
de
rsta
nd
ing
an
d
inte
rpre
tatio
n o
f
SC
M r
eg
ula
tio
ns
an
d p
olic
y.
Imp
lem
en
t
ac
qu
isitio
n a
nd
de
ma
nd
ma
na
ge
me
nt
pro
ce
ss
Page 51
Page51
3.5 Engineering Retail
The Retail component of Centlec is divided into two main components, namely Network Utilization
and Retail.
The Utilization Department consists of Network Control, Network Optimization, Sales Systems and
Power Quality and Customer Service. This department is headed by the Executive Manager Retail.
Energy and Network Control is the section where most of the functions in the control room, stand by
and Call Centre are run for 24 hours.
The business unit functions include control and energy management to maximized served energy
and minimized down time; plan and co-ordinate the distribution of electricity to meet the energy
demand; do energy management to meet the demand while minimizing the cost of energy
purchased; keep records of all incidents, power failures and statistics to measure the level of
performance; render a 24 hours service for customers complaints as well as the restoration of all
power failures and do construction and maintenance of all supervisory equipment on the network.
Page 52
PER
FO
RM
AN
CE O
BJEC
TIV
ES A
ND
IN
DIC
ATO
RS
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e
Str
ate
gy
IDP R
ef. N
o.
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al
Targ
et
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e
as
at
30 J
un
e
2013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E R
ef. N
o.
Re
ve
nu
e
Ma
na
ge
me
nt
A
no
ma
lies
en
co
un
tere
d
du
rin
g m
ete
r
rea
din
gs
inc
lud
ing
no
ac
ce
ss
- R
ed
uc
e t
he
an
om
alie
s
an
d f
ix f
au
lty
me
ters
- C
on
ve
rt t
he
no
ac
ce
sse
s
to p
rep
aid
- Se
cu
re t
he
serv
ice
s o
f a
co
ntr
ac
tor
- Elim
ina
te
10
0%
of
the
an
om
alie
s
- C
on
ve
rt
10
0%
of
the
no
ac
ce
sse
s
- G
o o
n
ten
de
r
- A
dd
ress
all
the
an
om
alie
s
- C
on
ve
rt a
ll
the
no
-
ac
ce
sse
s
Pa
rtly
Ac
hie
ve
d:
Se
rvic
es
of
a
co
ntr
ac
tor
we
re s
ec
ure
d
an
d a
n
ave
rag
e o
f
65
% o
f th
e
an
om
alie
s
wa
s
elim
ina
ted
an
d n
ot
all
no
ac
ce
sse
s
we
re
co
nve
rte
d.
An
ave
rag
e
of
35
% o
f
an
om
alie
s
co
uld
no
t b
e
elim
ina
ted
an
d n
ot
all
no
ac
ce
sse
s
we
re
co
nve
rte
d
du
e t
o la
ck o
f
pro
pe
r
info
rma
tio
n o
f
ad
dre
sse
s o
n
the
fin
an
cia
l
syst
em
.
Da
ta
pu
rific
atio
n
on
th
e
info
rma
tio
n
of
the
fin
an
cia
l
syst
em
ne
ed
s to
be
do
ne
.
EN
GR
00
1
Re
liab
le
Ele
ctr
icity
Su
pp
ly
3
000
+
cu
sto
me
rs’
me
ters
in
Be
rgm
an
Sq
ua
re a
re
rep
lac
ed
.
- P
ow
er
ou
tag
es
an
d
co
mp
lain
ts
are
re
du
ce
d
- Th
e s
torm
y
sea
son
in
Be
rgm
an
is
the
sa
me
as
in o
the
r a
rea
s
15
00
initia
l
targ
et
for
rep
lac
em
en
t
in B
erg
ma
n
Sq
ua
re
15
00
me
ters
rep
lac
ed
Fu
lly
Ac
hie
ve
d:
15
00
me
ters
rep
lac
ed
No
ne
N
on
e
EN
GR
00
2
Re
ve
nu
e
Ma
na
ge
me
nt
1
40
000
pre
pa
id
me
ters
in
MM
M a
re
au
dite
d
- D
ata
ca
ptu
red
in
the
in-h
ou
se
ve
nd
ing
syst
em
is
14
0 0
00
pre
pa
id
me
ters
to
be
vis
ite
d d
urin
g
the
au
dit
10
0%
of
the
MM
M
pre
pa
id
me
ters
vis
ite
d
an
d a
ud
ite
d
Pa
rtly
Ac
hie
ve
d:
10
3,6
00
pre
pa
id
me
ters
in
22
% -
No
ac
ce
ss;
3%
No
ele
ctr
icity;
an
d
Re
vis
its
to b
e
do
ne
an
d
wh
ere
ac
ce
ss is
de
nie
d,
EN
GR
00
3
Page 53
PER
FO
RM
AN
CE O
BJEC
TIV
ES A
ND
IN
DIC
ATO
RS
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e
Str
ate
gy
IDP R
ef. N
o.
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al
Targ
et
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e
as
at
30 J
un
e
2013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E R
ef. N
o.
ac
cu
rate
an
d li
nke
d
with
th
e
ne
two
rk
- M
ajo
r
imp
ac
t o
n
reve
nu
e lo
st
du
e t
o
ele
ctr
icity
the
ft
MM
M w
ere
au
dite
d
1%
Em
pty
sta
nd
s
thre
ate
n t
o
cu
t-o
ff
sup
ply
.
Re
ve
nu
e
Ma
na
ge
me
nt
1
000
+ b
ulk
cu
sto
me
rs
are
ab
le t
o
vie
w t
he
ir
ac
cu
rate
ly
ca
ptu
red
co
nsu
mp
tio
n
via
th
e
inte
rne
t
- Fe
w
co
mp
lain
ts
fro
m b
ulk
cu
sto
me
rs
ab
ou
t th
eir
co
nsu
mp
tio
n
sta
ts
- A
ssu
ran
ce
tha
t m
ete
r
rea
din
g d
ata
is u
plo
ad
ed
on
tim
e
pro
ce
sse
s fo
r
bill
ing
an
d
pu
blis
hin
g
10
0%
of
me
ters
co
nsu
mp
tio
n
bill
ed
an
d
pu
blis
he
d
suc
ce
ssfu
lly
eve
ry m
on
th
10
0%
suc
ce
ssfu
l
up
loa
d a
nd
pu
blis
hin
g o
f
co
nsu
mp
tio
n
info
rma
tio
n
Fu
lly
Ac
hie
ve
d:
11
00
%
suc
ce
ssfu
l
up
loa
d a
nd
pu
blis
hin
g o
f
co
nsu
mp
tio
n
info
rma
tio
n
(bu
lk
cu
sto
me
rs)
No
ne
N
on
e
EN
GR
00
4
Re
ve
nu
e
Ma
na
ge
me
nt
In
-ho
use
ve
nd
ing
syst
em
is
imp
lem
en
ted
with
min
ima
l
op
era
tin
g
co
sts
- Lo
w O
S
lice
nse
fe
es
- Fu
ll u
se o
f
serv
er
ca
pa
bili
ty
- W
ork
ing
red
un
da
nc
y
- Su
cc
ess
ful
imp
lem
en
tati
on
- M
inim
al
op
era
tin
g
co
sts
ou
tsid
e
the
ve
nd
ing
- Im
ple
me
nt
in-h
ou
se
ve
nd
ing
- R
ea
ch
all
cu
sto
me
rs
with
th
e n
ew
ve
nd
ing
Pa
rtly
Ac
hie
ve
d:
70
%
imp
lem
en
tati
on
of
in-
ho
use
ve
nd
ing
30
% g
ap
ac
co
un
ted
as
follo
ws:
D
ata
pu
rific
atio
n
to b
e d
on
e;
R
oll
ou
t o
f
En
sure
th
at
ve
nd
ing
da
ta is
co
rre
ct.
EN
GR
00
5
Page 54
PER
FO
RM
AN
CE O
BJEC
TIV
ES A
ND
IN
DIC
ATO
RS
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e
Str
ate
gy
IDP R
ef. N
o.
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al
Targ
et
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e
as
at
30 J
un
e
2013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E R
ef. N
o.
on
th
e
co
mm
un
ica
ti
on
s
infr
ast
ruc
ture
co
ntr
ac
ts
syst
em
sy
ste
m.
M
S S
QL
inst
ea
d o
f
Ora
cle
is
use
d
F
ull
serv
er
ca
pa
bili
ty
use
d
the
syst
em
;
C
om
mu
nic
atio
n b
ac
k-
up
In
fra
-
stru
ctu
re
Page 55
Page55
3. 6 Corporate services
The Corporate Services Department is headed by the Executive Manager Corporate Services and is
responsible for, inter alia:
a) the development of a performance based culture, custodian of the organizational structure;
supportive role to the CEO and other executives;
b) strengthening business structure and applying a range of business goals and overseeing the
application of the best practice standards in human resources management, centralized
supports;
c) effective knowledge/information management and business process systems management;
d) This department is also responsible for management of fleet, Health and Safety,
Communication and facilities;
Page 56
PER
FO
RM
AN
CE O
BJEC
TIV
ES A
ND
IN
DIC
ATO
RS
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e
Str
ate
gy
IDP
Re
f.
No
.
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e a
s
at
30 J
un
e 2
013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E
Re
f. N
o.
Inst
itu
tio
na
l
exc
elle
nc
e
thro
ug
h a
tho
rou
gh
go
ing
inst
itu
tio
na
l re
-
en
gin
ee
rin
g,
eff
ec
tive
lea
de
rsh
ip a
nd
eff
ec
tive
lon
g
ran
ge
de
ve
lop
me
nt
pla
nn
ing
W
ork
pla
ce
skill
pla
n a
pp
rove
d
an
d
imp
lem
en
ted
Ap
pro
ve
d a
nd
imp
lem
en
ted
wo
rkp
lac
e s
kill
s
pla
n
Ap
pro
ve
d
Wo
rkp
lac
e
skill
s p
lan
Ap
pro
ve
d
wo
rkp
lac
e
skill
s p
lan
imp
lem
en
ted
0%
1
00
%
Ap
pro
ve
d
Wo
rkp
lac
e
Skill
s P
lan
Wo
rk s
kill
s p
lan
to b
e
de
ve
lop
ed
an
d a
pp
rove
d
in F
Y 2
013
/14
No
ne
N
um
be
r o
f
lea
rnin
g
ac
tivitie
s
imp
lem
en
ted
4 le
arn
ing
ac
tivitie
s
imp
lem
en
ted
du
rin
g t
he
ye
ar
4 le
arn
ing
ac
tivitie
s
4 le
arn
ing
ac
tivitie
s
10
0%
N
on
e
No
ne
C
S0
01
D
eve
lop
me
nt
of
po
licy o
n
ind
ivid
ua
l
Pe
rfo
rma
nc
e
Ma
na
ge
me
nt
Syst
em
(IP
MS)
Ap
pro
ve
d
po
licy o
n
ind
ivid
ua
l
Pe
rfo
rma
nc
e
Ma
na
ge
me
nt
Syst
em
(IP
MS)
Ap
pro
ve
d
po
licy o
n
ind
ivid
ua
l
Pe
rfo
rma
nc
e
Ma
na
ge
me
nt
Syst
em
(IP
MS)
Ap
pro
ve
d
po
licy o
n
ind
ivid
ua
l
Pe
rfo
rma
nc
e
Ma
na
ge
me
nt
Syst
em
(IP
MS)
0%
1
00
%
Ap
pro
ve
d
po
licy o
n
ind
ivid
ua
l
Pe
rfo
rma
nc
e
Ma
na
ge
me
nt
Syst
em
(IP
MS)
PM
S P
olic
y t
o
be
de
ve
lop
ed
an
d a
pp
rove
d
in F
Y 2
013
/14
No
ne
Page 57
3.6
.1
Sa
fety
, H
ea
lth
, En
vir
on
me
nt,
Ris
k a
nd
Qu
ality
PER
FO
RM
AN
CE O
BJEC
TIV
ES A
ND
IN
DIC
ATO
RS
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e S
tra
teg
y
IDP
Re
f.
No
.
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e a
s
at
30 J
un
e 2
013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E
Re
f.
No
.
Imp
lem
en
t H
ea
lth
Sa
fety
syst
em
N
OSA
5 S
tar
Inte
gra
ted
Sa
fety
syst
em
Co
mp
lian
ce
with
all
sta
nd
ard
s
No
ne
Im
ple
me
nt
75
%
25
%
On
-go
ing
pro
ce
ss
CS0
02
De
ve
lop
He
alth
&
Sa
fety
Ma
na
ge
me
nt
Pla
n
C
on
stru
ctio
n
Re
gu
latio
ns
Co
mp
ile s
afe
ty
pla
n b
ase
d o
n
spe
cific
atio
ns
No
ne
A
do
pt
the
Sa
fety
Ma
na
ge
me
nt
Pla
n
50
%
50
%
The
pla
n is
no
t ye
t
ap
pro
ve
d.
Pla
n t
o b
e
ap
pro
ve
d in
the
201
3/1
4
CS0
03
Imp
lem
en
t H
ea
lth
& S
afe
ty P
olic
y
A
do
ptio
n b
y
Bo
ard
of
Dire
cto
rs
No
ne
M
on
ito
r a
nd
revie
w
50
%
50
%
Po
licy n
ot
ye
t
ap
pro
ve
d.
Po
licy t
o b
e
ap
pro
ve
d in
the
FY
20
13
/14
CS0
04
C
om
plia
nc
e w
ith
all
OH
S &
En
viro
nm
en
tal
Leg
isla
tio
n
No
ne
H
ea
lth
&
Sa
fety
insp
ec
tio
ns
an
d
en
forc
em
en
t
Em
po
we
r
em
plo
ye
es
with
kn
ow
led
ge
ab
ou
t
En
viro
nm
en
tal
Leg
isla
tio
n
Tr
ain
ing
by a
n
Ac
cre
dite
d
Fa
cili
tato
r
Nu
mb
er
of
sess
ion
s (3
)
No
ne
Se
ssio
n 1
10
0%
N
on
e
No
ne
C
S0
05
Co
mp
ilatio
n o
f
En
viro
nm
en
tal
Ma
na
ge
me
nt
Pla
n
No
ne
C
om
pile
Pro
jec
t
Sc
op
e a
nd
co
mm
en
ce
wo
rk
0%
1
00
%
Pla
n t
o b
e
de
ve
lop
ed
an
d c
om
pile
d
in F
Y 2
013
/14
No
ne
Em
po
we
r
em
plo
ye
es
with
Ed
uc
atio
n a
nd
ou
tre
ac
h
Nu
mb
er
of
sess
ion
s (6
)
No
ne
Se
ssio
ns
( 2
)
10
0%
N
on
e
No
ne
C
S0
06
Page 58
PER
FO
RM
AN
CE O
BJEC
TIV
ES A
ND
IN
DIC
ATO
RS
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/
Se
rvic
e S
tra
teg
y
IDP
Re
f.
No
.
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e a
s
at
30 J
un
e 2
013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E
Re
f.
No
.
kn
ow
led
ge
ab
ou
t
HIV
/AID
S
pro
gra
ms
Co
nd
om
dis
trib
utio
n
De
term
ine
th
e
pe
rce
nta
ge
of
em
plo
ye
es
livin
g
with
HIV
/AID
S
V
CT
Nu
mb
er
of
test
ing
sess
ion
s (6
)
No
ne
Se
ssio
ns
( 2
)
10
0%
N
on
e
No
ne
Sis
ter
Mo
sase
MM
M C
linic
Re
fere
nc
e
CS0
07
Em
po
we
r
em
plo
ye
es
with
ad
eq
ua
te
kn
ow
led
ge
of
OH
S
Leg
isla
tio
n
Tr
ain
ing
by
Ac
cre
dite
d
OH
S F
ac
ilita
tor
Nu
mb
er
of
tra
inin
g s
ess
ion
s
(12
)
No
ne
Se
ssio
ns
(4)
50
%
5
0%
2 t
rain
ing
sess
ion
s h
eld
.
No
ne
C
S0
08
Inc
rea
se
pe
rce
nta
ge
of
em
plo
ye
es
tra
inin
g in
First
Aid
Leve
l 1 C
ert
ific
ate
Tr
ain
ing
by
Ac
cre
dite
d
Tra
inin
g
Fa
cili
tato
r
Nu
mb
er
of
sess
ion
s (6
)
N/A
Se
ssio
ns
(2)
10
0%
N
on
e
No
ne
C
S0
09
Em
erg
en
cy
Pre
pa
red
ne
ss
Inc
rea
se
pe
rce
nta
ge
of
em
plo
ye
es
tra
ine
d
in f
ire
fig
htin
g a
nd
em
erg
en
cy
eva
cu
atio
n
Tr
ain
ing
by
Ac
cre
dite
d
Em
erg
en
cy
Pre
pa
red
ne
ss
Fa
cili
tato
r
Nu
mb
er
of
sess
ion
s (4
)
N/A
Se
ssio
ns
(1)
10
0%
Tr
ain
ing
by
Ac
cre
dite
d
Em
erg
en
cy
Pre
pa
red
ne
ss
Fa
cili
tato
r
On
e
em
erg
en
cy
pre
pa
red
ne
ss
sess
ion
to
be
he
ld in
th
e
20
13
/14
fin
an
cia
l ye
ar
Page 59
PER
FO
RM
AN
CE O
BJEC
TIV
ES A
ND
IN
DIC
ATO
RS
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/ S
erv
ice
Str
ate
gy
IDP
Re
f.
No
.
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e a
s
at
30 J
un
e 2
013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E
Re
f N
o.
To e
nsu
re g
oo
d
ma
na
ge
me
nt
of
co
mp
an
y f
lee
t.
To
en
sure
th
e
eff
ec
tive
an
d
eff
icie
nt
co
ntr
ol,
utiliz
atio
n,
safe
gu
ard
ing
an
d
ma
na
ge
me
nt
of
CEN
TLEC
’s
ve
hic
les
pla
nt
an
d
eq
uip
me
nt.
Pro
cu
rem
en
t o
f 6
ch
ass
is a
dd
itio
na
l
fle
et.
Pro
cu
rem
en
t
an
d
imp
lem
en
tatio
n
of
a f
lee
t
ma
na
ge
me
nt
syst
em
(fu
el,
ma
inte
na
nc
e
an
d
pro
cu
rem
en
t o
r
ren
tal o
f
ve
hic
les)
10
0%
Tra
nsf
er
of
rele
va
nt
fle
et
fro
m
MM
M
10
0%
N
on
e
No
ne
C
S0
10
The
Utiliz
atio
n a
nd
ma
na
ge
me
nt
of
ve
hic
les
is t
he
prim
e m
ec
ha
nis
m
by w
hic
h C
EN
TLEC
ca
n f
ulfil
C
ou
ld r
eg
iste
r 9
Ch
ass
is –
ca
bs
fro
m M
MM
to
CEN
TLEC
Fin
an
cia
l
pro
ce
ss f
or
ac
qu
irin
g
lice
nsi
ng
fe
es
for
the
fle
et
De
live
ry
of
sust
ain
ed
se
rvic
es
So
cia
l an
d
ec
on
om
ic
de
ve
lop
me
nt
A
co
ntr
ac
t h
as
be
en
exte
nd
ed
to a
se
rvic
e
pro
vid
er
(se
rvic
e
an
d
ma
inte
na
nc
e o
f
fle
et)
.
No
me
ch
an
ica
l
op
era
tio
na
l
em
plo
ym
en
t to
ve
rify
wo
rk
co
mp
lete
d b
y
the
re
pa
ir a
nd
ma
inte
na
nc
e
serv
ice
pro
vid
er
1
00
%
No
ne
N
on
e
CS0
11
To e
nsu
re t
ha
t
ve
hic
le d
rive
rs a
nd
div
isio
n m
an
ag
ers
are
aw
are
of
the
ir
resp
on
sib
ilitie
s w
ith
reg
ard
to
ve
hic
les
Nu
mb
er
of
ne
w
ve
hic
les
pro
cu
red
to s
atisf
y s
erv
ice
de
live
ry n
ee
ds
Su
ffic
ien
t
Bu
dg
et
ava
ilab
ility
to
ac
qu
ire
ne
w
fle
et
1
00
%
No
ne
N
on
e
CS0
12
Page 60
3.6
.2 C
om
mu
nic
atio
ns
an
d M
ark
etin
g
PER
FO
RM
AN
CE O
BJEC
TIV
ES A
ND
IN
DIC
ATO
RS
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/ S
erv
ice
Str
ate
gy
IDP
Re
f.
No
.
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e
as
at
30 J
un
e
2013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E
Re
f N
o.
To e
nsu
re e
ffe
ctive
co
mm
un
ica
tio
ns
serv
ice
s b
etw
ee
n
CEN
TLEC
, its
off
icia
ls, a
nd
va
rio
us
sta
ke
ho
lde
rs a
nd
als
o m
ark
et
the
bra
nd
im
ag
e o
f th
e
en
tity
.
C
EN
TLEC
bra
nd
to b
e
rec
og
niz
ed
na
tio
na
lly a
nd
inte
rna
tio
na
lly.
Ap
pro
ve
d C
&
M B
ud
ge
t
N/A
A
pp
rova
l of
C &
M B
ud
ge
t
10
0%
. N
on
e
No
ne
C
S0
13
To
ma
rke
t
Ce
ntle
c a
nd
pro
mo
te a
cc
ess
to in
form
atio
n
on
in
stitu
tio
na
l
ac
tivitie
s.
Nu
mb
er
of
ma
rke
tin
g
initia
tive
s ta
ke
n
N/A
4
Nu
mb
er
of
ma
rke
tin
g
initia
tive
s
10
0%
N
on
e
No
ne
C
S0
14
A
pp
rova
l of
the
Co
rpo
rate
Ide
ntity
Ma
nu
al
Ap
pro
ve
d
Co
rpo
rate
Ide
ntity
Ma
nu
al
N/A
1
Ap
pro
ve
d
Co
rpo
rate
Ide
ntity
Ma
nu
al
0%
N
o
ap
pro
ve
d
Co
rpo
rate
Ide
ntity
Ma
nu
al
Co
rpo
rate
ma
nu
al t
o b
e
de
ve
lop
ed
an
d
ap
pro
ve
d in
th
e
20
13
/14
Fin
an
cia
l ye
ar.
No
ne
To
en
ha
nc
e
go
od
re
latio
ns
with
th
e M
ed
ia
Nu
mb
er
of
sta
ke
ho
lde
r
sess
ion
he
ld w
ith
me
dia
ab
ou
t
the
bu
sin
ess
of
the
en
tity
N/A
To
im
pro
ve
rela
tio
nsh
ip
be
twe
en
Me
dia
(Au
dio
, A
ud
io
vis
ua
l an
d P
ress
)
0%
N
o
ap
pro
ve
d
Co
rpo
rate
Ide
ntity
Ma
nu
al
Co
mm
un
ica
tio
n
stra
teg
y t
o b
e
de
ve
lop
ed
an
d
ap
pro
ve
d in
th
e
20
13
/14
fin
an
cia
l ye
ar.
No
ne
R
evis
e e
xist
ing
po
licie
s (M
MM
)
Re
vis
ed
po
licie
s N
/A
Ide
ntify
a n
ee
d
to e
sta
blis
h a
po
sitio
n o
f a
0%
P
olic
ies
no
t
ye
t
ap
pro
ve
d
Po
licy t
o b
e
ap
pro
ve
d in
20
13
/14
No
ne
Page 61
PER
FO
RM
AN
CE O
BJEC
TIV
ES A
ND
IN
DIC
ATO
RS
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/ S
erv
ice
Str
ate
gy
IDP
Re
f.
No
.
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e
as
at
30 J
un
e
2013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E
Re
f N
o.
lan
gu
ag
e
pra
ctitio
ne
r o
n
the
str
uc
ture
.
Fin
an
cia
l Ye
ar
Ag
gre
ssiv
e
ma
rke
tin
g o
f th
e
co
mp
an
y t
hro
ug
h
ou
tre
ac
h p
rog
ram
s
D
ete
rmin
e
ne
ed
s o
f
Co
mm
un
ity a
nd
oth
er
exte
rna
l
sta
ke
ho
lde
rs.
Ne
ed
s a
na
lysi
s
rep
ort
N/A
P
roje
cts
vis
its,
safe
ty t
alk
s a
nd
ed
uc
atio
n
ca
mp
aig
ns.
No
t A
ch
iev
ed
:
Ne
ed
s
an
aly
sis
rep
ort
no
t a
va
ilab
le
Ne
ed
s
an
aly
sis
no
t
do
ne
.
Ne
ed
s a
na
lysi
s
to b
e
co
nd
uc
ted
in
the
FY
20
13
/14
No
ne
D
eve
lop
me
nt
of
stra
teg
ic
pla
nn
ing
an
d
reg
ula
r
inte
rve
ntio
ns
with
sta
ff o
n a
reg
ula
r b
asi
s
Min
ute
s o
f
inte
rna
l
me
etin
gs
he
ld
with
sta
ff
N/A
Im
ple
me
nta
tio
n
of
me
etin
g
with
in D
ivis
ion
on
a r
eg
ula
r b
asi
s to
en
sure
se
rvic
e
de
live
ry
10
0%
N
on
e
No
ne
C
S0
15
Ad
ve
rtis
ing
Eff
ec
tive
Co
mm
un
ica
tio
n
of
Info
rma
tio
n
to o
ur
co
nst
itu
en
cie
s
an
d v
ario
us
sta
ke
ho
lde
rs
Min
ute
s /
Re
po
rts
of
inte
rna
l
me
etin
gs
he
ld
with
co
nst
itu
en
cie
s
an
d
sta
ke
ho
lde
rs
N/A
Im
ple
me
nta
tio
n
of
co
mm
un
ica
tio
n
ch
an
ne
ls
0%
N
on
e
Me
etin
gs
with
sta
ke
ho
lde
rs t
o
be
he
ld in
th
e
20
13
/14
fin
an
cia
l ye
ar
No
ne
Pro
cu
rem
en
t o
f
da
ily a
nd
Su
nd
ay
ne
wsp
ap
ers
Da
ily a
nd
Su
nd
ay
ne
wsp
ap
ers
dis
trib
ute
d
N/A
C
om
mu
nic
atio
ns
an
d M
ark
etin
g
rec
og
niz
ed
at
stra
teg
ic le
ve
l.
50
%
No
ne
C
en
tle
c
cu
rre
ntly
rec
eiv
es
va
rio
us
loc
al N
ew
s
Pa
pe
rs.
CS0
16
Page 62
PER
FO
RM
AN
CE O
BJEC
TIV
ES A
ND
IN
DIC
ATO
RS
PER
FO
RM
AN
CE O
UTC
OM
ES
for
the
pe
rio
d 1
Ju
ly 2
012 –
30 J
un
e 2
013
Ob
jec
tive
/ S
erv
ice
Str
ate
gy
IDP
Re
f.
No
.
Pe
rfo
rma
nc
e
Ind
ica
tor
Pe
rfo
rma
nc
e
Me
asu
re
Ba
selin
e
(Ta
rge
t
2011/1
2)
An
nu
al Ta
rge
t
2012/1
3
Ac
tua
l
Pe
rfo
rma
nc
e
as
at
30 J
un
e
2013
Va
ria
nc
e
Co
rre
ctive
Ac
tio
n
PO
E
Re
f N
o.
Ne
wsl
ett
er
pu
blis
he
d o
n
qu
art
erly b
asi
s.
Pu
blic
ize
d
Ne
wsl
ett
ers
on
a
qu
art
erly b
asi
s
N/A
D
istr
ibu
tio
n o
f
co
pie
s in
tern
ally
an
d e
xte
rna
lly
(in
th
e a
rea
of
jurisd
ictio
n o
f
Ce
ntle
c)
0%
N
on
e
Ne
wsl
ett
er
to
be
de
ve
lop
ed
in t
he
Q1
of
FY
20
13
/14
No
ne
Page 63
Page63
CHAPTER 4
AUDITORS GENERAL FINDINGS ON PRIOR YEAR ISSUES
PURPOSE OF THE REPORT
To provide feedback on the progress made with respect to the implementation of the Audit Action
Plan as developed in response to the entity’s audit report for the financial year ended 30 June 2012.
To provide feedback on the current control environment and corrective measures implemented
during the 2012/2013 financial year.
1. Introduction and Background
The Executive Committee of Centlec was tasked with the development of mechanisms in pursuit of
the goal of obtaining an Unqualified Audit report by 2014. To this end the Audit Action Plan was
developed. All applicable directorates which had an impact on the Audit and Management Report
for the financial year ended 30 June 2012, have been involved in the development of the Audit
Action Plan to ensure that there is a uniform approach in addressing the deficiencies as identified by
the Office of the Auditor General during the year end audit.
Furthermore a task team was established comprising senior management representing all user
departments. The task team meets on a bi-weekly basis to track the overall progress made by the
entity in terms of the Audit Action Plan.
The progress report was tabled before the Audit Committee and the Oversight Committee for
deliberation and consideration on 7 June 2013. This progress is further shared with the office of the
Auditor General who provides continuous feedback.
Page 64
Page64
2. EXECUTIVE SUMMARY OF THE PROGRESS REPORT ON THE IMPLEMENTATION OF THE AUDIT ACTION
PLAN
This section will provide an executive summary of the corrective measures implemented by the
entity in the last three months to deal with the audit findings from the Auditor-General.
3. IMPROVEMENTS TO THE INTERNAL CONTROL ENVIRONMENT
In his audit report for the year ended 31 June 2012, the Auditor-General raised a number
paragraphs which led to the ―disclaimer of opinion‖. Management accordingly analysed the
findings raised as per the Audit Report and have determined that the following matters required
immediate attention in order to improve the situation. The components are:
4. PROGRESS ON MATTERS OF BASIS OF DISCLAIMER: FINANCIAL STATEMENTS
4.1 Property, plant and equipment
The single largest contributor to the limitation of scope and ultimate disclaimer of opinion as
received by the entity at 30 June 2012 was based on the completeness, valuation existence of,
and rights and obligation to property plant and equipment.
The entity has appointed service providers to compile a GRAP complaint infrastructure and
Movable Fixed Asset Register for the year ended 30 June 2013.
As at 30 June 2013 the verification phase of both projects has been completed and presently
the service provider is in the process of determining appropriate values for the assets verified.
Copy of Asset valuation Methodology was sent to the offices of Auditor and the Provincial
Accountant General for comment and the result of this is reflected in the improved audit
outcome on property plant and equipment.
The only remaining risk is the unauthorised movements of movable assets coupled with an
inadequate process to track the improvements / repairs made to infrastructure assets between
the end of the verification phase and the Fixed asset Register completion phase.
Page 65
Page65
Management assessment of the status of the item:
The work done to date should be sufficient to clear the limitation of scope issues as raised in the
audit report.
4.2 Intangible assets
The Auditor-General was unable to obtain sufficient appropriate audit evidence to verify the
completeness, valuation existence of, and rights and obligation to intangible assets.
A service provider was appointed to assist the Manager Assets in identifying all intangible assets
under the control of the entity. To this end intangible assets have been identified and
appropriate evidence to support their valuation has been obtained.
The only remaining areas which the entity is currently assessing are servitudes and the entity’s
website.
Management assessment of the status of the item:
The work done to date should be sufficient to clear the limitation of scope issues as raised in the
audit report.
4.3 Inventory
The Auditor-General raised a finding concluding that inventory was not carried at the lower of
cost or net realisable value. To this end the entity has embarked on determining the net
realisable value of all items of inventory on hand at 30 June 2012 to determine if there are any
inventory items which have a net realisable value lower than the original cost.
Detailed working papers in this regard were prepared and where necessary the inventory figure
as disclosed in the annual financial statements for the year ended 30 June 2012 were restated in
terms of GRAP 3.
Page 66
Page66
4.4 Other Financial Assets
The Auditor-General raised a finding concluding that sufficient appropriate audit evidence to
verify the completeness, valuation and allocation and existence of, and rights and obligation to
intercompany loan could not be obtained.
To this end the entity has located and submitted to the Office of the Auditor General all the
journals with their relevant supporting documentation supporting the entries processed between
MMM and Centlec during the 2012 financial year. Most of the prior year findings relating other
financial assets were resolved through engagement with the office the Auditor General.
Conclusion of Inter-Company Loan agreement as well as other agreements between the parent
and the entity are being considered by both the parties for conclusion before the end of the
current financial year. These agreements include Shareholder loan, Service Delivery, Public
lighting.
Furthermore the entity could not provide signed loan agreements in respect of loans granted (R3
601 811) as funding for capital purchases made by the municipal entity on behalf of other local
municipalities in the Free State. Management has attempted to engage the SFS Towns in this
regard however to date the agreements remain unsigned. The SFS municipalities concerned
have however undertaken to draft fresh agreements for the entity’s consideration.
4.5 Cash and cash equivalents
The Auditor-General raised a finding concluding that sufficient appropriate audit evidence to
verify the completeness, valuation and allocation and existence of, and rights and obligation to
cash and cash equivalents, stated at R162 784 175.
To this end the entity has located and submitted to the Office of the Auditor General all the
required supporting documentation supporting the reconciling items as listed in the Bank
Reconciliation for the month of June 2012. As a result most of the audit findings relating to Cash
and Cash equivalent arising from the prior year were resolved. This is part of the process whereby
the Office of the Auditor General is on site at Centlec to consider evidence and / or
representations pertaining to unresolved audit findings as per the audit report for the year ended
30 June 2012.
Page 67
Page67
4.6 Other financial liabilities
The Auditor-General raised a finding concluding that due to limitation on property plant and
equipment, I was unable to obtain sufficient appropriate audit evidence to verify the valuation of
other financial liabilities, stated at R136 089 716.
The entity has provided the signed loan agreement between the entity and MMM as well as the
loan register in this regard. All the prior year audit findings relating to other financial liabilities were
resolved through the process of engaging with the Auditors and submitting the required
supporting documents.
4.7 Payables from exchange transactions
The Auditor-General raised a finding concluding that sufficient appropriate audit evidence to
verify the completeness, valuation and allocation and existence of, and rights and obligation to
these payables, stated at R375 420 356 could not be provided.
The entity has provided the supporting documentation, reconciliations and other relevant
documentation in support of these transactions to the Office of the Auditor General. Most of the
findings arising from payable from exchange transactions were resolved through engagement
with the Auditors and submitting the required supporting documents.
Furthermore the entity applied for exemption from normal tax as per section 10(1)(c)(A) of the
Income Tax Act of South Africa, 1962 (Act No. 58 of 1962). At year-end, the entity had been
granted exemption from normal tax by the Commissioner of South African Revenue Service.
However the income tax exemption granted does not cover the period from when the company
started trading in 2005 until 1 July 2007.
The entity has engaged SARS in this regard and a detailed representation on the tax status of the
entity has been obtained. It is clear from the submission from SARS that the entity is liable for
normal income tax for the period 1 July 2003 to 30 June 2006. The entity was largely dormant in
this period and tax calculations have been submitted to SARS for the period 1 July 2003 – 30 June
2012 for their review. According to the correspondence received from SARS dated 18 April 2013
the matter is still receiving attention from SARS.
Page 68
Page68
4.8 Receivables from exchange transactions
The Auditor-General raised a finding concluding that sufficient appropriate audit evidence to
verify the completeness, valuation and allocation and existence of, and rights and obligation to
these receivables, stated at R188 679 035.
The entity has provided the supporting documentation, reconciliations and other relevant
documentation in support of these transactions to the Office of the Auditor General. As a result
several findings arising from receivables from exchange transactions were resolved. However
some areas of improvement relating to debtors’ data purification require extra focus to ensure a
clean audit outcome.
4.9 Consumer debtors
The Auditor-General raised a finding concluding that sufficient appropriate audit evidence to
verify the completeness, valuation and allocation and existence of, and rights and obligation to
consumer debtors, stated at R276 438 203.
The entity has provided the supporting documentation and other relevant documentation in
support of these transactions to the Office of the Auditor General. As a result several findings
arising from consumer debtors were resolved. However some areas of improvement relating to
debtors’ data purification require extra focus to ensure a clean audit outcome.
.
4.10 Consumer deposits
The Auditor-General raised a finding concluding that sufficient appropriate audit evidence to
verify the completeness, valuation and allocation and existence of, and rights and obligation to
consumer deposits, stated at R51 606 472.
The entity has provided the supporting documentation and other relevant documentation in
support of these transactions to the Office of the Auditor General. . As a result several findings
arising from consumer deposits were resolved. However some areas of improvement relating to
application forms supporting the consumer deposit relating to periods prior to July 2011 will still
require extra effort to realise a clean audit outcome.
Page 69
Page69
The consumer deposit register has been reconciled to the general ledger on a monthly basis for
the period 1 July 2012 to 30 June 2013.
4.11 Loans from shareholders
The Auditor-General raised a finding concluding that sufficient appropriate audit evidence to
verify the completeness of R2 015 624 372 could not be obtained.
To this end the entity has located and submitted to the Office of the Auditor General all the
journals with their relevant supporting documentation supporting the entries processed between
MMM and Centlec during the 2012 financial year. The entity has provided the signed loan
agreement between the entity and MMM. As a result most of the findings relating to the
shareholders loan were resolved.
Issues which still need to be resolved with respect to the shareholders loan is the correction of the
shareholders loan balance with approximately R387 million being the exclusion of the power
station not transferred to Centlec as per the original sale of business agreement.
4.12 Sale of electricity
The Auditor-General raised a finding concluding that sufficient appropriate audit evidence to
sufficient appropriate audit evidence to confirm the completeness, accuracy, occurrence,
classification and cut-off of revenue disclosed as R1 255 391 495.
The entity submitted all the required information with regard to findings raised in the prior year in
respect of sale of electricity. As a result some of the findings were resolved, however focus still
needs to be made on the on the reading of meters more frequently, reviewing of the estimates
and the recognition of the prepaid electricity sales in accordance with the Grap requirements.
Page 70
Page70
4.13 Government grants and subsidies
The Auditor-General raised a finding concluding that sufficient appropriate audit evidence to
sufficient appropriate audit evidence to confirm the completeness, accuracy, occurrence,
classification and grant revenue amounting to R126 560 786 as disclosed.
The entity has supplied the grants register as compiled for the year ended 30 June 2012 as well as
the supporting documentation for all items of grant expenditure as incurred for the year the
ended. Furthermore the entity has supplied all the related journals detailing the grant revenue
recognised as well as the related receivable for MMM in this regard.
As a result most of the findings relating to Grants revenue were resolved.
4.14 Interest income
The Auditor-General raised a finding concluding that due to the limitation on the intercompany
loan they were unable to obtain sufficient appropriate audit evidence to support the interest
income of R147 847 496.
To this end the entity has located and submitted to the Office of the Auditor General all the
journals with their relevant supporting documentation supporting the entries processed between
MMM and Centlec during the 2012 financial year. As a result most of the findings raised in
respect of interest income were resolved. However focus still need to be applied on the
technical aspects relating to the interpretation and application of the terms of the loan
agreements between the entity and the parent municipality.
4.15 Free basic services recovered
The Auditor-General raised a finding concluding that sufficient appropriate audit evidence to
support the free basic services recovered income of R3 368 071 could not be found.
To this end the entity has located and submitted to the Office of the Auditor General all the
journals with their relevant supporting documentation supporting the entries processed in this
regard. As a result the findings raised in the prior years in respect of Free basic services recovered
were resolved.
Page 71
Page71
4.16 Depreciation and amortisation
The Auditor-General raised a finding concluding that due to the limitation on property, plant and
equipment, the entity could not provide sufficient appropriate audit evidence to support the
depreciation and amortisation of R144 476 495.
To this end the entity has located and submitted to the Office of the Auditor General all the
journals with their relevant supporting documentation supporting the entries processed in this
regard.
The fixed assets register was revised to meet the GRAP reporting requirements which contributed
significantly to the resolution of findings raised in respect of property plant and equipment.
However areas of improvement relating mainly to the controls over the issuing of materials from
stores and creation of job cards need to be addressed if the entity is to realise a clean audit
outcome on property plant and equipment.
4.17 Employee related costs
The Auditor-General raised a finding concluding that the entity could not provide sufficient
appropriate audit evidence to support the employee cost of R13 624 425.
The entity submitted most of the information relating to the findings raised in respect of employee
cost and as a result some of these were resolved. However effort is still required to address the
controls over the processing of leave, salary payments and reconciliations, filling of supporting
documents for all transactions processed.
Page 72
Page72
4.18 Administration and management fees
The entity could not provide sufficient and appropriate audit evidence to support the
administration and management fees of R109 327 894.
The entity submitted most of the information relating to the findings raised in respect of
administration and management fees. As a result all the findings raised on this line item were
resolved.
4.19 Finance costs
The entity could not provide sufficient and appropriate audit evidence to support the finance
cost of R25 743 586 included in R200 068 254 as disclosed in note 26 to the financial statements.
The entity submitted most of the information relating to the findings raised in respect of finance
costs. As a result the findings raised on this line item were resolved. However focus is being made
to ensure that the agreements which serve as a guide to calculating the finance charges are
interpreted correctly to ensure compliance to applicable accounting standards.
4.20 Bulk purchases
The entity could not provide sufficient and appropriate audit evidence to support the bulk
electricity purchase and journal entries of R181 347 304 and R20 516 832 credited and debited,
respectively, to bulk purchases.
To this end the entity has located and submitted to the Office of the Auditor General all the
journals with their relevant supporting documentation supporting the entries processed in this
regard. As a result all the findings raised on this line item in the prior year were adequately
resolved.
Page 73
Page73
4.21 General expenses
The entity could not provide sufficient and appropriate audit evidence to support the transactions
and journal entries of R10 914 520 and R45 771 196 debited and credited, respectively, to
consulting and professional fees, contractors fees, travelling and subsistence, vendor
commission and other expenses due to an inadequate system to account for expenditure.
To this end the entity has located and submitted to the Office of the Auditor General all the
journals with their relevant supporting documentation supporting the entries processed in this
regard. As a result most of the findings were resolved. However focus need to be made on the
classification of and the disclosure of the General expenses on the financial statements.
4.22 Irregular, Unauthorised and Fruitless Wasteful expenditure
According to the AG, irregular expenditure to the amount of R 26 994 305 as a result of non-
compliance to the SCM policy and regulations was identified during the audit process and that
the budget was underspent by R 317 550 826. Fruitless and Wasteful expenditure of R 21 170 839
was also identified. The irregular, unauthorised and fruitless and wasteful expenditure was not
appropriately disclosed in the notes to the financial statements. Furthermore no evidence was
provided to substantiate that management identified, investigated and recorded irregular and
fruitless and wasteful expenditure for the period ended 31 June 2012.
A report of all irregular and fruitless and wasteful expenditure was identified by the AG for
2011/12 financial year was prepared and completed in February 2012. The report also
contained details of investigations by management for each identified irregular expenditure
item and was subsequently presented to the EXCO, Finance Committee and the Board after
which it was submitted to the parent municipality for tabling to Council for condonation.
With regard to the 2012/13 financial year, all irregular, fruitless and wasteful expenditure that
were identified were recorded up to 30 June 2013. The irregular and fruitless & wasteful
expenditure is updated on a monthly basis. Instances of irregular, fruitless and wasteful
expenditure are still being investigated by management and upon completion of the
investigations a report thereon will be submitted to the Oversight and Public Accounts
Committee and en-route to Council on the steps taken and for consideration.
However not all finding of prior year were resolved and improvement is still required to ensure
that irregular expenditure are kept to the minimum.
Page 74
Page74
4.23 Commitments
The Auditor-General raised a finding concluding that as a result of weaknesses in contract
management system as well as insufficient documentation, he was unable to confirm existence,
accuracy and completeness of R 52 892 390 as was disclosed in the notes to the financial
statements.
A satisfactory progress has been made in ensuring that all the supporting documents relating to
commitments as were disclosed to the annual financial statements are collated, verified and
submitted to the AG for evaluation and consideration against their initial findings.
With regards to the current financial year, both the operating and capital commitments registers
have been prepared and are updated up to 30 June 2013. The registers are from now on
updated on a monthly basis and supported by appropriate documentation. Moreover, the
departmental procedure manual has been developed, which will address a number of
procedural issues including, amongst others, procedures for updating, raising and recording of
commitments.
4.24 Contingent liabilities
The Auditor-General raised a finding concluding that the entity could not provide sufficient
evidence to enable the verification of the completeness of contingent liabilities of R33 868 634 as
disclosed in note 31 to the financial statements.
To this end the entity has provided the Office of the Auditor General with all the Legal
confirmations as obtained for the year ended 30 June 2012 which supports the disclosures made.
As a result the findings relating to prior year were resolved though effort needs to be made to
ensure that all confirmations from the attorneys are received in time
Page 75
Page75
5. PROGRESS ON OTHER LEGAL AND REGULATORY REQUIREMENTS
5.1 Predetermined Objectives
The AG concluded that he could not raise findings on usefulness and reliability of performance
report of the entity as it was not prepared as required by section 121(4) of MFMA.
The 2012/13 Annual Report, containing performance information for 2011/12 financial year was
developed and submitted to the AG for consideration and evaluation.
With regard to 2013/14 financial year, measures have been put in place to ensure that there is
regular reporting on performance against the SDBIP on a quarterly basis; this will assist in ensuring
that at the end of the financial year, performance information is readily available for inclusion
into the annual report for timely submission to the AG.
5.2 Strategic Planning & Performance Management
The AG concluded that supporting documentation that the Accounting Officer of the entity
submitted the results of performance of the entity during the first half of the financial year to the
board and the parent municipality could not be obtained.
For the 2012/13 financial year, the Mid-Term Budget and Performance Report was compiled and
submitted to the board and the parent municipality as required by section 88(1)(b) of MFMA.
5.3 Budgets
The AG raised a finding that the entity incurred expenditure in access of the limits of the amounts
provided in the votes in the approved budgets.
To date, there has been an improvement made in internal controls to the effect that prior to
procurement of goods and services, and prior to actual payment of obligations, there is a
verification commitment against the budget and confirmation of availability of funds.
Moreover, monthly budget statements are prepared and submitted to the Accounting Officer
prior to submission to the parent municipality for oversight.
Page 76
Page76
The status of this item should remain:
Annual Financial Statements, Performance and Annual Report
The AG concluded that the entity did not submit the annual financial statements within two
months from the end of financial year for auditing as required by MFMA. Furthermore, the AG
indicate that the financial statements submitted for auditing were not in all material respect
compliant with section 122 of MFMA, thus resulting in the financial statements receiving a
disclaimer of audit opinion.
For the current financial year, a financial statements preparation process plan has been
compiled. All the accounting policies were reviewed in time to ensure compliance with various
financial reporting standards. Where appropriate, these policies were aligned to those of the
parent municipality through a consultation process in order ensure that in the end, consolidation
process is seamless. Although a service provider was available to assist in the compilation of the
annual financial statements, the process was led internally by General Manager: Accounting
Services. As a result of the improvement process the financial statements for the 2012/13
financial period were submitted in time and there was an improvement in the audit outcome.
5.4 Audit Committees
The AG raised a finding that the Audit Committee did not effectively discharge its mandate as
required by MFMA. Furthermore there was no performance audit committee in place.
For the year under review and prior year no significant progress had been made, however the
Committee has since been appointed for the 2012/2013 financial year.
5.5 Procurement and Contract Management
The AG raised a number of findings in relation to procurement and contract management.
Generally, the findings range from non-compliance with SCM policy to functionality of Bid
Specification Committee.
To date, a number of internal controls measures have been introduced within the Supply Chain
Management processes, these ranges from controls regarding requesting of quotations and
registration of responses thereto to prevention of irregular expenditure and recoding of
approved deviations. However, in order to ensure maximum application of the internal controls,
vacancies within the SCM unit must still filled in as a matter of urgency and already a number of
important positions (e.g. Contracts Co-ordinators) within SCM have been advertised internally,
after which external advertisements will be publicised.
Page 77
Page77
5.6 Expenditure Management
Except for items of expenditure already addressed under matters of basis of disclaimer above,
the AG also raised a finding that payments were not made within do 30 days from date of receipt
of invoice, or such a period prescribed for certain categories of expenditure.
Firstly, a system of cash management programme has been put in place to ensure efficient cash
flow management so as to ensure that there is enough cash available to meet the obligations
when due.
Secondly, controls have been put in place to ensure traceable flow of invoices and other
internal documents necessary to effect payments. These controls include a registers used for
recording of invoices when received, recording of movement of invoices between user
departments for approval and finance for processing and finally payment of those invoices.
A register of all payments made after 30 days was compiled and updated up to 30 June 2013.
5.7 Asset Management
The AG raised a finding that the Accounting Officer did not take all reasonable steps to ensure
that the entity maintained an effective system of internal controls for assets (including an asset
register).
Internal controls have been established over assets, these include amongst others, assigning
responsibilities for assets to specific users and ensuring that those users take responsibility for the
use and movement of assets assigned to them and that any movement of the asset must be
reported to the Asset Manager.
An asset count of movable assets has been done up to 30 June 2013 and the asset register is
being updated and reconciled to the GL.
Page 78
Page78
5.8 Revenue Management
Except for items of revenue already addressed under matters of basis of disclaimer above, the
AG also raised a finding that the entity utilised the conditional grants for purposes other than
those specified in the respective grants and that revenue received by the entity was not always
reconciled at least on a monthly basis.
Reports on application of grants are prepared and presented to the various funders as per the
condition of the grants. The entity has developed a register of grants received and it is
maintained on a monthly basis.
5.9 HR Management
The AG raised a finding that key management positions were not filled and remained vacant for
most of the financial year.
Furthermore, that the competencies of financial and supply chain management officials were
not assessed promptly as required by Municipal Regulations of Minimum Competency Level
Regulations
Some of the key vacancies have been filled during the 2012/2013 financial year with suitably
qualified candidates. These key vacancies included CEO, COO, CFO, GM Financial Accounting,
Manager Financial Accounting, Manager Assets Management. Competency levels will be
assessed on continuous basis in terms of the regulations and interventions will be made when
necessary.
Page 79
Page79
6. PROGRESS ON INTERNAL CONTROL
6.1 Leadership
Key vacancies have been filled during the 2012/2013 financial year. These vacancies included
CEO, COO, CFO, Executive Manager – Wires and GM Financial Accounting. Filing of these senior
positions as well as various lower level positions will allow proper segregation of duties while
Management provide oversight and leadership.
Business plan providing Strategic direction with clear targets and resource consideration has
been developed and provided to the board of directors for consideration.
6.2 Governance
The AG raised a finding that the company did not identify risk relating to the achievement of
financial and performance objectives appropriate risk management activities were not
implemented to ensure that regular risk assessment were conducted.
Management has developed measures to monitor performance of service providers including
Internal Audit unit which is still outsourced. Plans are in place to establish the unit in-house
reporting to the Accounting Officer.
Provision has been made in the proposed organogram. Recruitment process will commence
once consultation process has been concluded with the employee representatives.
Page 80
Page80
CHAPTER 5
5.1 HUMAN RESOURCE MANAGEMENT
Workforce Profile
Occupational Levels
Total
Male Female
Foreign
Nationals
A C I W A C I W Male Female
Top management 5 0 0 1 0 0 0 0 0 0 6
Senior management 3 0 0 1 1 0 0 0 0 0 5
Professionally
qualified and
experienced
specialists and mid-
management
5 1 0 2 1 1 0 0 0 0 10
Skilled technical and
academically
qualified workers,
junior management,
supervisors, foremen,
and superintendents
38 1 0 7 39 1 0 3 0 0 89
Semi-skilled and
discretionary decision
making
5 0 0 6 0 0 3 0 0 14
Unskilled and defined
decision making 18 0 0 0 7 1 0 0 0 0 26
TOTAL PERMANENT 74 2 0 11 54 3 0 6 0 0 150
Temporary
employees 40 0 0 5 12 0 0 1 0 0 59
GRAND TOTAL 114 2 0 67 66 3 0 8 0 0 208
Page 81
Page81
Workforce Movement
5.2 RECRUITMENT
Occupational Levels
Total
Male Female
Foreign
Nationals
A C I W A C I W Male Female
Top management 2 0 0 0 0 0 0 0 0 2
Senior management 1 0 0 0 0 0 0 0 0 1
Professionally qualified
and experienced
specialists and mid-
management
2 0 0 1 0 1 0 0 0 0 4
Skilled technical and
academically qualified
workers, junior
management,
supervisors, foremen,
and superintendents
7 0 0 15 0 0 0 0 0 22
Semi-skilled and
discretionary decision
making
2 0 0 0 2 0 0 0 0 0 4
Unskilled and defined
decision making
15 0 0 0 6 1 0 0 0 0 22
TOTAL PERMANENT 34 0 0 3 5 0 0 1 0 0 43
Temporary employees 0 0 0 0 0 0 0 0 0 0 0
GRAND TOTAL 63 0 0 4 29 2 0 1 0 0 98
*Please take note this number excludes seconded employees of Mangaung metropolitan
municipality.
Page 82
Page82
5.3 PROMOTION
Occupational Levels Total
Male Female Foreign
Nationals
A C I W A C I W Male Female
Top management 1 0 0 1 0 0 0 0 0 0 2
Senior management 0 0 0 0 0 0 0 0 0 0 0
Professionally qualified
and experienced
specialists and mid-
management
1 0 0 0 1 0 0 0 0 0 2
Skilled technical and
academically qualified
workers, junior
management,
supervisors, foremen,
and superintendents
9 1 0 2 3 0 0 0 15
Semi-skilled and
discretionary decision
making
0 0 0 0 2 0 0 2 0 0 4
Unskilled and defined
decision making
0 0 0 0 0 0 0 0 0 0 0
TOTAL PERMANENT 1
1
1 0 3 6 0 0 2 0 0 23
Temporary employees 0 0 0 0 0 0 0 0 0 0 0
GRAND TOTAL 1
1
2 0 4 12 0 0 4 0 0 23
Page 83
Page83
5.4
Termination category
*Please take note this number excludes seconded employees of MMM
Human Resource Policies
Centlec utilised the policies of Mangaung Metropolitan Municipality (MMM) for the financial year
2012/13. The company is currently reviewing the human resource related polices and will be
tabled to board for approval in the 2013/14.
Terminations
Total
Male Female Foreign Nationals
A C I W A C I W Male Female
Resignation 0 0 0 1 0 0 0 0 0 0 1
TOTAL 0 0 0 1 0 0 0 0 0 0 1
TERMINATIONS
CHAPTER 6
Annual Financial Statements
8484
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Index
The reports and statements set out below comprise the financial statements presented to the provincial legislature:
Contents Page
Corporate Governance Report
General overview of the entity's performance
Director's Responsibilities and Approval
Audit Committee Report
Director's Report
Company Secretary’s Certification
Statement of Financial Position
Statement of Changes in Net Assets
Statement of Financial Performance
Cash Flow Statement
Statement of Comparison of Budget and Actual Amounts
Appropriation Statement
Accounting Policies
Notes to the Financial Statements
Appendixes:
Appendix F: Disclosure of Grants and Subsidies in terms of the Municipal Finance ManagementAct - Unaudited
90-91
135-193
Chief Executive overview
194
8585
87-89
92
94
95-96
97-99
100
101
102
103
104
105-109
110-111
112-134
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Index
Abbreviations
IDP Integrated Development Plan
NERSA National Energy Regulator of South Africa
DBSA Development Bank of South Africa
SA GAAP South African Statements of Generally Accepted Accounting Practice
GRAP Generally Recognised Accounting Practice
GAMAP Generally Accepted Municipal Accounting Practice
HDF Housing Development Fund
IAS International Accounting Standards
IMFO Institute of Municipal Finance Officers
IPSAS International Public Sector Accounting Standards
ME's Municipal Entities
MEC Member of the Executive Council
MFMA Municipal Finance Management Act
MIG Municipal Infrastructure Grant (Previously CMIP)
SOC State Owned Company
SALGA South African Local Government Association
AGSA Auditor-General of South Africa
86
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Corporate Governance Report
The Board & Administrative Governance
Introduction to Governance
The board sees and understand governance as fundamentally requisite in stewardship responsibilities.
To this end, the board is therefore committed to maintaining the highest standards of governance. The company has a Macro-Organisational structure in place, which provides for separation of duties and responsibilities between the board and administrators.
In the course of rendering services to the community, it is therefore important to do so within the parameters of the law, and this can beachieved by connecting corporate governance with legislative risk management as a guideline.
Board Governance
1. Board of Directors
The board strives to provide the right leadership, strategic oversight and control environment to produce and sustain the delivery of valueto all of the company’s shareholders. The board applies integrity, principles of good governance and accountability throughout its activitiesand each director brings independence of character and judgment to the role.
All of the members of the board are individually and collectively aware of their responsibilities to the company’s stakeholders and the boardkeeps its performance and core governance principles under regular review.
The board held both ordinary and special meetings during the period under review as follows in which a number of decisions were taken:
Type of Meeting Date VenueOrdinary 21 July 2012 Windmill Casino, BloemfonteinSpecial 24 August 2012 Protea Willow Lake Hotel, BloemfonteinSpecial 21 January 2013 Centlec (SOC) Ltd, Executive Boardroom, BloemfonteinOrdinary 01 February 2013 Protea Willow Lake Hotel, BloemfonteinSpecial 01 March 2013 Mangaung Metro Municipality, Committee Room A, BloemfonteinSpecial 15 March 2013 Mangaung Metro Municipality, Committee Room A, BloemfonteinOrdinary 08 June 2013 Mangaung Metro Municipality, Committee Room A, Bloemfontein
2. Board Committees
The board had the following committees during the period under review.
2.1 Audit & Risk Committee
N Mokhesi ChairpersonK M Moroka MemberL De Jager MemberChief Executive InviteeChief Financial Officer InviteeChief Operations Officer InviteeEM: Corporate Services InviteeEM: Engineering Invitee
87
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
The respective committees held meetings as follows during the period under review:
Committee No. of Meetings Dates of meetingsIT Governance 2 17 August 2012 29 April 2013Engineering 1 17 August 2012HR & Remuneration 3 18 August 2012 28 February 2013 31 May 2013Audit & Risk 1 23 August 2012Social Responsibility & Ethics 1 18 November 2012Finance 3 17 August 2012 12 March 2013 12 May 2013
Risk Management
The MFMA requires that the entity develops and maintain an effective, efficient and transparent systems of financial and risk managementand internal control; and of internal audit operating in accordance with any prescribed norms and standards.
The entity manages its Risk Management issues through the Internal Audit Unit. The Internal Unit is therefore mainly responsible for theimplementation of effective risk management as a key element of good governance and rigorous performance management. Riskmanagement is an integral part of corporate, business planning and service delivery.
During the period under review, corporate and operational risk assessment was performed for all areas within the entity.
89
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
General overview of the entity's performance
Overview by the Chairman
Centlec (SOC) Ltd “Centlec” was established as a municipal entity wholly owned by Mangaung Metropolitan Municipality “MMM” in termsof the Municipal Systems Act, 32 of 2000 “Systems Act” and the Companies Act, 71 of 2008 “Companies Act”.
The strategic intent for establishment of Centlec was and still is in line with the National Government’s initiatives to restructure theElectricity Distribution Industry.
Centlec is therefore, strategically poised to become the consolidation hub of electricity distribution for municipalities in the Free State.
In order to realise the above and other strategic objectives, the company’s strategic focus is described in its vision as:
“To become the electricity supplier of choice in the area of distribution”
We therefore believe that this vision is consistent with the broader service delivery objective of the Metro and informs the way the Centlecwill continue to deliver into the future.
To achieve the vision as mentioned above, Centlec performs within the Metro environment and is guided by the Metro’s IntegratedDevelopment plan (IDP) programs. For the year under consideration, the following issues were considered:
• Focus on infrastructure required for a basic level of service
• Consistent provision of Free Basic Electricity to the poor
• Growing the economy of the Metro
• Efficient use of funds
Performance monitoring and governance issues are continuously being discussed between the Metro and Centlec. For the year underreview, the following can be highlighted:
- To ensure that both the Metro and Centlec comply with applicable legislation;
- To ensure that Centlec is managed responsibly and transparently and meets its statutory, contractual and compliance obligations;
- To ensure that the Board of Directors and Chief Executive Officer are allowed to fulfil their responsibilities without undue interference.
- To establish a performance framework that considers service delivery and compliance environments
- To contribute towards a better audit outcome for both Centlec and the Metro.
Our primary objective remains that of ensuring sustainable, uninterrupted electricity service provision throughout our area of supply inorder to realise this goal. Our focus in the new financial year is to formulate a business strategy that will set the new focus about the futureof the entity within the industry that we are operating in. Secondly, our focus will also be on performance as per the IDP programs, whileobtaining improved audit outcome, as well as replacing an aging fleet of vehicles. Thirdly, the Board of Directors, will continue to ensurethat all our governance structures and systems are improved so as to ensure that we are able to provide coherent corporate governanceand conduct effective oversight over the affairs of the company.
In conclusion, I would like to thank my fellow Board Members for their focused leadership. It is only through committed and decisiveleadership that the vision of this entity can be realised.
I would also like to thank the executive managers and all the staff members of the entity for their dedication and commitment. It is throughtheir determination to serve that we are able to continue to render services to the community.
My sincere gratitude to our key stakeholders, all the Southern Free State Municipalities for their participation and engagement in issuespertaining to electricity supply in their respective municipalities.
90
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Finally, I acknowledge and appreciate our relationships and liaisons with the metro at both administrative and political spheres in thefurtherance of the course to the existence of Centlec.
Mr. ML MbaliChairperson of the Board
91
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Executive Summary
Chief Executive Officer’s Overview
The financial position of Centlec remains very robust given the prevailing economic climate that is persisting over the years. The companyinstituted revenue protection strategies that included the following:
• The conversion of most customers from rotational meters to prepaid meters which contributed to the improved revenue collection.
• The vigorous debt collection activities including termination of supply to defaulting customers, as well as engaging the services ofprofessional debt collectors.
• Improved meter reading and billing in lieu of estimates.
• Implementation of the Geographical Meter Management system that increased the accuracy of the meter auditing programs, as well thelocating of a meter to an ERF house number and eventually determine if a particular meter has been purchasing electricity.
• Improved cost management within operations.
Not withstanding the good financial position, the company is facing sustainability issues, when one considers the ever diminishing gapbetween the cost of doing business and revenue generated from operations:
• Electricity theft - many municipal entities in the EDI environment face the age old problem of electricity theft, and Centlec is not immuneto it. For the year under review this amounts to 11.1% of revenue. This threatens the financial sustainability of the company and hampersservice delivery of the Metro.
• Data purification – the company has a history of long term outstanding debt that of accounts that need to be verified. The datapurification exercise, when complete will provide an accurate account of the company’s debt position.
Regarding operations of the company one of the highlights during the year under review was the filling of leadership positions that werevacant for some time. These were the positions of CEO, COO, CFO and Executive Manager Engineering Wires. The “switching on” ofKhotsong by the Deputy Minister of Department of Energy, Me Barbara Thompson, accompanied by the honourable Executive Mayor ofMMM Clr Thabo Manyoni, was one of the highlights regarding a successful electrification projects completed in the Metro by Centlec.
Centlec received a disclaimer for the 2011/2012 financial year from the Auditor General. This opinion led to the establishment of acomprehensive audit action plan with an extensive follow up mechanism on the action plan. The progress on the action plan was regularlydiscussed at the Audit Steering Committee.
The strong challenge that persists to face Centlec operationally is the lack of human resources, both in number and in the skills mix. This hasbeen highlighted by both the AG and NERSA audit reports.
Going forward into the 2013/2014 financial year, the company is aiming at completing the following activities:
• Successful implementation of the in house developed vending system, which will go long way in enhancing the company’s revenue.
• The formulation of the business strategy which will culminate in re-establishing an organisational structure that will assist the company infulfilling its strategy, as well as facilitating in transfer and placement of the seconded staff from the Metro to Centlec.
• Replacement of aging fleet of vehicles to support service delivery.
• Investment in Electrical Infrastructure.
92
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
In conclusion, Centlec strives to operate within the vision of the Mangaung Metro Municipality, while maintaining operations efficiency,better audit outcome and legal compliance.
I would like to thank the Council, Executive Mayor, City Manager, the Board of Directors, Executive team and all the Centlec staff for
93
continued leadership and support throughout the past year.
Mr. M SebokaChief Executive Officer
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Director's Responsibilities and Approval
The directors are required by the Municipal Finance Management Act (Act 56 of 2003), to maintain adequate accountingrecords and are responsible for the content and integrity of the financial statements and related financial informationincluded in this report. It is the responsibility of the directors to ensure that the financial statements fairly present thestate of affairs of the municipal entity as at the end of the financial year and the results of its operations and cash flowsfor the period then ended. The external auditors are engaged to express an independent opinion on the financialstatements and was given unrestricted access to all financial records and related data.
The 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 financial statements are based upon appropriate accounting policies consistently applied and supported byreasonable and prudent judgments and estimates.
The directors acknowledge that they are ultimately responsible for the system of internal financial control establishedby the municipal entity and place considerable importance on maintaining a strong control environment. To enable thedirectors to meet these responsibilities, the directors sets standards for internal control aimed at reducing the risk oferror or deficit in a cost effective manner. The standards include the proper delegation of responsibilities within a clearlydefined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable levelof risk. These controls are monitored throughout the municipal entity and all employees are required to maintain thehighest ethical standards in ensuring the municipal entity’s business is conducted in a manner that in all reasonablecircumstances is above reproach. The focus of risk management in the municipal entity is on identifying, assessing,managing and monitoring all known forms of risk across the municipal entity. While operating risk cannot be fullyeliminated, the municipal entity endeavours to minimise it by ensuring that appropriate infrastructure, controls, systemsand ethical behaviour are applied and managed within predetermined procedures and constraints.
The directors are of the opinion, based on the information and explanations given by management, that the system ofinternal control provides reasonable assurance that the financial records may be relied on for the preparation of thefinancial statements. However, any system of internal financial control can provide only reasonable, and not absolute,assurance against material misstatement or deficit.
The directors have reviewed the municipal entity’s cash flow forecast for the year to 30 June 2014 and, in the light ofthis review and the current financial position, they are satisfied that the municipal entity has or has access to adequateresources to continue in operational existence for the foreseeable future.
The financial statements are prepared on the basis that the municipal entity is a going concern and that MangaungMetropolitan Municipality has neither the intention nor the need to liquidate or curtail materially the scale of themunicipal entity.
The financial statements set out on pages 19 - 111, which have been prepared on the going concern basis, wereapproved by the directors on 29 August 2013 and were signed on its behalf by:
Mr. LM MbaliChairperson of the Board
94
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Audit Committee Report
We are pleased to present our report for the financial year ended 30 June 2013.
Audit committee members and attendance
The entity had the audit committee which was established in terms of section 166(2) of the MFMA which was shared with the parentmunicipality. This consisted of the following members:Name of member Number of meetings attended or acceptable apologies givenE Rockman (Chairperson - resigned) AllN. Mokhesi (Chairperson) AllL.B.U Sibanyoni AllS Radebe AllGA Ntsala All
The share audit committee held 3 meeting on the following dates to address issues relating to the entity:
- 28 August 2012 - 07 June 2013 - 25 June 2013
However on the 01Auugust 2013 the parent municipality appointed a separate audit committee to serve the entity as provided for insection 166(2) of the MFMA. This consists of the following members:Name of member Number of meetings attended or acceptable apologies given T. Zakuza (Chairperson) AllM. Llale AllN Lubanga AllC Choeu All
All members of the Audit Committee are independent, with no interest in the management or conduct of the business of the Municipalityand its entities.
Audit committee responsibility
The audit committee reports that it has complied with its responsibilities arising from section 166(2)(a) of the MFMA in terms of its definedresponsibilities as an advisory body to the municipality.
The audit committee also reports that it has adopted appropriate formal terms of reference as its audit committee charter, has regulated itsaffairs in compliance with this charter and has discharged all its responsibilities as contained therein.
The effectiveness of internal control
The system of controls is designed to provide cost effective assurance that assets are safeguarded and that liabilities and working capital areefficiently managed. In line with the MFMA, Internal Audit provides the Audit Committee and management with assurance that the internalcontrols are appropriate and effective. This is achieved by means of the risk management process, as well as the identification of correctiveactions and suggested enhancements to the controls and processes.
From the various reports of the Internal Audit, the Audit Report on the Annual Financial Statements and management letter of the Auditor-General. It was noted that there were instances of weaknesses in controls. However the Audit Committee is pleased to report that there hasbeen significant improvement in the general controls and management has put mechanisms and action plans in place to deal with identifiedweaknesses. Management has further undertaken to report to the Audit Committee on a regular basis on progress made in this regard.
The Audit Committee therefore urges management to address these problems without any further delay.
95
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Audit Committee Report
Performance Management
The Board has also designated the Audit Committee as a Performance Audit Committee in terms of Municipal Planning and PerformanceManagement Regulations 2001.
The committee takes note of the progress made regarding Performance Management System. However, the committee noted a gap inreporting the quarterly performance reports, this is as a result that management does not present report on time to allow the PerformanceAudit Committee to exercise its oversight role. Accordingly the committee express no opinion on the municipal performance and notesinsufficient performance reporting which management has conceded to and undertaken to address.
Risk Management
The Audit Committee is also satisfied with the risk management processes within the institution.
On the 29 August 2013 the Committee reviewed the Annual Financial Statements of the Entity for the financial year 2012/13 and theperformance information which was presented by the Chief Financial Officer and the Chief Operations Officer respectively and recommendsthat the board submit such information to the Auditor General for audit.
The report of the Audit committee will be submitted at the appropriate time when the outcomes of the Audit by the Auditor General havebeen presented and reviewed by the Audit Committee.
T. Zakuza (Chairperson of the Audit Committee)
Date:
96
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Director's Report
The directors submit their report for the year ended 30 June 2013.
1. General information and nature of activities
The entity, which is a state owned company, is incorporated and domiciled in South Africa and provides electricity retail, distributionand electrification services.
The entity operates primarily in the Free State Province and employs over 126 people. The address of the entity’s registered office isFort Street, Oranjesig, Bloemfontein, 9324.
The entity is wholly owned by Mangaung Metropolitan Municipality, which is the sole parent municipality of the entity and isdomiciled in the Free State Province of South Africa. The address of the parent municipality is C/o Nelson Mandela Drive andMarkgraaf Street, Bram Fischer Building, Bloemfontein, 9300.
The entity is one of the only two state owned electricity companies in South Africa and the only one in the Free State province.
Other than the area of jurisdiction of Mangaung Metropolitan Municipality, the entity also distributes electricity to the following localmunicipalities in the Southern Free State area: Kopanong Local Municipality, Naledi Local Municipality, Mantsopa Local Municipalityand Mohokare Local Municipality.
The entity interacts with its customers and clients through a combination of physical and electronic channels, offering acomprehensive range of electricity services (from pre-paid electricity sales and billing through conventional metering, to electricityinfrastructure development to bulk-to-point connection).
The financial statements set out fully the financial positions, results of operations and cash flows of the entity for the reporting periodended 30 June 2013.
Main business and operations
The municipal entity is engaged in electricity distribution and operates principally in South Africa.
The operating results and state of affairs of the municipal entity are fully set out in the attached financial statements and do notin our opinion require any further comment.
The entity is continuously engaging with the relevant stakeholders in looking at their electricity rates spectrum and the results of thisengagement is expected to have a positive effect on Centlec's profitability.
2. Going concern
The financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumesthat funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingentobligations and commitments will occur in the ordinary course of business.
The following analysis supports the going concern assumption:
Current assets (R1 887 052 732) exceed current liabilities (R 406 898 365)
Total assets (R3 940 461 172) exceed total liabilities (R2 875 705 673)
The municipal entity has an accumulated surplus of R 888 016 011.
The ability of the municipal entity to continue as a going concern is dependent on a number of factors. The most significant of these isthat the entity has implemented a system to enhance the revenue collection and cash flow by improving on the debt recoverabilityprocesses.
97
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Director's Report
3. Subsequent events
The directors are not aware of any matter or circumstance arising since the end of the financial year that would have an impact onthe financial statements.
4. Accounting policies
The annual financial statements have been prepared in accordance with the effective Standards of Generally Recognised AccountingPractice (GRAP), including any interpretations and directives issued by the Accounting Standards Board and in accordance withsection 122(3) of the Municipal Finance Management Act, (Act No. 56 of 2003).
5. Share capital / Contributed capital
There were no changes in the authorised or issued share capital of the municipal entity during the year under review.
Authorised:
The authorised share capital of the company consists of 1 000 ordinary par value shares of R1 each. The authorised share capital ofthe company remained the same from the previous reporting period.
Issued:
The issued total issued share capital of the company of R100 consists 100 ordinary par value shares of R1 each.
6. Dividends
No dividends were declared or paid to shareholder during the year.
7. Directors
The current Board of Directors consist of eight (8) non-executive directors and was appointed with effect from 28 February 2012. Theterm of the previous Board ended in November 2011. Four (4) of the new Board members were appointed for a period of four (4)years while the other four members were appointed for a period of three (3) years.
The directors of the entity during the year and to the date of this report are as follows:
NameMr. LM Mbali (Chairperson)Ms. FP Zitha (Deputy Chairperson)Prof. L de JagerMr. MK MorokaMr. N MokhesiMr. SG XuluMr. SM ZimuMr. TJ Mongake
98
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Director's Report
8. Company secretary
The current Company Secretary, LR Bomela, was appointed as Acting Chief Executive Officer by the Board until 31 January 2013when the new Chief Executive Officer, MP Seboka was appointed.
With effect from 1 February 2013, L Bomela resumed his duties as the Company Secretary. His contact details are as follows:
Business address:
30 Rhodes Avenue OranjesigBloemfontein9300
9. Member and executive managers emoluments
Directors’ and officers’ personal financial interests in contracts
In term of Supply Chain Management Policy of the entity, Directors and the entity’s officers are prohibited from entering intocommercial transactions with the entity.
Directors are required to disclose any business interest which they may have elsewhere.
The register of declaration of interest is available in the office of the Company Secretary for inspection.
Consistent with the Supply Chain Management Policy of the entity, none of the directors or officers entered into any commercialtransaction with the entity during the period under review.
Furthermore, the directors had no interest in any third party or company responsible for managing any of the business activities ofthe entity.
Directors’ and prescribed officers’ emoluments
The upper limits of the salary, allowances and other benefits of the Directors, Prescribed Officers and Executive Managers weredetermined by the parent municipality. Directors, Prescribed Officers and Executive Managers emoluments are disclosed in theAnnual Financial Statements.
10. Controlling entity
The municipal entity's controlling entity is Mangaung Metropolitan Municipality incorporated in South Africa. The municipal entity iswholly owned by Mangaung Metropolitan Municipality.
11. Auditors
Auditor-General of South Africa will continue in office for the next financial period.
99
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Company Secretary’s Certification
Declaration by the company secretary in respect of Section 88(2)(e) of the Companies Act
In accordance with the provisions of the Companies Act 71 of 2008 I, L Bomela, the Company Secretary of Centlec State Owned CompanyLtd, hereby certify that:
In respect of the reporting period ended 30 June 2013, the Company has lodged with the Commissioner of the Companies and IntellectualProperty Commission (CIPC), all returns and notices prescribed by the Act and that all such returns and notices are true, correct and up todate.
LR BomelaCompany Secretary of Centlec (SOC) Ltd
100
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Statement of Financial Position as at 30 June 2013
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Statement of Comparison of Budget and Actual AmountsBudget on Accrual Basis
Approvedbudget
Adjustments Final Budget Actual amountson comparable
basis
Differencebetween final
budget andactual
R R R R R
Net increase/(decrease) in cash andcash equivalents
36 952 328 266 36 952 594 182 852 226 145 899 632
Cash and cash equivalents at thebeginning of the year
14 790 004 - 14 790 004 162 784 175 147 994 171
Cash and cash equivalents at theend of the year
51 742 332 266 51 742 598 345 636 401 293 893 803
109
Ce
ntl
ec
(SO
C)
Ltd
(Reg
istr
atio
n n
um
ber
20
03
/01
16
12
/07
)Fi
nan
cial
Sta
tem
ents
fo
r th
e ye
ar e
nd
ed 3
0 J
un
e 2
01
3
Ap
pro
pri
atio
n S
tate
me
nt
Ori
gin
al b
ud
get
Bu
dge
tad
just
me
nts
(i.t
.o. s
28
an
ds3
1 o
f th
eM
FMA
)
Fin
alad
just
me
nts
bu
dge
t
Shif
tin
g o
f fu
nd
s(i
.t.o
. s3
1 o
f th
eM
FMA
)
Vir
em
en
t (i
.t.o
.co
un
cil
app
rove
d p
olic
y)
Fin
al b
ud
get
Act
ual
ou
tco
me
Un
auth
ori
sed
exp
en
dit
ure
Var
ian
ceA
ctu
alo
utc
om
eas
% o
ffi
nal
bu
dge
t
Act
ual
ou
tco
me
as %
of
ori
gin
alb
ud
get
RR
RR
RR
RR
RR
R
20
13
Fin
anci
al P
erf
orm
ance
Serv
ice
char
ges
1 7
03
79
5 3
10
14
1 1
79
17
11
84
4 9
74
48
1-
1 8
44
97
4 4
81
1 7
47
41
1 6
71
(97
56
2 8
10
)%
95
%1
03
Inve
stm
ent
reve
nu
e-
12
9 6
55
58
31
29
65
5 5
83
-1
29
65
5 5
83
12
4 6
49
55
3(5
00
6 0
30
)%
96
%D
IV/0
Oth
er o
wn
rev
enu
e7
64
93
9-
76
4 9
39
-7
64
93
91
0 2
95
72
19
53
0 7
82
%1
34
6%
1 3
46
Tota
l re
ven
ue
(e
xclu
din
gca
pit
al t
ran
sfe
rs a
nd
con
trib
uti
on
s)
1 7
04
56
0 2
49
27
0 8
34
75
41
97
5 3
95
00
3-
1 9
75
39
5 0
03
1 8
82
35
6 9
45
(93
03
8 0
58
)%
95
%1
10
Emp
loye
e co
sts
(15
4 7
48
32
0)
(45
05
1 0
99
)(1
99
79
9 4
19
)-
-(1
99
79
9 4
19
)(1
54
61
5 6
11
)-
45
18
3 8
08
%7
7%
10
0D
ebt
imp
airm
ent
(38
78
8 5
14
)-
(38
78
8 5
14
)(3
8 7
88
51
4)
(36
56
9 5
05
)-
2 2
19
00
9%
94
%9
4D
epre
ciat
ion
an
d a
sset
imp
airm
ent
(45
12
7 7
44
)-
(45
12
7 7
44
)(4
5 1
27
74
4)
(11
7 8
49
03
0)
-(7
2 7
21
28
6)
%2
61
%2
61
Fin
ance
ch
arge
s(1
24
28
9 2
45
)(1
03
04
0 2
10
)(2
27
32
9 4
55
)-
-(2
27
32
9 4
55
)(2
44
27
1 6
79
)-
(16
94
2 2
24
)%
10
7%
19
7M
ater
ials
an
d b
ulk
pu
rch
ases
(1 1
49
42
0 2
13
)-
(1 1
49
42
0 2
13
)-
-(1
14
9 4
20
21
3)
(1 0
65
43
1 0
17
)-
83
98
9 1
96
%9
3%
93
Oth
er e
xpen
dit
ure
(15
5 2
74
58
0)
(11
5 9
28
68
8)
(27
1 2
03
26
8)
--
(27
1 2
03
26
8)
(18
9 8
09
86
2)
-8
1 3
93
40
6%
70
%1
22
Tota
l exp
en
dit
ure
(1 6
67
64
8 6
16
)(2
64
01
9 9
97
)(1
93
1 6
68
61
3)
--
(1 9
31
66
8 6
13
)(1
80
8 5
46
70
4)
-1
23
12
1 9
09
%9
4%
10
8
Surp
lus/
(De
fici
t)3
6 9
11
63
36
81
4 7
57
43
72
6 3
90
-4
3 7
26
39
07
3 8
10
24
13
0 0
83
85
1%
16
9%
20
0
110
Ce
ntl
ec
(SO
C)
Ltd
(Reg
istr
atio
n n
um
ber
20
03
/01
16
12
/07
)Fi
nan
cial
Sta
tem
ents
fo
r th
e ye
ar e
nd
ed 3
0 J
un
e 2
01
3
Ap
pro
pri
atio
n S
tate
me
nt
Ori
gin
al b
ud
get
Bu
dge
tad
just
me
nts
(i.t
.o. s
28
an
ds3
1 o
f th
eM
FMA
)
Fin
alad
just
me
nts
bu
dge
t
Shif
tin
g o
f fu
nd
s(i
.t.o
. s3
1 o
f th
eM
FMA
)
Vir
em
en
t (i
.t.o
.co
un
cil
app
rove
d p
olic
y)
Fin
al b
ud
get
Act
ual
ou
tco
me
Un
auth
ori
sed
exp
en
dit
ure
Var
ian
ceA
ctu
alo
utc
om
eas
% o
ffi
nal
bu
dge
t
Act
ual
ou
tco
me
as %
of
ori
gin
alb
ud
get
RR
RR
RR
RR
RR
R
Tran
sfer
s re
cogn
ised
-ca
pit
al1
25
00
0 0
00
5 7
17
99
61
30
71
7 9
96
-1
30
71
7 9
96
11
4 6
64
90
9(1
6 0
53
08
7)
%8
8%
92
Co
ntr
ibu
tio
ns
reco
gnis
ed -
cap
ital
an
d c
on
trib
ute
das
sets
24
76
7 4
24
-2
4 7
67
42
4-
24
76
7 4
24
5 8
60
69
1(1
8 9
06
73
3)
%2
4%
24
Surp
lus
(De
fici
t) a
fte
rca
pit
al t
ran
sfe
rs a
nd
con
trib
uti
on
s
18
6 6
79
05
71
2 5
32
75
31
99
21
1 8
10
-1
99
21
1 8
10
19
4 3
35
84
1(4
87
5 9
69
)%
98
%1
04
Surp
lus/
(De
fici
t) f
or
the
year
18
6 6
79
05
71
2 5
32
75
31
99
21
1 8
10
-1
99
21
1 8
10
19
4 3
35
84
1(4
87
5 9
69
)%
98
%1
04
Cap
ital
exp
en
dit
ure
an
d f
un
ds
sou
rce
s
Tota
l cap
ital
exp
end
itu
re1
84
76
7 4
24
5 7
17
99
61
90
48
5 4
20
-1
90
48
5 4
20
16
9 6
60
78
1(2
0 8
24
63
9)
%8
9%
92
111
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1. Presentation of Financial Statements
The financial statements have been prepared in accordance with the Standards of Generally Recognised Accounting Practice(GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board.
These financial statements have been prepared on an accrual basis of accounting and are in accordance with historical costconvention unless specified otherwise. They are presented in South African Rand and the amounts are rounded off to the nearestRand.
A summary of the significant accounting policies, which have been consistently applied, are disclosed below.
Centlec (SOC) Ltd ("the municipal entity") is a municipal entity wholly owned by Mangaung metropolitan municipality, a localgovernment institution in Bloemfontein in the Free State.
These accounting policies are consistent with the previous period.
1.1 Going concern assumption
The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basispresumes that funds will be available to finance future operation and that the realisation of assets and settlement of liabilities,contingent obligations and commitments will occur in the ordinary course of business.
The following analysis supports the going concern assumption:
Current assets (R1 887 052 732) exceed current liabilities (R 406 898 365)
Total assets (R3 940 461 172) exceed total liabilities (R2 875 705 673)
The municipal entity has an accumulated surplus of R 888 016 011.
The ability of the municipal entity to continue as a going concern is dependent on a number of factors. The most significant ofthese is that the entity has implemented a system to enhance the revenue collection and cash flow by improving on the debtrecoverability processes.
1.2 Property, plant and equipment
Property, plant and equipment are tangible non-current assets (including infrastructure assets) that are held for use in theproduction or supply of goods or services, rental to others, or for administrative purposes, and are expected to be used duringmore than one period.
The cost of an item of property, plant and equipment is recognised as an asset when: it is probable that future economic benefits or service potential associated with the item will flow to the entity; and the cost of the item can be measured reliably.
Property, plant and equipment is initially measured 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 thelocation and condition necessary for it to be capable of operating in the manner intended by management. Trade discounts andrebates are deducted in arriving at the cost.
Where an asset is acquired through a non-exchange transaction, its cost is its fair value as at date of acquisition.
Where an item of property, plant and equipment is acquired in exchange for a non-monetary asset or monetary assets, or acombination of monetary and non-monetary assets, the asset acquired is initially measured at fair value (the cost). If the acquireditem's fair value was not determinable, it's deemed cost is the carrying amount of the asset(s) given up.
When significant components of an item of property, plant and equipment have different useful lives, they are accounted for asseparate items (major components) of property, plant and equipment.
112
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.2 Property, plant and equipment (continued)
Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurredsubsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item ofproperty, plant and equipment, the carrying amount of the replaced part is derecognised.
The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located is also includedin the cost of property, plant and equipment, where the entity is obligated to incur such expenditure, and where the obligationarises as a result of acquiring the asset or using it for purposes other than the production of inventories.
Recognition of costs in the carrying amount of an item of property, plant and equipment ceases when the item is in the locationand condition necessary for it to be capable of operating in the manner intended by management.
Subsequent measurement:
Cost model
Motor vehicles and office equipment are carried at cost less accumulated depreciation and any impairment losses.
Revaluation model
Land, buildings and Plant and machinery are carried at revalued amount, being the fair value at the date of revaluation less anysubsequent accumulated depreciation and subsequent accumulated impairment losses.
Revaluations are made with sufficient regularity such that the carrying amount does not differ materially from that which wouldbe determined using fair value at the end of the reporting period.
When an item of property, plant and equipment is revalued, any accumulated depreciation at the date of the revaluation isrestated proportionately with the change in the gross carrying amount of the asset so that the carrying amount of the asset afterrevaluation equals its revalued amount.
When an item of property, plant and equipment is revalued, any accumulated depreciation at the date of the revaluation iseliminated against the gross carrying amount of the asset and the net amount restated to the revalued amount of the asset.
Any increase in an asset’s carrying amount, as a result of a revaluation, is credited directly to a revaluation surplus. The increase isrecognised in surplus or deficit to the extent that it reverses a revaluation decrease of the same asset previously recognised insurplus or deficit.
Any decrease in an asset’s carrying amount, as a result of a revaluation, is recognised in surplus or deficit in the current period.The decrease is debited directly to a revaluation surplus to the extent of any credit balance existing in the revaluation surplus inrespect of that asset.
Property, plant and equipment are depreciated on the straight line basis over their expected useful lives to their estimatedresidual value.
Property, plant and equipment are carried at revalued amount, being the fair value at the date of revaluation less any subsequentaccumulated depreciation and subsequent accumulated impairment losses. Revaluations are made with sufficient regularity suchthat the carrying amount does not differ materially from that which would be determined using fair value at the end of thereporting period.
Any increase in an asset’s carrying amount, as a result of a revaluation, is credited directly to a revaluation surplus. The increase isrecognised in surplus or deficit to the extent that it reverses a revaluation decrease of the same asset previously recognised insurplus or deficit.
Any decrease in an asset’s carrying amount, as a result of a revaluation, is recognised in surplus or deficit in the current period.The decrease is debited in revaluation surplus to the extent of any credit balance existing in the revaluation surplus in respect ofthat asset.
113
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.2 Property, plant and equipment (continued)
Depreciation
Depreciation is calculated over the depreciable amount, which is the cost or revaluation amount of an asset less its residual value.
Depreciation commences when an asset is available for use and ceases at the earlier of the date that the asset is derecognised orclassified as held for sale in accordance with GRAP 100 Non-current assets held for sale and discontinued operations. A non-current asset or disposal group is not depreciated while it is classified as held for sale.
Depreciation is recognised in surplus or deficit on a straight-line basis over the estimated useful lives of each part of an item ofproperty, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economicbenefits embodied in the asset. Land is not depreciated.
The residual value, and the useful life and depreciation method of each asset are reviewed at the end of each reporting date. Ifthe expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.
Reviewing the useful life of an asset on an annual basis does not require the entity to amend the previous estimate unlessexpectations differ from the previous estimate.
Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item isdepreciated separately.
The depreciation charge for each period is recognised in surplus or deficit unless it is included in the carrying amount of anotherasset.
Items of property, plant and equipment are derecognised when the asset is disposed of or when there are no further economicbenefits or service potential expected from the use of the asset.
The gain or loss arising from the derecognition of an item of property, plant and equipment is included in surplus or deficit whenthe item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment isdetermined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.
Assets which the municipal entity holds for rentals to others and subsequently routinely sell as part of the ordinary course ofactivities, are transferred to inventories when the rentals end and the assets are available-for-sale. These assets are notaccounted for as non-current assets held for sale. Proceeds from sales of these assets are recognised as revenue. All cash flows onthese assets are included in cash flows from operating activities in the cash flow statement.
The useful lives of items of property, plant and equipment have been assessed as follows:
Item Average useful lifeLand IndefiniteBuildings Office buildings 40 years Training centres 40 yearsPlant and equipment Graders 10-15 years Tractors 10-15 years Mechanical horses 10-15 years Lawn mowers 2 years Compressors 5 years Laboratory equipment 5 years Radio equipment 5 years Firearms 5 years Telecommunication equipment 5 years
114
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.2 Property, plant and equipment (continued)Furniture and fixtures Chairs 7-10 years Tables and desks 7-10 years Cabinets and cupboards 7-10 yearsMotor vehicles Trucks and light delivery vehicles 5-7 years Ordinary motor vehicles 5-7 years Motor cycles 3 yearsOffice equipment Computer hardware 5 years Computer machines 3-5 years Air conditioners 5-7 yearsInfrastructure Generation 50 years HV Transformers 40 years HV Substation Equipment 45 years HV Lines 40 years HV Cables 45 years Buildings 50 years MV Transformers 40 years MV Switchgear 45 years MV Lines 50 years MV Cables 50 years MV Switching Station 45 years OH Line Equipment 40 years Service Connections 45 years LV Distribution Boxes 50 years LV Lines 45 years LV Cables 50 years Meters Consumer Credit 20 years Meters Consumer Prepaid 15 years Meter Consumer Electronic 15 years Meters Consumer Smart 15 years Load Control 15 years Protection 20 years Electrical Information Systems 7 years IT Equipment 5 years MV Batteries 20 yearsSecurity measures Access control systems 5 years Security systems 5 years Security fencing 3 yearsBins and containers Household refuse bins 5 years Bulk refuse containers 10 yearsEmergency equipment Fire hoses 5 years Other fire-fighting equipment 15 years Emergency lights 5 years
1.3 Intangible assets
Intangible assets are initially recognised at cost.
An intangible asset acquired through a non-exchange transaction, 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.
115
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.3 Intangible assets (continued)
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. 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.
The amortisation period and the amortisation method for intangible assets are reviewed at each reporting date.
Other intangible assets that are acquired by the municipal entity and have finite useful lives are initially recognised at cost andsubsequently measured at cost less accumulated amortisation and accumulated impairment losses.
Where an intangible asset is acquired at no cost, or for a nominal cost, the cost is deemed to be its fair value as at the date ofacquisition.
Servitudes created through the exercise of legislation are not recognised as intangible assets and any costs incurred to registerthese servitudes are expensed. However, servitudes that are created through an agreement (contract) are recognised asintangible assets.
Subsequent expenditure
Expenditure on Intangible assets shall be recognised as an expense when it is incurred unless it forms part of the cost of anintangible asset that meets the recognition criteria. All other expenditure, including expenditure on internally generated goodwilland customer lists, is recognised in surplus or deficit as incurred.
Amortisation
Amortisation is calculated over the cost of the asset, or other amount substituted for cost, less its residual value.
Amortisation is recognised in surplus or deficit on a straight-line basis over the estimated useful lives of intangible assets, from thedate that they are available for use, since this most closely reflects the expected pattern of consumption of the future economicbenefits embodied in the asset. The estimated useful lives for the current and comparative periods are as follows:
Item Useful lifeComputer software 3-5 years
An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limitto the period over which the asset is expected to generate net cash inflows or service potential. Amortisation is not provided forthese intangible assets, but they are tested for impairment annually and whenever there is an indication that the asset may beimpaired. Where the carrying amount of an item of an intangible asset is greater than the estimated recoverable amount, it iswritten down immediately to its recoverable amount and an impairment loss is charged to the Statement of financialperformance.
Amortisation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate. Intangible assets are derecognised on disposal or when no future economic benefits or services potential are expected from itsuse or disposal. The gain or loss is the difference between the net disposal proceeds, if any, and the carrying amount. It isrecognised in the statement of financial performance when the asset is derecognised.
Intangible assets are derecognised: on disposal; or when no future economic benefits or service potential are expected from its use or disposal.
116
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.4 Commitments
The term ‘commitments’ is not defined in any of the standards but may be referred to as the intention to commit to an outflowfrom the entity of resources embodying economic benefits. Generally, a commitment arises when a decision is made to incur aliability e.g. a purchase contract. Such a decision is evidenced by, but not limited to, actions taken to determine the amount of theeventual resource outflow or a reliable estimate e.g. a quote, and conditions to be satisfied to establish an obligation e.g. deliveryschedules. These preconditions ensure that the information relating to commitments is relevant and capable of reliablemeasurement. An entity may enter into a contract on or before the reporting date for expenditure over subsequent accountingperiods e.g. a contract for construction of infrastructure assets, the purchase of major items of plant and equipment or significantconsultancy contracts. In these events, a commitment exists at the reporting date as the entity has contracted for expenditure butno work has started and no payments have been made. The notes to the financial statements must disclose the nature andamount of each material individual and each material class of capital expenditure commitment as well as non-cancelableoperating leases contracted for at the reporting date. Commitments for the supply of inventories, where a liability under acontract has not yet been recognised, do not require disclosure as a commitment.
1.5 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or a residual interestof another entity.
The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability ismeasured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interestmethod of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through theuse of an allowance account) for impairment or uncollectibility.
A concessionary loan is a loan granted to or received by an entity on terms that are not market related.
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes inforeign exchange rates.
Derecognition is the removal of a previously recognised financial asset or financial liability from an entity’s statement of financialposition.
A derivative is a financial instrument or other contract with all three of the following characteristics: Its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign
exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided in the case of a non-financialvariable that the variable is not specific to a party to the contract (sometimes called the ‘underlying’).
It requires no initial net investment or an initial net investment that is smaller than would be required for other types ofcontracts that would be expected to have a similar response to changes in market factors.
It is settled at a future date.
The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability (or group offinancial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period. Theeffective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life ofthe financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financialliability. When calculating the effective interest rate, an entity shall estimate cash flows considering all contractual terms of thefinancial instrument (for example, prepayment, call and similar options) but shall not consider future credit losses. The calculationincludes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate(see the Standard of GRAP on Revenue from Exchange Transactions), transaction costs, and all other premiums or discounts.There is a presumption that the cash flows and the expected life of a group of similar financial instruments can be estimatedreliably. However, in those rare cases when it is not possible to reliably estimate the cash flows or the expected life of a financialinstrument (or group of financial instruments), the entity shall use the contractual cash flows over the full contractual term of thefinancial instrument (or group of financial instruments).
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in anarm’s length transaction.
A financial asset is:
117
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.5 Financial instruments (continued) cash; a residual interest of another entity; or a contractual right to:
- receive cash or another financial asset from another entity; or- exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable tothe entity.
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a lossit incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debtinstrument.
A financial liability is any liability that is a contractual obligation to: deliver cash or another financial asset to another entity; or exchange financial assets or financial liabilities under conditions that are potentially unfavourable to the entity.
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes inmarket interest rates.
Liquidity risk is the risk encountered by an entity in the event of difficulty in meeting obligations associated with financial liabilitiesthat are settled by delivering cash or another financial asset.
Loan commitment is a firm commitment to provide credit under pre-specified terms and conditions.
Loans payable are financial liabilities, other than short-term payables on normal credit terms.
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in marketprices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk.
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes inmarket prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factorsspecific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in themarket.
A financial asset is past due when a counterparty has failed to make a payment when contractually due.
A residual interest is any contract that manifests an interest in the assets of an entity after deducting all of its liabilities. A residualinterest includes contributions from owners, which may be shown as: equity instruments or similar forms of unitised capital; a formal designation of a transfer of resources (or a class of such transfers) by the parties to the transaction as forming part
of an entity’s net assets, either before the contribution occurs or at the time of the contribution; or a formal agreement, in relation to the contribution, establishing or increasing an existing financial interest in the net assets
of an entity.
Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset orfinancial liability. An incremental cost is one that would not have been incurred if the entity had not acquired, issued or disposedof the financial instrument.
Financial instruments at amortised cost are non-derivative financial assets or non-derivative financial liabilities that have fixed ordeterminable payments, excluding those instruments that: the entity designates at fair value at initial recognition; or are held for trading.
Financial instruments at cost are investments in residual interests that do not have a quoted market price in an active market, andwhose fair value cannot be reliably measured.
Financial instruments at fair value comprise financial assets or financial liabilities that are: derivatives; combined instruments that are designated at fair value;
118
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.5 Financial instruments (continued) instruments held for trading. A financial instrument is held for trading if:
- it is acquired or incurred principally for the purpose of selling or repurchasing it in the near-term; or- on initial recognition it is part of a portfolio of identified financial instruments that are managed together and forwhich there is evidence of a recent actual pattern of short term profit-taking;- non-derivative financial assets or financial liabilities with fixed or determinable payments that are designated at fairvalue at initial recognition in accordance with paragraph 17 of GRAP 104; and- financial instruments that do not meet the definition of financial instruments at amortised cost or financialinstruments at cost.
Classification
The entity has the following types of financial assets (classes and category) as reflected on the face of the statement of financialposition or in the notes thereto:
`
Class CategoryNon-current receivables Financial asset measured at amortised costOther receivables Financial asset measured at amortised costCash and cash equivalents Financial asset measured at amortised costInvestments Financial asset measured at amortised costConsumer receivables Financial asset measured at amortised cost
The entity has the following types of financial liabilities (classes and category) as reflected on the face of the statement offinancial position or in the notes thereto:
`
Class CategoryOther non-current liabilities Financial liability measured at amortised costOther payables Financial liability measured at amortised costLoans from shareholders Financial liability measured at amortised costFinance lease obligation Financial liability measured at amortised costVAT Payable Financial liability measured at amortised costConsumer deposits Financial liability measured at cost
Initial recognition
The entity recognises a financial asset or a financial liability in its statement of financial position when the entity becomes a partyto the contractual provisions of the instrument.
The entity recognises financial assets using trade date accounting.
Initial measurement of financial assets and financial liabilities
The entity measures a financial asset and financial liability initially at its fair value plus transaction costs that are directlyattributable to the acquisition or issue of the financial asset or financial liability.
The entity measures a financial asset and financial liability initially at its fair value [if subsequently measured at fair value].
The entity first assesses whether the substance of a concessionary loan is in fact a loan. On initial recognition, the entity analysesa concessionary loan into its component parts and accounts for each component separately. The entity accounts for that part of aconcessionary loan that is: a social benefit in accordance with the Framework for the Preparation and Presentation of Financial Statements, where it is
the issuer of the loan; or non-exchange revenue, in accordance with the Standard of GRAP on Revenue from Non-exchange Transactions (Taxes and
Transfers), where it is the recipient of the loan.
119
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.5 Financial instruments (continued)
Subsequent measurement of financial assets and financial liabilities
The entity measures all financial assets and financial liabilities after initial recognition using the following categories: Financial instruments at fair value. Financial instruments at amortised cost. Financial instruments at cost.
All financial assets measured at amortised cost, or cost, are subject to an impairment review.
Fair value measurement considerations
The best evidence of fair value is quoted prices in an active market. If the market for a financial instrument is not active, the entityestablishes fair value by using a valuation technique. The objective of using a valuation technique is to establish what thetransaction price would have been on the measurement date in an arm’s length exchange motivated by normal operatingconsiderations. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willingparties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash flowanalysis and option pricing models. If there is a valuation technique commonly used by market participants to price theinstrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual markettransactions, the entity uses that technique. The chosen valuation technique makes maximum use of market inputs and relies aslittle as possible on entity-specific inputs. It incorporates all factors that market participants would consider in setting a price andis consistent with accepted economic methodologies for pricing financial instruments. Periodically, an entity calibrates thevaluation technique and tests it for validity using prices from any observable current market transactions in the same instrument(i.e. without modification or repackaging) or based on any available observable market data.
The fair value of a financial liability with a demand feature (e.g. a demand deposit) is not less than the amount payable ondemand, discounted from the first date that the amount could be required to be paid.
Reclassification
The entity does not reclassify a financial instrument while it is issued or held unless it is: combined instrument that is required to be measured at fair value; or an investment in a residual interest that meets the requirements for reclassification.
Where the entity cannot reliably measure the fair value of an embedded derivative that has been separated from a host contractthat is a financial instrument at a subsequent reporting date, it measures the combined instrument at fair value. This requires areclassification of the instrument from amortised cost or cost to fair value.
If fair value can no longer be measured reliably for an investment in a residual interest measured at fair value, the entityreclassifies the investment from fair value to cost. The carrying amount at the date that fair value is no longer available becomesthe cost.
If a reliable measure becomes available for an investment in a residual interest for which a measure was previously not available,and the instrument would have been required to be measured at fair value, the entity reclassifies the instrument from cost to fairvalue.
Gains and losses
A gain or loss arising from a change in the fair value of a financial asset or financial liability measured at fair value is recognised insurplus or deficit.
For financial assets and financial liabilities measured at amortised cost or cost, a gain or loss is recognised in surplus or deficitwhen the financial asset or financial liability is derecognised or impaired, or through the amortisation process.
Impairment and uncollectibility of financial assets
The entity assess at the end of each reporting period whether there is any objective evidence that a financial asset or group offinancial assets is impaired.
120
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.5 Financial instruments (continued)
Financial assets measured at amortised cost:
If there is objective evidence that an impairment loss on financial assets measured at amortised cost has been incurred, theamount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated futurecash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interestrate. The carrying amount of the asset is reduced directly OR through the use of an allowance account. The amount of the loss isrecognised in surplus or deficit.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an eventoccurring after the impairment was recognised, the previously recognised impairment loss is reversed directly OR by adjusting anallowance account. The reversal does not result in a carrying amount of the financial asset that exceeds what the amortised costwould have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal isrecognised in surplus or deficit.
Financial assets measured at cost:
If there is objective evidence that an impairment loss has been incurred on an investment in a residual interest that is notmeasured at fair value because its fair value cannot be measured reliably, the amount of the impairment loss is measured as thedifference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted atthe current market rate of return for a similar financial asset. Such impairment losses are not reversed.
121
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.5 Financial instruments (continued)
Derecognition
Financial assets
The entity derecognises financial assets using trade date accounting.
The entity derecognises a financial asset only when: the contractual rights to the cash flows from the financial asset expire, are settled or waived; the entity transfers to another party substantially all of the risks and rewards of ownership of the financial asset; or the entity, despite having retained some significant risks and rewards of ownership of the financial asset, has transferred
control of the asset to another party and the other party has the practical ability to sell the asset in its entirety to anunrelated third party, and is able to exercise that ability unilaterally and without needing to impose additional restrictionson the transfer. In this case, the entity :- derecognise the asset; and- recognise separately any rights and obligations created or retained in the transfer.
The carrying amounts of the transferred asset are allocated between the rights or obligations retained and those transferred onthe basis of their relative fair values at the transfer date. Newly created rights and obligations are measured at their fair values atthat date. Any difference between the consideration received and the amounts recognised and derecognised is recognised insurplus or deficit in the period of the transfer.
If the entity transfers a financial asset in a transfer that qualifies for derecognition in its entirety and retains the right to servicethe financial asset for a fee, it recognise either a servicing asset or a servicing liability for that servicing contract. If the fee to bereceived is not expected to compensate the entity adequately for performing the servicing, a servicing liability for the servicingobligation is recognised at its fair value. If the fee to be received is expected to be more than adequate compensation for theservicing, a servicing asset is recognised for the servicing right at an amount determined on the basis of an allocation of thecarrying amount of the larger financial asset.
If, as a result of a transfer, a financial asset is derecognised in its entirety but the transfer results in the entity obtaining a newfinancial asset or assuming a new financial liability, or a servicing liability, the entity recognise the new financial asset, financialliability or servicing liability at fair value.
On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the considerationreceived is recognised in surplus or deficit.
If the transferred asset is part of a larger financial asset and the part transferred qualifies for derecognition in its entirety, theprevious carrying amount of the larger financial asset is allocated between the part that continues to be recognised and the partthat is derecognised, based on the relative fair values of those parts, on the date of the transfer. For this purpose, a retainedservicing asset is treated as a part that continues to be recognised. The difference between the carrying amount allocated to thepart derecognised and the sum of the consideration received for the part derecognised is recognised in surplus or deficit.
If a transfer does not result in derecognition because the entity has retained substantially all the risks and rewards of ownership ofthe transferred asset, the entity continue to recognise the transferred asset in its entirety and recognise a financial liability for theconsideration received. In subsequent periods, the entity recognises any revenue on the transferred asset and any expenseincurred on the financial liability. Neither the asset, and the associated liability nor the revenue, and the associated expenses areoffset.
Financial liabilities
The entity removes a financial liability (or a part of a financial liability) from its statement of financial position when it isextinguished — i.e. when the obligation specified in the contract is discharged, cancelled, expires or waived.
An exchange between an existing borrower and lender of debt instruments with substantially different terms is accounted for ashaving extinguished the original financial liability and a new financial liability is recognised. Similarly, a substantial modification ofthe terms of an existing financial liability or a part of it is accounted for as having extinguished the original financial liability andhaving recognised a new financial liability.
122
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.5 Financial instruments (continued)
The difference between the carrying amount of a financial liability (or part of a financial liability) extinguished or transferred toanother party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in surplusor deficit. Any liabilities that are waived, forgiven or assumed by another entity by way of a non-exchange transaction areaccounted for in accordance with the Standard of GRAP on Revenue from Non-exchange Transactions (Taxes and Transfers).
Presentation
Interest relating to a financial instrument or a component that is a financial liability is recognised as revenue or expense in surplusor deficit.
Dividends or similar distributions relating to a financial instrument or a component that is a financial liability is recognised asrevenue or expense in surplus or deficit.
Losses and gains relating to a financial instrument or a component that is a financial liability is recognised as revenue or expensein surplus or deficit.
Distributions to holders of residual interests are debited by the entity directly to net assets, net of any related income tax benefit[where applicable]. Transaction costs incurred on residual interests is accounted for as a deduction from net assets, net of anyrelated income tax benefit [where applicable].
A financial asset and a financial liability are only offset and the net amount presented in the statement of financial position whenthe entity currently has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis, orto realise the asset and settle the liability simultaneously.
In accounting for a transfer of a financial asset that does not qualify for derecognition, the entity does not offset the transferredasset and the associated liability.
Cash and cash equivalents
Cash and cash equivalents comprise of cash on hand and demand deposits, and other short-term highly liquid investments thatare readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initiallyand subsequently recorded at fair value.
1.6 Tax
Current tax assets and liabilities
Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect ofcurrent and prior periods exceeds the amount due for those periods, the excess is recognised as an asset.
Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recoveredfrom) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of thereporting period.
Value added tax (VAT)
The municipal entity accounts for VAT on the cash basis. The municipal entity is liable to account for VAT at the standard rate(14%) in terms of section 7 (1) (a) of the VAT Act in respect of the supply of goods or services, except where the supplies arespecifically zero-rated in terms of section 11, exempted in terms of section 12 of the VAT Act or are scoped out for VAT purposes.The municipal entity accounts for VAT on a monthly basis.
1.7 Leases
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease isclassified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.
When a lease includes both land and buildings elements, the entity assesses the classification of each element separately.
123
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.7 Leases (continued)
Finance leases - municipal entity as lessee
Finance leases are recognised as assets and liabilities in the statement of financial position at amounts equal to the fair value ofthe leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor isincluded in the statement of financial position as a finance lease obligation.
The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease.
Minimum lease payments are apportioned between the finance charge and reduction of the outstanding liability. The financecharge is allocated to each period during the lease term so as to produce a constant periodic rate of on the remaining balance ofthe liability.
Any contingent rents are expensed in the period in which they are incurred.
Subsequent to initial recognition, the asset is account for in accordance with the accounting policy applicable to that asset.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets, or whereshorter, the term of the relevant lease.
The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inceptiondate of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangementconveys a right to use the asset. The classification of the lease is determined using the standard of GRAP on leases.
Operating leases - lessee
Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between theamounts recognised as an expense and the contractual payments are recognised as an operating lease asset or liability.
Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
1.8 Inventories
Inventories are initially measured at cost except where inventories are acquired through a non-exchange transaction, then theircosts are their fair value as at the date of acquisition.
Subsequently inventories are measured at the lower of cost and net realisable value.
Inventories are measured at the lower of cost and current replacement cost where they are held for; distribution at no charge or for a nominal charge; or consumption in the production process of goods to be distributed at no charge or for a nominal charge.
Net realisable value is the estimated selling price in the ordinary course of operations less the estimated costs of completion andthe estimated costs necessary to make the sale, exchange or distribution.
Current replacement cost is the cost the entity incurs to acquire the asset on the reporting date.
The cost of inventories comprises of all costs of purchase, costs of conversion and other costs incurred in bringing the inventoriesto their present location and condition.
The cost of inventories of items that are not ordinarily interchangeable and goods or services produced and segregated forspecific projects is assigned using specific identification of the individual costs.
The cost of inventories is assigned using the first-in, first-out (FIFO) formula. The same cost formula is used for all inventorieshaving a similar nature and use to the entity.
124
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.8 Inventories (continued)
When inventories are sold, the carrying amounts of those inventories are recognised as an expense in the period in which therelated revenue is recognised. If there is no related revenue, the expenses are recognised when the goods are distributed, orrelated services are rendered. The amount of any write-down of inventories to net realisable value or current replacement costand all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversalof any write-down of inventories, arising from an increase in net realisable value or current replacement cost, are recognised as areduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.
1.9 Impairment of cash-generating assets
Cash-generating assets are those assets held by the municipal entity with the primary objective of generating a commercialreturn. When an asset is deployed in a manner consistent with that adopted by a profit-orientated entity, it generates acommercial return.
Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition ofthe loss of the asset’s future economic benefits or service potential through depreciation (amortisation).
Carrying amount is the amount at which an asset is recognised in the statement of financial position after deducting anyaccumulated depreciation and accumulated impairment losses thereon.
A cash-generating unit is the smallest identifiable group of assets held with the primary objective of generating a commercialreturn that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets orgroups of assets.
Costs of disposal are incremental costs directly attributable to the disposal of an asset, excluding finance costs and income taxexpense.
Depreciation (Amortisation) is the systematic allocation of the depreciable amount of an asset over its useful life.
Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm’s length transaction betweenknowledgeable, willing parties, less the costs of disposal.
Recoverable amount of an asset or a cash-generating unit is the higher its fair value less costs to sell and its value in use.
Useful life is either:(a) the period of time over which an asset is expected to be used by the municipal entity; or(b) the number of production or similar units expected to be obtained from the asset by the municipal entity.
1.10 Impairment of non-cash-generating assets
Cash-generating assets are those assets held by the municipal entity with the primary objective of generating a commercialreturn. When an asset is deployed in a manner consistent with that adopted by a profit-orientated entity, it generates acommercial return.
Non-cash-generating assets are assets other than cash-generating assets.
Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition ofthe loss of the asset’s future economic benefits or service potential through depreciation (amortisation).
Carrying amount is the amount at which an asset is recognised in the statement of financial position after deducting anyaccumulated depreciation and accumulated impairment losses thereon.
A cash-generating unit is the smallest identifiable group of assets held with the primary objective of generating a commercialreturn that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets orgroups of assets.
Costs of disposal are incremental costs directly attributable to the disposal of an asset, excluding finance costs and income taxexpense.
125
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.10 Impairment of non-cash-generating assets (continued)
Depreciation (Amortisation) is the systematic allocation of the depreciable amount of an asset over its useful life.
Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm’s length transaction betweenknowledgeable, willing parties, less the costs of disposal.
Recoverable service amount is the higher of a non-cash-generating asset’s fair value less costs to sell and its value in use.
Useful life is either:(a) the period of time over which an asset is expected to be used by the municipal entity; or(b) the number of production or similar units expected to be obtained from the asset by the municipal entity.
1.11 Share capital / Contributed capital
An equity instrument is any contract that evidences a residual interest in the assets of an municipal entity after deducting all of itsliabilities.
1.12 Employee benefits
Short-term employee benefits
The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacationleave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the serviceis rendered and are not discounted.
The expected cost of compensated absences is recognised as an expense as the employees render services that increase theirentitlement or, in the case of non-accumulating absences, when the absence occurs.
The expected cost of bonus payments is recognised as an expense when there is a legal or constructive obligation to make suchpayments as a result of past performance and the obligation can be estimated reliably.
Defined benefit plans
For defined benefit plans the cost of providing the benefits is determined using the projected credit method.
Actuarial valuations are conducted on an annual basis by independent actuaries separately for each plan.
Actuarial gains and losses are recognised in the statement of financial performance in the period that they occur.
Gains or losses on the curtailment or settlement of a defined benefit plan is recognised when the entity is demonstrablycommitted to curtailment or settlement.
When it is virtually certain that another party will reimburse some or all of the expenditure required to settle a defined benefitobligation, the right to reimbursement is recognised as a separate asset. The asset is measured at fair value. In all other respects,the asset is treated in the same way as plan assets. In surplus or deficit, the expense relating to a defined benefit plan is presentedas the net of the amount recognised for a reimbursement.
The amount recognised in the statement of financial position represents the present value of the defined benefit obligation asadjusted for unrecognised actuarial gains and losses and unrecognised past service costs, and reduces by the fair value of planassets.
Actuarial assumptions are included in the note of defined benefit obligation plan.
126
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.13 Provisions
Provisions are recognised when: the municipal entity has a present obligation as a result of a past event; it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the
obligation; and a reliable estimate can be made of the obligation.
The amount of a provision is the best estimate of the expenditure expected to be required to settle the present obligation at thereporting date.
Where the effect of time value of money is material, the amount of a provision is the present value of the expenditures expectedto be required to settle the obligation.
The discount rate is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific tothe liability.
Reimbursements
Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, thereimbursement is recognised when, and only when, it is virtually certain that reimbursement will be received if the municipalentity settles the obligation. The reimbursement is treated as a separate asset. The amount recognised for the reimbursementdoes not exceed the amount of the provision.
Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Provisions are reversed if it is nolonger probable that an outflow of resources embodying economic benefits or service potential will be required, to settle theobligation.
A constructive obligation to restructure arises only when an entity: has a detailed formal plan for the restructuring, identifying at least:
- the activity/operating unit or part of a activity/operating unit concerned;- the principal locations affected;- the location, function, and approximate number of employees who will be compensated for services beingterminated;- the expenditures that will be undertaken; and- when the plan will be implemented; and
has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that plan orannouncing its main features to those affected by it.
A restructuring provision includes only the direct expenditures arising from the restructuring, which are those that are both: necessarily entailed by the restructuring; and not associated with the ongoing activities of the municipal entity
No obligation arises as a consequence of the sale or transfer of an operation until the municipal entity is committed to the sale ortransfer, that is, there is a binding arrangement.
After their initial recognition contingent liabilities recognised in entity combinations that are recognised separately aresubsequently measured at the higher of: the amount that would be recognised as a provision; and the amount initially recognised less cumulative amortisation.
Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 39.
127
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.14 Revenue from exchange transactions
Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in anincrease in net assets, other than increases relating to contributions from owners.
An exchange transaction is one in which the municipal entity receives assets or services, or has liabilities extinguished, and directlygives approximately equal value (primarily in the form of goods, services or use of assets) to the other party in exchange.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in anarm’s length transaction.
Measurement
Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and volume rebates.
Sale of goods
Revenue from the sale of goods is recognised when all the following conditions have been satisfied: the municipal entity has transferred to the purchaser the significant risks and rewards of ownership of the goods; the municipal entity retains neither continuing managerial involvement to the degree usually associated with ownership nor
effective control over the goods sold; the amount of revenue can be measured reliably; it is probable that the economic benefits or service potential associated with the transaction will flow to the municipal
entity; and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
128
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.14 Revenue from exchange transactions (continued)
Rendering of services
When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with thetransaction is recognised by reference to the stage of completion of the transaction at the reporting date. The outcome of atransaction can be estimated reliably when all the following conditions are satisfied: the amount of revenue can be measured reliably; it is probable that the economic benefits or service potential associated with the transaction will flow to the municipal
entity; the stage of completion of the transaction at the reporting date can be measured reliably; and the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.
When services are performed by an indeterminate number of acts over a specified time frame, revenue is recognised on a straightline basis over the specified time frame unless there is evidence that some other method better represents the stage ofcompletion. When a specific act is much more significant than any other acts, the recognition of revenue is postponed until thesignificant act is executed.
When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognised onlyto the extent of the expenses recognised that are recoverable.
Service revenue is recognised by reference to the stage of completion of the transaction at the reporting date. Stage ofcompletion is determined by services performed to date as a percentage of total services to be performed.
Service charges
Service charges relating to distribution of electricity are based on consumption. Meters are read on a monthly basis and arerecognised as revenue when invoiced. Provisional estimates of consumption, based on the consumption history, are made on amonthly basis when meter readings have not been performed. The provisional estimates of consumption are recognised asrevenue when invoiced, except at year-end when estimates of consumption up to year-end are recorded as revenue without itbeing invoiced. In respect of estimates of consumption between the last reading date and the reporting date, an accrual is raisedbased on the average monthly consumption. Adjustments to provisional estimates of consumption are made in the invoicingperiod in which meters are read. These adjustments are recognised as revenue in the invoicing period. Estimates of consumptionbetween meter readings are based on historical information.
Pre-paid electricity
Prepaid electricity revenue is recognised at the point of sale. Revenue is measured at the fair value of the consideration receivedor receivable, net of trade discounts and volume rebates. An adjustment for units not consumed at year end is made based onthe average consumption history. Pre-paid electricity sales are reconciled on a monthly basis and the sum of the monthly salesprovides the total sales for the year. The total annual pre-paid electricity sales is divided by 365 days to obtain the average dailysales. The deemed consumption for the month of June is obtained by multiplying the average daily sales by the number of days inthe last month of the financial year. The difference between the actual and deemed June sales is accounted for as deferredrevenue.
1.15 Revenue from non-exchange transactions
Non-exchange transactions are defined as transactions where the entity receives value from another entity without directly givingapproximately equal value in exchange.
Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in anincrease in net assets, other than increases relating to contributions from owners.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in anarm’s length transaction.
129
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.15 Revenue from non-exchange transactions (continued)
Conditional grants and receipts
Revenue from conditional grants is recognised when it is probable that the economic benefits or service potential will flow to themunicipal entity the amount of the revenue can be measured reliably and to the extent that there has been compliance with anyrestrictions associated with the grant.
Recognition
An inflow of resources from a non-exchange transaction recognised as an asset is recognised as revenue, except to the extent thata liability is also recognised in respect of the same inflow.
As the municipal 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 amountof 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 municipality.
When, as a result of a non-exchange transaction, the municipal entity recognises an asset, it also recognises revenue equivalent tothe 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 theobligation at the reporting date, and the amount of the increase in net assets, if any, recognised as revenue. When a liability issubsequently reduced, because the taxable event occurs or a condition is satisfied, the amount of the reduction in the liability isrecognised as revenue.
Government grants
Government grants are recognised as revenue when: it is probable that the economic benefits or service potential associated with the transaction will flow to the municipal
entity, the amount of the revenue can be measured reliably, and to the extent that there has been compliance with any restrictions associated with the grant.
The municipal entity assesses the degree of certainty attached to the flow of future economic benefits or service potential on thebasis of the available evidence. Certain grants payable by one level of government to another are subject to the availability offunds. Revenue from these grants is only recognised when it is probable that the economic benefits or service potential associatedwith the transaction will flow to the entity. An announcement at the beginning of a financial year that grants may be available forqualifying entities in accordance with an agreed program may not be sufficient evidence of the probability of the flow. Revenue isthen only recognised once evidence of the probability of the flow becomes available.
Restrictions on government grants may result in such revenue being recognised on a time proportion basis. Where there is norestriction on the period, such revenue is recognised on receipt or when the Act becomes effective, which-ever is earlier.
When government remit grants on a re-imbursement basis, revenue is recognised when the qualifying expense has been incurredand to the extent that any other restrictions have been complied with.
130
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.15 Revenue from non-exchange transactions (continued)
Other grants and donations
Other grants and donations are recognised as revenue when: it is probable that the economic benefits or service potential associated with the transaction will flow to the municipal
entity; the amount of the revenue can be measured reliably; and to the extent that there has been compliance with any restrictions associated with the grant.
If goods in-kind are received without conditions attached, revenue is recognised immediately. If conditions are attached, a liabilityis recognised, which is reduced and revenue recognised as the conditions are satisfied.
1.16 Turnover
Turnover comprises of sales to customers and service rendered to customers. Turnover is stated at the invoice amount and isexclusive of value added taxation.
1.17 Investment income
Investment income is recognised on a time-proportion basis using the effective interest method.
1.18 Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised aspart of the cost of that asset until such time as the asset is ready for its intended use. The amount of borrowing costs eligible forcapitalisation is determined as follows: Actual borrowing costs on funds specifically borrowed for the purpose of obtaining a qualifying asset less any investment
income on the temporary investment of those borrowings. Weighted average of the borrowing costs applicable to the entity on funds generally borrowed for the purpose of obtaining
a qualifying asset. The borrowing costs capitalised do not exceed the total borrowing costs incurred.
The capitalisation of borrowing costs commences when all the following conditions have been met: expenditures for the asset have been incurred; borrowing costs have been incurred; and activities that are necessary to prepare the asset for its intended use or sale are undertaken.
Capitalisation is suspended during extended periods in which active development is interrupted.
Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale arecomplete.
All other borrowing costs are recognised as an expense in the period in which they are incurred.
1.19 Comparative figures
When the presentation or classification of an item in the annual financial statements are amended, comparative amounts arereclassified.
1.20 Fruitless and wasteful expenditure
Fruitless expenditure means expenditure which was made in vain and would have been avoided had reasonable care beenexercised.
All expenditure relating to fruitless and wasteful expenditure is recognised as an expense in the statement of financialperformance in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of theexpense, and where recovered, it is subsequently accounted for as revenue in the statement of financial performance. Detaileddisclosure have been made in the notes to the financial statements as required by MFMA.
131
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.21 Irregular expenditure
Irregular expenditure as defined in section 1 of the MFMA is expenditure other than unauthorised expenditure, incurred incontravention of or that is not in accordance with a requirement of any applicable legislation, including - (a) this Act; or(b) the State Tender Board Act, 1968 (Act No. 86 of 1968), or any regulations made in terms of the Act; or(c) any provincial legislation providing for procurement procedures in that provincial government.
National Treasury practice note no. 4 of 2008/2009 which was issued in terms of sections 76(1) to 76(4) of the PFMA requires thefollowing (effective from 1 April 2008):
Irregular expenditure that was incurred and identified during the current financial year and which was condoned before year endand/or before finalisation of the financial statements must also be recorded appropriately in the irregular expenditure register. Insuch an instance, no further action is also required with the exception of updating the note to the financial statements.
Irregular expenditure that was incurred and identified during the current financial year and for which condonement is beingawaited at year end must be recorded in the irregular expenditure register. No further action is required with the exception ofupdating the note to the financial statements.
Where irregular expenditure was incurred in the previous financial year and is only condoned in the following financial year, theregister and the disclosure note to the financial statements must be updated with the amount condoned.
Irregular expenditure that was incurred and identified during the current financial year and which was not condoned by theNational Treasury or the relevant authority must be recorded appropriately in the irregular expenditure register. If liability for theirregular expenditure can be attributed to a person, a debt account must be created if such a person is liable in law. Immediatesteps must thereafter be taken to recover the amount from the person concerned. If recovery is not possible, the accountingofficer or accounting authority may write off the amount as debt impairment and disclose such in the relevant note to thefinancial statements. The irregular expenditure register must also be updated accordingly. If the irregular expenditure has notbeen condoned and no person is liable in law, the expenditure related thereto must remain against the relevantprogram/expenditure item, be disclosed as such in the note to the financial statements and updated accordingly in the irregularexpenditure register.
Irregular expenditure is expenditure that is contrary to the Municipal Finance Management Act (Act No.56 of 2003), the MunicipalSystems Act (Act No.32 of 2000), and the Public Office Bearers Act (Act No. 20 of 1998) or is in contravention of the economicentity’s supply chain management policy. Irregular expenditure excludes unauthorised expenditure. Irregular expenditure isaccounted for as expenditure in the Statement of Financial Performance and where recovered, it is subsequently accounted for asrevenue in the Statement of Financial Performance.
1.22 Use of estimates
The preparation of financial statements in conformity with Standards of GRAP requires the use of certain critical accountingestimates. It also requires management to exercise its judgement in the process of applying the municipal entity’s accountingpolicies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates aresignificant to the financial statements are disclosed in the relevant sections of the financial statements. Although these estimatesare based on management’s best knowledge of current events and actions they may undertake in the future, actual resultsultimately may differ from those estimates.
Estimates in the financial statements include but are not limited to the following:
- Depreciation - Bad debts - Pre-paid electricity - Sale of electricity - Leave accrual - Long service awards
132
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.23 Presentation of currency
These financial statements are presented in South African Rand.
1.24 Offsetting
Assets, liabilities, revenue and expenses have not been offset except when offsetting is required or permitted by a Standard ofGRAP
1.25 Investments
Where the carrying amount of an investment is greater than the estimated recoverable amount, it is written down immediately toits recoverable amount and an impairment loss is charged to the statement of financial performance.
Investments in securities
Investments in securities are recognised on a trade date basis and are initially measured at cost.
At subsequent reporting dates, debt securities that the municipal entity has the expressed intention and ability to hold to maturity(held-to-maturity debt securities) are measured at amortised cost, less any impairment losses recognised to reflect irrecoverableamounts. The annual amortisation of any discount or premium on the acquisition of a held-to-maturity security is aggregated withover investment income receivable over the term of the instrument so that the revenue recognised in each period represents aconstant yield on the investment.
Investments other than held-to-maturity debt securities are classified as either held for trading or available-for-sale, and aremeasured at subsequent reporting dates at fair value, based on quoted market prices at the reporting date. Where securities areheld for trading purposes, unrealised gains and losses are included in net surplus/(deficit) for the period. For available-for-saleinvestments, unrealised gains and losses are recognised directly in net assets, until the security is disposed of or is determined tobe impaired, at which time the cumulative gain or loss previously recognised in net assets is included in the net surplus/(deficit)for the period.
Investments in derivative financial instruments
Derivative financial instruments are initially recorded at cost and are remeasured to fair value at subsequent reporting dates.
Changes in the fair value of derivative financial instruments that are designated and effective as cash flow hedges are recogniseddirectly in accumulated surpluses/(deficits). Amounts deferred in net assets are recognised in the statement of financialperformance in the same period in which the hedged firm commitment or forecasted transaction affects net surplus/(deficit).
Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in thestatement of financial performance as they arise.
1.26 Conditional grants and receipts
Revenue received from conditional grants, donations and funding are recognised as revenue to the extent that the municipalentity has complied with any of the criteria, conditions or obligations embodied in the agreement. To the extent that the criteria,conditions or obligations have not been met a liability is recognised.
1.27 Segmental information
Segmental information on property, plant and equipment, as well as income and expenditure, is set out in Appendices C and D,based on the International Government Financial Statistics classifications and the budget formats prescribed by National Treasury.The municipal entity operates solely in its area of jurisdiction as determined by the Demarcation Board.
Segment information is prepared in conformity with the accounting policies applied for preparing and presenting the financialstatements.
133
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Accounting Policies
1.28 Related parties
The municipal entity operates in an economic sector currently dominated by entities directly or indirectly owned by the SouthAfrican Government. As a consequence of the constitutional independence of the three spheres of government in South Africa,only entities within the national sphere of government are considered to be related parties.
Management are those persons responsible for planning, directing and controlling the activities of the municipal entity, includingthose charged with the governance of the municipal entity in accordance with legislation, in instances where they are required toperform such functions.
Close members of the family of a person are considered to be those family members who may be expected to influence, or beinfluenced by, that management in their dealings with the municipal entity.
Only transactions with related parties not at arm’s length or not in the ordinary course of business are disclosed.
134
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
2. New standards and interpretations
2.1 Standards and interpretations effective and adopted in the current year
In the current year, the entity has adopted the following standards and interpretations that are effective for the current financial yearand that are relevant to its operations:
Standard/ Interpretation: Effective date:Years beginning on orafter
Expected impact:
GRAP 23: Revenue from Non-exchange Transactions (Taxes andTransfers)
01 April 2012 The expected impact on theannual financial statements isin the form of disclosure andpresentation requirementsset out in the standard. Theimpact on the financialstatements can be seen in theway Revenue from Non-Exchange Transactions isdisclosed on the face of theStatement of FinancialPerformance and thesubsequent notes to the lineitems classified underRevenue from Non-ExchangeTransactions. Disclosurenotes, implicit to Centlec(SOC) Ltd, impacted by thisstandard are Note 28Government Grants &Subsidies, Note 24 PublicContributions & Donationsand Note 16 VAT.Furthermore, it is expectedthat the accounting policyregarding Revenue from Non-Exchange Transactions will beimpacted by this standard.Refer to 1.15 Revenue fromNon-Exchange Transactionsunder Accounting Policies forthe disclosure of the entity'saccounting policy relating tothis standard.
135
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2. New standards and interpretations (continued) GRAP 24: Presentation of Budget Information 01 April 2012 The expected impact on the
annual financial statements isin the form of disclosure andpresentation requirementsset out in the standard. Theimpact on the financialstatements can be seen in theway budget information ispresented and disclosed asrequired by the standard inthe Statement of Comparisonof Budget and ActualAmounts and theAppropriation Statement.
GRAP 103: Heritage Assets 01 April 2012 It is unlikely that the standardwill have a material impacton the municipal entity'sannual financial statements.
GRAP 21: Impairment of non-cash-generating assets 01 April 2012 It is unlikely that the standardwill have a material impacton the municipal entity'sannual financial statements.
GRAP 26: Impairment of cash-generating assets 01 April 2012 The expected impact on theannual financial statements isin the form of disclosure andpresentation requirementsset out in the standard. Theimpact on the financialstatements can be seen in theway Impairment is disclosedon the face of the Statementof Financial Performance andthe subsequent note.Disclosure notes, implicit toCentlec (SOC) Ltd, impactedby this standard are Note 8Property, Plant andEquipment and Note 32Impairment of assets.Furthermore, it is expectedthat the accounting policyregarding Impairment ofCash-Generating Assets willbe impacted by this standard.Refer to 1.10 Impairment ofCash-Generating Assets underAccounting Policies for thedisclosure of the entity'saccounting policy relating tothis standard.
136
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2. New standards and interpretations (continued) GRAP 104: Financial Instruments 01 April 2012 The expected impact on the
annual financial statements isin the form of disclosure andpresentation requirementsset out in the standard. Theimpact on the financialstatements can be seen in theway all classes of FinancialInstruments are disclosed onthe face of the Statement ofFinancial Position and theirsubsequent notes. Disclosurenotes impacted by thisstandard are Note 3, Note 5,Note 6, Note 7, Note 10, Note11, Note 14, Note 15, Note16, Note17. Furthermore, it isexpected that the accountingpolicy regarding FinancialInstruments will be impactedby this standard. Refer to 1.5Financial Instruments underAccounting Policies for thedisclosure of the entity'saccounting policy relating tothis standard.
137
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2. New standards and interpretations (continued)
2.2 Standards issued and not yet effective
The entity has not applied the following standards and interpretations, which have been published and are mandatory for the entity’saccounting periods beginning on or after 01 July 2013 or later periods:
Standard/ Interpretation: Effective date:Years beginningon or after
Expected impact:
GRAP 18: Segment Reporting 01 April 2013 It is unlikely that the standard will havea material impact on the municipalentity's annual financial statements.
GRAP 25: Employee benefits 01 April 2013 It is likely that the standard will have animpact on the municipal entity's annualfinancial statements.
GRAP 105: Transfers of functions between entities undercommon control
01 April 2014 It is unlikely that the standard will havea material impact on the municipalentity's annual financial statements.
GRAP 106: Transfers of functions between entities not undercommon control
01 April 2014 It is unlikely that the standard will havea material impact on the municipalentity's annual financial statements.
GRAP 107: Mergers 01 April 2014 It is unlikely that the standard will havea material impact on the municipalentity's annual financial statements.
GRAP 20: Related parties 01 April 2013 It is likely that the standard will have animpact on the municipal entity's annualfinancial statements. The impact will bereflected in the related parties note inthe financial statements.
IGRAP 11: Consolidation – Special purpose entities 01 April 2014 It is unlikely that the standard will havea material impact on the municipalentity's annual financial statements.
IGRAP 12: Jointly controlled entities – Non-monetarycontributions by ventures
01 April 2014 It is unlikely that the standard will havea material impact on the municipalentity's annual financial statements.
GRAP 6 (as revised 2010): Consolidated and Separate FinancialStatements
01 April 2014 It is unlikely that the standard will havea material impact on the municipalentity's annual financial statements.
GRAP 7 (as revised 2010): Investments in Associates 01 April 2014 It is unlikely that the standard will havea material impact on the municipalentity's annual financial statements.
GRAP 8 (as revised 2010): Interests in Joint Ventures 01 April 2014 It is unlikely that the standard will havea material impact on the municipalentity's annual financial statements.
GRAP 1 (as revised 2012): Presentation of Financial Statements 01 April 2013 It is likely that the standard will have animpact on the municipal entity's annualfinancial statements. The impact of thiswill be assessed through the statementconfirming compliance with theapplicable GRAP standards,interpretations, guidelines anddirectives.
138
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2. New standards and interpretations (continued) GRAP 3 (as revised 2012): Accounting Policies, Change in
Accounting Estimates and Errors01 April 2013 It is likely that the standard will have an
impact on the municipal entity's annualfinancial statements.
GRAP 7 (as revised 2012): Investments in Associates 01 April 2013 It is unlikely that the standard will havea material impact on the municipalentity's annual financial statements.
GRAP 9 (as revised 2012): Revenue from Exchange Transactions 01 April 2013 It is likely that the standard will have animpact on the municipal entity's annualfinancial statements.
GRAP 12 (as revised 2012): Inventories 01 April 2013 It is likely that the standard will have animpact on the municipal entity's annualfinancial statements.
GRAP 13 (as revised 2012): Leases 01 April 2013 It is likely that the standard will have animpact on the municipal entity's annualfinancial statements.
GRAP 16 (as revised 2012): Investment Property 01 April 2013 It is unlikely that the standard will havea material impact on the municipalentity's annual financial statements.
GRAP 17 (as revised 2012): Property, Plant and Equipment 01 April 2013 It is likely that the standard will have amaterial impact on the municipalentity's annual financial statements.
GRAP 27 (as revised 2012): Agriculture (Replaces GRAP 101) 01 April 2013 It is unlikely that the standard will havea material impact on the municipalentity's annual financial statements.
GRAP 31 (as revised 2012): Intangible Assets (Replaces GRAP 102) 01 April 2013 It is likely that the standard will have amaterial impact on the municipalentity's annual financial statements.
IGRAP16: Intangible assets website costs 01 April 2013 It is likely that the standard will have amaterial impact on the municipalentity's annual financial statements.
IGRAP1 (as revised 2012):Applying the probability test on initialrecognition of revenue
01 April 2013 It is likely that the standard will have amaterial impact on the municipalentity's annual financial statements.
139
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Less: Provision for debt impairment90+ days (377 628 950) (341 059 445)
Reconciliation of allowance for impairmentBalance at beginning of the year (341 059 445) (122 667 100)Contributions to provision (36 569 505) (218 392 345)
(377 628 950) (341 059 445)
142
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
5. Consumer debtors (continued)
Consumer debtors pledged as security
No consumer debtors were pledged as security in the current or prior financial period.
Fair value of consumer debtors
Consumer debtors are reflected net of the provision for doubtful debt and the effect of discounting. The interest rate used indiscounting is the prime rate at period end adjusted for CPI applicable to the public sector.
The entity enters into settlement agreements with debtors whose accounts are long overdue and these are not charged any interest.The balance that is settled over a period longer than 12 months is deemed to constitute a financing arrangement and is accounted for atthe net present value of the future cash flows. The accounts which are due for more than 12 months are disclosed as non-currentreceivables.
The creation and release of provision for impaired receivables have been included in expenses in the statement of financialperformance. Unwinding of discount is included in the notes to the statement of financial performance. Amounts charged to theallowance account are generally written off when there is no expectation of recovering additional cash.
The maximum exposure to credit risk at the reporting date is the fair value of each class of trade receivables mentioned above. Themunicipal entity does not hold any collateral as security.
6. Other financial assets
Loans and receivablesKopanong Local MunicipalityThe capital funding provided to the Kopanong Local Municipality is repayable inmonthly installments based on the estimated useful life of the capital asset. The capitaladvances bears interest at 10%
2 073 586 2 332 242
Mohokare Local MunicipalityThe capital funding provided to the Mohokare Local Municipality is repayable inmonthly installments based on the estimated useful life of the capital asset. The capitaladvances bears interest at 10%
1 105 150 1 221 452
Naledi Local MunicipalityThe capital funding provided to the Naledi Local Municipality is repayable in monthlyinstallments based on the estimated useful life of the capital asset. The capitaladvances bears interest at 10%
423 075 536 920
Consumer debtors - ArrangementsConsumer debtors with arrangements which stretches over a period longer than 12months.
76 210 2 854 589
3 678 021 6 945 203
Non-current assetsLoans and receivables 3 215 673 6 456 400
Current assetsLoans and receivables 462 348 488 803
143
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
Financial assets at fair value
Renegotiated terms
None of the financial assets that are fully performing have been renegotiated in the last year.
None of the loans or receivables were pledged as security for any financial liabilities and no securities are held for any of the non-current loans and receivables
No trade and other receivables were pledged as security for overdraft facilities of the municipal entity.
The creation and release of provision for impaired receivables have been included in expenses in surplus or deficit.
Unwinding of discount is included in interest received in surplus or deficit. Amounts charged to the allowance account are generallywritten off when there is no expectation of recovering additional cash.
The maximum exposure to credit risk at the reporting date is the fair value of each class of loan mentioned above. The municipal entitydoes not hold any collateral as security.
144
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
8. Property, plant and equipment (continued)
Restrictions on title
Carrying value of assets not yet legally transferred from MangaungLocal Municipality to Centlec (SOC) Ltd in accordance with
the Sale of Business agreement:Land and buildings 65 129 312 65 129 312The intention of the sale of business agreement was to sell the land andbuildings to Centlec for operational usage. Centlec has been using the land andbuildings for operational usage since inception, 1 July 2005, but as at yearend30 June 2013 the land and buildings have not yet been legally transferred fromMangaung Metropolitan Municipality to Centlec.Motor vehicles - 1 744 083The intention of the sale of business agreement was to sell the motor vehiclesto Centlec (SOC) Ltd for operational usage. Centlec (SOC) Ltd has been using themotor vehicles for operational usage since inception, 1 July 2005, but as atyearend 30 June 2012 the motor vehicles have not yet been legally transferredfrom Mangaung Metropolitan Municipality to Centlec (SOC) Ltd. During thefinancial year ended 30 June 2013 all these motor vehicles were legallytransferred to Centlec (SOC) Ltd.
A register containing the information required by section 63 of the Municipal Finance Management Act is available for inspection at theregistered office of the municipal entity.
146
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Change in accounting policy - Servitudes recognised in terms of GRAP 31 :
During the period under review the entity adopted GRAP 31 which has given rise to the recognition of servitudes which the entity holdson certain properties within the Managaung area. The comparative statements for 2011/12 financial year have been restated. Theeffect of the change in accounting policy is summarised below:
Statement of financial positionIncrease in cost price of servitudes 204 567 893Increase in opening accumulated surplus or deficit (204 567 893)
147
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
10. Consumer deposits
Electricity 49 038 718 47 999 138
Guarantees in lieu of vendor deposits amounted to R 1,561,000 (2012: R 1,561,000).
Fair value approximates the carrying value of the vendor deposits.
11. Finance lease obligation
Minimum lease payments due - within one year 289 813 334 837 - in second to fifth year inclusive 126 228 320 674 - later than five years - -
Present value of minimum lease payments 382 816 566 351
Present value of minimum lease payments due - within one year 262 696 269 135 - in second to fifth year inclusive 120 118 297 216 - later than five years - -
It is the entity's policy to lease certain photo copiers under finance leases. The average lease term is 4 years and the average effectiveborrowing rate was 10% (2012: 10%). Initial lease payment varied between R215 and R7 926 per month for a lease period of between 3-5 years and subject to prime lending rates.
148
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
The long service awards liability arises from Centlec (SOC) Ltd being a party to the Collective Agreement on Conditions of Service for theFree State Division of SALGBC . This agreement is effective 1 July 2010.
The long service awards plan is a defined benefit plan. At year end 140 (2012 - 59) employees were eligible for long service bonuses.
The current service cost for the ensuing year is estimated to be R 626,000 (2012 - R 192,000) whereas the interest-cost for the next yearis estimated to be R 234,000 (2012 - R 59,000).
As at the valuation date, the long service leave award liability of the Organisation was unfunded, i.e. no dedicated assets have been setaside to meet this liability. We therefore did not value any assets as part of our valuation.
The key assumptions utilised by management in determining theLong service awards liability are listed below:Discount Rate 7.4% 7.92%Salary Increase 6.66% 6.74%Net Discount rate 0.69% 1.11%Mortality SA85-90 SA85-90Normal Retirement age 63 63Consumer price inflation 5.66% 5.74%
Present value of unfunded obligations:Present value of unfunded obligations (2 915 000) (695 000)
Reconciliation of present value of fund obligationsPresent value of fund obligations at the beginning of the year (695 000) -Current service costs (192 000) -Long service awards paid 49 676 -Interest costs (59 000) -Actuarial gains / (losses) (2 018 676) (695 000)
(2 915 000) (695 000)
The main reason for the large increase in the liability from 30 June 2012 to 30 June 2013 was the following:
1. Employee movements – Over the year 46 employees transferred over and 35 employees joined the service of the Organisation. Thiscaused the overall liability to increase by around R1.63m.
2. Change in the net effective discount rate - Changes in bond yields over the past 12 months resulted in a reduction in the net effectivediscount rate from 1.11% in 2012 to 0.69% in 2013. This caused the liability to increase by around R25,000.
3. Lower than expected withdrawals from service – Based on the actual 2012 data received there were no employees that left theservice of the Organisation over the past year. We expected a number of employees to leave service as per our withdrawal rateassumptions. The lower than expected withdrawals caused the liability to increase by around R450,000.
149
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
12. Long service awards (continued)
Sensitivity analysis:
In order to illustrate the sensitivity of the results to changes in certain key variables, the liabilities have been recalculated using thefollowing assumptions:
- 20% increase/decrease in the assumed level of withdrawal rates; - 1% increase/decrease in the Normal Salary cost inflation
Centlec (SOC) Ltd rents a building from Free State Development Corporation (FDC) situated in Botshabelo for an indefinite period whichcan be terminated by way of a 3 month cancellation clause. Management has estimated to rent from FDC until the year 2016. The leaserentals are escalated annually on 1 December by 10%. The straight lined amount was calculated as R29 824.90 per month.
150
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
14. Other current & non-current financial liabilities
The capital funding provided to Centlec is repayable in monthly installments based on the estimated useful life of the capital asset asinitially determined by Mangaung Metropolitan Municipality. The capital funding provided to Centlec shall bear interest annually at theinterest rate equal to the prime lending rate on the first day of each financial year and shall thereafter be fixed for the entire financialyear. The interest rate at 1 July 2012 is 9% (2012: 10%)
The loans are unsecured and bears interest at the lower of 15% of the revenue (sale of electricity and pre-paid electricity) of Centlec(SOC) Ltd for the previous financial year or the interest rate on the loan for the financial year ended 30 June 2011 adjusted annually forthe CPI applicable to the Public Finance Sector.
Installments of R267 867 789 are payable every five (5) years with the initial payment on 30 June 2015.
Shareholder loan is measured at amortised cost. The present value of future cash flows was discounted using the average prime ratefor the 5 years up to 30 June 2012. This is done to normalise fluctuations that might occur in prime interest rates.
18. Share capital / Contributed capital
Authorised1000 Ordinary shares of par value of R1 1 000 1 000
Issued100 Ordinary shares 100 100
19. Revaluation reserve
Opening balance 116 739 388 2 016 819 307Change during the year - (1 900 079 919)
116 739 388 116 739 388
20. Other NDR
In accordance with the terms of the NERSA (National Energy Regulator of South Africa) agreement it was agreed that R60 000 000 is tobe held as a non-distributable reserve.
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
22. Other income
Sundry services recovered 183 888 91 698Reconnection tests and removals 244 817 179 950Training income 393 122 -Sale of tender documents 254 824 243 394Other income 653 489 41
1 730 140 515 083
23. Interest Income
Interest on ABSA Current account 2 580 004 -Interest on loans and receivables from exchange transactions 83 971 918 88 441 607Interest on consumer debtors from exchange transactions 33 891 160 51 121 291Interest on ABSA Call account investments 4 206 471 -
124 649 553 139 562 898
Short-term deposits consists of two short term investments with ABSA bank. The details and interest earned on these investments areset out below:
- 32 Day call account with an interest rate of 5.15%. - 1 Day call account with varying interest rates between 0.00% and 5.00% depending on the amount invested.
24. Public contributions and donations
Public contributions and donations 5 860 691 8 392 395
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
28. Government grants and subsidies
Capital grantsNational electrification programme grant 21 929 825 28 000 000Urban settlements development grant 92 735 084 54 747 244Electricity demand side management grant - 6 327 382
114 664 909 89 074 626
114 664 909 89 074 626
DME Grant
Balance unspent at beginning of year - 362 548Conditions met - transferred to revenue - (362 548)
- -
Electricity demand side management grant
Balance unspent at beginning of year - 964 834Conditions met - transferred to revenue - (5 964 834)Conditions met - transferred to MMM debtor - 5 000 000
- -
To implement the Electricity Demand Side Management programme by providing capital subsidies to licensed distributors to addressthe programme in residential dwellings, communities and municipal buildings in order to mitigate the risk of load shedding and supplyinterruptions.
National Electrification Programme
Current-year receipts 25 000 000 12 635 000Conditions met - transferred to revenue (25 000 000) (28 000 000)Conditions met - transferred to MMM debtor - 15 365 000
- -
The grant is used to address the electrification backlog of permanently occupied residential dwellings, the installation of bulkinfrastructure and rehabilitation of electrification infrastructure.
Urban Settlements Development Grant
Current-year receipts 101 230 682 35 000 000Conditions met - transferred to revenue (105 717 996) (54 747 244)Conditions met - transferred to MMM debtor 4 487 314 19 747 244
- -
154
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
29. Revenue
Service charges 1 747 411 671 1 549 337 741Income from agency services 8 602 841 8 011 422Other income 1 730 140 515 083Interest received 124 649 553 139 562 898Government grants & subsidies 114 664 909 89 074 626Public contributions and donations 5 860 691 8 392 395
2 002 919 805 1 794 894 165
The amount included in revenue arising from exchanges of goods orservices are as follows:Service charges 1 747 411 671 1 549 337 741Income from agency services 8 602 841 8 011 422Other income 1 730 140 515 083Interest received - investment 124 649 553 139 562 898
1 882 394 205 1 697 427 144
The amount included in revenue arising from non-exchangetransactions is as follows:Taxation revenueTransfer revenueGovernment grants & subsidies 114 664 909 89 074 626Public contributions and donations 5 860 691 8 392 395
120 525 600 97 467 021
155
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
30. Employee related costs
Basic salary and wages 34 804 557 15 448 754Medical aid - company contributions 1 469 967 591 948UIF contributions 154 544 68 405Pension and provident fund contributions 3 038 697 517 788Travel, motor car, accommodation, subsistence and other allowances 3 936 355 -Overtime payments 2 797 368 6 331Long-service awards 2 269 676 695 000Housing benefits and allowances 87 982 831Bargaining council 10 448 3 561
48 569 594 17 332 618
Remuneration of Chief Executive Officer
Annual Remuneration 569 449 412 984Travel, motor car, accommodation, subsistence and other allowances 115 074 86 500Final settlement payment - 3 000 000Contributions to UIF, Medical and Pension Funds 23 978 4 735Acting Allowance 223 012 159 295
931 513 3 663 514
During the 2013 financial year a new Chief Executive Officer was appointed and took office on 31 January 2013.
During the 2012 financial year the Chief Executive Officer's contract was terminated and the Company Secretary was appointed as theActing Chief Executive Officer.
The remuneration as reflected in 2012 was for the period 1 October 2011 to 30 June 2012 i.e. 9 months.
Remuneration of Chief Financial Officer
Annual Remuneration 542 188 -Travel, motor car, accommodation, subsistence and other allowances 129 730 -Contributions to UIF, Medical and Pension Funds 63 970 -Acting Allowance 133 314 63 250
869 202 63 250
During the 2013 financial year a new Chief Financial Officer was appointed and took office on 1 December 2012.
During the 2012 financial year the Chief Financial Officer position became vacant and an Acting Chief Financial Officer was appointed.
The remuneration as reflected in 2012 was for the period 1 December 2011 to 30 June 2012 i.e. 7 months.
156
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
30. Employee related costs (continued)
Remuneration of Chief Operating Officer
Annual Remuneration 1 256 714 -Travel, motor car, accommodation, subsistence and other allowances 152 020 -Contributions to UIF, Medical and Pension Funds 16 544 -Acting Allowance 88 990 88 990
1 514 268 88 990
During the 2013 financial year a new Chief Operating Officer was appointed and took office on 1 December 2012.
During the 2012 financial year the Chief Operating Officer position became vacant and an Acting Chief Operating Officer was appointed.
The remuneration as reflected in 2012 was for the period 1 February 2012 to 30 June 2012 i.e. 5 months.
Remuneration of Company Secretary
Annual Remuneration 1 126 542 714 753Travel, motor car, accommodation, subsistence and other allowances 128 000 90 000Contributions to UIF, Medical and Pension Funds 63 619 43 185
1 318 161 847 938
Remuneration of Executive Manager: Retail
Annual Remuneration 1 037 488 699 430Travel, motor car, accommodation, subsistence and other allowances 124 920 90 000Contributions to UIF, Medical and Pension Funds 13 167 8 874
1 175 575 798 304
The remuneration as reflected in 2012 was for the period 1 October 2011 to 30 June 2012 i.e. 9 months.
Remuneration of Executive Manager: Wires
Annual Remuneration 770 970 -Travel, motor car, accommodation, subsistence and other allowances 4 800 -Contributions to UIF, Medical and Pension Funds 161 102 -Bonuses under remuneration 38 321 -Acting Allowance 511 986 -
1 487 179 -
During the 2012 financial year this position was vacant.
157
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
30. Employee related costs (continued)
Remuneration of Executive Manager: Corporate Services
Annual Remuneration 319 332 779 383Travel, motor car, accommodation, subsistence and other allowances 34 615 90 000Leave Paid 193 749 -Contributions to UIF, Medical and Pension Funds 5 955 9 674Acting Allowance 424 568 -
978 219 879 057
During the 2013 financial year the Executive Manager: Corporate Services position became vacant and an Acting Executive Manager:Corporate Services was appointed from 1 November 2012.
The remuneration as reflected in 2012 was for the period 1 October 2011 to 30 June 2012 i.e. 9 months.
ImpairmentsInventoriesAn assessment of the net realisable value against cost was performed and a write downwas adjusted to inventory.
8 859 -
Reversal of impairmentsInventoriesAn assessment of the net realisable value against cost was performed and a reversal ofthe adjustment was made to inventory.
- (1 073 762)
Total impairment losses (recognised) reversed 8 859 (1 073 762)
158
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
35. Taxation
The South African Revenue Authority confirmed that Centlec (SOC) Ltd falls within the definition of a "regional electricity distributor" asdefined in Section 1 of the Income Tax Act No.58 of 1962 (the Act). Annual receipts and accruals will therefore be exempt from normaltax under Section 10(1)(t)(viii) of the Act with effect from the commencement of the year of assessment ending on or after 1 January2007.
Centlec was granted exemption from income tax in terms of Section 10(1)(t)(v)(iii) of the Income Tax Act on the 27 August 2012.
The relevant exemption is subject to the condition that annual income tax returns are submitted to SARS.
Additional text
36. Auditors' remuneration
Audit fees 6 536 435 6 198 167
37. Cash generated from (used in) operations
Surplus (deficit) 194 335 841 (45 809 298)
Adjustments for:Depreciation and amortisation 117 840 171 101 487 148(Gain)/Loss on sale of assets and liabilities 37 260 -Impairment loss (reversal) 8 859 (1 073 762)Debt impairment 36 569 505 218 392 345Movements in operating lease assets and accruals 3 629 38 373Movements in provisions 2 220 000 695 000
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
38. Capital commitments
Commitments in respect of capital expenditure
Approved and contracted for Property, plant and equipment - Infrastructure 23 262 724 52 892 390
Approved but not yet contracted for Property, plant and equipment - Infrastructure 47 233 806 -
This expenditure will be financed from Government grants 23 262 724 52 750 899 Own resources 47 233 806 141 191
70 496 530 52 892 090
Operating leases - as lessee (expense)
Minimum lease payments due - within one year 386 627 351 479 - within 2 to 5 years inclusive 893 109 1 279 736 - later than five years - -
1 279 736 1 631 215
Centlec (SOC) Ltd rents a building from Free State Development Corporation (FDC) situated in Botshabelo for an indefinite period whichcan be terminated by way of a 3 month cancellation clause. Management has estimated to rent from FDC until 2016. The lease rentalsare escalated annually on 1 December at 10 %.
161
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
39. Contingencies
The entity is being sued for some of the following pending claims. All the claims are being contested based on legal advice. The certaintyand the timing of the outflow of these liabilities are uncertain.
Contingent liabilities 2013 2012
Litigation against Centlec to prohibit them from disconnecting electricity supply - MCoetzee
200 000 -
Service agreement termination by Centlec due to non performance - Vuyani Security - 614 000Service agreement termination by Centlec due to non performance - MNK Accountants 45 000 000 31 000 000Service agreement termination by Centlec due to non performance - MonnamakgaConstruction & development cc
250 000 480 000
Litigation against Centlec for breach of employment contract - Ramakarane 3 000 000 100 000Application brought against Centlec for the review of tariffs imposed on sectional titleunits.
2 000 000 1 500 000
Application brought against Centlec for access to records. - 60 000Labour disputes. 150 000 73 434Loss due to motor vehicle collision. - 41 200
50 600 000 33 868 634
Contingent assets
The entity is taking legal actions against a supplier and the result of the pending claim is uncertain. The claim is being contested basedon legal advice. The certainty and the timing of the inflow of these assets are uncertain. The details are as follows:
Contingent assets 2013 2012
Summons issued against Landis & GYR for delivering defective meters to Centlec 2 000 000 -
40. Events after the reporting date
The directors are not aware of any material matter or circumstances arising since the end of the financial year to the date of this reportin respect of matters which would require adjustments to or disclosures in the annual financial statements.
41. Prior period errors
The Municipal entity corrected the following prior period errors retrospectively and restated comparative amounts In terms of GRAP 3 -Accounting policies, Changes in Estimates and Errors:
41.1. Prior period error - Receivables from exchange transactions MMM intercompany loan:
During the period under review it was noted that certain consumer debtors with credit balances were not transferred by MMM toCentlec as required. The comparative statements for 2011/12 financial year have been restated. The effect of the correction of theerror(s) is summarised below:
Statement of financial positionIncrease in the intercompany loan 21 991 661Increase in consumer debtors from exchange transactions in advance (21 991 661)Increase in the intercompany loan 1 099 584
Statement of Financial PerformanceIncrease in interest income (1 099 584)
162
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
41. Prior period errors (continued)
41.2. Prior period error - Long service awards not provided for:
The long service awards obligation of the entity was not determined during the prior period under review. The comparative statementsfor 2011/12 financial year have been restated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionIncrease in long service awards liability (695 000)
Statement of Financial PerformanceIncrease in employee costs 192 000Increase in finance costs 59 000Increase in actuarial gain 444 000
41.3. Prior period error - Receivables from exchange transactions MMM intercompany loan:
Interest on the MMM Inter-Company loan was accounted for at 10% and it should have been accounted for at 9% which was the primerate on 1 July 2011 and then on the average loan balance during the year. The comparative statements for 2011/12 financial year havebeen restated. The effect of the correction of the error(s) is summarised below:
The effect of the restatement is summarised as below:
Statement of financial positionDecrease in the intercompany loan (9 384 181)
Statement of Financial PerformanceDecrease in interest income 9 384 181
41.4. Prior period error - Receivables from exchange transactions MMM intercompany loan:
Management fees accounted for on the MMM Inter-Company loan account was incorrectly calculated. The comparative statements for2011/12 financial year have been restated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionIncrease in the intercompany loan 7 080 453
Statement of Financial PerformanceDecrease in management fees (7 080 453)
41.5. Prior period error - Vat control account:
During the period under review the entity noted that the Vat control account misstated at 30 June 2011. The comparative statementsfor 2011/12 financial year have been restated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionDecrease in the Vat receivable (14 650 044)Decrease in opening accumulated surplus or deficit 14 650 044
163
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
41. Prior period errors (continued)
41.6. Prior period error - Vendor commission:
During the period under review the entity noted that vendor commission payable at 30 June 2012 was not accrued for at year end. Thecomparative statements for 2011/12 financial year have been restated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionIncrease in the trade payables from exchange transactions (3 794 700)Increase in Vat receivable 466 016
Statement of Financial PerformanceIncrease in vendor commission 3 328 684
41.7. Prior period error - Directors fees misstated
During the period under review the entity noted that directors fees payable at 30 June 2012 was not accrued for at year end. Thecomparative statements for 2011/12 financial year have been restated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionIncrease in the trade payables from exchange transactions (486 000)
Statement of Financial PerformanceIncrease in directors fees 486 000
41.8. Prior period error - Vat not claimed on vendor commission
During the period under review the entity noted that Vat was not claimed on certain payments made to vendors in lieu of vendorcommission paid during 30 June 2012. The comparative statements for 2011/12 financial year have been restated. The effect of thecorrection of the error(s) is summarised below:
Statement of financial positionIncrease in vat receivable 1 478 051
Statement of Financial PerformanceDecrease in vendor commission (1 478 051)
41.9. Prior period error - Vat claimed on interest expense
During the period under review the entity noted that Vat was incorrectly claimed on certain interest payments made due to the latesettlement of the bulk purchases account paid during 30 June 2012. The comparative statements for 2011/12 financial year have beenrestated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionDecrease in vat receivable (1 438 467)
Statement of Financial PerformanceIncrease in interest expense 1 438 467
164
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
41. Prior period errors (continued)
41.10. Prior period error - prepaid expense
During the period under review the entity noted that license fee which was prepaid for a period beyond 30 June 2012 was incorrectlyexpensed during 30 June 2012. The comparative statements for 2011/12 financial year have been restated. The effect of the correctionof the error(s) is summarised below:
Statement of financial positionIncrease in receivables from exchange transactions 22 766
Statement of Financial PerformanceDecrease in license fee (22 766)
41.11. Prior period error - insurance job cards receivable
During the period under review the entity noted that the insurance job cards receivable was understated at 1 July 2011. Thecomparative statements for 2011/12 financial year have been restated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionIncrease in receivables from exchange transactions 176 146Increase in opening accumulated surplus or deficit (154 514)Increase in vat payable (21 632)
41.12. Prior period error - trade payables not accrued for
During the period under review the entity noted that various creditors payable at 30 June 2012 were not accrued for at year end. Thecomparative statements for 2011/12 financial year have been restated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionIncrease in the trade payables from exchange transactions (130 204)
Statement of Financial PerformanceIncrease in training costs 115 500Increase in travelling and subsistence 1 701Increase in sundry expenses 21Increase in vendor commission 12 982
41.13. Prior period error - shareholders loan
During the period under review the entity noted that the shareholders loan agreement was incorrectly applied in determining theinterest rate as well as the legal substance of the agreement. The comparative statements for 2011/12 financial year have beenrestated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionIncrease in shareholders loan (60 378 248)Decrease in opening accumulated surplus or deficit 49 358 891
Statement of Financial PerformanceIncrease in interest paid shareholders loan 11 019 357
165
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
41. Prior period errors (continued)
41.14. Prior period error - prepaid consumers from exchange
During the period under review the entity noted that the consumer debtors in advance at 1 July 2011 as per the debtors ledger differedfrom the general ledger at the same date. The comparative statements for 2011/12 financial year have been restated. The effect of thecorrection of the error(s) is summarised below:
Statement of financial positionDecrease in consumer debtors from exchange transactions in advance 7 070Increase in opening accumulated surplus or deficit (7 070)
41.15. Prior period error - interest on consumer deposits
During the period under review the entity noted that interest had been accrued for on consumer deposits incorrectly. The comparativestatements for 2011/12 financial year have been restated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionDecrease in consumer deposits 3 607 334Increase in opening accumulated surplus or deficit (1 662 306)
Statement of Financial PerformanceDecrease in interest paid (1 945 028)
41.16. Prior period error - Input vat not claimed on payment made
During the period under review the entity noted that input vat was not claimed on a payment made to a supplier during the 2012financial year.The comparative statements for 2011/12 financial year have been restated. The effect of the correction of the error(s) issummarised below:
Statement of financial positionIncrease in vat receivable 71
Statement of Financial PerformanceDecrease in interest paid (71)
41.17. Prior period error - Disposal of leased assets not recorded
Interest on the MMM Inter-Company loan was accounted at 10% and it should have been accounted for at 9% which was the primerate on 1 July 2011 and then on the average loan balance during the year. The comparative statements for 2011/12 financial year havebeen restated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionDecrease cost price of leased assets (382 100)Decrease in accumulated depreciation leased assets 380 473Decrease in opening accumulated surplus or deficit 1 627
166
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
41. Prior period errors (continued)
41.18. Prior period error - Power station not recorded in the asset register
During the period under review the entity noted that the power station which was sold to the entity as part of the sale of businessagreement was not disclosed in the entity's fixed asset register at 30 June 2011.The comparative statements for 2011/12 financial yearhave been restated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionIncrease in cost price of infrastructure assets 282 340 000Increase in accumulated depreciation and impairment of infrastructure assets (282 340 000)
41.19. Prior period error - Misstatement of asset revaluation surplus
During the period under review the entity noted that various valuation errors were made during the 2009/2010 financial year when theentity attempted to determine the take on value of infrastructure assets. Furthermore the activity was incorrectly viewed as arevaluation of infrastructure rather than a take on adjustment in terms of GRAP 17. The comparative statements for 2011/12 financialyear have been restated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionDecrease in cost price of infrastructure assets (487 258 212)Increase the cost price of intangible assets 465 791Decrease in asset revaluation reserve 1 900 079 920Increase in opening accumulated surplus or deficit (1 413 287 499)
41.20. Prior period error - Misstatement of audit fees paid
During the period under review the entity noted that payments made in respect of audit fees was incorrectly allocated to consultingfees. The comparative statements for 2011/12 financial year have been restated. The effect of the correction of the error(s) issummarised below:
Statement of Financial PerformanceIncrease in audit fees 825 488Decrease in consulting fees (825 488)
41.21. Prior period error - consulting fees incorrectly capitalised to intangible assets
During the period under review the entity noted that payments made in respect of consulting fees were incorrectly capitalised tointangible assets. The comparative statements for 2011/12 financial year have been restated. The effect of the correction of the error(s)is summarised below:
Statement of financial positionDecrease in cost price of intangible assets (705 512)Decrease in opening accumulated surplus or deficit 705 512
167
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
41. Prior period errors (continued)
41.22. Prior period error - Software annual license incorrectly expensed
During the period under review the entity noted that a payment made for the license fee of the VIP payroll was incorrectly expensed tocontractors fee instead of being capitalised to intangible assets. The comparative statements for 2011/12 financial year have beenrestated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionIncrease in cost price of intangible assets 30 307
Statement of Financial PerformanceDecrease in contractors fee (30 307)
41.23. Prior period error - Understatement of free basic electricity receivable
During the period under review the entity noted that the free basic services rendered to MMM was understated in the annual financialstatements for the year ended 30 June 2013. The comparative statements for 2011/12 financial year have been restated. The effect ofthe correction of the error(s) is summarised below:
Statement of financial positionIncrease in receivables from exchange transactions 2 672 644
Statement of Financial PerformanceIncrease in free basic electricity income (2 672 644)
41.24. Prior period error - Overstatement of operating grant income
During the period under review the entity noted that operating grant income was overstated due to the entity invoicing MMM for boththe free basic services rendered as well as the allocated budget for free basic services. The comparative statements for 2011/12financial year have been restated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionDecrease in receivables from exchange transactions (37 486 160)
Statement of Financial PerformanceDecrease in equitable share income 37 486 160
41.25. Prior period error - Buildings
During the period under review the entity noted various errors and omissions whilst compiling a fixed asset register for buildings at 30June 2013. The comparative statements for 2011/12 financial year have been restated. The effect of the correction of the error(s) issummarised below:
Statement of financial positionIncrease in the cost price of buildings 95 331Decrease in the cost price of office equipment (95 331)Increase in accumulated depreciation buildings (612 448)Decrease in opening accumulated surplus or deficit 453 497
Statement of Financial PerformanceIncrease in depreciation buildings 158 951
168
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
41. Prior period errors (continued)
41.26. Prior period error - Motor vehicles
During the period under review the entity noted various errors and omissions whilst compiling a fixed asset register for motor vehiclesat 30 June 2013. The comparative statements for 2011/12 financial year have been restated. The effect of the correction of the error(s)is summarised below:
Statement of financial positionIncrease in the cost price of motor vehicles 40 027 536Increase in accumulated depreciation motor vehicles (25 798 982)Increase in opening accumulated surplus or deficit (22 327 665)
Statement of Financial PerformanceIncrease in depreciation motor vehicles 8 099 111
41.27. Prior period error - Infrastructure assets and Capital Work In Progress:
During the period under review the entity noted various errors and omissions whilst compiling a fixed asset register for Infrastructureand Capital work in progress at 30 June 2013. The comparative statements for 2011/12 financial year have been restated. The effect ofthe correction of the error(s) is summarised below:
Statement of financial positionIncrease in cost price capital work in progress 65 377 532Decrease in cost price Infrastructure (290 671 315)Decrease in accumulated depreciation Infrastructure (169 133 606)Increase in opening accumulated surplus or deficit 435 192 758Increase in receivables from exchange transactions 22 513 750
Statement of Financial PerformanceDecrease in depreciation Infrastructure (63 708 170)Increase in consulting fees 397 451Increase in travelling and subsistence 31 601
41.28. Prior period error - Retention creditors
During the period under review the entity noted that retention creditors were understated at 30 June 2012 as a result of a misallocationof a retention payment to streetlight expenditure recoverable from MMM at 30 June 2012. The comparative statements for 2011/12financial year have been restated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionIncrease in receivables from exchange transactions 152 501Increase in Vat receivable 21 350Increase in retention creditors (173 851)
41.29. Prior period error - Deferred revenue on prepaid sales
During the period under review the entity noted that deferred revenue was understated at 30 June 2012, the error resulted from theentity accounting for prepaid sales on the cash basis instead of accounting for unconsumed units as deferred revenue. The comparativestatements for 2011/12 financial year have been restated. The effect of the correction of the error(s) is summarised below:
169
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
41. Prior period errors (continued)
Statement of financial positionIncrease in deferred revenue (8 161 425)Increase in Kopanong Local Municipality receivable 109 145Increase in Mohakare Local Municipality receivable 9 862Increase in Naledi Local Municipality receivable 899Decrease in Mantsopa Local Municipality payable 97 172
Statement of Financial PerformanceDecrease in sale of prepaid electricity 7 944 347
41.30. Prior period error - Centlec Shareholders Loan
The Centlec shareholders loan was accounted for incorrectly due to unavailable information at the date of completion of the annualfinancial statements in the prior year. The unavailable information was the final audited Centlec revenue figures and updated CPI rates.The impact is as follows:
1. Interest was incorrectly calculated , the amount was corrected.
2. Deferred Interest was corrected to account for change due to the applied interest rates.
Statement of financial positionIncrease in shareholders loan (235 655)Increase in deferred Interest account on shareholders loan 1 113 316Increase in opening accumulated surplus or deficit (1 113 316)
Statement of Financial PerformanceIncrease in interest paid 235 655
41.31. Prior period error - Vendor commission Southern Free State Towns
During the period under review the entity noted that vendor commission was overstated with the commission incurred on the prepaidsales of the Southern Free State at 30 June 2012. The comparative statements for 2011/12 financial year have been restated. The effectof the correction of the error(s) is summarised below:
Statement of financial positionIncrease in Kopanong Local Municipality receivable 1 117 742Increase in Mangaung Local Municipality receivable 328 708Increase in Naledi Local Municipality receivable 315 520Decrease in Mantsopa Local Municipality payable 283 508
Statement of Financial PerformanceDecrease in vendor commission (2 045 479)
41.32. Prior period error - Overstatement of trade payables from exchange transactions
During the period under review the entity noted that trade payables from exchange transactions were overstated at 30 June 2012. Thecomparative statements for 2011/12 financial year have been restated. The effect of the correction of the error(s) is summarised below:
170
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
41. Prior period errors (continued)
Statement of financial positionDecrease in trade payables from exchange transactions 697 037Decrease in trade payables from exchange transactions 1 021 165Increase in opening accumulated surplus or deficit (1 718 202)
41.33. Prior period error - Understatement of security deposits held
During the period under review the entity noted that a security deposit held with ESKOM was omitted from the entity's accountingrecords at 30 June 2011. The comparative statements for 2011/12 financial year have been restated. The effect of the correction of theerror(s) is summarised below:
Statement of financial positionIncrease in deposits held 52 083Increase in opening accumulated surplus or deficit (52 083)
41.34. Prior period error - Understatement of vat control account
During the period under review the entity noted that the vat control account as at 30 June 2011 was understated by erroneouslyexcluding the vat control accounts of the Southern Free State towns from the vat control account balance of Centlec as disclosed. Thecomparative statements for 2011/12 financial year have been restated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionIncrease in opening accumulated surplus or deficit 6 626 756Increase in Vat liability 1 061 134Decrease in Kopanong Local Municipality receivable (2 374 617)Decrease in Naledi Local Municipality receivable (2 122 545)Decrease in Mantsopa Local Municipality payable 170 696Decrease in Mohokare Local Municipality receivable (3 361 424)
41.35. Prior period error - Leased Asset Register
During the period under review the entity noted various errors and omissions whilst compiling a fixed asset register for Leased Assets at30 June 2013. The comparative statements for 2011/12 financial year have been restated. The effect of the correction of the error(s) issummarised below:
Statement of financial positionDecrease cost price of leased assets (380 473)Decrease in accumulated depreciation leased assets 334 034Decrease in opening accumulated surplus or deficit 9 819
Statement of Financial PerformanceIncrease in depreciation on leased assets 36 619
41.36. Prior period error - Overstatement Intercompany receivable from exchange transactions
During the period under review the entity noted that the intercompany receivable from exchange transactions was overstated as aresult of the omission of VAT on the outstanding management fee at 30 June 2012 . The comparative statements for 2011/12 financialyear have been restated. The effect of the correction of the error(s) is summarised below:
171
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
41. Prior period errors (continued)
Statement of financial positionIncrease in receivables from exchange transactions 2 336 117Increase in vat payable (2 336 117)
41.37. Prior period error - Understatement of trade payables from exchange
During the period under review the entity noted that trade payables from exchange transactions was understated as a result of theomission of certain accruals at year at 30 June 2012 . The comparative statements for 2011/12 financial year have been restated. Theeffect of the correction of the error(s) is summarised below:
Statement of financial positionIncrease in trade payables from exchange transactions (31 800)Increase in vat receivable 3 905
Statement of Financial PerformanceIncrease in rental offices 27 895
41.38. Prior period error - Intangible assets
During the period under review the entity noted various errors and omissions whilst compiling an intangible fixed asset register at 30June 2013. The comparative statements for 2011/12 financial year have been restated. The effect of the correction of the error(s) issummarised below:
Statement of financial positionIncrease in cost price intangible assets 5 910 234Decrease in cost price office equipment (728 073)Decrease in cost price infrastructure (8 000 000)Increase in accumulated amortisation intangible assets (1 830 553)Decrease in opening accumulated surplus or deficit 8 021
Statement of Financial PerformanceIncrease in consulting fees 3 076 877Increase in amortisation cost 1 822 531Decrease in repairs and maintenance (259 038)
41.39. Prior period error - Understatement of trade payables from exchange
During the period under review the entity noted that trade payables from exchange transactions was understated as a result of theomission of certain accruals at year at 30 June 2012 . The comparative statements for 2011/12 financial year have been restated. Theeffect of the correction of the error(s) is summarised below:
Statement of financial positionIncrease in trade payables from exchange transactions (4 280)Increase in vat receivable 525
Statement of Financial PerformanceIncrease in rental offices 3 755
172
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
41. Prior period errors (continued)
41.40. Prior period error - Misstatement of payroll control and related salary expense
During the period under review the entity noted that the payroll control accounts were misstated due to incorrect payroll imports and /or capturing. The comparative statements for 2011/12 financial year have been restated. The effect of the correction of the error(s) issummarised below::
Statement of financial positionDecrease in salary control account (1 656 756)
Statement of Financial PerformanceEmployment related expenditure 1 656 756
41.41. Prior period error - Office equipment
During the period under review the entity noted various errors and omissions whilst compiling a fixed asset register for officeequipment at 30 June 2013. The comparative statements for 2011/12 financial year have been restated. The effect of the correction ofthe error(s) is summarised below:
Statement of financial positionDecrease in cost price office equipment (2 163 241)Decrease in accumulated depreciation 4 641 432Increase in opening accumulated surplus or deficit (6 158 218)
Statement of Financial PerformanceIncrease in depreciation 446 242Increase in repairs and maintenance 16 107Increase in general expenses 3 217 678
41.42. Prior period error - Vendors commission
During the period under review the entity noted various errors with respect to the vendor commission incurred during the previousfinancial year ended 30 June 2012. The comparative statements for 2011/12 financial year have been restated. The effect of thecorrection of the error(s) is summarised below:
Statement of financial positionIncrease in vat receivable 406 001
Statement of Financial PerformanceIncrease in vendors commission 861 913Decrease in consulting fees (1 267 914)
173
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
41. Prior period errors (continued)
41.43. Prior period error - Interest and penalties payable SARS
During the period under review the entity noted various errors with respect to the interest and penalties incurred due to the latesubmission of VAT 201 returns. The comparative statements for 2011/12 financial year have been restated. The effect of the correctionof the error(s) is summarised below:
Statement of financial positionIncrease in vat payable (988 235)
Statement of Financial PerformanceIncrease in penalties and interest 988 235
41.44. Prior period error - NERSA creation of a non-distributable reserve
During the period under review the entity noted that contrary to the requirements of NERSA, the entity did not create a non-distributable reserve as required in the tariff approval letter dated 30 June 2010. The comparative statements for 2011/12 financial yearhave been restated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionDecrease in opening accumulated surplus or deficit 60 000 000Increase in non-distributable reserves (60 000 000)
41.45. Prior period error - Understatement of income tax liability
During the period under review the entity noted that the tax liability for the period prior to the entity's tax exemption status was notaccrued for at 30 June 2011.The comparative statements for 2011/12 financial year have been restated. The effect of the correction ofthe error(s) is summarised below:
Statement of financial positionDecrease in opening accumulated surplus or deficit 6 152 047Increase in payables from exchange transactions (6 152 047)
41.46. Prior period error - Understatement of finance charges
During the period under review the entity noted that the interest payable on the shareholders loan was understated at 30 June2012.The comparative statements for 2011/12 financial year have been restated. The effect of the correction of the error(s) issummarised below:
Statement of financial positionIncrease in loans from shareholders (110 319 996)
Statement of Financial PerformanceIncrease in finance charges 110 319 996
174
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
41. Prior period errors (continued)
41.47. Prior period error - Classification error
During the period under review the entity corrected various classification errors as posted to the Statement of Financial Performance at30 June 2012.The comparative statements for 2011/12 financial year have been restated. The effect of the correction of the error(s) issummarised below:
Statement of Financial PerformanceIncrease in overtime paid 61 639Increase in travel and subsistence 527Decrease in salaries and wages (66 288)Increase in entertainment 13 338Increase in employee wellness 38 509Increase in training costs 12 881Decrease in contractors fees (1 273 042)Increase in meter reading charges 8 040 553Decrease in consultant fees (4 380 547)Decrease in Vendors Commission (1 579 304)Decrease in repairs and maintenance (868 266)
41.48. Prior period error - Vendor commissioner
During the period under review the entity noted that vendor commission payable at 30 June 2012 was not accrued for at year end. Thecomparative statements for 2011/12 financial year have been restated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionIncrease in the trade payables from exchange transactions (179 255)
Statement of Financial PerformanceIncrease in vendor commission 179 255
41.49. Prior period error - sundry receivables
During the period under review the entity noted that sundry receivables were overstated at 30 June 2011. The comparative statementsfor 2011/12 financial year have been restated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionDecrease in the trade and other receivables from exchange transactions (9 427 134)Decrease in opening accumulated surplus or deficit 9 427 134
41.50. Prior period error - inventory incorrectly expensed
During the period under review the entity noted that inventory items on had at 30 June 2012 were incorrectly expensed. Thecomparative statements for 2011/12 financial year have been restated. The effect of the correction of the error(s) is summarised below:
Statement of financial positionIncrease in inventory 585 042
Statement of Financial PerformanceDecrease in repairs and maintenance (585 042)
175
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
41. Prior period errors (continued)
41.51. Prior period error -bulk purchases incorrectly expensed
During the period under review the entity noted that bulk purchases expenditure was misstated at 30 June 2012 were incorrectlyexpensed. The comparative statements for 2011/12 financial year have been restated. The effect of the correction of the error(s) issummarised below:
Statement of financial positionIncrease in payables from exchange transactions (16 728)
Statement of Financial PerformanceIncrease in bulk purchases 16 728
42. Going concern
The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basispresumes 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.
The following analysis supports the going concern assumption:
Current assets (R1 887 052 732) exceed current liabilities (R 406 898 365)
Total assets (R3 940 461 172) exceed total liabilities (R2 875 705 673)
The municipal entity has an accumulated surplus of R 888 016 011.
The ability of the municipal entity to continue as a going concern is dependent on a number of factors. The most significant of these isthat the entity has implemented a system to enhance the revenue collection and cash flow by improving on the debt recoverabilityprocesses.
176
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
43. Related parties
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the otherparty in making financial and operating decisions or if the related party entity and another entity are subject to common control.
Related parties include:
- entities that are directly or indirectly controlled by the municipality;
- associates;
- joint ventures and management;
- key management personnel, and close members of the family of key management personnel;
- entities in which a substantial ownership interest is held, directly or indirectly, by key management personnel or entities over whichsuch a person is able to exercise significant influence; and
- entities that control or exert significant influence over the municipality
Controlling entity
Mangaung Metropolitan Municipality is the sole shareholder of Centlec (SOC) Ltd. Centlec (SOC) Ltd was formed to take over allactivities in respect of the supply of electricity.
Executive management
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities ofthe entity, directly or indirectly, including any director (whether executive or otherwise) of the entity. The economic entity's keymanagement personnel includes the Chief Executive Officer, Chief Financial Officer, Company Secretary and Executive Managers.
Close family members of key management personnel are considered to be those family members who may be expected to influence, orto be influenced by key management individuals, in their dealings with the group.
Business transactions took place between Centlec (SOC) Ltd and Jager Technologies CC. Prof L de Jager, a director of Centlec (SOC) Ltd,has business interests in Jager Technologies CC. The nature of the transactions is in the form of Centlec (SOC) Ltd having a service levelagreement with Jager Technologies CC to provide meter reading and meter auditing services.
Business transactions took place between Centlec (SOC) Ltd and Simunye Motors CC. Mr. J Blair, asset manager of Centlec (SOC) Ltd,has business interests in Simunye Motors CC. The nature of the transactions is in the form of Simunye Motors CC supplying fuel servicesto Centlec (SOC) Ltd.
Operating expense transactions with related partiesJager Technologies CC - Meter reading & -audit services 31 037 256 8 040 554Simunye Motors CC 505 822 -
Water and rates are treated as interdepartmental charges by the parent entity Mangaung Metropolitan Municipality at year end and notransactions are recorded at Centlec (SOC) Ltd
Compensation to Directors and other Key managementAnnual remuneration 5 622 683 2 606 550Travel, motor car, accommodation, subsistence and other allowances 689 159 356 500Contributions to UIF, Medical and Pension Funds 376 523 72 323Acting allowance 1 381 870 311 535Final settlement - 3 000 000Bonuses under remuneration 38 321 -Leave paid 193 749 -Directors fee 1 248 024 486 000
9 550 329 6 832 908
178
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
45. Risk management
Financial risk management
This note presents information about the entity's exposure to each of the financial risks below and the entity's objectives, policies andprocedures for measuring and managing financial risks. Further quantitive disclosures are included in the Annual Financial Statements.
The Board of directors has overall responsibility for the establishment and oversight of the municipal entity’s risk managementframework. The municipal entity’s audit committee oversees the monitoring of compliance with the municipal entity’s risk managementpolicies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the municipalentity. The audit committee is assisted in its oversight role by the municipal entity's internal audit function.
The municipal entity monitors and manages the financial risks relating to the operations of the municipal entity through internal riskreviews which analyse exposures by degree and magnitude of risks. These risks include the following:
- credit risk;
- liquidity risk; and
- market risk (including interest rate risk).
The municipal entity seeks to minimise the effects of these risks in accordance with the municipal entity’s policies approved by theBoard. The policies provide written principles on foreign exchange risk, interest rate risk, credit risk, and in the investment of excessliquidity.
Compliance with policies and exposure limits is reviewed by the internal auditors on a continuous basis. The municipal entity does notenter into or trade in financial instruments for speculative purposes.
180
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
45. Risk management (continued)
Liquidity risk
Liquidity risk is the risk that the municipal entity will encounter difficulty in meeting the obligations associated with its financial liabilitiesthat are settled by delivering cash or another financial asset.
Centlec's exposure to liquidity risk is as a result of the funds not being available to cover future commitments. The municipal entitymanages liquidity risk through ongoing review of commitments.
The municipal entity has started replacing rotational meters with prepaid meters to improve the cash funds available.
The municipal entity manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities bycontinuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
The municipal entity has not defaulted on payables and lease commitment payments and no re-negotiation of terms were made on anyof these instruments.
All of the financial entity's financial assets have been reviewed for indicators of impairment. Certain receivables were found to beimpaired and a provision has been recorded accordingly. The impaired receivables are mostly due from customers defaulting on servicecosts levied by the municipal entity.
The table below analyses the entity’s financial liabilities and net-settled derivative financial liabilities into relevant maturity groupingsbased on the remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed in thetable are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact ofdiscounting is not significant.
2013 Less than 1year
Between 1and 2 years
Other financial liabilities 12 766 872 109 875 508Finance lease 262 696 120 118Trade and other payables 322 435 039 -
335 464 607 109 995 626
2012 Less than 1year
Between 1and 2 years
Other financial liabilities 13 171 869 122 917 847Finance lease 269 135 297 216Trade and other payables 415 180 646 -
428 621 650 123 215 063
181
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
45. Risk management (continued)
Credit risk
Credit risk consists mainly of cash deposits, cash equivalents and trade debtors. The entity only deposits cash with major banks withhigh 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 thecredit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are setbased on internal or external ratings in accordance with limits set by the board. Centlec (SOC) Ltd utilizes a system where when debtorsdo not settle their account within 60 days a warning letter is issued after which the electricity supply will be cut until the account issettled. Sales to retail customers are settled in cash or using major credit cards. Credit guarantee insurance is purchased when deemedappropriate.
Receivables are presented net of an allowance for impairment.
Financial assets exposed to credit risk at year end were as follows:
These balances represent the maximum exposure to credit risk.
182
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
45. Risk management (continued)
Market risk
Market rate risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect theentity's revenue or the value of its holdings of financial instruments. The objective of market risk management is to manage and controlmarket risk exposures within acceptable parameters, while optimising the return.
There has been no change, since the previous financial year to the municipal entity's exposure to market risks or the manner in which itmanages and measures the risk.
Market risk consists of the following risks:
Foreign Currency Risk
The municipal entity does not enter into significant foreign currency transactions and has had very limited exposure to foreign currencyrisk.
Interest Rate Risk
Interest rate risk is defined as the risk that the fair value or future cash flows associated with a financial instrument will fluctuate inamount as a result of market interest changes. The municipal entity's policy is to minimise interest rate cash flow risk exposures onlong-term financing. Long term borrowings are therefore usually at fixed rates. The municipal entity's exposures to interest rates onfinancial assets and financial liabilities are detailed below:
At year-end, financial instruments exposed to interest rate risk due to being linked to prime interest rate were as follows: - Call and notice deposits - Current bank accounts - Intercompany loans - Shareholder loans - Capital advances - Interest charged on consumer receivables from exchange transactions overdue
The municipal entity's interest rate risk arises from the above financial instruments being linked to the prime interest rate. The primeinterest rate is used as a factor in calculating the interest received or interest charged on these financial instruments. Fluctuations in theprime interest rate during the year give rise to a possible interest rate risk affecting the entity.
Interest charged on the inter company loans are calculated using the prime rate at the beginning of the financial year on a weightedaverage basis. Since this interest rate is only based on prime rate at one point during the financial year, fluctuations in prime during theyear will not have a material affect on these loans.
Price risk
Price risk is the risk that the fair value of future cash flows of financial instruments will fluctuate because of changes in market prices.These changes are caused by factors specific to the individual financial instruments for its users or by factors affecting all similarfinancial instruments in the market. The entity's financial instruments are affected by the whole sale price of electricity from ESKOM.
183
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
46. Fruitless and wasteful expenditure
Opening balance 52 438 664 41 805 194Identified in current year: - Relating to prior year 3 507 604 - - Current year 4 696 504 10 909 348Reported incorrectly in previous year - (275 878)
60 642 772 52 438 664
Details of fruitless and wasteful expenditure incidents relating to 2012/13 is set out as follows:
Incident Incident resolutionInterest incurred on late payment of ESKOMElectricity accounts.
The expenditure was incurred in the prior year andhas been submitted to council for consideration ofbeing condoned.
793 470
Interest incurred on late submission and or paymentof Vat 201 returns.
The expenditure was incurred in the prior year andhas been submitted to council for consideration ofbeing condoned.
3 304 706
Interest on late payment and submission of EMP 201. The expenditure was incurred in the prior year andhas been submitted to council for consideration ofbeing condoned.
546 326
Legal fee paid in Telkom SA Limited VS Centlec (Pty)ltd case
The expenditure was incurred in the prior year andhas been submitted to council for consideration ofbeing condoned.
52 000
4 696 502
Details of fruitless and wasteful expenditure incidents relating to 2011/12 is set out as follows:
Incident Incident resolutionInterest incurred to to late payment of ESKOMElectricity accounts
The expenditure was incurred in the prior year andhas been submitted to council for consideration ofbeing condoned.
11 713 229
Interest incurred to to late submission and orpayment of Vat 201 returns
The expenditure was incurred in the prior year andhas been submitted to council for consideration ofbeing condoned.
988 235
Interest on late payment and submission of EMP 201 The expenditure was incurred in the prior year andhas been submitted to council for consideration ofbeing condoned.
397 477
13 098 941
184
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
46. Fruitless and wasteful expenditure (continued)
Details of fruitless and wasteful expenditure incidents relating to 2010/11 is set out as follows:
Incident Incident resolutionVAT incorrectly claimed on non VAT vendors The expenditure was incurred in the prior year and
has been submitted to council for consideration ofbeing condoned.
33 143
Interest charged on late payment of Auditor General'sinvoices
The expenditure was incurred in the prior year andhas been submitted to council for consideration ofbeing condoned.
29 996
Use of suite at the Rugby stadium The expenditure was incurred in the prior year andhas been submitted to council for consideration ofbeing condoned.
99 393
Internal audit fees charged by the parent Municipalitywith no services rendered
The expenditure was incurred in the prior year andhas been submitted to council for consideration ofbeing condoned.
1 000 000
Interest incurred due to late payment of ESKOMElectricity accounts
The expenditure was incurred in the prior year andhas been submitted to council for consideration ofbeing condoned.
27 624 929
Interest incurred to to late submission and orpayment of Vat 201 returns
The expenditure was incurred in the prior year andhas been submitted to council for consideration ofbeing condoned.
1 371 666
30 159 127
Details of fruitless and wasteful expenditure incidents relating to 2009/10 is set out as follows:
Incident Incident resolutionFinal settlement to the previous CEO The expenditure was incurred in the prior year and
has been submitted to council for consideration ofbeing condoned.
12 688 200
Total fruitless and wasteful expenditure are as follows:
Total 2012/13 fruitless and wasteful expenditure 4 696 503Total 2011/12 fruitless and wasteful expenditure 13 098 941Total 2010/11 fruitless and wasteful expenditure 30 159 127Total 2009/10 fruitless and wasteful expenditure 12 688 200
60 642 771
185
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
47. Irregular expenditure
Opening balance 148 595 252 92 151 062Identified in current year - Relating to prior year 61 827 328 - - Current year 75 164 235 56 444 190
285 586 815 148 595 252
Details of irregular expenditure incidents relating to 2012/13.Incident Disciplinary steps taken/criminal
proceedingsCompetitive bidding processes were not followed. The expenditure was incurred In the current year
without following the competitive bidding process. Theexpenditure has been submitted to council forconsideration of being condoned.
54 973 770
Required number of quotations were not obtained. The expenditure was incurred in the current yearwithout obtaining the required number of quotations.The expenditure has been submitted to council forconsideration of being condoned.
54 615
Payment to Directors without final council approval. Payment to Directors without final council approval. Theexpenditure has been submitted to council forconsideration of being condoned.
1 248 024
Overspending of the budget. The entity overspent on the financial cost due lack ofcapacity in the finance section. The expenditure hasbeen submitted to council for consideration of beingcondoned.
16 942 224
Tax clearance of suppliers expired at the time of thebid evaluation process.
Suppliers were awarded contracts at the time whentheir tax clearance certificates had expired. Theexpenditure has been submitted to council forconsideration of being condoned.
1 945 602
Total 2012/13 irregular expenditure. 75 164 235
186
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
47. Irregular expenditure (continued)
Details of irregular expenditure incidents relating to 2011/12.
Incident Disciplinary steps taken/criminal proceedingsCompetitive bidding processes were notfollowed.
The expenditure was incurred in the prior year and the expenditurehas been submitted to council for consideration of being condoned.
38 304 015
Payment to Directors without finalcouncil approval.
Payment to Directors without final council approval. The expenditurehas been submitted to council for consideration of being condoned.
487 374
Required number of quotation were notobtained.
The expenditure was incurred in the prior year and has beensubmitted to council for consideration of being condoned.
1 268 875
Overspending of the budget. The entity overspent on the financial cost due lack of capacity in thefinance section. The expenditure has been submitted to council forconsideration of being condoned.
78 211 254
Total 2011/12 irregular expenditure. 118 271 518
Details of irregular expenditure incidents relating to 2010/11.
Incident Disciplinary steps taken/criminal proceedingsNo municipal service rates or taxclearance was submitted.
The expenditure was incurred in the prior year and has beensubmitted to council for consideration of being condoned.
7 752 975
Suppliers failed to complete and submitthe SBD 4 and 8 forms as required bythe SCM regulation section 13C and 38.
The expenditure was incurred in the prior year and has beensubmitted to council for consideration of being condoned.
3 908 549
Supporting documents were notsubmitted for audit purposes.
The expenditure was incurred in the prior year and has beensubmitted to council for consideration of being condoned.
1 711 819
Required number of quotation werenot obtained.
The expenditure was incurred in the prior year and has beensubmitted to council for consideration of being condoned.
453 280
Total 2010/11 irregular expenditure. 13 826 623
187
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
47. Irregular expenditure (continued)
Details of irregular expenditure incidents relating to 2009/10.
Interest charged for late payment. The expenditure was incurred in the prior year andhas been submitted to council for consideration ofbeing condoned.
7 271 180
Non compliance with the companies act. The expenditure was incurred in the prior year andhas been submitted to council for consideration ofbeing condoned.
150
No compliance to supply chain managementregulations.
The expenditure was incurred in the prior year andhas been submitted to council for consideration ofbeing condoned.
173 924
Interest due to late submission of returns to SARS. The expenditure was incurred in the prior year andhas been submitted to council for consideration ofbeing condoned.
1 063 789
Supporting documents were not submitted for auditpurposes.
The expenditure was incurred in the prior year andhas been submitted to council for consideration ofbeing condoned.
44 387 183
Total 2009/10 irregular expenditure. 52 896 226
Details of irregular expenditure incidents relating to periods prior to 2009/10.Incident Disciplinary steps taken/criminal
proceedingsIrregular expenditure prior to 2009/10 for which thereare no reliable records.
The expenditure was incurred in the prior year andhas been submitted to council for consideration ofbeing condoned.
25 428 213
Total irregular expenditure relating to periods priorto 2009/10.
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
48. Additional disclosure in terms of Municipal Finance Management Act
Audit fees
Opening balance 35 024 -Current year fees 6 536 435 6 198 167Amount paid - current year (6 160 312) (6 163 143)Amount paid - previous years (36 342) -
374 805 35 024
Distribution losses
In the current year the energy losses were 6.00% (2012: 10.99%). These losses are the result off theft, vandalism, faulty meters andvariances in monthly consumption estimates. Management has determined that these losses are not recoverable.
kWh - units 104 810 908 192 501 033Rand value 94 906 556 183 033 832Percentage 6.00% 10.99%
PAYE, UIF and SDL
Opening balance 3 837 416 -Payable for the current year 9 444 955 3 188 115Interest and penalties - current year 295 789 -Interest and penalties - previous year - 649 301Amount paid - current year (9 455 758) -Amount paid - previous years (4 133 202) -
(10 800) 3 837 416
Pension and Medical Aid Deductions
Payable for the current year 6 724 066 1 044 715Amount paid - current year (6 708 049) (1 044 715)
16 017 -
189
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
48. Additional disclosure in terms of Municipal Finance Management Act (continued)
Supply Chain Management Regulations
In terms of Section 36 of the Municipal Supply Chain Management Regulations any deviation from the Supply Chain Management Policyneeds to be approved and/or condoned by the Accounting Officer and noted by the Board of Directors.
Paragraph 12(1)(d)(i) of Government Gazette No. 27636 issued on 30 May 2005 states that a supply chain management policy mustprovide for the procurement of goods and services by way of a competitive bidding process.
For the period under review there were instances where goods and services were procured via a deviation from the normal SupplyChain Management Regulations.
The reasons for these deviations were documented and reported to the Accounting Officer, who considered them and subsequentlyapproved the deviation from the normal Supply Chain Management Regulations.
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
49. Actual operating expenditure versus budgeted operating expenditure
Refer to Statement of Comparison of Budget and Actual Amounts for the comparison of actual operating expenditure versus budgetedexpenditure.
50. Actual capital expenditure versus budgeted capital expenditure
Refer to Statement of Comparison of Budget and Actual Amounts and Appropriation Statement for the comparison of actual capitalexpenditure versus budgeted expenditure.
51. Inter-departmental consumption
Inter-departmental consumption 934 740 411 242
The inter-departmental consumption is based on units consumed as per the meter records. The amount is disclosed as an expenseunder general expenditure in the Statement of Financial Performance.
52. Non-compliance with Municipal Finance Management Act and other Legislation
Non-compliance with Municipal Finance Management Act
During the current financial year the following non-compliance issues were identified:
Supply chain management regulations 12(1)(c), 17(1)(a) - (c)Goods and services of a transaction value between R10,000 and R200,000 were procured without inviting at least threewritten price quotations from accredited prospective providers and the deviation was not approved by the CFO or his/herdelegate.
Municipal Finance Management Act section 116(2)(b)The performance of all contractors were not monitored on a monthly basis.
Supply chain management regulations 36(1) - Goods and services with a transaction value above R200,000 were not procured by means of a competitive bidding process
and the deviation was not approved by the accounting officer or his/her delegate in accordance with the supply chainmanagement policy.- Deviations from competitive bidding were approved on the basis of it being an emergency, even though immediate actionwas not necessary and sufficient time was available to follow a bidding process. Deviations from competitive bidding wereapproved on the basis of it being an emergency, even though proper planning would have prevented such emergency.
Municipal Finance Management Act section 2(1)(f)Contracts were awarded without justification to bidders who did not score the highest points.
Municipal Finance Management Act section 116(3)(a)Contracts were amended or extended without tabling the reasons to the council and/or notifying the public.
Non-compliance with MFMA sec65(2)(e)Money owing by the entity to the value R 135 485 330 was not paid within 30 days of receiving the relevant invoice orstatement.
Non-compliance with MFMA sec 107 and 119The entity did not conduct an assessment of the minimum competency level of all financial officials and supply chainmanagement officials.
192
Centlec (SOC) Ltd(Registration number 2003/011612/07)Financial Statements for the year ended 30 June 2013
Notes to the Financial Statements
2013 2012R R
52. Non-compliance with Municipal Finance Management Act and other Legislation (continued)
Non-compliance with the Companies Act
In terms of section 9 of the Companies Act 71 of 2008 Centlec (SOC) Ltd must comply with all relevant provisions of the Act exceptwhere the entity has obtained exemptions. This was not complied with in the following aspects:
The entity did not purchase indemnity insurance for its directors in the period under review as required by section 78 of theAct.
The entity did not have the whistle-blowing mechanism during the period under review as required by Section 159. The entity did not finalise the code of conduct of ethics for the Board of Directors that meets the provisions of Section
214 of the Act.
Non-compliance with King III Code of Governance for South Africa, 2009
The King III Report on Corporate Governance (2009) provides governance principles and best implementation practice guides. The entitydid not fully comply with the provisions of the code in the following aspects:
The Shareholder Compact was not signed by the speaker/representative of the Council. The entity did not develop an Environmental Impact Assessment Plan and did not perform any environmental impact
assessments. The evaluation of the board, its committees and the individual directors was not conducted as required by Par 2.22 of the
code. The Employment Equity Act no. 55 of 1998 Section 3(2) and 20(1)
The entity did not develop and have an approved employment equity plan.
193
Ap
pe
nd
ix F
- U
na
ud
ite
dD
isc
los
ure
s o
f G
ran
ts a
nd
Su
bs
idie
s i
n t
erm
s o
f S
ec
tio
n 1
23
MF
MA
, 5
6 o
f 2
00
3
Na
me
of
Gra
nts
Na
me
of
org
an
of
sta
te o
rm
un
icip
al
en
tity
Qu
art
erl
y R
ec
eip
tsQ
ua
rte
rly E
xp
en
dit
ure
Re
as
on
fo
rd
ela
y/w
ith
ho
ldi
ng
of
fun
ds
Did
yo
ur
mu
nic
ipa
lity
co
mp
ly w
ith
th
eg
ran
tc
on
dit
ion
s i
nte
rms
of
gra
nt
fra
me
wo
rk i
nth
e l
ate
st
Div
isio
n o
fR
even
ue A
ct
Re
as
on
fo
rn
on
co
mp
lia
nc
e
Se
pD
ec
Ma
rJ
un
Se
pD
ec
Ma
rJ
un
Ye
s/
No
Natio
nal E
lect
rific
tion
Pro
gra
mm
e G
rant
Natio
nal
Gove
rnm
ent
--
25 0
00 0
00
-3 9
23 0
98
7 8
54 1
89
6 7
42 6
86
6 4
82 1
41
N
oY
es
N
/A
Urb
an S
ettle
ment
Deve
lopm
ent G
rant
Natio
nal
Gove
rnm
ent
--
43 7
01 5
49
57 5
29 1
33
22 2
61 3
09
16 7
51 6
89
24 7
46 2
84
42 4
05 6
13
N
oY
es
N
/A
--
--
--
--
--
68 7
01 5
49
57 5
29 1
33
26 1
84 4
07
24 6
05 8
78
31 4
88 9
70
48 8
87 7
54
Se
ctio
n 5
- P
ag
e
194
195
REPORT OF THE AUDITOR-GENERAL TO THE FREE STATE LEGISLATURE AND THE COUNCIL OF THE PARENT MUNICIPALITY ON CENTLEC (SOC) LIMITED
REPORT ON THE FINANCIAL STATEMENTS
Introduction 1. I have audited the financial statements of Centlec (SOC) Limited set out on pages xx to
xx, which comprise the statement of financial position as at 30 June 2013, the statements of financial performance, changes in net assets, cash flow statement for the year then ended, statement of comparison of budget and actual amounts, and the notes, comprising a summary of significant accounting policies and other explanatory information.
Accounting officer responsibility for the financial statements 2. The accounting officer is responsible for the preparation and fair presentation of the
financial statements in accordance with South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and the requirements of the Municipal Finance Management Act of South Africa, 2003 (Act No. 56 of 2003) (MFMA) and the Companies Act of South Africa, 2008 (Act No. 71 of 2008) (Companies Act), and for such internal control as the accounting officer 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 the financial statements based on my
audit. I conducted my audit in accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA), the general notice issued in terms thereof and 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.
196
Basis for qualified opinion
Property, plant and equipment
6. The municipal entity did not review the residual values and useful lives of all electricity infrastructure assets at each reporting date in accordance with SA Standard of GRAP, GRAP 17, Property, plant and equipment. I was not able to determine the correct net carrying amount of infrastructure assets as it was impracticable to do so. Additionally, there is a consequential impact on the depreciation, surplus for the period and the accumulated surplus. I was also unable to obtain sufficient appropriate audit evidence that management has properly allocated and accounted for sundry expense and labour cost included in infrastructure assets due to the status of the accounting records. I was unable to confirm the infrastructure assets included in property, plant and equipment by alternative means. Consequently, I was unable to determine whether any adjustment to infrastructure assets stated at R1 741 477 303 (2012: R1 686 666 631) in note 8 the financial statements was necessary.
Cash and cash equivalents
7. I was unable to obtain sufficient appropriate audit evidence that management has properly accounted for bank balances included in cash and cash equivalents for the current and prior year, as supporting documentation was not attached to cancelled cheques and stopped orders. I was unable to confirm the bank balances by alternative means. Consequently, I was unable to determine whether any adjustment to the bank balances included in cash and cash equivalents stated at R120 391 075 (2012: R162 784 175) in note 3 to the financial statements was necessary.
Consumer receivables from exchange transactions
8. I was unable to obtain sufficient appropriate audit evidence that management has properly accounted for all consumer receivables from exchange transactions for the current year and prior year, as the vendor account balances and suspense account were not cleared appropriately. Consequently, I was unable to determine whether any adjustment to consumer receivables from exchange transactions stated at R336 070 358 (2012: R291 106 792) in note 5 to the financial statements was necessary.
Receivables from exchange transactions
9. The entity did not account for receivables from exchange transactions in accordance with SA Standard of GRAP, GRAP 104, Financial instruments. The entity is party to a number of transactions with its parent municipality which have been accounted for as receivables at a different amount than that disclosed by the parent municipality. Consequently, receivables from exchange transactions and revenue from service charges are overstated by R82 725 035, respectively. Additionally, there is a consequential impact on the surplus for the period and accumulated surplus.
Inventory
10. I was unable to obtain sufficient appropriate audit evidence that management has properly accounted for all inventory for the current and prior year, as the inventory at one store was not included in the inventory value and adequate supporting documents were not available for the subsequent adjustment made to account for those inventory. I was unable to confirm the value of the inventory by alternative means. Consequently, I was unable to determine whether any adjustment to inventory stated at R55 146 608 (2012: R39 479 013) in note 4 to the financial statements was necessary.
197
Payables from exchange transactions
11. I was unable to obtain sufficient appropriate audit evidence that management has properly accounted for all payables from exchange transactions for the current and prior year due to the status of the accounting records. I was unable to confirm payables from exchange transactions by alternative means. Consequently, I was unable to determine whether any adjustment to payables from exchange transactions stated at R322 435 039 (2012: R415 180 646) in note 15 to the financial statements was necessary.
Revenue from service charges
12. The entity did not account for revenue from exchange transactions in accordance with SA Standard of GRAP, GRAP 9, Revenue from exchange transactions as the consumer estimates for conventional meters were not calculated appropriately. As a result, service charges and consumer receivables from exchange transactions are overstated by R27 674 037 (2012:R56 194 409), respectively. Additionally, I was unable to obtain sufficient appropriate audit evidence for year-end estimates of prepaid sales included in service charges. I was unable to confirm the value of the year-end estimates of prepaid sales by alternative means. Consequently, I was unable to determine whether any adjustment to service charges stated at R1 747 411 671 (2012: R1 549 337 741) in note 21 to the financial statements was necessary.
Statement of comparison of budget and actual amounts
13. The entity did not disclose the explanations for material differences between the budget
amounts and the actual amounts in the financial statements in accordance with SA Standards of GRAP, GRAP 24, Presentation of budget information in financial statements. As a result, the budget information disclosed in the financial statements is not complete.
Irregular expenditure
14. The entity did not disclose all the irregular expenditure in the notes to the financial statements, as required by section 125(2)(d)(i) of the MFMA. The entity made payments in contravention of the supply chain management requirements which were not included in irregular expenditure, resulting in irregular expenditure being understated by R55 953 216 (2012: R37 927 360).
Qualified opinion
15. In my opinion, except for the possible effects of the matters described in the basis for qualified opinion paragraphs, the financial statements present fairly, in all material respects, the financial position of Centlec (SOC) Limited as at 30 June 2013 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 MFMA and the Companies Act.
198
Emphasis of matters 16. I draw attention to the matters below. My opinion is not modified in respect of these
matters.
Restatement of corresponding figures
17. As disclosed in note 41 to the financial statements, the corresponding figures for 30 June 2012 have been restated as a result of errors discovered during the 2012-13 financial year in the financial statements of Centlec (SOC) Limited at, and for the year ended, 30 June 2012.
Material losses and impairment
18. As disclosed in note 5 to the financial statements, a provision for debt impairment amounting to R377 628 950 (2012: R341 059 445) has been made with regard to consumer debts with a gross value of R713 699 308 (2012: R632 166 237).
19. As disclosed in note 48 the municipal entity incurred a significant electricity distribution loss of 104 810 908 KWh with a value of R94 906 556 (2012: R183 033 832).
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
20. In accordance with the PAA and the general notice issued in terms thereof, I report the following findings relevant to performance against predetermined objectives, compliance with laws and regulations and internal control, but not for the purpose of expressing an opinion.
Predetermined objectives
21. I performed procedures to obtain evidence about the usefulness and reliability of the information in the service delivery performance report as set out on pages xx to xx of the annual report.
22. The reported performance against predetermined objectives was evaluated against the overall criteria of usefulness and reliability. The usefulness of information in the annual performance report relates to whether it is presented in accordance with the National Treasury’s annual reporting principles and whether the reported performance is consistent with the planned development priorities. The usefulness of information further relates to whether indicators and targets are measurable (i.e. well defined, verifiable, specific, measurable and time bound) and relevant as required by the National Treasury’s Framework for managing programme performance information (FMPPI).
23. The reliability of the information in respect of the selected development priorities is assessed to determine whether it adequately reflects the facts (i.e. whether it is valid, accurate and complete).
199
24. The material findings are as follows:
Usefulness of information
25. The FMPPI requires that performance targets be specific in clearly identifying the nature and required level of performance. A total of 82% of the targets were not specific in clearly identifying the nature and the required level of performance. This was due to the fact that management was aware of the requirements of the FMPPI but did not receive the necessary training to enable application of the principles.
26. The FMPPI requires that performance targets be measurable. The required performance could not be measured for a total of 77% of the targets. This was due to the fact that management was aware of the requirements of the FMPPI but did not receive the necessary training to enable application of the principles.
27. The FMPPI requires that indicators/measures should have clear unambiguous data definitions so that data is collected consistently and is easy to understand and use. A total of 82% of the indicators were not well defined in that clear, unambiguous data definitions were not available to allow for data to be collected consistently. This was due to the fact that management was aware of the requirements of the FMPPI but did not receive the necessary training to enable application of the principles.
28. The FMPPI requires that the time period or deadline for delivery be specified. A total of 100% of the targets were not time bound in specifying a time period or deadline for delivery. This was due to the fact that management was aware of the requirements of the FMPPI but chose not to prioritise reporting on performance.
29. The FMPPI requires that it must be possible to validate the processes and systems that produce the indicator. A total of 59% of the indicators were not verifiable in that valid processes and systems that produce the information on actual performance did not exist. This was due to the fact that management was aware of the requirements of the FMPPI but did not receive the necessary training to enable application of the principles.
Reliability of information
30. The FMPPI requires that institutions should have appropriate systems to collect, collate, verify and store performance information to ensure valid, accurate and complete reporting of actual achievements against planned objectives, indicators and targets.
31. I was unable to obtain the information and explanations I considered necessary to satisfy myself as to the reliability of information presented with respect to the development priorities for electricity and engineering wires. This was due to the fact that the entity could not provide sufficient appropriate evidence in support of the information presented with respected to development priorities for electricity and engineering wires.
200
Compliance with laws and regulations
32. I performed procedures to obtain evidence that the entity has complied with applicable laws and regulations regarding financial matters, financial management and other related matters. My findings on material non-compliance with specific matters in key applicable laws and regulations as set out in the general notice issued in terms of the PAA are as follows:
Strategic planning and performance management
33. The municipal entity did not have and maintain effective, efficient and transparent systems of financial and risk management and internal controls as required by section 95(c)(i) of the MFMA.
34. The accounting officer of the municipal entity did not, by 20 January, assess the performance of the entity during the first half of the financial year, taking into account the targets set in the service delivery agreement, business plan or other agreement with the entity’s parent municipality, as required by section 88(1)(a) of the MFMA.
Budget
35. Expenditure was incurred in excess of the limits of the amounts provided for in the votes of the approved budget, in contravention of section 87(8) of the MFMA.
Annual financial statements, performance and annual reports
36. The financial statements submitted for auditing were not prepared in all material respects in accordance with the requirements of section 122 of the MFMA. Material misstatements of cash and cash equivalent, property, plant and equipment, payables, revenue, employee cost, expenditure, related parties, irregular expenditure, and commitments identified by the auditors in the submitted financial statements were subsequently corrected and the supporting records were provided, but the uncorrected material misstatements and supporting records that could not be provided resulted in the financial statements receiving a qualified audit opinion.
37. The annual report for the year under review does not include an assessment by the accounting officer of any arrears on municipal taxes and service charges, the accounting officer's assessment of the municipal entity performance against measurable performance objectives for revenue collection from each revenue source and for each budget vote and particulars of any corrective action taken or to be taken in response to issues raised in the audit report, as required by sections 121(4)(c), (d), (e) of the MFMA.
201
Audit committee
38. The audit committee did not advise the accounting officer and board of directors on matters relating to internal financial control and internal audits, risk management, accounting policies, effective governance, performance management, adequacy, reliability and accuracy of financial reporting and information and performance evaluation as required by section 166(2)(a) of the MFMA.
39. The audit committee did not meet at least four times for the year under review regarding matters related to the entity, as required by section 166(4)(b) of the MFMA.
Internal audit
40. The internal audit unit did not function as required by section 165(2) of the MFMA, as it did not prepare a risk based audit plan and an internal audit programme for the financial year under review as the audit plan was not approved in time.
Procurement and contract management
41. Contracts and quotations were awarded to providers whose tax matters had not been declared by the South African Revenue Service to be in order, as required by SCM regulation 43.
42. Goods and services of a transaction value above R200 000 were procured without inviting competitive bids, as required by SCM regulation 19(a).
43. The performance of contractors or providers was not monitored on a monthly basis, as required by section 116(2)(b) of the MFMA.
44. Awards were made to providers who are in the service of other state institutions or whose directors/ principal shareholders are in the service of other state institutions, in contravention of section 112(j) of the MFMA and SCM regulations 44.
45. Sufficient appropriate audit evidence could not be obtained that goods and services with a transaction value of below R200 000 were procured by means of obtaining the required price quotations, as required by SCM regulation 17(a) and (c).
46. Sufficient appropriate audit evidence could not be obtained that contracts were only extended or modified after tabling the reasons for the proposed amendment in the council of parent municipality, as required by section 116(3) of the MFMA.
47. Sufficient appropriate audit evidence could not be obtained that all extension or modification to contracts were approved by a properly delegated official, as required by SCM regulation 5.
48. The municipal entity did not implement a SCM policy as required by section 111 of the MFMA.
202
49. Bid adjudication was not always done by committees which were composed in accordance with SCM regulation 29(2).
50. Sufficient appropriate audit evidence could not be obtained that contracts were awarded to bidders based on points given for criteria that were stipulated in the original invitation for bidding, as required by SCM regulations 21(b) and 28(1)(a) and Preferential Procurement Regulations.
51. Quotations were accepted from prospective providers who are not registered on the list of accredited prospective providers and do not meet the listing requirements prescribed by the SCM policy in contravention of SCM regulations 16(b) and 17(b).
Human resource management and compensation
52. The competencies of financial and supply chain management officials were not assessed in a timely manner in order to identify and address gaps in competency levels as required by the Municipal Regulations on Minimum Competency Levels regulation 13.
53. The annual report of the municipal entity did not reflect information on compliance with prescribed minimum competencies as required by the Municipal Regulations on Minimum Competency Levels regulation 14(3).
Expenditure management
54. Money owing by the municipal entity was not always paid within 30 days, as required by section 99(2) (b) of the MFMA.
55. An adequate management, accounting and information system was not in place which recognised expenditure when it was incurred and accounted for creditors, as required by section 99(2) (c) of the MFMA.
56. Reasonable steps were not taken to prevent irregular expenditure and fruitless and wasteful expenditure, as required by section 95 (d) of the MFMA.
Revenue management
57. An adequate management, accounting and information system which accounts for revenue and debtors was not in place, as required by section 97(h) of the MFMA.
58. An effective system of internal control for debtors and revenue was not in place, as required by section 97(i) of the MFMA.
Asset management
59. An adequate management, accounting and information system which accounts for assets was not in place, as required by section 96 (2)(a) of the MFMA.
60. An effective system of internal control for assets (including an asset register) was not in place, as required by section 96(2)(b) of the MFMA.
203
Liability management
61. An adequate management, accounting and information system which accounts for liabilities was not in place, as required by section 96(2)(a) of the MFMA.
62. An effective system of internal control for liabilities (including a liability register) was not in place, as required by section 96(2) (b) of the MFMA.
Internal control
63. I considered internal control relevant to my audit of the financial statements, the service delivery performance report and compliance with laws and regulations. The matters reported below under the fundamentals of internal control are limited to the significant deficiencies that resulted in the basis for the disclaimer of opinion, the findings on the service delivery performance report and the findings on compliance with laws and regulations included in this report.
Leadership
64. Key management positions were vacant during the year under review. The leadership did not always take timely and adequate action to address weaknesses in the finance and supply chain management directorate, which resulted in non-compliance with applicable legislation and gave rise to fruitless and wasteful and irregular expenditure. The lack of decisive action to mitigate emerging risks, implement timely corrective measures and address non-performance was evident by the failure of management to adequately address the external audit findings in a timely manner.
Financial and performance management
65. Effective performance systems, processes and procedures as well as the management thereof had not been adequately developed and implemented. The financial statements were not properly reviewed for completeness and accuracy prior to submission for auditing. This resulted in many findings relating to incorrect recording, classification, non-accrual, disclosure or non-disclosure. Pertinent information is not identified and captured in a form and time frame to support financial reporting.
66. The entity did not manage the payment procedure effectively due to inadequate system controls, resulting in duplicate payments made to suppliers for the same invoices. Furthermore, management could not provide supporting audit evidence for the stopped orders and cancelled cheques.
67. The entity did not correctly implement the policies formulated by management for financial reporting purposes in case of consumption estimates.
68. The evaluation of long outstanding sundry receivables for possible write-off/write back was not concluded before year-end, as the data purification exercise on the consumer receivables was prioritised.
69. The entity did not have the capacity to address backlog issues and financial system problems, resulting in the need to appoint consultants. Consultants assisted also with the preparation of an asset register and financial statements. The management also appointed consultants to identify the irregular, fruitless and wasteful expenditure.
204
Governance
70. Internal control deficiencies were not identified, communicated and corrected in a timely manner. This resulted in the prior year audit findings not being substantially addressed. Although the entity had outsourced internal audit function, it was not operating effectively during the year under review. Audit committee did not effectively perform the oversight role over the financial operations of the entity for the entire financial year under review.
