CITY OF EKURHULENI METROPOLITAN MUNICIPALITY - Notice of availability of annual financial statements - BIEM

Notice of availability of annual financial statements - BIEM

CITY OF EKURHULENI METROPOLITAN MUNICIPALITY
JSE alpha code: BIEM
(“City of Ekurhuleni”)

NOTICE OF AVAILABILITY OF ANNUAL FINANCIAL STATEMENTS

City of Ekurhuleni hereby notifies its debt investors that it has publicly released its audited annual
financial statements for the year ended 30 June 2020 (“AFS”) and that the auditor’s report relating to
the AFS prepared by the Auditor-General of South Africa (“auditors” or “AGSA”) is unqualified.

The AFS contain various restatements in respect of the year ended 30 June 2019 (“Prior Period”) as a
result of the correction of Prior Period errors as follows:

•   The intangible assets increased due to the reversal of the accumulated impairment recognised in
    the Prior Period due to incorrect useful lives on ERP modules that were not in line with the
    previous accounting system, the useful lives were amortised over 4 years instead of 20 years for
    similar programs used by the City of Ekurhuleni, which led to reduction of amortisation of
    R56,327,627. Furthermore, part of the development costs previously derecognised were
    capitalised as they are part of the development process.
•   Assets under construction decreased due to the corrections of completed projects in the Prior
    Period, partially capitalised as a results of additional project management costs and other
    consumer price adjustments costs incurred after the completion of the construction phase or
    where there were disputes on contract variations. These corrections do not have an impact on
    assets’ gross values but result in additional accumulated depreciation for the Prior Period.
•   Other receivables from non-exchange decreased due to proceeds from the disposal of assets
    recognised as a receivable, but when the payment was received in the Prior Period, it was not
    deducted from the receivables. In addition, there was a correction of court claims raised as
    receivables in the Prior Period.
•   Inventory increased due to additional transfer/ capitalisation of other assets under construction.
•   The decrease in Investment Property and PPE relates to the depreciation of a correction of the
    Prior Period capitalisation, including capitalisation of project management costs incurred after
    the construction phase.
•   The increase in trade payables and staff costs related to the accrual of the 13th cheque bonus for
    the Prior Period.
•   Reclassification between bulk purchases and general expenses relates to the City of Ekurhuleni’s
    electricity consumption on its own buildings.
•   The net impact of these corrections led to decrease in the accumulated surplus as previously
    reported.

Full details of the above restatements are included in note 56 of the AFS.

In addition, the auditor’s report contains a paragraph relating to emphasis of matters in relation to:

1. the abovementioned restatements;
2. material uncertainties as a result of various lawsuits, the outcome of which cannot be presently
   determined and/or reliably measured;
3. material impairments in relation to consumer debtors’ balances;
4. material losses in relation to electricity and water; and
5. the impact of COVID-19.

The AGSA’s audit opinion has not been modified as a result of the emphasis of matters and full details
are set out in the auditor’s report forming part of the AFS.

The AFS, including the auditor’s report, are available on the City of Ekurhuleni website at
https://www.ekurhuleni.gov.za/annual-report and for inspection at City of Ekurhuleni’s registered
office at Corner of Rose and Cross Streets, Germiston, 1400, South Africa.

31 March 2021

Debt Sponsor: Nedbank Corporate and Investment Banking, a division of Nedbank Limited

Date: 31-03-2021 05:45:00
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