Preparation of Annual Financial Statements for (3) Years and Interim Financial Statements (3) Years

Walter Sisulu Local Municipality (WSLM) has identified critical shortcomings within its financial management, reporting, and revenue

management functions. These gaps have contributed to recurring audit findings, difficulties in producing credible Annual

Financial Statements (AFS), weak internal controls and an overall strain on internal capacity.

2.1 In terms of the Government Gazette No. 37577 issued 22 April 2014,

a) The Municipal Regulations on a Standard Chart of Accounts (mSCOA) is currently applicable to all municipalities and

municipal entities. The Municipality therefore needs to enhance the municipal expertise to compile GRAP and MSCOA

compliant Annual Financial Statements for each financial year over the contracting period.

signed appointment by the municipality.

1. OBJECTIVES OF THE ASSIGNMENT

The overarching objective of this assignment is to stabilise, strengthen, and professionalise the financial management environment of

Walter Sisulu Local Municipality to ensure credible, compliant, efficient, and sustainable financial administration beyond the contract

period.

The Municipality seeks to appoint a competent service provider to provide comprehensive financial management support for the

preparation of AFS over a three-year period and Interim Financial Statements for three years. The support model is intended to capacitate

the municipality so that by year 3 it can prepare the annual financial statements internally and is structured as follows:

• Year 1: Full support (100% intervention) focusing on Preparation of Grap financial statements and Asset register, rapid

improvement of the Audit opinion and foundational controls.

• Year 2: Tapered support (50% intervention) focusing on strengthening internal capacity and transferring skills.

• Year 3: Handholding and final transfer (capacity consolidation) enabling WSLM to perform functions independently.

This Terms of Reference (ToR) outlines the context, scope, deliverables, and expectations for the appointed service provider.

3.1 Primary Objectives

The primary objectives of the service provider’s intervention are to:

• Ensure timely and accurate preparation of Annual Financial Statements (AFS) and Interim Financial Statements that comply with

GRAP.

• Strengthen financial governance and internal controls across all finance functions.

• Improve audit outcomes by addressing root causes of historical findings.

• Enhance financial reporting, budgeting, revenue management, expenditure management, and SCM controls.

• Implement a structured skills transfer programme to enable WSLM officials to eventually perform all functions independently.

3.2 Supporting Objectives

• Provide technical support to improve financial systems alignment to SOPs and reporting capabilities.

• Support implementation and monitoring of the Audit Action Plan.

• Improve cash flow management, including revenue enhancement and payment controls.

• Strengthen asset management processes, with increased focus during Years 2 and 3.

3.3 Long-term Sustainability Objectives

Tender Document Walter Sisulu Local Municipality

• Build a professionalised finance team through mentorship, coaching, and on‐the‐job capacity development.

• Improve institutional resilience through documented Standard Operating Procedures (SOPs) and financial control frameworks.

• Enable the municipality to achieve progressively better audit outcomes.

• Ensure full transfer of knowledge, systems understanding, and operational capability to municipal staff.

3. SCOPE OF THE SERVICES

The service scope is to undertake the accounting services for the Walter Sisulu Local Municipality and the implementation

thereof, reporting directly to the designated official.

4.1. Accounting & financial management services

• To Review and restate 2024/25 Financial statements

• To compile the three year annual financial statements that are compliant with GRAP standards, conform to National treasury

requirements and that have a clear audit trail for Financial Year 25/26, 26/27, 27/28

• Compile the AFS using case ware

• Perform Actuarial valuation for Long term service awards and post -retirement benefits

• To perform a review of the prior year audit report and management letter and resolve audit findings

• To perform prior year adjusting journal entries accepted by Auditor General SA,

• To provide clear supporting documentation that will be acceptable to Auditor General SA

• ensure that the balances in the general ledger and on the annual financial statements are fairly presented in all material respect

(i.e. contain no material misstatements)

• To respond to audit queries arising from financial statements

• In addition to the foregoing requirements, the municipality requires accounting files (Master file and a copy) to support the figures

reported on the financial statements for audit purposes.

• To provide a clear training plan (Skills Transfer)

• Identify, record and disclose irregular, Fruitless and wasteful expenditure

• Preparing Commitment Register and Contract Registers Reviewing them making sure they are in line with AG standards

• Assist with Supply Chain queries during audit execution

• Developing of Internal Controls

• Assist with rectifying of irregular expenditure of prior years and current year

• Prepare Reconciliations on all balances & prepare necessary registers

• Review of GL and ensure accurate recording

• To Ensure TB, GL, & AFS are in agreement

• Addressing Prior year errors

• Submitting AFS Quarterly for Reviewing

• Accounting for landfill sites

• Vesting of land and our IGRAP 18 methodology

• Accounting for VAT and Grants

• Perform A detailed review of all accounting policies in comparison to new developments in the public sector sphere (changes

in standards, changes in best practice, changes in MFMA requirements or changes in MSCOA). The relevant review notes

needs to clearly indicate how items were resolved with particular reference to our approach to reduce boilerplate disclosure,

4.1.3) A detailed review and assistance of all estimates and supporting working papers, including assistance with finding a

suitable service provider/s for providing the following reports:

a. Post-employment Benefits,

b. Traffic Fines

c. Rehabilitation of landfill sites

d. Debtors impairments and GRAP 104 (2019 version of the standard)

e. Asset register related estimates

f. Changes in estimates

g. Principle Agent Arrangements

h. Actuarial valuations (post retirement medical benefits and long service awards)

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4.1.9) Review of Revenue and Receivables as per requests.

Classification of receivables and revenue as exchange or non-exchange

a. Classification of receivables as Statutory Receivables or Financial Instruments

b. Impairment methodology, calculations and disclosures

c. Assessment of billing correctness

d. Annual tariff file in comparison to the tariff policy

e. Valuation reconciliation review

f. The general valuation of debtors such as discounting, impairment indicators, payment ratios etc.

g. General revenue support requests

h. Completeness of revenue and receivables

4.1.10) A detailed review of all MFMA disclosures and supporting working papers, inter alia, distribution losses, suppliers with

an interest of state, etc.,

4.1.11) Where needed, the municipality shall request specialist support regarding the Property Rates Policy and Tariffs aligned

to the updated expectation emanating from legislation and MSCOA interpretations

4.1.12) Preparation of any non-trial balance disclosures, such as GRAP 19 contingencies, budget comparison statement, cash

flow calculations, related parties, going concern, etc.,

4.1.13) A detailed the review of all Expenditure and Payables cycle.

:

4.2 Asset register services:

4.2.1) General:

a. Ensure classification mapping is in accordance with mSCOA framework

b. Review the municipal asset hierarchy

c. Review the municipal asset unbundling methodology

d. Review the useful lives, residual values and depreciation and impairment calculations

e. Assist and/or review the annual impairment processes for the budget or AFS periods as requested (including

provision of valuation values where needed)

f. Review and/or drafting of all asset related forms and standard operating procedures with the aim of budgeting and

transacting for assets as per best practices aligned to MSCOA (e.g. planned and preventative maintenance)

g. Review the retentions for the year aligned to the audit risk

h. Periodic ad-hoc physical verification projects. The local community should be approached as sub-contracted staff

when large verification projects are envisaged

i. Ad-hoc requests for the asset department as needed (which might include fleet and insurance questions)

4.2.2) Land Reconciliation:

Preparing the annual deeds, SG data, General Valuation, Debtors system and FAR reconciliation

b. The deed search, GV, debtors erf number and FAR would be provided

c. The municipality will provide land sales and proposed land sales to be used in reconciling the Asset Register,

Inventory Register and Spatial Data (e.g. SG register and GV)

erven)

e. The service provided would provide an IGRAP 18 assessment of land where indicators of a loss or gain of control

without the title deed is evident.

f. Where needed, the tenderer may consult with the duly appointed municipal valuator to obtain updated valuations where

the current GV does not fairly reflect the value of erven given its current or proposed use. The service will be limited to

valuations and will only be upon pre-approval from the asset manager (the asset manager will issue an order to the

valuator for the work)

g. The land reconciliation will be provided to the municipality based on the detailed SOP and decision trees used by the

municipality

i. Decision trees and SOP’s may be updated prior to the commencement of the reconciliation

an annual land register for the fixed assets and inventory that is reconciled, with substantive evidence

supporting the exceptions, with the GV and SG data.

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iii. Vitally, the land registers provided shall include all impairments based on the GV’s value for assets (or when there’s a

change in use, an updated valuation received from the municipal duly appointed valuators)

a. Using the municipal asset unbundling methodology, and prepare the municipal unbundling of capital acquisition at

each year-end

asset hierarchy

c. Assist the finance department with the roll-out of the new integrated asset management through data-cleansing,

updating of GIS spatial information and updating asset information either through verification or otherwise with the

information needs of the user departments (breaking down the FAR to a technical FAR in terms of the user

requirements for master planning)

unbundling pack agrees to the assets on the floor (or underground as per observable markers that allows the tracing

of underground networks).

e. While physically verifying the unbundled asset, provide the finance department with photo’s of all completed works and

where necessary, provide the potential impairment, disposal and change in useful life audit ready calculations

f. Where capital projects pertain to replacement or partial replacement of assets, provide the finance team with a detailed

list of assets that needs to be disposed as well as the value of the disposal if partial disposal is appropriate

g. Level of Unbundling

The municipality will prescribe the level of unbundling in its asset management policy which is aligned to

CIDMS Asset Hierarchy. A template would be provided to this extent

h. New assets completed during each financial year (30 June)

Identify completed projects (Work-in-progress assets as at the previous financial year PLUS capital expenditure

for current financial year)

The tenderer should provide the municipality with the information that is easily integrated with the municipality’s

asset management system. The information should at least include the following:

i. A list of all completed projects as at the current financial year-end totalling to the capital expenditure per project to

date

ii. Cost per componentised asset as per Asset Management Policy

iii. GIS link (spatial link) & feature

iv. Technical attributes of componentised asset (from as-builts, BOQ’s and field verification

v. Cost per componentised asset

vi. Useful life of componentised asset

vii. Locations of componentised asset

viii. GPS co-ordinates per asset

ix. Field verification and photographic evidence of unbundled immovable assets

x. Completion date

xi. Insofar as to allow the municipality to have a complete audit file that can be reperformed, both spatially and

financially

register accounting software,

provided by the municipality (CS Account):

As-built plans will be provided by Walter Sisulu Local Municipality upon request as well as copies of the

payment certificates where needed

the completion of the Annual Financial Statements

which could easily be integrated into GIS

personnel

k. Engineering expertise with a financial background would be necessary

4.2.4) Work-in-progress assets at the end of each financial year (30 June)

a. Identify all projects that will remain a work-in-progress as at the end of the current financial year

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certification by the relevant departmental head/manager of Walter Sisulu Local Municipality, and

year

d. The tenderer should conduct spot-checks on high-value work-in-progress to ensure the credibility

of the amount in progress is reasonable

4.2.5) Existing assets as at the end of each financial year (30 June)

a. While doing the current year’s unbundling, the tenderer will identify any impairments of existing assets and provide the

municipality of a list of assets that should be impaired and what indicator was used to identify the impairment

b. While doing the current year’s unbundling, the tenderer will identify any disposals of existing assets and provide the

municipality of a list of assets that should be disposed and the reason for the disposal

useful life be provided if it is found that the remaining useful lives of assets are incorrect (in other words, evaluating

current estimated useful lives of existing assets); and

d. Assisting the with all audit queries relating to unbundling infrastructure assets. Tenderer(s) should provide the

municipality with a close-out report by 10 August of each financial year where

the methodology used is provided as well as an SOP document that describes the methodology to be used in future

4.2.6)

a. Identify discrepancies where assets cannot be located or traced back to the asset register in excel format for:

i. Assets with no GPS co-ordinates

ii. Assets duplicated

iii. Assets on excel sheet provided not identified in the shape files

4.2.7) Water and Electricity Meter Asset register and reconciliation:

a. The municipality utilises a sub-register to resolve its accounting responsibilities for meters due to the extent of

meters in relation to other assets. The service provider will be responsible to reconcile the sub-meter and asset

register entries in relation to stores issues, meters donated by developers, job-cards, debtors’ masterfile

management and other financial accounting entries

(e.g. insurance claims, donations by suppliers or the public etc.).

b. Preparation of the meter reconciliation with the debtors and stores issue reports and all other relevant

supporting documents. The reconciliation will be cleared, and a final asset register for meters will be submitted

by the tenderer.

c. The reconciliation involves a one-to-one matching of the stores issues of meters to the job-card and ultimately

the debtors’ report containing the registered meter per customer account.

numbers have changed from the prior year, the appropriate accounting treatment will be resolved, i.e. retain

records, disposal, transfer etc., prior to the finalisation of the meter asset register.

e. The reconciliation will include the necessary accounting entries, and the proposed final asset register entries

per the lines already contained in the asset register.

f. The municipality will not accept a list of exceptions as a register and will consider such a

misinterpretation of our requirements to be a material breach of contract.

4.2.8) Any other special needs requests as identified by the Senior Manager: Financial Statements and Assets.

4.3 Assistance with External audit & queries raised by the Auditor General as needed.

.

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4.4 Skills transfer & job shadowing support to municipal officials in the execution of the above services support. Practical training

transfer plan that will be implemented over the 3 year period.

Reporting Requirements

• Monthly Progress Reports outlining activities undertaken, progress against deliverables, risks and mitigation.

• Monthly Financial Compliance Reports including reconciliations, MFMA compliance and audit actions.

• Quarterly Steering Committee Reports with detailed performance summaries.

• Annual Reports including AFS working papers, asset reports and audit readiness packs.

• Capacity Building Reports presented quarterly.

• Phase Reports including Year 1 Stabilisation Report, Year 2 Capacity Strengthening Report and Year 3 Transition Report.

6 Risk Management

A structured risk management process shall be implemented across the duration of the contract. The service provider will work with

WSLM to identify, assess and manage risks related to financial reporting, compliance, internal controls, systems and capacity

building.

Key risk management activities include:

• Development of a project risk register.

• Monthly risk monitoring and reporting.

• Implementation of mitigation strategies.

• Escalation procedures for high‐impact risks.

• Review of systemic risks affecting audit outcomes.

Payment Terms

period. No advance payments will be made. WSLM reserves the right to withhold payment if deliverables are incomplete,

substandard, or not submitted in accordance with the agreed schedule.

Functionality

Item description Capacity, experience and Weight Requirement

methodology

experience in executing projects of a

similar nature

Company experience in preparation of Letters of reference from

GRAP annual financial statements municipalities

- 1 to 2 projects = 10 head of the municipality and

- 3 to 4 projects = 15 signed by Accounting

- 5 or more projects = 20 Officer/CFO)

Maximum points = 20

Experience in execution of Municipal Letters of reference from

support municipalities

- 2 letters = 15 head of the municipality and

- 3 or more letters = 20 signed by Accounting

Maximum points = 20 Officer/CFO)

Expertise Qualifications of team members 40

Project director: CFO-level 10

professional; BCom

Accounting/Financial Management;

Postgraduate qualification preferred

10+ years in local government; senior

financial management experience;

MFMA compliance; GRAP AFS

oversight; Municipal financial recovery

and turnaround processes Total points

Project leader’s membership of 5 CV of project leader with

professional bodies (SAICA or IRBA) certified copies of

- Proof of membership = 5 qualifications

- No membership = 0

Total points = 5

Project leader’s qualifications CV of project leader with

- Diploma in accounting field= 1 certified copies of

- Degree in accounting field = 3 qualifications

- Postgraduate diploma or higher – 5

Maximum points - 5

Team members 25 CV of project leader with

• Asset Management certified copies of

Specialist: Registered qualifications

Professional Engineer (Pr.

Eng) with ECSA; Degree in

Engineering = 5 points

• Agricultural specialist :

experience with biological

asset counts = 5 points

• Revenue Management

Specialist: 5+ years in

revenue controls, billing,

indigent management, credit

control =5 points

• Budget & mSCOA Specialist:

5+ years in municipal

budgeting and mSCOA

configuration (Evidence of

previous experience of CCG

mSCOA added adv)

Total points 5

• Capacity Building & Training

Coordinator: 5+ years in

training facilitation; skills

transfer in government

environments = 5 points

Methodology Project execution approach 20

- Detailed work plan with timeframes Detailed work plan and

= 5 methodological approach

- Skills transfer plan =5

- Understanding of the requirements

are met = 5

- Methodological technical approach

= 5

- On each one of the above not

included in the proposal = 0

Maximum points = 20

Total 100