A Guide for Councillors

Part 6 Understanding the Municipal Finance Management Act

THIS IS WHAT THE ANNUAL FINANCIAL STATEMENTS CONSIST OF:

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the balance sheet: this shows the overall fi nancial position of the municipality at the end of the fi nancial year (this is also called the statement of fi nancial position) the income statement: this shows if the municipality has made or lost money during the year (this is also called the statement of fi nancial performance) statement of cash fl ows: this shows where the cash in a municipality came from and how it was spent statement of net assets: this is what the municipality would be worth after it has paid all it owes notes to the fi nancial statements: these explain in more detail certain matters contained in the fi nancial statements.

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The fi nancial position of a municipality is re fl ected by: resources: the staff and assets that a municipality has fi nancial structure: the systems and procedures a municipality has in place to manage its fi nances liquidity: how much cash a municipality has available to meet its fi nancial commitments levels of sustainability: how well a municipality can continue to meet its obligations in the future adaptability: how easily the municipality can change and adapt to meet new demands. • • • • •

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The Role of Councillors in Municipal Finance Management