Enhancing Financial Accountability through mSCOA Project Phases and Segments Alignment

Summary presentation: Q & A Session Presented by National Treasury

mSCOA Project Phases: The journey to the checkered flag Regulation issued and commissioning of mSCOA Project Phase 4: Change manageme and piloting including identification of pilots Kick off engagements with municipalities, vendors and other stakeholders agement Piloting commencement with 9 pilot municipalities (local and districts) and 4 Metro s (City of Cape Town, Ekurhuleni, Mangaung and Buffalo City) Phased over 2015/16 and 2016/17) Vendors were briefed as to development of mSCOA and initial evaluations of system functionality. Ensuring that piloting municipalities and system functionality is aligned to the compliance requirements of the Regulation will create an enabling environment for the roll out to non-piloting municipalities Remaining metro s to implement (pilot) mSCOA and project initiation for the non-piloting municipalities 278 municipalities fully mSCOA compliant 2

The Local Government Accountability Cycle and mSCOA The IDP (unlimited needs and wants) must directly inform the formulation of the budget (limited basket of resources). mSCOA requires budget formulation (as per the MBRR) from a project level (The Project Segment is the departure point in formulating a budget across the 7segments). 5 Year Strategy IDP Budget implementation (transact & report) MBRR and reporting to LG Database (6 regulated segments) Formulate implementation plan e.g. regional perspective, funding, cash flow breakdown etc. In-year reporting (focus MBRR), MFMA s. 71 & 72. Budget to directly inform implementation and transactional environment. Seamless alignment. One version of the truth Evidence based financial management in real time. Transactional validation and audit trails. Budget 3 Year Annual Plan to Implement SDBIP Monitoring IYR mSCOA provides for alignment of the accountability cycle; Improved transparency and accountability; Classification based on leading practice and internal standards; Consistent aggregation of municipal financial info across the entire accountability cycle Whole of government reporting Oversight AFS Accountability Reporting Incorporate GRAP Improve standardisation Improve audit process across 278 munis. Consistent comparability Transparency Annual Report Standard Chart of Accounts Improved Service Delivery 3

What Segments are Required Project: This segment is to ensure that all projects in the IDP is aligned to budgets. Municipal Standard Classification: MSC is a non regulated segment and will probably still represent the MFMA vote. Function: Here we align with the IMF, GFS, Constitution and Municipal Structures act to Departments and Votes Costing: The costing segment will grow as maturity levels grow initially a allocation of cost from Administrative functions to Commercial services will suffice. Item: This is the Accountants segment and is informed by GRAP, IFRS and accounting standards. All financial reporting and reconciliations happen in this segment. Region: Communities need to feel and see delivery, Only through planning and physical delivery can this be communicated effectively. Fund: National and Provincial Government are on Modified cash and Local government Item are on Accrual Here we align to Payments and receipts and in essence achieve cash flow here. 4

Consolidated Evaluation by PTs/Advisors 34 Chances are high that municipality will NOT meet 1 July 2017 deadline 46 Not implementing yet but will be live 1 July 2017 with budget without fill IDP 26 Not implementing yet but will be live 1 July 2017 with full IDP linked budget 109 Started implementing with IDP budget 59 Live on mSCOA 19 0 20 40 60 80 100 120

Vendor / Province Assessment Live on mSCOA Vendors Provinces Started implementing with IDP budget module Not implementing yet but will be live 1 July 2017 with full IDP linked budget 13% 19% 8% 25% 24% 8% Not implementing yet but will be live 1 July 2017 without full IDP 30% 16% 16% 41% Chances are high that the municipality will NOT meet the 1 July 2017 deadline

mSCOA Aligned to MFMA Calendar: The journey to success Budget process: Populate the Municipal running cost and Maintenance & repairProjects; Functions will need to link the requiredItemsto deliver the Projects; Align the IDP with available resources (Funding & Revenue Items ); and Determine the Costing module and finalize tariffs. IDP process: Needs to begins with in the prescribed period from 3 August 2016. Finalization of the chart Budget Approval process Create SDBIP based on Budget. Community Participation: Identify Projects (Capital and typical work streams); Identify Regionsof these projects; and Identify the Function that need to deliver the projects. Implementing the new chart of accounts and carry over of the legacy items opening balances. Note restatements for 2018/19 year. 7

mSCOA Aligned to MFMA Calendar: The way forward: Institutionalization Ongoing management and review of posting, correction of miss-allocations and performance against projects = IDP. Finalization of integration of subsystems. Development of costing. Institutionalization of business processes and SOPs. Transacting on the full mSCOA chart, preparation for submission of first data strings at month end First mSCOA year end and AFS. Annual report, performance against projects = IDP. Audit of mSCOA compliance by AGSA. Submission of the first quarterly report; Previous year audit Correction of prior year errors, Implementing the audit outcomes, Preparation and further developments for the 2nd mSCOA year. Business as usual!

Thank you QUESTIONS? 9 9