Municipal Financial Compliance and mSCOA Implementation Overview

PT and NT oversight role Presented by National Treasury

Compliance When: 1 July 2017 Implementation Delegated to: Accounting Officers/ Chief Financial Officers/ Project Managers, NT / PT Roles: Technical support to municipalities, monitoring progress and implement corrective measures However the responsibility remains with Councils and boards, numerous efforts were made in providing training, issue circulars, direct engagements and open door policies. No system can ever be compliant / It may be mSCOA enabling 2 2

What entails mSCOA Compliancy The object of these Regulations is to provide for a national standard for the uniform recording and classification of municipal budget and financial information at a transaction level. may not contain data which is mapped or extrapolated or which otherwise does not reflect transactions recorded or measured by the municipality or municipal entity. The standard chart of accounts of a municipality or municipal entity- (a) must contain the segments in the Schedule as required by regulation 4(1); (b) must accurately record all financial transactions and data in the applicable segment; and The financial and business applications or systems used by a municipality or municipal entity must- (a) provide for the hosting of the general ledger structured in accordance with the classification framework determined in terms of regulation 4(2); (b) be capable of accommodating and operating the standard chart of accounts Each municipality and municipal entity must have, or have access to, computer hardware with sufficient capacity to run the software which complies with the requirements in sub-regulation (2). It is important to note that all the above require a data extraction loaded to the LG database portal. 3 3

Non Non Compliant Compliant Compliant Compliant 1. Non Submission of the IDP by End November 2016. (Project, Function Region) 2. Non Submission of Budget by end of March (Project, Function, Fund, Region and Costing) 3. Not going live on 1 July 2017 with full integration to sub-systems. Data string upload to the portal by due dates and compliant to: 1. No Mapping. 2. Use segments. 3. Seamless integration. 4. Integrated budgeting directly to IDP and SDBIP. of all Item, linked Version 6 of the Chart must be used to budget.

mSCoA Effective Implementation Plan Provincial Treasury Appointment of PT Project Manager Functioning of provincial mSCoA Steering Committee Assessment on the implementation of mSCOA circulars by municipalities Consistently assess mSCOA compliance (MFMA Circular 80) Communication (training, circulars, direct engagements) Municipalities/municipal entities Appointment of Project Manager Functioning of mSCoA Steering Committee Implementation of mSCOA circulars Implement mSCoA Financial System (transversal tender if applicable) Link IDP projects to budget Compile mSCoA compliant budget for 2017/18 in Version 6 of the chart Converted opening balance (historical data and information) mSCoA ready system installed and ready for testing mSCoA ready system configured and Live mSCOA data submitted to NT and verified Link current trial balance to mSCoA trial balance 5 5

Provincial Status Summary Summary Status Per Province 60 50 40 30 20 10 0 Western Cape Eastern Cape Free State Gauteng KZN Limpopo Mpumalanga Northern Cape North West Transacting Live on mSCOA Started implementing with IDP budget Not implementing yet but will be live 1 July 2017 with full IDP linked budget Not implementing yet but will be live 1 July 2017 with budget without full IDP Chances are high that municipality will NOT meet 1 July 2017 deadline

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

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. 8

In conclusion Status review: Confirm the status of each of your municipalities Focus on the 46 red municipalities to ensure that they cross the line in time call the MM and CFO to the PT/ NT office, discuss the challenges and initiatives to address these, engage the vendors to ensure their support. LG Database report to ensure all your municipalities have submitted successfully by 31 October. Assist to address issues and rejections. Engage your municipalities to ensure submission of IDP by 30 November 2016. Assist to enable submission as required, including engagement with vendors and NT team. Budget submission: Confirm the status of each of your municipalities in terms of budget development and population of the segments. Provide guidance as required. Focus on the 46 red municipalities (slide ) to ensure that they are able to prepare a budget and populate the segments. Also engage their service providers to ensure that the functionality is supporting the municipality. Upskill yourself by using the data review tools (slice and dice), reading the position papers, reviewing the changes to the chart, reviewing data submissions and meeting with municipalities and vendors. Start early with reviewing the budget submissions and use the tools that have been developed. Interrogate municipalities and vendors - there is no such thing as a stupid question!! Ask the municipal steering committee and the project team to explain how the system works. (Past and future) Ask the municipal steering committee and the project team to explain how integration has been achieved, and where manual journals and reconciliation are still required? (Indication of possible non-compliance) Ask the municipal steering committee and the project team to explain what has changed, and what risks they foresee and how will these be managed. Ask the municipal steering committee and the project team how employees have been prepared? 9

QUESTIONS?

Annexures

Assessment of progress by municipalities what questions should be asked The focus now needs to change to practical assessment relating to the following in order to ensure that municipalities will achieve mSCOA readiness on 01 July 2017: Confirmation of Governance structures Maintain Audit File / Project Documentation Data purification Budget alignment to mSCOA segments Trial balance alignment to mSCOA segments Repairs and maintenance unpacked to the Project Segment Capital Projects unpacked to the Project Segment? ICT Status

Governance Steering Committee: Date first meeting Date last meeting Number of meetings held Number of members Terms of reference completed for all members Implementation/Technical Committee: Date first meeting Date last meeting Number of meetings held Number of members Project manager appointed Terms of reference completed for all members yyyy-mm-dd yyyy-mm-dd xx xx Yes/No yyyy-mm-dd yyyy-mm-dd xx xx Yes/No Yes/No

Project Documentation and Audit File Is the municipality s project documentation and audit file in place? (electronic copies to be provided at training workshop session) Project Plan Risk Register Council Agenda and minutes reflecting: - mSCOA project approval - implementation plan - committees terms of reference - updated KPI s - progress reports Minutes of committee meetings in place Yes/No Yes/No Yes/No Yes/No Yes/No Yes/No Yes/No Yes/No

mSCOA Data Purification Has data purification of the information directly impacting on mSCOA been completed? Organogram Tasks matched to GFS functions aligned to function segment Yes/No Core and non-core functions identified for function segment Asset Management Asset register complete and accurate Asset register reconciled to financial position Valuation Role Valuation role reconciled to property rates control Correct zoning applied for allocation of property rates Suspense Accounts Have suspense accounts been cleared and allocated Yes/No Yes/No Yes/No Yes/No Yes/No Yes/No

Trial Balance/Budget Alignment Has the municipality unpacked their trial balance and budget and aligned it to the mSCOA segments? Has every line item been allocated to: Project segment Item segment - item expenditure - item revenue - item assets and liabilities - item gains and losses Function segment Fund segment Costing segment Regional segment Yes/No Yes/No Yes/No Yes/No Yes/No Yes/No Yes/No Yes/No Yes/No

Trial Balance/Budget Alignment Has the municipality unpacked its "Maintenance & Repairs" and all its "new capital projects" utilising the Project Segment? All Repairs and Maintenance" items were unpacked to the Project Segment? All "Capital Projects" were unpacked to the Project Segment? Yes/No Yes/No ii

ICT Status Have you assessed the IT infrastructure in the municipality currently and what you will need to change /upgrade/ procure in order to meet the capacity requirements of the mSCOA enabled system? Has an IT Infrastructure assessment been done in the municipality? Has the municipality identified which category of municipality they fit in to as per the transversal contract (RT25 issued on 4 March 2016, refer MFMA Circular 80). Has the municipality identified the necessary modules required to ensure mSCOA compliance Has the municipality considered whether to upgrade their current system or procure a new system Yes/No Yes/No Yes/No Yes/No

ICT Status Has the municipality reviewed their current system functionality taking in to consideration the minimum business process abilities in Annexure B of MFMA Circular 80? Yes/No Has the municipality identified which category of municipality they fit in to as per the transversal contract (RT25 issued on 4 March 2016, refer MFMA Circular 80). Has the municipality engaged with 3rd party vendors to ensure seamless integration of all systems and modules used at the municipality Yes/No Yes/No

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