Can we all move forward if the Pilots are still Piloting? CIGFARO/ IMFO WC SEMINAR - 6 JUNE 2017

Content Background - mSCOA Regulations National Treasury Implementation Strategy Initial Pilot Process: Overstrand Municipality Factors impacting on mSCOA Implementation Process Risks Reality Check Consequence Management Strategy / Contingency Plans Conclusion

Background - mSCOA Regulations Local government has an important role to play in strengthening the link between the citizens and government’s overall priorities and spending plans: The National Development Plan (NDP) sets out an integrated strategy for accelerating growth, eliminating poverty and reducing inequality by 2030; Local Government is required to incorporate the objectives of the NDP in its budgets; The goal should be to enhance service delivery aimed at improving the quality of life for all citizens.

Background - mSCOA Regulations Budget & Reporting Regulations: The Municipal Budget and Reporting Regulations were published by the Minister of Finance, with the concurrence of the Minister of Provincial and Local Government in Government Gazette 32141 dated 17 April 2009 and took effect on 1 July 2009. Reforn Achievements prior to mSCOA: Consolidated MTREF budget information for all municipalities Quarterly Section 71 reports State of Municipal Finances report – annually Over- and under expenditure report to Parliament Local Government Budgets and Expenditure Review Report on the Tabling of budgets to Parliament

Background - mSCOA Regulations MUNICIPAL REGULATIONS ON A STANDARD CHART OF ACCOUNTS [SCOA for MUNICIPALITIES] - Project Summary Document

Background - mSCOA Regulations Next logical step - Development and implementation of a mSCOA for Local Government: Improve credibility and reliability of financial data General business processes and applications

Background - mSCOA Regulations Preamble Chapter 1: Interpretation, Object and Application Chapter 2: SCOA for Municipalities and Municipal Entities Chapter 3: Minimum Business Process and System Requirements Chapter 4: Technical Committee for SCOA Chapter 5: Implementation of Standard Chart of Accounts Chapter 6: General SCHEDULE: Segments of SCOA For Municipalities and Municipal Entities

National Treasury Implementation Strategy

National Treasury Implementation Strategy

Pilot Process: Overstrand Municipality Overstrand mSCOA Roadmap The mSCOA implementation has taken place from July 2014 with Overstrand being fully compliant when Phase 4 ends in June 2017. The project has been split into 5 Phases in order to enable a smoother implementation that is the least disruptive. In collaboration with Bytes Universal Systems, Overstrand has taken a three-phased approach to the system development and piloting processes. Two further phases have been adopted in order to implement the mSCOA regulations by 01 July 2017.

Pilot Process: Overstrand Municipality Overstrand mSCOA Roadmap Phase 1 – Budgeting Module Phase 2 – Transactional Posting Levels Phase 3 – Reporting Modules Phase 4 – mSCOA Piloting Implementation Phase 5 – Full mSCOA Operational Compliance It was anticipated that the most difficult components, i.e. those requiring detailed business process changes or system transactions, will be implemented during Phase 4 as it will take longer to configure or design.

Pilot Process: Overstrand Municipality mSCOA Governance Steering Committee MUNICIPAL MANAGER DIRECTOR: COMMUNITY SERVICES DIRECTOR MANAGEMENT SERVICES DIRECTOR: PROTECTION AND SECURITY SERVICES DIRECTOR: FINANCE (PROJECT SPONSOR) DIRECTOR: INFRASTRUCTURE AND PLANNING DIRECTOR: LOCAL ECONOMIC DEVELOPMENT CHIEF AUDIT EXECUTIVE

Pilot Process: Overstrand Municipality mSCOA Working Group DIRECTOR: FINANCE (PROJECT SPONSOR) SENIOR MANAGER: SUPPLY CHAIN MANAGEMENT SENIOR MANAGER: REVENUE SENIOR MANAGER: EXPENDITURE AND ASSETS DEPUTY DIRECTOR: FINANCE (SCOA CHAMPION) SENIOR MANAGER: FINANCIAL SERVICES MANAGER: FINANCIAL ACCOUNTING MANAGER: BUDGET OFFICE SENIOR MANAGER: SYSTEMS DEVELOPMENT SENIOR BUSINESS ANALYST SYSTEMS ADMINISTRATOR: SAMRAS

Pilot Process: Overstrand Municipality

Pilot Process: Overstrand Municipality High Level Scope - Project Plan

Pilot Process: Overstrand Municipality Pilot Implementation 1 July 2015: Budget Workshops Change Management Information Sharing (Big Bang Event) on June 2015

Pilot Process: Overstrand Municipality Pilot Implementation 1 July 2015:

Pilot Process: Overstrand Municipality Ongoing mSCOA Implementation after 1 July 2015:

Pilot Process: Overstrand Municipality Ongoing mSCOA Implementation after 1 July 2015:

Factors impacting on Pilot Implementation Process 1. Advertising and Award - Transversal tender RT25 in 2016; 2. Release of Circular 80 – March 2016; 3. Release of mSCOA Circular 5 – July 2016 – requesting Local Government to conduct an extensive ICT Due Diligence Exercise assessing System / Applications minimum functionality; 4. Release of Addendum to Circular 80 – October 2016; 5. Subsequent Versions of the Chart, Final Lock-down of Version 6.1 - November 2016; 6. mSCOA A1 Budget Schedules outstanding - December 2016; 7. MFMA Circular 86 – Changes to Schedule A1 – March 2017

Factors impacting on Pilot Implementation Process

Factors impacting on Pilot Implementation Process

Factors impacting on Pilot Implementation Process

Factors impacting on Pilot Implementation Process

Risks Major Risks - WC Government (mSCOA Project Management)

Risks (i):

Risks (ii):

Risks Risks (iii):

Reality Check: IDP/Budget Process – Overstrand Municipality

Reality Check: NT - 9 March 2017

Reality Check: MFMA Circular 86 (NT - 9 March 2017)

Reality Check: MFMA Circular 86 (PT - 17 March 2017)

Reality Check: MFMA Circular 86 (PT - 17 March 2017)

Reality Check: (PT - 17 March 2017)

Consequence Management / Accountability? Failure of Service Rendering to Communities? Monthly Billing / Municipal Accounts? Payment Boycotts - Cash flows? Incorrect Payments (Creditors / Payroll)? Municipal Stores - Stock Levels? Procurement - Orders? Non-Compliance to MFMA? SCOA Regulations / Budget and Reporting Regulations; Submission of Annual Financial Statements; Data Corruption / Material Misstatements / Audit Outcomes

Strategies / Contingency Plans Proactive strategies (Preparation and accountability) - Execution of a Project Implementation Plan OR Reactive Strategies (Activities in response to an event) - Measures to contain consequences A COMBINATION OF BOTH

Strategies / Contingency Plans Proactive strategies (Preparation and accountability) Project Implementation Plan (i): Keep proper record of all testing done as well as the outcome of any changes required during the process; Continuous communication between all stakeholders involved in order to keep everybody informed about the problems / solutions encountered; Important to establish dialogue between service provider and any third party vendor; Do not interpret communication between service provider and third party vendors, rather facilitate direct communication;

Strategies / Contingency Plans Proactive strategies (Preparation and accountability) Project Implementation Plan (ii): Preferable to have a hotline to vendor for users as far as possible, while testing is done in order to assist with response time and understanding of practical environment; Ensure that ALL staff (financial and technical) are well versed with the requirements and workings of mSCOA to minimize incorrect input data and to ensure that budget is done correctly; Format and content of Management Information reports MUST be resolved upfront; Issues to be logged and tracked from initiation to closure in order to monitor progress in the weekly SCOA steering committee meetings;

Contingency Plans

Contingency Plans (Example)

Conclusion The perceived readiness of municipalities to implement mSCOA, should be regarded as one of the most serious challenges facing Local Government in decades; Local Government can be severely affected in terms of these issues as highlighted; Urgent consultation with Local Government regarded as prudent.

With Acknowledgement to - Overstrand Finance Directorate Staff, for working together tirelessly and inspired as a team towards mSCOA compliance. National Treasury & Provincial Treasury, for statistics and other information included in this presentation. Thank You