mSCOA VERSION 6.2 Presented by National Treasury: 30 October 2017

Background to Change Request

Motivation for change of chart Piloting was done on version 5.3 and 5.4 of the chart. Major changes were done on the chart from version 5 to version 6. These changes were only tested from 1 July 2017 when all municipalities started to use the full chart. The resulting challenges discovered by NT, PT and municipalities have to be corrected going forward. Municipalities logged FAQ requests, that were investigated and found to have merit. These requests have passed the full work flow process determined by NT for chart changes and have been accepted by the working committee. Demarcation and name changes of municipalities were updated in accordance with the Demarcation Board and Gazettes.

Process for Chart Change

mSCOA version maintenance process 1. FAQ queries: Research and develop proposed solutions (FAQ sub-committee) Refer to Technical working group for consideration 2. Technical working group: Review proposed solutions and impact on the mSCOA chart, alignment with SCOA, GRAP, MFMA, reporting requirements Communicate with stakeholder groups if applicable and time allows Recommendation to the Technical Committee within NT for approval 3. Technical Committee: Review proposed solutions and impact on the mSCOA chart Make a decision regarding the proposal

mSCOA version maintenance process Communicate the decisions of the Technical Committee with the various stakeholder groups. Update: the mSCOA working version chart; the mSCOA working version PSD; all the working version reports (budget schedules, in year and AFS); and all the training material. Prepare for release with the budget circular

Region Segment

Region segment changes Ward / township breakdown requested by municipalities on FAQ Swellendam municipality – added towns Swellendam, Barrydale, Suurbraak, Buffeljagsrivier, Malagas, Infanta Langeberg municipality – added towns Ashton, Robertson, Montagu, Bonnievale, McGregor Rand West City Re-aligned the ward councillors and town names 4 requests updated

Region segment changes (cont) Retiring decommissioned municipalities due to demarcation: Camdeboo + Ikwezi + Baviaans = Dr Beyers Naude 34 municipalities retired Municipalities   EC101 Camdeboo Administrative or Head Office (Including Satellite Offices) Ward Ward 1 Ward 2 Ward 3 Ward 4 Ward 5 Ward 6 Ward 7 Whole of the Municipality  EC101 Dr Beyers Naude

Region segment changes (cont) Updating name changes due to demarcation and gazette notifications received: Camdeboo / Ikwezi / Baviaans => Dr Beyers Naude //Khara Hais / Mier => Dawid Kruiper Randfontein / Westonarea => Rand West City 16 name changes made

Item Segment

Item segment changes Item Expenditure - Depreciation: Add breakdown of asset classification to align to the CIDMS classification and SA34d 113 accounts added Roads Infrastructure Storm water Infrastructure Network and Communication Infrastructure Coastal Infrastructure Community Assets Roads Infrastructure   Roads Road Structures Road Furniture Capital Spares Storm water Infrastructure Drainage Collection Storm Water Conveyance Attenuation

Item segment changes (Cont) Item Assets, Liabilities and Nett Assets: Remove all “Closing Balance” accounts Liabilities: 4409 accounts retired Assets: 1617 accounts retired Net Assets: 13 accounts retired Cash and Cash Equivalents   Cash at Bank Bank Account Specify (replace with account description) Opening Balance Deposits Withdrawals Interest Earned Charges Closing Balance Cash and Cash Equivalents   Cash at Bank Bank Account Specify (replace with account description) Opening Balance Deposits Withdrawals Interest Earned Charges Closing Balance

Item segment changes (Cont) Item Assets, Liabilities: Add “Opening Balance” accounts – Scenario 1 Carry detail in sub-system Assets: Retire 90 add 18 Liabilities: Liabilities   Current Liabilities Financial Liabilities Current portion of Finance Lease Liabilities Specify (Financial Institution and Account Number) Opening Balance Transfer to/from Non-current Liabilities Liabilities   Current Liabilities Financial Liabilities Current portion of Finance Lease Liabilities Specify (Financial Institution and Account Number)

Item segment changes (Cont) Item Assets, Liabilities: Add “Opening Balance” accounts – Scenario 2 Assets: Add 294 Liabilities   Current Liabilities VAT Payable (Control) Opening Balance Movement VAT Credit: Output Accrual Output VAT Liabilities   Current Liabilities VAT Payable (Control) VAT Credit: Output Accrual Output VAT

Item segment changes (Cont) Item Expenditure: Add “Transfer to Accumulated Surplus” account: The surplus/deficit of each Vote must be transferred to the accumulated surplus account in the Item: Net Assets; The chart does not have a dedicated account in the Statement of Financial Performance, to transfer the surplus/deficit; Every Revenue and Expenditure account must carry a transaction to clear the account at year-end, resulting in many transactions. The last account in Revenue and Expenditure items is Default. Create the new account below the Default account in Expenditure. Expenditure   Default (IE 018) Transfer to/ from Accumulated Surplus (IE 020)

Item segment changes (Cont) Item Expenditure: Add “Capitalisation” accounts: Version 6.1 only allows for the capitalisation of salaries to assets; A need was raised to add accounts to capitalise materials, plant and vehicle costs; These accounts should be added to the Item expenditure.

Function

Function segment changes Expand definition descriptions to guide municipalities on the difference between core and non-core functions.

Fund

Fund segment changes Fund: Update Fund segment with requests logged on the FAQ; Ensure alignment between Fund, Item Liabilities and Item Revenue; Grants, transfers and subsidies – provide a higher/ reporting level based on the nature of the allocation and then allow municipalities to break down for transacting purposes (DORA changes every year, province specific grants and subsidies differ, grants and subsidies between municipalities and municipalities and entities)

Project

Project segment changes No changes were made to the Project segment

Costing

Costing segment changes No changes were made to the Costing segment; Costing must be implemented at all municipalities with the 2018/19 MTREF, and new enhancement requirements might be identified during this cycle.

FAQ Queries

Some FAQ queries received Query 6382: Change text names of lines: 4313 by adding Recipes, Formulae, Prototypes, Designs and Models Accumulated Impairment; 4292 to Patents, Licences, Copyrights, Brand names and Trademarks Accumulated Impairment. Various queries: Currently reporting per institution and therefore also transacting per banking institution for bank accounts, investments, loans (municipality to provide detail). Should therefore allow for breakdown, but maintain higher level for reporting, or “explode” chart to allow per individual account. Query 6413: Add remuneration of Section 79 chair under Expenditure: Remuneration of Councillors, as this needs to be reported separately. Query 6391: Mismatch between item segment gains and losses on disposal on non-current and current assets. To be aligned. Query 6410: Add line item for operational expenditure from Rural Roads Asset Management Systems Grant (Schedule 5B). Query 7444: National Environmental Management Act: Air Quality Act of 2004, provision made for application handling fee, but need a line item for the licence revenue.

VAT

VAT coding in the Item segment VAT re-visited in all the Item segments to indicate the correct codes; mSCOA chart maintenance program updated to accept codes from list, eliminating spelling differences; Codes: N/a Not applicable for VAT CapIn Capital Input VAT Eout Exempted Output VAT ZeroIn Zero-rated Input VAT Zout Zero-rated Output VAT StdIn Standard-rated Input VAT StdOut Standard-rated Output VAT AdInBd Adjustment Input Bad Debt VAT MixedUse Mixed classification of VAT

Thank you