1. MSCOA Risk management Inculcating ethical culture through
governance processes for
sustainable service delivery
Audit & risk indaba
Presented by National Treasury: Chief Directorate Local Government Budget Analysis – 20 June 2017

2. mSCOA - High-level overview mSCOA and Risk Management
WORKSHOP AGENDA
Introduction
mSCOA - High-level overview
mSCOA and Risk Management
Discussion - the way forward

3. INTRODUCTION – RISK MANAGEMENT
A management function dealing with the uncertainties of pure risk, the consequences and the impact thereof on service delivery
A management function with the objective of protecting people and assets by eliminating or minimising the potential for loss from pure risk and the provision of resources to recover from losses that do occur
A management function with the objective of propagating a corporate culture in which there is an awareness of the effects risk exposure has on the organisation, and which results in the introduction of deliberate measures to minimise the effects thereof

4. INTRODUCTION – RISK MANAGEMENT
Event or incident
Timing is uncertain
Outcome can be
Does mSCOA meet these criteria?
Neutral
Negative
Positive

5. ? Let’s share experience/ ideas mSCOA Risk Management
Mention at least five (5) risks associated with mSCOA implementation and identify the possible outcomes thereof.
Keep these handy as we will be referring back to them several times during the afternoon.

6. MSCOA –
High-level OVERVIEW

7. The seven (7) mSCOA Segments: an Overview
Municipal Standard Classification: Against which organisational vote or sub-vote (in the municipality’s unique organisational structure) should the transaction be recorded? Non-mandatory
Project: Does the transaction relate to a specific project, and if so, what type of project? Capital/ Operational/ Default
Ensures that all projects in the IDP are aligned to the budget.
Function: Against which function or sub-functions should the transaction be recorded?
Enforces the Constitution, IMF, GFS classification, and Municipal Structures Act.
Item: What is the nature of the transaction to be recorded?:
Revenue/ Expenditure/ Gains and losses/ Liabilities/ Net Assets.
Enables the traditional financial reporting and reconciliations. (The Segment that most practitioners are traditionally familiar with.)
Costing: Introduces management accounting/ tariff modelling. What is the impact of an item on services?
Allows a municipality to redistribute primary cost between functions.
Fund: What source will fund the transaction and from which source is the revenue received?
Aligns Revenue and Expenditure to reflect cash flow.
Region: Which geographical area is deriving the benefit from the transaction?
Administrative or Head office/ Wards/ Whole of Area – Country/Province/ Whole of the Metro/District/Municipality

8. mSCOA – HIGH–LEVEL OVERVIEW
A financial classification framework
A system upgrade/ re-implementation/ replacement
Upgrade of hardware and connectivity
Review and update of policies and procedures
Time – regulated in April 2014, go live 1 July 2017
Extent – affects all financial management and internal control systems
Requirement – seamless integration
Impact – organisational reform

9. mSCOA seamless integration

10. ? Let’s share experience/ ideas mSCOA Risk Management
Do you know the milestone requirements leading up to 1 July 2017?
Do you know the current status of your municipal implementation?
Will your municipality make the deadline?
Do you have an action plan for 1 July 2017?

11. MSCOA and
Risk management

12. mSCOA and Risk Management
Risk evaluation:
Possible outcomes
Frequency
Severity (consequences)
Mitigating measures
Residual risk
Risk treatment
Cost of risk

13. ? Let’s share experience/ ideas mSCOA Risk Management
Look at the risk(s) you listed earlier and update the possible outcomes, if necessary.
Attach a frequency and severity value to these risks using your current municipal methodology.
Evaluate the mitigating measures you have in place.

14. mSCOA and Risk Management
Risk treatment:
Avoidance (do not engage in activities)
Elimination (eliminate the potential of loss)
Reduction (reduce the likelihood of occurrence or severity of the resultant loss)
Transfer
Risk management options:
Physical options
Procedural measures
Education and training
Legal procedures

15. ? Let’s share experience/ ideas mSCOA Risk Management
Select suitable risk treatments AND risk management options for the identified risk(s).

16. mSCOA and Risk Management
Risk Management Objectives:
Financial – reduce the total cost of risk
Resources – protect assets, physical and emotional well being of employees
Stakeholders, customers, community, public
Cost of risk:
Insurance cost
Opportunity cost
Self funding cost
Risk control cost
Administrative cost

17. ? Let’s share experience/ ideas mSCOA Risk Management
Can we now cost the risks we have identified?

18. MSCOA and Risk management:
The way forward?

19. ? Let’s share experience/ ideas mSCOA Risk Management
In relation to the objectives of risk management and our municipal risk appetite, what is the way forward?
What am I taking home from this Audit and Risk Indaba?

20. Questions

21. Thank you for the opportunity to discuss mSCOA – Risk Management with you