1. SCOA V4 RE-IMPLEMENTATION INTRODUCTION NATIONAL AND PROVINCIAL ROADSHOWS Presenter: SCOA Technical Committee | National Treasury | February - March 2013

2. Overview Objectives set out by the SCOA Technical Committee (i.e. why the change); How these objectives were achieved; Development timeline; Summary of the segments; 2

3. Why the change? There were a number of user needs that had to be addressed: –improving the accuracy of allocations across the SCOA segments thereby eliminating the inconsistent economic classification of transactions; –eliminating the duplication of projects in the project segment; –improving system processing times; –rationalising the Item segment; 3 1 2 3 4

4. How are these objectives achieved? Improving the accuracy of allocations across the SCOA segments thereby eliminating the inconsistent economic classification of transactions: –creation of category links in BAS (i.e. filtering of account views); –limiting the availability of accounts in BAS to specific departments; To build the category links all break down allowed accounts had to be removed; 4 1

5. How are these objectives achieved (cont.)? Eliminating the duplication of projects in the project segment : –allow flexibility in creation of projects especially where one project has a number of sub-projects cutting across different economic classifications; To do this –all lower levels (e.g. infrastructure & non-infrastructure) had to be removed; –an eighth segment was created to carry the detail on infrastructure and the economic classification indicator  Infrastructure Segment; 5 2

6. How are these objectives achieved (cont.)? Improving system processing times : –deletion of inactive entities (suppliers) and user IDs; –implementation of new databases for departments; –updating of departmental parameters and registers; –cleanup of old debt/suspense accounts; To do this requires BAS reimplementation; 6 3

7. How are these objectives achieved (cont.)? Rationalising the item list: –deletion of unused items (including leger items); –regrouping of similar items; –renaming of items; –aligning to changes in accounting policy and reporting requirements (e.g. finance leases and inventory); –creation of items requested by sector departments (e.g. R&D items, grouping of health facilities, DOD assets); 7 4

8. Development timeline Research and design of proposals by the SCOA Technical Committee (until end July 2012); SCOA Workshop with key stakeholders hosted by NT to discuss proposals in August 2012; Presented inventory / consumable proposals at Asset Management Workshop hosted by NT in September 2012; Final draft SCOA presented at BAS user forum in November 2012; Awareness sessions with National and Provincial Departments in February 2013; Go live  1 April 2013; 8

9. Development timeline Research and design of proposals by the SCOA Technical Committee (until end July 2012); SCOA Workshop with key stakeholders hosted by NT to discuss proposals in August 2012; Presented inventory / consumable proposals at Asset Management Workshop hosted by NT in September 2012; Final draft SCOA presented at BAS user forum in November 2012; Awareness sessions with National and Provincial Departments in February 2013; Go live  1 April 2013; 9

10. Development timeline (Cont.) Available documentation –Project summary report with supporting annexures; –SCOA in excel with item definitions, illustration of category links, and limitations placed on accounts (i.e. departmental access); –Updated classification circulars – inventory & consumables, leases; –Worked examples; 10

11. 11 The purpose of infrastructure segment is to identify whether or not a spending item relates to infrastructure and to show the type of infrastructure it relates to. Infrastructure segment The purpose of this segment is to record receipt and payment transactions as well as transactions in assets and liabilities. Item segment The purpose of this segment is to identify asset classes to which a transaction is allocated when the purpose relates to an asset or the use of an asset. Asset segment The purpose of this segment is to identify whether or not a payment is part of a project. Project segment The purpose of this segment is to identify the source of funding from which payments are effected, and the nature of receipts. Fund segment The purpose of this segment is to identify the programme/activity against which any given transaction should be recorded. The segment reflects a department’s programme and sub-programme structure in as much detail as is required both for reporting and management purposes. Objective segment The purpose of this segment is to identify the cost centre of any given transaction. As the location of cost centres varies across departments, depending on their organisational structure, this segment is not standardised and the departments maintains the segment. Responsibility segment The purpose of this segment is to identify which region benefits from government spending. Regional Identifier segment Standard Chart of Accounts

12. 12 Order of capturing The economic classification

13. Questions? 13

14. SCOA V4 RE-IMPLEMENTATION NATIONAL AND PROVINCIAL INFORMATION SESSIONS Presenter: SCOA Technical Committee | National Treasury | February - March 2013

15. Segment Discussion Highlights of the changes to the different segments 15

16. NEW INFRASTRUCTURE SEGMENT 16

17. Infrastructure Segment Main segment for identifying the economic classification Centrally controlled and standardised for all departments and aligned to the economic classification Improved recording of Own Account and Outsourced transactions – one to one link New category for lease transactions Category links into the system now centrally controlled “Refer to Annexure C for detailed structure” 17

18. Infrastructure segment… Distinguish between expenditure vs. non-expenditure Expenditure is divided into Infrastructure and Non-Infrastructure –Infrastructure Economic classification same as the old “Projects Infrastructure”:  Existing Infrastructure; Maintenance and repairs (Current) Upgrades and Additions (Capital) Refurbishment and Rehabilitation (Capital)  New Infrastructure (Capital)  Infrastructure Transfer (Current/Capital) Introduced Payments for financial assets for Concessional loans relating to Infrastructure Created a Lease category for Finance or Operating leases “Refer to Annexure C for detailed structure” 18

19. Infrastructure segment… –Non-Infrastructure Includes expenditure categories previously under “Projects non- infrastructure and Stand-alone” Non-Infrastructure current Non-infrastructure / stand-alone current Maintenance and repairs current Non-infrastructure capital Non-Infrastructure / stand-alone capital Non-Infra: Upgrades and Additions Non-Infra: Refurbishment and Rehabilitation Non-Infra: Transfers Non-Infra: Payments for Financial Assets Non-Infra: Internal Charges Non-Infra: Cara Expenditure Non-Infra: Leases 19

20. Infrastructure segment Non Expenditure This category is to be used for non expenditure transactions  General Account  Receipts  Assets and Liabilities NB. Changed the term Revenue to Receipts 20

21. Category links in the system Built using the Infrastructure an the Item segment in the system The purpose of the infrastructure category type is to provide the link between the posting level items in the Infrastructure segment and those in the Item segment of the chart. The infrastructure category type in the financial system ensures that the correct items in the Item segment is linked to the correct posting level projects in the Infrastructure segment, so ensuring correct classification and the elimination of inconsistencies. This link is pre-set in the systems environment, and when a infrastructure category type is identified a set of posting level items are provided in the Item segment that is linked to such category. “Refer to Annexure D for detailed structure” 21

22. Old category links 22

23. ITEM SEGMENT 23

24. Item segment Compensation of Employees: New item to be created to under salaries & wages for learnership/internship Goods and Services The changes range from the shifting of items between non-posting levels, the removal of unused items, the renaming or redefining of items to the creation of additional items. “Refer to Annexure B for detailed structure” 24

25. Item segment… Prefix OWN to replace PRJ for own account transactions Outsourced A project is “outsourced” when the department appoints a third party to execute the activity in its entirety; then the total value of the amount payable to that outside contractor must be recorded as Outsourced. Own Account A project is accounted for as “Own account’ when the Department purchases all the necessary inputs and uses its own resources (e.g. staff and equipment) to plan, implement, and execute the activity. Inputs into the project may include the appointment of professional services such as engineers, architects, project managers, etc. as well as smaller portions of the project that is outsourced, for example the construction of a laboratory outsourced to a private company forming part of a bigger school building project being implemented by the department from own account. 25

26. Item segment… Audit Costs The item AUDIT COST EXT: REGULARITY has been added at level 5 under the item AUDIT COST: EXTERNAL. This item has been created to monitor the total cost related to regulatory audits. 26

27. Goods and Services External Computer Services The item EXT COMP SER: SYSTEM DEVELOP was exclusively for National Treasury for payments related to systems development and is now open for use by all departments. Consultant and professional service New items were added for science and technologies activities expenditure. New items were added for outsourced maintenance and repairs to be restricted to departments undertaking infrastructure project (i.e. DPW, Health, Transport). 27

28. Item segment… 28

29. Goods and Services… Contractors:Mnt&Rep,Imp Oth Infr Ass Item has been expanded to provide for one on one link relating to maintenance, upgrades or refurbishments with the infrastructure segment (Own Account / Outsourced). 29

30. Goods and Services… Fleet Services The items relating to the management and operation of fleet have been grouped together under FLEET SERVICES (F/SER). This will ensure that the full cost related to the management of the departmental fleet is recorded together. 30

31. Goods and Services… Property Payments: Contract maintenance, improvements Item has been expanded to provide for one on one link relating to maintenance, upgrades or refurbishments with the infrastructure segment (Own Account / Outsourced). 31

32. Goods and Services… Travel and Subsistence The naming “WITH/WITHOUT OPERATOR” under TRAVEL AND SUBSISTENCE has been removed, thus there is now one item for each classification. T&S DOM WITHOUT OP: KM ALL (OWN TR) subsistence. 32

33. 33 Interest… Lease transactions  Operating lease item still under goods and services;  Finance lease items created per category of asset under purchase / construction of capital assets;  Interest on Finance lease not recorded separately  Classification of lease transaction to be explained in detail in the Lease Circular.

34. Payments for Financial Assets The categories for PAY FIN ASS:WATER TRAD ACC, TRADING ENTITY:DEPRECIATION and TRAD ENT:LOSS ON SALE OF CAP ASS were removed as these were originally created for recording accruals transactions for trading entities, however, these items have not been used in the recent past. Similar items under Revenue were also removed. 34

35. Transfers and Subsidies The creation of an item for payment towards bursaries related to research and development BURSARIES (R&D) was created on request from the Department of Science and Technology. It was created to cater for postgraduate students (all masters and PhDs excluding coursework degrees) and organised lifelong training for scientists and engineers or the equivalent for those intending to exercise an STA’s 35

36. Payments or Construction of Capital Assets Changes to the Capital assets category include : –The item SMA Parachutes and Aircraft Launch/Landing/Ground Handling Equipment has been moved from SMA to Machinery and Equipment. –The item Normal Aircraft has been changed to Military Aircraft –An item for SPECIALISED MILITARY TRAILERS has been created, which includes trailers specifically designed for the military. –An item for MILITARY COMMUNICATION EQUIPMENT has been created, which caters for specialised communication equipment for military use. 36

37. ASSET SEGMENT 37

38. 38 Asset Segment Changes: Previously duplicated assets removed i.e. Clinic & Community Health Centre Lease assets has been removed, transactions can be identified in the Item and Infrastructure segment. NB. Department to use “Tangible Capital Asset” to create posting level for lease assets. It is important for the posting level to unique from the normal capital asset. Example when creating a posting level: TANGIBLE CAPITAL ASSETS BUILD & OTHER FIXED STRUCTURES NON-RESIDENTIAL BUILDINGS OFFICE BUILDINGS LEASE:40 CHURCH SQUARE 40 CHURCH SQUARE Laboratories and Mortuaries moved from Non-residential to Health assets Prefabricated and Portable Buildings duplicated Health: Prefabricated and Portable Buildings School: Prefabricated and Portable Buildings Asset Segment

39. PROJECT SEGMENT 39

40. 40 Project Segment Changes: Infrastructure reporting moved to the Infrastructure segment Project Segment changed to only identify Projects within the Department Economic Classification removed from the Project Segment New project category for Scientific and Technological Activities Departments to provide for lower level details (Breakdown allowed) Project Segment

41. FUND OBJECTIVE RESPONSIBILITY REGIONAL IDENTIFIER SEGMENTS No changes made to the segments 41

42. Questions? SCOA Contact Details: Helpdesk: 012 315 5311 Email: scoa@treasury.gov.zascoa@treasury.gov.za Website: http://scoa.treasury.gov.za 42