mSCOA : Position Paper – Reporting (Draft) Presented by National Treasury: Chief Directorate Local Government Budget Analysis | 22 June 2015

Outline Background Reporting defined Design Principles Phase 1: Current Reporting Formats linked to mSCOA Phase 2: Revised/Updated/New Reporting Format linked to mSCOA What has been done to date, still need to be done and way forward to finalise Still to be addressed: Municipal Entities Month and Year-end Closure Procedures General Ledger detail versus “other modules/sub-ledgers” Materiality and Reporting Discussion notes on Phase 1 and 2 defined above

Background Principles defined in the mSCOA Design Framework: Central point of access for all local government information Improved data quality and integrity Uniform classification framework standardised by classification framework Supported by a modernised system application Reporting addresses in the context of mSCOA: Day-to-day running of the municipality, e.g. management account, distribution account, etc External reporting to National Treasury, Provincial Treasury, audit purposes, etc AFS, BRF, IYM, NERSA, DWA In the context of mSCOA, limited to financial information.

Background (Continued) In the context of mSCOA, limited to financial information. End result: various reports in the accountability cycle redefined to support “seamless alignment of financial information” based on mSCOA LG Database update from mSCOA Stakeholder consultation on Phase 1 and Phase 2 Recent meetings with the mSCOA Project Team, interactions with the Auditor-General of South Africa (AGSA), the Accounting Standards Boards (ASB) and municipalities identified the need to define the National Treasury position towards “reporting” in the broad context relevant to local government.

What is considered to be included in reporting? Budget Reporting Formats 2015/16 In-year Reporting Formats as at 31 March 2015 Monthly Returns Illustrated Financial Statements – OAG Web 20 May 2015 NERSA Reporting Tables – 2012 DWA Reporting Tables – December 2013 Internal reporting needs defined by the municipality Still to be addressed: Cities Infrastructure Delivery Management Systems (CIDMS)

Design Principles: Phase 1: Current Reporting Formats linked to mSCOA Minimal changes in terminology, layout and presentations Technical Work Group consent on alignment, potential inconsistencies and “best fits” Seamless alignment in reporting may not be achieved Links to be presented in the mSCOA Tables Version Reports to be tested during pilot site implementation. Annual Financial Statements, Budget Reporting Tables may or may not be extracted directly from the application. Reporting to external stakeholders, for example NERSA and DWA, need be linked and aligned in content, layout and format

Design Principles: Phase 1: Current Reporting Formats linked to mSCOA Reporting format not giving justice mSCOA detail “Single point of access for LG information” - SARB, STATSA, COCTA, etc. Definition of level of detail for the import file proposed to be at an accumulation of transaction detail at the posting level for all segments in a predefined reporting file. Posting levels and breakdown allowed redefined [slide to follow] – informed by detail to be retained in the LG Database. Maintaining the LG Database does not remove governance responsibility Period of Relevance Sufficient time lapsed for comparatives to be available without taking unnecessary risk to make restatements in the annual financial statements. 1 July 2015 (pilot site implementation) – Redefining of reporting formats to take place at a latter stage of the project lifecycle .

Design Principles: Phase 2: Revised/Updated/New Reporting Format linked to mSCOA Seamless alignment in Accountability Cycle, NERSA and DWA reporting Justice given to the level of “detail” defined in mSCOA. The accumulated effect of monthly reporting upload with “final year end period” become the official information hosted in the LGDB. Management compile annual financial statements with the discretion, judgement and consideration of materiality in the presentation of the annual financial statements as guided by the Standards of GRAP and advocated by the ASB. Applying the illustrated financial statements is the decision of management. The information retained in the LGDB is considered to be “oversight and stakeholder information” with seamless aligned as described above. The annual financial statements prepared by management are considered to be a distinctive process for general use by the municipalities’ annual report. Achieving the above in reporting design principles will result in satisfying compliance to the Standard of GRAP and retaining comparable, similar detail and comprehensive yet flexible information in the LGDB.

Design Principles: Phase 2: Revised/Updated/New Reporting Format linked to mSCOA Annual Financial Statements (illustrates with notes), Budget Reporting Tables and other reports preferably be extracted directly from the application. NERSA and DWA to be linked and aligned in content, layout and format in consultation with the stakeholder. Customised within the system application for direct submission to the respective stakeholders. Links to be presented in the mSCOA Tables Version 6 (update allowing some time for piloting outcomes – November 2016?) to be used with filters to guide on the appropriate disclosure line in the respective reports or SQL (still to be explored) Report extraction from the application to be tested during pilot site implementation. Period of Relevance: sufficient time lapsed for comparatives to be available without taking unnecessary risk to make restatements in the annual financial statements. [1 July 2019 (all municipalities’ life – 2 years after regulated implementation date)].

What has been done to date, Still need to be done and way forward to finalise? Activity Stakeholder Involvement Completion Date Version 5.4 (final for piloting) mSCOA Project Team mSCOA Work Group with specific inputs from OAG 30 June 2015 BRF. IYM links to be updated. 2. Links for illustrated annual financial statements to be included 3. Notes made on the “linking of mSCOA” to the existing reports to be presented and discussed at the Technical Work Group. Links to be checked and reviewed. 4. Consultation/Information sharing – comments? ICF ASB AGSA

To be added? What has been done to date, Still need to be done and way forward to finalise? Activity Stakeholder Involvement Completion Date Version 6 (update mid-piloting for going live) 30 November 2016 Discussion documents to be completed considering disclosure requirements 2. Preparation Work: Updates and suggestions on revision of reports to achieve seamless alignment. 3. Consultation: Issue revised formats for comments, workshops, consultation and consent ICF PT’s and non-delegated municipalities NT Directorates and delegated municipalities ASB 4. Revision: Update changes proposed and re-issue for comments 5. Testing of Reports Pilot Municipalities 6. Submission for Approval to the mSCOA Technical Committee mSCOA Technical Committee

Breakdown and Posting Level redefined Version 5.4 General Rules: Rule 1: Accounts/information to be added for retaining in the LG DB unique to each municipality. Detail maybe extracted from other source provided all mSCOA segment detail captured per transaction Posting Level - No Breakdown - Yes Rule 2: Information for LG DB standardised – nothing to be populated. Municipality to add detail at own discretion/use Posting Level - Yes Breakdown - No These rules to be consistently applied through all segments.

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