ASSOCIATED BENEFITS OF mSCOA IN THE ASSET LIFE CYCLE

Current challenges in the asset life cycle TABLE OF CONTENTS Asset life cycle Current challenges in the asset life cycle Associated benefits of mSCOA segments in the asset life cycle Other benefits of mSCOA Conclusion

ASSET LIFE CYCLE 1. Planning & Budgeting 2. Acquisition 3. Operation & Maintenance 4. Disposal or Re-use 1. Planning & Budgeting Where an asset is purchased, constructed or otherwise created Where requirements of a new asset are planned for & established. Resources are set aside Initiated when economic life has diminished or the service provided by the asset disappears Where asset is used for its intended purpose & maintained

Budget, implementation and reporting Accountability Reporting ACCOUNTABILITY CYCLE & mSCOA Standard Chart of Accounts Improved Service Delivery The integrated development plan (unlimited needs and wants) must directly inform the formulation of the budget (limited basket of resources). In a mSCOA perspective, this requires budget formulation (as per the MBRR) from a project level. Consequently the Project Segment is consider the departure point in formulating budgets across all seven segments. IDP 5 Year Strategy Budget 3 Year Budget SDBIP Annual Plan to Implement IYR Monitoring AFS Oversight Annual Report Budget, implementation and reporting Budgets is consistent with IDP Asset procurement plan consistent with 3 year budget. Monitoring via SDBIP possible. Ensure IYR balances to asset register and GL accounts. AFS reporting will be consistent with sub ledger. Classification exist for : Planned, WIP, In use, Held for disposal and Disposed in the GL. Perfect alignment to sub-system Accountability Reporting Incorporation of GRAP Improved standardisation Improved audit process across 278 Consistent comparability Transparency Improved Service Improved planning ensures better funding allocation. Improved funding leads to improved service delivery at an operational level

THE CURRENT CHALLENGES IN THE ASSET LIFECYCLE No proper planning in the acquisition of assets leading to poor service delivery due to the use of outdated or no assets; Most municipalities do not specify assets & liabilities in projects and are often called "special projects” or “Mayoral Projects” and not reflective to items that have been purchased Funds allocated to Assets being expended in other activities e.g. operational cost; Sources of funding for assets not always clear; Ownership of assets in municipalities not clear; Repairs & maintenance not adequately planned or accounted for; Asset registers not properly maintained;

THE CURRENT CHALLENGES IN THE ASSET LIFECYCLE cont.…... Incorrect classification of assets; Usage of assets not linked to the core functions of municipalities.

ASSOCIATED BENEFITS OF mSCOA IN SEGMENTS PROJECT SEGMENT Linked to the IDP and certainty is given in mSCOA that assets prioritised Historically budgeting was done at the budget office, mSCOA brings together all departments e.g. engineers (project implementers),budget manager, accountants at planning phase for asset projects and repairs and maintenance etc. Eliminates the mismatch between IDP, budgeting, in year reporting (S71 & 72) and annual financial statements mSCOA links the Fixed Asset Register (FAR) to the Project segment and automatically aligns with the IDP and MTREF

TYPICAL APPLICATION OF mSCOA PROJECT SEGMENT SCOA currently aligns the project segment and the fixed asset register at the asset sub-class level, and makes provision for additional breakdowns on both capital and maintenance expenditure. Component level budgeting automatic aligns the IDP, MTREF, FAR and financial record Adopted from I@Consulting

ASSOCIATED BENEFITS OF mSCOA IN SEGMENTS FUNDING SEGMENT It is easy to identify the sources of funding for assets in mSCOA which is defined at the posting level of the funding segments mSCOA facilitates the accumulation of information within the financial system to be able to report on how specific source of funding e.g. MIG has been spent by extracting this specific information from the fund segment Funding segment aligns the expenditure on repairs and maintenance against the source of income e.g. transfers and subsidies, internal billing and other Assist in the budgeting phase by clearly identifying funding sources at planning phase The funding segment contains all sources of funds available to the municipality and enables the monitoring of funds (operational and capital against the source of fund utilised.

ASSOCIATED BENEFITS OF mSCOA IN SEGMENTS FUNCTION SEGMENT The function segment standardises a vote structure against which a transaction is recorded across all municipalities creating uniformity The function provided are based on MFMA circular 12 and consistent with S145 (1) and 145 (4) of the constitution which provides for core functions and non core functions respectively A user department/function that is allocated the asset will report on the asset and increase accountability The electricity function has been expanded to include all NERSA requirements which will improve compliance across all segments

ASSOCIATED BENEFITS OF mSCOA IN SEGMENTS REGIONAL SEGMENT Whether services are being provided impartially, fairly, equitably and without bias, as required by the Constitution; Whether progress is being made in addressing regional backlogs in social infrastructure and access to services; Whether government spending by different departments and municipalities are including spending on assets is being properly sequenced and co-ordinated; Whether actual spending by government is aligned to the relevant plans of the three spheres of government; Assist councillors and mayors to account to the communities for resources allocated and actual spending of the municipality to communities and wards; Provide specific ward information to councillors' to assist in decision-making.

ASSOCIATED BENEFITS OF mSCOA IN SEGMENTS ITEM SEGMENT mSCOA enables a clear distinction of what is being bought or money received for in the item segment in four main categories being Revenue, Expenditure Assets, Liabilities and Net assets Assets related expenditure in the asset life-cycle including depreciation, amortisation, impairment of assets can be monitored in the item segment Item segment standardises all asset categories and improves uniformity

ASSOCIATED BENEFITS OF mSCOA IN SEGMENTS COSTING SEGMENT Provides classification of indirect secondary cost which are not normally attributable to output and in terms of assets the usage of assets is reflected in the municipal core functions . The costing function can act as a powerful management tool in the planning phase of the assets life cycle if usage between the core functions can be determined.

OTHER BENEFITS OF mSCOA Advantages of mSCOA 6. Reduce the cost of compliance & information gathering in the long-term 1. Access to municipal financial systems will enable Treasuries to verify municipal information in terms of credibility, reliability & accuracy amongst others 2. Bring consistency in terms of classification of municipal information at transactional level across all municipalities within the province and nationally 3. Alignment of reporting formats such as budget & financial reporting 4.Consistent use of terminology across all municipalities by defining all accounts and labels 5. The improved quality of data will lead to improved budgeting, financial reporting and result in better decision-making in local government

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