Can we all move forward if the Pilots

Can we all move forward if the Pilots are still Piloting? CIGFARO/ IMFO WC SEMINAR - 6 JUNE 2017

Content Background - m. SCOA Regulations National Treasury Implementation Strategy Initial Pilot Process: Overstrand Municipality Factors impacting on m. SCOA Implementation Process Risks Reality Check Consequence Management Strategy / Contingency Plans Conclusion

Background - m. SCOA Regulations Local government has an important role to play in strengthening the link between the citizens and government’s overall priorities and spending plans: �The National Development Plan (NDP) sets out an integrated strategy for accelerating growth, eliminating poverty and reducing inequality by 2030; �Local Government is required to incorporate the objectives of the NDP in its budgets; �The goal should be to enhance service delivery aimed at improving the quality of life for all citizens.

Background - m. SCOA Regulations Budget & Reporting Regulations: The Municipal Budget and Reporting Regulations were published by the Minister of Finance, with the concurrence of the Minister of Provincial and Local Government in Government Gazette 32141 dated 17 April 2009 and took effect on 1 July 2009. Reforn Achievements prior to m. SCOA: Consolidated MTREF budget information for all municipalities Quarterly Section 71 reports State of Municipal Finances report – annually Over- and under expenditure report to Parliament Local Government Budgets and Expenditure Review Report on the Tabling of budgets to Parliament

Background - m. SCOA Regulations MUNICIPAL REGULATIONS ON A STANDARD CHART OF ACCOUNTS [SCOA for MUNICIPALITIES] - Project Summary Document

Background - m. SCOA Regulations Next logical step Development and implementation of a m. SCOA for Local Government: ü Improve credibility and reliability of financial data ü General business processes and applications

Background - m. SCOA Regulations SCOA Regulation – Preamble Chapter 1: Interpretation, Object and Application Chapter 2: SCOA for Municipalities and Municipal Entities Chapter 3: Minimum Business Process and System Requirements Chapter 4: Technical Committee for SCOA Chapter 5: Implementation of Standard Chart of Accounts Chapter 6: General SCHEDULE: Segments of SCOA For Municipalities and Municipal Entities 7

National Treasury Implementation Strategy

National Treasury Implementation Strategy

Pilot Process: Overstrand Municipality Overstrand m. SCOA Roadmap The m. SCOA implementation has taken place from July 2014 with Overstrand being fully compliant when Phase 4 ends in June 2017. The project has been split into 5 Phases in order to enable a smoother implementation that is the least disruptive. In collaboration with Bytes Universal Systems, Overstrand has taken a three-phased approach to the system development and piloting processes. Two further phases have been adopted in order to implement the m. SCOA regulations by 01 July 2017.

Pilot Process: Overstrand Municipality Overstrand m. SCOA Roadmap Phase 1 – Budgeting Module Phase 2 – Transactional Posting Levels Phase 3 – Reporting Modules Phase 4 – m. SCOA Piloting Implementation Phase 5 – Full m. SCOA Operational Compliance It was anticipated that the most difficult components, i. e. those requiring detailed business process changes or system transactions, will be implemented during Phase 4 as it will take longer to configure or design.

Pilot Process: Overstrand Municipality m. SCOA Governance Steering Committee m. SCOA GOVERNANCE STEERING COMMITTEE MUNICIPAL MANAGER DIRECTOR: COMMUNITY SERVICES DIRECTOR MANAGEMENT SERVICES DIRECTOR: PROTECTION AND SECURITY SERVICES DIRECTOR: FINANCE (PROJECT SPONSOR) DIRECTOR: INFRASTRUC TURE AND PLANNING DIRECTOR: LOCAL ECONOMIC DEVELOPME NT CHIEF AUDIT EXECUTIVE

Pilot Process: Overstrand Municipality m. SCOA Working Group m. SCOA WORKING GROUP DIRECTOR: FINANCE (PROJECT SPONSOR) SENIOR MANAGER: SUPPLY CHAIN MANAGEM ENT SENIOR MANAGER: REVENUE SENIOR MANAGER: EXPENDIT URE AND ASSETS DEPUTY DIRECTOR: FINANCE (SCOA CHAMPION ) SENIOR MANAGER: FINANCIAL SERVICES SENIOR MANAGER: SYSTEMS DEVELOPM ENT MANAGER: FINANCIAL ACCOUNTING MANAGER: BUDGET OFFICE SENIOR BUSINESS ANALYST SYSTEMS ADMINISTR ATOR: SAMRAS

Pilot Process: Overstrand Municipality

Pilot Process: Overstrand Municipality High Level Scope - Project Plan

Pilot Process: Overstrand Municipality Pilot Implementation 1 July 2015: Budget Workshops Change Management Information Sharing (Big Bang Event) on June 2015

Pilot Process: Overstrand Municipality Pilot Implementation 1 July 2015:

Pilot Process: Overstrand Municipality Ongoing m. SCOA Implementation after 1 July 2015:

Pilot Process: Overstrand Municipality Ongoing m. SCOA Implementation after 1 July 2015:

Factors impacting on Pilot Implementation Process 1. Advertising and Award - Transversal tender RT 25 in 2016; 2. Release of Circular 80 – March 2016; 3. Release of m. SCOA Circular 5 – July 2016 – requesting Local Government to conduct an extensive ICT Due Diligence Exercise assessing System / Applications minimum functionality; 4. Release of Addendum to Circular 80 – October 2016; 5. Subsequent Versions of the Chart, Final Lock-down of Version 6. 1 - November 2016; 6. m. SCOA A 1 Budget Schedules outstanding - December 2016; 7. MFMA Circular 86 – Changes to Schedule A 1 – March 2017

Factors impacting on Pilot Implementation Process

Factors impacting on Pilot Implementation Process

Factors impacting on Pilot Implementation Process

Factors impacting on Pilot Implementation Process

Risks Major Risks - WC Government (m. SCOA Project Management)

Risks (i):

Risks (ii):

Risks (iii):

Reality Check: IDP/Budget Process – Overstrand Municipality

Reality Check: NT - 9 March 2017

Reality Check: MFMA Circular 86 (NT - 9 March 2017)

Reality Check: MFMA Circular 86 (PT - 17 March 2017)

Reality Check: MFMA Circular 86 (PT - 17 March 2017)

Reality Check: (PT - 17 March 2017)

Consequence Management / Accountability? Failure of Service Rendering to Communities? Monthly Billing / Municipal Accounts? Payment Boycotts - Cash flows? Incorrect Payments (Creditors / Payroll)? Municipal Stores - Stock Levels? Procurement - Orders? Non-Compliance to MFMA? ØSCOA Regulations / Budget and Reporting Regulations; ØSubmission of Annual Financial Statements; ØData Corruption / Material Misstatements / Audit Outcomes

Strategies / Contingency Plans Proactive strategies (Preparation and accountability) - Execution of a Project Implementation Plan OR Reactive Strategies (Activities in response to an event) - Measures to contain consequences OR A COMBINATION OF BOTH

Strategies / Contingency Plans Proactive strategies (Preparation and accountability) Project Implementation Plan (i): Keep proper record of all testing done as well as the outcome of any changes required during the process; Continuous communication between all stakeholders involved in order to keep everybody informed about the problems / solutions encountered; Important to establish dialogue between service provider and any third party vendor; Do not interpret communication between service provider and third party vendors, rather facilitate direct communication;

Strategies / Contingency Plans Proactive strategies (Preparation and accountability) Project Implementation Plan (ii): Preferable to have a hotline to vendor for users as far as possible, while testing is done in order to assist with response time and understanding of practical environment; Ensure that ALL staff (financial and technical) are well versed with the requirements and workings of m. SCOA to minimize incorrect input data and to ensure that budget is done correctly; Format and content of Management Information reports MUST be resolved upfront; Issues to be logged and tracked from initiation to closure in order to monitor progress in the weekly SCOA steering committee meetings;

Contingency Plans

Contingency Plans (Example)

Conclusion The perceived readiness of municipalities to implement m. SCOA, should be regarded as one of the most serious challenges facing Local Government in decades; Local Government can be severely affected in terms of these issues as highlighted; Urgent consultation with Local Government regarded as prudent.

With Acknowledgement to Overstrand Finance Directorate Staff, for working together tirelessly and inspired as a team towards m. SCOA compliance. National Treasury & Provincial Treasury, for statistics and other information included in this presentation. Thank You