The introduction of the Municipal Standard Chart of Accounts (mSCOA) by the South African National Treasury has altered the South African municipal operating environment. In this short article you will find 7 ways in which mSCOA compliance will benefit municipal operations and read more about IMQS’s approach to mSCOA-ready Infrastructure Asset Management (IAM).
WHAT IS MSCOA?
mSCOA is a financial-reporting regulatory reform that will come into full effect in South Africa on 1 July 2017. This reform represents a business-process-focused project that standardises all municipal accounting practices and reporting across the country.
Every municipality and municipal entity has a chart of accounts that lists all accounts used in the general ledger. The ledger is leveraged by municipal accounting software to aggregate information into an entity's financial statements. mSCOA targets municipal operations by enforcing a standardisation of municipal account numbers and descriptions in their charts.
As seen in Figure 11 below, mSCOA enforces the uniform collection of local government transactional information around seven key segments and fifteen fundamental business processes.
7 BENEFITS TO MSCOA COMPLIANCE
According to the South African National Treasury 2, mSCOA will benefit municipalities in the following ways:
Improved data quality and credibility
Deeper analysis of sector comparison
Uniform recording of transactions
Uniform data sets
Standardised key business processes
Standardisation and alignment of government accountability cycle
Standardisation of account classification
A TWO-PRONGED APPROACH TO MSCOA-READY IAM
Municipalities are infrastructure-intensive organisations and make use of information management systems such as IMQS Web to effectively manage their infrastructure landscape, both in terms of finance and engineering. All municipal reporting on infrastructure-asset-related expenditure must conform to mSCOA requirements. This requires the municipality to align business processes and link information management systems with the seven mSCOA segments.
The foundation of mSCOA-ready Infrastructure Asset Management is the standardisation of processes, on the one hand, and the definition of accountability and transparency of information across all stakeholder groups, on the other.
The first step to mSCOA-ready IAM is to identify and define the systems and processes that underpin at municipality’s mSCOA approach and full life-cycle asset management strategy.
To clearly define responsibility and accountability in terms of infrastructure expenditure, it is necessary to define all standard business processes across municipal departments. An “As-is analysis” is conducted to identify current business-process shortcomings. The exercise highlights inconsistencies in terms of processes followed between departments and points to where responsibility is vague, as well as the method of communication fragile.
The next step was to draw up “To-be business process documents” that portray how, through systems integration, current manual interventions can be replaced.
On the systems side, financial budgets need to be set up within a municipality’s Financial System, where all mSCOA segments are included within each budget line.
In the process of unbundling asset components, the cost of each unbundled component needs to be accurately determined. This process is informed by data derived from the received project expenditure across all components.
Once the components are ready for physical use, and the apportioning of costs is complete, the components can be capitalised to an mSCOA compliant Financial Asset Register (FAR).
COMPREHENSIVE LIFECYCLE ASSET MANAGEMENT
Comprehensive Lifecycle Asset Management software solutions take people, processes and systems into account. From the IMQS perspective, such solutions are built on the foundation of integrated products that include:
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