ASSOCIATED BENEFITS OF mSCOA 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

2. Acquisition

3. Operation & Maintenance

4. Disposal or Re-use

1. Planning & Budgeting

Where requirements of a new asset are planned for & established. Resources are set aside

Where an asset is purchased, constructed or

otherwise created

Where asset is used for its

intended purpose & maintained

Initiated when economic life

has diminished or the service

provided by the asset disappears

Standard Chart of AccountsImproved Service Delivery

4

ACCOUNTABILITY CYCLE & mSCOA

IDP •5 Year Strategy

Budget• 3 Year

Budget

SDBIP• Annual Plan to

Implement

IYR • Monitoring

AFS • Oversight

Annual Report

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.

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.

Accountability Reporting• Incorporation of GRAP• Improved

standardisation• Improved audit

process across 278• Consistent

comparability• Transparency

Classification exist for :• Planned, WIP, In use,

Held for disposal and Disposed in the GL.

• Perfect alignment to sub-system

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• No proper planning in the acquisition of assets leading to poor service delivery due to the use of outdated or no assets;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

PRO

JECT

SEG

MEN

T

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 SEGMENTSCOA 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

FUN

DIN

G S

EGM

ENT 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 SEGMENTSFU

NCT

ION

SEG

MEN

T

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

REG

ION

AL S

EGM

ENT

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

SEG

MEN

T 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

COST

ING

SEG

MEN

T

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

QUESTIONS

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