ICF 8 & 9 September DurbanFeedback site visits & Minimum Business processes

Presented by National Treasury: Chief Directorate Local Government Budget Analysis

ICF 8 & 9 September Durban

What is the current status of piloting municipalities?

Achieved

System vendors have gone through modernisation through investment to achieve the core objectives of the regulation.

They are able to submit the segmental transactional data strings.

Next Cycle Deliverables

The business process engineering in most systems is at an advance stage to accommodate the accounting cycle with specific reference to: Integral budget tools

accommodating the IDP and Projects,

Seamless 3Rd party integrations based on the segments.

Removal of suspense accounts. Non financial reporting.

Final Stage Research

We are now at the Rubicon that require the issuing of minimum business process and system specifications.

External review and publish.

Where is this work stream going

OUTCOMES AS AT 15 AUGUST 2015

Summary position on piloting

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These are municipalities that discontinued the piloting attempt and their clients had to be flagged as risks as clear mitigation plans need to be brought to the table at the end of piloting to ensure that the non-piloting municipalities are not placed on risk

The pilots all have implemented to a high degree all segments with costing and region limitations. High instance of projects have been observed but all indicated that piloting were meant to complete their charts and thus virement is used.

Position

1. Accounting Cycle

2. Hybrid with definite plans to migrate

3. Delayed pilots

4. Metro’s

Pilots = 8Total Municipalities = 82.5

Pilots = 7Total Municipalities = 161

Pilots = 4Total Municipalities = 34.5

SAP(3), Oracle(1)BCX(3)

microMEGA(1).

Number of Municipalities

Initial shock due to change in environment were experienced but they all extremely proud and report great uptake from management due to their ability to show their alignment with service delivery.

The metro’s that we have engaged so far all have conceptually engaged with the requirements and are targeting 2017 for full compliance, Close milestone management will need to be followed to ensure that they do comply in time.

Piloting Lessons Learned .

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Pilots indicated that their biggest single risk were institutional change management requirements and that this should be highlighted to non piloting municipalities.

They found disparate systems in their environments that were duplications and even some triplications of work most of those processes needed to be and were centralised into the ERP solution.

That systems should not be defined as the software, but the processes required. “Manual is also a process”. That where municipalities elected to minimize the change by using short codes it appears that additional effort is

required to manage transactions. Project originating systems had the biggest change management requirement but functionally support the local

government accountability cycle. That All vendors is close to finalizing their configurations and in essence will have ungraded their systems to

accommodate for mSCOA: at varying levels. The mSCOA classification framework is structured in support of the local government accountability cycle IE proof

of concept achieved. That even though transacting on the segments has been achieved at varying levels, further independent evaluation

is required. The numbering and structure change of the long code will create extensive configuration and historical data

issues.

Segments used

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Vendor View

Project Function Item Fund Region Costing

BCX            

BIQ            

Fujitsu            

microMega  Rdata            microMega  Sebata            

Munsoft            

Sage Evolution            

SAMRAS            

Vesta            

             

Full

Partial

Derived / Not used 

• The above self assessment by vendors as indicated above indicate probable compliance but is not necessary shared by our observations at pilots and as such is an indication of ability versus actual.

ICF 8 & 9 September Durban

What constitutes compliancy to the Regulation?

Hardware ICT InfrastructureMust have access to Hardware that need to be sufficient to run the software.

Financial and Business Applications or Systems must: 1) Provide for hosting GL structure.2) Be able to accommodate and operate 3) Portal / Report Extraction?

At a Minimum the municipal chart must: 1) At a transactional level accurately record against segments.2) Must contain the segments as per schedule.3) May not map, extrapolate or otherwise do not reflect.

Minimum Business Processes (Back to basics) Regulation No 37577)

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Original Blue Print

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65432

1IDP – Project based BudgetsProjects Linked to the IDP as defined in the schedule of the regulations. In the piloting we found that where a matrix that start with project and then function allows for easy arrival at the cost Centre or vote.

Integration If the system is not a full ERP (Disparate systems not allowed) integration is non negotiable

Due to the historical non focus on integration it seems to be an issue for most systems for the Project based integration of IDP, Performance management (SDBIP) Asset management inclusive of PMU with resultant under spending of grants. This will need to be addressed very quickly.

Business processes Business process as described in the regulation is understood to include non financial information and as can be seen from the self assessment we are grappling with the processes due to historical system configurations.The main focus for us during the next engagement cycle will be on asset management that is closely augmented by the grant, land and real estate business processes. For this purpose we are distributing in addition to circular 2 required submissions detail business process template assessment tools.

ERPThe regulation consistently hinted that an enterprise resource management solution would be the basis of measurement when minimum system specification are to be released. Based on the self assessment most vendors are close to achieving this requirement, be it through integration or 3rd party systems.

Minimum Business Processes ( Draft outline)

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Business Process (City of Johannesburg further breakdown)

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Business ProcessCorporate Governance Internal Audit, External Audit, Audit Committee, Performance Management System, Reporting mechanisms,

Financial Risk Management, Oversight Committees

Municipal Budgeting, Planning and Financial Modelling Planning, Forecasting, Budget ManagementFinancial Accounting General Ledger Accounting , Accounts Receivable , Accounts Payable Costing and Reporting Cost Planning, Cost ManagementProject Accounting Operational, Typical Work Streams, Project Approval & Execution, Project Closing

Treasury and Cash Management Cash ManagementProcurement Cycle: Supply Chain Management, Expenditure Management, Contract Management and Accounts Payable

Quotation for Procurement , Procurement Contract , Consumable Purchasing , Procurement, Return to Vendor , Physical Inventory / Inventory Count and Adjustment , Procurement of Third-party Resources, Inventory Valuation for Year-End Closing

Grant Management Allocation Management of Grant, Subsidies, Payments officeFull Asset Life Cycle Management including Maintenance Management Asset Acquisitions, Asset Retirement, Asset Postings, Asset Under Construction , Periodic Processing (Asset

Closing), Asset Acquisition through Direct Capitalization , Asset Acquisition for Constructed Assets

Maintenance Management Internal MaintenanceReal Estate and Resources Management Rental, General ProcessesHuman Resource and Payroll Management Personnel Management, Personnel Time Management, Payroll, Training & Events Management

Customer Care, Credit Control and Debt Collection Customer Interaction, Events, Revenue Accounting , Fines, Debt collectionValuation Roll Management Valuation Roll ManagementLand Use Building Control Land Use Management, Building Control, SpatialRevenue Cycle Billing Scheduling, Billing Order Management, Bill Customer, Exception Billing, Deeds Registration, Rates

Clearance, Refunds, Rebates

External consolidation and review

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• The steering committee resolved that after this extensive engagement framework that an external party will review and compile the final business process and requirements.

• You input and responses to the questionnaire as well as contributions in the follow up engagements will guide the final output.

Circular 57

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Circular 57 is problematic and regular attempts are made to bypass it. Section 5(2)(d) of the MFMA to be institutionalised in addition to the supply chain

regulation to ensure the systems market remains stable post mSCOA and circular 57. Due to vendors not attending to non pilots and their systems at these non piloting

municipalities are aged and based on legacy architecture, municipalities are therefore worried not only for the purpose of mSCOA but also due to functional and physical constraints and are therefore looking at the market for modern solutions. (This is exasperated by unfavourable audit comments about systems.)

Small to medium sized municipalities cannot afford an ERP type system in both operational as well as original capital and configuration outlay. (This includes both the monetary as well as the requisite expertise)

Follow up on circular 57 giving minimum business process. Independent assessments not Treasury.

Engagement framework

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THANK YOU

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