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
asset disappears
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 theformulation of the budget (limited basket of resources). In a mSCOA perspective, this requiresbudget formulation (as per the MBRR) from a project level. Consequently the Project Segment isconsider 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• No proper planning in the acquisition of assets leading to poor service delivery due to the use of outdated or no assets;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 SEGMENTSP
RO
JEC
T S
EG
ME
NT
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 SEGMENTSF
UN
DIN
G S
EG
ME
NT 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 SEGMENTSF
UN
CT
ION
SE
GM
EN
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 SEGMENTSR
EG
ION
AL
SE
GM
EN
T
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 SEGMENTSIT
EM
SE
GM
EN
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 SEGMENTSC
OS
TIN
G S
EG
ME
NT
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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