ON JULY 1 this year, after about three years in development, all of South Africa’s 257 municipalities went live with a new standardised financial classification framework – the Municipal Standard Chart of Accounts (mSCOA).
The system capable of supporting mSCOA was developed by Sebata, a MICROmega Group company and leading provider of integrated technology solutions and enterprise management solutions.
Before mSCOA, a chart of accounts in most municipalities was limited to item revenue (how funds were raised), expenditure (what funds were spent on), and cost centres (which departments were doing the raising/spending). There was also no standard methodology, so each municipality formulated its own structures and classifications – creating inconsistencies and raised flags regarding transparency, accountability and governance.
Many municipalities have also become dependent on funding from the National Budget – such is the case in Ndlambe and Makana. Ideally operations should be funded by revenue raised from property rates, electricity and water sales, refuse removal and sanitation charges, licensing, and building plan fees. But with massive arrears in the collection of rates and service charges, and a huge proportion of the municipal budget spent on salaries, this has not been possible. Ndlambe has lacked a capital budget from internal revenue for many years, and Makana is bankrupt.
The intent of the new Sebata-supported mSCOA is to standardise the financial management processes of all 257 municipalities by incorporating best practices and forcing accountability through:
• policy formulation,
• service delivery implementation,
• in-year reporting frameworks, and
• annual reports and statements
The standardisation of these processes provides the basis for significantly improved municipal reporting and will increase levels of transparency and governance; factors that will, it is hoped, lead to higher levels of municipal effectiveness.
The framework will also improve municipalities’ ability to raise revenue, manage spending, control leakages, and monitor performance, and the National Treasury will be better equipped to answer important questions like:
• How much national revenue should be directed to municipalities?
• How do electricity increases affect the sustainability of municipalities?
• What is the extent of deferred maintenance on municipal infrastructure?
• How does in-migration from rural areas impact on cities?
• What is the extent of service delivery backlogs?
• What funding is needed to address service delivery backlogs?
As with any change of this magnitude, Sebata has faced some challenges, especially regarding the sophisticated software development involved.
Carl Stroud, MD of Sebata, said: “If I had to single out one challenge, it would be the change management associated with this reform, because of the impact it has on all stakeholders within local government.”
While Sebata said its implementation and migration methodologies incorporated all possible eventualities and necessary corrective measures, the company recognises that the bulk of the work is yet to come.
“Our teams have tirelessly supported all our clients through this transition; however, it is anticipated that the full change management implications will continue over the medium to longer term”, said Stroud. “We look forward to meeting any challenges head on, with the same level of commitment shown by Sebata to date.”