TRANSITION

Municipal transformation

SAP Africa COO, Mehmood Khan
Mehmood Khan 3 (2).jpg

Following the recently published Municipal Regulation on Standard Chart of Accounts Regulation (MSCOA) by the South African National Treasury, SAP South Africa is now engaging with its ecosystem and local government in order to assist municipalities to simplify its functions and new regulatory processes. 

To support municipalities and the business community transition swiftly from a technology perspective, in alignment with government, SAP is working closely with South African customers and partners in evaluating the impact of the legislation. Several workshops have already been held with the metro’s to assess their understanding, preparation for MSCOA and their transition to the new regulation.

SAP’s extensive public sector experience with local governments across the globe has to date shaped a unique SAP Urban Matters program that is focused on citizen-centric efficient cities. SAP Africa COO, Mehmood Khan, says SAP clearly has a keen understanding of local government municipalities and recognises that they require more than just cutting edge technology to meet new regulations in today’s challenging economy.  

The new regulation for municipalities involves a multi-dimensional framework designed to help municipal managers follow a prescribed method for diligently recording and classifying all local municipal financial transactions and information. According to the new regulations, there are minimum specifications for financial and related systems applications required before the Standard Chart of Accounts (SCOA) can be implemented. For many municipalities this has major technology implications, for example, the specifications of MSCOA indicate that the new system must operate on a web-based integrated platform and incorporate all key functions and processes of a municipality, says Khan in an interview with Service:

Can you give us a detailed explanation of the recently published Municipal Regulation on Standard Chart of Accounts Regulation (MSCOA) by the South African National Treasury?

In April 2014, National Treasury published in the Government Gazette, the Municipal Regulation on Standard Chart of Accounts. The purpose of which is to propose segments and a classification framework for the standard chart of accounts to be used in local government. The new regulation aims to standardise all municipal processes across the country by providing a national standard framework for the recording and classification of municipal budget and financial information. Similar forms of classification are also used in National and Provincial Governments.

How will the new regulation standardise all municipal processes across the country by providing a national standard framework for the recording and classification of municipal budget and financial information?

National Treasury gives guidance on the minimum business processes that municipalities have to implement.  These include municipal budgeting, financial accounting, treasury, procurement, revenue management etc. The Municipal Standard Chart of Accounts provides lists of segments that form the chart of accounts. By using these guidelines and segments, National Treasury will ensure that revenue and expenditure, for example, are classified the same across all the municipalities in the country, thus making it easy to benchmark, align with national and provincial governments and use for national policy co-ordination and reporting.

What are the benefits of this legislation for municipalities?

The legislation is meant to help fulfil National Treasury and other stakeholder reporting requirements, such as Nersa and the Department of Water Affairs. Some of the benefits for municipalities would include proper accounting for funds used, service delivery and reliable financial reporting. Also, with a uniform approach to accounting, it will be easy to share resources and skills across the municipalities.

What will the biggest challenges be?

The biggest challenge by far would be ensuring that all municipalities meet the deadline of 1 July 2017. Change management and organisational readiness are some of the challenges we envisage.

Why did SAP decide to support municipalities and the business community in this regard?

SAP is committed to ensuring that its solutions cater for local requirements. As part of our Africa Growth Plan, we have a program to further develop our solutions to meet country specific requirements. Our support in this regard allows us to remain in the leadership position as far as South African requirements are concerned, and also helps our customers with a path to become SCOA compliant with the full support of the SAP product organisation.

How will SAP be working with the South African National Treasury?

SAP, just like all other system vendors, participate in integrated consultative forums and various training opportunities provided by National Treasury. Through these, and other resources that have made publicly available, we are able to engage with National Treasury and our customers to understand the requirements further and provide solutions to what needs to be done to be compliant.

Can you please expand on the plan of action for the go-live of SCOA at municipalities by 1st July 2017?

Each one of the municipalities currently has its own internal organisation. Therefore much of the go-live will imply that each one of the municipalities first do their homework: meaning an internal review on how SCOA affects the current process and what needs to be adapted to be compliant with the guidelines from National Treasury. SAP will support the municipalities to be compliant with SCOA, by automating the process and incorporating the National Treasury guidelines in a standard solution. Additional information on how SAP supports SCOA processes will be regularly published. However the first step is for the municipalities to ensure internal readiness to follow those processes.

You are looking at readiness for the 2017/18 fiscal year budgeting cycle, which is estimated to be complete by December 2016. Is this not optimistic?

We are in contact with the South African National Treasury about a detailed plan of action for the go-live of SCOA at municipalities by July 2017, including readiness for the 2017/18 fiscal year budgeting cycle. It will certainly be a challenge, but we believe it is achievable.  We will work with the municipalities to ensure that their implementation plans are also in line with the timelines required.

You have already had workshops with the Metros to assess their understanding, preparation for MSCOA and their transition to the new regulation. How did these sessions go? And what is the general feeling of local government on this score?

The outcomes of the workshops were very positive. Each of the Metro’s that run SAP has implemented it differently. And therefore we had to understand what each metro’s plans are and what needed to be done, by all involved, to meet the requirements.

 

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