Municipality mSCOA | 7 Segments of mSOCA Explained | What is mSCOA Compliance | 5 Benefits of mSCOA

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As part of South Africa’s initiatives to reform and improve the financial budgeting and reporting processes within the public sector, particularly, within municipalities, the Department of National Treasury introduced municipal Standard Chart of Accounts (or otherwise known as m-SCOA)
What is MSCOA?
m-SCOA is a standardised accounting system that aims to change how municipalities transact by standardising financial management processes through policy formulation, budgeting, in-year reporting frameworks and statements.
With effect from 1 July 2017, municipalities are required to capture all their financial transactions against a predefined classification framework, which will result in uniformity of line items in terms of revenue, expenditure, assets and liabilities.
mSCOA is not just a budget/finance reform - it is a business reform affecting the entire municipality.
The Objective of MSCOA:
m-SCOA provides for several mechanisms for strengthening accountability, facilitating budget reporting as well as adding value to the budget process, to ultimately improve Service Delivery.
The primary objective is to achieve an acceptable uniformity, credibility and quality from the collection of data.
Segments of MSCOA
The mSCOA frameworks introduced seven key segments and fifteen fundamental business processes which must be complied with to ensure the
successful transition and implementation of the new framework.
The seven segments are:
1. Funding: This segment focuses on the source of the funds to be used to procure a particular item
2. Function: The function segment focuses on identifying which function or sub-function the item should be recorded
3. Item: This segment addresses nature of the item to be procured or the nature of the transactions by classifying the transaction as either an asset, liability, revenue, capital or operational expenditure)
4. Region: The region segment identifies the geographical area to which the benefit of such item would be derived. For example, which ward, department, directorate will ultimately benefit from this transaction.
5. Classification: This segment identifies the specific organisational vote or sub-vote to be used to record the item or the transaction
6. Project: This segment identifies whether such item or transaction would constitute an operational or capital project
7. Costing: Ultimately, this segment identifies the impact of the item or transaction on the cost drivers, tariffs or tariffs formulations.
Fundamental business processes
1. Governance
2. Budget, Planning & Financial Modelling
3. Costing & Reporting
4. Project Accounting
5. Financial Accounting
6. Grant Management
7. Treasury & Cash Management
8. Procurement: SCM, Contract, Expenditure Creditors
9. Valuation Roll Management
10. Land use & Building Control Management
11. Real Estate & resource management
12. Asset Life Cycle & Maintenance Management
13. Customer Care, Credit Control & Debt Collection
14. Revenue Management & receipt
15. Revenue Cycle: meter reading, billing, debtors
Benefits of implementing MSCOA
When m-SCOA is properly implemented, municipalities will benefit through:
• An improvement of the quality and credibility of the data they provide
• A Deeper comparative analysis of each sector
• Alignment and Uniform recording of transactions
• Alignment of reporting information
Disclaimer:
This publication and the information included in it are not intended to serve as a substitute for consultation with a professional. Specific issues, concerns and conditions always require the advice of an appropriate professional advisor. The use of the contained information is at the user's own discretion.