ICF 8 & 9 September Durban
Feedback 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?
OUTCOMES AS AT 15 AUGUST 2015
Where is this work stream going
Achieved
Next Cycle Deliverables
 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.
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.
Summary position on piloting
Number of Municipalities
1. Accounting
Cycle
2. Hybrid with
definite plans
to migrate
3. Delayed
pilots
4. Metro’s
Pilots = 8
Total Municipalities = 82.5
Pilots = 7
Total Municipalities = 161
Pilots = 4
Total Municipalities = 34.5
SAP(3), Oracle(1)
BCX(3)
microMEGA(1).
Position
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 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.
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 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.
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Piloting Lessons Learned .
 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.
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Full
Costing
Region
Fund
Item
Function
Vendor View
BCX
BIQ
Fujitsu
microMega Rdata
microMega Sebata
Munsoft
Sage Evolution
SAMRAS
Vesta
Project
Segments 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.
Partial
Derived / Not used
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ICF 8 & 9 September Durban
What constitutes compliancy
to the Regulation?
Minimum Business Processes (Back to basics)
Regulation No 37577)
Hardware ICT Infrastructure
Must 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.
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Original Blue Print
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Minimum Business Processes ( Draft outline)
1
2
3
4
5
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IDP – Project based Budgets
Projects 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.
ERP
The 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.
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Business Process
(City of Johannesburg further breakdown)
Business Process
Corporate Governance
Internal Audit, External Audit, Audit Committee, Performance Management System, Reporting mechanisms,
Financial Risk Management, Oversight Committees
Municipal Budgeting, Planning and Financial Modelling
Financial Accounting
Costing and Reporting
Project Accounting
Planning, Forecasting, Budget Management
General Ledger Accounting , Accounts Receivable , Accounts Payable
Cost Planning, Cost Management
Operational, Typical Work Streams, Project Approval & Execution, Project Closing
Treasury and Cash Management
Cash Management
Procurement Cycle: Supply Chain Management, Expenditure Management, Contract Quotation for Procurement , Procurement Contract , Consumable Purchasing , Procurement, Return to
Management and Accounts Payable
Vendor , Physical Inventory / Inventory Count and Adjustment , Procurement of Third-party Resources,
Inventory Valuation for Year-End Closing
Grant Management
Full Asset Life Cycle Management including Maintenance Management
Allocation Management of Grant, Subsidies, Payments office
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
Real Estate and Resources Management
Human Resource and Payroll Management
Internal Maintenance
Rental, General Processes
Personnel Management, Personnel Time Management, Payroll, Training & Events Management
Customer Care, Credit Control and Debt Collection
Valuation Roll Management
Land Use Building Control
Revenue Cycle Billing
Customer Interaction, Events, Revenue Accounting , Fines, Debt collection
Valuation Roll Management
Land Use Management, Building Control, Spatial
Scheduling, Billing Order Management, Bill Customer, Exception Billing, Deeds Registration, Rates
Clearance, Refunds, Rebates
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External consolidation and review
• 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.
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Circular 57
 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.
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Engagement framework
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THANK YOU
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