Project Status Report s2

PROJECT STATUS REPORT

mSCOA Implementation Umzumbe mSCOA Implementation Report 2016

Contents 1. PROJECT DETAILS...... 3 2. EXECUTIVE SUMMARY...... 3 3. PROJECT DELIVERABLES...... 3 4. DETAILED STATUS REPORT...... 6

4.1. PROJECT SCHEDULE...... 6

4.2. PROJECT EXPENSES...... 7

4.3. PROJECT RISKS...... 7

4.4. MITIGATION MEASURES...... 7

4.5. PROJECT ISSUES...... 8

4.6. RECOMMENDATIONS...... 9 Umzumbe mSCOA Implementation Report 2016

1 PROJECT DETAILS

Project Name : Umzumbe Local Municipality mSCOA Report Recipients : Umzumbe Local Municipality Project ID : Report Prepared By : Tendai Mandaa Project Sponsor : Walter Muwandi Report Preparation Date : 12 February 2016 Project Manager : Nozipho Nkomo/ Jo-Ann Savari Reporting Period : 1 - 12 February 2016

2 EXECUTIVE SUMMARY

Project Description : SCOA IMPLEMENTATION Overall Status : In Progress Project Schedule : The project started on the 25th of February 2016

Project implementation has commenced, the period 2 – 5 February was predominantly utilized to conduct budget workshops where the departmental budgets were discussed with the relevant departments to break it down to the detail that is required on mSCOA. These have been completed and the budget was successfully broken down to the mSCOA posting levels. From 8 – 12 February the project effort was on consolidation and review of the budget prepared per department as well as setting up Municipal Billing and creation of the balance sheet side of the chart of accounts.

3 PROJECT DELIVERABLES Deliverable Components Description

Drafting of planning documents and convening of the project 1 Planning Phase kick-off meeting. Create user readiness and mSCOA enabled environment and

2 Change Management also creating an awareness to the Municipality and other stakeholders on mSCOA and its importance. Assessment and testing of IT infrastructure for compatibility Assessment of IT 3 and ensuring that it meets minimum requirements of various Infrastructure systems. Identification of project and alignment of activities to mSCOA Alignment of IDP/SDBIP 4 segments including the breaking down of the budget per to mSCOA segments. activity. Umzumbe mSCOA Implementation Report 2016

Deliverable Components Description Analyzing and Understanding the current municipal business processes and 5 configuration of configure them to suit the mSCOA system. business processes

Analysis and feasibility Quality checks of integration to third party systems (e.g. 6 testing for third party Payroll, fixed assets, etc) systems (integration)

Alignment and Ensuring that mSCOA segments are available on the live 7 importing of mSCOA database. segments

Creation of mSCOA 8 Creation of the charts of accounts as per IDP/SDBIP. database

Charts of accounts Assigning current Chart of Accounts votes to mSCOA votes for 9 migration and analysis take on balances. Importing Budgets on Setting up budgets based on the mSCOA database and 10 mSCOA Database incorporating splits as per IDP/SDBIP.

Historical transaction Creation of the conversion lead schedule for audit trail 11 analysis and conversion purposes.

User processing in mSCOA database and running reports to 13 User Acceptance Testing test full system functionality on mSCOA database.

14 Training of Staff Training of all municipal staff on mSCOA.

Testing of the compatibility of third party systems to mSCOA 15 System Testing system. Processing of transactions on both old and new database to ensure that users get used to the mSCOA votes. 16 mSCOA Parallel Run

17 Go Live Municipality officials fully running on the live mSCOA database.

Handholding and Coaching and support of staff to ensure embedment and full 18 Support understanding on the mSCOA system. Umzumbe mSCOA Implementation Report 2016

Project Risks Refer to 2.3

Project Issues Refer to 2.5

Project Changes Project commencement date from October 2015 to January 2016. Umzumbe mSCOA Implementation Report 2016

4 DETAILED STATUS REPORT 4.1 Project Schedule

Section Status Action plan 15-19 Feb-16 Responsibility Setup of Municipal Billing Completed 10/02/2016 Complete Camelsa Testing of Municipal Billing Waiting for completion of chart of accts so transaction types and Camelsa debtors balances are setup. Budget compilation workshops Completed 05/02/2016 Complete Camelsa Budget Consolidation and resolving of Completed Complete Camelsa errors 09/02/2016 Creation of budget votes i.e. Income Halted awaiting installation of Branch accounting module as all Procurement of Branch Camelsa & and Expenditure side of Chart of new accounts will require linking to the new branch and therefore accounts to be done. We shall Umzumbe Accounts (COA) and budget capturing cannot be set up without Branch Accounting Module run the database on a small local network of our laptops and edit it there while we await the purchase of Branch Accounts. Conversion of Balance Sheet elements In progress. Challenges faced in that there are several votes on old Clean-up of votes required. Camelsa & of the Chart of Accounts. chart of accounts that have inaccurate descriptions and nobody Currently we shall convert only Umzumbe has knowledge on what they pertain to. the accounts on the current and prior year TB. Migration of users to new database Completed 10/02/2016 Complete Camelsa & Umzumbe Setup of Access Permissions In progress IT and SCM managers are reviewing the permissions Results to be received by Camelsa & using the guidelines provided. Set-up of groups in progress in Tuesday for update onto the Umzumbe consultation with Umzumbe. system. Transaction Types Pending. To be set up when the COA has been loaded onto the To be set up when the COA is Camelsa system. set-up. Branch Accounting Waiting for quote to be provided by Camelsa Module to be procured and Camelsa installed by Friday 19 February. Supplier Database In progress SCM Manager to provide final Umzumbe database for capturing onto Evolution. Umzumbe mSCOA Implementation Report 2016

4.2 Project Expenses Expense Type Budgeted Actual Actual Summary Expenditure Expenditure Variance (R) (R) (R)

Travel mileage 6 182.80 6 182.80 - 1 508km @ R4.10 Tollgates 409.00 409.00 - Tollgates Other Expense 0.00 1 038.90 1 038.90 Meals on day 1 and breakfast day 2 Accommodation 40 850.00 40 850.00 - Accommodation for 5 consultants for 11 nights Total 48 480.70 48 480.70 1 038.90

4.3 Project Risks Accuracy of Adjusted Budget Allocations

The adjusted budget was originally created using a non mSCOA compliant budget structure. While splitting this budget to the level of detail required on mSCOA it was noted that the basis of the budget re-allocations was not factual as most items were based on approximations. This may pose a risk in that some budget votes may be depleted while others are overfunded as the budget allocations are not factual. A proposal was made that come 2016/17 budgeting all allocated budget amounts must be consumption based and factual. The budget must also be created using the new mSCOA compliant structure.

4.4 Mitigation Measures

Risks Mitigation Measures

Accuracy of Adjusted Budget Allocations Change of budget approach at 2016/17 budget sessions to ensure the zero based budgeting approach is implemented. Umzumbe mSCOA Implementation Report 2016

4.5 Project Issues

1. Unavailable posting levels on function segment.

While working on the community services budget it was noted that the function segment does not seem to have a posting level for Indigent Support – Seed Distributions and service delivery expenses. Furthermore, another expense for free basic electricity and solar could not be traced to a posting level in the item segment. The closest codes under the item segment are as shown below; Posting Breakdown Definition 1 2 3 4 Level Required (Yes/No) (Yes/No) No No Municipal additional rebate above the general Expenditure Contra Accounts Revenue: Discretionary residential rebate Revenue Cost of Free Basic Residential Rebate Services No No Revenue foregone resulting from the provision Expenditure Contra Accounts Revenue: Electricity of free basic services. The revenue sacrificed Revenue Cost of Free Basic are included in revenue with an equal deduction Services in expenditure. 50 Kwh per household per month No No Revenue foregone resulting from the provision Expenditure Contra Accounts Revenue: Municipal Housing of free basic services. The revenue sacrificed Revenue Cost of Free Basic are included in revenue with an equal deduction Services in expenditure. No No Revenue foregone resulting from the provision Expenditure Contra Accounts Revenue: Sanitation of free basic services. The revenue sacrificed Revenue Cost of Free Basic are included in revenue with an equal deduction Services in expenditure. Free sanitation service No No Revenue foregone resulting from the provision Expenditure Contra Accounts Revenue: Solid Waste of free basic services. The revenue sacrificed Revenue Cost of Free Basic are included in revenue with an equal deduction Services in expenditure. No No Revenue foregone resulting from the provision Expenditure Contra Accounts Revenue: Water of free basic services. The revenue sacrificed Revenue Cost of Free Basic are included in revenue with an equal deduction Services in expenditure. 6 kl per household per month Umzumbe mSCOA Implementation Report 2016

It seems there is an error by treasury as all the items in this section are not at a posting level and breakdown is not allowed leaving us with no posting level.

2. Item “Petty Cash” on budget

The budget presented to us has the expense item ‘Petty Cash”. Petty cash cannot be an expense line item as it is actually and asset. It only becomes an expense when it is used. Therefore we cannot have an operating expense name petty cash on our expenditure budget.

3. Provision for bad debts

In our budget compilation process it we realized that there is no budget allocation for bad debts provision. This is a real cost that needs to be budgeted for as it shall be deducted from revenue.

4. Typical work stream segments requiring breakdown

Several segment codes under typical work streams were found to be sitting at a non-posting level that allows for breakdown. These were broken down by us and will require unique codes to be created on the system. There were about 193 items that require breakdown and the database is to be updated with the new codes.

5. Expenses with different funding sources resulting in multiple votes for the same expense line

While compiling the budget votes it was noted that there are some expenses that are on the budgets that are funded by several different funding sources. For example some electrification projects were funded by Integrated Electrification Program (INEP), Equitable Share, Housing Grant and the Municipal Infrastructure Grant (MIG). As a result this one expense item for R3million was then broken down to 4 expense lines with the same segment codes except for the funding segment. Confirmation is needed to ascertain if this treatment though representative of the client’s practice is allowed by Treasury and correct. Further to that this allocation is being done to fund expenditure from all available funding sources on the departments’ funding allocation. This practice also raises another issue that there is no guarantee of consistency in what funding source will fund what expense in subsequent budgeting periods. Consequently we may need to continue creating new accounts for the same expense in line with what funding source will have been used to fund that expense. 4.6 Recommendations Issues Recommendation 1. Unavailable posting levels on Follow up with National Treasury to determine the required treatment or function segment. rectify if this is an error.

2. Item “Petty Cash” on budget This should be taken off the budget and the actual expenditure it is used for noted.

3. Provision for bad debts This should be added to the budget.

4. Typical work stream segments Assistance shall be sought from pilot sites on how to create and append requiring breakdown these breakdowns to database’s chart of accounts.

5. Expenses with different funding Clarification should be sought from National Treasury on how best to treat sources resulting in multiple votes such instances. for the same expense line Umzumbe mSCOA Implementation Report 2016