Download mSCOA Risk Management

MSCOA RISK MANAGEMENT
Inculcating ethical culture through
governance processes for
sustainable service delivery
AUDIT & RISK INDABA
Presented by National Treasury: Chief Directorate Local Government Budget Analysis – 20 June 2017
WORKSHOP AGENDA
• Introduction
• mSCOA - High-level overview
• mSCOA and Risk Management
• Discussion - the way forward
INTRODUCTION – RISK MANAGEMENT
 A management function dealing with the uncertainties of
pure risk, the consequences and the impact thereof on
service delivery
 A management function with the objective of protecting
people and assets by eliminating or minimising the
potential for loss from pure risk and the provision of
resources to recover from losses that do occur
 A management function with the objective of propagating a
corporate culture in which there is an awareness of the
effects risk exposure has on the organisation, and which
results in the introduction of deliberate measures to
minimise the effects thereof
INTRODUCTION – RISK MANAGEMENT
Risk:
• Event or incident
• Timing is uncertain
• Outcome can be
Negative
Neutral
Positive
• Does mSCOA meet these criteria?
mSCOA Risk Management
Let’s share experience/ ideas
• Mention at least five (5) risks associated with
mSCOA implementation and identify the possible
outcomes thereof.
• Keep these handy as we will be referring back to
them several times during the afternoon.
MSCOA –
HIGH-LEVEL OVERVIEW
The seven (7) mSCOA Segments: an Overview
Municipal
Standard
Classification:
Against
which organisational vote
or
sub-vote
(in
the
municipality’s
unique
organisational
structure)
should the transaction be
recorded? Non-mandatory
Project: Does the transaction
relate to a specific project, and if
so, what type of project? Capital/
Operational/ Default
Ensures that all projects in the
IDP are aligned to the budget.
Costing:
Introduces
management accounting/
tariff modelling. What is the
impact of an item on
services?
Allows a municipality to
redistribute primary cost
between functions.
Region:
Which geographical area is
deriving the benefit from the transaction?
Administrative or Head office/ Wards/
Whole of Area – Country/Province/ Whole of
the Metro/District/Municipality
Function: Against which function
or sub-functions should the
transaction be recorded?
Enforces the Constitution, IMF,
GFS
classification,
and
Municipal Structures Act.
Item: What is the nature of the
transaction to be recorded?:
Revenue/ Expenditure/ Gains and
losses/ Liabilities/ Net Assets.
Enables the traditional financial
reporting and reconciliations. (The
Segment that most practitioners
are traditionally familiar with.)
Fund: What source will fund the transaction
and from which source is the revenue received?
Aligns Revenue and Expenditure to reflect
cash flow.
mSCOA – HIGH–LEVEL OVERVIEW




A financial classification framework
A system upgrade/ re-implementation/ replacement
Upgrade of hardware and connectivity
Review and update of policies and procedures
 Time – regulated in April 2014, go live 1 July 2017
 Extent – affects all financial management and internal
control systems
 Requirement – seamless integration
 Impact – organisational reform
Municipal
Accountability
Three-year budget
Cycle
mSCOA seamless
Five-year strategy
IDP
Budget
Annual implementation plan
integration
SDBIP
In-year
reporting
Implementation monitoring
Annual
Financial
Statements
Annual
report
Oversight
report
Accuracy of •
information •
depends on: •
Accountability reporting
Organisational structure aligned to basic services
Sound municipal policies, processes and procedures
Standard chart of accounts for municipalities
mSCOA Risk Management
Let’s share experience/ ideas
• Do you know the milestone requirements leading
up to 1 July 2017?
• Do you know the current status of your municipal
implementation?
• Will your municipality make the deadline?
• Do you have an action plan for 1 July 2017?
MSCOA AND
RISK MANAGEMENT
mSCOA and Risk Management
Risk evaluation:
 Possible outcomes
 Frequency
 Severity (consequences)




Mitigating measures
Residual risk
Risk treatment
Cost of risk
mSCOA Risk Management
Let’s share experience/ ideas
• Look at the risk(s) you listed earlier and update
the possible outcomes, if necessary.
• Attach a frequency and severity value to these
risks using your current municipal methodology.
• Evaluate the mitigating measures you have in
place.
mSCOA and Risk Management
Risk treatment:
 Avoidance (do not engage in activities)
 Elimination (eliminate the potential of loss)
 Reduction (reduce the likelihood of occurrence or severity
of the resultant loss)
 Transfer
Risk management options:
 Physical options
 Procedural measures
 Education and training
 Legal procedures
mSCOA Risk Management
Let’s share experience/ ideas
• Select suitable risk treatments AND risk
management options for the identified risk(s).
mSCOA and Risk Management
Risk Management Objectives:
 Financial – reduce the total cost of risk
 Resources – protect assets, physical and emotional well
being of employees
 Stakeholders, customers, community, public
Cost of risk:
 Insurance cost
 Opportunity cost
 Self funding cost
 Risk control cost
 Administrative cost
mSCOA Risk Management
Let’s share experience/ ideas
• Can we now cost the risks we have identified?
MSCOA AND
RISK MANAGEMENT:
THE WAY FORWARD?
mSCOA Risk Management
Let’s share experience/ ideas
• In relation to the objectives of risk management
and our municipal risk appetite, what is the way
forward?
• What am I taking home from this Audit and Risk
Indaba?
Questions
Thank you
for the opportunity
to discuss mSCOA –
Risk Management
with you