mSCOA Illustrative Annual Financial Statements – Issued 29 July 2019
On 29 July 2019 National Treasury issued the final mSCOA illustrative Annual Financial Statements. A key objective of the specimen is to be able to link up the mSCOA segments especially the Item segment to the Annual Financial Statements. In other words be able to visualise the mSCOA datastrings in an Annual Financial Statements context. This process has already been completed for the Budget Regulations (Schedule A, B and C).
CaseWare mSCOA template
CaseWare’s GRAP template is currently in use by a wide range of users which includes; Public Entities, TVET Colleges, Trading Accounts, Traditional Authorities, Municipal Entities and Municipalities. It is a template based on the GRAP Standards, as a general purpose template. This means the template has been developed for a wide range of users. With the issue of the mSCOA specimen, National Treasury has set guidance for more industry specific application of the GRAP standards .
CaseWare has in response started with the development of a new template and called it the mSCOA template, which only uses the Datastrings derived from your ERP System as the source of information (Trial Balance). It will then automate the production of a set of Annual Financial Statements which looks like the mSCOA specimen but with all the features and functions users expect from CaseWare Working Papers.
Roadmap and the way forward
CaseWare will aim to launch this new template on 16 October 2019. Our team has made incredible progress up to now and we are happy to report that we are in the advanced stages of the development process. We wanted to give our clients a sneak preview of the new template. Please look at the video below by clicking on the hyperlinked thumbnail:
2018/2019 Annual Financial statements
National Treasury did indicate in its communication that the illustrative Annual Financial Statements can be used as a guideline to assist municipalities with the preparation of their 2018/19 Financials. To do this Municipalities needs to consider the following to ensure they make an informed decision:
- Municipalities are ultimately still responsible for the completeness and correctness of presentation and disclosure requirements as required by the GRAP standards.
- Municipalities will be audited to comply with the GRAP standards and compliance with regards to approved legislation only. The first priority is to implement any changes to the GRAP standards and any other applicable legislation.
- Any information that is included in the Annual Financial Statement will be subjected to an audit. If any new information is added, GRAP 1 requires comparative information and if not provided in the previous years will also be subjected to an audit. Additional information not required by the GRAP standards specifically, but included in the Annual Financial Statements will also be subjected to an audit. All values need to be substantiated by supporting evidence.
- Due process needs to be followed by the Municipality in changing presentation and disclosure of the Annual Financial Statements that will be audited. That is part of the reason why oversight committees introduced the Interim Financial Statements process. Stakeholders need to be given the opportunity to engage and scrutinise changes and give the relevant input. The requirements of GRAP 3 should also be carefully considered and complied with in this regard.
- This is the 2nd year that mSCOA is the base classification framework as well as the 11th year in relation to following the GRAP standards. A very important point to take note of is the concept of comparability and consistency. Municipalities need to manage this process carefully.
- The illustrative is a guideline to assist Municipalities.
The latest GRAP release template (GRAP 2018.10.05) is fully compliant with the requirements of the GRAP standards and legislation changes applicable for the 2018/2019 Financial year. This template also includes some of the additional disclosures added in the mSCOA illustrative (e.g. Funding of assets and Maintenance of assets, but as noted above, these will be subject to audit, so Municipalities must ensure they have sufficient audit evidence to support the additional disclosure).
Although the current GRAP template does not look exactly like the mSCOA illustrative, if a Municipality continue using this template for the 2018/2019 year, it would be consistent with the prior year Annual Financial Statements, it would have been the the basis used for the Interim Financial Statements which oversight committees already approved and would include all the relevant GRAP Standards and legislation requirements for 2018/2019.
Most importantly, municipalities needs to discuss the above with their external auditors to ensure all parties are aligned with the requirements for the 2018/2019 audit.
The use of the mSCOA template which CaseWare will be rolling out in the near future as stated above, will also be based on an extensive stakeholder change management process. The ultimate success criteria of this template will be to show the link between the Datastring to the Annual Financial Statements.
Contact your Account Manager for any pricing enquires.
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