Municipal financial systems have been overhauled. Under the new Municipal Standard Chart of Accounts (mSCOA) framework, municipalities have changed the way in which they do their finances. As a result, Stats SA implemented changes to its Quarterly financial statistics of selected municipalities (QFSSM) survey.

What is the QFSSM?

Not only does Stats SA publish data on unemployment, service delivery, poverty, economic growth and inflation, but it also collects financial statistics from government institutions. The QFSSM is a quarterly survey that sources detailed financial data from local government, which includes metropolitan, district and local municipalities.

The QFSSM has been through two major changes in recent times.

The survey, which began in 2008, previously sourced data from all municipalities. With effect from the September 2020 quarter, the QFSSM shifted gear to focus on the largest 130 municipalities in terms of expenditure. These selected municipalities represent 85% of total expenditure across local government. Annexure C in the latest statistical release provides a list of these 130 municipalities.

The second major change was mSCOA.

What is mSCOA and why it is important?

If you would describe mSCOA in a single word, it would be uniformity.

National Treasury spearheads the mSCOA project, with the aim of improving financial reporting across local government.¹ The project was initiated to address concerns around inconsistencies in local government financial processes, irregular reporting, and poor data integration. mSCOA enforces accounting standards, including the collection of financial data.²

According to the Municipal Infrastructure Support Agent, there are benefits to mSCOA when properly implemented: uniformity in the recording of transactions; improved data quality and credibility; uniformity across data sets; standardised key business processes; standardisation and alignment of the government accountability cycle; and standardisation of classifications.^3,4 Aligning all municipalities under the mSCOA umbrella is expected to improve service delivery. It also allows for comparative financial data analysis across local government.

Aligning QFSSM to mSCOA

The change in the way municipalities record and report on financial data would undoubtedly have an impact on Stats SA’s QFSSM survey. Changes had to be made to the survey in order to accurately represent financial data according to the new framework.

All municipalities were expected to capture financial transactions against mSCOA with effect from 1 July 2017. Many municipalities, however, struggled to convert their old systems (such as payroll) to the new standard. Other municipalities that managed to switch over to mSCOA experienced delays in capturing financial data into the new system.

In 2017 these difficulties resulted in a number of challenges for the QFSSM survey. In particular, Stats SA had difficulty sourcing information from municipalities. When information was sourced, it was sometimes incomplete. The systems used by a number of municipalities generated reports with erroneous figures that could not be used, and a few municipalities were unable to provide employee-related data.

Since 2017 many municipalities have addressed the difficulties that they faced, allowing Stats SA to implement the required changes to the QFSSM questionnaire. For more detail, Annexure D in the QFSSM statistical release provides a list of mSCOA-related adjustments that were made to the survey.

Stats SA published the first mSCOA-aligned QFSSM release in December 2021, covering data for the quarters ending September 2020, December 2020, March 2021, June 2021 and September 2021. The latest QFSSM release covers data for the December 2021 quarter, and is available for download here.

The next mSCOA-aligned publication will be the annual Financial Census of Municipalities, due for publication in July 2022. This report will cover data for all 257 municipalities.

¹ National Treasury, National Treasury rolls out training on municipal Standard Chart of Accounts (mSCOA) (available here).

² IMQS, What is mSCOA? (available here).

³ Municipal Infrastructure Support Agent (MISA), Infrastructure Delivery Management System (IDMS): Pilot roll out in selected municipalities through stakeholder engagement and training. Training Module 2 (download here).

⁴ Detailed information on mSCOA is available from National Treasury here.

Similar articles are available on the Stats SA website and can be accessed here.

For a monthly overview of economic indicators and infographics, catch the latest edition of the Stats Biz newsletter here.