Standards in practice: mSCOA and GRAP
When mSCOA and GRAP disagree, which one do you follow?
The trial balance shows one figure, the AFS need another, and the auditors want to know why. How mSCOA and GRAP fit together, and how to handle the cases where they seem to disagree.
Most municipal finance teams have been through it. The trial balance shows one figure, the annual financial statements (AFS) need to show another, and the auditors want an explanation. When we trace these differences back, we usually end up at mSCOA.
Municipalities have used the Municipal Standard Chart of Accounts (mSCOA) since 1 July 2017. Nine years later it is still often treated as something the system vendor takes care of. But mSCOA is also the ledger your financial statements come from, so it deserves more attention than that.
With the 2025/26 audits under way and chart version 7.1 now in use for 2026/27, we thought it worth setting out how mSCOA fits with Generally Recognised Accounting Practice (GRAP), and what to do when the two seem to say different things.
A quick explanation of mSCOA
Think of mSCOA as one filing system for all municipal money. Before it came in, every municipality had its own chart of accounts. Three neighbouring towns could record the same refuse truck repair in three different ways, which made it very hard to compare one municipality with another.
The Minister of Finance changed that through the mSCOA Regulations, which were gazetted on 22 April 2014 and applied to every municipality and municipal entity from 1 July 2017. National Treasury looks after the chart and releases a new version each year. All 257 municipalities now use the same one.
Every transaction is given a code with seven parts, called segments. Each segment tells you something different about the transaction.
| Segment | What it tells you |
|---|---|
| Project | Which project in the Integrated Development Plan (IDP) and budget the transaction belongs to, and whether that project is capital or operational |
| Function | Which municipal function or service it relates to |
| Item | What kind of transaction it is, for example revenue, expenditure, an asset or a liability |
| Funding | Where the money comes from |
| Regional Indicator | Which ward or area benefits |
| Costing | How internal costs are charged between departments, so that the full cost of a service can be worked out |
| Municipal Standard Classification | Which department or vote is responsible in the municipality's own structure. This is the only segment Treasury does not prescribe |
Swipe sideways to see the whole table.
The municipality sends this information to Treasury in files known as data strings. The budget goes in when it is tabled, when it is adopted and when it is adjusted. Actual figures go in every month, and the pre-audit and audited figures follow at year-end. Treasury uses the strings to produce its reports on local government.
It helps to remember that mSCOA is not an accounting standard. It has nothing to say about when revenue should be recognised or how an asset should be measured. Its job is to tell you where to record a transaction once those accounting decisions have been made.
Where mSCOA affects the financial statements
The financial statements can only be as good as the ledger behind them. The trial balance is built on the Item segment, and every line in the statements is mapped from it. If transactions are coded properly during the year, the statements come out of the system with very few adjustments. If they are not, the finance team spends July and August passing correcting journals.
These are the problems we see most often.
The first is a capital project that was set up as operational. That one mistake throws out property, plant and equipment, work in progress and repairs and maintenance all at once. Repairs and maintenance is picked up through the Project segment, so the way projects are set up matters more than people expect.
The cash flow statement is another. Treasury's cash flow tables are populated from the Funding and Item segments. When receipts are miscoded they land under the wrong activity, and the tables no longer agree with the cash flow statement in the AFS.
The comparison of budget and actual amounts required by GRAP 24 only works when the budget and the actuals sit on the same codes. In the same way, the segment note under GRAP 18 depends on the Function and Regional Indicator segments, and loose coding there means the note will not agree to the face of the statements.
Comparative figures need care too, because each new chart version moves or renames some accounts and last year's figures have to be remapped.
The one that causes the most trouble is journals passed outside the system. When adjustments are made only in the AFS software, the ledger, the data strings and the audited statements end up showing three different sets of figures. Treasury has been specific about this. Adjustments agreed with the Auditor-General must be processed in the core financial system and not in the AFS tool.
Treasury also publishes specimen financial statements built on the mSCOA chart and updates them each year. The 2025/26 specimen is based on chart version 6.9 and the latest GRAP amendments. It is a guide to presentation and does not replace GRAP, although metros are already required to use the format for their separate trading service statements.
So which one do you follow?
For the annual financial statements, you follow GRAP. Section 122(3) of the Municipal Finance Management Act (MFMA) requires the statements to be prepared in accordance with GRAP, and the Auditor-General audits them on that basis.
mSCOA has a different purpose. It is a way of classifying transactions so that they can be recorded and reported consistently. The Regulations require the chart to be aligned to the accounting standards, which means the two were designed to agree with each other.
A simple way to keep them apart is to ask what kind of question you are dealing with. Whether to recognise something, when to recognise it, at what amount, and how to present and disclose it in the AFS are all GRAP questions. Which code the transaction carries in the ledger is an mSCOA question. Budget and in-year reports follow the Municipal Budget and Reporting Regulations and are populated from mSCOA data.
In our experience, genuine conflicts are rare. Treasury updates the chart every year to keep up with GRAP. Version 7.1, for example, added accounts for capitalising conversion costs to water inventory under GRAP 12, realigned the cash flow linkages to GRAP 2 and introduced intercompany items to support consolidation under GRAP 35. When a team tells us that mSCOA and GRAP conflict, the cause is usually an old chart version, an incorrect mapping or a system that was never set up properly.
Where there is a real difference, it will be a difference in classification. An account may have a different name in the chart, or be grouped differently, from the line in the AFS. That is never a reason for the amounts to differ. This is how we suggest handling it.
- Account for the transaction the way GRAP requires, and do it in the financial system and not only in the statements.
- Post it to the mSCOA item that fits best. Do not create your own accounts, and do not force it into an item that describes something else.
- If the mSCOA item and the AFS line are named or grouped differently, write down the mapping. The amounts in the trial balance, the data strings and the statements must still agree.
- Log the issue on Treasury's mSCOA FAQ portal so that it can be considered for a future chart version.
Issues for version 7.2 had to be logged by 31 August 2026, so anything that comes up in the current audit will be considered in the round after that.
The budget manager as mSCOA champion
We believe the budget manager is the right person to champion mSCOA, because everything in mSCOA starts with the budget. The budget is loaded into the system code by code, and a system that is set up properly will not allow spending against a code that has no budget. If the budget is on the wrong code, the expenditure follows it there and so do the financial statements. In practice the budget office has designed the year's ledger before the first invoice is captured.
That control can be overridden, though. Treasury still finds spending against items with no budget when it reviews the data strings, and it treats this as a sign that budget controls were bypassed.
A budget manager who takes on this role would normally do the following.
- Lead the change to each new chart version and explain to the rest of the municipality what has changed.
- Make sure the budget is captured in the financial system at the right level of detail, and not kept in a separate spreadsheet.
- Check the data strings before they are sent to Treasury. Treasury's database locks at 00:00 on the tenth working day of each month, and closed periods are not reopened to fix errors or late submissions, so it is risky to leave submission to the last day.
- Agree with the AFS team early in the year how accounts will be mapped to the financial statements. August is too late.
- Work with the line departments, because they are the ones choosing codes every day.
- Keep the mSCOA steering committee meeting regularly and the road map up to date.
The road map has to be revised every year with the budget, adopted by council and uploaded to Treasury. From 2026/27 each municipality also completes a self-assessment on Treasury's web-based Financial Management Capability Maturity Model (FMCMM) system, and the action plan that the system produces is attached to the road map.
Treasury monitors progress and has said that this will form the basis for decisions on withholding the equitable share where a municipality does not comply with mSCOA. Treasury also expects the municipality to own its road map, and has said it should not be written by a vendor or a consultant.
Being the champion does not mean carrying the responsibility alone. Treasury does not prescribe who the champion should be, and under the Regulations the municipal manager remains responsible.
Getting people to change how they work
mSCOA tends to fail where it is left to the finance or IT department. Treasury describes it as a reform of the whole organisation, and that is how it needs to be managed.
Most municipalities face the same difficulties. Training was done once, several years ago, and many of the people who attended have since left. In some cases the system vendor understands the setup better than the municipality's own staff.
The municipalities that manage it well have a few things in common. The municipal manager and the CFO support it openly and keep it on the agenda of management meetings. Everyone who selects codes, including project managers, supply chain, HR and asset staff, is shown what their part is. Training is short, practical and repeated, and it is designed around what each role actually does.
They also correct coding errors in the system in the month they happen, instead of leaving them for a year-end journal. They keep track of data string errors, correcting journals and differences between the ledger and the statements, and they report on these every month. And when they use vendors or advisers, they make skills transfer to their own staff a condition of the work.
This takes steady attention through the year, but it does show in the audit outcome.
How we can help
Ambition Partners Advisory works with municipalities on mSCOA from the budget through to the audited financial statements. Our team has prepared GRAP financial statements and worked on municipal financial systems, so we understand both sides. We can help with the following.
- mSCOA implementation and maintenance, including chart version updates, budget setup and reviews of system configuration
- Draft (tabled), final (adopted) and adjustments budgets, prepared in the regulated formats and aligned to the current chart
- Monthly section 71 reports, quarterly reports and the mid-year assessment
- Reviewing data strings before they are uploaded, and correcting errors in the system
- Reviewing and correcting the ledger and mappings before the statements go to the Auditor-General, as part of audit readiness
- Preparing GRAP-compliant annual financial statements that agree to the ledger and the data strings
- Automating the manual work between the ledger, the data strings and the financial statements
- Change management and training for finance teams, line departments and steering committees, with skills transfer to your staff
Talk to us. If your financial statements and your data strings do not agree, we would be glad to help. Message us on WhatsApp or use the contact form. Our municipal finance calendar lists the statutory reporting dates for the year.
Sources
- Municipal Regulations on a Standard Chart of Accounts, Government Notice R.312, Gazette 37577, 22 April 2014
- MFMA section 122, preparation of financial statements
- MFMA Circular No. 132, 5 December 2025: chart version 7.1, FAQ cut-off, road map, period locking
- MFMA Circular No. 134, 20 March 2026: road map ownership, metro trading service statements
- MFMA Circular No. 129, December 2024: alignment of trial balance, data strings and AFS; budget control overrides
- MFMA Circular No. 126: mSCOA segments and GRAP 18
- 2025/26 mSCOA specimen AFS, SA Accounting Academy summary, 10 July 2026
Accounting treatments depend on the facts and the applicable GRAP requirements.
Frequently asked questions
Is mSCOA an accounting standard?
No. mSCOA is a standard way of classifying and coding transactions. It does not say when revenue is recognised or how an asset is measured. Those are GRAP questions. mSCOA tells you where to record a transaction once the accounting decision has been made.
Which framework do municipal annual financial statements follow?
GRAP. Section 122(3) of the MFMA requires municipal annual financial statements to be prepared in accordance with GRAP, and the Auditor-General audits them on that basis. The mSCOA Regulations require the chart to be aligned to the accounting standards.
What should we do if an mSCOA item does not match the AFS line?
Account for the transaction as GRAP requires, in the financial system. Post it to the mSCOA item that fits best, document the mapping where the names or groupings differ, and make sure the trial balance, data strings and statements still agree. Then log the issue on Treasury's mSCOA FAQ portal for a future chart version.
Can audit adjustments be processed only in the AFS software?
No. Treasury requires adjustments agreed with the Auditor-General to be processed in the core financial system. Adjustments made only in the AFS tool leave the ledger, the data strings and the audited statements showing different figures.
Discuss your municipality’s requirements
Ambition Partners Advisory is a Chartered Accountant (SA) led practice working with municipalities, municipal entities, government departments and public entities across South Africa. Tell us where you are in the reporting cycle and we will send you a scope, timeline and fee.