What Is mSCOA? A Plain-Language Guide for Municipal Officials

If you work in a South African municipality and keep hearing “mSCOA” in meetings or audit reports, you are not alone. Many municipal officials — from administration to technical services — are expected to work with mSCOA without having had a clear, jargon-free explanation of what it is or why it matters. This guide answers the question what is mSCOA in plain language: what the acronym means, why National Treasury introduced it, who it applies to, what happens when a municipality is not compliant, and where you can learn more.

What does mSCOA stand for?

mSCOA stands for Municipal Standard Chart of Accounts. In simple terms, it is a standardised list of codes that every municipality in South Africa must use when recording and reporting money in and money out. Instead of each municipality using its own labels and categories (which would make it impossible to compare one municipality with another), mSCOA gives everyone the same “dictionary.” When your municipality records revenue, expenditure, assets, or liabilities, it must classify each transaction using these standard codes. That way, National Treasury, the Auditor-General, and the public can understand and compare municipal finances across the country.

mSCOA is not optional. It is required by the Municipal Finance Management Act (MFMA) and the Municipal Standard Chart of Accounts Regulations issued by National Treasury. So when someone says “we need to be mSCOA compliant,” they mean your municipality must use this standard chart of accounts correctly when preparing its books and reports.

Why did National Treasury introduce mSCOA?

Before mSCOA, municipalities used different charts of accounts and different ways of classifying the same types of transactions. That made it difficult to:

• Compare one municipality’s spending or revenue with another’s.
• Aggregate data at provincial or national level for policy and planning.
• Audit financial statements in a consistent way.
• Hold municipalities to a single, transparent standard.

National Treasury introduced mSCOA to fix this. The goals are standardisation (everyone uses the same codes), transparency (it is clear what each code means), and comparability (you can compare municipalities fairly). When every municipality classifies “water revenue” or “employee costs” the same way, the system works: Treasury can see where money is going, the Auditor-General can verify that figures are correct, and councils and residents can make better decisions. For more on how this fits into the bigger picture of municipal finance law, see our guide to MFMA compliance requirements.

A brief overview of the mSCOA segments

mSCOA is built around a set of segments — think of them as questions every transaction must answer. Each segment is a different dimension of classification. National Treasury defines seven segments. You do not need to memorise them here; the idea is to get a sense of what they do.

• Fund — Which “pot” of money does this relate to? (e.g. general fund, water fund, electricity fund.)
• Function — Which service or area? (e.g. administration, water, roads, community services.)
• Item — What type of revenue or expense? (e.g. employee costs, rates, grants received, bulk purchases.)
• Project — Is this linked to a specific project or grant? If yes, which one?
• Region — Which geographic area, if your municipality reports by ward or district?
• Costing — Which activity or cost centre, for internal cost analysis?
• MSC (Municipal Standard Classification) — Other standard categories required by Treasury for reporting.

Not every transaction needs every segment; it depends on the type of transaction and your municipality’s reporting needs. The important point is that when a segment is required, the correct code must be used. If you need to go deeper — for example, how to classify a specific type of expenditure or how to avoid common errors — the mSCOA chart of accounts guide walks through the seven segments in detail and explains how classification works in practice.

Who does mSCOA apply to?

mSCOA applies to all South African municipalities. There are 242 municipalities in total (metropolitan, district, and local). Every one of them must use the Municipal Standard Chart of Accounts when preparing their annual financial statements and when submitting in-year reports to National Treasury. So whether you are in a large metro or a small local municipality, the same rules apply. The aim is a level playing field: one standard, one set of codes, one way to report.

What happens if we are not mSCOA compliant?

Non-compliance with mSCOA has real consequences. The Auditor-General checks whether financial statements are prepared in line with the prescribed framework, including correct use of the chart of accounts. When classification is wrong, missing, or inconsistent, the AG can issue audit findings. In serious cases, that can lead to a qualified or adverse audit opinion instead of a clean audit. Only a small fraction of municipalities achieve clean audits each year; incorrect or incomplete mSCOA application is often one of the reasons.

Persistent non-compliance with the MFMA and related requirements (including proper financial reporting) can also contribute to Section 139 interventions. Under the Constitution, provincial government can step in when a municipality fails to fulfil its obligations. While Section 139 is not triggered by mSCOA alone, poor financial reporting and repeated AG findings are part of the picture that can lead to intervention. So getting mSCOA right is not only about avoiding audit findings; it is about demonstrating that your municipality manages its finances in line with the law.

The good news is that compliance is achievable with the right processes, training, and systems. Many municipalities use municipal software that supports mSCOA — with the chart of accounts pre-configured and validation built in — so that staff can capture transactions against the correct codes from the start.

Where can I learn more?

• For a detailed, practical guide to the seven segments, classification rules, and common mistakes, read the mSCOA chart of accounts guide.
• For MFMA obligations in one place — including reporting deadlines and what auditors look for — see MFMA compliance requirements for 2026.
• For tools designed for municipal finance and mSCOA-compliant reporting, explore Dolobha, Skynode’s municipal software.

mSCOA can feel overwhelming at first, especially if you do not have a finance background. Understanding what it is and why it exists is the first step. From there, working with your CFO or finance team — and using guides and systems that support the standard — will help your municipality stay compliant and build a stronger foundation for clean audits and better service delivery.