27 June 2022

IT controls remain a cause for concern in local government

Author: Msizi Gwala CA(SA), Project Director: Public Sector Enabling Competencies at SAICA

The Auditor-General of South Africa (AGSA) Municipal Finance Management Act (MFMA) Report 2021-20, has once again highlighted serious concerns regarding Information Technology (IT) controls in local government.

Transactions and financial information are processed using information systems that should include sound systems of internal control, thus ensuring the integrity of information used for decision-making. The assessment of the IT control environment identified significant weaknesses, illustrating the severity of challenges faced by local government. IT controls are foundational to credible reporting and can contribute immensely to the success of a municipality.

Good IT governance enables municipalities to achieve municipal objectives. IT governance processes at 75% of the 79 municipalities assessed were found to be ineffective. This resulted in IT control environments that were vulnerable to abuse or misuse, runaway IT projects exceeding budgets and time targets, and unjustifiable expenditure. The audit outcomes indicate that the integrity of information processed by information systems at 94% of the audited municipalities was ineffective or inadequate. The ineffective system controls resulted in large sums being spent to streamline systems, while the audit process was unable to rely on transactions and data processed by such systems.

In times of increased cyberattacks and related risks, citizen data and information held by local government may not always be safe. Information at 86% of the 79 municipalities assessed was found to be vulnerable to breaches by hackers or employees. Local government needs to pay particular attention to this area and work to strengthen cybersecurity and access controls. Breaches have been experienced by some municipalities in the past, with crippling outcomes. This risk should be appropriately and urgently mitigated before it’s too late. Cyberattacks and hackers that may compromise data and systems, delay service delivery, defraud the municipality or demand a ransom, all pose significant threats that need the immediate attention of local government.

Another area that needs improvement is the management of IT projects, contracts, and licenses. The AGSA assessed 15 municipalities and found problems at nine of these.

With regards to contracts and licenses, 10 contracts at six of the 29 municipalities were not concluded in the best interest of the municipality as the intended value was not received.

The findings on IT controls and environments at local government is even more concerning given the fast pace at which both private and public organisations are needing to adapt in the Fourth Industrial Revolution. In this context, a combination of technologies are changing the way people live, work, and interact and represents a significant change in the way the world functions, presenting massive challenges and opportunities for local government. The Fourth Industrial Revolution offers municipalities the potential to leapfrog and accelerate the delivery of key services through digital-enabled solutions, to engage citizens more effectively and to report credible information with greater ease.

SAICA urges government and stakeholders to work collaboratively to ensure that the basics of a sound IT environment are in place so that communities benefit and municipalities thrive through technology.

About SAICA

The South African Institute of Chartered Accountants (SAICA), South Africa’s pre-eminent accountancy body, is widely recognised as one of the world’s leading accounting institutes. The Institute provides a wide range of support services to more than 50 000 members and associates who are chartered accountants (CAs[SA]), as well as associate general accountants (AGAs[SA]) and accounting technicians (ATs[SA]), who hold positions as CEOs, MDs, board directors, business owners, chief financial officers, auditors and leaders in every sphere of commerce and industry, and who play a significant role in the nation’s highly dynamic business sector and economic development.

Chartered Accountants are highly valued for their versatile skill set and creative lateral thinking, that's why all of the top 100 Global Brands employ Chartered Accountants.

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