Over 30 flaws in SAP system

2019-10-03 16:25
City Hallâ??s Clock tower keeps ticking. The Msunduzi municipality has managed to keep ahead of the problem the pigeons keep dropping. Photo. Jonathan Burton8BIM

City Hallâ??s Clock tower keeps ticking. The Msunduzi municipality has managed to keep ahead of the problem the pigeons keep dropping. Photo. Jonathan Burton8BIM (File)

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Msunduzi Municipality has identified more than 30 “flaws” in its controversial SAP computerised financial system, which have compromised the way Msunduzi manages its finances and placed it at risk of being defrauded.

This was revealed in a June report that recently came before the City’s executive committee in which the municipality’ assurance manager, Sithabile Msomi, outlined the dire impact the poor implementation of SAP had on Msunduzi.

She explained that the failure to follow processes in the implementation of SAP had already caused Msunduzi to suffer financial losses, however, there were still deficiencies so more money would have to be spent to get the system to work optimally.

The municipality initially budgeted R90 million for the implementation of SAP, but to date more than R200 million has been spent with another 36-month contract, worth over R60 million, having been awarded earlier this year.

Msomi said the business intelligence module had been “incorrectly configured rendering current revenue reports being inaccurate … For example, the ageing analysis report does not accurately categorise overdue amounts in the correct ageing categories”.

Other billing module deficiencies that were identified by Msomi include absence of reports related to the billing of services, meters estimated beyond the provisions of the by-laws, services not billed in properties, incorrect monthly customer statements and an ineffective consumer query logging process.

“Consistent system challenges with the ISU [revenue] module has resulted in the credibility of billing records being compromised, thus negatively impacting on collections.

“This will result in the debtor’s book being inflated,” said Msomi.

She said the inaccuracies in the program that generates customers’ statements had also resulted in some customers not being billed “due to bills being printed displaying an invalid error message on the bill or the bill reflecting inaccurate figures”.

Msomi also picked up that there were no customer contact channels, there were deficiencies in how some debts were written off and an insecure manual interference with the system. Transfers for items such as valuations information were done manually.

Apparently there was also “inappropriate user access” on the system and “excessive access” had been granted to SAP consultants.

She warned of a risk of potential fraud, misstatements and concealment errors when audit trials were not reviewed regularly by management.

Other flaws were picked up in the manner in which Msunduzi paid salaries. These included the manual adjustments of payroll components outside SAP and reports that did not reconcile.

“Lack of payroll certificate report and payroll summary report not agreeing with wage type report may result in fictitious employees added on the payroll thus resulting in financial losses.”

The system had also been configured to pay bonuses to people who no longer work for Msunduzi.

Msomi also explained that failure to reconcile SAP with SARS’ easy file system could result in incorrect IRP5 tax certificates being issued and penalties from SARS in instances where lesser amounts were filed during the reporting period.

She said the system also financially compromised the City’s staff in terms of how pay-as-you-earn tax was levied.

“Manual adjustments of payroll components outside the system may enhance the potential irregularities and misstatements resulting in financial losses.”

Msomi said that the implementation of SAP outside the City’s information and communication technology (ICT) section contributed to the configuration failures that were identified.

She warned that these problems would persist until the custody of SAP was moved from the finance business unit to ICT as the system required certain technological expertise to function properly.

She also picked up that SAP did not have some of the programs that were critical for an organisation such as a municipality, so Msunduzi needed to find a way to ensure that these were added to it.

Administrator Sibusiso Sithole said the relevant council portfolio committees must monitor the progress on how the defects identified by Msomi were being addressed because they carried a lot of risks if they were not attended to.

Acting City manager Nelisiwe Ngcobo told Exco that the system deficiencies identified have also been included as part of the case that Msunduzi has against the company contracted to implement SAP — EOH Mthombo (EOH).

In August, The Witness reported that the municipality was planning to take EOH to court over the alleged failures in the implementation and configuration of SAP. However, the company had accused Msunduzi of withholding more than R50 million for the services already rendered.

Read more on:    pietermaritzburg  |  msunduzi municipality
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