Sapped by the system

2019-08-02 15:00
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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More than three years and over R200 million later, Msunduzi’s controversial SAP computerised financial system which has wreaked havoc in consumer billing, continues to be a very costly headache for the City.

Msunduzi uses SAP to keep all its financial records, including payroll, creditors, projects, revenue and others. City administrator Sibusiso Sithole’s turnaround report reveals that the original cost of implementation was supposed to be R90 million, but it has already cost more than double that.

The Witness previously reported how SAP was blamed for statements sent to some consumers being incorrect, while other consumers were not billed at all.

Acting municipal manager Nelisiwe Ngcobo — who is the City’s chief financial officer — has always denied to council that the system was problematic even though staff disagreed and some officials claimed that they were not adequately trained to use SAP.

Msunduzi migrated from Promis to the SAP system in July 2016. The R90 million tender for the implementation of SAP was awarded to a Johannesburg firm EOH Mthombo (EOH).

However, according to a recent confidential report by Sithole, the municipality has spent more than R200 million.

“These cost overruns take place against the backdrop that the implementation of all SAP modules have not been accomplished and system is not mSCOA compliant, and those that have been implemented still have challenges,” he said.

The Municipal Standard Chart of Accounts (mSCOA) is the National Treasury’s system for budgets and reporting that all municipalities should abide by. “There is an outstanding claim by EOH of about R54 million though this is in dispute.

“The project has not been completed and teething problems are still being experienced in terms of the accuracy of data and billing and [further] challenges are still anticipated. For example the Debtors Bank Clearing Account sits at R184 014 291 and this reflects monies are paid but not allocated to specific debts,” wrote Sithole.

City spokesperson Ntobeko Ngcobo said mSCOA was implemented by EOH on the current SAP system, however, EOH left the site without completing the mSCOA part.

Apparently EOH pulled its team from Msunduzi in March as the City refused to pay the R58,1 million the company believed it was owed.

“The matter of payments to service providers cannot be shared with the media at this point in time since the municipality is in the process of instituting a claim against some service providers who did not perform their duties in terms of the agreement,” said Ngcobo in response to The Witness’ query on the total expenditure to date on the SAP system.

Due to the pending dispute with the main contractor Msunduzi has appointed Nambiti Technologies on a 36-month contract that is rumoured to be worth more than R60 million.

Ngcobo confirmed that Nambiti had been appointed to provide SAP support and maintenance but would not disclose the value of the contract.

Sithole said Msunduzi also still had a number of legacy information systems that were not reconfigured to SAP. “There is also a risk that a new service provider appointed to maintain the system will face challenges as the system they are employed to maintain has been beset by many unresolved deficiencies during implementation. These deficiencies still persist.”

Most notably, he said, were the data migration challenges that affected the quality and accuracy of bills sent out to customers.

“It is doubtful that change management processes from the old to the new system have been handled correctly and staff are properly trained to optimise the deployment of SAP.”

On whether SAP was functioning as it should, Ngcobo said: “It is early days to say that the system is working as it should since we have a legal battle at hand and divulging some of the information may compromise our case.

“The city is dealing with clearing all issues and problems that have been experienced with the intention to ensure that they do not reoccur.”

Audit committee seeks review

The City’s audit committee has called for a review of SAP as there were indications of configuration flaws on the system which had a negative impact on how the City carried out its functions.

Tabling the committee’s report at a recent council meeting, the chairperson Mongezi Madliwa said the system was not adequately configured to cater for the business requirements of the municipality as a number of functions have either not been configured or were incorrectly configured when implemented.

He said the implementation of SAP without aligning it to the City’s information and communications technology contributed to the configuration and implementation failures. Madliwa highlighted the issues with SAP when he spoke about the “inadequate” and “ineffective” internal controls within Msunduzi’s finance department, which he said required urgent attention.

The significant findings included systems validations that were not built into SAP, inadequate monitoring and review of underspending on conditional grants as well as matters that some councillors said constituted financial misconduct. These included lack of supporting documents for certain transactions and payments processes subsequent to the contracts expiring.

“For certain payments service level agreements had expired with no evidence of an extension to the contract being approved. For certain payments the rates stipulated as per the service level agreement did not agree to the amount as per invoice,” said Madliwa.

EOH ‘followed proceedure’

 

EOH confirmed that all business processes and procedural requirements in respect of the SAP system were implemented at Msunduzi, as per the approved scope of work.

“As part of the implementation, EOH provided training prior to ‘go live’ on all the modules implemented in SAP and further training was provided on an ongoing basis by EOH consultants during the support phase whilst on site at Msunduzi Municipality,” said the company in response to questions from The Witness.

The information technology company said that logged requests for changes, enhancements and additional functionality that were received during this “post go live” period, were addressed by EOH.

“EOH also confirms that during the period it had communicated and escalated all system related issues to Msunduzi management timeously. 

“Most importantly, it must be noted that the Msunduzi Municipality had signed off the User Acceptance Testing [UAT] and go live of the system, before initiating the system go live.”

In terms of the original scope of work, EOH said it delivered what was agreed on. It said additional change requests were also implemented. “The ‘post go live’ project has since been terminated by the municipality and EOH is currently engaging with the Msunduzi Municipality to resolve outstanding payment issues.”

According to EOH’s opinion Msunduzi “has been — at large, successfully operating according to the intended implementation purposes of the SAP financial/IT system implementation.”This involves:

  • Generating monthly billing charges and statements to consumers;
  • Receipting of the customer payments and monies from municipality customers;
  • Payments of salaries to employees;
  • Procuring goods and services and payment to creditors regulated by the Municipal Finance Management Act;
  • Producing annual financial statements; and
  • Reporting to National Treasury as per the requirements.

Read more on:    pietermaritzburg  |  msunduzi municipality
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