An audit on the management of software as an asset has endorsed the practices of four federal government departments, despite finding none of the organisations had asset management plans for software.
The Australian National Audit Office on Tuesday released its ‘Capitalisation of Software’ audit report, a review of how software costs were capitalised at the Australian Bureau of Statistics, Australian Electoral Commission, Australian Quarantine and Inspection Services and Centrelink.
The capitalisation of software refers to the monetary value of software and its potential benefits. This is determined by calculating factors such as usage, intellectual property, obsolescence, and lifecycle.
The report concluded that most of the entities audited had addressed software capitalisation control risks and met accounting standards.
However, the lack of asset management plans meant “there was no formalised link between the entities’ accounting policies…and plans for future software asset acquisition”, the report said.
Linking accounting policies and acquisition plans would ensure enough funds would be available for software assets to be replaced at the end of their “useful lives”, according to the report.
The report also said while the entities audited recognised the importance of a life-cycle approach, three had not formally reviewed “the useful lives of their software assets”. The useful lives of software assets should be reviewed “at least annually” to reflect usage and the rate of obsolescence, the report recommended.
The Commonwealth’s software assets were valued at over $2.9 billion as of June 30, 2002.
Peter Green from the Australian National Audit Office said this was the first audit by the Office focused on software.
“Usually this issue is reviewed as part of agencies’ financial statements but this audit is of a greater intensity on software,” Green said.
Green said he believed the four departments reviewed in the audit were chosen as a “representative group” of IT users in government.
Intellectual property was another area the report earmarked for improvement.
“None of the entities had specifically considered risks to the appropriate identification and protection of intellectual property as part of their software project risk assessments,” the report said.
This issue was the subject of another performance audit in progress, Green said.