For the Public Sector, Security and Compliance are Just Good Business

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For the Public Sector, Security and Compliance are just Good Business

From “American City and County” | By Neil Steinhardt, President, ClassWallet | Published April 17, 2024

State and local officials in charge of distributing public funds understand that security and compliance must be a top priority, but it can feel like a challenge to be fully prepared for audits.

First, government organizations face a significant challenge in securing cyber infrastructure and protecting the personal data of their constituents from malicious actors. Earlier this year, one of the largest counties in Pennsylvania reported that a cyberattack disabled its emergency communications system. This was only one of the many recent cyber incidents wreaking havoc on state and local governments. Government organizations are responsible for administering vital services to their constituents, including public funding, which can be compromised in the face of growing cyber threats.

The other piece of the puzzle is compliance. Although they differ by state, state and local leadership must adhere to various regulatory standards that govern public fund management. To keep constituents’ trust in the public sector, dataneeds to be managed correctly and in accordance with government and industry standards. There are a number of robust frameworks that offer standards for security, including SOC, (Security and Operation Controls) Levels 1 & 2 from the American Institute of Certified Public Accountants, and StateRamp and FedRamp for cloud service providers based upon The National Institute of Standards and Technology’s NIST SP 800-53.

While the immediate challenges are evident, fortunately there are a few steps local leaders can take to ensure their data is not only compliant, but holistically secure. By adopting and enforcing the latest security frameworks, extending efforts beyond compliance and partnering with organizations that are transparent and trustworthy, state and local organizations can maintain an effective security ecosystem to protect citizen data.

Prioritizing compliance in a highly auditable environment

The first step in upgrading the funding ecosystem is unavoidable—maintaining and prioritizing compliance. Local governments need to prepare for audits on a regular basis or suffer the consequences of failing to do so.

When we think of compliance broadly, it’s about staying up to date on policies, safety standards and operations. Beyond industry and government regulated initiatives, organizations should focus internally on building their own compliance culture. When companies put compliance first, and it becomes embedded in their development and operational procedures, it becomes much easier to protect sensitive data and to manage unforeseen incidents.

By training staff on regulatory requirements, establishing clear policies and procedures and regularly monitoring adherence, organizations can ensure individuals at all levels and departments approach their daily tasks with a compliance mindset. When it comes to audits, implementing and maintaining an internal review system with a real-time trail for transactions is crucial.

This allows for transparency and efficient monitoring of all activities. These reviews ensure issues can be addressed promptly to maintain readiness for official audits. While compliance initiatives establish a foundation for funding requirements, organizations must go beyond checking boxes and seeking certifications to developing their own comprehensive security strategy.

Adopting robust security frameworks

The number of cyberattacks against state and local governments are increasing and becoming more sophisticated. The current statistics for state data breaches are alarming. Research from the Center for Internet Security found that cyberattacks on state and local governments increased over the last year. According to the report, malware attacks increased by 148 percent, while ransomware incidents were 51 percent more prominent than the year before.

For state and local organizations dealing with public funds, a high level of security is even more paramount. To bolster cyber efforts, security leaders within these organizations must first adopt a framework such as SOC2 or NIST—beginning with identifying any vulnerabilities in the existing security posture. From there, organizations should provide regular security monitoring for their internal systems and third-party partners. In the event of a cyber-attack, it’s important to have a plan to communicate concise info quickly and thoroughly to employees and partners alike.

Securing access to data through endpoint management and least privilege policies goes a long way toward securing sensitive data and allows for the enforcement of a highly robust data management policy.

What to look for in a partner that prioritizes security

This fight does not strictly fall on the shoulders of state and local officials and their employees. Partnerships between the public and private sector can play a large role in creating a more secure and compliant ecosystem.

That said, local officials must look for industry counterparts that foster a culture of trust and transparency. In fact, most data breaches come from third parties. While searching for the right private sector partner, state and local officials want peace of mind that their security goals and needs will be prioritized, and partnering with organizations that put their own security first can do just that. Strong security partners are organizations with third-party validation, a proven track record of transparency and an understanding of the specific challenges that the public sector faces. Transparent partners share insights into their security practices and data protection efforts, in turn building trust.

Whether working independently or with partners, a top-notch fund management system goes beyond simply maintaining compliance and security. Organizations can look to external resources to help remain audit-ready and protect their constituents’ data and dollars, but they ultimately need to take responsibility for their own security and compliance and go beyond the requirement. By adhering to some of these best practices, state and local leaders can have peace of mind that their public funding is safe, and as a result, keep the trust of their taxpayers’ dollars.

ClassWallet’s digital wallet technology can help administrators of public funds increase operational efficiency, reduce costs on manual (and tedious) tasks, complete audit-ready reporting in a timely manner, and build trust with stakeholders. If you are interested in learning more about ClassWallet, contact us.

Neil Steinhardt is president and co-founder of ClassWallet. In this role, he is dedicated to revolutionizing how public funds are distributed while maximizing their impact and improving compliance. He has more than 20 years of executive leadership experience in the financial services industry and graduated with his master’s degree in marketing and international business from Baruch College.