Insights | Audit Office of South Australia

Insights

December 2025

Audit lessons

Using artificial intelligence

Recent years have seen rapid growth in artificial intelligence (AI) and large language models (LLMs) like ChatGPT and Microsoft Copilot. While AI offers significant potential to transform the public sector, SA Government agencies must balance innovation with accountability, transparency and public trust. The challenge lies in building the expertise, systems, and governance needed for safe adoption while developing the capability to assess AI applications and their controls.

The SA Government is encouraging agencies to use AI as a tool for efficiency, data insights and service improvement. The Office for AI was established in July 2024 to help build central AI capabilities and oversee the allocation of the AI Proof of Value Program funding. $28 million was allocated in the 2025-26 State Budget to the Digital Investment Fund for the AI Program across the public sector.

Risks

Integrating AI into government services carries significant risks that must be managed to maintain public trust. Poor or incomplete data can lead to bias and unfair outcomes, while AI-driven decisions raise privacy concerns and require transparency and oversight to uphold equity and accountability.

Operational challenges include legacy IT systems, automation bias, and cybersecurity vulnerabilities, all of which threaten reliability and service continuity. The complexity of AI technologies also creates audit challenges, requiring ongoing assessment and guidance on governance. As AI adoption grows, we will monitor its use and incorporate AI risks into future audit programs.

Overview of agency AI use in 2025

We found that most large SA Government agencies have developed central guidance to support the use of AI, established governance frameworks and are cautiously exploring AI. Current use is mainly limited to pilots, productivity tools and embedded software features, with AI serving as a support tool rather than making core decisions. Agencies are planning to expand pilots for document analysis, chatbots and workflow automation to improve efficiency and reduce administrative burden, with some considering limited decision-making by AI. Key challenges include verifying unreliable outputs, integrating AI tools with legacy systems and regularly updating policies to keep up with rapid AI technology changes.

Governance and risk management

Adopting AI technologies in government must be underpinned by robust governance to ensure that risks are appropriately understood and managed. The South Australian Cyber Security Framework is a mandatory policy that requires all SA Government agencies to have cyber security policies and procedures in place. The Guideline for the use of Generative Artificial Intelligence and Large Language Model Tools, written by Office of the Chief Information Officer (OCIO), applies to all SA Government agencies, people and non-government suppliers accessing government resources.

What agencies should do

Download our guide for more information

^Source:^{Source: Audit Office of South Australia,}^{Auditor-General’s Report 8 of 2025 Annual report for the year ended 30 June 2025, Part A: Executive summary}^,^{published June 2025.}

May 2025

Audit lessons

Contract management in government

We are currently finalising a review of contract management with two councils, focusing on areas such as risk management, performance management, contract variations, and contract extensions and renewals. The insights from this review will be of significance to all local government, as well as broader government agencies. This review is scheduled for tabling in June 2025.

Our reviews continue to identify a pattern of recurring issues in contract management practices across government, many of which we have highlighted in previous reports. This suggests that while awareness of these issues may be growing, consistent and sustained improvements in practice are still needed.

Our 2024 annual report (Part B Controls opinion) identified a number of opportunities for improvement in contract management practices with application across government.

What we found

We reviewed a sample of significant contracts from several agencies and found an ongoing need to improve contract management practices. We found:

instances where contract management plans were not in place, were outdated or did not address all key areas of contract management, or were not approved before the contract commencement date
that contract management practices did not always ensure key contract and legislative requirements were met
that contract management processes did not always demonstrate a clear understanding of risks to the agency, how they were managed, and whether the responses were effective, tracked and documented
that contract management practices did not always ensure that all aspects of the arrangements were assessed through appropriate measurement, reporting of KPIs and annual reviews
that contract registers were incomplete, not updated or did not agree to executed contracts
instances where contract meetings with suppliers were not held or were held with no documented outcomes
instances where the agency’s application of contract management differed from Procurement SA’s recommended approach
that key documents required for the contract management phase of a project were not always prepared and submitted promptly to those charged with governance of the project
that contract management reporting did not always have sufficient evidence to support contract activities performed by the supplier occurring at the right times an instance of a contractor not performing in line with contracted service levels
that contract closure assessments, post‐contract reviews and timely reporting to governance on the outcomes did not always occur
that there was no evidence of contract managers completing mandatory contract management training in some cases
an instance where an agency was not effectively monitoring or appropriately approving expenditure incurred under a contract.

Several of these findings represented non‐compliance with Treasurer’s
Instruction 18 and Procurement SA policies and procedures.

What public authorities should do

Regardless of the nature of the contract, it is important for agencies to take an active role in improving their contract management practices by:

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