What Is SOC 2 Compliance and Why Is It Important for Local Government?

The number of cybersecurity incidents and their associated costs to organizations is rising. In recent years, the average cost of a data breach in the U.S. exceeded $9.4 million. As a result, many organizations are going to great lengths to improve their security protocols.

However, despite internal cybersecurity efforts, many organizations remain vulnerable through their service providers. If third-party service providers such as data intelligence platforms and CRMs do not prioritize cybersecurity, the organizations they serve become more exposed to attacks by extension.

This is where SOC 2 comes into play. SOC 2 is a reporting methodology that evaluates a service provider’s control regarding the security, availability, processing integrity, confidentiality, and privacy of systems and data.

So, how does SOC 2 compliance benefit local governments? You’ll find out here.

Understanding SOC 2 Compliance

The SOC 2 standard was developed by the American Institute of Certified Public Accountants (AICPA) to assess organizations that provide services to other entities, such as SaaS providers.

As local governments embrace digitization, stakeholders expect adherence to security principles to protect resident and government data. SOC 2 lends itself well to this initiative because it provides community members with assurances about government security measures.

SOC 2 compliance reporting uses five criteria, known as Trust Service Criteria (TSC) (formerly trust service principles), to assess data security protocols at the target organization. Each criterion has specific requirements, and organizations implement internal controls to meet these standards.

The Five Trust Service Criteria

1. Security

This metric evaluates the organization’s procedures for protecting systems and data against unauthorized access. This may include looking for measures such as firewalls, two-factor authentication, and intrusion detection systems.

Local governments can set an assessment scope that determines which Trust Service Criteria (TSC) will be evaluated. While the other four criteria are optional, Security is mandatory as its requirements are foundational to all criteria. Thus, achieving the Security criteria satisfies the baseline requirements for all SOC trust service criteria.

2. Availability

Availability ensures that systems are operational and accessible to users as agreed upon in the service contract. Fulfilling this criterion requires organizations to perform risk assessments to identify potential causes of system downtime and implement controls to prevent them. It also involves continual system monitoring to detect and address unforeseen issues promptly.

Examples of availability controls are disaster recovery sites (cold, warm, and hot sites) and edge computing.

3. Processing Integrity

Processing integrity guarantees that the results of processing are complete, accurate, valid, and timely. Processing integrity is vital as the outcomes influence business operations and decisions.

This criterion is particularly important for precision systems that process critical data, such as healthcare and manufacturing.

Organizations can establish data validation, error detection, and software testing controls to uphold processing integrity.

4. Confidentiality

Confidentiality refers to confidential information remaining accessible only to authorized personnel. This entails categorizing data and applying access controls. Users and processes can then gain access to data for which they qualify. Confidentiality also includes encryption of data in storage and in transit to prevent unauthorized access.

5. Privacy

The privacy criterion evaluates how organizations collect, process, store, and dispose of personal information. Meeting this criterion requires local governments to comply with various personal data privacy laws and regulations. This principle protects against misuse or unauthorized access to a user’s personal information.

To uphold privacy, organizations are required to:

• Obtain consent from users to collect data
• Minimize the amount of personal data collected
• Collect data using lawful means
• Use it only for the specified purpose
• Delete it at the end of the predetermined period

SOC 2 Compliance Requirements

Unlike other security standards, such as ISO 27001, SOC 2 does not have explicit requirements. Instead, it allows organizations to select the controls they feel are best suited for their industry and operations.

For a local government seeking SOC 2 compliance, the first step is to determine which of the five trust service criteria it wishes to meet. They can select one, some, or all of these criteria.

Since Security is mandatory, they should evaluate which of the remaining criteria is most relevant to their current objectives. Once this is determined, they can begin developing their compliance program by outlining the controls necessary to meet the selected criteria.

The next step is to document the information security program’s controls, policies, and procedures so everyone in the agency has access to and understands the requirements.

This documentation forms a significant part of the SOC 2 compliance evaluation. Auditors compare security procedures in your program with actual security activities to verify policy implementation.

Auditing

Once the organization staff is prepared, they can engage an independent auditor to verify that their controls meet SOC 2 requirements. Evaluations typically take 2 to 6 weeks.

The auditor evaluates controls and issues a report on the government systems’ SOC 2 compliance. There are two types of SOC reports: Type 1 and Type 2.

Type 1 is a “point-in-time” report that captures all active controls as of a certain date. Type 2 is a review of control implementation over a period of time, typically 12 months. For example, an auditor assessing change management may request records of software tests and pull requests from the past 12 months.

The SOC 2 report will include the auditor’s opinion of the results. There are four types of opinions for SOC 2 compliance reports:

• Unqualified: The organization successfully implemented audit requirements.
• Qualified: The organization passed, but some areas require improvement.
• Adverse: The organization failed the audit.
• Disclaimer of Opinion: The auditor didn’t get enough information to make a fair assessment.

Organizations must conduct ongoing monitoring to innovate and adapt to new threats and regulatory requirements.

Importance of SOC 2 Compliance for Local Government

The following are some of the ways local governments’ security posture can benefit from SOC 2 compliance:

1. Enhanced data protection: SOC 2 compliant controls like encryption and role-based access control help ensure sensitive data is only used for its intended purpose and not accessed without authority.
2. Boosts public trust: SOC 2 compliance of local governments demonstrates to the public a commitment towards data security and protection of privacy.
3. Regulatory compliance: This helps local governments comply with various national and international data security and privacy laws.
4. Better public services: Implementing SOC2 service criteria can improve government service delivery. Ensuring availability, for instance, means digital government service portals are always on to serve residents.
5. Enhances operational efficiency: Some of the SOC 2 compliance criteria have a positive effect on government operations’ efficiency and effectiveness. For example, adhering to processing integrity criteria results in accurate and streamlined operations, ultimately leading to more efficient government services.

Implementation Challenges and Solutions

Simplified SOC 2 Compliance With Government Software

Compliance with SOC 2 and other regulations empowers local governments to improve service delivery while safeguarding critical data. Given the multitude of tasks they handle, local governments can benefit greatly by selecting software providers that have extensive security measures in place.