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Tuesday, August 14, 2012

21 govt bodies cited for fund management lapses

21 govt bodies cited for fund management lapses
Yahoo! NewsroomBy Jeanette Tan | Yahoo! Newsroom – Tue, Aug 14, 2012

10 ministries and 11 statutory boards were revealed to have lapses in their management of public funds and resources in an annual report by the Auditor-General’s Office (AGO).

In a more than 100-page report for the financial year ending 31 March 2012 released on Monday, the AGO said these lapses were found in its investigations into 11 complaints lodged during the latest financial year, as well as in its audits on financial statements from all government ministries and state organs.

At the forefront of the lapses were those related to procurement, contract management and financial administration, said Auditor-General Lim Soo Ping.

One of the biggest amounts cited in the report was the $69.42 million total of nine tenders by the National Parks Board (NParks) for park development projects that had been approved by the wrong authority.

The ministries or their divisions cited in the report include those of Defence, Education, Finance, Foreign Affairs, Health, Home Affairs, Manpower, National Development, Trade and Industry and the Prime Minister’s Office.

Statutory boards that were identified in the report for lapses include the Singapore Sports Council, the Accounting and Corporate Regulatory Authority, the Inland Revenue Authority of Singapore, the Workforce Development Agency, NParks, the National Environment Agency, the Public Utilities Board and the Singapore Tourism Board.

Approval of tenders

Lim noted that there were many instances when approval for contracts was only sought after a decision was made and commitment was given, or when approving authorities were given incomplete or incorrect information.

He said the role of an approving authority “is not a perfunctory role and must not be treated as such” by procurement officers.

In one instance cited in the report, the Ministry of Manpower awarded a tender for office chairs to the highest bidder at the value of S$258,750, almost six times higher than the lowest bid submitted, but the cost-effectiveness was not explained.

In another instance, the Ministry of Trade and Industry failed to state explicitly to the Cabinet that its appointed operator, Singapore Power, would be working in a joint venture on a district cooling system in Marina Bay. The ministry had sought the Cabinet’s approval to appoint Singapore Power as the operator with the knowledge that the company had planned to undertake the project through a joint venture.

Abuse of term contracts and overcharging

Lim also said he observed a lack of detailed and accurate documentation in the procurement process and he also highlighted the abuse of term contracts — those that are agreed-upon for an extended period — which resulted in several government departments being “grossly overcharged” for projects. He said the overcharging came mostly from items that were not covered in the agreed-upon term contracts.

Under the Ministry of Finance (MOF), for example, 12 cases of duplicate payments were found between April and December last year, including one that came up to more than S$18 million disbursed by the ministry’s payment processing arm Vital. The AGO noted, though, that the 12 payments represented a small percentage out of more than S$26 billion that was processed through some 286,000 payment vouchers during that period.

Also, according to the AGO report, the Ministry of Health had overpaid a contractor by an estimated S$830,000 for foundation work and basement construction at Khoo Teck Puat Hospital, out of a total payment of almost S$5 million.

The Immigration and Checkpoints Authority, which falls under the Ministry of Home Affairs, was said to have inappropriately used term contracts in 12 projects (valued at S$1.21 million altogether) where open tenders should have been called instead. This allowed the term contractor to earn profits over the invoiced prices when calling for quotations on subcontracted work under the term contract.

Similar incidents occurred with the Singapore Police Force and the Singapore Prison Service, resulting in them being overcharged by estimated amounts of S$73,000 and S$1.36 million respectively.

As similar cases of overcharging may exist in other agencies that may not have come under review by the AGO, Lim made recommendations to the MOF to introduce procurement rules pertaining to the appropriate use of term contracts, as well as to ensure that agencies are charged at fair market prices for items that do not come under these contracts.

Breach of laws in accounting for revenue and expenditure

The AGO also discovered irregularities in accounting and procurement practices at the Ministry of National Development (MND).

MND had reported its expenditure on a land reclamation project as an amount net of revenue collected, and so was found to have understated the revenue in its consolidated fund and expenditure in its development fund by some S$141.03 million. This violated the country’s financial regulations, which require that gross revenue and expenditure be recorded in the government’s accounts.

In understating its revenue and expenditure, the S$141 million was used to fund part of the ministry’s expenditure on the reclamation project, which contravened Singapore’s constitution, requiring that all revenue must be paid into the consolidated fund, and not be used to fund expenditure, according to the report.

Poor management of contracts

The National Environment Agency was also found to have high rates of non-compliance with specifications laid out in deals it signed with contractors.

The AGO discovered that out of 225 locations where street cleaning was supposed to be taking place, workers failed to turn up at 190 of them. Even after extending its checks to two hours beyond the stipulated time agreed upon in the contract at 68 locations, the workers still did not appear at 67 of them.

Further, the AGO observed substandard work carried out at 15 out of another 39 locations it checked, where for instance a road kerb area remained littered even after it was “swept”.

Further lapses found by the AGO in its review included waiving competition on weak grounds in the awarding of tenders, failure to evaluate bids in accordance with specified criteria and splitting purchases in order to avoid the need to call for tenders and quotations.

In response to the AGO’s findings, the majority of the identified ministries and stat boards agreed to seek repayment, where overcharging occurred, to review terms and contracts where applicable and to send their staff for training on better procurement practices, among other reformative practices.

Noting that agreement to send staff for procurement training was a common response given by agencies committing these lapses, Lim said, “While training is important, I should mention that many of the lapses found were not due to a lack of knowledge of procedures but more to administrative expediency or preference for certain suppliers taking precedence over financial prudence.”

He stressed the importance of incorporating values expected of public officers as custodians and stewards of public monies.

“This should be reinforced by the senior management of public sector agencies setting the right tone at the top on governance and financial control matters,” he added.

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