Auditor-General flags lapses in contract management, IT controls in public sector

SINGAPORE — In its annual audit of the public sector, the Auditor-General’s Office (AGO) has flagged lapses in contract management and procurement, weaknesses in information technology controls as well as gaps in the management of social grants.

Some concerns raised in the AGO’s latest report were similar to issues raised in last year’s audit.

In its 84-page report released on Tuesday (July 16), the ministries rapped included the Ministry of Defence (Mindef) for overpaying and underpaying flying allowances to its pilots.

The Ministry of Health (MOH) was also rebuked for not ensuring that hospitals adhere to guidelines when disbursing Medical Endowment Fund (Medifund) assistance, resulting in higher aid being given out than is needed.

It turned out that the ministry has been aware since 2015 that hospitals and other public healthcare institutions have not been closely following guidelines and relied on the same approach when disbursing Medifund aid.

This year’s report raised “observations” — as the AGO called them — relating to seven ministries, two government funds and four statutory boards.

“These are typically observations which indicate malfeasance, lapses with significant financial impact, systemic or common lapses that may seriously weaken financial governance and controls if not corrected,” it said.

AGO said the report stated that the Auditor-General, Ms Goh Soon Poh, had pointed out that some of the issues raised in this year’s report, such as lapses in contract management and weaknesses in information technology controls, were similar to those highlighted last year. But the lapses this time round involved different entities.

“(Ms Goh) said that it was important for public sector entities to avoid repeating similar lapses and to implement effective measures to enhance governance and controls on the use of public funds,” it said.

It was Ms Goh’s first annual audit since assuming the role in February this year.

Here is a breakdown of the report’s key findings:

ERRONEOUS PAYMENTS TO PILOTS

Checks by the AGO showed that erroneous payments amounting to S$278,970 were made to 14 pilots in the Republic of Singapore Air Force (RSAF). Of these, there were 12 cases of overpayment, with the other two involving underpayment.

“For one case, the erroneous payments took place over a period of almost six years,” the report stated.

Out of the 14 cases, nine cases saw a total of S$271,370 in erroneous payments. This was due to administrative lapses but no details were provided.

Five cases of erroneous payments totalling S$7,600 were due to human resource officers having the wrong interpretation of eligibility criteria when processing the flying allowance.

In response to the AGO’s findings, Mindef said that it has recovered the erroneous payments for nine cases and is in the process of “recovering or making good” the payments for the other five cases.

Right now, the ministry relies on manual checks to process payments pertaining to flying allowances. However, it informed the AGO that it is looking into automating the payment processes and reviewing policies to minimise manual inputs as far as possible.

Until that is in place, the RSAF would increase its audits of the flying allowance “to provide added governance of and control over the administration of flying allowances until the technological solution was ready”.

LAPSES IN MANAGING PROCUREMENT AND CONTRACTS

Lapses in these areas were found in the Ministry of Culture, Community and Youth (MCCY), the Islamic Religious Council of Singapore (Muis) and the National Council of Social Service.

For MCCY, for instance, lapses were found following the audit of the National Gallery development project, which is owned by the ministry and managed by the National Gallery Singapore.

There were lapses found in the approval process relating to 142 variations of contracts amounting to S$12.4 million. They include obtaining approval for the contracts only after works had started or had already been completed, obtaining approval from the “incorrect approving authority” and not seeking approval for substantial increases in costs.

“Failure to properly assess and manage contract variations could result in MCCY not obtaining full value from the public funds spent,” the AGO said.

WEAKNESS IN INFORMATION TECHNOLOGY CONTROLS

This issue was found in four ministries, namely Mindef, the Ministry of Education, Ministry of Finance and Ministry of Manpower, as well as Muis.

Among the problems found were inadequate logging and review of activities of privileged users, which means individuals who have the right to install or remove software and upgrade the operating system.

Some of these privileged users were staff members of IT vendors, the AGO noted.

For instance, the AGO found that a number of employees of an IT vendor working for Mindef were granted unrestricted access to read personnel and payroll information in Mindef’s human resource system.

“The read-access was not granted on a strict, needs-only basis,” the report said. “Mindef should have granted the read-access to each of the IT vendor staff based strictly on their job scope and duties to be performed in the (human resource) system,” the report said without naming the IT vendor.

The AGO also said that since 2014, Mindef had not reviewed the log records of access made by the staff members of the IT vendor when it came to information that required controlled access.

GAPS IN MANAGEMENT OF GRANTS

In its audit of Medifund, an endowment fund set up by the Government to help needy Singaporeans with their medical bills, audit checks on one restructured hospital showed that it did not follow the guidelines issued by MOH in the administration and assessment of the scheme.

As a result, the hospital granted higher Medifund assistance than what was provided for in the Medifund manual.

Based on the AGO’s checks, the difference amounted to S$119,100 for 24 bills involving 22 patients who chose to stay in class B2 wards at the hospital during the period from April 1, 2017 to March 31, 2018.

The hospital informed the AGO that it has been using the approach to compute how much assistance patients can get from Medifund since 2009.

Following the audit, MOH estimated that there could be 4,500 class B2 ward bills at the hospital where Medifund assistance was provided from 2013 to 2018.

The AGO report said that MOH has been aware since 2015 that aside from that hospital, other public healthcare institutions also use the same method to calculate how much assistance patients can get from Medifund.

“The different approaches in computing Medifund assistance across public healthcare institutions would result in inconsistent treatment of Medifund recipients,” the AGO said.

MOH had informed AGO that it will not be recovering the difference in Medifund assistance granted to patients, as the guidelines in the Medifund manual were for “reference and not strict adherence”.

But to ensure a consistent computation approach across the public healthcare institutions, MOH said that it will roll out a new billing system by the end of this year. No details were provided in the report.

HAJ ADMINISTRATION FEES NOT REFUNDED

Muis collects administration fees from individuals who apply to perform the Haj pilgrimage. But if an individual dies before performing it, the fee is to be refunded to the estate of the deceased.

Under the current process, Muis will check the individual’s status against its internal records to see when his or her allocated Haj year is due. A refund will be made if the checks show that the applicant has died.

However AGO found that Muis has yet to refund the administration fees collected from 226 Haj applicants who died between 2012 and 2018. The amount stands at S$57,900.

“AGO noted that if Muis waited until the deceased applicant’s respective allocated Haj year to refund the fees, it could be many years later before refunds to their estate were made,” the report said.

It added that Muis could also face difficulties in locating the next-of-kin by then.

This issue was similarly raised in the audit in the financial year of 2012/2013, with the AGO stating that it is “important that Muis be more proactive in following up on the refund of Haj administration fees”.

In response, Muis said that it agreed with the AGO that refunds should be made as soon as possible and would review the process for “further improvements”.