Auditor-General calls for better emergency public spending measures after Covid-19 review

THE SkillsFuture Singapore Agency (SSG) made overpayments of an estimated S$4.22 million because of lapses in grant management, the Auditor-General’s Office (AGO) has found.

In a report on Wednesday (Jul 20), the AGO also called the SSG “tardy in its enforcement actions” over an estimated S$43 million of outstanding levy collections for 2015 to 2020, and flagged inadequate efforts to carry out audits of employers who might owe “significant amounts”.

These failings were among the issues raised in the Singapore Auditor-General’s report for FY2021/2022. Separately, the Auditor-General also called for the set-up of “a reasonable level of governance and planning arrangements for use in an emergency”, which could be done during peacetime.

That’s as this year’s report also featured a thematic audit of Covid-19-related procurement and spending, where the AGO found flaws in Covid-19 spending by the Health Promotion Board (HPB), Singapore Land Authority (SLA) and Ministry of Manpower (MOM), which had spent a combined S$1.51 billion on manpower, housing and catering from January 2020 to March 2021.

The audited agencies’ Covid-related spending included lapses in evaluating contractors’ proposals, as well as inadequate checks on the validity of payments, discrepancies in payment claims and a lack of supporting documentation, according to the AGO.

While the AGO said the 3 agencies “generally had processes in place” for procurement and contract management, it also identified “areas where controls could be improved”.

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In a joint statement, the HPB, SLA and MOM acknowledged the AGO’s observations and said that they “have since taken immediate steps to rectify the lapses and prevent recurrence”.

For instance, the HPB “has now formalised the need for written agreements with all external partners as good practice”, after the AGO flagged a lack of documentation related to third parties that volunteered to help HPB hire Covid-19 swab personnel at no charge.

As for payment lapses made to contractors, the MOM has fully recovered some S$150,000 of overpayments and made good on about S$51,000 of underpayments, the statement said.

The HPB has so far recovered about two-thirds of an overpayment of S$580,000, as at Mar 31, 2022, while the SLA has taken steps to recover about S$25,000, with another S$10,000 of potential overpayment for contracts still under review after a payment verification exercise.

Meanwhile, the MOM and SLA have lodged reports with the relevant authorities for further probes, as the AGO found “possible irregularities” in both records furnished for the extension of a MOM contract and the authenticity of some documents submitted to the SLA by a contractor.

Spending by the 3 agencies during the Covid-19 pandemic included S$700 million in 607 new contracts by the MOM, to tackle issues such as Covid-19 outbreaks in migrant worker dorms.

The SLA was responsible for isolation, recovery and other accommodation facilities – including contracts with more than 150 hotels, and more than 12,000 bed spaces in 18 state properties.

And the HPB noted that it had to train and hire 5,100 swab personnel trained within 3 months, which was more than 6 times the agency’s pre-pandemic staff headcount.

The AGO, which test-checked about one-fifth of the agencies’ expenditure, observed “a number of good practices” – such as the SLA’s use of a retainer-basis model in December 2020 and January 2021, which paid hotels only when they were activated as accommodation facilities.

“As the Covid-19 pandemic transits to a different phase, it is important for the public sector to reflect on lessons learnt… Even as swift action is needed in an emergency, the need for good financial governance is not reduced,” the AGO said in its report.

It concluded that “it may be useful to look at the entire life cycle comprising procurement, contract management and payment, and consider ‘fit for purpose’ governance arrangements in an emergency to help agencies manage the entire life cycle”.

Whole-of-government emergency procurement procedures – activated by the Ministry of Finance (MOF) in January 2020 – covered the procurement stage of the “procure-to-pay” cycle.

“Drawing from the lessons learnt, MOF is reviewing our emergency procedures to provide better guidance to agencies in managing procurement, contracts and payments,” the ministry said in a separate statement. “We expect this review to be completed by end-FY2022.”

The MOF will also issue an advisory to all agencies “to strengthen the adoption of good practices and minimise financial risks during emergencies”, including better supervision and documentation of decisions such as approvals and adjustments in a transaction.

Separately, the SSG told the press in a statement that it takes the AGO findings seriously and “has taken immediate corrective action” over the lapses in grant management.

Changes include a reduction of reliance on “declarations and manual processing”, as well as tighter audits of payments disbursed, a spokesperson said.

For the under-collection of Skills Development Levy (SDL) charges, the SSG noted that variance between estimated SDL payable and actual payments has fallen from 18 per cent of overall SDL collected in 2008, to 3 to 4 per cent now.

“However, SSG acknowledges that a more effective system is needed to follow up on variances between our estimates of SDL due, and what companies actually pay, and more needs to be done to reconcile the remaining gap,” the spokesperson said.

She pointed the media to new processes that will be put in place, such as timelier payment reminders, faster resolution of any differences between the company’s and the SSG’s estimates of SDL payable, and “more decisive punitive action” on errant employers.