Lapses in Public Sector Entities

Parliamentary Question by Mr Mohd Ismail Hussein:

To ask the Deputy Prime Minister and Minister for Finance in light of the recent Auditor General's Report for FY 2014/2015 on lapses found in public sector entities:(a) whether the respective Ministries have conducted their own investigations into the lapses; (b) whether these investigation reports will be made public; (c) how many of these lapses are repeat lapses; and (d) what are the measures the respective Ministries plan to take to tighten controls and avoid serious lapses that affect the proper use of public funds.

Reply by Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam:

I thank Mr Mohd Ismail Hussein for his question.

2. Before I get into the specifics, let me briefly explain that there are two types of audit conducted annually by the Auditor-General’s Office (AGO).

i) The first is a financial statements audit. AGO checks if the Government Financial Statements have been prepared in accordance with the law. The Government Financial Statements incorporate the accounts of all Ministries, Departments and Organs of State. AGO’s audit hence covers the accounts of all these agencies.

ii) The second type of audit is a selective audit. AGO checks on individual public agencies’ compliance with rules and procedures, and also on their internal controls. AGO does these selective audits on a selection of agencies every year.

3. For its audit of the Government Financial Statements, AGO has given an unmodified audit opinion this year, just as in previous years. That is to say, the Government Financial Statements, containing accounts of the Ministries, Departments and Organs of State, are reliable, and public funds are properly accounted for. The same is true for the Statutory Boards, all of which received an unmodified audit opinion from their respective auditors for the Financial Year 2014/15.

 
4. The findings reported in the Auditor-General’s latest report (for FY2014/15) did not affect AGO’s opinion of the Government Financial Statements. The findings, which are the result of the various selective audits performed by the AGO, highlight lapses in complying with the rules and procedures which the Government imposes on itself to ensure proper conduct. Each of our agencies takes every lapse seriously, and ensures improvements are made promptly.

Lapses in the AGO Report for FY 2014/15 and Follow-up Actions

5. I will now address the specific questions that Mr Mohd Ismail Hussein has raised.

6. All of AGO’s audit findings are looked into by the heads of the respective agencies. In the case of Ministries, this is the Permanent Secretary. They are responsible for ensuring that the lapses are rectified and steps are taken to minimise recurrence. This includes the need for further investigations within the agencies when required, and to take disciplinary actions where warranted. Any suspicion of corruption or fraud is referred promptly to the Police, and investigated thoroughly. 

7. With regard to Statutory Boards, their audit findings and any further investigations are also reviewed by their respective supervising Ministries.

8. In this year’s report, AGO has observed lapses in some agencies regarding their administration of grants, management of procurement or revenue contracts, management of contract variations and related-party transactions. All the agencies involved have conducted their own investigations into the lapses.

9. Except for one audit finding, concerning an agency’s procurement of event management services, all the other audit findings in this year’s AGO report were not repeat lapses.

10. All agencies where lapses were found have taken steps to improve. Depending on the problem, this includes closer monitoring by supervisors and internal auditors, improved and clearer internal guidelines for officers, enhanced IT systems to enable better tracking, and developing fund administration guidelines for management of programme vendors.

11. Further, officers responsible for the lapses are taken to task. Because of the consistent way we have dealt with lapses in the past, all public officers and their supervisors know that if they are responsible for any misdoing, firm measures including disciplinary actions will be taken whenever necessary. 

12. Except for one case in the latest AGO findings which has been referred to the Police for further investigation, all the other cases were due to administrative or procedural lapses. These were mainly due to a lack of knowledge, carelessness or poor supervision. But even where there is no evidence of fraud or corrupt intent, an officer may face serious disciplinary action, such as having his salary increment withheld and being debarred from promotion for a few years. 

13. Mr Mohd Ismail has also asked if Ministries’ investigation reports will be made public. The Public Accounts Committee, comprising Members of this House, can and has called up public agencies to give a full account for areas which are of concern to the Committee. Agencies are required to submit all materials related to their cases, including investigation reports, to the Committee if asked. The Committee then gives its opinions and observations, including its assessment of the agencies’ follow-up action, to Parliament and to the public.

14. To go beyond this and make public each agency’s investigations into every lapse each year will not help in ensuring the thorough internal investigations needed to get to the bottom of things. What matters is that agencies take each and every lapse seriously, and take steps to minimise recurrence.

Reliable accounts and sound checks and balances
 
15. To conclude, let me reassure members that we have a sound system of checks and balances in place in the public sector, which is why it is regarded as one of the cleanest and most reputable administrations in the world^[1]. Public officers and agencies know they have a responsibility to safeguard the use of public funds. Internal controls are in place within each agency, audits by an impartial AGO are carried out regularly and rigorously, and the AGO’s findings are made public. The agencies take prompt action whenever problems are found, and make no attempt to cover them up. And where there is any suspicion of fraud or corruption, investigations are thorough and errant officers face the full measure of the law regardless of their seniority.

16. Any AGO audit must be expected to turn up some lapses and oversights, as with diligent audits of large organisations anywhere. If nothing was found, I would be concerned about the independence and rigour of AGO’s audits. Neither can we tighten controls to the point of making lapses impossible. It is not possible to avoid human lapses completely. We would also be weighing down the system with more rules than is sensible for an effective administration, and it would freeze decision-making within our agencies. We must continue to maintain a sensible balance of rules, subject ourselves to regular and thorough audit, and take thorough enforcement actions whenever necessary.

17. Finally, I should emphasise once again that AGO’s findings on compliance with rules and procedures do not impinge on its assessment that the Government’s financial accounts are reliable. They leave no doubt as to whether the public’s money is fully accounted for and in safe hands.

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^[1] The Singapore Government ranks 3rd in the Global Competitiveness Report 2013-2014 for the least corruption in the economy and highest in the region where transparency is valued highly; due to clear and strict laws and legislations imposed by the government over business dealings and transactions.