SINGAPORE: The People's Association (PA) was flagged for various lapses in the latest report by the Auditor-General's Office (AGO) for the financial year of 2017/2018 released on Tuesday (Jul 17).
These included lapses in procurement for festive street light-ups and the management of welfare assistance schemes.
The AGO report also said there were "serious weaknesses in controls over overseas purchases and payments which could be exploited."
LAPSES IN PROCUREMENT FOR STREET LIGHT-UPS
PA and one of its grassroots organisations failed to adhere to Government procurement principles of open and fair competition, transparency and value for money for two tenders and four quotations, AGO noted in its report.
The tenders, worth S$500,000, were for the manufacture of decorative items for street light-ups for Mid-Autumn Festival 2016 and Chinese New Year 2017.
The two tenders for both street light-ups were awarded to the same overseas manufacturer, who had been awarded the contracts every year since 2014.
In its proposal for the Mid-Autumn Festival 2016 light-up, the company had listed additional costs including accommodation for its workers during their stay in Singapore, transportation charges for materials and the provision of a site for assembling lanterns.
However, the grassroots organisation did not consider these additional costs on top of the tender price in its evaluation when comparing the price for the proposals.
The same company was also the sole bidder for the Chinese New Year 2017 light-up, and similarly included additional cost items that the grassroots organisation did not mention when seeking approval for the tender.
AGO found in its report that the grassroots organisation should have included the costs of the additional items in the price comparison so that all tender offers could be evaluated on the same basis.
"Besides the issue of fairness, there was also no assurance that the contract was awarded to the tenderer which could provide the best value," it stated.
In addition, the grassroots organisation accepted the proposal from the company after the specified closing time for the Chinese New Year 2017 light-up tender, and allowed the company to revise its proposals and bid price after the tender had closed.
While AGO noted that there was only one bidder for this tender, it said that accepting the submission of late tender proposals and allowing the company to amend its proposals and bid price after the closure of the tender went against the principles of open and fair competition as well as transparency.
"Such lapses could lead to allegations of unfairness," it said.
The contracts signed with the overseas tenderer were also based on the laws of the company's country, and required any unresolved disputes to be filed for litigation in the courts of that country.
As the other country has a different legal system, such provisions in the contracts may not safeguard the Singapore agencies' interests, AGO said.
PA explained that the contracts were prepared by the company and the grassroots organisation without the advice of PA's legal department. Moving forward, the grassroots organisation will prepare contracts, PA said.
PA informed AGO that the procurement lapses were largely due to the procuring team having an inadequate understanding of Government procurement guidelines and operating under time constraints, according to the report.
PA also said it would take measures to improve its staff's understanding and compliance with Government procurement requirements as well as ensure proper contract management documentation, the report noted.
READ: Auditor-General report: Overpayment of grass-cutting fees; lax procurement controls uncovered at MINDEF
OFFICER SUBMITTED CLAIMS WITH DUBIOUS AUTHENTICITY
AGO's checks also revealed that a PA officer's reimbursement claims for overseas purchases and payments for costumes and accessories worth S$142,200 for Chingay Parade 2017, were supported by some supporting documents with "tell-tale signs" that cast doubt on their authenticity.
The officer paid for the purchases in cash or through a remittance agent and claimed for reimbursement using cash sales receipts.
There was no assurance that the reimbursement claimed by the officer was the actual amount he paid for the items, AGO said.
It added that while he was accompanied by at least one other staff during the sourcing and purchasing trips, he had made two additional personal overseas trips at his own expense to make purchases, settle final payments for earlier purchases and obtain cash sales receipts. This exposed PA to the risk of duplicated and inflated claims, according to AGO.
PA had also posted Invitations to Quote for the items in the Government's electronic procurement system, GeBIZ. It subsequently posted "no award" announcements in GeBIZ even though it had awarded the contracts to overseas vendors not registered under the system separately through manual quotations.
AGO said conducting parallel manual quotation exercises are not allowed; as obtaining manual quotations from overseas supplies are not subject to the more stringent controls of GeBIZ, PA could be exposed to risks from the manipulation of bids as well as allegations of discriminatory practices and a lack of transparency.
PA has informed AGO that it has stopped all overseas direct purchases by staff and procured the costumes and accessories for Chingay through GeBIZ since April 2017, as well as reviewed past purchases for Chingay to determine if there were similar weaknesses, AGO said.
Preliminary findings by PA indicate that the purchases and payments made were genuine, PA said in a statement in response to AGO's report.
It added that an independent investigation panel led by a senior officer in the Ministry of Culture, Community and Youth was also set up in June this year to provide a second round of checks on the procurement for Chingay 2017 as well as review past overseas Chingay purchases and payments for any indications of fraud.
The officer involved left PA's employment last year, it said.
RECURRING FAILURE TO GET PROPER APPROVALS FOR CONTRACTS
AGO checked 189 purchases worth S$6.03 million by 18 grassroots organisations, and found that 13 grassroots did not obtain proper approvals for the award of contracts and variations in these contracts for 25 purchases totalling S$619,900.
Of these, 19 purchases were made with only verbal approvals or approvals after the goods and services had been delivered, while the rest were made with approvals from parties that did not have the authority to grant them.
AGO noted that PA's failure to obtain proper approvals is a recurring lapse, with a similar observation noted in the report for the financial year 2014/2015.
PA's explanation was that some of the lapses resulted from unexpected requirements that arose at short notice.
Nonetheless, it acknowledged that proper approvals should have been sought for the contracts and said that it would review its financial procedures and strengthen the approval processes to cater for contingencies and ensure proper approvals are sought. It also said it would step up procurement training for grassroots organisations, according to the report.
MANAGEMENT OF WELFARE ASSISTANCE SCHEMES
AGO test checks also revealed that cash gifts and assistance-in-kind given out under grassroots organisations' welfare assistance schemes from April 2016 to June 2017 were not properly managed.
As a result, there was no assurance that the assistance, which included supermarket vouchers, food vouchers and groceries for needy residents, were given to only eligible applicants and properly accounted for, the report said.
For example, three grassroots organisations did not have documentary evidence to substantiate residents' eligibility for cash and assistance-in-kind at festive events.
PA said the applicants were interviewed and assessed for welfare assistance but that it was not documented, and said it would put in place procedures to standardise the evaluation process across grassroots organisations.
AGO also found that there were weak controls over reimbursement claims for food vouchers, with some grassroots organisations failing to invalidate vouchers that had already been used, and not tagging them to the reimbursement claims. One grassroots organisation also did not keep records of authorised representatives who could claim reimbursement, exposing itself to the risk of paying to unauthorised individuals.
In addition, some of the groceries purchased for distribution to needy residents were not the same in type and price as those stated in the contracts with a vendor, or could not be accounted for.
PA said that it would strengthen its procedures on the stock-taking, packing and distribution of groceries, the report stated.
In its subsequent statement, PA said it had reviewed the welfare disbursements and confirmed that all funds were used for their intended purposes.
The association said that welfare assistance schemes are meant to help vulnerable residents in a timely way and that as the needs and circumstances of residents differ, grassroots organisations need to be sensitive and flexible in the way they render help.
"In disbursing assistance, our grassroots organisations have to strike a balance between strong financial controls, flexibility and responsiveness, while upholding the dignity of our residents," it added.
STEPS BEING TAKEN TO REDUCE LAPSES: PA
Since AGO's audit, PA and the grassroots organisations involved have taken immediate steps to rectify the lapses by validating purchases, seeking proper approvals and completing documentation, the association said, adding that it will also "deal with the officers responsible for lapses".
Further steps include improving its online procurement platform for grassroots organisations, centralising the management of high-value contracts by specialised procurement staff at PA headquarters and deploying specialised staff to assist grassroots organisations in their procurement by mid-2019.
In April this year, PA also rolled out e-learning for grassroots volunteers, which includes training on financial procurement matters, it said.
"PA acknowledges and takes a serious view of the observations of the AGO," it said in the statement.
"PA has put in measures over time which have shown signs of progress. While addressing lapses among the grassroots organisations is a work in progress and cannot be achieved overnight, PA headquarters will continue to have oversight and is confident of making improvements over time."
In a statement on Tuesday, the Ministry of Finance (MOF) said the Government is firmly committed to ensuring accountability and transparency in its use of public resources and has been stepping efforts to address the issues identified by AGO.
"We agree with AGO that it is important for public agencies to exercise due diligence in managing their contracts," it said.
For example, the PA has taken steps to address the financial controls lapses highlighted by AGO and is enhancing its systems to strengthen its procurement and contract management functions, MOF added.
The report covered AGO's audit of financial statements incorporating the accounts of all 16 Government ministries and eight organs of state, the financial statements of three statutory boards, a Government fund, four Government-owned companies and three other accounts.
Other lapses found in the report include weaknesses in Information Technology controls and gaps in the management of research and development grants.