SINGAPORE: The Ministry of Health (MOH) spent more than S$4 million on site supervisory staff engaged by its agent without verifying the “need for and reasonableness” of this expenditure, according to the Auditor-General’s Office (AGO) report for the latest financial year released on Tuesday (Jul 18).
These irregularities were found in the contract management for the development of Ng Teng Fong General Hospital, when MOH had already engaged a contractor to provide site supervisory services for the project which began in October 2011, the report said.
During its audit, AGO found that the ministry had paid up to S$2.83 million by March 2015 for site supervisory staff separately engaged by its agent without having any contractual agreement for such services. MOH did not seek approval from its approving authority to bear the cost of this expenditure either, AGO added.
The project was completed in October 2015 at a total contract value of S$797.24 million.
During the audit, MOH told AGO it was not aware that its agent had separately engaged site supervisory staff until sometime in 2011. Even after becoming aware of this engagement, MOH had not assessed the need and “cost reasonableness” of the service, AGO said.
MOH was also unable to update AGO if it was obliged to pay its agent for site supervisory services incurred after March 2015. As of Nov 9, 2016, this expense amounted to about S$4.08 million.
“There was thus no assurance that the site supervisory services were not excessive when the agent proceeded to separately engage site supervisory staff,” the Auditor-General said. “The irregularities … indicated a lack of controls and inadequate oversight by MOH in managing its financial transactions with its agents.”
When MOH eventually updated AGO that there was no “duplication of services” as the number of staff engaged by its own site supervisory services contractor had been reduced by five to match the five hired by its agent, AGO found evidence to the contrary.
“The number of staff under the (original) contract was reduced by three instead of five, and the agent hired six staff instead of five,” AGO said. “There was thus a net increase of three staff.” MOH had also paid for about two years for the services of one of the three workers who was supposedly reduced from the original contract, the report added.
MOH acknowledged that it should have obtained written approval from its approving authority before bearing the cost of site supervisory staff separately engaged by its agent, AGO said. The ministry informed AGO that it had since implemented a “more structured process” for the engagement of site supervisory staff to ensure “prudence in the use of public funds”.
In a separate statement on Tuesday, MOH said it would set up a centralised infrastructure project development and contract management team to ensure healthcare development projects follow "standardised policies, processes, technical norms and guidelines" during delivery.
INADEQUATE SCRUTINY OF CONTRACT VARIATIONS
AGO also found that MOH’s agent did not follow the proper approval process for variations, or amendments to the terms and conditions, amounting to S$30.09 million in the contract for the main building of the hospital.
MOH’s agent only sought approval from one staff – an in-principle approval – when it should have complied with MOH’s more stringent conditions of two signatories for variations up to S$80,000 and three signatories for variations above S$80,000, AGO said.
AGO said majority of the variations were processed through the in-principle approval arrangement. This increased risk of fraud, it added, as there was no assurance that authorities had assessed the need for variations and their impact on overall project costs.
The ministry said the in-principle approval arrangement was not intended to be an approval to start work, but for the consultants and contractors to carry out detailed pre-works to expedite the preparation before seeking formal approval. However, AGO noted the detailed pre-works would incur time and costs and commit MOH to pay for such works.
"The arrangement had in effect undermined the financial controls that MOH had put in place to ensure that proper approval was obtained before expenditure was committed."
In response, MOH informed AGO that from April 2017, in-principle approvals would require two signatories and would only be allowed for urgent variations, such as safety issues. MOH would additionally request its internal auditors to check its variation approval processes as part of internal audits.
Meanwhile, AGO conducted checks on 121 contract variations, amounting to S$26.1 million, implemented between July 2011 and July 2016 for 13 separate infrastructure projects handled by MOH and its agents.
Irregularities were found in 40 of them, and these include approvals for contract variations sought after variation works had commenced and approvals not obtained or obtained from incorrect authorities.
“Seeking approval for variations, especially those that would result in commitment of additional expenditure, serves to ensure financial prudence,” AGO said.
The Health Ministry said in its statement that it would set up a construction audit unit to ensure proper approval of variations. “MOH will also improve the competencies of our officers through more structured training on public procurement procedures and regular briefings on the contract variation process,” it added.
INCORRECT CLAIMS FROM ELDERCARE FUND
AGO also found errors in 12 submissions by four nursing homes to seek funding from MOH for hiring additional nursing care staff, under the Eldercare Fund. The errors resulted in overpayment of S$48,600 to two nursing homes, and an under-claim of S$12,300 by two other nursing homes.
These funding submissions, made between April 2015 and March 2016, contained errors like the inclusion of patients who had been discharged or had passed away, leading to one nursing home under-claiming by S$9,600.
MOH informed AGO that it would rectify the incorrect claims and amend the claim submission process to prevent recurrence of similar lapses.
“MOH has also introduced additional checks to detect inaccurate claims submissions and instituted a checklist to strengthen funding audits,” it added in the statement. “MOH will guide eldercare providers through these changes.”
The ministry also said in its statement that based on the AGO report, there was no indication of fraud or corrupt practices, which warrant further investigation or deliberate wrongdoing by the people involved in the projects.