Actions Taken by SkillsFuture Singapore in light of Lapses in Disbursement of Grants

Mr Yip Hon Weng asked the Minister for Education regarding the FY 2021/22 Auditor-General's Report finding that SkillsFuture Singapore (SSG) was lax in collecting Skills Development Levy (SDL) funds (a) what are the reasons and root causes as to why the discrepancy is not detected over five years; (b) how long will it take for SSG to collect back the required funds; and (c) what does the agency intend to do to prevent such similar grant management issues from occurring in the future.

The Auditor-General’s Office (AGO) had identified lapses in two areas in the audit of SkillsFuture Singapore (SSG): overpayment in grant disbursement and under-collection of Skills Development Levy. SSG takes these findings seriously.

First, AGO found lapses in SSG’s disbursement of grants, which led to estimated overpayments of about $4.22 million between 1 April 2018 and 30 June 2021. The main causes of these lapses were due to inaccurate or erroneous declarations by grant applicants and training providers that were not picked up by SSG’s internal checks. The bulk of such errors occurred prior to November 2020, when SSG’s previous IT system for grant administration had used a declaration-based approach. Other errors also occurred during manual processing of grants, including human errors made by the service provider contracted by SSG to perform grant administration functions.

SSG has contacted all affected training providers, companies and individuals for the necessary recovery. Parties will be given time to check their own records and return any confirmed overpayment.

To reduce reliance on declarations and manual processing, SSG implemented a new IT system for administering Training Grants since November 2020. The system uses administrative data in Government databases to determine and verify eligibility of the grant applicants. SSG is also streamlining its business rules to rely less on declared information and manual verification. Where these cannot be avoided, SSG will tighten its audits on payments disbursed and on the work of its service provider.

Separately, AGO found that SSG did not follow up adequately, on a variance of $43 million, between SSG’s estimate of the Skills Development Levy (SDL) that employers should pay and what was collected for the period 2015 to 2020.

Allow me to explain the SDL and how it is collected today. The SDL is a levy which companies pay every month for both their local and foreign employees in Singapore. The SDL payable for each employee is 0.25% of the monthly total wages. SSG derives estimates of SDL payable by companies based on existing Government data such as CPF. SSG’s estimates may differ from actual SDL amounts paid by the employers due to factors such as fluctuations in total wages paid to foreign workers every month, some of whom might be on home leave and not receiving salary during the period of home leave. In some cases, the variance may be due to employers using more updated employee data, instead of being an actual under-payment of SDL.

SSG has adopted a risk-based approach to follow up on estimated variances. The overall variance between the estimated SDL payable and the actual payments has fallen from 18% of overall SDL collected in 2008, to the current 3% to 4%, with the majority of companies compliant in paying their levy today. This was achieved through IT system improvements and SSG’s reminder letters and calls. Nevertheless, SSG acknowledges that more needs to be done to actively reconcile the remaining gap and help all employers pay the correct amount of SDL.

SSG will give affected employers time to validate the amounts owed. It has started engaging the affected employers and will contact all of them by the end of the financial year.

SSG will send timely payment reminders and develop more efficient processes to resolve differences in the companies' and SSG’s estimates of SDL payable. For the few recalcitrant employers who do not pay the outstanding levies despite reminders, SSG will take decisive punitive actions.

Finally, if there is any negligence found, individuals will be taken to task. Learning from the AGO audit, SSG will do even more to review and enhance its processes, policies and systems to prevent lapses.

Thank you, Mr Deputy Speaker. I thank the Minister of State for her reply. I have two supplementary questions. First, whether errant vendors will be closely monitored to prevent similar situations from happening in the future? Two, will SSG consider working with specialist agencies like GovTech to make sure that the computer system is up-to-date and to ensure that similar situations do not happen in the future?

I thank the hon Member Mr Yip Hon Weng for the supplementary questions. Indeed, SSG will work more closely with GovTech and is actually looking at rolling out a new IT system to be able to estimate more accurately and be able to track the employers in the payment of SDL. By the middle of next year, we are hoping to roll out a new system to help employers as well, to estimate much better what is the SDL that they are liable for and also for SSG to be able to verify.

Thank you, Deputy Speaker. I have four supplementary questions for the Minister of State. The first is, AGO cited that there were $4.22 million of overpayment. I would like clarification as to whether this is based on a 100% check by AGO or this is just what was found based on test checks, meaning there could be others that have not been detected so far. So, that is the first question: whether $4.22 million is based on a test check or a 100% check.

The second question: one of the lapses found was that there were payments made for courses that were actually not approved by SSG. The remedial action cited in the report was that retrospective approval would be obtained for these courses to be approved. My question is: is this the correct approach to take? Meaning that funding was paid out for unapproved courses, but now retrospective approval is being sought to approve those courses retrospectively.

The third question: whether the Ministry is considering taking any action against the outsourced service provider?

The fourth question: earlier, the Minister of State mentioned that if there was negligence found in these lapses, then actions will be taken. AGO actually mentioned that the business rules of SSG were not well-defined. So, the question is: how far up should this accountability go?

First of all, I would like to say that the SDL Act has been around since 1979. Prior to SSG, the Government was already collecting the Skills Development Levy. Indeed, as AGO has pointed out, business rules have a certain looseness that needs to be tightened so that companies can better assess – more accurately as well – the SDL that is payable. SSG is in the process of reviewing this. In fact, we are also in the process of reviewing the SDL Act.

With the review of upstream business rules, it will make it easier for companies to be able to estimate the SDL that is payable and for SSG to be able to collect more promptly the amount that companies owe to the Government.

Ms Sylvia Lim also asked about whether AGO had conducted 100% checks when they detected the $4.22 million of grant overpayment. At the moment, I do not know if it was 100% checks, but to my knowledge, AGO normally does sampling checks over a period of time and in this case, they had checked for the grant disbursed between the period of 1 April 2018 and June 2021, I believe. And amongst the transactions that they had checked, they found overpayments. Actually, these overpayments are still in the process of being verified with the entities involved.

Just as an example, AGO found that through their own AGO database, there was overclaim of absentee payroll by employers. What AGO did was, they looked at the salaries paid by companies over a 12-month period and they divided it by 12 to estimate the monthly salaries paid by the companies. But actually, it is more accurate for us, for SSG, to take a look at the salary that the company had paid to its employees in the month that the course was conducted. So, what I am trying to say is that, it is quite a complicated process and for the amounts that are estimated to be over payment of the grant, SSG is now in the process of doing verification and using more detailed data with the entities involved.

To that question about whether retrospective approvals will be made, I think, what is more important is for us to understand the spirit of SkillsFuture courses. SkillsFuture courses are meant to help individuals as well as employers with upskilling. I think what matters to us most at the end of the day is, whether the individuals and companies are eligible for the grants that they have applied for. If the lapses in application were due to administrative errors, then we would want to look at how we can help these individuals, companies and the training providers in rectifying this in a proper way.

As to whether actions will be taken against the service provider, indeed, we discovered some human errors in the manual processing by the service provider. There are contractual terms and key performance indicators (KPIs) that the service provider is liable for and SSG will be looking through this.

At the moment, I think the root cause that we have identified is the massive volume of manual processing. It makes it very, very difficult for all the verifications to be done fully. And hence, there needs to be more upstream changes in policies and business rules.

Thank you, Deputy Speaker. Sorry, I should have asked earlier also. I do not know whether part (b) and (c) of my filed Parliamentary Questions were answered. So, is the Minister of State able to tell us how much has been defrauded or overpaid since inception and how much has been recovered? I am sorry if I missed your answer, but I do not recall hearing that the answer to (b) and (c).

Actually, it has not been ascertained if the $4.22 million that AGO pointed out is fraud. We have not used that term yet, because, as I explained, there is a lengthy verification process with the individuals and the companies and training providers involved. Since SSG was formed, there have been fraud cases detected. I think the most significant one was in 2017. There was a syndicate that was found to have committed fraud amounting to $40 million. Besides that, similarly in 2017, there was a discovery of 4,400 individuals who made false claims for SkillsFuture Credit and that was also discovered and arrested back then.

As to how much is being recovered, SSG is still in the process of following up with individuals and the companies and they will need some time. It is not very easy to do the verification quickly. So, we ask the Members to allow SSG some time to recover the overpayments.