Findings on Improper Payments in Auditor-General's Report

Mr Png Eng Huat asked the Minister for Finance based on the findings in the Report of the Auditor-General for FY2016/17, whether AGO will direct all the entities in the Report to investigate all improper payments made and determine the amount of money to recover.

Mr Speaker, the Auditor-General's (AG's) report reflects its findings in respect of two types of audit conducted every year on Government agencies. The first concerns whether the accounts of the Government are reliable and prepared in accordance with the law. The second concerns the rules and procedures in individual public agencies, for example, whether the rules and processes are adequate and have been complied with.

On the former, the Auditor-General's Office (AGO) has given the Government's Financial Statements this year an unmodified audit opinion, as has been the case in previous years. In other words, in the AGO’s opinion, the Financial Statements have been presented, in all material respects, in accordance with the applicable financial reporting framework. This means that the accounts of the Ministries, departments and Organs of State have all been found to be reliable and prepared in accordance with the law. On the latter, AGO has highlighted in its report some areas in which there have been procedural lapses and where the Government agencies can do better. We take these findings seriously.

Let me address Mr Png's question on investigating all improper payments and its recovery. I should clarify at the outset that there is no indication in the AGO report of any payments due to fraud, misfeasance or dishonesty. The cases highlighted by AGO this year largely concerned overpayments and payments made without prior approval, arising from human error, negligence or failure to follow established procedures.

In each of these cases, agencies have been taking prompt actions to recover any monies which might have been erroneously paid out. AGO noted that the Singapore Corporation of Rehabilitative Enterprises (SCORE) has recovered the overpaid amounts. The Economic Development Board (EDB) has completed the remedial action for all payment related lapses, including recovery of monies in the two incidences of overpayments. The Ministry of Social and Family Development (MSF) is also taking corrective actions to make good under-reimbursements and to recover over-reimbursements for the Government-paid Paternity Leave scheme. The Ministry of Health (MOH) also completed its review of the claims by its agents and service providers. There is no overpayment as the additional sums claimed by its agents have not been paid out. MOH will only be reimbursing its agents for the correct amount due to them.

The Government agencies are taking the necessary corrective actions in respect of the lapses highlighted in the AGO report.

I thank the Senior Minister of State. I have a question because, in the AGO Report, there is also, for example, language used, such as "there is no assurance that the Ministry exercised financial prudence" and also “there is a risk of fraud”. Can any entity whose lapses are highlighted in the AGO report come to the conclusion that there is no fraud because the AGO report is not forensic in nature? That is my question.

MOH. Mr Speaker, I think what the hon Member is really asking is whether an AGO report can prove a negative. You cannot prove a negative. One does not go around looking to see whether I can disprove or show that there is no fraud. An audit, by its nature, selects samples. It looks at the samples and it considers whether the system as a whole is robust and, if it picks up a point that the system, in itself, has got inefficiencies or deficiencies, it will highlight it.

An audit, by its nature, also, if it encounters a specific lapse or error, such as overpayment or under-reimbursement, it will also highlight that. So, what an audit does really is that it does sample checks, sees whether the system as a whole is robust and efficient, and it highlights specific lapses that it may encounter. That is the nature, not just of an audit by AGO, but of all audits.

Mr Speaker, Sir, just one last clarification. Although the AGO or audit is not forensic, so, technically, you cannot detect fraud. But in the aftermath of the report, when it was released, MOH, in its statement, said that, "Based on the AGO report, there was no indication of fraud or corrupt practices", which the AGO report did not say. Then the statement went on to say that "that warrants no further investigation required".

Would the Senior Minister of State comment on it because I think no one should take the AGO report as an endorsement that there is no fraud. The AGO only highlights lapses. Like what the Senior Minister of State said, it is selective audit. As such, the AGO report, when it came out, the language they used is quite similar to what was also used previously. We have encountered it before. It is not forensic. So, no Ministry should take for granted that, because it is not mentioned that there is no fraud, and if there is no fraud, it does not warrant any further investigations.

Mr Speaker, the hon Member may have misunderstood the nature of an audit. An audit will highlight or precipitate forensic inquiry if there is reason to do a forensic inquiry. So, if you go in and if you find there is conflict of interests, for example, payments to related third-parties or that your system as a whole enables the same person to approve a payment, submit a request for payment and sign a cheque for payment, that would require a forensic investigation.

But if you go in and you find that there is, in MOH's case, a possibility of an overpayment which actually has not even occurred and you point it out and you can rectify it, and if the nature of that is because, as I have explained earlier, human error, negligence or non-compliance, that, in itself, does not trigger a forensic audit.

What you have to do is you have to look at the nature of the lapse. Is it something that requires a further and deep investigation, or is it something that does not?

In this case, as I have explained earlier, the Financial Statements of the Government are fair and accurate. They are reliable. So, you can take the statements as reliable. Then, the second part of the audit is that you look to see whether or not the rules and processes are adequate and have been complied with. In this case, it would appear that the rules and processes are adequate, but, in some cases, they were not complied with that does not necessitate a forensic investigation.

So, it is quite correct for MOH to say that the audit did not, in this instance, disclose evidence of fraud.