TWELFTH PARLIAMENT OF SINGAPORE _____________ Second Session _____________ FOURTH REPORT OF THE PUBLIC ACCOUNTS COMMITTEE Parl. 2 of 2015 _________ Presented to Parliament on 4 February 2015 _________ PUBLIC ACCOUNTS COMMITTEE Members Mr Cedric Foo (Chairman) Mr Ang Hin Kee Mr Christopher de Souza Ms Foo Mee Har Mr Gan Thiam Poh Ms Jessica Tan Dr Teo Ho Pin Mr Zaqy Mohamad CONTENTS Page FOURTH REPORT OF THE PUBLIC ACCOUNTS COMMITTEE Committee’s Queries and Ministries’ Responses in relation to Audit Observations in Auditor-General’s Report for FY 2013/14 Management of Land and Assets 1-2 Administration of Schemes and Programmes 2-4 Procurement 4-7 Other Lapses 7 APPENDIX I Minutes of Proceedings 8-10 Blank Page FOURTH REPORT OF THE PUBLIC ACCOUNTS COMMITTEE 1 The Committee considered the Report of the Auditor-General for the Financial Year 2013/14 (Paper Cmd. 6 of 2014). The Committee’s enquiries into specific observations are discussed in paragraphs 2 to 44. Management of Land and Assets 2 The Committee noted three lapses reported in the Auditor-General’s Report on the management of land and assets. The Committee was concerned over the weak management of resources, particularly the under-utilisation of land, buildings and assets resulting in waste of public resources. The Committee sought written explanations from the following Ministries on these lapses: (i) Ministry of Defence (MINDEF); and (ii) Ministry of National Development (MND). MINDEF – Lapses in the Licensing of Land 3 MINDEF entered into a licence agreement with its contractor in 1995, to sublet land at a nominal rate for the contractor to use solely for the purpose of providing services to MINDEF. The Committee noted that MINDEF continued to charge nominal rent, even after the contractor was privatised in 2000 and had been using the land for commercial activities beyond providing services to MINDEF. The Committee was concerned that public resources might be used for subsidising commercial activities. 4 In response to the Committee’s query, MINDEF clarified that as the contractor was a wholly Government-owned company prior to 2000, there was no clause in the 1995 licence agreement to state that the land leased to the contractor was to be used strictly for the purpose of providing services to MINDEF and not for commercial activities. Following the audit observation, MINDEF entered into a new rental agreement with the contractor and would be charging the contractor annual rental for the land used for commercial activities, using revenue as a proxy. MND – Under-utilisation of Land, Buildings and Facilities 5 The Agri-Food and Veterinary Authority (AVA) operates a number of laboratories and facilities at various sites in Singapore. The Committee was concerned over the under-utilisation of land, buildings and facilities at two of the sites, as reported in the Auditor-General’s Report, which had resulted in wastage. 6 MND informed the Committee that the AVA Board had asked its Management to conduct a comprehensive review on the usage of all AVA’s land, buildings and facilities, and report the outcome to AVA’s Finance and Audit Committee in early 2015. This review was carried out by a committee chaired by the Deputy Chief Executive Officer of AVA and covered the following areas: 1 (i) AVA’s current and future space requirements; (ii) Recommendations and plans for the unoccupied facilities; and (iii) Evaluation on whether some activities currently at the Sembawang site could be relocated to the Lim Chu Kang site, taking into consideration the possible changes to AVA’s business and space needs. 7 AVA had since completed its review for the Sembawang site and had submitted a land return proposal to the Singapore Land Authority. MND –Under-utilised Equipment and Machinery 8 The Committee noted that some equipment and machinery held by AVA were under-utilised or left unused. 9 On the progress of follow-up actions taken by AVA, MND informed the Committee that AVA was reviewing the equipment and machinery highlighted in the Auditor-General’s Report. Those identified as no longer required would be put up for disposal. Departments have also been reminded to dispose of equipment and machinery in a timely manner to realise any salvage value and to free up storage space. 10 In addition, MND informed the Committee that AVA’s Finance Department had carried out independent checks on the assets to reinforce the need for review. Going forward, these independent checks would be carried out on an annual basis. 11 The Committee noted the responses from MINDEF and MND. The Committee would like to emphasise that public sector agencies should exercise greater diligence in managing public resources and review their usage regularly so as to optimise their use and minimise wastage. Administration of Schemes and Programmes 12 The Committee noted the inadequacies and lapses in the administration of schemes and programmes reported in the Auditor-General’s Report. The Committee sought written explanations from the following Ministries on these lapses which could impact the effectiveness of the Ministries’ administration of such schemes and programmes: (i) Ministry of Health (MOH); and (ii) Ministry of Manpower (MOM). MOH – Ineffective Control of Approval Process for Import of Medicinal Products 13 The Committee noted that the Health Sciences Authority (HSA) had lax controls over the approval of applications for import of medicinal products. The Auditor- General’s Office (AGO) found that 386 of the 1,479 import applications (26 per cent) 2 checked contained errors. Such errors include missing, incomplete or erroneous requisite product information and/or importer licences. 14 In view of the many non-compliant applications and errors noted by AGO, the Committee asked MOH: (i) Whether the importers had breached any regulation or law, pertaining to the 386 applications noted; and (ii) Whether HSA or other authorities would be taking actions against importers which had breached the law. 15 MOH informed the Committee that HSA had conducted checks on the 386 import applications and verified that these 386 products had been licensed or approved for importation, although the information provided in the applications were incorrect. 16 The Committee noted that HSA would be enhancing the current trade declaration system so as to carry out 100 per cent system verification of information contained in the application forms electronically. MOM – Lapses in Monitoring and Following Up of Erroneous Medisave Claims 17 The Committee noted lapses in the Central Provident Fund Board (CPFB)’s monitoring and following up of erroneous Medisave claims submitted by medical institutions. The Committee asked MOM for an update on the progress of the follow-up actions and the root causes for the lapses. 18 On the progress of actions taken by CPFB to rectify the lapses, MOM informed the Committee that CPFB had: (i) Formalised and documented the procedures on follow-up of erroneous claims in June 2014; (ii) Improved the tracking system on follow-up of claims in June 2014; (iii) Sent reminders to all restructured hospitals to improve their medical classification of claim cases and to make the appropriate refunds to the claimants’ Medisave Accounts; and (iv) Settled 90 per cent of erroneous claims as of January 2015 and was working closely with MOH on the recovery of the remaining claims. 19 MOM also informed the Committee that CPFB had been working with MOH since 2011 to explore various deterrent measures against medical institutions that made erroneous claims, such as the possibility of imposing administrative or penalty fees for erroneous claims. 20 The Committee was of the view that the issue of the erroneous Medisave claims submitted by medical institutions should be addressed at its source. The Committee 3 asked MOM whether there is a system in place to help the staff at medical institutions submit the claims correctly. 21 MOM informed the Committee that the majority of the erroneous claims arose from misinterpretation of the surgical procedures and guidelines. To minimise erroneous claims, MOM informed the Committee that MOH has stepped up efforts to educate clinical practitioners and providers. MOH has also put in place a process to update the list of surgical procedures claimable under Medisave or MediShield more regularly to ensure that it keeps pace with medical advancements and takes into account feedback from the clinical community. 22 The Committee noted the responses from MOH and MOM. The Committee would like to emphasise that it is important for public sector agencies to address gaps or inadequacies in their work processes so as to ensure that the schemes and programmes under their purview are implemented effectively and can be reasonably complied with. Procurement 23 The Committee noted that several observations reported in the Auditor- General’s Report relate to lapses in procurement. The Committee noted that there were lapses in the award of contracts to five incumbent contractors by HSA as well as in a limited tender called by the Standards, Productivity and Innovation Board (SPRING). The Committee sought written explanations from the following Ministries on the procurement lapses: (i) Ministry of Health (MOH); and (ii) Ministry of Trade and Industry (MTI). 24 The Committee also sought the views of the Ministry of Finance (MOF), which is responsible for Government procurement policies and rules, on management of contract variations which exceeded the approved original procurement values substantially. MOH – Contracts Awarded to Incumbent Contractors that Did Not Meet Tender Requirements 25 The Committee noted that HSA had awarded contracts to five incumbent contractors even though their tender proposals did not fully meet tender requirements. For the tenders relating to blood processing and warehousing services, the Committee was of the view that fresh tenders should have been called as the original tender conditions and specifications were modified.