2011 08-22-control-compliance-in-public-sector-procurement

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Control and compliance in public sector procurement. Covers evolution of public sector procurement in Singapore, procurement risks, managing procurement risks, control and compliance issues.

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  • Paper to digitalTypical procurement processes – put up requisitions > approved > route to purchasing > 3 quotes or tender depending on value > response from vendors > evaluation > approval > award > contract management.Centralisation
  • Paper to digitalTypical procurement processes – put up requisitions > approved > route to purchasing > 3 quotes or tender depending on value > response from vendors > evaluation > approval > award > contract management.Centralisation
  • Paper to digitalTypical procurement processes – put up requisitions > approved > route to purchasing > 3 quotes or tender depending on value > response from vendors > evaluation > approval > award > contract management.Centralisation
  • New IM3 on Procurement
  • Paper to digitalTypical procurement processes – put up requisitions > approved > route to purchasing > 3 quotes or tender depending on value > response from vendors > evaluation > approval > award > contract management.Centralisation
  • Paper to digitalTypical procurement processes – put up requisitions > approved > route to purchasing > 3 quotes or tender depending on value > response from vendors > evaluation > approval > award > contract management.Centralisation
  • Paper to digitalTypical procurement processes – put up requisitions > approved > route to purchasing > 3 quotes or tender depending on value > response from vendors > evaluation > approval > award > contract management.Centralisation
  • Paper to digitalTypical procurement processes – put up requisitions > approved > route to purchasing > 3 quotes or tender depending on value > response from vendors > evaluation > approval > award > contract management.Centralisation
  • No checks after goods received.Late submission of discrepancy reports – leading to unnecessary financial losses, i.e. miss out claiming on warranty.
  • Procurement procedures did not provide adequate checks and balances that prices of items purchased were fair and reasonable.
  • Those lapses will affect the openness, fairness and transparency of public sector procurement.
  • 2011 08-22-control-compliance-in-public-sector-procurement

    1. 1. Control and Compliance in Public Sector Procurement<br />Public Sector Fraud Risk Management <br />& Internal Compliance<br />22 to 23 August 2011<br />Yoong Ee Chuan, CPA, CIA, CISA, CISM, MSID<br />1<br />
    2. 2. Evolution of public sector procurement<br />Procurement risks<br />Managing procurement risks<br />Control and compliance issues<br />Agenda<br />2<br />
    3. 3. Paper to Digital<br />Centralisation to de-centralisation<br />IM3B to IM on procurement<br />Snapshot of procurement ecosystem<br />Evolution of Public Sector Procurement<br />3<br />
    4. 4. Evolution of Public Sector Procurement<br />4<br />
    5. 5. Evolution of Public Sector Procurement<br />5<br />
    6. 6. Principles remain similar i.e. open and fair competition, transparency and value-for-money (or previously “lowest cost meeting specifications”)<br />Procurement processes were very manual<br />IM3B – Government Instruction Manual on Procurement prescriptive rules for manual handling of procurement exercises<br />Rules for quotations vs tenders<br />Estimated procurement value (EPV)<br />>=$3,000 < $70,000 – quotations<br />> $70,000- tenders<br />Evolution of Public Sector Procurement<br />6<br />
    7. 7. Evolution of Public Sector Procurement<br />7<br />
    8. 8. Quotations<br />Less onerous compliance wise to tenders<br />Confidentiality of quotations<br />Fax quotations vs mailed quotations<br />Dedicated fax, officer opening etc.<br />Posting of quotations on notice board<br />Evolution of Public Sector Procurement<br />8<br />
    9. 9. Tenders<br />Offer by vendors – more legal documentation as it is binding<br />Confidentiality and integrity important<br />Tender boxes system with dual key<br />Tender opening committee<br />Tender witnessing officers<br />Evaluation by committee<br />Award by approving authorities based on value<br />Posting of bids on notice boards<br />Evolution of Public Sector Procurement<br />9<br />
    10. 10. SLA Fraud 2011<br />Evolution of Public Sector Procurement<br />10<br />
    11. 11. SLA Fraud 2011 (BT 29/09/2010 cont’d)<br />Evolution of Public Sector Procurement<br />11<br />
    12. 12. SLA Fraud 2011 (BT 29/09/2010 cont’d)<br />Evolution of Public Sector Procurement<br />12<br />
    13. 13. SLA Fraud 2011 (BT 29/09/2010 cont’d)<br />Evolution of Public Sector Procurement<br />13<br />
    14. 14. SLA Fraud 2011<br />Evolution of Public Sector Procurement<br />14<br />
    15. 15. [Post-SLA] Finance Circular No 1/2011 [4 March 2011] & Corrigendum [13 May 2011]<br />New Roles:<br />Approving Officer - AO (Approval of Requirement - AOR) function<br />Approving Officer (Bid Amendment) –Permanent Secretary (PS) or delegated officer<br />Other Requirements<br />Period contracts require AO (AOR) approval<br />Good practice to establish own period contracts for regular purchases<br />Limiting of “Limited” tenders – GPE should seek guidance from PS/CEO/Head of Agency if in doubt<br />Evolution of Public Sector Procurement<br />15<br />
    16. 16. Quotation Approving Authority (QAA) preferable (good practice) to be from different department (division/section/unit) requesting procurement<br />Goods/services Receipt Officer ensure documentary evidence (e.g. delivery orders, service reports, inventory stock-take) that goods/services delivered or performed<br />Segregation of Payment Certifying Officer / Approving Officer duties extended to Statutory Boards<br />Evolution of Public Sector Procurement<br />16<br />
    17. 17. Centralisation to de-centralisation<br />THEN<br />Central procurement office (CPO)<br />Stationeries e.g. pens obtained via CPO<br />Savings from bulk purchases but spoilage from stock obsolescence, matching demand/supply<br />NOW<br />Decentralised<br />E.g. e-Catalogue buy, bulk tender, GeBIZ<br />You buy what you need, block budget aproach<br />Evolution of Public Sector Procurement<br />17<br />
    18. 18. IM3B to IM on procurement<br />THEN<br />Instruction manuals came in paper files<br />Updating was a pain, manually cross out super-ceded paras, paste over new paras etc.<br />People were more controls & rules conscious<br />NOW<br />Web-based<br />Ease of reference and ease of forgetting (in some cases)<br />Evolution of Public Sector Procurement<br />18<br />
    19. 19. Inherent Risks<br />Procurement is susceptible to corruption (in general)<br />E.g. vendors gifts, ang-pows, free samples<br />Non-compliances can threaten openness, fairness and transparency occur<br />Laxity and lapses in basic contract management can result in loss of value-for-money<br />Report of the Auditor-General highlights cases of non-compliance<br />Procurement Risks<br />19<br />
    20. 20. In the past:<br />AG’s Report 1994/1995<br />Audit of Purchases under United States Foreign Military Sales Programme<br />Review of Financial Systems of Singapore Armed Forces Sports Association<br />Compliance with Government Procurement Procedures by Statutory Boards<br />Procurement Risks<br />20<br />
    21. 21. Procurement Risks<br />21<br />
    22. 22. Procurement Risks<br />22<br />
    23. 23. Procurement Risks<br />23<br />
    24. 24. Recently – Report of the Auditor-General FY2008/09, Auditor-General’s Overview<br />Areas of concern<br />Laxity in procurement and contract management<br />Lack of financial prudence in procurement and poor management of contracts and agreements<br />Resulting in higher expenditure for goods and services<br />Procurement Risks<br />24<br />
    25. 25. Areas of concern (cont’d)<br />Under-performance not detected<br />Penalties for non-performance not imposed<br />Revenues due not collected<br />Little or no assurance of value-for-money in projects carried out<br />Procurement Risks<br />25<br />
    26. 26. Procurement Risks<br />26<br />
    27. 27. Procurement Risks<br />27<br />
    28. 28. Procurement Risks<br />28<br />
    29. 29. Procurement Risks<br />29<br />
    30. 30. People<br />Lapses due to the way people interpret and enforce the rules as well as implementing the procedures<br />IM3B now more principles-based, i.e. more room for people to interpret hence critical to educate staff handling procedure about how to apply the principles<br />IM3B now provides case studies to help us<br />Segregation of responsibilities<br />Not one person do everything<br />Managing Procurement Risks<br />30<br />
    31. 31. People<br />Segregation of responsibilities (cont’d)<br />GeBIZ – more different roles, e.g. goods received and goods inspection must be different officers, purchasing officer also cannot be approving etc.<br />Previously can circumvent if manual, now with GeBIZ roles, more difficult<br />Evaluation team for tenders shouldn’t all be from the same dept/team<br />Education and awareness of IM 3B (and 3G)<br />Trade-off between controls and efficiency<br />Managing Procurement Risks<br />31<br />
    32. 32. System of procurement<br />Implement systems and processes that adhere to IM3<br />But public agencies do vary in implementation<br />E.g. of SBs that had dubious quotations<br />Get internal audit to review<br />Perhaps external audit may review<br />However, does not focus too much on internal controls over procurement, i.e. more concerned about validity and authorisation, completeness of recording of purchasing and payment transactions then procurement principles: openness, fairness and transparency<br />Managing Procurement Risks<br />32<br />
    33. 33. GeBIZ: A game changer<br />Controls are built into the procurement process<br />More difficult (but not impossible! i.e Singapore Land Authority case) to circumvent relative to manual processes<br />Examples<br />Openness of web invitations to quotes and invitations to tenders and request for proposals (global)<br />Routing for approvals<br />Publication of awards<br />Make full use of GeBIZ<br />Because you HAVE to (SBs MUST follow IM3)<br />Because it’s good for your agency<br />Managing Procurement Risks<br />33<br />
    34. 34. Some issues for agencies to consider:<br />To what extent does your agency adhere to principles of IM3B/G?<br />To what extent is your standard operating procedures for procurement in line with IM3B/G?<br />How familiar are your people with IM3B/G principles and procedures (i.e. GeBIZ use)<br />Have you set-up assurance and audit of procurement<br />Get your internal audit to look into it<br />Ask your external auditor to look into it<br />Use data analytics to detect unusual patterns<br />Control and Compliance Issues<br />34<br />
    35. 35. Mitigating Controls:<br />Segregation of duties<br />New AO(AOR), AO(Bid Amendment) etc.<br />Goods receipt, inspection and 3-way matching (Purchase Order, Delivery Order, Invoice)<br />Staff rotation<br />SLA fraud surfaced partly due to staff rotation<br />Oversight by Department Heads/Officers responsible for budget and payment approvals<br />Review monthly / quarterly expenditure against budget<br />Review purchases or payment reports and query on payments to “unusual” vendors<br />Understand own department’s procurement needs <br />Control and Compliance Issues<br />35<br />
    36. 36. Mitigating Controls<br />Consider centralisation of procurement<br />Weigh balance between efficiency and controls and risk of procurement fraud<br />Central purchasing “acts” as AOR as all purchases routed through dept<br />Better able to spot split quotations / purchases<br />Consider lower approval limits<br />Not fool-proof as shown by SLA fraudulent transactions were below $70,000 (threshold for calling tenders) but makes fraudster “work” harder<br />Whistle-blowing policy or Internal Disclosure Policy [PMO (PSD) Circular No. 3/2011]<br />Control and Compliance Issues<br />36<br />
    37. 37. Questions?<br />Contact<br />Yoong Ee Chuan, Director/Internal Audit Office<br />535 Clementi Road, Singapore 599489<br />Ngee Ann Polytechnic (www.np.edu.sg)<br />yec2@np.edu.sg<br />DID: 6460-6275<br />Twitter: @eechuan<br />LinkedIn: http://sg.linkedin.com/in/eechuan<br />Thank you!<br />37<br />

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