Control And Compliance In Public Sector Procurement 18 Aug 2010

Public Sector Procurement Asia 2010 17-18 August 2010 g Yoong Ee Chuan, CIA, CPA, CISA, CISM 1

 Evolution of public sector procurement  Procurement risks  Managing procurement risks  Control and compliance issues 2

 Paper to Digital  Centralisation to de-centralisation  IM3B to IM on procurement  Snapshot of procurement ecosystem 3

 Principles remain similar i e open and fair i.e. competition, transparency and value-for-money (or previously “lowest cost meeting specifications”) ifi i ”)  Procurement processes were very manual  IM3B – Government Instruction Manual on Procurement prescriptive rules for manual handling of procurement exercises g p  Rules for quotations vs tenders  Estimated procurement value (EPV) ◦ >=$3,000 < $30,000 – quotations ◦ > $70,000- tenders 6

 Quotations ◦ Less onerous compliance wise to tenders ◦ Confidentiality of quotations ◦ Fax quotations vs mailed quotations l d ◦ Dedicated fax, officer opening etc. ◦ Posting of quotations on notice board g q ◦ Finance Circular No 3/2010 [11 August 2010] Changes to the Quotation Process  Minimum Conditions of Contract for Quotation  Publication of Quotation Schedule and Corrigendum Changes  P bli i Publication of Reasons f Quotations that are “Cancelled” or fR for Q i h “C ll d” “No Award” 8

 Tenders ◦ Offer by vendors – more legal documentation as it is binding ◦ Confidentiality and integrity important  Tender boxes system with dual key  Tender opening committee  Tender witnessing officers  Evaluation b committee E l i by i  Award by approving authorities based on value ◦ Posting of bids on notice boards 9

 Centralisation to de-centralisation ◦ THEN  Central procurement office (CPO)  Stationeries e.g. pens obtained via CPO  Savings from bulk purchases but spoilage from stock obsolescence, matching demand/supply ◦ NOW  Decentralised  E.g. e-Catalogue buy, bulk tender, GeBIZ  You buy what you need, block budget aproach 10

 IM3B to IM on procurement ◦ THEN  Instruction manuals came in paper files  Updating was a pain, manually cross out super-ceded paras, paste over new paras etc.  People were more controls & rules conscious ◦ NOW  Web based Web-based  Ease of reference and ease of forgetting (in some cases) ) 11

 Inherent Risks ◦ Procurement is susceptible to corruption (in general) ◦ E.g. vendors gifts, ang-pows, free samples ◦ Non-compliances can threaten openness, fairness and transparency occur ◦ Laxity in contract management can result in loss of value-for-money al e for mone ◦ Report of the Auditor-General highlights cases of non-compliance non compliance 12

 In the past: ◦ AG’s Report 1994/1995  Audit of Purchases under United States Foreign Military Sales Programme  Review of Financial Systems of Singapore Armed Forces Sports Association S A i i  Compliance with Government Procurement Procedures by Statutory Boards 13

 Recently – Report of the Auditor-General FY2008/09, Auditor-General’s Overview  Areas of concern ◦ Laxity in procurement and contract management ◦ Lack of financial prudence in procurement and poor management of contracts and agreements ◦ Resulting in higher expenditure for goods and g g g services 17

 Areas of concern (cont’d) (cont d) ◦ Under-performance not detected ◦ Penalties for non-performance not imposed non performance ◦ Revenues due not collected ◦ Little or no assurance of value-for-money in y projects carried out 18

 People ◦ Clear from AGO report that lapses are due to the way people interpret and enforce the rules as well as implementing the procedures ◦ 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 ◦ IM3B now provides case studies to help us ◦ But still need to inculcate controls consciousness 23

 People ◦ Segregation of responsibilities  Not one person do everything  GeBIZ – different roles, e.g. goods received and goods inspection must be different officers, purchasing officer also cannot be approving etc. ffi l b i  Previously can circumvent if manual, now with GeBIZ roles, more difficult  Evaluation team for tenders shouldn’t all be from the same dept/team ◦ Education and awareness of IM 3B (and 3G) ◦ Trade-off between controls and efficiency 24

 System of procurement ◦ Implement systems and processes that adhere to IM3 ◦ But public agencies do vary in implementation  E.g. of SBs that had dubious quotations ◦ Get internal audit to review ◦ Perhaps external audit may review  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 25

 GeBIZ: A game changer ◦ Controls are built into the procurement process ◦ More difficult (but not impossible!) to circumvent relative to manual processes ◦ Examples  Openness of web invitations to quotes and invitations to tenders and request for proposals (global)  Routing for approvals  Publication of awards f ◦ Make full use of GeBIZ  Because you HAVE to (SBs MUST follow IM3)  Because it’s good for your agency 26

 Some issues for procurement managers to consider: ◦ To what extent does your agency adhere to IM3B/G? ◦ To what extent is your standard operating p procedures for p procurement in line with IM3B/G? ◦ How familiar are your people with IM3B/G principles and procedures (i.e. GeBIZ use) ◦ Have you set-up assurance and audit of d d f procurement  Get your internal audit to look into it  Ask your external auditor to look into it 27

 Understand your own control and compliance issues first  Auditor-General s Auditor General’s Office will carry out audits on a rotational basis ◦ Your turn for procurement or contracts audit by AGO will (eventually!) come  ◦ At least minimise or reduce number of findings by g y AGO (or your agency will be featured in Report of the Auditor-General FY 20XX/XX 28

 Questions?  Contact ◦ Yoong Ee Chuan, Director/Internal Audit Office Chuan ◦ 535 Clementi Road, Singapore 599489 ◦ Ngee Ann Polytechnic (www.np.edu.sg) (www np edu sg)  yec2@np.edu.sg  DID: 6460-6275  Twitter: @eechuan  LinkedIn: http://sg.linkedin.com/in/eechuan 29

Control And Compliance In Public Sector Procurement 18 Aug 2010

by Ee Chuan Yoong on Aug 18, 2010

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Control And Compliance In Public Sector Procurement 18 Aug 2010 — Presentation Transcript