Thursday, May 27, 2010

All kinds of valid reasons for all kinds of major audit lapses


Mr Teo and the Audit Officer entered the room, both with stern and straight faces. Ah Tan, Lui and Chinnam stood up to greet the two men. Mr Teo just nodded and signaled them to be seated.

MR TEO: Guys, the Officer here has already completed his analysis on the audit findings, and I must assure you that I'm very unhappy with what he has found out.

Lui and Chinnam suddenly felt a drip of cold sweat flowing down their spine.

MR TEO: You may disclose the findings to them.

The Audit Officer took a few pieces of papers out from his thick document file and cleared his throat before addressing the men.

OFFICER: The committee is gravely concerned with a large number of lapses that reflect poorly on the overall internal controls of your department.

The Audit Officer made a dramatic pause to glance at the bloodless faces of Lui and Chinnam.

OFFICER (continued to read from the papers): We found laxity in procurement and contract management, lack of rigour in scrutiny by the approving authorities and too light a touch in ministry-statutory board dealings.

Chinnam made a sudden strong gasp which was clearly audible in the graveyard quiet room.

MR TEO (interrupted sternly): Guys, I'm very concerned. These lapses taken together reflect poorly on the overall internal controls of your department. Officer, please continue.
OFFICER: The committee noted that you had entered into a two-year contract valued at $933,312 to outsource some of your enforcement functions. But before the start of the contract, it was already discovered that some of the functions could not be outsourced due to legal reasons. But still, your department did not seek a reduction in the contract price for the reduced scope of work.
CHINNAM (interrupted): I can explain that!

All men at the table turned to look at Chinnam.

CHINNAM: Yes, the scope of work has been reduced, but since the vendor had committed to deploy the same level of manpower for the reduced work scope, we decided not to reduce the price but to redeploy the surplus manpower instead. I mean, since we've already budgeted for it right?
LUI (whispering to himself): And if we don't spend our budget, it will be reduced next year...
MR TEO (turned to Lui): Did you say something?
LUI (shocked): No Sir, sorry...

Ah Tan kicked Lui slightly under the table. He then gave Lui a nobody-talks-about-fight-club look. Lui returned a oops-sorry look.

MR TEO: So where were the surplus manpower deployed to then?
CHINNAM (fidgeting in his seat): Er... they helped out in the office... for admin stuff like to deliver internal mails, photocopying and... printing out and documenting all the policies and... tidying up the storeroom...

MR TEO shook his head and signalled the Audit Officer to continue.

OFFICER: We also found undue delay in refunding $6.06 million in radio and television licence fees, the committee noted that at the time of the audit in November 2008, the department was still processing refunds called for back in 2005.
CHINNAM (interrupted): Wait wait! This has been resolved!

All men at the table turned to look at Chinnam again.

CHINNAM: Since last October, two automated processes have been put in place to increase the efficiency of refunds and we have since completed making the refunds! So this issue should be closed!
OFFICER: But you took one whole year to put in place the automated processes and which means in total you took four years to refund the fees!
LUI (whispering to himself): Four years okay what...

Mr Teo turned to look at Lui, who then stared back blankly. Ah Tan kicked Lui slightly under the table. He then gave Lui another nobody-talks-about-fight-club look. Lui returned a oops-sorry look once again.

MR TEO: Chinnam, why did it take so long to implement the automated processes?
CHINNAM (fidgeting in his seat): Sir, the refund process is very complicated. Very complicated. It is not as easy as it sounds. It is a very complicated process to refund the right amount of money to the right people. This is essential to ensure that we do not make a single mistake, because this concerns money. So we had to employ a very sophisticated IT company to have their very sophisticated engineers work on a very sophisticated database. Very sophisticated. Mr Teo, I assure you, the database is a state-of-art and we should not have this refund problem moving forward.

Mr Teo nodded silently.

OFFICER: We also found under-collection of broadcasting licence fees amounting to $0.84 million. This occurred after your department did not apply the normal non-concessionary rate for two broadcasting licences even after the concessionary period had ended.

Mr Teo looked at Chinnam and waited for an answer.

CHINNAM: Er... we have since instituted a procedure to track and ensure compliance with licence conditions.
MR TEO: And you are confident that this procedure works?
CHINNAM (nodding): Don't worry, Sir, we have another checkpoint procedure to ensure that this procedure works, and another procedure to review the checkpoint procedure periodically, and one last procedure to internally audit the review procedure.

AH TAN (whispering to himself): And I'm already feeling giddy from the swirl created by all your procedures...



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