Questions
Mr Liang Eng Hwa: To ask the Minister for Trade and Industry (a) what is the cause of overpayments under the Jobs Support Scheme last year; (b) whether businesses will be affected by the rectification actions; and (c) what are the measures taken to prevent potential recurrence.
Mr Sharael Taha: To ask the Minister for Trade and Industry (a) when and how have the overpayments for the Jobs Support Scheme been detected; (b) what lessons have been incorporated to prevent similar issues in the future; (c) whether the external auditors have discovered other errors; and (d) when is the Ministry expecting the overpayment amounts to be fully recovered.
Ms Joan Pereira: To ask the Minister for Trade and Industry whether there can be additional cashflow support such as short-term loans offered to the companies that will have their excess Jobs Support Scheme (JSS) payouts reclaimed from them, as their manpower budgets may have already been set at the start of the year taking into account the future JSS payouts.
Written Answer by Minister for Trade and Industry Mr Chan Chun Sing
1. The Ministry of Trade and Industry (MTI) and Ministry of Finance (MOF) had shared in a joint press statement on 8 April 2021 that as a result of the incorrect tagging of businesses’ re-opening dates, incorrect Jobs Support Scheme (JSS) payouts were made, with about 5,400 businesses overpaid and 1,100 businesses underpaid. Together, this is about 4% of firms eligible for JSS. The median, 75th percentile and mean overpaid amount was $3,300, $11,600, and $69,000 respectively.
2. Members will recall that this time last year, Singapore was in a Circuit Breaker due to the COVID-19 pandemic. Workplaces across Singapore were closed except for those providing essential services. This was unprecedented. We had never shut down the economy before. The scale and speed at which we had to do so was unprecedented. Cashflow was critical to the survival of firms and the Government responded swiftly, where amongst various measures, the JSS was introduced and enhanced several rounds to provide wage support for firms. In particular, the Fortitude Budget introduced on 26 May 2020 provided for JSS support to be pegged at the highest tier till the dates when businesses were permitted to reopen after the Circuit Breaker ends on 2 June 2020. The JSS also provides higher support for firms in sectors that are more severely impacted, using the classification of firms based on their Singapore Standard Industrial Classification codes, or SSIC codes for short, amongst other parameters.
3. It is unfortunate that the complexity, urgency and scale of the Circuit Breaker operations led to some data errors.
4. MTI undertook the complex operations of working with multiple Government agencies to process applications from businesses to resume operations after the Circuit Breaker. Businesses were permitted to reopen in phases for broad classes of activities as proxied by their SSIC codes but there were also cases where MTI had to review in depth as some business entities have different lines of businesses which are not reflected in their SSIC codes. Due to the work settings where there may be a high degree of interactions amongst individuals, businesses in the Construction, Marine and Process (CMP) and Tourism sectors had to submit applications to resume operations and each application had to be individually reviewed.
5. MTI and the various Government agencies had to process the applications quickly so as not to delay support for firms.
6. At the same time, there was a significant volume of more than 1.8 million applications from businesses to resume operations after the Circuit Breaker.
7. Enterprise IT systems were not available to manage the Circuit Breaker and reopening process. To build a new system to process the applications from firms and the corresponding reopening dates would have required at least six months which would not be acceptable as we have to process the data in a timely manner to render financial support to firms. As such, existing systems and manual processes had to be used to grant approvals for businesses to re-open.
8. IRAS’ regular checks on JSS disbursements detected potential anomalies in November 2020. At that time, the cause of the anomalies and the number of businesses affected were unclear as JSS computations involved data from multiple agencies including MTI, IRAS, CPFB and MOF. It was only after thorough investigation that the cause of the anomalies was traced to the reopening dates.
9. Let me elaborate on the overpayment cases. These are cases which primarily involve firms supporting CMP projects but which are not CMP firms themselves. These firms were wrongly tagged with the re-opening date of the CMP projects because their company details had been included in the project resumption application, even though they were playing only a supporting role, if at all, in the projects. For example, construction projects often require the services of machinery and equipment rental firms to support various aspects of the construction project. A machinery rental firm, which is under the SSIC code of 77330, would have been permitted to operate on 2 June, together with other firms in its class. The error occurred when the 2 June re-opening date for the firm was erroneously overwritten with the later construction project approval date, say of 1 July. This led to such firms being wrongly ascribed a longer closure period and thus allocated higher JSS payouts for the affected period, in this example of between 2 June and 1 July.
10. Despite the urgency of time and pressure to support businesses and livelihoods, we could have done better. MTI and MOF have written to the affected businesses to inform them of the overpayments. We will do our best to ensure minimum inconvenience and disruptions. Most affected firms will not need to take any action as IRAS will automatically offset the excess amount against the businesses’ future JSS payouts.
11. We have recovered over $250 million (68%) through automatic offsets from the affected firms’ JSS payouts in end April. We have also reached out to the larger affected firms and secured their commitment to return an additional $83 million (22%). We expect to recover another $20 million or 5% from firms’ future JSS payouts, and the remaining in cash thereafter. The offsets will be completed by December 2021 when the final JSS tranche is be paid out to eligible firms. Firms will be given sufficient time to return in cash any outstanding balance.
12. We estimate that there will be about 1,000 firms whose future JSS payouts will be insufficient to fully offset the excess payment. MTI, MOF, and IRAS will reach out to these firms to recover the overpayment. The cash recovery sum for three-quarters of these firms is less than $10,000; the estimated median recovery sum is less than $3,500. Based on our records, no firms who received the erroneous payments have been wound up to date.
13. Businesses that face cashflow difficulties may approach us for assistance. We will make available the option for instalment payments. Enterprise Singapore also has a temporary bridging loan programme offered by participating financial institutions.
14. Since the incident, MTI has worked with MOF and IRAS to carefully examine and rectify the processes. Additional checks and steps have been instituted to prevent similar occurrences. The compilation of reopening dates is no longer done manually and is now coded with rules that have been reviewed and tested. An external auditor has also been engaged to thoroughly check and verify the reopening dates used in the computation of JSS payouts. The agencies will learn from this incident and spare no effort to strengthen processes going forward.