Wednesday 27 July 2016

AGO Report FY 2015/2016: Inadequate financial controls, weak governance uncovered in Auditor-General's report

Channel NewsAsia, 26 Jul 2016

The Auditor-General's report for Financial Year 2015/2016 was released on Tuesday (Jul 26), and it uncovered instances of inadequate financial controls over Government operations and weak governance.

In a media release, the Auditor-General's Office (AGO) said that, as a whole, it audited the Government Financial Statements - incorporating the accounts of all 16 Government ministries and eight organs of state - and the financial statements of three statutory boards, a Government fund, five Government-owned companies and three other accounts. Selective audits were also carried out on nine statutory boards and three Government funds.

The audit observations in this year's report relate to six ministries, including the Ministry of Education and Ministry of Defence, and six statutory boards such as the Housing and Development Board (HDB) and Nanyang Polytechnic, AGO said.

The Auditor-General observed a number of instances of inadequate financial controls over Government operations, including those outsourced to external operators. There were cases of inadequate controls resulting in loss of revenue to the Government, he added.

For example, the AGO found that HDB did not have adequate oversight of the operations of its car parks at industrial estates and residential estates, which were outsourced to commercial operators.

"There were many instances where vehicles were not charged parking fees and motorists had evaded payment by manipulating the car park system," the AGO report stated. "HDB could have detected these instances if it had examined the data from its car park system and the monthly reports from the operators of the car parks."

The AGO also found that the Singapore Police Force (SPF) had overpaid its Volunteer Special Constabulary (VSC) officers allowance amounting to about S$2.63 million from Apr 1, 2008, to Dec 31, 2015.

It said that since early 2008, SPF had been paying its VSC officers a revised allowance rate of S$3.60 per hour - S$0.80 higher than the rate stipulated in the Police (Special Constabulary) Regulations.

Additionally, the Deputy Commissioner of Police and Permanent Secretary of Home Affairs, who approved the revised rate, were not authorised under legislation to do so, the report said.

SPF acknowledged the lapse in not seeking the Minister's approval to amend the regulations, and has since initiated action to amend the regulations to regularise the overpayments and to provide for payment of of allowances to VSC officers for the full period of their duty.


The Auditor-General also observed weak governance over the management of public funds in certain areas, noting in a summary to the report that "in one public sector entity, the principles of good governance and financial controls were disregarded in several areas, resulting in a lack of financial accountabilty".

For one, an audit of Nanyang Polytechnic found that the school did not have a proper governance framework to manage transactions with its subsidiary, Nanyang Polytechnic International, including situations of conflict of interest.

The AGO also found that the Land Transport Authority had "weak" control over the collection of tolls at the Woodlands and Tuas Checkpoints, and estimated that the under-collection could be about S$13.93 million for FY2014/15.

Other areas of concern noted were inadequate oversight of external entities administering schemes and loans on behalf of the public sector entities, and lapses in the management of contracts including variations, according to the AGO.

For instance, in the audit of the National Arts Council (NAC), the Auditor-General found from its checks of contracts for the Victoria Theatre and Victoria Concert Hall Redevelopment project that 47 out of 164 variation works were carried out before approvals were given. The delays in obtaining approval were up to 3.5 years, it added.

"The large number of instances indicated a breakdown in the controls put in place to ensure that variations were properly justified and approved before works commenced," it added.

AGO also found that NAC had paid a consultancy fee of S$410,000 for the construction of a bin centre costing S$470,000. "There was inadequate assessment on the reasonableness of the exceptionally high consultancy fee, at 87.2 per cent of the cost of construction," it said.

The Ministry of Culture, Community and Youth (MCCY) had told AGO that the construction of the bin centre was more complex and required significantly more design expertise, technical consultancy services and effort to coordinate with multiple parties and these were the reasons for the fee to be above the norm.

The ministry acknowledged that the cost assessment could have been "more robust" and that it would adopt the norm for cost assessment of consultancy fees for future development projects and provide justifications where there are grounds for deviating from the norm, the AGO report revealed.

Auditor-General's Office report

AGO report: AGO flags weak MOE controls over public funds
By Lim Yan Liang, The Straits Times, 27 Jul 2016

The Ministry of Education (MOE) has not done enough to ensure that tuition fee loans and study loans given to tertiary students are paid back on time, the Auditor- General's Office (AGO) said in its latest annual report.

Loans due for recovery from National University of Singapore and Nanyang Technological University graduates stood at $228.04 million last June. This is part of $511.49 million in the outstanding balance of tuition fee and study loans given to students of institutes of higher learning, the AGO said.

This weakness was part of a larger theme the AGO identified across various agencies, including weak governance of public funds and lax oversight of several schemes.

MOE stood out for scrutiny, given that the management of significant amounts of public funds it is responsible for is outsourced to external administrators, and its oversight was found to be lacking.

Also flagged: lapses in monitoring and enforcing foreign students' scholarship bonds at two universities, and Nanyang Polytechnic not having a proper governance framework for dealings with a subsidiary.

"For proper accountability, it is important that controls and mechanisms are in place to ensure that public funds are used to achieve the intended objectives," Auditor- General Willie Tan said in his overview at the start of the report.

The AGO highlighted four areas where agencies should improve.

First, inadequate financial controls that could result in the loss of government revenue. Second, weak governance over the management of public funds. Third, inadequate oversight of external entities administering schemes and loans. And fourth, lapses in the management of contracts and development projects involving significant amounts of public funds.

The AGO said agencies "have indicated they are committed to rectify the lapses and put in place measures to prevent future occurrence", adding that it will ascertain that these follow-up actions are taken.

Long delay in MOE review draws scrutiny
AGO had, six years ago, flagged formula used to calculate fees payable to banks for administering loans to students
By Lim Yan Liang, The Straits Times, 27 Jul 2016

The Ministry of Education's long delay in completing a review to make sure student loans are repaid promptly drew scrutiny from the Auditor-General's Office (AGO) in its annual report out yesterday.

Loans due for recovery from former National University of Singapore (NUS) and Nanyang Technological University (NTU) students stood at $228.04 million last June.

This is part of over half a billion dollars in tuition fee and study loans given to students of institutes of higher learning that are outstanding, the AGO said in getting across the magnitude of the issue.

The public sector watchdog highlighted these sums in questioning the Ministry of Education (MOE) over its drawn-out review of a formula used to calculate fees payable to banks for administering the loans.

The AGO had, six years ago, flagged this formula, pointing out that it "discourages" banks from putting in their best efforts to recover outstanding loans.

The MOE gives NUS and NTU the loan principal and absorbs any defaults. Universities outsource administration of the loans to two banks, which are paid fees.

But the AGO found the formula wanting, as the fees are a percentage of total outstanding loan balances.

As of June 30 last year, the outstanding balance of such loans totalled $511.49 million.

"Any recovery or write-off of loans would therefore reduce the outstanding balance and correspondingly the amount of agency fees payable to the banks," it said.

The MOE said then that it would review the formula, and gave targets for completing the review each time the AGO followed up since 2010.

But the AGO noted yesterday that these dates "had been postponed several times", and the review had not been completed as of March.

NUS and NTU also did not put in place adequate controls to ensure loans due were promptly recovered, relying on banks to monitor and recover them, said the AGO.

It checked 116 such loans, and found 27 cases where work to recover them was delayed by one to 31/2 years. It also checked on another 58 loans in default for at least two years and, in 33 cases, the banks could not produce documents showing recovery action "for prolonged periods" of up to 31/2 years.

Even when the banks did flag cases of long-overdue loans, MOE "was not prompt in following up".

The AGO's test-check of 32 loans that the banks said were pending MOE action found that MOE had waited for between two and 61/2 years to follow up on 23 of them.

MOE did not act in the remaining nine cases.


MOE said the majority of tertiary students who take loans are Singaporeans, and the tuition fee and study loan schemes "ensure they do not miss out on tertiary education because of financial constraints".

It is working closely with universities and banks on prompt follow-up of loans in arrears.

"Where the delay in loan repayments is due to instances such as the borrower facing financial difficulty, MOE may allow the borrower to defer the monthly loan instalment repayment or reduce the monthly instalment payable temporarily," it said.

It also said the review of agency fees, part of a larger review of service-level agreements with the banks, has taken longer than desirable, and is "expediting the review".

MOE told The Straits Times the default rate for these loans has "remained low", at about 1.4 per cent of the total outstanding loan amounts. In 2014, about 30 per cent of undergraduates and 4 per cent of diploma students from publicly funded institutions tapped government study loans, it said.

MOE added that banks have an established process to follow up with borrowers who are late in repayments. If a borrower consistently misses his repayment, legal action may be taken by the banks, and the borrower and guarantor "are liable to pay all legal costs and expenses on an indemnity basis".

Both NUS and NTU said they are working together with MOE and the banks to review and tighten the existing loans recovery process.

OCBC Bank and DBS Bank, which administer the loans, said they will work closely to help former students in financial difficulties reach a suitable financial arrangement.

OCBC Bank added that the challenges of each recovery case are unique. "Where necessary, we will work with the institutions to facilitate the recovery," it said.

Study loans 'not profit-driven like commercial ones', says MOE to Auditor-General's Office audit
Compassion a consideration in loan recovery, says MOE in response to Auditor-General's Office audit
By Calvin Yang, The Straits Times, 30 Jul 2016

While admitting the need to tighten recovery of student loans, the issue must also be handled with compassion, especially in cases of financial difficulty.

This was the response from the Ministry of Education (MOE), after a government audit flagged "inadequate controls" to ensure that outstanding loans funded by the ministry were promptly recovered.

Highlighting how education is the "best social leveller" and that "our young should not miss out because of financial difficulties", the MOE told The Straits Times that its loan schemes are not administered the way for-profit commercial ones are.

Instead, it has "intentionally allowed easy access to loans" to ensure Singaporeans are not denied a university education due to money issues. That is why tuition fee and study loans are interest-free during the period of study, while repayment and interest can start up to two years after a student graduates. There is also a maximum loan repayment period of 20 years.

"While there is cost to the Government in delaying loan servicing and waiver of interest, these are deliberately policy decisions to assist students, especially those from lower- income families," said the MOE.

In its report released on Tuesday, the Auditor-General's Office (AGO) said the loans due for recovery from former students of the National University of Singapore (NUS) and Nanyang Technological University (NTU) stood at $228.04 million as of June 30 last year.

The AGO said that including other institutes of higher learning, the total is $511.49 million in outstanding loans. But only 1.4 per cent of the sum is in default and "may be unrecoverable", highlighted the MOE.

"The vast majority of graduates service their loans and make regular repayments," the ministry added.

Over the past few years, the take-up rates for loans have remained relatively stable, the ministry said. In 2014, about 30 per cent of undergraduates and 4 per cent of diploma students from publicly funded institutions tapped these loans.

Institutions outsource the administration of the loans, which includes processing of applications and recovery of loans, to the banks. MOE said banks have an established process to deal with borrowers who are late in repayments. If a borrower keeps missing repayments, legal action may be taken by the bank, and the borrower and guarantor "are liable to pay all legal costs and expenses on an indemnity basis".

ST understands from financial insiders that the recovery of overdue government study loans is slow and not as straightforward as it seems.

One observer, who declined to be named, said: "The money borrowed doesn't belong to the banks. The recovery would require the approval of a few parties."

The MOE said in cases where the the borrower faces financial difficulties, it may allow him to defer the monthly loan instalment or reduce the instalment temporarily.

This was done in the case of a 26-year-old NTU graduate who became unemployed. His mother, the guarantor, was the sole breadwinner as his father had died.

The ministry also granted temporary deferments of loan repayments and interest for a 38-year-old NUS graduate as he was unable to work owing to a medical condition.

It added: "MOE is working closely with the institutions and banks to ensure prompt follow-up of loans in arrears or overdue."

About the loans
By Calvin Yang, The Straits Times, 30 Jul 2016

The tuition fee loan covers up to 90 per cent of the fee payable by citizens at the undergraduate level. The remaining 10 per cent can be covered by a means-tested study loan.

Both loan schemes are interest-free during the period of study, and repayment of the principal and interest can start up to two years after a student leaves the institution.

This is to give students time to settle down in their careers before servicing their loans, said the Education Ministry in its reply to queries.

It added: "Our starting point is that education is the best social leveller. Our young should not miss out on education because of financial difficulties or family backgrounds.

"Loans and bursaries granted by our universities therefore aim to help equalise opportunities for all, regardless of the students' background."

Students can liaise with the banks to set their monthly loan repayment amounts based on their financial circumstances, subject to a minimum monthly instalment of $100 per loan, and a maximum loan repayment period of 20 years.

As their earning power increases over time, they can adjust the monthly instalment amounts upwards to allow them to pay off their outstanding loans at a faster rate.


Lapses in enforcing scholarship bonds
By Lim Yan Liang, The Straits Times, 27 Jul 2016

The Ministry of Education (MOE) did not do enough to ensure that foreign students who received scholarships but failed to serve their bonds were reminded of their obligations and paid up liquidated damages, the Auditor- General's Office (AGO) said.

These students had studied at the National University of Singapore (NUS) and Nanyang Technological University (NTU).

In its report, released yesterday, the AGO flagged lapses in monitoring and enforcement of these bonds for the scheme, which disbursed $36.52 million in financial year 2014/2015.

When the AGO checked on 30 cases of scholarship winners who were not serving their required bonds, it found 14 cases where the universities did not send letters to remind them of their obligations, or impose liquidated damages in cases that warranted it.

At the time of audit, the letters were between one and 22 months late. In two other cases, the letters were sent after a lag of 17 and 26 months.

The AGO noted that the Ministry of Education could have done more, given that the universities submit yearly reports on the bond status of its scholarship winners.

"MOE could have followed up with the universities on cases where actions had not been taken," it said.

The AGO also found that the MOE had over-contributed $4.14 million over nine years to NTU's sinking fund, and disbursed research grants of $2.96 million to NTU and NUS without carrying out reviews to ensure projects were progressing according to its guidelines.


The MOE said most of the bond-breaking cases flagged were from earlier graduating batches, and it has tightened and enhanced monitoring and enforcement of scholarship bonds in the last few years.

Measures include informing scholarship winners of their obligations at the start of their freshman year and reminding them again in their final year, and recovering liquidated damages with interest from those who intentionally default - failing which, they will not be allowed to work or live here.

MOE also works with agencies such as the Central Provident Fund Board and the Ministry of Manpower to track the bond service records of graduates closely.

With enhanced measures in place, default rates "have come down significantly" and 95 per cent of international scholarship recipients are meeting their bond obligations or have applied for deferment.

MOE also stressed that most of its foreign scholarship recipients take their bond obligations seriously. "Scholarships are also given out in the spirit of international cooperation, recognising that many Singaporeans have previously benefited from similar scholarships, such as the Colombo Plan scholarships offered by Australia, Canada, New Zealand and the UK," it said.

"MOE's enhanced processes are a signal that our willingness to welcome international students must be matched by their sincerity to honour their word." MOE has recovered the excess money disbursed to NTU. It is also taking steps to keep up with the growing volume of research projects it has to monitor.

Nanyang Poly found weak in governance
By Janice Heng, The Straits Times, 27 Jul 2016

The manner in which Nanyang Polytechnic (NYP) managed transactions involving public funds with its subsidiary "reflects a disregard for financial controls and proper governance", the Auditor-General's Office (AGO) said yesterday.

NYP was one of 11 statutory boards audited for financial year 2015/16 by the AGO.

The public sector watchdog found that NYP did not have a proper governance framework for transactions with its subsidiary, Nanyang Polytechnic International.

Some members of NYP's board of governors with "vested interests" in the subsidiary were involved in making related decisions.

The board also approved a funding model more generous than that provided for in government instructions.

Also, by not charging market rates for the use of its premises, and by giving more funding than that approved by the board, NYP gave its subsidiary hidden subsidies and excess funds totalling $8.38 million from 2007 until March last year.

"Without a proper framework to manage conflict of interest, there was no assurance that decisions on transactions with its subsidiary were made in an objective and impartial manner," said the AGO.

Generous funding terms, excess funding and hidden subsidies lacked transparency and made it hard for the Government to assess the subsidiary's true financial performance and viability, it added.

The AGO flagged two other issues.

During an October 2014 event, NYP allowed the Nanyang Polytechnic Education Fund's name to be used to solicit $286,300 in donations for needy graduates - a purpose that was not authorised under the fund.

It also issued tax deduction receipts in the fund's name, and claimed and received matching grants of $429,500 from the Ministry of Education (MOE).

The AGO also did test checks on seven of NYP's revenue contracts and found lapses in two contracts worth $1.1 million, for a childcare centre and a canteen operator.

The lapses include failing to determine rental rates through market tests or professional valuation.


NYP said in a statement yesterday that it acknowledged and accepted the findings of the AGO's report.

"We have commenced a detailed review of the areas highlighted to ensure that measures are put in place to effectively address the issues of concern," it added.

NYP also noted that some board members and staff were appointed to the subsidiary's board "to ensure alignment of objectives" between the polytechnic and the subsidiary. They do not receive separate director's fees.

"None of the decisions cited in the audit observations yielded personal gain for any of the individuals involved," it added.

Still, to avoid "a situation of actual or perceived conflict of interest", NYP will put in place a governance framework on the handling of transactions with subsidiaries.

In a separate statement, MOE - under which NYP falls as a statutory board - made similar points.

Nanyang Polytechnic International was set up to receive foreign visitors and take NYP's courses overseas, and all its profits belong to NYP, added MOE.

But it acknowledged the need for a proper governance framework and has instructed NYP to take immediate actions to put one in place.

In April this year, the polytechnic stopped funding its subsidiary and started charging it the market rate for the use of its premises.

The board of governors has been informed of the excess funding and NYP will seek its decision on what to do.

As for the donations, NYP is working with MOE and seeking donors' approval to use the funds to help needy current students instead.

It has also engaged a professional valuer to review rental rates for the childcare centre, and changed the tender process for canteens.

Auditor-General's Office report: From lax enforcement to overpayment
AGO report lists four areas of concern, including weak governance over funds and lapses in managing contracts
By Charissa Yong, The Straits Times, 27 Jul 2016

From unearthing unused phone lines to finding volunteers who were overpaid, the Auditor- General's Office (AGO) left no stone unturned in its annual audit of 16 ministries, 11 statutory boards and several government funds.

The report released yesterday highlighted four areas of concern: inadequate financial controls that could result in the loss of revenue, weak governance over public funds, a lack of oversight in how schemes are administered, and lapses in managing contracts.

One area of weak financial controls flagged by the AGO was a lack of oversight by the Housing Board over carparks that were outsourced to commercial operators.

There was a loss of revenue because no action was taken against those who avoided paying carpark charges, such as by manipulating the carpark system, the AGO noted.

The AGO also observed that the Land Transport Authority (LTA) could have lost out on $13.93 million by undercollecting toll charges at the Woodlands and Tuas checkpoints in financial year 2014/15. This was a fifth, or 21.9 per cent, of LTA's total toll collection that year.

LTA has since said there was a need to review the controls and enforce revenue collection at the checkpoints, and is working to address these gaps, including imposing stiffer penalties.

These are some of the weaknesses the AGO found at several agencies.


Motorists have been getting away with not paying for parking at HDB carparks, such as by tailgating another vehicle at the gantry. This was possible because HDB neither adequately monitored carparks nor enforced payments.

The AGO's spot checks on residential carparks found 2,501 instances between April and September last year when vehicles exited Electronic Parking System carparks without paying, for more than three times in a month. HDB received monthly reports but did not take action against the motorists.

HDB has since begun analysing carpark operator reports, and started work on amending the law to act against parking charge evaders. It has also made police reports against motorists who evaded parking charges in industrial carparks.


The Ministry of Defence (MINDEF) invested $50.26 million from its Savings and Employee Retirement (Saver)-Premium Fund in a United States real estate investment trust exchange-traded fund - without the approval of its board of trustees.

MINDEF also made the investment through an investment manager without first getting approval from the board to appoint the manager.

The AGO found the evaluation carried out for the investment was inadequate. The department responsible did not give complete information on the investment costs when seeking the relevant director's approval.

MINDEF is reviewing its processes.


The Ministry of Foreign Affairs (MFA) subscribed to 28 mobile phone lines after they were no longer needed, resulting in $80,744 of public funds being wasted.

Eleven of these lines were not used for more than two years. For the 17 remaining lines, the officers who were assigned those lines had left MFA or been given other lines three months to three years earlier.

The AGO also found overpayments of phone bills totalling $109,868.

MFA has since terminated the 28 unused lines. It plans to put in place a process to terminate or reassign lines when officers leave MFA, and has reminded its officers to verify their bills against their contracts.



Since early 2008, the allowance rate for part-time officers under the Volunteer Special Constabulary was raised to $3.60 an hour, 80 cents above the rate stipulated by law.

The deputy commissioner of police and permanent secretary for home affairs approved the hike despite not being authorised to do so.

Police also paid allowances for duties lasting beyond four hours, and pro-rated allowances for duties under an hour, which was not allowed. All this resulted in $2.63 million worth of overpayments in total.

The Singapore Police Force has begun work to amend its regulations.


The assets left behind by people who died in nursing homes may not have been properly recorded or handled. The Public Trustee's Office did not have adequate controls over the handling or proper recording of such assets, the AGO found from checks on 14 cases. This lack of proper controls increased the risk that valuable assets could be misappropriated, said the AGO.

Assets were also either omitted from the records or incorrectly recorded in four cases. Identities of the recording officers were left out.

Changes have since been made.


The Manpower Ministry bought a $432,407 computer system that turned out to be incompatible with its current system.

The new system was meant to be integrated with MOM's Foreign Domestic Worker system. But the ministry did not carry out a robust evaluation of whether the two would be compatible before procurement.

MOM then decided not to use the new computer system as modifying it would cost too much. It has been unused since November 2014.

The AGO pointed out that some of the hardware assets and database licences could have been redeployed elsewhere in the ministry. MOM said it is exploring doing so.


The National Arts Council (NAC) paid an exceptionally high consultancy fee to construct a bin centre in Victoria Theatre and Victoria Concert Hall. NAC paid a $410,000 consultancy fee for the bin centre - 87.2 per cent of the bin centre's $470,000 construction cost.

The AGO said the consultancy fee was "exceptionally high", and NAC did not conduct a cost assessment to ensure it was reasonable.

When approval was sought to draw down the funds, the parent ministry - then the Ministry of Information, Communications and the Arts - did not use the normal method (a percentage of the construction cost), but benchmarked the fee for building the bin centre against other more complex projects.

NAC now comes under the Ministry of Culture, Community and Youth (MCCY), which told the AGO the fee was high as "the construction of the bin centre for this project was more complex and required significantly more design expertise, technical consultancy services and effort to coordinate with multiple parties".

MCCY said it would adopt the normal method to assess consultancy fees in future development projects.

MINDEF responds to AGO's report

The Ministry of Defence would like to clarify the two issues highlighted in the recent Auditor-General's Office (AGO) report ("From lax enforcement to overpayment"; last Wednesday).

MINDEF welcomes the AGO's annual external audit, as it complements internal audits conducted throughout the year.

These audits allow MINDEF to conduct reviews of its processes, give an account of lapses identified and fix shortcomings to ensure good corporate governance, proper risk controls and transparent accountability in the management of public funds and resources.

First, the AGO found that explicit approval was not sought from the Savings and Employee Retirement and Premium (Saver-Premium) Fund board of trustees for a particular investment item of $50.26 million under the Saver-Premium Fund.

MINDEF explained to the AGO that the board of trustees had already provided approval for investments in real estate investment trusts (Reits) as a strategic direction, which the investment department had deemed as a sufficient mandate to act on specific investments.

However, the AGO's view was that the board of trustees should explicitly approve the specific Reit exchange-traded fund investment and the appointment of the investment manager to handle the transaction.

MINDEF has since obtained the board of trustees' approval to formally appoint the investment manager. MINDEF will also review current mandates by the board to refine them when necessary, to remove ambiguity for the investment department.

Secondly, the AGO pointed out that MINDEF did not make Central Provident Fund (CPF) contributions for the Full Savings Vesting Bonus (FSVB) for SAF regulars.

MINDEF explained that the FSVB was started and communicated to regulars as part of the Saver retirement scheme. MINDEF had designed the FSVB to be paid after a period of minimum service. Those who did not fulfil the required length of service would not receive the FSVB.

However, the AGO's view was that, as a strict rule, all bonuses to employees during employment would attract CPF contributions.

Internally, MINDEF debated if it should withhold the FSVB till retirement, but decided that it would maintain the current scheme as it had improved retention. MINDEF would instead make up for the CPF contributions due on past FSVB payments.

MINDEF has addressed the findings in the AGO report and reiterates its commitment to achieve the highest standards of corporate governance and public accountability.

Han Neng Hsiu
Deputy Secretary (Administration)
Ministry of Defence
ST Forum, 3 Aug 2016

Bin centre was a complicated project, says National Arts Council after AGO flags high consultancy fees
Arts council cites technical challenges and need to ensure that traffic nearby was smooth
By Charissa Yong, The Straits Times, 2 Aug 2016

The National Arts Council (NAC) has explained the high fees paid to consultants of a centralised refuse collection project in the Civic District, saying it was "not a simple bin centre to build".

There were many technical challenges to consider, as well as the need to ensure traffic nearby was smooth and the buildings were conserved, it said on Government website Factually, which aims to correct misinformation posted online.

The $410,000 it paid for a study on the project alone is nearly 90 per cent of the cost of actually building the bin centre, which was another $470,000.

The bin centre stands above the basement of the Asian Civilisations Museum's (ACM) outhouse and is for the rubbish from Victoria Theatre and Victoria Concert Hall as well as the nearby ACM and Old Parliament House. Previously, each had its own bin centre.

The issue drew sharp criticism, particularly online, after the Auditor-General's Office singled out the high consultancy fees in its annual report released last week.

Responding, the NAC acknowledged and accepted that the cost assessment for building the centre should have been more robust.

The council, which comes under the Ministry of Culture, Community and Youth, said that in future, it would decide whether consultancy fees were reasonable by looking at the quoted fee as a proportion of the project's construction cost.

It had not used this method for the bin centre when seeking approval for funds to pay the consultancy fee. Instead, it compared the quoted fee against fees for other complex projects. This was the reason it was not clear that the consultancy fee was exceptionally high, said the AGO report.

The report also said NAC had directly engaged the Victoria Theatre and Victoria Concert Hall consultants to provide these additional consultancy services. It did not call for a separate tender.

NAC said this was because the consultants - who were not named - were selected based on an open tender for the project as a whole.

The NAC, in its reply, also said there could be some misunderstanding about the reasons for building the bin centre. It was not a standalone project, but part of the redevelopment for the Civic District, which the NAC said was "an important cultural and heritage area for Singapore".

Building the bin centre would improve operations and enhance the area's aesthetics, it said.

It also said the construction cost was less than 1 per cent of the development cost of the Victoria Theatre and Victoria Concert Hall.

The project, it said, was complex for several reasons.It involved structural and reinforcement works as it was above the ACM basement.

Mechanical and electrical services had to be accounted for, and existing underground services had to be diverted. The project also had to include ventilation so that foul smells would not escape from it as the bin centre stands next to the ACM offices.

Other considerations included preserving the aesthetics of the historic area, and studying the impact of the bin centre on the ACM loading and unloading bay.

"Consultancy services were necessary because of the complexity of the project," said the NAC.

The consultancy services included a feasibility study taking into account the various requirements of the three buildings, which house three separate institutions.


Government responds to lapses found in AGO report 2015/2016; World of difference between AGO and AHTC reports

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