Thursday 18 August 2016

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

No evidence of systemic weakness; system is transparent and accountable, says Indranee
By Charissa Yong, The Straits Times, 17 Aug 2016

Most lapses flagged by the Auditor-General's Office (AGO) stem from individual officers not following procedures, and do not reflect any systemic weakness, Senior Minister of State for Finance Indranee Rajah told Parliament yesterday.

She said 28 officers have been counselled or warned arising from this year's audit findings. One officer was put on a performance review process for repeated poor performance and later left his agency.

Ms Indranee added that independent auditors have found public funds to be properly accounted for.

"We have a system that is transparent and accountable, and with Government responding to every weakness that is found," she said.

The fact that there are reports of lapses from the AGO each year reflects this transparency and accountability, she said.

"It is a part of the workings of a robust system - which includes a diligent and impartial AGO, and government agencies that willingly submit to AGO's audit, have their lapses displayed openly and seek to rectify them promptly."

Ms Indranee added that the system "is not perfect" but it has given Singapore international recognition for clean and efficient Government.

This year's AGO report had highlighted lapses in, among others, the Ministry of Education, National Arts Council and Ministry of Defence. MPs had raised nine questions on the report on Monday and yesterday.

Ms Indranee said the Government looks at two areas when it reviews the AGO report each year.

The first area is whether the accounts of public agencies are reliable and prepared according to the law. They pass muster when the AGO gives an unmodified audit opinion, as it has every year.

This means "public funds are properly accounted for and we know what they are being used for".

The second area pertains to how rules and procedures in the agencies are followed, for instance, to prevent overspending.

In this regard, Ms Indranee gave three reasons why the Government remains confident that the public sector is accountable and responsive to every weakness found.

First, most lapses were due to non-compliance by individual officers or agencies, and do not reflect a systemic weakness.

Second, no instances of fraud or corruption were found.

Third, steps have been taken to rectify the lapses.

"I can say with confidence from this year's AGO report and past years', that there is no evidence of a systemic weakness within government agencies with regard to compliance," Ms Indranee said.

But it would be unrealistic to expect no lapses to be found.

"With over 140,000 officers in the public service handling hundreds of thousands of transactions each year, human laxity or errors of judgment will happen," she noted.

"We take each and every lapse seriously, but if nothing was found by AGO, we would be very concerned about the independence and rigour of AGO's audits."

Ms Indranee also noted that the AGO found no hint of financial malfeasance, such as fraud or corruption - for which the Government has zero tolerance.

Two recurring problem areas are being tackled: The management of contracts, and procurement.

The Building and Infrastructure Centre of Excellence was set up under JTC this year to advise agencies on how to manage contracts. This is particularly useful for agencies that do not regularly manage construction projects, Ms Indranee said.

Permanent secretaries and agency chief executives must also report regularly to the Finance Ministry with an assessment of the findings in procurement audits and their follow-up actions, she added.

"We will continue to tackle all lapses identified each year with the same resolve."

World of difference between AGO and AHTC reports: Indranee
By Charissa Yong, The Straits Times, 17 Aug 2016

There is "a world of difference" between the lapses found in government agencies and those found at the Workers' Party-run Aljunied-Hougang Town Council (AHTC), Senior Minister of State for Finance Indranee Rajah said.

"They are different in scale, in nature, and in the way government agencies and the town council have each responded to problems when they are found," she told the House.

She was responding to Mr Liang Eng Hwa (Holland-Bukit Timah GRC) who asked how the AGO report was different from auditor KPMG's report on AHTC.

The town council was previously known as the Aljunied-Hougang-Punggol East Town Council (AHPETC) when Punggol East was held by the WP before the general election last September.

Ms Indranee highlighted four key ways the lapses found in Government are different from the problems faced by AHTC.


The Government's accounts were found to be reliable, unlike those of the town council, whose own auditors were repeatedly unable to verify that they were accurate.

The AGO concluded in its special audit report last year on then AHPETC that there was no assurance the town council's accounts are accurate and reliable, or public funds are properly spent, accounted for and managed, Ms Indranee said.

"There is no similar problem in government," she added.

The reason: the accounts of ministries, departments, organs of state and statutory boards have all been found by AGO and independent auditors to be reliable and prepared in accordance with the law.


No systemic weakness was found in government agencies.

In contrast, the problems at AHTC were of a systemic nature and not just a matter of individual lapses, Ms Indranee said.

She noted the AGO and auditors found 115 control failures at AHTC, and independent accountants KPMG found another 70 lapses.

KPMG concluded in its monthly report last month that these failures were pervasive, and "there is an issue larger than the sum of individual lapses at AHTC".

But the AGO report on the Government shows "there is no evidence of widespread compliance problems. There is certainly no culture of non-compliance".


There was no question of personal gains in any of the lapses highlighted in this year's AGO report, said Ms Indranee.

But in the case of AHPETC, there are serious issues that have to do with "personal gains from related third-party transactions".

She cited how the town council's general manager, deputy general manager and secretary were also the owners and directors of FM Solutions and Services (FMSS), which provided managing agent services to AHPETC and was paid for them.

A review also found the profit margins of FMSS were abnormally high, said Ms Indranee.

But the case of Nanyang Polytechnic and its subsidiary NYP International that was highlighted in the AGO report is fundamentally different, she said.

There were no personal interests involved on the part of their directors and no leakage of money to any third parties.


Ministries and agencies have taken steps to rectify all weaknesses found, Ms Indranee said.

But, she said: "AHPETC did not take prompt measures to rectify these problems despite repeated requests by the Ministry of National Development to do so."

She noted AHPETC appointed KPMG as an independent accountant only after being ordered by the courts.

KPMG also noted in its latest monthly report last month that progress to remedy the control failures has been slow - an observation made four years since the town council's auditors first voiced reservations about its accounts.

Ms Indranee noted that AHTC is working on its remedial plans, but it has not resolved the area of governance of related-party transactions.

In contrast, she said, every government agency acknowledges lapses flagged by the AGO and takes steps to address them as soon as possible.

"Our system is transparent, accountable and responsive and we look forward to the same in AHTC as it hopefully rectifies its problems," she added.

Consultant's study on bin centre part of extensive feasibility study
AGO did not conclude consultant was overpaid, it was concerned about how fees were assessed
By Charissa Yong, The Straits Times, 16 Aug 2016

A centralised refuse-collection centre in the Civic District was delivered satisfactorily and at an acceptable cost, National Development Minister Lawrence Wong said yesterday as he addressed the controversy over the high fees paid to the consultant of the project.

He pointed out that the Auditor- General's Office (AGO) did not conclude the consultant was overpaid, but was instead concerned about how the fees paid were assessed.

Mr Wong was responding on behalf of Minister for Culture, Community and Youth Grace Fu to a parliamentary question from Nominated MP Kok Heng Leun. Ms Fu is in Brazil at the Olympic Games.

The National Arts Council (NAC) had come under fire over the bin centre after the AGO's annual report on public spending flagged the issue of the consultancy fees.

The AGO noted that the $410,000 paid to the consultant came up to nearly 90 per cent of what was paid to build the bin centre, which cost another $470,000.

Mr Wong said the scope of the consultant's study was much wider than was typical for a bin centre, as an extensive feasibility study had to be done due to the historic nature of the buildings.

The original plan was to have a standalone bin centre for Victoria Theatre and Victoria Concert Hall, but it was later decided that a centralised centre that served other nearby buildings as well would be more suitable.

Moreover, the consultant's quotation was assessed to be within the range of such fees for other complex projects in the area, he said.

The consultancy cost was 8.7 per cent of total costs to redevelop the Victoria Theatre and Concert Hall.

Mr Wong said this was within the industry benchmark of 10 per cent.

He added that the consultant had also helped to bring down the construction costs to $470,000, through "extensive value engineering". The project's contractors had initially quoted $890,000.

When asked by Ms Lee Bee Wah (Nee Soon GRC) if the ministry would have decided differently in hindsight, he said it would have made the same choice.

Mr Wong added that as it was not clear at the start what form the final refuse centre would take, and how much it would cost to construct, the NAC had decided against pegging the consultancy fees to the project cost. Instead, it paid a lump sum to "limit any potential escalation of costs". He acknowledged that detailed documentation should have been provided to clearly explain the scope and complexity of the project, and pledged that this would be done in future.

Foreign students who break bond may face ban on stay and work
About 1% have defaulted and MOE contacting another 4% to check whether they will fulfil obligations
By Calvin Yang, The Straits Times, 16 Aug 2016

Foreign students who deliberately default on their scholarship bond obligations may be banned from working or residing in Singapore, Parliamentary Secretary for Education Low Yen Ling said yesterday.

Ms Low also told Parliament that about 1 per cent of them have defaulted, and the Ministry of Education (MOE) is contacting another 4 per cent to check whether they can fulfil their bond obligations.

The remaining 95 per cent are serving their bond or have applied for deferment to pursue further studies, while a handful are unable to fulfil their obligations owing to reasons like illness, she added.

Those who show no intention of serving their bond will be made to pay liquidated damages.

"A few have started to pay back the monies and we will continue to chase the rest of the defaulters for the scholarship monies," she said.

"In the event that they do not pay the liquidated damages, they will not be able to come to Singapore to work or to stay."

Ms Low was replying to Mr Png Eng Huat (Hougang), who had asked, among other things, about the amount MOE had recovered from foreign students who are bond breakers, the number of them deemed non-contactable, the length of time taken to recover such scholarship monies and the amount written off.

The Auditor-General's Office (AGO), in its latest annual report, found that the ministry did not do enough to ensure these students were reminded of their obligations and paid the liquidated damages.

Ms Low said that in the last few years, MOE has "progressively stepped up" measures to track and ensure scholarship holders serve their bond.

These include working more closely with agencies, such as the Manpower Ministry and Immigration and Checkpoints Authority, to track the employment status of these scholarship holders, as well as informing them of their obligations when they are given their scholarship and throughout their studies.

Ms Low also said, when replying to Mr Cedric Foo (Pioneer), that her ministry's top priority is to nurture Singaporean talent. Most of the undergraduate scholarships are given to Singaporeans, she added.

Giving the big picture, she said international scholarships add diversity to campus life, offering "opportunities for Singapore students to develop cross-cultural skills exposure and global awareness".

The AGO report also found inadequate controls to ensure outstanding student loans were promptly recovered. The loans are administered by banks but the money is from the MOE.

Unpaid loans of former students of National University of Singapore and Nanyang Technological University stood at around $228.04 million as at June 30 last year. Add on the loans of those from other institutes of higher learning and the total soars to $511.49 million.

But only 1.4 per cent of the sum is in default and deemed unrecoverable, Acting Education Minister (Higher Education and Skills) Ong Ye Kung told the House yesterday.

It is not a high rate, he added, noting that corresponding figures are about 40 per cent in the United Kingdom and 10 per cent to 20 per cent in the United States.

"Write-off of loans is considered only as a last resort when the banks have exhausted all means and all efforts to recover them," Mr Ong said in his reply to Ms Denise Phua (Jalan Besar GRC).

He also said access to such student loans is "deliberately made easy to help as many students as possible".

"This was never meant to be a commercial operation, but part of our policy to help students with their education, and it also serves a social objective," he added.

Volunteer cops got larger allowances due to procedural error: Shanmugam
By Charissa Yong, The Straits Times, 16 Aug 2016

Volunteer police officers received larger allowances than they should have because of a procedural error, Home Affairs Minister K. Shanmugam said yesterday.

But it was not a case of public officers making decisions on their own and deliberately bypassing the minister, he added.

Referring to the lapse flagged by the Auditor-General's Office (AGO) in its annual report last month, he said: "The matter has been handled with advice from the Attorney- General's Chambers (AGC). And the officers have been advised to be more careful."

The AGO said in its report that the increase in the allowance for part-time Volunteer Special Constabulary officerswas higher than what was stipulated by the regulations. In 2008, the hourly rate was increased from $2.80 to $3.60. This was approved by the deputy commissioner of police and permanent secretary of the Home Affairs Ministry.

As the approval of the Home Affairs Minister was not sought, the AGO classified the $2.63 million that was paid out as overpayments, said Mr Shanmugam, who became Home Affairs Minister in September last year.

Responding to questions from Mr Desmond Choo (Tampines GRC) and Mr Low Thia Khiang (Aljunied GRC), he said he agreed with the rationale for the payments and authorised the hike retrospectively after being advised by the AGC that he could do so.

He added that a review was under way on raising the rate further, and praised volunteer police officers for their contributions.

"They do not serve because of the $3.60 an hour. They come forward to serve Singapore," he said.

But Mr Low, in a follow-up question to the minister, said the issue was not about how much was paid out but the ministry's response to the AGO.

The Workers' Party chief asked if the public officers had broken the law in not seeking approval for the hike, and noted that the minister later decided to make it lawful by approving it, after the fact.

He said: "Is this (the) correct way for the Government to make an unlawful payment a lawful payment, and an overpayment a correct payment? And is this the way to respond to AGO's report?"

In response, Mr Shanmugam reiterated that what had happened was "a pure process error", and contrasted it with "errors in substance".

Illustrating his point, he cited a hypothetical scenario of a group taking over an organisation with a lot of money.In a description reminiscent of the WP's governance lapses at the Aljunied-Hougang Town Council, he said: "The new group appoints its friends. It sets up a structure which helps to vacuum money out of the organisation.

"And its own accountants say in writing that, despite repeated requests, the organisation did not provide all the critical documents relating to the transactions with the friends.

"And assume that they repeat it every year, and yet the organisation doesn't do anything. That is an error both in process and in substance, and that is unlawful... So, let's keep things in perspective."

AGO Report FY 2015/2016: Inadequate financial controls, weak governance uncovered in Auditor-General's report
Auditor-General's report for Financial Year 2015/2016
'Pervasive' lapses found in Workers' Party town council; At least 18 months needed for AHTC to fix lapses: KPMG

Parliament Q&A:
Lapses and Breaches in the Auditor-General Report FY15/16
Reply to Supplementary Question from Mr Liang Eng Hwa on the Auditor-General Report FY15/16 Findings
Oral Reply to Parliamentary Question on Overpayment to VSC by M K Shanmugam, Minister for Home Affairs and Minister for Law
How many foreign students did not complete their scholarship bonds after graduating from NUS and NTU
Centralised bin centre at Civic District

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