Second Reading Speech by Senior Minister of State for Finance Indranee Rajah on The Audit (Amendment) Bill 2017

1.    Speaker Sir, I beg to move, “That the Audit (Amendment) Bill be now read a second time.” 

(i)    Enhance Powers of the Auditor-General to Conduct Follow-the-Dollar Audits 

2.    The Auditor-General’s Office (AGO) is a key institution in the overall framework of public accountability and financial governance of the Government. The Auditor-General is empowered to audit public entities or bodies that administer public funds.  The Auditor-General conducts independent audits of government finances, checks for financial irregularities and ascertains whether there has been excess, extravagance, or gross inefficiency in the use of public funds. These audits give assurance to the President and Parliament on the proper accounting, management and use of public resources.  

3.    However, the work of the Government has expanded and become more complex over the years. The Government is increasingly involving a wide range of non-government entities in public service delivery, such as restructured hospitals, autonomous universities, voluntary welfare organisations (VWOs), charities, pre-school operators, town councils and outsourced contractors. Substantial public funds are also disbursed to non-government entities for various purposes such as for economic or social development for the benefit of Singapore and Singaporeans. Collectively, this amounts to several billions of dollars. 

4.    Hence there is a need to enhance the audit powers of the Auditor-General. The Audit Act will thus be amended to allow the Auditor-General to conduct “follow-the-dollar” audits on any non-government entities that receive public funds.

5.    This is not unique, as other countries around the world see the same trend in terms of involving more non-government entities to deliver public services. Jurisdictions including Canada, the United Kingdom, Australia, Denmark, Sweden and Finland all empower their national auditors to conduct “follow-the-dollar” audits. 

6.     The audits under this Bill are limited in scope to only whether the entities’ use of public funds is in accordance with the terms and conditions specified by the government agency that provided the funds. The audits will not extend to the non-government entities’ use of their own funds or funds from other sources.

7.    I wish to emphasise that it is not the intention in this Bill for the Auditor-General to take over the role of private sector auditors who will continue to audit these non-government entities as they are now doing. The Auditor-General will only be called upon to undertake the “follow-the-dollar” audit if the Minister for Finance is satisfied that it is in public interest to do so. This is a similar approach to a range of other local statutes, where the Minister responsible for the subject matter - in this case, public finances - has the power to direct that certain things be done in order to protect the public interest. 

8.    An example would be when, let’s say a VWO has been appointed by the Ministry of Social and Family Development (MSF) to disburse public funds to the needy. However, there are reasons to suspect that the VWO has used the funds for staff benefits instead of channelling them to the needy as intended. 

9.    Or take another example:  an autonomous university is given a sum of money by the Ministry of Education (MOE) which is meant to be disbursed as education bursaries for students. However, there may be reasons to believe that the money is being used for other purposes instead, such as the recruitment of academic staff or for the purchase of research equipment. 

10.    In these cases, the Minister for Finance can direct that a “follow-the-dollar” audit be conducted on the VWO or the university. The Auditor-General will be empowered to audit whether the public funds given to the VWO or the university have been used according to the terms and conditions set out by MSF and MOE respectively.  
 
11.    In short, “follow-the-dollar” audits will apply to recipients of public funds, and only undertaken in cases where it is in the public interest to do so, and the audit will only be limited to whether the funding terms and conditions have been complied with. 

(ii)    Enabling the Auditor-General to Obtain All Necessary Information   

12.    In order for a “follow-the-dollar” audit is to be conducted, the Auditor-General will need to have the necessary powers to discharge his duty. The Audit Act will therefore be amended to provide the Auditor-General with additional powers to search and obtain all necessary documents or information which he requires to conduct a “follow-the-dollar” audit.

13.    In line with the powers granted to the National Audit Organisations in other jurisdictions such as Australia and New Zealand, the Auditor-General and his authorised representatives will be empowered to enter and remain in any premises occupied by the subject of the audit, or premises occupied by someone who holds custody of the required information.  AGO will also be able to search for and inspect documents, information and records. Such powers are already given to officers of EMA or IRAS when they need to perform enforcement functions.

Conclusion

14.    To conclude, the amendments to the Audit Act will provide powers to the Auditor-General to conduct “follow-the-dollar” audits on non-government entities’ use of public funds. This is to ensure that public funds are used for the purposes for which they are intended and to enable accountability of public spending. The amendments keep the powers of the Auditor-General updated and relevant in an operating context where non-government entities are increasingly receiving public funds to help deliver a range of services. This will enable the Auditor-General to fulfil his role of strengthening financial governance and ensuring accountability for the use of public resources.

15.    Speaker Sir, I beg to move. 

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Last Updated on December 04, 2017
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