Reply to Supplementary Question from Mr Liang Eng Hwa on the Auditor-General Report FY15/16 Findings16 Aug 2016
Reply by Senior Minister of State for Finance and Law Indranee Rajah:
1. I thank Mr Liang Eng Hwa for his question. There is a world of difference between the lapses found in Government agencies and those at AHPETC or now known as AHTC. 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.
Are the Accounts Reliable?
2. First, AHPETC’s accounts have been unreliable. Its own auditors repeatedly gave the Town Council a “Disclaimer of Opinion”, which is the least desirable audit opinion. AGO concluded in 2015 that there was “no assurance that AHPETC’s accounts are accurate and reliable, or that public funds are properly spent, accounted for and managed.”
3. There is no similar problem in Government. 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. Public funds are properly accounted for and we know what they are being used for.
Are the Problems of a Systemic Nature?
4. Second, the problems at AHTC, formerly AHPETC, are of a systemic nature, not just a matter of individual lapses. The independent accountant KPMG found a further 70 control failures in AHTC, in addition to the 115 found previously by AGO and statutory auditors. To quote KPMG in their July 2016 report, “Control Failures are pervasive, cutting across the key areas of governance, financial control, financial reporting, procurement and records management over the course of five years… there is an issue larger than the sum of individual lapses at AHTC.”
5. As I have explained earlier, there has been no such systemic problem in Government. From this year’s and past years’ AGO reports, there is no evidence of widespread compliance problems. There is certainly no culture of non-compliance.
Are there issues of Personal Gain?
6. Third, in the case of AHPETC, there are serious issues to do with personal gains from related third party transactions.
7. The General Manager, Deputy General Manager and Secretary of the Town Council were also the owners and directors of FM Solutions and Services Pte Ltd (FMSS) which provided managing agent services to AHPETC and received payments.
8. In addition, the Secretary of AHPETC was the sole owner of FM Solutions and Integrated Services (FMSI), which provided maintenance and lift rescue services to AHPETC, and likewise received payments.
9. In a review carried out by ACRA, it was found that the profit margins of FMSS were abnormally high. The total payments by AHPETC to FMSS Owners and Directors amounted to 22% of FMSS’ revenue in FY12/13, and grew further to 36% in FY13/14.
10. The ‘conflicts of interest’ highlighted by AGO in the AHPETC case are fundamentally different from the case of Nanyang Polytechnic’s (NYP) and its subsidiary NYPi, that was highlighted in the AGO report.
11. As explained by Ag Minister for Education Ong Ye Kung yesterday, in the case of NYP and NYPi, there was no question of personal gain. There were no personal interest involved on the part of the Directors of NYP and NYPi, and no leakage of money to any third parties. NYPi is wholly owned by NYP, and any profits made by NYPi will only benefit NYP.
How are Problems Addressed and Corrected?
12. Fourth, our Government agencies and AHPETC have been completely different in the way they have responded to problems when they are found. Notwithstanding the shortcomings and failures identified by their own auditors and subsequently the AGO, AHPETC did not take prompt measures to rectify these problems despite repeated requests by MND to do so. This resulted in MND having to bring an application to Court, and it was only after the court order was made that KPMG was appointed as an independent accountant by AHPETC.
13. KPMG has been issuing monthly reports since April 2016. In its latest monthly report published in July 2016, 4 years since AHPETC’s auditors first voiced their reservations of the accounts, KPMG had stated that “Progress remedying the Control Failures has been slow”.
14. We understand that AHTC is working on its remedial plans. In the Jun 2016 KPMG report, AHTC has updated and implemented its revised Conflict of Interest Policy, which now extends to AHTC’s Town Councillors, management and employees, and supporting procedures to manage conflicts of interest. However, the other remediation plans - on the governance of related party transactions - were still unresolved.
15. By contrast, every government agency takes AGO’s findings seriously. Where there are lapses, they are openly acknowledged and steps taken to address them as soon as possible. The Auditor-General has himself noted their commitment to rectify the lapses and put in place measures to prevent future occurrences.
16. So to conclude, let me emphasise once again that the lapses found in Government are wholly different from AHTC’s problems.
• Our accounts are reliable, unlike AHTC’s.
• There is no systemic weakness in Government agencies, unlike what the auditors have found at the Town Council.
• Unlike AHPETC too, there was no question of personal gains in any of the lapses highlighted in this year’s AGO report.
• And finally, the Ministries and agencies have in all instances taken steps to rectify the weaknesses identified.
• Our system is transparent, accountable and responsive, and we look forward to the same in AHTC, as it hopefully rectifies its problems.