THIRTEENTH PARLIAMENT OF ______

First Session ______

FIRST REPORT OF THE PUBLIC ACCOUNTS COMMITTEE

Parl. 3 of 2017

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Presented to Parliament on

17 January 2017

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PUBLIC ACCOUNTS COMMITTEE

Members

Ms Soon Neo (Chairman) Mr Mr Ang Wei Neng Mr Dr Mr Ms Mr

CONTENTS

Page

FIRST REPORT OF THE PUBLIC ACCOUNTS COMMITTEE

Overview 1-2

Committee’s Enquiries and Ministries’ Responses in relation to Observations in the Report of the Auditor- General for the Financial Year 2015/16

Inadequate Financial Controls 3-5

Proper Governance Framework Not in Place 5-7

Lack of Oversight of Administration of Schemes and 7-9 Programmes

Lapses in Management of Contracts 9-13

Other Lapses 13-15

Committee’s Enquiries and Ministries’ Responses in relation to Observations in the Report of the Auditor- General for the Financial Year 2014/15

Administration of Grants 16-17

Management of Contract Variations 17-19

Related Party Transactions 19-20

Other Lapses 20-21

APPENDIX

I Minutes of Proceedings 22

FIRST REPORT OF THE PUBLIC ACCOUNTS COMMITTEE

Overview

1 The Public Accounts Committee considered the Reports of the Auditor-General for the financial years 2014/15 and 2015/16.

2 The Committee noted that there were a number of instances where processes were in place but not adhered to due to weak governance. For example, there were several observations regarding variation works being carried out before the required approvals were given. There was also a lack of assessment on the reasonableness of the cost of the works and services procured. There were also instances of inadequate financial controls over Government operations including those outsourced to external operators.

3 The Committee also noted that the lapses pertaining to procurement (e.g. management of contract variations) and governance as highlighted in the Reports of the Auditor-General over the two financial years were recurring across different agencies, indicating that these are common areas of concern that need to be addressed.

4 The Committee noted that agencies had acknowledged the lapses and were taking the necessary rectification actions to address the gaps in controls and lapses identified. The Committee would like to emphasise the importance of putting in place effective measures to prevent recurrence of the lapses. In this regard, the Committee has the following points to share.

5 First, in considering the measures to be implemented to address the lapses, agencies should address the underlying causes. Agencies should review the relevant systems and processes to come up with holistic solutions that are effective and efficient. These may include redesigning the system and making better use of technology. Agencies should not introduce piecemeal measures that would result in more rules and procedures, which might increase bureaucracy and costs unnecessarily without addressing the fundamental causes of the lapses.

6 Second, heads of agencies should set the tone at the top to ensure adherence to processes and controls as part of good governance. This is important as public sector agencies use significant amounts of public funds for a wide range of schemes, programmes, operations and projects. Agencies should ensure that their officers understand the importance of and principles behind the financial controls and governance practices, and comply with them.

7 Third, public officers handling public funds need to be equipped with the relevant knowledge to carry out their duties effectively.

8 Lastly, to address common lapses found across agencies, there should be sharing of lessons learnt and best practices so that other agencies can review their processes to ensure that similar gaps in controls and processes are promptly addressed. In this regard, the Committee noted that the Ministry of Finance (MOF) has a key role to play in the sharing of learning points and best practices across public sector agencies, as well as providing guidance in the area of procurement and governance. MOF has done so through

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various forums and should continue to engage agencies to enhance their processes to prevent the recurrence of lapses.

9 The Committee’s enquiries into specific observations and the agencies’ responses are discussed in the following sections.

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Committee’s Enquiries and Ministries’ Responses in relation to Observations in the Report of the Auditor-General for the Financial Year 2015/16

10 The Committee considered the Report of the Auditor-General for the Financial Year 2015/16 (Paper Cmd. 4 of 2016). The Committee’s enquiries into specific observations are discussed in paragraphs 11 to 70.

Inadequate Financial Controls

11 The Committee noted observations of inadequate financial controls over revenue collection and payment in the Report of the Auditor-General. In this regard, the Committee sought written explanations from the following Ministries:

(i) Ministry of Defence (MINDEF);

(ii) Ministry of National Development (MND);

(iii) Ministry of Transport (MOT); and

(iv) Prime Minister’s Office (PMO).

MINDEF – Failure to Provide for Central Provident Fund (CPF) Contributions for Bonus Paid

12 The Committee noted that MINDEF had estimated that the amount of CPF, which it did not contribute for 215 members for the Full Savings Vesting (FSV) Bonus paid in the financial year 2014/15, was $324,000. The Committee asked MINDEF whether interest payable was included in the estimated amount and whether MINDEF would be making the CPF contributions (including interest payable where applicable) for FSV Bonus paid from 2007 (when the bonus was introduced) to the financial year 2013/14.

13 In response, MINDEF informed the Committee that the interest payable to the employees was not included in the estimated amount of $324,000 as it would be calculated by the CPF Board after MINDEF had completed back payment of the CPF contributions. MINDEF would make payments for the interest that would have been earned if the CPF contributions had been made at the time of the FSV Bonus payment. MINDEF also informed the Committee that the CPF contributions for FSV Bonus paid in the financial year 2014/15 had been credited into the employees’ CPF accounts in August 2016. MINDEF would also make back payment of CPF contributions (including interest payable) for FSV bonus paid since its inception in 2007 and it aimed to do so by December 2016.

MND – Inadequate Monitoring of Car Park Operations and Enforcement

14 The Committee noted that the Housing and Development Board (HDB) did not have adequate oversight of the operations of its car parks at industrial estates and

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residential estates which were outsourced to commercial operators. HDB had made police reports against the motorists who had deliberately manipulated the car park system to evade parking fees in industrial estates and would be amending the Parking Places Rules (Cap. 214, R2) (the Rules) to enable HDB to take action against motorists who evade parking fees. The Committee asked MND whether HDB could have taken its own enforcement actions without having to refer the cases to the police. The Committee would also like to know the timeline for the amendment of the Rules.

15 MND explained that the car parks in industrial estates were not gazetted under the Parking Places Act (Cap. 214, 2014 Revised Edition). Hence, HDB had to refer the cases to the police for enforcement action to be taken. MND informed the Committee that with the proposed transfer of industrial estates to the Jurong Town Corporation, HDB is working with various government agencies to review the need to gazette these industrial car parks. The review would be completed in February 2017.

16 In the meantime, the Rules, which currently covered car parks in residential estates, were amended on 11 July 2016 to allow HDB to take enforcement action against motorists who deliberately evade payment of parking charges. According to MND, as at 31 August 2016, HDB had issued 199 parking offence notices to motorists who were caught deliberately evading payment of parking charges at Electronic Parking System car park since the Rules were amended.

17 MND informed the Committee that HDB was exploring the use of analytic tools to flag out cases of evasion of payment by the first quarter of 2017. Convicted cases would also be publicised as a deterrence to other motorists. Other measures included stepping up the education of its tenants at industrial estates, introducing additional signboards and pilot testing on additional humps and more efficient sensors at car parks to prevent tailgating of vehicles.

18 The Committee noted HDB’s measures to address the lapses. The Committee would like HDB to review its car park system and processes to identify if the overall effectiveness and efficiency of its car park operations and enforcement could be further enhanced. These could include better use of technology and redesign of car parks where appropriate.

MOT – Weaknesses in Controls over Revenue Collection at Checkpoints

19 The Committee noted that the controls over collection of toll at the Woodlands and Tuas Checkpoints were weak and there could be potential loss of revenue. The Committee would like to know the cause of the weaknesses in controls and whether the under-collection was pervasive at both Checkpoints and for certain vehicle types.

20 In response, MOT explained that the Land Transport Authority of Singapore (LTA)’s collection system at the Checkpoints was not linked to the system of the Immigration and Checkpoints Authority (ICA). Motorists could therefore clear immigration without paying the correct toll and fees. LTA estimated that the probable loss in toll could be 10 per cent of total toll based on a three-month period from March to May 2016, which would translate to a probable loss of toll of about $7 million per year on average.

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21 The Committee also asked MOT for the measures that were or would be taken (including the implementation timeline) to address the weaknesses in controls and enforcement over revenue collection at the Checkpoints. MOT updated the Committee that LTA had increased its frontend manpower at the Checkpoints since May 2016 and increased penalties for evasion of toll and fees from 1 August 2016. LTA would be working with ICA on a trial to link its collection system to ICA’s system by the financial year 2016/17. LTA targets to roll out the system fully from the financial year 2017/18. Going forward, LTA would also study less manpower intensive options which could be made possible with the linkage of the collection system to ICA’s system and implementation of new technology.

22 LTA would also be amending the Road Traffic Act (Cap. 276, 2004 Revised Edition) to prohibit the entry or exit of foreign vehicles with unpaid toll and fees by the first quarter of 2017.

23 The Committee noted LTA’s measures to address the lapses. The Committee would like LTA to relook at its system of collection of toll and related fees to identify if the overall processes could be further enhanced for more effective and efficient collection of toll and related fees.

PMO (Public Service Division) – Lapses in Administration of Trainer Fees

24 The Committee noted that there were delays by the Civil Service College (CSC) in its payment of trainer fees. CSC would be developing a new training and administration system that would be integrated with its Finance system to minimise the need for manual processes. The Committee would like to know whether this would help to address the delays in payment of trainer fees.

25 PMO assured the Committee that the new training and administration system (operational by September 2018) would automate the processing of trainer fees upon completion of classes and, hence, address the delays in payment of trainer fees. In the interim, CSC had tightened the monitoring process for payments to trainers since January 2016 and would standardise the payment terms for all trainers to reduce processing time by end of 2016. An Audit and Governance Review Committee (chaired by Dean/Chief Executive of CSC) was formed in August 2016 to provide guidance and oversight of the measures taken to address AGO’s audit observations. According to PMO, CSC had shown improvement in the timeliness of payment to trainers as at July 2016 with the above measures.

Proper Governance Framework Not in Place

26 The Committee noted that most of the audit observations on the Nanyang Polytechnic (NYP) pointed to a knowledge gap in understanding the rules and relevant Government’s instructions. In this regard, the Committee asked the Ministry of Education (MOE) for the measures that were or would be taken (including the implementation timeline) to ensure that officers have the requisite knowledge and training to carry out their duties effectively.

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27 MOE assured the Committee that it took a serious view of AGO’s audit observations and had asked NYP for a full report to account for the lapses and to detail the measures to be taken. MOE had also briefed all the statutory boards under its purview to minimise recurrence of such lapses and to reiterate the importance of good governance and strong internal controls. MOE informed the Committee that NYP had taken several measures targeting at different groups of officers to ensure that they have the requisite knowledge and training to carry out their duties effectively:

(i) NYP’s Board of Governors (BOG) Secretariat would be updated on the positions held by the BOG members to prevent situations of real or perceived conflict of interest. All board papers would be cleared with the Secretariat before circulation. NYP would put up a Corporate Governance Framework (consolidating the guidelines and rules from Government Instruction Manuals, Nanyang Polytechnic Act and PSD Handbook for Public Officers to Boards of Statutory Boards) for approval at the BOG meeting in October 2016.

(ii) NYP officers handling donations and fund-raising would be attending courses in October 2016 to keep abreast of matters related to donations and fund-raising.

(iii) NYP has a central department that functions as the knowledge expert for all tendering contracts. The department provides advice and training on procurement matters, and is currently conducting a series of procurement sharing sessions for officers handling procurement and revenue tendering contracting.

MOE – Donations Raised for Unauthorised Purpose

28 The Committee noted that NYP had allowed the name of the Nanyang Polytechnic Education Fund (NYPEF), an Institution of Public Character (IPC), to be used to solicit donations for a purpose not authorised under the Fund. In this regard, NYP had issued tax deduction receipts to the donors in the name of NYPEF. The Committee asked MOE whether there are implications on the tax deductions given to the donors that need to be addressed and how these would be addressed. The Committee would also like to know the details of measures that were or would be taken (including the implementation timeline) to prevent recurrence of such lapses.

29 MOE informed the Committee that it had instructed the Chairman of NYPEF to inform the donors that their earlier donations could not be used for the purpose communicated as such usage was beyond the approved scope of NYPEF. Their donations would be channelled to other approved purposes. If the donor objected to it, NYPEF would return the donations to the donor, cancel the tax deductible receipts issued and notify the Inland Revenue Authority of Singapore promptly. According to MOE, of the 43 donors notified by NYP, 31 had agreed to NYP’s proposal. NYP would continue to follow up with the remaining 12 donors who had not responded. In addition to the training for officers handling donations and fund-raising (mentioned in paragraph 27), since July

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2016, NYP had been actively seeking clarifications from various authorities to ensure that it adhered to all fund-raising requirements.

Lack of Oversight of Administration of Schemes and Programmes

30 The Committee noted that there were several lapses on oversight of administration of schemes and programmes by MOE and sought written explanation from MOE on these lapses. In response, MOE assured the Committee that it took a serious view of AGO’s audit observations and had taken steps to rectify the irregularities and strengthened its processes and internal controls, as elaborated below.

MOE – Tuition Fee Loans and Study Loans Due Not Promptly Recovered

31 The Committee asked MOE for details of the improvements made on its review of long outstanding loans, and for an update on the timeline for the issuance of guidelines on the loan schemes to detail the responsibilities of various parties and procedures on loan recovery and defaults.

32 MOE informed the Committee that:

(i) The National University of Singapore and the Nanyang Technological University (NTU) had worked with their agent banks to reconcile the students’ statuses for all outstanding loan accounts so that the banks could take prompt loan recovery actions on those who have graduated or left the universities. The reconciliation was completed in July 2016.

(ii) MOE had revised its procedures on review of long outstanding loans in June 2016. The revised procedures provide greater clarity on when cases for write-off would be put up for approval, after completing the stipulated assessment and checks.

(iii) Since August 2016, the banks were required to submit to MOE a master list on all unrecoverable loan cases, with details on the loans and recovery actions taken by the banks on a quarterly basis.

33 MOE informed the Committee that as at September 2016, it had reviewed about 20 per cent of the outstanding cases and targeted to complete the rest by June 2017. In addition, MOE had targeted to issue the guidelines detailing the responsibilities of the various parties and procedures on loan recovery and defaults by March 2017. MOE had concurrently worked with the universities and the banks to tighten the work processes and clearly define the responsibilities of each party under each work process. MOE had targeted to reach an agreement with the universities and the banks by July 2017 and would update the guidelines accordingly.

MOE – Undue Delay in Review of Agency Fees

34 The Committee noted that MOE had not completed its review of the formula for agency fees payable to the banks for administering tuition fee loans and study loans six

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years after AGO had raised the observation in the financial year 2008/09. The Committee asked MOE on the status of the review and the target completion date.

35 MOE informed the Committee that it had carried out several rounds of iterations with the universities and the banks to review the agency fees formula. After further deliberation, MOE had decided not to change the existing formula as changing the agency fee formula alone would not incentivise the banks’ loan recovery efforts. Therefore, MOE would take the alternative approach of focusing its efforts on reducing loan defaults by working with the universities and the banks to tighten loan administration with closer monitoring and tracking of borrowers for loan recovery. These would include spelling out more clearly the roles and responsibilities of the banks, and introducing key performance indicators and penalty clauses to enable actions to be taken if the banks did not meet the stipulated service standards.

36 MOE informed the Committee that it targets to reach an agreement with the universities and the banks by July 2017.

37 The Committee noted that MOE, after taking more than six years to review the formula for agency fees payable to the banks for administering tuition fee loans and study loans, had decided not to change the formula. While the Committee welcomed the efforts to tighten the loan administration, the Committee urged MOE to closely monitor the effectiveness of the new measures on a yearly basis.

MOE – Over-contributions to Sinking Fund

38 The Committee noted that MOE would work with NTU to recover the excess amount of sinking fund contributions disbursed. On the Committee’s query on whether the excess amount has been recovered from NTU, MOE confirmed that this had been done in July 2016.

39 On the Committee’s query on the measures taken to prevent the recurrence of such lapses, MOE informed the Committee that it would review the current approach of relying on the building registers from the universities to compute the annual sinking fund contributions. It targets to complete the review by September 2017.

MOE – Inadequate Monitoring of Research Progress

40 The Committee noted MOE’s plan to develop an Integrated Grant Management System (IGMS)1, to provide for a more systematic tracking of research projects. In response to the Committee’s query on the timeline for the implementation of the system, MOE replied that the new IGMS would be implemented by March 2018.

41 As for the Committee’s query on the interim measures implemented to prevent the recurrence of such lapses, MOE explained that it had put in place the following manual measures to closely monitor and check the submission of required progress reports before disbursement:

1 According to MOE, IGMS is to be built through inter-agency effort for use by several agencies.

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(i) Since August 2015, MOE had enhanced the existing Online Grant Administration system to generate a report on the submission status of all progress reports to support the administrator’s monitoring of outstanding progress reports.

(ii) From January 2016, the universities were required to submit to MOE a monthly update on the submission status of the final progress reports and an update by 31 August of each year on the submission status of the yearly progress reports.

(iii) For each claim submitted, the universities would be required to declare the submission status of the project progress report. MOE would verify the status declared against the progress reports and would hold back disbursements until the required progress reports were submitted.

42 The Committee noted the above measures taken by MOE to strengthen its processes and internal controls over the administration of schemes and programmes. In this regard, the Committee would like to emphasise that MOE remains overall accountable for the schemes and programmes even though the administration of the schemes are outsourced to external parties such as the universities and the banks. Hence, MOE should exercise adequate oversight of the public funds used to ensure that the intended objectives of the schemes and programmes have been achieved.

Lapses in Management of Contracts

43 The Committee noted that several findings in the Report of the Auditor-General pertained to lapses in the management of development projects. In this regard, the Committee sought written explanations from the following Ministries:

(i) Ministry of Culture, Community and Youth (MCCY);

(ii) Ministry of Education (MOE); and

(iii) Ministry of National Development (MND).

MCCY – No Assurance of Reasonableness of Consultancy Fee

44 On the lapses in the management of Victoria Theatre and Victoria Concert Hall (VTVCH) Redevelopment project by the National Arts Council (NAC), the Committee noted MCCY’s explanation that the construction of the bin centre for this project was more complex, which required significantly more design expertise, technical consultancy services and effort to coordinate with multiple parties. These were the reasons for the fee to be above the norm. MCCY had acknowledged that the cost assessment could have been more robust. The Committee noted that the Ministry did not have any document to show that, at the material point in time, these reasons were considered. The Committee also noted that in MCCY’s reply to the Parliamentary Question at the Parliament sitting on 15 August 2016 on this matter, it mentioned that the consultant did value engineering

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which reduced the original quote for the construction cost of the bin centre from $890,000 to $470,000. The Committee therefore sought written explanation from MCCY on the following:

(i) Details of the unique design features and services to justify the consultancy fee paid for the bin centre and whether there is documentary evidence to substantiate these;

(ii) Details of the value engineering carried out by the consultant to reduce the construction cost of the bin centre and whether there is documentary evidence to substantiate this work; and

(iii) Details of measures that were or would be taken (including implementation timeline) to prevent the recurrence of such lapses.

45 MCCY explained that the scope of the consultancy went well beyond design features and services for the construction of a bin centre for VTVCH. It involved a technical feasibility study for a centralised refuse collection centre serving a number of heritage institutions in the Civic District, including VTVCH, the Asian Civilisation Museum, the Old Parliament House and the Parliament House. The consultant was to work out and implement a centralised refuse collection solution that would meet the operational needs of the various institutions, optimise space for the precinct, and preserve the aesthetics and integrity of historical buildings in the vicinity which included several national monuments. MCCY confirmed that it had documentary evidence to show those works performed by the consultant.

46 In response to the Committee’s clarification on whether services of conservation specialist or historian were engaged to preserve the aesthetics and integrity of the historical buildings, MCCY confirmed that the work carried out by the consultant on the bin centre did not require such services.

47 The consultant’s work involved, among others, proposing suitable site options that would not intrude on the character and obstruct activities of the various cultural institutions in the area, and developing design proposals that blended with surrounding historical buildings.

48 With regard to the value engineering carried out by the consultant, MCCY informed the Committee that the consultant’s efforts which included proposals for alternative construction methods/detailing resulted in cost savings of $420,000.

49 On the measures taken to prevent recurrence of such lapses, MCCY informed the Committee that the Permanent Secretary of MCCY had sent a memorandum to the Chief Executive of NAC and MCCY’s Director overseeing procurement to reiterate the need to ensure that approval submissions should contain documentation of evaluation of the reasonableness of quoted fees. Such documentation should also include justifications where there were good grounds to deviate from the normative method of assessing consultancy costs as a percentage of construction costs. Lessons learnt from AGO’s audit observation would be shared with MCCY directors and the Chief Executives of MCCY’s statutory boards at the MCCY’s Audit Committee meeting on 12 October 2016.

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50 The Committee would like to reiterate the importance of having a clearly defined and properly documented scope of works especially for complex projects, and ensuring a robust scoping of such projects. The Committee suggested that as far as practicable, there should be separation between standard and non-standard items in the specifications.

MCCY – Variation Works Carried Out Before Approval

51 The Committee asked MCCY for the measures that were or would be taken (including the implementation timeline) to monitor variation works to ensure that consultants obtained approvals before variation works are carried out, and to strengthen NAC’s management of contracts. The Committee also asked about the measures that were or would be taken (including the implementation timeline) to tighten the process of seeking approval to ensure that pertinent facts are provided for approving authorities to make informed decisions.

52 MCCY informed the Committee that the Chief Executive of NAC had been reminded on the need to follow existing procedures for the management of Variation Orders for future projects. MCCY explained that NAC had also enhanced its procedures to include the following:

(i) NAC officers would be required to formally communicate to consultants that any variation works that commence without prior approval risk non- payment.

(ii) In cases where urgent variation works were required due to unforeseen site conditions, verbal instructions to the contractor to proceed would be documented through email and the corresponding approvals sought thereafter, to ensure that works were not unnecessarily delayed while documentation remained robust.

(iii) Detailed guidelines were provided on the necessary information to be included when seeking approval for contract variations to ensure pertinent facts were provided to the approving authority.

53 To strengthen its management of contracts, since October 2015, NAC had appointed the Centre for Public Project Management (a unit under the Ministry of Finance) to ensure that its project management practices complied with the Government’s instructions and the principles of the Public Sector Standard Conditions of Contract. MCCY informed the Committee that NAC had completed implementing the remedial plans and would periodically review its processes for effectiveness.

MOE – Lapses in Tendering and Management of Revenue Contracts

54 The Committee noted that NYP had predetermined rental rate for a childcare centre operator without assessing whether this reflected market rate and on renewal, had continued to charge the same rental rate on the basis that the rate was reasonable when compared to those charged by the other four polytechnics for the childcare centres on their premises. However, NYP’s rental rate was only 51.5 per cent of the average rental

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rate charged by the four polytechnics. In another tender to appoint a canteen operator, NYP justified the predetermined rental rate on the basis that it was comparable to the rates used by other polytechnics and existing canteens in NYP. However, NYP’s rate was 29.4 per cent lower than the average rental rate of the other polytechnics’ canteens.

55 The Committee sought written explanation from MOE on the following:

(i) Details of measures (including the implementation timeline) that were taken or would be taken to strengthen NYP’s revenue tendering process to ensure that it is fair and transparent, and at the same time ensure the best outcome that serves the interest of NYP and the intended community; and

(ii) Whether there would be a review to strengthen the way rental rates are being evaluated, benchmarked and justified, and details of the actions to be taken, including the implementation timeline.

56 MOE informed the Committee that NYP had since engaged a professional valuer to determine the market rate for the tenancy of the childcare centre and this would be done once every three years. Rental based on market value would be used for the next tenancy agreement of childcare centre upon expiry of the existing tenancy on 30 November 2016.

57 On the tender for the operation of canteens/food courts, MOE informed the Committee that NYP had since adopted an open bidding system. The tender specifications would clearly indicate NYP’s requirements (including the need to keep food/drink prices low) and how the offers would be evaluated to ensure fairness and transparency while meeting NYP’s requirements. For the exercise of options for renewal of tenancies (the next one due in April 2017), NYP would engage a professional valuer to determine the market rate. At the end of the full contract period, an open bidding exercise would be conducted.

MND - Long Delays in Finalising Accounts of Contracts and Making Final Payments to Contractors

58 The Committee noted that there was late issuance of Certificates of Substantial Completion (CSCs) of works, delays in the finalisation of accounts in a number of contracts, and delays in making final payments to contractors by HDB. HDB had informed AGO that it would be implementing a tracking system to improve the management and monitoring of the issuance of CSCs. The Committee asked MND for the reasons for the long delays and how the tracking system would improve the management and monitoring of the issuances of CSCs as well as the implementation timeline. The Committee would also like to know whether other measures were taken or would be taken (including the implementation timeline) to prevent the recurrence of such lapses.

59 MND explained that the long delays were due to HDB requiring more time to verify the information and documents furnished by contractors to substantiate their claims, time required by contractors to coordinate with their sub-contractors and to settle disputes with consultants on measurements and valuation of works, as well as time required for

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thorough checks by HDB before final payments could be made. MND informed the Committee that HDB had implemented the following measures:

(i) In July 2016, an electronic system to track and monitor the issuance of CSCs at different milestones had been implemented. The system would trigger an alert for any delay in issuance of CSCs and the delay would be escalated to higher management for attention so that prompt follow-up actions would be executed.

(ii) Since July 2016, the monitoring process to initiate the finalisation of accounts had been brought forward by at least two months. Key indicators and timeframe had also been introduced to guide staff in the monitoring process.

(iii) In September 2016, an electronic monitoring system was implemented to track and alert relevant parties to ensure that payment was done within the contractual provision of 21 days.

60 On the Committee’s concern as to whether any of the contractors had become insolvent as a result of the delays in payment, MND informed the Committee that HDB was not aware of any such cases. HDB was of the view that the likelihood of insolvency due to delay in final payment was low given that the contractors would have received the bulk of the payments as the project progressed towards the final payment and most also had other on-going contracts.

Other Lapses

61 The Committee also sought written explanations from various ministries on lapses relating to other areas such as IT and procurement.

MinLaw – Weaknesses in Monitoring of Access to IT System

62 The Committee noted the weaknesses in monitoring of access to the Insolvency and Public Trustee’s Office Business Information System by the Ministry of Law (MinLaw). The Committee was concerned whether there were any unauthorised accesses and changes to the data as a result of MinLaw not promptly removing accounts that were not needed and granting excessive rights. MinLaw assured the Committee that there were no such cases of unauthorised accesses and changes based on its checks of the system logs. The checks confirmed that the unneeded or inactive accounts had not been used and there were no log-ins from the time the accounts were no longer needed to the time they were removed. MinLaw had since removed all the unneeded accounts.

63 MinLaw also informed the Committee that it had put in place a standard operating procedure to review the list of account users, the access rights and the audit logs on a monthly basis. This process would be further enhanced with the implementation of the electronic Access Rights Management System in 2017.

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MinLaw – Lapses in Procurement of Goods and Services

64 The Committee noted that the Intellectual Property Office of Singapore (IPOS) had not adhered to procurement guidelines and upheld the key principles of open and fair competition and transparency in four tenders and two quotations. The Committee asked MinLaw for the reasons why procurement guidelines were not adhered to and the detailed measures that were or would be taken (including the implementation timeline) to strengthen the procurement process and prevent recurrence of such lapses.

65 MinLaw explained to the Committee that the lapses were mainly due to the adoption of an incorrect approach or practice which was not in line with the Government’s instructions. MinLaw informed the Committee that IPOS has put in place procurement training programmes for its Senior Management to enable them to better scrutinise procurement plans and make correct decisions, and for its procurement officers to equip them with the requisite procurement knowledge and policies. IPOS would also carry out internal audits to ensure that all its departments complied with procurement rules and internal controls.

MOM – Procured System Not Used Resulting in Wastage

66 The Committee noted that the Ministry of Manpower (MOM) bought a Document Generator System (DGS) which had been left unused for 1.5 years after it was procured as it could not be integrated with the Foreign Domestic Worker (FDW) system. MOM had separately awarded the procurement of the DGS to one vendor and the development of the FDW system to another vendor. MOM had evaluated the DGS product based on the technical specifications and assessed that it could use industry interface standards to integrate it with the new FDW system. MOM had prioritised the rollout of the FDW system over the integration of the DGS to the FDW system so as to meet the deadline of migrating out of a legacy system. MOM acknowledged that its evaluation should have been more robust before procuring the DGS and that it could have taken more active steps to explore the redeployment of the DGS assets. On the Committee’s query on the measures to ensure robust evaluation of IT systems proposed by vendors, MOM informed the Committee that from November 2016, it would require tenderers to use trial licences to conduct hands-on product evaluation and demonstrate interoperability and compatibility during tender evaluation.

67 On measures that would be put in place to ensure that assets are not left unused for prolonged periods of time, MOM informed the Committee that it would identify any unused assets in its upcoming stocktake exercise for the financial year 2016/17. On an on-going basis, project teams would be required to provide an update on assets that had not been put to use within six months after the projected deployment date, and to obtain approval from the appropriate approving forums to redeploy these assets within MOM or to other Ministries. MOM added that with the successful rollout of the FDW system, it is currently working on implementing DGS in future phases of the work pass system.

68 The Committee noted that given that the project was awarded to two different parties, greater diligence is required in evaluating the interoperability and integration of the systems. In cases where the systems are supplied by different parties, agencies should

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ensure that there are proper procedures in place to ensure interoperability and integration of the systems.

MOT – Undue Delay in Finalisation of Agreement with Mass Rapid Transit System Operator

69 The Committee noted that there was undue delay by LTA in finalising a Lease and Maintenance Agreement (LMA) on non-rail facilities and assets with the Circle Mass Rapid Transit Line operator. The Committee asked MOT for the measures that were or would be taken (including the implementation timeline) to prevent the recurrence of such lapses.

70 MOT informed the Committee that LTA had inserted a condition requiring the LMA to be executed upon the issuance of the operator licence (i.e. prior to or on the same day of licence issuance). This would be adopted for all future lines.

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Committee’s Enquiries and Ministries’ Responses in relation to Observations in the Report of the Auditor-General for the Financial Year 2014/15

71 The Committee considered the Report of the Auditor-General for the Financial Year 2014/15 (Paper Cmd. 5 of 2015). The Committee’s enquiries into specific observations are discussed in paragraphs 72 to 92.

Administration of Grants

MOM – Laxity in Monitoring Programme Partner’s Administration of Grants

72 The Committee noted laxity by the Singapore Workforce Development Agency2 (WDA) in monitoring its programme partner’s administration of grants. The Committee asked the Ministry of Manpower (MOM) for details of the measures that were or would be taken (including the implementation timeline) to strengthen WDA’s processes and oversight of the programme partner to prevent the recurrence of such lapses.

73 MOM informed the Committee that:

(i) WDA had, in June 2015, issued a warning letter to the programme partner on the need to strengthen its governance structure and comply with WDA’s funding guidelines.

(ii) A revised WDA Funding Manual was issued to the programme partner in August 2015 to provide guidance on the imposition, monitoring and waiver of minimum service period and grant recovery process.

(iii) WDA had enhanced oversight of the programme partner. Since August 2015, the programme partner was required to table six-monthly reports with details such as audit due dates, audit status as well as cases that required fund recovery at the WDA-Programme Partner bilateral meetings co-chaired by Chief Executive of WDA and Chief Executive of the programme partner. Monthly operational level meeting between WDA and the programme partner had also been implemented in July 2016 to forge closer collaboration and facilitate early resolution of operational issues.

(iv) Under a new funding arrangement, effective from January 2017, the programme partner would be required to align its Key Performance indicators (KPIs) to WDA’s corporate KPIs and disbursements would be linked to the programme partner’s submission of quarterly KPI achievement reports.

2 With effect from 4 October 2016, the Singapore Workforce Development Agency (WDA) has been reconstituted into a new statutory board, Workforce Singapore Agency. The functions of WDA were taken over by the Workforce Singapore Agency as well as another new statutory board, the SkillsFuture Singapore.

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(v) From 1 January 2016, WDA had appointed its own auditors to audit programme partners who received WDA grant; disbursements would be withheld when the audit reports were not submitted to WDA.

Management of Contract Variations

74 The Committee noted the lapses in controls over management of contract variations and sought written explanations from the following Ministries:

(i) Ministry of National Development (MND);

(ii) Ministry of Trade and Industry (MTI); and

(iii) Prime Minister’s Office (PMO).

MND – Lapses in Management of Gardens by the Bay Project

75 The Committee noted the lapses by the National Parks Board (NParks) in managing the Gardens by the Bay Project; the lapses relate to failure to obtain approval before commencement of consultancy services and laxity in control over contract variations. The Committee asked MND for the details of measures that were or would be taken (including the implementation timeline) to strengthen the processes to ensure that approvals are obtained before services and variation works are carried out.

76 MND assured the Committee that it took a serious view of the audit observations and had directed NParks to thoroughly review the lapses and to give a full and proper account of the lapses. MND informed the Committee that to minimise the need for variation works, NParks had included as many foreseeable services as possible in the development contracts for all new projects since 2015. Where unforeseen specialist consultancy services were required, a separate open tender would be called. NParks had also implemented a new computerised system in November 2014 which required all variation requests and their justifications to be documented. NParks would track the decisions made by the relevant authority before instructing the contractors to commence work. In August 2015, NParks also set up a dedicated internal audit team to carry out audits of development projects and to monitor follow-up actions on audit findings.

77 On the Committee’s query on the measures that were or would be taken to ensure that officers involved had the requisite knowledge to carry out their duties effectively, MND informed the Committee that NParks had, since February 2014, implemented annual training and sharing sessions for all its staff involved in procurement. New staff are also trained on procurement and project management during induction. To exercise greater scrutiny of external consultants, NParks had also deployed more manpower to manage its major garden development projects.

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MTI – Lapses in Management of International Cruise Terminal Development Project

78 The Committee noted that the Jurong Town Corporation (JTC) did not obtain approval for about 87 per cent of variations before the works were carried out for the International Cruise Terminal (ICT) development project. Assessment of reasonableness of fees was also not carried out before JTC engaged consultants to provide new services. The Committee asked MTI for the measures that were or would be taken (including the implementation timeline) to strengthen the processes to ensure that approvals are obtained before variation works are carried out and assessment of reasonableness of consultants’ fees is done before engaging consultants to provide new services.

79 MTI explained that as the ICT project was the first of its kind for Singapore, the agencies involved had to modify the original design as they learnt more about the industry’s needs. This had contributed to the exceptionally high number of contract variations carried out. The project was also on a tight schedule. JTC explained that it had obtained in-principle approvals for urgent contract variations and acknowledged that it should have documented the in-principle approvals more thoroughly and followed up with formal approvals promptly.

80 MTI informed the Committee that JTC had put in the following measures since July 2015:

(i) In-principle approvals were disallowed by default, unless the variation works were necessary and urgent. Where in-principle approval was given, a formal Request for Variation Order would be required within three weeks of the in-principle approval.

(ii) The Contracts and Procurement Division of JTC would monitor all potential variation works to ensure compliance with established processes. Proper documentation of all approval requests and decisions would be made in writing.

(iii) Contract Managers were required to document in writing all costs-benefits assessments of contract variation proposals, including the reasonableness of any increase in consultancy fees from the proposed variation compared to prevailing market rates.

81 In response to the Committee’s query on measures to ensure that officers involved in development projects had the requisite knowledge to carry out their duties effectively, MTI informed the Committee that JTC had briefed its officers in detail on the approval processes, including the contract variation management process. Their knowledge would be reinforced regularly during divisional and departmental meetings, and throughout the project execution phase. New officers would also be coached by senior officers through a buddy system. Lastly, all relevant policies and procedures were made available to all officers on the JTC intranet.

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PMO (National Population and Talent Division) – Irregularities in Procurement of Event Management Services

82 The Committee noted that the National Population and Talent Division (NPTD) of PMO had not checked that the prices of goods and services procured by its vendor on its behalf for two overseas events held in 2013 and 2014 were reasonable. A similar observation was reported in the Report of the Auditor-General for the financial year 2011/12. In addition, NPTD did not obtain prior approval for all contract variations for the event held in 2013. The Committee sought written explanation from PMO on the measures that were or would be taken (including the implementation timeline) to strengthen the processes to ensure that approvals are obtained before variations are carried out and to ensure that reasonableness checks on prices of goods and services are carried out.

83 PMO informed the Committee that in November 2015, NPTD formed a Review Committee (chaired by the then Permanent Secretary) to review procurement practices relating to the overseas events. Several measures were recommended to significantly reduce the extent of variations and these had been implemented in full for the overseas event held in 2016. The measures included confirming key requirements prior to tender to reduce variations, pricing the tender on a fixed lump sum basis instead of reimbursement basis, and requiring tenderers to provide schedule of rates for pricing of variations. One Director had also been delegated the powers to approve variations that were deemed urgent provided that the variations did not result in the Approved Procurement Value being exceeded.

84 PMO also informed the Committee that it would be conducting an internal audit of the procurement processes relating to the overseas event held in 2016 to ensure that the lapses identified earlier by the Auditor-General have been fully addressed, and to draw insights on how to further improve the governance over the organisation of this event.

85 As shown by the common lapses across the above agencies, the Committee noted that contract management especially for variation orders is an area of concern that needs to be addressed. The Committee would like to urge agencies to share their experience and best practices implemented to address common areas of lapses so that improvements could be made across public sector agencies. In addition, agencies could take a holistic look at processes to identify improvements, including leveraging on technology.

Related Party Transactions

86 The Committee noted that there were lapses in the management of transactions with related parties and sought written explanations from the following Ministries:

(i) Ministry of Culture, Community and Youth (MCCY); and

(ii) Ministry of Education (MOE).

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MCCY – Irregularities in Procurement and Payment at a Citizens’ Consultative Committee

87 The Committee noted the lapses in the management of related party transactions by the People’s Association (PA). The Committee asked MCCY for the details of measures that were or would be taken (including the implementation timeline) to ensure that conflict of interest (COI) is declared and properly managed.

88 MCCY informed the Committee that PA had put in place measures to manage COI situations. On 15 July 2015, PA had issued a circular to remind all grassroots leaders to declare their COI as and when a situation of actual or perceived COI arises during their term of service. Quarterly circulars were sent to all Grassroots Organisations (GROs) to notify them of the importance, scope and procedure for the declaration of COI. Since January 2016, grassroots leaders were also prompted at the start of every GRO meeting to declare their COI and exit from the meeting when actual or potential COI situation arose. At the same time, PA had intensified its internal audit checks on COI. MCCY also informed the Committee that PA had stepped up training of its officers and the grassroots leaders and had since conducted 74 training sessions for over 2,600 grassroots leaders.

MOE – Not Dealing with Related Parties at Arm’s Length

89 The Committee noted that the Singapore Polytechnic (SP) did not recover the salaries and related costs for a senior officer seconded to its subsidiary, the Singapore Polytechnic International Pte Ltd (SPI). SP had also sub-leased a land parcel to its related party, the Singapore Polytechnic Graduates’ Guild (SPGG) at a nominal rental.

90 In response to the Committee’s query on the actions taken to rectify the lapses, MOE informed the Committee that a secondment agreement with proper terms and conditions for the senior officer seconded to SPI has been established with effect from 16 November 2015. MOE also informed the Committee that it had directed SP to comply with Government policy and charge market rental on the land sub-leased to SPGG. In November 2015, SP obtained market valuation that placed the annual market rental for the SPGG land parcel at $154,000. The revised rental based on market rate was formalised through a supplementary agreement between SP and SPGG with effect from 1 April 2016.

Other Lapses

MOE – Lapses in Evaluation of and Approval for Investments in Bonds

91 The Committee noted the lapses by the Temasek Polytechnic (TP) in its process and documentation relating to evaluation and approval of investments in bonds. The Committee asked MOE for the measures that were or would be taken (including the implementation timeline) to improve the processes and documentation to address the lapses found.

92 MOE informed the Committee that TP had reviewed its bond investment approval process and requirement at TP’s Investment Committee meeting held on 1 July 2015.

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Going forward, TP would ensure that the quorum of the Investment Committee is met before placing any order for bonds. Besides the bond interest rate, additional guidelines on factors to be considered (such as industry sector, business model, management team, financial performance and other track records of the issuer) had been included in TP’s Investment Policies. MOE assured the Committee that TP noted the importance of proper documentation of the evaluation and investment decisions, and would do so for all such matters.

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Appendix I

MINUTES OF PROCEEDINGS

______

1st Meeting ______

Thursday, 25th August 2016

10.30 a.m. ______

PRESENT:

Ms Jessica Tan Soon Neo (in the Chair) Mr Ang Hin Kee Mr Ang Wei Neng Dr Lim Wee Kiak Mr Leon Perera Ms Tin Pei Ling Mr Zainal Bin Sapari

ABSENT: Mr Liang Eng Hwa

______

1. The Committee observed one-minute of silence as a mark of respect to the late former President S R Nathan.

2. The Committee considered the Reports of the Auditor-General for the Financial Year 2015/16 (Paper Cmd. 4 of 2016) and Financial Year 2014/15 (Paper Cmd. 5 of 2015).

3. The Committee deliberated.

4. The Committee examined findings contained in the Auditor-General’s reports and agreed to write to the Ministry of Culture, Community and Youth, Ministry of Defence, Ministry of Education, Ministry of Law, Ministry of Manpower, Ministry of National Development, Ministry of Trade and Industry, Ministry of Transport and the Prime Minister’s Office to submit memoranda on matters raised.

Adjourned to a date to be fixed.

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MINUTES OF PROCEEDINGS

______

2nd Meeting ______

Monday, 14th November 2016

10.30 a.m. ______

PRESENT:

Ms Jessica Tan Soon Neo (in the Chair) Mr Ang Hin Kee Mr Ang Wei Neng Dr Lim Wee Kiak Mr Leon Perera Mr Liang Eng Hwa Ms Tin Pei Ling Mr Zainal Bin Sapari

______

1. The Committee considered the memoranda received from the Ministry of Culture, Community and Youth, Ministry of Defence, Ministry of Education, Ministry of Law, Ministry of Manpower, Ministry of National Development, Ministry of Trade and Industry, Ministry of Transport and the Prime Minister’s Office.

2. The Committee deliberated and considered the Chairman’s draft report.

3. The Committee agreed to write to the Ministry of Culture, Community and Youth, Ministry of Education, Ministry of Manpower, Ministry of National Development and Ministry of Transport to submit further memorandum on matters raised.

Adjourned to a date to be fixed.

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MINUTES OF PROCEEDINGS

______

3rd Meeting ______

Thursday, 12th January 2017

10.30 a.m. ______

PRESENT:

Ms Jessica Tan Soon Neo (in the Chair) Mr Ang Hin Kee Mr Ang Wei Neng Dr Lim Wee Kiak Mr Leon Perera Ms Tin Pei Ling Mr Zainal Bin Sapari

ABSENT: Mr Liang Eng Hwa

______

1. The Committee considered the memoranda received from the Ministry of Culture, Community and Youth, Ministry of Education, Ministry of Manpower, Ministry of National Development and Ministry of Transport.

2. The Committee further deliberated.

Report

3. The Chairman’s report brought up and read the first time.

4. Resolved, “That the Chairman’s report be read a second time paragraph by paragraph.”.

5. Paragraphs 1 to 92 inclusive read and agreed to.

6. Resolved, “That this report be the report of the Committee to Parliament.”.

7. Agreed that the Chairman do present the Report to Parliament when copies are available for distribution to Members of Parliament.

Adjourned sine die.

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