SINGAPORE: Lapses in the enforcement of scholarship bonds, a lack of oversight of study loans and conflict of interest situations were some of the lapses uncovered in the Auditor-General’s audit of the Ministry of Education (MOE) and Nanyang Polytechnic (NYP).
LAPSES IN ENFORCEMENT OF SCHOLARSHIP BONDS
The report found that MOE did not maintain adequate oversight on the monitoring and enforcement of scholarship bonds by Nanyang Technological University (NTU) and the National University of Singapore (NUS).
Among 30 recipients of a scholarship scheme who were not serving the required bonds, there were 14 cases where there was a lack of follow-up by the two universities. In another two cases, Letters of Demand were sent after a lag of 17 and 26 months.
Total disbursements for the particular scholarship scheme were S$36.52 million in FY2014/15, the report said.
In response, MOE said it has worked with the universities to tighten and enhance the monitoring and enforcing of scholarship bonds. Most of the lapses flagged by AGO were from earlier graduation batches, before the measures were fully implemented, the ministry said.
These measures include informing international students of their obligations at the start of their freshman year and reminding them in their final year, and working with Government agencies such as CPF Board and the Ministry of Manpower to track the bond service records of the graduates.
“For scholars who intentionally default, we will recover liquidated damaged with interest from them, failing which, defaulters will not be able to work or reside in Singapore,” MOE said.
According to the ministry, default rates have fallen since the measures were implemented. Among international scholarship recipients who graduated over the last three years, about 1 per cent intentionally defaulted, another 4 per cent are still being contacted and a “small handful” are unable to fulfil their bonds due to medical reasons.
The large majority of international scholarship recipients fulfil their bond obligations, MOE said. “Many are contributing to Singapore in various ways. Scholarships are also given out in the spirit of international cooperation, recognising that many Singaporeans have previously benefitted from similar scholarships, such as the Colombo Plan scholarships offered by Australia, Canada, New Zealand and the UK.”
That aside, MOE was also found to have disbursed more money to NTU than what was needed. An extra S$4 million was given to its sinking fund over nine years to develop buildings and facilities. A contributing factor was duplicate and incorrect records, which were filed in MOE's building register.
"It is good that the AGO has flagged some of these findings for the respective ministries to take steps to improve their governance as well as ensure there is no relapse," said Mr Zainal Sapari, a member of the Government Parliamentary Committee for Education.
TUITION FEE LOANS, STUDY LOANS NOT PROMPTLY RECOVERED
The AGO report also found the ministry had inadequate controls to ensure that tuition fee loans and study loans due were promptly recovered.
Both NTU and NUS relied on outsourced agents to monitor and recover the loans, and did not follow-up adequately on default cases. As at Jun 30, 2015, the outstanding balance of loans due for recovery from former students of the two universities was S$228.04 million.
AGO’s test checks on 116 loans that were due for recovery revealed 27 cases - with an outstanding balance of S$440,000 - where the commencement of loan recovery was delayed by one to three-and-a-half years.
Checks of another 58 loans which were in default for at least two years revealed 33 loans - with an outstanding balance of S$1.15 million - where the banks could not produce any documentation of having taken loan recovery actions for prolonged periods of time ranging from six months to three-and-a-half years.
The report also found that MOE was not prompt in following up on long outstanding loans surfaced by the banks to ensure that recovery actions taken by the banks were adequate.
Test checks of 32 loans, which were pending MOE’s action, revealed that the ministry did not promptly follow up on 23 loans for between two and six-and-a-half years. MOE also did not act on the remaining nine loans due, mainly because of miscommunication with the banks.
The ministry said it is working with the universities and banks to ensure prompt follow-up of loans in arrears. Each outstanding loan is assessed individually, including the borrower’s financial circumstances, it said.
“The majority of students in tertiary institutions who take loans are Singaporean citizens. The tuition fee loan and study loan schemes complement the bursary schemes in providing aid to students to ensure that they do not miss out on tertiary education because of financial constraints,” MOE said.
In cases 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 amount payable temporarily.
NO PROPER GOVERNANCE OF NYP SUBSIDIARY
The audit of NYP found that the school did not have a proper governance framework to manage transactions with its subsidiary Nanyang Polytechnic International (NYPi), including conflict of interest situations.
Some NYP board members with vested interests in NYPi were involved in the evaluation and decision-making process of several matters, including approving a funding model for NYPi that was more generous than that provided for in the Government’s instructions, the report said.
In addition, NYP did not charge market rates for premises used by NYPi and had given funding in excess of that approved by the board, resulting in NYPi being provided with hidden subsidies and excess funds totalling S$8.38 million since its inception till March 2015.
In its criticism of NYP’s practices, the AGO said the school showed a “disregard for financial controls and proper governance”.
“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. In addition, the provision of generous funding terms, excess funding and hidden subsidies lacked transparency, and also distorted NYPi’s financial state of affairs, making it difficult for the Government to assess the true financial performance and viability of NYPi.”
In response, MOE said that NYPi was set up to handle certain functions of the school, such as to receive foreign visitors and bring the school’s courses overseas. The subsidiary was paid a service fee instead of being given a budget.
“The functions performed by NYPi remain an internal function of NYP. The functions have not been outsourced to an unrelated external party, such as a private contractor,” the ministry said.
Selected board members and staff of the school serve as board members of the subsidiary to “ensure alignment between NYPi’s activities and NYP’s mission and objectives”.
“NYPi’s board directors do not receive separate directors’ fees. All profits of NYPi belong to its 100 per cent shareholder, NYP. None of the decisions cited in the audit observations yielded personal gain for any of the individuals involved, as they had no bearing on their remuneration or benefits,” it added.
"I'm a bit disappointed with some of the lapses found in NYPi. Given that NYPi is a subsidiary of NYP, some of these lapses could have been avoided given that NYP by itself is well-established. They would know ... the governance framework that is required," said Mr Zainal.
MOE said it has since instructed NYP to put in place a proper governance framework, to avoid any actual or perceived conflict of interest in relation to its dealings with the subsidiary.