PA to take 'all appropriate steps' to learn from AGO’s audit findings after lapses flagged: Edwin Tong
SINGAPORE: The People’s Association (PA) is committed to resolving and improving its governance and oversight processes, following lapses flagged by the Auditor-General’s Office (AGO) earlier this year, said Minister for Culture, Community and Youth Edwin Tong in Parliament on Monday (Sep 13).
Mr Tong was responding to questions by Leader of the Opposition MP Pritam Singh (WP-Aljunied) as well as MP Sitoh Yih Pin (PAP-Potong Pasir) and MP Foo Mee Har (PAP-West Coast) on lapses and possible irregularities uncovered by the AGO in its audit of public agencies in Singapore for the year 2020/2021.
“As a steward of public funds, we know that there must be public confidence in the integrity of governance systems, and the PA takes the findings of the AGO very seriously,” said Mr Tong.
“This is underscored by how immediate steps were taken to review the observations, going beyond AGO’s findings, and subsequently the remedial steps ... The PA is committed to resolving and improving its governance and oversight processes and will take all the appropriate steps to learn from and improve on the AGO’s audit findings.”
Mr Tong highlighted a number of measures that PA has put into place, including the appointment of an external consultant from a “leading accounting” firm with a “broad mandate”.
The external consultant will examine the PA’s governance system and oversight functions in relation to contract management and operations of its development projects, said Mr Tong.
Among other things, the external consultant will conduct an audit and business process review on the contract management of development and facility management projects of PA in recent years.
“The external consultant will have a broad mandate to review. They will make practical recommendations to rectify control weaknesses or lapses noted, as well as identify areas of improvement in terms of efficiency, economy and effectiveness,” said Mr Tong.
“PA will take in these recommendations, improve processes where needed and implement better oversight,” he added.
The AGO report, which was released on Jul 22, covered all 16 government ministries and eight organs of state, 11 statutory boards, four Government-owned companies and two other accounts.
The AGO findings for PA cover two development projects - Our Tampines Hub and Heartbeat @ Bedok. Observations were made in relation to the construction and maintenance phases of the two community hubs, said Mr Tong.
IRREGULARITIES IN DOCUMENTS
For Our Tampines Hub, the AGO observed possible irregularities in documents relating to payments, and lapses in the management of facility maintenance contracts. These were for minor building works at the facility, undertaken by external contractors during the maintenance phase.
In reviewing the payments made to the contractors, AGO test-checked 36 payments, totalling S$1.27 million, made between Apr 1, 2018, and Mar 31, 2020.
It found possible irregularities in the supporting documents for 34 of such payments.
These included possible falsification of quotations, alteration of hardcopy payment supporting documents and the creation and backdating of documents.
Following this, an internal investigation panel was convened to look into the transactions, said Mr Tong.
"The investigation confirmed AGO’s observations," said Mr Tong.
"As the findings relate to claims involving possible falsification of documents, including in relation to claims by external parties, PA lodged a police report after the conclusion of this investigation," he added.
In addition, the staff who were directly involved have also been suspended pending the outcome of these investigations.
“PA is presently reviewing each of these transactions, to ascertain if any losses have been occasioned by these irregularities, and if so, to take the appropriate recovery action,” he said.
PRICE FLUCTUATION FOR CONSTRUCTION CONTRACTS
In its report, the AGO had also highlighted PA's lapses in the adoption of full-price fluctuation for Our Tampines Hub’s main construction contracts.
For all public construction developments with a contract value of more than S$5 million, the Government requires agencies to adopt full-price fluctuation adjustment for key construction materials, specifically, concrete and steel reinforcement.
However this was not adopted in the case of Our Tampines Hub’s main construction contract. Rather, parties adopted a 70 per cent price fluctuation adjustment.
Responding to a question from Mr Singh on why the PA did not adopt the Government's instruction, Mr Tong said investigations showed this was discussed and proposed by PA’s appointed team of consultants, and accepted by PA.
“However, this was a mistake as PA should have adopted full price fluctuation in accordance with the Government’s instruction,” he added.
After this finding, PA undertook a review of the 31 relevant public construction developments, said Mr Tong. The review found that, in the last seven years, two other construction projects had also erroneously adopted a 70 per cent price fluctuation adjustment.
“On these two construction projects, the preliminary calculation is that if a full price fluctuation had been adopted instead, this would have resulted in a price adjustment differential of about S$60,000 in favour of the PA,” said Mr Tong.
“PA has since ensured that the provision in all such similar standard construction contracts is clear and is fixed to ensure greater clarity and compliance on how price fluctuation adjustments should be made as per the requirement for all government projects."
MANAGEMENT OF CONTRACT VARIATIONS
AGO also observed weaknesses in management of contract variations for the main construction contracts during the development phase of both Our Tampines Hub and Heartbeat @ Bedok.
Out of 465 contract variations sampled from both developments, lapses were found in the approvals for 252 of them.
Mr Tong said that PA's "thorough check" on all 252 cases flagged by the AGO has since showed that while there were inadequate or missing documentation in respect of the variation works identified by AGO, those variation works were in fact requested for and approved.
"PA was able to independently verify ... that the variation works were carried out following discussions and decisions taken at project site meetings between PA and its consultants, and following the issuance of work orders," said Mr Tong.
"However, the project staff and consultants at that time did not maintain proper documentation of these decisions, resulting in AGO’s observations. This is a lapse which has to be addressed."
INTERNAL AUDIT PROCESS
Responding to a question from Mr Sitoh on whether PA’s internal audit team had picked up on any of the lapses raised by the AGO, Mr Tong said that PA’s internal audit team identifies key compliance risk areas and conducts sample checks to detect any lapses or non-compliance.
It also has an external auditor that conducts annual audits on its financial information, he said.
“PA last audited OTH and HBB in 2018 and 2019 respectively. At that time, these developments had just started operations (and) the audits focused on procurement, revenue and tenancy management. PA’s internal audit did not uncover any significant discrepancies, nor did AGO highlight any issues with respect to these three areas,” Mr Tong explained.
In February last year, PA’s internal audit had included in their FY2021 work plan to conduct checks on Our Tampines Hub and Heartbeat @ Bedok, he added.
“The checks were to be focused on the facilities’ development and maintenance relating to progress claims, documentation and term contracts. These plans were however put on hold when AGO began its audit of OTH and HBB in July 2020. The planned areas of audit for OTH in FY21 were eventually covered under AGO’s audit that was conducted in FY2020,” said Mr Tong.