The Auditor-General's Office (AGO) released its annual report for Financial Year 2015/2016 [PDF link] on Tuesday, July 26.

With respect to the audit of the Ministry of Education, the AGO report

- uncovered inadequate financial controls and weak governance,

- found lapses in the monitoring and enforcement of scholarship bonds by Nanyang Technological University (NTU) and the National University of Singapore (NUS),

- highlighted a conflict of interest situations in its audit of the Ministry of Education (MOE) and Nanyang Polytechnic (NYP).

MOE has issued a statement to address the areas flagged in the AGO report.

MOE's response to media queries on AGO report FY2015/2016

The MOE takes a serious view of the issues flagged by the AGO. It has taken action to rectify irregularities, as well as strengthen processes and internal controls.

Breaking of scholarship bonds by international students

The breaking of scholarship bonds by international students is a matter of serious concern. While the sums involved are not insignificant, it is also a question of honour and integrity. MOE regards the breaking of bonds as an ignoble act.

Over the past few years, we have worked with the Universities to tighten and enhance the processes in monitoring and enforcing the scholarship bonds.

Most of the lapses flagged out by AGO were from earlier graduation batches, before the enhanced measures were fully implemented. These measures include the following:

- International students are informed of their obligations at the start of their freshman year, and reminded of their obligations in their final year.

- MOE works with other government agencies, such as CPF Board and MOM, to track the bond service records of the graduates closely.

- For scholars who intentionally default, we will recover liquidated damages with interest from them, failing which, defaulters will not be able to work or reside in Singapore.

Since these measures have been in place, default rates have come down significantly. For international scholarship recipients who graduated over the last three years, about 1% had intentionally defaulted. Another 4% are still being contacted. The large majority -- 95% -- are fulfilling their obligations or have applied for deferment, and a small handful are unable to fulfill their obligations due to medical reasons.

MOE will continue to work closely with the universities to ensure that the processes are applied rigorously, and that international students take their obligations seriously.

The large majority of international scholarship recipients in fact do. Many are contributing to Singapore in various ways. Scholarships are also given out in the spirit of international cooperation, recognising thaat many Singaporeans have previously benefited from similar scholarships, such as the Colombo Plan scholarships offered by Australia, Canada, New Zealand and the UK.

MOE's enhanced processes are a signal that our willingness to welcome international students must be matched by their sincerity to honour their word.

Tuition Fee Loans and Study Loans Due Not Promptly Recovered

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. The loans are interest-free during the period of studies. Repayment of principal and interest only commences after the student graduates.

MOE is working closely with the universities and banks to ensure prompt follow-up of loans in arrears. MOE assesses each outstanding loan individually, including the borrower’s financial circumstances, and the time taken depends on the complexity of the circumstances. 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 monthly instalment payable temporarily.

Undue Delay in Review of Agency Fees

The review of the formula for agency fees payable to banks for administering the loan schemes is part of the larger review of the service level agreements with the banks. The review of the service level agreements involves working towards a common agreement among multiple parties which have different processes in place. MOE acknowledges that the review has taken longer than desirable, and is expediting the review.

Over-contributions to Sinking Fund

MOE has recovered in full the excess amount disbursed to NTU. The current formula to compute the sinking fund contribution is also being reviewed.

Inadequate Monitoring of Research Progress

University research creates new knowledge that forms the foundation for future innovations and discoveries that serve Singapore’s needs. MOE has put in place systems to evaluate, fund, and monitor research in our universities.

Over the years, the research and development landscape in Singapore’s autonomous universities has grown dramatically in complexity, volume and sophistication.

In this context, MOE is taking steps to improve its systems to monitor the growing volume of research projects more robustly and efficiently. We have enhanced the existing grants administration system to track the submission of progress reports more efficiently, and now require the universities to provide monthly updates on the submission of final reports from researchers. In addition, we are working with other key public research funding agencies to co-develop a new Integrated Grant Management System, which will make the tracking of research progress more systematic once the new system is implemented in late 2017. MOE is also reviewing the appropriate action to take against researchers who are late in submitting their progress reports.

Findings relating to Nanyang Polytechnic

Receiving foreign visitors and bringing NYP courses overseas were functions handled within NYP, with a set budget. In 2007, NYP decided that for better focus, it would set up a fully-owned company – NYP International Pte Ltd (NYPi) – to do this. NYPi would be paid a service fee instead of being given a budget.

Even after this change, 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.

To ensure alignment between NYPi’s activities and NYP’s mission and objectives, selected board members and staff of NYP also serve as board members of NYPi. NYPi’s board directors do not receive separate directors’ fees. All profits of NYPi belong to its 100% 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.

Notwithstanding this, MOE acknowledges that a proper governance framework to avoid any actual or perceived conflict of interest in relation to NYP’s dealings with NYPi should have been in place. MOE has therefore instructed NYP to take immediate actions to put in place a proper governance framework.

MINISTRY OF EDUCATION

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