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Earlier this year, several "possible irregularities" were discovered in the records of several ministries and statutory boards, according to the latest report by the Auditor-General's Office (AGO).

Two of the projects flagged by the AGO included Our Tampines Hub (OTH) and Heartbeat @ Bedok (HBB), both of which are projects under the People's Association (PA).

Several Members of Parliament (MPs) asked questions regarding these projects, and this was addressed by Minister for Culture, Community and Youth Edwin Tong in Parliament on Monday (Sep. 13).

Non-adoption of full price fluctuation

One main issue brought up by MPs was the PA's failure to adopt full price fluctuation adjustments, in the case of OTH's main construction contract.

Tong explained that 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, like steel reinforcement and concrete.

This is to encourage companies to put in more realistic bids for public sector projects.

The AGO found that the full price fluctuation was not adopted for OTH's main construction contract; instead, the parties involved adopted a 70 per cent price fluctuation adjustment instead.

Based on PA's investigations, this move was discussed and proposed by PA's appointed team of consultants, and was accepted by PA.

Led to S$60,000 price difference

Tong acknowledged that this was "a mistake", as they should have adopted a full-price fluctuation, in accordance with government regulations.

According to Tong, PA reviewed 31 relevant public construction developments after the incident, and found that two other construction projects had also erroneously adopted a 70 per cent price fluctuation adjustment in the last seven years.

Preliminary calculations revealed that this resulted in a price adjustment differential of about S$60,000.

Tong said that PA has since ensured that the provision in its standard construction contracts is "fixed and clear", and it has reiterated to relevant officers the importance of compliance to government requirements.

Lapses found in the approvals for 252 contract variations

The AGO had checked 465 contract variations during the development phase of the OTH and Heartbeat @ Bedok, and found lapses in the approvals for 252 variations.

The AGO found that there were a lack of evidence of approvals, and that in some cases, approvals were given after the works had commenced, or were already completed.

There was also a lack of evidence that approvals were sought for the increase in variation cost.

Full review will be conducted

In response to AGO's findings, Tong said that PA undertook a thorough check on all 252 cases flagged by AGO.

PA determined that the project staff and consultants did not maintain proper documentation, which Tong acknowledged to be a lapse that needed to be addressed.

He said that PA is now undertaking a full review of the remaining contract variations, beyond those sampled by AGO, for the main construction contracts during the development phase of OTH and HBB, in order to check that the contract variations were carried out with appropriate approvals and proper documentation.

Irregularities found after checking 36 payments

The AGO also found "possible irregularities" in documents relating to payments, and lapses in the management of facility maintenance contracts at OTH.

They sampled 36 payments, amounting to a total of S$1.27 million, and found that there were possible irregularities in the supporting documents for some of these payments.

These included possible falsification of quotations, alteration of hardcopy payment supporting documents, and the creation and backdating of documents to give the false impression that proper processes had been followed.

PA lodged a police report

PA launched an internal investigation panel, led by senior officers from the PA and the Ministry of Culture, Community and Youth (MCCY), which subsequently confirmed AGO's observations.

PA lodged a police report after the conclusion of the investigation, and the staff who were directly involved have also bee suspended pending the outcome of the investigations.

Tong said that PA is currently reviewing the transactions, to ascertain if there are any losses as a result of these irregularities, and to take the appropriate recovery action.

PA's initial audits were focused on other matters

In response to a question posed by Sitoh Yih Pin, who asked whether PA's internal audit team had picked up on the lapses raised by AGO, Tong said that PA last audited OTH and HBB in 2018 and 2019 respectively.

However, as both developments had just started operations then, the audits were focused on procurement, revenue and tenancy management, hence no significant discrepancies were uncovered.

Tong said that part of PA's FY2021 workplan was to conduct checks on OTH and HBB, although these plans were put on hold when AGO began its audit of OTH and HBB in July 2020, and the planned areas of audit were eventually covered under AGO's audit.

External consultant appointed

Tong said that PA has accepted AGO's findings, and will take steps to thoroughly review its governance and compliance systems.

An external consultant from a leading accounting firm has been appointed to examine PA's governing system and oversight functions, in relation to contract management and the operations of all its development projects.

The external consultant will also conduct audits on the contract management of development and facility management projects of PA in recent years, and provide recommendations to strengthen systems and processes in relation to the oversight functions of all development projects.

Tong said that once PA completes the reviews of its remaining contracts, it will disclose its findings to the public.

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