Audit (Amendment) Bill

Order for Second Reading read.

The Senior Minister of State for Finance (Ms Indranee Rajah) (on behalf of the Minister for Finance): Mr Speaker, Sir, on behalf of the Minister for Finance, I beg to move, "That the Bill be now read a Second time."

The Auditor-General's Office (AGO) is a key institution in the overall framework of public accountability and financial governance of the Government. The Auditor-General is empowered to audit public entities or bodies that administer public funds. The Auditor-General conducts independent audits of Government finances, checks for financial irregularities and ascertains whether there has been excess, extravagance, or gross inefficiency in the use of public funds. These audits give assurance to the President and Parliament on the proper accounting, management and use of public resources.

However, the work of the Government has expanded and become more complex over the years. The Government is increasingly involving a wide range of non-Government entities in public service delivery, such as restructured hospitals, autonomous universities, voluntary welfare organisations (VWOs), charities, pre-school operators, Town Councils and outsourced contractors. Substantial public funds are also disbursed to non-Government entities for various purposes such as for economic or social development for the benefit of Singapore and Singaporeans. Collectively, this amounts to several billions of dollars.

Hence, there is a need to enhance the audit powers of the Auditor-General. The Audit Act will thus be amended to allow the Auditor-General to conduct "follow-the-dollar" audits on any non-Government entities that receive public funds.

This is not unique, as other countries around the world see the same trend in terms of involving more non-Government entities to deliver public services. Jurisdictions including Canada, the United Kingdom, Australia, Denmark, Sweden and Finland all empower their national auditors to conduct "follow-the-dollar" audits.

The audits under this Bill are limited in scope to only whether the entities' use of public funds is in accordance with the terms and conditions specified by the Government agency that provided the funds. The audits will not extend to non-Government entities' use of their own funds or funds from other sources.

I wish to emphasise that it is not the intention in this Bill for the Auditor-General to take over the role of private sector auditors who will continue to audit these non-Government entities as they are now doing. The Auditor-General will only be called upon to undertake the "follow-the-dollar" audit if the Minister for Finance is satisfied that it is in public interest to do so. This is a similar approach to a range of other local statutes, where the Minister responsible for the subject matter – in this case, public finances – has the power to direct that certain things be done in order to protect the public interest.

An example would be when, let us say a VWO has been appointed by the Ministry of Social and Family Development (MSF) to disburse public funds to the needy. However, there are reasons to suspect that the VWO has used the funds for staff benefits instead of channelling them to the needy as intended.

Or take another example: an Autonomous University is given a sum of money by the Ministry of Education (MOE) which is meant to be disbursed as education bursaries for students. However, there may be reasons to believe, whether from MOE's ordinary checks or otherwise, that the money is being used for other purposes instead, such as the recruitment of academic staff or for the purchase of research equipment.

In these cases, the Minister for Finance can direct that a "follow-the-dollar" audit be conducted on the VWO or the university. The Auditor-General will be empowered to audit whether the public funds given to the VWO or the university have been used according to the terms and conditions set out by MSF and MOE respectively.

In short, "follow-the-dollar" audits will apply to recipients of public funds, and only undertaken in cases where it is in the public interest to do so, and the audit will only be limited to whether the funding terms and conditions have been complied with.

In order for a "follow-the-dollar" audit to be conducted, the Auditor-General will need to have the necessary powers to discharge his duty. The Audit Act will therefore be amended to provide the Auditor-General with additional powers to search and obtain all necessary documents or information which he requires to conduct a "follow-the-dollar" audit.

In line with the powers granted to the National Audit Organisations in other jurisdictions such as Australia and New Zealand, the Auditor-General and his authorised representatives will be empowered to enter and remain in any premises occupied by the subject of the audit, or premises occupied by someone who holds custody of the required information. AGO will also be able to search for and inspect documents, information and records. Such powers are already given to officers of the EMA or IRAS when they need to perform enforcement functions.

To conclude, the amendments to the Audit Act will provide powers to the Auditor-General to conduct "follow-the-dollar" audits on non-Government entities' use of public funds. This is to ensure that public funds are used for the purposes for which they are intended and to enable accountability of public spending. The amendments keep the powers of the Auditor-General updated and relevant in an operating context where non-Government entities are increasingly receiving public funds to help deliver a range of services. This will enable the Auditor-General to fulfil his role of strengthening financial governance and ensuring accountability for the use of public resources. Mr Speaker, Sir, I beg to move.

Question proposed.

4.35 pm

Mr Liang Eng Hwa (Holland-Bukit Timah): Mr Speaker, Sir, the way the public sector deliver its services have changed significantly over the years. Besides direct service by public agencies, increasingly, much of the public services and public goods are contracted out to private sectors and to not-for-profit sectors. The Government also disburses a substantial amount of public money in the form of grant and subsidies to a wide range of organisations such as restructured hospitals, VWOs and the Town Councils amongst others. In addition, the Government also provides performance guarantees to help finance infrastructural projects and undertake utility payments in public private partnership (PPP) projects. Going forward, there will be more varied, more complex and more innovative arrangements where public money will go to non-Government sectors; which could be multi-layered and multi-dimensional.

This is unavoidable as the Government seeks to carry out its public functions and specific policy executions in the most efficient, most effective and optimal way; drawing on the strengths and expertise of the private and non-Government sectors. In addition, the Government also used its budgetary resources subsidies services and programmes. For example, the Government kept the costs of municipal services affordable by giving cash grants to Town Councils to help keep down the costs of estate maintenance. Another example, MOT also inject funds to the PTOs to help reduce the capital costs of enhancing public transport such as the BSEP. And there are increasingly more of such programmes as the Government intervenes to improve public services, to build economic and security capabilities or to increase its social spending.

This would continue to be the modus operandi in the way the future whole-of-Government would work. We know that as the delivery of services and its accounting on the use of funds are further away from the direct view of Government audit, the risk of improper or corrupt conduct would increase. Under current law, some of the entities that receive such public funding are not accessible for audit by the public auditors. Hence, there is the need to equip AGO with the powers to audit the non-Government entities and to ensure the public funds are indeed properly used.

The current laws therefore need to be updated and to keep up with times. I support the changes to the Audit Act which allow the AGO to conduct "follow-the-dollar" audit. The amendments would also enhance powers of the AGO to obtain documents, information, records or equipment which is necessary to establish proper use of the fund against its public intent and to ensure full accountability.

Mr Speaker, Sir, while we seek accountability and increase trust in public finance, we must be mindful that the enhanced powers of the AGO would not add heavy regulatory burden to businesses seeking public sector contracts and that the new changes would not be so onerous that it discourages businesses wanting to seek public sector contract. That would work against public interest.

Hopefully, the balance can be struck with the provision under section 4A where the Finance Minister's approval must be sought on the basis of public interest to carry out the "follow-the-dollar" audit and for the Minister to set limits or the scopes of the audit. There may be instances where public money may need to be disbursed to non-Government sectors or agencies to carry out emergency tasks such as in a disaster recovery situation. It is hence appropriate to have some executive leeway. MOF should also monitor the impact of these changes to private sector companies who are receiving public funding.

Many countries have empowered their National Audit Offices to audit on the "follow-the-dollar" basis. Overall, I believe that it will reduce the possibility of improper conduct and strengthen trust in public finance. Sir, with that, I support the amendments.

4.40 pm

Mr Louis Ng Kok Kwang (Nee Soon): Sir, I stand in support of this Bill. Enhancing the Auditor-General's powers to ensure public accountability of public monies is welcomed. I have just one clarification to seek.

The new section 6A states that an individual cannot rely on the common law privilege against self-incrimination to refuse to provide an explanation, information, document, record or answer a question required under section 6.

This is subject to a carve-out that any such explanation, information, document, record or answer provided cannot be used as evidence against an individual in civil or criminal proceedings, and can only be used in proceedings for a section 177 of the Penal Code or an offence relating to the falsity of the answer.

The Audit Act, as it currently stands, includes a broad obligation in section 6(3) where an individual called upon for any explanation or information is "legally bound to furnish such explanation and information".

On a literal plain reading, this suggests that section 177 of the Penal Code would already apply if this section 6(3) obligation was contravened by an individual, even without the amendments in this Bill.

On a comparative note, another legislation, which confers such a broad obligation, is the Prevention of Corruption Act. Corrupt Practices Investigation Bureau officers have the power to require a person to "give any information on any subject" relating to corruption cases and the person so questioned is "legally bound to give that information".

In the Prevention of Corruption Act, there is no specific provision excluding the common law privilege against self-incrimination.

In this context, given that such a broad obligation exists to compel an individual to furnish explanation and information, with the relevant penalty provision in section 177 of Penal Code already in place, can the Minister clarify the intent of specifically excluding this privilege against self-incrimination in this Bill?

I understand from the Explanatory Notes that this new section 6A will help ensure the efficiency of the audit process is not diminished by the Auditor-General and his officers having to engage in time-consuming negotiations about the provision of privileged documents.

However, the nature of inquiries by the Auditor-General does have potentially wide and severe implications.

Can the Minister clarify how this new section 6A will allow the Auditor-General to better carry out its primary work of ensuring public accountability of the Government to the Parliament, in the event that an explanation, information, document, record or answer obtained under section 6A does, in fact, raise concerns which ought to in public's interest lead to civil or criminal prosecution?

Sir, notwithstanding the above clarifications, I stand in support of the Bill.

4.42 pm

Ms Indranee Rajah: Mr Speaker, Sir, I thank Mr Liang Eng Hwa and Mr Louis Ng for their observations and their support of the Audit (Amendment) Bill.

Mr Liang Eng Hwa highlighted the need to ensure that we do not add to the regulatory burden of companies and that there should be some executive leeway given for situations where public money may be given to non-Government entities to carry out emergency tasks.

We agree that the right balance needs to be struck and will be mindful that the scope and the extent of the audit should be commensurate with the circumstances of the case. The amendments have been designed to avoid adding to the regulatory burden of companies. The "follow-the-dollar" audits are not meant to replace the normal audit processes. As I explained in my speech, "follow-the-dollar" audits will not be activated lightly. The threshold for triggering such audits is high. It can only be directed by the Minister for Finance and only if he is satisfied that it is in the public interest to do so. The audits will also only be limited to whether the funding terms and conditions have been complied with.

Mr Louis Ng asked about the intent of specifically excluding the privilege against self-incrimination in this Bill given that there exists a broad obligation to compel an individual to furnish explanation and information to the Auditor-General.

The insertion of this clause is to make explicit what is already in practice, that a person cannot rely on the common law privilege against self-incrimination to refuse to give documents or information or to answer questions from the Auditor-General. By stating this clearly, we can avoid time-consuming negotiations to clarify the obligations on the provision of privileged documents which will diminish the efficiency of the audit process.

This is the consistent with the drafting approach adopted for legislation in the recent years, for instance, in the recently passed amendments to the Town Councils Act, the Banking Act and the Securities and Futures Act.

Mr Ng also asked what would happen if information obtained from the individual under the claim of self-interest does raise concerns which ought to lead to civil or criminal prosecution. In situations where the information provided contains evidence of a more egregious matter than an audit breach, the Auditor General may report and bring the matter to the Police or other relevant enforcement agencies. These agencies would have access to more extensive powers of investigation, which would then allow them to obtain the necessary evidence to proceed with the civil or criminal prosecution.

Mr Speaker, Sir, once again I would like to thank the Members for their thoughtful comments and support for the Bill.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Ms Indranee Rajah].

Bill considered in Committee; reported without amendment; read a Third time and passed.