ALLEGED FRAUD AT SLA

ALLEGED FRAUD AT SLA:

(Findings and measures to prevent recurrence): 4.

Mr Lim Biow Chuan asked the Minister for Law (a) whether the Auditor-General had audited the Singapore Land Authority (SLA) in the last two years and why the alleged fraud committed in SLA was not detected; (b) whether there are additional findings on the full extent of the fraud committed; and (c) what are the

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measures that have been taken to prevent a recurrence.

The Minister for Law (Mr K Shanmugam): Mr Speaker, Sir, I will first give an update on the investigations so far. Investigations were undertaken into Koh Seah Wee's past activities, following the discovery of possible fraud at the Singapore Land Authority (SLA). These investigations showed that he may also have committed fraud at the Intellectual Property Office of Singapore (IPOS).

Koh joined Infocomm Development Authority (IDA) in 1997. He was deployed by IDA to Supreme Court, IPOS and then SLA. He left SLA and resigned from IDA earlier this year.

Koh's accomplice in the SLA case, Lim Chai Meng, joined IDA in 2006. SLA was his only posting.

At SLA, Lim was the officer who initiated IT procurement and evaluated quotations. Koh was the officer authorised to approve quotations. Koh and Lim are suspected to have conspired with several business entities to win IT contracts from SLA, and then submit false invoices to receive payment for the services and goods being procured, but which the business entities never intended to deliver. The fraudulent activities were conducted between January 2008 and March 2010.

At IPOS, Koh was the officer who initiated procurement and evaluated quotations. He is suspected to have conspired with one business entity to submit lowest quotations for IT maintenance services and goods being procured by IPOS. IPOS would then be billed for the services and goods which were never delivered. The activities took place between December 2005 and March 2007.

The perpetrators took careful steps to get the appearance of compliance and

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normality. They kept the procurement amounts within approval limits, complied with the internal guidelines such as getting the requisite approvals and putting up the requisite paperwork.

The bulk of the charges for the suspected fraud at SLA and IPOS have been tendered in court. To date, the amount allegedly defrauded from SLA is about $12.18 million and the amount from IPOS is about $286,000. Of these, about $10 million have been secured pending the completion of the trial.

SLA and IPOS' procurement and finance processes were in accordance with procurement guidelines. Koh and Lim are believed to be have circumvented the checks and balances by colluding with each other and with business entities.

The Auditor-General did not audit SLA and IPOS during the period when the frauds took place. SLA and IPOS' financial statements and accounts were instead audited by external auditors, in accordance with the Auditor-General's requirements.

Sir, immediately after the frauds were discovered, SLA and IPOS launched their own internal investigations. The Ministry also set up independent Internal Review Panels to identify how the frauds took place and to recommend measures to tighten SLA and IPOS' procurement and finance processes.

The Review Panels have given their views and recommendations. Among their conclusions was that certain officers at SLA and IPOS did not exercise sufficient supervision over Koh and Lim and had not carried out their audit responsibilities thoroughly, and that there were weaknesses in the internal audit processes at SLA and IPOS. SLA and IDA have since taken disciplinary action against two officers whose oversight had

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contributed to the fraud taking place undetected in SLA. As for the fraud at IPOS, IDA is currently conducting disciplinary investigations against Koh's supervisors during the period he was deployed at IPOS.

SLA and IPOS have since been implementing the recommendations of the Panels and the outcome of their own internal investigations. These include strengthening internal audit, centralising the procurement processes under one department, requiring a different officer to verify the request to call for quotation and reducing the limit for approval of financial transactions.

In taking these measures, we need, however, to strike a balance between adding more layers of checks and the resultant reduction in operational efficiency. We must guard against tightening up the system so much that the vast majority of legitimate transactions are hindered on a day-to-day basis. Adding more checks will slow down the work for many officers but may not necessarily increase our ability to detect fraud.

Sir, on this, I speak as someone who has been involved in investigating and taking follow-up actions in various such frauds in the private sector, including Barings. No system can guarantee to prevent fraud against a skilful operator. Even audits, whether external or internal, are not always guaranteed to pick up fraudulent activities. The real insurance against fraud is to have vigilant people supervising and discharging their responsibilities properly.

Indeed, the system of checks and balances is built on the basis that officers entrusted with the approval authority and supervisory responsibilities discharge these responsibilities diligently and with care.

They have to ask questions and undertake regular reviews. When they do not do so, there is opportunity for fraud.

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Sir, let me emphasise that these facts that I have set out are based only on our investigations. They have not yet been proven in court. The answers I can give are also limited for the same reason because the cases are pending in court. I would add that investigations are still ongoing, including investigations into Koh's activities when he was posted to the Supreme Court between 1997 and 2004.

Mr Lim Biow Chuan (Marine Parade): Sir, it was reported in the newspapers that the perpetrators of the fraud were driving opulent and luxurious cars. I find it difficult to understand why no one in the Government agencies had noticed that mid-level executives were driving such cars. Could the Minister clarify whether any measures are being introduced to ensure that regular checks are conducted by either the Chief Executive of the statutory board or other agencies if they detect any suspicious ownership of high-value assets by their staff?

Mr Shanmugam: The Member can be rest assured that if someone drives a Lamborghini to SLA's office, I think it will be picked up. They were careful in that they never drove these cars, from what we understand, to their offices. They took particular care to make sure that nothing in their lifestyle gave anything away.

Mdm Cynthia Phua (Aljunied): Mr Speaker, Sir, I would like to ask the Minister whether he would elaborate on the current practice of internal audits by Ministries on statutory boards and also, in view of this case, whether there would be any increased measures in terms of the regime for internal audit. External audit is really looking at financial matters while internal audit will help each of the statutory boards look into the processes and also the independency of individual officers versus the process itself. So I would like to ask the Minister whether he

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has actually looked into the internal audit regime for statutory boards.

Mr Shanmugam: Sir, the internal audit processes at both SLA and IPOS were very carefully looked into both by the Ministry as well as by the independent Review Panels. As I said, I did not want to go too much into the details because the cases are pending. But as I have indicated in my answer, strengthening the internal audit processes in both places is part of the recommendations, and steps have been taken and will be taken. But I also want to add a note of caution. Often, internal audit processes do financial audits and financial audits, even if they have been conducted properly in this case, may not have – I do not say "will not have" – picked up if care was taken to make sure that all the documentation was properly done. The real answer is that at every level, the supervising officers must exercise vigilance, proper supervision and checks carefully. As I have admitted, that was lacking in respect of the supervisors in this case, and investigations are ongoing at IPOS in respect of the supervisors, and at SLA, certain conclusions have been drawn.

Mr Speaker: Last question, Mr Low.

Mr Low Thia Khiang: Sir, I would like to ask why the CPIB or the Commercial Affairs Division (CAD) was not able to pick up this case.

Mr Shanmugam: Sir, from my answers, if I can summarise the earlier answers, the perpetrators took considerable care in making sure that their activities were not spotted, both in their lifestyle and in the way they carried out the fraud, combining with external vendors. So it is a combination of a couple of people inside and external vendors together making sure that the paper trail was complete and could not be picked up. But one of the

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certainties is that through a system of rotation, these things do get picked up and when they were picked up, then, of course, the Police got involved immediately and investigations were conducted, and $10 million was seized. The Member can be rest assured that if any irregularity comes to light, it will be exposed and swift action will be taken and answers will be given in Parliament.

Mr Speaker: Mdm Halimah, last question.

Mdm Halimah Yacob (Jurong): The Minister did mention that the Auditor-General did not do audits of SLA and IPOS during this period. My question to the Minister is: why is that so? What criteria does the Auditor-General use as to which statutory board or Ministry it should audit and why it does not audit others?

Mr Shanmugam: My colleague, Mr Shanmugaratnam, is more than happy to answer that question. So he will answer it for the Auditor-General.

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