The Auditor-General’s Office (AGO) has said that the Ministry of Culture, Community and Youth’s (MCCY) National Gallery development project “did not give assurance that public funds has been properly managed,” as it revealed that contractual provisions involving a hefty S$13 million were waived off without due scrutiny by the Ministry.
The National Gallery development project was managed by the National Gallery Singapore (NGS) through a funding agreement, under the purview of MCCY which is led by ruling party politician Grace Fu.
Test checks conducted by the AGO uncovered weaknesses that showed that the final payment for the main construction contract was not adequately monitored. Revealing these weaknesses in its audit report for the 2018/2019 financial year, the AGO reported:
“AGO’s test checks revealed weaknesses such as waivers of contractual provisions involving $13 million without due scrutiny by MCCY, and inadequate monitoring (including the lack of timely audits) to ensure that the final sum to be paid for the main construction contract was properly supported.”
The AGO reported that the Funding Agreement did not identify which party was supposed to approve waivers of contractual provisions and that “MCCY did not explicitly give authority to the NGS to decide on such waivers.”
This means that NGS went ahead to waive contractual provisions without gaining approval or undergoing scrutiny from MCCY. The AGO further revealed that MCCY only questioned NGS about the waivers in Sept 2018 – a year after the final payment for the construction contract had been made.
Asserting that MCCY did not adequately monitor the situation to ensure “that the waivers with substantial financial implications were highlighted for its attention on a timely basis,” the AGO added that there was “a significant gap” between the last monthly status report and the last audit of the project expenditure.
The AGO said that MCCY remained unaware of the waivers that were granted for a year after the accounts and payments were settled and only scheduled its final audit in the second half of 2018 – close to a year after the final payment was made to the construction contractors.
The AGO found lapses in the project’s main construction contract, exhibition fit-out contracts and integrated consultancy services contract. The total value of the contracts amounted to S$458.98 million.
These lapses include the failure to obtain approval before implementing contract variations, obtaining approval from the incorrect approving authority and the failure to deduct costs for incomplete works, among others.
The AGO checked 403 contract variations and found that there were lapses in the approval of 142 variations, amounting to a hefty S$12.4 million. Revealing that the estimated over payment for works not completed amounts to a whopping S$265,800, the report added:
“AGO also found two instances under the main construction contract where works provided for in the contract were not carried out. Contract variations should have been issued to deduct the costs from the contract sum. However, this was not done, resulting in an estimated overpayment of $11,500.”
The AGO urged MCCY and NGS to implement measures that ensure that approvals are obtained from the correct authorities and ensure that costs deduction for incomplete works are done so that public funds are spent with full value.
Stressing that MCCY should have had a “proper governance framework and key controls” given that it owns NGS, especially since “the waivers of contractual provisions had significant financial implications amounting to $13 million,” the AGO said:
“There is hence a need for MCCY to strengthen its oversight to ensure financial prudence in the use of public funds managed by NGS on its behalf.”
The Government authority said that MCCY should ensure that the funding agreement clearly lists NGS’ roles and responsibilities and that NGS must ensure that it obtains MCCY’s approval over decisions involving large sums of public funds.
MCCY and NGS responded to the AGO’s report and agreed that its processes can be improved. -/TISG
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