Mindef responds to AGO's report

The Ministry of Defence would like to clarify the two issues highlighted in the recent Auditor-General's Office (AGO) report ("From lax enforcement to overpayment"; last Wednesday).

Mindef welcomes the AGO's annual external audit, as it complements internal audits conducted throughout the year.

These audits allow Mindef to conduct reviews of its processes, give an account of lapses identified and fix shortcomings to ensure good corporate governance, proper risk controls and transparent accountability in the management of public funds and resources.

First, the AGO found that explicit approval was not sought from the Savings and Employee Retirement and Premium (Saver-Premium) Fund board of trustees for a particular investment item of $50.26 million under the Saver-Premium Fund.

Mindef explained to the AGO that the board of trustees had already provided approval for investments in real estate investment trusts (Reits) as a strategic direction, which the investment department had deemed as a sufficient mandate to act on specific investments.

However, the AGO's view was that the board of trustees should explicitly approve the specific Reit exchange-traded fund investment and the appointment of the investment manager to handle the transaction.

Mindef has since obtained the board of trustees' approval to formally appoint the investment manager. Mindef will also review current mandates by the board to refine them when necessary, to remove ambiguity for the investment department.

Secondly, the AGO pointed out that Mindef did not make Central Provident Fund (CPF) contributions for the Full Savings Vesting Bonus (FSVB) for SAF regulars.

Mindef explained that the FSVB was started and communicated to regulars as part of the Saver retirement scheme. Mindef had designed the FSVB to be paid after a period of minimum service. Those who did not fulfil the required length of service would not receive the FSVB.

However, the AGO's view was that, as a strict rule, all bonuses to employees during employment would attract CPF contributions.

Internally, Mindef debated if it should withhold the FSVB till retirement, but decided that it would maintain the current scheme as it had improved retention. Mindef would instead make up for the CPF contributions due on past FSVB payments.

Mindef has addressed the findings in the AGO report and reiterates its commitment to achieve the highest standards of corporate governance and public accountability.

Han Neng Hsiu

Deputy Secretary (Administration)

Ministry of Defence

A version of this article appeared in the print edition of The Straits Times on August 03, 2016, with the headline 'Mindef responds to AGO's report'. Print Edition | Subscribe