Nanyang Polytechnic gave hidden subsidies, excess funds to subsidiary

Nanyang Polytechnic gave hidden subsidies, excess funds to subsidiary
Nanyang Polytechnic. TODAY file photo
Published: 12:55 PM, July 26, 2016
Updated: 3:45 PM, July 27, 2016

SINGAPORE — Nanyang Polytechnic (NYP) has been rapped by the Auditor-General’s Office (AGO) for practices that reflect a “disregard for financial controls and proper governance”, including “excess funding and hidden subsidies” disbursed to its subsidiary, NYP International Private Limited (NYPi).

The AGO’s annual audit of the public sector for financial year 2015/16 revealed that NYP — one of 11 statutory boards audited — had given funds to NYPi without requiring repayment or getting a market rate of returns on the funds. 

The Government requires funding to subsidiaries to be provided by means of a loan or equity, and that returns be made in the form of interest or dividends.

Instead, NYPi — established in 2007 to enhance NYP’s global presence by receiving foreign visitors and taking its courses overseas — could make donations and sponsorships to the polytechnic at its discretion, allowing the subsidiary to lower its tax liability.

As of March 31 this year, NYPi could claim tax deductions for S$2.54 million of the S$2.84 million it contributed to the polytechnic.

The AGO report, made public on Tuesday (July 26), also found that the funds disbursed to NYPi were in excess of what had been approved by the polytechnic’s board of governors. 

This resulted in hidden subsidies and excess funding totalling S$8.38 million given to NYPi since its inception in March last year.

Over the same period, NYP did not charge the market rate for the premises used by NYPi, and did not impose fees for secondment of officers to NYPi.

The AGO also noted that the polytechnic had solicited donations under the name of the NYP Education Fund for unauthorised purposes during a fund-raising event in October 2014. 

About S$287,000 in donations were collected from the event, for which the Education Ministry provided S$430,000 in matching grants. The AGO report did not describe the nature of the event. 

Among other things, the NYP Education Fund provides financial assistance to needy and deserving students, and funds research and development.

The AGO also flagged conflict of interest situations, where some members of the polytechnic’s board of governors, who were also directors in NYPi, were involved in decisions on matters related to the subsidiary. 

On one occasion, they approved a funding model more generous than what was instructed by the Government. 

The AGO audit found lapses in tendering and management of two contracts totalling S$1.1 million. 

For instance, the rent that NYP charged a childcare centre operator was about half (51.5 per cent) the average rent charged by the other four polytechnics, while the rent it charged to a canteen operator was 29.4 per cent lower than the average rental rate of the other polytechnics. 

In a statement, NYP noted that it fully owns NYPi, and the latter is not an unrelated third party, such as a private sector contractor.

“None of the decisions cited in the audit observations yielded personal gain for any of the individuals involved, as they had no bearing on their remuneration or benefit,” the polytechnic said. It has started a “detailed review” and will implement measures to address the lapses flagged.

Since April, the polytechnic has stopped funding NYPi, and will no longer receive donations from it. NYP is also in the process of refunding the S$2.54 million previously donated to it by the subsidiary.

Also in the works is a governance framework for NYP’s board members on handling transactions with subsidiaries, which will require members with vested interests to recuse themselves from decision-making processes.

CORRECTION: An earlier version of this story wrongly reported the amount of tuition fee loans and study loans in arrears at NUS and NTU as S$224.04 million as at June 30 last year. The correct figure is $228.04 million. We apologise for the error.