Functions of Nanyang Polytechnic International

Mdm Speaker, receiving foreign visitors and offering programmes to international participants have been internal functions of Nanyang Polytechnic (NYP). In April 2007, NYP set up Nanyang Polytechnic International Pte Ltd (NYPi) to handle these activities. So, what was "internal function" is now put into a company. These are potential revenue-generating activities and, through a subsidiary, NYP intends to make it a self-sustaining activity.

To ensure alignment between NYPi's activities and NYP's mission and objectives, selected board members and staff of NYP also serve as board members of NYPi. This reflects the intention of NYP to closely supervise, guide and manage the activities of NYPi, which is its fully-owned subsidiary, and there are two points I would like to highlight here.

First, NYPi is a fully-owned subsidiary of NYP and, hence, it is not a third party vendor. The activities performed by NYPi are to fulfil the mission and objectives of NYP, rather than NYPi's own objectives. This is why it is fully-owned by NYP. Profits made by NYPi, if any, ultimately belong to the parent, which is NYP. No profits flow out to any third party.

Second, the NYPi's board directors do not receive any directors' fees. And the NYPi staff do not partake in any profit-sharing scheme. The audit observations of the Auditor-General's Office (AGO) for the Financial Year (FY) 2015/2016 report have no bearing on the remuneration or benefits of NYPi's board directors and staff, and there is no question of any personal gain involved.

The mistake NYP has made was to continue treating NYPi as if it was a department or a division of NYP when it is no longer the case. It is now a company, a separate legal entity. So, all rental and charges by NYP imposed on NYPi should have been made based on market rates or with subsidies explicitly approved and recorded in NYP's accounts. NYP has taken immediate actions to put in place a proper governance framework to handle its transactions with NYPi.

I have to emphasise a key point in all of these, at the risk of repeating myself, so that AGO's observations are not misunderstood. There was no personal interest involved on the part of the directors of NYP and NYPi, and no leakage of money to any third parties.

When AGO referred to some NYP board of governors (BOG) members as having "vested interests", it merely referred to the fact that they would have had an interest in ensuring NYPi performs well in NYP. It had nothing to do with them having any personal or financial interests in NYPi. And it was, indeed, in NYP's interest that NYPi did well.

This is, hence, completely different from a situation where you have an entity where a director or staff owns a stake in an outside party vendor and then provides services or sells products to the entity for a fee or revenue.

Mdm Speaker, I thank the Acting Minister for the replies and the assurance. I have three supplementary questions, just to follow up on the initial question that I filed. Did the excess funding of about $8.38 million given to NYPi cause any disruptions to programmes or operations of NYP itself?

My second question is whether sufficient steps have been taken to ensure that current and future members of the BOG are adequately informed and reminded of the need to be above-board and ensure proper financial controls and governance?

Third, are any actions taken against NYP BOG members who had so-called vested interests, as well as NYP's staff involved and whose lack of oversight may have caused these lapses to occur?

I thank the Member for her supplementary questions. I will answer the last one first which is whether there were any actions taken against staff or directors.

I think a mistake was made but it is one, as I have mentioned earlier, that does not involve profits flowing out to any third party. It does not involve any fraud or personal gains. As a result, it is a corporate governance and process lapse. So, there is no fraud involved and, therefore, no disciplinary action ought to be taken in this aspect. However, we have to take every step that we can to improve the corporate governance framework, because if you want to set up a subsidiary and a company, notwithstanding it is fully-owned, it is a separate legal entity and there has to be a proper governance framework.

To answer the Member's second question, we are taking additional steps to brief every single polytechnic and Institute of Technical Education about all these rules. NYP, as we speak, is drafting a framework. It has a Board of Directors' meeting in October, and all those steps and the new framework will be approved by October.

As for the so-called excess funding of $8.38 million, to put this into context, NYPi was previously a division and department with a budget, when it also received all these so-called subsidies. It is just that, after it became a separate entity, NYP continued to provide the help to allow it to function well. But it should now be a lot more transparent. There is nothing wrong with subsidising your own subsidiary when it is 100% owned and carrying out your mission and objectives. What NYP ought to have done was to make those subsidies and help transparent, and NYP is doing so, so as to ensure a better corporate governance framework.