There are two categories of public enterprises in Singapore - statutory boards and companies which are wholly or partly owned by the government. These enterprises were largely established since 1959 when Singapore achieved internal self-government and were used to implement the objectives of the development plans aimed at encouraging economic growth by promoting exports, attracting foreign investment, alleviating unemployment and diversifying the economy.
In efforts to promote industrialisation, joint-venture companies with local and foreign investor participation, state-owned companies and statutory boards were established. These bodies engaged in diverse activities ranging from manufacturing, shipbuilding and repair,, trading, financial services, tourism, hotels, construction and property development, to aeronautics, petro-chemicals and farming. The Prima Flour Mills (1961), Sugar Industry of Singapore Ltd (1963), Chemical Industries (F.E.) Ltd (1962) and Jurong Shipyard Ltd (1963) were some of the earlier public enterprises that were established.
Statutory boards were also set up to bring about greater flexibility in administration. Such bodies as the Public Utilities Board, Housing Development Board and Telecommunication Authority of Singapore provide the infrastructure and goods and services which are essential for public welfare and the industrial growth of the country.
In the early years of industrialisation, joint-venture companies and state-owned companies were the norm because private investors were reluctant to take any risks. The early projects in the Jurong Industrial Estate belonged to this category. Later government ventures into business were not due to reluctance by investors but increasingly to fulfil new needs which became apparent as the economy grew (e.g. Development Bank of Singapore).
In 1961 there were two statutory boards, and two companies partly owned by the government which held equity capital of S$3.4 million. In 1966 there were 5 statutory boards, 16 companies partly owned by the government with government equity capital of S$33.6 million and one company wholly owned by the government with paid up capital of S$0.8 million. By June 1988, the numbers had increased to 41 statutory boards and 505 government-linked companies with total shareholders' funds estimated at market value of S$8.7 billion.
Statutory bodies are established by special Acts of Parliament. The Acts specify the functions, duties and powers of the bodies so established, and their relationship to the responsible ministers. Such special Acts also set out provisions relating to the appointment of staff, financial provisions and audit control. Government-owned companies are incorporated under the Companies Act.
The diversity in functions and activities of public enterprises can be seen in the following examples:
Statutory boards - Housing Development Board, Economic Development Board, Monetary Authority of Singapore, Post Office Savings Bank, Singapore Broadcasting Corporation, Singapore Institute of Standards and Industrial Research.
Government-owned companies (wholly and partially owned) - Singapore Food Industries Pty Ltd, Singapore National Printers Pty Ltd, Neptune Orient Lines, Singapore Airlines, Singapore Aviation, General Insurance Company (Pty) Ltd, Hotel Premier Pty Ltd, and Singapore Tourist Industry Pty Ltd.
Each statutory board is managed by a Board of Directors appointed by the responsible Minister. The Board is headed by a chairman and consists of representatives from related ministries, professional bodies and interest groups from the private sector. Below Board level, the organisation structure is similar to that of a private-sector company with a chief executive officer and a team of supporting operating staff. The chief executive officer is responsible to the Board for the day-to-day running of the organisation.
Government-owned companies operate as do private-sector companies except that the Boards of Directors comprise senior civil servants and prominent persons from the business sector. They are appointed by a seven-man Directorship and Consultancy Appointments Council (DCAC) chaired by the Finance Minister.
Statutory boards are empowered to recruit, promote and remove their own staff. Rates of staff remuneration broadly follow the rates applying to civil servants.
Boards of government-owned companies also have the power to recruit, promote and remove their own staff. In setting rates of pay, however, they have total flexibility and autonomy in that they are not obliged to adopt pay scales applying to civil servants. Staffing conditions and remuneration are based solely on market forces - the government exercises no direct control.
Staff training arrangements are determined by the statutory boards and companies themselves without any government interference. Training may be in the form of in-house, local or overseas training courses.
Statutory boards such as the Telecommunication Authority of Singapore, Port of Singapore Authority, Monetary Authority of Singapore and Post Office Savings Bank are self financing in that they are able to generate sufficient revenues to cover recurrent operating expenditures. Other statutory boards, particularly those providing social services, receive subsidies or grants from the government to finance their deficits. The National University of Singapore, Singapore Polytechnic and Housing Development Board fall into this category. Some statutory boards are totally dependent on the government for financing as they do not receive any revenues for their goods or services (e.g. Preservation of Monuments Board).
Equity participation by the government in companies provides them with initial working capital. Generally, these companies are expected to earn a reasonable profit or at least be self-financing. They receive no special privileges and are expected to be fully competitive with the private sector. Those which fail are liquidated.
The borrowing powers of statutory bodies are prescribed in the respective enabling Acts and, accordingly, loans may be obtained from external sources such as the Asian Development Bank or the World Bank. The lending agencies sometimes require that such loans be guaranteed by the government. Government companies do not require ministerial approval to raise loans.
Ministers do not exercise day-to-day control over public enterprises, but lay down broad policy guidelines. No direct control is exercised over companies.
Statutory boards and government-owned companies enjoy much more autonomy than departments in the civil service in staffing and operational matters. Nevertheless, supervisory control over statutory bodies is exercised by the respective ministries. The Ministry of Finance too may issue overall government guidelines with which statutory bodies are expected to comply.
The Boards of Directors in statutory boards and government owned companies exercise oversight over the operations of the organisations under them. They ensure that the organisation complies with the broad policies set by the Ministers and have full control over staffing and operational matters. However they do not exercise control over the organisation's day-to-day activities.
The Boards of Directors of all public enterprises make rules and regulations with regard to financial and operational matters. However, there are occasions when statutory boards are expected to comply with some overall government policies. For example, all statutory boards are expected to comply with standard government tender procedures to ensure that the public-sector procurement system is competitive, open and fair.
Statutory boards are required to comply with provisions incorporated in their enabling Acts and wherever possible, accounting standards, issued by the Singapore Society of Accountants and with generally accepted accounting principles (GAAP). All government-owned companies must comply with the provisions in the Companies Act and accounting standards and GAAP.
There is no requirement for statutory boards to present their budgets to Parliament for approval. However, they are required by law to present to Parliament an annual report, including financial statements.
Non self-financing statutory boards prepare their own budgets and submit them to their respective supervising ministries for approval. Although self-financing statutory boards are not required to obtain such approval, they submit their budgets to the respective supervising ministries to inform them of the financial proposals in the coming year.
Government-owned companies are not required to present their budgets for financial statements to Parliament.
Financial statements presented to Parliament are scrutinised by the Public Accounts Committee (PAC) which is constituted at the beginning of each session of Parliament with a chairman and not more than seven other members.
The PAC works very closely with the Auditor-General (SAI). The Committee examines a great variety of subjects, some of which are reactions to observations by the Auditor-General. To ensure that the recommendations of the PAC are acted upon, the Auditor-General monitors their implementation and submits progress reports to the Committee.
The enabling legislation of most statutory boards provides for the appointment of the SAI as the auditor, but where this is not so, there is provision for the SAI to be consulted in the appointment of commercial auditors. Due to staff constraints, not all statutory bodies' accounts are audited by the SAI. However, where such accounts are audited by commercial auditors, surveillance audits are carried out by the SAI.
As a general rule, the SAI does not audit government-owned companies except in circumstances where it is deemed in the interests of the country to do so (e.g. defence-related companies).
At present, 28 out of the 41 statutory boards and 59 out of the 505 government-owned companies are audited annually by the SAI.
All audits of statutory bodies are done in accordance with the Acts of the respective statutory boards and with the requirements of the Audit Act involving the certification of the financial statements and in compliance, where applicable, with the Statement of Auditing Practices issued by the Singapore Society of Accountants. Furthermore, when resources are available or when issues are significant enough, Value-for-money (VFM) audits are carried out.
The audits of government-owned companies are carried out by the SAI in compliance with the requirements of the Companies Act.
The objective of the annual audit of all public enterprises is to examine the annual financial statements and to express an opinion as to whether the statements are "true and fair", whether proper accounting records have been kept, and whether all laws are complied with. Value-for-money and program audits are also carried out to investigate waste, extravagance and inefficiency.
There is no statutory requirement for public enterprises in Singapore to have internal audits. However, in the light of the substantial increase in revenues and expenditures handled by public enterprises, they are encouraged to set up internal audit units to supplement the functions of the SAI in ensuring the veracity of accounting records and to periodically review the effectiveness of the internal control systems.
Currently, most medium and large statutory boards have set up internal audit units. The effectiveness of some of these units has been enhanced by requiring them to report to audit committees.
As mentioned earlier, commercial auditors are engaged to assist in the audit of statutory boards because of manpower constraints faced by the SAI. The audit carried out by them is the normal statutory financial audit.
5.6. AUDIT METHODS AND TECHNIQUES
A variety of audit methods and techniques are used. For financial certification a system-based approach is used. Flowcharting and statistical sampling are also techniques commonly employed to facilitate audit work. Computer assisted audit techniques are used to audit computerised accounts.
Three divisions within the SAI carry out the audits of all public enterprises. These divisions are headed by an Assistant Auditor-General (AAG), who reports to the Auditor-General.
Two divisions are responsible for the annual certification of accounts and supervision of audits carried out by commercial auditors. The third division looks at VFM issues.
The period and frequency of audits depend on the type of audits being undertaken.
Financial statements of the 28 statutory boards and 59 government-owned companies are audited annually by the SAI. VFM and program audits, on the other hand, are not carried out on a regular basis, but are initiated on requests from the supervising ministries or from internal decisions from within the SAI. Ad hoc investigations are also carried out when complaints are received from external sources.
An audit certificate is issued along with the published accounts of statutory boards. It is generally short, expressing an opinion as to whether the accounts are "true and fair". The published accounts which form part of the annual reports of the statutory boards to Parliament are scrutinised by the PAC.
In addition, observations arising from VFM audits carried out on the statutory boards are included in the Auditor-General's annual Audit Report to Parliament.
The Auditor-General's findings are considered by the PAC. When the Committee completes its examinations, it makes its report and recommendations to Parliament. The Auditor-General monitors the action taken by ministries and departments in implementing the Committee's recommendations and submits periodic reports to the Committee on the progress made.