By Kenneth Jeyaretnam

The Auditor General’s Report for the financial year 2011/12. arrived in the President’s in- tray in July of this year and is now publicly available.   The  objective of the report is stated clearly in the mission statement that precedes it.

“MISSION

To audit and report to the President and Parliament, in accordance with the law, on the proper accounting of public moneys (sic) and use of public resources so as to enhance public accountability.”

It’s a long report almost all of it vital and essential but my attention was drawn  in particular to Part 1B which is an audit of Government Ministries, Organs of State and Government Funds.  Astonishingly the AGO observes that the MOF breached Article 144 of the Constitution.

Under  the heading, ” Ministry of Finance,  you will find the report headed: President’s Concurrence Not Obtained for Promissory Note issued….. 

On 04th January 2012 the Ministry of Finance issued a promissory note for US$16.34 million to the International Development Association.  The International Development Association, by the way is the soft lending arm of The World Bank. By soft lending I  mean that it lends money on concessionary terms to the poorest countries. By  concessionary terms I mean it virtually  gives the  money away. In March of this year the IDA encashed US$2.94 million from the note.

Again let me make this  clear just as I did with the case of the IMF loan. The problem is not the Association (IDA) or the end recipient of the monies. I am not against The IDA  or its mission per se and Singapore needs to be a player on the global stage.  Also, as I said in my second affidavit,  it is equally clear that the sum of money involved is also not material.

The problem with this promissory note to the IDA (which may be a loan or an outright grant) is that the MOF breached Article 144 of the Constitution. Isn’t this what I have been saying all along about the IMF loan?

You can read the full report here.

Page 16 says:

“The Constitution of the Republic of Singapore (1999  revised edition) includes safeguards to protect past reserves of the Government.  One such safeguard, set out in Article 144, requires the President’s concurrence  for the granting of certain loans and guarantees. 

AGO found that the Ministry of Finance did not comply with Article 144 of the Constitution when it issued a promissory note without obtaining the  required President’s concurrence. (sic)”

The Audit clearly pulls the MOF up for breaching the Constitution. It seems the MOF breached the Constitution and gave away our money, blatantly ignoring any requirement for a safeguard.

The AGO’s wording is interesting here. Note,  he doesn’t separate loans and guarantees and interpret it to be  the raising of one versus the giving of the other. This report merely states that the President’s concurrence must be obtained for “the granting of certain loans and guarantees. “

You will be familiar with the Indonesian Loan case from 1997 by now.  If the Auditor -General is correct here then the Attorney General who pronounced in the 1997 loan to Indonesia case was wrong.  I always thought so and have often thought  that my upcoming  IMF case would be very embarrassing for him. The validity of the Indonesian loan rationale after all, has never been tested in a Court of Law. Interestingly that Chief Justice from 1997, Mr. Chan Sek Kheong announced a couple of days ago that he was stepping down.  He will be 75 in November anyway but this will save him from having to recuse himself from my case.

So how was this Constitutional breach  allowed to happen? The Minister (of Finance) gives two excuses in the report for the breach of the Constitution

1. It wasn’t me it was an administrative oversight by an officer who wasn’t familiar with the procedures because we don’t give away money that frequently.

2. It didn’t come from our past reserves anyway, it came from the MOF operating budget for the financial year 2011/2012.

So, that’s how it happened. Let’s move on. What happens subsequently when a Minister (or his Ministry officer)  breaches the Constitution as he did here ?

Well according to the audit  the original promissory note had to be declared invalid. It was scrapped and the MOF subsequently issued a fresh one, this time with the obligatory Presidential concurrence.

According to the AGO, the Ministry then reviewed internal processes following the report’s findings and tightened its standard operating procedures to prevent similar occurrences in the future.

So let’s get this clear. An officer in MOF unknown to the Minister,  gave money away to a foreign organisation from out of  his Ministry’s general operating budget and in breach of the Constitution. When this breach was thrown up by an audit the President signed off on it retrospectively and procedures were then tightened. I wish life was always that simple.

Here is some of what is missing from the report.

  • The Ministry of Finance says there was no draw on past reserves as the money came from  surplus in their own operating expenditure budget. As far as I know any unspent money in the budgeted operating expenditure of Government Ministries stays in the consolidated fund as money not drawn upon.   I can’t see any category in the amount allocated for operating expenditure budget that covers giving money away to foreign lending bodies. Maybe it is covered under the category, International public relations and Communications?
  • The IDA Act section 4  allows for subscriptions or a promissory note in place of a subscription to be given to IDA on behalf of the government. The Act states, “The total subscription to the Association shall not exceed the sum of US$1 million unless increased  with the approval of Parliament signified by resolution.”   The AG only speaks about the President’s concurrence NOT having been obtained. When and how was Parliamentary approval for the US$16.34 million obtained? Where does the authority for the larger sum of money come from?
  • The original promissory note was invalid. If the original note was invalid so was the encashment.  Did the IDA therefore repay the encashed US$2.94 million from the note?
  • The IDA encashed US$2.94 million but where would the money have come from if they had encashed the whole amount of US$16.34 million?  A promissory note is the same as a bank-note and allows the whole amount to be encashed at any time. US$16.34 million is about 2.5% of the total operating expenditure budget  of the MOF. Since when did we allow our Government  Ministries to under spend by US$20 million and then to give that money away rather than return it to State coffers?
  •  How could a Minister failing to obtain Presidential concurrence and  committing a basic breach of the Constitution, thereby rendering the President’s role as a safeguard redundant  be dismissed as an administrative error?
  • What happened to the Officer responsible for the oversight and doesn’t the buck end with the Minister?
  • What does the President intend to do about this?  Is he satisfied with the Minister by -passing him and is he satisfied that the new tightening of operational procedures will prevent this occurrence in future.
  • Presumably the new procedures came into place after the encashment of March and after the publication of the report in July. Does this mean that the new tighter operational procedures weren’t in place when the IMF loan was pledged in March this year?

All of this makes me feel very uneasy . Even when the President’s approval is unequivocally required it appears that it can be simply be overlooked until at the end of the financial year an audit throws up the constitutional breach.   The same due constitutional process must be complied with as mandated under the constitution whether it be for $1 or as in the case of MAS a potential $300 billion under management or in the case of the GOS a minimum of $705 billion; which monies, any and all, belong to the people/citizens of the Republic of Singapore. Here we are dealing with a more manageable US 16.34 million.  True, it is considerably more than the sum involved in the folding bicycle debacle and considerably less than the sum in the IMF loan case. But is is still our money and the MOF and Parliament need to account for it.

This article first appeared on Kenneth Jeyaretnam's blog here.

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