Accounting: Competent Personnel and Rotating Duties

Two former Singapore Land Authority (SLA) officers, Former deputy director of technology and infrastructure, Koh Seah Wee, 41, was sentenced to 22 years in jail, and his subordinate, former manager Lim Chai Meng, 38, was sentenced to 15 years for being involved in a $12 million fraud case. With the help of seven other external parties they were able to create fraud by altering the accounts. They misused the company’s money for their own use.

With the money they divested cash to various accounts to their relatives and invested in private properties, unit trusts, stocks and shares. Koh also bought his wife and mother-in-aw two luxury cars worth up to about $1.9million.

A) Internal Control
1.Competent personnel and rotating duties: Allowing accounting employees must be adequately trained and supervised in performing their jobs. It may also be advisable to rotate duties of employees. In this way, existing errors or fraud may be detected. They failed to hire competent personnel, former manager, Lim Chai Meng was not adequately trained and supervise in his job.

Quote from article: “Working in collusion with seven external parties, the men had – in the time between Jan 2008 and March 2010 – cheated SLA by rendering false invoices through various business entities for IT services and goods which were not delivered.” 2.Proof and security measures: Proofs and security measures should be used to safeguard assets and ensure reliable accounting data. This control procedure applies to may dfferent technique, such as authorization, approval, and reconciliation procedures. The company fail to have authorisation of approval for invoices by reliable accounting data. Therefore Koh and Lim were able to render the invoice and embezzle the company’s funds.

Quote from article: “In all, SLA paid $12.2 million in 282 contracts to 11 bogus vendors. To date, $9 million out of the total amount has been recovered” 3.Separating responsibility for related operation: To decrease the possibiity of errors, and faud, the responsibiity for related operations hould be divided among two or more persons. The company should have divide the operation of ordering, delivering and checking off goods between employees instead of letting koh and lim do the work alone. Furthermore they have seven external parties to help them with the fraud.

Quote from the article: “Working in collusion with seven external parties, the men had – in the time between Jan 2008 and March 2010 – cheated SLA by rendering false invoices through various business entities for IT services and goods which were not delivered.”

B) Learning point
We have learnt that when we start a business we should hire competent personnel and personnel who are trustworthy. The deputy director who is in charge of SLA should set a good example for his employees, Instead of embezzling the company’s fund.

Failing to have authorized approved invoice, employees can therefore alter the invoices and take the company money without any acknowledgement.

If company do not divide the responsibilities among different department, employees who are tasked to do two different departments can easily create fraud. External parties play a big part in helping to embezzle one’s company money as they work together to create fraud.

C) Recommendation
Companies should spend money to do background checks on their staff such credit check, criminal records, verify their resume. By doing so, they would know if the employees are financially stable, facing any debt, etc before hiring them and not hire problem employees.

Also, keep in mind that the most loyal employees can take advantage of you. Even if someone’s your best employee, you need to have checks and balances so they don’t control everything

Invoices should be authorized and approved by the head of department before going ahead with the procedures. This will allow the head to be acknowledged of the procedures and give the permission to carry out with the task.

No one person should have control of any one accounting process, nor should one employee handle all aspects of a transaction. If one employee writes checks, another should reconcile the bank account. Switch duties every month. Switching duties allows everyone to cross-train and keeps one person from retaining total control of a critical process

Short summary of the article 2.
The founder of one of Singapore’s richest churches was charged in court Wednesday for allegedly syphoning off nearly $19 million of the congregation’s money to support his wife’s singing career. Pastor Kong Hee, 47, faced three charges of “criminal breach of trust” relating to the misuse of the funds of the City Harvest Church, On Tuesday, officials overseeing charities estimated that Kong was involved in misappropriating Sg$23 million ($18 million) in church funds but in the charge sheet filed on Wednesday, the total was raised to Sg$24 million. According to court documents, the church funds were channelled through “purported bond investments” in two companies, which were in fact “sham transactions”.

A) Accounting concept
Business entity: In accounting we treat a business or an organization and its owners as two separately identifiable parties. This concept is called business entity concept. It means that personal transactions of owners are treated separately from those of the business.

Businesses are organized either as a proprietorship, a partnership or a company. They differ on the level of control the ultimate owners excise on the business, but in all forms the personal transactions of the owners are not mixed up with the transactions and accounts of the business.

Instead of following the business entity concept, Pastor kong mixed his own personal life/family together with the business. He should not have use the business money to invest or help with his wife singing career as using the concept, business and personal expenses should be separated.

Quote from the article: “Kong was accused of “dishonestly misappropriating monies” from the church’s building fund over several years to support the career of his wife Ho Yeow Sun, who had tried to become a music star in the United States.”

B) Learning point
By punishing and publishing out the crimes they did, people will learn from it and will not follow pastor’s kong behaviour. Separating business funds and personal life is essential in operating a business, although temptation are there, self-discipline plays a big role in it, business capital are for the business operations and one should not embezzle the company’s capital.

C) Recommendation
The church should have a system where people are not allow to personally take money from the church funds without a good reason or without going through a strict procedure. They should have a system that needs to be gone through by more people so that no one will be able to embezzle the company money. Eg: There should be more than 2 people who take care of the money of the church and all donations should be take care separately by different people.

Individuals with access to the company’s fund may steal the company’s fund therefore, employee behaviour should be first checked and analysed before he/she is hired. Know your employees; know who handles your finances and what controls are in place to safeguard your funds.

APPENDIX

Link of article 1:
http://www.channelnewsasia.com/stories/singaporelocalnews/view/1083872/1/.html

SINGAPORE : The Singapore Land Authority (SLA) has been hit by a S$12 million fraud case involving two of its senior staff.

40-year-old Koh Seah Wee, a deputy director with SLA’s Technology and Infrastructure Department, faces 249 charges of cheating while a second suspect, Christopher Lim Chai Meng, a manager in the same department, is currently helping the police with investigations.

The SLA, a statutory board under the Law Ministry, uncovered the fraud in June this year.

Investigations showed that a number of irregular payments in its Technology and Infrastructure Department took place between January 2008 and March 2010, worth nearly S$12 million.

SLA posts its tenders for IT maintenance services on the government procurement website.

According to the charges against Koh, he had conspired with two others – Lim Chai Meng and Ho Yen Teck – to award the IT maintenance contracts to firms which did not deliver the services.

However, SLA paid the firms which have turned out to be fictitious. Amounts paid ranged from $2,600 to $60,000.

As deputy director of SLA’s Technology and Infrastructure Department, Koh had the authority to approve payments to the firms.

Koh also faces several charges of using his ill-gotten gains to buy cars and properties.

The charges said that Koh had used the money to pay for a Lamborghini, Mercedes Benz cars, acquire property at Axis@Siglap along East Coast Terrace, and purchase various unit trusts.

The authorities have so far recovered cash and assets worth about $10 million from Koh.

Koh was charged on June 25, and he is being defended by lawyer Ravinderpal Singh. His case will be mentioned again on October 19.

Koh is now in remand as he has not been able to raise the S$1.5 million bail offered to him.

Giving details of Koh and Lim’s employment with the SLA, a spokesman told Channel NewsAsia that they were deployed to SLA in March 2007 and July 2006 respectively.

Koh was posted back to the Infocomm Development Authority (IDA) in March this year where he resigned on June 1.

Lim returned to IDA on 1 May 2010, and then went on no-pay leave. He has since been suspended from duty.

According to a joint statement from the SLA and the Law Ministry, SLA had finance and procurement processes in accordance with government guidelines.

However, the two SLA officers were said to have conspired with each other and the business entities involved, which enabled them to circumvent the checks and balances.

The Law Ministry set up an independent review panel following the matter in June, and SLA has since implemented the panel’s recommendations to improve its tender system, such as requiring an officer from a different department to verify the request to call a quotation.

It has also reduced the financial limit for approval of financial transactions by certain levels of officers.

SLA said disciplinary investigations have commenced in respect of two officers whose oversight might have allowed the fraud to take place undetected.

These investigations are in progress, and disciplinary action will be taken, if and where found appropriate.

SLA added that it did not go public any earlier as police investigations including the tracing of assets were on-going.

Investigations against Koh are only now largely completed and another tranche of charges was tendered against Koh in court earlier Tuesday morning, and this is the first appropriate opportunity for SLA to inform the public of the case. – CNA /ls

Link of article 2:
http://www.abs-cbnnews.com/global-filipino/world/06/27/12/singapore-pastor-charged-19-m-fraud-case

Title of article: Singapore pastor charged in $19-M fraud case Website: abs-cbnnews.com
Date of article: 06/27/2012

SINGAPORE – The founder of one of Singapore’s richest churches was charged in court Wednesday for allegedly syphoning off nearly $19 million of the congregation’s money to support his wife’s singing career. Pastor Kong Hee, 47, faced three charges of “criminal breach of trust” relating to the misuse of the funds of the City Harvest Church, one of Singapore’s biggest with a membership of over 30,000. Kong was accused of “dishonestly misappropriating monies” from the church’s building fund over several years to support the career of his wife Ho Yeow Sun, who had tried to become a music star in the United States. The church, which has affiliates in neighboring Malaysia and other countries, is known for services that resemble pop concerts. The pastor’s wife, now in her early 40s, was hoping international stardom would help spread the church’s message, according to previous reports in the Singapore media. Four other church executives were charged Wednesday before a district court for aiding Kong and faced other charges for allegedly attempting to misappropriate millions of dollars from the church’s funds. Kong and the four others were arrested Tuesday by the Commercial Affairs Department, a police unit set up to fight financial crime, and could face life imprisonment as well as a fine if convicted.

They have been suspended from their church positions and are out on bail of Sg$500,000 each, with their passports impounded. On Tuesday, officials overseeing charities estimated that Kong was involved in misappropriating Sg$23 million ($18 million) in church funds but in the charge sheet filed on Wednesday, the total was raised to Sg$24 million. According to court documents, the church funds were channelled through “purported bond investments” in two companies, which were in fact “sham transactions”. “They were devised by the accused persons in order to conceal the diversion of the Church’s Building Fund to fund Sun Ho’s music career… As well as other unauthorised purposes,” the documents said.

City Harvest is a Christian group listed as a charity. The arrests came after a two-year police investigation. Kong, who appeared in a courtroom filled with supporters as well as local media, stood with a grave expression as charges were laid out against him. After the session, Kong walked out holding hands with his wife, declining to speak to the media as members of his entourage shoved journalists away and tried to prevent photographers from shooting pictures. The couple became minor celebrities in Singapore after launching the church, which officials estimated had net assets of Sg$103 million in 2009. Singapore authorities have cracked down on heads of charities found to have been involved in irregularities. In 2009, a prominent Buddhist monk was jailed for six months for misappropriating hospital funds and lying about it to authorities.