Tee International said in a March 15 regulatory filing that it has made several enhancements to its compliance, risk management, and internal controls amid an ongoing investigation into its former group chief executive Phua Chian Kin for allegedly stealing company funds.

Prior to the filing, the construction engineering company made several consecutive announcements over the past few weeks, providing updates on the ongoing investigation. Beginning on March 3, it released a summary of the findings of an investigation conducted by its external investigator PwC Risk Services, which it appointed in September 2019 to review unauthorized fund transfers totaling $6.55 million between Tee and private entities personally held by Kin.

Tee said it discovered the unauthorized remittances while preparing its financial statements for the year ended May 31, 2019. Specifically, PwC’s investigation revealed the checks for the unauthorized remittances “were signed without supporting documents, despite the presence of established policies and procedures in place.”

These remittances, which Kin repaid in August 2019, were made based on “verbal instructions and management override of internal controls,” the company said. In addition, the payment vouchers were approved only after funds were transferred.

PwC further uncovered failures to report “interested person transactions” (IPTs) as there was no process in place to ensure that IPTs reported to the audit committee for review and approval were accurate and complete. PwC’s report uncovered several potential breaches of the Companies Act and possible non-compliance with the Singapore Exchange (SGX) Listing Rules and the Code of Corporate Governance.

Investigations announced

In response to PwC’s findings, the SGX released its own statement on the matter. “The Exchange expects issuers to have in place appropriate internal controls to monitor material disbursements of issuer’s funds,” the SGX stated. “The issuers and their directors must also ensure that procedures are in place to monitor IPTs for compliance with the Listing Rules. In light of this, we will be carefully reviewing PwC’s report, as well as other matters to do with the company for potential breaches of the Listing Rules.”

On March 4, Tee announced it had additionally received notice from the Commercial Affairs Department, Singapore’s principal enforcement agency, for a request to produce various documents to assist with an investigation into Kin. These document requests include supporting documents for all remittances between Tee, Kin, and its related entities; minutes of board and audit committee meetings since June 2017; general ledgers for financial years 2018 and 2019; signing limits/authority of bank accounts given by Tee to Kin; and all correspondence between Tee, PwC, and its internal auditors related to the investigation.

Compliance enhancements

In the latest update, based on recommendations by its internal auditor Protiviti, Tee said it has made several enhancements to its compliance and governance controls, including the following:

Outsourcing of enterprise risk management, internal audit, legal, and compliance: To enhance corporate governance, the internal audit function and the ERM function will be fully outsourced to the company’s internal auditors. Further, its legal and compliance functions have been outsourced to the company’s corporate service provider and legal advisers.

Enhanced whistleblowing policy: The Group has enhanced its whistleblowing policy to ensure that any whistleblowing report made through e-mail will be automatically directed to the audit committee. The Group already has in place a whistleblowing hotline, and a receiving officer has been appointed by the audit committee to ensure that any whistleblowing report made will be recorded and reported to the audit committee.

Changes to its authorized signatories: In September 2019, Kin was removed as an authorized signatory for all payments by the Group. Additionally, the number of signatories required for approval of payments over $50,000 Singapore dollars has been increased from two to three; the interim group chief executive officer (CEO) and the group CFO are now prohibited from jointly approving payments; and the group CFO and the financial controller are prohibited from jointly approving payments.

Additionally, “tiered upper limits have also been established in the approval process which require, at separate tiers, Executive Committee or Board approval,” the company stated. “The bank mandates will be reviewed on a half-yearly basis or when there is a change of signatories.” The company said it’s also currently in the process of removing the current Group CFO and financial controller as authorized signatories for all payments by the Group.

Enhancements to its Related Party (RP) and IPTs: “A comprehensive and consolidated RP/IP register is now maintained by the human resources department based on the lists of related parties submitted by the staff to their managers quarterly,” Tee said. The calculation and monitoring of IPT thresholds by the finance department, and the list of RP/IP transactions, are now reviewed by internal auditors before being submitted for review on a quarterly basis or when necessary, the company said.

Payments can only be made to valid and approved vendors with an ID set up in the accounting system. “The approved vendor list is subject to half-yearly review by the procurement department,” Tee said. “The company has now enhanced its policies to prohibit payments to RP/IP which are not on the approved vendor list.” Tee described other enhancements to its internal controls, as well.

Mandatory training and communication efforts: Tee will carry out mandatory training on its policies—including conflicts of interest, RP/IP, and whistleblowing—on all new employees and annual training or refresher courses on existing employees. Tee said it’s also implementing an awareness campaign of its policies, including townhall sessions, training sessions, and the display of information on bulletin boards.

Tee added that the testing of the implementation of the enhanced internal controls and policies and procedures will be ongoing as part of the current three-year internal audit plan.