In the 1940s and 1950s, Singapore had a thriving movie industry. This was due mainly to the movie entrepreneur Sir Run Run Shawwho, together with his brother Runme Shaw, founded a company, Shaw Organization, which played a pivotal role in establishingSingapore ;s film industry and also brought many iconic movies from Hollywood and Hong Kong to Singapore;s silver screens.
One of Shaw Organization most important contributions in Singapore was in providing a launch pad for Malay films in the late 1940s whenthe Shaw Brothers set up a Malay film studio at Jalan Ampas. More 200 Malay films were produced ushering in the Golden Age of MalayCinema.
That era in Singapores history faded away in the 1960s.
In 2000, with renewed interest in movie making among the younger generation of Singaporeans and seeing the economic potential, thegovernment set up a Movie Promotion Agency (MPA). The potential lies in Singapore being multi-cultural and its movies in the Englishand Chinese language would have appeal in both regional and international markets.
The recent success of a few Singaporean films at the Cannes Festival in 2011 to 2013 gave the sector a much needed boost. MPA wasset up as a government funded body with an annual grant of $20 million. In the 13 years since it was set up, MPA grew at a fast rate interms of its activities and organizational size. Today, MPA is receiving from the Government an annual operating grant of $30 million withseparate grants given for infrastructure construction.
The main activities of MPA are as follows:
1. Giving seed grants to start-up movie companies.
2. Investment in movie companies
3. Investment in overseas movie projects to help secure participation by Singapore companies, e.g. set production, post-production,lighting, costume design.
4. Giving of training scholarships.
In the last three years, MPA expanded the scope of its mission to include animation and digital media, including computer games. In thisconnection, provided grant for the setting up of a concept art school with focus on both movie and games related concept art skills.Twenty artists graduate from the school each year after completing its one year diploma program.
MPA Organization
From a modest staff strength of 30 when it was formed in 2000, MPA now has about 150 staff including 12 who are stationed at MPA;soverseas offices in Los
Angeles (LA) and Shanghai.
Under its CEO, MPA ;s organizational structure has 6 divisions, namely:
1. Central Administration
2. Grants and Awards Division
3. Industry Development & Research Division
4. Marketing & Events Division
5. Infrastructural Projects Division
6. Facilities Management Division
Central Administration looks after finance, HR, PR and general administration matters, including routine procurements. Grants andAwards Division administers the giving of grants and awards. The Industry Development & Research Division monitors industry trendsand it oversees the operation of the LA and Shanghai offices. Marketing & Events Division takes care of all marketing activities including
the promotion of movies and digital media as a career choice. The Infrastructural Projects Division handles all major infrastructuralprojects. The Facilities Management Division takes charge of the operation and maintenance of all physical facilities of MPA including amovie production facility at Buona Vista area set up with assistance from Mediacorp.
Internal Audit
MPA has an internal audit function which is outsourced to an auditing firm. Once a year, an audit team from the audit firm would carry out an audit which focuses on compliance issues. The audit typically involves two weeks of field work and two weeks of analysis and the preparation of the audit report which gives the findings and recommendations where appropriate. The audit report would be submitted to the Audit Committee chairman. The CEO would be required to respond to the audit report and following up on directions given by the Audit Committee pursuant to the audit report.
Future Directions of MPA
MPA has received approval from its supervising Ministry to further expand its operations. The annual funding it receives would be increased by 20%. Among its various plans relating to expansion of its operation, MPA will be increasing the capacity of the movie production facility by about 50%. This will involve building an extension to the current facility at Buona Vista.
Past Issues Regarding Use of Money
MPA had been receiving complaints about its operations in particular its use of public funds over the years. Three complaints as described below were of particular concern to MPA;s Chairman. The first concerns MPA;s grant scheme for start-up movie companies. Since the Scheme was started in 2003, a total of about $40 million worth of grant had been disbursed. There had been allegations of impropriety in the awards of grants to certain companies. The allegations were mostly related to conflict of interests in the evaluation of grant applications. For example, a member of an evaluation panel was a shareholder of the company that the panel evaluated and endorsed for award of a grant. Secondly, there was a complaint that MPA renovated a disused government building at $2m for use as its office in 2005. However, 3 year later it moved to a new building at Fusion-polis in Buona Vista, thereby allegedly wasting the money spent on the renovation. Thirdly, it was brought to MPA;s Chairman attention that the business recovery system which MPA acquired in 2010 at a cost of $1.5 million was found to be highly ineffective because of design problems and the vendor had been ineffective in trouble-shooting and taking corrective action. As a result the system hardware was now being used for other purposes.
Meeting with Board Chairman The Board Chairman felt that it was time that MPA has an internal audit department in light of its growing annual expenditure and complexity of its operations. He has not been particularly pleased with the extent or rigor of internal audits carried out so far. The chairman approached the National Audit Office (NAO) for assistance in advising on the setting up an IA department. You are a Group Director of the NAO. NAO assigned you to provide the necessary advice to the Chairman. At your first meeting with him, the Chairman explained that he was concern about the various complaints MPA had been receiving regarding various areas of its operations. While all complaints have been addressed and some improvements in systems were made, he was concern that MPA such complaints may recur. He was also concerned that MPA may not be making the best use of the annual funding it received from the government (currently $30m a year), especially in procurement and the giving of grants to start-up movie companies.
The Chairman pointed out that most MPA officers including those in senior ranks are from the commercial sector where what ultimately count are bottom lines. But since as a public sector agency, MPA;s performance is not measured by the bottom line, spending may be not sufficiently prudent. In this regard, he had observed that when proposals were made by MPA;s management, MPA;s Board members often have had to ask whether alternatives that are more cost effective had been considered. The Chairman said that he is aware from his own experience on many boards that IAs generally focus only on compliance issues. He feels strongly that an IA should also have the role of looking into whether public funds are used in the best manner to deliver the desired and intended outcomes. The Chairman would like your advice on setting up an IA. He said that the head of the IA should ideally be from within MPA so that it would be easier for the IA to get started, but he is open to other suggestions. He says that from among existing staff, the Deputy Head of Finance (under Central Administration) and the Head of Development projects (under Infrastructural Projects Division) who has previously worked in an audit firm as team lead) are possible candidates. The Chairman asks that you provide him with a written proposal with recommendations which he would table at the next Board meeting for consideration. Among other things, the proposal should cover the Terms of Reference (TOR) of the IA, its staffing and any specific requirements to ensure that the IA is effective. The CEO who was also present at the meeting added that there should also be KPIs set for the IA. In this regard, he suggested that one of the KPIs be the number of IA recommendations implemented within a year. The Chairman asked that this suggestion be considered in your proposal.
Question 1
a. From the audit perspective, what are the main risks areas in MPA?
b. Propose a set of Terms of Reference (TOR) for the Internal Audit Department?
c. What are necessary ingredients for an Internal Audit Department to be effective?
d. What KPIs, if any, would you propose for the Internal Audit Department of MPA? In this regard, what do you think of the CEO;ssuggestion?
Question 2
Prepare a formal proposal to be submitted to the Chairman of MPA (approx length: 2 pages).