Parliament To Debate Lapses Highlighted in AGO’s Audit Of WP’s AHPETC

Parliament will sit today, with the Auditor-General’s report on the audit of the Aljunied-Hougang-Punggol East Town Council (AHPETC), as well as the calculation of public transport fares on the agenda.

A total of 45 questions were submitted by Members of Parliament for this sitting: Thirty-three questions for oral answer and 12 for written answer.

Minister of National Development Khaw Boon Wan will move a motion on the Auditor-General’s report on the AHPETC, which flagged major lapses in “governance and compliance”.

The Ministry of National Development will call for a stronger legislative framework for town councils, in order to hold those responsible for their good management to proper account, and will also call on all Town Councils to uphold high standards of accounting, reporting and corporate governance to safeguard residents’ interest.

The Members of Parliament have also submitted questions on a wide range of topics, covering childcare centres, public transport fees, the Productivity and Innovation Credit scheme and the rental or sale of HDB flats, among others.

The State Lands (Amendment) Bill and the Land Acquisition (Amendment) Bill will be introduced during this Parliament sitting. The second reading for the Deep Seabed Mining Bill will also be deliberated.

The report by the Auditor-General following its audit of the Aljunied-Hougang-Punggol East Town Council (AHPETC) revealed that key individuals running the town council also have stakes in companies it hired to manage its estates.

Experts have said that in cases where there are such conflicts of interests, a possible solution may be to have an independent body overseeing some of the town council’s management processes, such as when it calls for tenders.

Lapses in the management of related party transactions were among the findings in the Auditor-General’s report that was released on Monday (Feb 9).

The Auditor-General’s report found that AHPETC had hired two managing agents to carry out estate maintenance services. One of these was FM Solutions and Services Management (FMSS), which was first set up in May 2011.

FMSS’ managing director, general manager and two deputy general managers are shareholders in the company. They are also on the management board of the AHPETC – holding the position of secretary, general manager and deputy general managers.

AHPETC’s secretary also owns FM Solutions and Integrated Services (FMSI), a sole proprietorship. FMSI was engaged as a managing agent to manage precincts under the Hougang Town Council from April 2011 to June 2012.

Among the lapses highlighted in the Auditor-General’s report, it was found that a fee of S$1.28 million paid to the two companies for services during the financial year of 2012 to 2013 was not recorded in its financial statements.

Invoices made to the two companies were also issued and signed by the town council’s general manager and secretary, who were acting in their capacity as director of FMSS and owner of FMSI respectively.

The report said the town councils did not adequately manage the conflicts of interests that arose.

Associate Professor Mak Yuen Tee, who is with the National University of Singapore Business School, said: “The minimum is to declare and make people aware that you have those conflicts, to then not be involved on both sides of the transactions. In other words, you should not be verifying the payments and then approving the payments.

“Ideally, you want a situation where you are not sitting on both sides – either you step off the town council or you do not get involved with the managing agent.”

A possible alternative is to have an independent body overseeing some of the management processes like tenders for projects where there might be potential conflicts of interests.

Assoc Prof Mak added: “If you need estate management services, one issue would be what are the available options out there. If you call a tender, are you able to get different organisations to participate in the tender?

“I am involved in organisations where we call tenders and sometimes you do not have enough options and you end up selecting from a list of one. Ideally, you do not want that to happen but sometimes it will. If that happens and you end up in a related party situation, then that is where you need to take steps to mitigate that by involving people who are independent to review and to approve.”

Another solution is to develop or adopt a framework that can help the town council improve its management processes and manage risks.

Mr Sidney Lim, managing director of Protiviti Singapore, a company that deals with corporate governance, said: “The framework essentially looks at the three different risks that organisations face – the compliance risk, operational risk and reporting risk. And what is in the framework is a series of processes as well as components to help them manage and improve on corporate governance.”



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