National Development Minister Khaw Boon Wan moved a motion in Parliament on Thursday (Feb 12) to “note with concern” findings from the Auditor-General’s Report on the Aljunied-Hougang-Punggol East Town Council’s (AHPETC) financial accounts.
Mr Khaw noted that “AHPETC have not submitted their reports on time ever since their formation in 2011”. The first report, delivered after a delay of more than four months, was a qualified one, with the Auditor making a “Disclaimer of Opinion” – which means that the auditors are unable to state that the financial statements provide a true and fair account of the TC’s financial position, said Mr Khaw.
AHPETC’s reports for financial year 2012 were also submitted after a delay, and the auditor also submitted a Disclaimer of Opinion, noted Mr Khaw. There were nine new issues of pressing concern, in addition to four areas identified by the auditor in the previous year, which remained unresolved contrary to AHPETC’s assurance to MND, he added.
As stewards of public funds, all Town Councils must keep proper accounts and records, and maintain adequate control over their assets, said the minister.
The AGO’s report is a “sad commentary” on the state of affairs at the AHPETC, said Mr Khaw. The AGO found that “AHPETC’s financial and accounting processes and systems are unreliable and their accounts, inaccurate”, he added.
“Things can only get worse” because the bulk of the AHPETC’s lift replacements – about 90 per cent of its 1,870 lifts – are due after 2025, said Mr Khaw, as “if it continues to miss contributions to its sinking fund, the residents will eventually be living in blocks where lifts are unsafe or unreliable, and other infrastructures often break down”.
AHPETC needs to build up its sinking fund, said Mr Khaw: “There is always the temptation, when a Town Council is financially strapped, to postpone saving, and say it will make up the shortfall later, or worse, to put its hand into the cookie jar, to draw from the savings to satisfy immediate needs.”The Town Council also did not “adequately manage the conflicts of interests of related parties arising from ownership interests of its key officers,” said Mr Khaw. “It was very convenient. Husband issued payment voucher, wife issued payment.”
Mr Khaw said the AGO’s report showed that AHPETC has close to S$27 million worth of contracts with its two related parties, FMSS and FMSI, and of these, close to S$6 million was given without tender.
“AHPETC’s repeated failure to do so shows a disregard for its obligation to account to its residents; and also disregard for this Parliament of which the AHPETC’s Chairman, Vice-Chairmen and their fellow MPs have solemnly sworn to serve in,” said Mr Khaw.
The Auditor General’s findings confirm that something is “seriously wrong” at the Town Council, said Mr Khaw: “They paint a picture of financial mismanagement, incompetence and negligence in corporate governance.”
Mr Khaw said that by law, Councillors and Members of Parliament are “ultimately responsible” for everything in the Town Council, and they cannot delegate their responsibility away to the Managing Agent, or others. But “throughout the AHPETC saga, we have found the MPs running the AHPETC to be evasive, unresponsive and misleading,” he said.
“Financial incompetence aside, failure to carry out critical cyclical maintenance work is an even graver safety concern,” said the minister, highlighting the six-month delay of AHPETC’s FY2013 cyclical maintenance works report.
On the appointing of a related party, FMSS as a Managing Agent, Mr Khaw asked: “Why did AHPETC not disclose these related party transactions and take steps to prevent the risk of abuse when the companies it gave contracts to were owned by its key officers?”
He also questioned what the MPs of AHPETC were doing “throughout this sad saga”, saying that the MPs of AHPETC were consistently “side-stepping and avoiding responsibility”.
MND expects AHPETC to follow up and remedy the problems and weaknesses listed in the AGO Report, said Mr Khaw. MND has withheld the FY2014 S&CC grant from the AHPETC. The money has been put aside in a separate deposit account, and will be paid out after the problems are fixed.
The Ministry will also address the weaknesses in the current Town Council regulatory framework. “We can no longer take the light touch and assume that all MPs running Town Councils will be responsible,” said Mr Khaw. A proper system of enforcement and penalties will be instituted.
Mr Khaw also noted that it is not a Town Council’s business to organise and operate trade fairs, as it would be unfair to existing HDB shops. AHPETC was found guilty of holding a festive trade fair, without a permit, in 2014.
MND’s regulatory oversight will be strengthened, with powers to collect information and conduct investigations, and a stronger penalty framework, said Mr Khaw. Town Councils need competent, honest people and proper systems to serve their residents well, added Mr Khaw. “Good intentions and bland assurances alone are not sufficient … Compared to the sound and fury of politicking, governing is long, tedious and unglamorous work.”
WORKERS’ PARTY SUPPORTS THE MOTION
The Workers’ Party supports the motion, said party chief Low Thia Khiang.
Mr Low also addressed the “misconception that the Managing Agent was given the contract without tender”, saying the fact remains that AHPETC finds it hard to attract a Managing Agent as many Managing Agents serving PAP Town Councils appear unwilling to serve a non-PAP Town Council.
He said that any Opposition party aspiring to take over the Government must first build an army of civil servants, calling it a “strange situation”.
He called upon the Government to protect resident’s interests during the transition from one party to another, and said that the process of transition for Town Councils should be depoliticised.
Mr Low also said that the AHPETC episode should be taken in proper perspective, as that the Town Council’s performance in other aspects is comparable to others.
The Workers’ Party chief ended his speech saying that the party will continue to serve AHPETC residents to the best of its ability, despite a “challenging political climate”.
‘KEY IMPROVEMENTS AND UPDATES’ MADE: SYLVIA LIM
The AHPETC has made the needed corrections and payments for the sinking fund, said AHPETC chairman Sylvia Lim. She added that the money not transferred to the sinking fund was not lost, and that “the Town Council accepts that it should have transferred the full amount each quarter.
She said that the AHPETC has never disputed that the Town Council and the Managing Agent are related parties, saying that the agent has no decision-making powers in award of tenders. The tenders are awarded by a separate committee, said Ms Lim.
Ms Lim said that FMSS was only appointed as a transitional Managing Agent following the General Election in 2011, but when open tenders were called for a Managing Agent in 2012, only FMSS tendered. Still, AHPETC has various structures in place to oversee the work of the Managing Agent, she said.
The AHPETC chairman also suggested that MND “makes it clear which parties are considered related parties”.
Ms Lim also touched on the unintended overpayments to the Managing Agent over the nine-month interim period, saying that the sum has been paid back. “I bear personal responsibility,” she said.
For payments made to the Managing Agent, Ms Lim said monthly reports were churned out based on the performance and time taken. The AHPETC has started to introduce more oversight on the Managing Agent and processes have been changed, added Ms Lim.
She maintained that it was not the case that the Town Council disrespected residents and Parliaments by not providing information to the AGO, saying that AHPETC has done its best to provide whatever information they could to auditors. Ms Lim admitted that they were late with some information for the cyclical maintenance, but she said that they were not ignoring it and that some information has been submitted.
There was no finding that AHPETC was dishonest or falsified records in the audit, said Ms Lim.
AUDIT SERVES AS A WARNING TO ALL TOWN COUNCILS: SAM TAN
The AHPETC audit serves as a warning to all Town Councils, said Minister of State, Prime Minister’s Office & Ministry of Culture, Community and Youth Sam Tan. He also pointed out that Workers’ Party Members of Parliament have frequently criticised the PAP’s transparency in part election rallies.
Mr Tan also touched on potential conflicts of interest, saying that it is hardly in the public interest if the person who generates and approves an invoice is the same person.
He said that Town Councils need to be held responsible when it is at fault, pointing out that the current Town Councils Act doesn’t allow this.
The Minister of State, citing Confucious, also called Members of Parliament to apply high standards to themselves. He pointed to Workers’ Party’s Chen Show Mao first Parliament speech in 2011, calling Mr Chen’s words “righteous and powerful”, and saying that he was looking forward to hearing Mr Chen’s views on the AHPETC audit.
Mr Chen explained that all payments from AHPETC required the signatures of both Sylvia Lim and Mr Png Eng Huat.
AHPETC PAYMENT APPROVAL PROCESS ‘UNLAWFUL’: SHANMUGAM
Law Minister K Shanmguam said that the AHPETC’s payments were made without “transparency and accountability”, adding that there was “no discussion of conflicts of interests”.
Mr Shanmugam called Managing Agent FMSS a “convenient vehicle”, to which “millions of dollars went from the Town Council to FMSS”. He also distributed a graphic to Parliament, which depicted the payment approval process for the AHPETC, calling the process “unlawful”.
The ownership interest and control of the Managing Agent is what “distinguishes AHPETC from other Town Councils”, said the Law Minister.
“This is not just a question of negligence, or inexperience,” he added.
The Law Minister also said the payments that the Managing Agent were verifying and and approving on behalf of the Town Council “were going into their own pockets”, calling it a “real conflict” of interest.
Mr Shanmugam also distributed a table in Parliament that compared Managing Agent rates across the various Town Councils. FMSS now charges “double what everyone else” does, he said.
“The rhetoric from the WP is always about helping the poor man,” said Mr Shanmugam. “The reality is that WP took money from the man in the street and gave it to (Managing Agent) FMSS.”
The behaviour of the WP, which “claims to champion transparency and accountability”, was “shocking”, said Mr Shanmugam. “Why doesn’t the Town Council give proper answers instead of playing hide and seek?” he asked.
AHPETC’s actions were “not negligence” but an “active decision to suppress”, said Mr Shanmugam. “It raises the issue of integrity.” He added that the Town Council’s “failure to disclose the details of its contracts with FMSS” in FY2012/2013 was “in breach of the Singapore Financial Reporting Standards”.
He asked if AHPETC chairman Sylvia Lim or any Town Councillor can “honestly say that no monies have been lost” from the Town Council, asking “overpayment to related party is not loss?”
“The law takes an extremely strict view on related party transactions, on conflict of interests,” said the Law Minister. He said the money was not lost through accident, but that the structure was “approved by at least some of the Town Councillors”.
“The basic point is that while the Town Council lost money, FMSS and FMSI seem to have made money,” said Mr Shanmugam.
The Law Minister called on WP chief Low to “stop playing the victim card”, and said that it was time for each Town Councillor to “come clean before this Parliament”.
He asked if Mr Chen knew about the payment structure, saying that if Mr Chen knew all the facts, he “could not have agreed to this structure”. He added that the WP’s Pritam Singh makes “fierce speeches on transparency”, but has been “anything but transparent”, and that FMSS got the contracts because they were friends of Mr Low.
“The AGO Report makes sad reading,” said Mr Shanmugam. “Basically, the Town Council is in shambles.”
“So many things are so disastrously wrong,” he added. “There has been a complete dereliction of duties.”
“We have to ask the WP to come clean and explain yourselves to the public,” said Mr Shanmugam in closing. “Your residents deserve some real honest answers.”
WP REJECTS LAW MINISTER’S ASSUMPTION
WP’s Sylvia Lim and Pritam Singh both rejected Law Minister K Shanmugam’s statement.
“We reject the assertions that the appointment of the Managing Agent was to benefit our friends,” said Ms Lim. She also said that it was premature for Mr Shanmugam to accuse the WP of not giving answers, as some MPs were yet to speak.
Mr Singh said that his duty was to AHPETC residents, and that he would answer questions if they were posed by a resident, to which Minister of State Sam Tan said: “I’m an Aljunied resident. You can give your answers to me.”