MND Legal Counsel: AHPETC ‘Technically Insolvent’

The Aljunied-Hougang-Punggol East Town Council (AHPETC) is “technically insolvent” and its chairman Sylvia Lim had been “economical with the truth” when she said in Parliament in February that the town council has been making transfers to its sinking fund for the 2014 financial year.

These were the charges levelled today (May 5) by the Ministry of National Development’s (MND) legal counsel — and were unchallenged by AHPETC — during the second and final day of a hearing on the ministry’s application to the courts to appoint independent accountants to safeguard government grants to the town council.

AHPETC had not made payments to the sinking fund for two quarters of FY2014, even though these were “mandatory obligations”, as the Attorney-General’s Chambers deputy chief counsel for litigation Aurill Kam, who is representing the MND, put it.

The court had heard that AHPETC’s income from service and conservancy charges (S&CC) was insufficient for it to make the quarterly sinking fund transfers. If the town council had made the transfers as required, it would not have enough money, Ms Kam noted. “From that point of view, it would not be an overstatement to say that (AHPETC) is technically insolvent,” she said.

The MND has withheld the service and conservancy charges (S&CC) grants to AHPETC for financial years 2014 and 2015. Its application was meant to safeguard fresh grants disbursed, following a report in February by the Auditor-General’s Office (AGO), which found major lapses in AHPETC’s financial management, governance and compliance with the Town Councils Act.

“There is a suggestion that (MND’s application) is unprecedented. We submit that the adverse findings in the AGO report is unprecedented. The conduct of the defendant is unprecedented. Their response to calls to do the responsible thing is unprecedented,” Ms Kam said.

She added: “We say that unless these independent accountants are appointed, no serious steps will be taken to credibly review whether there has been any wrongful payment, breach of duty or unlawful conduct.”

Referring to Ms Lim’s comments in Parliament, Ms Kam said: “The reality was that at that time, the January 2015 transfer had already been missed. This wrong impression was reinforced when the defendant informed this court on March 27 this year, that it did not need fresh S&CC grants urgently, and could do without the funds for the next three months.”

AHPETC lawyer Peter Cuthbert Low had argued on Monday that the courts do not have the power to assign independent accountants to co-sign payments a town council makes using government grants, and that the Town Councils Act was intended to give elected Members of Parliament and town councillors full autonomy in managing town council funds — and to be accountable only to their residents.

MND had proposed that the court appoint Mr Ong Chao Choon and Mr Chan Kheng Tek from accounting firm, PriceWaterhouseCoopers (PwC), to be the independent accountants, or any other people the court deems fit and proper.

Today, Mr Low objected to the ministry’s nomination of the two individuals because PwC was involved in the AGO report. “So my client’s position is that there is a suspicion of bias,” said Mr Low. “We are not saying that… they will be biased, but because they came from the same auditing firm and PwC was the firm which was engaged.”

He added: “They need not come with preconceived notion, but as long as there is a perception…” Instead, the town council proposed that a “neutral” third party such as a retired judge or a Senior Counsel should nominate the independent accountants.

To address weaknesses in its accounting practices, AHPETC has hired Audit Alliance as its auditors and sole-proprietorship Business Assurance as its financial consultant. Lawyer Terrence Tan, who is also representing AHPETC, said the town council is on track to submit its overdue accounts for the FY2013/2014.

Judgement was reserved. After the hearing, Ms Lim told reporters that the town council looks forward to a fair outcome.



Leave a Comment

Your email address will not be published. Required fields are marked *