Sunday, 29 November 2015

Appeal court orders WP-run AHPETC to appoint accountants to fix lapses

Appointment, which is subject to HDB's approval, is to fix lapses at WP town council
By Walter Sim, The Straits Times, 28 Nov 2015

The Court of Appeal yesterday ordered the Workers' Party-run town council to appoint accountants, subject to the approval of the Housing Board, to fix lapses uncovered by an audit this year.

In doing so, Singapore's highest court said it had to "focus sharply on what Aljunied-Hougang-Punggol East Town Council (AHPETC) is obliged to do and has not done".

It noted various lapses in governance and accounting, and said that "on the facts before us, there is no real dispute that AHPETC has not fully complied" with its obligations under the Town Councils Act and guidelines under the Town Councils Financial Rules.

The accountants will help to identify outstanding lapses; advise on steps to be taken to fix the lapses; submit monthly progress reports to the HDB, until they are "reasonably satisfied" that AHPETC is compliant with the law; and look into whether past payments were improper and should be recovered.

The appeals court said the HDB must consent to the identity and, if need be, the terms of reference of the accountants so as to "ensure transparency and efficacy in the execution of these duties".

On its part, the HDB should not "unreasonably withhold" consent.

In the event of any dispute over this, it added, either party can seek assistance from the court.



The court also ordered the town council to make all its outstanding transfers to the sinking fund within three months.

The town council must also decide, by then, whether to accept the grants-in-aid previously offered by the Minister for National Development subject to conditions, so as to make the sinking fund transfers.

Otherwise, it is to take other steps to raise funds, such as increasing service and conservancy charges or liquidating investments.

The 72-page judgment yesterday was delivered by Chief Justice Sundaresh Menon, who heard the case in August with Judges of Appeal Chao Hick Tin and Andrew Phang.

In May, the Ministry of National Development (MND), which has withheld $14 million in government grants from the AHPETC, appealed against a decision by the High Court, which rejected MND's application for the court to appoint independent accountants to safeguard the grants to AHPETC.

The Court of Appeal yesterday upheld the High Court's dismissal of that MND application. CJ Menon wrote that under the Town Councils Act, "the court can only make orders compelling the Town Council to perform its statutory duty. It cannot appoint its own agents to perform these powers, duties and functions of the Town Council".

The High Court had also ruled in May that only the HDB or residents - not the MND - could take legal action against a town council if it fails to perform its duties.

The appeals court said it agreed with the High Court on this. It thus allowed an application by the HDB, made in June, to join MND as a plaintiff in the case - a move that was opposed by the AHPETC.

One of the issues at the crux of the appeal hearing was how much power the court has when a town council is in breach of its duties.

Ms Aurill Kam, the Attorney-General Chambers' deputy chief counsel for litigation, who acted for the MND and HDB, had argued that the court can not only compel a town council to perform its duties, but also "do whatever is necessary" to remedy a breach of duty.

Therefore, the court could appoint the independent accountants as its "agents".

Mr Peter Low, who represented AHPETC, said the court could only ask the town council to abide by the law - and make declarations when it had failed to do so.

The appeals court disagreed with both parties.

"It is inconceivable that the court could be put in such a position in a matter that involved an aspect of local government," CJ Menon wrote, adding that Mr Low's contention "reduced the court to an irrelevant and ultimately toothless observer".

If the court were to appoint accountants to the town council, it would effectively "substitute" AHPETC by having accountants "step in and do what is needed to secure the performance of the relevant duties".

What the court could do, however, is compel the town council to perform its duties by court orders.

CJ Menon noted that AHPETC has appointed an independent consultant, Business Assurance, to address the lapses, although the town council has yet to fully carry out its duties.

"There is no reason why AHPETC should not or cannot engage external consultants to assist it in fulfilling the statutory duties and responsibilities that are incumbent upon it," he wrote. "The various interests at play would be adequately secured by an order requiring AHPETC to make the necessary appointment itself."




 WATCH: Don’t play a game of smoke and mirrors, says Minister for Law and Home Affairs K Shanmugam Sc about the AHPETC saga in this exclusive interview.
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Key decisions

What town council must do

• Make all outstanding sinking fund transfers within three months from yesterday; rectify breaches and contraventions of the Town Councils Act.

• Decide whether to accept grants-in-aid made by National Development Minister or take other measures to raise funds for the transfers.

• Appoint accountants subject to the consent of the Housing Board.

Accountants' roles

• Identify outstanding lapses.

• Advise on steps to fix lapses.

•Produce and submit monthly progress reports to HDB until it is reasonably satisfied the town council is fully compliant with the law.

•Look into whether any past payments made were improper and should be recovered.





MND tells APHETC it will disburse $14m grants once safeguards in place
By Walter Sim, The Straits Times, 28 Nov 2015

The $14 million in operating grants withheld from the Workers' Party (WP) town council will be disbursed once safeguards are in place, the Ministry of National Development (MND) said yesterday.

In a joint statement with the Housing Board, both parties said they welcomed yesterday's Court of Appeal ruling that ordered the Aljunied-Hougang-Punggol East Town Council (AHPETC) to appoint accountants who are subject to the HDB's approval.

The judgment is "in the interest of residents and will improve accountability of public funds".

They also welcomed a statement by the WP's newly reconstituted Aljunied-Hougang Town Council (AHTC). The WP lost Punggol East to the People's Action Party in September's General Election.

AHTC chairman Pritam Singh said the town council fully accepts the judgment and will comply with all the orders the court made.

"The town council acknowledges its role as a guardian of public funds," he said. "We assure the MND that government grants or grants-in-aid are used solely for the upkeep of the town and in the interests of all residents."

He added that AHTC will work with MND to facilitate the prompt transfer of the outstanding grants, so that AHTC can make the outstanding sinking fund transfers.

On the question of the service and conservancy charges (S&CC) grants, the MND said it respected the court's view that it is for the minister to specify conditions under which the grants will be disbursed - and for the town council to decide if it will accept the grants.

The ministry said it "stands ready to re-engage AHTC" so that the grants can be disbursed soon, with the necessary safeguards in place. These include the appointment of the accountants to ensure that funds are properly used.

"MND has been and remains prepared to disburse the S&CC grants to the town council," it said.

This is the latest development in a saga which started in February this year, when a report by the Auditor-General's Office flagged serious accounting and governance lapses at AHPETC.

The Court of Appeal noted some of these lapses in its judgment yesterday - which MND and HDB also cited in their statement.

Among other things, the court noted lapses in internal control, as well as clear conflict of interests involving key officers of AHPETC, some of whom were also directors and shareholders of FM Solutions and Services, which was previously the town council managing agent.

The court said it did not appear that AHPETC "had (or has as yet) seriously considered whether and, if so, what steps need to be taken to recover possible sums due from wrong payments". It also said AHPETC did not have a system to accurately monitor the scale of S&CC arrears, and its accounting systems and procedures were inadequate.




HDB questions the experience and expertise of AHTC's choice of accountant to fix governance lapses. The Chief Justice ordered both parties to bear legal costs of about S$50,000 for the case.
Posted by Channel NewsAsia Singapore on Thursday, January 7, 2016





tdy.sg/1mEVEON - The chairman of the Aljunied-Hougang Town Council “presented a selective and incomplete account” of the...
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* WP-run town council told to give more info on accountant
Appeals court acts to resolve dispute between WP town council and HDB over audit choice
By Chong Zi Liang, The Straits Times, 8 Jan 2016

The Court of Appeal yesterday ordered the town council run by the Workers' Party (WP) to provide more information on the accountant it wants to hire, as part of a move to resolve a disagreement with the Housing Board on which accountant it can hire to look into its books.

The Aljunied-Hougang Town Council (AHTC) had applied to the apex court for a decision on the matter. It wanted to appoint its current accountant, Business Assurance, but HDB objected as it felt the firm did not have the required experience and expertise.

Instead, the HDB proposed that one of the four major accounting firms - Deloitte & Touche, Ernst & Young, KPMG and PricewaterhouseCoopers - be appointed.

The town council was ordered by the Court of Appeal last November to appoint accountants to look into its financial lapses.

At yesterday's hearing, Chief Justice Sundaresh Menon noted that AHTC had failed to provide certain information on its preferred accountant - such as its experience in auditing public institutions and in conducting forensic work - that HDB had asked for.

The three-judge court, which included Justice Andrew Phang and Justice Chao Hick Tin, directed AHTC to provide the information by Monday.

HDB has to review the data by Wednesday. Hence, the next hearing is expected to be on next Thursday or Friday.

According to court documents, Business Assurance was AHTC's choice because it had worked with the town council for two annual audits and knew its financial management issues well.

The town council added that Mr Alex Chai, who heads Business Assurance, had "extensive experience" as a chief financial officer of listed companies and had worked at accounting firms such as KPMG and Grant Thorton. Business Assurance was also a less costly choice than the Big Four accounting firms.

Can you believe The Workers' Party? In 2011, they boasted about FMSS' 20 years experience in estate management. 4 years...
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But HDB has doubts about Business Assurance. It noted the firm, registered in February 2014, has been operating for less than two years. Mr Chai's resume also did not state how long he had spent working at the various accounting firms cited, and the details of the forensic audits he was said to have done in the United States.

HDB also said it is open to considering other firms with a proven track record, and is not insisting that AHTC pick one of the Big Four.

Another matter before the appeals court was the scope of the work of the accountants.

Both sides agreed that the accountants should focus on issues flagged in the report by the Auditor-General's Office (AGO) and the audit reports of financial years 2013/2014 and 2014/2015.

The AGO report, released last February, highlighted "major lapses" in financial governance. Independent auditors that the town council hired were unable to verify its accounts.

The appeals court also set an Aug 31 deadline for the prospective accountants to submit a report on whether any past payments of the town council were improper. On the issue of costs, it ruled each party should bear its own legal fees.

After the hearing, AHTC said the court had not given the accountants "carte blanche to look into the town council's affairs".

It added that, in considering the issue of costs, the court had rejected HDB's argument that AHTC's conduct in the case was "egregious and somehow improper".


They said AHTC had failed to disclose that it had tried to seek legal costs from MND and HDB.

Also, the court had disagreed with AHTC's bid to limit the accountants to reviewing only the lapses identified by the AGO and improper payments relating to its former managing agent, FM Solutions & Services and FM Solutions and Integrated Services, they added.




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