Saturday 14 February 2015

Hri Kumar: PAP 'cannot go easy on WP even if there is political price'

Hri Kumar Nair (MP, Bishan- Toa Payoh GRC) speech in Parliament on the AGO report on the audit of AHPETC
13 Feb 2015

The AHPETC Saga - The WP Should Do The Right Thing

In my 24 years as a lawyer, I have investigated the affairs of a number of companies, including listed companies, and have authored a few audit or investigation reports. It has been my experience that lapses are invariably caused by human failings. You may have good systems in place, but ultimately, your systems are only as good as the people who run them. There will always be individuals who will ignore or try to get around the rules - sometimes because they are lazy or complacent, sometimes because they are incompetent and sometimes, unfortunately, because they are dishonest. Almost always, they are not questioned or challenged because of the positions they occupy. In every case, losses were suffered.

And so, the findings in the AGO Report are depressingly familiar to me. I have read a number of media and online reports which have portrayed the Report’s findings as “lapses in control”, “inadequate oversight” or “poor management of records”. Indeed, there are many such findings in the Report. But these understate the gravity of the findings.

So I had planned to come to this House to make the point that these are serious matters. But then I encountered something quite bizarre. The people I discussed the matter with kept telling me – don’t attack the WP; they will only get more sympathy; find a way to move on; you have to keep in mind the politics.

I could not get my head around that. Has it come to this? This is a matter involving public funds. How could anyone in good conscience ignore or downplay what the AGO and PwC have found? They are not partisan bodies as Mr Png accepts. Indeed, AGO routinely audits government agencies and does not shirk from highlighting lapses, and members of all parties in this House have rightly scrutinised those lapses and held the Government to account. So, why should the WP be let off easy just because they are the opposition? And why should their residents be forced to accept anything less than full accountability? This cannot be the right way forward.

And sure enough, when Mr Low and Ms Lim spoke yesterday, they tried to downplay the breaches and make excuses for themselves – we are small; we are learning; the system is against us; these are only procedural lapses. That’s playing politics and these excuses are flimsy. Mr Low says that unlike the PAP TCs, the WP cannot find a Managing Agent. But the Bishan - Toa Payoh Town Council does not have a Managing Agent. For the last 19 years, we have been managing the Town Council ourselves. We employ our own staff and ensure that they are trained and have the proper skills to do their job. We are not perfect, but we consistently score an all-green rating in the TCMRs and our accounts are submitted on time and are unqualified. Mr Low also had no Managing Agent when he ran Hougang Town Council. So this is a red herring. Mr Chen Show Mao, a very experienced corporate lawyer, then suggests the rules on disclosing conflicts are unclear and difficult to apply. But that is not correct, and he must know that. Besides, they have professionals they can turn to for advice. And if the rules are so unclear, why is the AHPETC the only TC with this difficulty?

To me, all these are deflections and distractions. What is more important is what the AGO Report actually says. And these findings cannot be brushed off as down to inexperience or a lack of resources. This entire episode raises questions about the competence, accountability and integrity of those who run AHPETC. Minister Shanmugam gave examples yesterday and some are worth re-stating.

First, the appointment of FMSS and FMSI, and their ownership by the Secretary of AHPETC and his wife, who is also the General Manager of FMSS – both hard-core Workers’ Party members. By any standard of corporate governance, the engagement of FMSS and FMSI involve a conflict of interest. Ms Lim suggests that FMSS was appointed because CPG did not want to continue as Managing Agent. But there is still no explanation as to why FMSS was formed 7 days after the election results and before CPG discontinued its services.

But that is not all. There is nothing wrong per se with an engagement which involves a potential conflict of interest, provided it is in the best interests of the organisation, the conflict is fully and properly declared and the risks are managed. The AGO Report makes it clear that all this was not done. The AGO Report notes that PwC Consulting did not see any documentary evidence that the AHPETC Town Councillors had considered the full extent of the conflicts of interests involved and the safeguards needed (para 5.11). We are still waiting for an explanation why the minutes do not reflect that Mr Loh and his wife’s ownership of FMSS was not declared.

But that is still not all. We heard the examples yesterday of how the Secretary, GM and DGM routinely issued works orders and approved payments to themselves. Mr Png says there are oversight committees. But PwC was unable to determine if the Chairman and Vice-Chairmen of AHPETC adequately verified payments to related parties before they signed the cheques (para 5.13). Mr Png says most of these were for recurring payments and must be paid otherwise rubbish will pile up. But again, that’s not the point. They keep missing the point. Just because there is a contract, you pay? Where was the oversight? In other words, what assurance is there that the very people who were in a conflict did not take advantage of their position? Were they paid for actual or proper services rendered? They were petting their own backs with one hand and lining their own pockets with the other. Now they are all tied up with knots.

These are egregious breaches that demand a proper explanation, not excuses. It cannot be a question of inexperience.

Was the appointment of FMSS, the party in conflict, in the best interests of the Town Council? The Report says there was no open competition in FMSS’ appointment and therefore no assurance that AHPETC obtained competitive prices for its services (para 5.10). The Report (para 5.10(b)) then gives an extra-ordinary account of how FMSS’ fees came to be approved. It states that the AHPETC Town Councillors were assured that FMSS would charge about the same amount as the previous contractors. But this was false. The Report notes that the combined fee of the previous contractors was only about $49,000 per month. As it turns out, the fees billed by FMSS for the period from October 2011 to June 2012 averaged $67,000 per month: more than 35% per cent higher. In short, the AHPETC’s own Town Councillors were misled. Ms Lim now says all these were errors.

But such an error is so flagrant that it certainly raises suspicions and warrants a more thorough investigation. . What is important to appreciate is that it is not the AGO’s remit to determine whether dishonesty was involved. And even if we accept that a mistake had been made at the outset, it is hard to believe that 9 months of overpayment to FMSS was not discovered.

But the worse thing for me was what Ms Lim and her team said in response to the AGO Report - that it confirms that no monies are missing, nor has criminal or dishonest activity been uncovered. Mr Low repeated that argument yesterday. This is the consistent line they are selling their residents.

This is blatantly misleading on two counts. First, the Report says no such thing. In fact, the AGO responded that Ms Lim’s “broad conclusion cannot be derived from AGO’s audit”.

What does the Report in fact say? An important element of the cases I mentioned earlier involves piecing together what went wrong and tracing or figuring out where monies have gone to. By and large, this can be done because almost all transactions leave paper trails, and forensic accountants use documents to analyse and reconstruct what happened. But what does the AGO Report say about the state of AHPETC documents? I quote some portions:
- At para 5.13, “PwC was not provided with sufficient documentary evidence for it to independently ascertain the manner and extent of verification of the payments at the cheque-signing stage by the Chairman or Vice-Chairman.”
- At para 5.28, AHPETC did not have a proper system to ensure that documents were properly accounted for and safeguarded. AHPETC was unable to provide supporting documents for the period April to July 2011 to its auditor.
- At para 5.31, AHPETC also could not provide some documents required during the current audit that concerned transactions taking place after AHPETC had taken over from the previous Town Council. In response to reminders, AHPETC indicated that it could not locate some of the documents and was still looking for others, three months after the request for the documents.
- At para 4.1, “until the weaknesses are addressed, there can be no assurance that AHPETC’s accounts are accurate and reliable, or that public funds are properly spent, accounted for and managed.”
In short, the AGO cannot say if public monies have all been accounted for because documents which AHPETC are obliged to keep are missing. So, contrary to what Ms Lim and her colleagues want the public to believe, the AGO Report does not by any stretch confirm that no monies are missing, or that there has been no criminal or dishonest activity. Rather, it says that it does not know because of the way the Town Council has mismanaged its operations. If AHPETC considers this an endorsement, then it speaks volumes about its attitude to managing public funds.

Second, as Mr Shanmugam explained and as any person knows, loss does not only occur when money is stolen. There are numerous instances of possible breach of fiduciary duties by AHPETC officers. We now also know that:
- FMSS was paid far more than other Managing Agents;
- There were substantial over-payments to FMSS, which would not have been discovered but for the audit; and
- an operating surplus of over $3.2m has become a deficit of $700,000. That money is not going to come back. This is something we still have not heard any explanation for.
Could there be more? We do not know because the accounts for FY2013 have still not been submitted.

While lapses can occur in all organisations, my experience has also shown me that what distinguishes a good organisation is its response to discovering those lapses – failings are acknowledged, systems tightened, losses made good and those responsible dealt with.

So, what was AHPETC’s response? First to brush off the many lapses as “mistakes and omissions due to inadvertence, human error, IT system constraints and a lack of experience dealing with certain scenarios.“ Second, to misleadingly spin the Report as an endorsement that there was no wrongdoing.

It was a blasé response from people charged with handling millions in public funds. They did come to this House with a different, more contrite tone. And I acknowledge their saying that they will support the Motion. But that facade fell away when Mr Pritam Singh said that he will answer to residents who ask him questions during his house visit and not to this House. Let me ask Mr Singh this: does this mean you will keep silent if no one asks? How many residents does he think would have read the Report and fully digested its contents? How many will have the accounting or legal training to know the full implications of the Report or to ask the right questions? And is your answer when asked going to be: don’t worry, AGO did not find any wrong-doing?

So, the real question is how is the WP team going to account to their residents? In fact, it is not just their residents because the funds they manage include Government grants which come from all Singaporeans. Make no mistake - if this had been any other company, the directors would have been immediately removed and a Receiver appointed to protect its assets. I do not think anyone will dispute this.

The AGO has explained why it does not know certain things because it has not been shown all the documents. Ms Lim and her colleagues attempts to play down and rewrite the findings in the AGO Report does not change its findings and certainly does not make things right.

If Ms Lim and her team are truly for transparency and accountability, they should help all of us understand what really happened, not obfuscate, deflect and distract. We should not forget that we are dealing with hard earned public funds, and ultimately, the interests and welfare of Singaporeans living in Ajunied, Hougang and Ponggol East. They did no wrong and they deserve better. The answer cannot be business as usual or to simply improve procedures going forward.

Most of all, Ms Lim, Mr Singh and their team need to assure this House that no public funds under their care have been lost, misappropriated or are unaccounted for, and that AHPETC has not suffered loss – in the real sense and not their narrow definition. They have said much in this House – but have carefully avoided saying that. And if they can give that assurance, they must tell us how they are able to, given the findings in the AGO report, the missing documents, their own auditors refusal to sign off on the audit and their own inability to say when the accounts for FY2013 will be ready, despite their claims that everything has been addressed.

And if they cannot give a complete and satisfactory answer to the highly relevant questions Mr Shanmugam posed, then something must be done. It is now close to 4 years since they took over. I do not know if there is a statute of limitations for excuses, but they must have long exceeded it.

What is the right and only thing to do? Do what any responsible company and board of directors in such a situation would do - for AHPETC to commission a complete forensic investigation, and thereafter, undertake legal proceedings to recover all losses and damages suffered by it, regardless of who the prospective defendant may be. The WP team should also procure an undertaking from FMSS and FMIS that they will make all their papers and staff available for that investigation. That is the only way to put this matter to rest. And I really hope, for the sake of the residents, that the result will be that AHPETC has suffered no loss, or will be able to recover all losses. But if WP is not willing to do this, that will say everything.

Last year, we debated in this House what constructive politics means and how we would like to see our political landscape evolve. The Motion reflects an intention and desire to do what is necessary for the good of Singapore and all Singaporeans. But it is not enough for the WP to simply say that they support the Motion. If they mean what they say, they must follow through by doing everything they can to ensure that all the questions raised in this House are answered and this mess is cleared up once and for all.

WP MPs 'have not answered all the questions posed to them'
By Nur Asyiqin Mohamad Salleh, The Straits Times, 14 Feb 2015

THE Workers' Party (WP) has not been forthcoming in addressing the accounting lapses of its town council, People's Action Party ministers and MPs said yesterday.

Several times in the debate, they described the responses by WP MPs as inadequate and insincere, and criticised their attempts to distract instead of coming clean on how the lapses occurred.

The criticism came even as the WP said its MPs took "collective responsibility" for the lapses and would put things right.

National Development Minister Khaw Boon Wan said he was initially cheered when WP chief Low Thia Khiang declared the party would back the motion that Parliament noted "with concern" the Auditor-General's Office (AGO) report on the audit of the Aljunied-Hougang-Punggol East Town Council (AHPETC).

He said that changed when Mr Low launched into "a political speech, playing the victim of an unfair political world created by the Government".

WP MPs repeated objections the AGO had rebutted, said Mr Khaw, adding: "This consistent pattern of evasive behaviour gives us cause to doubt the sincerity of the AHPETC MPs... Instead, there was a certain arrogance, a disdain for having to come and address the House to answer for the adverse findings of the AGO audit."

Mr Hri Kumar Nair (Bishan-Toa Payoh GRC) said the opposition MPs tried to "brush off" its lapses as mistakes due to inexperience and human error.

They also cast the report as saying that no funds were missing and that no criminal or dishonest activity was uncovered, when it did not "by any stretch" say so.

"Rather, (the report) says that it does not know, because of the way the town council has mismanaged its operations," he said.

He added later: "They did come to this House with a different, more contrite tone... But that facade fell away when Mr Pritam Singh said that he will answer to residents who ask him questions during his house visit and not to this House."

Mr Singh (Aljunied GRC) had said on Thursday that the WP MPs would answer any questions that residents might have.

Yesterday, Mr Nair asked several times whether the WP would come clean and answer all questions asked of them in Parliament.

Mr Singh's response: "The WP members have come to Parliament and are taking collective responsibility... We are not here to make excuses."

To this Mr Nair said: "They have not answered all the questions that have been posed to them, and they are certainly not answering the questions they don't want to answer."

WP must now walk the talk, take action

AHPETC paid Managing Agent estimated S$1.6m a year more than other TCs: MND

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