Friday 13 February 2015

Khaw Boon Wan on AHPETC incompetence: In the good old days, Japanese CEOs may even kill themselves

A sad commentary on state of affairs in town council: Khaw
National Development Minister Khaw Boon Wan spoke on MPs' responsibilities in running town councils in Parliament yesterday.
The Straits Times, 13 Feb 2015

THE Auditor-General's Office's report has set out clearly its approach and its findings. It is a sad commentary on the state of affairs at Aljunied-Hougang-Punggol East Town Council. In summary, the Auditor-General's investigation has uncovered major lapses. The Auditor-General has found that:
- AHPETC did not transfer monies to its Sinking Fund as required by law;
- AHPETC had inadequate oversight of related party transactions involving ownership interests of key officers;
- AHPETC had weak internal controls and systems to monitor payments received and made; and
- AHPETC had no system to safeguard important documents or keep proper accounts as required under law, and failed to provide key information required by its auditor and the Auditor-General.
The Auditor-General's findings confirm that something is seriously wrong at the AHPETC. They paint a picture of financial mismanagement, incompetence and negligence in corporate governance.

If an auditor makes such a finding on a listed company, it will immediately cause consternation among the shareholders, and a call for the removal of the CEO and the board of directors.

In Japan, the chairman and CEO would call a press conference, take a deep bow and, in the good old days, they may even commit hara-kiri.

Where there are breaches of the Companies Act, both the company as well as the individuals responsible could be charged, and if found guilty, punished with fines and/or jail terms for the individuals.

Town councils (TCs) are not regulated under the Companies Act or the Charities Act. Parliament decided in 1989 to give elected Members of Parliament more authority and responsibility over the HDB estates in their constituencies, in order to strengthen the nexus between the residents and their elected MPs.

The strategic intent was to bring home to the MPs that how they manage and run their TC will affect their electoral fortunes at the next election, and to voters that the MPs they elect will be responsible for looking after their housing estates.

This would enhance accountability, push MPs to focus on what mattered to the residents and, in turn, encourage voters to scrutinise more closely the capabilities and track record of election candidates.

That is why the TCs Act deliberately takes a light-touch approach to regulation and enforcement. However, light touch does not mean that the MPs and the councillors running the TC bear no responsibility and need not be held to account if the TC fails to perform.

By law, the MPs and councillors are ultimately responsible for everything in the TC. They cannot delegate their responsibility away to the managing agent or others.

Unfortunately, throughout this AHPETC saga, we have found the MPs running the AHPETC to be evasive, unresponsive and misleading. In response to legitimate queries from auditors, my Ministry of National Development (MND) officials, and their residents and the media, they stone-walled, deflected the queries, made false or dishonest claims, raised irrelevant excuses and sought to confuse the public with a flurry of red herrings...

Throughout this sad saga, what are the MPs of AHPETC doing? I do not expect them to take over the job of their managing agent, but I do expect them to exercise close supervision, and when problems arise or issues are highlighted, to step up and take responsibility, to look into them quickly and address them squarely. This is the accountability that we expect of all elected MPs or, for that matter, any director of a company, or any member of the governing board of a charity.

Instead, what we have consistently gotten from the MPs of AHPETC is side-stepping and avoiding responsibility - first "no response", then "in due course", and then followed by a series of excuses, blaming everybody else for their failure to perform...

So far MND has been relying on moral suasion and TCs' self-declarations. For effective governance and regulatory oversight, MND requires powers to collect information and conduct investigations. This also has to be coupled with a stronger penalty framework, to enable the Government to take errant TCs to task for non-compliance.

How TCs perform matter. How our public housing estates are managed impacts public health, public safety, and the quality of life for millions of Singaporeans, and the value of their flats.

TCs need competent, honest people and proper systems to serve their residents well. Good intentions and bland assurances alone are not sufficient.

Elected MPs need to supervise the work of their TCs and their managing agents. While they enjoy wide autonomy, they also have huge responsibility. And they are accountable to their residents. They have statutory duties but they are also subject to national laws.

Running a TC requires elected MPs to govern, not just politick. Compared to the sound and fury of politicking, governing is long, tedious and unglamorous work. But good government is what secures a good life for Singaporeans, on a long-term, sustainable basis.

Conversely, neglect of government ultimately compromises residents' well-being. It may not show up immediately, but it will eventually.

Beyond ensuring that our HDB estates are well run, the TCs Act has a wider strategic objective: to ensure that any party aspiring to form the national government of Singapore first shows that it can run a town council competently.

This aim remains sound.

That is why despite the problems that AHPETC has run into, we do not propose taking back the TCs' powers and having HDB run everything again, like before. Instead, we will strengthen the TC framework to remedy the weaknesses in it, so that elected MPs have to perform and be held more tightly to account in running their TCs and towns.

I do not relish making this statement. Parliament should be about accountability and responsibility. Sadly, the Auditor-General's report has found lack of accountability and failure to take responsibility on the part of the AHPETC chairman and her councillors. I hope they will act speedily to remedy the problems.

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