Sunday, 22 March 2015

AHPETC: MND applies to court to appoint Independent Accountants to safeguard S&CC funds

MND seeks court's nod for independent accountants to be sent to AHPETC
Only then will it release $14m in grants to town council
By Rachel Chang, Assistant Political Editor, The Straits Times, 21 Mar 2015

THE Ministry of National Development (MND) has applied to the High Court to appoint independent accountants to oversee government grants given to the Aljunied-Hougang-Punggol East Town Council (AHPETC) run by the Workers' Party (WP).

Only when the court gives the nod will it release about $14 million in grants to AHPETC, money it disburses to all town councils but which it has withheld from the opposition town council for a year now, owing to serious lapses in governance and compliance.


In addition, MND said it has a duty to make sure AHPETC has taken steps to recover any money that might have been wrongly paid out, and so has asked the court to empower the accountants to look at past AHPETC payments and take appropriate action to recover any losses suffered by AHPETC and its residents.



Analysts said this unprecedented move is likely to mean a full-blown financial investigation into whether AHPETC overpaid its managing agent, and whether any unlawful conduct was involved.

During a heated parliamentary debate last month over AHPETC's lapses, People's Action Party (PAP) ministers charged it was paying its managing agent $1.6 million more per year than what other town councils pay theirs.

AHPETC's managing agent, FM Solutions & Services (FMSS), is majority-owned by AHPETC's secretary Danny Loh and general manager How Weng Fan, a married couple. The longtime WP supporters were found to have approved payments from the town council to the company they own.

PAP ministers questioned the propriety of these arrangements.

The WP's MPs replied in Parliament that they were aware of the conflict of interest and isolated the staff, including the couple, from financial decisions.

The WP maintained there was no criminal wrongdoing or lost money, just errors of inexperience. WP chief Low Thia Khiang said FMSS was the only company that bid for AHPETC's business.

The WP did not respond to requests for comment on the court documents, which were served on AHPETC yesterday. A pre-trial conference is set for next Friday.

During the Parliament debate, National Development Minister Khaw Boon Wan said the grants would be withheld until "AHPETC cleans up the mess".

MND's court application makes clear the Government is now willing to disburse the grants - $7 million each for FY2014 and FY2015 - as long as "there are adequate safeguards". These are that AHPETC keeps the grants in segregated accounts, and that payments above $20,000 from these accounts are co-signed by the independent accountants.

Replying to media queries, MND said last night that it has proposed major accounting firm PwC's partners Ong Chao Choon and Chan Kheng Tek as the independent accountants to the court. It added that it will pay the costs.

Observers said MND's move was likely motivated by frustration that the WP has not done what Mr Khaw suggested its leaders do last month: Conduct a forensic audit of its accounts to see if payments to FMSS were correct and lawful, and take action to recover any lost public money.

"AHPETC has not indicated that it is willing to take these actions," said MND yesterday.





* 'Accountants will derail our work'
WP chairman 'surprised' by Govt's court application
By Walter Sim, The Straits Times, 28 Mar 2015

A HIGH Court application by the Government to have independent accountants oversee government grants given to the Workers' Party-run town council will, if granted, "derail our work towards meeting deadlines" to file its accounts, party chairman Sylvia Lim said yesterday.

The Aljunied-Hougang-Punggol East Town Council (AHPETC) has till June 30 to submit its 2013 accounts, which are late. It was also asked to submit its 2014 accounts by Aug 31.

In her first comments since the court proceedings were made public on Friday last week, Ms Lim, an MP for Aljunied GRC, said she was "very surprised" the case was brought against the town council.

Speaking after a closed-door administrative hearing at the court, she said of the expected delay: "They're asking for the independent accountants to make inquiries, so we would have to handle a few different sets of auditors at the same time... It will derail our work and we may not be able to file our accounts until the next elections." The next general election must be held by January 2017.

The town council is represented by lawyers Peter Low and Terence Tan of Peter Low LLC.

Since a two-day parliamentary session last month debated the findings of a report by the Auditor-General's Office into its finances, AHPETC has been taking "additional steps", Ms Lim said.

These included appointing its own consultants to help the town council address the weaknesses and disclaimers outlined in the report, said Ms Lim, who was at yesterday's hearing with fellow Aljunied GRC MP Faisal Manap.

She declined to comment on the specifics of the court application but said: "We'll be making our case known in court. We don't think those orders are warranted."

If the court gives the nod, the National Development Ministry will release about $14 million in grants to AHPETC - money disbursed to all town councils but which it has withheld for a year now owing to serious lapses in governance and compliance.

MND, which will foot the bill for the accountants, is asking for "adequate safeguards", such as having segregated accounts and for payments above $20,000 from this account to be co-signed by the accountants. It also asked the court to empower the accountants to look at past payments and take appropriate action to recover losses suffered by AHPETC and its residents.

The town council has to file an affidavit by April 17, to which MND will reply by April 24, said Mr Tan. A closed-door hearing for MND's application has been fixed for the week starting April 27, he added.





Independent accountants 'will reassure residents'
MND move seen as necessary to safeguard public funds: Analysts
By Walter Sim And Rachel Chang, Assistant Political Editor, The Straits Times, 21 Mar 2015

A COURT application by the Ministry of National Development (MND) to appoint independent accountants to the only opposition- run town council here will help residents by ensuring that government grants given to the town council are properly used, analysts said yesterday.

But some called this a "patchwork" measure, saying that a larger overhaul of the town council structure is needed to avoid any future mismanagement of funds.

The ministry said yesterday that it has applied to the High Court to appoint accountants to safeguard government grants given to the Aljunied-Hougang-Punggol East Town Council (AHPETC), which is run by the Workers' Party (WP).

The ministry also wants the accountants to have the power to look at past payments made by the town council and to take action to recover any losses that may have been suffered by the AHPETC and its residents.

This comes after accounting and governance lapses were found at the town council, following a special audit that was concluded earlier this year.

Of particular concern were some relatively high payments made by the AHPETC to its managing agent, which is majority- owned by the AHPETC's secretary and general manager, who are married to each other.

Corporate lawyer Robson Lee said that, with taxpayers' money involved, the MND "has a legitimate duty and interest to seek the assistance of the court" to make sure the AHPETC's payments are in order.

Associate Professor Eugene Tan, a Singapore Management University law don and former Nominated MP, said the MND's move may have been prompted by the "non-committal" attitude of the WP towards calls for it to conduct a forensic audit of the AHPETC's accounts.

National Development Minister Khaw Boon Wan had called for such an audit in Parliament last month and said his ministry will withhold grants from the AHPETC until it sets its house in order.

The grants amount to about $7 million a year.

But the MND said yesterday that, if the court grants the application, it will disburse the funds to the AHPETC for financial years 2014 and 2015.

The town council will have to keep the money in separate accounts, and payments above $20,000 will have to be co-signed by the independent accountants.

Prof Tan said the MND's move removes the Government from a "damned if they do, damned if they don't" situation.

The Government is reluctant to disburse the grants as it fears misuse of the funds, but withholding the grants may lead to the perception that "the Government is penalising voters of AHPETC", he said.

Having accountants safeguard the grants "ensures the Government's interests are not compromised by WP's intransigence", he added.

"It's also probably not inaccurate to say that WP's ability to manage its forensic audit will be taken away" if the court application is granted.

If the AHPETC's books are found to be in order, residents will benefit from the reassurance, Prof Tan said.

National University of Singapore accounting don Mak Yuen Teen, who specialises in corporate governance, said it is not clear if the AHPETC has suffered any losses.

"Even if the rates charged by the managing agent in AHPETC are higher, they may argue that, since they have to set up this company specifically to service the town council because they cannot get others to do it, there are high start-up costs and no economies of scale," he said.

Mr Sidney Lim of business consulting and internal audit firm Protiviti said the measure is at best a stopgap one, because having to obtain the accountants' approval for each payment will not be cost-efficient in the long run.

"This may lead to a disruption of the town council's ability to get certain things done. The accountants will need to do their own due diligence and so payments may not be approved in a timely way."

Associate Professor Mak called the measures "patchwork", and urged a full review of the regulatory framework of town councils, given their "political nature".




Key aspects of ministry's application

The Ministry of National Development (MND) last night spelt out key aspects of its application to the High Court to appoint Independent Accountants (IAs) to Aljunied-Hougang- Punggol East Town Council (AHPETC), in response to media queries.


What is the role of the IAs?

If the court grants the order, the IAs will be empowered to co-sign payments from the segregated accounts holding the service and conservancy charges (S&CC) grants and to look at past payments made by AHPETC and to take appropriate action to recover losses.


Must IAs complete a review of past payments before S&CC grants are disbursed?

Once the court grants the order, MND will be able to disburse S&CC grants to AHPETC. There is no need for the IAs to complete its review of past payments before MND can disburse the grants. The court application is to enable MND to disburse the grants with the proper safeguards to ensure they will be properly managed and spent, without the need to wait till AHPETC has fully rectified its lapses and weaknesses.


What are the thresholds for which payments from the accounts need to be co-signed by IAs?

Amounts in excess of $20,000.


Do past payments refer to all payments or just those made to the managing agent FMSS?

It is not restricted to payments made to FMSS.


Who might be appointed as independent accountants?

MND has proposed Mr Ong Chao Choon and Mr Chan Kheng Tek (partners of PwC), or any other that the court deems fit and proper.


Is this the first time that MND has made such a court application with regard to a town council?

Yes.


Who will pay for the appointment?

MND





Depoliticising AHPETC saga may be court move’s aim: Analysts
Independent accountants, court to ultimately protect residents’ interests, says observer
TODAY, 21 Mar 2015

Apart from acting to protect residents’ interests, the Government’s unprecedented move in seeking to appoint independent accountants to safeguard its grants for Aljunied-Hougang-Punggol East Town Council (AHPETC) could also be a way of depoliticising the saga, said political observers.

Going through the courts process to apply for independent accountants would help allay accusations that the spotlight on AHPETC is politically motivated, Singapore Management University law lecturer Eugene Tan said. “I don’t think anyone would have any basis to say that the courts are being used,” he said.

By doing this, the Ministry of National Development (MND) is “demonstrating their resolve” to assure residents that this was not a political battle. “Whether it is politically motivated or not, we can’t run away from the fact that there are real issues raised by the Auditor-General’s report,” he added.

National University of Singapore (NUS) Institute of Policy Studies sociologist Tan Ern Ser said independent accountants are expected to be professional and non-partisan, and therefore objective and unbiased, thus helping to snuff out rumblings that the episode is a political attack on the Workers’ Party.

However, Associate Professor Bilveer Singh, from NUS’ Department of Political Science, felt that despite such efforts, the political overtones will never be removed from the saga, as it involves “politicians, political parties and the public’s money”.

Associate Professor Eugene Tan also said the MND’s hands are “tied” due to the Auditor-General’s report on the AHPETC’s accounts, detailing governance lapses at the town council. “The MND has to follow up on the remedial action ... because if they do nothing, (the MND) would be accused of failing in their duties,” he said.

He added that the move would ultimately serve to safeguard residents’ interests. “They would get the government grants they are entitled to, and if there were any wrongful payments made, then those would be made good,” he said.

Any measure taken to enhance governance, accountability and transparency is a good thing, said Dr Tan Ern Ser, while Dr Singh said this would remind other town councils to be more careful and transparent in their operations.

Corporate governance expert Mak Yuen Teen said the MND should be “cautious” in giving independent accountants powers to approve expenditure beyond a certain amount. “If we are talking about them just making sure that the spending is broadly within the (confines of) the Town Councils Act (TCA) and the Town Council Financial Rules (TCFR), then fine.

“But you certainly cannot have the accountant making the decision on spending — because then, you cannot hold the town council accountable if they cannot decide on how to spend the money within the broad guidelines set out in the TCA and TCFR.

The independent accountants who are signing off cannot be the independent auditors — that would be a conflict of interest,” said the NUS Business School associate professor.

He added that all town councils should be subjected to more regular compliance and performance audits conducted by the Auditor-General’s Office.

“There are regulatory and oversight gaps when it comes to town councils and other institutions such as public universities, which are subject to less scrutiny than public companies, charities, and most statutory boards and government departments or ministries. Whenever you have regulatory and oversight gaps, things are likely be go wrong,” he said.





Having independent accountants at AHPETC will let residents continue enjoying government grants: DPM Teo
By Fiona Chan And Pearl Lee, The Straits Times, 21 Mar 2015

SINGAPORE - Appointing independent accountants to safeguard government grants at the Workers' Party-run town council will allow residents there to continue benefiting from such grants, Deputy Prime Minister Teo Chee Hean said on Saturday.

His comments come a day after the Ministry of National Development (MND) asked the High Court to appoint independent accountants to oversee government grants at the Aljunied-Hougang-Punggol East Town Council (AHPETC), where accounting and governance lapses were found after a special audit that ended earlier this year.

"There are a lot of unanswered questions and the MND does want to make sure that the residents continue to enjoy the benefits of the grants that MND is giving to every town council," said Mr Teo, who is also Home Affairs Minister and Coordinating Minister for National Security.

"And I think this is one way in which MND can continue to give grants but in a way which safeguards public funds," he told reporters on the sidelines of a recruitment drive organised for heartland merchants at Rivervale Mall in Sengkang.

"I think it's a fair way of doing so, and I hope the town council accepts it."

AHPETC, the only opposition-run town council in Singapore, came under the spotlight in February after an audit by the Auditor-General's Office found problems in accounting, governance and compliance.

During a debate in Parliament on these lapses, National Development Minister Khaw Boon Wan had said his ministry would withhold grants until "AHPETC cleans up the mess". The grants amount to $7 million each for FY2014 and FY2015.

On Friday, however, the MND said it would release these funds to the town council provided the Court agreed to appoint independent accountants to safeguard the use of the grants.

If the Court application is allowed, AHPETC must keep the government grants in segregated accounts, and any payments above $20,000 from these accounts must be co-signed by the independent accountants.





Some residents pay fees to wrong council
They have been paying S&CC fees to Marine Parade even after GE2011
By Tham Yuen-c, Assistant Political Editor, The Straits Times, 3 Apr 2015

THE Workers' Party (WP) town council has informed some of its residents who have been paying their service and conservancy fees to the wrong town council that they could incur penalties for non-payment.

These residents of Aljunied GRC's Kaki Bukit division have been paying their service and conservancy charges (S&CC) to Marine Parade Town Council instead of Aljunied-Hougang-Punggol East Town Council (AHPETC).

They have been doing it even after the 2011 general election, when their homes were no longer part of Marine Parade GRC.

So each time, the Marine Parade Town Council would transfer their payments to AHPETC.

But in February this year, both sides agreed to end the arrangement "because this has been going on for too long", the chairman of Marine Parade Town Council, Mr Lim Biow Chuan, told The Straits Times yesterday.

Earlier this week, AHPETC informed its residents that Marine Parade Town Council would stop forwarding the money to AHPETC from Wednesday.

"As such, we would not be notified if you have made your S&CC payment. Your account would then be in arrears and penalty fee will be imposed," said AHPETC in its May 27 letter.

It advised the residents to immediately correct their Internet banking payment mistake. These residents live in areas of Kaki Bukit that used to be part of Marine Parade GRC. But in the 2011 general election, they came under Aljunied GRC, which the People's Action Party lost to the WP.

AHPETC could not be reached for comment yesterday.

Mr Lim said his town council had given AHPETC the names and addresses of residents making the mistake, each time a wrong payment was made.

The situation has improved over the years and now, there are fewer than 50 of them, he added.

"Each time we received such payment, we would issue a cheque to AHPETC, with a reminder to ask its residents to pay their own town council directly," he said.

The payments range from about $10 to $200, as some would pay for every quarter.

But from Wednesday, Mr Lim said his town council would refund the money to the residents directly.

"We will return the money. It does not belong to us and we should not keep them. But there is an administrative cost to doing this," he said.

But the cost would not be passed to the residents, he added.



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