Friday 5 June 2015

Workers’ Party Town Council Saga: Why lapses cannot be swept under the carpet

By Lawrence Wong, Published The Straits Times, 5 Jun 2015

THE judgment on the AHPETC (Aljunied-Hougang-Punggol East Town Council) case is out.

The Workers’ Party is thrilled that the Ministry of National Development’s (MND’s) application was dismissed and that it will not have to open its books for scrutiny by an independent accountant.

* Handling of town council saga speaks volumes of dishonesty

But the ministry points out that the High Court took note of “grave and serious questions” raised regarding AHPETC’s accounts, and the validity and propriety of payments to related parties. The full judgment is 80 pages long. You may not have read the full judgment, but it contains several important findings. Here are four of them.
- AHPETC is in breach of the law and has not rectified those breaches
AHPETC admits that it is in breach of Town Councils Act and Town Councils Financial Rules. This includes the failure to transfer funds to its sinking fund for the last two quarters of FY14/15. These are serious breaches.

The Court found the AHPETC officers’ conduct to be “the height of financial irresponsibility”.

It said that had these lapses been committed by those managing a private building or condominium, or officers running a public listed company, “severe consequences” would have followed, including civil or even criminal action against them.

At the time of the judgment, these breaches had still not been rectified and the Workers’ Party had not said when they would be rectified.
- The conditions imposed by the MND for the release of grants-in-aid to AHPETC were fair
The Workers’ Party accepted that the MND is entitled to impose conditions for the release of grants.

It also recognised that the orders MND was seeking, such as the appointment of independent accountants, were conditions MND could impose for the release of the grants.

The Court also found that such conditions would be reasonable in the light of the problems with AHPETC’s accounts and the findings of the Auditor-General’s Office.
- Ms Sylvia Lim lied to Parliament
Ms Sylvia Lim told Parliament on Feb 12, 2015 that AHPETC has been making transfers (to the sinking fund) for FY2014.

The Court found that Ms Lim had failed to mention that the transfers which had been made were late, and that one transfer which was already due had not been made. Indeed, that transfer, as well as the next one, had still not been made by the time of the Court hearing on May 4 and 5, 2015.

The Court said a Latin legal phrase, suppresio veri, suggestio falsi, was particularly apt here.

According to the Law Dictionary, the phrase means to suppress key facts, and suggest something which is untrue, amounting to fraud. So Ms Lim was effectively lying to Parliament.

The Workers’ Party accepted the Court’s findings. But there has not been a word of apology either from the Workers’ Party or from Ms Lim.
- Residents suffer when the management of a town council goes rogue
The Court pointed out that it is the residents who will ultimately pay the price. As the judgment said: “…what has been misspent in the past remains a loss… Hence if the service and conservancy charges (S&CC) have to be increased to make up for the loss, then the constituents have to bear the increase. Secondly, if the funds are misspent, or mismanaged, or the Town Councillors turn rogue and run off with funds, there will be no bail-out by the Government. The Government will not come in and make good the losses.”

This is the crux of the entire saga. When there is dishonesty in the town council, it is the residents who suffer.

Why these findings matter

SOME people have asked: If AHPETC is still managing the estate and paying its bills, why should the breaches, especially the failure to transfer funds to the sinking fund, matter?

It matters a great deal. Every dollar of S&CC collected from residents is split between the operating account for current activities (for example, daily cleaning and rubbish collection) and the sinking fund account for major cyclical expenses (for example, replacement of lifts and water tanks).

An irresponsible or dishonest party can meet its current obligations by using the monies to meet immediate expenses, and not transfer monies to the sinking fund.

As long as it continues to win elections and stay in control of the town council, it can defer the day of reckoning. Before that happens, the party can disappear and leave the mess for someone else to clean up.

Things would have worked out very nicely for the party and its friends. It would not be so nice for the residents who end up paying huge amounts to rebuild the deficient sinking fund.

The writer is Minister for Culture, Community and Youth and Second Minister for Communications and Information.

MND rebuts WP charge that ministry misconstrued its actions
By Walter Sim, The Straits Times, 6 Jun 2015

THE Workers' Party (WP)-run town council yesterday accused the Ministry of National Development (MND) and Minister for Culture, Community and Youth Lawrence Wong of misconstruing its actions and intentions.

In a media statement, WP chairman Sylvia Lim, who also heads the Aljunied-Hougang-Punggol East Town Council (AHPETC), said MND was wrong in saying the town council wanted government grants without conditions.

MND, which is withholding $14 million in grants from the town council owing to concerns over its financial processes, had said on Thursday that AHPETC has "consistently resisted" its offer to disburse half the grants with terms attached - although it needs fresh funds urgently.

MND added that this was "presumably because (AHPETC) wants the grants, but without conditions and accountability".

Yesterday, Ms Lim said this was a "gross misrepresentation" of AHPETC's position.

In fact, she said, AHPETC had told MND it accepts that the law allows the National Development Minister to set conditions for giving grants to town councils.

She added that AHPETC "went further to agree to most of the conditions" set by MND over the disbursement of the grants.

One of the conditions is the appointment of independent accountants to the town council.

MND wanted the High Court to appoint the accountants, but the request was turned down last week. The ministry is appealing against the court decision and has applied to fast-track the appeal process.

Yesterday, Ms Lim said, in her view, only two issues remain unresolved: the identity of these accountants, and AHPETC's request that its grant for FY2014/2015 be deposited into its sinking fund, which is for long-term maintenance of the housing estate.

But in a lengthy reply last night to Ms Lim's statement, MND said it had invited AHPETC to propose names of accountant candidates and AHPETC had not responded.

MND had also told AHPETC it is prepared to consider placing the FY2014/2015 grant in its sinking fund, and asked the town council to give the reasons for its request and data on its cash flow. Again, there was no response.

Separately, an AHPETC spokesman responded to Mr Wong's commentary in yesterday's The Straits Times. The minister had implied AHPETC was dishonest and irresponsible in not making transfers to its sinking fund that are required by law.

Mr Wong said Ms Lim had "effectively lied" in Parliament in February, when she said AHPETC has been making such transfers for FY2014. While two transfers had been made, both after their due date, a third was still outstanding at the time of Ms Lim's statement.

The spokesman said Ms Lim denies lying to Parliament. "Just because AHPETC did not physically transfer monies into (its) sinking fund from its operating funds does not mean that monies are missing. Up to FY2013/2014, AHPETC has done the necessary transfers," the spokesman added.

Rebutting the spokesman, MND said Mr Wong's concerns about the finances were also made by the High Court in its judgment.

The court said AHPETC's conduct was the "height of financial irresponsibility", and "AHPETC should consider the court's findings seriously, instead of dismissing them cavalierly", MND said.

MND appeal on AHPETC ruling expected to be heard on Aug 3
By Walter Sim, The Straits Times, 5 Jun 2015

AUG 3 is expected to be the hearing date for the Ministry of National Development's (MND) appeal against a High Court decision not to appoint independent accountants to the town council run by the Workers' Party (WP).

But it still hinges on whether two other Judges of Appeal are available to sit with Chief Justice Sundaresh Menon for the hearing.

Chief Justice Menon gave the tentative date yesterday at a High Court hearing when he agreed to the ministry's request to hasten the appeal, a move supported by the WP as well.

Pointing to the persistent breaches of duties by the Aljunied-Hougang-Punggol East Town Council (AHPETC), it said it needed the court to determine as soon as possible what steps the town council must take to remedy the breaches.

Second, it noted that AHPETC was in urgent need of fresh service and conservancy charges grants to both deliver essential services to its residents and meet legal obligations.

The town council had "consistently resisted" its offer to disburse half the grants, with terms attached, MND said, adding that the move was "presumably because it wants the grants, but without conditions and accountability".

Third, the ministry noted the serious questions that had been raised about the validity and propriety of payments made previously to related parties.

This was in reference to two companies engaged by AHPETC, including managing agent FM Solutions and Services (FMSS), being owned by some key officials of the town council.

"There is an urgent need for the independent accountants to be appointed with powers of inquiry and recovery," said the ministry, noting AHPETC's contract with FMSS would expire on July 14.

Separately, when asked why AHPETC would like to speed up the case, chairman Sylvia Lim said: "We want to move on from what we consider (to be) needless litigation and to fully focus on our core mission of serving the residents."

The ministry has withheld from AHPETC about $14 million in grants, over two financial years, owing to financial lapses. It said last week it could not immediately disburse the sum without independent accountants safeguarding the monies, given the High Court's grim view of AHPETC's actions.

Despite his harsh words for AHPETC, Justice Quentin Loh said there was no legal basis for the court to appoint the accountants as MND has the powers to impose conditions when disbursing the grants. He said only the Housing Board or residents - and not MND - can take legal action against a town council if it fails to perform its duties.

During the hearing, the High Court was told that AHPETC was in urgent need of the grants because it was "technically insolvent", and would run out of funds by this month.

It also failed to make two out of four transfers into its sinking fund for the last financial year, using the money instead to pay for routine expenses and to ensure continuity of operations.

Ms Lim said yesterday that the two outstanding transfers had yet to be made. She said AHPETC has asked the ministry to deposit the grants for financial year 2014/2015 directly into the sinking fund.

Though unusual, the ministry told The Straits Times yesterday it informed AHPETC on May 2 that it was prepared to consider the suggestion.

It asked for the reason for the request and information on its cash flow position, "to ensure its proposal - if acceded to - will not affect its delivery of essential services to residents", its spokesman said.

"However, AHPETC has to date not replied to MND."

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