Tuesday 1 September 2015

Workers' Party town council managing agent FMSS has been "grossly profiteering" off AHPETC: MND

AHPETC faced losses while agent's profits jumped 300%: MND
Such levels of profit margin are abnormal, says MND, which also says there was "gross profiteering" on the part of FMSS from its only client
By Walter Sim, The Sunday Times, 30 Aug 2015

The Ministry of National Development (MND) yesterday produced figures which show that in one year, the managing agent for the Workers' Party (WP) town council made a 300 per cent jump in profit after tax.

Its profit was around $510,000 in financial year 2012/13, and rose to over $2 million the following year.

But in this same period, the revenue of FM Solutions and Services (FMSS) rose by only 30 per cent, from $6.7 million to $8.8 million.

The ministry also noted that total payments by the town council to FMSS owners, who were at the time also senior officers of the town council, amounted to 22 per cent of the revenue in financial year 2012/2013 - and 36 per cent a year later.

Such levels of profit margin are "abnormal", said MND, which also said there was "gross profiteering" on the part of FMSS from its only client: the Aljunied-Hougang-Punggol East Town Council (AHPETC).

"Had the town council not overpaid FMSS, it might well have had been able to break even."

AHPETC issues remain unresolved and have worsened: Khaw
WP not being upfront on AHPETC issue: Shanmugam

FMSS, which was appointed by AHPETC from July 2011 until last month, is owned by long-time WP supporters Danny Loh and his wife How Weng Fan. Both were senior officers at the town council.

Two hours after MND issued its statement, Law Minister K. Shanmugam told reporters at a community event that AHPETC has stayed silent on related party transactions involving FMSS.

To prove his point, he pointed to statements by WP MPs that show their stance on the matter, including remarks by Mr Pritam Singh during a parliamentary debate in February on the findings of a special audit by the Auditor-General's Office. It detailed major lapses in accounting and governance at AHPETC.

Several other People's Action Party (PAP) leaders have also weighed in on the issue of AHPETC's financial mismanagement, which is shaping up to be a hot-button issue at the Sept 11 General Election.

Prime Minister Lee Hsien Loong, who is PAP secretary-general, said at the launch of the party's manifesto yesterday morning that if an opposition party runs a town council like AHPETC, "I don't know where your service and conservancy charges (S&CC) money is going to go. Surpluses will turn into deficits. You will have problems for many years to come".

Deputy Prime Minister Tharman Shanmugaratnam, PAP's second assistant secretary-general, also underlined the gravity of the town council lapses last Friday, when he unveiled the PAP's slate for Aljunied GRC.

AHPETC Scandal
Michelle Ang made this video that explains the AHPETC issue. A bit long but easy to understand.Sylvia Lim Swee Lian and Low Thia Khiang must respond to these queries! (Video by Michelle Ang)
Posted by Maa Zhi Hong on Saturday, September 5, 2015

MND's statement came two days after the Accounting and Corporate Regulatory Authority (ACRA) submitted its findings of an ad hoc review into FMSS' auditor, Teo Liang Chye & Co, to look into the quality of the managing agent's accounts and audit process.

The ministry had written to ACRA on July 9, shortly after getting AHPETC's financial statements and reports for FY2013/2014. It asked ACRA if it had any concerns about the quality of FMSS' accounts and the audit process. It did so after noting that AHPETC's auditors for FY2013/2014 found that AHPETC's then deputy general manager Yeo Soon Fei, who owns shares in FMSS, had certified FMSS invoices totalling $2.1 million on behalf of the town council. He subsequently approved related payment vouchers by the town council to FMSS, with no segregation of duties.

"This reinforced MND's concerns about the town council's state of financial management and, in particular, whether payments made by the town council were valid and proper," the ministry said.

ACRA started its review on Aug 14, after giving FMSS' auditor the required one month's notice, and submitted its report to MND on Aug 27.

MND then wrote to WP chairman Sylvia Lim to ask, among other things, if she was aware of the extent of profiteering in FMSS and, if so, when she had known and what she had done about it. It also asked how she intends to recover the monies lost due to overpayment.

"As FMSS was paid using S&CC collections from residents and operating grants from the MND, public monies are at stake," MND said.

"What happened between the town council and FMSS is not a private matter, but one which MND needs to look into."

The former managing agent of Aljunied-Hougang-Punggol East Town Council (AHPETC) has sent a letter of demand, saying the...
Posted by The New Paper on Sunday, August 30, 2015

FMSS issues legal letter to AHPETC, says it is owed $3.5m
The New Paper, 31 Aug 2015

The former managing agent of Aljunied-Hougang-Punggol East Town Council (AHPETC) has sent a letter of demand, saying the town council owes it more than $3.5 million.

The New Paper has learnt that the managing agent, FM Solutions & Services (FMSS), sent the letter, dated July 20, through its lawyers, Netto & Magin.

This comes at a time when the Ministry of National Development is asking AHPETC whether it overpaid FMSS and, if so, how it plans to claim back public monies that allowed FMSS to make huge profits.

FMSS was incorporated in 2011 soon after the Workers' Party (WP) won the Aljunied group representation constituency in the 2011 General Election.

The company was the managing agent for the town council between July 15, 2011, and July 14 this year.

The relationship between the two parties soured following the Auditor-General's Office (AGO) report in March.

Six days after WP did not renew FMSS's contract, the company demanded to be paid monies owed between April and July 14.

Town council staff said AHPETC and FMSS had been locked in talks over financial matters for several months.

AHPETC had initially tried to claw back $250,000, which was later raised to $450,000, from monies paid to FMSS.

FMSS, in turn, is claiming not to have been paid for services provided between April and July 14, when its contract with the town council was not renewed.

The talks broke down when one of the four FMSS directors, Mr Danny Loh, died on June 27 while holidaying in Japan.

The letter of demand, which TNP saw last week, said: "Our clients instruct us that despite repeated requests and demands, you have neglected, failed and/or refused to pay the amounts due fully, in time, as and when invoices and statements of accounts were sent to you from time to time, particulars of which you are fully aware of.


"Take notice that if the sum of $3,520,722.13 together with further interests as aforesaid, are not paid by you directly to our clients or to us as solicitors for our clients within SEVEN (7) days from the date hereof, we have firm instructions to commence proceedings against you without further reference to you.

"In that event you shall also be liable for legal costs incurred by our client."

TNP understands that AHPETC is trying for a mediation session with FMSS over the letter of demand.

The AGO report in March had found accounting and governance lapses in the town council when FMSS was the managing agent.

AHPETC had also submitted its accounts to its own auditors, Audit Alliance, who highlighted several areas of concern in its report, including that of related-party transactions to do with FMSS.

All four directors behind FMSS also held key positions in AHPETC.

Following a separate ad-hoc review of FMSS auditor Teo Liang Chye & Co, the Accounting and Corporate Regulatory Authority found that FMSS had made a handsome profit.

The WP has been running AHPETC on its own since last month when it failed to find a managing agent in its three-week tender last November.

The tender did not attract a single bid, not even from FMSS.

Would AHPETC continue to work with FMSS, TNP asked AHPETC vice-chairman Png Eng Huat.

He said: "Ah, no, no. I think we are on self-management, so we will give self-management a run."

TNP approached the three remaining directors of FMSS but they declined comment.

AHPETC also declined comment when asked about the letter of demand.

"In addition, MND notes that AHPETC had an operating deficit of $1.5 million in financial year 2012/2013 and a further deficit of $2 million in financial year 2013/2014."

- Ministry of National Development in its statement on Saturday

BY THE numbers

$3,520,722.13 - Amount of money that FMSS is asking for in its letter of demand to AHPETC

What do you think of the AHPETC saga? Is it something more or less than what it's made out to be by the two opposing parties? Here're some questions you might want to consider before deciding.
Posted by The Middle Ground on Monday, August 31, 2015

WP hits back at MND, denying it overpaid
By Tham Yuen-C, The Sunday Times, 30 Aug 2015

The Workers' Party (WP) yesterday hit back at the Ministry of National Development (MND) over claims that its town council had overpaid its managing agent.

In a strongly worded letter, party chairman Sylvia Lim said she was appalled at the ministry's "series of careless accusations" aimed at discrediting her party politically.

Dismissing the accusation of overpayment, she said the Aljunied-Hougang-Punggol East Town Council (AHPETC) had paid its managing agent based on its contractual rates. "It is shocking that despite our clarifications on your allegations relating to lost monies and overpayment, your ministry continues to make spurious statements to distract the public and aimed at politically discrediting AHPETC," she said.

She was responding after the ministry issued a statement yesterday accusing FM Solutions & Services (FMSS) of profiteering at the expense of the WP-run town council.

The ministry also wrote to Ms Lim to ask if she intended to recover the "monies lost due to overpayment".

The town council was the only client of FMSS in the financial years 2012/2013 and 2013/2014, when the company's owners received about $1.5 million and $3.2 million. This works out to 22 per cent and 36 per cent respectively of the company's revenue in those years.

Calling this profit margin "abnormal", the ministry reiterated its concerns that the town council had "overpaid FMSS excessively".

[Reader's Contribution] Irrefutable video proof that WP campaigns on half-truths. Do residents of East Coast and Marine Parade GRC want them as your MPs? Think carefully. Vote wisely.
Posted by Talking Singapore on Wednesday, September 9, 2015

Ms Lim refuted this in her letter, which she made public on the WP website. She said the town council did not overpay FMSS, and asked what the ministry meant by an "abnormal" profit margin. She noted that managing agents of other town councils had not made known their profit levels.

She added that FMSS was appointed managing agent from 2012 to 2015 after a public tender. The company's contract to provide essential maintenance services to the town council was also awarded in a public tender.

The town council paid FMSS in line with contractual rates, and "payment in accordance with contracts cannot be overpayment", said Ms Lim, the immediate past chairman of the town council.

The ministry had also taken issue with the fees and salaries paid to key town council officers who were also the owners of FMSS.

The late Mr Danny Loh, his wife How Weng Fan, Mr Yeo Soon Fei, and Mr Johnson Lieow Chong Sern were paid about $1.1 million in FY 2013/2014 alone. On that point, Ms Lim said what FMSS paid its employees was not within the town council's control. The town council also "does not ask its contractors about their profitability or internal arrangements", she added.

She also said it is "misleading and unfair" to compare the rates charged by FMSS with rates charged by managing agents of People's Action Party town councils.

When FMSS put in a bid for the job in 2012, it had no competitors. Thus, its bid was assessed based on rates charged by CPG Facilities Management, which was the town council's managing agent when Aljunied GRC was under the PAP, said Ms Lim.

Pointing to this, she said the political environment here had put "non-PAP town councils" at a financial disadvantage as companies were less likely to bid for their jobs. "Your ministry ought to recognise the existence of an imbalanced system and take into consideration the political reality of the situation," she said.

The ministry had also said that the latest findings - following an ad hoc review by the Accounting and Corporate Regulatory Authority (ACRA) of FMSS' auditor Teo Liang Chye & Co - underscored the need for independent accountants to be appointed to AHPETC. There is a pending judgment from the Court of Appeal on this.

But Ms Lim said there was no basis for it, adding: "We also question your ministry's political motivation for issuing a public release on this matter at such a premature stage, when you say that your ministry has not even completed a review of the findings by ACRA."

When asked by The Sunday Times, the ministry said ACRA had made known its findings last Thursday. MND then "made a public statement immediately, as this is a matter of public interest involving public and residents' monies".

One can perhaps say that Sylvia Lim, chairman of Workers' Party, has perfected the art of lying with an earnest face and...
Posted by Singapore Matters on Sunday, August 30, 2015

AHPETC confirms $3.5m legal demand from agent
Claims are for fees related to projects and won't affect bottom line, says Sylvia Lim
By Tham Yuen-C, Assistant Political Editor, The Straits Times, 1 Sep 2015

Workers' Party (WP) chairman Sylvia Lim yesterday confirmed that the party's town council had received a legal demand for $3.5 million from its former managing agent, but insisted this would not hit its bottom line.

She said the amount demanded was for fees related to projects handled by the managing agent, and linked to the town council's sinking fund expenditure. But she declined to give further details, citing confidentiality agreements.

The New Paper reported yesterday that FM Solutions and Services (FMSS) sent a letter of demand to Aljunied-Hougang-Punggol East Town Council (AHPETC) to say the latter owed it more than $3.5 million for services provided between April and July 14. The letter was dated July 20, six days after the managing agent's contract with the town council ended on July 14.

After receiving the letter, AHPETC then did its own checks and withheld payment as it had "some questions about those claims", Ms Lim said.

The town council had also reportedly tried earlier to recoup $250,000 from FMSS, a sum it then raised to $450,000.

Yesterday, WP chairman Sylvia Lim downplayed the matter - which will go before mediators in October - saying it will not affect AHPETC's bottom line.

"We can confirm that we received this letter but this is actually quite old news because it has been overtaken by events... Most of the claims are related to the current financial year 2015/2016, and a substantial portion is related to sinking fund payments. So they do not actually impact on the routine funds," she said. Money in a town council's sinking fund is earmarked for long- term and cyclical projects, such as upgrading works.

Ms Lim also said that the town council had since paid off a substantial part of the $3.5 million amount and that the disputed sum will "not actually affect the bottom line in terms of surplus and deficit of the accounts".

News of the dispute broke two days after the Ministry of National Development (MND) released figures to show that there had been, in its words, "gross profiteering" on the part of FMSS from its only client, AHPETC.

Asked yesterday if her town council felt it had overpaid FMSS, Ms Lim replied: "A large part of the disputed claims is actually concerning projects which are a different kind of claim as compared to a claim for managing agent monthly rates. It is not connected with us looking (at) or reviewing the managing agent rates. It's not the case at all."

FMSS had been authorised to act as a project manager for the town council. When the firm handled projects, it was allowed to claim a percentage of the project value as additional fees, above and beyond its managing agent fees, said Ms Lim, adding that that was also the case at other town councils.

For now, both parties are headed for mediation in October to resolve the issue, said Ms Lim, adding that the case will not go to court.

On whether the WP had briefed its new candidates on the issue, Ms Lim said: "This is one of the matters that we're sorting out with our contractors under a process that's already been agreed, so we do not see why this should concern the new candidates because everything is according to our agreement."

She was also asked why AHPETC had not made public the matter earlier, given the large amount involved. She cited the confidentiality agreement, adding: "It's just a letter of demand. People can demand things, but whether they are legitimate or not and to what extent, that is another question altogether."

AHPETC FY2014/2015 financial statements are still qualified
By Tham Yuen-C, Assistant Political Editor, The Straits Times, 1 Sep 2015

The Workers' Party (WP) town council submitted its accounts on time yesterday and said it had an annual surplus of $1.7 million, if government grants were taken into account.

But this set of accounts still failed to receive a clean bill of health from its own auditors.

The town council's auditor, Audit Alliance, qualified the accounts over late transfers to the sinking fund and erroneous payments out of the sinking fund, and gave a disclaimer of opinion as it was unable to determine the accuracy and validity of several items in the council's accounts.

Other than that, the auditor said, proper records had been kept in line with the law.

By filing yesterday, Aljunied-Hougang-Punggol East Town Council (AHPETC) met the Aug 31 deadline for filing audited accounts for financial year 2014/2015.

WP and town council chairman Sylvia Lim said in a note prefacing the accounts that the latest set of accounts also showed a "marked improvement" in the town council's financial position.

She acknowledged that according to the audited accounts, the town council closed the financial year in deficit.

But if government grants worth $7.2 million, which it had yet to receive, were taken into account, then it would have an operating surplus of $1.7 million.

The grants were withheld by the Ministry of National Development (MND) after serious financial and governance lapses were uncovered at the town council by the Auditor-General's Office.

"Taking into account the $7.2 million in grant which AHPETC expects to receive, AHPETC's annual income and expenditure statement would show an annual surplus of $1.7 million," said Ms Lim.

In an open letter released online to residents of all three WP constituencies, Ms Lim said: "The current positive position came about through a combination of steps taken by AHPETC.

"These included lowering its utilities costs by using contestable energy, reducing its general and administrative expenditure, and increasing its revenue."

Ms Lim's letter comes two days after the MND's strongly-worded statement on former managing agent FM Solutions and Services' (FMSS) net after-tax profit of $2 million after paying its directors and shareholders fees and salaries amounting to $1.14 million in FY2013-FY2014.

In the same period, the town council suffered an operating deficit of $2 million.

Ms Lim had also refuted allegations that AHPETC was bankrupt and running huge deficits that were not sustainable, calling them "misguided".

She explained that the town council's past operating deficit was largely the outcome of "higher tender price for various service contracts and start-up costs".

Ms Lim's letter comes on the eve of Nomination Day when the WP is expected to field 28 candidates in all for the Sept 11 polls.

The WP will hope to build on ground gained at the polls in 2011 where it took on the People's Action Party in Aljunied GRC and won.

Running AHPETC has been "difficult" in the initial years after the WP took over Aljunied, she said.

"AHPETC management believed that it could improve the (town council's) financial position, and the latest audit shows that it has," she added.

"We expect to further consolidate and improve AHPETC's financial position going forward."

AHPETC was back in the black after agent contract ended: Khaw
By Salma Khalik, Senior Health Correspondent and Amelia Teng, The Straits Times, 2 Sep 2015

When "their friends" were the managing agent, the Aljunied-Hougang-Punggol East Town Council (AHPETC) was losing money.

When this arrangement stopped, AHPETC was back in the black.

This is what it boils down to, said National Development Minister Khaw Boon Wan yesterday, as he urged Singaporeans not to "get lost and drown in the details" of the explanations which the Workers' Party has provided since last Saturday.

That was when his ministry revealed figures which showed how AHPETC's former managing agent, FM Solutions and Services (FMSS), had been "grossly profiteering" off its one and only client.

FMSS made a net profit of $2 million in the financial year 2013/2014, after paying its four owners - then senior officers at the AHPETC - salaries that amounted to $1.14 million, the ministry said.

In the same year, AHPETC suffered an operating deficit of $2 million, the ministry added.

On Monday, when the WP submitted its accounts, chairman Sylvia Lim said the town council had an annual surplus of $1.7 million, if government grants worth more than $7 million were taken into account. The WP is now managing its town council directly, after the FMSS contract expired in July.

Mr Khaw asked Singaporeans to draw their own conclusion from the events.

"Let me simplify the message... The town council lost money, about $2 million a year. FMSS made profit of more than $2 million a year. After the FMSS contract is terminated, the town council is now in the black," he said at the PAP branch office in Woodlands Avenue 6 yesterday morning. This was before he and his Sembawang team headed to Yishun Primary School to submit their nomination papers.

The Ministry of National Development's (MND) revelation has been criticised as being politically motivated as it came two weeks before Polling Day. But Mr Khaw said he did not want to address the timing of the announcement, having already explained it on Sunday, when he said that there was nothing unusual about it.

But it was a point that Law Minister K. Shanmugam did address yesterday when he spoke to reporters after submitting his team's nomination papers at the same place. He is leading a team against the WP in Nee Soon GRC.

"I think they (MND) released it as soon as they received the report," he said, referring to the report on FMSS' accounts from the Accounting and Corporate Regulatory Authority (Acra).

It was delivered two days before the MND released its statement.

What surprised him was the WP's own shock. He pointed out that the numbers were "something that was always known to the town council so it's not information that would be unknown".

He added that the WP could have dealt with the revelations earlier if it had done more to cooperate with the authorities.

"This is the very information that the auditors had asked for and they refused to give and now I think it's a bit odd to say, how come you released it?'

"In the interest of transparency, they should have released it a long time ago," he said.

WP candidate Kenneth Foo, who is standing in Nee Soon GRC, was asked yesterday about the Aljunied town council issue, but he declined to say much.

The new WP face, who was presented on Sunday, said: "This is in the hands of court, so it's not fair for me to make any comment at this point of time."

The MND has applied to the High Court to appoint independent accountants to AHPETC.

Added Mr Foo, who works in a voluntary welfare organisation: "Our focus is on Nee Soon constituency, and this campaign. So if you've any further questions, maybe you can refer back to Ms Sylvia (Lim) or Mr Low (Thia Khiang), or the WP media team."

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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