Sunday, 12 March 2017

Town Councils Act amended: Law passed to strengthen town council governance on 10 March 2017

Regulations part of wide-ranging changes to clarify town councils' role, boost financial management
By Danson Cheong, The Straits Times, 11 Mar 2017

Town councils that fail to submit their audited financial accounts on time would have committed an offence under a new law passed by Parliament yesterday.

Another offence introduced in the new Town Councils Act is failing to keep a record of the conflicts of interest declared by town councillors and employees when dealing with, say, contracts.

A town council will also run afoul of the law when it carries out commercial activities, such as organising trade fairs, which are not part of its core functions.

The penalties include a fine of up to $5,000 when town councils fail to comply.

The regulations are part of wide-ranging changes that Senior Minister of State for National Development Desmond Lee said would clarify a town council's role, improve governance and strengthen financial management.

His ministry will also have greater regulatory oversight of town councils, a change opposed by the Workers' Party (WP).

Mr Lee said the changes will boost the transparency and public accountability of town councils.

The new law follows a review of the Town Councils Act that was mooted in 2013, following heated parliamentary debates on the running of town councils and the handover of Aljunied GRC, which the WP took over from the People's Action Party after the 2011 polls.

The amendments are the most sweeping since town councils were introduced in 1989.

In explaining their importance, Mr Lee said town councils serve more than 3.2 million residents and collectively manage over $1.6 billion in public funds. This is a sharp rise from 2.4 million residents and $300 million in the early 1990s, he noted.

The robust debate involving 14 MPs lasted three hours. Eventually, all nine WP MPs voted against it.

The law's key changes include:

• Town councils must submit audited financial reports within six months of the financial year ending.

• Conflict of interest when handling say, contracts, must be declared and a record kept by the town council secretary. Those who must declare such conflict include town councillors, employees or anyone delegated with town council responsibilities.

• The ministry now has powers to do regular checks on the financial health of town councils and investigate suspected irregularities. It can appoint inspectors, who could be public officers or professionals, to do it. Key town council officers found guilty can be fined up to $5,000, jailed for up to a year, or given both punishments.

But the stronger enforcement powers to investigate and require specific remedial actions to be taken "will generally be exercised when a town council is uncooperative or recalcitrant, refusing to correct irregularities despite due and fair notice", said Mr Lee.

The WP's Mr Pritam Singh (Aljunied GRC), in opposing it, said: "The MND (Ministry of National Development) risks becoming a tool of the ruling party of the day to fix the opposition."

But Mr Lee stressed that the new law seeks to preserve the autonomy and latitude of town councils while protecting residents' interests and public funds.

"With a stronger regulatory framework, MND will play a more effective role in safeguarding residents' interests," he added.

Workers' Party chided for questioning impartiality of civil service
By Charissa Yong, The Straits Times, 11 Mar 2017

The Workers' Party (WP) yesterday objected to giving the Ministry of National Development (MND) powers to govern town councils, as part of changes to the Town Councils Act.

During the debate in Parliament, the WP MPs argued that civil servants will find it hard to be politically neutral because they report to political office-holders.

These ministers may wield the enforcement powers bestowed by the Act as a political tool against elected town councillors from a different political party, said Ms Sylvia Lim (Aljunied GRC).

But Senior Minister of State for National Development Desmond Lee defended the impartiality of the civil service, saying her allegations were serious and unwarranted.

He cited three broad reasons. First, public servants understand the need for fairness and will act and do what is right, he said.

Second, the People's Action Party's track record shows it will act on alleged wrongdoing and not sweep things under the carpet. A case in point is the investigation of Ang Mo Kio Town Council's general manager and secretary, said Mr Lee. AMKTC is the town council of Prime Minister Lee Hsien Loong.

"Even in the PM's town council, when allegations were made, they took the first step to make a report and now the CPIB (Corrupt Practices Investigation Bureau) is investigating," he said.

Third, any abuse of public powers is subject to the jurisdiction of the courts.

In the debate, Ms Lim and Mr Pritam Singh (Aljunied GRC) zeroed in on Part 6(A) of the Bill. It allows MND to appoint inspectors to investigate town councils that have flouted regulations, and issue an order to specify remedial action, among other things. These may be public servants or qualified professionals.

Mr Singh said this can lead to the politicisation of the public service, adding: "The MND risks becoming a tool of the ruling party of the day to fix the opposition."

Ms Lim said: "It is not possible to argue that the ministry is a politically neutral body as recent history unfortunately belies that claim."

She said the ministry was "an active campaigner against the WP" in the 2015 General Election, regularly issuing statements on alleged misconduct of the WP-run town council. But after Polling Day, she said, little was heard for weeks. She added that civil servants cannot be expected to issue stinging reports against a town council run by a minister.

Mr Lee objected to what he called Ms Lim's insinuation that public officers acted in a partisan way, and said MND gives town councils the chance to correct inconsistencies and accounting errors in their submitted financial statements.

Ms Lim, a former police officer, said she recognised civil servants do their best to act responsibly, but realistically might find it difficult.

Countering, Mr Lee said: "First she says on the one hand... her former colleagues are people of integrity with spines of steel... and on the other hand, she says they will kowtow their timorous souls.

"I think we all object to that. Our officers are brought up with an ethos of integrity, service and excellence."

MND won't step in unless situation is dire
By Rachel Au-Yong, The Straits Times, 11 Mar 2017

The Ministry of National Development (MND) will intervene in how town councils are run only when the safety or health of residents is at risk, Senior Minister of State Desmond Lee said yesterday.

He gave this assurance after opposition MPs expressed concern that new rules in the Town Councils Act could threaten the autonomy of town councils.

Amendments to the law allow the Government to investigate a town council over suspected irregularities, issue rectification orders or step in to manage it in severe cases, among other things.

Previously, MND had powers to step in only as a last resort, and in limited circumstances.

Mr Lee told members that the ministry will adopt a light-touch approach to such infractions, saying: "MND's rectification order can only reflect what the town council ought to have done in the first place.

"It will not require the town council to take any action over and above what is necessary to comply with the Act and its subsidiary legislation."

All nine Workers' Party MPs opposed the changes as they objected to the oversight provision.

Mr Pritam Singh (Aljunied GRC) said the WP did not oppose five of the six amendments proposed in the explanatory statement to the Act - "however, the introduction of oversight mechanisms and monitoring powers... has the potential for abuse".

He said this amendment was "overly intrusive" and runs counter to the idea of using town councils as a way to evaluate the effectiveness of an MP.

But Mr Lim Biow Chuan (Mountbatten) said: "If the WP is able to manage the town council well, and with proper governance... the Government would not come in." He added: "If my town council is badly managed, I would expect the Government to look after the interests of residents and interfere."

However, Ms Sylvia Lim (Aljunied GRC) argued that there could be potential conflicts of interest, as such interventions would be directed by the minister, who is "supposed to be running a town council too". "His bosses... are all also running town councils... Is the minister a suitable gatekeeper with these massive conflicts of interest?"

In reply, Mr Lee said these are "serious allegations, quite unwarranted and perhaps are indicative of the world view from which the WP comes".

He pointed to the WP's conduct in the saga over Aljunied-Hougang Town Council's (AHTC) troubling accounts, citing how when the HDB sought court intervention in 2015 to appoint an independent auditor to look into problems and take necessary action, AHTC fought the application and tried to stop an independent auditor from being appointed.

"Is it a willingness for appropriate independent, fair, justifiable regulatory oversight or is there a preference for no oversight whatsoever?" he said.

Ms Lim replied that AHTC took that position in court based on legal advice, and said it was not tenable to give political office-holders decision-making power over political institutions like town councils.

Mr Lee responded: "The key point I would like this House to take away was that while Ms Lim talked aspirationally about the need for independent oversight, what the town council was arguing in court was that where there was mismanagement of funds, nothing could be done beyond the ballot box."

Key changes to Town Councils Act
The Straits Times, 11 Mar 2017

1 Audited financial reports must be submitted within six months of the financial year's end. Town councils must also publish them openly. Those which persistently fail to submit their accounts on time can be fined not more than $5,000.

2 Town councils must notify the public and the Ministry of National Development of changes to key personnel, such as chairman, general manager or finance manager, within 30 days. They must put up notices in the estate and online. Currently, they need to publish a notice only in the Government Gazette on the changes "as soon as it is practicable".

3 Town councillors, committee members, town council staff, or anyone delegated with responsibilities must declare conflicts of interest. The town council secretary is to keep a register of all such disclosures. If he does not, he can be fined not more than $5,000.

4 The ministry can take investigative and enforcement action in the case of potential regulatory breaches or systemic weaknesses in a town council. It may conduct periodic compliance reviews, and issue orders for remedial action, among other things. As a last resort, the minister may put the town council under "official management" - this means all town council members are suspended from office unless otherwise indicated - if the "health or safety of the residents is under threat".

5 Easier handover of town councils between political parties after elections. The minister can set rules, like ordering a town council to give information to the party taking over.

6 Town councils must set up a Lift Replacement Fund for lift-related replacement and upgrading works. More details, such as minimum contribution rates, will be set out in subsidiary legislation.

New law to reduce woes of town council handover
Minister can set out rules for post-election transfers, ensuring more seamless transition
By Toh Yong Chuan, Manpower Correspondent, The Straits Times, 11 Mar 2017

The pain and problems of handing over a town council when constituencies change hands between political parties after an election will be reduced, under a new law passed in Parliament yesterday.

The amended Town Councils Act will let the Minister for National Development set out rules for post-election transfers, including ordering the outgoing town council to provide financial accounts information to the incoming team.

"A smooth changeover of town councils ensures continuity in services to residents," Senior Minister of State for National Development Desmond Lee said yesterday as he wrapped up the debate on the Town Councils (Amendment) Bill.

The changes give legal teeth to guidelines on handovers found in a guidebook drawn up by the National Development Ministry in 2013 and circulated before the 2015 General Election, Mr Lee added.

He was replying to Dr Teo Ho Pin (Bukit Panjang) and Mr Zainal Sapari (Pasir Ris-Punggol GRC), who had asked for clear rules and procedures as well as a deadline to be set for town councils to comply with in a handover.

Mr Zainal, in calling for greater guidance, crossed swords with four Workers' Party MPs - Mr Low Thia Khiang, Ms Sylvia Lim and Mr Pritam Singh (Aljunied GRC) as well as Mr Png Eng Huat (Hougang) - when he dwelt at length on obstacles in the handover of single-seat Punggol East. The People's Action Party (PAP) lost the constituency to the WP in a by-election in January 2013 but wrested it back in the 2015 General Election.

The constituency's management then shifted from the WP-run Aljunied-Hougang Town Council (AHTC) to the PAP's Pasir Ris-Punggol Town Council (PRPTC).

Mr Zainal, chairman of PRPTC, lamented: "It was unfortunate the poor practices and failure of compliance by AHTC then 'contaminated' the entire set of accounts for the whole of PRPTC, through no fault of our own."

Mr Singh, the chairman of AHTC, countered that Mr Zainal could have raised the matter with him but chose not to. Ms Lim and Mr Low bristled at his reference to an auditor's report on the AHTC.

Last November, independent auditors KPMG identified "systemic difficulties" when it reviewed the town council's books.

But was there a finding of criminal intent in the report? asked Mr Low and Ms Lim.

Each time, Mr Zainal said it was a matter for the authorities to decide.

Mr Lee and House Speaker Halimah Yacob put a stop to the arguments, saying the debate was on the principles of the Bill and not the details of specific cases.

Weighing in, Mr Charles Chong (Punggol East) accused the WP of dragging its feet on the handover, saying: "The Government will be remiss in its duty to Singaporeans if it allowed what happened to Punggol East to ever happen again."

But the key to a "seamless transition" is the willingness of both sides to cooperate on the transfer of assets and information, said Mr Lee.

He also said the law has been kept broad to give the parties room to resolve issues. "Not every detail can be anticipated," he added.

He said the ministry will step in if there are irreconcilable differences of opinion.

In an impasse, the minister "can require an outgoing town council to furnish the necessary information" to the incoming team, he added.

PAP gets back $4 million in funds owed to Punggol East
By Danson Cheong, The Straits Times, 11 Mar 2017

The People's Action Party (PAP) may have won back Punggol East from the Workers' Party in the 2015 General Election, but it got back the full sum of the single-member constituency's (SMC) funds only on Thursday after a lawyer's letter was sent.

The WP-run Aljunied-Hougang Town Council (AHTC) paid the Pasir Ris-Punggol Town Council (PRPTC) about $4 million - the final payment of over $24 million owed to PRPTC in the handover.

PRPTC announced the $4 million payment in a statement hours before the House debated the Town Council (Amendment) Bill.

It received $20 million from AHTC earlier.

On Tuesday, it sent AHTC a letter of demand for the remainder.

PRPTC also said it received the financial statements, the third set submitted by AHTC, on Feb 24 - 15 months after the handover on Nov 30, 2015.

The first two sets were withdrawn by AHTC after discrepancies were identified, it said.

Last October, the Court of Appeal had ordered AHTC to hand over all financial documents related to Punggol East to the PRPTC - the culmination of a dispute over documents needed to review the SMC's accounts.

PRPTC said it had also notified AHTC its demand is "without prejudice" to PRPTC's right to recover any other amounts that may be due.

Accountability wins the day after back-and-forth
By Janice Heng, The Straits Times, 11 Mar 2017

Twice during the four-hour debate on changes to the Town Councils Act, Speaker Halimah Yacob had to remind MPs that the purpose of the Bill's passage through the House was not to debate specific issues, but the general principles of the proposed legislation.

She said so about 80 minutes into the debate, and again about an hour later, after several MPs began to get caught up in details and events that, arguably, served as the cause for why the Act needed to be refreshed with tighter or new measures.

These included what occurred when the single-seat Punggol East changed hands - first after the Workers' Party (WP) won it in a 2013 by-election, and then when the People's Action Party (PAP) won it back in the 2015 General Election.

Granted, the details and recollections of what transpired in the aftermath of these changes - the need to account for and transfer assets, the pace at which these took place and so on - are useful for illustrating broad points such as the need for efficiency, transparency and accountability.

Pasir Ris-Punggol Town Council (PRPTC) chairman Zainal Sapari, in recalling aspects of the handover after Punggol East came under his town council, said the inclusion of unaudited financial statements - from when the WP held the constituency - compromised PRPTC's accounts as a whole, for FY2015/2016.

He suggested allowing town councils to keep two separate financial accounts, pending the submission of "unqualified audited financial statements" of the constituency being taken over.

While such details add useful context to the debate and some of the proposed changes, others were, perhaps, less necessary.

When Ms Sylvia Lim (Aljunied GRC) and Mr Pritam Singh (Aljunied GRC) rose separately to respond to Mr Zainal's remarks, the exchange got mired in minutiae, such as the data that the WP originally gave the PAP being in the wrong file format.

There was also a back-and-forth over a comment which Mr Zainal cited from an academic, which saw Ms Lim and WP chief and fellow Aljunied GRC MP Low Thia Khiang challenge Mr Zainal on the question of whether independent auditors KPMG had uncovered anything criminal in their audits.

That parts of the debate yesterday on the Town Councils (Amendment) Bill drifted away and became, at times, a finger-pointing exercise, distracted from what was an important piece of legislation - some four years in the making, and which involved several rounds of public consultations, including with town councils.

Indeed, Senior Minister of State for National Development Desmond Lee pointed out that the debate had gone off course - an observation that Madam Halimah agreed with.

The danger of debates veering off course is that more pertinent questions are missed.

But with the intervention and steady direction provided by Madam Halimah, the debate thankfully stayed on track.

And in doing so, the House was able to address other practical and no less important aspects, such as how to handle disputes between statutory boards and town councils.

There was broad agreement on the Bill's intent - even if the WP opposed the provision on oversight.

But it was heartening in the end that MPs on both sides of the House affirmed the ideals behind the Bill, such as the need for accountability and dealing with issues of conflicts of interest. Given how the changes will affect most Singaporeans, it was important that the debate concentrated on worthwhile and concrete outcomes.

MND flags issues with AHTC FY2015 accounts
Ministry seeking clarifications of financial statements from WP-run town council
By Nur Asyiqin Mohamad Salleh, The Straits Times, 10 Mar 2017

The Ministry of National Development (MND) yesterday flagged several issues with financial statements submitted by the Aljunied-Hougang Town Council (AHTC).

The town council's external auditor had raised several instances where the AHTC's statements for the 2015 financial year failed to comply with the Town Councils Act and Town Councils Financial Rules, the ministry said in a statement.

It did not disclose what these instances of non-compliance were, but noted the auditor had similarly flagged the AHTC's financial statements for its 2014 financial year.

The MND has sought clarifications from the Workers' Party-run AHTC and will present the finalised financial statements to Parliament upon receiving them, it said.

The ministry's statement comes a day before Parliament debates changes to the Town Councils Act that will give the Government greater oversight over town councils.

The ministry also noted that this is the fifth year that the AHTC's external auditor has qualified its financial statements.

The AHTC submitted the statements on Feb 24, and sent in accompanying documents the subsequent week - six months after the deadline on Aug 31, said the MND.

It was the fourth time the statements were late since the Workers' Party won Aljunied GRC in May 2011. The AHTC submitted statements for the 2014 financial year on time.

The ministry also laid out a brief timeline related to the submissions. On Aug 12 last year, the AHTC wrote to the MND requesting an extension for the submissions, citing "outstanding issues to resolve with its auditor", the ministry said.

Over the next few months, the MND repeatedly asked the AHTC for a timeframe of when its audit for financial year 2015 would be completed. But the AHTC could not give a firm reply on the timeline, nor the exact reasons for the delays, it said.

Responding in a statement yesterday, AHTC chairman Pritam Singh said the town council has explained the reasons for its late submission to the ministry. He also said the AHTC recently called a public tender for an internal auditor, "to ensure compliance with the Town Councils Act and the Town Councils Financial Rules on an ongoing basis".

However, the town council did not receive any submissions from accounting firms in Singapore. Mr Singh said it will call a second tender and put its statements for FY2015 on its website after it has addressed the issues raised by the MND.

* PwC calls for inquiry into payments made to former managing agent of Workers' Party town council
By Chong Zi Liang, Political Correspondent, The Straits Times, 3 May 2017

The setting up and appointment of the former managing agent (MA) for the town council run by the Workers' Party (WP) has been called into question in a new report.

Their tainted circumstances "would put the propriety of all payments made under two MA contracts to FMSS (FM Solutions and Services ) into question," said the report by accounting firm PwC, which sought an inquiry into the payments.

These contracts total at least $23 million uncovered last year in an audit of Aljunied-Hougang Town Council (AHTC) by KPMG.

Now, there is another $500,000, at least, that could have been saved in Punggol East constituency - when it was run by the WP - had proper procedure been followed, PwC said.

It uncovered this new amount following a review of other contracts and tender evaluation reports.

PwC added that while its report does not look into potential criminal liability, "the circumstances may warrant further investigations by the relevant authorities as to the relevant potential offences".

PwC was appointed by the Pasir Ris-Punggol Town Council (PRPTC) to review past payments made by AHTC in relation to Punggol East, which the WP held from 2013 to 2015. During that time, AHTC was called Aljunied- Hougang-Punggol East Town Council (AHPETC). PRPTC is under the People's Action Party (PAP), which won Punggol East in the 2015 General Election.

In the report, PwC said there was a lack of documentation on why contracts were sometimes awarded to those that did not submit the lowest bid.

The town council also did not make use of options in existing contracts to extend them at lower rates. Instead, it engaged the same vendors at significantly higher rates.

"The total cost savings that the town council could have saved (as well as payments made in some instances without proper supporting documents) add up to a total amount of (at least) $506,562.06."

Chiefly, PwC said the circumstances around the selection of FMSS as MA of AHTC show it was done by design, with FMSS assured of the job two months before it was formally appointed in August 2011.

FMSS had started charging AHTC for its services in June 2011, even before the previous managing agent CPG was discharged in August 2011.

PwC cited evidence suggesting FMSS owners How Weng Fan and her husband Danny Loh had been approached to set up a company to manage the new town council.

PwC said: "Apart from personal civil liability, it also appears to us that the circumstances collectively may give rise to inferences that a deliberate course of action could have been taken by some within the town council to appoint and install FMSS as the MA, and to benefit FMSS (and the conflicted persons) with such award of MA contract..."

"The conflicted persons were only able to get away with such conduct because the relevant elected town councillors had wholly failed to exercise proper due diligence and supervision in the award of the two MA Contracts to FMSS," it said.

"Accordingly, they should also bear personal responsibility for such improper payments made to FMSS," PwC added.

"A proper inquiry should be held (for instance, through legal proceedings) to determine the improper payments made to FMSS which ought to be recovered," it said.

In the report, PwC detailed how PRPTC said it was still reviewing the report but called its findings "deeply troubling". It also said it was seeking legal advice on how to proceed.

"PRPTC will also consider whether it should take steps to recover the losses suffered by Punggol East residents as a result of AHPETC's mismanagement," it said.

In a separate statement, the Ministry of National Development said the PwC report "reinforced our concerns regarding how public funds under the town council's charge had been managed".

The ministry noted that KPMG's report in October last year had raised similar questions on the propriety of payments made by AHPETC to FMSS. KPMG is the independent accountant of AHTC, as it is once again known now.

"The report also raised the possibility of civil and criminal liabilities," the ministry said.

It added that the report will be forwarded to the independent panel appointed by AHTC in February this year to look into improper payments made by the town council.

There was no comment from AHTC or KPMG on PwC's findings, the report noted. Yesterday, the WP told The Straits Times it would study the report.


Town Councils (Amendment) Bill 2017 2nd Reading Speech By SMS Desmond Lee -10 Mar 2017
Town Councils (Amendment) Bill 2017 Round-Up Speech By SMS Desmond Lee -10 Mar 2017

MND: Aljunied-Hougang Town Council’s FY2015 Financial Statements -9 Mar 2017

'Pervasive' lapses found in Workers' Party town council accounts; Some lapses may amount to criminal conduct: KPMG

AMK Town Council general manager under CPIB probe

Workers' Party town council lapses detailed in KPMG report; AHTC to transfer sinking funds for Punggol East in instalments

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

AGO Audit of Workers' Party-run town council FY2012-13 accounts flags major lapses

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