Debated in Parliament on 13 Feb 2015.
Order read for Resumption of Debate on Question [12 February 2015]
"That this Parliament:
(i) notes with concern the Auditor-General's Report on the Audit of Aljunied-Hougang-Punggol East Town Council (AHPETC) (Paper Misc 1 of 2015), specifically its findings on:
(a) the deficiencies in AHPETC's financial and accounting systems, record-keeping and safeguards;
(b) the uncertain accuracy and reliability of AHPETC's accounts;
(c) the lack of proper disclosure and oversight by AHPETC's Town Councillors, especially over related-party transactions and conflicts of interest; and
(d) the risk that AHPETC has not properly managed and spent public funds;
(ii) calls on all Town Councils to uphold high standards of accounting, reporting and corporate governance so as to safeguard residents' interests; and
(iii) supports strengthening the legislative framework for Town Councils, in order to hold those responsible for their good management to proper account. – [Minister for National Development]."
Question again proposed.
Minister Shanmugam.
Mdm Speaker, I said that I would come back to clarify if necessary on Annex 3. Ms Lim asked me yesterday whether the table, which I circulated showing AHPETC paying FMSS significantly more per unit, is correct. I have verified the rates in the table that I gave, in Annex 3, are correct. These are the rates in the management agency contracts that the Town Councils have signed with their respective
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Managing Agents.
AHPETC is the only Town Council where the Managing Agent charges differential rates for residential and commercial units. Some Town Councils, in the past, charged differential rates, but all the Managing Agents have since done away with those and applied a fixed rate for both. Ms Lim may have been mistaken and confused the Managing Agent rates with the service and conservancy charges (S&CCs) paid by commercial units which may differ from the S&CCs paid by residential units.
So, the calculation that I have put out is correct and, on a weighted average basis, AHPETC pays $1.6 million more, compared with other Town Councils. Thank you.
Mdm Speaker : Ms Sylvia Lim, you wish to make a clarification?
Yes, Madam, and also to clarify to what the Minister has just clarified, if I could.
Mdm Speaker : Yes, not a speech, please, Ms Lim.
No.
Mdm Speaker : Just a clarification.
Yes, Mdm Speaker. I would like to respond to what the Minister mentioned. I was not confused about whether it was S&CC rates or Managing Agent rates. My response was based on documents that we had seen from PAP Town Council Managing Agents stating very specifically that they charged a higher rate for commercial units compared to residential units. So, that is my clarification.
Madam, may I proceed to clarify something I said in my speech yesterday?
Yes, please.
Yesterday, in response to the Minister's mention of cyclical information reports being late from AHPETC, I said that in terms of replacing lift parts, the ropes and sheaves were on time and that lift batteries were being scheduled in accordance with the schedule by the Ministry of National Development (MND). What I should have said was that the replacement of the ropes and sheaves was on schedule, and that the replacement of lift
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batteries is being done in accordance with the schedule that we have given to MND.
Mr Liang Eng Hwa.
Mdm Speaker, thank you for the opportunity to join in the debate.
What was revealed in the Auditor-General's Office (AGO) report went beyond what many had imagined. It is like reading an extreme negative case study in a text book on corporate governance. The only difference is that this is real. It is a live example and, sadly, something that will bring disrepute to many of our elected Members here.
Glaring lapses that are most disturbing to me and many others are the mismanagement of the Sinking Funds, the disregard for the governance of related party transactions and conflict of interest, the shocking lack of internal control, the mishandling of S&CC arrears and several instances of amounts collected and paid out that were not properly recorded, to name a few.
It gave the impression of a house in disarray and also, critically, the absence of leadership to ensure governance, transparency and accountability.
The financial affairs for the Town Council were in such a shambles that both AGO and, earlier, the AHPETC independent auditors, were unable to draw any meaningful opinion on the Town Council's state of affairs and transactions. AGO said that due to the inadequacies in the accounting system and procedures, the financial statements prepared were inaccurate and not reliable. And, hence, they were unable to establish if public funds were properly spent, accounted for and managed.
AHPETC's independent auditor had not once but twice and, in fact, two years in a row, stated that they were not able to obtain sufficient appropriate audit evidence to provide the basis for an audit opinion. In the 2012/2013 report, its independent auditor issued a qualified opinion stating 13 issues of concern over the Town Council's account.
I know this was talked about at length yesterday by Minister Khaw and Minister Shanmugam, but it is worth reiterating again to remind all in this Chamber of the seriousness.
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Qualified opinions from independent auditors are about the most disapproving opinion you can get from an auditor. And it usually suggests material discrepancies that compromise the accuracy and integrity of the financial statements. Any companies receiving a qualified opinion would almost drop everything to immediately address the issues raised and would expeditiously act to rectify the concerns raised as well. However, in the case of AHPETC, its response to the adverse audit report was surprisingly one of sloppiness and lack of urgency, with a number of audit issues not rectified thereafter.
The public has no access to the Town Council's state of finances and processes. Hence, they will have to depend on independently audited statements to know if things are in order. In the last three years, the public and Parliament were denied the right as there were no credible and unqualified financial reports available that can be used as a basis to scrutinise them.
So, yesterday, Ms Sylvia Lim told the House that many committees had been formed by the Town Council, and of how she chaired her chairman's committee meetings, the various measures she has put in place, the Members of Parliament's estate visits. They were all mentioned in the annex that she presented. Well, form without substance is meaningless. What really matters to the public are results and desired outcomes, in the sense that funds are well-spent and accounted for. Clearly, in the case of AHPETC, the outcomes are a let-down.
The Town Council was set up to manage the Housing and Development Board (HDB) estates and entrusted with the responsibility to manage very large sums of public money, money from residents in the form of S&CC and from the Government in the form of grants from MND.
Town Councils are not part of the Singapore Public Service. Therefore, the Ministry of Finance (MOF)'s Instruction Manual (IM) does not apply here. Instead, the Town Councils Act was crafted to give the Town Councils financial autonomy and devolved powers to manage their own businesses, including procurement and financial management. The elected Members of Parliament of the Town Councils are empowered to appoint key appointment holders and council members.
Clearly, there are significant powers and autonomy given to the Town Councils. But it does come with accountability and responsibility as well.
Given the political nature of Town Councils, the issue of governance and accountability should rightly be dealt with in Parliament, the highest political institution of the land. It is the duty of every one of us here in this House to resolutely uphold the high standards of
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governance in Town Councils, certainly no worse standards than any companies or charitable organisations. We must not let any errant practices erode public confidence and trust in the integrity of the finances of Town Councils. We, the elected representatives, are the guardians of governance, transparency and accountability. And it cannot be just form without substance, talk without actions.
The debate in this House is also necessary because, in the area of financial management, payments and procurement procedures and processes, it is not often obvious to the general public as to whether public monies are properly managed and clearly accounted for.
Mdm Speaker, I want to record my concerns with regard to the lapses in the Sinking Fund raised by AGO.
In AGO's report, it flagged that AHPETC had failed to make the required transfers of the conservancy and service fees and the Government grants into the sinking fund accounts for the last three quarters of FY2011/2012, in non-compliance with the Town Councils Financial Rules. It later transferred a $2.7 million and an additional amount of $1.2 million only after being queried by AGO.
Monies in the sinking fund are set aside for future cyclical maintenance, such as repainting of common areas, replacing water tanks and pipes, re-roofing and electrical rewiring, upgrading of lifts, which is a costly item, replacing rubbish chutes and water pumps and so on. These are the real things that need to happen with money from the Sinking Fund.
The consequences of having insufficient money in the Sinking Fund are that many of these essential maintenance works may not be done and, hence, resulting in poorer living conditions, living environment, frequent breakdowns and repair disruptions and even compromising the safety of residents. These consequences may not be seen in the initial few years but, as the estates ages, residents will soon be at the short end of the stick and suffering. And the Town Council may have to levy more S&CC to pay for the maintenance costs. And, of course, there is also this risk of inflation that you have to take into consideration.
It is for this reason that Sinking Funds are segregated and ring-fenced so that Town Councils cannot dip into these funds for other operating and routine uses. If there are no regular and diligent contributions to the Sinking Fund, it will soon run out of money and there will be no cyclical maintenance to talk about.
Like the reserves that the country builds up over the years for our long-term security, the accumulation and disciplined contribution to the Sinking Fund are at the core of the type
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of government that we want in Singapore, which is, to do whatever is right and in the long-term good of Singapore and our people. In contrast, mismanagement and the wrong use of Sinking Funds tell a different set of value system – that of a short-sighted and populist government.
I am very concerned that AHPETC took such a lax attitude towards the Sinking Fund. If AGO had not pointed out this lapse, it is only common sense to expect that the Town Council Sinking Fund would soon be running short of funds to maintain the estates. Then, we will see the estate deteriorating and the quality of life worsening for the residents.
Also of particular concern is another related lapse pointed out by AGO with regard to the Goods and Services Tax (GST) input tax claimed from the Inland Revenue Authority of Singapore (IRAS). In this case, Sinking Fund expenditures were paid from the Sinking Fund's bank accounts for two financial years. However, the two amounts claimed – $643,000 and $888,000 – were not returned to the Sinking Fund and ended up in the operating account. This, again, will deplete the Sinking Funds which are for longer-term use. Instead, the funds were transferred to the operating account which is for short-term use.
In another instance, maturing deposits of $5.49 million intended for the Sinking Fund were not credited into the Sinking Fund bank account. Again, it went into the operating fund account. According to the AGO's report, even after restoring the full amount, the Sinking Fund is still short of the missing $490,000.
These and other lapses related to the Sinking Fund pointed out by the AGO will seriously undermine the adequacy and sufficiency of the Sinking Fund, and this is not unacceptable.
The Workers' Party (WP) is not new in running a Town Council, having run Hougang Town Council for more than 20 years. Hence, it surprised me why AHPETC did not transfer the money, as required, to the Sinking Fund bank accounts. It is not about whether you have a good IT software system or not. It is simply about whether the management is conscious of the importance of the Sinking Fund and the presence of mind to see that this is adhered to.
The previous People's Action Party (PAP)-run Town Council for Aljunied left a healthy reserve of about $90 million to the current WP-run Town Council. It is only right that the current leadership of the Town Council ensured that the long-term funding needs of the Town Council are safeguarded and the hard-earned monies of the residents are properly and fairly spent.
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The AGO's report also pointed out the serious conflict of interest issues and the disregard for related party transactions, which were well-covered by Minister Shanmugam and Minister Khaw yesterday.
Again, I want to record my serious concern over this situation where the "Group of Four" or the "Gang of Four" sit as key appointment holders of AHPETC and yet are also the owners and directors of the company that render for-profit services to the Town Council. And most amazingly, notwithstanding the related party transactions and the fit and proper issues, they were given the job of certifying work done and approving cheque payments from the Town Council to their own company.
So, again, the common sense question is: how can that be allowed to be passed by the Councillors of the Town Council? Are the stewards of the Town Council not supposed to discharge their fiduciary duties and responsibilities?
Again, were these lapses due to ignorance, or were they incompetent? Or is it a case of the Town Council taking advantage of the financial autonomy granted to the Town Councils?
It is also amazing to see how AHPETC has flip-flopped and reported wide swings in the S&CC arrears numbers. The arrears report to MND and to AHPETC's Finance and Investment Committee was unreliable and not aligned. More than three years into running the Town Council, AHPETC still does not have a system that can generate reliable arrears data. This is unsustainable and unfair to residents who duly pay their S&CC.
Mdm Speaker, we are all really shocked and at the same time saddened to read observations in the AGO report and the AHPETC's Independent Auditor's report. The systemic breakdown of internal controls as well as the messiness and the sloppiness in the way the Town Council operated are the consequences of incompetent management, to say the least.
As of now, we are not even sure if the financial statements tabled are correct and reflect the true state of affairs at AHPETC. In other words, we do not know what we do not know. Listening to the speeches of the WP Members of Parliament yesterday, I am not sure if they have come to grips with these serious lapses.
Last night, at a coffee shop dinner, an auditor friend of mine told me an interesting comment. He said, "Why is the PAP doing WP a favour by helping them to get their house in order, and yet being accused of bullying the WP?" He said that the way things are going, the Town Council is clearly down on a slippery slope and, in no time it will turn into a monster
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and collapse on its own weight.
So, I had to explain to him that as a responsible political party, we cannot allow such poor management of public funds and public money to occur and impacting the lives of our citizens, even if it means hurting us politically, and also the perception that the PAP bullies WP. In any case, we are more concerned whether WP is bullying their own residents with these malpractices. From the numbers that Minister K Shanmugam just clarified, obviously the Managing Agent is charging the Town Council a lot more than the other Town Councils, and, from the other numbers that have been reviewed, it is quite clear that FMSS has short-changed the Town Council. In other words, the Town Council paid more and the residents got less.
Mdm Speaker, what we have learnt from the AGO report is far from the best practices that we expected from a political-linked organisation like Town Councils, funded by public money and run by elected Members. These are worst practices that may not even find its place in a Third World parliament.
Finally, I want to quote a comment made by Mr Zulkifli Baharudin in Wednesday's Straits Times. He said, "It shouldn't be that if you're from a smaller party, your standards are lower. If someone votes for opposition, it is because he thinks they can do a better job. You cannot join politics and say that you are inexperienced."
Our politics must not be about accepting mediocre performance and sub-standard practices. Singaporeans deserve better. AHPETC has to rectify these serious shortcomings and accurately restate and present their financials expeditiously.
Madam, I support the Motion in the name of the National Development Minister. Given the seriousness of the issue, at the time of voting, and with your consent, I would like to call for a Division.
Mdm Speaker, we all know what the AGO is known for and the values they represent. In every report that came out of AGO since time immemorial, entities under its scrutiny had to go through a baptism of fire whenever the AGO came knocking. I have full respect for their work.
Over the years, the AGO has found sad instances of over payments, payments without evidence that goods and services were delivered, duplicate payments and, in one instance,
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amounting to $18.6 million, and so on in many Ministries and Organs of State it audited.
One agency was found to have called for a quotation instead of a tender for a project that exceeded $70,000 in the 2010/2011 AGO report. Another agency was cited to have issued purchase orders to the term contractor only after the contractor has started the work.
AGO also revealed that 10 Statutory Boards did not present their FY2006/2007 annual reports to Parliament within the six-month time frame and three of these boards had also been late the previous two years. One of them did not even present its audited financial statements to Parliament for the previous two financial years.
Awarding the contract to the sole tenderer despite the offer not meeting technical requirements specified in the tender and paying more than the contract price for extension of the contract were all flagged. Even the agencies under MND were cited for over-payment, late payment, mistaken use of waiver of competition.
The Ministry of Foreign Affairs was cited for not having complied with Government procurement principles of transparency, open and fair competition and value for money when an overseas mission was audited.
The Public Service Division was also flagged for informing a bidder that it had secured a contract worth $455,000, 13 days before the Tender Board made the award decision.
Some of these lapses were small in financial values while others were serious and the list goes on. Like what the Ministers said yesterday, in some countries, the CEO would have taken a deep bow, apologised, and resigned, but I guess this is not in our culture.
Madam, AHPETC is also found by AGO to have erred in some of these areas and I am certain AHPETC will not be the last as well because good corporate governance is a work in progress.
The WP takes the AGO findings very seriously. We have acknowledged our shortcomings in certain areas as well as defended our actions in others. On any other given day, this report may read like a typical AGO report on any entity under audit but, today, the spotlight is on AHPETC and we will explain the issues to the public.
First, I would like to specifically address one of the major lapses mentioned by AGO under para 3.2(c) of the main report which states that AHPETC does not have "a system to monitor arrears of service and conservancy charges accurately and hence there is no
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assurance that arrears are properly managed."
We have explained to AGO that AHPETC does have a system to track every financial transaction in a resident's account, including HDB grants, monthly S&CC payments, penalties, legal costs, and interests, if any, dating back to 1996 if the residents are from Hougang.
We have also explained how these S&CC payments are collected and uploaded into our financial and accounting system. Every transaction via cash, credit card, cheque, NETS, Internet banking and inter-bank GIRO is identified and posted into the respective residents' record in the Accounts Receivable and General Ledger at the end of the day or whenever the collection agencies inform us. This has allowed AHPETC to monitor the arrears situation of an individual account "live", up to date and on demand.
AHPETC is able to account to residents as to whether they have paid their S&CC or whether they are in arrears, if they were to enquire at the any of our branches across our town.
Madam, what AHPETC does not have is a programme to generate aggregated S&CC data in the format requested by MND and to monitor them in that specific format. The computer system currently in use at AHPETC was an upscaled version of the system from Hougang Single Member Constituency (SMC) and it was put into operation within a short span of one month. A lot of the features required to handle the operation of a Group Representation Constituency (GRC) were not implemented then.
As we have mentioned in our media release, all reports submitted to MND up to April 2013 were prepared by staff based on data generated by the IT system and extracted through manual sorting and counting. AHPETC also acknowledges that this manual process is not ideal and efficient as the data set is huge. It is also tedious and subject to reporting and human errors.
AHPETC has made incremental improvements to the computer system over the years. Our system may be rudimentary in features compared to what was available before 2011, but it is certainly robust in keeping a reliable database. We took time to have the data and process reviewed internally and externally before we released our S&CC arrears rate of 5.66% as at 30 September 2014 a few weeks ago. In short, we were not evasive when we said we would address the issue in due course. We will work towards providing timely data to MND in the coming weeks, albeit not in the format the Ministry requires, but, nonetheless, relevant enough to take a snapshot of the arrears situation at AHPETC.
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Next, I want to highlight the challenging environment AHPETC is working in, some of which relate to the 13 points of disclaimers highlighted by the auditors of AHPETC for FY2012/2013.
In Part 1 of the AGO report under one of the disclaimers on Receivables from Sundry Debtors, AGO revealed that AHPETC did not monitor and take timely follow-up action on its receivables.
In para 2.34 of the report, it was stated that most of the outstanding receivables as at 1 July 2014 were amounts due from HDB and the National Environment Agency (NEA). While there were invoices under dispute, there were also instances where HDB was reviewing claims dating back to May and November 2012.
In subsection (ii) of the same para, NEA rejected four invoices from AHPETC because they were wrongly sent to one of the regional offices. NEA further explained that by the time the invoices were received by the relevant division, the period provided for payments or the credit period, had lapsed and NEA was unable to process the invoices for payment. The agency then requested AHPETC to re-issue the four invoices.
Madam, invoices do not carry expiry dates. The 30-day credit term listed on an invoice is to let the debtors know that they have to pay within the stipulated period or the creditors will reserve the right to impose penalties. It is common to replace a missing invoice under the same invoice number and date, or to re-issue an invoice due to amendments but to request for new invoices due to expired credit terms is highly unconventional.
To void an invoice needs justification. Is it right to do that just so an agency can be seen to be prompt in making payments on paper?
Under the same report for Disclaimer 6(a) on page 23, AGO also revealed that AHPETC does have a standard operating procedure (SOP) for non-routine works, contrary to what the previous auditor had claimed. AGO was of the opinion that AHPETC should stipulate a timeline for verification works to be done by property officers after job sheets were received in the SOP, not that AHPETC does not have an SOP.
Next, I would like to highlight what my colleague, Ms Sylvia Lim, said yesterday on the oversight of payments.
The headline in Lianhe Wanbao, "Town Council Secretary and GM pay their own company $6.6 million", is very mischievous. Out of the $6.6 million, $6.4 million or 96% is related to agreed monthly sums for services provided by the Managing Agent and Essential
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Maintenance Service Unit under contracts approved by the Town Council.
These are necessary recurring payments for critical services to keep our town running, or else rubbish will pile up three-storey high and lives will be endangered if residents are trapped in the lifts with no rescue effort carried out in the shortest possible time.
Our Managing Agent cannot make payments to themselves for the above services without the Chairman or one of the Vice Chairmen to co-sign the cheque, bearing in mind that, at the same time, there are oversight committees to ensure work is done.
We monitor calls, complaints, conservancy issues, electrical issues, lift issues, customer services issues and so on across our town and by divisions. Checks are done monthly at our Estate and Community Liaison Committee (ECLC) meetings and quarterly Town Council meetings. So, these are not payments for nothing or for unknown services or work done.
Last, I wish to touch on safeguarding public funds. It is a waste of public funds for an incoming administration to develop a new computer system that does essentially the same functions as the previous system, which was also developed with public funds.
I understand, in the old days, HDB used to provide Town Councils with a centralised computer system. It makes perfect sense since Town Councils are set up to manage only HDB estates and the common areas. Who else would have the latest data on the number of flats in an estate, the types of flats, the residency status of the tenants, the amount of grant each flat should receive, when to start collecting S&CC and whether the unit is rented out whole or partial? All this information affects S&CCs and grants.
And such systems are not cheap to develop. The old system at Aljunied Town Council cost over $20 million in hardware and software split amongst other PAP Town Councils. AHPETC has spent over half a million dollars just to replicate the old system and what the old system could do, and we still have some way to go. Is that not a waste of resources and public funds? Setting up a centralised computer system will certainly safeguard residents' interest and money, no doubt.
Madam, there are many observations made in the AGO report. But at the end of it all, the buck stops at AHPETC. I cannot remember if any Minister had ordered any audit on any Ministry or Organ of State in recent times due to disclaimers or adverse opinions expressed by its auditors. But nonetheless, AHPETC has cooperated in this audit and will take lessons from the findings in the spirit of public accountability and good corporate governance.
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Mrs Josephine Teo.
Mdm Speaker, I would like to seek a clarification from the Member, Mr Png.
Mr Png had compared AGO's report of its audit on AHPETC to the findings that the AGO makes during its annual audit of Government agencies. But I would like to ask, in relation to the conclusion that it drew from its audit of AHPETC, and I quote from its report, "The AGO concluded that unless the weaknesses are addressed, there can be no assurance that AHPETC's financial statements are accurate and reliable and that public funds are properly spent, accounted for and managed."
I would like to seek a clarification from the Member whether he is aware of any other audit conducted by AGO of a Government Ministry, Statutory Board or agency that has drawn a similar conclusion.
I have drawn examples from AGO's reports because I read them every year. It is not meant to be a comparison with AGO's report on AHPETC. I have mentioned in the final part – that it is not meant as a comparison, but it is meant to point out that such lapses do exist and I had mentioned that good corporate governance is a work-in-progress. We have accepted the AGO report. We have accepted it and Mr Low Thia Khiang has already stated at the beginning of his speech that we support the Motion.
Mrs Josephine Teo.
Mdm Speaker, unless I am completely mistaken, sitting right opposite Mr Png when he was speaking, he said something to the effect that in any other report made by the AGO, it would not attract the same level of scrutiny. That is the effect of what he was saying.
So, I seek this very specific clarification. I think it is an important clarification because the audits that the AGO conducts of Ministries and Statutory Boards are something that is done every single year. The report is tabled to Parliament. And every Ministry or Statutory Board that has findings has to account for it.
When, in the past, as a Member of the backbench, I had been seated in the Public Accounts Committee (PAC), I can share with Members very honestly and very certainly that Ministries and Statutory Boards, when they respond to queries, they take a very different
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attitude and replies to the PAC take on a very different tone than the tone that is reflected in the AHPETC's comments to the AGO.
So, I wanted to seek this clarification because Mr Png, it seems to me, has suggested that Ministries and Statutory Boards have the same problems. But the conclusion drawn by the AGO is a very specific one. It says that unless the weaknesses are addressed, there can be no assurance that AHPETC's financial statements are accurate and reliable and that public funds are properly spent, accounted for and managed.
So, I would like to know whether Mr Png is aware of any other occasion that the AGO has drawn the same conclusion for a Government Ministry or Statutory Board. That is a very important point. Since the Member has raised this point, I hope you will clarify it.
The AGO report presented to Parliament does not have all those conclusions stated there. If we read the AGO report presented every year, it is all stated there. There is no conclusion for those cases that AGO cited. Some of them would say they would refer the cases to the Police for investigations and some of them would say they would take remedial action.
So, likewise, the WP has said we have taken measures. Yesterday, Ms Sylvia Lim had highlighted those measures and what we have done. So, the conclusion that AHPETC got from AGO is, it is unique, yes, we accepted it. But those examples that I cited are things that AGO picked up, too. Are those not real instances where lapses happened, too? I am not saying that because it is AHPETC which is tabled in Parliament, but I am just citing that AGO's work is thorough, fair and I respect it.
Mr Pritam Singh.
Mdm Speaker, in Minister Khaw Boon Wan's letter to the Minister of Finance dated 18 February 2014, the Minister highlighted four issues in particular that he felt were not addressed by AHPETC, hereafter referred to as the Town Council. This led to his request to the Minister for Finance to carry out an audit on the Town Council through the AGO. Ms Sylvia Lim has already spoken on the first two points covering related party transactions and the transfer of Sinking Funds.
The third issue, on the failure to make available accounts and records after the audit period FY2012/2013 available to the auditor, Foo Kon Tan, for subsequent event review, has been addressed by the AGO. The AGO found no significant matters in these documents that
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would materially affect the Town Council's FY2012/2013 financial statements. Be that as it may, the Town Council acknowledges the points made by the AGO on this note.
I will speak largely on the fourth matter raised in the Minister's letter to the Finance Minister covering the unexplained differences in the figures under audit amounting to a total exceeding $20 million. This matter overlaps to some extent, with the observations made by the AGO, summarised as items 4 and 5 in its main report. This broadly covers the lapses in internal control, procurement and inadequacies in record management and accounting system.
I will deal with these matters, focusing on the disclaimers and issues that have the highest financial signature, in the spirit of full transparency and accountability to the residents of AHPETC and to Singaporeans. I will also provide some context that the public should be made aware of, acknowledge shortcomings, identify ideas where systemic improvements will be or have already been made and where processes will continue to be enhanced.
First, lift upgrading programme and lift expenses. Mdm Speaker, Foo Kon Tan's fifth disclaimer was on the HDB Lift Upgrading Programme (LUP) and covered its inability to determine the accuracy of AHPETC's lift upgrading expenses of about $18.6 million.
To provide some context to this point, the FMSS staff who previously worked in the Hougang Town Council environment were not familiar with the nature of the billings to HDB for LUP works, as no lift upgrading was carried out in Hougang SMC in the past. Some LUP bills were passed on to FMSS from the previous Managing Agent under the PAP-run Aljunied Town Council. This matter was also brought up in Parliament in 2012 by Ms Sylvia Lim.
In particular, the Town Council was concerned about instances where it was billed one year in advance by HDB and certain bills were carried over from FY2011 to FY2012, amongst other matters. Accordingly, the Town Council did not recognise LUP expenses in earlier years amounting to $8.38 million as the Town Council disputed its share of LUP expenses with HDB. In view of the very large numbers, one can understand why the Town Council took a cautious approach. The AGO report has since confirmed that the Aljunied-Hougang-Punggol East Town Council has fully paid up the $18.61 million owed to HDB in May 2013 and that this matter has been fully resolved.
Associated with this point is Foo Kon Tan's fourth disclaimer which stated that lift repair expenses of about $1.6 million were expenses that related to the previous financial year and that the Town Council management did not ascertain the quantum of the prior year's
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expenses and that their expenditure had been over-stated.
The Town Council informed the AGO that some work orders were not raised before 31 March 2012 for works performed in FY2011/2012 due to a staff oversight, explaining the incorrect recording of those expenses. The AGO found out that the actual amount of expenses relating to FY2011/2012 included in the FY2012/2013 audit was actually $63,902 and that the impact of this error in the AGO's words, was, I quote, "not significant."
Nonetheless, the AHPETC informed the AGO that with the implementation of the work orders system module on 1 April 2012 for non-routine works, and 1 October 2012 for routine works, lift repair expenses would be accounted for in a timely manner going forward.
Point two, receivables from various stakeholders. The second disclaimer from Foo Kon Tan covered receivables from the Citizens Consultative Committee (CCC), a carry-over largely of the CIPC funding process governed by MND to the previous PAP Aljunied Town Council. The other stakeholders in this disclaimer are the taxman and sundry debtors. The total amount in question under this heading is about $3.1 million.
First, the CCC. The AGO's findings revealed that, in fact, about $614,237 was due from the CCC while the remaining $563,622 were receivables from other parties, such as tenants and lessees. Separately, even though HDB had banked in about $388,887 into the AHPETC's bank account in June and September 2012, the Town Council was unable to match the receipts to the corresponding receivables.
The Town Council would like to acknowledge the AGO's efforts in unravelling this disclaimer and following up with the Ang Mo Kio Town Council which, in the aftermath of the AGO's audit and intervention, established that the reimbursement it received from HDB should have originally been made to AHPETC instead, by virtue of boundary changes made on the occasion of the 2011 General Elections.
I will deal with the point by the AGO that it was able to unravel the issue of the CCC receivables using documents given to it by AHPETC later in my speech, covering the handing over and taking over of records between the old Aljunied Town Council and AHPETC and the management of records in general.
Secondly, on receivables from the taxman, IRAS. Foo Kon Tan noted in its FY2012/2013 audit report that it was not able to ascertain receivables amounting to $110,735. AHPETC acknowledges that these receivables were wrongly stated and that it has duly reversed out these incorrectly stated receivables in May 2014.
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Thirdly, on sundry debtors. Foo Kon Tan noted in its FY2012/2013 audit report that it was not able to ascertain about $1.8 million of receivables from sundry debtors. AGO found out that the Town Council had incorrectly over-stated about half these receivables and that the Town Council should have been more industrious in recovering payments on a timely basis.
Mdm Speaker, while the Town Council acknowledges this point, a bit of background will be helpful to contextualise this particular issue. When the Town Council upscaled the Hougang Town Council's computer system to replace the terminated system used by the former Aljunied Town Council, the Hougang system had a limited number of categories for Town Council operations. This system was set up for the operation of a single member ward of an Opposition Town Council. The accounting for Government programmes, such as the revitalisation of shops, neighbourhood renewal programme and schemes involving the Town Council's collaboration with NEA were new and, in some cases, unheard of to the management of AHPETC. Like lift upgrading, many of these were not extended to Hougang in the past.
Separately, some invoices were the subject of disagreements with HDB on co-payment for facade repair to HDB blocks and, hence, were subject to follow-up by the Town Council, resulting in them not being removed as receivables. The Town Council has since informed AGO that it has received payment from sundry debtors in the two financial years after the Foo Kon Tan audit of FY2012/2013, amounting to $508,730, of which, $483,134 was owed by HDB.
Separately, the AGO report noted that about $376,316 remained outstanding to AHPETC from HDB and NEA respectively, with some owed for more than two years. The AGO's findings also confirmed that NEA had overlooked eight invoices amounting to $11,673 owed to AHPETC. For two particular invoices not rejected by HDB and deemed to be in order, HDB informed AGO that it was still reviewing claims amounting to $175,067, which it received in May and September 2012, almost two and a half years after they were presented to HDB by AHPETC.
Mdm Speaker, notwithstanding, the Town Council has adopted a practice of management regularly churning out a list of debtors and appointing a finance staff to follow up with debtors by issuing reminders on the sums owed. This due diligence will have a positive knock-on effect in ensuring that receivables owed are captured in the accounts to accurately reflect the transactions and state of affairs in the Town Council.
Point three, creditors and accrued expenses. According to Foo Kon Tan's disclaimer, the total amount in question under this head comes to $647,094. The first issue on accrued liabilities covers a claim by Foo Kon Tan that the Town Council did not have an SOP covering
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the timely recording of liabilities. I will deal with this issue, first.
The AGO has taken a different position from Foo Kon Tan on this point, to correctly report that the Town Council, indeed, had an SOP, with the qualification that this SOP does not stipulate a timeline for verification works done by property officers after job sheets were received, to enable the timely issuance of work orders. I have since personally checked on the SOP with the Town Council's property manager and confirmed that, for the overwhelming number of accrued liabilities, the SOP now puts the timeframe from job completion to issuance of payments to take a maximum of three months.
Secondly, on accruals without work orders. Foo Kon Tan reported that the Town Council was unable to provide details covering some $338,379 in accrued expenses from the previous Aljunied Town Council. The Town Council explained that it was not able to provide the details required as it did not have supporting documents. The AGO was able to find out that some of these items were over-statements, as the Town Council did not reverse out the accrued expenses from its accounts.
As explained earlier, the Town Council was hampered operating a GRC with a manual works order system. With the rollout of a new works order system in 2012, the Town Council is enhancing its SOPs to ensure that, moving forward, an accurate reflection of the amounts due to external parties is established.
Thirdly, on other payables. The AGO found poor monitoring and lack of due diligence by the Town Council in following up on items in a temporary clearing account which Foo Kon Tan noted came up to $308,715. The Town Council has since cleared up many of the receipts and we will put in resources to clear up the remaining amount.
Mdm Speaker, the Town Council accepts that proper management involving the handover of records from the previous management was something that, in hindsight, should have been better addressed. The reality at that time was that many staff who signed for finance-related files from the previous Managing Agent after GE 2011, resigned in 2011 and 2012. With this, came the loss of the institutional knowledge specific to documents pertaining to the handover period.
Going forward, and in the interest of better corporate governance, the Town Council will monitor the management and handover of records more systematically. To that end, proper handover procedures for resigning staff prior to the issuance of their final pay cheque have already been implemented.
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Before concluding, Mdm Speaker, I wish to say a few words about tenders and contracts as I have been the Chairman of the Tenders and Contracts Committee since 2012. In that context, it would also be appropriate for me to make some comments about the Managing Agent's role in the decision-making process involving the calling of tenders and award of contracts in view of some media reports insinuating personal benefit for FMSS by virtue of being the Managing Agent of AHPETC.
Firstly, in a situation where FMSS is a tenderer in a tender called by the Town Council, as was the case in 2011 for the Managing Agent contract, FMSS is kept at an arm's length and a China wall is built between FMSS and the Town Council. What happens in such a case? The evaluation of such a tender is done solely by the elected and appointed members of the Town Council, all of whom have no interest, pecuniary or otherwise, in FMSS. The decision-making to award the tender in such a case will be the sole remit of the Tenders and Contracts Committee. No staff member of the Managing Agent is privy to the evaluation or decision-making process in this case. The Secretary of the Town Council Mr Danny Loh and its General Manager Ms How Weng Fan are not involved in this process at all.
In 2011, in view of operational exigencies, a decision was made, with the concurrence of Town Councillors, and, as detailed earlier, FMSS did not participate in the evaluation or recommendation, in strict adherence with the Town Council's financial rules.
This was the same scenario that played itself out late last year and early this year, when Town Councillors met to evaluate the specifications of the Managing Agent tender for FY2015 and beyond.
In a second scenario where FMSS does not participate in the tenders called by the Town Council pertaining to, for example, conservancy lift maintenance and horticultural contracts, FMSS' role is purely administrative. FMSS is expected to thoroughly evaluate and assess the tenderers and recommend which tenderers meet the minimum requirements of the Town Council. At no point does FMSS make a decision on whom to award the tender to.
FMSS' administrative role is purely to advise the Tenders and Contracts Committee on the tenderers and their submissions. It is for the Committee to deliberate and determine, in the interests of the residents of the Town Council, which tenderer the contract ought to be awarded to, after considering all the relevant facts. Once again, no personal benefit is accrued to FMSS by virtue of these processes.
Mdm Speaker, I have not covered all the points made by both AGO and PwC in their reports. But I have focused on the big sum items. This, in no way, minifies or downplays the weight the Town Council places on arrears where there are amounts owing or owed, and for
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reconciliation or follow-up, are lower or less significant.
The Town Council will strengthen its processes and we will do it with the same vigour that we sought to ensure that residents' lives would not be affected during the course of the post-GE2011 handover. I would like to thank all the staff of the Town Council, past and present, for their efforts and service to the Town Council. I note that AGO, with a full-time team working for almost a year, with up to 16 personnel, including those from PwC, did not flag out any potential criminal wrong-doing on the part of any staff member of the Town Council.
We will make full use of the AGO's findings to boost our financial systems and processes.
Mdm Speaker, in my 24 years as a lawyer, I have investigated the affairs of a number of companies, including listed companies, and have authored a few audit or investigation reports myself. It has been my experience that lapses are invariably caused by human failings. You may have good systems in place but, ultimately, your systems are only as good as the people who run them.
There will always be individuals who will ignore or try to get around the rules – sometimes because they are lazy or complacent, sometimes because they are incompetent and sometimes, unfortunately, because they are dishonest. Almost always, they are not questioned or challenged because of the positions they occupy. In every case I have been in, losses were suffered.
And so, the findings in the AGO report are depressingly familiar to me. I have read a number of media and online reports which have portrayed the report's findings as "lapses in control", "inadequate oversight" or "poor management of records". Indeed, there are many such findings in that report. But these understate the gravity of the findings.
So, I had planned to come to this House to make the point that these are serious matters. But then I encountered something quite bizarre. The people I discussed the matter with kept telling me – do not attack the WP; they will only get more sympathy; find a way to move on; you have to keep in mind the politics.
I could not get my head around that. Has it really come to this? This is a matter involving public funds. How could anyone, in good conscience, ignore or downplay what the AGO and PwC have found? These are not partisan bodies. And Mr Png accepts that. Indeed, AGO routinely audits Government agencies and does not shirk from highlighting lapses, and
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Members of all parties in this House have rightly criticised those lapses and held the Government to account. So, why should WP be let off easy just because they are the Opposition? And why should their residents be forced to accept anything less than full accountability? This cannot be the right way forward.
And sure enough, when Mr Low and Ms Lim spoke yesterday, they tried to downplay the breaches and make excuses for themselves – we are small; we are learning; the system is against us; these are only procedural lapses. That is playing politics. And these excuses are flimsy.
Mr Low says that, unlike the PAP Town Councils, it is very difficult for WP to find a Managing Agent. But the Bishan-Toa Payoh Town Council does not have a Managing Agent. For the last 19 years, we have been managing the Town Council ourselves. We employ our own staff and ensure that they are trained and have the proper skills to do their job. We are not perfect, but we consistently score an all-green rating in our TCMRs; our accounts are submitted on time and, all the time, are unqualified.
Mr Low also had no Managing Agent when he ran Hougang Town Council. So, this issue of a Managing Agent is a complete red herring. Mr Chen Show Mao, a very experienced corporate lawyer, then suggests the rules on disclosing conflicts are unclear and difficult to apply. But that is not correct. The rules are simple; he must know that. Besides, they have professionals they can turn to for advice. And if the rules are so unclear, why is AHPETC the only Town Council with difficulty following them?
So, Mdm Speaker, to me, all these are deflections and distractions. What is more important is what the AGO report actually says. And these findings cannot be brushed off as down to inexperience or a lack of resources. This entire episode raises questions about the competence, accountability and integrity of those who run AHPETC. Minister Shanmugam gave examples yesterday and some are worth restating.
First, the appointment of FMSS and FMSI and their ownership by the Secretary of AHPETC and his wife, who is also the General Manager of FMSS – both hardcore WP members. By any standard of corporate governance, the engagement of FMSS and FMSI involves a conflict of interest. Ms Lim suggests that FMSS was appointed because CPG did not want to continue as Managing Agent. But there is still no explanation as to why FMSS was formed seven days after the election results, and before CPG discontinued its services.
But that is not all. There is nothing wrong per se with an engagement which involves a conflict of interest, provided – and this is critical – it is in the best interests of the organisation, the conflict is fully and properly declared and disclosed, and the risks are managed. The AGO
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report makes it clear that all this was not done. The AGO report notes that PwC Consulting did not see any documentary evidence that the AHPETC Town Councillors had considered the full extent of the conflicts of interests involved and the safeguards needed. We are still waiting for an explanation why the minutes do not reflect that Mr Loh and his wife's ownership of FMSS was not declared. Still waiting for that.
But that is still not all. We heard the examples yesterday of how the Secretary, General Manager and Deputy General Manager routinely issued works orders and approved payments, effectively, to themselves. Mr Png says there are oversight committees, but PwC was unable to determine if the Chairman and Vice Chairman of AHPETC adequately verified payments to related parties before they sign the cheques.
Mr Png repeats what Ms Lim says, and says that these are over recurring payments and that if you do not pay them, the rubbish will pile up high. But again, that is not the point. They keep missing the point. Just because there is a contract does not mean you pay blindly. Where is the oversight? In other words, what is the assurance that the very people who are in a conflict did not take advantage of their position? The report makes it quite clear that there was no such assurance. There was no assurance that the services they were being paid for were performed or performed adequately.
In other words, these people were patting themselves on the back while lining their own pockets. And, now, they have all ended up in knots. So, these are egregious breaches that demand a proper explanation, not excuses. And it cannot be a question of inexperience.
Second, was the appointment of FMSS, the party in conflict, in the best interests of the Town Council? The report says that there was no open competition in FMSS' appointment and, therefore, no assurance that AHPETC obtained competitive prices for their services. The report then gives an extraordinary account of how FMSS' fees came to be approved. It states that the AHPETC Town Councillors were assured that FMSS would charge about the same amount as the previous contractors. But this was false. The report notes that the combined fee of the previous contractors was only about $49,000 a month. As it turns out, the fees billed by FMSS for the period from October 2011 to June 2012 averaged $67,000 a month, more than 35% higher.
In short, their own Town Councillors were misled. Ms Lim now says all these were errors, rounding-up errors, and so on. But such an error is so flagrant that it certainly raises suspicions and warrants a more thorough investigation.
What is important to appreciate is that it is not the AGO's remit to determine whether dishonesty was involved. And even if we accept that a mistake had been made at the outset,
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it is hard to believe that the nine months of over-payment was not discovered.
But the worst thing for me in this entire debate – really, the worst thing for me – was that Ms Lim and her team said in response to the AGO report that it confirms that no monies are missing nor has criminal or dishonest activity been uncovered. Mr Low repeated that argument yesterday and I think it is being said ad nauseam in this House. This is a consistent line they are giving to this House and, no doubt, to their residents as well.
But this is blatantly misleading on two counts. First, the report says no such thing. In fact, after that statement came out, AGO responded that Ms Lim's, and I quote, "broad conclusion cannot be derived from AGO's audit".
What does the report, in fact, say? An important element of the cases I mentioned involves piecing together what went wrong and tracing or figuring out where monies have gone to. By and large, this can be done because almost all transactions leave paper trails and forensic accountants use documents to analyse, reconstruct and draw a picture of what had happened. But what does the AGO report say about the state of the AHPETC documents? I will quote some portions.
At paragraph 5.13, "PwC was not provided with sufficient documentary evidence for it to independently ascertain the manner and extent of verification of the payments at the cheque-signing stage by the Chairman and Vice Chairman."
At paragraph 5.28, "AHPETC did not have a proper system to ensure that documents were properly accounted for and safeguarded. AHPETC was unable to provide supporting documents for the period April to July 2011 to its auditor."
At paragraph 5.31, "AHPETC also could not provide some documents required during the current audit that concerned transactions taking place after AHPETC had taken over from the previous Town Council." So, it has nothing to do with the previous Town Council. "In response to reminders, AHPETC indicated that it could not locate some of the documents and was still looking for others, three months after the request for the documents."
And then the report concludes at paragraph 4.1, I quote, "until the weaknesses are addressed, there can be no assurance that AHPETC's accounts are accurate and reliable, or that public funds are properly spent, accounted for and managed."
In short, AGO cannot say if public monies have all been accounted for because documents which AHPETC were obliged to keep are missing. So, contrary to what Ms Lim and her colleagues want the public to believe, the AGO report does not, by any stretch,
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confirm that no monies are missing, or that there is no criminal or dishonest activity. Rather, it says that it does not know because of the way the Town Council has mismanaged its operations. If AHPETC considers this an endorsement, then it speaks volumes about its attitude towards managing public funds.
My second problem with that statement, because as Mr Shanmugam explained and as any person with any common sense knows, loss does not only occur when money is stolen. There are numerous instances in the report of possible breaches of fiduciary duties by AHPETC officers. We now also know that FMSS was paid far more than other Managing Agents. We now know that there were substantial over-payments to FMSS, which would not have been discovered but for the audit. And we also know that an operating surplus of over $3.2 million has become a deficit of over $700,000. That money is not going to come back. This is something we still have not heard an explanation for. Could there be more examples? We do not know because the accounts for FY2013 have not yet been submitted.
While lapses can occur in all organisations – and I accept that – my experience has also shown me what distinguishes a good organisation is its response to discovering those lapses: failings are acknowledged, systems tightened, losses made good and those responsible dealt with.
So, what was AHPETC's response? First, to brush off the many lapses as, I quote, "mistakes and omissions due to inadvertence, human error, IT system constraints and a lack of experience dealing with certain scenarios." And then, second, to misleadingly spin the report as an endorsement that there was no wrongdoing.
It was a blasé response from people charged with handling millions in public funds. They did initially come to this House with a different, more contrite tone – I thought I heard that – and I acknowledge their saying that they will support the Motion. But that facade completely fell away when Mr Pritam Singh said that he will answer to residents who ask him questions during his house visits and he will not answer the questions posed in this House.
Let me ask Mr Singh this: does this mean that you will keep silent if no one asks you? How many residents does he think would have read the report and fully digested its contents? How many will have the accounting or legal training to know the full implications of the report and know the right questions to ask? And is your answer going to be, to every question asked, "Do not worry, AGO said no wrongdoing"?
The real question is how is the WP team going to account to their residents? In fact, not just their residents, it should be all Singaporeans, because half of their revenue comes from
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Government grants which we all contribute to. Make no mistake, if this had been any other company, the directors would have been immediately removed and a Receiver appointed to protect its assets. No doubt about it. This happens many times in the private sector, and I do not think anyone will dispute that.
AGO has explained why it does not know certain things because it has not been shown the documents. Ms Lim and her colleagues attempt to play down and rewrite the findings in the AGO report. Their attempts, really, do not change the findings themselves and certainly does not make things right.
If Ms Lim and her team are truly for transparency and accountability, which they say they are, they should help all of us understand what really happened, not obfuscate, deflect and distract. We should not forget that we are dealing with hard-earned public funds and, ultimately, the interests and welfare of Singaporeans living in Aljunied, Hougang and Punggol East. They did no wrong and they deserve better. The answer cannot be same-old business as usual or "I will improve going forward". That cannot be the answer or, at least, the complete answer.
Most of all, Ms Lim, Mr Singh and the entire team, they need to assure this House that no public funds under their care have been lost, misappropriated or are unaccounted for, and that AHPETC has not suffered loss in the real sense and not the narrow sense they want to use.
They have said much in this House – many speakers, all of them have had their say – but they have carefully avoided saying that there has been no loss. And if they can give that assurance – that there has been no loss – then they must tell us how they know. How are they able to give that assurance, given the findings in the AGO report, the missing documents, their own auditors' refusal to sign off on the audit and their own inability to say when the accounts for FY2013 will be ready?
Despite all their claims that everything is hunky-dory, it will be done, they still cannot give a commitment as to when those accounts will be ready. And if they cannot give a complete and satisfactory answer to the highly relevant questions Mr Shanmugam posed, then something must be done. It is now close to four years since they took over. I do not know if there is a statute of limitations for excuses, but they must have long exceeded it.
What is the right and only thing to do? Do what any responsible company and board of directors in such a situation would do – for AHPETC to commission a complete forensic investigation and, thereafter, undertake legal proceedings to recover all losses and damages
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suffered by it, regardless of who the potential or prospective defendant may be.
The WP team should also procure an undertaking from FMSS and FMIS that they will make all their papers and their staff available for that investigation. That is the only way to put this matter to rest. I really hope, for the sake of the residents, that the result will be that AHPETC has suffered no loss or will be able to recover their losses – that is good for the residents. But we need to do that investigation and find out. But if WP is not willing to do this, then that says everything.
Mdm Speaker, last year, we debated in this House what constructive politics means and how we would like to see our political landscape evolve. The Motion reflects an intention and desire to do what is necessary for the good of Singapore and Singaporeans. But it is not enough for the WP to simply say they support the Motion. If they mean what they say, they must follow through by doing everything they can to ensure that all the legitimate questions posed have been answered and this entire mess is cleaned up once and for all.
Ms Lee Li Lian. Mr Pritam Singh, you have a clarification?
Thank you, Mdm Speaker. Mdm Speaker, with regard to the point made by the hon Member, the WP MPs have come to Parliament and we are taking collective responsibility for all the issues that affect our Town Council. We are not here to make excuses and I have said we will work towards cleaning up the accounts in my speech. We acknowledge the lapses and we will put things right. That is the message that I want to give to the Member.
The second issue was a point made about this figure of $733,000 from the old Aljunied 2010 accounts and the deficit of $3.3 million in the 2012 accounts of the Aljunied-Punggol East Town Council. Can I just confirm which document the Member was reading these figures from before I give the Member a reply, please?
Mdm Speaker, I acknowledge what the hon Member has said. They have come to this House to answer the questions they can answer or are willing to answer. They have not answered all the questions that we have posed to them and they are certainly not answering the questions that they do not want to answer. And all I need to ask them to do is to pick up the Hansard of Mr Shanmugam's speech where he has posed a number of very highly relevant, very legitimate questions and just answer those. That is a good start, and I invite him to do that today and, if not today, then in the near future, and not six or 12
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months down the road.
On the second point, I was restating the figures given by Mr Khaw in his speech where he made it clear that the Aljunied Town Council had an operating surplus of over $3.2 million, and it has now become an operating deficit of over $700,000 after the WP took over.
Thank you very much for that. Can I then put the question, Sir, to Minister Khaw, which document he was referring to, just for us to be clear on this before I reply to this point?
Thank you. May I refer you to the AGO report, main report, page 3?
Thank you, Minister. Minister, those figures originated from the income and expenditure statements for Financial Year 31 March 2012, Financial Year 31 March 2013. If we look into those figures, that is correct for 2010 under the previous Aljunied Town Council. If we look at the operating expenditure, there are five heads. Cleaning Works under the previous Aljunied Town Council was $5.1 million; under the AHPETC in 2012 was $6.7 million. For Lift Maintenance, it was $1.8 million in 2010 and $4 million in 2012. That is a rise of about $2.1 million to $2.2 million. Water and Electricity was $8.9 million in 2010 and it was $10.1 million in 2012. It was a larger town by 2012, so that explains that. There are two other heads, but let me deal with the one which has the largest cost increase, which is lift maintenance.
I remember sometime in 2012, there was an episode where a lift did not home to the correct floor. There was a resident in the lift. This was in Paya Lebar, if my memory serves me right. In 2011, I beg your pardon. And the resident, of course, had a very jarring experience. At that point, the Members of Parliament got to know about it and we were quite concerned about safety issues involving lifts and lift maintenance. So, the Town Council commissioned the consultant to try and understand our lift maintenance contracts, lift maintenance procedures, whether there was any problem with them and what we could do to improve the situation.
And at that point, it was determined that for the novated contract from the Aljunied Town Council, it had third party who was looking after all the lifts in the town and we had a lot of different types of lifts, as I am sure the other Town Councils do – 9G lifts, Mitsubishi lifts, Sigma lifts, EM Services, Otis, Fujitec – and it goes on and on, of course. So, the recommendation that was made to the Town Council was to try as far as possible to ensure that, for lift maintenance, get the original equipment manufacturer to be maintaining those lifts. And this was quite an important consideration for us because we were noticing that the
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lift downtimes for lifts which were maintained by this third-party contractor were rather long.
Mr Singh, you have to keep your clarification short and not make a speech.
Yes. I will finish up very shortly. Because of those downtimes, we decided, "Look, we have to probably invest a bit more money and try and make sure that our lift maintenance procedures and contracts are up to the mark or up to the satisfaction of the Members of Parliament. And that really explains the large jump of about $2.2 million. It is the largest jump in the operating expenditure. And that explains that figure.
Mr Hri Kumar.
Mdm Speaker, can I get a clarification of Mr Singh's clarification? He has asked me a question, I have answered him. I have asked him whether he is going to answer the questions which Mr Shanmugam posed and when is he going to answer those questions.
Mdm Speaker, I have made it clear that we all —
*Hon Member Mr Low Thia Khiang rose.*
Mr Low, do you want to take the floor?
Mdm Speaker, as Mr Pritam Singh said, we will take collective responsibility as a team. I do not see any Member of Parliament should need to answer any individual questions.
Ms Lee Li Lian.
Thank you, Madam. Finally, I get to speak. I reiterate what my fellow party colleagues had all said before me, that is, the Town Council acknowledges that there are areas for improvements which were highlighted by the audit. Going forward, we are committed to improving the processes and have, indeed, taken on some measures already.
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There are two parts to my speech. Part one, is to address some of the disclaimers pointed out by AGO and what the Town Council has since done to improve the system and work processes. Next, I will also be touching on my experience with unforeseen challenges faced by Opposition Town Councils.
Number one: disclaimers flagged out by AGO. I refer to Appendix A of the AGO's report, disclaimers 8, 9 and 10 and what the Town Council has since done to improve our systems and work processes. These are information already publicly available.
Disclaimer 8: income taxes. The Town Council had since engaged a tax agent to prepare the income tax computations for FY2012/2013 as well as FY 2013/2014.
Disclaimer 9: goods and services taxes. Some of these problems arose because the former Finance Manager, who was familiar with the GST submissions had, unfortunately, resigned. Going forward, the Town Council will have to work with our IT vendor to split the GST for routine and Sinking Fund income or expenses in the system. Several of our Town Council Finance team are also now familiar with the apportionment formula required by IRAS. Systems and processes for out-going staff have been put in place, as mentioned earlier by my fellow colleague Mr Pritam Singh.
Disclaimer 10: cash and bank balances. AHPETC recognised that it is good control practice for bank reconciliation to be independently reviewed and for the reviewer to sign off and date on the bank reconciliation statement as evidence of review. When Aljunied-Hougang Town Council was formed in 2011, the merger resulted in the Town Council inheriting several bank accounts from the former management, in addition to those from Hougang Town Council. These accounts were mainly used for receipts and payments.
To streamline the accounts, the Town Council decided to close unnecessary accounts, leaving only four accounts, that is, one operating fund and one Sinking Fund account each with two banks. Since mid-2013, the Town Council has been doing monthly bank reconciliation at the account level for each of these four accounts.
I move on to Appendix B of the AGO report on Internal Controls, points 5, 6 and 7.
Point 5: weak controls over cheques received. The Town Council noted AGO's observations and had improved upon its safeguarding of cheques received by mail. Cheques not banked in by the end of the day are now placed in the safe. As an additional control, all cheques received are scanned by Finance staff into a central server. Currently, the reception area is already monitored by CCTV, which would be able to detect unauthorised personnel
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accessing mails received.
Point 6: surprise examinations not carried out in accordance with Town Councils Financial Rules. The Town Council has noted this observation and will implement surprise checks by the Town Council Secretary or his representative at every branch office at least once a financial year. A senior Finance staff had gone to each branch office in FY2013 and FY2014 to conduct a surprise check on cash collections and balances.
Point 7: weak controls over access to strong room and safe. There were already written authorisations by the Secretary to various officers to hold the keys to the strong room in the Town Council HQ and Finance rooms and safes at Town Council HQ as well as the branches. The Town Council has since enhanced its controls and obtained the Chairman and Secretary's authorisations for access to the strong rooms and safes.
Next, Madam, I move on to unforeseen challenges. I had my first "surprise" shortly after the Punggol East by-election in January 2013. I was on the ground shortly after to meet representatives from the then conservancy contractor for both SK 1 and SK 2. SK 1 refers to blocks 101 to 141 and SK 2 refers to blocks 142 to 197.
We were informed by the contractor from SK 1 that because of issues they were having with the Ministry of Manpower, they were not able to continue their contract with us.
As AHPETC was going to take over only from May 2013, the Town Council requested the handing over Town Council, that is, Pasir Ris-Punggol Town Council, to call for a tender for SK 1 in March. Subsequently, two established cleaning companies tendered for the contract.
The tenderers were invited to attend the tender meeting in late April 2013, just before the handover in May. Unfortunately, representatives were sent from both companies to inform that they were no longer able to participate in the tender and would like to withdraw from the tender process. It was also followed up by written notices to the Town Council Chairman on their decision to withdraw without any valid reasons.
AHPETC had no choice but to respect the companies' decision to withdraw. As the incumbent conservancy contractor had to cease their services by end June 2013, the Town Council then needed to quickly make a decision to invite companies to tender; otherwise no one will be clearing rubbish and cleaning lifts! This is just one of the many challenges an Opposition Town Council faces.
On the other hand, I am pleased to note that EMSU services provided by the previous contractor continued their services in Punggol East. Regardless of political affiliations,
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residents' interests should always be the priority and there should not be elements of political preference or fear. It will be sad if there are elements of fear when bidding for a project in Opposition Town Councils.
In conclusion, Madam, we respect the findings made by AGO. In response, I want to emphasise that the Town Council has already made changes to work processes, systems and procedures to address specific lapses. With that, I would like to end off my speech by thanking all the staff who were involved in this rigorous audit process.
Order. I propose to take the break now. I suspend the Sitting and will take the Chair again at 4.00 pm.
Sitting accordingly suspended
at 3.40 pm until 4.00 pm.
Sitting resumed at 4.00 pm.
[Mdm Speaker in the Chair]
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