Debated in Parliament on 12 Feb 2015.
Mdm Speaker, I beg to move,
"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."
A copy of the audit report has been circulated to Members as Paper Misc 1 of 2015. It was also released to the public on Monday, 9 February 2015.
This is the first time in the history of Town Councils (TCs) that the Auditor-General (AG) has undertaken a special audit on a Town Council to look into concerns about its financial circumstances, under section 4(4) of the Audit Act. Let me explain how this came about.
Each year, Town Councils are required to submit their audited financial statements, auditor's report, and annual reports to my Ministry by 31 August, within five months of their financial year closure. MND will then table the reports to Parliament. All Town Councils have
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been able to meet the submission deadline, except AHPETC.
AHPETC have not submitted their reports on time ever since their formation in 2011. Their first set of reports for Financial Year 2011 was only submitted to MND on 11 January 2013, a delay of more than four months, after repeated reminders. Even then, their auditor's report was a qualified one, with the auditor making a Disclaimer of Opinion on the financial statements. The auditor listed four areas as the basis for their disclaimer. In audit terms, a Disclaimer of Opinion is a serious matter. It means that the auditors are unable to state that the financial statements provide a true and fair account of the Town Council's financial position.
In response, AHPETC assured MND that they had rectified most of the observations raised by their auditor and were in the midst of rectifying the others. That was in August 2013. MND decided to give the Town Council time to resolve their issues.
Unfortunately, the following year saw no improvement. Their second set of reports for Financial Year 2012 was submitted to MND on 10 February 2014, after another long delay of six months. And once again, their independent auditor, Foo Kon Tan Grant Thornton, submitted a Disclaimer of Opinion on AHPETC's Financial Year 2012 financial statements.
Not only was this the second consecutive year that the Town Council's independent auditor had submitted a Disclaimer of Opinion on AHPETC's Financial Statements, but they now raised 13 areas as the basis for their disclaimer. There were nine new issues of pressing concern, in addition to four areas identified by the auditor in the previous year, which remained unresolved contrary to AHPETC's assurance to MND. The auditor also issued a qualified opinion on AHPETC's other legal and regulatory requirements, stating that AHPETC had not complied with the provisions of the Town Councils Act and Financial Rules in various respects. The Town Council's financial accounting had further deteriorated.
This is a cause for serious concern. Town Councils collect substantial monthly Service & Conservancy Charges (S&CC) from their residents and their commercial tenants. Town Councils also receive large S&CC grants from MND. These are all public monies. As stewards of public funds, all Town Councils must keep proper accounts and records and maintain adequate control over their assets. Who has paid and who has not? How is the money spent? Is it properly used? Is anybody doing anything wrong? Is the Town Council solvent, being able to pay its bills on time? Does the Town Council have enough reserves in its Sinking Fund to replace major infrastructure when it is needed? For example, can the Town Council afford to replace the lifts when it is time to do so?
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These and many other questions directly affect the interests and safety of the residents. They are not trivial technical issues raised merely to satisfy the accountants or the auditors, or to meet financial regulations. Unfortunately, the observations in AHPETC's auditor's reports have raised serious questions about the reliability and accuracy of its financial and accounting systems.
That is why on 19 February 2014, at my request, the Minister for Finance exercised his power under the Audit Act to direct the AG to conduct a special audit of AHPETC's accounts. This was not a routine audit. AG was to ascertain whether AHPETC had taken all reasonable steps to safeguard the collection and custody of AHPETC's monies, ensure adequate controls over payments, and ensure that all legal provisions relating to AHPETC's monies were fully complied with. AG was to investigate the causes of Foo Kon Tan's Disclaimer of Opinion and ascertain the reliability and accuracy of AHPETC's financial management and accounting processes and systems.
The AGO report has set out clearly its approach and its findings. It is a sad commentary on the state of affairs at the AHPETC. In summary, the AG's investigation has uncovered major lapses. It found that AHPETC had failed to take all reasonable steps to safeguard the collection and custody of AHPETC's monies, ensure adequate controls over payments and fully comply with all legal provisions relating to AHPETC's monies. It concluded that the AHPETC had no proper accounting system, resulting in the Town Council's financial statements failing to "accurately reflect the state of affairs and transactions of AHPETC". It added that "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 other words, AHPETC's financial and accounting processes and systems are unreliable and their accounts, inaccurate.
Members can read the details in the AG's report. But let me just highlight four of AGO's key findings.
The AG has found that:
(a) AHPETC did not transfer monies to its Sinking Fund as required by law;
(b) AHPETC had inadequate oversight of related-party transactions involving ownership interests of key officers;
(c) AHPETC had weak internal controls and systems to monitor payments received and made; and
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(d) AHPETC had no system to safeguard important documents or keep proper accounts as required under the law and failed to provide key information required by its auditor and the AG.
As a result of these major lapses, the AG concluded that there was no assurance that public funds are properly spent, accounted for and managed by AHPETC.
Let me quote relevant sections from the AGO report to elaborate on these findings.
First, the AG found that, "AHPETC had not complied with the Town Councils Financial Rules. It failed to make the required transfers to sinking fund bank accounts".
All Town Councils are required by law to transfer 30% to 35% of their S&CC collections and grants received to their own Sinking Funds. These monies are the Town Councils' own savings, for the Town Councils to replace major infrastructures like lifts and to do major repairs and repainting. The transfers have to be made promptly, to ensure that the monies are safeguarded.
The AG found that more than a year after the end of each financial year, AHPETC still had not transferred the full sums required for their Sinking Fund. It owed $7.9 million for the Financial Year 2011 Sinking Fund and $3.9 million for Financial Year 2012.
In Financial Year 2012, AHPETC had $86 million in its Sinking Fund. Eighty-six million might seem like a lot of money. However, AHPETC has about 1,870 lifts which the Town Council needs to replace when their operating-life expires. In fact, over the next 10 years alone, it will need to replace 10% of the entire stock of lifts. This will cost $54 million, or 60% of the current Sinking Fund. So, that will leave only 40% of the current Sinking Fund for other major repairs and repainting works that also need to be done. Things can only get worse beyond that, because the bulk of the lift replacements – about 90% of the 1,870 lifts – are due after 2025. AHPETC needs to build up its Sinking Fund. If it continues to miss contributions to its Sinking Fund, the residents will eventually be living in blocks where lifts are unsafe or unreliable and other infrastructures often break down.
There is always the temptation, when a Town Council is financially strapped, to postpone saving, and say it will make up the shortfall later or, worse, to put its hand into the cookie jar, to draw from the savings to satisfy immediate needs. Just spend, use the savings first. Sounds appealing. But the Town Council will then be simply running down its reserves and mortgaging away the future of its residents. And that is why the Town Councils Act and Financial Rules enforce saving to pay for replacements and major repairs which have to be
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carried out in future.
Second, the AG found that, "AHPETC did not disclose fully the related-party transactions in its financial statements. It also did not adequately manage the conflicts of interests of related parties arising from ownership interests of its key officers".
The related parties were two companies, FMSS and FMSI, engaged by AHPETC to carry out managing agent services and essential maintenance and lift rescue services. FMSI was a sole proprietorship owned by the Secretary of AHPETC. The directors and shareholders of the other company, FMSS, were the Secretary, General Manager and Deputy General Manager of AHPETC. The Secretary and General Manager of AHPETC are, by the way, husband and wife.
The AG found that, "The key officers of AHPETC, that is, Secretary, General Manager and Deputy General Manager, who had ownership interests in FMSS and, at the same time, performed a role for AHPETC in approving payments to FMSS were in clear conflicts of interests. Hence, it was important for AHPETC to have put in place adequate mitigating controls to manage the conflicts of interests".
However, AHPETC did not properly oversee transactions with these companies owned by its key officers. The AG found that before AHPETC entered into contracts with these companies, "There was no documentary evidence that the AHPETC Town Councillors had specifically considered the ownership interests of AHPETC's Secretary, General Manager and a Deputy General Manager. These contracts amounted to about $25.9 million in total".
The AG also found that, "There were control weaknesses, and lack of documentary evidence that payments to the related parties were independently verified so as to ensure that work has been satisfactorily performed and payments were fully justified and correctly computed". The report cites "instances where the Secretary and General Manager issued payment claims as owner of FMSI and director of FMSS respectively, and subsequently, the same General Manager certified these payment claims and approved the payment vouchers in her capacity as an officer of AHPETC". In other words, it is very convenient – the husband issued the payment voucher and the wife approved the payment and the wife also signed the cheque. It is all in the family.
The AG concluded that, "Taken in totality, AHPETC did not adequately manage the conflicts of interest involved in related party transactions". This means that AHPETC may not have obtained the best value for the monies paid to these related parties. Or worse, there could be opportunities of wrong-doing or unethical practices which AHPETC may not be able
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to detect or prevent.
Compounding this risk, the AG found "lapses in internal controls, which exposed AHPETC to the risk of loss of monies, or valuables, commitment to expenditure without requisite approval as well as wrong payments for goods and services". The AGO report contained many examples of such lapses, including instances of a lack of segregation of duties within the payment process for many invoices to third-party vendors. For example, "the General Manager of AHPETC certified work done as well as approved the payment vouchers and cheques", to external vendors. This was in addition to the lapses in payment to the related parties owned by the key officers that I mentioned earlier.
Now, Town Councils award millions of dollars of contracts each year. Residents and taxpayers need to know that their monies are properly spent and they are getting best value for money. When these contracts are awarded to parties related to the Town Council, the Town Council needs to be upfront with its residents as well as with taxpayers at large, so that there is transparency and proper scrutiny. In total, AHPETC has close to $27 million worth of contracts with its two related parties, FMSS and FMSI. Of these, close to $6 million was given without tender.
Third, the AG observed that AHPETC did not have a system to monitor the scale of its S&CC arrears accurately. "The statistics on arrears that AHPETC submitted to MND as well as AHPETC's Finance and Investment Committee were unreliable". As a result, the AG concluded that, "There is no assurance that AHPETC is able to monitor and manage its S&CC arrears properly or present an accurate picture of arrears in its financial statements".
Each year, AHPETC collects about $37 million in S&CC from residents and tenants and receives another $7 million in grants from the Government. The Town Council also manages a reserve of about $90 million, accumulated from residents' monies and Government grants over the last 25 years. Without a proper accounting system, the Town Council cannot accurately ascertain how much of the arrears is recoverable. This means that the Town Council's financial position, as reported in its annual financial statement may, in fact, be overstated. If so, the Town Council may actually get into financial difficulties without realising it. There is also no assurance that Government grants, which are taxpayers' monies disbursed to the Town Council, are being safeguarded and channelled to the purpose for which they are given. And most fundamental of all, there is no safeguard against potential mischief and loss of public monies.
Fourth, the AG reported that AHPETC had no proper system to safeguard important documents and had weak accounting procedures. It did not provide key information required by its auditor and the AG. Without access to proper records, the AG, like the Town Council's own auditors, was unable to make a proper assessment of the Town Council's
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financial situation. As a result, the AG concluded that, "There can be no assurance that AHPETC's accounts are accurate and reliable".
Now, Madam, a key plank of Town Councils' accountability towards their residents is via their financial accounts, which have to be audited annually by an independent auditor and tabled to Parliament. AHPETC's failure to provide information to its auditor and the AG has completely undermined the system of accountability. While the Town Council framework is designed to give Town Councils maximum autonomy in their operations, it demands, in turn, that Town Councils account for their actions through proper accounting, governance and disclosure. AHPETC's repeated failure to do so shows a disregard for its obligation to account to its residents; and also disregard for this Parliament which the AHPETC's Chairman, Vice-Chairmen and their fellow Members of Parliament have solemnly sworn to serve in.
As the accounts are unreliable, we do not know the exact state of AHPETC's financial position. Based on their published reports, AHPETC's financial position has deteriorated sharply since Aljunied Town Council was merged with Hougang Town Council in 2011. The audited Financial Year 2010, financial stake accounts at Aljunied Town Councils, had reported an operating surplus of $3.3 million. By Financial Year 2012, the merged Town Council had incurred a $734,000 operating deficit.
Now, a Town Council runs a surplus if its income exceeds expenditure for that year; conversely, it runs a deficit if its expenditure exceeds income. In Financial Year 2010, the Aljunied Town Council's expenditure was less than its income and, hence, the Town Council had a surplus. But in Financial Year 2012, AHPETC's expenditure had exceeded its income, resulting in a deficit. In two years, AHPETC's income rose 14% as its population base had increased, but its expenditure had shot up disproportionately by 30%.
The deterioration of AHPETC's financial position was in part due to Aljunied absorbing Hougang and its bad finances. In Financial Year 2010, before merging with Aljunied, Hougang Town Council had an operating deficit of $92,000. It was also partly due to the abnormally large fees it paid to its Managing Agent, FMSS, which was fully owned by the key officers of AHPETC.
Mdm Speaker, the AG's findings confirm that something is seriously wrong at the AHPETC. They paint a picture of financial mismanagement, incompetence and negligence in corporate governance.
If an auditor makes such a finding on a listed company, it will immediately cause consternation among the shareholders, and a call for the removal of the CEO and the Board
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of Directors. In Japan, the Chairman and CEO would hold a press conference and take a deep bow. And in the good old days, they may even commit harakiri. Where there are breaches of the Companies Act, both the company as well as the individuals responsible could be charged and, if found guilty, punished with fines and/or jail terms for the individuals.
Even for charities, if their auditor makes such a damning finding, the Commissioner of Charities will haul up the Governing Board and key officers for a full inquiry. They will be suspended and eventually removed from their duties if the findings are borne out. They can also be charged and punished for any breaches of the Charities Act.
Town Councils are not regulated under the Companies Act or the Charities Act. As I explained in this House in May 2013, Parliament decided in 1989 to give elected Members of Parliament more authority and responsibility over the HDB estates in their constituencies in order to strengthen the nexus between the residents and their elected Members. The strategic intent was to bring home to the Members that how they manage and run their Town Council will affect their electoral fortunes at the next election and, to voters, that the Members of Parliament they elect will be responsible for looking after their housing estates. This would enhance accountability, push Members to focus on what mattered to the residents and, in turn, encourage voters to scrutinise more closely the capabilities and track record of election candidates. That is why the Town Councils Act deliberately takes a light-touch approach to regulation and enforcement.
However, light touch does not mean that the Members and the Councillors running the Town Council bear no responsibility and need not be held to account if the Town Council fails to perform. By law, the Members and Councillors are, ultimately, responsible for everything in the Town Council. They cannot simply delegate their responsibility away to their Managing Agent or any others.
Unfortunately, throughout this saga, we have found the Members of Parliament running the AHPETC to be evasive, unresponsive and misleading. In response to legitimate queries from auditors, my MND officials, their own residents and the media, they stone-walled, deflected the queries, made false or dishonest claims, raised irrelevant excuses and sought to confuse the public with a flurry of red herrings. Let me give four illustrations.
First, their lack of transparency – they failed to disclose things on time; they failed to submit reports they should be submitting. Every time we reminded them, again and again, they came up with yet another excuse.
AHPETC's FY2011 and FY2012 financial statements were late and its FY2013 statements are still outstanding. AHPETC's Service and Conservancy Charges (S&CC) arrears reports have
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been outstanding for nearly two years.
Financial incompetence aside, failure to carry out critical cyclical maintenance work is an even graver safety concern. For instance, even AHPETC's FY2013 cyclical maintenance works report which informs MND of any delays in replacing major infrastructure, was late for more than six months, incomplete and inaccurate. This is serious as it potentially impacts on public health and safety. For instance, we expect lifts to be replaced after 28 years. If the Town Council prolongs the replacement of a lift beyond the recommended operating-life, we require them to disclose it and declare that it remains in serviceable condition and has been duly certified by qualified personnel. But AHPETC does not seem to be exercised over such reporting. Each time MND officers update me on their Town Councils' submissions, it reads, "AHPETC still outstanding". Why this lack of transparency? Why are reports from AHPETC always outstanding?
Second, the Town Council appointed a related party, FMSS, as its Managing Agent. As I explained earlier, the owners of FMSS are Mr Danny Loh, who became the Town Council's Secretary, and Ms How Weng Fan, Mr Loh's wife, who became the Town Council's General Manager. There were occasions where Ms How certified work done, approved the payment voucher and approved the cheque from the Town Council to her own company.
The AG has found insufficient disclosure of the related-party transactions in AHPETC's financial statements and lack of evidence of safeguards to manage the conflicts of interests of related parties arising from the ownership interests of its key officers. Why did AHPETC not disclose these related-party transactions and take steps to prevent the risk of abuse when the companies it gave contracts to were owned by its key officers?
Third, FMSS was paid abnormally high fees. It was paid 20% more than the previous Managing Agent that ran Aljunied, 50% more than a comparable Town Council and more than any other Town Council. Why? When asked, the Town Council explained publicly that the higher rates included services which used to be contracted out, such as IT administration and maintenance, resulting in savings for the Town Council. Sounds like fair enough. But is it true?
In December 2012, in response to MND, the Town Council said, "It had moved on to upscale and develop the Financial System which was in use at the former Hougang SMC". So, it is not true. And what exactly is the capability of this "up-scaled and developed Financial System"? Apparently, it could not even track and make simple monthly arrears reports. To produce the reports, the Town Council told MND that they would require "manual counting and sorting".
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Fourth, their failure to deal expeditiously with problems – S&CC arrears being a prime example. Throughout this sad saga, what are the Members of Parliament of AHPETC doing? I do not expect them to take over the job of their Managing Agent, but I do expect them to exercise close supervision and, when problems arise or issues are highlighted, to step up, take responsibility, look into them quickly and address them squarely.
This is the accountability that we expect of all elected Members of Parliament or, for that matter, any company director or any member of the governing board of a charity. Instead, what we have consistently gotten from the Members of Parliament of AHPETC is side-stepping and avoiding responsibility – first "no response", then "in due course" and then followed by a series of excuses, blaming everybody else for their failure to perform.
Finally, last month, AHPETC declared that they had "embarked on a roadmap to enhance its aggregated arrears reporting module sometime in November 2014". This is their response to a problem in June 2013, 17 months earlier! Simply astounding.
Clearly, this state of affairs is unacceptable. MND will follow up in three ways.
First, MND expects AHPETC to follow up and remedy the problems and weaknesses listed in the AGO Report. It is already too late for AHPETC to submit their FY2013 financial reports on time. But MND expects them to submit an unqualified set of their FY2013 financial reports to MND by 30 June 2015, and FY2014 financial reports by 31 Aug 2015. These must be tabled to Parliament, just like the financial reports from all the other Town Councils.
MND further expects AHPETC to deal decisively with the gross incompetence of its Managing Agent. Please do something for the sake of your residents. There has been overpayment and public funds have been affected. Will the Town Council be suing the FMSS for return of money lost? Meanwhile, MND is studying what other legal recourse any aggrieved party may have.
Second, because of these serious problems, MND has withheld this year's FY2014 S&CC grant from AHPETC. The money has been put aside in a separate deposit account and will be paid out after the problems are fixed.
MND is mindful that the suspension does not unwittingly result in the Town Council not being able to pay its essential services, leading to hardship for the local residents. In fact, we are prepared to consider paying out the S&CC grants in full or, at least in half, if AHPETC could assure MND that the grants will be properly channelled to the purpose for which they are given.
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MND has asked AHPETC what measures they could institute to ensure this. AHPETC has not yet taken up MND's offer. On 12 November 2014, Ms Sylvia Lim replied MND to say that they are assessing the situation and will reply should they wish to take up the option of the half-grant. We are concerned, but we have not heard from her since then. Anyway, the earlier the AHPETC clean up the mess, the earlier we could resume payment of the S&CC grants. So, the ball is in the Town Council's court.
Third, MND will address the weaknesses in the current Town Councils regulatory framework. We can no longer take the light touch and assume that all Members of Parliament running Town Councils will be responsible. We will amend the Town Councils Act to ensure that the Town Councillors, including the elected Members of Parliament, carry out their duties and, if they do not, to institute a proper system of enforcement and penalties.
Regardless of which party is running the Town Council, there is a need to ensure proper systems, accountability and governance, to safeguard residents' interests. The Companies Act regulates companies closely. Boards of Directors are held to a high standard of fiduciary duties. The Town Councils Act has not and may not need to follow the Companies Act in full. But the basic need for accountability and good corporate governance must be followed and the legislative provisions strengthened as in the Companies Act.
After the Committee of Supply this year, MND will table a Bill to amend the Town Councils Act to tighten the current legislative framework, so as to better protect the public interest. Senior Minister of State Lee Yi Shyan has been working on this and will take the Bill through Parliament. But let me set out briefly three key areas which the amended Act will address.
First, at the fundamental level, we will make clear that Town Councils are subordinate to and must comply with the authority of public law and of Government agencies charged with enforcing the law. While Town Councils are statutorily vested with the function and duty to manage and maintain common property, they do not own the common property and their powers are not unfettered.
We have assumed that all Town Councils will follow this fundamental principle without needing to spell it out explicitly. But, sadly, AHPETC has proven us wrong. For example, we require all Town Councils to focus on their primary mission which is to maintain the common areas under their care. Town Councils are not set up like for-profit companies to make money. Town Councils should break-even with revenue from the S&CC collections and Government grants.
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For example, it is not their business to organise and operate trade fairs which compete with existing HDB shops as that would be unfair to the shops. That is why there are clear rules against such a practice. However, AHPETC has refused to comply with such rules, despite repeated reminders from MND and other Government agencies.
Second, we will strengthen Town Councils' corporate governance and financial accountability, to ensure that Town Councils plan and use their finances in a sustainable way. This will take reference from best practices in companies and other organisations, and include spelling out the duties and responsibilities of the Town Councillors and elected Members of Parliament and the penalties if they fail to perform those duties.
Third, we will strengthen MND's regulatory oversight with powers to collect information and conduct investigations and a stronger penalty framework. Currently, the Town Councils Act does not provide MND with any levers to cause Town Councils to comply, except for offence provisions in three narrow areas.
MND also lacks the power to investigate irregularities or non-compliance with the Town Councils Act, as it does not have the express authority to require Town Councils to submit any information beyond the annual financial statements. So far, MND has been relying on moral suasion and Town Councils' self-declarations.
For effective governance and regulatory oversight, MND requires powers to collect information and conduct investigations. This also has to be coupled with a stronger penalty framework, to enable the Government to take errant Town Councils to task for non-compliance.
Mdm Speaker, how Town Councils perform matters. How our public housing estates are managed impacts public health, public safety and the quality of life for millions of Singaporeans and the value of their flats.
Town Councils need competent, honest people and proper systems to serve their residents well. Good intentions and bland assurances alone are not sufficient. Elected Members of Parliament need to supervise the work of their Town Councils and their Managing Agents. While they enjoy wide autonomy, they also have huge responsibility and they are accountable to their residents. They have statutory duties but they are also subject to national laws.
Running a Town Council requires elected Members of Parliaments to govern, not just politick. Compared to the sound and fury of politicking, governing is long, tedious and unglamorous work. But good government is what secures a good life for Singaporeans, on a
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long-term, sustainable basis. Conversely, neglect of Government ultimately compromises residents' well-being. It may not show up immediately, but it will, eventually. Meanwhile, where serious problems have been identified, MND has to intervene to require the Town Council to remedy them.
Mdm Speaker, beyond ensuring that our HDB estates are well run, the Town Councils Act has a wider strategic objective: to ensure that any party aspiring to form the national government of Singapore first shows that it can run a Town Council competently. This aim remains sound. That is why, despite the problems that AHPETC has run into, we do not propose taking back the Town Council's powers and having HDB run everything again, like before. Instead, we will strengthen the Town Council framework to remedy the weaknesses in it, so that elected Members of Parliament have to perform and be held more tightly to account in running their Town Councils and towns.
Madam, I do not relish making this statement. Parliament should be about accountability and responsibility. Sadly, the AG's report has found the lack of accountability and failure to take responsibility on the part of AHPETC Chairman and her Councillors. I hope they will act speedily to remedy the problems. Mdm Speaker, I beg to move.
*Question proposed. (proc text)]
Mdm Speaker, the Workers' Party supports the Motion. We treated the AGO audit seriously. I understand that the Town Council had made all efforts to respond to AGO's queries to the extent of the need to prioritise the audit over some other works due to manpower resource constraints.
The Chairman of the Town Council, Sylvia Lim, attended to AGO's audit personally. The staff employed by the Managing Agent working at the Town Council had undergone tremendous stress. They are overwhelmed by their workload amidst challenging conditions. I would like to thank them for putting in their best efforts.
We take the findings of the AGO seriously and have responded to details of the findings in writing to AGO. The Chairman and Vice Chairmen of the Town Council as well as other Members of Parliament from the Workers' Party, elected Members, will deal with the various findings of the AGO report.
I would like, first, to address the public misconception that the Managing Agent was given the contract without tender. Open public tenders were called in 2012 for the Managing
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Agent (MA) and EMSU contracts. The most recent tender for the MA contract was called in November 2014. However, tender was not called for the MA contract for the specific transition period between July 2011 and July 2012 and for the EMSU contract, the period between October 2011 and June 2012, due to the urgency to take over the management of the town and to ensure that major services were not disrupted to affect the lives of residents. The important point to note is that the Town Councils Act allows the Chairman of a Town Council to waive tender requirement under the circumstances.
Mdm Speaker, the fact remains that it has been a challenge for the Workers' Party, being an Opposition Party, to attract Managing Agents. When the public tender was called in 2012, three companies collected the tender documents and only one company submitted the tender. In a more recent tender, only one company, the largest Managing Agent managing PAP Town Councils, collected the tender document but no one submitted any tender.
What we learnt from this AGO audit is that we should have appointed a consultant to look at internal controls in compliance with the Town Councils Act while the elected Members of Parliament focused on taking over the management of the town to ensure that major services are not interrupted and residents' routine lives are not affected. This is something we will do if such a privilege should happen in future elections.
But the problem of professional town management in compliance with financial rules will remain a real challenge if there are no established Managing Agents who are prepared to do the job. It will seem that Managing Agents serving PAP Town Councils are unwilling to serve as Managing Agents in non-PAP Town Councils, and that the reason appears to be political rather than professional. It looks like the only option for any Opposition Party to take over a Town Council will be direct management. I did this in Hougang SMC when I took over the Town Council in 1991. However, at that time, the HDB provided computer and EMSU services and the Town Council paid a fee per month for the services. The Council recruited staff directly to manage the town. Hougang SMC is a compact town.
Currently, the only alternative Town Council financial accounting system was developed by Hougang SMC which had proven to be inadequate for a GRC town. Direct management means newly elected Members of Parliament will have to start from scratch to recruit and train staff to be familiar with HDB estate management, to start taking over management of the town within 90 days as required under the Town Councils Act. And, at the same time, to look for accounting software to transfer the account into a new system and pray that the system will work. If we are not able to do all these at the same time, we will be labelled as "incompetent".
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Hence, Mdm Speaker, under our current system, it seems to me that any Opposition Party which aspires to be elected in a GRC will have to build a town management team to train hundreds of staff officers first. Then, taking the advice of the Minister for National Development, start shopping for an off-the-shelf accounting software. If an Opposition Party aspires to be the next government, perhaps it may need to build an army of civil servants first. This is a strange political situation for any functioning democracy to be in.
The Workers' Party was fortunate to have a Managing Agent at least with the experience in managing the town of Hougang Single Member Constituency, and who was prepared to take the challenge of managing a much larger town, to enable us to take over the management of the Aljunied GRC town, without major disruption to the services affecting the lives of thousands of residents. We did also have a financial accounting system in place although it fell short of features and functions that managing a larger town requires.
I think this is not the way forward for the good of the nation. If we consider residents' interests as most important, then the Government must also protect residents' interests in the transition of town management from one Party to another Party. We are for transparency and accountability. We are not shy to support the Motion that is critical of us but we will address and remedy the issues raised by the AGO report.
In fact, you will see from the speeches of my colleagues, we have already taken concrete steps to address and remedy many of the issues. We are fully aware that if we overlooked certain matters, the PAP Government will be the first to take us to account. We are not daunted by it, as this is what a First World Parliament should be – keep whoever is in charge on their toes, to do the job properly and be accountable to the people.
AGO has taken a year to check the accounts of AHPETC for the Financial Year 2012/2013 and found lapses in several areas. It has not found the Town Council to be engaged in corrupt practices nor that any money had been lost or misappropriated after thousands of transactions were examined. We should put this episode in a proper perspective. Based on the Town Council Management Report, except for S&CC arrears management and corporate governance, AHPETC's performance in other aspects of town management is comparable to other Town Councils.
We support the Motion to strengthen the legislative framework for Town Councils. As we relook the legislative framework, we need to look at the de-politicisation of the transitioning process and the professionalising of town management so that the incoming Town Councils can work to achieve good management and not be left stranded. Newly-elected Members of Parliament should not be tested on whether they can build up town
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management systems from scratch, putting residents' interests at risk in the process.
Finally, Madam, I would like to thank the residents living in the towns of Aljunied, Hougang and Punggol East and the public for their concern and support. Despite the challenging political climate, the Workers' Party will continue to serve you to the best of its ability. Thank you.
I propose to take the break now. I suspend the Sitting and will take the Chair at 4.35 pm.
Sitting accordingly suspended
at 4.15pm until 4.35pm.
Sitting resumed at 4.35 pm
[Mdm Speaker in the Chair]
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