Saturday, 23 July 2016

'Pervasive' lapses found in Workers' Party town council accounts: KPMG; WP MPs sued by own Town Council AHTC over $33 million in improper payments

Weaknesses cover key areas of governance, financial control and reporting, among others: KPMG
By Lim Yan Liang, The Straits Times, 22 Jul 2016

Auditors of the Workers' Party-run Aljunied-Hougang Town Council (AHTC) had harsh words for the way it was managed, saying they found "pervasive" control failures in its accounts and work processes over the past five years.

These weaknesses cover key areas of governance, financial control, financial reporting, procurement and records management, KPMG said in a report on Wednesday.

In all, KPMG flagged six areas where AHTC's control environment had failed to set the foundation for discipline and structure for its internal workings. These include the lack of communication and enforcement of integrity and ethical values. For instance, "highly irregular" methods were used to process over $60 million worth of payments, and temporary accounts used for more than one million transactions were not cleared swiftly.

Also, several payments were made using a dummy code that meant duplicate or fictitious payments could be made without being detected. The town council's audit committee also did not meet as often as it should to address the issues raised by AHTC auditors as well as the Auditor-General.

"There is an issue larger than the sum of individual lapses at AHTC," KPMG said in its report, which the Workers' Party (WP) released on Wednesday night.

The lapses were a systemic problem and fixing them means town councillors have to "reset the tone at the top of AHTC" to emphasise competence and accountability.



KPMG estimated that the town council will take at least 18 months to rectify all the lapses and weaknesses that have been found.

AHTC chairman Pritam Singh said it accepts all the recommendations in full, and its MPs "will immediately lead an exercise to review" governance, controls and other key areas identified in the report.
Last night, the Housing Board noted "with grave concern" the findings, including the town council's slow progress in remedying the lapses after "a long and protracted process for AHTC to appoint an independent accountant following orders by the Court of Appeal".

"It is imperative that AHTC takes immediate steps to reset its tone from the very top," it added.

"As large sums of public monies are at stake, AHTC also needs to account to its residents and the public whether any monies have been lost as a result of these lapses," it said.

The monthly report by KPMG is its fourth on the state of AHTC, which hired it to look into its books following significant lapses in governance flagged by its own auditors and the Auditor-General in a special report in February last year.

The new report completes one part of KPMG's work, which is to identify where AHTC did not comply with the Town Council Act.

KPMG is now reviewing whether past payments AHTC made between 2011 - when it was formed - and last year were improper and need to be recovered.

KPMG will also communicate directly with accountants of Pasir Ris-Punggol Town Council as required by the Court of Appeal, the HDB noted. This concerns the transfer of funds for Punggol East, which WP lost in last year's General Election. "We look forward to AHTC's fullest cooperation in this review... (to) ensure that public monies are safeguarded," said the HDB.

In its report, KPMG also identified another 70 "control failures".

These are on top of the 115 failures already found by the Auditor-General's Office and the town council's statutory auditors. Among the most glaring lapses KPMG uncovered was AHTC's use of 18 temporary clearing accounts, which had contained a total of more than one million transactions valued at over $648,000. It is standard practice for transactions in such accounts to be cleared swiftly, but it was not done until after KPMG began its review.

AHTC also extensively used manual journal entries to record payments to third parties. This avoids records being entered into accounts payable, thus circumventing financial controls.

There were over 48,500 such manual entries involving more than $60 million from 2011 to last year.

KPMG said: "This highly irregular shortcut makes effective oversight of payments by the finance department practically impossible."

"Unwarranted and extensive" use of this shortcut indicates "a lack of accountability in applying basic financial controls principles". This makes it "easier for duplicate or fictitious payments to be made without being detected", KPMG said.

AHTC's procurement policies had also allowed the use of a "dummy" vendor code for refunds of tender deposits and other purposes.

Even if all the identified control failures are remedied, KPMG said AHTC's compliance with the Town Council Act "will not be sustainable" unless town councillors and senior management define accountability for lapses and engage suitable vendors and employees.

While some AHTC representatives were receptive to the recommendations, certain members of its management "see the control failures as requiring short-term fixes and historical explanation".

This risks undermining future compliance by failing to plug today's shortfalls, KPMG added.

AHTC's Mr Singh said it will review work processes to strengthen controls. It has also called a tender for a new accounting system, and will appoint an internal auditor.









Report on Aljunied-Hougang Town Council's accounts

WP MPs 'have not shown integrity'
Shanmugam urges party's elected MPs to come clean on irregular payments flagged by KPMG in ongoing audit
By Charissa Yong, The Sunday Times, 24 Jul 2016

Workers' Party (WP) leaders have not shown integrity or ethics in managing their town council's finances and fixing lapses, Home Affairs and Law Minister K. Shanmugam said yesterday.

In a strongly-worded Facebook post, he called on WP's six elected MPs to come clean on millions in irregular payments in its "dark corners", sums that were flagged by independent auditor KPMG in its report on WP-run Aljunied-Hougang Town Council (AHTC) last week.

KPMG found "pervasive" control failures in AHTC's accounts and processes over the past five years, spanning governance, financial control, financial reporting, procurement and records management.

The lapses were a systemic problem and town councillors had to "reset the tone at the top of AHTC" to emphasise competence and accountability, KPMG's report said.


Yesterday, Mr Shanmugam said the report underlined the key issue: "AHTC's leadership has neither upheld nor enforced integrity and ethical values. The rot is at the top."

This, he added, was no surprise, citing how the High Court and the Court of Appeal had criticised WP chairman Sylvia Lim and AHTC chairman Pritam Singh "for suppressing the truth (designed to mislead) both in Parliament and in Court". Mr Shanmugam said: "To them, the truth is a tradable commodity."

The report by KPMG is part of its ongoing audit of AHTC following significant lapses in governance flagged by its own auditors and by the Auditor-General's Office (AGO) in a special report in February last year.

Mr Shanmugam said the latest report was "a damning litany of highly irregular and suspicious financial practices, poor governance structures and extensive leadership failures".

KPMG, he added, had "uncovered even more faults than the AGO and AHTC's statutory auditors". AGO and AHTC's auditors found 115 failures. KPMG uncovered 70 more - making 185 failures in all, he said.

"Since the AGO audit, the situation has not gotten better. It has gotten far worse," he added.

KPMG had flagged highly irregular shortcuts used by AHTC to process $60 million to pay related parties and "suppliers" over five years. AHTC also used "dummy" vendor codes for over $270,000 of payments without naming suppliers.

"These practices could have concealed duplicate or fraudulent payment. Obviously, WP's leadership thought they could play Aljunied residents - and Singaporeans - for dummies," Mr Shanmugam added.

He also criticised AHTC's finance and audit committees for being "not bothered" over issues flagged as they did not meet regularly.

He said AHTC's attitude in dealing with its problems is telling, adding that chairman Pritam Singh "breezily" said it accepted KPMG's recommendations fully without "apologies, explanations, clarifications".

Mr Singh had also said AHTC MPs would immediately lead an exercise to review the key areas flagged.

But Mr Shanmugam called for a fuller explanation from AHTC, listing three sets of questions over rectifying past payments, coming clean and producing documents.

"They went to court to oppose, tooth and nail, the appointment of an independent accountant.

"We know now why: They don't want any light shone into their dark corners, of which there are many," he said, adding: "Mr Singh and his colleagues can't keep Singaporeans in the dark so easily."

KPMG is continuing to also look at AHTC's past payments, and if needed, their recovery.

Mr Shanmugam said: "More facts will emerge, which will show what actually happened to the monies, and what the WP has been up to in Aljunied, Hougang and, for two years, Punggol East."

Last night, Mr Singh said Mr Shanmugam's response was "surprising" as KPMG's report was "a stock-take on AHTC's internal controls". AHTC had published all KPMG's monthly reports that began in April, though it was not obliged to do so, and asked KPMG to publish the 70 more lapses identified, said Mr Singh.

Remedial measures AHTC has undertaken since the additional lapses were identified were also highlighted in the July report, he added.

Mr Singh also said the review of past payments is ongoing and a full report is expected to be made to AHTC at the end of next month.

AHTC will make it public and take actions that are needed, he said.




















Town council's 'irregular' procedures

1. “Highly irregular” methods were used to process over $60 million worth of payments.

2. Temporary accounts used for more than one million transactions were not cleared swiftly.

3. Several payments were made using a dummy code that meant duplicate or fictitious payments could be made without being detected.

4. Town council’s audit committee also did not meet as often as it should to address the issues raised by AHTC auditors as well as the Auditor-General.

5. AHTC also extensively used manual journal entries to record payments to third parties. There were over 48,500 such manual entries involving more than $60 million from 2011 to last year. This avoids records being entered into accounts payable, thus circumventing financial controls.

KPMG said: “This highly irregular shortcut makes effective oversight of payments by the finance department practically impossible."










KPMG flags pattern of accounting breaches
By Lim Yan Liang, The Straits Times, 22 Jul 2016

KPMG identified another 70 lapses in the way Aljunied-Hougang Town Council (AHTC) was governed. Here are the key areas of weakness.

Lack of accountability

• Until earlier this month, AHTC did not have a code of conduct that sets out its expectations of staff. Its code of business conduct is in draft form.

• A control mechanism in AHTC's work order system to prevent work that exceeds the gazetted budget was bypassed on several occasions, mainly for lift-related work. KPMG said town councillors appeared not to know of this circumvention.

Commitment to competence

• Changes made in May to AHTC's accounting system for reporting service and conservancy charges arrears were done without documentation of program changes, "jeopardising the accuracy" of the system.

Town councillors' participation

• AHTC's finance and investment committee met an average of four times a year between 2014 and this year when they were supposed to meet eight times. Given four years of qualified audit reports and the Auditor-General's special report, "they should have been meeting more frequently to address these issues".

Management attitudes

• AHTC has 18 temporary clearing accounts, which have a total of more than one million transactions valued at over $648,000. Some were from before 2011. It is standard practice for such transactions to be cleared swiftly, but that was not done until after KPMG began its review.

• Extensive use of manual journal entries to record payments to third parties. Over 48,500 such manual entries involving more than $60 million were recorded from 2011 to last year.

• Accounts payable balances were not regularly reviewed, resulting in duplicate entries, incomplete processing, mismatched payments and other inaccuracies. A 2012 vendor invoice for more than $52,000 was recorded twice, while there has been no investigation of 48 payable accounts totalling over $105,000.

• AHTC's procurement policies allow the use of a "dummy" vendor code, which has been used for more than $270,000 in transactions since it was created last year. There is no monitoring mechanism to ensure such transactions are bona fide payments to one-time suppliers.

• KPMG said these failures of management can conceal duplicate or fraudulent payments.









 




















Town Councils Act to be beefed up soon
Changes will ensure public funds are managed properly and town councils have a proper governance structure
By Rachel Au-Yong, The Straits Times, 25 Jul 2016

Changes to the law on town councils to ensure public funds are managed properly are being finalised and should be ready by the year end, National Development Minister Lawrence Wong said yesterday.

The amendments to the Town Councils Act will, among other things, ensure that town councils have a "proper governance structure", he told reporters after a ministerial visit to Kebun Baru ward in Nee Soon GRC.

Mr Wong was responding to reporters' queries on what his ministry was doing after a report on the Workers' Party-run Aljunied-Hougang Town Council (AHTC) by independent auditor KPMG last week flagged "pervasive" control failures in AHTC's accounts and processes.

"All the more, the findings by the auditor give us the impetus to make sure that the Town Councils Act will be amended so that we can have a proper governance structure over the town councils," Mr Wong said.

"We have talked about this before, the legislative changes are being studied and are in the process of being finalised, and we hope to make the legislative changes by the end of the year."



The changes to the law have been in the works for some time.

In February last year, then National Development Minister Khaw Boon Wan said the changes would address weaknesses in the current regulatory framework.

Addressing Parliament during a debate on the Auditor-General's special report that month, which flagged major problems in the WP town council's finances, Mr Khaw said there was a need to ensure that proper systems, accountability and governance are in place to safeguard the interests of residents.

The amended Act, when passed by Parliament, will cover three key areas, he said. It will make clear that town councils must comply with the law and agencies enforcing it.

Governance and accountability will also be strengthened so town councils plan and use their finances in a sustainable way. The ministry will also have stronger regulatory oversight, with powers to get information and make investigations.

Currently, the Ministry of National Development has no power to compel town councils to give information and there are no penalties if a town council refuses to do so.

KPMG's latest report is part of its ongoing scrutiny of AHTC's governance and finances in the wake of the Auditor-General's report.

KPMG highlighted lapses over the past five years that span governance, financial control, procurement and records, among others, and said the AHTC management had failed to set the foundation for discipline for its internal workings.

These include highly irregular shortcuts used by AHTC to process $60 million worth of payments over five years. It also used "dummy" vendor codes for more than $270,000 worth of payments without naming suppliers.

These practices, KPMG noted, could have concealed duplicate or fraudulent payment.

On Saturday, Home Affairs and Law Minister K. Shanmugam criticised WP leaders for not showing integrity in managing their town council's finances and fixing lapses.

He urged its six elected MPs to come clean on millions in irregular payments in its "dark corners", which KPMG had flagged.

AHTC chairman Pritam Singh replied that KPMG's review of the town council's past payments is still ongoing, and a report is expected by the end of next month.

"AHTC will publish the past payments report," Mr Singh said, adding that the town council will take any necessary action after that.

Yesterday, Mr Wong said the auditor's findings were "a very serious matter" and he awaited AHTC's response. Some of the lapses "pertain to the culture of management, which has to change", he added.

"This is not the end of KPMG's findings because there are still more studies and reviews to be done, including the issue of past payments and whether they have been made properly," Mr Wong said.

"Their work is still ongoing but, clearly, there are very serious lapses surfacing. We will continue to await further recommendations from the auditor and we will monitor the matter very closely."








AHTC awards contract for new accounting system

The Sunday Times, 31 Jul 2016

The town council run by the Workers' Party (WP) has awarded a contract for a new accounting system that it says will help address critical lapses which were flagged by an ongoing independent review.

Aljunied Hougang Town Council (AHTC) chairman Pritam Singh, announcing this in a Facebook post yesterday, said it has been an "uplifting last couple of days" at the town council, with the awarding of the contract for the $750,000 accounting system.

He added that it "marks an important objective in working to reset fundamental control and reporting related issues at the town council".

The contract was awarded to Anacle Systems, one of two companies that tendered for the job.

Accounting firm KPMG, appointed by AHTC to look into its books, had said in its latest report that the systemic problems at the town council can be fixed only if town councillors "reset the tone at the top of AHTC" to emphasise competence and accountability.

In the report, released by the WP on July 20, KPMG said that it had found "pervasive" lapses in the past five years at the town council that spanned governance, financial control, procurement and records, among others.

Home Affairs and Law Minister K. Shanmugam, responding on July 23 to the findings, had criticised WP leaders for not showing integrity in managing their town council's finances and fixing lapses.

He had called on the party's six elected MPs to come clean on the millions in irregular payments which KPMG had flagged.

The report is part of KPMG's ongoing scrutiny of AHTC's governance and finances, in the wake of a special audit by the Auditor- General's Office.

The accounting firm is also reviewing past payments made by the town council to determine if these were improper.

Mr Singh said yesterday that AHTC will continue to look for "experienced and steady hands" for its finance department as part of efforts to address issues.





* Parliament: Handover procedure for town councils to be reviewed

Control failures at Aljunied-Hougang Town Council are cause for concern: Desmond Lee
By Rachel Au-Yong, The Straits Times, 17 Aug 2016

The procedure for handing over town council accounts and documents to a rival party after an election looks set to change.

Senior Minister of State for National Development Desmond Lee indicated the possibility in Parliament yesterday, when he expressed "deep concern" over the pervasive control failures that auditors found at Aljunied-Hougang Town Council (AHTC).

"When boundaries change, especially across political lines, delays in submission of accounts and documents may impact the financial audits of the receiving town council," he said.

"So, this is certainly something we need to look at in the course of this review."

Mr Lee was referring to the ongoing review of the Town Councils Act to address its weaknesses. If approved by Parliament, the changes would be in place by the year end.

The handover issue has come under the spotlight again after Mr Charles Chong of the People's Action Party won back Punggol East from the Workers' Party (WP) in last year's general election.

Yesterday, Mr Chong and Mr Zainal Sapari (Pasir Ris-Punggol GRC) asked, among other things, how the Ministry of National Development (MND) would better safeguard public monies and recover improper past payments made by AHTC.

In the saga over AHTC's accounts, there has been a long-running clash between the WP-run town council on one side, and the MND and the Housing Board on the other.

In February last year, the Auditor-General's Office said its special audit unearthed major lapses at the then Aljunied-Hougang-Punggol East Town Council.

AHTC's current accountant KPMG, appointed to fix the lapses, has found more.

Required to make monthly reports, KPMG said last month that it found "pervasive" control failures in AHTC's accounts and processes over the past five years, spanning governance, financial control, financial reporting, procurement and records management.

Citing these, Mr Lee said that despite repeated assurances from WP leaders, AHTC had been dragging its feet in remedying its accounts.

He noted that KPMG said AHTC had completed only a few of the steps it said it would take to correct its accounts.

KPMG also estimated that the review would take 18 months, not 15 months as said by AHTC.

"Instead of completing the remediation plans expeditiously, what we have seen from the town council in this past 1-1/2 years is a series of actions that have only slowed down, prolonged and frustrated the whole process," Mr Lee said.

His ministry is also concerned about the "systemic control failures" highlighted by KPMG, including highly irregular short cuts used to process $60 million paid to related parties and suppliers over five years, he said as he described some of them to the House.

"These control failures continue to paint a serious state of affairs in AHTC and are a cause for concern," he said, adding that the failures could conceal duplicate, fictitious or fraudulent payments that could have been made without being detected.

Ms Sylvia Lim (Aljunied GRC), who was chairman of the WP town council until last year, asked Mr Lee whether the MND knew of other town councils that also had control failures. She also wanted his ministry to make public its findings on other town councils' control failures "so that we can better benchmark ourselves" against others.

Mr Lee said he had no doubt that other town councils also made mistakes from time to time. The findings - as with their annual accounts - are published on their websites and set out in MND's annual report on town councils, he added.

But the issues at AHTC, he argued, are of a different nature because its accounts had never been given a clean bill of health by its accountants in the past four financial years.

Urging AHTC to cooperate fully with KPMG in reviewing past payments, he said: "Residents of Aljunied, Hougang and also Punggol East need to be assured on whether there were any improper past payments that ought to be recovered.

"The Singaporean public also needs to know as large sums of public monies and grants are at stake."





AHTC 'frustrated' process of straightening out accounts

By Rachel Au-Yong, The Straits Times, 17 Aug 2016

Senior Minister of State for National Development Desmond Lee yesterday said the Workers' Party-run town council had "slowed down, prolonged and frustrated" the process of straightening out its accounts.

Among other things, he said, the Aljunied-Hougang Town Council (AHTC) had refused to jointly appoint an accountant with the People's Action Party-run Pasir Ris-Punggol Town Council (PRPTC).

AHTC had been ordered to appoint an independent accountant to look into its books by the Court of Appeal last November, following serious governance and financial lapses being discovered at the town council by the Auditor- General's Office.

AHTC appointed KPMG for the task in March. Separately, PRPTC had hired PWC to audit the accounts of Punggol East constituency, which it took over after the WP lost the constituency in last September's General Election.

Yesterday, Mr Lee said PRPTC had done so to comply with the apex court's order.

He said that, since the town council had taken over management of Punggol East from the WP, it was required to get to the bottom of the constituency's accounts as "all the rights and obligations and liabilities of Punggol East flow on to its successor organisation".

He added that PRPTC had wanted to jointly appoint an accountant with AHTC, but was rebuffed.

"It would have been ideal if both town councils addressed one set of accountants" as it was less likely to lead to duplicated work, he said.

But Ms Sylvia Lim (Aljunied GRC) said that the Court of Appeal, at a July hearing over the issue, had "declined to answer" if PRPTC was required to comply with the court order.

At the hearing, the court directed the accountants of the two town councils to work with each other and share documents the other side would need.

Mr Pritam Singh (Aljunied GRC), the chairman of AHTC, added that he was "a bit surprised" to find out how important the joint appointment was, given that the Housing Board had not raised the matter to the Court of Appeal last November.





** AHTC needs more staff to fix lapses, say auditors

No duplicate or fictitious payments found when the use of 'dummy' vendor code was checked
By Lim Yan Liang, The Straits Times, 19 Aug 2016

Aljunied-Hougang Town Council (AHTC) needs to have more staff with the relevant expertise for it to resolve the problems in its accounts in a timely manner, said its auditors, KPMG, yesterday.

KPMG also said that no duplicate or fictitious payments were found when it checked on AHTC's use of a "dummy" code, a problem it had flagged in an earlier report.

The auditors noted that the town council, run by the Workers' Party, has resolved three of the 17 audit points raised in the previous monthly report.

The remaining 14 outstanding remedial measures fall into two categories.

One comprises implemented measures that are being tested by KPMG to see whether they are effective.

The other is made up of yet-to-be- implemented measures which are being finalised with KPMG's help.

The auditors gave these latest updates on the town council's accounts in their fifth report, which AHTC put on its website yesterday.

One major area among the 17 points is the town council's temporary clearing accounts.

KPMG highlighted AHTC's slow progress in investigating the items in the accounts to drive home the point that the town council needed more qualified manpower to remedy its lapses.

Of the more than one million transactions in 18 temporary accounts to be cleared - a task KPMG said would take about a year - AHTC had cleared only 599 in the past two months.

"The rate of progress has increased since our July 2016 report; however, AHTC needs to increase the available staff with the requisite expertise so that it could complete investigation prior to the migration of accounting data to AHTC's new accounting system," it said.

Last month, AHTC awarded a $750,000 contract for a new accounting system to Anacle Systems, one of two companies that bid for the job.

AHTC had hired KPMG to look into its books following significant lapses in governance found by its own auditors and the Auditor- General's Office (AGO) in a special report in February last year.

KPMG said last month that it found "pervasive" control failures in the town council's accounts and work processes over the past five years, and estimated that AHTC will take at least 18 months to rectify all the lapses and weaknesses.

The AGO and AHTC's earlier auditors found 115 control failures that were grouped under the 17 audit points, which grew later by another 71 control failures found by KPMG.

AHTC had said it aimed to complete its rectification plans in 15 months.

In last month's report, KPMG said the use of a "dummy" vendor code for making payments makes it easier for duplicate or fictitious payments to be made without detection.

Created last year by AHTC, the code is used for refunds of tender deposits and other purposes.

KPMG said it had reviewed all 207 payments using this code - totalling $271,598.20 - and no duplicate or fictitious payments were made.

However, in 41 instances, totalling $248,346.07 in transactions, AHTC should have used a supplier account instead of the "dummy" code, said KPMG.

It also found seven invoices, totalling $23,197.40, where payment was made without AHTC confirming the goods and services were received. This is a breach of the Town Council Financial Rules.

AHTC chairman Pritam Singh noted in a statement yesterday that KPMG, after checking its use of the dummy code, did not find any duplicate or fictitious payments.

"AHTC accepts the control shortcomings in the use of these codes and will be reviewing its processes to ensure their proper use in future," he added.









AHTC to hand over Punggol East documents

By Chong Zi Liang, The Straits Times, 19 Aug 2016

The Aljunied-Hougang Town Council (AHTC), run by the Workers' Party (WP), has agreed to hand over financial documents to rival Pasir Ris-Punggol Town Council (PRPTC) but only those that relate strictly to Punggol East constituency.

This was agreed on in the Court of Appeal yesterday.

It is, however, only a partial agreement as their lawyers and accountants will have to meet to thrash out the conditions for PRPTC to access documents with information that includes other parts of AHTC as well.

Chief Justice Sundaresh Menon, who presided over the hearing, told both sides that should there be a dispute, they can return to the court with samples of the documents to illustrate the problem and receive guidance from the judges.

The two sides are entangled in a row over the sharing of financial documents needed to review the accounts of Punggol East, after the People's Action Party won back the single-seat constituency from the WP.

Punggol East also returned to the fold of the PRPTC.

Last month, the apex court had directed the accountants of both town councils to work with each other and share documents.

AHTC's accountant is KPMG while PRPTC's is PricewaterhouseCoopers (PwC).

At yesterday's hearing, Mr Peter Low, representing AHTC, said PwC should ensure its team of accountants does not have political or grassroots affiliations. PwC should also undertake not to reveal confidential information about AHTC it may come across, he added.

But Senior Counsel Davinder Singh, representing PRPTC, said the issue of political affiliation was irrelevant and there was no evidence that information was going to be misused.

Agreeing, CJ Menon said: "It's not evident to us on what basis Mr Low can impose conditions on who your clients want to appoint unless he can find a specific interest that is implicated. And so far that doesn't appear to be the case."

He added that PwC should have access to all documents related to Punggol East, but said: "It may be necessary to protect that flow of information related to AHTC and limit the disclosures to the parts relating to Punggol East."

CJ Menon also said that it was not the court's intention for PwC to duplicate the work already done by KPMG, which had been appointed to examine AHTC's books.

"I don't think it's on our mind that an identical exercise is going to be done twice over, by two groups of people because that would be rather disruptive," he said.





*** AHTC seeks extension of deadline for finance report

By Tham Yuen-C, Assistant Political Editor, The Straits Times, 1 Sep 2016

The Aljunied-Hougang Town Council (AHTC) has asked the Housing Board to extend the deadline for submitting a report on its finances by another month to end-September. The original deadline was yesterday.

The report on the town council's past payments is part of an ongoing scrutiny of its governance and finances following the discovery of major lapses in these areas by the Auditor-General's Office.

AHTC chairman Pritam Singh said in a statement last night that his town council had written on Tuesday last week to the HDB to ask for more time. He added: "We are working with KPMG, and will endeavour to submit the report to HDB by Sept 30, 2016."

Accounting firm KPMG is reviewing the past payments made by the town council to determine if any were improper and ought to be recovered, following a Court of Appeal order last November.

The town council's senior officers were also owners and directors of its managing agent FM Solutions and Services (FMSS), and had approved payments to their own company. The town council contract with FMSS ended in July last year.

Mr Singh said the AHTC had asked for an extension "in view of the additional work being performed for the report".

He added that KPMG has been asked to carry out checks on all payments the town council made to related parties: $270,000 worth of transactions made using a dummy code instead of supplier accounts, and some 48,500 manual journal entries used to record about $60 million in payments to third parties.

"In the absence of further queries, we anticipate that KPMG will complete the review of procurement-related activities and most related party payments shortly - including forensic data analytics, forensic technology procedures on AHTC electronic devices, and corporate intelligence procedures," he said.


KPMG had highlighted "pervasive" control failures at the town council in its monthly report in July, which AHTC had put up on its website.





**** AHTC accounts: Audit points not resolved since last report

KPMG update says town council has made little headway in past month
By Tham Yuen-C, The Straits Times, 17 Sep 2016

The Aljunied Hougang Town Council (AHTC) has not made much headway over the past month in resolving outstanding issues flagged in past audits, said its accountant KPMG on Thursday. The Workers' Party-run town council has resolved 17 of the 71 control failures identified by the accounting firm.

KPMG gave these updates on AHTC's accounts in its sixth report, which the town council put on its website on Thursday. The accounting firm was appointed by AHTC to look into its books following significant lapses in governance found by the Auditor-General's Office in a special audit. Referring to the lapses, KPMG said "no audit points were resolved" in the period since the last progress report last month.

While AHTC has put in place some measures to address these issues, several have not been fully implemented and others have not been tested, said KPMG. It added that some measures were also found lacking. As a result, they were not enough to bring the town council in line with the Town Councils Act, said KPMG.

Since March, AHTC has resolved three of 17 audit points.

In a statement on Thursday, AHTC said it had made "satisfactory progress" in addressing an issue with its temporary clearing accounts, one of the major areas among the 17 audit points.


KPMG had highlighted AHTC's slow progress in this area in its report last month. Of the more than one million transactions in 18 temporary accounts to be cleared, AHTC had cleared only 599 by then.

The town council also said it had completed tests on its service and conservancy charges arrears reports for the months of May to July. This follows a finding by KPMG of programming errors in the systems used to generate the reports.

KPMG also gave an update on the 71 control failures it found, which cover key areas including governance and financial control.

Of these, 17 have been successfully addressed by the town council.

Meanwhile, AHTC also said in its statement that it is working with KPMG to complete a review of past payments by the end of this month.


The town council was to have submitted a report to the Housing Board by the end of last month, but it asked for an extension.

KPMG is reviewing the past payments to determine if any were improper and ought to be recovered.










***** Town councils clash again over Punggol East documents

One party says documents not handed over, the other disputes this
By Chong Zi Liang, The Straits Times, 10 Oct 2016

The Aljunied-Hougang Town Council (AHTC) and Pasir Ris-Punggol Town Council (PRPTC) have clashed again over financial documents related to Punggol East constituency, with both sides unable to agree on the documents that have been exchanged.

This led PRPTC to say yesterday that it has applied to appear before the Court of Appeal in a bid to get an order for the Workers' Party-run AHTC to hand over the documents it needs.

Both sides are in a dispute over documents needed to review the accounts of Punggol East. The dispute appeared to be on its way to resolution in August when they reached an agreement in the apex court for PRPTC to have access to documents that relate strictly to Punggol East.

They also agreed to thrash out the conditions for AHTC to hand over other documents that also contain information about other constituencies under the town council.

But PRPTC said in a statement yesterday that despite numerous requests, AHTC had not provided the required documents.


AHTC disputed this hours later. The town council said in a statement that it had handed over all documents that relate solely to Punggol East.

It added that its staff and its independent accountant KPMG have met PRPTC's accountant, PricewaterhouseCoopers, to answer questions about the documents.

Regarding the other category of documents, PRPTC said AHTC had not handed over any of it, but had also not raised any specific concerns about confidentiality.

AHTC said it was in "the final stages" of preparing these documents, which will be handed over once lawyers from both sides agree on the conditions for their release.



The People's Action Party won back Punggol East from the WP in last year's general election, and the single-seat constituency returned to the fold of the PRPTC.

"PRPTC's need to obtain all the documents is all the more acute in the light of the highly troubling findings and observations in the Auditor-General's report and the Court of Appeal's judgment, both of which identified serious issues and lapses on the part of AHPETC," PRPTC said, referring to AHTC by its former name.

In February last year, the Auditor-General's Office said its special audit unearthed major lapses at the then AHPETC.

Audit firm KPMG - hired by AHTC after it was ordered by the Court of Appeal to appoint a Big Four accounting firm to look into its books - is currently helping to fix governance and financial lapses at the town council.

AHTC also said yesterday that it has left Punggol East "in better financial health" than PRPTC had.

It said that when it first took over Punggol East from PRPTC after the Punggol East by-election in 2013, the constituency had $22.5 million in sinking funds. It added that it had handed over the constituency to PRPTC with $26.8 million in sinking funds and $755,000 in accumulated surplus.


This is based on the audited accounts of Punggol East for the period of April to Nov 30 last year, which AHTC said it submitted to PRPTC on Sept 28.





****** AHTC yet to submit audited statements

Delay due to 'significant resources' being devoted to KPMG reviews, says Pritam Singh
By Rachel Au-Yong, The Sunday Times, 23 Oct 2016

The Aljunied-Hougang Town Council (AHTC) has not submitted its latest audited financial statements, the only town council among 16 yet to do so, said the Ministry of National Development (MND) in a statement yesterday.

AHTC had asked for an extension on Aug 12, citing "outstanding issues to resolve with its auditor", the ministry said.

The town council had appointed accounting firm KPMG to look into its books after the Auditor- General's Office found significant governance lapses in a special audit last year.

This is the fourth time the statements have been late since the Workers' Party won Aljunied GRC in May 2011. The town council submitted its statements for the 2014/2015 financial year on time.

MND said it is awaiting a reply from AHTC on when it planned to submit the documents.

AHTC chairman Pritam Singh then said in a statement that it "would not be helpful" to give a date as KPMG is finalising a draft report to determine if any of AHTC's past payments were improper, which could throw up new queries about the financial documents.

"We do not anticipate this to significantly affect the town council's audit of its financial statements for FY15/16. However, as a matter of prudence and professionalism, our auditor would inevitably have to peruse this report carefully before signing off (on them)," he said.

Mr Singh said AHTC wanted to submit its statements on time, as it had last year, but was delayed due to "significant resources" being devoted to KPMG's reviews of its financial processes and past payments.

It also had to finalise and submit the financial statements for Punggol East, and "continues to attend to queries" from the Pasir Ris-Punggol Town Council's (PRPTC) accountants PricewaterhouseCoopers, he said.




AHTC had also lost some time as its chosen auditor was only approved by MND in May, when such appointments are usually confirmed by March, he added.

The ministry had initially rejected AHTC's proposed auditor but later approved it after an appeal.

In a subsequent statement last night, MND said it initially rejected AHTC's auditor as the firm's proposed partner had failed the Accounting and Corporate Regulatory Authority's Practice Monitoring Programme (PMP), which ensures public accounting firms and accountants comply with standards and procedures.

In its appeal, AHTC assured MND and the Auditor-General's Office that concerns about weaknesses in the town council's accounting system would be addressed by KPMG. MND said AHTC was given the green light in view of this, and because the PMP's findings against the proposed auditor "were not considered severe".

After MND's second statement, Mr Singh responded with a detailed timeline setting out the sequence of how its auditor was eventually appointed, and reiterated AHTC's commitment to submit its audited financial statements to MND "as soon as practicable".

The WP lost Punggol East to the People's Action Party in September last year, and the single-member constituency returned to the fold of PRPTC. Both town councils are in an ongoing dispute over documents needed to review the accounts of Punggol East.

Mr Singh pointed out that AHTC's unaudited financial statements were submitted on time by June 30, but both KPMG and MND had highlighted transactions to look into.

In its second statement, MND said the unaudited statements "contained numerous errors, inconsistencies, and non-compliance with MND guidelines".

The ministry had earlier noted that AHTC's delay affected PRPTC, which received a qualification on its financial statements "solely because it was not able to confirm the accuracy of the amounts due from AHTC" for Punggol East.

AHTC said it had informed PRPTC in August of the delay.

In its own statement last night, PRPTC said it received the audited financial statements of Punggol East in late September and noted that these were qualified.

It added that it will continue to "pursue a proper handover and accounting" of the Punggol East accounts.

MND said the other 14 town councils submitted unqualified reports.











Court order sought for Punggol East documents

Pasir Ris-Punggol Town Council and AHTC go to court for third time over issue
By Tham Yuen-C, Assistant Political Editor, The Straits Times, 25 Oct 2016

The Pasir Ris-Punggol Town Council (PRPTC) yesterday sought a court order for documents it needs from Aljunied Hougang Town Council (AHTC). It is the third time both town councils, run by rival political parties, have gone to court over the issue.

PRPTC's lawyer Davinder Singh told the three-judge Court of Appeal that the town council was still being "pushed around, frustrated and stymied" in its bid to obtain the documents needed to review the accounts of Punggol East.

The PRPTC took over the con- stituency from the Workers' Party- run AHTC after last year's General Election.

But AHTC said, through lawyer Peter Low, that it had made an effort to hand over the documents and had met 10 times with PRPTC and PRPTC's accountant over it.

The latest hearing comes more than two months after the town councils agreed in court for AHTC to hand over all documents that relate strictly to Punggol East.


Both sides had also agreed to work out the conditions for access to "town-wide" documents relating to Punggol East as well as other constituencies under AHTC.



Yesterday, Mr Singh said PRPTC had not received any of the documents in this category and also had not received all the documents relating solely to Punggol East.

He asked for a court order directing AHTC to instruct its own accountant, KPMG, to hand over all the documents in KPMG's possession no later than Oct 29.

But AHTC said the town council had confidentiality concerns and was willing to give PRPTC and the town council's accountant, PwC, access to the "town-wide" docu- ments only on several conditions. One of the conditions is that PRPTC cannot reveal to a third party any information deemed confidential.

Mr Low said this includes the identity of vendors, pricing and quotations. He asked the court to include a protection for this information in its order.

Mr Singh countered that PRPTC should be permitted to use the documents as long as it was done in the exercise of its rights and in the discharge of its duties.

He said that since Punggol East is now under PRPTC, the town council should be entitled to the documents. He added that agreeing to AHTC's conditions would prevent PRPTC from fulfilling its duties to its residents.

For instance, he said, information on vendors and quotations is "fundamental information" which the town council may have to disclose if monies were lost because particular vendors had been preferred under dubious circumstances.

He also said that ordering any protection for confidentiality may have future implications for other town councils during handovers.

But Chief Justice Sundaresh Menon said that while he accepted the principle that "what is decided here may shine a light on future occasions", its implications may not be so wide because of the specific circumstances of the current case.

He said the case is partly the result of the way then-AHPETC, now known as AHTC, had arranged its documents, and the result of one part of AHPETC changing hands.

On the use of the documents, CJ Menon said PRPTC should not be limited in what it does because it was entitled to the documents.

"If matters in the town council had been arranged in a different way, such that Punggol East's documents were discrete and complete, I don't think there would be any argument that Punggol East is entitled to these documents," he said.

The court's concern, he added, was to "make sure (AHTC's) legitimate confidentiality interests are not implicated".

He also said that"any restriction in access had to be rooted in a specific concern of confidentiality."


The judges will make a decision within the week.





******* Court orders AHTC to hand over to PRPTC all financial documents related to Punggol East by 4 Nov 2016

By Tham Yuen-C, Assistant Political Editor, The Straits Times, 29 Oct 2016

The Aljunied Hougang Town Council (AHTC), run by the Workers' Party (WP), has been ordered by the Court of Appeal to hand over all financial documents related to Punggol East constituency to the Pasir Ris-Punggol Town Council (PRPTC) by Nov 4.

Also, its request for PRPTC to sign a blanket non-disclosure agreement was dismissed.

The agreement was aimed at stopping PRPTC from revealing vendor-related information in the documents, among other things.

These decisions follow PRPTC's request for an urgent hearing to the Court of Appeal.

But the apex court imposed limits on PRPTC's use of some of the documents that also contain information about other constituencies still managed by AHTC.

For these "category 2" documents, PRPTC can disclose or use them only to exercise its rights and in the discharge of its duties under the law.

Both town councils have been tussling over the documents since July this year, and had been in court three times over the issue.


The last hearing on Monday was initiated by PRPTC to get from AHTC the documents it is still owed. AHTC, citing confidentiality concerns, had said it would release the remaining "category 2" documents only if PRPTC agreed to a non-disclosure agreement.



In its judgment released yesterday, the three-judge Court of Appeal said it was important to balance the interests of both town councils.

But it added that AHTC had failed to raise any "specific and identifiable" confidentiality concerns it had with particular documents so that action can be taken to mitigate the concerns while giving PRPTC access.

"All that has been done is that the word 'confidential' or its cognate expressions have been added as adjectives to various classes of documents.

"We cannot see how these generic descriptors can suffice to show that AHTC has specific confidentiality concerns in respect of particular documents," said Chief Justice Sundaresh Menon in issuing the judgment.

He also said that PRPTC is entitled to the documents since it had taken over Punggol East from AHTC, formerly known as Aljunied-Hougang- Punggol East Town Council (AHPETC), after the September 2015 General Election. The WP had lost the constituency to the People's Action Party.

Therefore, PRPTC should be allowed to use the documents or disclose its contents as long as it was to further its "legitimate legal interests", said the Chief Justice.

These interests relate to the town council's mandate to administer the common property for the benefit of residents, and manage Punggol East's financial affairs in line with the Town Councils Act, among other things.

At an earlier hearing in August, the court had ordered AHTC to hand over all the "category 1" documents, which relate solely to Punggol East.

This was not done as some of the documents were kept in the same files that also had confidential information about other parts of AHTC.

AHTC vice-chairman Sylvia Lim had said in court on Monday that it would be too onerous to separate the documents physically as the town council was tied up with other audits.

Chief Justice Menon said this was "unsatisfactory". He said AHTC could choose to make copies of all the documents, or allow PRPTC's accountant, PwC, to have access to the originals.


"What it cannot do is cite administrative difficulties in the extraction of the documents as a reason for non-compliance," he added.
















******** Audit of AHTC finds series of improper payments

By Pearl Lee, The Straits Times, 2 Nov 2016

Governance failures at Aljunied-Hougang Town Council (AHTC) put public funds running into millions of dollars at risk of improper use. If these lapses were deliberate, they could amount to criminal conduct, said a report by independent auditor KPMG yesterday.

Payments with a total value of at least $23 million were approved by town council members who had a conflict of interest, KPMG added in the 68-page report submitted to the Housing Board and Workers' Party-run AHTC.

Citing widespread control failures, the report homed in on two companies - FM Solutions and Services (FMSS) and FM Solutions and Integrated Services (FMSI) - that were appointed as the town council's managing agent, as well as providers of essential maintenance services.

The direct owners of these companies also held key management and financial control positions in the town council at the same time.

This meant FMSS shareholders working in the town council effectively approved and made payments to themselves when they paid FMSS, said KPMG.

The report by KPMG, appointed by the town council to look into its books, is part of the ongoing audit of AHTC following lapses flagged by its own auditors as well as by the Auditor-General's Office in a special report in February last year.

KPMG's report listed improper payments - through overpayment or payment without proper certification - amounting to $1.5 million made to FMSS and FMSI. Of these, $600,000 should be recovered, KPMG said. The report also pointed out AHTC's improper payments to third-party vendors, including an extra $2.8 million by engaging the pricier of two consultants on its panel for seven projects, without inviting them to submit a tender.

The scope of the auditor's work was not focused on identifying criminal acts, KPMG said. But if the lapses were found to be committed deliberately, they could amount to criminal conduct, it warned.

AHTC last night said the report did not find any duplicate or fictitious payments. The town council is now studying the report in detail.

















AHTC failed to address conflicts of interest, says independent auditor KPMG

Independent auditor says this led to improper payments; at least $624k should be recovered
By Janice Heng, The Straits Times, 2 Nov 2016

The managing agent of Aljunied- Hougang Town Council (AHTC) was paid more than $600,000 in project management fees for services that should have been covered by its managing agent fees, said independent auditor KPMG in a report yesterday.


These were among several improper payments that the town council made to managing agent FM Solutions and Services (FMSS) and service provider FM Solutions and Integrated Services (FMSI), said KPMG.

Such improper payments were made in a situation where there were "control failures" and conflicts of interest, as the shareholders of the two companies were holding key management positions in the town council.

In all, KPMG identified improper payments amounting to more than $1.5 million to FMSS and FMSI, of which at least $624,621 should be recovered.

But in a written response to KPMG before the report was released, AHTC disagreed that most of the payments were improper.


The payments in question are: Project management fees In 99 invoices totalling $608,911, a 3.5 per cent project management fee was wrongly paid to FMSS for repairs and redecoration works.

The amount should be recovered, said KPMG. It is more appropriate to classify the payments as managing agent services and these would be covered by FMSS's managing agent fees.

KPMG also noted that on 83 occasions, project management fees totalling $611,786 were charged for what were really "a combination of project management services as well as managing agent services".

AHTC disagreed in both instances. Advice from its lawyers said it is contractually allowed to appoint the managing agent to provide project management services for cyclical works.

It noted that when Aljunied GRC was run by the People's Action Party (PAP), the then managing agent CPG had claimed project management fees for cyclical work, including repainting. Unsupported payments KPMG found $194,759 worth of payments to FMSS or FMSI that were not supported by certifications of services received, or by contracts. AHTC disagreed, providing evidence like a complaint log to show services were delivered.

But KPMG said this was not evidence that the work was satisfactorily delivered.

Payments in breach of financial authority KPMG found that $80,990 in cheque and bank transfers were made to FMSS even though the required co-signature of the AHTC chairman or vice-chairman was not obtained.

AHTC said this was a "technicality issue".




Overpayment to FMSS

KPMG found that AHTC had overpaid FMSS by $8,990 for overtime claims and Central Provident Fund contributions, and by $3,720 for electrical parts.

Besides the specific improper payments found, KPMG took issue with the broader context of AHTC's "pervasive" control failures in areas such as governance, financial reporting and procurement.

These include a failure to address serious conflicts of interest and a lack of meaningful oversight by town councillors, it added.

There might be other improper payments which went undetected, it noted: "The same pervasive control failures that allowed improper payments would tend to conceal instances of improper payment."

KPMG identified six FMSS shareholders who held key management posts in AHTC, such as secretary, general manager, and finance manager - creating a conflict of interest.

There were 748 transactions, totalling more than $23 million, where these persons "effectively certified or approved payments to themselves", said KPMG.

KPMG further described the tender processes by which FMSS and FMSI were appointed as "inadequate and unsatisfactory".

The first managing agent contract worth $5.4 million, from July 15, 2011, to July 14, 2012, was awarded to FMSS without a tender, and the circumstances did not justify this, said KPMG.

The second contract worth $23.2 million was awarded by tender, but AHTC "failed to secure competitive rates or sufficiently address FMSS's serious conflicts of interest".

KPMG estimated that AHTC paid $1.26 million more than if CPG had been retained.

AHTC's "flawed governance... exposed public funds to the risk of improper use and application", concluded KPMG.




FLAWS IN GOVERNANCE


The failed control environment ought not to have been permitted by the town councillors, pointing to a flawed system of governance overall. On the basis that such individuals hold fiduciary duties and responsibilities in respect of public funds entrusted to the town council, the town councillors bear a personal and collective responsibility for improper payments enabled or permitted by such a flawed system.

- KPMG REPORT
















No significant lack of oversight: AHTC

By Janice Heng, The Straits Times, 2 Nov 2016

Aljunied-Hougang Town Council (AHTC) acknowledged lapses in finance management, but denied there was a "significant lack of oversight" over its managing agent.

Responding to an earlier version of independent auditor KPMG's report, released yesterday, AHTC disagreed that its town councillors had "surrendered" responsibility to managing agent FM Solutions and Services (FMSS).


KPMG had flagged conflicts of interest in how some FMSS shareholders also held management roles in AHTC with significant authority over financial affairs. There was "minimal oversight by the town councillors", added KPMG.

In a process known as Maxwellisation, AHTC had been given a chance to respond to a draft of the report to confirm its factual accuracy - and rebut any factual findings if it disagreed. This was to ensure that it was given the opportunity to respond to any criticism. AHTC's response was included as an annex to KPMG's report yesterday.

In its reply, AHTC said double-hatting was "not unusual".

It cited the secretary and general manager of former People's Action Party-run Aljunied Town Council, who was also managing director of its managing agent, CPG Facilities Management. He had played an active role in approving town council payments to CPG.

But KPMG countered that FMSS' situation was different from that of the CPG employee.

"For other managing agents, those signing off payments for the town councils are not, as shareholders, ultimate beneficiaries of a fixed proportion of every payment to the managing agent that they approve," said KPMG.

As for the conflict of interest that arises when such persons have authority in financial transactions, AHTC said having co-signatories - the town council chairman or vice-chairman - is an effective control measure.

KPMG said co-signatories could potentially be influenced by the persons with a conflict of interest.

To this, AHTC replied: "To suggest that a co-signatory can be influenced easily casts aspersions on his/her integrity."

AHTC also disagreed that there was inadequate oversight over day-to-day management, citing meeting minutes that indicated checks and queries on FMSS' work.

"The town councillors were vigilant and did not merely accept FMSS' proposals and preferences," AHTC said. It cited how it instructed FMSS to prioritise the Auditor-General's Office audit despite FMSS' reservations about the impact on its functions.

AHTC further disagreed with KPMG's assessment of its managing agent's performance as "highly lacking". Though there were lapses in finance management, FMSS was performing satisfactorily in estate management, said AHTC.

Responding to the report yesterday, AHTC noted that KPMG had deployed at least 72 personnel at its offices over eight months to thoroughly examine millions of accounting entries and documents. It noted that KPMG had found no duplicate or fictitious payments.

AHTC added that it was still studying the report in detail.
















AHTC could've avoided $2.8m in payments: Report

Engaging pricier consultant without reasonable justification could be breach of rules, says auditor
By Pearl Lee, The Straits Times, 2 Nov 2016

Aljunied-Hougang Town Council (AHTC) could have avoided paying $2.8 million if it had worked with lower-priced consultants, instead of engaging the pricier option without any reasonable justification, auditor KPMG said in its latest report.

Such actions could be a breach of the Town Council Financial Rules, KPMG added.

Apart from making improper payments to two companies whose shareholders worked in the town council, AHTC, formerly Aljunied- Hougang-Punggol East Town Council, also made improper payments to third-party consultants, suppliers and contractors, it said.

KPMG worked out that these amounted to about $5.4 million in all, with $2.4 million in expenditures incurred without authority, in a breach of the rules and its own internal controls.

"Such improper payments stem from a lack of discipline in the town council's financial operations and record-keeping, reflecting the failed control environment," KPMG said.

It added that the town council should recover what it can of its losses from the recipients of these improper payments.

On the higher-priced consultant, KPMG said the town council had appointed two consultants, A and B, through a tender process and placed them on a panel to work on certain projects at a fixed rate.

From time to time, both were engaged to provide services.

KPMG looked at 10 of the projects that Consultant A did for the town council, and found that it charged a higher fee than Consultant B for seven of the projects.

Yet "reasons for appointing Consultant A and not Consultant B for these projects were not documented at the relevant time", it added.

KPMG noted the town council had informed it that Consultant B was working on two Neighbourhood Renewal Programme projects, and progress was deemed to be "slow-moving". But apart from the town council's meeting minutes in February 2013 stating that Consultant B was slightly behind schedule for a project at the pre-tender stage, there were no further discussions of its poor performance in later meetings, said KPMG.

AHTC also did not have documentation to support the view that Consultant B was less favourable. And there was "no meaningful panel" to choose the consultants from, as it had only two options, KPMG said.

But AHTC disagreed with the auditor's view that this constituted an improper payment, adding that it has sought legal advice. It said both consultants were appointed to its panel following an open tender.

The Town Council Financial Rules should not apply to such a situation, AHTC added, as it was not going out to buy new services, but was instructing work under contracts that had been entered into.

















Some lapses may amount to criminal conduct: KPMG

By Lim Yan Liang, The Straits Times, 2 Nov 2016

The town councillors of Aljunied- Hougang Town Council (AHTC) may be liable for serious offences under the Penal Code, such as criminal breach of trust and abetment, independent auditor KPMG said in a report released yesterday.

The reason is that, as custodians of public funds entrusted to the town council, they have a fiduciary duty that entails "personal and collective responsibility''.

So, KPMG said, if the improper payments had been made deliberately, "they could amount to criminal conduct".

The town councillors named in the report include Workers' Party MPs Low Thia Khiang, Sylvia Lim, Pritam Singh and Png Eng Huat.

All four sit on the WP's executive council: Mr Low is secretary-general; Ms Lim, the chairman; Mr Singh, the assistant secretary-general; and Mr Png, the organising secretary.


The report said payments totalling at least $23 million were approved by town council members with a conflict of interest. This raised questions about whether the payments were fully justified.

The auditors also identified improper payments totalling about $1.5 million, of which at least $624,000 ought to be recovered.

The report then went on to explain the duties and responsibilities of town councillors under the law.

Under the Town Council Financial Rules, an officer who makes a payment without proper authority or who incorrectly certifies a voucher shall be responsible for the amount. But such personal liability applies only when the officer did not act in good faith.

Town councillors, like public officers, have a fiduciary duty to two bodies: the Government and the public. The reason is that they are entrusted with the control and management of public funds.

Under the Town Council Act, members of a town council, like directors of a company, must declare their interests in transactions in which they are directly or indirectly interested. "This duty, to avoid a conflict of interest, goes to the heart of a fiduciary's duty to his principal," said KPMG.

It noted, among other lapses, the way AHTC governed matters related to its then managing agent FM Solutions and Services (FMSS) was seriously flawed. "An unacceptably high degree of financial responsibility was relinquished by the town councillors to the conflicted persons, in a control environment in which meaningful oversight by the town councillors was absent," the report said.

AHTC also had a "failed control environment", which showed in the lack of discipline in its financial operations and record-keeping.

"This exposed public funds to risks of erroneous payments, overpayments, payments for which services had not been sufficiently verified and payments without proper authority, as well as the potential for actual misappropriation or civil or criminal breach of trust," it said.

A public servant or agent guilty of criminal breach of trust can be jailed for life, or jailed up to 20 years and fined. Abetment of the offence carries the same punishment.

The report concluded that its findings "may give rise to personal claims against the town councillors, or disclose the finding of criminality". But KPMG stressed its findings are not meant to "conclusively" decide if the town councillors had broken the law.

"This report does not seek to make a finding on whether these circumstances, individually or collectively, demonstrate a deliberate course of action taken by the town councillors to benefit FMSS and (service provider FM Solutions and Integrated Services) FMSI," it said.

But should such conduct have taken place intentionally, it would potentially amount to an offence under the Penal Code, it said.









WP chief Low Thia Khiang: KPMG report on AHTC did not say anything new or conclusive

By Lim Yan Liang, The Straits Times, 3 Nov 2016

KPMG's latest report on Aljunied- Hougang Town Council's (AHTC) accounts do not draw any new conclusions beyond what the Auditor- General's Office (AGO) found in February last year, Workers' Party chief Low Thia Khiang said yesterday.

When asked about the independent auditor's observation that governance lapses could amount to criminal conduct, if found to be deliberate, he added that the report was "inconclusive" on this issue.

"KPMG has camped at the town council for eight months... deployed at least 72 staff, who ploughed through millions of accounting entries... examining documents," he told reporters at his Meet-the-People Session in Aljunied GRC.

"The report has not said anything about conflict of interest between the MPs, town councillors, staff and managing agent we appointed, or any contractors who are working for the town council," he said.


"The report also found no fictitious, fraudulent nor duplicate payments. So that is what is important for the public to know," he added.

"They have talked about improper payments, but it's important to look into the definition of improper - what do you mean by improper?"



The latest KPMG report, released on Tuesday, said payments amounting to at least $23 million were approved by town council members with a conflict of interest.

The direct owners of two companies - FM Solutions and Services (FMSS) and FM Solutions and Integrated Services (FMSI) - AHTC had appointed as managing agent and providers of essential maintenance services, held key management and financial control positions in the town council at the same time.

Two key individuals were Mr Danny Loh, the town council's secretary who died while on holiday in Japan last June, and wife How Weng Fan.

The couple formed FMSS, where both were majority owners, shortly after WP won Aljunied GRC in the 2011 elections. Mr Loh was also the owner of FMSI, a contractor the town council had hired to provide lift maintenance and rescue services.

The AGO, in its report, singled out governance lapses and conflicts of interest involving FMSS - but WP said it made sure transactions with FMSS were given greater scrutiny.

KPMG's report said improper payments of $1.5 million had been made to FMSS and FMSI, of which $600,000 should be recovered.

KPMG defined improper payments as those made in breach of procedure, the Town Council Act, Town Council Financial Rules or other duties imposed on councils by the law. It also regarded overpayment and payment for work or services not done satisfactorily, or not sufficiently delivered, as improper.

Asked about the report's finding that the lapses could amount to criminal conduct on the part of town councillors if done deliberately, Mr Low said the report "seems to be inconclusive in that sense".

KPMG had said AHTC's "failed control environment" exposed public funds to, among others, "the potential for actual misappropriation or civil or criminal breach of trust".

It added its findings "may give rise to personal claims against the town councillors, or disclose the finding of criminality", but said these findings are not meant to "conclusively" decide if the town councillors had broken the law.

But Mr Low said: "The report seems to have a lot of answering (to do), despite the fact that they have deployed so (much) manpower, public money is used, and eight months spent, and the town council also spent a lot of manpower in response to their queries.

"The town council has studied the report. To me, the report is simply more detailed than the AGO's report, in terms of the framework and the kind of lapses that they found," he added. "But in more detail, because they've spent a lot of time going through the records."










Further probe into AHTC's books likely: Observers

Unusual for auditor to raise possibility of criminal conduct in report, they say
By Charissa Yong, The Straits Times, 3 Nov 2016

With the independent accountant hired by the Aljunied-Hougang Town Council (AHTC) finding that millions in improper payments had been made by the town council, the ball is now in the court of the authorities to investigate if there was criminal wrongdoing, said corporate governance and legal experts yesterday.

They added that accounting firm KPMG raising the possibility of criminal conduct in its report underscores the seriousness of the lapses at the town council, as it is unusual for accountants to do so.

Speaking to The Straits Times, Institute of Singapore Chartered Accountants president Gerard Ee said: "Things cannot be left hanging at this stage. By doing that, you're telling the public, 'There're no working controls, something serious could have happened but whether it did is anyone's guess.'


"That cannot be. Residents will want to know for sure."

KPMG had found after a review of AHTC's past payments that at least $23 million of payments to the town council's managing agent, FM Solutions and Services (FMSS), had been approved by the owners and shareholders of FMSS in their capacity as key officers of the town council.

Of this amount, about $1.5 million have been determined as improper payments including overpayments, payments for work or services that were not performed, or payments in breach of the law or the town council's policies.

The town council also made another $5.4 million of improper payments through the use of a higher- priced consultant panel and overpaying a town councillor, among other things. KPMG had said in its report that, if the payments were made intentionally, it could amount to criminal wrongdoing.

Yesterday, experts zeroed in on how unusual and serious it was for the auditor to raise the possibility of criminal conduct.

Singapore Management University accounting associate professor Themin Suwardy said: "It's a pretty strong word. Errors happen, companies pay wrong amounts, make mistakes with decimal points. But the moment you raise the word, you have to look at whether there was intent."

Nanyang Technological University accounting associate professor El'fred Boo, noting that "accountants normally operate conservatively and do not normally say more than they need to", said that the lapses uncovered so far "do provide opportunities for criminal breach of trust".

A natural next step would be to commission a detailed investigation into the town council's accounts to reassure residents that nothing criminal took place, said Mr Ee, who chairs the Charity Council and is familiar with governance and regulation issues in the charity sector.

This could take the form of the Ministry of National Development and the Housing Board launching formal investigations under the Town Councils Act or the Penal Code, said Singapore Management University law don Eugene Tan.

Similarly, law enforcement agencies like the police or the Commercial Affairs Department will have to study the report and decide if further action is necessary, he said.

Among the things that would have to be determined is whether the improper payments were made deliberately. If so, KPMG had said in its report, it could amount to criminal breach of trust or a breach in fiduciary duty towards residents.

If investigations are launched, the town council and FMSS may be compelled to grant access to their books and records and may have to be interviewed, said Prof Boo.

Associate Professor Tan said AHTC will also have to think about whether it will mount an investigation, perhaps by independent third parties, into the various findings.


AHTC said on Tuesday that it is is studying the report in detail.










AHTC told to take steps to recover improper payments

By Charissa Yong, The Straits Times, 5 Nov 2016

The authorities have asked Aljunied-Hougang Town Council (AHTC), run by the Workers' Party, to take steps to recover improper payments that it made.

The Housing Board, in a letter to AHTC yesterday, also asked that it confirms within seven days that it will appoint a suitable third party to take steps on its behalf, "to recover the monies which have been lost".

These steps include taking legal action where necessary, the HDB said.

The Ministry of National Development (MND), parent ministry of the HDB, was similarly stern when it said: "To protect residents' interests, steps must be taken to recover the monies which have been lost, and to ensure that those who acted wrongfully are held to account."

Accounting firm KPMG, hired by AHTC to review its accounts, said that at least $23 million of payments were approved by town council members who had a conflict of interest. This included $1.5 million which AHTC paid to its then managing agent FM Solutions and Services (FMSS) and service provider FM Solutions and Integrated Services.


KPMG said that at least $624,621 paid to FMSS should be recovered.

It also said that if the payments were made intentionally, it could amount to criminal wrongdoing.

The MND said that given the concerns KPMG highlighted, the Government is considering what other steps are necessary.

These relate to "the way some of the town councillors have behaved, in dealing with public funds".

AHTC disagrees that most of the payments were improper.












AHTC faces uphill task to recover payments: Observers

HDB calls for immediate action to do so, including starting legal action if needed
By Charissa Yong, The Straits Times, 5 Nov 2016

The Aljunied-Hougang Town Council (AHTC) has seven days to respond to the Housing Board on whether it will appoint a third party to recover improper past payments it has made.

It was given the deadline by HDB in a letter yesterday.

Observers interviewed said the town council faces an uphill task in getting its money back, adding that a more detailed forensic audit may be necessary.

They were commenting on the options available to the Government, following a statement by the Ministry of National Development (MND) and a letter sent by the HDB to AHTC yesterday.

In it, the HDB said: "It is clear that town council monies have been wrongfully paid, in substantial amounts that run into millions... It is imperative that immediate steps be taken to recover the improper payments, including, where necessary, the commencement of legal proceedings."


It added: "As the improper payments may give rise to personal claims against existing town councillors, a suitable third party should have charge and conduct of these proceedings, on the town council's behalf."

Singapore Management University law don Eugene Tan said the town council would have to determine the extent of questionable transactions in order to recover any money paid erroneously.

But this would be difficult, he said, given its lack of discipline in record-keeping and financial operations highlighted in independent accountant KPMG's report.

KPMG, citing AHTC's spotty track record in this area, had said it could not conclude if the payments identified as improper, totalling about $6.9 million, are "exhaustive and on the complete quantum of improper payments that ought to be recovered".

Institute of Singapore Chartered Accountants president Gerard Ee suggested that a possible next step would be to conduct a detailed forensic audit to analyse all the transactions to see if any were "seriously questionable".

But even if this was established, there is no guarantee that the parties paid erroneously would cooperate, added Mr Ee.

The KPMG report established that some of the improper payments were made to AHTC's then managing agent FM Solutions and Services (FMSS).

AHTC and FMSS are currently in arbitration over a financial dispute emerging from the lapses at the town council.

Mr Ee said that if FMSS refuses to pay back any sum deemed to be improper or excessive, AHTC may have to take FMSS to court and "building a case for such claims is not easy".

Prof Tan said that even if monies cannot be legally recovered, the town councillors could be taken to task for potential breach of statutory and fiduciary duties.

In its letter to the town council, the HDB had also said: "The town councillors were under a duty not to improperly use or apply the public funds entrusted to them. They had a personal and collective responsibility for improper payments enabled or permitted by such a system."

The HDB added that AHTC could "potentially look to the town councillors for recovery of losses or costs-savings arising from any breaches of fiduciary duties".

The KPMG report had raised the possibility of criminal conduct if the improper payments were made intentionally, like criminal breach of trust under the Penal Code. Legal and town council governance experts, however, said the task of establishing such intent could be onerous.

"They might have been very careless in not observing certain rules, but were they being intentional?" said real estate don Yu Shi-Ming of the National University of Singapore.

Prof Tan also cautioned that it was crucial to "not get ahead of ourselves by presuming the town councillors to be guilty".

"Ultimately, it could boil down to a question of competence," he said.

The observers also pointed out that the current Town Councils Act does not give the Ministry of National Development the powers to obtain information on finances or relevant documents from town councils, let alone impose penalties on offenders.

MND has proposed changes to the Act and had asked for public feedback last month.

Prof Tan said that since public monies are involved, there will be the expectation for the Government to take a more "interventionist role".

He added: "The MND statement suggests that it's going to be a long road ahead for all concerned, especially for AHTC."











How KPMG report on AHTC came about

By Janice Heng, The Straits Times, 5 Nov 2016

The statement the Ministry of National Development issued yesterday was prompted by findings of improper payments by the Aljunied-Hougang Town Council.

Independent auditor KPMG, appointed by AHTC following a court order, found that the improper payments the town council made between 2011 and last year amounted to at least $6.9 million.

KPMG had been tasked to determine if any past payments made by AHTC were improper and should be recovered, as part of a review into the town council's books following lapses uncovered by the Auditor-General's Office in a special audit.These events came after the AHTC's own auditors declined to give an opinion about its financial performance and accounts four years in a row, indicating insufficient information.


In a report, released by AHTC on Tuesday, KPMG highlighted "pervasive control failures" in governance at the town council that had exposed $23 million of public funds to risks of improper use.

The sum was paid to AHTC's managing agent FM Solutions and Services (FMSS), and had been approved by six of the town council's key officers who were also shareholders of FMSS. KPMG found 748 transactions in which the six people had "effectively certified or approved payments to themselves".


Of the $23 million, more than $1.5 million has been determined by KPMG to be improper payments, including overpayments, payments for work or services without proof that they were performed, or payments in breach of the law or the town council's policies.

Separately, the accountant found AHTC had made another $5.4 million of improper payments through awarding tenders to higher-priced contractors and overpaying a town councillor, among other things.

AHTC, responding to KPMG, had disagreed that most of the payments were improper.

KPMG also said it was "outside our mandate to conclude whether any offence has or has not been committed", but added it had flagged instances where facts and circumstances observed could "potentially give rise to an offence"."We are advised that the issues identified... may give rise to personal claims against the town councillors or disclose the commission of criminality," it said.

KPMG also said the "lack of discipline in financial operations and record-keeping" at AHTC meant it could not "conclude whether the improper payments identified... are exhaustive".










AHTC agrees to recover improper payments

By Pearl Lee, The Sunday Times, 13 Nov 2016

The Workers' Party-run town council has agreed to appoint a third party to recover improper payments it made between 2011 to 2015.

The Sunday Times understands that the Aljunied-Hougang Town Council (AHTC) had, on Friday, replied to the Housing Board's letter asking the town council to appoint a suitable third party "to recover the monies which have been lost".

The HDB letter was sent to AHTC on Nov 4 after accounting firm KPMG determined that payments totalling $6.9 million were overpayments, payments for work or services without proof that they were performed, or payments in breach of the law or the town council's policies.

This included $1.5 million which AHTC paid to its then managing agent FM Solutions and Services (FMSS) and service provider FM Solutions and Integrated Services. The payments were approved by six of AHTC's key officers who were also shareholders of FMSS.

HDB and the Ministry of National Development (MND) had asked AHTC to take steps to recover the money, including taking legal action where necessary.

KPMG, hired by AHTC to review its accounts, had also said that if the payments were made intentionally, it could amount to criminal wrongdoing. The MND had said that given these concerns raised by KPMG, the Government is considering what other steps are necessary.





AHTC acts on three audit issues

It will take 3 to 6 months to judge efficacy of WP-run town council's measures: KPMG
By Chong Zi Liang, The Straits Times, 17 Dec 2016

The Aljunied-Hougang Town Council (AHTC) has put in place measures to address three outstanding financial and governance problems flagged in past audits, but its independent accountant KPMG still has to test the efficacy of these plans.

The three areas have to do with incorrect use of sinking funds; lack of disclosures, due diligence and assessment of potential conflicts of interest prior to awarding contracts to related parties; and untimely recording of lift repairs and upgrading expenses, and absence of guidelines for verification of works and issuance of work orders.

It will take three to six months to determine whether measures taken by AHTC to resolve these issues are effective, KPMG said in its ninth monthly report issued on Thursday.

Since the first report issued in April, AHTC has resolved three out of 17 audit points flagged in past audits with the help of KPMG, which it appointed to look into its books after the Auditor-General's Office found significant governance lapses in a special audit.

Another eight have measures in place that still have to be tested, while the remaining six have to be further reviewed by KPMG.




KPMG also said AHTC had transferred $3,785,956.76 to its sinking fund account for the third quarter of this year. However, it did so three days after the transfer deadline, on Nov 3.

AHTC said the transfer was late because a deputy finance manager had delayed getting authorised signatures. The person will leave the town council at the end of this month.

As for the 71 control failures at the Workers' Party-run town council that were identified by KPMG, 23 have been fully addressed, the same as the last month.

In a statement issued on Thursday night, AHTC chairman Pritam Singh said the town council will deploy the first phase of its new town council management system next month.

The accounting system costs $750,000, and the contract for it was awarded in July to Anacle System, one of two companies that bid for the tender.






AHTC has resolved 5 issues flagged in past audits, says KPMG

By Pearl Lee, The Straits Times, 16 Jan 2017

The Aljunied-Hougang Town Council (AHTC) has made progress in resolving governance issues to do with related-party transactions, its independent accountant KPMG said.

In its latest monthly progress report on the town council run by the Workers' Party (WP), KPMG said AHTC has resolved five governance and financial problems flagged in past audits.

They relate to issues such as the incomplete disclosure of transactions with related parties in financial statements and weaknesses in the approval of payments to related parties, among other things, KPMG said in its 10th monthly report that the WP made available online yesterday.

The owners of AHTC's former managing agent FM Solutions and Services and service provider FM Solutions and Integrated Services held key positions in the town council, and had approved and made payments to their own companies.



With the resolution of the five issues, the town council has addressed eight of 17 audit points that it is required to resolve.

The town council had appointed KPMG to look into its books after the Auditor-General's Office found significant governance lapses in a special audit.

KPMG said the town council has also deployed a new accounting platform that is used to record and account for transactions.

AHTC had implemented phase one of the accounting system on Jan 3.





Independent panel to look into AHTC's payments

Panel will study if improper payments can be recovered, take follow-up actions
By Chong Zi Liang, The Straits Times, 18 Feb 2017

An independent panel has been appointed to look into improper payments made by the Aljunied- Hougang Town Council (AHTC), following an extensive report by audit firm KPMG last year that found $6.9 million worth of such payments.

The panel, which will comprise senior counsel Philip Jeyaretnam, senior counsel N. Sreenivasan, and KPMG managing partner Ong Pang Thye, will consider if the payments can be recovered and take other follow-up actions.

The Housing Board (HDB) and AHTC said in separate statements yesterday that they have agreed to the appointment of the panel, which Mr Jeyaretnam will chair.

HDB had asked AHTC to appoint a third party to recover the improper payments made from town council funds. These include overpayments and payments without proper certification of work being done, among other things.

KPMG had traced some of the improper payments made to AHTC's then managing agent FM Solutions and Services.

The panel will have the power to make demands and come to settlements on behalf of AHTC, among other things. It can also request the cooperation of AHTC members to provide necessary documents, and update AHTC and HDB on the progress of its work.



HDB said yesterday that the KPMG report on improper payments had flagged regulatory breaches by AHTC and also pointed out that the town council's "failed control environment exposed public funds to the potential for misappropriation and civil or criminal breach of trust".

It added that KPMG had said AHTC may potentially recover some of the losses from the town councillors if they were found to have breached their fiduciary duties. "The independent panel will consider what recovery actions should be taken, in respect of the findings in the report," HDB said.

The Workers' Party-run town council said in its statement that "the panel will act independently, without remuneration, and without taking directions from AHTC, HDB or any other party".

AHTC also said that while it had "a different perspective" on key aspects of the KPMG report, it "believes that it is in the interests of AHTC and its residents to appoint an independent panel to review the findings and take such action as deemed appropriate to safeguard AHTC's interests".

The report on improper payments by KPMG is part of the ongoing audit of AHTC following lapses flagged by its own auditors as well as the Auditor-General's Office. AHTC had appointed KPMG in March last year to look into its books following an order from the Court of Appeal.





AHTC review of past GST returns almost complete: KPMG

By Chong Zi Liang, The Straits Times, 17 Mar 2017

The Aljunied-Hougang Town Council (AHTC) has nearly completed its review of past goods and services tax (GST) returns, its independent auditor KPMG said on Wednesday.

In its latest monthly progress report on the town council run by the Workers' Party (WP), KPMG also said the process of clearing AHTC's temporary accounts is about 70 per cent complete.

However, no outstanding financial and governance problems flagged in past audits were resolved last month.

The WP issued a statement about the monthly report and and made it public yesterday.

Since the first report issued in April last year, AHTC has resolved eight out of 17 audit points flagged in past audits with the help of KPMG, which it appointed to look into its books after the Auditor-General's Office found significant governance lapses in a special audit.

Another three audit points have measures in place that still have to be tested, while the remaining six have to be further reviewed by KPMG.

KPMG also provided updates on several other matters.

AHTC is still in the process of moving its records to a new $750,000 accounting system that was adopted in January, it noted.

The audit firm said it has yet to review a business continuity management policy and a business continuity plan approved by AHTC's chairman and vice-chairman on March 15.

A tender for a two-year internal audit services contract closed early this month, but the town council did not receive any bids.

AHTC is evaluating its next steps, KPMG said.





* Fifth year in a row that AHTC's statements were qualified by its external auditor


Auditor found AHTC broke town council rules: MND
Ministry lists issues with town council's financial statements for 2015 financial year
By Joanna Seow, The Straits Times, 13 Apr 2017

Aljunied-Hougang Town Council's (AHTC) auditor found it did not comply with the Town Councils Act and Town Councils Financial Rules on several counts in the 2015 financial year, the Ministry of National Development (MND) said yesterday.

Three issues were flagged by AHTC's external auditor of its annual financial statements ending March 2016, it noted.

One was its failure to transfer funds into the sinking fund bank account in a timely manner, as required by Rule 4(2B)(a) of the Town Councils Financial Rules, the ministry said, adding that similar observations had been made by AHTC's auditor for the three preceding financial years.

AHTC also did not ensure that money from the sinking fund was used only for the purposes stated in the rules, the ministry said.

Another issue was the town council's failure to include a debarment statement in its call for quotations and tenders. Such a statement would state that unless there are special reasons, contracts will not be awarded to contractors the Government has suspended from taking on all or that particular type of contract.



Responding to the ministry's statement, AHTC chairman Pritam Singh said last night that the town council has made all outstanding sinking fund transfers "upon the receipt of the withheld government grants in April 2016".

The $4,161.87 which had been incorrectly used from the sinking fund was returned last Dec 14.

"An estate staff had wrongly classified the repair of a resident's leaking ceiling as facade repair works, the latter of which is properly attributable to the sinking fund," he said.

The omission of the debarment statement was an isolated case involving one Invitation To Quote exercise, Mr Singh said. It was given in all subsequent exercises, he added, noting that the clarifications were made known to the ministry through the auditor's detailed observations.

The ministry, in its statement, also said it presented to Parliament AHTC's audited financial statements, as required by law.

The Worker's Party-run AHTC submitted its statements on Feb 24, nearly six months after the Aug 31, 2016 deadline for all town councils. There were several reporting discrepancies, requiring two rounds of amendments before the statements were submitted, MND said.

This is the fifth year in a row that AHTC's statements were qualified by its external auditor, it added.

The auditor issued disclaimers this year in the areas of the town council's opening balances, conservancy and service fees received in advance, payables and accrued expenses, as well as staff costs.

This means the auditor was unable to obtain the necessary evidence to certify the statements as either accurate or inaccurate.










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

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

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

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

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

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

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



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

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

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

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

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

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

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

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

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

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

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

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

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



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

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

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

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

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















Investigations into AHTC likely, say observers
Another auditor's report on town council raises possibility of criminal conduct
By Chong Zi Liang, The Straits Times, 5 May 2017

Corporate governance experts said it is likely the authorities will hold an investigation into the Workers' Party (WP) town council, following an auditor's report that said the town council had failed to ensure proper financial management.

The report, released by accounting firm PwC on Tuesday, found that circumstances surrounding the appointment of the town council's managing agent "may give rise to potential criminal offences under the Penal Code, including criminal breach of trust".

This comes seven months after the Aljunied-Hougang Town Council's (AHTC) independent auditor KPMG made a similar finding of possible criminal wrongdoing, after a review of the town council's past payments.

KPMG had said in its October report that AHTC town councillors may be liable for serious offences under the Penal Code, such as criminal breach of trust and abetment.

The reason is that as custodians of public funds entrusted to the town council, they have a fiduciary duty that entails "personal and collective responsibility''. If the improper payments had been made deliberately, "they could amount to criminal conduct", KPMG added.

Both auditing firms did not look into criminal liability in their reports, but said the findings may warrant further investigation by the authorities into potential offences at AHTC, which was previously known as Aljunied-Hougang-Punggol East Town Council (AHPETC).



Experts told The Straits Times the strong language used is highly unusual for accountants and auditors, and highlighted the gravity of the situation in the town council.

"Auditors don't use these words lightly. There must have been compelling evidence for them to bring up the issue of potential criminal breach of trust," said Singapore Management University accounting associate professor Themin Suwardy.

This was also the view of Nanyang Technological University accounting associate professor El'fred Boo, who said: "Accountants and auditors practise conservatism to a T. For PwC to make such a statement, the implications could be pretty grave for the town council."

PwC was brought in by the Pasir Ris-Punggol Town Council (PRPTC) to review past payments made by then AHPETC in relation to Punggol East, which the WP held from 2013 to 2015.

The People's Action Party (PAP) won Punggol East in the 2015 General Election, and the single-seat constituency has since come under the management of PRPTC.

PwC's 94-page report called into question the propriety of all payments made under AHTC's former managing agent FM Solutions and Services (FMSS). These payments add up to about $23 million.

Meanwhile, KPMG was appointed by AHTC to look into its books following a court order.

PwC said the circumstances around the selection of FMSS as managing agent show it was done by design, with FMSS assured of the job two months before it was formally appointed. FMSS had started charging AHTC in June 2011, before existing managing agent CPG was discharged in August.

PwC also found that Punggol East could have saved another $500,000 had proper procedure been followed by the town council.

Prof Suwardy said improper financial practices alone do not amount to criminal breach of trust.

"The key word is 'intentional'," he said referring to how the actions resulting in the loss must have been taken intentionally. "You can be very dumb, and did something badly, but that does not equate to criminal breach of trust."

He added: "Given the significant findings... I cannot see why a criminal investigation would not take place."

Agreeing, Prof Boo said: "The next logical move would be a thorough investigation to establish criminal breach of trust and getting to the bottom of how much was actually lost that needs to be recovered from the relevant parties."

The Ministry of National Development said on Tuesday it will forward the PwC report to an independent panel appointed by AHTC in February to look into getting back the improper payments made.

Singapore Management University law don Eugene Tan said it will be a "long-drawn process which will involve a fair bit of resources".

"The ball is in the PRPTC's court now. It's clear they will pursue the matter vigorously to recover what rightfully belongs to the Punggol East residents," he added.

When asked, Punggol East MP Charles Chong said PRPTC is studying the report and seeking legal advice on the matter, but has not made a police report.

The WP said it was studying the report and did not respond to queries for further comment.





 






 






** AHTC taking Workers' Party leaders to court to account for $33 million it paid

The MPs deny town council's allegations and say they acted in best interests of residents
By Danson Cheong and Charissa Yong, The Straits Times, 27 Jul 2017

Aljunied-Hougang Town Council (AHTC) is taking some of its most senior councillors - including Workers' Party (WP) chief Low Thia Khiang and party chairman Sylvia Lim - to court to account for more than $33 million in payments made to its former managing agent and service provider.

AHTC alleges that the payments it made to managing agent FM Solutions and Services (FMSS) and service provider FM Solutions and Integrated Services, from July 15, 2011, to July 14, 2015, are null and void as the town councillors had acted in breach of their fiduciary duties - a charge they strongly deny.

AHTC initiated the legal action under the direction of an independent panel it appointed in February to help recover improper payments, as first reported by The Straits Times yesterday.

It is demanding that Mr Low, Ms Lim, FMSS owner How Weng Fan and FMSS give an account of the $33,717,535 in payments.

AHTC wants "equitable compensation" for any sum that has been wrongfully paid out.

At the very least, it wants Mr Low and Ms Lim to be liable for a sum of $1,261,773 - which it claims was the difference in fees between the "inflated rates" charged by FMSS and the rates it would have paid under CPG Facilities Management, the previous managing agent.



AHTC claimed that Mr Low and Ms Lim had acted in bad faith and misled other town councillors in order to justify installing FMSS as the managing agent without a tender. They then "set up and/or allowed a system" that made it possible for FMSS and its officers to "benefit themselves".

"No town councillor could have reasonably approved the system, without being in breach of his or her duties," said AHTC.

The town council, represented by lawyer David Chan from Shook Lin & Bok, set out its demands in a statement of claim filed in the High Court.

The independent panel that directed the action is chaired by Senior Counsel Philip Jeyaretnam and includes Senior Counsel N. Sreenivasan and KPMG managing partner Ong Pang Thye.

The WP MPs have denied the allegations.

Speaking to the media last night, Mr Low thrice said that his conscience is clear.

"We acted in good faith and in the best interests of residents - the residents can see for themselves," said Mr Low, who was flanked by Ms Lim and town council chairman Pritam Singh, also a defendant in the suit.

Ms Lim and Mr Singh said they welcomed the opportunity to tell their side of the story in court.

Mr Singh said: "It is my firm conviction that we acted in good faith. We are not in politics for the purposes of enriching ourselves and things of that nature."



In a statement released earlier yesterday, the WP MPs said they "will contest the lawsuit and lay out our case vigorously in court".

They have engaged Senior Counsel Chelva Retnam Rajah from Tan Rajah & Cheah to represent them. A pre-trial conference has been scheduled for Aug 31.

Besides the three MPs, other parties named in the suit include two town councillors, Mr Chua Zhi Hon and Mr Kenneth Foo.

The two, along with Ms Lim, were part of the town council's tenders and contracts committee, which was chaired by Mr Singh.

AHTC claims the four breached their duties by causing the town council to enter into contracts in contravention of the Town Councils Financial Rules.

In a separate statement, the Housing Board said it is studying the details of the claim, and has asked the Attorney-General's Chambers for advice on the lawsuit.





AHTC submits amended GST returns: KPMG

By Joanna Seow, The Straits Times, 16 Aug 2017

The Aljunied-Hougang Town Council (AHTC) has submitted its amended goods and services tax returns for a 51/2-year period from August 2011 to March 2017, said its independent auditor KPMG.

However, the town council has not resolved any outstanding financial and governance problems flagged in past audits, KPMG noted in its latest monthly progress report yesterday. It did not resolve any audit points in the previous month either.

To date, the Workers' Party-run town council has resolved 11 of 17 audit points.

KPMG said AHTC had taken some steps to address some of the six areas that remain unresolved - such as the management of the sinking fund - but five audit points have to be further reviewed, while one has measures in place that still have to be tested.

For instance, AHTC has not migrated certain items over to its replacement accounting system, said KPMG, which was appointed to look into AHTC's books after the Auditor-General's Office found significant governance lapses in a special audit.

KPMG also noted discrepancies in the credit notes or invoices issued by AHTC, and collections or reimbursements from the relevant authorities.

AHTC is working with its vendor to ensure such differences are spotted by its system in future, and will work to resolve the discrepancies with the relevant authorities.

The monthly report comes amid an ongoing lawsuit brought against AHTC town councillors, including Workers' Party (WP) chief Low Thia Khiang and party chairman Sylvia Lim. AHTC initiated legal action against them last month under the direction of an independent panel it appointed in February to help recover improper payments.

The town council has asked its councillors to account for some $33 million in payments to former managing agent FM Solutions and Services and service provider FM Solutions and Integrated Services from July 2011 to July 2015. It contends that the payments it made are null and void as the town councillors had acted in breach of their fiduciary duties.

The WP MPs have said they "will contest the lawsuit and lay out our case vigorously in court".












*** Sixth year in a row that AHTC's statements were qualified by its external auditor

All town councils submitted unqualified financial statements for FY2016 except Aljunied-Hougang Town Council (AHTC): Ministry of National Development
Channel NewsAsia, 20 Nov 2017


All town councils have submitted unqualified financial statements for the previous financial year, except for Aljunied-Hougang Town Council (AHTC), said the Ministry of National Development (MND) on Monday (Nov 20).

AHTC's financial statements were qualified by the town council's external auditor, said MND in the press release.

"The auditor had issued disclaimers as it was unable to ascertain the town council’s opening balances, payables and accrued expenses, or verify staff costs.

"This is the sixth consecutive year that AHTC has received qualified financial statements from its external auditor," said MND.



MND also released the FY2016 Town Council Management Report which assesses the councils' performance from April last year to March this year.

This is the first report for the 16 town councils formed after the 2015 General Election and they were assessed under five indicators, using three colour bands.

All scored "Green" for estate cleanliness and lift performance, despite reports of lift breakdowns in recent months. Town councils qualify for the top rating if there were, on average, fewer than four counts of "cleanliness observations" per block.

For lift performance, there were fewer than two breakdowns every month for every 10 lifts in the estates and the lifts' ARD (Lift Automatic Rescue Device) failure rate was zero, MND said.

The ARD brings the lift car to the nearest lift landing during a power failure.



However, only four town councils scored "green" for estate maintenance - Ang Mo Kio, Nee Soon, Sembawang and Tanjong Pagar. The other 12 estates scored "amber".

An amber score means that, on average, there were between four and eight counts of "maintenance observations" per block.

All town councils except AHTC also got the top rating of "green" for arrears management. MND added that Aljunied-Hougang-Punggol East Town Council, whose score was pending the outcome of a KPMG review, was banded "red" for FY2015.

Punggol East is now under the management of Pasir Ris-Punggol Town Council.



In the category of corporate governance, AHTC scored "red" while Ang Mo Kio got an "amber" rating.

According to MND, AHTC was banded “red” due to three non-compliances with the Town Councils Financial Rules (TCFR):

(i) Late quarterly transfer to the sinking fund;
(ii) Waiver of quotation that was not in accordance with requirements under the TCFR;
(iii) Fixed assets count report not certified by the town council in accordance with the requirements under the TCFR.

"AHTC has reviewed our statutory auditor’s comments. We will strive to keep all inadvertent administrative errors to a minimum and comply with the TCFR," the town council said in a statement on Monday.

Ang Mo Kio was banded “amber” as the town council had not sought approval from the correct approving authority for the waiver of quotations as required under the TCFR.




Related
Audit of Workers' Party-run town council flags major lapses

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

Appeal court orders WP-run AHPETC to appoint accountants to fix lapses

Workers' Party town council ordered by Court of Appeal to appoint one of the Big Four accounting firms to examine its books

Workers' Party town council lapses detailed in KPMG report

KPMG’s Monthly Report dated 20 July 2016

KPMG’s Monthly Report dated 18 Aug 2016

KPMG’s Monthly Report dated 15 Sep 2016

KPMG’s Monthly Report dated 15 Oct 2016

KPMG’s Past Payments Report dated 31 October 2016

MND’s Statement on the KPMG Report - 4 Nov 2016

KPMG’s Monthly Report dated 15 Nov 2016

KPMG’s Monthly Report dated 15 Dec 2016


KPMG’s 10th Monthly Report dated 15 Jan 2017

AMK Town Council general manager under CPIB probe

KPMG’s 11th Monthly Report dated 15 Feb 2017

AHTC Appoints Independent Panel to Review Findings of KPMG Past Payments Report dated 31 Oct 2016 and Safeguard AHTC’s Interests -17 Feb 2017

Town Councils Act amended: Law passed to strengthen town council governance

KPMG’s 12th Monthly Report dated 16 Mar 2017

MND: Aljunied-Hougang Town Council’s FY2015 Financial Statements -12 Apr 2017

Pasir Ris Punggol Town Council Past Payments Review Report by PWC -30 April 2017

MND: Findings from PwC report -2 May 2017





Workers' Party MPs sued by own Town Council AHTC over $33 million in improper payments -27 Jul 2017

MND: Town Councils’ FY2016 Financial Statements and the FY2016 Town Council Management Report -20 Nov 2017





World of difference between AGO and AHTC reports



When...















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