National Development Minister Khaw Boon Wan said yesterday in Parliament that the Government will act against the "astounding" and "clearly unacceptable" situation in Aljunied-Hougang-Punggol East Town Council (AHPETC).
In addition to amending the law to give the Government more oversight and penalty powers over town councils, it will also withhold several million dollars of grants to AHPETC until "it cleans up its mess", he said.
Kicking off a parliamentary debate on the Auditor-General's Office (AGO) report on AHPETC, which found the Workers' Party-run town council to have lapses in governance and compliance with the law, Mr Khaw told the House that the Government will seek to change the Town Councils Act to give it the power to investigate and take to task errant town councils.
The current Act does not provide the Ministry of National Development (MND) with any levers to make town councils comply with its requests for information beyond annual financial reports, nor any powers to investigate irregularities or non-compliance.
This has allowed the MPs running AHPETC to be "evasive, unresponsive and misleading" for three years in response to growing concern from the Government over its financial situation, he said. As a result, Finance Minister Tharman Shanmugaratnam requested last February for the Auditor-General to scrutinise AHPETC's accounts.
Mr Khaw said that the Government will act in response to the AGO's report in two other ways.
First, it expects AHPETC to "follow up and remedy the problems and weaknesses listed in the AGO report (and to) deal decisively with the gross incompetence of its managing agent".
AHPETC must submit an unqualified set of its 2013 financial year financial reports to MND by June 30, and for the 2014 financial year by Aug 31, he said.
"There has been overpayment and public funds have been affected. Will the town council be suing FM Solutions & Services (FMSS, its managing agent) for return of money lost?" he asked.
FMSS, which is majority-owned by the secretary and general manager of AHPETC, was paid 20 per cent more than the previous managing agent that ran Aljunied, 50 per cent more than a comparable town council, and more than any other town council, Mr Khaw said.
He added: "MND is studying what other legal recourse the aggrieved parties may have."
Until AHPETC "cleans up its mess", the Government will also withhold from it an annual service and conservancy charges grant of several million that MND gives to every town council.
For AHPETC, this amounts to about $7 million each year.
"MND is mindful that the suspension does not unwittingly result in the town council not being able to pay its essential services, leading to hardship for local residents," he said.
"We are prepared to consider paying out the grants in full, or at least in half, if AHPETC could assure MND that the grants will be properly channelled to the purpose for which they are given," he said.
MND has not had any response on the matter from AHPETC's chairman, Ms Sylvia Lim, since November.
"So the ball is in the town council's court," Mr Khaw concluded.