Aljunied-Hougang town council accepts auditors' 'reset' call

Auditors of Workers' Party-run Aljunied-Hougang Town Council (AHTC) have 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.

In a report yesterday, KPMG also found that the town council's management lapses went beyond individual issues and were a systemic problem.

The auditors recommended that town councillors "reset the tone at the top of AHTC" to emphasise competence and accountability.

The report, released by AHTC on Wednesday night, is the fourth monthly report by KPMG, which the town council had hired to look into its books following significant lapses in governance flagged by its own auditors and the Auditor-General's Office in a special audit report in February 2015.

It marks the completion of KPMG's recommendations on steps AHTC has to take to set right weaknesses flagged in those earlier reports.

AHTC chairman Pritam Singh said the town council accepts all the recommendations in full, and its MPs "will immediately lead an exercise to review the key areas of governance, financial control, financial reporting, procurement and records management".

In its July report, KPMG 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 last year.

Among the most glaring lapses uncovered was AHTC's use of 18 temporary clearing accounts, that together contained a total of more than one million transactions at a value of over $648,000.

KPMG said such accounts should be used only on a short-term basis but investigation and clearance of these transactions were not done prior to the review.

Clearing these transactions is now a "major task" that is estimated to take a year to resolve.

Another major lapse it found was extensive use of manual journal entries to record payments to third parties, which avoid records being entered into accounts payable and thus circumvents financial controls. There were over 48,500 of such manual entries used to record payments of more than $60 million from 2011 to 2015.

"This highly irregular short-cut makes effective oversight of payments by the Finance Department practically impossible," said the report. "Such large-scale use of this practice raises questions about the management of AHTC's financial function."

KPMG found that AHTC's accounts payable module was not regularly reviewed, and might contain inaccuracies which could be exploited to initiate or conceal fraudulent payments.

Among the payables outstanding for more than three years, KPMG found a 2012 vendor invoice for $52,000 that was recorded twice.

In a statement, AHTC chairman Singh said AHTC will review the work processes of the town council to strengthen controls. It has also called a tender for a new town council accounting system and will appoint an internal auditor to ensure management, governance and control processes are working.

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