Independent accountants 'will reassure residents'

Independent accountants 'will reassure residents'

A court application by the Ministry of National Development (MND) to appoint independent accountants to the only opposition- run town council here will help residents by ensuring that government grants given to the town council are properly used, analysts said yesterday.

But some called this a "patchwork" measure, saying that a larger overhaul of the town council structure is needed to avoid any future mismanagement of funds.

The ministry said yesterday that it has applied to the High Court to appoint accountants to safeguard government grants given to the Aljunied-Hougang-Punggol East Town Council (AHPETC), which is run by the Workers' Party (WP).

The ministry also wants the accountants to have the power to look at past payments made by the town council and to take action to recover any losses that may have been suffered by the AHPETC and its residents.

This comes after accounting and governance lapses were found at the town council, following a special audit that was concluded earlier this year.

Of particular concern were some relatively high payments made by the AHPETC to its managing agent, which is majority- owned by the AHPETC's secretary and general manager, who are married to each other.

Corporate lawyer Robson Lee said that, with taxpayers' money involved, the MND "has a legitimate duty and interest to seek the assistance of the court" to make sure the AHPETC's payments are in order.

Associate Professor Eugene Tan, a Singapore Management University law don and former Nominated MP, said the MND's move may have been prompted by the "non-committal" attitude of the WP towards calls for it to conduct a forensic audit of the AHPETC's accounts.

National Development Minister Khaw Boon Wan had called for such an audit in Parliament last month and said his ministry will withhold grants from the AHPETC until it sets its house in order.

The grants amount to about $7 million a year.

But the MND said yesterday that, if the court grants the application, it will disburse the funds to the AHPETC for financial years 2014 and 2015.

The town council will have to keep the money in separate accounts, and payments above $20,000 will have to be co-signed by the independent accountants.

Prof Tan said the MND's move removes the Government from a "damned if they do, damned if they don't" situation.

The Government is reluctant to disburse the grants as it fears misuse of the funds, but withholding the grants may lead to the perception that "the Government is penalising voters of AHPETC", he said.

Having accountants safeguard the grants "ensures the Government's interests are not compromised by WP's intransigence", he added.

"It's also probably not inaccurate to say that WP's ability to manage its forensic audit will be taken away" if the court application is granted.

If the AHPETC's books are found to be in order, residents will benefit from the reassurance, Prof Tan said.

National University of Singapore accounting don Mak Yuen Teen, who specialises in corporate governance, said it is not clear if the AHPETC has suffered any losses.

"Even if the rates charged by the managing agent in AHPETC are higher, they may argue that, since they have to set up this company specifically to service the town council because they cannot get others to do it, there are high start-up costs and no economies of scale," he said.

Mr Sidney Lim of business consulting and internal audit firm Protiviti said the measure is at best a stopgap one, because having to obtain the accountants' approval for each payment will not be cost-efficient in the long run.

"This may lead to a disruption of the town council's ability to get certain things done. The accountants will need to do their own due diligence and so payments may not be approved in a timely way."

Associate Professor Mak called the measures "patchwork", and urged a full review of the regulatory framework of town councils, given their "political nature".

Key aspects of ministry's application

The Ministry of National Development (MND) last night spelt out key aspects of its application to the High Court to appoint Independent Accountants (IAs) to Aljunied-Hougang- Punggol East Town Council (AHPETC), in response to media queries.

What is the role of the IAs?

If the court grants the order, the IAs will be empowered to co-sign payments from the segregated accounts holding the service and conservancy charges (S&CC) grants and to look at past payments made by AHPETC and to take appropriate action to recover losses.

Must IAs complete a review of past payments before S&CC grants are disbursed?

Once the court grants the order, MND will be able to disburse S&CC grants to AHPETC. There is no need for the IAs to complete its review of past payments before MND can disburse the grants. The court application is to enable MND to disburse the grants with the proper safeguards to ensure they will be properly managed and spent, without the need to wait till AHPETC has fully rectified its lapses and weaknesses.

What are the thresholds for which payments from the accounts need to be co-signed by IAs?

Amounts in excess of $20,000.

Do past payments refer to all payments or just those made to the managing agent FMSS?

It is not restricted to payments made to FMSS.

Who might be appointed as independent accountants?

MND has proposed Mr Ong Chao Choon and Mr Chan Kheng Tek (partners of PwC), or any other that the court deems fit and proper.

Is this the first time that MND has made such a court application with regard to a town council?

Yes.

Who will pay for the appointment?

MND

waltsim@sph.com.sg

rchang@sph.com.sg


This article was first published on Mar 21, 2015.
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