The Ministry of National Development (MND) yesterday outlined four areas of concern when urging the High Court to appoint independent accountants to oversee government grants given to a Workers' Party-run town council and examine its past payments.
The ministry's main concerns centred on Aljunied-Hougang- Punggol East Town Council's (AHPETC) current cash flow position, its state of account-keeping, questions about related-party transactions, and steps taken to remedy its accounting lapses.
The MND cited AHPETC chairman Sylvia Lim as saying in previous correspondence that the town council had sufficient funds to last until June this year.
But in an April 17 affidavit Ms Lim filed, the adequacy of such funds was "premised on them not making sinking fund transfers", said Attorney-General's Chambers deputy chief counsel for litigation Aurill Kam, who is representing the MND.
AHPETC made just two transfers to the sinking fund - which is for long-term cyclical maintenance - instead of the four required for the 2014/2015 financial year. Both were also made late.
Ms Lim told Parliament in February that AHPETC was taking steps to make good the sinking fund transfers.
Yesterday, Ms Kam said it was clear AHPETC was "in need of fresh service and conservancy charge grants to deliver essential services to residents".
And while the AHPETC accepted that the National Development Minister could impose conditions for disbursing grants, it opposes having these grants subjected to payment controls and safeguards.
Ms Kam also said that while AHPETC hired two external companies in March to manage its finances, these were "lukewarm assurances". The firms are Audit Alliance, which will audit past accounts; and Business Assurance as its financial consultant.
But Business Assurance was registered just a year ago and has "no track record" of dealing with town council matters, Ms Kam said. It also has no prior experience in advising on internal controls, nor a good understanding of systems governing town councils.
It will also not look at related- party transactions or whether any money was lost. She added that AHPETC's failure to get professionals with the right experience showed "a lack of willingness and appetite to independently and properly inquire into and rectify the grave oversights that have and are apparently still continuing".
Also, the independent accountants MND wants the court to appoint will not duplicate the work of AHPETC's own auditors, said Ms Kam: "Even if their auditors complete their work in June or August, which is what we understand the estimated timeline to be, it's not going to shed light on any unlawful payments, breach of duty or unlawful conduct."
MND referred repeatedly to the Auditor-General's Report, which cited the potential conflicts of interest arising from key town council staff being co-owners of its managing agent, FM Solutions and Services. The report added that an overpayment of more than $122,000 was recovered only after the findings of the report.
Ms Kam dismissed AHPETC's claim that the case was a political dispute between the People's Action Party and Workers' Party. It was a legal matter between MND, which gives grants and has regulatory oversight, and AHPETC.
The case involved the public accountability of a town council, its responsibilities in handling its funds, and the necessary remedies it must make when it fails to meet its obligations, she added.
"The mere fact that the leadership of a town council comprises members of a political party neither makes the present case a 'political dispute' nor confers on the defendant any peculiar political immunity," she said.