The sharp increase in the service and conservancy charge (S&CC) arrears of the Aljunied-Hougang-Punggol East Town Council is "shocking", Minister of State for National Development Desmond Lee said last night.
He indicated that the financial position of the Workers' Party-run council might be worse than stated, given that it had not submitted statements for the 2013 financial year despite reminders.
Mr Lee was critical of WP chief Low Thia Khiang's recent comments that S&CC arrears were a common problem - something he had also experienced in his previous Hougang constituency - and that residents would eventually pay up.
The severity of the arrears came to light in the annual report card on how town councils had performed in five areas.
The Aljunied-Hougang-Punggol East Town Council (AHPETC) received a red rating for S&CC arrears as well as for corporate governance.
Mr Low, in comments on the rating reported by the Lianhe Zaobao Chinese daily on Wednesday, said poor financial management did not impact the council's operations and services - and so did not affect the safety and living environment of the residents.
Mr Lee said he was taken aback by Mr Low's comments.
While some arrears could be because of some residents in temporary financial difficulty, the high rate suggested that residents who could pay were not doing so.
"As at April 2013 (when his town council last reported a shocking arrears rate of 29 per cent), 39,000 households in AHPETC were effectively subsidising 16,000 households who did not pay their S&CC," Mr Lee said in response to media queries.
"If this trend continues, the council's finances must surely decline and the council will not be able to sustain its operations. The delivery of essential services must then be affected, to the detriment of residents," he added, noting that the councils had to replace critical infrastructure - lifts and water tanks, for instance - at their own expense.
Mr Lee revealed yesterday that Mr Low, an MP for Aljunied GRC, had taken a similar approach to S&CC arrears management at the then Hougang Town Council. Its arrears rate in 2010 was 7.8 per cent - the highest then among all the town councils.
What Mr Low did not disclose at the time was that even the council's independent auditor had raised concerns over whether it had enough funds to support its daily operations, as it had a net operating deficit of about $92,000 and an accumulated deficit of about $9,000, said Mr Lee.
"What Mr Low also did not disclose is that Hougang managed to avoid a cash flow problem only after he merged Hougang with Aljunied after GE 2011," said Mr Lee.
But within two years, the new AHPETC's financial position deteriorated rapidly. Before that, Aljunied, under the People's Action Party, had an operating surplus of $3.3 million. But the merged entity had a deficit of $734,000 in the 2012 financial year.
He said the council's financial situation might be worse. It has not submitted financial statements and the Auditor-General is looking into the matter. Said Mr Lee yesterday: "And yet Mr Low says AHPETC 'has no cash flow problems'. I hope he is correct."
Neither Mr Low nor AHPETC responded to media queries by press time.
This article was first published on Nov 8, 2014.
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