Why lapses cannot be swept under the carpet

Why lapses cannot be swept under the carpet
The Aljunied-Hougang-Punggol East town council (AHPETC) at Block 701, Hougang Ave 2.

The judgment on the AHPETC (Aljunied-Hougang-Punggol East Town Council) case is out.

The Workers' Party is thrilled that the Ministry of National Development's (MND's) application was dismissed and that it will not have to open its books for scrutiny by an independent accountant.

But the ministry points out that the High Court took note of "grave and serious questions" raised regarding AHPETC's accounts, and the validity and propriety of payments to related parties.

The full judgment is 80 pages long. You may not have read the full judgment, but it contains several important findings. Here are four of them.

AHPETC is in breach of the law and has not rectified those breaches

AHPETC admits that it is in breach of Town Councils Act and Town Councils Financial Rules. This includes the failure to transfer funds to its sinking fund for the last two quarters of FY14/15.

These are serious breaches.

The Court found the AHPETC officers' conduct to be "the height of financial irresponsibility". It said that had these lapses been committed by those managing a private building or condominium, or officers running a public listed company, "severe consequences" would have followed, including civil or even criminal action against them.

At the time of the judgment, these breaches had still not been rectified and the Workers' Party had not said when they would be rectified.

The conditions imposed by the MND for the release of grants-in-aid to AHPETC were fair

The Workers' Party accepted that the MND is entitled to impose conditions for the release of grants.

It also recognised that the orders MND was seeking, such as the appointment of independent accountants, were conditions MND could impose for the release of the grants.

The Court also found that such conditions would be reasonable in the light of the problems with AHPETC's accounts and the findings of the Auditor-General's Office.

Ms Sylvia Lim lied to Parliament

Ms Sylvia Lim told Parliament on Feb 12, 2015 that AHPETC has been making transfers (to the sinking fund) for FY2014.

The Court found that Ms Lim had failed to mention that the transfers which had been made were late, and that one transfer which was already due had not been made. Indeed, that transfer, as well as the next one, had still not been made by the time of the Court hearing on May 4 and 5, 2015.

The Court said a Latin legal phrase, suppresio veri, suggestio falsi, was particularly apt here.

According to the Law Dictionary, the phrase means to suppress key facts, and suggest something which is untrue, amounting to fraud. So Ms Lim was effectively lying to Parliament.

The Workers' Party accepted the Court's findings. But there has not been a word of apology either from the Workers' Party or from Ms Lim.

Residents suffer when the management of a town council goes rogue

The Court pointed out that it is the residents who will ultimately pay the price. As the judgment said: "…what has been misspent in the past remains a loss… Hence if the service and conservancy charges (S&CC) have to be increased to make up for the loss, then the constituents have to bear the increase. Secondly, if the funds are misspent, or mismanaged, or the Town Councillors turn rogue and run off with funds, there will be no bail-out by the Government. The Government will not come in and make good the losses."

This is the crux of the entire saga. When there is dishonesty in the town council, it is the residents who suffer.

Why these findings matter

SOME people have asked: If AHPETC is still managing the estate and paying its bills, why should the breaches, especially the failure to transfer funds to the sinking fund, matter?

It matters a great deal. Every dollar of S&CC collected from residents is split between the operating account for current activities (for example, daily cleaning and rubbish collection) and the sinking fund account for major cyclical expenses (for example, replacement of lifts and water tanks).

An irresponsible or dishonest party can meet its current obligations by using the monies to meet immediate expenses, and not transfer monies to the sinking fund.

As long as it continues to win elections and stay in control of the town council, it can defer the day of reckoning. Before that happens, the party can disappear and leave the mess for someone else to clean up.

Things would have worked out very nicely for the party and its friends. It would not be so nice for the residents who end up paying huge amounts to rebuild the deficient sinking fund.

This article was first published on June 5, 2015.
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