In a report made public yesterday, the Auditor-General's Office (AGO) highlighted five areas of lapses in the accounts of the Workers' Party-run Aljunied-Hougang-Punggol East Town Council (AHPETC).
One of the main areas of concern was not disclosing that the owners of the companies hired to provide services to the town council were also on AHPETC's management team.
This meant the owners of the companies, in their capacity as town council officials, were signing off on cheques to pay their own companies.
Minister for National Development Khaw Boon Wan will be moving a motion in Parliament on Thursday based on the Auditor-General's report.
In a statement issued yesterday, AHPETC said it will be responding to the AGO report in Parliament. There were also responses from AHPETC within the AGO report.
The Auditor-General was directed to conduct the audit in February 2014 by Finance Minister and Deputy Prime Minister Tharman Shanmugaratnam.
This came after AHPETC's own independent auditor raised 13 issues of concern in a disclaimer of opinion in a report on the town council's accounts in the financial year (FY) of 2012-13.
In the AGO's 17-page report, it said AHPETC did not "adequately manage" conflicts of interests with FM Solutions and Services (FMSS) and FM Solutions & Integrated Services (FMSI) - the town council service providers.
Both companies were hired to provide managing agent services and essential maintenance and lift rescue services.
Senior officers of AHPETC - secretary Danny Loh Chong Meng, general manager How Weng Fun, and deputy general managers Yeo Soon Fei and Johnson Lieow Chong Sern - are also directors and shareholders of FMSS.
Furthermore, Mr Loh is the sole proprietor of FMSI, and is married to Ms How.
The AGO's report stated that this was not made clear in town council minutes seen by auditors.
In fact, in the August and September 2011 minutes, it was only recorded that Mr Loh and Ms How said they were married to each other, and were directors and employees of FMSS. However, it did not state Mr Loh's role in FMSI.
Cheques signed off by Mr Loh were co-signed by either the chairman or vice-chairmen of the town council - Ms Sylvia Lim, Mr Png Eng Huat and Mr Pritam Singh.
But the AGO's report said there was "no documentary evidence" to show what the chairman or vice-chairmen had checked or verified before signing off on the cheque payments.
In their response within the report, AHPETC said it had no intention of hiding any information, and that it was common practice for managing agents to hold key positions within the town councils they manage.
It also asked for the relevant authorities to specify on when managing agents and town councils are considered "related parties", and to what extent town councils must disclose information.
"What is clear from the AGO findings on the disclaimers is that no money has been found to be missing, nor has there been any criminal or dishonest activity uncovered," the town council wrote.
OTHER LAPSES AND RESPONSES
There were several other areas that the Auditor-General's Office (AGO) flagged in its report, which Aljunied-Hougang-Punggol East Town Council (AHPETC) responded to.
In some areas, the AGO and its auditing partner, PricewaterhouseCoopers Consulting, had further responses.
Lapses in management of sinking funds
AGO: This is meant to be a fund separately maintained from their operating fund accounts, used for the improvement and long-term maintenance of properties. AHPETC's transfers were late and short of the required amounts, and in most instances, "only made after auditors' queries".
AHPETC: At all times, the monies were still in the town council's bank accounts, but were left in the operating fund accounts rather than transferred into the sinking fund accounts. The town council will be more mindful about the sinking fund accounts and will use the account appropriately. Separately, it has rectified the mistake of paying for the Neighbourhood Renewal Programme out of the sinking fund when it is in fact an operating fund matter.
Lapses in arrears of service and conservancy (S&C) charges
AGO: There was no system to accurately monitor conservancy and service arrears.
AHPETC: It was hampered by a lack of historical data needed for an ageing analysis. Furthermore, since it did not have a system to generate the arrears, town council staff had to manually sort the information. A mistake during this process led to the town council reporting inflated figures in April 2013. The town council added it is in the process of improving its system.
Lapses in internal controls and procurement
AGO: The town council did not perform monthly bank reconciliations prescribed by the Town Councils Financial Rules; did not have adequate controls to safeguard valuables, receiving and handling of cheques; did not follow the Financial Rules in approval of procurement and did not segregate duties in the payment processes. Cheques received by AHPETC and not banked in by the end of the day were not kept under lock and key, and opening of mail that includes cheques, was done in an area accessible to the public.
AHPETC: Surprise checks were done at branch offices in FY 2013 and 2014. It has improved its controls, it added. For example, cheques not banked in by the end of the day were now kept in a safe and all cheques received are scanned by finance staff into a central server.
Inadequacies in management and accounting systems
AGO: The town council did not have an adequate management and accounting system and its statements for FY2012/13 did not accurately reflect the state of affairs.
AHPETC: Part of the reason was that it did not have an IT system that could keep track of things on a larger scale, and the system used for the Hougang SMC could not handle the volume of a GRC. It has since improved its system which can now receive payments in many modes, but is still a work in progress.
This article was first published on FEBRUARY 10, 2015.
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