SINGAPORE - The independent auditor for the Aljunied-Hougang-Punggol East Town Council's (AHPETC's) 2012 financial statement has refused to give it the all-clear, due to several issues it has found in the town council's accounts.
In its independent auditor's report submitted to the Auditor-General yesterday, the firm Foo Kon Tan Grant Thornton said it is not expressing an opinion on the accounts.
This is because it could not "obtain sufficient appropriate audit evidence to provide a basis for an audit opinion".
It highlighted 13 issues it had noticed while going through the accounts.
One of them was that the town council had not provided to the auditor the details of project management service fees that were paid to a related party.
A related party refers to an organisation in which the town council's key management personnel have a personal financial interest.
The town council also did not transfer to the sinking fund the amounts collected for service and conservancy charges, grants-in-aid and interest payable to the sinking fund, during the whole financial year.
This flouts a rule set out in the Town Councils Financial Rules.
There were also "unexplained differences" amounting to $518,707 in goods and services taxes, and $63,458 in "unreconciled difference" in cash and bank balances.
The auditor also could not determine the validity and accuracy of lift upgrading expenses of $18.6 million and lift repair expenses of $1.6 million, because expenses from the previous financial year had been included in these expenditures, but the town council did not provide the exact figures for these expenses.
The firm also could not audit receivables of $1.8 million recorded as coming from sundry debtors.
The Ministry of National Development (MND) expressed concern over this latest development in a statement released last night.
It noted that this is the second year that AHPETC's auditors have submitted a disclaimer of opinion on its accounts, adding: "This is a cause for concern."
MND said that town councils were required to submit their financial statements by August 31 last year.
It started reminding AHPETC to do so in September and, after seven reminders, the town council "finally" did so.
In her notes to the financial statements, AHPETC chairman Sylvia Lim said that there were "several handover issues which required more time to resolve" and that these were "handover legacy issues".
She also noted there were "systemic and structural issues associated with developing a new financial system", which has many modules, some of which require more time for development.
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Here is the full statement from the Ministry of National Development:
Town Councils (TCs) are required by law to submit their audited financial statements to the Minister for National Development, for presentation to Parliament. A copy of the audited financial statements and any report made by the Town Council's auditor shall also be forwarded to the Auditor-General.
All TCs were required to submit their financial statements by 31 August 2013 for the financial year 2012. After seven reminders from September 2013, the Aljunied-Hougang-Punggol East Town Council (AHPETC) finally submitted to MND its audited financial statements and a report from its auditors, M/s Foo Kon Tan Grant Thornton LLP on 10 February 2014.
The AHPETC's auditors reported that AHPETC had not complied with the provisions of the Town Councils Act and the Town Councils Financial Rules. The auditors reported that:
(a) AHPETC had not transferred funds into its Sinking Funds as required under Rule 4(2B)(a) of the Town Councils Financial Rules.
(b) the auditors had not been able to determine the completeness of the related party disclosures in AHPETC as the TC had not made available to the auditors details of project management service fees paid to a related party. (Related party transactions refer to transactions where the TC's key management personnel have a personal financial interest.)
(c) AHPETC had not made available to the auditors its latest management accounts and records of minutes subsequent to the financial year end, to allow the auditors to ascertain whether AHPETC's financial statements properly reflected adjustments or disclosures needed in light of relevant subsequent events.
(d) the auditors were unable to determine the validity and accuracy of various items in AHPETC's accounts, including receivables of some $1.8 million recorded in Sundry Debtors, lift repair and lift upgrading expenses of some $20 million, temporary unidentified receipts from residents and HDB of some $308,000, and advance receipts from residents in respect of conservancy and service charges of some $507,000. There were also unexplained differences of GST payable of some $518,000 and unreconciled differences of some $63,000 in cash and bank balances.
The AHPETC auditors' observations have led the auditors to submit a disclaimer of opinion on AHPETC's financial statements. This is the second year that AHPETC's auditors have submitted a disclaimer of opinion on its accounts. This is a cause for concern. The auditors have submitted their audit report to the Auditor-General on 13 Feb 2014 as required under the law.