THE town council operated by the Workers' Party (WP) is running out of funds and yet it has not taken enough steps to put its house in order, the Ministry of National Development (MND) said yesterday.
Questions remain over the cash flow position and accounting practices of the Aljunied-Hougang-Punggol East Town Council (AHPETC), which has recently missed two sinking fund payments as it needs the money to keep its daily operations going, MND revealed. That is why the High Court should appoint independent accountants to oversee government grants to AHPETC and examine its past payments, MND argued at the start of a two-day hearing to decide if such a move is necessary.
MND had applied to the court on March 20 to appoint independent accountants to AHPETC, after accounting and governance lapses were discovered following a special audit of its books by the Auditor-General's Office.
But the town council, represented by lawyers Peter Low and Terence Tan, countered yesterday that the court should not intervene in what it called a "political dispute" between the WP and the ruling People's Action Party.
The lawyers also argued that the Town Councils Act does not give the High Court the power to grant MND's request, adding that such a move would contradict the Government's stance to adopt a "light touch" in regulating town councils.
If there is any mismanagement of town council funds, only the Housing Board or the residents have the right to complain, Mr Low said in response to questions by Justice Quentin Loh, who is presiding over the case.
And if the town council runs out of funds, nothing can be done until the next general election, when voters can register their dissatisfaction, he added.
Attorney-General's Chambers deputy chief counsel for litigation Aurill Kam, representing MND, responded that calling this a "political dispute" is a "very serious assertion" that overlooks the legal questions involved.
"The leadership of the town council being WP members is not the point," she said. Rather, the accountants, if appointed, would look into whether payments were properly authorised, and if there was any breach of duty.
Key AHPETC staff are co-owners of its managing agent, FM Solutions and Services (FMSS), giving rise to potential conflicts of interest. FMSS' contract is also due to expire in July, which reinforces the urgency of MND's application, said Ms Kam.
She noted that AHPETC had missed two out of four payments into its sinking fund for the last financial year. The money is for long-term cyclical maintenance.
While AHPETC chairman Sylvia Lim had said at a hearing in March that it had enough funds to supply essential services until June, this was "premised on them not making sinking fund transfers", Ms Kam said. Although AHPETC has appointed an external auditor and financial consultant to help clean up its books, the move is a "lukewarm assurance" as its finances remain "shrouded in uncertainty".
She also said AHPETC had initially stressed its urgent need for MND grants but changed its tune when MND offered to give half the grants, with terms attached.
MND has withheld about $14 million in grants to AHPETC, which it will disburse only if its court application is successful.
Near the end of the hearing, Justice Loh asked twice if AHPETC would meet the deadlines for the submission of its past accounts. Mr Low replied: "It is work in progress... We're working towards the deadlines."
The hearing continues today.
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