The Ministry of National Development (MND) yesterday produced figures which show that in one year, the managing agent for the Workers' Party (WP) town council made a 300 per cent jump in profit after tax.
Its profit was around $510,000 in financial year 2012/13, and rose to over $2 million the following year.
But in this same period, the revenue of FM Solutions and Services (FMSS) rose by only 30 per cent, from $6.7 million to $8.8 million.
The ministry also noted that total payments by the town council to FMSS owners, who were at the time also senior officers of the town council, amounted to 22 per cent of the revenue in financial year 2012/2013 - and 36 per cent a year later.
Such levels of profit margin are "abnormal", said MND, which also said there was "gross profiteering" on the part of FMSS from its only client: the Aljunied-Hougang-Punggol East Town Council (AHPETC).
EVIDENCE OF PROFITEERING
Such levels of profit margin are abnormal... As AHPETC was FMSS' only client, these findings support MND's earlier concern that the town council had overpaid FMSS excessively.
MINISTRY OF NATIONAL DEVELOPMENT, on the 300 per cent rise in FMSS' profit after tax in one year
"Had the town council not overpaid FMSS, it might well have had been able to break even."
FMSS, which was appointed by AHPETC from July 2011 until last month, is owned by long-time WP supporters Danny Loh and his wife How Weng Fan. Both were senior officers at the town council.
Two hours after MND issued its statement, Law Minister K. Shanmugam told reporters at a community event that AHPETC has stayed silent on related party transactions involving FMSS.
To prove his point, he pointed to statements by WP MPs that show their stance on the matter, including remarks by Mr Pritam Singh during a parliamentary debate in February on the findings of a special audit by the Auditor-General's Office. It detailed major lapses in accounting and governance at AHPETC.
Mr Singh had said: "Our duty is to the residents... Well, Minister, if you were a resident, I will answer your question."
Mr Shanmugam had said then: "Maybe there was no one taking money through the back door in the dark of the night, there was no need because the money was taken from the front door in broad daylight through all this overcharging."
Several other People's Action Party (PAP) leaders have also weighed in on the issue of AHPETC's financial mismanagement, which is shaping up to be a hot-button issue at the Sept 11 General Election.
Prime Minister Lee Hsien Loong, who is PAP secretary-general, said at the launch of the party's manifesto yesterday morning that if an opposition party runs a town council like AHPETC, "I don't know where your service and conservancy charges (S&CC) money is going to go. Surpluses will turn into deficits. You will have problems for many years to come".
Deputy Prime Minister Tharman Shanmugaratnam, PAP's second assistant secretary-general, also underlined the gravity of the town council lapses last Friday, when he unveiled the PAP's slate for Aljunied GRC.
MND's statement came two days after the Accounting and Corporate Regulatory Authority (Acra) submitted its findings of an ad hoc review into FMSS' auditor, Teo Liang Chye & Co, to look into the quality of the managing agent's accounts and audit process.
The ministry had written to Acra on July 9, shortly after getting AHPETC's financial statements and reports for FY2013/2014. It asked Acra if it had any concerns about the quality of FMSS' accounts and the audit process. It did so after noting that AHPETC's auditors for FY2013/2014 found that AHPETC's then deputy general manager Yeo Soon Fei, who owns shares in FMSS, had certified FMSS invoices totalling $2.1 million on behalf of the town council. He subsequently approved related payment vouchers by the town council to FMSS, with no segregation of duties.
"This reinforced MND's concerns about the town council's state of financial management and, in particular, whether payments made by the town council were valid and proper," the ministry said.
Acra started its review on Aug 14, after giving FMSS' auditor the required one month's notice, and submitted its report to MND on Aug 27.
MND then wrote to WP chairman Sylvia Lim to ask, among other things, if she was aware of the extent of profiteering in FMSS and, if so, when she had known and what she had done about it. It also asked how she intends to recover the monies lost due to overpayment.
"As FMSS was paid using S&CC collections from residents and operating grants from the MND, public monies are at stake," MND said.
"What happened between the town council and FMSS is not a private matter, but one which MND needs to look into."