PARLIAMENT

World of difference between AGO and AHTC reports: Indranee

The town council is working on its remedial plans, but it has not resolved the area of governance of related-party transactions, Ms Indranee noted.
The town council is working on its remedial plans, but it has not resolved the area of governance of related-party transactions, Ms Indranee noted.ST FILE PHOTO

There is "a world of difference" between the lapses found in government agencies and those found at the Workers' Party-run Aljunied-Hougang Town Council (AHTC), Senior Minister of State for Finance Indranee Rajah said.

"They are different in scale, in nature, and in the way government agencies and the town council have each responded to problems when they are found," she told the House.

She was responding to Mr Liang Eng Hwa (Holland-Bukit Timah GRC) who asked how the AGO report was different from auditor KPMG's report on AHTC.

The town council was previously known as the Aljunied-Hougang- Punggol East Town Council (AHPETC) when Punggol East was held by the WP before the general election last September.

Ms Indranee highlighted four key ways the lapses found in Government are different from the problems faced by AHTC.

1 RELIABILITY OF ACCOUNTS

The Government's accounts were found to be reliable, unlike those of the town council, whose own auditors were repeatedly unable to verify that they were accurate.

The AGO concluded in its special audit report last year on then AHPETC that there was no assurance the town council's accounts are accurate and reliable, or public funds are properly spent, accounted for and managed, Ms Indranee said.

"There is no similar problem in government," she added.

The reason: the accounts of ministries, departments, organs of state and statutory boards have all been found by AGO and independent auditors to be reliable and prepared in accordance with the law.

2 SYSTEMIC WEAKNESSES

No systemic weakness was found in government agencies.

In contrast, the problems at AHTC were of a systemic nature and not just a matter of individual lapses, Ms Indranee said.

She noted the AGO and auditors found 115 control failures at AHTC, and independent accountants KPMG found another 70 lapses.

KPMG concluded in its monthly report last month that these failures were pervasive, and "there is an issue larger than the sum of individual lapses at AHTC".

But the AGO report on the Government shows "there is no evidence of widespread compliance problems. There is certainly no culture of non-compliance".

3 ISSUE OF PERSONAL GAIN

There was no question of personal gains in any of the lapses highlighted in this year's AGO report, said Ms Indranee.

But in the case of AHPETC, there are serious issues that have to do with "personal gains from related third-party transactions".

She cited how the town council's general manager, deputy general manager and secretary were also the owners and directors of FM Solutions and Services (FMSS), which provided managing agent services to AHPETC and was paid for them.

A review also found the profit margins of FMSS were abnormally high, said Ms Indranee.

But the case of Nanyang Polytechnic and its subsidiary NYP International that was highlighted in the AGO report is fundamentally different, she said.

There were no personal interests involved on the part of their directors and no leakage of money to any third parties.

4 STEPS TO RECTIFY WEAKNESSES

Ministries and agencies have taken steps to rectify all weaknesses found, Ms Indranee said.

But, she said: "AHPETC did not take prompt measures to rectify these problems despite repeated requests by the Ministry of National Development to do so."

She noted AHPETC appointed KPMG as an independent accountant only after being ordered by the courts.

KPMG also noted in its latest monthly report last month that progress to remedy the control failures has been slow - an observation made four years since the town council's auditors first voiced reservations about its accounts.

Ms Indranee noted that AHTC is working on its remedial plans, but it has not resolved the area of governance of related-party transactions.

In contrast, she said, every government agency acknowledges lapses flagged by the AGO and takes steps to address them as soon as possible.

"Our system is transparent, accountable and responsive and we look forward to the same in AHTC as it hopefully rectifies its problems," she added.

A version of this article appeared in the print edition of The Straits Times on August 17, 2016, with the headline 'World of difference between AGO and AHTC reports: Indranee'. Print Edition | Subscribe