AHTC faces uphill task to recover payments: Observers

The Aljunied-Hougang Town Council.
The Aljunied-Hougang Town Council. ST PHOTO: TIFFANY GOH QI QI

HDB calls for immediate action to do so, including starting legal action if needed

The Aljunied-Hougang Town Council (AHTC) has seven days to respond to the Housing Board on whether it will appoint a third party to recover improper past payments it has made.

It was given the deadline by HDB in a letter yesterday.

Observers interviewed said the town council faces an uphill task in getting its money back, adding that a more detailed forensic audit may be necessary.

They were commenting on the options available to the Government, following a statement by the Ministry of National Development (MND) and a letter sent by the HDB to AHTC yesterday.

In it, the HDB said: "It is clear that town council monies have been wrongfully paid, in substantial amounts that run into millions... It is imperative that immediate steps be taken to recover the improper payments, including, where necessary, the commencement of legal proceedings."

It added: "As the improper payments may give rise to personal claims against existing town councillors, a suitable third party should have charge and conduct of these proceedings, on the town council's behalf."

 
 

Singapore Management University law don Eugene Tan said the town council would have to determine the extent of questionable transactions in order to recover any money paid erroneously.

But this would be difficult, he said, given its lack of discipline in record-keeping and financial operations highlighted in independent accountant KPMG's report.

KPMG, citing AHTC's spotty track record in this area, had said it could not conclude if the payments identified as improper, totalling about $6.9 million, are "exhaustive and on the complete quantum of improper payments that ought to be recovered".

Institute of Singapore Chartered Accountants president Gerard Ee suggested that a possible next step would be to conduct a detailed forensic audit to analyse all the transactions to see if any were "seriously questionable".

But even if this was established, there is no guarantee that the parties paid erroneously would cooperate, added Mr Ee.

The KPMG report established that some of the improper payments were made to AHTC's then managing agent FM Solutions and Services (FMSS).

AHTC and FMSS are currently in arbitration over a financial dispute emerging from the lapses at the town council.

Mr Ee said that if FMSS refuses to pay back any sum deemed to be improper or excessive, AHTC may have to take FMSS to court and "building a case for such claims is not easy".

Prof Tan said that even if monies cannot be legally recovered, the town councillors could be taken to task for potential breach of statutory and fiduciary duties.

In its letter to the town council, the HDB had also said: "The town councillors were under a duty not to improperly use or apply the public funds entrusted to them. They had a personal and collective responsibility for improper payments enabled or permitted by such a system."

The HDB added that AHTC could "potentially look to the town councillors for recovery of losses or costs-savings arising from any breaches of fiduciary duties".

The KPMG report had raised the possibility of criminal conduct if the improper payments were made intentionally, like criminal breach of trust under the Penal Code. Legal and town council governance experts, however, said the task of establishing such intent could be onerous.

"They might have been very careless in not observing certain rules, but were they being intentional?" said real estate don Yu Shi-Ming of the National University of Singapore.

Prof Tan also cautioned that it was crucial to "not get ahead of ourselves by presuming the town councillors to be guilty".

"Ultimately, it could boil down to a question of competence," he said.

The observers also pointed out that the current Town Councils Act does not give the Ministry of National Development the powers to obtain information on finances or relevant documents from town councils, let alone impose penalties on offenders.

MND has proposed changes to the Act and had asked for public feedback last month.

Prof Tan said that since public monies are involved, there will be the expectation for the Government to take a more "interventionist role".

He added: "The MND statement suggests that it's going to be a long road ahead for all concerned, especially for AHTC."

A version of this article appeared in the print edition of The Straits Times on November 05, 2016, with the headline 'AHTC faces uphill task to recover payments: Observers'. Print Edition | Subscribe