Audit of Workers' Party-run town council flags major lapses

Potential conflicts of interest not managed properly: Auditor-General

The Auditor-General has found "major lapses" in governance and compliance with the law in its audit of the Aljunied-Hougang-Punggol East Town Council (AHPETC) run by the Workers' Party (WP).

In a 59-page report issued last Friday and made public yesterday, the Auditor-General's Office (AGO) identified five broad areas of "weakness":

  • Lapses in management of sinking funds;
  • Lapses in governance of related party transactions leading to conflicts of interest;
  • Lapses in management of arrears of service and conservancy charges;
  • Lapses in internal controls and procurement; and
  • Inadequacies in record management and accounting system.

Dominating the report was the second section, where the AGO said AHPETC inadequately managed potential conflicts of interest in its transactions. AHPETC senior staff, such as its secretary and general manager, also own companies that the town council had contracted to provide estate management services.

While double-hatting of roles is not uncommon among town councils, including those run by the People's Action Party, ownership of companies that provide managing agent services is not prevalent. In the case of AHPETC, the AGO said it found inadequate disclosure and oversight of such conflicts of interests.

For example, it identified 84 instances in which one of AHPETC's staff involved in reviewing work and approving payment also had ownership interest in the company that was receiving the payment. These transactions, in 2012 and 2013, amounted to $6.61 million.

The AGO also flagged the town council's failure to transfer monies to its sinking fund several times, as required under the law. It did not transfer a total of $7.9 million to its sinking fund for the last three quarters of the financial year 2011/12, until it was queried by the AGO. The following year, it failed to transfer funds amounting to about $4 million to its sinking fund on time or in full.

Town councils are required by law to have a sinking fund they can draw on for the improvement and long-term maintenance of properties they have charge of.

The AGO report concluded: "Unless the weaknesses are addressed, there can be no assurances that AHPETC's financial statements are accurate and reliable, and that public funds are properly spent, accounted for and managed."

In response, AHPETC, headed by WP chairman Sylvia Lim, said: "What is clear from the AGO findings is that no money has been found to be missing, nor has there been any criminal or dishonest activity uncovered.

"Instead, the observations show mistakes and omissions due to inadvertence, human error, IT system constraints and a lack of experience in dealing with certain scenarios."

The AGO replied that this "broad conclusion cannot be derived from AGO's audit".

The AHPETC said that, while it would benefit from the AGO's findings, it had been "very challenging" juggling the resource-intensive audit with day-to-day running of the town council.

Experts interviewed yesterday said uncovering fraud or criminal wrongdoing is beyond the remit of the AGO. Identifying instances where a conflict of interest is present does not amount to uncovering wrongdoing, they added.

The audit report will be debated in Parliament on Thursday. Last night, Ms Lim said AHPETC would give its full response to the audit report in Parliament.

The top-level scrutiny of AHPETC, the largest town council ever run by an opposition party, was requested last February by Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam. It came after two consecutive years of AHPETC's own auditors saying they could not give its accounts a clean bill of health.

rchang@sph.com.sg