Independent auditors hired by the Aljunied-Hougang-Punggol East Town Council (AHPETC) have been unable to verify its accounts for the third year running.
Although the Workers' Party-run town council met a newly imposed June 30 deadline to submit its accounts for the 2013/2014 financial year, its auditors, Audit Alliance, flagged eight areas of concern, including the presence of related party transactions and failing to make timely transfers to its sinking fund.
AHPETC was also unable to resolve three of the 13 disclaimers raised by its previous auditors, Foo Kon Tan Grant Thornton, in its FY 2012/2013 report.
Thus, Audit Alliance, appointed by AHPETC in March, was "not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion".
Last night, the Ministry of National Development (MND) said AHPETC's latest financial statements and report "reinforce MND's existing concern about the town council's state of financial affairs".
AHPETC chairman Sylvia Lim said in a foreword to the annual report that the town council formed an audit committee in August 2013 to monitor and review internal financial control and reporting.
One area of concern the auditors raised was in service and conservancy charges (S&CC). They could not determine the accuracy of S&CC owed as AHPETC was "unable to provide any supporting documentation for the balance carried forward from other town councils".
Auditors could also not verify the amount of S&CC paid in advance to the town council as it "was unable to provide a detailed breakdown for the advance receipts of $507,809".
Also, AHPETC's deputy general manager certified 12 invoices from FM Solutions and Services (FMSS) between May 2013 and March last year, but the manager is a shareholder and director of FMSS.
"There is no segregation of duty between the person certifying the abovementioned invoices and the person approving the related payment vouchers," the auditor noted.
AHPETC also failed to comply with the Town Council Act and Town Council Financial Rules as there were lapses in tender specifications prepared by its managing agent, sinking fund transfers were late, and town improvement expenses were wrongly paid out of the sinking fund - points noted by the auditors and by MND.
MND said: "AHPETC's financial position has consistently deteriorated between FY 2011/2012 and FY 2013/2014, even though the town council received full government grants from MND during these three years". AHPETC went from an accumulated surplus of $853,000 in FY 2012/2013 to an accumulated deficit of $1.42 million in FY 2013/2014 . "The town council had previously overstated its accumulated surplus in FY 2012/2013 as $1.84 million."
Ms Lim explained in the report that AHPETC "faced escalating costs due to higher tender prices and higher lift maintenance expenses... We will continue to work on sustainable spending to reduce the accumulated deficit over time".
AHPETC still owes MND its FY 2014/2015 accounts by Aug 31. The deadline was set in February during a parliamentary debate when MND said the state of affairs at AHPETC was "clearly unacceptable".