National Development Ministry explains Town Council surplus and grant issues

A man walks past the Aljunied-Hougang-Punggol East town council at Rivervale Crescent in Sengkang on April 17, 2014. The Ministry of National Development (MND) has explained how the Government disburses grants to town councils, and how much of a
A man walks past the Aljunied-Hougang-Punggol East town council at Rivervale Crescent in Sengkang on April 17, 2014. The Ministry of National Development (MND) has explained how the Government disburses grants to town councils, and how much of a council's surpluses must be set aside after an election. -- PHOTO: ST FILE

SINGAPORE - The Ministry of National Development (MND) has explained how the Government disburses grants to town councils, and how much of a council's surpluses must be set aside after an election.

It was responding to questions from the media, and discussion online, linked to the financial position of the Workers' Party-run Aljunied-Hougang-Punggol East Town Council (AHPETC).

These included whether the amount of government grants it receives as well as the financial surpluses that the council has access to, affected its financial well-being and ability to carry out its role.

The council has been in the news after an annual report on town councils gave it a red rating - the lowest among 16 councils - over the sharp increase in its service and conservancy charge (S&CC) arrears, as well as for corporate governance.

The last monthly report on S&CC arrears submitted by the council - in April last year - showed an arrears rate of 29.4 per cent. This meant that 16,000 households had not paid the charges, and that the 39,000 households which did, were effectively subsidising those who did not pay.

WP chief and Aljunied GRC MP Low Thia Khiang said in the wake of the annual report by the MND that S&CC arrears were a common problem. It was something he experienced when he was MP for the Hougang single-seat constituency, and residents would eventually pay up.

He added that poor financial management did not impact AHPETC's operations and services and, as such, did not affect the safety and living environment of the residents.

In its statement on Thursday, the ministry said all town councils receive an S&CC operating grant based on the number of HDB units and type of flats. The grants are higher for smaller units - $33.30 a month and $26.20 a month respectively for one-room and two-room flats - compared to $17 a month for three-room and $9 a month for four-room flats.

Councils receive a higher amount if they have more and smaller flat-types, the ministry said. The councils for Ang Mo Kio, for example, where 39 per cent of the 89,127 flats are three-room or smaller, and Tanjung Pagar, where 59 per cent of the 75,050 flats are three-room or smaller, both receive more grants than AHPETC, where 29 per cent of the 71,760 flats are three-room or smaller.

By contrast, Chua Chu Kang - which has an almost similar 71,348 flats as AHPETC - receives less in S&CC grants as only 12 per cent of its flats are three-room or smaller. The S&CC grant for Chua Chu Kang is $4.9 million compared to AHPETC's $7.2 million, the ministry said.

The ministry also responded to a question from The Straits Times to explain comments by Minister of State for National Development Desmond Lee on Nov 7 about the financial position of AHPETC.

And it also confirmed that after the 2011 General Election - when the People's Action Party lost Aljunied GRC to the WP - an amount of $3.7 million from Aljunied council's accumulated surplus was transferred to its sinking fund. Under the Town Councils Act, this must be done after an election. But the sinking fund can be used by councils for future major repair and repainting works.

In his comments on Nov 7, Mr Lee noted that Aljunied Town Council - before it was merged with Hougang Town Council by the WP - had an operating surplus of $3.3 million. But within two years, the merged council's financial position deteriorated rapidly. It had an operating deficit of $734,000 in the 2012 financial year.

Using financial statements of AHPETC, the ministry provided comparisons of finances in the 2012 financial year, and that of the 2010 financial year when Aljunied was under the PAP.

The data showed that despite AHPETC's increased income of $29.8 million in FY2012 - 11 per cent more than the $26.8 million in FY2010 - its expenditure was up significantly at $35.4 million. This was 30 per cent more than the $27.3 million of FY2010.

The council's operating deficit in FY2012, before grants, was $5.6 million. The ministry said this was a 1,120 per cent increase over the $500,000 operating deficit in FY2010.

After grants and less transfers, AHPETC's operating deficit was $734,000 - as compared to a surplus of $3.3 million in FY2010.

As to the question of why Aljunied received $26.7 million in government grants in FY2010/2011 and that a much lower $7.3 million went to AHPETC in both FY2011/2012 and FY2012/2013, the ministry said that of the $26.7 million given, an amount of $19.2 million was a one-off grant to help the council offset the cost of the lift upgrading programme. It added that Hougang council, under the WP in FY2010, similarly received $5 million.

The ministry also said on Thursday that it did not have the powers under the Act to compel AHPETC to submit its monthly arrears reports and that there were no penalties for not doing so.

Currently only three offences attract fines: the misuse of council funds, contravention of the lift upgrading programme rules, and wilful withholding of information required by an auditor, it said, adding that this is because councils "are supposed to be directly accountable to their residents".

But the ministry said it was reviewing the Act "to strengthen regulatory oversight over the town councils, to better safeguard residents' interest".

This was being carried out as a part of a strategic review of town councils led by Senior Minister of State for National Development Lee Yi Shyan, which started last year .