No significant lack of oversight: AHTC

The Workers' Party-run Aljunied-Hougang Town Council (AHTC).
The Workers' Party-run Aljunied-Hougang Town Council (AHTC). ST PHOTO: TIFFANY GOH FOR THE STRAITS TIMES

Aljunied-Hougang Town Council (AHTC) acknowledged lapses in finance management, but denied there was a "significant lack of oversight" over its managing agent.

Responding to an earlier version of independent auditor KPMG's report, released yesterday, AHTC disagreed that its town councillors had "surrendered" responsibility to managing agent FM Solutions and Services (FMSS).

KPMG had flagged conflicts of interest in how some FMSS shareholders also held management roles in AHTC with significant authority over financial affairs. There was "minimal oversight by the town councillors", added KPMG.

In a process known as Maxwellisation, AHTC had been given a chance to respond to a draft of the report to confirm its factual accuracy - and rebut any factual findings if it disagreed. This was to ensure that it was given the opportunity to respond to any criticism. AHTC's response was included as an annex to KPMG's report yesterday.

In its reply, AHTC said double-hatting was "not unusual".

 

It cited the secretary and general manager of former People's Action Party-run Aljunied Town Council, who was also managing director of its managing agent, CPG Facilities Management. He had played an active role in approving town council payments to CPG.

Responding to the report yesterday, AHTC noted that KPMG had deployed at least 72 personnel at its offices over eight months to thoroughly examine millions of accounting entries and documents.

It noted that KPMG had found no duplicate or fictitious payments.

  • About the issue

  • The latest KPMG report is part of its ongoing audit of Aljunied-Hougang Town Council (AHTC), after lapses in governance were flagged by both its own auditors and the Auditor-General's Office (AGO).

    In February last year, the AGO released a special report on major lapses at the then Aljunied-Hougang-Punggol East Town Council.

    The lapses date as far back as 2011, when the Workers' Party won Aljunied GRC and took over the town council.

    They included inadequate management of conflicts of interest, and weaknesses in the approval of payments.

    AHTC's external auditors had also issued "disclaimers of opinion" for each of its financial statements for FY2012 to 2015, indicating insufficient information.

    The AGO report was debated in Parliament, and the Ministry of National Development and the Housing Board applied to the courts to appoint independent accountants to look into AHTC's books.

    Last November, the Court of Appeal ordered AHTC to appoint accountants to establish whether any past payments made were improper and should thus be recovered.

    But both sides could not agree on a firm. Eventually, in January this year, the court ordered AHTC to appoint one of the Big Four accounting firms.

    In March, AHTC appointed KPMG. Since April, KPMG has provided monthly reports on AHTC's progress in rectifying issues.

But KPMG countered that FMSS' situation was different from that of the CPG employee.

"For other managing agents, those signing off payments for the town councils are not, as shareholders, ultimate beneficiaries of a fixed proportion of every payment to the managing agent that they approve," said KPMG.

As for the conflict of interest that arises when such persons have authority in financial transactions, AHTC said having co-signatories - the town council chairman or vice-chairman - is an effective control measure.

KPMG said co-signatories could potentially be influenced by the persons with a conflict of interest.

To this, AHTC replied: "To suggest that a co-signatory can be influenced easily casts aspersions on his/her integrity."

AHTC also disagreed that there was inadequate oversight over day-to-day management, citing meeting minutes that indicated checks and queries on FMSS' work.

"The town councillors were vigilant and did not merely accept FMSS' proposals and preferences," AHTC said. It cited how it instructed FMSS to prioritise the Auditor-General's Office audit despite FMSS' reservations about the impact on its functions.

AHTC further disagreed with KPMG's assessment of its managing agent's performance as "highly lacking". Though there were lapses in finance management, FMSS was performing satisfactorily in estate management, said AHTC.

Responding to the report yesterday, AHTC noted that KPMG had deployed at least 72 personnel at its offices over eight months to thoroughly examine millions of accounting entries and documents. It noted that KPMG had found no duplicate or fictitious payments.

AHTC added that it was still studying the report in detail.

A version of this article appeared in the print edition of The Straits Times on November 02, 2016, with the headline 'No significant lack of oversight: Town council'. Print Edition | Subscribe