Parliament: 4 ways in which audited Govt agencies differ from WP town council

The Aljunied-Hougang office at Blk 701, Hougang Avenue 2.
The Aljunied-Hougang office at Blk 701, Hougang Avenue 2. ST PHOTO: DESMOND FOO

SINGAPORE - There is "a world of difference" between the lapses found in government agencies and those found at the Workers' Party-run Aljunied-Hougang Town Council (AHTC), Senior Minister of State for Finance Indranee Rajah told Parliament on Monday (Aug 16).

"They are different in scale, in nature and in the way government agencies and the town council have each responded to problems when they are found," she added.

"The lapses found in Government are wholly different from AHTC's problems. Our accounts are reliable unlike AHTC's. There is no systemic weakness in government agencies unlike what the auditors have found at the town council," she said.

"And unlike in AHPETC, there was no question of personal gains in any of the lapses highlighted in this year's AGO report. In all instances, the ministries and agencies have taken steps to rectify the weaknesses identified too."

 

She was responding to Mr Liang Eng Hwa (Holland-Bukit Timah GRC) who asked how the AGO report was different from auditor KPMG's report on AHTC - which was known as AHPETC when Punggol East was held by the WP before last year's general election.

Ms Indranee highlighted four key differences.

Reliability of accounts

First, the Government's accounts were found to be reliable, unlike that of the town council, whose own auditors repeatedly gave it a disclaimer of opinion.

The AGO concluded in its special report on the then-Aljunied-Hougang-Punggol East Town Council (AHPETC) in 2015 that there was no assurance that the town council's accounts are accurate and reliable, or that public funds are properly spent, accounted for and managed, Ms Indranee noted.

"There is no similar problem in government," she said. "The accounts of ministries, departments, organs of state and statutory boards have all been found by AGO and independent auditors to be reliable and prepared in accordance with the law. Public funds are properly accounted for and we know what they are being used for."

Systemic weaknesses

Second, there was no systemic weakness found in government agencies.

By comparison, the problems at AHTC were of a systemic nature and not just a matter of individual lapses, Ms Indranee said.

"The independent accountant KPMG found a further 70 control failures in AHTC in addition to the 115 found previously by AGO and statutory auditors. To quote KPMG in their July 2016 report: control failures are pervasive, cutting across key areas of governance, financial control, financial reporting, procurement and records management over the course of five years," she said.

"There is an issue larger than the sum of individual lapses at AHTC. There has been no such systemic problem in Government."

"From this year and past years' AGO reports, there is no evidence of widespread compliance problems. There is certainly no culture of non compliance," she added.

Issue of personal gain

Third, there were no question of personal gains in any of the lapses highlighted in this year's AGO report, said Ms Indranee.

In the case of AHPETC, there are serious issues to do with personal gains from related third-party transactions, she added, citing how the town council's general manager, deputy general manager and secretary were also the owners and directors of FM Solutions & Services (FMSS) which provided managing agent services to AHPETC and received payments.

The secretary of AHPETC was also the sole owner of FM Solutions & Integrated Services (FMSI) which provided maintenance and lift rescue services to AHPETC and likewise received payments.

A review also found the profit margins of FMSS were abnormally high, she said.

The conflicts of interest highlighted by AGO in the AHPETC case are fundamentally different from the case of Nanyang Polytechnic (NYP) and its subsidiary NYP International (NYPI) that was highlighted in the AGO report, she said, noting that there was no question of personal gain in NYP's case.

"There were no personal interests involved in the part of the directors of NYP and NYPI and no leakage of money to any third parties. NYPI is wholly owned by NYP and any profits made by NYPI will only benefit NYP," she added.

Steps to rectify weaknesses

Fourth, ministries and agencies have in all instances taken steps to rectify weaknesses found, Ms Indranee said.

"Notwithstanding the shortcomings and failures identified by their own auditors and subsequently the AGO, AHPETC did not take prompt measures to rectify these problems despite repeated requests by the Ministry of National Development to do so," she said.

This resulted in MND having to bring an application to court and only after a court order was made was KPMG appointed as an independent accountant by AHPETC.

KPMG in its latest monthly report in July 2016 - four years since the town council's auditors first voice reservations about the accounts - noted that progress to remedy the control failures has been slow, she added.

The Government understands that AHTC is working on its remedial plans, and has updated and put in place a revised policy to manage conflict of interest issues, but other remediation plans on governance of related party transactions were still unresolved, she added.

"By contrast, every government agency takes AGO findings seriously. Where there are lapses, they are openly acknowledged and steps taken to address them as soon as possible," Ms Indranee said.

"Our system is transparent, accountable and responsive and we look forward to the same in AHTC as it hopefully rectifies its problems," she added.