Workers' Party chairman Sylvia Lim has described as incomplete and misleading the Ministry of National Development's (MND) statement on the financial statements of the town council under the opposition party.
On Thursday, the MND issued a statement to express concern that the independent auditors engaged by Aljunied-Hougang-Punggol East Town Council (AHPETC) submitted a disclaimer of opinion on the accounts for the second year running.
On Friday, Ms Lim issued her response, in her capacity as chairman of AHPETC.
She said the MND's statement had to be put "in proper perspective" and set out her response to the problem areas flagged by the ministry.
On Friday night, MND issued a second statement to say the auditor raised 13 issues of concern, four of which it had raised a year earlier and which AHPETC had promised to fix but has not. MND said the other nine problem areas, including AHPETC's failure to transfer monies to the Sinking Fund as required, have nothing to do with handover issues.
In its report, AHPETC's auditor Foo Kon Tan Grant Thornton said it had been unable to obtain sufficient audit evidence and determine the accuracy and validity of several items in the council's accounts. On Thursday MND highlighted areas such as lift upgrading expenses of some $18.6 million, lift repair expenses of $1.6 million, receivables of some $1.8 million recorded as coming from sundry debtors and unexplained differences of goods and services tax payable of some $518,000.
On Friday, Ms Lim said AHPETC understands its auditor's plight as information gaps that existed when the WP took over the town council from the People's Action Party in 2011 still remain unfilled today.
She focused on a sum of $1.12 million which the former PAP-run Aljunied Town Council had recorded as receivables from the Citizens' Consultative Committees for town improvement projects. The auditor said AHPETC had received about $521,000 from the CCC, but this could not be identified and matched to the $1.12 million receivable.
Repeated attempts by AHPETC to obtain information on this amount from the former managing agent and government authorities like MND and the Housing Board "did not yield answers", she said. "Unless those agencies with the required information furnish them to the TC, it is likely that information gaps will remain and the accounts will continue to be qualified every year," said Ms Lim, adding that MND "could well be the best party" to assist AHPETC with resolving some of the key information gaps.
MND had also flagged the auditor's observation that AHPETC had not transferred any conservancy and service charges to its sinking funds in the last financial year, which is required by the Town Councils Financial Rules. Responding, Ms Lim said AHPETC acknowledged that the council's practice of transferring money to the sinking fund after deducting sinking fund expenses was an oversight "which has since been rectified".
She stressed that the oversight had not resulted in any loss of monies or unauthorised spending, adding that AHPETC has taken their auditors' advice to ensure a physical transfer from the operating fund to the sinking fund every quarter from now on.
Another area highlighted by MND was the auditor's observation that AHPETC had not made available details of project management service fees paid to a related party, that is, an entity where the town council's key management personnel have a personal financial interest. The council had declared under "related party transactions" fees worth some $5.3 million paid to its managing agent, FM Solutions and Serivces (FMSS), as well as project management services that FMSS had rendered "at an agreed percentage".
Ms Lim said it is standard practice for town councils to include project management as part of their managing agents' services awarded. Town council financial statements also do not specify that project management fees should be separately reported as these are listed as the project's construction costs or sinking fund expenditure, she said. "In any event, AHPETC submits quarterly returns to MND on any new contracts awarded to MAs (managing agents). We are thus puzzled by the auditors' observation as to why this leads to a qualification of the accounts, but more puzzled by why MND sees this as an issue."
Ms Lim also took issue with the insinuations of impropriety in AHPETC awarding its managing agent contract to FMSS in media reports. FMSS managing director Danny Loh is secretary of AHPETC while his wife, Ms How Weng Fan, is the firm's director and town council general manager. Ms Lim reiterated that FMSS was appointed without tender in 2011 for only one year to tide over the handover period. Subsequently, FMSS got its contract after an open and specially audited tender, she said.
Ms Lim said the town council continues to fine-tune its accounting systems and welcomed any audit by MND it deems necessary. She also sought MND's assistance in resolving the issues raised by the auditor by helping to verify and confirm some opening figures handed over by AHPETC's predecessor under the PAP.