The Aljunied-Hougang-Punggol East Town Council (AHPETC) did not have a system that could monitor its service and conservancy charges (S&CC), nor generate accurate historical data, said the Auditor-General's Office (AGO).
This led to the town council submitting "unreliable" arrears statistics to the Ministry of National Development (MND) and the town council's own finance and investment committee.
"Consequently, there is no assurance that S&CC arrears are properly monitored and managed," said the AGO.
The findings in the AGO report shed more light on the town council's management of its S&CC arrears, for which it was given the worst banding in the latest annual Town Council Management Report that was released in November last year.
The town council had drawn flak from government leaders for the high arrears rate of 29.4 per cent reported for April 2013.
But last month, AHPETC chairman Sylvia Lim said the figure was inflated because of "reporting and human error".
In fact, she said it had reported an arrears rate of 7.42 per cent as of March 2013.
The AGO said that the discrepancies in the numbers between the March and April reports "indicated that one or both the reports were incorrect".
In response, the AHPETC said the lapses were due to hiccups experienced when it took over the town council's management from the People's Action Party after the 2011 General Election.
For instance, it said it was "hampered by a lack of historical data" and could not generate time-based reports on the S&CC charges it was owed.
This was confirmed by IT company NCS, which had been the town council's vendor under the PAP's charge, it said.
The AGO also pointed out "significant discrepancies" in the March 2013 arrears reports that AHPETC had submitted to the MND and its own finance and investment committee.
The report submitted to the MND shows that there are 4,379 households with S&CC arrears of three months or more.
But the report given to AHPETC's finance and investment committee shows 17,502 such households.
AHPETC said the reason for the difference is that the arrears report to MND was sorted by months, whereas the report to its own committee was sorted by days. It added that it has since taken steps to improve its IT system and to develop an arrears reporting module that can generate reports in the format required by MND.
The AGO, in its reply, said the discrepancies were "significant" and "cannot be explained by the difference in time periods used".