The $14 million in operating grants withheld from the Workers' Party (WP) town council will be disbursed once safeguards are in place, the Ministry of National Development (MND) said yesterday.
In a joint statement with the Housing Board, both parties said they welcomed yesterday's Court of Appeal ruling that ordered the Aljunied-Hougang-Punggol East Town Council (AHPETC) to appoint accountants who are subject to the HDB's approval.
The judgment is "in the interest of residents and will improve accountability of public funds".
They also welcomed a statement by the WP's newly reconstituted Aljunied-Hougang Town Council (AHTC). The WP lost Punggol East to the People's Action Party in September's General Election.
AHTC chairman Pritam Singh said the town council fully accepts the judgment and will comply with all the orders the court made.
"The town council acknowledges its role as a guardian of public funds," he said. "We assure the MND that government grants or grants-in-aid are used solely for the upkeep of the town and in the interests of all residents."
He added that AHTC will work with MND to facilitate the prompt transfer of the outstanding grants, so that AHTC can make the outstanding sinking fund transfers.
On the question of the service and conservancy charges (S&CC) grants, the MND said it respected the court's view that it is for the minister to specify conditions under which the grants will be disbursed - and for the town council to decide if it will accept the grants.
The ministry said it "stands ready to re-engage AHTC" so that the grants can be disbursed soon, with the necessary safeguards in place. These include the appointment of the accountants to ensure that funds are properly used.
"MND has been and remains prepared to disburse the S&CC grants to the town council," it said.
This is the latest development in a saga which started in February this year, when a report by the Auditor-General's Office flagged serious accounting and governance lapses at AHPETC.
The Court of Appeal noted some of these lapses in its judgment yesterday - which MND and HDB also cited in their statement.
Among other things, the court noted lapses in internal control, as well as clear conflict of interests involving key officers of AHPETC, some of whom were also directors and shareholders of FM Solutions and Services, which was previously the town council managing agent.
The court said it did not appear that AHPETC "had (or has as yet) seriously considered whether and, if so, what steps need to be taken to recover possible sums due from wrong payments". It also said AHPETC did not have a system to accurately monitor the scale of S&CC arrears, and its accounting systems and procedures were inadequate.