AHPETC clarifies "disclaimer of opinion" of audit report

The Aljunied-Hougang-Punggol East Town Council issued a media statement on 14 February in response to recent reports about auditors submitting a disclaimer of opinion on the town council’s accounts, as it was felt the town council had not complied with provisions of the Town Councils Act and the Town Councils Financial Rules.
In the media statement, town council chairman Slyvia Lim cautioned that the Ministry of National Development’s public statement of the issue might have misled public perception. She also indicated that the problems identified by the auditors were a result of information gaps that existed at the hand-over process of the town council after the 2011 General Elections. The media release indicated that “MND could well be the best party to assist the TC to resolve some of the key information gaps”, and noted the AHPETC’s request for MND’s assistance to verify and confirm the missing information.
We have reproduced the media statement in full below.
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REQUEST FOR MND’S ASSISTANCE AND AUDIT OF AHPETC
We refer to the media statement by the Ministry of National Development (MND) released on the evening of 13 February 2014. Therein, MND highlighted various concerns regarding the auditor’s report on the financial statements of Aljunied-Hougang Town Council (AHTC) for Financial Year 2012. As MND’s observations as stated are incomplete and will mislead the public, it is therefore necessary to put the MND’s statement in proper perspective.
The auditors have given us a qualified report. It is not an adverse report. They have also stated clearly that apart from their specific observations, our books, accounts and records have been kept in accordance with the Town Councils Act. The full audited report can be found at www.ahpetc.sg.
In its media statement, MND highlighted the auditors’ inability to verify certain figures. We do understand the auditors’ plight, as there were information gaps that existed at the handover after the General Election 2011 which to date are still not filled. At FY 2011, the auditors had tried to request information from former auditors, unsuccessfully. Repeated attempts by the Town Council (TC) to obtain information from the former Managing Agent (MA) and government authorities, such as asking MND / the Housing and Development Board regarding $1.12 million which the PAP-run Aljunied TC had recorded as receivables from the Citizens Consultative Committees (CCCs) for Town Improvement Projects, did not yield answers. Attempts in FY 2012 to get the information were also unsuccessful. 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. In this regard, we note that MND could well be the best party to assist the TC to resolve some of the key information gaps.
We refer next to the transfer of monies to the TC Sinking Fund in FY 2012. We acknowledge that the TC’s practice of transferring monies to the Sinking Fund after deducting Sinking Fund expenses was an oversight, which has since been rectified. This oversight did not result in any loss of monies nor unauthorized spending. The auditors’ advice has been taken to ensure a physical transfer of monies from the Operating Fund of the TC to the Sinking Fund every quarter from now on.
Mass media reports have repeated past insinuations of impropriety in the TC awarding the MA contract to FM Solutions and Services Pte Ltd (FMSS). These must be debunked.
MND’s media statement highlighted the auditors’ observations that project management fees to a related party had not been separately disclosed in the accounts. It is standard practice for TCs which engage MAs, including PAP TCs, to include project management as part of the MA services awarded. As far as we know, TC financial statements do not specify separate reporting for project management fees paid, as these are reported as construction costs for the project or Sinking Fund expenditure. In any event, AHPETC submits quarterly returns to MND on any new contracts awarded to MAs. 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.
It is useful to set out, again, the circumstances leading to the appointment of FMSS as MA for AHTC. Post General Election in May 2011, there was an urgent need to put in place a new MA for Aljunied GRC, as the incumbent MA had indicated its wish to be released from the MA contract. At the same time, the Town Council Management System (TCMS) had been sold to Action Information Management Pte Ltd (AIM), a company wholly-owned by the People’s Action Party, and could be terminated anytime with one month’s notice. The TC determined that there was no time to call a tender under these circumstances, and the most prudent course of action was to plan for a tender in a year’s time after the proper completion of handing over was better assured. The TC then decided to appoint FMSS, which comprised key staff from the former Hougang TC, to manage the newly gazetted Aljunied-Hougang Town. FMSS was appointed without tender for only ONE year, a transitional period, principally to oversee key tasks of the handover, using the same rates as the former MA appointed by the PAP for Aljunied TC. An open tender was then called in 2012 for a customary 3-year contract. Although three companies picked up the tender documents, only FMSS submitted a tender. The tender was rigorously evaluated and subject to a special audit. Accordingly, any allegation of impropriety is utterly rejected. Nevertheless, as indicated previously, any authority or anyone believing there was wrongdoing should report the matter to the Corrupt Practices Investigation Bureau with whom the TC will fully co-operate.
At this point, we continue to fine-tune the town management accounting systems as we operate live on a daily basis. As MND has expressed its concerns over our accounts, we seek its assistance in resolving the issues raised by our auditor, by helping us verify and confirm the various opening figures handed over from the former Aljunied TC. We also welcome any audit by MND which it deems necessary.
SYLVIA LIM
CHAIRMAN
ALJUNIED-HOUGANG-PUNGGOL EAST TOWN COUNCIL
14 February 2014