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In its closing submission to court on Tuesday, Ministry of National Development (MND) said that Aljunied-Hougang-Punggol East Town Council (AHPETC) is “technically insolvent” as it does not have sufficient money in the town council to make its mandatory payments to its sinking funds.
The two-day court hearing at the High Court was initiated by MND to seek a court order to appoint independent auditors from PriceWaterhouseCooper (PwC) to AHPETC, who would then co-authorise and co-sign all payments in excess of S$20,000 from segregated bank accounts established by AHPETC and grants payable for financial years 2014/15 and 2015/16 from MND.
The independent auditors to be appointed will also ensure that all payments are properly authorised and sought to recover payment that are not properly authorised or lawfully made and to take appropriate action against any person action for AHPETC if there has been any breach of duty or unlawful conduct.
“If the defendant (AHPETC) had complied with the mandatory obligation to make their 2014 Q3 and Q4 quarterly transfers, they would not have sufficient monies,” said Attorney-General’s Chambers deputy chief counsel for litigation Aurill Kam who is acting on behalf of MND.
Ms Kam said from that point of view, it would not be an overstatement to say that the Workers’ Party-run town council is “technically insolvent”.
Grants to the town council have been withheld by MND since last year.
AHPETC had requested in June 2014 that MND disburse the Service and Conservancy Charges (S&CC) Operating Grant for FY 2014 “without further delay”, stating that “the continued withholding of the grant to AHPETC is likely to critically and adversely affect the TC’s cash flow position”.
In February this year, Minister for National Development, Mr Khaw Boon Wan said in parliament, “We are prepared to consider paying out the grants in full, or at least in half, if AHPETC could assure MND that the grants will be properly channelled to the purpose for which they are given,”
MND claims that if the court order is passed, it will then be able to disburse the S&CC grants for both FY14 and FY15 to AHPETC.
Mainstream media reported heavily on Ms Kam’s statement that AHPETC is “technically insolvent”.
CNA: AHPETC “technically insolvent”: Ministry of National Development
TODAY: AHPETC technically insolvent: MND legal counsel
Straitstimes: Town councils must abide by financial rules: MND
Channel News Asia’s report even went further to state that AHPETC did not challenge the charge by Ms Kam on being “technically insolvent”.
But what the papers did not state is that AHPETC’s representing lawyer, Mr Peter Low had highlighted from AHPETC’s affidavit in response to Ms Kam’s assertion in court.
Mr Low noted from the affidavit, “Since late April 2014, the MND had informed AHPETC of its intention to withhold the Government’s operating grants until the AGO audit was concluded. This turn of events was of concern, as all TCs rely on grants-in-aid from the MND, to meeting operating expenditure and so as not to go into the red.”
While AHPETC had only made two payments to the sinking funds since for FY 2014, it had already been a year since AHPETC had received any grant money from MND.
In the episode last year where Minister of State for National Development, Desmond Lee, said that the AHPETC had an “operating deficit of S$734,000 in FY 2012, TOC wrote about how the slash of government grants to the town council would likely have caused the deficit.
It is also said how all town councils require the grants so as not to suffer deficits in their accounts.
As seen from the chart above compiled by TREmeritius of a few town councils on the deficit and government grants given, the listed town councils were all in the red before receiving the grants from the government.
Therefore, it is fair to say that Ms Kam’s comment of “technically insolvent” would have been applied to any town council which had their grants withheld for a year and still expected to make payments into its sinking funds.