Oral Answer by Ministry of National Development on measures to safeguard public monies and residents' S&CC payments
Aug 16, 2016
Mr Charles Chong: To ask the Minister for National Development what measures the Ministry intends to take to better safeguard public monies and residents’ service and conservancy payments to Town Councils and to recover any improper past payments made by Aljunied-Hougang Town Council (AHTC), especially in light of the July 2016 KPMG report on AHTC's financial controls and systems.
Answer:
MND is deeply concerned with what KPMG had uncovered about the state of financial controls and systems in Aljunied-Hougang Town Council, or AHTC.
In its July 2016 report, KPMG reported a total of 185 control failures in AHTC. This comprises 115 identified by AHTC’s own statutory auditors and the Auditor-General’s Office (AGO) in previous audits, and an additional 70 control failures uncovered by KPMG. KPMG concluded that AHTC’s control failures were “pervasive, cutting across the key areas of governance, financial control, financial reporting, procurement and records management over the course of five years”.
Recap of Findings by AHTC’s Auditors, AGO and KPMG
To briefly recap, AHTC had received qualified financial statements from its own independent auditors for 4 consecutive financial years since FY2011. AHTC’s auditors were unable to determine the accuracy of the Town Council’s various balances, expenses and receivables, including those relating to their Service & Conservancy Charges. There were also other audit observations, including late Sinking Fund transfers, incorrect usage of Sinking Funds, as well as inadequate disclosure and segregation of duties over related party transactions.
When AGO undertook a special audit on the Town Council in 2014, it similarly found lapses in the Town Council’s management of Sinking Funds, governance of related party transactions, management of S&CC arrears, internal controls and procurement, as well as inadequacies in their record management and accounting system.
When AGO’s Report was debated in Parliament in February last year, the Town Council’s then-Chairman and her fellow Town Councillors assured this House that they had “already taken concrete steps to address and remedy many of the issues.”
More than a year has passed but the Town Council appears to have made little progress. KPMG had noted in its July 2016 report that only a few of the remediation steps that AHTC had said they would do, had been completed. While AHTC had indicated that they aimed to complete the remediation works in 15 months (i.e. from July 2016), KPMG estimates that at the current rate of progress, the remediation process will take at least 18 months.
Instead of completing the remediation plans expeditiously, what we have seen from the TC in this past one and a half years is a series of actions that have only slowed down, prolonged and frustrated the whole process. First, the TC attempted to avoid having one of the Big Four firms appointed as its independent accountant. The TC also rejected the joint appointment of accountant with Pasir Ris-Punggol Town Council (PRPTC) to review AHTC’s past payments in relation to Punggol East (PE), and when PRPTC appointed its own accountant, AHTC refused to grant access to documents or to attend the coordination meetings called by HDB with all parties to try to resolve the impasse. This pattern of behaviour is all the more worrying when set against what KPMG had stated in its July 2016 report, that the remediation of the control failures will require that the Town Councillors engage to “reset the tone at the top of AHTC, emphasising competence and accountability”.
Apart from AHTC’s slow progress in remedying the control failures, MND is also concerned about various systemic control failures that KPMG’s latest report has highlighted, including:
a) First, the extensive use of manual journal entries that bypassed AHTC’s accounts payable module, for payments totaling more than $60 million. KPMG had flagged this as “highly irregular” and “makes effective oversight of payments by the finance department practically impossible”;
b) Second, temporary clearing accounts which were not investigated or cleared, containing transactions amounting to over $648,000 in total; and
c) Third, the use of dummy codes which might not update payee records in the Accounting System, for transactions amounting to over $270,000 in total.
These control failures continue to paint a serious state of affairs in AHTC and are a cause for concern. KPMG noted that these control failures could conceal duplicate, fictitious or fraudulent payments, which could have been made without being detected.
Court-Ordered Review of Past Payments
As ordered by the Court of Appeal, KPMG is currently reviewing the past payments made by the Town Council to ascertain whether any were improperly made, and therefore ought to be recovered. The findings are due on 31st August 2016, the end of this month.
MND asked AHTC to cooperate fully with the accountants to carry out a thorough and robust review of the past payments. This matter has dragged on for many years, with multiple court hearings and not much actual progress made. For four financial years consecutively, AHTC has not had accounts that have passed the accountants’ muster. This is accurately summed up by the Auditor General in its report, that there was “no assurance that accounts are accurate or reliable, or that public funds have been properly spent, accounted for, or managed.” Residents of Aljunied, Hougang and also Punggol East need to be assured as to whether or not there were any improper past payments that ought to be recovered. The Singaporean public also needs to know as large sums of public monies and grants are at stake.
MND and HDB will be studying the accountants’ subsequent findings carefully, and will take the necessary and appropriate steps to ensure that residents’ interest are safeguarded and any improper past payments are duly recovered.