09 January 2013

Town Councils and AIM — From ReAiming to Review

When the bureaucrats at Ministry of National Development noted that Aljunied-Hougang Town Council had yet to submit its auditors’ Management Letter — a material factor in grading the town council's corporate governance — little did they realise that they would open a Pandora's box.

Apart from the two main players — AHTC chairman Sylvia Lim and coordinating chairman for 14 PAP town councils Teo Ho Pin — how did the politicians respond to the ensuing political furore?

Grace Fu: Wrong Focus
Weeks into the saga, Minister in the Prime Minister's Office Grace Fu said that the people who were questioning the sale and leaseback of the town council management system between the 14 People's Action Party-managed town councils and Action Information Management Pte Ltd (a dormant $2 PAP company) were hoping that the public would forget how the saga started — Ministry of National Development's Fourth Town Council Management Report which gave AHTC a "red" for service and conservancy charges arrears management and "pending" for corporate governance[1][2].

When an organisation is under intense public scrutiny and a member of its Central Executive Committee tells the public to refocus, the inevitable conclusion is that the public is already focusing on the right — and the most important — aspect.

Baey Yam Keng: Town Councils Are Political Organisations
PAP Member of Parliament Baey Yam Keng felt that the matter had been unnecessarily politicised.  According to the vice-chairman of Tampines Town Council, the public might be reading too much into the political association (it is not clear whether he was referring to the political association between the PAP-controlled town councils and AIM or between AIM and PAP or among all three).  He said that town councils are run by political parties and are political organisations, not public institutions nor public service companies even though they provide a public service[3].

What was Mr Baey thinking?

Does the fact that (i) the boundaries of a town coincide with the boundaries of parliamentary constituencies and (ii) the chairman and other elected members of a town council are the elected Member(s) of Parliament for that constituency or constituencies make a town council a political organisation?

Even if one were to concede that a town council is a political organisation, that does not make a town a political organisation.  This distinction is crucial.

A town council and its members are distinct and separate from the town.  A town council is not the town.

When dealing with matters concerning any town, a town council has a fiduciary duty to the town and its residents, and must comply with such duty to the town and its residents.  Such duty exceeds what typically is acceptable in many other business relationships because a fiduciary is in an enhanced position of trust.  The town council must place the interest of the town and its residents first.

Dr Tan Cheng Bock: Questions
2011 Presidential candidate and former long-time PAP backbencher Dr Tan Cheng Bock raised several questions about the saga, including whether it was right and beneficial for the 14 PAP-controlled town councils to give up the towns' ownership of software that had been developed using the towns' funds[3].

Minister Khaw Boon Wan: Silence
The town councils come under the purview of the Ministry of National Development.  But Minister for National Development Khaw Boon Wan has been extremely silent.  Mr Khaw is also PAP chairman.

PM Lee Hsien Loong: MND to Review
Prime Minister and PAP Secretary-General Lee Hsien Loong directed the Ministry of National Development to review the sale of computer systems by PAP town councils to AIM and its subsequent lease back in the interest of transparency and maintaining trust in the system, and satisfy itself that public funds were safeguarded and residents' interests were not compromised[4].

PM Lee noted that the transaction was not raised as an issue by any of the external auditors who audited the FY2010 accounts of these town councils.

The furore has more to do with possible conflicts of interest and corporate governance issues.  Would any of the respective town councils' external auditors have known whom AIM was?

The sale took place within the period from 1 April 2010 to 31 March 2011, which is FY2011 (or FY2010/11 as some organisations call it), not FY2010.

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Notes
1. 4th TCMR http://www.towncouncils.sg/doing/Results_4thTCMR.html.

2. Taking Aim at AIM Misses Fundamental Point: Grace Fu TODAY 5 Jan 2013.

3. AIM Deal Begs Questions: Tan Cheng Bock TODAY 8 Jan 2013.

4. PM Lee Directs MND to Fully Review AIM Transaction ChannelNewsAsia.com 8:33 p.m. 8 Jan 2013.

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