23 February 2015

PAP vs. WP AHPETC Audit Circus

Member of Parliament Hri Kumar Nair said, in conjunction with the debate in Parliament on Auditor-General's Office's Audit of Aljunied-Hougang-Punggol East Town Council, that the people he discussed the matter with kept telling him not to attack The Workers' Party ("WP") because they will only get more sympathy. But he couldn't get his head around that.

He should have heeded their advice and cautioned his colleagues to refrain from going overboard.


Town Council Management System
The decision by the town councils managed by the People's Action Party ("PAP") to sell their town council management systems ("TCMS") to PAP-owned Action Information Management Pte Ltd ("AIM") in 2010 and immediately lease it back is the source of many of the difficulties faced by AHPETC that were highlighted in AGO's report.

This is because the lease allowed AIM to terminate the contract with any town council by giving that town council one month's notice in the event of material changes to the membership, or to the scope and duties, such as changes to the boundaries, of that town council.

When WP took over Aljunied-Hougang Town Council, it had to rapidly upscale and improve the TCMS it used in Hougang. But it was difficult.

A fully functional TCMS is critical for the proper functioning of any town council. In the beginning, Housing and Development Board ("HDB") provided town councils with a centralised computer system. As WP's Png Eng Huat explained:

"It makes perfect sense since town councils are set up to manage only HDB estates and the common areas. Who else would have the latest data on the number of flats in an estate, the types of flats, the residency status of the tenants, the amount of grant each flat should receive, when to start collecting S&CC and whether the unit is rented out whole or partial? All these information affects S&CC and grants."

As town councils manage HDB estates and property, it is only logical that all town councils use the same TCMS. It facilitates exchange of information between HDB and the town councils. It also facilitates the transfer of information between town councils when town boundaries change following redrawing of electoral boundaries at general elections.

How is it justifiable for MND or HDB to leave it to the individual town councils to develop their own TCMS, and end up with a product that costs more (in aggregate) and cannot pretend to be superior? It's a waste of public funds.

Managing Agent's Fees
Minister for Law K Shanmugam presented data in Parliament purporting to show that AHPETC's managing agent, FMS Solutions and Services Pte Ltd ("FMSS"), charged much more per unit than the managing agents in other towns.

Are such data are available all the time, so that the residents of the towns and the town councillors can use them as a benchmark, or only when MND wishes to publish them?

Even if FMSS's rates are higher than its peers', it is arguable whether FMSS or WP can be faulted if no other managing agent capable of managing a town the size of AHPETC is interested in the job. Someone has to do the work and the elected town councillors of AHPETC are not in a position to recruit, train, supervise and manage a large group of estate management staff who may not have any experience at all. Nor is it the reason why the citizens of Aljunied GRC, Hougang SMC and Punggol East SMC elected The Workers' Party's candidates to Parliament.

Why were the companies providing managing agent services to the PAP-managed town councils not interested in managing AHPE town, especially if (as some allege or insinuate) WP is prepared to pay much more than their PAP counterparts elsewhere? Is it politics? Or did they suspect that it would be a very challenging job, in light of either the problems with its TCMS or the suspicion that the PAP Government would give AHPETC special attention?

It is also possible that FMSS incurs higher costs because the fact that AHPETC's TCMS is not up to scratch means that a lot more time and effort are required for generating reports in the format set out by MND.

Even as Mr Shanmugam said that "the rest of us and the whole Singapore" would not know how much FMSS and FMSI (FM Solutions and Integrated Services) made because FMSS is a private exempt company and FMSI is a sole proprietorship, Mr Khaw said, "[W]e must not allow FMSS to profiteer from their incompetence, all the more when it is at the expense of residents and public monies. Even if it was not illegal, it is morally wrong." Profiteer?

Mr Khaw should explain how it is right for the PAP-controlled Parliament to approve "Salaries for a Capable and Competent Government" as the basis for setting the salaries (paid out of public funds) of PAP Government cabinet ministers (together with other political appointment holders) that are not only the highest in the world but also multiples of what the president of the United States earns.


Service and Conservancy Grants
It is incomprehensible that Mr Khaw could even consider suspending giving AHPETC the S&C Grants for FY2014 (1 April 2014 to 31 March 2015). It's childish. It may even be unlawful.

How AHPETC has handled the financial affairs of the town council has nothing to do with the residents AHPE town.

Can the citizens of Singapore refuse to pay their income taxes because of the lapses in the Government ministries and statutory boards that are highlighted by AGO every year? They can't because they will be taken to task.

Mr Khaw believes he can suspend the S&C Grants because the situation here is such that the balance of power lies overwhelmingly with the Government, and neither AHPETC nor the residents can or will sue him or MND.

The S&C Grants are financial assistance to citizens living in HDB flats. Without the S&C Grants, all town councils will have to raise S&C charges to break even. Indeed, Mr Khaw said:

"MND is mindful that the suspension does not unwittingly result in the town council not being able to pay its essential services, leading to hardship for the local residents. In fact, we are prepared to consider paying out the S&C 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 has asked AHPETC what measures they could institute to ensure this. AHPETC has not yet taken up MND’s offer. On Nov 12, 2014, Ms Sylvia Lim replied MND to say that they are assessing the situation and they will reply should they wish to take the option of the half-grant. We are concerned but we have not heard from her since then. Anyway, the earlier the AHPETC cleans up the mess, the earlier we could resume payment of the S&C grants. So the ball is in the TC’s court."

Is that Mr Khaw's goal — getting AHPETC to admit that the past S&C Grants were not channelled to the purpose for which they were given?

Mr Khaw said he was concerned about residents' safety and public health, but what happens when AHPETC runs out of money?


Missing Monies
Minister for Education Heng Swee Keat made the following startling statement in Parliament:

"$12 million was missing from their Sinking Fund. $12 million missing.

It was only after AGO pointed this out that this was put back. And, even so, one year after the financial year has ended, they still owe a substantial sum to the Sinking Fund."

It is a statement intended to shock the audience. I thought the $12 million was missing from AHPETC's bank accounts. But that's not true.

Nowhere in AGO's report did AGO say that any money was missing from the sinking fund. What AGO said was:

"The Town Councils Financial Rules require a Town Council to make the necessary transfers to sinking fund bank accounts within one month from the end of each quarter of a financial year

The Aljunied-Hougang-Punggol East Town Council (AHPETC) did not transfer monies as required to the sinking fund bank accounts and did not manage its sinking funds properly. This included not transferring Conservancy and Service (C&S) fees and grants allocated to sinking funds into the sinking fund bank accounts accurately and promptly for the financial year (FY) 2012/13. It also did not transfer monies to the sinking fund accounts for the last three quarters of FY 2011/12 until queried by AGO."

Mr Heng speculated:

"This is a very serious matter. It is wrong for the Town Councillors to argue that as long as money was put back, nothing was wrong in the first instance. The fact is they put the money back only because they were caught.

Why did this happen? Either the MA is totally incompetent or they deliberately decided not to fill the Sinking Fund, to show a better financial picture and have a large operating account to pay for expenses, the largest item being their MA fees."

Any auditor worth his salt would have noticed that the requisite transfer of monies from the operating account to the sinking fund had not been made.


Conclusion
Messrs Khaw, Shanmugam and Heng were so intent on capitalising on AHPETC's mistakes in handling its financial affairs and painting a picture of AHPETC's incompetence that they ended up looking rather silly.

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