A probe into the sale of the People's Action Party (PAP)'s Town Council management software to Action Information Management (AIM) has found no evidence of any misuse of public funds.
A report submitted to Prime Minister Lee Hsien Loong by the Ministry of National Development (MND) found that the controversial AIM deal had complied with the Town Councils Act and Town Council Financial Rules.
In its findings, the report stated that the main issue at hand was whether the interests of residents had been protected, if there had been a conflict of interest for the parties in the deal and if there had been any misuse of public funds.
In a press release Lee said that the government "accepted the findings".
"The Review Team concluded that the AIM transaction complied with the Town Councils Act and Town Council Financial Rules, and there was no misuse or loss of public moneys in the transaction. They also noted a broader issue: the risk of politicising TC administration, because of the party political nature of TCs operating in a competitive context," read the release.
With this in mind, Lee announced that National Development Minister Khaw Boon Wan will be delivering a Ministerial Statement on the review, covering both the AIM transaction and overall governance of TCs, when Parliament sits on 13 May.
AIM deal legally sound
The review found that AIM deal was legally sound as the law does not prohibit transactions between town councils and companies with political affiliations.
It also found that no town council members had material interests in AIM or interfered in the awarding of the contract to AIM in 2010 through an open tender process. AIM had in fact made the only official bid despite five other companies expressing interest.
Accepting a single bid is legally allowed under the Town Council Financial Rules as long as it meets the requirements of the tender.
In addition, the review found that AIM had, contrary to speculation, made a loss on its transaction with the Town Council and its directors had received no fees. Subsequent management fees only covered their manpower costs in fulfilling their role of supporting the Town Council.
Independent external auditors who audited the 2010 financial accounts of the PAP's 14 Tcs did not raise the AIM deal as an issue.
Misunderstanding between AHTC and AIM
Addressing the issues raised between Members of Parliament (Mps) from the then-Aljunied Hougang TC (AHTC), the review stated that there seemed to have been a misunderstanding on the execution of a termination clause in 2011 based on formal communication between the two.
The opposition-run AHTC had believed that AIM would be terminating its contract under it's contract's termination clause and planned to upscale its system. AHTC therefore wrote to AIM in June 2011 to inform them that it was developing its own system and requested to be able to use AIM's system until August 2011 as it tested the reliability of its new system.
AIM, on the other hand, interpreted AHTC's letter to mean that they were giving a notice of intention to use its own system and no longer wished to rely on existing AIM systems, and subsequently issued a notice of termination on 22 June 2011.
This, said the report led to a misunderstanding between the two parties, with Worker's Party MP Sylvia Lim accusing the PAP of trying to "trip" up incoming opposition against public interest.
The review also recommended several “safeguards” to avoid future complications over Town Council contracts and handovers between political parties.
One option was to have in place contractual provisions allowing for automatic one-off extensions following an election when there is a change of political parties in charge of a Town Council.
The report also said that while Town Councils have fulfilled the original objectives for which they were set up, there was a "fundamental tension" between the councils' objectives of delivering good public service and the political accountability of the MPs running them.
It said that the current arrangement "'inherently bears the constant risk of politicization of town council administration" and proposed that the government consider a review of town councils in their current form to find a management process which would serve residents better.
In response to the MND's findings, the Worker's Party issued a response through Party Chairman Sylvia Lim on Friday.
"The Worker's Party and the Aljunied-Hougang-Punggol East Town Council note the release today of the findings of the MND on the nature of Town Councils and the software transactions concerning AIM Pte Ltd. We are studying the report in detail and will give our response in due course and in Parliament," said Lim in a statement.