What you need to know about the AHPETC saga

The front office of the Workers' Party-run Aljunied-Hougang-Punggol East Town Council in February 2015. (Yahoo photo)

What's the deal?
Singapore's lead opposition party, the Workers' Party, runs a town council overseeing all the constituencies it now represents, called the Aljunied-Hougang-Punggol East Town Council (AHPETC). In an ongoing saga, the AHPETC has been facing questions over, among others, its management of its accounts, as well as the collection of its service and conservancy charges (S&CC).

Minister of Finance Tharman Shanmugaratnam had directed the Auditor-General's Office to conduct an independent financial audit into AHPETC's accounts. The report was released to the public on 9 February.

What did the Auditor-General's report say?
The report found five key lapses in the AHPETC's accounts:
1. Lack of governance over transactions with related parties;
2. Poor monitoring of S&CC arrears;
3. Poor record and accounting system;
4. Non-compliance with rules on sinking fund;
5. Insufficient internal controls

Who are the people and parties involved?

  • Sylvia Lim, Workers' Party chairman and also chairman of the AHPETC

  • Teo Ho Pin, co-ordinating chairman of the PAP-run town councils

  • Khaw Boon Wan, minister for national development, who oversees the HDB and the governance of town councils

  • Action Information Management Pte Ltd (AIM), a company owned by former PAP MPs

  • FM Solutions and Services (FMSS), the AHPETC's managing agent

  • Danny Loh and How Weng Fan, managing director and general manager of FMSS (they are married to each other)

What happened?
Two consecutive town council management reports were released at the end of 2012 and 2013, grading AHPETC a "red" band for both its management of its S&CC arrears and corporate governance — issues included inconsistencies in money transferred to the sinking fund and the awarding of tenders.

The Town Council's appointed auditors also twice gave a "disclaimer of opinion" on their accounts, which Lim explained to be because of "information gaps" in the handover from Aljunied Town Council's previous management. The Ministry of National Development pointed out that some issues were raised in 2012 and AHPETC had promised to fix them by 2013. The MND also did not accept Lim's explanation of handover issues as a valid reason.

Teo had also raised, in Parliament, the issue of the "troubling" relationship between the AHPETC and FMSS, because Loh and How were also general manager and deputy secretary at the town council. Additionally, two other officers in the AHPETC — deputy general managers Yeo Soon Fei and Johnson Lieow Chong Sern — also have stakes in the company. While this is common among town councils, the AGO noted that the AHPETC had failed to declare the potential for conflict of interest.

In a statement on 14 May 2013, Lim responded that the then-Aljunied-Hougang Town Council, which existed before the Workers' Party won the Punggol East by-election in January 2013, had commissioned a special audit into the award of the contract to FMSS. "The audit covered compliance and good governance practices, and noted the steps taken in due diligence to ensure value for money for the Town Council," she said at the time.

AHPETC added that town councillors were also "very much aware" of the four persons' ownership stakes in FMSS, as well as their roles in the town council.

It added that all cheques issued to FMSS also had to be co-signed by Lim or vice-chairman Png Eng Huat. It said it has also put in place further controls and made sure of a segregation of duties.

The key numbers involved:
Sinking fund: For FY12/13, AHPETC transferred only S$1.5 million to the sinking fund in February 2013, roughly a quarter of what it was supposed to. It transferred another S$2.74 million in January 2014, but this was still less than the total of S$5.44 million that was required. Following the AGO’s query, AHPETC transferred another S$1.2 million in June 2014.

In the last three quarters of FY11/12, AGO found that AHPETC did not make any transfers to the sinking fund bank accounts. Following AGO’s query, AHPETC transferred $7.44 million on 30 June 2014. AGO found errors in AHPETC’s computation, which resulted in a shortfall of $469,000 in the transfer they made.

Awarding and amending contract quantum without tender: AHPETC awarded a contract amounting to S$88,346 without calling a tender. The minimum amount for a project requiring a town council to call a tender, as stated in the Town Council Financial Rules, is S$70,000. The quantum later increased to S$101,641, an amount that was approved by only the AHPETC chairman when it should have been approved by the town council, under the existing financial rules.

Other contracts awarded: S$26 million in town council funds were paid in contracts from tenders called with one bidder, $5.2 million of which did not go through a tender process at all.

Discrepancies in declarations of lift upgrading expenses: AHPETC spent S$240,000 more than what they declared in FY10/11, and a hefty S$8.14 million more than what they actually spent in FY11/12. They also overstated their expenses on the programme by S$8.38 million in FY12/13.

Additional reporting by Justin Ong