Auditors ‘unable to express opinion’ on financial statements of WP town council

SINGAPORE — Independent auditors said they were unable to express an opinion on the latest financial statements of the Aljunied-Hougang-Punggol East Town Council (AHPETC), after they could not determine if items worth more than S$22 million were valid or accurate.

Putting the Workers’ Party-run town council’s 2012/13 financial statements under the spotlight, the Ministry of National Development (MND) flagged cause for concern in a statement issued yesterday evening.

This was the second year in which AHPETC’s auditors, Foo Kon Tan Grant Thornton, have submitted a disclaimer of opinion on the town council’s accounts, MND said. “This is a cause for concern,” the ministry said.

A disclaimer of opinion is issued when the auditor is unable to express an opinion on the financial statements, which could be due to the inability to obtain sufficient appropriate evidence to provide a basis for audit opinion.

The Workers’ Party (WP) did not respond to media queries by press time.

Under the law, town councils are required to submit their audited financial statements to the Minister for National Development for presentation to Parliament. A copy of the audited financial statements and any report made by the town council’s auditors must also be forwarded to the Auditor-General.

In a statement to the press, the MND said seven reminders were issued to AHPETC before its audited financial statements for the latest financial year was finally submitted. This was done on Monday, five months after the Aug 31, 2013, deadline.

The MND noted several findings of the auditors:

The town council did not provide the auditors with details of the project management service fees paid to FM Solutions and Services, its managing agent. As such, the auditors were not able to determine if the related party disclosures were complete. Related party transactions refer to transactions where the town council’s key management personnel have a personal financial interest.

The financial statement showed that S$5.3 million was paid in managing agent fees to FM Solutions in the 2012/13 financial year, and S$3.8 million was paid in the previous year.

Auditors were also unable to determine if lift repair and upgrading expenses amounting to about S$20 million were valid or accurate. This was also the case for S$1.8 million of receivables recorded under “Sundry Debtors”, S$308,000 of temporary unidentified receipts from residents and the Housing and Development Board, and advance receipts of about S$507,000 from residents relating to conservancy and service charges.

There were “unexplained differences” of Goods and Services Tax (GST) payable of S$518,000, and differences of S$63,000 in cash and bank balances that were not reconciled.

In the financial statements, the auditors reported that the town council did not transfer any conservancy and service charges to the bank account of the sinking funds – a contravention of Town Councils Financial Rules, which state this should be done within one month of the end of each quarter of each financial year.

Based on their observations, the auditors said AHPETC “has not complied” with the provisions of the Town Councils Act and the Town Councils Financial Rules.

In its annual report, however, the town council said that preparing the FY2012/2013 financial statement “continues to be a challenge” and acknowledged that there were items whose validity the auditors were unable to verify.

As with the previous financial year, there were several handover issues that required more time to resolve, AHPETC wrote. “There were receivables from the Citizens’ Consultative Committee which could not be verified.”

There were systemic and structural issues associated with a new financial system after the town council changed hands, it added. “GST differences, Income Tax provisions and payments, conservancy charges received in advance are major accounts which require more time and effort to reconcile.”

AHPETC did not receive a rating on corporate governance in last November’s Town Council Management Report because it had not submitted its audited financial statement for 2012 at the time — the same issue that erupted into a heated debate between the WP and the People’s Action Party (PAP) over the sale of an IT system to a PAP-owned company.

Coordinating Chairman of the PAP Town Councils Teo Ho Pin had asked if the WP had got the best deal by awarding a managing agent contract worth over S$5 million, and exercised due diligence in awarding S$21 million in contracts to FM Solutions, run by long-time WP supporters Mr Danny Loh and Ms How Weng Fun.

AHPETC Chairman Sylvia Lim then challenged National Development Minister Khaw Boon Wan and Dr Teo to report the matter with FM Solutions to the Corrupt Practices Investigation Bureau if they believed something was amiss.