AHTC has ‘pervasive’ lapses, needs to ‘reset tone’

SINGAPORE — A “pervasive” culture of systemic weaknesses in the Workers’ Party-run Aljunied-Hougang Town Council (AHTC), including lax enforcement of ethical practices, has been flagged by audit firm KPMG.

And remedying the situation would require no less than the town councillors stepping up to “reset the tone at the top of AHTC” to emphasise “competence and accountability”, it added.

The firm’s findings prompted the Housing and Development Board to express its “grave concern”, as it noted the urgent need for AHTC to take “immediate steps” on the systemic weaknesses highlighted by KPMG.

It also added: “As large sums of public monies are at stake, AHTC also needs to account to its residents and the public whether any monies have been lost as a result of these lapses.”

In a 43-page report posted by AHTC on its website on Wednesday, KPMG — which was appointed by the town council on court orders to help fix compliance and governance lapses following a protracted legal tussle — said it had identified a further 70 “control failures” after four months of work. These cut across key areas of governance, financial control and reporting, procurement and records management over five years. 

They come on top of the 115 “control failures” that had been identified earlier through a special audit by the Auditor-General’s Office and the town council’s statutory auditors. It also said the town council would take at least 18 months to remedy the “pervasive” lapses in its operations, noting that progress to remedy these failures has been slow.  

The report, posted by AHTC on its website on Wednesday, is the fourth by KPMG since its appointment, and wraps up its work on recommending ways to fix 17 audit points that had been flagged in AHTC previously. 

Among the issues flagged was AHTC’s “extensive use of manual journal entries” in its payments to third parties. These transactions, involving more than S$60 million worth of payments, had bypassed the accounting system that the town council’s finance department uses to oversee movement of money. There were more than 48,500 such entries, made between May 2011 and November 2015.

The use of this “highly irregular shortcut” made it “practically impossible” to have effective oversight of these transactions, the firm said. It added: “Such large-scale use of this practice raises questions about the management of AHTC’s finance function. Consequently, it is easier for duplicate payments or fictitious payments to be made without being detected.”

In addition, KPMG noted that the issues at AHTC are “larger than the sum of individual lapses”. Even if all of the control failures are individually remedied, “compliance with the Town Councils Act (TCA) will not be sustainable unless Town Councillors and senior management set the right tone at the top”, it said. The town council, it said, appeared to see the control failures as requiring “short-term fixes” and “historical explanation”. But doing so can undermine compliance by failing to address the shortfalls in the environment more generally, the firm said. 

Noting that the TCA governs with a light touch and elected town councillors are ultimately accountable to residents through the parliamentary election process, “the right tone at the top is all the more important”, it added. 

In a media release on Wednesday, AHTC said it will review the work processes of the town council and, in particular, the finance and investment and audit committees, and appoint more professionals with relevant financial experience to serve on these committees. It has also called a tender for a new Town Council Accounting System, which will facilitate and automate reporting of financial information, and it will appoint an internal auditor to provide independent assurance that AHTC’s risk management, governance and internal control processes are operating effectively.

In response to queries, AHTC chairman Pritam Singh said they “accept fully” KPMG’s urging to set the right tone, seeing it as a requirement to improve the current governance structure.

Asked if the town council would consider engaging a Managing Agent — it switched to direct management after an earlier tender to appoint one drew no response — Mr Singh said they have not ruled out the possibility.