SINGAPORE— Following a year-long audit, the Auditor-General’s Office (AGO) has found several lapses in governance and compliance with the law by the Aljunied-Hougang-Punggol East Town Council (AHPETC).

The AGO report was submitted to the Government on Friday and made public yesterday. The 17-page report, which came with several annexes and appendices, will be discussed in Parliament on Thursday, after National Development Minister Khaw Boon Wan tabled a motion on it.

The town council’s major lapses included a failure to transfer monies into the sinking-fund bank accounts as required by the Town Councils Financial Rules, inadequate oversight of related party transactions, not having a system to monitor arrears of service and conservancy charges (S&CC) accurately, poor internal controls, and no suitable system to safeguard documents and keep proper accounts and records as required by the Town Councils Act.

While the town council has maintained that it did not do anything wrong or illegal, the AGO said: “Until the weaknesses are addressed, there can be no assurance that AHPETC’s accounts are accurate and reliable, or that public funds are properly spent, accounted for and managed.”

In February last year, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam directed the Auditor-General to conduct an audit of the town council’s 2012 accounts, after independent auditors said they were unable to express an opinion on its latest financial statements. This led to the Ministry of National Development (MND) flagging cause for concern as it was the second successive year in which the town council’s auditors, Foo Kon Tan Grant Thornton, had submitted a disclaimer of opinion on its accounts — with the auditors raising several more issues of pressing concern in the second year, compared to the first year.

Among other findings, the AGO report said that conflicts of interest arose when key officers in AHPETC also owned or were linked to companies hired by the town council for estate management work. It cited 84 invoices amounting to S$6.61 million, involving an AHPETC key officer who reviewed the work and approved payment, and also had shareholdings in the company that received the money. It cannot be ascertained if these payments had been adequately verified due to a lack of necessary checks and balances, the report said.

The report also highlighted several instances where AHPETC failed to make necessary transfers to its sinking funds, which are used for improvement and long-term maintenance of properties. For instance, no transfer was made for the last three quarters of financial year 2011/2012. Even when S$7.44 million was put in in June last year following AGO’s queries, there was still a shortfall of S$469,000.

The report is the latest development of long-running saga that began in 2012, when the authorities first raised a red flag on the management of S&CC arrears by the Aljunied-Hougang Town Council, which subsequently merged with the Punggol East Town Council to become AHPETC following the Worker’s Party’s (WP) victory in the 2013 Punggol East by-election.

After town council chairman Sylvia Lim blamed its poor performance on the need to develop new IT systems after the People’s Action Party (PAP)-owned Action Information Management (AIM) terminated its contract, a review was conducted of the transaction which saw the 14 PAP town councils selling management software to AIM via an open tender in 2010.

In May 2013, the review by the Ministry of National Development gave the AIM transaction the all-clear but it recommended that the Government conducts a “strategic review” on the roles and functions of town councils, in view of their politicised nature. It led to a review of the town council framework which is still ongoing.

Since 2012, WP’s management of its town council has come under scrutiny regularly, especially after its poor performances in the annual town council management report.

During the saga, sharp words were exchanged in Parliament as well via the media, with Ms Lim at one point challenging Mr Khaw and Coordinating Chairman of PAP Town Councils Teo Ho Pin to report the matter to the Corrupt Practices Investigation Bureau if they believe something was amiss.

Most recently, Minister of State (National Development) Desmond Lee and Ms Lim were involved in a war of words, with Mr Lee saying that the excuses the WP has been doling out has cast doubt not only on the competence of AHPETC, but also on the integrity of its leaders. Minister for Culture, Community and Youth Lawrence Wong also commented that AHPETC’s silence on its financial situation may suggest “bigger problems lurking”.

Last month, after being repeatedly pressed for explanations, AHPETC clarified that a counting error had led to its inflated S&CC arrears report.

Corporate governance and political analysts whom TODAY spoke to said the AGO report raised concerns even though there was no evidence of fraud or criminal wrongdoing.

Calling AHPETC’s financial affairs “messy”, National University of Singapore Associate Professor Lan Luh Luh said: “If you don’t exercise care when you take public money, it can be quite serious, because it allows room for fraud.”