MND discloses how it computes govt grants to town councils

SINGAPORE — The Ministry of National Development (MND) has disclosed how it computes government grants to town councils.

Since the annual Town Council Management report released on Nov 4 showed Aljunied-Hougang-Punggol East Town Council’s (AHPETC) poor ratings for S&CC (service and conservancy charges) arrears, online news sites and forums have questioned how the quantum of government grants are decided, with some suggesting that the smaller grant given to AHPETC being reason for its poor financial health.

Minister of State for National Development Desmond Lee had also said that the arrears racked up by AHPETC has “serious implications” for residents.

In response to media queries on government grants for town councils, the MND said the S&CC operating grant is allocated to all town councils based on the number of HDB flat units and the flat types, with smaller flat types get higher grants.

MND’s response in full below:

HOW THE S&CC OPERATING GRANT IS COMPUTED

The S&CC operating grant is allocated to all Town Councils (TCs) based on the number of HDB flat units and the flat types. Smaller flat types get higher grants.

The grant enables TCs to subsidise the S&CC for residents living in 4-room and smaller flats, with more being allocated for 1-room (S$33.70 per month), 2-room (S$26.20 per month) and 3-room (S$17 per month) households. The grant for each 4-room household is S$9.00 per month.

This grant formula has been in place since 1999, and is applied consistently to all TCs. S&CC grants are not based on the number of voters, nor does it apply to private property residents. TCs will receive more grants if they have more and smaller HDB flat types. Ang Mo Kio TC and Tanjong Pagar TC receive more grants than AHPETC because they have more and smaller HDB flats. Ang Mo Kio has 89,127 HDB flats, of which 39 per cent are 3-room or smaller. Tanjong Pagar has 75,050 HDB flats, of which 59 per cent are 3-room or smaller.

In comparison, AHPETC has 71,760 flats, of which only 29 per cent are 3-room or smaller. Likewise, even though Chua Chu Kang has about the same number of HDB flats (71,348) as AHPETC, Chua Chu Kang receives less S&CC grant (S$4.9 million compared to AHPETC’s S$7.2 million), because only 12 per cent of its flats are 3-room or smaller.

OPERATING VS ACCUMULATED SURPLUS

The operating surplus = income – expenditure for any one year. The TC’s operating surplus for that year is not affected by the transfer to the Sinking Fund under Section 34 of the TCs Act.

The accumulated surplus is the amount of operating surplus cumulated over the years. Under Section 34 of the TCs Act, all TCs have to transfer the stipulated amount of their accumulated surplus to their Sinking Fund after an election. This is the TC’s own Sinking Fund. The TC can use this to pay for future major repair and repainting works. After General Elections (GE) 2011, Aljunied transferred S$3.7 million Accumulated Surplus (80 per cent of total Accumulated Surplus) to its Sinking Fund, as required by law.

If Aljunied had transferred its accumulated surplus to its own Sinking Fund, can MND clarify Minister of State Desmond Lee’s remarks about the operating surplus under Aljunied vis-à-vis the operating deficit under AHPETC? Why is it that the Aljunied TC got S$26.7 million in government grants in FY2010/2011, then a much lower S$7.3 million in both FY 2011/2012 and FY2012/2013?

Minister of State Desmond Lee stated in his statement of Nov 7, 2014: “What Mr Low (Thia Khiang) also did not disclose is that Hougang managed to avoid a cash flow problem only after he merged Hougang with Aljunied after GE 2011. The two TCs’ finances were then co-mingled. Before merger, Aljunied had an operating surplus of S$3.3 million. Within two years, the merged AHPETC’s financial position has deteriorated rapidly. The operating surplus of S$3.3 million Aljunied had in FY10 had turned into an operating deficit of S$734,000 in FY12.”

MND has observed that AHPETC’s financial position has deteriorated rapidly, based on AHPETC’s own financial statements. Despite an increase in income (AHPETC’s income in FY12 was S$29.8 million, compared to S$26.8 million in FY10, a 11 per cent increase), its expenditure increased more significantly (its expenditure in FY12 was S$35.4 million, compared to S$27.3 million in FY10, a 30 per cent increase). Its operating deficit before grants was S$5.6 million in FY12 compared to S$0.5 million in FY10 (1,120 per cent increase). After grants and less transfers, it ran an operating deficit of S$734,000 in FY12 compared to a surplus of S$3.3 million in FY10.

Of the S$26.7 million in government grants received by Aljunied in FY10, S$19.2 million was a one-off grant to help TCs offset the cost of the Lift Upgrading Programme. So the perceived drop in government grants after FY10 is due to the one-off grant (Hougang TC, under the Workers’ Party, also received S$5 million in FY10).

MND earlier said: “All TCs report their S&CC arrears rate monthly, using a simple table, stating how many households owed S&CC and for how long (eg. how many owed three months or longer). AHPETC submitted its monthly S&CC arrears report using this table till April last year, when the TC reported a S&CC arrears rate of 29.4 per cent. The TC stopped submitting the monthly report thereafter. This was many months before the AGO audit, which started only in February this year. We do not know AHPETC’s current arrears rate.” Can MND share the table, possibly the TC’s April last year report?

All TCs submit their S&CC arrears report monthly, using the same table. The table is simple and has been in use by all TCs including Hougang Town Council since April 2008. In fact, AHPETC used the form for some months till April last year when it reported an arrears rate of 29.4 per cent. Since then, the TC did not submit the monthly returns. Based on the TC’s last reported S&CC arrears rate of 29.4 per cent, 39,000 households in AHPETC were effectively subsidising 16,000 households who did not pay their S&CC. MND notes from AHPETC’s submission that 10,000 (63 per cent) out of the 16,000 households only started owing arrears in the last two years. AHPETC’s report also showed that the arrears rate for hawkers was 8.2 per cent while that for commercial tenants was 50.2 per cent. The TC stopped submitting the required monthly S&CC arrears report to MND after April 2013. We do not know AHPETC’s current arrears rate.

What can MND do if a TC refuses to submit the required information?

Under the TCs Act today, MND has no power to compel TCs to submit information to MND, and there is no penalty under the TCs Act if the TC does not do so. There are currently only three offences that attract fines — these relate to the misuse of TCs’ funds, contravention of TC-Lift Upgrading Programme (LUP) rules and the wilful withholding of information required by an auditor without reasonable cause. This is because the TCs are supposed to be directly accountable to their residents. MND is reviewing the TCs Act with a view to strengthen regulatory oversight over the TCs, to better safeguard residents’ interest.