Singapore

Shanmugam slams AHTC for ‘breezy’ attitude on KPMG report

Shanmugam slams AHTC for ‘breezy’ attitude on KPMG report
TODAY file photo
Published: 8:25 PM, July 23, 2016
Updated: 11:08 PM, July 23, 2016

SINGAPORE — Not only does the latest report by KPMG on Aljunied-Hougang Town Council (AHTC) show that “the rot is at the top”, the town council’s breezy response to the report shows no sense of responsibility, said Home Affairs and Law Minister K Shanmugam.

KPMG’s latest monthly progress report had identified an additional 70 “control failures” in the town council’s governance, financial control and reporting, procurement, and records management over five years, and also flagged a “pervasive” culture of systemic weaknesses.

In a Facebook post on Saturday (July 23), Mr Shanmugam took issue with a statement from AHTC chairman Pritam Singh.

“The attitude of AHTC in dealing with its severe problems is quite telling”, Mr Shanmugam said. “Mr Pritam Singh breezily says: ‘AHTC accepts all the recommendations in full’. That’s it. He seems to think that suffices. No need for apologies, explanations, clarifications.”

“He does not explain why AHTC indulged in ‘highly irregular’ practices. He does not explain why there was ‘failure in (its) control environment’. He doesn’t apologise for the mess, nor account for the ‘attitudes, awareness and actions of those charged with governance and management’.

“Mr Singh’s attitude is consistent with what KPMG in essence said about them: That AHTC’s management has not acted responsibly in dealing with its failings. Where is their sense of responsibility to put things right? Where is their sense of duty, honour and integrity?” Mr Shanmugam added.

Mr Singh responded in a media statement hours later, expressing surprise at Mr Shanmugam's remarks and said AHTC released the KPMG reports "even though it was not obliged to do so". According to Mr Singh, the AHTC also "specifically requested" the audit firm to publish the 70 additional lapses it had found in since April.

The 70 “control failures” identified by KPMG, which was appointed by the town council on court orders to help fix compliance and governance lapses following a protracted legal tussle, comes 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.

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.

Mr Shanmugam said KPMG’s report also underlined that “AHTC’s leadership has neither upheld nor enforced integrity and ethical values”.

“The rot is at the top,” he added. “This should come as no surprise. The High Court and the Court of Appeal have already criticised Ms Sylvia Lim and Mr Pritam Singh for suppressing the truth (designed to mislead) both in Parliament and in Court. To them, the truth is a tradable commodity.”

Mr Singh did not respond directly to Mr Shanmugam's comments except to say that "the remedial measures AHTC has undertaken since the 70 additional lapses were identified are also highlighted in the July report".

In his Facebook post, Mr Shanmugam also suggested that AHTC wanted to keep Singaporeans in the dark when they went to court to oppose the appointment of an independent accountant. 

"We are still at the early stages in this painful saga," he said. "Much work remains to be done. More facts will emerge, facts which will show what actually happened to the monies and what the WP has been up to in Aljunied, Hougang, and for two years, Punggol East."

In his statement, Mr Singh said a review of past payments made by AHTC is still ongoing and that KPMG expects to send a full report on this matter to the AHTC at the end of August. "Therefore, it is not helpful to speculate or jump the gun," he added. "The public can be assured that AHTC will publish the Past Payments Report, like all previous KPMG reports for scrutiny in full, and AHTC will take any necessary action thereafter."

In an earlier 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.