New governance rules for town councils to start in April 2020

SINGAPORE — From April next year, town councils across Singapore will have to abide by new rules that govern how they should take care of public housing estates and their own affairs.

And starting September 2021, they will also have to submit a checklist to the Ministry of National Development (MND) every year, to declare that they have abided by the code of governance, which was launched by the ministry on Wednesday (June 19).

If town councils choose not to comply or are working towards observing the rules, they will have to provide "meaningful explanations on how the governance standards in the code are achieved”, MND said.

Dr Teo Ho Pin, the co-ordinating chairman of the 15 town councils under the ruling People’s Action Party (PAP), said that one of the requirements is for town councils to appoint auditors to check on compliance with the code. This would raise operational costs, he noted.

Town councils would also find it challenging to appoint experienced town councillors with the relevant skills as volunteers, he added.

Still, he said that PAP’s town councils supported the new rules, which would strengthen the corporate governance of town councils.

“(The code) will also help to avoid conflicts of interest among various stakeholders of the town council,” he said.

MND said that while it has sought to introduce more robust governance standards, it was mindful of the cost of compliance and the different operating circumstances across the town councils.

Speaking to TODAY, Mr Pritam Singh, chief of Workers' Party (WP) and vice-chairman of Aljunied-Hougang Town Council (AHTC), said: “We were asked to give feedback and we have given our feedback.”

Mr Singh, who is also a Member of Parliament (MP) for the Aljunied Group Representation Constituency, declined comment when asked if his town council largely supports the rules.

The new rules cover four areas: Effectiveness, internal controls and processes, financial management, and vendor management. 

TOWN-COUNCIL EFFECTIVENESS

Town councils should provide effective leadership and oversight in carrying out their tasks.

• Town-council plan: They should have a plan that sets out their long-term goals and how they will ensure enough resources to meet these objectives. The plan should also include their expenditure and investment approaches to meeting those goals.

• Chairmen: Town council chairmen — who are elected MPs — should fulfil a range of duties, such as promoting high governance standards and a culture of integrity, honesty and openness, and ensuring effective communication with residents.

• Town councillors: Town councillors should be honest, act in good faith, have integrity, and grasp the views of residents so that decisions are made objectively and in residents’ best interests. Town-council secretaries should also record the attendance of town councillors at all council meetings, as showing up is key to making effective contributions. The attendance of each councillor should also be circulated to the councils and reported to the chairmen at least once a year.

• Composition and structure: Town councils should have committees overseeing key areas including audit and risk management, finance, the procurement of goods and services, and estate management. The chairperson of the finance committee, for instance, should not helm or sit on council committees handling procurement. Town councils should also have processes to select and appoint members with the relevant experience, skills and competencies to carry out their duties. They should also disclose the process for selecting, naming and reappointing town councillors in their annual reports.

INTERNAL CONTROLS, PROCESSES

Town councils should have adequate risk-management measures and internal controls to protect their assets and facilities, and residents’ interests.   

• Risk management and internal controls: They should, for instance, ensure that they have processes to identify, assess, and regularly track and review key risks. These include financial, operational, compliance, and information-technology risks, and the measures to guard against them. They should also state in their annual reports if they have assessed these risks and if there are enough and effective controls.

• Internal audit: Town councils should set up an effective internal-audit function that reports to their committees overseeing this area. This function may be in-house or outsourced, but should have enough resources and be run by people with the relevant expertise, and who are independent of the activities that they audit. The internal-audit committees should also evaluate the effectiveness of this function at least once a year.

• Record-keeping: Town councils should ensure that all records are maintained properly and kept updated.

• Data privacy and protection: They should have a data-governance and information-security framework spanning areas such as collecting, protecting, using and sharing data; disclosing data to third parties; retaining and disposing of personal data, and other confidential and sensitive information. They should also ensure that town councillors, committee members, staff members, employees of managing agents and other parties receive training in this area, if they handle confidential and sensitive data, for instance.

• Human resources: Town councils should approve human-resource policies that govern staff members in areas such as recruitment, remuneration and disciplinary action. They should, for example, also ensure that a process is in place to identify the training needs of staff members to arm them with the skills they need to perform their roles.

• Whistle-blowing: They should have a whistle-blowing policy as well as procedures for employees, residents and other people to raise concerns in confidence about  possible financial or other irregularities. The policy should include procedures for the town councils to probe concerns independently and take action.

FINANCIAL MANAGEMENT

Town councils should have sound financial-management practices to ensure that funds and assets are protected and accounted for, and managed in accordance with the law.

• Budgeting and planning: They should ensure that funds allocated through the annual budget for public expenditure are aligned to their objectives. They should also set in motion a documented process to regularly plan and review their present and long-term finances. At council meetings, town councils should also be briefed regularly about their present and projected financial position, and financial statements should be presented.

• Financial reporting: Town-council management teams, including general managers and finance managers, should regularly give councils relevant financial information, to allow them to make timely, balanced and informed decisions. Town councils should also deal with significant financial-reporting issues raised by auditors.

• Fund investments: Town councils that invest their funds should do this in line with investment policies that they have approved. They should also make certain that returns on these funds are regularly reviewed and brought up at council meetings.  

VENDOR MANAGEMENT

Town councils should have a system to manage procurement processes and measure the service standards of their vendors, including the managing agent that handles their key operations.

• Procurement: They should make sure that they carry out procurement activities in a manner that demonstrates value for money and the appropriate use of funds, and that these comply with regulatory requirements and the town councils’ objectives. They should also give “equitable consideration” to all tenders and ensure that all such activities are kept confidential, so that no interested bidder — including incumbent vendors and managing agents — have an unfair edge. Invitations to tender, the bidders who take part and their offers, as well as the successful tender and its tender price, should also be posted to publicly available channels.

• Performance management: Before awarding contracts, town councils must tell the managing agent and vendors about their roles and responsibilities, and expectations. They should also oversee the services of these contractors, and have a formal process to evaluate their performance based on criteria that they have laid out.

DRAFTING THE CODE

PAP manages 15 of the 16 town councils in Singapore. WP runs the remaining one, AHTC.

In releasing the code of governance on Wednesday, MND said that town councils, which are governed by the Town Councils Act, manage about S$2 billion in public and residents’ monies.

“As public institutions entrusted with significant amounts of public funds, town councils should have good governance and management controls in place to remain transparent and accountable to their residents,” MND said.

The ministry noted that the new rules, announced in March 2017, complement the legislative framework for town councils.

In drafting the code, MND worked with its consultant, Ernst & Young Advisory, and sought the views of an advisory panel comprising experienced academics, governance experts and industry practitioners. It also took in the views of town councils and the public.

The new rules come as several town councils have hogged news headlines over the years.

In a case involving AHTC, three WP MPs and two other town councillors are being sued by Pasir Ris-Punggol Town Council and an independent panel acting on behalf of AHTC. Those involved are alleged to have wrongfully paid S$33.7 million to managing agent FM Solutions and Services and other third-party service providers between 2011 and 2015.

In March this year, Wong Chee Meng, a former general manager of Ang Mo Kio Town Council, pleaded guilty to receiving S$86,141 in kickbacks from the director of two building and repair companies. He admitted to taking the bribes from 2014 to 2016 as inducements to advance the business interests of the two firms.