Let AGO do rotational audits of all town councils, as suggested by WP

Given the ongoing case involving the Workers’ Party’s Aljunied-Hougang Town Council (AHTC), it might seem to most people that the reasonable thing to do is for the Auditor General’s Office (AGO) to conduct rotational checks on all the town councils in Singapore.

This would keep the town councils on their toes, and allow the authorities to keep an eye on the town councils.

To be sure, town councils “already have to be audited by external auditors and the AGO has decided that individual Town Councils can suggest auditors, which have to be approved,” according to what Minister Desmond Lee said in 2016.

However, while such audits by external auditors are welcome, there is still no reason why the AGO cannot also conduct rotational checks or audits on town councils, especially given that town councils deal in millions and even billions of dollars of public funds.

Another layer of checks will not hurt anyone and in fact will give residents an added assurance that funds are managed properly. This is especially pertinent given the fact that in the last 20 years, there were only 2 instances where the AGO was tasked to conduct special audits of Government-related organisations. This was revealed in the reply by the Minister of Finance, Heng Swee Keat, to a question by WP’s Non-constituency Member of Parliament (NCMP), Leon Perera, in 2016. (See here.)

Incidentally, both cases involved the opposition.

“The first case related to investigating a claim made by an Opposition MP in the 1990s,” Mr Perera posted on his Facebook page. “The second case related to AHPETC.”

There have never been a AGO audit of a PAP town council since 1988, when town councils were created through the Town Councils Act.

A few incidents show that perhaps it is time for the AGO to do so.

Incident #1: Victor Wong of Ang Mo Kio Town Council

The recent case of Victor Wong Chee Meng, the former general manager of the Ang Mo Kio Town Council, is instructive. Mr Wong, who is currently undergoing a court trial, is accused of “allegedly [taking] bribes from two company directors, town council tenders and contracts worth millions of dollars…” (See here.)

Mr Wong faces 55 counts of “corruptly accepting gratification.”

What is also disconcerting is that Mr Wong’s alleged criminal behaviour was not discovered by any audits by external auditors, but came to light through a whistleblower who made a complaint to the town council. (See here.)

Mr Wong’s criminal behaviour had by that time gone on for 2 years, between December 2014 and September 2016, before they were discovered through that complaint.

If external audits are supposed to prevent such criminal activities, as Minister Desmond Lee seem to imply, then they have clearly failed in this case.

Incident #2: PAP company Action Information Management (AIM)

Another example which is worth noting is that of Action Information Management (AIM), the so-called $2 company set-up by the People’s Action Party in 1991.

For 20 years, 1991 to 2011, AIM was – by and large – an unknown entity. Few knew that it even existed. For almost 20 years, the company had no business dealings until June 2010, when it bought the computer system from the 14 PAP town councils then, for a measly $140,000. The computer system was reportedly built for some $20m to $25m, apparently with residents’ money.

And just as it was quietly registered in 1991, it also quietly went away in 2015, after the general elections that year, when it was “struck off” in the ACRA records.

Was the developmental costs of the computer system reflected in the PAP town councils’ reports of 1991 or later?

Was the sale of the computer system to AIM in June 2010 reflected in any of the PAP town councils’ financial records?

In the 2010/2011 Annual Report of the Ang Mo Kio Town Council, for example, it was stated simply, under “Other Commitments”:

“The Town Council entered into a maintenance contract with National Computer Systems Pte Ltd for maintaining the town council’s computer system. The contract period was renewed for one year from 1 November 2010 to 31 October 2011.”

It is strange for the statement to say that the AMK TC entered into a deal with NCS, instead of AIM. Is this “computer system” the same as the financial management system?

Do note that the computer system had already been sold to AIM in June 2010. (See here.)

The statement seems to say that the town council itself had entered into the contract with the NCS, although news reports have said that the PAP town councils had sold the system to “a third party”, namely AIM, and had also leased the use of the computer system from AIM, and not NCS.

The Straits Times reported in 2013:

“The PAP town councils sold the management software to a third party because it was “cumbersome and inefficient” to have 14 individual town councils hold intellectual property rights to the software.

“Dr Teo Ho Pin, the coordinating chairman of PAP town councils, gave this explanation in a 26-paragraph, four-page statement outlining why and how the town councils came to have a sale and lease back deal with the PAP-owned Action Information Management (Aim).”

So, what is it – did AMK TC (and all PAP TCs) enter into a contract with NCS or with AIM?

Why does the financial statement from AMK TC say one thing, and the co-ordinating chairman of the PAP TCs say another, seemingly?

Incident #3: PAP’s Aljunied Town Council

In the civil suit brought against the AHTC, senior counsel for Pasir Ris-Punggol Town Council, Davinder Singh, “questioned the process [adopted by AHTC] of calling a tender to appoint a panel of consultants and leaving it to the managing agent to choose which contractor on that panel would do specific jobs.” (See here.)

WP chief, Pritam Singh, who was on the stand, replied that “they had proceeded on the basis of precedent, noting that the previous town council’s managing agents had engaged in the same practice.”

To this, Mr Davinder Singh responded: “But two wrongs don’t make a right.”

It is an interesting response from the senior counsel, who explained why it was wrong for AHTC & ATC to do what they did – that “they did not follow the rules, or the “rationale and spirit of the rules” of the Town Councils Financial Rules (TCFR).”

What is to be noted here is that the auditors of ATC back then did not catch this apparent infringement of the TCFR by ATC.

Incident #4: Loss of $16 million by PAP town councils in toxic investments

In 2008, Singaporeans were shocked to learn that PAP town councils had invested their money in toxic financial products. The losses eventually amounted to some $16 million.

In fact, Singaporeans were unaware of such investments, taken on their behalf, until the collapse of Lehman Brothers in the States became public.

It prompted calls for town councils to disclose their investments to the public.

Let AGO conduct rotational audits on all town councils

As can be seen from the above incidents, financial irregularities and failure to catch them do not only apply to AHTC. They also apply to PAP-run town councils. That much is clear. Even the town councils’ external auditors have apparently missed certain criminal behaviour, such as those of Mr Wong.

In Parliament, in 2017, WP MPs in fact urged the government to require the AGO to conduct such rotational audits of all the town councils.

But first, in his speech in the Amendment Bill which introduced tighter oversight powers for the government, Mr Desmond Lee said “the new provision holds Town Councils to higher standards of governance, transparency and accountability in carrying out their duties. This is the right thing to do and Singaporeans expect this of Town Councils.”

He also added that “recent developments suggest that we cannot assume that MPs will always act in the residents’ best interests.”

“Taking a light-touch approach does not mean that the Government adopts a no-touch policy,” Mr Lee said. “At the end of the day, the Government’s overriding considerations must be to safeguard residents’ interests and public funds.”

Mr Pritam Singh then rose to ask if the Ministry would consider rotational audits “as a way to improve the current TC governance structure.”

Mr Lee replied that “in regard of the investigation into Town Councils, it will be carried out by independent professionals.”

“The AGO can already be triggered under the clauses in the Audit Act, as had been the case for AHPETC,” Mr Lee added.

However, as pointed out by Sylvia Lim at the same sitting, the power to decide whether to instruct the AGO to do an audit rests with the Minister who necessarily is politically vested, given that town councils are political institutions.  

“To vest a political officeholder with the decision-making power over political institutions, I think is just not tenable,” Ms Lim said.

Mr Lee held his ground, and basically dismissed the WP suggestion to have the AGO do a regular rotational audit of the town councils, without needing the Minister to trigger such audits.

It is unfortunate that the government does not see merit in the suggestion, even as it declares that safeguarding residents’ and public funds are of paramount importance and priority.

The reason given, that town councils are already audited by their own external auditors are clearly specious, given the incidents mentioned above, where residents were basically kept in the dark about certain going-ons in the town councils.

If one requires more examples to support the WP’s suggestion, then perhaps that of the People’s Association (PA) should suffice.

In 2 separate test audits by the AGO in recent years, the AGO found numerous financial irregularities with some grassroots organisations which came under the umbrella of the PA.

If test audits already reveal such troubling financial irregularities, what would full audits uncover?

Apply this to town councils, especially PAP-run town councils. Since the creation of town councils 30 years ago in 1988, no PAP-run town councils have been fully audited by the AGO.

Is this a good way to safeguard public funds?

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