It was a long eight-minute exchange in parliament between Deputy Prime Minister (DPM) Tharman Shanmugaratnam and Workers' Party (WP) chairwoman Sylvia Lim on the financial lapses of Aljunied-Hougang-Punggol East Town Council (AHPETC) by the Auditor-General's Office (AGO) on Aug. 17, 2015.
A bit of context: DPM Tharman spoke about the AGO report, noting that while there are lapses in both the public sector agencies and AHPETC, the government's accounts "is safe". Unfortunately, DPM Tharman said that "the whole house of AHPETC's finances is unsafe, with many structural defects".
tl;dr version: Instead of saying "noted with thanks, we will improve and do better next time", Lim decided to take on the finance whiz-kid about finances. And the result for Lim is not pretty.
Lim: Actually, the auditors said it's okay what. Only three issues remained unresolved out of 13.
Tharman: Wait. You submit very late and the accounts still got issues. House analogy 1: If house is structurally unsafe, you cannot put a new coat of paint on the front walls.
Lim: You did not answer my question - can you accept my point that only three remained unresolved?
Tharman: House analogy 2: That is like saying that except the pillars of my house are in serious danger of collapsing, everything is fine. The examples do strike me as a Finance Minister as being fairly serious examples.
Anyway, below is the full exchange (key soundbites in blue):
Thank you Mdm, three clarifications or supplementary questions for Deputy Prime Minister Tharman. He made some references in his answer to the audit done by the AGO on the Aljunied-Hougang Punggol East Town Council (AHPETC) and I would like to ask him some questions on this.
First, is he aware that the town council has since filed a subsequent audited accounts for FY2013/2014 by 30 June. Secondly, can he confirm if he has read those accounts? Third, the auditors that audited our accounts which was recently submitted on 30 June. Is he not aware that out of the 13 disclaimers that were put into our previous accounts, the auditors has confirmed that only 3 remained unresolved. And last of all, does DPM, is he not also aware that that this recent audit that we did for FY13/14, our auditors actually made the observation that except for certain specific issues, the town council actually compiled with the act – in terms of keeping proper accounts and books.
DPM Tharman Shanmugaratnam:
I have been reading the reports regarding the latest accounts. First of course it has to be noted that they were submitted very late – several months after they were meant to be submitted to the Ministry of National Development (MND). MND in fact issues a reply to queries on the matter – which I have read – the accounts are still qualified with disclaimers of opinion.
They are qualified on several counts. First I should also note that these are new auditors appointed by AHPETC and they have flagged 8 different areas of concern involving non-compliance with legal and regulatory requirements. 8 areas where there were non-compliance.
These were fairly basic areas – they were not minor areas of infraction.
There were still matters to do with related-party-transactions. Quite significant matters. There were lapses with regards to transfer to sinking funds, which is an extremely important matter for all town councils.
Failure to transfer money to sinking funds when due is really putting the house at risk.
The transfer that AHPETC made according to the auditors report were late and as you recall from the previous AGO report, errors were discovered in the computation only after the AGO’s audit. So there is something seriously wrong there.
There were also problems to do with the accounts themselves. Problems to do with the opening balances, problems to do determining the accuracy of the services and conservancy charges that were owed to the town council. Problems to do with the accounting for creditors and accrued expenses.
So it's not something to be whitewashed. When the house is structurally unsafe one doesn’t just go put a new coat of paint on the front walls.
"When the house is structurally unsafe one doesn’t just go put a new coat of paint on the front walls"
I think it needs a very hard look at the foundations need to be put in place. It's hard work but you’ve had a lot of time to do so.
Thank you Mdm. DPM still has not actually answered my question – whether he accepts that in the FY13/14 accounts which our auditors approved – that they have noted that out of 13 disclaimers from the past, only 3 have remained unresolved. So I like him to confirm whether he accepts that point.
Secondly does he also accept some of the areas which our auditors highlighted were also carried over from the previous opening balance issues. That is the second point.
Third point, is regarding the sinking fund transfers. I think it is public knowledge that the town council still has not received its operating S&CC grants for FY 14 and FY15. So is DPM not aware of that as well.
Last of all, does DPM not accept what I put to him earlier that the auditor’s opinion that except the specific observations, we have complied with the (Town Council) Act.
Well, that is like saying that, except for the fact that the pillars of my house are in serious danger of collapsing, everything is fine.
The examples that I have given are of the areas that the auditor has qualified, do strike me as a Finance Minister as being fairly serious examples. There are not minor infractions which you put a coat of paint over. They are very serious examples.
"So I would really strongly advise not to get into the game of saying whether there is three or eight or so on but to look into the substance of the matter."
So I would really strongly advise not to get into the game of saying whether there is three or eight and so on but to look into the substance of the matter. These are very serious issues – a failure to transfer money into the sinking funds, being unable to account for your service and conservancy charges after a few years, after a few years. They are very serious matters to be taken seriously by everyone up and down the line. I strongly advise that.
"These are very serious issues...They are very serious matters to be taken seriously by everyone up and down the line"
Second, on the matter of grants. Here again I’ve looked at MND’s statement on the matter which I have in front of you. I am sorry to have to go through it again. But I have to take you through the key issues.
First, AHPETC had made a rather unusual request that the MND grants which ought to be split, going by normal rules and procedures, between sinking funds and operating funds – AHPETC made the unusual request for all the monies to go to the sinking funds. And MND, despite the unusualness of the request, said that it was prepared to consider this suggestion and merely asked for some information. Cashflow information. To ensure that if MND does as requested the delivery of essential services would not be compromised. That was an entirely reasonable request by MND. They are willing to entertain the suggestion you made but they would like some information to make sure that the delivery of essential services is not compromised.
AHPETC has not answered these questions. Very reasonable questions. Legitimate questions. It has not answered these questions.
And this is exactly the same thing that happened in 2014. It’s exactly the same thing.
I think you also know, that what is owing from the operating fund to the sinking fund is actually a very substantial sum. Even if you take into account MND’s grants, which MND is willing to discuss with you. And you have part of the MND grant that has to properly go into the sinking fund, and another part which goes into the operating fund, the amount that is owed to the sinking fund from the operating fund will not be solved by MND grants. That is a more fundamental problem.
Watch the full video here:
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Top photo from Gov.sg Youtube.