By Kimberly Spykerman, Channel NewsAsia, 5 May 2015
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The Aljunied-Hougang-Punggol East Town Council (AHPETC) is "technically insolvent", according to the Ministry of National Development (MND), which wrapped up its case on Tuesday (May 5), following a court hearing into whether independent accountants should be appointed to, among other things, safeguard Government grants.
This charge was not challenged by the town council.
The court heard on Monday and Tuesday that the town council had failed to make two mandatory payments to its sinking fund, which is used for long-term estate maintenance. With about S$14 million in Government grants currently being withheld, the town council does not have sufficient income from its service and conservancy charges to make those payments.
"If the defendant (AHPETC) had complied with the mandatory obligation to make their 2014 Q3 and Q4 quarterly transfers, they would not have sufficient monies," said MND's legal counsel Aurill Kam.
Ms Kam said that from that point of view, it would not be an overstatement to say that the Workers' Party-run town council is "technically insolvent". She also charged that the town council had been "economical with the truth", when its leaders told Parliament in February that it had been making transfers to the sinking fund for 2014.
Payments to the fund are made quarterly, but at that time, the town council had already missed the payment for the third quarter.
Ms Sylvia Lim, Chairman of AHPETC, maintained that what she said in Parliament is factual. "When it comes to what I said to Parliament, I filed an affidavit to explain, and it's still my position today that what I said is factual,” she said.
In her affidavit, Ms Lim said her statement to Parliament that the town council had been making transfers to the fund was true and correct, as two payments totaling about S$8 million had already been made.
The court also heard that the town council has sufficient funds to last till June, but this would mean not making the mandatory payments to the sinking fund.
Ms Kam said these breaches took place despite the town council's public assurances and statements that it was aware of this obligation and was complying with it.
"Does the defendant (AHPETC) view its obligations to comply with the Town Councils Act and the Town Councils Financial Rules seriously? They treat their mandatory obligations as malleable and that is a matter of concern," she told the court.
MND maintains that unless independent accountants are appointed, fresh grants that are disbursed to the town council will not be protected, and there can be no assurance that serious steps will be taken to credibly review whether there have been any wrongful payments, breach of duty, or unlawful conduct so far.
AHPETC OBJECTS TO MND'S NOMINATED INDEPENDENT ACCOUNTANTSThe town council also objected to MND's nomination of individuals from major accounting firm PricewaterhouseCoopers (PwC) as the court-appointed independent accountants. This was because PwC was the accounting firm that helped the Auditor-General's Office produce the report that flagged major lapses in the town council's books. The town council said this could give rise to a possible bias.
AHPETC's lawyer Peter Low said PwC had already made findings in the AGO's report that it was "not fully satisfied" with the validity and propriety of the town council's transactions with its managing agent. AHPETC also had disagreements with PwC during the course of the AGO audit.
Responding to a series of questions from Justice Loh, Mr Low acknowledged that there was no evidence of bias, but maintained that there could be the perception of bias. He said the town council hoped that the Court would consider a more neutral third-party – such as a retired Judge or Senior Counsel – to nominate the independent accountants, if MND's application is granted.
Justice Loh noted that the town council's leaders had stated in Parliament that they had accepted the professional and integrity of the AGO's report, and therefore could not have grave suspicions about PwC's work. Justice Loh assured the town council that if independent accountants were indeed appointed and they showed bias, they would be answerable to the court.
The town council also told the court that it is on track to meet new deadlines to submit two sets of audited accounts, which are already overdue.
Justice Loh will deliver his judgement at a later date. And Ms Lim told reporters that the town council looks forward to a fair outcome.
MND accuses the Aljunied-Hougang-Punggol East Town Council of being “technically insolvent” as it "would not have sufficient monies" if it made compulsory payments to its sinking fund.
Posted by Channel NewsAsia Singapore on Tuesday, May 5, 2015