Audit of Aljunied-Hougang-Punggol East Town Council

Transcription

Auditor-General's report on the audit of
Aljunied-Hougang-Punggol East Town Council
Misc 1 of 2015
Presented to Parliament by Minister of National Development
Ordered by Parliament to lie upon the Table:
9 February 2015
Auditor-General’s Office
Singapore
Audit of Aljunied-Hougang-Punggol
East Town Council
Main Report
6 February 2015
CONTENTS
Page
1
ABOUT THE AUDIT
1
2
BACKGROUND
3
3
OVERVIEW OF AUDITOR-GENERAL’S
OBSERVATIONS
5
4
CONCLUSION
8
5
SUMMARY OF KEY OBSERVATIONS
9
Lapses in Management of Sinking Funds
9
Lapses in Governance of Related Party Transactions
10
Lapses in Management of Arrears of Conservancy and Service
Charges
12
Lapses in Internal Controls and Procurement
13
Inadequacies in Record Management and Accounting System
14
ANNEXES
Annex A
Minister’s Directive on Audit of the Financial Accounts of
Annex B
Auditor’s Report to Aljunied-Hougang-Punggol East Town
Council for the Financial Year 2012/13
Annex C
Auditor’s Report to Aljunied-Hougang Town Council for the
Financial Year 2011/12
APPENDICES
Appendix A
Report (Part I – AGO) on Disclaimer Areas Reported for the
Financial Year 2012/13
Appendix B
Report (Part II – AGO) on AHPETC’s Financial Management
and Accounting Systems
Appendix C
Report (Part III - PwC) on Inflows and Outflows of Bank
Accounts
Appendix D
Abbreviations of Key Terms in the Reports
1
ABOUT THE AUDIT
Audit Authority
1.1
The Minister for Finance, on 19 February 2014, directed the Auditor-General under
section 4(4) of the Audit Act to carry out an audit of the Aljunied-Hougang-Punggol
East Town Council (AHPETC)’s Financial Year (FY) 2012/13 accounts, records and
books according to the terms of reference as stated below (see Annex A for the
Minister’s full directive).
Terms of Reference
1.2
The terms of reference set out in the Directive were as follows:
“(1)
Pursuant to section 5 of the Audit Act, to make such examination as the
Auditor-General may consider necessary to ascertain whether, for FY 2012/13,
all reasonable steps have been taken by AHPETC to:
(i) Safeguard the collection and custody of AHPETC’s moneys;
(ii) Ensure that issues and payments of AHPETC’s moneys were made in
accordance with proper authority and payments were properly
chargeable and are supported by sufficient vouchers or proof of payment;
and
(iii) Ensure that the provisions of any written law relating to AHPETC’s
moneys, including but not limited to the Town Councils Act and Town
Councils Financial Rules, were in all respects complied with.
(2)
In addition, to make such examination and evaluation as the Auditor-General
may consider necessary to:
(i) Investigate the causes of the Disclaimer of Opinion by M/s Foo Kon Tan
Grant Thornton LLP in their independent auditor's report for FY 2012/13;
and
(ii) Ascertain the reliability and accuracy of AHPETC’s financial
management and accounting processes and systems, and to ascertain and
understand AHPETC’s accounts.”
Audit Approach
1.3
In carrying out the audit, the Auditor-General’s Office (AGO) interviewed AHPETC
staff and other external parties, and also examined records, files, reports and other
documents obtained from the relevant parties. The external parties whom AGO
approached for information and documents included the auditor Foo Kon Tan Grant
Thornton LLP (FKT), the former managing agent CPG Facilities Management Pte Ltd
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(CPGFM), and ministries and statutory boards such as the Ministry of National
Development (MND), the Housing and Development Board (HDB) and the Inland
Revenue Authority of Singapore (IRAS).
1.4
The Auditor-General also engaged PricewaterhouseCoopers Consulting Pte Ltd (PwC)
to review selected areas of AHPETC’s accounts. PwC’s review complements the audit
work of the team from AGO.
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2
BACKGROUND
Constitution & Reconstitution of Town Council
2.1
Following the General Election on 7 May 2011, the Aljunied-Hougang Town Council
(AHTC) was formed on 27 May 2011 with the merger of Hougang Town Council and
Aljunied Town Council.
2.2
AHTC was subsequently reconstituted as AHPETC with effect from 22 Feb 2013,
following the by-election for Punggol East Single Member Constituency.
Auditor’s Reports for FY 2011/12 and FY 2012/13
2.3
The financial statements of AHTC for FY 2011/12 and AHPETC for FY 2012/13 were
audited by FKT. The key items in the published financial statements are as follows:
Total Assets
Total Liabilities
Operating Income
Operating Expenditure
Surplus for the Year
2.4
FY 2011/12
$101,572,151
$6,964,720
$28,682,516
$32,079,316
$1,104,388
FY 2012/13
$104,386,059
$14,553,486
$29,826,156
$35,056,941
($733,918)
For both the financial statements, FKT was unable to obtain sufficient appropriate audit
evidence to provide a basis for an audit opinion. For the FY 2011/12 financial statements,
FKT issued a disclaimer of opinion, listing four areas as the basis for its disclaimer. For
FY 2012/13, FKT also issued a disclaimer of opinion on AHPETC’s financial statements,
listing 13 areas as the basis for its disclaimer (see Annex B for details on FKT’s
disclaimers for FY 2012/13). Three of the four disclaimer areas for FY 2011/12 financial
statements were related to the disclaimer areas reported for FY 2012/13 (see Annex C
for details on FKT’s disclaimers for FY 2011/12).
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[Blank]
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3
OVERVIEW OF AUDITOR-GENERAL’S OBSERVATIONS
3.1
The Auditor-General’s Office (AGO) found that AHPETC had several lapses in
governance and compliance with the Town Councils Act and Town Councils
Financial Rules.
3.2
The major lapses include the following:
(a)
failure to transfer monies into the sinking fund bank accounts as required by
the Town Councils Financial Rules;
(b)
inadequate oversight of related party transactions involving ownership
interests of key officers, hence risking the integrity of such payments;
(c)
not having a system to monitor arrears of conservancy and service charges
accurately and hence there is no assurance that arrears are properly managed;
(d)
poor internal controls, hence risking the loss of valuables, unnecessary
expenditure as well as wrong payments for goods and services; and
(e)
no proper system to ensure that documents were safeguarded and proper
accounts and records were kept as required by the Town Councils Act.
3.3
Unless the weaknesses are addressed, there can be no assurance that AHPETC’s
financial statements are accurate and reliable and that public funds are properly spent,
accounted for and managed.
3.4
Sinking funds are required to be separately maintained by Town Councils for the
improvement to and long-term maintenance of properties.
3.5
AHPETC had not complied with the Town Councils Financial Rules. It failed to make
the required transfers to sinking fund bank accounts for the last three quarters of FY
2011/12. AHPETC did make some transfers for FY 2012/13 but these were late and
short of the required amounts. In most instances, the transfers were only made after
auditors’ queries.
3.6
In addition, there were other instances of non-compliance with the Town Councils
Act involving wrong use of monies in sinking fund bank accounts.
3.7
AHPETC did not disclose fully the related party transactions in its financial statements.
It also did not adequately manage the conflicts of interests of related parties arising from
ownership interests of its key officers.
3.8
The related parties were two companies engaged by AHPETC to carry out managing
agent (MA) services and essential maintenance and lift rescue services (EMSU services).
They were FM Solutions and Integrated Services (FMSI) and FM Solutions and Services
Pte Ltd (FMSS). The Secretary of AHPETC was the owner of FMSI, a sole
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proprietorship. The Secretary, General Manager and Deputy General Manager of
AHPETC were directors and shareholders of FMSS.
3.9
AHPETC did not disclose in its FY 2012/13 financial statements the amount of fees
for project management services and EMSU services rendered by the related parties.
Therefore, AHPETC did not comply with the Singapore Financial Reporting
Standards which require disclosure of related party transactions in financial
statements.
3.10
There were lapses in the procurement of EMSU services in 2011 from FMSS. AHPETC
waived the calling of open tender, due to its failure to take adequate and timely action to
procure the services. There was also a lack of due diligence in assessing the fee proposal.
As a result, the information used in approving the contract and the fees was incorrect,
which led to fees paid being higher than intended.
3.11
AHPETC could not produce documentary evidence to show the consideration by Town
Councillors of the full extent of the related party interests, conflicts of interests involved
and the safeguards needed, before AHPETC entered into contracts with FMSS. In
particular, there was no documentary evidence that the AHPETC Town Councillors had
specifically considered the ownership interests of AHPETC Secretary, General Manager
and a Deputy General Manager. These contracts amounted to about $25.9 million in total.
These issues are relevant especially in the context of weaknesses observed in paragraphs
3.12 and 3.13.
3.12
There were instances where the Secretary and General Manager issued payment claims
as owner of FMSI and director of FMSS respectively, and subsequently the same
General Manager certified these payment claims and approved the payment vouchers in
her capacity as an officer of AHPETC. PwC was not provided with sufficient
documentary evidence for it to independently ascertain the manner and extent of
verification of the payments at the cheque-signing stage by the Chairman or ViceChairman. The key officers of AHPETC (i.e. Secretary, General Manager and Deputy
General Manager) who had ownership interests in FMSS and at the same time
performed a role (for AHPETC) in approving payments to FMSS were in clear
conflicts of interests. Hence, it was important for AHPETC to have put in place
adequate mitigating controls to manage the conflicts of interests.
3.13
For two of the contracts awarded in 2012 (totalling $20.7 million), services rendered by
FMSS had commenced before formal approvals were obtained and written agreements
issued.
3.14
Taken in totality, AHPETC did not adequately manage the conflicts of interests involved
in related party transactions.
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Lapses in Management of Arrears of Conservancy and Service Charges
3.15
AHPETC did not have a system to monitor the scale of its Conservancy and Service
(C&S) arrears accurately. The statistics on arrears that AHPETC submitted to MND
as well as AHPETC’s Finance and Investment Committee were unreliable.
3.16
There were significant discrepancies between AHPETC’s arrears reports submitted to
MND and to AHPETC’s Finance and Investment Committee for the same month of
March 2013, which were not due to the reports’ different formats with regard to
duration of arrears. In addition, there were discrepancies in the numbers between
AHPETC’s reports to MND for March and April 2013 which indicated that one or
both the reports were incorrect.
3.17
Hence, there is no assurance that AHPETC is able to monitor and manage its C&S
arrears properly or present an accurate picture of arrears in its financial statements.
3.18
There were lapses in internal controls, which exposed AHPETC to the risk of loss of
monies or valuables, commitment to expenditure without requisite approval as well as
wrong payments for goods and services. In particular, it was observed that:
(a) AHPETC had not performed monthly bank reconciliations in the manner
prescribed by the Town Councils Financial Rules which require a bank
reconciliation statement to be prepared for each account at least once a month;
(b) AHPETC did not have adequate controls to safeguard valuables;
(c) AHPETC did not have adequate controls over receipt and handling of cheques;
(d) AHPETC did not comply with the Town Councils Financial Rules with regard to
approvals of procurement in a number of instances; and
(e) AHPETC did not have segregation of duties within the payment process for a
number of invoices to external vendors.
3.19
AHPETC took over the managing agent, CPGFM, from the previous Town Council in
May 2011, and subsequently appointed FMSS as the new managing agent in August
2011. AHPETC did not properly manage the transition between its two managing
agents.
3.20
AHPETC did not ensure that documents were properly accounted for and safeguarded.
As a result, AHPETC was unable to provide supporting documents for the period
April to July 2011 to its auditor, FKT. This affected the audit of its FY 2011/12
accounts and consequently the opening balances of the FY 2012/13 accounts.
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3.21
AHPETC also could not provide some documents required during the current audit that
concerned transactions taking place after AHPETC had taken over from the previous
Town Council. In response to reminders, AHPETC indicated that it could not locate
some of the documents and was still looking for others, three months after the request for
the documents.
3.22
In addition, AHPETC’s accounting systems and procedures were inadequate. In several
instances, amounts collected and paid out were not properly recorded and correctly
accounted for. AHPETC also had not exercised due diligence in monitoring and
following up on amounts due (i.e. receivables) and monies received (i.e. receipts) from
external parties. AHPETC did not trace the amounts received and remove these amounts
from the accounts for amounts due (i.e. receivables accounts). Consequently, amounts
due recorded in the accounts were overstated.
3.23
As a result of the inadequacies, AHPETC’s financial statements for FY 2012/13 did
not accurately reflect AHPETC’s state of affairs and transactions.
3.24
The observations in this overview are elaborated in the summary of key observations in
paragraph 5 while the detailed observations, AHPETC’s comments and auditors’ further
comments are contained in Appendices A to C.
4
CONCLUSION
4.1
Based on the audit observations above, the financial statements for FY 2012/13 prepared
by AHPETC did not accurately reflect the state of affairs and transactions of AHPETC.
AHPETC’s auditor had also stated in its auditor’s report for FY 2012/13 that it was not
able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.
Until the weaknesses are addressed, there can be no assurance that AHPETC’s accounts
are accurate and reliable, or that public funds are properly spent, accounted for and
managed.
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5
SUMMARY OF KEY OBSERVATIONS
5.1
The key observations from the Auditor-General’s Office (AGO)’s audit are in the
following five areas:
A.
B.
C.
D.
E.
Lapses in Management of Sinking Funds;
Lapses in Governance of Related Party Transactions;
Lapses in Management of Arrears of Conservancy and Service Charges;
Lapses in Internal Controls and Procurement; and
Inadequacies in Record Management and Accounting System.
A.
5.2
The Town Councils Financial Rules require a Town Council to make the necessary
transfers to sinking fund bank accounts within one month from the end of each
quarter of a financial year. Such funds are required to be separately maintained for
the improvement to and long-term maintenance of properties.
5.3
The Aljunied-Hougang-Punggol East Town Council (AHPETC) did not transfer
monies as required to the sinking fund bank accounts and did not manage its sinking
funds properly. This included not transferring Conservancy and Service (C&S) fees
and grants allocated to sinking funds into the sinking fund bank accounts accurately
and promptly for the financial year (FY) 2012/13. It also did not transfer monies to
the sinking fund accounts for the last three quarters of FY 2011/12 until queried by
AGO.
5.4
AGO observed the following instances of sinking funds not being transferred or the
transferred amount falling short:
(a)
For FY 2012/13, AHPETC only transferred $1.5 million to the sinking fund
bank accounts on 13 February 2013, one month before the end of FY 2012/13.
Although it subsequently made another transfer of $2.74 million on 16
January 2014, nine months after the end of the financial year, AGO found that
this was still less than what was required to be transferred under the Town
Councils Financial Rules. Following AGO’s query, AHPETC made an
additional transfer of $1.2 million on 30 June 2014.
(b)
For the last three quarters of FY 2011/12, AGO found that AHPETC did not
make any transfers to the sinking fund bank accounts. Following AGO’s
query, AHPETC transferred $7.44 million on 30 June 2014. AGO found errors
in AHPETC’s computation which resulted in a shortfall of $469,000 in the
transfer made by AHPETC.
(c)
AHPETC was supposed to transfer Goods & Services Tax (GST) input tax
claimed from Inland Revenue Authority of Singapore (IRAS) for sinking fund
expenditures paid from sinking fund bank accounts for FY 2011/12 and FY
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2012/131 back to the sinking fund bank accounts. It did not. The maximum
amount of GST input tax claimable was about $643,000 and $888,000 for FY
2011/12 and FY 2012/13 respectively.
5.5
In addition, AGO noted from its test checks that there were other instances of noncompliance with the Town Councils Act and lapses in the manner AHPETC managed
its sinking fund bank accounts.
5.6
There were instances of wrong use or wrong transfer of monies pertaining to sinking
fund bank accounts. These lapses included the following:
(a)
AHPETC wrongly deposited $5.49 million intended for sinking fund bank
accounts into an operating fund bank account upon maturity of two sinking
fund fixed deposits and closure of a sinking fund bank account in FY 2012/13.
AHPETC subsequently made a sinking fund fixed deposit placement of $5
million from the operating fund bank account instead of $5.49 million. There
was thus a shortfall of $490,000.
(b)
AHPETC had wrongly treated Neighbourhood Renewal Programme (NRP)
expenses as payments that could be made from sinking fund bank accounts. It
paid NRP expenses incurred in FY 2012/13 from sinking fund bank accounts
even though under the Town Councils Act and the Town Councils
(Disbursement of Moneys from Sinking Fund) Rules, such expenses should
not be paid from sinking funds. It later transferred NRP grants to its sinking
fund bank accounts in March 2013 (towards the end of FY 2012/13) although
there was no requirement to do so.
B.
5.7
AHPETC did not disclose fully the related party transactions in its financial statements.
It also did not adequately manage the conflicts of interests of related parties arising
from ownership interests of its key officers. There were control weaknesses, and lack
of documentary evidence that payments to the related parties were independently
verified so as to ensure that work has been satisfactorily performed and payments
were fully justified and correctly computed.
5.8
The related parties were two companies engaged by AHPETC to carry out managing
agent (MA) services and essential maintenance and lift rescue services (EMSU
services). They were FM Solutions and Integrated Services (FMSI) 2 and FM
Solutions and Services Pte Ltd (FMSS)3. The Secretary of AHPETC was the owner
1
AHPETC is allowed to claim from IRAS, GST input tax paid for sinking fund expenditure if the expenditure
falls within IRAS’ criteria. Since the GST input tax was paid from bank accounts of sinking funds, such GST
claimed from IRAS has to be returned to sinking funds.
2
FMSI provided EMSU services for the precinct under the former Hougang Town Council for the period April
2011 to June 2012.
3
FMSS provided MA services since August 2011, EMSU services for precincts under AHPETC except those
under the former Hougang Town Council from October 2011 to June 2012 and EMSU services for all precincts
under AHPETC since July 2012.
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of FMSI, a sole proprietorship. As for FMSS, the Secretary, General Manager4 and a
Deputy General Manager of AHPETC were directors and shareholders of FMSS.
5.9
First, AHPETC did not disclose in its FY 2012/13 financial statements the amount of
fees for project management services rendered by FMSS, amounting to $223,000.
AHPETC also did not disclose that FMSS and FMSI had provided EMSU services to
AHPETC in FY 2012/13 for a total fee of $1.28 million. Therefore, AHPETC did not
comply with the Singapore Financial Reporting Standards which require a reporting
entity to disclose related party transactions in its financial statements.
5.10
Second, AGO found that there was no open competition for the procurement of
EMSU services in 2011. Hence, there is no assurance that AHPETC had obtained
competitive prices for the services.
5.11
(a)
AHPETC did not take adequate and timely action to procure EMSU services
for the period October 2011 to June 2012, which led to a waiver of tender for
the services in September 2011. The contract was awarded to FMSS.
(b)
For the same tender, AGO also observed that there was a lack of due diligence
in assessing the fee proposal submitted by FMSS. The committee of four
AHPETC Town Councillors appointed to consider FMSS’ proposal informed
the other Town Councillors that the fee payable should be about the same as
the combined fees charged by the two incumbent contractors and that the
combined fees was $70,110 per month. However, AGO’s checks revealed that
the combined fees of the incumbent contractors was about $49,000 per month,
which was 30.1 per cent lower than what the Committee had informed the
other Town Councillors. AGO observed that the fees billed by FMSS for the
period October 2011 to June 2012 averaged $67,000 per month which was
36.7 per cent higher than the combined fees charged by the two incumbent
contractors at the time of tender.
Third, PricewaterhouseCoopers Consulting Pte Ltd (PwC) did not see any
documentary evidence that the AHPETC Town Councillors had considered the full
extent of the interests of the related parties, the conflicts of interests involved and
safeguards needed (see footnotes 2 and 3 for details on the related party relationships)
before AHPETC entered into the contracts with FMSS. In particular, there was no
documentary evidence that the AHPETC Town Councillors had specifically considered
the ownership interests of AHPETC Secretary, General Manager and Deputy General
Manager.
(a)
4
For the contract for MA services of about $5.2 million awarded in 2011, PwC
noted that there was incomplete disclosure by the related parties based on
documents made available. The fact that AHPETC Secretary and General
Manager had ownership interest in FMSS was not recorded in the minutes of
Town Council meetings. There was also no disclosure or documented notation
of an AHPETC Deputy General Manager’s ownership interest in FMSS.
These conflicts of interests and the safeguards needed to address the conflicts
The General Manager of AHPETC is the spouse of the Secretary of AHPETC.
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are material and should have been properly evaluated and documented, before
the contract was entered into.
(b)
For the contracts for MA and EMSU services totalling approximately $20.7
million awarded in 2012, PwC observed that the reports and minutes of Town
Council meeting made available to PwC, did not show that the relationships,
the ownership of FMSS, the conflicts of interests involved and the mitigating
control procedures that would be instituted, were considered before the
contracts were entered into.
5.12
Fourth, AHPETC did not have the necessary checks and balances in payment to
related parties. PwC observed 84 invoices amounting to $6.61 million from FMSS
and FMSI which were issued and signed by the General Manager and Secretary of
AHPETC in their roles as director of FMSS and owner of FMSI respectively. Of
these, 11 invoices amounting to $1.69 million were certified (for work done) by the
General Manager on behalf of AHPETC and 9 invoices amounting to $264,000 were
verified by the Deputy General Manager who is a shareholder of FMSS. For these
invoices, the General Manager also approved the payment vouchers and / or the
cheques before the cheques were handed over to the cheque signatories for signing.
The Secretary was also one of the signatories for some of the cheques.
5.13
PwC was also unable to determine if the Chairman or Vice-Chairman of AHPETC
adequately verified payments to related parties before they signed the cheques.
AHPETC represented that the Chairman or Vice-Chairman performed independent
checks on such payments. However, PwC was not provided with sufficient
documentary evidence for it to independently ascertain the manner and extent of
verification of the payments at the cheque-signing stage by the Chairman or ViceChairman.
5.14
The key officers of AHPETC (i.e. Secretary, General Manager and Deputy General
Manager) who had ownership interests in FMSS and at the same time performed a role
(for AHPETC) in approving payments to FMSS were in clear conflicts of interests.
Hence, it was important for AHPETC to have put in place adequate mitigating controls
to manage the conflicts of interests.
5.15
Fifth, AHPETC did not comply with the Town Councils Financial Rules as it issued
written contracts only after the services had commenced. For the two contracts
(totalling $20.7 million) awarded to FMSS in 2012, AGO observed that approvals for
award were obtained and written agreements issued, up to a month after services had
commenced. Consequently, AHPETC’s interest would not have been safeguarded.
C.
Lapses in Management of Arrears of Conservancy and Service Charges
5.16
AGO’s review of AHPETC’s C&S arrears revealed that AHPETC did not have a
system to monitor the scale of its arrears accurately. AGO found indications that
AHPETC’s statistics for arrears submitted to the Ministry of National Development
(MND) as well as to AHPETC’s Finance and Investment (F&I) Committee were
unreliable.
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5.17
AGO observed significant discrepancies between AHPETC’s arrears reports
submitted to MND and to AHPETC’s F&I Committee, which were not due to the
reports’ different formats with regard to duration of arrears. The arrears reports
submitted to MND for the month of March 2013 showed 4,379 units with arrears of
three months or more. However, the report submitted to AHPETC’s F&I Committee
for arrears as at 31 March 2013 showed 17,502 units with arrears of more than 90
days.
5.18
In addition, AGO noted discrepancies in the numbers between AHPETC’s reports to
MND for March and April 2013. The April 2013 report showed a high number of
17,077 units with arrears of three months or more. However, the March 2013 report
did not show a similar large number of units with arrears either in the “less than three
months” category or “three months or more” category which could be traced to the
April 2013 report. This indicates that one or both the reports were incorrect.
5.19
Consequently, there is no assurance that C&S arrears are properly monitored and
managed.
D.
5.20
AGO and PwC observed various lapses in internal controls and procurement, which
exposed AHPETC to the risk of loss of monies or valuables, commitment to
expenditure without requisite approval as well as wrong payments for goods and
services.
(i)
5.21
Lapses in performance of monthly bank reconciliation
AHPETC had not performed monthly bank reconciliations in the manner prescribed
by rule 32(2) of the Town Councils Financial Rules which requires a bank
reconciliation statement to be prepared for each account at least once a month. It is
important that bank reconciliations are carried out on a timely basis, at least monthly,
to enable any differences between the accounting records and the bank statements to
be investigated and addressed promptly.
(ii)
Lapses in controls over cheques received and valuable items
5.22
AGO found that AHPETC did not have adequate controls to safeguard cheques and
valuable items. The controls over receipts of cheques were weak and there were
inadequate procedures for handling cheques. There was no evidence that the
appointed AHPETC officer had carried out surprise examination of valuables in FY
2012/13. Furthermore, AGO observed that one officer in AHPETC had custody of
the key to the padlock, the password to the electronic lock of the strong room in the
main office of AHPETC, and also the key to the safe placed inside the strong room.
5.23
Given these lapses, there is a risk of AHPETC losing valuable items and not
detecting the loss on a timely basis. AHPETC had not implemented adequate controls
to properly safeguard its valuables and cheques received.
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(iii)
Lapses in Procurement and Payment
5.24
PwC’s test checks found lapses in the calling and approval of quotations. There were
also payments not made in accordance with contractual rates as well as delays in
payments.
5.25
AHPETC did not comply with the requirements under the Town Councils Financial
Rules 5 with regard to approvals of procurement. PwC’s checks revealed the
following:
(a)
AHPETC had called a quotation and awarded a contract for provision of event
management services amounting to $88,346, even though a tender should
have been called under the requirements in the Rules. The cost subsequently
increased to $101,641 due to changes in scope of work. However, the total
expenditure for the event was only approved by the Chairman of AHPETC
instead of the Town Council as required under the Rules.
(b)
There were four waivers of quotation for purchases amounting to $20,672 and
a quotation amounting to $1,500, which were approved by the Deputy
General Manager. However, there was no documentation provided to PwC to
show the delegation of authority under the Rules to the Deputy General
Manager to approve waivers of quotation and to incur expenditure.
5.26
Besides the lapses in payment to related parties mentioned in paragraph 1.12, PwC’s
checks also revealed a lack of segregation of duties within the payment process for 10
invoices amounting to $393,224 to external vendors. PwC observed that the General
Manager of AHPETC certified work done as well as approved the payment vouchers
and cheques. The lack of segregation of duties within the payment process exposes
AHPETC to the risk of wrong payments for goods and services.
5.27
PwC further observed delays in settlement of invoices by AHPETC to its vendors.
There were 85 invoices amounting to $1.26 million where the approval dates of the
payment voucher were more than 60 days from the invoice dates, the longest of
which was 8 months from the invoice date. Unnecessary delays in payments may
result in additional interest costs to AHPETC.
E.
5.28
AHPETC did not have a proper system to ensure that documents were properly
accounted for and safeguarded. In addition, AHPETC’s accounting system and
procedures were inadequate. As a result, AHPETC’s financial statements for FY
2012/13 did not accurately reflect AHPETC’s state of affairs and transactions.
5
Rules 34(1), 73(1), 73(1A), 73(3A), 73(11), 73(12) and 74(1).
Main Report
Page 14
(i)
Inadequate systems to safeguard documents
5.29
AHPETC did not ensure that it had the accounting documents to support the figures
for April to July 2011 which were included in the FY 2011/12 financial statements6.
Consequently, its auditor, Foo Kon Tan Grant Thornton LLP (FKT), was unable to
issue an audit opinion that AHPETC’s FY 2011/12 financial statements were true and
fair. This also had an impact on the audit of the opening balances in the FY 2012/13
financial statements.
5.30
AHPETC took over the managing agent, CPG Facilities Management Pte Ltd
(CPGFM), from the previous Town Council but did not manage properly the
transition from the first managing agent to its new managing agent, FMSS. AHPETC
did not ensure that it had a system to account for and safeguard the relevant
accounting documents. Further, while there was turnover of finance staff of FMSS,
AHPETC did not have formal handing and taking over procedures when finance staff
resigned.
5.31
AHPETC was also not able to provide AGO and PwC some documents on
transactions taking place after AHPETC had taken over from the previous Town
Council. These documents included contracts and job sheets 7 . In response to
reminders, AHPETC had indicated that it was not able to locate some of these
documents and was still looking for the other documents even though requests for
these documents were made at least three months earlier.
5.32
It was the responsibility of AHPETC to ensure that it took over all necessary
accounting documents and data, and put in place a proper system of record
management for safeguarding all its documents and data. AHPETC did not comply
with the Town Councils Act which requires a Town Council to keep proper accounts
and records of its transactions and affairs. Consequently, AHPETC was not able to
provide some of the documents and information required by AGO, PwC and FKT.
(ii)
Inadequacies in accounting system
5.33
AHPETC was unable to generate from the system an accurate ageing analysis of
C&S fees due in order to support its provision for fees that may not be collectable.
Inadequacies in AHPETC’s accounting system had affected its ability to provide the
information required by FKT on C&S fees due (i.e. receivables) and fees received in
advance (i.e. advance receipts).
5.34
AGO observed that the inadequacies resulted in some advance payments made by
residents at the counter to be incorrectly recorded in the accounts. This had the effect
of reducing the amounts due. The payments should have been recognised as C&S
fees received in advance. In addition, there were incorrect amendments of identifiers
(i.e. bill codes) in the accounting system, resulting in the wrong classification of
6
Aljunied-Hougang Town Council (AHTC) engaged Mazars LLP (Mazars) in July 2011 to carry out a special
audit of the financial statements for the period 1 April 2011 to 31 July 2011, prepared for handover of precincts
of Aljunied Town Council to AHTC, Ang Mo Kio Town Council and Pasir Ris-Punggol Town Council. Mazars
issued a clean audit opinion on all the financial statements.
7
Job sheets contain the summary of works carried out and are issued by contractors.
Main Report
Page 15
receipts in the accounting system. Consequently, FKT was not able to determine the
validity and accuracy of advance receipts and provision for C&S fees that may not be
collectable.
5.35
AGO’s checks also revealed the following inadequacies in AHPETC’s accounting
procedures:
(a)
AHPETC had not exercised due diligence in monitoring and following up on
amounts due (i.e. receivables) and monies received (i.e. receipts) from
external parties. AHPETC did not trace the amounts received and remove
these amounts from the accounts for amounts due (i.e. receivables accounts).
Consequently, amounts due recorded in the accounts were overstated. In this
regard, AGO’s test checks revealed that the amounts due could be overstated
by about $1.73 million for FY 2012/13. There was also no assurance that
amounts were collected when due.
(b)
AHPETC did not exercise due diligence in monitoring and following up on
items in a temporary clearing account used to record receipts whose nature
could not be identified immediately. The account had a net balance of
$308,715 as at 31 March 2013. Transactions in the temporary clearing account
should be reviewed promptly so that the accounting records could be updated
correctly and any unauthorised or invalid transactions could be detected and
investigated.
(c)
AHPETC did not trace and remove from its liabilities accounts, amounts
pertaining to works that had been paid or settled as at 31 March 2013. AGO’s
test checks revealed overstatement of liabilities for “Accrual without work
orders” by $162,112.
(d)
AHPETC did not record lift upgrading programme expenses in its financial
statements for earlier financial years (i.e. FY 2010/11 and FY 2011/12) in
which the expenses were incurred. Consequently, AHPETC did not correctly
reflect in its financial statements the lift upgrading programme expenses for
the three financial years from FY 2010/11 to FY 2012/13; there were
understatements of about $240,000 and $8.14 million in FY 2010/11 and FY
2011/12 respectively as well as overstatement of $8.38 million in FY 2012/13.
(e)
AHPETC did not reconcile the tax provisions for income tax with the actual
tax assessments and GST in the accounting records with the GST submissions
to IRAS. As a result, adjustments for over-provision or under-provision were
not made to the accounting records. In this regard, AGO’s checks revealed
that the tax provisions in the accounting records could be understated by
$495,367 for FY 2012/13.
(f)
AHPETC also did not have adequate guidelines for non-routine works to
ensure timely verification of works and issuance of work orders. As liabilities
and expenses would be recorded only after work orders were issued, there was
no assurance that liabilities and expenses were recorded in the appropriate
accounting period.
Main Report
Page 16
6
DETAILED OBSERVATIONS
6.1
The detailed observations, AHPETC’s comments and both AGO’s and PwC’s further
comments are in the following Appendices:
(a)
Appendix A: Report (Part I - AGO) on Disclaimer Areas Reported for the
Financial Year 2012/13;
(b)
Appendix B: Report (Part II - AGO) on Financial Management and Accounting
Systems; and
(c)
Appendix C: Report (Part III - PwC) on Inflows and Outflows of Bank
Accounts.
Main Report
Page 17
Annex A: Minister's Directive on Audit of the Financial Accounts of AHPETC
Page 1
Page 2
Page 3
Page 4
Page 5
Annex B: Auditor's Report to AHPETC for the Financial Year 2012/13
Page 1
Page 2
Page 3
Annex B: Auditor’s Report to AHPETC for the Financial Year 2012/13
Page 4
RESTRICTED
Page 5
Page 6
Annex C: Auditor's Report to AHTC for the Financial Year 2011/12
Page 1
Annex C: Auditor’s Report to AHTC for the Financial Year 2011/12
Page 2
RESTRICTED
Annex C: Auditor's Report to AHTC for the Financial Year 2011/12
Page 3
AUDIT OBSERVATIONS ON DISCLAIMER AREAS REPORTED
FOR THE FINANCIAL YEAR 2012/13
1
Opening Balances
Disclaimer Reported by FKT
“As we were unable to obtain sufficient, appropriate audit evidence to provide a basis
for an audit opinion on the financial statements of Aljunied-Hougang Town Council
for the financial year ended 31 March 2012 as stated in our independent auditor’s
report dated 19 November 2012, we were also unable to determine if the opening
balances of the Town Council, and the comparatives in the current year’s financial
statements which were derived from the financial statements for financial year ended
31 March 2012 are fairly stated. Any adjustment to opening balances would have
consequential effects on the current year or prior year’s figures.” (emphasis added)
Background
1.1
Foo Kon Tan Grant Thornton LLP (FKT) referred to its auditor’s report dated 19
November 2012 for the Financial Year (FY) 2011/12 financial statements of the Town
Council in its description of the FY 2012/13 disclaimer on opening balances.
1.2
According to FKT’s report on the Aljunied-Hougang Town Council 1 (AHTC)’s
financial statements for FY 2011/12 dated 19 November 20122, FKT was unable to determine
whether the income and expenses and, receipts and payments from 1 April 2011 to 31 July
2011 for Aljunied Town Council (ATC)1 that were included in the FY 2011/12 financial
statements of AHTC, were fairly stated due to the following reasons:
a. “…we were not allowed access to the auditor’s audit documentation”; and
b. “We were also not able to obtain the supporting accounting documents from the
previous managing agent 3 of the Aljunied Town Council prior to the
reconstitution.”
1
Following the General Election in May 2011, the Aljunied-Hougang Town Council (AHTC) was formed on 27
May 2011 with the merger of Hougang Town Council and Aljunied Town Council. AHTC was subsequently
reconstituted as Aljunied-Hougang-Punggol East Town Council (AHPETC) with effect from 22 February 2013,
following the by-election for Punggol East Single Member Constituency.
2
Extract from FKT’s FY2011/12 Auditor’s Report:
“The accompanying financial statements include the Income and Expenditure Statement, Sinking Funds, Town
Improvement and Project Fund and Government Grants whose figures include those stated in the Statement of
Income and Expenditure and Receipts and Payments for the period 1 April 2011 to 31 July 2011 of Aljunied
Town Council. This statement was audited by another firm of auditors and we were not allowed access to the
auditor’s audit documentation. We were also not able to obtain the supporting accounting documents from the
previous managing agent of the Aljunied Town Council prior to the reconstitution. As a result, we were unable
to determine whether the income and expenses and receipts and payments for the period 1 April 2011 to 31 July
2011 for Aljunied Town Council that are included in the accompanying financial statements, are fairly stated.”
3
The managing agent was CPG Facilities Management Pte Ltd.
Appendix A: Report (Part I - AGO)
Page 1
Audit Observations
Observation
1.3
The Auditor-General’s Office (AGO) found that there was no documentary evidence
showing that FKT was not allowed access to the audit work papers of Mazars LLP (Mazars)4 .
With regard to supporting accounting documents, the previous managing agent, CPG
Facilities Management Pte Ltd (CPGFM) informed AGO that it had handed over those
documents to Aljunied-Hougang-Punggol East Town Council (AHPETC)1. The details of the
observations are explained in the following paragraphs.
Not allowed access to audit work papers
1.4
FKT was not able to provide AGO with any documentation showing that FKT was
not allowed access to the audit work papers of Mazars. AGO noted that FKT had made an
attempt on 16 October 2012 to contact Mazars requesting “access to [Mazars’] audit
workpapers for the audit work done for the period 1 April 2011 to 31 July 2011”. According
to FKT, it did not receive a response to its letter and had not taken any follow-up action
subsequently. AGO checked with Mazars on the request by FKT and was informed that
Mazars did not receive FKT’s letter.
Handing over of accounting documents by previous managing agent
1.5
According to CPGFM, it had handed over all documents pertaining to ATC, including
the supporting accounting documents to AHPETC in July and August 2011. CPGFM
provided AGO with photocopies of listings showing the type of accounting documents up to
31 July 2011 that had been handed over to AHPETC. The listings had the signatures of staff
of the new managing agent of AHPETC, FM Solutions and Services Pte Ltd (FMSS) who
were involved in taking over the documents. AGO subsequently sighted the originals of
these listings at an AHPETC office.
1.6
AGO requested AHPETC for some documents that are of the types stated in the
listings and are dated within a specified period. AHPETC was only able to provide some of
the documents.
1.7
According to AHPETC, the FMSS staff who signed for the accounting documents had
since resigned. Of the five staff in Finance Department, including the Finance Manager, who
were involved in taking over the accounting documents from CPGFM, four resigned in 2011
and one resigned in 2012.
1.8
From interviews with three of the resigned staff, AGO was informed that the staff had
signed for and taken over the accounting files and documents from CPGFM (as mentioned in
paragraph 1.5) but they had not verified the contents of the files. The three staff who
resigned and another former staff (who was not involved in the taking over from CPGFM)
also informed AGO that these files and documents were left in AHPETC’s premises at the
4
Aljunied-Hougang Town Council (AHTC) engaged Mazars LLP in July 2011 to carry out a special audit of the
financial statements for the period 1 April 2011 to 31 July 2011 prepared for handover of precincts of Aljunied
Town Council to AHTC, Ang Mo Kio Town Council and Pasir Ris-Punggol Town Council. Mazars issued a
clean audit opinion on each of these financial statements.
Page 2
Audit Observations
time of their resignation. Based on interviews with AHPETC and former staff, AGO noted
that there were no formal handing and taking over procedures when staff resigned.
1.9
The evidence gathered by AGO indicates that certain documents were handed over by
CPGFM. AHPETC informed AGO that it had carried out extensive search to locate the
documents which AGO requested for and was not able to find the documents other than those
that had been provided to AGO.
1.10
AHPETC did not implement adequate procedures to ensure that accounting
documents were properly taken over and safeguarded. In addition, AHPETC did not have
formal handing and taking over procedures when staff resigned. Consequently, AHPETC
was not able to provide some of the accounting documents requested by AGO. Under section
35(a) of the Town Councils Act, a Town Council shall keep proper accounts and records of
its transactions and affairs. It is therefore the responsibility of the Town Council to put in
place a proper system of record management to ensure the proper safeguarding of its
documents.
Page 3
Audit Observations
[Blank]
Page 4
Audit Observations
2a
Receivables from Various Stakeholders – Citizens Consultative Committee
“(a)
Citizens Consultative Committee
As at 31 March 2013, included in other receivables and deposits were amounts of
$1,177,859 due from the Citizens Consultative Committee. Out of these receivables,
$1,118,574 relates to carried forward balances in respect of grants due for Town
Improvement projects that were in the accounts handed over by the previous
managing agent. During the current financial year, the Town Council received
$520,926 from the Citizens Consultative Committee. However, these receipts could
not be identified and matched to the receivable balance of $1,118,574. Accordingly,
the Town Council recorded this amount received of $520,926 in other payables as at
31 March 2013. We are unable to determine the appropriateness of the Town
Council’s accounting treatment of this receipt of $520,926 from the Citizens
Consultative Committee.”
Observation
2.1
AGO’s checks revealed that there was poor monitoring and lack of due diligence by
AHPETC in following up on amounts due (i.e. receivables) and monies received (i.e. receipts)
from external parties, to ensure that payments due were collected on a timely basis and that
receipts were accurately captured in the accounting records.
Amounts due from Citizens Consultative Committee of $1,177,859
2.2
AGO found from its review of an audit schedule provided by AHPETC to FKT and
the accounting records, that of the $1,177,859 stated by FKT as amounts due from Citizens
Consultative Committee (CCC) in the disclaimer, only $614,237 was due from CCC while
the remaining $563,622 was receivables from other parties such as tenants and lessees.
2.3
AGO noted that AHPETC did not exercise due diligence in following up on and
reconciling the amounts due from CCC in a timely manner. Correspondences provided by
AHPETC revealed that AHPETC started to follow up on these receivables by contacting the
Housing and Development Board (HDB) only in August 2012 (more than a year after the
accounts were handed over by CPGFM, the previous managing agent).
2.4
Arising from AHPETC’s follow-up, HDB asked AHPETC to provide project details
supporting the receivables but AHPETC did not do so. AHPETC informed AGO that it was
not able to identify the project details required by HDB as it did not have the supporting
documents for these receivables. These receivables were recorded in ATC’s accounts handed
over by CPGFM to AHPETC. Nevertheless, AGO was able to identify the project details on
the amount of $614,237 from various documents, such as invoices and payment advices,
provided by AHPETC.
Page 5
Audit Observations
2.5
AGO found that $388,887 of the $614,237 receivables had already been paid by
HDB into AHPETC’s bank account on 1 June and 24 September 2012. According to
AHPETC, it did not have the breakdown of the receivables and hence could not match the
receipts to the corresponding receivables. It had instead recorded these receipts in other
payables (i.e. $388,887 was part of $520,926 recorded as other payables which FKT also
indicated in this disclaimer).
2.6
After taking into account the $388,887 receipts and net over-accruals of $90,113 not
adjusted for when receipts were finalised, the amounts due from CCC as at 31 March 2013
should be $135,237 instead of $614,237. The $135,237 related to three projects5 carried out
in precincts which were subsequently transferred to two other Town Councils – Ang Mo Kio
Town Council (AMKTC) and Pasir-Ris Punggol Town Council (PRPGTC) due to boundary
changes in 2011.
2.7
According to CPGFM, the expenses for the three projects were paid by ATC and
ATC had claimed for reimbursement from HDB. CPGFM also confirmed that the
receivables for these claims remained in AHPETC’s accounts and were not transferred to
AMKTC and PRPGTC following the handing over of precincts with the corresponding assets
and liabilities to these two Town Councils. HDB informed AGO that it had paid these two
Town Councils in 2012 for the claims of $135,237 pertaining to the three projects.
According to HDB, it was not privy to the distribution of assets or liabilities between Town
Councils at handover. Hence, it had sought verbal confirmation from these two Town
Councils that the reimbursements for the projects should be paid to them.
2.8
AGO followed up with the two Town Councils on the three projects. AMKTC
informed AGO that it had since established that the reimbursement it received from HDB (for
one project) should be made to AHPETC instead. Subsequently, on 6 August 2014, HDB
informed AHPETC to raise an invoice to HDB so that HDB could process the reimbursement
to AHPETC.
2.9
PRPGTC informed AGO that it was informed by HDB to issue invoices to claim for
reimbursements for the other two projects. PRPGTC issued the invoices and was
subsequently paid by HDB. In view of the lack of clarity on which Town Council(s) should
be reimbursed for the projects, HDB, AHPETC and PRPGTC could work together to resolve
the matter.
Amounts due from other parties of $563,622
2.10 For the amounts due from other parties amounting to $563,622, AHPETC was not
able to provide some of the supporting documents requested by AGO for test checks. For the
two largest amounts totalling $196,257 which were due from HDB, AGO checked with HDB
and found that these two amounts should have been reversed out from receivables balance as
explained in paragraphs 2.12 and 2.13 below; there was thus an overstatement of the amounts
that were due to AHPETC from other parties.
5
The relevant project codes are 2009-0013-2C, 2010-0718-2C and 2010-0028-3C.
Page 6
Audit Observations
2.11 Based on the audit schedule provided by AHPETC and the accounting records,
$256,650 of the $563,622 comprised receivables carried forward from the accounts of
Hougang Town Council (HTC), as shown in Table 1 below:
Table 1: Breakdown of receivables carried forward from HTC
S/N
Reference/ Description
Journal Date
Amount ($)
1
HU1435/12 (no description)
30 March 1996
68,915
2
HG0058/13 (no description)
31 March 1996
7,778
31 March 2011
53,219
31 March 2011
143,038
1995 to 2011
(16,300)
6
3
HG0005/13-BFA
from HDB
to be claimed
4
HG0015/13-Agency Fee – Car Park
5
Miscellaneous items
Total
256,650
2.12 AHPETC was not able to provide AGO with supporting documents for the items in
Table 1. AGO noted that the receivables (S/N 3 and 4 of Table 1 amounting to $196,257) for
Barrier Free Access (BFA) project and car park agency fees relating to HTC were due from
HDB. According to HDB, it had made the final payment for the BFA project formerly under
HTC to AHPETC in FY 2012/13 and there was no outstanding claim for BFA projects as at
31 March 2013. Hence, AHPETC should have reversed out the receivable of $53,219 (S/N 3
of Table 1) for BFA claim.
2.13 AHPETC informed AGO that the receivable of $143,038 (S/N 4 in Table 1) was
accrued by HTC in March 2011 for car park agency services performed by HTC in 2010.
AHPETC produced to AGO an invoice amounting to $152,531 which it had issued to HDB to
support the receivable. AGO noted that AHPETC had upon issuance of the invoice in May
2012, recorded the amount of $152,531 under receivables but did not reverse out the
receivable of $143,038 accrued by HTC earlier. Hence, AHPETC had overstated the
receivable by $143,038.
2.14 The remaining amounts due from other parties (i.e. $306,972) comprised numerous
items of small amounts. AGO selected seven journal adjustments made in FY 2012/13 and
35 records relating to legal fines and penalties for test checks, amounting to $24,547.
AHPETC was only able to provide AGO with the supporting documents for the seven journal
adjustments and 24 records, amounting to $23,443.
Receipts from CCC of $520,926
2.15 The disclaimer mentioned that AHPETC received $520,926 in FY 2012/13 but
recorded this amount received in other payables as these receipts could not be identified and
matched to the receivable balance.
6
AGO understood from AHPETC that the receivables pertained to Barrier Free Access (BFA) construction
projects.
Page 7
Audit Observations
2.16 AGO had traced and identified the entire sum of $520,926 mentioned in the
disclaimer as follows:
a.
$388,887 could be matched to receivables under Other Debtors ledger (refer
to paragraph 2.5);
b.
$126,168 could be matched to receivables in Sundry Debtors ledger; and
c.
$5,871 could not be matched to any receivable amount in the accounting
records since AHPETC had not recorded any receivable for this amount due.
As such, the receipt should be recognised as income instead of other payables.
2.17
AGO found that AHPETC did not ensure that the accounting records of AHPETC
relating to receivables from CCC and other parties, correctly reflect the transactions and state
of affairs. It did not exercise due diligence in monitoring and following up on the receivables,
which could result in payments due from external parties not received on a timely basis.
Consequently, there is no assurance that such funds are correctly accounted for and moneys
are collected when due.
Page 8
Audit Observations
2b
Receivables from Various Stakeholders – Inland Revenue Authority of
Singapore
“(b)
Inland Revenue Authority of Singapore (“IRAS”)
As at 31 March 2013, included in other receivables and deposits were amounts due
from IRAS of $110,735 that were in the accounts handed over by the previous
managing agent. Management does not have any supporting documents to
substantiate these receivables. Accordingly, we are not able to ascertain if these
receivables are appropriately stated.”
Observation
2.18 AGO found that AHPETC did not account for payments received in its accounting
records correctly. A substantial amount of the receivables had been received but AHPETC
did not match and reverse out the amounts accordingly from its receivables. Consequently,
the receivables due from IRAS as at 31 March 2013 were overstated and the accounting
records did not correctly reflect the receipts. AHPETC informed AGO that it had since
updated the payments from IRAS in its accounting records and had reversed out the
corresponding receivables.
Receivables amount of $110,735
2.19 Based on documents made available by AHPETC to AGO, the amounts due from
IRAS of $110,735 were made up of the following:
Table 2: Breakdown of $110,735 due from IRAS
Receivables
a. Goods and Services Tax (GST) receivables
b. Refund of contribution in lieu of property tax7
c. Balance brought forward from HTC’s accounts
Total
Amount ($)
99,026
12,592
(883)
110,735
2.20 AGO noted that FKT had reported a similar disclaimer in its auditor’s report for FY
2011/128 financial statements of the $99,026 receivable from IRAS. AHPETC had not taken
any effective action to resolve the issue, thus resulting in a similar disclaimer in FY 2012/13.
7
Under the Property Tax (Valuation of Properties of the Housing and Development Board) Order (Cap. 254,
OR13), HDB shall in respect of certain properties, pay to the Government by way of contribution a sum in lieu
of property tax. For HDB properties managed by the Town Council, HDB directed the Town Council to submit
the returns and pay the contribution to IRAS on its behalf.
8
It was reported in FKT’s FY 2011/12 disclaimer that “Included in other receivables and deposits … are
amounts of … $99,026 due from … the Inland Revenue Authority of Singapore…, that were in the accounts
handed over by the previous managing agent. Management does not have any supporting documents to
substantiate these receivables. Accordingly, we were not able to obtain supporting documents to verify the
validity and collectability of these receivables.”
Page 9
Audit Observations
2.21
In addition, AGO noted that the GST receivables of $99,026 had been paid into the
bank account of AHPETC (banked in on 2 August 2011 and 6 September 2011). AGO found
that AHPETC did not match these receipts against the corresponding receivables and reverse
out the amounts from the receivables. As a result, the receivables from IRAS were overstated
by $99,026. Following AGO’s query, AHPETC reversed out the receivables in May 2014.
2.22 For the refund of contribution in lieu of property tax (recorded in the accounts as
receivables) of $12,592 (refer to Table 2), AHPETC had recorded the amount in May 2012
after submitting a revised return dated 23 May 2012 to IRAS to claim for excess amount paid.
AHPETC was not able to provide AGO with adequate documents supporting the receivable.
Subsequent to AGO’s request for supporting documents from AHPETC, AHPETC reversed
out the receivables in May 2014.
2.23 AGO checked with IRAS on the amount of contribution in lieu of property tax, to be
refunded. According to IRAS, it had verbally informed AHPETC that it could only process
the refund upon submission of the certified accounts to support AHPETC’s request for refund.
IRAS also informed AGO that there was no overpayment of contribution by AHPETC based
on AHPETC’s subsequent submission to IRAS in April 2013. Hence no refund was due to
AHPETC. In this regard, AHPETC should have reversed out the receivables from its FY
2012/13 accounting records.
2.24 AHPETC did not promptly identify and correctly account for the receipts that had
been credited into its bank accounts. AHPETC also did not promptly reverse out the
receivables when these receivables were no longer valid. Consequently, AHPETC had
overstated the amounts that it is due to receive from other parties, thus resulting in inaccurate
figures.
Page 10
Audit Observations
2c
Receivables from Various Stakeholders – Sundry Debtors
“(c)
Sundry Debtors
As at 31 March 2013, included in Sundry Debtors of $3,333,628 (as disclosed in Note
11) were amounts due from the Housing and Development Board of $2,135,069. Of
this amount, $1,502,534 was received subsequently. For the remaining balance of
$1,831,094 recorded in Sundry Debtors, we were unable to carry out audit
procedures to determine the validity and collectability of the receivables.”
Observation
2.25 AGO’s test checks revealed poor monitoring and lack of due diligence by AHPETC
in following up on outstanding receivables and payments received from external parties to
ensure that payments due were collected on a timely basis and that receipts were accurately
captured in the accounting records. Consequently, receivables as at 31 March 2013 were
overstated by at least $946,408 and payments were not received on a timely basis.
2.26 The balance of $1,831,094 recorded in Sundry Debtors, which was highlighted by
FKT in its disclaimer, comprised the following:
Table 3: Breakdown of Sundry Debtors
Status of Receivables
Amount ($)
a. Receivables where payments from
debtors had been received on or before
31 March 2013
626,397
b. Receivables where AHPETC
issued replacement invoices
had
122,332
were
208,807
c. Receivables where
rejected by HDB
invoices
d. Incorrect adjusting entries
(11,128)
e. Receivables where payments had been
received from 1 April 2013 to 30 June
2014
508,370
f.
376,316
Receivables still outstanding as at 1
July 2014
Total
Net overstatement
of receivables by
$946,408
1,831,094
a. Receivables where payments from debtors had been received on or before 31
March 2013
2.27 AGO found that AHPETC had received payments from debtors on or before 31
March 2013, of which $175,028 was received in FY 2011/12. However, these receipts were
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Audit Observations
incorrectly recorded by AHPETC in its accounting records. As a result, the corresponding
receivables were not reversed out from the accounting records, leading to an overstatement of
$626,397.
b. Receivables where AHPETC had issued replacement invoices
2.28 AGO found that for 14 invoices amounting to $122,332, AHPETC had issued
replacement invoices and recorded additional receivables based on the new invoices, without
taking out the receivables recorded earlier for the same works or services. As a result of the
double-counting, the receivables were overstated by $122,332. Of these 14 invoices, 10 were
issued by CPGFM, the previous managing agent, and the receivables were recorded in the
accounts of ATC subsequently handed over to AHPETC.
c. Receivables where invoices were rejected by HDB
2.29 AGO found that seven invoices issued by AHPETC amounting to $208,807 were
rejected by HDB in FY 2012/13 but AHPETC did not reverse out the receivables or follow
up with HDB on the rejected invoices. As a result, the receivables were overstated by
$208,807.
2.30 According to HDB, the claims raised for these seven invoices were for repairs of
water seepage, which were not covered under the co-payment scheme for repair of facade.
HDB had informed AHPETC of its rejection of these invoices through an email dated 2
January 2013. Hence, AHPETC should have reversed out the receivables in FY 2012/13.
d. Incorrect adjusting entries
2.31 AGO noted errors in posting of adjusting entries which resulted in the understating of
receivables by $11,128.
e. Receivables where payments had been received from 1 April 2013 to 30 June
2014
2.32 AHPETC informed AGO that it had received payments from debtors during the
period from 1 April 2013 to 30 June 2014 for $508,370 of the receivables, of which $483,134
were amounts due from HDB. HDB confirmed with AGO that the amounts had been paid in
May 2014.
f. Receivables still outstanding as at 1 July 2014
2.33 Of the $376,316 outstanding as at 1 July 2014, AGO found that there were inadequate
monitoring and a lack of timely follow-up for receivables amounting to $367,018 (97.5%)
which had been outstanding for 17.5 to 37.6 months.
2.34 AGO noted that of the $367,018 long outstanding receivables, $326,332 and $32,236
were amounts due from HDB and the National Environment Agency (NEA) respectively.
AGO checked with HDB and NEA on these receivables and was informed that:
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Audit Observations
i.
For eight invoices totalling $47,559, HDB and NEA did not receive the
invoices. AGO noted that four of the invoices pertained to standard monthly
claims from NEA and NEA had sent an email on 3 April 2013 to remind
AHPETC to issue the invoices.
ii.
For 17 invoices totalling $124,269, these were rejected by HDB (13 invoices)
and NEA (four invoices). HDB rejected the 13 invoices as they were not in
order. HDB had informed AHPETC in FY 2012/13 either through emails (for
10 invoices) or verbally (for two invoices), to re-issue 12 of the invoices. For
the remaining invoice, HDB had informed CPGFM, the previous managing
agent in July and August 2011 of the rejected invoice.
For the four invoices rejected by NEA, NEA explained that the invoices were
wrongly sent to one of its regional offices. By the time the invoices were
received by the relevant division, the period provided for payments (credit
period) had lapsed and NEA was unable to process the invoices for payment.
NEA had sent an email in April 2013 to AHPETC to re-issue four invoices.
HDB and NEA updated AGO in May 2014 and June 2014 respectively that
they had not received any replacement invoices from AHPETC.
iii.
For eight invoices totalling $11,673, NEA informed AGO that it had
overlooked the invoices which it received in May 2012.
iv.
For two invoices totalling $175,067, HDB informed AGO that it was still
reviewing the claims which it received in May and November 2012.
2.35 AHPETC did not monitor and take timely follow-up action on its receivables.
AHPETC also did not exercise adequate due diligence in ensuring that the accounting records
relating to sundry debtors correctly reflect the transactions and state of affairs of AHPETC.
Hence the accounting records did not correctly reflect the actual amounts due from external
parties. As a consequence, there is no assurance that AHPETC had properly accounted for
and collected such payments that are due to AHPETC.
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Audit Observations
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Audit Observations
3
Conservancy and Service Receivables
“The Town Council provides for impairment losses for outstanding conservancy and
service receivables only when the receivables are more than seven years in arrears.
Such policy is drawn up by the Town Council as it has considered that the
conservancy and service receivables will be recoverable as long as the ownership of
the flats remained unchanged, and that there were no adverse circumstances
indicating potential non-collectability of the outstanding dues.
As at 31 March 2013, the conservancy and service receivables totalled $2,587,937
and the allowance for impairment losses amounted to $589,656. Management was
unable to provide an aging analysis or information on the credit profile of the
individual units.
Accordingly, we are unable to ascertain the credit risk
characteristics of the conservancy and service receivables, and therefore not able to
determine if management’s impairment assessment is appropriate.
As a result of the above, we are unable to determine the collectability of the
conservancy and service receivables as at 31 March 2013. Consequently, we are also
unable to ascertain the validity and accuracy of the allowance for impairment losses
of $589,656 as at 31 March 2013. In addition, we are unable to determine the
accuracy of the ageing analysis of the conservancy and service receivables as
disclosed in Note 10 to the financial statements.”
Observation
3.1
AGO found that AHPETC was not able to provide an ageing analysis or information
on the credit profile of the individual units’ conservancy and service (C&S) fees (recorded as
C&S receivables), due to lack of historical data. The information was required to determine
the amount of outstanding C&S fees that may not be collectable due to the length of time
they had remained outstanding (i.e. allowance for impairment losses). Receipts were also
incorrectly classified in the accounting system due to incorrect amendments to identifiers (i.e.
bill codes) in the accounting system.
Lack of historical data
3.2
AHPETC’s policy was to provide for impairment losses for C&S receivables that
were outstanding for seven years or more. AHPETC informed AGO that it only had such
transaction data for seven years or more for HTC. For precincts taken over from ATC and
Marine Parade Town Council (MPTC)9, AHPETC only had the transaction data on arrears for
the two years prior to handover. The allowance for impairment loss shown in the FY
2012/13 financial statements was computed by adding the balance carried forward from FY
2011/12 and additional impairment allowances for receivables relating to the precinct under
9
Following the General Election in May 2011, AHPETC took over the precinct of Kaki Bukit from MPTC due
to boundary changes.
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Audit Observations
HTC only. As a result, there was no assurance that impairments were completely and
accurately provided for all precincts under AHPETC in accordance with AHPETC’s
impairment policy.
3.3
AGO noted from correspondence dated 13 May 2011 among the Secretaries of MPTC,
ATC and HTC that AHPETC had asked for receivables data and estate details from MPTC
and ATC for uploading into AHPETC’s accounting system. AGO’s checks showed that for
the receivables data, AHPETC was provided with receivables balances as at 31 May 2009
and 31 July 2011 and transaction data for a two-year period from 1 June 2009 to 31 July 2011.
3.4
AHPETC informed AGO that it had requested for transaction data for the past seven
years, from the person responsible for coordinating the provision of data from the accounting
system used by MPTC and ATC (external co-ordinator)10. According to AHPETC, it agreed
to obtain transaction data for two years as it was assured by NCS Pte Ltd (NCS) which was
maintaining the accounting system of MPTC and ATC, that it could obtain additional data if
required at a later date. However, AHPETC was not able to provide AGO with any
documentation of its request for seven years of transaction data.
3.5
AGO approached this external co-ordinator for information. He provided AGO with
an email dated 12 July 2011, in which he informed NCS to provide AHPETC with the seven
years of transaction data requested by AHPETC. The external co-ordinator had indicated in
the same email to NCS that transaction data for the first five years (from June 2004 to May
2009) could be given to AHPETC later.
3.6
AGO asked NCS why it had not provided the first five years of transaction data to
AHPETC. NCS explained to AGO that the first five years of transaction data were not
provided as there was no subsequent follow-up request from AHPETC or the external coordinator. AGO was not able to sight documentation to show that apart from the initial
request, AHPETC had taken further action to obtain the first five years of transaction data.
Wrong classification of receipts
3.7
At a meeting with AHPETC and its IT vendor, AGO was informed that there were
incorrect amendments of identifiers (i.e. bill codes) 11 in the accounting system, resulting in
the wrong classification of receipts in the accounting system. As such, AHPETC was unable
to generate from the system an accurate ageing analysis in relation to its C&S receivables.
3.8
With regard to the incorrect amendment of bill codes in the accounting system, AGO
noted that there were inadequacies in the controls over the amendment of bill codes.
According to the IT vendor, any incorrect changes made to the bill codes could adversely
affect the recording of receipts in the accounting system. AGO was informed by AHPETC
that there were no independent checks on amendments made to bill codes in the accounting
system. In addition, according to the IT vendor, the system log would only reflect the latest
amendment made to the bill codes. There was thus a lack of documentary trail to enable
AHPETC to identify all amendments made in order to rectify the incorrect amendments.
10
The external co-ordinator was an IT Director of PAP TC Co-ordinating Town Councils.
11
Bill Codes are predefined codes used to identify the nature of amounts due/received in the Accounts
Receivable ledger for updating to the specific accounts in the General Ledger.
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Audit Observations
3.9
AHPETC did not take adequate measures to ensure that it had complete and accurate
data on C&S receivables for determining the allowance for impairment losses. The
weaknesses in controls over the amendment of bill codes had also affected the accuracy and
reliability of its accounting records. As a result, there is no assurance that AHPETC had
accurately accounted for the relevant transactions.
3.10 AHPETC informed AGO that it had taken measures to ensure that the receipts
collected on and after 1 April 2014 would be correctly recorded in the accounting system, and
its IT vendor was writing a program to generate ageing analysis for C&S receivables.
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Audit Observations
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Audit Observations
4
Lift Repair Expenses
“Included in the lift repair expenses of $1,630,298 were expenses relating to the
previous financial year. As a result, the current year’s expenditure has been
overstated accordingly. Management did not ascertain the quantum of prior year’s
expenses that was included in the current year’s financial statements. Accordingly,
we are unable to determine the accuracy of the lift repair expenses of $1,630,298
recorded in the year under audit.”
Observation
4.1
AGO found that AHPETC recognised lift repair expenses of $63,902, for works done
in FY 2011/12, only in the subsequent financial year.
4.2
According to AHPETC, some work orders were not raised before 31 March 2012 for
works performed in FY 2011/12 due to staff oversight. As a result, AHPETC did not record
these expenses in the correct financial year.
4.3
AGO’s checks showed that the amount of expenses relating to FY 2011/12 included
in the FY 2012/13 lift repair expenses of $1.63 million was $63,902. The impact of this error
on the FY 2012/13 financial statements was, therefore, not significant, i.e. the lift repair
expenses were overstated by $63,902 (3.9%).
4.4
AHPETC informed AGO that with the implementation of its Work Order System
module on 1 April 2012 for non-routine works and 1 October 2012 for routine works, lift
repair expenses would be accounted for in a timely manner.
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Audit Observations
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Audit Observations
5
Lift Upgrading Program
“Included in the lift upgrading program of $18,612,857, under sinking fund
expenditure were expenses relating to the previous financial year. As a result, the
current year’s LUP expenditure has been overstated accordingly. Management did
not ascertain the quantum of prior year’s expenses that was included in the current
year's financial statements. Accordingly, we are unable to determine the accuracy of
the lift upgrading expenses of $18,612,857 recorded in the year under audit.”
Observation
5.1
AGO’s checks revealed that the lift upgrading program (LUP) expenses were
overstated by $8.38 million (i.e. 45%) for FY 2012/13 as AHPETC did not make the
necessary accruals in earlier financial years.
5.2
The LUP expenses of $18.61 million reflected in FY 2012/13 financial statements
should be charged to the relevant financial years as follows:
Table 4: Breakdown of LUP expenses
Financial Year
Amount
2010/11
2011/12
2012/13
Total
($ million)
0.24
8.14
10.23
18.61
5.3
According to AHPETC, it had not recognised the LUP expenses in the earlier
financial years which amounted to $8.38 million as it disputed some of the billings issued by
HDB for AHPETC’s share of the LUP expenses. AGO had confirmed with HDB and verified
that AHPETC had fully paid HDB the LUP expenses of $18.61 million by May 2013.
5.4
The responsibility for preparation of financial statements lies with the Town Council.
The Singapore Financial Reporting Standards 12 require a reporting entity to give its best
estimate of the expenses incurred in the financial year and accrue the amounts in the
accounting records. Without accruing the expenses in the relevant financial years, AHPETC
did not correctly reflect in its financial statements the LUP expenses from FY 2010/11 to FY
2012/13.
12
Section 36(1) of the Town Councils Act requires a Town Council to prepare financial statements in such
form as the Auditor-General may direct. The Auditor-General has directed that Town Councils prepare their
financial statements in accordance with the Singapore Financial Reporting Standards (SFRS).
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Audit Observations
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Audit Observations
6a
Creditors and Accrued Expenses
“(6)
(a)
For non-routine works, the Town Council records the accrued liabilities for
the services rendered by the vendors only when the work orders are issued by the
Town Council’s project managers. The Town Council does not have any Standard
Operating Procedures to enable timely recording of liabilities. As a result, we are
unable to ascertain the completeness of the liabilities as at 31 March 2013.”
Observation
6.1
AGO found that AHPETC had Standard Operating Procedures (SOP) for non-routine
works, but the SOP did not stipulate a timeline for verification works to be done by property
officers after job sheets were received to enable timely issuance of work orders. Since
liabilities would be recorded only after work orders were issued, the liabilities and expenses
in the accounting records could be understated if work orders were not issued timely.
6.2
AGO’s test checks of 16 work orders issued in April and May 2013 revealed that six
work orders were not issued in a timely manner. These work orders amounting to $9,426
were issued between 56 and 191 days after the job sheets were prepared by the contractors.
AHPETC was not able to provide to AGO at the time of audit, the reasons for delays in
issuance of these six work orders.
6.3
AHPETC did not have adequate guidelines to ensure that there was timely verification
of works and issuance of work orders. As such, there was no assurance that liabilities and
expenses were recorded in the appropriate accounting period. Consequently, the financial
statements may not accurately reflect the transactions pertaining to non-routine works.
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Audit Observations
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Audit Observations
6b
“(6)
(b)
As at 31 March 2013, included in accrued expenses was an amount of
$338,379 pertaining to “Accrual without work orders” brought forward from
Aljunied Town Council in August 2011. The Town Council was unable to provide
details of these amounts. Accordingly, we are unable to ascertain the validity of these
amounts.”
Observation
6.4
AGO’s checks revealed that a substantial amount of “Accrual without work orders” as
at 31 March 2013 had been paid or settled but AHPETC did not match and reverse out the
amounts accordingly from its accrued expenses. Consequently, the accrued expenses as at 31
March 2013 were overstated.
6.5
According to a document13 provided by AHPETC to FKT and AGO, the amount of
$338,379 pertained to balances brought forward from ATC. AHPETC informed AGO that it
was not able to provide details of the “Accrual without work orders” included in the accounts
handed over by CPGFM, the previous managing agent, as it did not have the supporting
documents.
6.6
Upon AGO’s request for details of the $338,379, AHPETC provided AGO with two
schedules. AGO’s analysis of the schedules revealed that only $178,185 of the $338,379
pertained to balances brought forward from ATC. The remaining $160,194 was recorded by
AHPETC after July 2011 for expenses incurred in FY 2011/12. AGO’s test checks revealed
overstatement of accrued expenses by $162,112 (see details in paragraphs 6.8 and 6.10).
Accrual without work orders brought forward from ATC
6.7
AGO found from its test checks on the $178,185 balance brought forward from ATC
that invoices amounting to $150,565 had either been paid by AHPETC in February 2012 or
cancelled by vendors. However, AHPETC did not reverse out the accrued expenses, resulting
in an overstatement of $150,565.
6.8
Of the balance brought forward from ATC, AGO’s checks on the four largest amounts
totalling $168,434 revealed the following:
a.
13
Accrual without work orders amounting to $81,910 pertained to precincts
under AMKTC and not AHPETC. The vendor, Seng Foo Building
Construction Pte Ltd, had cancelled its two invoices dated 24 August 2010 on
9 April 2013.
“Accruals GL Code 43180 Reconciliation for the Year Ended 31 March 2013”
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Audit Observations
b.
HDB confirmed that AHPETC had paid the amount owing to HDB, totalling
$47,731 in February 2012.
c.
Accrual without work orders amounting to $20,924 pertained to three invoices
issued by Cerberus Security Pte Ltd. The vendor informed AGO that it had
cancelled two of its invoices dated 9 November 2010 by issuing a credit note
to AHPETC on 6 June 2012. The vendor also informed AGO that it had
cancelled the third invoice dated 9 November 2010 but was unable to provide
AGO with any correspondence regarding the cancellation.
d.
Paya Lebar Citizens Consultative Committee (PLCCC) informed AGO that it
did not have any records showing that AHPETC owed PLCCC amounts
totalling $17,870.
Accrual without work orders recorded by AHPETC
6.9
For the $160,194 accrued expenses recorded by AHPETC after July 2011 for FY
2011/12 (as mentioned in paragraph 6.7), AGO noted that AHPETC had made payments in
FY 2012/13. However, AHPETC only reversed out $148,647 from the accrued expenses in
FY 2012/13 but not the remaining balance of $11,547. Thus, there was an overstatement of
accrued expenses by $11,547.
6.10 AHPETC did not take adequate steps to ensure that accrued expenses in the
accounting records were accurate. The accounting records for accrued expenses did not
correctly reflect the amounts due to external parties. Consequently, there is no assurance that
AHPETC had accurately accounted for the relevant transactions.
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Audit Observations
6c
“(6)
(c)
As at 31 March 2013, included in other payables was an amount of $308,715
relating to temporary receipts from residents and Housing and Development Board.
The Town Council was unable to provide details of this amount. Accordingly, we are
unable to ascertain the validity of these amounts.”
Observation
6.11 AGO found that there were poor monitoring and lack of due diligence by AHPETC in
following up on items in a temporary clearing account. This clearing account was classified
under other payables.
$308,715 of temporary receipts
6.12 AGO observed from a schedule provided by AHPETC that the amount of $308,715 in
the temporary clearing account comprised mainly receivables and monies received by
AHPETC (i.e. receipts) as shown below:
Table 5: Breakdown of amount of $308,715 in temporary clearing account
Description
Amount ($)
(Debit Entries)
Amount ($)
(Credit Entries)
Recorded by ATC:
Singapore Post SAM collections (i.e.
amount due from SingPost)
86,822
Recorded By AHPETC:
Adjusting entries
Payment from HDB
Payment from NEA
Unexplained difference between
bank statements and accounting
records
Others
Total
Net Total
29,563
283,441
548
63,458
77,653
116,385
425,100
308,715 (Credit Balance)
6.13 According to AHPETC, some receipts were recorded in the temporary clearing
account as the nature of these receipts could not be identified; AHPETC would need to check
with the payers on the nature of the receipts before it could reflect the receipts in the correct
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Audit Observations
accounting records. AGO’s test checks revealed that some of the items recorded in the
temporary clearing account were not investigated and identified promptly, as detailed below.
Singapore Post SAM collections
6.14 Included in the temporary clearing account was an amount due from Singapore Post
(SingPost) totalling $86,822 brought forward from ATC. AGO found that the amount
pertained to C&S fees collection and had been paid into AHPETC’s bank account on 15
August 2011. However, 19 months after receiving the payment from SingPost, there was no
evidence to show that AHPETC had recorded the receipt in its accounting records.
Adjusting entries
6.15 AGO could not determine the nature of adjusting entries amounting to $29,563 from
the schedule provided by AHPETC. AGO requested from AHPETC on 5 May 2014 for
supporting documents to perform test checks on 11 items. As of 21 July 2014, AHPETC was
only able to provide AGO with some documents pertaining to one item. However, the
amount reflected on the documents did not match the amount of the item reflected on the
schedule. For the other 10 items, AGO could not carry out any checks due to the lack of
supporting documents.
Payments from HDB and NEA
6.16 AHPETC informed AGO that the payments of $283,441 received from HDB in
October 2012 and $548 received from NEA in June 2012 had been matched in December
2013 to the corresponding receivables in its accounting records. AHPETC had since made
the necessary adjustments to the accounting records in December 2013, more than a year
after the monies had been received by AHPETC from HDB and NEA.
Others
6.17 AGO noted that AHPETC had received $17,600 of the $77,653 under the “Others”
description between June 2012 and February 2013. AGO found that these payments were for
receivables recorded under Sundry Debtors. However, AHPETC had recorded the receipts in
the temporary clearing account instead of matching and reversing out the receivables
recorded under Sundry Debtors.
6.18 For the remaining balance of $60,053, on 5 May 2014, AGO requested AHPETC for
supporting documents to perform test checks on nine samples amounting to $58,880 and was
provided with documents on 21 July 2014 for seven samples amounting to $35,925. AGO
noted that for six samples, AHPETC could have identified the parties that made the payments
and should have taken action to ascertain the nature of these receipts in order to update its
accounting records correctly.
6.19 For the other sample, the supporting documents revealed that the amount of $9,800
was in relation to invoices issued by a vendor in July 2012. AHPETC should take action to
ascertain whether the amount is still outstanding.
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Audit Observations
6.20 AHPETC was not able to provide AGO with the documents requested for the
remaining two samples amounting to $22,955. Hence, AGO could not carry out any checks
to ascertain the nature of these unidentified receipts.
Unexplained difference between bank statements and accounting records
6.21 AHPETC had recorded the unexplained difference of $63,458 between bank
statements and accounting records on cash and bank balances reported by FKT in its auditor’s
report for FY 2012/13 (see Disclaimer 10), in the temporary clearing account in June 2013.
6.22 AHPETC informed AGO that it had identified some receipts and payments
contributing to the unexplained difference of $63,458 and had removed the amounts
correspondingly from the temporary clearing account.
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Audit Observations
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Audit Observations
7
Conservancy and Service Fees Received in Advance
“As at 31 March 2013, there were advance receipts from residents in respect of
conservancy and service charges amounting to $507,809. We are unable to
determine the validity and accuracy of this amount as the Town Council was unable
to provide details of this amount.”
Observation
7.1
AGO found that there were inadequacies in AHPETC’s accounting system which had
affected the Town Council’s ability to provide the information required by FKT to verify that
the amount included as C&S fees paid to AHPETC in advance (advance receipts) is correct.
7.2
According to AHPETC, it was unable to generate a report showing a breakdown of
the advance receipts of $507,809 by individual commercial and residential units as requested
by FKT. The IT vendor which maintained the accounting system for AHPETC informed
AGO that there was a program bug. The program bug had caused some of the advance
receipts made by residents at the counter to be incorrectly recorded under receivable accounts
instead of C&S fees received in advance account. As a result, AHPETC was not able to
provide an accurate breakdown of the C&S advance receipts in the accounting records to
FKT.
7.3
AHPETC also informed AGO that it was unable to produce the information for FKT
as the receipts collected each day were updated to the accounting records (i.e. the General
Ledger) as a total amount without details on the individual receipts (i.e. batch posting).
AHPETC would need to manually extract the information required by FKT from voluminous
hard copy reports.
7.4
AHPETC updated AGO that it had rectified the program bug in May 2013 and started
to post individual receipts to its accounting records since October 2013. However, according
to the IT vendor, the system was still not able to generate the breakdown by individual units
of the advance receipts reflected in the accounting records (i.e. the General Ledger) as of July
2014.
7.5
Of the $507,809, AGO noted that $284,625 was automatically recorded by the system
into the accounting records as advance receipts after payments were received from residents.
The remaining $223,184 was an adjustment made by AHPETC to correct the advance
receipts wrongly recorded in receivables accounts (see paragraph 7.2). However, AHPETC
was not able to provide supporting documents for AGO to carry out test checks on both
amounts. According to AHPETC, records of advance receipts in the accounting system were
updated constantly and would reflect the latest status. Hence, AHPETC would not be able to
provide records supporting the amounts of C&S fees paid in advance in the earlier accounting
periods to AGO. As a result, AGO could not ascertain the validity and accuracy of the
$507,809.
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Audit Observations
7.6
There were inadequacies in AHPETC’s accounting system and AHPETC was not able
to provide the information required by FKT. Consequently, FKT was not able to determine
the validity and accuracy of advance receipts.
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Audit Observations
8
Income Taxes
“As at 31 March 2013, provision for income tax totalled $756,383.
During the current financial year, the Town Council paid $77,407 in respect of the
tax payable by Hougang Town Council for the year of assessment 2012. At the time
of handover of operations on 26 May 2011, there was no provision for tax payable
made.
In addition, during the current year, $383,688 and $429,271 were paid by Aljunied
Town Council for the years of assessment 2011 and 2012 respectively. The provision
for tax recorded in the accounting records for years of assessment 2011 and 2012
were $474,669 and $445,425 respectively.
Due to the matters mentioned above, we are unable to determine the validity and
accuracy of tax provisions totalling $756,383 as at 31 March 2013.”
Observation
8.1
AGO found that AHPETC did not carry out reconciliation of its tax provisions and
correctly reflect the amount in its accounting records. Such reconciliation should be
performed at least once at financial year end to ensure that the provisions are accurate.
8.2
AGO observed that AHPETC did not reconcile the tax provisions made in the
accounting records to the actual tax levied by IRAS in its notice of tax assessment for each
year of assessment (YA). As a result, any over-provision or under-provision of taxes for each
YA was not adjusted after tax assessment was received, which would render the provision
amount incorrect.
8.3
Based on IRAS’ statements of accounts, AGO noted that a net over-provision of
$158,115 for FY 2010/11 and earlier was not reversed out from the accounting records. In
addition, based on notices of tax assessment dated 14 October 2013 and 4 February 2014,
there was an under-provision of income tax of $382,621 for FY 2011/12. After adjusting for
the above under and over-provisions, the net provision for income tax as at 31 March 2013
should be $980,889 instead of $756,383 as reflected in the FY 2012/13 financial statements
(i.e. there was a net under-provision of $224,506).
8.4
AHPETC informed AGO that it had since engaged a tax agent to prepare the income
tax computations for FY 2012/13 and FY 2013/14.
8.5
AHPETC did not take adequate steps to ensure that tax provisions in the accounting
records were accurate. The inaccurate provisions for tax would mean that there is no
assurance that the figures reflected in the financial statements of AHPETC are accurate. The
responsibility for preparation of financial statements lies with the Town Council. For proper
accounting, the Town Council should carry out reconciliation between tax provisions in the
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Audit Observations
accounting records and the tax levied by IRAS promptly and make necessary adjustments to
the accounting records.
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Audit Observations
9
Goods and Services Taxes
“There were unexplained differences amounting to $518,707 between the GST
balances recorded in the Town Council’s accounting records and the GST returns
submitted to the Comptroller of GST. Accordingly, we were unable to determine the
validity and accuracy of the GST payable of $518,707 as at 31 March 2013.”
Observation
9.1
AGO found that AHPETC did not carry out reconciliation of its GST balances
between its accounting records and the quarterly GST returns submitted to IRAS. Such
reconciliation should be performed at least once at financial year end, preferably once a
quarter, to ensure that the GST provisions are accurate.
9.2
AGO found that two figures reflected in the disclaimer did not agree with the relevant
documents and/or accounting records. First, the unexplained differences between the GST
balances recorded in AHPETC’s accounting records and the GST returns submitted to IRAS
for each of the four quarters in FY 2012/13 totalled $336,656, and not $518,707 (as reflected
in the first statement of the above mentioned disclaimer). FKT informed AGO that the wrong
figure was due to typographical error.
9.3
Second, the GST payable as at 31 March 2013 reflected in the accounting records was
$535,857 and not $518,707 as indicated in the second statement of this disclaimer. FKT
informed AGO that its figure in the disclaimer was based on GST payable in the accounting
records before audit adjustments.
9.4
AGO noted that IRAS had queried AHPETC in May 2013 on its GST submissions for
FY 2011/12 and FY 2012/13. Based on IRAS’ assessment finalised in December 2013, the
GST payable as at 31 March 2013 was $806,718, comprising fourth quarter FY 2012/13 GST
amount of $474,121 and over-claims for FY 2011/12 and first three quarters of FY 2012/13
of $332,597. The over-claims by AHPETC were mainly due to AHPETC not applying the
apportionment formula in deriving the input tax claimable. As a result, AHPETC was fined
$26,700 and charged with a late payment penalty of $16,630.
9.5
AHPETC had paid the GST for fourth quarter of FY 2012/13 in May 2013 and all the
over-claims, fine and penalty by February 2014.
9.6
AHPETC did not take adequate steps to ensure that GST provisions in the accounting
records were accurate. This would affect the accuracy of the figures reflected in the financial
statements of AHPETC. The responsibility for preparation of financial statements lies with
the Town Council. For proper accounting, AHPETC should reconcile the GST balances in its
accounting records to the GST returns submitted to IRAS promptly and make necessary
adjustments to the accounting records. Such reconciliation would enable AHPETC to identify
and make adjustments for any over-provision or under-provision to the accounting records.
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Audit Observations
[Blank]
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Audit Observations
10
Cash and Bank Balances
“Out of the $67,589 unexplained difference noted during the March 2012 bank
reconciliation, $63,458 of remained un-reconciled. The balance of $63,458 has been
included in other payables as at 31 March 2013.”
Observation
10.1 AGO found that AHPETC had not performed monthly bank reconciliations in the
manner prescribed by rule 32(2) of the Town Councils Financial Rules (Cap. 329A, R1),
which required a bank reconciliation statement to be prepared for each account at least once a
month. In addition, AGO observed that AHPETC had not carried out bank reconciliations on
a timely basis.
FY 2011/12
10.2 For the period August 2011 to March 2012, AHPETC did not carry out monthly bank
reconciliations for each of its four bank accounts maintained for operating purposes (i.e.
operating funds). AHPETC could only provide AGO with monthly bank reconciliation
statements prepared on a consolidated basis for all four bank accounts. AHPETC informed
AGO that it started from March 2012 onwards to reconcile on a consolidated basis the
monthly bank balances in the accounting records to the bank statements for the months of
August 2011 to March 2012 but was not able to reconcile the balances.
10.3 In addition, AHPETC had two bank accounts for sinking funds. AHPETC provided
AGO with a year-end reconciliation for one of the bank accounts and monthly bank
reconciliations for the other bank account.
10.4 AGO noted that all the above bank reconciliation statements for FY 2011/12
furnished by AHPETC to AGO were not dated to show when they were prepared and there
was no sign-off to indicate that the bank reconciliations had been reviewed by another officer.
It is a good control practice for bank reconciliation to be independently reviewed and for the
reviewer to sign off and date on the bank reconciliation statement as evidence of review.
FY 2012/13
10.5 For FY 2012/13, AGO observed that AHPETC had not performed monthly bank
reconciliations in the manner prescribed by the Town Councils Financial Rules. AGO noted
that for the four accounts of operating funds maintained with two banks (two accounts each),
AHPETC had carried out reconciliation for the months of April 2012 to March 2013 on a
consolidated basis at bank level instead of by individual bank account. AGO noted that
AHPETC did not differentiate transactions according to the different accounts of each bank
in its accounting records.
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Audit Observations
10.6 In addition, AGO observed that the bank reconciliations for bank accounts of
operating and sinking funds were not carried out on a timely basis as described below:
a. Monthly reconciliations for bank accounts of operating funds were carried out 2.7
to 9.9 months after the respective month end.
b. 8 out of 12 monthly reconciliations for one bank account of sinking funds were
carried out 1.3 to 5.0 months after the respective month end. One of the remaining
four monthly bank reconciliations was not dated.
c. 11 out of 12 monthly reconciliations for the other bank account of sinking funds
were carried out 1.3 to 6.9 months after the respective month end.
10.7 AHPETC informed AGO that it had identified some receipts and payments
contributing to the un-reconciled balance of $63,458 and would continue to investigate on the
outstanding un-reconciled balance.
10.8 AHPETC did not comply with the Town Councils Financial Rules as it did not
prepare bank reconciliation statements for each bank account at least once a month.
Preparing bank reconciliation statements at least once a month would enable any differences
between the accounting records and the bank statements to be investigated and addressed
promptly.
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Audit Observations
11
Transfer to Sinking Funds
“The Town Council did not comply with Section 4(2B)(a) of the Town Councils
Financial Rules. The financial rule states that within one month from the end of each
quarter of each financial year, the Town Council shall transfer to the bank account of
the sinking funds established for the residential and commercial property within the
Town, the amount of conservancy and service charges, grants-in-aid and interest that
are payable to the sinking funds and that were received by the Town Council.
During the current financial year, the Town Council had not transferred any amounts
of conservancy and service charges to the bank account of the sinking funds.”
Observation
11.1 AGO found that AHPETC had not complied with the Town Councils Financial Rules
(TCFR) as it did not make the necessary transfers to bank accounts of sinking funds within
one month from the end of each quarter for FY 2012/13 and the last three quarters of FY
2011/12.
11.2 AGO observed that AHPETC had paid for sinking funds expenditure from bank
accounts of both operating funds and sinking funds. In computing the transfers to sinking
funds, AHPETC had deducted sinking funds expenditure paid from bank accounts of
operating funds, from the amounts payable to the sinking funds; the C&S fees and grants for
FY 2011/12 and FY 2012/13 payable to sinking funds were $15.73 million and $14.86
million respectively. This approach had made the computation of the amounts to be
transferred to the bank accounts of sinking funds complicated. It would be less complicated
if AHPETC had transferred the full amounts to the bank accounts of sinking funds when due
and pay sinking fund expenditures directly from these bank accounts.
FY 2012/13
11.3 AGO observed that in FY 2012/13, AHPETC only transferred $1.50 million to a fixed
deposit account of its sinking funds on 13 February 2013. There were no other transfers to
bank accounts of sinking funds.
11.4 FKT had in its disclaimer stated that AHPETC had not transferred any amounts to the
bank account of sinking funds. According to FKT, during its audit it was informed by
AHPETC that no transfer to bank accounts of sinking funds was made for FY 2012/13.
11.5 AGO noted that nine months after FY 2012/13 had ended, AHPETC transferred $2.74
million to its bank accounts of sinking funds on 16 January 2014. AGO carried out checks on
AHPETC’s transfer and found errors in AHPETC’s computation of $2.74 million.
11.6 Subsequently, AHPETC informed AGO that it had recomputed the amount to be
transferred to bank accounts of sinking funds and had transferred an additional $4.18 million
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Audit Observations
on 30 June 2014. AGO noted that the $4.18 million included $2.98 million transfer to make
good Neighbourhood Renewal Programme (NRP) expenses wrongly paid from bank accounts
of sinking funds (elaborated in paragraph 11.13).
11.7 AGO’s test checks did not reveal any further errors in AHPETC’s computations.
However, AGO noted from its test checks that there were other non-compliance with the
Town Councils Act and lapses in the manner AHPETC managed its bank accounts of sinking
funds. Details are in paragraphs 11.13 to 11.17.
FY 2011/12
11.8 AGO’s checks on FY 2012/13 bank transactions showed that there was no transfer of
moneys to AHPETC’s bank accounts of sinking funds in April 2012. AGO followed up and
found that AHPETC did not make any transfer to its bank accounts of sinking funds for the
last three quarters of FY 2011/12 14 . As for the first quarter of FY 2011/12, AGO was
informed by CPGFM, the previous managing agent that it had transferred $4.80 million to
bank accounts of sinking funds in July 2011 for precincts under ATC. According to CPGFM,
the $4.80 million transferred was for C&S fees and grants allocated to sinking funds for the
first quarter of FY 2011/12 totalling $4.02 million and other items, such as claim of GST
input tax for sinking funds expenditures, amounting to $0.78 million.
11.9 Following AGO’s query, AHPETC informed AGO that it had transferred an
additional $7.44 million on 30 June 2014 for FY 2011/12.
11.10 AGO found errors in AHPETC’s computation of $7.44 million for two amounts
which it deducted from the sinking fund to be transferred. As a result of the errors, there was
a shortfall of $0.46 million in the transfer made by AHPETC to the bank accounts of sinking
funds as elaborated below:
Table 6: Errors in AHPETC’s computation of $7.44 million transfer
S/N
1
2
Description
AHPETC’s
computation
($ million)
(4.18)
Deduction for transfer to bank
accounts of sinking funds, for
C&S fees and grants allocated to
sinking funds, made by CPGFM
Deduction for C&S fees that need
(0.89)
not be transferred to the bank
accounts of sinking funds as they
were not yet received15.
Total amount
AGO’s
computation
($ million)
(4.02)
Shortfall in
AHPETC’s
transfer ($ million)
0.16
(0.59)
0.30
0.46
14
AHPETC’s non-compliance with the Town Councils Financial Rules was not highlighted in the auditor’s
report for AHPETC’s FY 2011/12 financial statements.
15
The amount was computed by taking the difference between ending and opening balances of C&S fees
receivables that were allocated to sinking funds.
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Audit Observations
11.11 With regard to S/N 1 in Table 6, AHPETC had in its computation deducted the
amount of $4.18 million from the total amount that AHPETC was required to transfer to the
bank accounts of sinking funds for FY 2011/12. AHPETC had derived the amount of $4.18
million from the audited financial statements for 1 April 2011 to 31 July 2011 of ATC’s four
precincts16 and assumed that CPGFM had transferred $4.18 million to the bank accounts of
sinking funds. However, CPGFM had only transferred $4.02 million for April to June 2011,
(as mentioned in paragraph 11.8). Accordingly, there was a shortfall of $0.16 million in the
transfer made by AHPETC to the bank accounts of sinking funds, which AHPETC should
make good.
11.12 With regard to the computation of the deduction amount stated in S/N 2 of Table 6,
AGO noted that AHPETC had not taken into account the opening balances of C&S fees
receivables for precincts taken over (i.e. Kaki Bukit and Hougang). Consequently, there was
another shortfall of $0.30 million in the transfer made by AHPETC to the bank accounts of
sinking funds, which AHPETC should make good.
Non-compliance with the Town Councils Act
11.13 AGO noted that NRP expenses of $3.19 million incurred in FY 2012/13 were paid
from bank accounts of sinking funds. NRP expenses should not be paid from the bank
accounts of sinking funds under the Town Councils Act and the Town Councils
(Disbursement of Moneys from Sinking Fund) Rules (Cap. 329A, R5). Although AHPETC
subsequently transferred $2.98 million on 30 June 2014 to bank accounts of sinking funds,
AGO noted that the amount had excluded GST of $0.21 million. AHPETC should make good
the GST paid from bank accounts of sinking funds.
11.14 Separately, AGO observed that AHPETC had transferred $4.80 million of NRP grants
kept in the bank accounts of operating funds to bank accounts of sinking funds in March 2013.
According to MND, there is no requirement for Town Councils to transfer NRP grants
received to the bank accounts of sinking funds.
Other lapses
11.15 There was no evidence that AHPETC had transferred into bank accounts of sinking
funds, any GST input tax claimed from IRAS relating to sinking funds expenditures paid
from the bank accounts of sinking funds for FY 2011/12 and FY 2012/13. AGO noted that
all GST payments from IRAS were made to the bank accounts of operating funds. GST input
tax claimable for sinking funds expenditure paid from bank accounts of sinking funds for FY
2011/12 and FY 2012/13 could be as high as $0.64 million and $0.89 million respectively, as
elaborated below.
16
Bedok Reservoir-Punggol, Paya Lebar, Eunos and Serangoon
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Audit Observations
Table 7: Estimated GST input tax not transferred into bank accounts of sinking funds
Description
Sinking funds expenditure for the year
[A]
FY 2011/12
($ million)
12.41
FY 2012/13
($ million)
22.06
Less: Sinking funds expenditure paid from
bank accounts of operating funds
[B]
(3.21)
(9.37)
Estimated sinking funds expenditure paid from
bank accounts of sinking funds
[A-B]
9.20
12.69
Estimated GST input tax claimable 17 for
sinking funds expenditure paid from bank
accounts of sinking funds
7% x [A-B]
0.64
0.89
11.16 AGO also observed from its test checks, two instances where AHPETC had wrongly
deposited into one bank account of operating funds the principal and interest of sinking funds
fixed deposits amounting to $5.27 million which had matured (see S/N 1 & 2 of Table 8
below). Furthermore, AHPETC had transferred to a bank account of operating funds an
amount of $0.22 million from a bank account of sinking funds that was closed (see S/N 3 of
Table 8 below).
Table 8: Sinking funds deposits wrongly
deposited into the bank account of operating funds
S/N
Amount
($ million)
Date of remittance
Sinking Funds Fixed Deposits which had matured
1
2
6 June 2012
5.02
23 July 2012
0.25
Deposit in bank account of sinking funds that was closed
3
30 January 2013
Total
0.22
5.49
11.17 Sinking funds fixed deposits which had matured and not renewed should be deposited
into bank accounts of sinking funds. AGO noted that AHPETC subsequently made a sinking
funds fixed deposit placement of $5.00 million on 4 October 2012 from the bank account of
operating funds. Hence, AHPETC should transfer back the remaining $0.49 million, after
deducting the $5.00 million placement from the $5.49 million wrongly deposited (reflected in
Table 8) to bank accounts of sinking funds.
11.18 AHPETC did not comply with the Town Councils Act as it had made disbursements
from its sinking funds bank accounts for NRP expenses which were not disbursements
allowed under the Town Councils Act and Town Councils (Disbursement of Moneys from
Sinking Fund) Rules. AHPETC had also breached the Town Councils Financial Rules by not
making the transfers of moneys to the bank accounts of sinking funds within one month from
the end of each quarter of each financial year. Transfers to bank accounts of sinking funds
17
Assuming all sinking funds expenditures are subject to GST and the full GST input tax is claimable.
Page 42
Audit Observations
should be made promptly so that moneys can be set aside for the Town Council’s long-term
maintenance needs.
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Audit Observations
[Blank]
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Audit Observations
12
Related Party Transactions
“The Town Council had not made available to us details of the project management
service fees paid to a related party. Accordingly, we are unable to determine the
completeness of the related party disclosures as disclosed in Note 22 of the financial
statements.”
Observation
12.1 AHPETC did not comply with the Singapore Financial Reporting Standards which
require the nature of related party transactions and the amounts involved to be disclosed.
AHPETC’s disclosure of related party transactions in the financial statements was incomplete
as explained below.
12.2 AHPETC disclosed in its financial statements the appointment of its related party, FM
Solutions and Services Pte Ltd (FMSS) 18 as its managing agent and the fees incurred.
AHPETC also disclosed the fact that FMSS rendered project management services to
AHPETC but did not provide the amount involved.
12.3 According to FKT, “AHPETC had refused to disclose on the basis that other TCs
[Town Councils] did not disclose the PM [project management service] fees so AHPETC did
not see why they had to make the disclosure.”
12.4 AHPETC informed AGO that it “had no issue with the disclosure provided that ‘as a
matter of principle’ all other TCs make the same disclosure since their MAs [Managing
Agents] are also related parties.”
12.5 AGO also found from its test checks on related party transactions that FMSS had
provided essential maintenance and lift rescue services to AHPETC in FY 2012/13, but these
transactions and the fees incurred were not disclosed in the financial statements. In addition,
AGO noted from its checks that AHPETC had paid fees (amounting to $88,200) to another
related party, FM Solutions and Integrated Services (FMSI)19, for essential maintenance and
lift rescue services rendered for the period April to June 2012. This related party transaction
was not disclosed as well.
12.6 AGO’s checks revealed that the fees for project management services and for
essential maintenance and lift rescue services billed by FMSS in FY 2012/13 amounted to
$0.22 million and $1.19 million respectively.
18
The Secretary of AHPETC was the Managing Director of FM Solutions and Services Pte Ltd (FMSS). The
General Manager of AHPETC, who was the spouse of the Secretary, was also a director of FMSS.
19
The Secretary of AHPETC was the owner of FM Solutions & Integrated Services which was a sole
proprietorship. For the period 1 April 2012 to 30 June 2012, essential maintenance and lift rescue services for
the precinct under the former Hougang Town Council was provided by FMSI before FMSS took over from 1
July 2012.
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Audit Observations
12.7 AHPETC did not comply with the Singapore Financial Reporting Standards, which
require a reporting entity to disclose related party transactions in its financial statements.
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Audit Observations
13
Subsequent Events Review
“The Town Council had not made available to us its latest management accounts and
records of minutes subsequent to the financial year end. Therefore, we were unable
to carry out audit procedures to obtain sufficient appropriate audit evidence as to
whether events occurring between the date of the financial statements and the date of
the auditor’s report that require adjustment of, or disclosure in, the financial
statements are properly reflected in this set of financial statements in accordance with
Singapore Financial Reporting Standards.”
Observation
13.1 AHPETC failed to provide the information requested by FKT which was necessary
for its audit. AGO found that AHPETC had only provided FKT with minutes of Council
meetings held on 9 May 2013. Minutes of subsequent Council meetings held on 15 August
2013 and 14 November 2013 (before the auditor’s report was issued) and management
accounts for November 2013 were not provided to FKT.
13.2 AGO noted that AHPETC had sent an email to FKT (carbon copied to Chairman of
the Audit Committee of AHPETC) on 21 January 2014, indicating that “The accounts for
Nov 2013 that you [FKT] had requested for is not material to the finalizing of the audit . . . I
would like to reiterate that in view of the already long delay in audit, there is no further need
for you to verify anything further”.
13.3 Upon request, AHPETC had made available to AGO the minutes of the Council
meeting held on 15 August and 14 November 2013 as well as the management accounts for
November and December 2013. AGO’s review showed that no significant matters were
mentioned in these documents that would materially affect AHPETC’s FY 2012/13 financial
statements.
13.4 AHPETC did not provide the information requested by FKT for its subsequent events
review. AGO noted that common audit procedures for subsequent events review include
review of management accounts and minutes of meetings subsequent to the financial year end.
To enable a proper audit to be carried out, AHPETC should provide the required information
to its auditor.
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Audit Observations
[Blank]
Page 48
AHPETC’s Comments
AHPETC’S COMMENTS ON
AUDIT OBSERVATIONS ON DISCLAIMER AREAS
1.
General Remarks about the Audit
1.1
The past months since the commencement of the audit by the Auditor-General's Office
(AGO) have been very challenging, as the Town Council (TC) dedicated its limited
resources to facilitating the audit, including searching for voluminous information,
some collated before the current management took over. This onerous task was
undertaken concurrently with running a live operation.
1.2
Having read the AGO's draft findings on the 13 disclaimers by the TC's commercial
auditors Foo Kon Tan Grant Thornton (FKT) in the Financial Statements of FY 12, we
note that the AGO has managed to clear some of the disclaimers while shedding light
on others.
1.3
The TC will benefit from the findings. We note that the AGO team took time and care
to unravel some of the problems Aljunied-Hougang TC (AHTC) faced in FY 12. In
our view, these breakthroughs were possible as the AGO team was able to exercise its
powers under Audit Act to obtain information from government agencies and other
parties. This has shed much light on the nature of the disclaimers to enable us to move
forward and on which areas can be improved upon. The findings have also resulted in
other parties having to take steps to rectify errors and omissions e.g. entities such as
HDB having to reverse wrongful payments to other TCs that were due to AHTC.
1.4
Overall, the TC agrees with the AGO's findings to the effect that its financial
management and reporting in FY 12 needed to be enhanced and improved upon. Some
enhancements to reporting and controls have been done, while others are still work in
progress requiring time to realize / complete. Indeed, the AGO audit in March 2014
inadvertently caused some of the enhancements already committed by the TC before
the AGO audit to be deferred. For instance, in 2013, the TC had appointed an Audit
Committee to enhance its financial management and internal controls; however, this
Committee could not reasonably commence its work till the AGO audit is completed.
In addition, some of the scheduled IT system enhancements had to be deferred due to
both the key TC management and the IT system vendor being involved in the AGO
audit.
1.5
Information about the assurance measures and improvements implemented / in the
pipeline is in this document. By year-end 2014, the TC will also engage a public
accounting firm / chartered accountant as consultant to review its financial reporting
and controls, as an added assurance to ensure their adequacy.
1.6
What is clear from the AGO findings on the disclaimers is that no money has been
found to be missing, nor has there been any criminal or dishonest activity uncovered.
Instead, the observations show mistakes and omissions due to inadvertence, human
error, IT system constraints and a lack of experience in dealing with certain scenarios.
These occurred in FY 12 in the context of a deliberate decision by the new
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AHPETC’s Comments
management to prioritise the continuity of essential estate services in order to avoid
disruptions to residents in the initial months after the take over from the previous
management in August 2011.
AGO’s further comments
1.
AHPETC concluded that “What is clear from the AGO findings on the disclaimers is
that no money has been found to be missing, nor has there been any criminal or
dishonest activity uncovered…”. AHPETC’s broad conclusion cannot be derived from
AGO’s audit. AGO’s audit was based on evidence that it had asked for and made
available to AGO on the areas of audit. Through the audit, AGO found lapses in
governance and compliance with requirements in Town Councils Act and Town
Councils Financial Rules.
2.
On AHPETC’s comments that breakthroughs were possible as the AGO team was able
to exercise its powers under the Audit Act to obtain information, AGO would like to
point out that AGO had addressed most of the disclaimer areas using documents that
were obtained from AHPETC. Further, for other information on the disclaimer areas,
AHPETC could have followed up with external parties such as its vendors and
government agencies to obtain information.
3.
AHPETC claimed that AGO’s findings have resulted in HDB having to reverse
wrongful payments to other Town Councils that were due to AHPETC. This is an
incorrect representation of AGO’s findings in paragraphs 2.8 and 2.9 of the Report (Part
I – AGO). Please refer to AGO’s further comments in point 5 of section 2 below for
clarification on the incorrect representation.
2.
Opening Balances, Poor Information / Missing Information
2.1
Several of AGO's observations (such as the Opening Balances, Incomplete Records
on Receivables) relate to incomplete or missing records / information.
2.2
As mentioned above, FY 12 (April 12 to Mar 2013) covered the first year of new
operations that commenced wef Aug 2011. From just after the General Elections in
May 2011 (GE2011), the new management had to upscale its operations very quickly
to take over five new divisions by August 2011. One of the main challenges was the
computer and financial system. The previous system in use, the Town Council
Management System (TCMS), was terminated with short notice in June 2011 by
Action Information Management Pte Ltd (AIM). The JD Edwards computer system in
use in Hougang Single Member Constituency (Hougang SMC) had to be upscaled
within less than three months to cater for town management at the Group
Representation Constituency (GRC) level. The Hougang SMC system's capabilities
were limited to what was required at an SMC, where some of the work could be
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AHPETC’s Comments
handled manually due to the smaller scale of operations. While the TC's IT vendors
worked hard with the TC to upscale the system to the GRC's needs, its development
was concurrent with its being used for live operations. Human intervention and
manual tracking were done to manage the situation, resulting in errors / gaps.
2.3
To compound matters, as a result of electoral boundary changes to Aljunied GRC for
GE 2011, the TC (and its auditors) had to contend with segregating and aggregating
information involving 3 other TCs — Ang Mo Kio TC (AMKTC), Pasir Ris Punggol
TC (PRPGTC) and Marine Parade TC. The complications that arise from electoral
boundary changes can be seen in AGO's observations at paras 2.6 to 2.9, that even the
government housing authority, Housing and Development Board (HDB), wrongly
paid to AMKTC and PRPGTC sums due to AHTC.
2.4
While some information was handed over from the former management in 2011, the
current management is not able to confirm whether all the records signed off as
handed over were indeed handed over or continued to be with the TC. We accept that
the TC is responsible for keeping proper records, and that the TC should have done
better in this respect. However, there were some factors that, although not
exculpatory, were contributory. First, there was turnover of Finance staff in 2011 and
2012, including all those who signed for the Finance-related files from the former
management. Secondly, there was an audit by Mazars LLP for the handover period
April to July 2011 (when the TC was under the former management) that took place
in September 2011, when some of the records would have been needed by Mazars.
Nevertheless, we agree that more vigilance should have been exercised to ensure the
correctness, completeness and retention of information handed over, including
handing over procedures when the Finance staff resigned. The omission to exercise
more care in record tracking and keeping was not deliberate, but due to the time
constraints where key management attention was placed on prioritising operations and
ensuring that essential services to residents were not disrupted.
2.5
With regard to the opening balances, the TC had informed AGO on 10 March 2014
that FKT had noted discrepancies between some of the opening balances recorded by
Mazars (as at 1 April 2011) and the closing balances as at 31 March 2011 (which FKT
audited for Aljunied TC for FY 10). This point was not addressed in AGO's findings.
2.6
For completeness, it should be noted that the TC had to move on with less than
complete information. For instance, the TC was not able to provide an ageing analysis
for service and conservancy receivables (para 3.1 to 3.6) because that NCS / AIM did
not provide us with the necessary historical data despite being requested to. As a
further example, the TC found some documents showing that a town park connector
project "One Link@Aljunied" had been approved for government funding (under the
Community Improvement Projects Committee (CIPC) scheme) and a tender called,
but according to our records, this information was not declared in the Statement of
Transferable Surpluses - Capital Commitments as at the day before Issue of Writ of
Election.
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AHPETC’s Comments
2.7
2.8
Improvements to Record Keeping and Tracking:
1)
Outgoing staff are required to sign an exit clearance form, including
documents handed over, to their manager in charge / supervisor for
verification before their final salaries will be paid.
2)
The original Hougang IT system has seen many improvements since 2011.
The receivable module was enhanced to handle collections and payments
from AXS stations, SAM, credit card companies, CDC, and HDB. A
comprehensive enhancement was also made to the work order system in April
2014 to better track work progress and related payments and to better tie in
with the Accounts Payable module.
3)
Tracking of GST payable and GST reporting is undergoing enhancement at
the moment.
4)
While advanced receipts and arrears accounts are being captured in the
system, enhancement is in the works to facilitate better arrears reporting and
management going forward.
Overall, the IT system at AHPETC is a 'work-in-progress' system that has served its
purpose well despite its inherent limitations which are being addressed over time.
1.
With regard to AHPETC’s comments in paragraph 2.4 that some information was
handed over from the former management, AGO noted that AHPETC took over the
managing agent, CPG Facilities Management Pte Ltd (CPGFM) from the previous
Town Council in May 2011, and subsequently appointed FM Solutions and Services
Pte Ltd (FMSS) as the new managing agent in August 2011. According to CPGFM,
it had handed over all documents pertaining to Aljunied Town Council to AHPETC
in July and August 2011. As reported in paragraph 1.10 of the Report (Part I - AGO),
AGO observed that AHPETC did not implement adequate procedures to ensure that
accounting documents were properly taken over and safeguarded. AHPETC also did
not have formal handing and taking over procedures when staff resigned.
2.
AHPETC commented in paragraph 2.5 that AGO had not addressed a point on
discrepancies in some of the opening balances noted by FKT. AGO would like to
point out that FKT did not mention discrepancies in opening balances in its
disclaimer. AGO had addressed FKT’s concern stated in the disclaimer which was on
the lack of audit evidence on opening balances. AHPETC was not able to provide
AGO with accounting documents relating to the opening balances as reported by
AHPETC in its financial statements. AGO’s observations are detailed in paragraph 1
of the Report (Part I - AGO) on the disclaimer on opening balances.
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AHPETC’s Comments
3.
On AHPETC’s comments about “opening balances recorded by Mazars”, AGO
would like to point out that the financial statements which contained the opening
balances, were prepared and signed by AHPETC (then known as AHTC). Hence,
AHPETC was in a position to address and should have addressed the discrepancies
and ensured that it had the evidence to support the opening balances reflected in the
financial statements it prepared.
4.
On the matter of incomplete information, AHPETC has commented that NCS/AIM
did not provide AHPETC with the necessary historical data despite being requested
to. AGO had addressed this matter in paragraphs 3.4 and 3.6 of the Report (Part I AGO). According to AHPETC, it agreed to obtain transaction data for two years as it
was assured by NCS that it could obtain additional data if required at a later date.
AHPETC had not provided AGO with any documentation to show that AHPETC had
taken further action to obtain the first five years of transaction data.
5.
Pertaining to AHPETC’s comment about the payments to AMKTC and PRPGTC by
HDB, AGO did not conclude that HDB wrongly paid the sums due to complications
that arose from electoral boundary changes. HDB had informed AGO that “Under
the incidental and consequential provisions in the Town Councils (Declaration of
Towns) Order and the Town Councils (Dissolution of Various Town Councils) Order,
the rights, liabilities and agreements etc. of the handing over TC [Town Council] will
automatically become that of the TC taking over”. HDB would reimburse the Town
Council “with the legal claim over the reimbursement … unless otherwise instructed
by the TC”.
3.
Receivables from Various Stakeholders
3.1
The TC is enlightened by AGO's unraveling of the receivables recorded as due from
the Citizens Consultative Committee (CCC). The TC observes that this was achieved
by the AGO dedicating a full-time team to trace the transactions and exercise its
powers under the Audit Act to obtain information from the HDB and other TCs,
resulting also in the discovery of sums wrongly paid by HDB to other TCs that were
due to AHTC.
3.2
Of item 2c on Sundry Debtors, AHTC faced difficulty in tracking the large variety of
transactions. As mentioned before, the chart of accounts used in Hougang SMC that
was being adapted for AHTC had limited categories of transactions and had to be
modified to cater for new transactions such as Revitalisation of Shops (ROS),
schemes involving TC collaborations with National Environment Agency (NEA), Lift
Upgrading Programme (LUP) and Neighbourhood Renewal Programme (NRP).
Nevertheless, AHTC managed to trace $1,502,534 of these as received.
3.3
The TC does not agree with the findings at para 2.29 and 2.30 on the receivables
where invoices were rejected by HDB. After HDB's email of 2 Jan 2013, AHTC did
respond to HDB on 3 and 4 Jan 2013. The TC did not agree that the rejected amounts
were not claimable under HDB's co-payment scheme for facade repair, as the rejected
Page 53
AHPETC’s Comments
claims pertained to necessary waterproofing works that were part and parcel of the
repairs. The TC is still of this view and would follow up with HDB on the same.
3.4
As for para 2.34 b, 10 of the invoices to HDB for facade repairs were rejected as HDB
did not want to pay for thermal imaging when this was part of the methodology
adopted for the repairs. The TC would be following up on this impasse with HDB.
3.5
The general finding on the need to follow up on receivables promptly is noted. The
circumstances why these matters were not prioritized in FY 12 have been described
earlier. Since September 2014, the TC has adopted a practice of management
churning out every month a list of such debtors and appointing a Finance staff to
follow up with debtors by issuing reminders on sums owed.
1.
On AHPETC’s comment that AGO’s unravelling of the receivables recorded as due
from CCC was achieved due to among other things, AGO’s exercising of its powers
under the Audit Act to obtain information, AGO’s further comments on the matter are
in point 2 of section 1 above.
2.
Specifically for receivables recorded as due from CCC, AGO observed that HDB
asked AHPETC to provide project details supporting the receivables but AHPETC did
not do so. AHPETC had informed AGO that it was not able to identify the project
details required by HDB as it did not have the supporting documents for these
receivables. In this regard, AGO was able to identify the project details from
documents provided by AHPETC and to follow up with HDB on the receivables using
these project details. AHPETC could have done the same at that time but it did not.
The observation above was reflected in paragraph 2.4 of the Report (Part I – AGO).
3.
With regard to AHPETC’s disagreement with AGO on an observation pertaining to
invoices rejected by HDB (mentioned in paragraph 3.3 of AHPETC’s comments
above), AGO would like to add that during the audit, AGO had asked AHPETC for
supporting documents and its follow-up action on the invoices. AHPETC did not
provide AGO with the two emails which it mentioned in its comments.
4.
AHPETC provided AGO with the two emails only after AGO had forwarded its
observations to AHPETC for comments. AGO followed up with HDB and was
informed that AHPETC subsequently re-submitted its invoices on 31 January 2013.
HDB rejected these invoices for the same reason; that is the claims raised were for
repairs of water seepage which were not covered under the co-payment scheme for
repair of façade. HDB had informed AHPETC on 15 March 2013 of its rejection.
AGO had asked for but was not provided with any evidence of further action by
AHPETC from 15 March 2013 to the time of the Report (Part I - AGO).
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AHPETC’s Comments
4.
Conservancy and Service Receivables
4.1
As noted in paras 3.1 to 3.6, the TC was hampered by lack of historical data in order
to provide the ageing analysis. This was confirmed by the former TC's IT vendor's
agent, NCS Pte Ltd (para 3.6). The steps TC has taken to generate ageing analysis are
noted at para 3.10.
1.
Pertaining to AHPETC’s comments on the lack of historical data, AGO’s further
comments are in point 4 of section 2 above.
5.
Lift Expenses
5.1
During the annual audit, the TC had given FKT all the hard copies of documents
regarding lift repairs and lift upgrading bills, where the dates of the works were
documented. The TC had not been asked to provide a listing of the works. The TC
also had to work with a manual system for almost a year after the previous Works
Order system under TCMS was terminated.
5.2
As for the Lift Upgrading Bills from HDB, the TC spent several months exercising
due diligence to check and seek clarifications on the billings. The management (whose
key staff were working in Hougang TC previously) was not familiar with the way
HDB billed for LUP, as there had been no LUP done in Hougang SMC from 1991 to
2011 due to HDB's prevailing policy of deferring upgrading in opposition wards. It
was noted that the management of the former Aljunied TC had also queried HDB on
certain LUP bills and withheld payment, passing these onto the new management to
process. The issue of LUP bills was raised in Parliament in March 2012, and several
meetings were held with HDB right up till October 2012. These queries and checks
were done in the exercise of due diligence to protect the TC, as the bills were very
large (in the millions) to be paid out of public and residents' monies, and the terms of
billings (such as being billed one year in advance in some cases) were questionable.
Hence, some bills were carried over from FY11 to FY12.
5.3
Be that as it may, we note that the AGO was easily able to segregate the expenses to
FY10, FY11 and FY12. This finding effectively removes a total of $20.2 m from any
concern.
5.4
Improvement to Lift Expenses Processing:
1)
The TC implemented its Work Order System module in its IT system with
effect from 1 April 2012 for non-routine works and 1 October 2012 for routine
works (para 4.4). This would enable timely recording of such expenses.
Page 55
AHPETC’s Comments
2)
Despite the TC's concerns about the Lift Upgrading bills, the TC had been
more efficient in processing payments to HDB.
6.
6.1
Findings noted. Though AGO noted that the TC had not exercised due diligence and
been slow to follow-up on the various items, this had not been deliberate. This was a
result of having to prioritise the essential services during the initial take over months.
6.2
AHTC was using a manual system to track both routine and non-routine expenses
pending the development of a Works Order System. Given the size of a GRC and the
high volume of transactions, the manual system had its limitations and accrual
problems arose.
6.3
When the new Works Order System was implemented in 2012, appropriate SOPs were
rolled out. TC is enhancing its SOPs to put in time lines to verify works and issue
works orders.
6.4
As regards disclaimer 6c, the TC had cleared up $283,989 of the $308,715
unexplained receipts (see para 6.16). The TC will put in resources to clear the
remaining unexplained receipts in disclaimer 6c.
7.
Conservancy and Service Fees Received in Advance
7.1
Findings on the inadequacy of the TC's IT system to handle this reporting are noted.
The system enhancement is still work in progress. However, this inability to churn out
the total amount paid in advance should not be misunderstood as a lack of records by
household, as the TC has records of payments and advance payments for each
household.
8.
Income Taxes
8.1
Findings are noted. The TC has engaged a tax agent (para 8.4) to assist.
9.
Goods and Services Tax
9.1
Findings are noted. Some of the problems arose because the former Finance Manager
familiar with GST submissions had resigned. As a step forward, several of the TC
Finance team are now familiar with the apportionment formula (para 9.4). The TC will
work with IT Vendor to split the GST for routine and sinking fund income / expenses
in the system.
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AHPETC’s Comments
10.
Cash and Bank Balances
10.1
Findings noted.
10.2
When Aljunied-Hougang Town was formed in 2011, the merger resulted in the TC
inheriting several bank accounts from the former management, in addition to those
from Hougang TC. These accounts were mainly with DBS Bank and United Overseas
Bank and were used for receipts and payments. To rationalize the accounts, the TC
decided to close unnecessary accounts, leaving only a total of 4 such accounts — one
Operating Fund account and one Sinking Fund account each with DBS and UOB.
10.3
Since mid-2013, the TC has been doing monthly bank reconciliation at the account
level for each of these 4 accounts.
11.
Sinking Fund Disclaimer
11.1
We acknowledge the AGO's findings and advice regarding the management of
Sinking Funds in FY11 and FY12. It was also found that at all times, the monies were
still in the TC's bank accounts — it was just that the monies were left in Operating
Fund accounts rather than transferred into the Sinking Fund bank accounts.
11.2
We have also noted AGO's observation at para 11.2 that the TC's practice of leaving
the monies in the Operating Fund accounts and making Sinking Fund payments out of
the Operating Fund accounts made the Sinking Fund transfer calculations
"complicated", since it would be necessary to calculate the net amount to be
transferred after deducting Sinking Fund expenses made. We will abide by the advice
to transfer sums due to Sinking Fund first and make all Sinking Fund payments out of
Sinking Fund accounts. We have also rectified the mistake of recognizing
Neighbourhood Renewal Programme (NRP) as a Sinking Fund item when there was
no such requirement — the NRP funds are now received and paid out of Operating
Funds.
11.3
We note that the AGO has found that, for FY 12, there was in fact a transfer of $1.5m
into a Sinking Fund fixed deposit. This is contrary to FKT's disclaimer that no
transfers were made at all in FY 12.
11.4
One significant fact not highlighted by the AGO was that there was a sum of $7
million paid into Sinking Funds in April 2011 by the former management, recorded as
a transfer for "FY 2011/12". As transfers to Sinking Funds are required within a
month after each quarter, it would be assumed that the transfer in April 2011 would
have been for the January to March 2011, being the last quarter of FY 10. However,
the sum of $7 million would have been unusually large as a quarterly transfer, since
the quantum of quarterly transfers was closer to $4 million. Why such a large sum was
transferred in April 2011, and recorded as done for FY 2011/12 deserves
investigation. Further, as the TC has now transferred sums into the Sinking Fund for
FY 11 without taking into account the $7 million transferred in April 2011, there may
have been an over-transfer for FY 2011 that would warrant a transfer back to
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AHPETC’s Comments
Operating Fund.
11.5
Improvements to Management of Sinking Funds:
1)
2)
3)
4)
5)
6)
7)
Sinking Fund expenses are now strictly paid out of Sinking Fund bank
accounts only, to avoid "complications".
NRP funds will only flow into and from Operating Fund accounts.
Quarterly transfers to Sinking Fund have been made good for FY 11 and FY12.
The sums were $7.44 million for FY 11 (net of Sinking Fund expenses) and
$6.92 million for FY 12 (net of Sinking Fund expenses).
A further $1.16m is due to be transferred owing to shortfalls for some specific
transactions (paras 11.10, 11.13). This sum will be transferred by early Nov
2014.
Quarterly transfers (done without deducting for Sinking Fund expenses) for FY
13 totalled $21.54 million.
The TC will do its best to verify what further sums out of GST refunds from
the Inland Revenue Authority of Singapore(IRAS) (para 11.5, table 7) have to
be transferred to the Sinking Funds. This will take some months to unravel.
Going forward, the TC will work with its IT system vendor to implement a
function that will capture Sinking Fund items that attract GST, to ease the
calculation of GST refunds from IRAS to be paid back to Sinking Fund.
1.
AGO would like to point out that AGO did not conclude that “at all times, the monies
were still in the TC [AHPETC]’s bank accounts…”.
2.
What AGO had found was that AHPETC failed to make the required transfers to
sinking fund bank accounts for the last three quarters of FY 2011/12. AHPETC did
make some transfers for FY 2012/13 but these were late and short of the required
amounts. Please refer to paragraph 11 of the Report (Part I - AGO) for details of
AGO’s observation.
3.
AHPETC commented that AGO had not highlighted a significant fact on a sum of $7
million paid into bank accounts of sinking funds in April 2011 by the former
management. The Town Councils Financial Rules require C&S charges, grants-in-aid
and interests that are payable to sinking funds to be transferred to sinking fund bank
accounts within one month from the end of each quarter of each financial year. AGO
found that the transfer in April 2011 was not for C&S fees, grants and interest meant
for allocation to sinking funds for FY 2011/12. Therefore, it has nothing to do with
AGO’s observation on sinking fund transfers for FY 2011/12.
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AHPETC’s Comments
12.
Related Party Transactions
12.1
The TC notes AGO's findings on the requirements of Financial Reporting Standard
(FRS) 24, which has undergone revisions in recent years.
12.2
The TC had no intention to hide any material information, as it had specifically made
a disclosure under the heading Related Party Transaction that had not been made by
other TCs. The project management fees had been disclosed as a percentage of the
value of projects undertaken. As noted by the AGO, the amount of project
management fees was only $220,000 for FY12, which the TC believes is not
significant in the context of the TC's undertaking.
12.3
The TC would like to see a consistent standard applied to all TCs on this matter. It is
the norm / common practice to have management personnel of Managing Agents hold
key positions in the TCs they manage. To assist TCs, the relevant authorities (e.g.
AGO, Ministry of National Development etc.) could articulate when Managing
Agents and TCs are considered related parties and the extent / details of disclosures
required in the TC context.
1.
AGO would like to point out that requirements for related party disclosures and
considerations for determination of related party relationships were already stipulated
in the Singapore Financial Reporting Standards (SFRSs) at the time of FKT’s audit for
FY 2012/13. AHPETC had not complied with these requirements.
2.
AHPETC’s Secretary, General Manager and Deputy General Manager were
shareholders and directors of AHPETC’s managing agent, FMSS. In addition, the
Secretary was the owner of FM Solutions & Integrated Services (FMSI), a sole
proprietorship which provided services to AHPETC. Thus, AHPETC is required to
make the necessary related party disclosures pertaining to transactions with FMSS and
FMSI.
13.
Subsequent Events Review
13.1
Advice noted.
Page 59
AUDIT OBSERVATIONS ON FINANCIAL MANAGEMENT AND
ACCOUNTING SYSTEMS
CONSERVANCY AND SERVICE ARREARS
1
Lapses in Management of C&S Arrears
Observation
1.1
The Auditor-General’s Office (AGO)’s review of the Aljunied-Hougang-Punggol
East Town Council (AHPETC)’s conservancy and service (C&S) arrears (termed
“receivables” in the financial statements) for the Financial Year (FY) 2012/13 revealed that
AHPETC did not have a system to generate C&S arrears information accurately. As a result,
the statistics furnished by AHPETC were unreliable.
1.2
AGO noted that C&S arrears for precincts handed over by Hougang Town Council
(HTC) as at 27 May 2011 and Aljunied Town Council (ATC) and Marine Parade Town
Council (MPTC) as at 1 August 2011 amounted to about $1.94 million1. The amount of
arrears as at 31 March 2013 based on AHPETC’s FY 2012/13 financial statements was $3.18
million2. Thus, there was an increase of $1.24 million (or 64 per cent) between the handover
and 31 March 2013.
1.3
AHPETC has a Finance and Investment (F&I) Committee whose terms of reference
include the monitoring of arrears level of the Town Council. Pertaining to the frequency of
F&I Committee meetings, AGO was informed that “There is no written SOP on the
frequency of the F&I meetings, but it was agreed that as the Town Council meetings were
held quarterly (Feb, May, Aug and Nov), the F&I Committee would meet monthly except for
the months were [where] there were TC meetings i.e. F&I would meet 8 times a year. There
was some adjustment on occasions but in the main, this was the framework.” However, AGO
observed that as of 12 December 2014, the last F&I Committee meeting was held in April
20143.
1.4
AHPETC submits arrears reports to its F&I Committee. According to AHPETC, the
F&I Committee had no specified requirements on the frequency of arrears reports. In
addition, AHPETC is required to submit monthly arrears reports to the Ministry of National
Development (MND). AGO requested AHPETC for arrears reports submitted to MND as
well as AHPETC’s F&I Committee, up till September 2014. AGO observed that the last
arrears report submitted to MND was for April 2013 and the last arrears report submitted to
AHPETC’s F&I Committee was for February 20144.
1
The amount of $1.94 million was compiled from audited financial statements of precincts handed over.
The figure of $3.18 million was based on AHPETC’s FY 2012/13 financial statements for which the auditor
issued a disclaimer of opinion.
3
The F&I Committee was established in June 2012. It was noted that F&I Committee meetings were held in
July 2012, September 2012, October 2012, January 2013, February 2013, April 2013, July 2013, September
2013, October 2013, February 2014 and April 2014.
4
AGO was provided with the arrears reports submitted to AHPETC’s F&I Committee for arrears as at 31
December 2012, 31 March 2013, 31 August 2013, 30 November 2013 and 28 February 2014.
2
Appendix B: Report (Part II – AGO)
Page 1
1.5
With regard to the reason for not submitting arrears report to MND subsequent to
April 2013, AHPETC informed AGO that its “IT system … is not able to churn out the
required arrears data by household automatically. Manual sorting and counting is required
to aggregate the data by number of households and avoid double-counting. System
enhancements were in the pipeline to facilitate reporting in MND’s required format, but these
were delayed.” AHPETC added that the “system tracked the dollar value of arrears, but the
unit data required time to segregate. MND required the arrears reports in its prescribed
format, including by households.” According to AHPETC, it “prioritised resources for the
TC’s annual audit by FKT [Foo Kon Tan Grant Thornton LLP] from mid-2013 till Jan 2014
and then the AGO audit from March 2014, and deferred this reporting request”.
1.6
AGO also observed discrepancies between AHPETC’s arrears reports submitted to
MND and to AHPETC’s F&I Committee. The arrears reports submitted to MND for the
month of March 2013 showed 4,379 units (or 7.6 per cent of 57,590 total units) with arrears
of three months or more totalling $2.43 million. However, the report submitted to AHPETC’s
F&I Committee for arrears as at 31 March 2013 showed 17,502 units with arrears of more
than 90 days totalling $2.54 million. For the month of April 2013, the arrears reports
submitted to MND showed 17,077 units (or 29.6 per cent of 57,677 total units) with arrears
of three months or more totalling $2.35 million. No report for arrears as at 30 April 2013 was
submitted to the F&I Committee.
1.7
Arrears reports for months subsequent to March 2013 submitted to the F&I
Committee did not contain statistics on the number of units with arrears; only amounts of
arrears were stated. According to AHPETC, the “reporting to the F&I Comm was similarly
affected [as mentioned in paragraph 1.5], with no unit data in the reports after March 2013.”
AHPETC also informed AGO that the F&I Committee did not specify any format for the
arrears reports.
1.8
In addition, AGO noted discrepancies in the numbers between AHPETC’s reports to
MND for March and April 2013. Since the reports were supposed to capture the number of
units with arrears in consecutive months, there should be traceability and comparability of the
number of units with arrears from one month to the next. AGO observed that this was not the
case. The April 2013 report showed a high number of 17,077 units with arrears of three
months or more. However, the March 2013 report did not show a similar large number of
units with arrears either in the “less than three months” category or “three months or more”
category which could be traced to the April 2013 report. This strongly indicates that the
numbers in either one or both the reports were incorrect.
1.9
In summary, AGO noted that AHPETC’s C&S arrears has increased from $1.94
million at the point of taking over from the previous Town Councils in 2011 to $3.18 million2
as at 31 March 2013. According to AHPETC, the arrears as at 30 September 2014 which
included the precinct of Punggol East taken over in May 2013, was $3.37 million.
1.10 AGO’s observations in paragraphs 1.6 and 1.8 strongly indicate that AHPETC’s
statistics for arrears submitted to MND and AHPETC’s F&I Committee were unreliable.
AHPETC did not have a system to generate accurate C&S arrears information. There is also
no assurance that AHPETC is able to properly monitor and manage its C&S arrears.
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AHPETC’s Comments
1.11 The financial system in use at AHPETC is customized around the Oracle’s JD
Edwards World system, a comprehensive ERP system that is used by many customers
around the world and known for its robust capability and renowned stability.
1.12 AHPETC does have a system to track every financial transaction in a resident’s
account ‘live’ and such information can be displayed at the terminal at the collection
counter. A resident at the counter would be able to find out his/her up-to-date arrears status
accurately and on demand.
1.13 What AHPETC does not have is a system to generate and format aggregated C&S
arrears information in the format requested by MND. To meet the demands of such routine
reporting, AHPETC has to enhance the system and this is a work in progress.
1.14 In the absence of such reporting capability, reports were prepared by staff based on
data generated by the town council's IT system and extracted through manual sorting and
counting. For March 2013, in preparing the arrears report to MND, additional adjustments
were made manually to the data contained in the earlier report submitted to the town
council's F&I Committee.
1.15 AHPETC acknowledges that this manual process is not the most ideal and efficient
way of doing arrears reporting as the data size is voluminous; a single account will comprise
many documents dating back to many years of record keeping. As such, the aggregated
arrears information reporting process is tedious and subject to reporting and human error.
1.16 To further compound the complexity of the reporting process, the MND arrears
reporting format dictates that aggregated arrears are to be segregated by months according
‘1 - 1.99 mth’, ‘2 - 2.99 mth’, ‘3 - 3.99 mth’, ‘4 - 4.99 mth’, ‘5 - 5.99 mth’, and etc whereas
the arrears reports given to AHPETC’s F&I Committee were sorted by days according to ‘0
– 30 days’, ‘31 – 59 days’, ‘60 – 90 days’, and so forth. The reports submitted to MND and
AHPETC’s F&I Committee will exhibit some inherent discrepancies to begin with.
1.17 This is evident in the observations made by AGO in para 1.6. It is also evident in that
the report for March 2013 for MND was only submitted in May 2013. Likewise, the report
for April 2013 could only be submitted in late June 2013. Additionally, on 18 June 2013, the
TC had informed HDB that it was sorting out a bug in the IT programme generating arrears
data and was still working on submitting its April 2013 data to HDB / MND.
1.18 In view of the extensive manual work / processing required to prepare the arrears
data into MND’s prescribed format, the work was suspended after April 2013 to prioritise
staff resources and management time on meeting the requirements of the annual TC audit
which continued till January 2014. After April 2014, F&I Committee meetings (including
the preparation of management's arrears reports to the Committee) were suspended, in order
to free up the management and Finance staff from other financial reporting to prioritise the
AGO audit. As such, the F&I Committee did not meet between May 2014 to November
2014.
Page 3
1.19 Nonetheless, it is important to note that at any point in time, the accuracy, integrity,
monitoring and management of each individual C&S account is not compromised in any
way by the manual statistics reporting processes described above.
1.20 AHPETC has undertaken to expedite the development of the arrears reporting
module to comply with the reporting requirement. It has completed and tested a module to
aggregate C&S arrears for 1 to less than 3 months and for 3 months and above aging. The
integrity, accuracy, and aging treatment of the C&S arrears data as of 30 September 2014
were also subject to a review by external consultants, as an added measure of reliability.
AGO’s Further Comments
1.21 AHPETC had commented that the reports submitted to MND and AHPETC’s F&I
Committee will have some inherent discrepancies due to the difference in time periods used
and that this is evident in AGO’s observations in paragraph 1.6.
1.22 AGO is of the view that the discrepancies cannot be explained by the difference in
time periods used. The discrepancies reported in paragraph 1.6 were significant; the number
of units in the report to MND for arrears of three months or more was 4,379 as compared to
17,502 indicated in the report to AHPETC’s F&I Committee for arrears of 90 days or more,
pertaining to the month of March 2013.
Page 4
PROCUREMENT
2
Procurement Not Subject to Open Competition
Observation
2.1
AGO found that AHPETC had to waive the calling of open tender, due to its failure to
adequately plan and to take timely action for procurement of essential maintenance and lift
rescue (EMSU) services for the period from October 2011 to June 2012. As a result, there
was no open competition for the procurement and no assurance of AHPETC obtaining best
value for money.
2.2
AHPETC had awarded the contract for EMSU services for a nine-month period on 20
September 2011 to its managing agent, FM Solutions and Services Pte Ltd (FMSS) through a
waiver of tender. This was 10 days before the contracts for EMSU services with the
incumbent contractors, CPG Facilities Management Pte Ltd (CPGFM)5 and EM Services Pte
Ltd (EM Services)6, were to expire (i.e. 30 September 2011).
2.3
In an email dated 18 September 2011 to seek approval from the Town Council, the
committee7 appointed to consider FMSS’ proposal for the EMSU services stated that the then
contractors for EMSU services (i.e. CPGFM and EM Services) “confirmed just this last week
that they are not willing to extend their services beyond 30 Sep. In CPG’s [CPGFM’s] case,
this came as a surprise on 14 Sep and was contrary to the verbal agreement that they were
willing to extend for 6 months till March 2012.” It was recommended that “an interim
contract only be awarded, and a tender be called after this interim period.”
2.4
AGO observed from email correspondence provided by AHPETC that CPGFM had
alerted AHPETC on 16 May 2011 that CPGFM’s contract for EMSU services would expire
on 30 September 2011. CPGFM had also on 9 June 2011 reminded AHPETC at a Town
Council meeting that the CPGFM’s contract and another contract with EM Services for
EMSU services would expire on 30 September 2011. Thus, AHPETC had at least three
months to plan for the procurement of EMSU services.
2.5
With regard to the verbal agreement mentioned in the committee’s email dated 18
September 2011 (refer to paragraph 2.3), AHPETC was not able to provide AGO with any
record of the verbal agreement between CPGFM and AHPETC to extend the contract. Even
if there was a verbal agreement, AGO is of the view that it would not be prudent to rely on a
verbal agreement for such an important contract, with no written record of the critical terms
and the concurrence of CPGFM to provide the services.
2.6
While AGO noted that AHPETC did write to CPGFM and EM Services on 26 August
2011 to request that they extend their services for another six months, making the requests so
close to the expiry of the contracts would restrict AHPETC’s ability to call an open tender,
5
CPGFM’s EMSU contract was for precincts taken over from the former Aljunied Town Council.
EM Services’ EMSU contract was for a precinct taken over from Marine Parade Town Council.
7
The committee was appointed by the Town Council under rule 76(4) of the Town Councils Financial Rules
and comprised four town councillors.
6
Page 5
should the existing contractors decide not to extend the contract. In this case, EM Services
and CPGFM replied on 7 September 2011 and 14 September 2011 respectively to decline the
requests, which was less than a month before the existing contracts expired.
2.7
AHPETC did not plan adequately and take prompt action to ensure that an open
tender could be called for EMSU services. By not calling open tender, there is no assurance
that AHPETC was able to obtain the best value for money. As stated in rule 74(18) of the
Town Councils Financial Rules, waiver of tenders shall only be used under very special
circumstances and must be fully justified. While it could be said that the need to ensure
continuity of EMSU services coupled with the lack of time to call tender would qualify as
“special circumstances”, AGO is of the view that the circumstances arose due to AHPETC’s
failure to adequately plan and take timely action even though it knew of the expiry of the
contracts more than three months in advance.
AHPETC’s Comments
2.8
The TC was aware sometime in May 2011 that the EMSU contracts would be
expiring on 30 Sep 2011 for both CPGFM (covering 4 wards in Aljunied GRC) and EM
Services (covering the remaining ward, Kaki Bukit, which had previously been part of
Marine Parade GRC). The TC’s preference was to extend the existing contracts with
CPGFM and EM Services for an interim period of six months from October 2011 to March
2012, to facilitate calling of a tender for EMSU services for Aljunied-Hougang Town (see
TC Chair’s email of 16 Sep 2011).
2.9
To this end, there were discussions during the handover period (June to July / August
2011) between CPGFM and FMSS on extending CPGFM’s EMSU contract. Our
recollections were that CPGFM indicated they were amenable to an extension of six months.
However, no written confirmation was received. As time wore on, it became critical to get
an official response. The TC GM then wrote to both CPGFM and EM Services on 26
August 2011. Two weeks later, when the TC met for its scheduled meeting on 8 Sep 2011,
the TC was aware that EM Services would not agree (it sent a letter dated 7 Sep 2011,
received by the TC on 9 Sep 2011) while CPGFM had still not yet replied. The TC noted the
apparent reluctance / unwillingness of EMSU service providers at the time to provide such
services to the TC. In view of short time frame before 30 Sep 2011, the TC appointed a
committee under TCFR 76(4) to consider a proposal by the incumbent MA to provide the
EMSU services for an interim period, pending calling of a tender. The minutes of TC
meeting of 8 Sep 2011 recorded the same. A week after the TC meeting, and 3 weeks after
receiving the TC GM’s letter of 26 August 2011, CPGFM replied on 14 Sep 2011 that it
would not be appropriate for them to extend their services. The committee appointed by the
TC then sat urgently on 18 Sep 2011 (Sunday) to consider the proposal by FMSS to provide
EMSU services for an interim period.
2.10 The TC had no intention to exclude competition. These events occurred in the
context of a post-election (May 2011) handover where operational stability was a priority.
The TC would have preferred to extend the existing contractors for EMSU services till a
tender could be called. However, as events unfolded, this was not feasible. It was an
exceptional situation.
Page 6
2.11 As corroborative evidence that a six-month extension of EMSU services from Oct
2011 to March 2012 was within CPGFM’s planning at the time, it should be noted that the
EMSU contracts for various other TCs were apparently extended by six months from Oct
2011 to Mar 2012, and new contracts from Apr 2012 to Mar 2017 were awarded after a
tender. This is especially likely as, according to the Coordinating Chairman of the PAP TCs
Dr Teo Ho Pin’s Statement to Parliament on 13 May 2013, the PAP TCs call joint tenders
for EMSU services to enjoy economies of scale, with the EMSU tender for the 15 PAP-run
TCs grouped into 3 zones (East, West and Central).
AGO’s Further Comments
2.12 The documentary evidence (that was provided after AGO’s audit findings were
forwarded to AHPETC for comments) do not show that CPGFM had agreed to extend the
EMSU contract with AHPETC. Hence, AHPETC’s comment in paragraph 2.11 above is
not relevant to the observation raised by AGO that AHPETC did not plan adequately and
take timely action for procurement of EMSU services.
Page 7
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Page 8
3
Approving a Vendor’s Proposed Fees without Due Diligence Resulting in
Fees Higher than Intended
Observation
3.1
AGO observed that there was a lack of due diligence in assessing the proposal
submitted for EMSU services for the period 1 October 2011 to 30 June 2012 under a tender
awarded under waiver of competition. In an email dated 18 September 2011 to seek approval
to waive the tender and award the contract for EMSU services for the period 1 October 2011
to 30 June 2012, the committee7 appointed to consider FMSS’ proposal for the EMSU
services (comprising four town councillors) informed the other town councillors that the fee
payable under the contract would be about the same as the combined fees charged by the
incumbent contractors, CPGFM and EM Services (see paragraph 3.2). On the contrary, AGO
found that the proposed monthly fee of $70,110 under the new contract was 43.1% higher
than the combined fees charged by the incumbent contractors (of about $49,000).
3.2
In the 18 September 2011 email, the committee stated that “fee payable should be
about the same as the existing combined fees charged by CPG [CPGFM] and EM Services,
adjusted for electoral boundary changes. The fee currently is $70,110.08, excluding
replacement parts.”
3.3
However, AGO’s checks on invoices from the incumbent contractors, CPGFM and
EM Services, showed that the combined fees for August and September 2011 (after taking
into account electoral boundary changes and excluding replacement parts) were about
$49,000 per month:
Table 1: Monthly Fees of Incumbent Contractors
Month
August 2011
September 2011
CPGFM ($)
39,110.64
39,110.64
EM Services ($)
9,982.94
9,956.44
Combined Fees ($)
49,093.58
49,067.08
3.4
AGO’s checks revealed that the difference in fees of more than $20,000 arose as a
result of FMSS using a fee structure and contractual rates that were different from the
contracts of CPGFM and EM Services. The components of property units under management
used by FMSS to charge for certain services were also different from those of CPGFM and
EM Services. Details are elaborated below.
(a)
The charging basis for Lift Telemonitoring Services (TMS)8 and Installation of
Radio Frequency Identification (RFID) tags9 in the contract with FMSS was
different from that of CPGFM as shown below:
8
Lift Telemonitoring Services involved the use of the lift telemonitoring system to monitor the operation of lifts
in the precincts, such as looking out for lift fault, massive power failure and forced entry into the motor room.
9
RFID tags are installed at all blocks. The staff of the contractor could scan the RFID tag installed at all blocks
to timestamp their presence at any HDB block during the course of their work.
Page 9
Table 2: Differences in Charging Basis
Types of Services
TMS
CPGFM’s contract rates
$0.10 per lift
FMSS’ contract rates
$0.10 per unit (i.e. property
units under management)
RFID tags
$0.20 per block
$0.20 per unit
As a result, FMSS’ proposed fees for the above services were about $13,000
higher than the incumbent contractors’ fees for August and September 2011.
(b)
The components of property units under management used by FMSS to charge
for telephone answering/channelling and feedback services and tradesmen
services were different from those of CPGFM and EM Services contracts.
FMSS had included parking lots in its computation of property units under
management which CPGFM and EM Services had excluded. In addition, for
tradesmen services, FMSS’ proposed unit rate of $0.30 for precincts taken
over from ATC was different from CPGFM’s rate of $0.295 per unit. As a
result, FMSS’ proposed monthly fees for the above services were about $3,500
(or 14.6 per cent) higher than the incumbent contractors’ fees for the months
of August and September 2011.
(c)
FMSS’ proposal used an estimated number of 1,464 lifts to derive the fees for
lift rescue services which was higher than the total number of lifts reflected in
the invoices of CPGFM and EM Services of 1,223 and 1,222 for August and
September 2011 respectively. This accounted for a difference of about $4,300
for lift rescue services.
3.5
AHPETC did not ensure that information used by the Town Council in approving the
contract and the fees was correct. Consequently, there was no assurance that AHPETC had
obtained value for money for the services. In this regard, AGO observed that the fees billed
by FMSS for EMSU services for the period October 2011 to June 2012 averaged $67,000 per
month, which was $18,000 (or 36.7 per cent) higher than that of CPGFM and EM Services
for August and September 2011.
AHPETC’s Comments
3.6
As mentioned above, due to the inability to obtain an extension of the existing EMSU
contracts with CPGFM and EM Services, FMSS proposed to provide EMSU services for an
interim period until a tender for EMSU services could be called for Aljunied-Hougang Town.
3.7
Due to the urgency of the matter, the committee met on Sunday 18 Sep 2011 to
evaluate the proposal by FMSS. The proposal included a pricing structure. There was an
understanding that FMSS would adopt pricing similar to CPGFM and EM Services, to protect
TC’s interest in the interim period. The proposal presented reflected the existing rates charged
by CPGFM and EM Services. However, there were some aspects where there were in fact
differences, as pointed out by the AGO report. These differences arose when the wrong unit
Page 10
multiplier was used to compute the prices for lift monitoring services (per unit instead of per
lift) and RFID tags (per unit instead of per block). There was also a rounding of the unit rate for
tradesmen services ($0.30, which should have been $0.295). The TC agrees that these are
errors, inadvertently made, that need to be rectified.
3.8
The TC has since done a check on the amounts actually billed by FMSS for EMSU
services for Oct 2011 to June 2012. The monthly billings were between $67,325 to $68,040,
lower than the $70,110 indicated in the proposal. After correcting the unit multipliers for lift
monitoring services and RFID tags, and precisely computing tradesmen services at $0.295
instead of $0.30 per unit, the amount to be credited back to the TC is $122,411.98; this amount
has been paid back to the TC via a credit note.
3.9
The TC regrets this computation error. The TC notes that the Committee should have
verified the comparability of the indicative price computation to the previous contractors’
before seeking the Council’s approval of the pricing.
3.10 It was also noted by AGO that under the CPGFM and EMSU contracts, car park lots
were not used to compute pricing, whereas, under FMSS’ proposal, car park lots were
included. The TC notes that car parks are specifically included in the scope of works for EMSU
services. The amount paid attributable to car park lots is approximately $2,500 per month. As
this issue was not discussed with the contractor prior or during the performance of the services,
this amount was not adjusted.
Page 11
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Page 12
4
Approval Obtained and Written Agreements Issued Only After
Commencement of Services
Observation
4.1
AGO’s test checks revealed that approvals for award of tender for two contracts
awarded to FMSS for EMSU services and managing agent (MA) services were obtained and
the written agreements issued only after services had commenced.
4.2
AGO observed that AHPETC had awarded the following contracts to FMSS in the
Financial Year 2012/13:
(a)
(b)
Term Contract for EMSU services for the period 1 July 2012 to 30 June 2015;
and
Term Contract for MA services for the period 15 July 2012 to 14 July 2015.
4.3
The approvals for award of both contracts were obtained on 2 August 2012, after
services for EMSU and MA had commenced on 1 July 2012 and 15 July 2012 respectively.
The written agreements (i.e. letters of award) were subsequently issued on 3 August 2012,
more than two weeks after commencement of services.
4.4
AHPETC did not comply with rule 81(6) of the Town Councils Financial Rules
(TCFR) which states that “For works, period quotations and contract, there shall be a
written agreement before the works or supply of services begin.”
4.5
AHPETC did not ensure that its approving authority had given the necessary approval
for award of contracts prior to commencement of services. In addition, AHPETC did not
comply with the TCFR as it issued written agreements after services had commenced.
Consequently, the role of approving authorities was undermined and AHPETC’s interest
would also not have been safeguarded as there was no formal written agreement (with terms
of agreement) before services were rendered to hold the contractor accountable for its
performance.
AHPETC’s Comments
4.6
These contracts involved Managing Agent and EMSU services, which were being
provided by the same contractor before the 2012 tender. The contractor was the sole bidder
in the tender, and continued to provide the services after the preceding term expired on 14
July 2012 and 30 June 2012 respectively, while awaiting the formal approval of the new
contracts by the Town Council at its quarterly meeting on 2 August 2012.
4.7
The TC took a longer time than usual to evaluate the MA tender by, inter alia,
interviewing the tenderer twice and commissioning a special voluntary audit of the tender
process. The TC Chairman had also been of the view that the TC would not be prejudiced,
as no payments were due to the contractor until the contracts and rates had been approved by
the Council at its quarterly meeting on 2 Aug 2012. Nevertheless, the TC accepts that
Page 13
retrospective approvals are not ideal.
4.8
For subsequent MA and EMSU tenders, a longer lead-time has been planned for.
Specifically, the tender for the MA contract commencing mid-July 2015 was called in
November 2014 and closed on 1 December 2014, to give ample time for approvals before
the contract commencement date of mid-July 2015. The tender for EMSU services is
expected to be called by February 2015, with commencement of the new contracts due 1
July 2015.
Page 14
INTERNAL CONTROLS
5
Weak Controls Over Cheques Received
Observation
5.1
During the audit of AHPETC’s accounts and financial systems, AGO observed that
AHPETC did not have any written procedures to guide officers in handling of mail and
cheques. AGO’s checks on AHPETC’s controls over receipt of cheques, including physical
observation of the collection process at its main office, revealed gaps or weaknesses as
elaborated below.
Cheques not Properly Safeguarded before Bank-in
5.2
AGO observed that cheques received (through mail or over the counter) and not
banked-in by the end of the day were not safeguarded under lock and key. Instead, the
cheques would be placed in an open box behind the cash collection counters. Consequently,
there is a risk that the cheques could be lost or misappropriated before they could be banked
in on the next day.
Valuable Mail not Properly Handled
5.3
AGO observed that all mail, including mail with cheques (valuable mail), were
opened in an area which was accessible to the public. In addition, the mail opening officer
did not maintain a record of all cheques received through mail.
5.4
AGO observed that the mail opening officer had opened and checked the contents of
the mail at the reception (an open area accessible to the public). Opening of mail should be
done in a more secured area to minimise the risk of the mail, especially those with cheques,
being taken away by unauthorised personnel.
5.5
AGO also observed that there was a control weakness in handing and taking over of
cheques between the mail opening officer and an officer in the Administration Department as
the record of the cheques was only prepared subsequently by the Admin officer who took
over the cheques. The Admin officer was responsible for recording the details of the cheques
(i.e. cheque number, payee bank and amount) in the remittance record and would sign off in
the remittance record to acknowledge receipt of the cheques. Consequently, there is a lack of
accountability in handing and taking over of cheques and there is no assurance that all
cheques received through the mail had been properly accounted for.
5.6
AHPETC did not have adequate procedures for handling of cheques received through
mail. As a result, there is a risk of losing cheques through theft, misappropriation or
otherwise.
Page 15
AHPETC’s Comments
5.7
The TC has noted the observation and improved upon its safeguarding of cheques
received by mail. Cheques not banked in by the end of the day are now placed in the safe. It
should be highlighted that, as an additional control, all cheques received are scanned by
Finance staff into a central server.
5.8
As regards the observation that cheques received by mail should not be handled in an
open area, the TC feels it needs to balance the need for staff to be productively deployed
while managing any risks of cheques being lost. Currently, the reception area is already
monitored by CCTV, which would be able to detect unauthorized personnel accessing mail
received. To require reception staff to move to a private area to process mail would be
unproductive currently. However, to reduce the risk of cheques being lost, the TC will
henceforth require the Admin staff responsible for recording receipt of cheques to be present
at the reception counter when cheques by mail are received, so as to do the recording on the
spot, obviating the need for any handover from the receptionist to the Admin staff.
5.9
The TC will continue to review the workflow to see if any further enhancement
should be made.
Page 16
6
Surprise Examinations Not Carried Out In Accordance With Town Councils
Financial Rules
Observation
6.1
AGO found that there was no evidence that surprise examinations were conducted in
FY 2012/13 for every safe, cash-box, drawer or other receptacle for money in the charge of
appointed officers, as well as stocks of unused receipt books.
6.2
Rule 114(1) of the Town Councils Financial Rules (TCFR) states that “The secretary
or his representative shall carry out surprise examinations of every safe, cash-box, drawer or
other receptacle for money in the charge of officers entrusted with the custody of money,
stamp, or other valuables of any kind, as well as stocks of unused receipt books.” Rule 114(2)
further states that “Such surprise examinations should be held at uncertain intervals of time,
and the date, nature and result thereof shall be recorded in a book which shall be initialled
by the secretary or his representative on the occasion of each examination.”
6.3
The AHPETC Secretary had appointed an officer to carry out physical internal checks
as required under rule 114 of TCFR, with effect from 6 January 2012. According to the
appointed officer, he had carried out only one surprise examination since his appointment two
and a half years earlier. Based on the record provided to AGO, the examination was
conducted on 6 January 2012 at one branch office. There was no record of any other surprise
examination carried out by AHPETC.
6.4
AHPETC had not complied with the TCFR as it had conducted only one surprise
examination of valuables at one branch office. In addition, from controls perspective, not
conducting any surprise examination in FY2012/13 was inadequate. Consequently, any
discrepancies in the moneys held in custody would not have been detected and investigated
timely.
AHPETC’s Comments
6.5
The TC has noted the observation and will implement the surprise checks by the TC
Secretary or his representative at every branch office at least once a financial year.
6.6
The TC had been implementing other surprise checks on cash. A senior Finance staff
had gone to each branch office in FY 13 and FY 14 to conduct a surprise check on cash
collections and balances.
6.7
Nevertheless, TC appreciates that surprise checks by persons specifically authorized
by the Secretary are required.
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7
Weak Controls Over Access to Strong Room and Safe
Observation
7.1
AGO observed that AHPETC did not implement adequate controls over access to the
strong room and safe. In addition, there was no authorisation by the Chairman of AHPETC
for officers to hold the keys to the strong room and safe although such authorisations are
required under the Town Councils Financial Rules (TCFR).
7.2
Rule 24 of TCFR requires the strong room to be installed with at least two locks with
the key to one lock held by the secretary or an officer appointed by him and the key to the
other lock held by an officer appointed by the chairman. Rule 23(3) also requires the key to
the lock on the money delivery box, cash deposit bag or other container and the key to the
strong room or safe to be kept by separate officers authorised by the chairman.
Weak Controls over Access to Strong Room and Safe
7.3
AGO found that the controls over access to the strong room and safe were ineffective.
While the strong room in the main office10 of AHPETC was fitted with two locks, i.e. a
padlock and password-controlled electronic lock, AGO found that one officer had custody of
the key to the padlock and also the password to the electronic lock. In addition, AGO
observed that the officer also had custody of the key to the safe placed inside the strong room.
Thus, this officer had access to valuable items such as cash float of $1,300 kept in the safe
and unused receipt books kept in the strong room and could remove such valuable items
without authority or knowledge of another officer.
7.4
As reported in paragraph 6, AGO also observed that AHPETC did not conduct any
surprise examination in FY2012/13 on safe, cash-box, drawers or other receptacle for money
as well as stock of unused receipt books. Thus, any loss of valuables would not be detected
timely.
No Authorisation by Chairman for Custody of Keys
7.5
AGO was not able to sight written authorisation(s) by the Chairman of AHPETC for
any officer to hold one of the keys to the strong room and/or the key to the safe. Upon query,
the Chairman verbally informed AGO that she had not issued the authorisation required
under the TCFR for access to the strong room and safe.
7.6
AHPETC’s controls over access to the strong room and safe were weak. Coupled
with the lack of surprise examinations, there is a risk of losing the valuable items and not
detecting the loss.
10
AGO had only reviewed access to the strong room at the main office.
Page 19
AHPETC’s Comments
7.7
There were written authorisations by the Secretary to various officers to hold the
keys to the strong room in the TC HQ and Finance rooms and safes at TC HQ as well as the
branches. However, the need to have certain authorisations by the Chairman and the need
for certain keys to be kept by separate officers is noted.
7.8
The TC has since enhanced its controls and obtained Chairman’s and Secretary’s
authorisations for access to the strong rooms and safes.
Page 20
AUDIT OBSERVATIONS ON INFLOWS AND OUTFLOWS OF
BANK ACCOUNTS
Through our review of the inflows and outflows of the 6 current bank accounts
operated by Aljunied-Hougang-Punggol East Town Council (“AHPETC”) in the
financial year 2012-13 (i.e. 1 April 2012 to 31 March 2013), we have made
observations on and/or identified issues with a number of transactions of AHPETC.
We set out below in this Management Letter the key observations and/or issues.
1.
Related Party Transactions (RPTs): Lack of proper disclosure /
assessment before award of contract and control lapses in
payments
Observations
1.1
As part of our review of payments, we noted that AHPETC has entered into a
number of RPTs whereby substantial sums were paid to related parties in
FY2012-13. The Town Council (“TC”) despite repeated requests, did not provide
us with all the critical documents relating to these transactions. As a result, we
were unable to determine if the TC had properly considered potential conflicts of
interest that arose when awarding contracts to related parties. Based on the
documents that have been provided, full disclosures did not appear to have been
made, and proper procedures undertaken before award of contract. In addition,
control gaps in the payment processes exposed AHPETC to the risks that
payments might not be fully justified or properly computed. We elaborate below.
1.2
The related parties are namely FM Solutions & Services Pte Ltd (“FMSS”) and
FM Solutions & Integrated Services (“FMSI”). The present shareholders and
directors of FMSS are:(1) AHPETC’s Secretary, Mr Danny Loh Chong Meng
(“Mr Loh”), (2) AHPETC’s General Manager (“GM”), Ms How Weng Fan (“Ms
How”), and (3) both AHPETC’s Deputy GMs, Mr Yeo Soon Fei (“Mr Yeo”) and
Mr Johnson Lieow Chong Sern (“Mr Lieow”), and they hold all the shares in
FMSS1. In addition, Mr Loh is the sole proprietor of FMSI, and both Mr Loh and
Ms How are husband and wife. In other words, the owners of FMSS/FMSI (i.e.
Mr Loh, Ms How, Mr Yeo and Mr Lieow) also hold the senior positions in the TC,
and, prima facie, played a significant role in dealing and liaising with FMSS in
their capacity as TC officers, as further outlined below. Collectively, we will refer
to these relationships amongst Ms How, Mr Loh, Mr Yeo, Mr Lieow, FMSS,
FMSI and/or AHPETC as the “Relationships”.
1.3
The RPTs with FMSS and FMSI (where payments were made to FMSS and
FMSI during FY2012-13) and their contract values (as far as they can be
determined) are as follows:
Their shareholdings are, respectively, 250,000 (50%), 100,000 (20%), 100,000 (20%) and 50,000 (10%)
shares.
1
Appendix C: Report (Part III – PwC)
Page 1
S/n Description
Amount (S$)
per
1
a. FMSS contract for management of the former 339,462.99
Aljunied Town Council (“ATC”) for a period of 1 month
year from 15 July 2011.
b. FMSS took over the existing staff of the former 1,114,283.02
Hougang Town Council (“HTC”) at their existing annum
salary and terms of appointment on 15 June 2011
for a period of 1 year. The managing agent (“MA”)
fees were based on the annual staff cost according
to HTC’s annual report for the year ended 31
March 2011.
2
3
4
5
per
(collectively known as the “1st MA Contract”)
FMSS contract for the provision of essential
maintenance and lift rescue services (“EMSU”) for
precincts under AHPETC except Hougang from 1
October 2011 to 30 June 2012 for the different type
of EMSU services provided.
Monthly
charges
were based on the
number of property
units
under
management
or
lifts
serviced,
depending on the
type of services.
FMSI contract for the provision of EMSU services 29,400 per month
to precinct under former HTC (for the period 15
October 2007 to 14 October 2012, but the contract
was terminated as of 30 June 2012) (the “FMSI
EMSU Contract”).
3-year MA contract with FMSS (the “2nd MA 16,752,314 for 3
Contract”) (for the period 15 July 2012 to 14 July years and 3.5%
2015), which includes a Project Management Fee Project
(on top of MA fees), computed as a percentage of Management Fees
the final value of the projects undertaken by
AHPETC. This contract superseded the contract in
(1) above.
FMSS contract for the provision of EMSU services 110,356 per month
for AHPETC (for the period 1 July 2012 to 30 June
2015) (the “FMSS EMSU Contract”). This contract
superseded the contracts in (2) and (3) above.
Page 2
Lack of Proper Disclosure / Assessment of Related Party Interests
before Award of Contract
1.4
Full and proper disclosure should be made for every RPT before such
transaction is undertaken. All relevant material information needs to be placed
before the TC concerning the RPT in order for the TC to make a proper
assessment of the RPT. The disclosure of all relevant material information and
discussion/evaluation of the RPT should also be duly recorded in the minutes
of the TC and/or should exist as a matter of record.
1.5
We asked for minutes of the TC where the above transactions should have
been discussed before they were entered into but we have not seen any
evidence that there were proper and sufficient disclosures of the interest of the
related parties, the Relationships, the conflicts of interests involved and
assessment of the safeguards thereof before AHPETC entered into these RPTs.
Notwithstanding that the tender process has been effectively implemented, we
noted the following in relation to the RPTs.
1.6
The documents made available to us (the minutes of 2 TC meetings on 4 August
2011 and 8 September 2011 (the “2011 minutes”)) show that there was
incomplete disclosure in respect of the 1st MA Contract. The 2011 minutes show
that Mr Loh and Ms How only disclosed that they were directors and employees
of FMSS and that they were married to each other. The fact that they also had
ownership interest in FMSS and FMSI was not recorded in the minutes. Nor
was there any disclosure or documented notation of Mr Yeo’s ownership interest
in FMSS. An employee of the TC who has a financial and ownership interest in
the MA and at the same time performs a role (for the TC) in approving payments
to the MA is in a clear conflict of interest. Given that the role of MA includes
ensuring all expenses, disbursements and such other outgoings are duly paid
and discharged out of the monies collected on behalf of the TC and this is known
at the time the 1st MA Contract was approved, this conflict, and the safeguard to
address this, is material and ought to have been fully disclosed to the TC, and
properly evaluated before the RPT is entered into. We understand it is normal
practice for the MA’s employees to be appointed as officers of a Town Council.
This is so because that is one of the key ways in which the MA provides its
services. The real issue on the facts above is that the TC senior officers’
ownership of the MA has not been specifically highlighted or recorded in the
minutes - it is important for the TC to know and to note these interests, the
evaluation of the risks thereof and the safeguards required.
1.7
Second, in relation to the 2nd MA Contract and the FMSS EMSU Contract, which
are RPTs of a higher value than the 1st MA Contract and for a longer period, we
have not seen any documents showing that there has been any specific
disclosure in respect of the related party nature of these contracts, which were
cumulatively worth approximately $20.7 million (excluding project
management fees for the 2nd MA Contract). There is no reference in the
Tender Evaluation Reports, the minutes of the Tenders and Contracts
Committee or the minutes of the TC to show that the Relationships, the
ownership of FMSS, the conflicts of interest involved and the mitigating
control procedures that would be instituted, were disclosed and evaluated,
before these contracts were entered into.
Page 3
Control Lapses in Payment Processes
1.8
We observed that there were control lapses in relation to the payment of monies
to related parties for the RPTs. We note in our review of the 84 FMSS/FMSI
invoices/credit notes (net amount of $6,605,613.85) paid during FY2012-13 that,
in practice, FMSS/FMSI issued invoices for work done, and their shareholders,
namely Mr Loh, Ms How and Mr Yeo, acting on behalf of the TC, had a role in
reviewing the work and in approving payments from the TC to FMSS/FMSI.
This practice along with the lack of documented discussion at the time of
appointment, when taken in totality, raises question whether the risks associated
with this conflict of interests have been fully addressed and whether adequate
safeguards are in place.
1.9
Invoices from FMSS and FMSI to AHPETC were issued and signed by Ms How
and Mr Loh, on behalf of FMSS and FMSI respectively. First, we found that for
11 invoices amounting to $1,694,217.98: (a) the certification of work done /
services provided by FMSS and FMSI; and (b) the subsequent approval of
payment voucher and/or the cheque approval to FMSS and FMSI for such work
done / services provided were done by the same person, i.e. Ms How, who, at the
same time, was (and still is) also an interested party for the reasons described in
paragraph 1.2 above. In other words, the same person both certifies work done
(which entitles the payee to receive payment) and also issues the approval for
AHPETC to make payment. It is unclear how the TC (or each Town Councillor)
would have properly verified that work was done and that payments from
AHPETC were due in those circumstances.
1.10
Second, we also observed that for 9 invoices amounting to $264,468.04, these
invoices were then subsequently verified (which entitles the payee to receive
payment) by Mr Yeo, who is a shareholder of FMSS. Ms How then also played
the role of approving the payment vouchers and/or approving the cheques to be
prepared. These cheques were then in turn, signed by Mr Loh as one of the
cheque signatories, in addition to another signatory (the Chairman or Vice
Chairman).
1.11
Although payments made were based on contracts approved by the TC, our
concern over the above situation is raised in light of the fact that: (1) Ms How is a
co-shareholder and director of FMSS and her husband, Mr Loh, is the owner of
FMSI, and they are both also GM and Secretary of the AHPETC at the same time;
and (2) likewise, Mr Yeo is a co-shareholder and director of FMSS and he is also
the Deputy GM of AHPETC at the same time. Both Ms How and Mr Yeo are
clearly interested parties (with an interest in the RPTs with FMSS and/or FMSI),
and could not have been reasonably relied upon in the circumstances to provide
an independent verification / check, in the best interests of AHPETC, for the
certification of work done / services provided by FMSS and FMSI, and/or the
approval of payment / cheque preparation to these vendors.
Page 4
1.12
As for the AHPETC’s cheques signed by Mr Loh, they were also co-signed by
either the Chairman or Vice-Chairman. The TC represented that the Chairman
or Vice Chairman performed independent checks on such payments. However,
we have not been given documentary evidence to sufficiently show what the
Chairman or Vice-Chairman checked or verified, prior to them signing off each
of the cheque payments. Having requested but only received very few relevant
documents that may evidence any verification performed, we are unable to
determine, and independently verify, the processes undertaken by the Chairman
and/or Vice-Chairman to support the cheque payments. This is also in relation
to 31 project fee invoices amounting to $209,637.65. Further, we note that 11
out of 31 such project fee invoices (amounting to $73,463.99) only had
accompanying invoices from FMSS and payment summaries computing the
project fees were submitted, without any other supporting documents (i.e. third
parties’ invoices, which form the basis for the computation of the project
management fees). For 5 out of 11 of these invoices, their supporting documents
which were separately kept were located by us while reviewing other
transactions. We subsequently requested Mr Yeo to locate the supporting
documents for the remaining 6 invoices, of which supporting documents for 2 of
the invoices still remain outstanding to date. The TC informed us that the reason
for separating the supporting documents was that it was a filing practice to
remove the third parties invoices and to refile them into the respective payment
files, as payments were also made to these third parties and the invoices were
used as supporting documents for the payments. Having regard to the points
above, and based on the documentation that we have seen (and assuming that
these are all that exist), we are unable to determine or independently verify the
manner and extent of verification of these payments at the cheque-signing stage
by the Chairman or Vice-Chairman.
Other Matter
1.13
Separately, we also note a disclaimer of opinion made by M/s Foo Kon Tan
Grant Thornton (“FKT”) in their Auditor’s Report of AHPETC for FY2012-13
in respect of disclosure of RPTs vis-à-vis FMSS in AHPETC’s financial
statements.
Risks
1.14
Based on the documents provided, there did not appear to have been proper
and/or full disclosure and there was a failure to fully evaluate and consider the
conflicts and potential issues involved in the RPTs before entering into them. In
addition, control gaps in the payment process expose AHPETC to the risks that
the work / service may not have been satisfactorily performed by FMSS / FMSI,
and/or the payment may not be fully justified or correctly computed.
Please refer to Attachment 1 for more details on the 84 invoices/credit notes.
Page 5
AHPETC’s Comments
1.15
Further to our earlier responses from 9 Jan to 23 Jan 2015, PwC issued
revised findings dated 23 Jan 2015. Below are our responses to the revised
findings.
Disclosures
1.16
Paras 1.1 to 1.7 refer. We still do not believe paras 1.1 to 1.7 are within the
scope of PwC’s remit, and believe they should be removed.
1.17
We reiterate that:
1.
TC does not see the relevance of comments on the RPTs to PwC’s job
scope of analysing the inflows and outflows of the bank accounts
operated by the TC.
2. TC has never disputed the fact that the TC and its incumbent Managing
Agent, FM Solutions and Services Pte Ltd (FMSS) were related parties as
defined by the Financial Reporting Standards.
3. AGO has dealt with the matter in its draft report (Part 1) on the
disclaimers put in by M/s Foo Kon Tan Grant Thornton (FKT).
4. TC does not see the value and purpose of re-hashing the details in para
1.2. In addition, Mr Johnson Lieow was not a director of FMSS until May
2013, after FY 12/13.
1.18
TC has provided PwC with whatever documents it has relating to the
disclosures and discussions surrounding the engagement of FMSS to provide
Managing Agent and EMSU services, including those listed in TC’s response
on 16 Jan. We stress that the tender documents submitted contained the
ACRA profile of the company, where the directorships and shareholdings
were listed.
1.19
TC had also commissioned a voluntary audit of its MA tender exercise in
2012. The agreed-upon procedures were as follows:
(1) To review the tender procedures and procurement practices in place
relating to the calling of the tender for Managing Agent services for
2012 to 2015 for Aljunied-Hougang Town Council and to assess the
extent of compliance therewith in the tender exercise;
(2) To consider whether the current procedures and practices are adequate
to ensure that the procurement is made in the ordinary course of
business, and there are adequate controls to ensure the award is
conducted in an unbiased, objective, fair and transparent manner; and
Page 6
(3) To assess whether the evaluation and award of the tender was
conducted in accordance with existing requirements and good
corporate governance practices.
After the above audit, the TC was graded ‘A’.
1.20
In terms of disclosures of the RPTs, in actual fact, the Town Councillors were
very much aware of the details of composition of FMSS and the relationships
of the directors / shareholders as TC management. PwC’s issue appears to be
that disclosures about RPTs should be detailed in particular documents.
However, it was open to PwC to interview any Town Councillor as to what he
/ she knew about the RPTs. The composition of the Town Council remained
practically the same in August 2011 and August 2012 (except for the change
in MP for Hougang SMC due to the 2012 by-election); all the appointed
Councillors who approved the para 1.3 S/Nos 1 and 2 also approved S/Nos 4
& 5. In addition, five out of the six appointed Councillors (except for Chua
Zhi Hon) were Councillors sitting on the former Hougang TC, who would
have known about S/No 3 (EMSU contract for Hougang TC from 2007 to
2012). Thus, there was no risk of lack of knowledge on the part of the Town
Councillors.
1.21
Paras 1.8 to 1.12 refer.
1.22
As regards para 1.8, out of the $6,605,613.85, a sum of $6,365,276.80 or 96%
thereof consists of MA and EMSU monthly payments, with $5,958,312.93
(90%) consisting of repeated monthly figures ($118,080.92 monthly for
EMSU and $460,000+monthly for MA services). These payments were
agreed sums based on contracts awarded in 2012. As regards the 11 items
(para 1.9), 9 pertained to agreed monthly fees for EMSU and MA services
(totalling $1.693 m, leaving just 2 items (S/No 17 & 21) totaling $1,165.28.
1.23
The question is what independent checks are in place to show that services
had been performed before payments were made to the related parties. The
following are the key checks:
(a) The TC adopted an SOP on 8 Sep 2011 that every cheque to FMSS,
regardless of amount, needed to be co-signed by the Chairman or a ViceChairman, none of whom have any interest in FMSS.
(b) As detailed in TC’s email to AGO on 7 June 2014, various tracking and
feedback channels existed to gauge the MA’s service levels. These
included the computer system tracking service requests from residents
and the actions taken, resident feedback, regular but unannounced block
/ flat visits by Members of Parliament, monitoring by the TC committees,
weekly TC Chairmen’s briefings and correspondences / dealings with
government agencies.
Page 7
(c) MND’s annual Town Council Management Review provides an external
scorecard, showing good / average banding for AHTC / AHPETC in the
key areas of estate cleanliness, lift breakdowns and maintenance.
(d) If the routine services were not satisfactorily provided, the effects would
have been obvious (e.g. rubbish not cleared) and likely highlighted by
residents or other interested parties to the mass media.
1.24
Para 1.12 refers. Regarding the project fee invoices, PwC stated that 20 out of
the 31 invoices had separate supporting documents from third parties, while
for the remaining 11, it has had access in 9 cases to the supporting
documents, meaning that PwC did not record seeing the remaining 2 cases
out of 31. The TC is unclear as to whether PwC expects the Chairman or the
Vice-Chairman to query further the third party invoices, which would be
certified as payable by professional architects and quantity surveyors. This, to
us, is not reasonable.
1.25
Furthermore, para 1.13 and its reference to FKT’s observation is without
foundation as FKT was dealing with a separate point about whether project
management fees should be disclosed as a separate item in the Financial
Statements. This was about reporting standards, not about whether the
transactions were entered into with full disclosure or not.
Enhancing controls
1.26
The transactions reviewed were in FY 12, during the first year of operation of
the new management. Control / segregation of duties has been enhanced
since then.
1.27
Instead of direct invoicing for the monthly payments under the approved
contracts for MA and EMSU services, a works order is raised by the Office
Manager and countersigned by the TC Chairman. After this, FMSS would
raise its invoice and the certification of works would be confirmed by the
Executive Manager, before the invoice is forwarded to Finance. The payment
voucher would be approved by the Deputy General Manager before the
cheque is issued. Evidence of this was already given to PwC.
1.28
For projects, an additional step has been taken to pre-approve works
attracting project management fees before the works commence. This is done
during the meetings of the Estate and Community Liaison Committee that
meets monthly. The TC Chair is also asked to approve works orders before
project claims are made. Evidence of these were also given to PwC.
Page 8
PwC’s Further Comments
Disclosures
1.29
In relation to the TC’s query on the relevance of PwC’s comments on the
RPTs to PwC’s job scope, we set out the following points:
a) The mandate from AGO was to review the inflow and outflow of the 6
bank accounts, as well as to identify and follow up on any irregular
transactions and to ascertain the legitimacy of the transactions.
b) In the analysis of the inflows and outflows, PwC would therefore have to
also review the payments / transactions made, especially those involving
higher-risks vendors.
c) To fulfil the objectives of our mandate, the review on payments /
transactions was made broadly on 2 levels:
i.
The governance surrounding the creation of the payment
obligation i.e. the genesis of why a payment is needed to be made
to the vendor (i.e. tender/quotation evaluation process and
potential safeguards required on any foreseeable risk); and
ii.
The governance and internal controls surrounding the payment of
the transaction itself (i.e. segregation of duties, authorisation,
independence, etc.).
d) For FY2012-13 (i.e. the period of our review), the TC entered into two
substantial contracts with FMSS, whereby significant payments were
made from the TC’s bank accounts to FMSS. The fact that these
transactions are RPTs with related vendor would, by itself, warrant
greater duty of care, given the higher risks associated with such
transactions.
e) Based on the above explanations in a), b), c) and d), these transactions
are within the scope of our review.
1.30
For the purposes of our observations on the RPTs (including the control gaps
in the payment process), it was necessary for us to set out the full
composition behind FMSS and FMSI in paragraph 1.2 of the observations.
1.31
In our review of the payments, we traced to when these obligations were
created (i.e. when the contracts were entered into, including their
circumstances) for RPTs (as well as for other vendors subjected to our
review) and sought to ascertain if there were full and proper disclosures of
interests, as well as due consideration, discussions and proper evaluation of
these transactions, including any possible mitigating measures against
conflict of interests and payment controls (for payments to related parties).
Page 9
1.32
However, from the documents (i.e. minutes or tender evaluation documents)
that we reviewed, although we noted that some disclosures were made for the
1st MA Contract, we did not see any of such disclosures expressly set out in
respect of the 2nd MA Contract.
1.33
We note that the TC mentioned that tender documents submitted by FMSS
contained an ACRA profile of the company. Although that was the case, there
was no documentary evidence that the ownership of FMSS was flagged to the
TC / Tenders and Contracts Committee as the case may be and the risks of
conflict of interest and the corresponding safeguards discussed and evaluated
by the TC. There was no record in the TC minutes of meeting in 2011 or
2012, which evidence any such disclosure or a proper discussion / evaluation
of this issue.
1.34
We note that the TC engaged an independent firm to review the MA tender
exercise in 2012. As our scope covers the actual payments made to the MA
which is a related party, we have made additional observations in relation to
the disclosures / considerations that ought to have been included when the
obligations to pay the MA were first created.
1.35
We note the TC’s comments that the Town Councillors were aware of the
composition of FMSS and the relationships involved. However, the basis for
our observation is not only whether the TC members were aware of the RPTs
alone, but also whether the conflicts and risks associated with the RPTs had
been properly considered, evaluated and addressed by the TC before entering
into these RPTs; and subsequently documented properly. We note that
despite the Town Councillors’ knowledge, there was no documentary
evidence showing such consideration / evaluation, as well as discussion
surrounding controls and safeguards for payments to FMSS/FMSI, given the
positions the interested parties held in the TC and whether these interested
parties should or could still be involved in the payment process to
FMSS/FMSI.
1.36
The TC has sought to explain that a significant percentage of the sums paid to
FMSS and FMSI consists of monthly payments, based on agreed contractual
rates.
1.37
A robust payment process is essential in safeguarding the TC’s funds and
ensuring that all payments to vendors (including payments based on agreed
contractual rates) are fully justified. Further, apart from ensuring that
payments are based on agreed contractual rates, the TC would also need to
certify and be satisfied of the work done or services performed by the vendor
before any payment is made. Hence, having interested parties verifying and
approving payments may undermine the effectiveness of the safeguards
required prior to payments.
Page 10
1.38
Our specific responses to the TC’s comments on independent checks being in
place to show that services had been performed before payments were made
to related parties are as follows:
a) We have reviewed the SOP stated by the TC. However, the SOP
(origination date: 8 September 2011) does not address the concern
surrounding the adequacy of supporting documents required for the
cheque signers (i.e. the Chairman and Vice-Chairman) to review and the
degree of checks made by the cheque signers prior to signing the cheques.
b) The TC stated that there are various checks on the MA’s service levels,
and had provided us with some documentation in this regard. However,
most of these documents were in relation to periods outside the period of
review (i.e. FY2012-13).
c) TC informed us that there are various checks on the service level during
FY2012-13 such as resident feedback, regular but unannounced block /
flat visits by Members of Parliament, monitoring by the TC committees,
weekly TC Chairmen’s briefings and correspondences / dealings with
government agencies. These various channels provide informal feedback
on the services rendered by the MA but are in themselves, not the formal
independent checks that form the basis of the release of payments.
d) On paragraph 1.24 of the observation which relates to project fees, due to
the way supporting invoices are filed, we are unable to independently
verify what was presented for verification during cheque signing for
certain payments.
Enhancing controls
1.39
We note the TC is currently enhancing its controls and segregation of duties
(and has provided us with some documents showing the new measures as set
out in paragraphs 1.27 and 1.28 above that they have recently implemented
in the last quarter of 2014).
Page 11
2.
Instances of non-compliance of the Town Council Act (“TCA”)
and Town Council Financial Rules (“TCFR”)
Observations
2.1
We have observed various transactions where AHPETC did not comply with the
TCA and TCFR (and/or had contravened the same).
2.2
The transactions in question are as follows:
(a)
We noted an instance where the procurement of event management
services and logistics for an AHTC Neighbourhood Renewal Programme
(“NRP”) event (including a lucky draw) which was above $70,000 was
through an invitation to quote rather than through a tender. The
quotation for the event was initially $88,346 and eventually cost $101,641.
This contravenes Rules 73 (1), 73 (1A) and 74 (1) of the TCFR, which
prescribe that quotations should generally be invited for work / service
estimated not to cost more than $70,000 and a tender should be called
for those that cost above $70,000.
Additionally, according to Rule 34(1) of the TCFR, it states that “authority
to incur expenditure for any one item shall be as follows: …….exceeding
$100,000 — Town Council” and Rule 34(2) of the TCFR further states
“To determine the authority to approve the expenditure, the financial
limits are to be applied to – a) the value of any single item of stores,
services or works to be awarded; and b) the total value, inclusive of
variation orders, of the stores, services or works to be awarded to any one
contractor.” Based on available documents, the total expenditure of
$101,641 for the AHTC NRP event at Eunos Spring, Bedok Reservoir
Road was only approved by the Chairman and not by the Town Council
and hence, it would be in contravention of Rule 34 (1) and (2) of the
TCFR.
Page 12
(b)
We noted 3 instances where the approval or approval for waiver of
quotations were only given after the event had occurred. This would mean
that the management would not have reviewed the proposed expenditure
for the event beforehand and satisfied itself that the payments to be
incurred were necessary and correct. The 3 instances / events are as
follows:
(i)
A summary of quotation of $17,580 for the provision of event
management services and logistics for a Lucky Draw Event at
Eunos Spring, Bedok Reservoir Road was only approved by the
Chairman on 4 October 2012 when the event took place on 29
September 2012. Such approval was also only given after a Letter
of Award had been sent to the vendor informing them that
AHPETC had accepted its quote.
(ii)
AHTC NRP event at Eunos Spring, Bedok Reservoir Road (i.e. the
same event as in (a) above) was held on 11 and 12 August 2012
with the original awarded amount of $88,346. However, there was
a request for optional, addition & variation order for an amount of
$13,295, which was only approved by the Chairman on 21 August
2012 after the event occurred. The total expenditure of the event
thus came up to $101,641. Such approval was also only given after
a Letter of Award had been sent to the vendor informing them that
AHPETC had accepted its quote.
(iii)
A request to approve waiver of quotation less than $70,000 for a
sum of $5,700 for the revamp of AHTC website was only approved
by the Chairman on 15 November 2012. However, based on the
invoice description, “the job started on 23 July 2012 and ended on
13 October 2012”. The TC has explained that the Public Relations
Manager post had been vacant for several months, which
contributed to the backlog in paperwork, and they will be more
vigilant on the need to call or waive quotations in a timely manner.
By entering into the contracts without first obtaining the requisite
approvals, this raises the question of whether adequate checks or proper
validation were done to ensure that the payments involved were indeed
necessary and correct. These 3 instances / events indicate a potential noncompliance of Section 35(c) of the TCA, which provides that “the Town
Council shall do all things necessary to ensure that all payments out of its
moneys are correctly made and properly authorised and that adequate
control is maintained over the assets of, or in custody of, the Town
Council and over the expenditure incurred by the Town Council”.
Page 13
(c)
For the supply and installation of exercise equipment for a fitness corner
at Block 636 Bedok Reservoir Road and the repair of a playground in
Block 647 Jalan Tenaga, we noted that the Deputy GM had approved 2
waivers of quotation less than $3,000, as well as 2 waivers of quotation
of more than $3,000. This appears to contravene: (i) Rule 73(11) of the
TCFR, which provides that a waiver of quotation may only be approved
by either the Chairman or an officer authorised by the Chairman for
works estimated to cost less than $3,000, as there is no letter of
authorisation showing that the Deputy GM was duly authorised to
approve the waiver of quotation; and (ii) Rule 73(12) of the TCFR,
which provides that only the Chairman is allowed to approve a waiver
of quotation for more than $3,000. The total expenditure in respect of
these transactions is $20,672.41. The TC has acknowledged this
oversight and stated that waivers of quotations are now centralised at
the Chairman, Secretary or GM.
(d)
We noted a quotation for $1,500 (excluding GST) to supply and install a
sit up bench at Block 423 Hougang Ave 6 was approved by the Deputy
GM on 15 October 2012. Rule 73(3A) of the TCFR provides that
“quotations may be accepted on a Town Council’s behalf by officers
authorised by the Town Council to incur expenditure … but only within
the limits of their financial authority under rule 34(1)”. Rule 34(1) further
provides that an officer will have the authority to incur expenditure not
exceeding $10,000 only if “authorised by the chairman”. There is
however no documentation made available to us showing that the Deputy
GM had been duly authorised to incur expenditure not exceeding
$10,000. The expenditure in respect of this transaction is $1,605. The TC
has acknowledged this oversight and stated that this has been rectified at
the TC meeting held on 15 August 2013.
Risks
2.3
The failure to comply with the rules and/or the proper processes may put the
propriety and validity of the above TC’s transactions, expenditures and
payments in question. Complying with the financial rules in the TCA and TCFR
provide the necessary safeguards for the use of public monies held by the TC.
AHPETC’s Comments
2.4
TC notes the observations in paras 2.1 to 2.3.
2.5
As regards the payments relating to the Eunos Spring NRP publicity event,
this was the first experience of the current TC management going through an
NRP publicity event. The management was unable to forecast how much the
event would cost, and hence called a quotation instead of tender. As the event
progressed, additional services were called for, which added to the cost. The
TC has learned from the experience to better manage subsequent NRP
publicity events.
Page 14
3.
Failure to provide all requested documents and information,
which are critical for our evaluation of transactions
Observations
3.1
AHPETC did not provide us with all the necessary and relevant accounting
documents and information, which are essential and critical for our work.
Accordingly, we are unable, amongst others, to fully review AHPETC’s
FY2012-13 accounts, records and books and determine whether public funds
in AHPETC have been properly applied. We have noted this above, in
connection with specific observations which we were not able to verify, and
also highlight in particular the following facts. We note that FKT had made a
similar observation.
3.2
Since the commencement of our review in April 2014, we have made various
requests for documents from AHPETC as part of our review of selected
transactions. In our view, these documents (such as documents which record
the proper disclosure and consideration of RPTs) ought to exist as a matter of
record. Notwithstanding numerous requests and reminders, AHPETC did not
provide a number of the requested documents.
3.3
This led to the AGO having to issue a formal letter to the Chairman of
AHPETC on 22 August 2014, asking that AHPETC provide both AGO and PwC
the outstanding documents by the final deadline of 12 September 2014.
3.4
AHPETC subsequently provided us with some further documents on 12
September 2014. However, when we reviewed this, we noted that a significant
number of documents remained outstanding (i.e. requested documents for
590 out of 1,046 general ledger line items2 remained outstanding).
3.5
To assist AHPETC to be more focussed on the key items of review, we
subsequently narrowed the selected documents from the outstanding
documents (i.e. 163 line items were chosen from the outstanding 590 (i.e., 22
payment transactions)) which AHPETC should prioritise and provide to PwC
first. Unfortunately, even on this reduced list of selected documents, AHPETC
failed to provide all the documents.
3.6
As of 26 November 2014, the outstanding documents relate, amongst others,
to the procurement and/or payment process for goods and services and the
tender / contract evaluation process, and they are therefore critical for our
evaluation of these transactions. Broadly, these documents are as follows:
(a)
2
invoices issued from the vendors for the work ordered by AHPETC and
any other supporting documents relating to payment to the vendors;
“Line Item” refers to payment information obtained from the general ledger.
Page 15
(b)
delivery orders, job sheets, work reports, liquidated damages report,
photographs and/or any other supporting documents to show that work
was completed;
(c)
contracts, quotations, supplemental agreements, and variation orders;
(d)
successful and/or unsuccessful quotations/tender documents; and
(e)
tender evaluation report, minutes of meeting, internal notes, internal
and external correspondences (emails, letters or otherwise) and any
other documents relating to: (i) the process leading to the award of the
tender/contract; and (ii) evidencing the deliberation / evaluation of the
award of tender/contract, waiver of quotation, disclosure of interest or
are otherwise related to approval for transactions chosen.
3.7
Please see Attachments 2 to 7 for details of these outstanding documents.
3.8
Apart from the outstanding documents, there were also documents which
AHPETC provided previously but later when we asked for the same
documents, AHPETC did not give us the documents. We also had various
queries arising from the documents. AHPETC did not give us all the
documents previously provided. Neither did it answer all our queries (Please
see Attachment 7 for the List of missing documents”).
Risks
3.9
As a result of the above, we are unable to fully review AHPETC’s FY2012-13
accounts, records and books and determine whether public funds in AHPETC
have been properly applied. The lack of documents has prevented us from: (1)
drawing further conclusions on some of our observations set out above; (2)
fully determining the validity of some of the transactions reviewed (such as
RPTs); (3) determining if there is an underlying cause or a more serious or
systemic problem in corporate governance or financial management behind
the various lapses identified above, as well as irregularities and discrepancies
identified in Attachment A as stated in Observation 4 below.
3.10
We would also add that the lack of provision of these documents also raises
concerns on whether record keeping at AHPETC is adequate. Both the TCA
and TCFR have provisions requiring all TCs to keep proper accounts, books
and records (see, for instance, Section 35(a) of the TCA and Rule 96(1) of the
TCFR).
Page 16
AHPETC’s Comments
3.11
The heading is “Failure to provide all requested documents and
information, which are critical for our evaluation of transactions”. The
same phrasing is seen in paras 3.1 and 3.5. Such phrasing, at first glance,
may give the impression that the TC did not provide any of the requested
documents and information, which is clearly not the case. Perhaps a more
accurate phrasing would be “Failure to provide some documents and
information”.
3.12
The TC has done its best to facilitate the audit. The TC will, in due course
and if necessary, enumerate the considerable amount of documents and
information provided to the AGO and PwC to facilitate the audit. This is on
top of running a live operation, where the key personnel attending to the
auditors are also the key management running the Town Council.
3.13
Specifically in respect of the Attachments 2 to 63:
(a) Attachment 2 (originally App B3 4 ): only 1 of 22 documents is
outstanding; and
(b) Attachment 3 (originally App B5 4): only 3 of 75 documents are
outstanding.
3.14
As for Attachment 7 (documents “missing”) – 3 of the 4 documents had
been provided to PwC earlier.
3.15
We understand that the TC, apart from facilitating the audit, has to run a
live operation.
3.16
However, based on our observations in paragraphs 3.2 to 3.5, we have
repeatedly requested from TC for the necessary documents over a period of
time but were not provided.
3.17
We have received several new documents in January 2015. We have
correspondingly updated the list of outstanding information, however,
there remains to date, documents that have not been provided.
Various attachments were provided to the TC earlier and the TC’s comments that have been
incorporated to the Attachments are not reflected here.
4 App B3 and App B5 were appendices attached to the letter issued by AGO to the Chairman of
AHPETC on 22 August 2014, asking for outstanding documents.
3
Page 17
3.18
In particular, we would point out that the TC did not provide us with any
internal notes and correspondences, including emails, which may shed
light on: (i) the process leading to the award of tenders/contracts; and (ii)
evidencing the deliberation / evaluation of the award of tenders/contracts,
waiver of quotations, disclosure of interest or are otherwise related to
approval for transactions chosen.
3.19
On paragraph 3.14, although the TC had informed us that 3 out of the 4
documents were provided to us earlier, these documents were not
available when we requested to review them again.
Page 18
4.
Various other irregularities, non-compliances, discrepancies
observed
4.1
Apart from the key observations and/or issues above, we also observed various
other findings, including irregularities, non-compliances and discrepancies in
AHPETC’s transactions, as well as deviations from documented processes. We
have set out the details of these other irregularities, non-compliances,
discrepancies and/or deviations in Attachment A.
Page 19
5.
Concluding remarks
5.1
Based on our findings above and documents reviewed to date, we conclude
that:
(a)
We are unable to be fully satisfied whether the TC appropriately entered
into the RPTs of the 2nd MA Contract and the FMSS EMSU Contract,
which are listed as items 4 and 5 in the table set out in Paragraph 1.3,
that were entered into in FY2012-13. In addition, we are unable to be
fully satisfied that all payments made to FMSS and FMSI are fully
justified and properly computed. Taken together, we are not fully
satisfied with the validity and propriety over the RPTs.
(b)
We are unable to verify the validity and propriety of transactions
amounting to a total of $147,198.41 entered into in contravention of the
regulations as set out in the TCA and TCFR.
Page 20
ATTACHMENT A
1.
Unauthorised person approving documents relating to
procurement (i.e. Written Instruction (“WI”) and Work Order
(“WO”)) indicating a lack of compliance with documented
procedures
Observations
1.1.
Based on documents reviewed, we observed that the General Manager
(“GM”) singly approved the WOs within the procurement cycle.
However, through the walkthrough conducted and the 3 flow charts
provided by AHPETC, we noted that 2 out of the 3 flow charts stated that
WO should be approved by the “PM” while the remaining 1 stated it
should be “endorsed” by both the Estate Manager and General Manager
even though the nature of the flow chart is similar. In the WOs we
reviewed, the GM was neither the “PM” (i.e. Property / Project Manager)
nor was there another approval signed by the Estate Manager.
1.2.
The observation in paragraph 1.1 relates to 9 WOs amounting to
$210,224.27 in total, which indicate a lack of compliance with
documented procedures.
1.3.
Similarly, based on the documents reviewed, we observed that the GM
also approved WIs within the procurement cycle. However, based on the
3 flow charts received, we noted that 1 out of the 3 flow charts stated that
the Estate Manager should be the one approving the WI, while the other
stated that the “Manager” should approve the WI even though the nature
of the flow chart is similar. However, the GM was neither the “Estate
Manager” nor “Manager”.
1.4.
The observation in paragraph 1.3 relates to 12 WIs amounting to
$313,952.09, which indicates a lack of compliance with documented
procedures.
Risks
1.5.
The purpose of an approval for the WIs or WOs is to minimise a situation
where an unauthorised procurement of goods and services is undertaken. Attachment A of Report (Part III – PwC)
Page 1
AHPETC’s Comments
AHPETC’s General Comments
1.6.
The payments made in FY 12 relate were made in the first year of the TC’s
operation after the takeover pursuant to the General Election 2011.
During this initial phase, there was much set-up and prioritisation of
critical tasks, to ensure that services to residents was not disrupted. Due
to the exigencies then, expediency and efficiency was critical. The
refinement of back-end processes thus took more time.
1.7.
Below are some specific observations in response to PwC’s Attachment A.
AHPETC’s Comments on Observation 1
1.8.
PwC noted that the GM singly approved WIs and WOs in certain cases.
To say the GM is “unauthorised” when she is senior in the chain of
command to the other signatories (e.g. Property Manager or Estate
Manager) is not correct, since she has higher authority than the other
signatories. Perhaps the heading could be worded as “Wrong signatory
approving WOs and WIs…”
1.9.
The observation relates to 9 WOs and 12 WIs. For a proper perspective,
the total number of WOs and WIs reviewed should be included. From our
records, there were 16,481 WOs made available for PwC’s approval.
1.10. S/Nos 5 & 6 [from PwC’s exception listing] relate to procuring insurance
cover for the TC. This decision is usually initiated at the GM level.
1.11.
The stated risk of “unauthorised procurement” is not appropriate on the
facts given.
1.12. We have noted TC's comments in relation to S/Nos 5 and 6 [from PwC’s
exception listing]. However, we have not sighted to any TC documented
procedures on the list of expenses that are initiated at the GM level.
Attachment A of Report (Part III – PwC)
Page 2
2.
Same person approving documents relating to procurement and
payment (i.e. Certification of Work (“CoW”), Payment Voucher
(“PV”) and approvals for issuance of cheques) indicating a lack
of segregation of duties
Observations
2.1.
There was a lack of segregation of duties as the GM approved the CoW,
PV and cheque within the payment process. The concept of segregation
of duties in this process is to prevent the approver for certification of
work (CoW) to be the same person approving the payment to the vendor
(PV). At the same time, the function of the approver for cheques is to
validate that the cheques are in respect of goods and services rendered
and that the payment details (such as name of payee, amount) match to
the supporting documents prior to releasing the cheques for authorised
signatories to sign. Although we noticed the cheque signatories were not
the GM, we are unable to verify the extent and robustness of the cheque
signatories’ due diligence on the supporting documents as well as cheque
details prior to them signing the cheques. In this respect, the segregation
of duties in the CoW, PV and approval for cheque issuance is an
important safeguard before the release of funds. The observation relates
to 10 invoices amounting to $393,223.86.
Risks
2.2.
There appears to be a lack of segregation of duties within the payment
process resulting in a risk of potential payment for non-existent goods
and/or services as the person verifying that services and/or goods had
been satisfactorily completed is the same person as the approver for
payment.
AHPETC’s Comments
2.3.
S/Nos 1, 2, 4, 5, 6, 7 [from PwC’s exception listing] relate to payments to
architects.
2.4.
S/No 3 was for Repairs and Redecoration Works at Bedok North (Kaki
Bukit Division of Aljunied GRC) which was commenced before General
Election 2011 under Marine Parade Town Council and completed after
the GE by the Marine Parade TC Managing Agent. AHTC’s GM approved
the documents for payment to the contractor, relying on documentation
provided by Marine Parade TC’s MA.
2.5.
S/No 10 was for IT services.
Page 3
3.
Missing signatures for documents relating to procurement and
payment (i.e. WI, WO, service / job sheets and cheque) and dates
on documents potentially indicating a lack of compliance by the
executing personnel
Observations
3.1.
Based on the walkthrough conducted, WI and WO should be signed by
the respective officer from the Project or Property department and
approved by the relevant department's manager. We reviewed the
documents provided by AHPETC and note a lack of signatures in the “Issue
by” and “Approved by” field in certain WI and WO, “Cheque Approved”
field in the PV and CoW stamp of approval on certain documents for jobs
that were done (i.e. supply and delivery of refuse bins, operation support
maintenance services, supply and fixing of UPVC adaptor, collar brackets
and pipe, repair external wall seepage and conservancy and cleaning
works). The following are instances noted where there are missing
signatures and dates for documents relating to procurement and payment:
(a)
No signature was sighted on the "Approved by" field of the WI.
Although we noted the property manager signed off as the issuing
officer, there was no reviewer to validate the necessity for the
expenditure. This observation relates to 3 WIs amounting to
$25,977.441.
(b)
No signature was sighted on the "Approved by" field of the WO. The
WO is instrumental in the payment process as it is the initial
document used to commence payment to the vendor. The lack of
approval indicates there was no reviewer to validate if the goods
and/or services was satisfactorily requisite and delivered. The
approval is also an important step as it is relied upon by subsequent
reviewers that initial validation had been carried out (i.e. works
were carried out), something which the reviewers may not be able to
validate themselves. This observation relates to 1 WO amounting to
$23,005.
1 Although the description on the invoice does not match fully with the WI stated, we are aware that one WI may have several
invoices. However, not all invoices were included in our sample for each WI. Hence, the amount stated is only the sum of
invoices reviewed for each WI.
Page 4
(c)
No signature was sighted on the "Cheque Approved" field of the PV.
The purpose for such a review is to validate that the details on the
cheques match to the payment supporting documents. Although
these PVs amounted to only $217,963.35, these PVs were batched
together with other PVs to collectively form the basis of 7 cheques
amounting to $1,378,564.20 being issued.
(d)
Even though there was an assistant lift engineer signing off in the
“Approved by” field in the WI, there was no Issuing Officer
signature to issue work instructions to the vendor for a job
pertaining to the repair of PC Board and directional indicator at
Block 525 Bedok North. This may indicate that proper procedures
according to the TC’s stated policies and procedures may not have
been complied with. This observation relates to 1 WI amounting to
$107.
We note there may be practical situations where the issuing officer
may not sign on the WI on time and alternate means of requisition
for services may be used, such as emails. Ultimately, there should be
a requestor and an approver for the requisition of goods and
services.
(e)
No signature sighted on the ‘Prepared by’ field of the WO. The
purpose of this signature is to ensure there is no duplication of roles
between the preparer and the approver. This observation relates to 1
line item amounting to $2,000.
(f)
We reviewed the signature on a WI issued to EM Services Pte Ltd to
replace 1 fluorescent tube at Block 520 Bedok North Ave 1 and
noted the Property Manager had the same signature in the “Issuing
Officer” and “Approved by Officer” field, indicating that there is a
lack of segregation of duties. This observation relates to 1 WI
amounting to $13.38.
Given that the above transaction had occurred where the same
officer requested and approved the services, there is a possibility
that procurement of services were unauthorised and/or
unnecessary.
Page 5
(g)
Date of issue on 2 WIs was not stated; hence we are unable to
determine when the services were requested, which may lead to
work being completed before an official request was made for
services to be performed. This observation relates to 2 WIs
amounting to $20,222.85.
(h)
Date of completion was not stated on 14 Service / Job sheets
(Service/Job Sheets typically are vendor’s documents to describe
the type of work completed and the date of completion), hence we
are unable to determine if services were performed prior to or after
proper requisition of services. This observation relates to 14 job
sheets amounting to $572,389.99.
(i)
Date of confirmation on 8 inspection reports for the charging of
liquidated damages was not stated; hence we are unable to
determine if the confirmation of checks were done before the letter
was issued to the vendors to inform them of the liquidated damages
charged. Reasons for liquidated damages charged were due to
failure to carry out conservancy work; failure to provide sweeping,
washing to residential blocks and cleaning of bulky waste, etc. The
amount of liquidated damages charged by AHPETC amounted to
$7,175.
(j)
2 taxi claims ($34.90) submitted by FMSS did not have an approval
signature in the ‘verified by’ column on the FMSS staff
reimbursement/claim voucher indicating a lack of effective review
prior to claims being reimbursed.
Risks
3.2.
A departure from procurement and payment procedures may increase the
risk of unnecessary or unapproved expenditures being executed for items
(a) to (c) and (j).
3.3.
Missing signature for Issuing Officer (for item (d)), missing signature for
‘Prepared by’ column on the WO by the Property Officer (for item (e)) or
same signature for both the Issuing Officer and Approving Officer on the
WI (for item (f)) have a risk that subsequent checks have not been vigilant
enough and proper procedures may not have been applied in accordance to
AHPETC’s stated policies.
Page 6
3.4.
Missing dates indicate a risk that services could have been performed
and/or completed prior to proper requisition of services (for items (g) and
(h)) or that letters were issued to the vendors to inform them of the
liquidated damages charged before it was confirmed by the Project
Manager (for item (i)).
AHPETC’s Comments
3.5.
Re PwC’s observation at 3.1(c), the relevant amount of PVs that PwC is
querying is $217,964.35. It is not relevant to highlight the cheque amounts
totalling $1.378m, since the balance of $1.16m is not in issue. The total
cheque amount should be omitted.
3.6.
TC attached a document in the email for paragraph 3.1.(h), stating that the
date of completion were captured on the work order system for works
carried out by the vendor.
3.7.
TC has replied that all documents provided to PwC, with regards to
paragraph 3.1.(i), all come with dates.
3.8.
In response to the observation in paragraph 3.1.(h), whilst the document
attached in the email to us contained some additional information (such as
WO numbers, date of completion etc) in relation to the items in PwC’s
exception listing, we were not provided with the certified WOs source
document themselves (which would have an endorsement by a TC officer to
verify that work has been satisfactorily completed) or other source
documents to verify the date of completion.
3.9.
Dates on the LD inspection report are dates which the inspections were
conducted. However, the observation in paragraph 3.1.(i) is that
confirmation (i.e. endorsement) dates for the inspection reports are
missing. These confirmation dates are important as it proves that the PM
checks the inspection report before the letter is issued to the vendors to
inform them on liquidated damages.
Page 7
4.
Inconsistencies in approval signatures for documents relating to
procurement and payment (i.e. WI, service / job sheets and
cheque) may lead to unauthorised procurement of services and
payment
Observations
4.1.
Inconsistencies in approval signatures were noted in the following
instances:
(a)
Signature by Issuing Officer 2 on the WI did not match previous
signatures sighted in the supporting documents (i.e. WIs, WOs and
job sheets) obtained indicating that the WI may not have been
raised by the appropriate officer. This observation relates to 1 WI
amounting to $107.
(b)
The project Manager’s signature on the 3.5% project fees payment
summaries claimed by FMSS or the WIs issued did not match the
specimen signature obtained from AHPETC. This specimen
signature can be found in AHPETC’s internal document titled
‘Delegation of Authority Under Town Councils Financial Rules’.
This could indicate a potential unauthorised approval on the project
fees summary claim calculation for the invoice to be processed and
submitted for payment. This observation relates to 12 invoices
amounting to $208,702.46.
Risks
4.2.
The risk relates to a possibility of unauthorised requisition of services (for
item (a) and (b)) and unauthorised approval for project fees summary
claim calculation prior to satisfactory completion of works (for item (b)).
These may lead to unnecessary expenditure by AHPETC.
2
As this Issuing Officer has left AHPETC, we were unable to verify if he has 2 different signatures.
Page 8
AHPETC’s Comments
4.3.
Re para 4.1 (b) [from PwC’s exception listing], TC recalls that the Project
Manager was interviewed by the AGO and confirmed that he signed those
documents.
4.4.
We had clarified this matter with AGO. AGO did not interview the Project
Manager to confirm that he signed those documents.
Page 9
5.
Payments made to vendors are higher than the agreed rates
stated in the contracts or that the payments were not part of the
contract
Observations
5.1.
We noted the following instances where payments made to vendors are
higher than agreed rates as stated in the contracts:
(a)
Fourways Pte Ltd charged a monthly invoice amount of
$58,940.43 compared to the contract amount of $57,677.61 (i.e.
lump sum price of $2,076,394 divided over a period of 3 years) for
the conservancy and cleaning works for Serangoon Division. This
resulted in potential overpayment of at least $3,787.29 (i.e.
monthly overpayment of $1,262.43 multiplied by 3 invoices
reviewed), which indicates a lack of effective review for amounts
charged by the vendor, and AHPETC may have paid the vendor
more than the agreed price per contract. This observation relates
to 3 invoices amounting to $189,198.78.
(b)
A caster wheel was purchased and recharged by RDE Construction
Pte Ltd to AHPETC at a mark-up not in accordance with the
agreed rate as stated in the contract. The caster wheel was
purchased for $78 from Tai Li Leong Hardware Centre and
subsequently recharged to AHPETC for $120 by RDE
Construction Pte Ltd. The mark up of 53.8% was not the agreed
rate as stated in the Contract (15%), indicating that RDE
Construction Pte Ltd may have been paid more than what was
contracted. According to the Deputy GM on 11 August 2014, he
informed that the recharged rate could also include the costs of
screws. As of 5 November 2014, the Deputy GM indicated that he
is still checking on this and will reply to us. This observation
relates to 1 invoice amounting to $220.26 (which included other
items other than the caster wheel).
Page 10
(c)
The contract between C P Lee Building & Plumbing Pte Ltd and
AHPETC stated a discount of 26.88% adjustment to the Schedule
Rate. However from the review of invoices, we note that a lower
invoice discount rate of 23.88% was used, indicating that the
vendor (C P Lee Building & Plumbing Pte Ltd) was be paid $86.12
more than what was agreed based on the difference of discount
rate agreed in the contract and applied in the invoices reviewed.
This observation relates to 5 invoices amounting to $2,290.91. We
subsequently received a confirmation from AHPETC’s Secretary
that this was a system error on the vendor’s end, which resulted in
the miscomputation of discount.
(d)
For lift maintenance charged by 9G Elevator, there was an 1 invoice
which included Lift A and B located at Lorong Ah Soo Block 145
being charged at a monthly rate of $140 per lift and 2 invoices for
Lift A and B located at Serangoon North Ave 1 Block 123 and 125
being charged at a monthly rate of $130 per lift. However, these
blocks were not part the contract signed with the vendor and the 3
invoices amounted to $1,320. This indicates that AHPETC may have
paid the vendor more than required.
Risks
5.2.
While the quantum may not be significant, discrepancies in agreed rates
of contract and rates charged in invoice indicate that AHPETC may have
been paying more than what was contractually required and payable to the
vendors suggesting a lack of vigilance in its controls. The observation on
paragraph 5.1 (c) further strengthens the proposition on whether the due
diligence for payments were robust enough. This may also be a noncompliance of Rule 56(4)(c) of the Town Council Financial Rules (“TCFR”),
which state:
It is the responsibility of the Head of Department to satisfy himself that the
prices charged are either according to contracts or approved scales, or fair
and reasonable according to current local rates.
AHPETC’s Comments
5.3.
For para 5.1 (a) on Fourways, Deputy GM had informed PwC that
payment was based on the equivalent dwelling units (EDUs) that changed
over time. Fourways were also entitled to an incentive payment under
their agreement with TC.
Page 11
5.4.
Re para 5.1 (c), the contractor has paid back to TC the amount overpaid.
5.5.
For para 5.1 (d), the lifts at Lorong Ah Soo were covered under the
contract. For Blk 123 and 125 Serangoon North, work was verified as
done and payment made in accordance with the usual rates for a
comparable block at 115 Bedok Reservoir Road.
5.6.
With regards to the observation in paragraph 5.1.(a), while the Deputy
GM has informed us of the changes in EDU over time, we noted that the
contract was awarded based on a lump sum price. Using this contract
sum as a basis, the monthly invoice amount should have been $57,677.61.
However, we noted that the actual invoiced amount was $58,940.43
instead, and the difference was $1,262.43 more than the supposed
invoice amount. On this note, we would have expected a variation order
or a similar agreement to account for this increase in invoice amount.
5.7.
The document (an email dated 18 September 2014 from the vendor)
provided by the TC for the observation in paragraph 5.1.(c) set out the
total amount of discount provided by the vendor. Whilst the amount
overpaid has been repaid, computation checks and comparison of
invoiced discounts to agreed discount according to the contract would
have been prevented over-payment in the first place.
5.8.
The tender price breakdown provided by the TC, for Lift A and B at
Lorong Ah Soo for Block 145 in the observation in paragraph 5.1.(d), was
for the period 1 August 2007 to 31 July 2010 (which is out of our scope
period) and we were not provided with this contract. Even if the contract
was still applicable, we have not been provided with an extension letter to
validate that the rates stated on the contract was still applicable. In
addition, lifts for block 123 & 125 at Serangoon North Ave 1 were not
reflected in the contract (Contract OT/0230/10: Term Contract for the
Maintenance of Fujitec and Sigma Lifts from 1st January 2011 to 31
December 2013) provided to us. In addition, even if these two lifts were
part of the contract, we have not seen any variation orders to include
these two blocks.
Page 12
6.
Delay in settlement of vendor invoices
Observations
6.1.
There were instances noted where the payment voucher approval date is
dated more than 60 days later from the invoice date. Notwithstanding
clarifications to be made with AHPETC, we noted some vendors indicated
a credit term of 30 days and there may be delay from the time AHPETC
received the invoice to the time the relevant staff in Finance received the
invoice for processing.
6.2.
However, even after taking the 30 days credit term into account and any
potential delay in Finance, there were 85 invoices amounting to
$1,257,237.72 where the payment voucher approval dates were dated more
than 60 days from invoice date (ie aged for more than 60 days). This
meant that the cheques were dated after the 30 days credit period. The
longest time lag for the payment voucher approval was a period of 8
months from the invoice date.
Risks
6.3.
Unnecessary delays in payments which may potentially result in additional
interest costs being paid by AHPETC to the vendors.
AHPETC’s Comments
6.4.
The TC processes payment claims following standard procedures which
requires checks and verifications of work done before payment.
6.5.
As for the risks, the vendors had not imposed interest for any delayed
payment.
6.6.
Our observation was that payments made to vendors were longer than the
credit terms. In this regard, the TC should review its payment process and
expedite payments to vendors.
Page 13
7.
Expense claims submitted by FMSS that have lack of sufficient
and/or
appropriate
documentation
to
support
or
inconsistencies in claimant signatures
Observations
7.1.
The following instances were noted where there was a lack of sufficient
and/or appropriate documentation to support expense claims submitted
by FMSS:
(a)
No original receipts relating to expense claims (relating to purchase
of hard disks, office supplies, taxi fares, meals expenses) for 4
invoices amounting to S$3,657.88 submitted by FMSS and hence
we are unable to verify the authenticity of such claims.
(b)
Certain claims such as a meal expense claims and transportation
fares such as taxi, bus and mrt (total amounted to around $327.14)
from FMSS were made without any supporting documents, hence
we are unable to verify the authenticity of such claims. We
understand the practically of obtaining bus tickets as fares may be
paid through the use of a stored-value card.
(c)
We were unable to determine the claimants for petty cash expenses
amounting to S$2,197. Even though we recognised that these claims
were submitted by a FMSS personnel, there were no records in the
supporting documents to detail the claimants for petty cash.
7.2.
These observations indicate that the authenticity of reimbursement claims
were not verified and that there is a potential lack of effective review before
approvals were given.
7.3.
We also observed on 4 claims made by FMSS (amounting to $148.70)
where the claimant signatures did not match specimen signature obtained.
Hence, we were unable to verify the authenticity of these 4 claims made by
FMSS.
7.4.
In addition, we were unable to authenticate the signature of a Customer
Service Officer on 4 claim vouchers, amounting to $229.39, as there were
no specimens provided.
Page 14
Risks
7.5.
Payments may have been made for double claims or claims for events
which did not occur.
7.6.
Claims made in the name of an official personnel but was in fact made by
another personnel may result in fictitious or double claims.
Page 15
8.
Dates in documents relating to procurement and payment (i.e.
WI and WO) charged are not consistent with our understanding
of the procurement and payment cycle including dates in
documents relating to liquidated damages charged
Observations
8.1.
Based on the walkthrough conducted, WI should be the first document in
the procurement process to be signed and approved by an authorised
officer before handing it to the vendor for work to be done. Subsequent
to that, a WO would be raised by the officer from the relevant
department (Project or Property) and approved by the relevant
department's manager. However, we note there was a WI with the issue
date later than WO date, amounting to $1,252.53.
8.2.
The date of issue (5 September 2012) was later than the date of completion
(31 August 2012) stated on the WI, for an amount of $710.22, indicating
that work may have been completed before official instructions were given
to the vendor. Potentially, this may be a lack of effective review on
instructions given to vendors to carry out the works (i.e. flushing of
surrounding area in Block 129 Lorong Ah Soo, including scraping
hardened oil sludge off sewer and branch lines using high pressure water
jetting). Based on the walkthrough conducted, WI should be the first
document in the procurement process to be signed and approved by an
authorised officer before work is allowed to commence and be completed.
8.3.
Dates of confirmation on 4 inspection reports for the charging of liquidated
damages were dated later than the dates of letters issued to the vendor to
inform them of the liquidated damages charged. Reasons for liquidated
damages charged were due to failure in “providing cleaning operator, carry
out sweeping and clean car parks”; failure to comply with repeated
instructions “to ensure drains are clear to prevent mosquito breeding spot”,
etc. The amount of liquidated damages charged by AHPETC amounted to
$3,515.
Risks
8.4.
There may be a procurement of unnecessary services or inaccurate
liquidated damages charged due to a lack of appropriate or timely
approvals.
Page 16
9.
Photocopies of DOs and not the originals were attached to the
invoice
Observations
9.1.
Photocopied delivery orders were attached as part of payment supporting
documents for 2 invoices totalling $1,626.40 for Printex Offset Printing Co.
Hence, we are unable to verify the authenticity of these supporting
documents.
Risks
9.2.
The lack of originals used as supporting documents exposes AHPETC to
risk that such document may be fictitious or that photocopied delivery
orders may have been re-used as ‘supporting’ for subsequent invoices
issued but goods may not have been delivered.
Page 17
10. Contract pricing, contract period, or contract requirement has
not been complied with
Observations
10.1. Amount charged on invoice did not match with contract pricing and this
was on lift maintenance charged for Lift B located at Block 222 Hougang,
Street 21, was at a rate of $53.33. However, based on the contract, it stated
that the monthly charge rate should be $100 per month. Thus indicating
that AHPETC may have benefited more by $46.67, (i.e. paying less than
the agreed amount). Although this situation indicates that AHPETC has
benefited by paying less, it also indicates a lack of overall checking done by
the reviewer before payment is made.
10.2. Based on the contract with Seng Foo Building Construction Pte Ltd, the
contract period was from 12 January 2009 to 11 January 2010 with no
letter of extension or any form of agreement to state that work should
continue despite the end of the contract period. However, based on our
review of 14 invoices with amount of $572,389.99, showed that services
were still performed and invoiced after the contract period. This indicates
that AHPETC may have been paying more than necessary.
10.3. Based on the Fourways Pte Ltd contract, contract number OT/0203/09,
there was a clause in Section 1.18 Report (A) Monthly Report) that stated
“Contractor is required to submit a monthly report” and the monthly shall
include, but notwithstanding, the following:
(a)
List of instructions given by the S.O. Representative indicating the
current status of the instruction;
(b)
Inspection checklist;
(c)
Photographs of maintenance defects and irregularities;
(d)
Statement of Account (including any outstanding invoices, work
orders, etc);
(e)
Photo of the existing Bin Compound in the estate; lift landing and
staircase; and
(f)
Status of Schedule Task.
Page 18
In addition, Section 1.18 Report (B) Daily Report) also states that “The
Contractor is required to submit Estate Report comprises of common
building works and conservancy works” on a daily basis.
However, based on the review of 3 invoices amounting to $189,198.78, we
have not seen such documents and per our understanding from the Deputy
GM, no such monthly or daily report exist; a daily inspection is carried out
by the Property Officers and any irregularities or unsatisfactory work will
be charged as liquidated damages to the vendor. A lack of monthly report
indicates non-compliance with the contract requirement and status of
schedule task is important to track that the vendor is following the
instructions given to them.
10.4. Based on Section 1.25 Half Yearly Performance Assessment of the
Fourways Pte Ltd contract, contract number OT/0203/09, it states that
‘Contractor will be accorded incentive for the amount of S$2,500 half
yearly if contractor scored 76% and above’ and a sample of calculation was
attached in Annex H. However, based on the review of 3 invoices
amounting to $1,337.52, we have observed that the vendor has been
awarded this performance incentive and we have not seen any
documentation or calculation showing the performance for this vendor and
it could indicate that the vendor is paid the performance incentive without
a documented assessment.
Risks
10.5. Difference of amount charge on invoice compared to amount stated in the
contract or invoices issued for services rendered despite the end of contract
may indicate a lapse of proper checks before payment was made.
10.6. Lack of monthly report gives rise to a risk that the vendor may not be
fulfilling their scope of work as stated in the contract and they may not be
adhering to the instructions given to them by AHPETC.
10.7. With no supporting documentation on the calculation of the performance
incentive, it gives rise to a risk that the vendor may be paid this incentive
without actually deserving it.
Page 19
ATrACHME~TTS 1
Control
to 7
in paYlllent processes (to related parties)
Attach:mcnt 1
Summary of signatories for payments to FMSS and FMSI
Approval signatories
Date from
SIN
Invoice No.
Cheque signatories
Issuance of Invoice Certification of work Payment voucher Cheque approval Signatory 1
Signatory 2
Invoice amount ($)
source invoice
1 FlvV1308/11
23/03/2012 Danny Loh
Yeo Soon Fei
f-bw Weng Fan
How Weng Fan
Danny Loh
Lisa Wong
1,200.00
2 FlvV1309/11
No signature
How Weng Fan
How Weng Fan
Danny Loh
Lisa Wong
29,400.00
3 FlvV1310111
How Weng Fan
How Weng Fan
How Weng Fan
Sylvia Lim
Lisa Wong
29,400.00
4 FMl1311/11
28/0512012 Danny Loh
How Weng Fan
How Weng Fan
How Weng Fan
Sylvia Lim
Danny Loh
29,400.00
5 FIVV1312/11
How Weng Fan
How Weng Fan
How Weng Fan
Sylvia Lim
Danny Loh
29,400.00
----
-
6 FMSS1226
31/03/2012 How Weng Fan
How Weng Fan
How Weng Fan
How Weng Fan
Sylvia Lim
Danny Loh
7 FMSS1228
Yeo Soon Fei
How Weng Fan
How Weng Fan
Sylvia Lim
Danny Loh
784,79
8 FMSS1231
30104/2012 How Weng Fan
Ronley Ng
How Weng Fan
No approval
Sylvia Lim
Danny Loh
12,170.83
72,288.17
9 FMSS1230
How Weng Fan
How Weng Fan
How Weng Fan
Sylvia Lim
Danny Loh
462,582,30
10 FMSS1232
Yeo Soon Fei
How Weng Fan
How Weng Fan
Sylvia Lim
Danny Loh
72,288,17
11 FMSS1233
Yeo Soon Fei
How Weng Fan
How Weng Fan
Sylvia Lim
Danny Loh
803,89
12 FMSS1237
Ronley Ng
How Weng Fan
How Weng Fan
Sylvia Lim
Lisa Wong
1,830.37
13 FMSS1240
Ronley Ng
f-bw Weng Fan
How Weng Fan
Sylvia Lim
Danny Loh
462,58230
14 FMSS1241
Ronley Ng
How Weng Fan
How Weng Fan
Sylvia Lim
Danny Loh
5,586.25
15 FMSS1242
Ronley Ng
How Weng Fan
How Weng Fan
Sylvia Lim
Danny Loh
33.05
16 FMSS1243
How Weng Fan
How Weng Fan
No approval
Sylvia Lim
Danny Loh
72,326.69
17 FMSS1244
How Weng Fan
How Weng Fan
How Weng Fan
Sylvia Lim
Lisa Wong
574,64
18 FMSS1239
Ronley Ng
How Weng Fan
f-bw Weng Fan
Sylvia Lim
Lisa Wong
5,665,08
19 FMSS1248
How Weng Fan
How Weng Fan
How Weng Fan
Sylvia Lim
Danny Loh
462,582.30
20 FMSS1250
How Weng Fan
How Weng Fan
How Weng Fan
Sylvia Lim
Danny Loh
72,490,94
21 FMSS1251
How Weng Fan
How Weng Fan
How Weng Fan
Sylvia Lim
Danny Loh
590,64
22 FMSS1249
Yeo Soon Fei
How Weng Fan
How Weng Fan
Sylvia Lim
Danny Loh
5,263,89
LO~l
462,582.30
23 FMSS1225
How Weng Fan
How Weng Fan
How Weng Fan
Sylvia Lim
Danny
24 FMSS1280
Yeo Soon Fei
Rayrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
1,931.82
25 FMSS1289
Yeo Soon Fei
Raymond Tan
How Weng Fan
Sylvia Lim
Danny Loh
2,202.06
26 FMSS1323
Yeo Soon Fei
Raymond Tan
How Weng Fan
Sylvia Lim
Danny Loh
1,741.05
27 CNOO06'
Yeo Soon Fei
Raymond Tan
How Weng Fan
Sylvia Lim
Danny Loh
(1,62715)
28 CNOO05'
Yeo Soon Fei
Raymond Tan
How Weng Fan
Danny Loh
Png Eng Huat
( 166,591.00)
29 FMSS1298
Yeo Soon Fei
Raymond Tan
How Weng Fan
Danny Loh
Png Eng Huat
178,252.37
30 FMSS1269
Ronley Ng
Raymond Tan
How Weng Fan
Sylvia Lim
Danny Loh
91.29
31 FMSS1270
Ronley Ng
Raymond Tan
How Weng Fan
Sylvia Lim
Danny Loh
310.45
32 FMSS1271
Ronley Ng
Rayrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
422.06
33 FMSS1272
Ronley Ng
Raymond Tan
How Weng Fan
Sylvia Lim
Danny Loh
6,612.84
34 FMSS1278
Ronley Ng
Raymond Tan
How Weng Fan
Sylvia Lim
Danny Loh
35 FMSS1279
Ronley Ng
Raynnnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
14,773.31
36 FMSS1273
Ronley Ng
Rayrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
469.200.89
118,080.92
18,440.62
----
37 FMSS1274
31/08/2012 f-bw Weng Fan
Ronley Ng
Raymond Tan
How Weng Fan
Sylvia Lim
Danny Loh
38 FMSS1277
Ronley Ng
Raymond Tan
How Weng Fan
Sylvia Lim
Danny Loh
1,197,92
39 FMSS1267
Ronley Ng
Rayrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
2,196.79
40 FMSS1268
Ronley Ng
Raym:md Tan
How Weng Fan
Sylvia Lim
Raynnnd Tan
114.20
41 FMSS1281
Ronley Ng
Rayrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
229.71
42 FMSS1284
Ronley Ng
Raymond Tan
How Weng Fan
Sylvia Lim
Danny Loh
118,080.92
43 FMSS1283
Ronley Ng
Raynnnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
469,200.89
44 FMSS1282
Ronley Ng
Rayrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
198.00
45 FMSS1264
Ronley Ng
Raymond Tan
How Weng Fan
Sylvia Lim
Danny Loh
26,516.99
46 FMSS1265
Ronley Ng
Raymond Tan
How Weng Fan
Sylvia Lim
Danny Loh
14,98689
47 FMSS1266
Ronley Ng
Raymond Tan
How Weng Fan
Sylvia Lim
Danny Loh
12,103.29
48 FMSS1288
Ronley Ng
Raymond Tan
How Weng Fan
Sylvia Lim
Raymond Tan
8,267.14
49 FMSS1311
Ronley Ng
Raymond Tan
How Weng Fan
Sylvia Lim
Danny Loh
1,084.36
Attachments 1 to 7 ofRCIJ07't
III-pwe)
l'oqel
Attachment
1
(cont)
Cheque signatories
Approval signatories
Date frolll
SIN
Invoice No.
Issuance of Invoice Certification of wark Paym=nt voucher Cheque approval Signatory 1
Signatory 2
Invoice 3rTDllnt ($)
source InVOice
50 FMSS1312
Ponley Ng
Payrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
78.60
51 FMSS1315
Ponley Ng
Payrmnd Tan
No approval
Sylvia Lim
Danny Loh
15269
52 FMSS1313
Ponley Ng
Payrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
469,200.89
53 FMSS1314
Ponley Ng
Payrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
118,080.92
54 FMSS 1320
Ponley Ng
Payrmnd Tan
I--low Weng Fan
Sylvia Lim
Danny Loh
986.94
55 FMSS1325
Ponley Ng
Payrmnd Tan
I-Iow Weng Fan
Sylvia Lim
Danny Loh
178.73
56 FMSS1326
Ponley Ng
Payrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
469,200.89
118,080.92
57 FMSS1327
Ponley
I~g
Payrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
58 FMSS1319
Ponley Ng
Payrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
1,176.73
59 FMSS1322
Ponley Ng
Payrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
3,139.93
60 FMSS1330
Ponley
I~g
Payrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
1,52101
61 FMSS1321
Ponley Ng
Payrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
2,211.82
62 FMSS1324
Ponley Ng
Rayrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
1,537.55
63 FMSS1303
Ponley Ng
Raynnnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
118,080.92
64 FMSS1302
Ponley Ng
Rayrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
469,200.89
65 FMSS1309
Ponley Ng
Raym:md Tan
How Weng Fan
Sylvia Lim
Danny Loh
154.85
66 FMSS1308
Ponley Ng
Rayrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
1,596.07
67 FMSS1304
Ponley Ng
Payrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
1,529.33
68 FMSS1310
Ponley Ng
Raynnnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
69 FMSS1291
Ponley Ng
Payrmnd Tan
How Weng Fan
Danny Loh
Png Eng Huat
70 FMSS1292
Ponley Ng
Payrmnd Tan
How Weng Fan
Danny Loh
Png Eng Huat
687.86
71 FMSS1293
Ponley
I~g
Payrmnd Tan
How Weng Fan
Danny Loh
Png Eng Huat
9,355.16
17976
2,51203
72 FMSS1290
Ponley Ng
Payrmnd Tan
How Weng Fan
Danny Loh
Png Eng Huat
349.03
73 FMSS1294
Ponley Ng
RaYlTDnd Tan
How Weng Fan
Danny Loh
Png Eng Huat
10,950.20
74 FMSS1296
Ponley Ng
Payrmnd Tan
How Weng Fan
Danny Loh
Png Eng Huat
469,200.89
75 FMSS1297
Ponley Ng
RaYrTDnd Tan
How Weng Fan
Danny Loh
Png Eng Huat
118,080.92
76 FMSS1295
Ponley
I~g
Payrmnd Tan
How Weng Fan
Danny Loh
Png Eng Huat
334.19
77 FMSS1299
Ponley Ng
Raym:md Tan
How Weng Fan
Danny Loh
Png Eng Huat
1,627.15
78 FMSS1254
Ponley Ng
Raynnnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
225.96
79 FMSS1255
Ponley Ng
Payrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
5,804.75
80 FMSS1256
Ponley Ng
Payrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
466.211.85
81 FMSS1257
Ponley Ng
Payrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
118,080.92
82 FMSS1258
Ponley Ng
Payrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
19,18228
83 FMSS1259
Ponley Ng
Payrmnd Tan
How Weng Fan
Sylvia Lim
Danny Loh
4,232.87
84 FMSS1260
Ponley Ng
Payrmnd Tan
How Weng Fan
SylVia Lim
Danny Loh
12,643.12
Tota!:
Note:
-tc
84
6,605,614
The nature of the docurrent is that of credit notes.
Attachments 1 to 7 ofReport (Part III - PwC)
Page 2
Outstanding invoices issued from the vendors for the work ordered by AHPETC and any other supporting documents relating to
payment to the vendors for the Transactions
Attachment 2
Legend
PV
Payrrent Voucher
Outstanding delivery orders, job sheets, work reports, liquidated damages reports, photographs and/or any other supporting
documents to show that work was completed for the Transactions
Attachment 3
the contract
supporting documents
indicating the hourly charge
out rate for consultants
y - to allow us
is a rubber stamp chOp for the certification
of warks done which has been signed by
I to sight 10 the
upgraded
systemi
auld not maKe payment to the vendor if
ark has not been done
provide
detailed report
show ing
(The Invoice and quotation as w ell as w ark I enhancement
75257
21359
PIi
Vendor C
OT/0286A/12
y
Legend
PIi
PVV
Payment Voucher
\fl/O:-K Order Invmces
Note: "Line Item" refers to payment information obtained from the general ledger
AttClchments 1 to 7 ofReport (Part III - PwC)
Page 3
Outstanding contracts, quotations, supplemental agreements, and variation orders for the Transactions
Attachment 4
contract
Contract (OT/266/12) w as
PH C conflrnl2d that contract
hanclpd over to AGO on
OT/266/12 has been taken over
26106/2014 and was
from A GO. FromTC's respor.se,
it appears that the follow ing
invoices relate to IN ark Vi Ilich
are purportedly under the
contract with the tel m
contractor but
w as taken over
by Vendor G due to certain
"stalling" issues. Please provide
supporting docurnonts (i.e
erraiVrdnutes of neeling/w (Itten
I agreen1enls), If any. on this
FW
enUlrerating the consu~ants'
rates of payrrent. TC's
recollection is that the rates
are slaled in docUm2nts
provided to AGO I FIN C
-----------------------------------~~~..~--------------------------------~~~~~~--------------------------~--------
Attachments 1 to 7 ofReport (Part III - pwe)
Page 4
Attachment 4 (cont)
to deIP.rnine
e do not have
recollection IS that the rates
are stated III docurrents
plO'Jided to AGO I Pw C,
Page 5
Attachment 4 (cont)
83786
83786
I 12009360
confirm that these line iterrs
pertain 10 that quotation. Hence,
these Clre still in the outstanding
list
83786
I 12009361 I
f¥J
81776
18/06/2012
ICheque 0004592
Page 6
Attachment 4 (cont)
17 November 2014
Need IlYJrc inforrrution on this
request
the
30 January 2015
AN C has now confirrred
receipt of all requested
Vendor H's contract
cnurwrating the consultants
85731
24324
38 ,584 20
FV
<7Co;:-;,:;:t;:Cec~t"'to"b:::eC:pC:coC:v::C;ide::d;1-,R"'e7:re"'co:::n",e::CjC,"ba=s:::e::C
d ::0''',j::,v=c=-icccc~~--1 rates of pay rm nt. TC's
recoll.:;ction is that the rates
ale slaled in doculTents
provided to AGO I p.,',I C
24328
I
FV
IVendor H
tUnable to
I Unable to delerrrine 112021253
980.83114/12/2012 I
10/011701:1
I C:hf'nllf' 00:'1.0S1:11 :111 SM?!l I CnntrAr:f-t()-hA -nrfwirlpr! I No applicable rBference poillt
117 Novem ber 2014 All other Vendor Hs IN
ere handed over to Delia of Pw C on 12/09/2014 30 January: 2015
Pw C has now confimcd
receipt of all requested
contracts! quotations.
Vendor H's contract
enulrerating the consllilants'
rates of payrTent. TC's
recollection is that the rates
are stated in dOCLIITents
to AGO/ PHC
85731
I
24330
I
FV
Note: "Line Item" refers to payment information obtained from the gCllcrallcdgcr
Attachments 1 to 7 ofReport (Part III
7
Attachment 4 (cont)
Legend
PV
Payrrant Voucher
PoN
Work Order Invoices
Outstanding unsuccessful quotations/tender documents for the Transactions
Attachment 5
This attachment has been removed based on TC's comments that they do not have unsuccessful tenderer documents for contracts won by Citicon Construction Pte
Ltd, RDE Construction Pte Ltd and Tongying Construction Pte Ltd; while the unsuccessful tenderer documents for contract won by Tang's Engineering Pte Ltd
have been discarded.
Page 8
Outstanding tender evaluation reports, minutes of meeting, internal notes, internal and external correspondence (emails, letters or
otherwise) and any other documents relating to: (i) the process leading to the award of the tender / contract; and (ij) evidencing the
deliberation / evaluation of the award of tender / contract, waiver of quotation, disclosure of interest or are otherwise related to
approval for the Transactions
but not limited to, related
transactions)
Attachment 6
The list of outstanding items previously set out in this attachment has been removed based on TC's comments that they only took over the term contracts for
Citicon Construction Pte Ltd, FM Solutions & Integrated Services and RDE Construction Pte Ltd and there are no other documents available. TC has also indicated
on 30 January 2015 that they have provided all documents in respect of FM Solutions & Services Pte Ltd CFMSS") and Tang's Engineering Pte Ltd. In respect of
FMSS, the initial request made is as follows:
Legend
PV
Payr~Jer:
Voucher
In respect of FMSS, we have asked for em ails and any internal notes and correspondences, including emails etc. (see header of table above), which may shed
light on: (i) the process leading to the award oftenders/contracts; and (ii) evidencing the deliberation / evaluation ofthe award oftenders/contracts, waiver of
quotations, disclosure of interest or are otherwise related to approval for transactions chosen. The TC has replied that in respect of FMSS (invoice batch 78593)
that "All documents e.g. minutes of evaluation meeting, TC meeting, RSM Ethos evaluation report, tender documents etc. have been given to PwC". Such
documents provided do not include any internal notes, correspondences and e-mails etc.
Page 9
Attachment 7
Doc
List of documents not located on 5 November 2014
1 Vendor I
12010176 PN
2 Vendor I
3 Vendor J
12010182 PN
12002008 PN
84691
84691
76512
07/12/2012
07/12/2012
05/0712012
18/12/2012
18/12/2012
09/0712012
445.84
445.84
1,252.53
Invoice (No. 2051/10/2012) dated 07/12/2012
Invoice (No. 2288/11/2012) dated 07/12/2012
1. Written Instructions (No. 17316) dated 12/08/2012
2 Work Order (No. 39644232) dated 03/07/2012
3. Invoice (No 11 AJ-957) dated 05/07/2012
4. Jobs heet (No 706) dated 12/03/2012
Corr1T<3nts(5
This document is an addition to the above list P..v C tried
to find it on 5 Noverrber, however it w as not in the "C&C"
file, w here it w as previously kept. PN C would like to
request Mr Yeo to help locate this docurrent
This document is an addition to the above list. Pvv C tried
to find it on 5 Noverrber, however it w as not in the "C&C"
file, w here it w as previous Iy kept. Filii C w auld like to
request Mr Yeo to help locate this document
This document is an addition to the above list. P..v C tried
to find il on 5 Noverrber, but w as unable to locale it. FYI C
Mr Yeo to help locate this
document
W Quid like to request
y
y
Y
Attachments 1 to 7 ofReport (Part III - pwe)
Page 10
ABBREVIATIONS OF KEY TERMS IN THE REPORTS
Abbreviation
Meaning
AGO
-
Auditor-General's Office
AHPETC
-
AHTC
-
Aljunied-Hougang Town Council
AMKTC
-
Ang Mo Kio Town Council
ATC
-
Aljunied Town Council
BFA
-
Barrier Free Access
C&S
-
Conservancy and Services
CCC
-
Citizens Consultative Committee
CPGFM
-
CPG Facilities Management Pte Ltd
EM Services
-
EM Services Pte Ltd
EMSU
-
Essential Maintenance and Lift Rescue
FKT
-
Foo Kon Tan Grant Thornton LLP
F & I Committee
-
Finance and Investment Committee
FMSI
-
FM Solutions and Integrated Services
FMSS
-
FM Solutions and Services Pte Ltd
FY
-
Financial Year
GST
-
Goods and Services Tax
HDB
-
Housing and Development Board
HTC
-
Hougang Town Council
IRAS
-
Inland Revenue Authority of Singapore
LUP
-
Lift Upgrading Programme
MA
-
Managing Agent
Mazars
-
Mazars LLP
MND
-
Ministry of National Development
MPTC
-
Marine Parade Town Council
Appendix D: Abbreviations of Key Terms in the Reports
Page 1
Abbreviation
NCS
-
NCS Pte Ltd
NEA
-
National Environment Agency
NRP
-
Neighbourhood Renewal Programme
PLCCC
-
Paya Lebar Citizens Consultative Committee
PRPTC
-
Pasir-Ris Punggol Town Council
PwC
-
PricewaterhouseCoopers Consulting Pte Ltd
RFID
-
Radio Frequency Identification
SFRSs
Meaning
Singapore Financial Reporting Standards
SingPost
-
Singapore Post Limited
SOP
-
Standard Operating Procedures
TCFR
-
Town Councils Financial Rules
TMS
-
Lift Telemonitoring Services
YA
-
Year of Assessment
Appendix D: Abbreviations of Key Terms in the Reports
Page 2

Audit of Aljunied-Hougang-Punggol East Town Council

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