SINGAPORE: The former managing agent of Aljunied-Hougang-Punggol
East Town Council (AHPETC) FM Solutions and Services (FMSS) has
been "grossly profiteering" off the town council which is its sole
client, the Ministry of National Development (MND) found.
MND said the Accounting and Corporate Regulatory Authority
(ACRA) conducted an ad-hoc review of FMSS' auditor, Teo Liang Chye
and Co. In FY 2013/2014, while AHPETC suffered an operating deficit
of S$2 million, FMSS made a net after-tax profit of S$2 million,
after paying its directors and shareholders fees and salaries
amounting to S$1.14 million, MND said in a statement on Saturday
(Aug 29).
FMSS was managing agent (MA) for the Workers' Party-run AHPETC
from July 15, 2011 to July 14, 2015. In AHPETC’s FY2013/2014
financial statements and reports, its independent auditor, Audit
Alliance LLP, found that AHPETC’s deputy general manager, who was
also a shareholder and director of FMSS, certified invoices
received from FMSS totalling S$2.1 million on behalf of the town
council, and subsequently also approved the related payment
vouchers by the TC to FMSS, with no segregation of duties, the
ministry said.
"This reinforced MND’s concerns about the TC’s state of
financial management, and in particular, whether payments made by
the TC to FMSS were valid and proper," it added. ACRA started a
practice monitoring review on FMSS' auditor and submitted its
findings to MND on Aug 27.
On examining the accounts, MND said it found:
For FY2012/2013
FMSS made a profit after tax of S$510,904. This was after FMSS
paid its three owners/directors, fees and salaries of S$702,295,
and consultancy and secretarial fees of S$300,000 .
Total payments to the three FMSS Owners/Directors for
FY2012/2013 amounted to S$1,513,199.
For FY2013/2014
FMSS made a profit after tax of S$2,035,784. This was after FMSS
paid its four owners/directors fees and salaries of S$839,696, and
consultancy and secretarial fees of S$300,000 .
Total payments to the four FMSS owners/directors for FY2013/2014
amounted to S$3,175,480.
Between FY2012/2013 and FY2013/2014
While FMSS’ revenue increased by 30 per cent in one year, from
S$6,740,572 to S$8,773,429, its profit after tax rose 300 per cent,
from S$510,904 to S$2,035,784.
Total payments by AHPETC to FMSS owners and directors amounted
to 22 per cent of FMSS’ revenue in FY12/13. It grew further to 36
per cent in FY2013/2014. "Such levels of profit margin are
abnormal," said MND. "As AHPETC was FMSS’ only client, these
findings support MND’s earlier concern that the TC had overpaid
FMSS excessively."
Additionally, MND noted that AHPETC had an operating deficit of
S$1.5 million in FY2012/2013, and a further deficit of S$2 million
in FY2013/2014. "Had the TC not overpaid FMSS, it might well have
had been able to break-even," MND said.
The ministry has written to Ms Sylvia Lim, the immediate-past
chairman of AHPETC "to ask if she was aware of the extent of
profiteering in FMSS, and if so since when had she known, and what
she had done about it". MND has also asked Ms Lim if she has
examined past transactions of the town council with FMSS, and how
she intends to recover the monies lost due to any overpayment.
"As FMSS was paid using Service & Conservancy Charges
(S&CC) collections from residents and S&CC operating grants
from MND, public monies are at stake," the ministry said. "What
happened between the town council and FMSS is not a private matter,
but one which MND needs to look into. MND is therefore making a
public statement on this matter of public interest, which
underscores why MND has applied to the Court to appoint independent
accountants."
MND is appealing against a High Court decision after it rejected
MND's application to have independent accountants appointed to
oversee Government grants to AHPETC.
Law and Foreign Affairs Minister K Shanmugam said FMSS made
"huge profits" from AHPETC. Speaking to the reporters on the
sidelines of an event at Sree Narayana Mission Home, he said the
town council did not provide this information to auditors and the
Auditor-General's Office.
"They refuse to give information on related-party transactions,
on transactions with FMSS. It's obvious overcharging. They were
asked in Parliament if they were going to recover this money. And
they said 'No, everything was above board'. They will not recover
(the money), because it was all fair. And they justified the
payments without disclosing the details."
WP APPALLED BY MND'S "SERIES OF CARELESS
ACCUSATIONS"
In response Ms Lim wrote to a senior director in MND on
Saturday. In a letter shared on the Workers' Party (WP) website,
she stated: "We are appalled at the series of careless accusations
made by your ministry against Aljunied Hougang Punggol East Town
Council (AHPETC). It is shocking that despite our clarifications on
your allegations relating to lost monies and overpayment, your
ministry continues to make spurious statements to distract the
public and aimed at politically discrediting AHPETC."
Ms Lim, who is chairman of WP, said FMSS was appointed managing
agent for AHPETC through a public tender and won a contract to
provide Essential Maintenance Services Unit services through an
open tender. "Payments made by AHPETC to FMSS were made pursuant to
these contracts. Payment in accordance with contracts cannot be
overpayment," she wrote.
"We wish to highlight that arrangements between FMSS and its
employees are entirely commercial and not within the control of
AHPETC," she added. "I am not aware of the matters you have
highlighted therein, as AHPETC does not ask its contractors about
their profitability or internal arrangements. We emphasise that
AHPETC has ensured that payments made to FMSS are in line with and
within the budget provided under the tender awarded.
"It is also ambiguous as to what the ministry means by an
'abnormal' profit margin, when it is not clear what the other MAs’
levels of profit are in other town councils."
"It is unfortunate that the political environment has put
non-PAP town councils at a financial disadvantage due to the lack
of competitive bidders. Your ministry ought to recognise the
existence of an imbalanced system and take into consideration the
political reality of the situation," Ms Lim countered.
"We also question your ministry’s political motivation for
issuing a public release on this matter at such a premature stage,
when you say that your ministry has not even completed a review of
the findings by ACRA."
AHPETC currently has no managing agent, after no one came forth
to submit a bid.
- CNA/ly
