Observation Assessment

Aljunied-Hougang-Punggol East Town Council (AHPETC): Assurance Engagement and Audit

Observation Description Engagement Performed on 19 February 2014
Observation Summary
An audit team was set up to ensure reasonable steps have been taken by AHPETC to safeguard the
collection and custody of AHPETCs monies, ensure that issues and payments of AHPETCs monies
were made in accordance with proper authority and payments were properly charged and supported
by relevant documents, and ensure that AHPETC complied with any written laws relating to their
monies.
A few major lapses were found:
a)
b)
c)
d)
e)

Lapses in management of sinking fund,

Lapses in disclosure of related party transactions,
Lapses in arrears of conservancy and service charges,
Lapses in internal controls and procurement, and
Inadequacies in record management and accounting system.

Conditions
AHPETC had not made transfers to sinking fund bank accounts. They failed to make the transfer in
the last three quarters of FY 2011/2012. For FY 2012/2013, late payments were made.
AHPETC did not disclose fully the related party transactions in its financial statement regarding the
two companies they engaged: FM Solutions and Integrated Services (FMSI) and FM Solutions and
Services Pte Ltd (FMSS). The Secretary of AHPETC was the owner of FSMI. The Secretary, General
Manager and Deputy General Manager of AHPETC were directors and shareholders of FMSS.
AHPETC did not have a system to monitor the scale of its Conservancy and Service arrears
accurately. There were significant discrepancies between AHPETCs arrears reports submitted to
Ministry of National Development (MND) and to AHPETCs Finance and Investment (F&I)
Committee for March and April 2013.
AHPETC had not performed monthly bank reconciliation, did not have adequate controls to safeguard
valuables, over receipt and handling of cheques, did not comply with the Town Councils Financial
Rules with regard to procurement and did not have segregation of duties within the payment process.
Criteria
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.
According to the Singapore Financial Reporting Standards, an entity is to disclose related party
transactions in its financial statements.
The Town Council Financial Rules require a Town Council to call for tender and approval of the
Town Council for various projects. AHPETC did not call for a tender, and instead approved the
project by the Chairman of AHPETC.
Cause

A lack of knowledge of regulations or manpower could have caused AHPETC to have lapses in the
management of their sinking funds and failure to make proper disclosure of related party transactions.
AHPETC did not have a system to monitor the scale of its arrears accurately, leading to discrepancies
between the statistics for arrears submitted to MND and AHPETCs F&I Committee.
AHPETC did not have a proper system to ensure that documents were properly accounted for and
safeguarded. AHPETC did not manage properly the transition when they took over from the managing
agent.
Effect
Since the sinking funds are maintained for the improvement to and long-term maintenance of
properties, there is a risk that AHPETC do not have enough funds for the maintenance of properties in
that area. This could lead to residence being unhappy, while damaging AHPETCs reputation.
A failure to disclose related party transaction may damage AHPETCs reputation in their governance,
raising public concerns in their contracts with third party.
The lack of internal controls and procurement process 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.
The inadequacies in accounting system exposed AHPETC to the risk of loss of income through not
collecting C&S fees.