I refer to the various news reports of 12th and 13th May on the information and comments released by the Ministry of National Development (MND) to the media, concerning the withholding of the Service & Conservancy Charges (S&CC) operating grant for Financial Year (FY) 14/15 to Aljunied-Hougang-Punggol East Town Council (AHPETC). In order that the public and residents may better understand the matter, it is necessary for AHPETC to respond.
S&CC operating grants are needed
First, I wish to set out AHPETC’s position on the annual S&CC operating grant (“the operating grant”).
Like all Town Councils, AHPETC requires the operating grant to fulfil its obligations under the Town Councils Act. Without the government’s operating grant, all Town Councils would run deficits, and over time would face cash flow problems and financial difficulty. During the MND Committee of Supply debates in 2013, MND Senior Minister of State Lee Yi Shyan had estimated that the government grants accounted for 15% of Town Councils’ annual budgets.
I wish to state categorically here that there has not been any statement by me nor anyone on AHPETC’s behalf that AHPETC does not require the operating grant.
MND had indicated in its letter of 28 April 2014 that it would withhold the operating grant till the conclusion of the Auditor-General’s Office (AGO) audit. AHPETC went through the extensive audit. However, after the AGO audit was concluded, a special Parliamentary debate was convened on 12-13 February 2015 to scrutinise the findings. MND’s position there was that AHPETC needed to take various follow up measures or to satisfy the Ministry that the grants would be safeguarded, before the operating grants for FY 14/15 and FY 15/16 could be paid out to AHPETC.
The next step by MND was the court application filed on 20 March 2015. MND is now asking the court to appoint independent accountants to co-sign cheques drawn on the government grants to be disbursed to AHPETC subject to certain conditions.
Be that as it may, AHPETC welcomes the intended disbursement of the grants for FY 14/15 and FY 15/16. AHPETC has indicated that under the Town Councils Act, the Minister may impose reasonable conditions as he may determine for the disbursement of the grants, and that no court application was necessary for this.
AHPETC Manages Cash Flow to Continue Its Operations
Next, I turn to the circumstances facing AHPETC in FY 2014/15 and how it has managed to continue its operations to deliver services to residents.
When MND wrote to AHPETC on 28 April 2014 on its intention to withhold the operating grant ($7.1 million) for FY 2014/15, it indicated that it would do so until the conclusion of the audit by the AGO.
At the time of MND’s letter of 28 April 2014, the AGO audit had just commenced the previous month (March 2014). It was not clear how long the AGO audit would take. As such, AHPETC decided it was premature to reply to MND on the issue, but should continue to devote resources to the audit and monitor AHPETC’s cash flow situation.
By mid-June 2014, it was still not clear how long more the AGO audit would take, and correspondingly how long more the S&CC operating grant would be withheld. As further delays would affect cash flows, I wrote to MND calling for release of the grant, and subsequent correspondences followed.
Specifically, MND was also made aware on 30 July 2014 that AHPETC would not be able to make the quarterly transfer to Sinking Funds for the first quarter of FY 2014/15 on time, by 31 July 2014.
It was the utmost priority that essential services to residents not be disrupted while the grant was withheld. AHPETC thus prioritized the continuity of operations and ensuring cash flow for routine activities. It deferred its quarterly Sinking Fund transfers, which enabled interim management of cash flow through retention of more funds in its Operating Funds.
Despite AHPETC’s ability to manage its operations in the interim in this way, AHPETC would still require the operating grants to fulfil its obligations under the Town Councils Act e.g. to complete the quarterly Sinking Fund transfers.
Why AHPETC deferred the Offer of Half-Grant
On 7 October 2014, MND wrote to AHPETC to offer to release half the operating grant to AHPETC subject to certain conditions. The option was considered carefully right up to November. By then, much progress had been made on the AGO audit, and it appeared that the conclusion of the audit was imminent. Furthermore, to ensure continuity of operations, AHPETC had decided to earmark the entire sum of the grant, which was withheld, as part of its Sinking Fund transfer for FY 14/15, while it continued to make the quarterly Sinking Fund transfers when it could.
As AHPETC’s understanding was that MND would consider whether and / or how it would release the entire operating grant upon conclusion of the AGO audit, and the conclusion of the AGO audit appeared imminent, AHPETC decided to defer the decision on the half-grant. AHPETC then wrote to MND on 12 Nov 2014 that it was assessing the situation and would come back to MND should it wish to take up the option of the half-grant.
AHPETC continued with its interim strategy to manage cash flow while continuing to devote resources to the AGO audit, which was completed end January 2015. The AGO report was released on 9 February 2015 and debated in Parliament on 12-13 February 2015. Parliament was engaged in the Budget and Committee of Supply Debates till 13 March 2015. MND commenced its court action against AHPETC a week later, on 20 March 2015.
AHPETC’s Position in Court Case
It is useful to briefly summarise AHPETC’s position in the court case commenced by MND.
Regarding the grants for FY 14/15 and FY 15/16 which have not yet been received, AHPETC’s view is that the Town Councils Act enables the Minister to impose reasonable conditions on the disbursement of the grants as he may determine. A court application is not needed for the same.
As for the proposal to appoint independent accountants to inquire into past transactions, AHPETC is advised that the legal basis for such a court order is questionable. AHPETC also does not believe that there is factual justification to mount an oppressive fishing expedition.
The arguments have been presented in Court and we await the verdict of the Court.
AHPETC will Prioritise Continuity of Services
News reports have generated concern about AHPETC’s ability to continue to operate. AHPETC hopes to receive the operating grants soon. In the meantime, AHPETC will continue to prioritize its operations to avoid disruption of services to residents.
ALJUNIED-HOUGANG-PUNGGOL EAST TOWN COUNCIL
14 May 2015