The Ministry of National Development’s (MND’s) letter to Sylvia Lim yesterday highlighted “the MND’s concerns about the Town Council’s state of financial management, and whether the payments made by the TC to FMSS were valid and proper”. Sylvia Lim’s subsequent response called out the MND for making “spurious statements to distract the public and aimed at politically discrediting AHPETC”.
Inevitably, this issue is being deeply politicised by the upcoming elections. Yet, amid all the rumours floating around and accusations tossed about, it can be difficult to decide between what to believe and what not to believe. I will attempt to clarify the situation with some analysis based on what I have found from reading through annual reports and other facts that I have picked up in my search. In particular, I will be tackling some of the ideas I have seen float about social media that are not quite right.
(1) There were no government grants given to AHPETC, causing them to go be in deficit
This statement is not true. There were indeed government grants given to AHPETC, as with all other Town Councils. According to their annual report FY2013-2014, they were given around 7 and 8 million dollars in 2013 and 2014 respectively. The figures given to them are comparable to other Town Councils, for instance Bishan-Toa Payoh TC which was granted about 7 million in both 2013 and 2014. Despite this, AHPETC posted deficits of approximately S$1.5m to S$2m in FY2013 and FY2014 respectively. Hence, AHPETC deficits were not the result of a deliberate attempt by the government to drain it of resources as some might believe.
(2) AHPETC should have awarded the tender to a more competitively priced bidder
The problem with this statement is that no other vendor responded to the public tender for the contracts for Managing Agent (MA) and Essential Maintenance and Services Unit (EMSU) services. There were simply no other bidders that AHPETC could have awarded the contracts to because nobody else bid on them. I am not sure how or why this is the case though, it does not make sense that other companies don’t bid on these contracts as they could potentially be very profitable.
However, this does not change the fact that FMSS probably had a lot of power to dictate its prices to AHPETC given that no other competing tenders were submitted. A possible interpretation of this scenario is that AHPETC was a victim of being overcharged by FMSS since it was the only bidder. AHPETC likely did not have much bargaining power here.
(3) FMSS was overpaid by AHPETC
Whether or not FMSS was overpaid is the subject of the ongoing review by MND. In fact, the MND letter written to Sylvia Lim yesterday may not necessarily have intended to highlight a fault of the people running AHPETC. Rather, the body of the letter seems to focus on highlighting “gross profiteering by FMSS, at the expense of AHPETC, its sole client” – a direct quotation taken from the letter by MND. Even if AHPETC could be faulted for agreeing to engage FMSS, it certainly could not directly be faulted for FMSS’s overcharging and profiteering off the Town Council, and subsequently paying its Owners/Directors fees amounting to just over S$1.5 million in FY12/13 and over S$3.1 million in FY13/14, figures derived from the MND letter.
Ms Sylvia Lim’s response letter to the MND reiterates that AHPETC has no control over the corporate affairs of FMSS, including how much it pays its directors. If this is the case, then there was no need for that letter to be overly defensive against the MND letter which was clearly aimed at peeling apart FMSS rather than attempting to say bad things about AHPETC. Based on the letter, MND rightfully seems to be trying to aid AHPETC in recovering monies lost through overcharging rather than attempting to politically discredit AHPETC.
(4) Links between FMSS and AHPETC
Unfortunately, the above scenario is muddled further by the fact that Mr Danny Loh, the former secretary of AHPETC, also was the majority owner of FMSS. According to the investigation, he owned 50% of FMSS, while his wife Ms How Weng Fan owned 20% for a hefty combined 70% ownership of FMSS as of 30 Apr 2014. This changes things drastically for the above point (3). The former secretary of AHPETC and his wife were in the position to directly benefit from paying fees to FMSS, which casts a shadow of doubt on how fairly FMSS was charging the Town Council for MA and EMSU services. We are also uncertain of how decisions on pricing for the services were reached, as well as whether this was an appropriate arrangement for the division of responsibility and proper oversight of Town Councils.
To be perfectly fair, other Managing Agents and providers of EMSU do not have their annual reports publicly available, and I am unable to comment on how they are remunerated. It would be useful to compare how profitable other Managing Agents are as compared to FMSS, and from there see if other companies might be overcharging Town Councils. However, the lack of separated responsibility in AHPETC and FMSS has likely led to this investigation by the MND in the first place.