Town Councils (Amendment) Bill

Order for Second Reading read.

2.09 pm

The Senior Minister of State for National Development (Mr Desmond Lee): Mdm Speaker, I beg to move, "That the Bill be now read a Second time."

The Town Councils Act, administered by the Ministry of National Development (MND), establishes the legal framework for Town Councils to control, manage, maintain and improve the common property of Housing and Development Board (HDB) housing estates for the benefit of residents living in those estates.

When Town Councils were formed in 1989, the intent was to give elected Members of Parliament (MPs) the autonomy and latitude to run their own towns. MPs were empowered to engage residents directly, understand their concerns and work with them to shape their living environment. Each town could then develop a distinctive character of its own, under their MP's stewardship. In turn, MPs would be directly accountable to their constituents for their performance, through the ballot box.

To quote then First Deputy Prime Minister Mr Goh Chok Tong at the Parliamentary debate in 1988, I quote, "This Bill will contribute to the attainment of the two philosophical objectives. First, it transfers some powers from HDB to the MPs and grassroots leaders. It gives them, and the residents, greater power and responsibility to manage their own affairs and to participate in their estate's development. Second, because MPs will have increased authority and responsibility, voters will be more likely to vote carefully and sincerely and choose honest and effective MPs."

Mr Goh Chok Tong added that the formation of Town Councils would provide political parties without any track record with a platform to prove their mettle. To quote him, "If a party can manage Town Councils well, it will prove its competence in at least one area − good administration – which is the prerequisite of any government."

Mdm Speaker, the raison detre of Town Councils remains relevant today. Through Town Councils, MPs and Town Councillors have partnered residents to shape their living environment, respond to residents' needs and enhance their sense of belonging to the community.

However, over the past 28 years, we have learnt useful lessons from the management and operations of Town Councils. Today, Town Councils serve more than 3.2 million residents and collectively manage over $1.6 billion worth of public and residents' monies. This is a significant increase from 2.4 million residents and $300 million in the early 1990s.

Residents' expectations of their Town Councils have also risen. They expect greater accountability and better performance, especially in areas, such as estate cleanliness and maintenance, where the results are visible and immediate. But the challenge lies in less tangible areas, like financial management and corporate governance. These are just as important, if not more, given the potential downstream impact of financial insolvency and loss of public funds if Town Councils are not managed well. But governance lapses and poor management of a Town Council's finances could remain unnoticed until much later, when significant damage or losses have already occurred. Ultimately, residents are the ones who will be saddled with the consequences.

So, residents have a right to expect responsible governance from their Town Councils. As public institutions entrusted with millions of dollars received from residents and the Government, Town Councils should be held to at least the same standards of governance as charities and public-listed companies.

As the former Minister for National Development Mr Khaw Boon Wan said in Parliament in 2015, MND can no longer take a light-touch approach and assume that the people running Town Councils will all be responsible. There is a need to ensure proper systems, accountability and governance to safeguard residents' interests. For instance, Town Councils may take the easy way out − make short-term, populist measures, such as lowering service and conservancy charges (S&CC), at the expense of their long-term financial health and the well-being of residents. We have also seen in recent years serious deficiencies in some Town Councils' governance and financial systems as well as regulatory breaches, but there were few direct levers to put things right. While most Town Councils have been cooperative, MND has limited powers under the current Town Councils Act to look into suspected irregularities or enforce the rules set out in the Act if they are not complied with. MND has powers to step in, only as a last resort, and in very limited circumstances. And this is why Parliament unanimously passed a Motion in February 2015 that called for, among other things, I quote, "strengthening of the legislative framework for Town Councils".

The amendments to the Town Councils Act seek to address the limitations of the current legislative framework, while adhering to the original spirit and intent of the Act. Town Councils will continue to manage our Towns autonomously and can decide how best to serve their residents' interests. But the Act will establish the required standards of transparency, public accountability and performance for Town Councils and provide for more effective oversight of Town Councils to safeguard the interests of residents.

Mdm Speaker, this Bill caps a detailed review process spanning almost four years. As early as 2013, we engaged all the Town Councils on key proposals that would impact their operations, such as financial sustainability and Town Council handover arrangements. The Lift Replacement Fund in this Bill addresses a shared concern raised at one of these sessions, on the long-term adequacy of Town Councils' Sinking Funds.

Over the last few years, we have heard from Members through debates in this House on Town Council-related issues. We have also received feedback from members of the public on these matters through letters to MND or HDB or to the media and, more recently, in October last year, MND held a month-long public consultation on the proposed amendments in the Bill. All Town Council chairmen were also invited to provide their feedback on the proposed amendments. The feedback that was received and MND's responses to them were also published online.

We would like to thank Members of this House and the public for all their contributions and feedback. We have carefully considered all the views and incorporated them, where appropriate, in the process of drafting this amendment Bill.

Madam, let me introduce the main provisions of this Bill, which I will broadly categorise into four categories: first, clarifying Town Councils' roles and functions; second, improving Town Councils' governance and accountability; third, strengthening Town Councils' financial management; and fourth, enhancing MND's regulatory oversight.

First, the Bill clarifies the roles and functions of Town Councils. Clause 11 reiterates that the Town Councils' core function is to manage the common property of their towns and emphasises that Town Councils are to do so for the benefit of their residents. In relation to this, the Bill sets out to clarify some areas that are not explicit in the current Act. First and foremost, Town Councils have a duty of care to their residents.

Clause 12 clarifies that Town Councils are not to carry out commercial activities that are inconsistent with their core functions. Such activities include setting up subsidiary companies to carry out commercial activities which are not related to their core function to manage common property. Town Councils are clearly not set up for these purposes and residents should not be made to bear the uncertainties and business risks associated with such commercial ventures. Some Town Councils have asked if this restriction extends to the fund investments that Town Councils currently carry out to counter inflation. It does not. Town Councils can still invest their funds, subject to guidelines under the Town Councils Financial Rules (TCFRs) that limit risk exposure.

Second, Town Councils do not own the common property and neither is their power unfettered. Under the existing Act, Town Councils may already set and collect charges but only for uses prescribed by MND and are not entitled already to charge HDB for the use of common property. This will continue to be the case going forward. In addition, it will now be an offence for a Town Council to impose unlawful charges.

Another area that the Bill will clarify is the Town Councils' relationships and interactions with HDB and other statutory authorities. It makes two fundamental points clear.

First, as the owner of common property in HDB estates, HDB has landowner rights, including the use and access to common property. Clause 29 reaffirms the status of HDB as landowner and emphasises that Town Councils must not perform their functions or exercise their powers in a way that is inconsistent with HDB's title and rights as landowner.

Second, Town Councils are subordinate to public law. They cannot hamper statutory authorities carrying out their statutory functions to ensure public health, safety and order, or undertaking works, for instance, Smart Nation initiatives, to improve the quality of life of residents in and around the town.

Clause 14 requires Town Councils to cooperate with these agencies and public officers and grant them access to and use of common property, for instance, allowing the National Environment Agency (NEA) to install closed circuit television (CCTV) cameras to catch or deter high-rise littering.

If a Town Council unreasonably delays, hampers or obstructs the work of the agency or its officers despite receiving ample notice, the agency may have to, with HDB's consent as landlord, issue a notice to the Town Council, and non-compliance with the notice without reasonable excuse will be made an offence.

Lastly, the Bill will make it clear that Town Councils have a role to play during public emergencies. Clause 14 allows MND to direct Town Councils to make emergency-related preparations, for instance, to ensure that essential services remain available. Where reasonable, MND may provide grants or reimbursements to Town Councils to defray costs incurred.

I should emphasise that the provisions I just described merely spell out what is already expected of all Town Councils today. They do not curtail the broad autonomy and latitude that Town Councils currently enjoy.

The amendments give Town Councils greater clarity on the activities that are part of their core functions and those that are not. Town Councils should focus on their core function of managing HDB estates and not take on unnecessary commercial and financial risks that detract from their core mission.

At the same time, there is no reason why Town Councils, HDB and other public agencies should not work collaboratively to further residents' interest, or to safeguard public health, public safety and public order.

Next, let me move on to provisions that improve Town Councils' governance and accountability to residents. The issue of governance of Town Councils has been a subject of much discussion and cause for concern, as seen from recent events. This House has spoken unanimously and agreed on the need to strengthen the legislative framework for Town Councils, and the question is how and by how much. As a regulator, MND seeks to promote good governance, without unduly hampering the Town Councils' operations and autonomy.

The first suite of enhancements seeks greater transparency and public accountability from Town Councils by raising the standard of disclosure on three fronts: (a) key personnel appointments, (b) financial reporting and (c) Town Councils' compliance with other governance standards.

First, on Town Councils' key personnel. Town Councils will be required to notify the public and MND of key personnel changes within the Town Council, through amendments to clause 10. Clause 9 of the Bill clarifies the definition and treatment of conflicts of interest scenarios.

The new section 15A extends conflict disclosure requirements beyond Town Councillors, to committee members, employees of the Town Council or anyone who is delegated with the responsibilities of the Town Council. This will better manage any risk of conflicts that may arise in Town Councils' management and operations. The Town Council Secretary will be required by law to keep a register of all conflict disclosures.

Second, on financial reporting. To strengthen public and regulatory oversight of Town Councils' finances, clause 21 now specifies a timeframe of six months from the financial year (FY)-end for Town Councils to submit their audited statements to MND for presentation to Parliament. Town Councils are also required to publish the statements for public access and viewing. It will be an offence if a Town Council, without reasonable excuse, persistently fails to submit its financial statements on time.

Third, on governance. Clauses 23 and 31 expand the scope of rules that MND can prescribe and Town Councils must comply in the areas of finance and governance. These include rules for Town Councils to disclose their compliance with governance standards.

MND will work with Town Councils to finetune these reporting instruments and roll them out in due course. In particular, we will work with Town Councils to develop a Code of Governance for Town Councils. This will take reference from similar Codes for Charities and Companies, which seek to strengthen accountability and boost public confidence in the respective sectors. The Code will cover best practices that Town Councils are encouraged to adopt through a comply-or-explain regime.

Besides strengthening disclosure requirements, the Bill also seeks to strengthen internal controls in relation to potential conflicts of interest within a Town Council and related parties. Clauses 8, 13 and 16 disqualify the Town Council's Managing Agent (MA) and its appointed auditor from concurrently holding key roles in a Town Council, at the Town Council, Town Councils' committee and executive levels.

These roles pose a conflict of interest risk because the Auditor is tasked to conduct an independent and objective assessment of the Town Councils' finances. The MA provides a significant proportion of Town Councils' services and could stand to gain from how contracts are awarded by the Town Council.

We have intentionally nuanced these prohibitions, as disqualification is a heavy bar. It is certainly not our intention to stop individuals with the relevant skillsets and experience, for example, in audit and estate management, from serving residents in the Town Councils.

The scenario that we want to avoid is one where a person wields significant influence or power in two conflicting roles, for example, as General Manager of the Town Council and the Chief Executive Officer or Managing Partner in the Town Council's MA.

Non-C-suite executives and other regular employees of the Auditor and MA are not barred from double-hatting in the Town Council. Nevertheless, we will require, in clause 9, Town Council staff to make disclosure of interests to the Town Council and to recuse themselves from decision-making if there is potential conflict.

Next, I will move on to enhancements in the Bill that aim to strengthen the way Town Councils manage their finances. Earlier this year, we announced a series of steps that MND will take to ensure that Town Councils take a long-term view of their finances and start setting aside monies for big ticket items, such as lift and other asset replacements.

The provisions in the Bill give legislative effect to some of these measures.

First, the Bill will require Town Councils to establish a Lift Replacement Fund (LRF) that is ring-fenced for lift-related replacement and upgrading works. Clause 18 ensures that Town Councils set aside sufficient funds in the LRF, as lift expenditures are large and backloaded. The detailed mechanics of LRF, such as the minimum contribution rates, will be set out in the subsidiary legislation. As announced earlier, additional grants will also be provided to help Town Councils accumulate sufficient funds.

Second, the Bill empowers MND to make rules for Town Councils to prepare and maintain long-term financial plans. Clause 23 will instil greater financial discipline among Town Councils to review their financial positions regularly and to make timely adjustments to their financial plans in response to changes in the operating environment.

Third, the Bill introduces safeguards that avoid service disruptions, if a Town Council is on the brink of financial insolvency. Clause 23 allows MND to make rules under the TCFR that prescribe Town Councils' course of action in such scenarios. This could include the appointment of advisors to advise the Town Council on the proper management of its affairs.

Madam, I will now move on to MND's powers as regulator. Under the current Town Councils Act, MND's regulatory levers to secure compliance from Town Councils with the law are limited. While MND is responsible for administering the Act, it lacks powers to require Town Councils to submit any information beyond their annual financial statements.

In addition, MND lacks the regulatory levers to intervene where there is a detected non-compliance with the Act. There are only three narrow areas where non-compliance with the Act is now an offence: one, the misuse of Town Council funds; two, the contravention of Lift Upgrading Programme Rules; and three, the failure to provide information to the auditor without reasonable excuse.

This is neither desirable nor tenable. As regulator, MND must also have powers to conduct regular health checks for Town Councils, look into suspected irregularities and, where necessary, take prompt and effective actions to safeguard residents' interests.

Clause 24 of the Bill thus introduces a new Part VI A that allows MND to take the necessary investigative and enforcement actions to address potential regulatory breaches or systemic weaknesses in the Town Councils in a timely and calibrated manner.

First, in addition to the annual financial reporting, MND may periodically conduct compliance reviews to check for regulatory compliance. These are basically health checks, in the form of risk-based audits on different aspects of Town Councils' operations. The objective is to assess if there are specific areas of non-compliance, process gaps or areas for improvement.

MND will appoint inspectors, who may be public officers or professionals with the relevant qualifications and experience, to conduct these reviews. During these reviews, Town Councillors and staff will have to answer queries from the inspectors and produce documents upon request. At the end of the review, the inspectors' findings and recommendations for improvement will be presented to both MND and the Town Council.

Second, if there are reasonable grounds to suspect a material irregularity in a Town Council's affairs, MND may direct an investigation to be undertaken to establish if there was a contravention. Town Councillors and Town Council staff will be expected to extend their full cooperation to the inspectors during the investigation.

Third, where the compliance reviews or investigations throw up deficiencies in the running of a Town Council or irregularities in its financial affairs, MND may follow up by issuing a rectification order. This rectification order will specify remedial actions for the Town Council to address the irregularity and a timeframe to do so. At the end of the specified period, the Town Council is to report on the action it has taken.

Finally, as a last resort, the Minister may put the Town Council under Official Management, if there is urgency to act as the health or safety of the residents is under threat. To be very clear, this provision of last resort is not new and is already present in the current Town Councils Act. The Bill merely repeals the provision under section 50 and reintroduces it in the new section 43G.

The various steps that I have just outlined enable MND to take timely action and calibrate its enforcement approach according to the action, or inaction, of the Town Council. In practical implementation, MND will first seek to engage the Town Councils to understand the situation and determine the severity of any contravention. Town Councils will continue to be responsible for correcting any lapses or management deficiencies that are uncovered in the course of the compliance reviews and investigations. As I have said earlier, the findings by the inspectors will be shared with both MND and the Town Council.

While the Bill has introduced stronger enforcement powers to investigate and require Town Councils to take specific remedial actions, they will generally be exercised when a Town Council is uncooperative or recalcitrant, refusing to correct irregularities despite due and fair notice.

In addition to the three penalty provisions in the Town Councils Act, the Bill will introduce new penalty provisions to hold Town Councils accountable in three key areas.

One, annual audit and disclosure of information. The Bill will make it an offence when Town Councils fail to provide regular submissions relating to audit and governance or fail to cooperate with requests for information relating to governance. Two, responsible financial management. Town Councils can be taken to task for flouting financial rules or specific instructions to rectify their contraventions. Three, abiding by public laws and cooperating with public authorities. Town Councils can be taken to task for making unlawful collections or putting public health and safety at risk. Where applicable, we have benchmarked the penalties to those for similar offences under the Charities Act.

We all recognise and accept that Town Councils and their key decision-makers have to act honestly and responsibly. This is reflected in section 33(6B) of the current Town Councils Act where key decision-makers in the Town Council, namely, the Chairman and Secretary, are held equally liable for the offence committed by the Town Council, if the offence was committed with their consent or connivance.

The Bill extends this existing treatment and penalties to the new offence provisions, so as to hold culpable parties accountable. This sets the tone for the leadership of Town Councils and underscores the point that there would be stern consequences for key decision-makers who abet poor governance or fail in their fiduciary duties.

To streamline the enforcement process, clause 26 will also empower MND to offer composition for some of the offences. This is an existing provision. This will enable MND to take mitigating or aggravating factors into consideration when deciding whether to compound an offence or proceed to recommend prosecution to the public prosecutor.

Besides what I have covered above, the Bill includes amendments to clarify existing definitions and processes. It also covers Town Council handover processes which have been a subject of review, and a handover guide in 2013.

Mdm Speaker, the Town Councils (Amendment) Bill balances two objectives − to preserve the autonomy and latitude of Town Councils, while protecting residents' interests and public monies.

These amendments have adhered to the original spirit and intent of allowing Town Councils to operate autonomously, while establishing the necessary standards of governance, public accountability and transparency that residents and the general public expect of our Town Councils, standards that this Parliament voted for in February 2015 to strengthen through legislation.

With a stronger regulatory framework, MND will play a more effective role to safeguard residents' interests and public funds. We hope that these amendments can give residents greater assurance that their housing estates are properly managed and S&CC monies are used for their benefit. Mdm Speaker, I beg to move.

Question proposed.

Mdm Speaker: Dr Teo Ho Pin.

2.36 pm

Dr Teo Ho Pin (Bukit Panjang): Mdm Speaker, I wish to declare my interest as the Chairman of Holland-Bukit Panjang Town Council and also the Coordinating Chairman for the 15 People's Action Party (PAP) Town Councils.

Mdm Speaker, I rise in support of the Bill. The proposed amendments to the Town Councils Act will further improve corporate governance, transparency and public accountability of the Town Councils.

As elected MPs running Town Councils, we owe a duty of care to our residents and the public to manage our HDB estates properly and in compliance with the Town Councils Act and financial rules. We must also ensure that Town Councils get value for money when procuring products and services. This includes providing fair and open competition, proper tender evaluation and awarding contracts to ensure public accountability.

Against this backdrop, the 15 PAP Town Councils support the amendments which will guide all Town Councils to better serve our residents. While MND has so far adopted a light-touch approach as regulator, I appreciate that a "light-touch" does not mean "no touch".

Recent events have also shown us that not all Town Councils act decisively to rectify problems that surface. At the end of the day, MND must be given the powers to move in and nip the problems in the bud and ensure that public interest is not compromised.

Madam, the PAP Town Councils have been doing their level best to serve their residents and comply with the Town Councils Act and financial rules. We look forward to working with MND to identify ways in which we can continue to improve to serve our residents better.

Madam, I wish to highlight three areas of the Bill which I hope the Minister can clarify and make provisions to ensure compliance by all Town Councils.

First, keeping proper accounts and financial statements. Madam, the Town Councils Act was passed in August 1988 to give elected MPs the authority and responsibility to manage public housing estates in their respective constituencies. This arrangement enables elected MPs to manage and serve their residents and, more importantly, ensures that they are accountable to their residents when running the estates.

Over the past 28 years, many elected PAP MPs have run Town Councils to serve their residents. These PAP Town Councils have always practised financial prudence to ensure that they provide quality maintenance services to their residents. The PAP Town Councils have also been diligently submitting their audited accounts, financial statements and annual reports on time to Parliament for the purposes of public accountability.

Madam, I fully support the amendments as set out in clause 20 of the Bill which repeals and re-enacts section 35 of the Town Councils Act which states the duty of the Town Council to keep proper accounts and manage its monies properly. I also agree to the implementation of the new requirement as stipulated in section 38. This requires all Town Councils to submit their audited accounts and financial statement within six months after the close of the FY to the Minister. This requirement is necessary as it will ensure that all Town Councils will not only keep proper records of their accounts, but also have their accounts properly audited by independent auditors.

In particular, I believe the new requirement under section 38 (13A) will further strengthen corporate governance. This amendment to the Act will require Town Councils to display their audited accounts, financial statements and the auditor's report at an online location accessible to all residents within 30 days after it has presented the report to Parliament. This results in greater transparency and will allow Town Councils greater accountability to their residents. In this regard, I propose that the Ministry set down rules pertaining to the format and presentation of the audited accounts and financial statements, so as to facilitate greater understanding of the accounts by the residents.

Two, handover process of Town Councils. Madam, in every General Election or by-election, many Town Councils undergo a handover process upon change in electoral boundary and elected MPs, between members of the same political party or between different political parties.

In such instances, most Town Councils follow the handing and taking over guidelines provided by MND to effect the handover. Generally, most Town Councils have not encountered any major problems when taking over the property data, financial data, contracts and work in progress from the previous staff in the Town Councils who were managing the information.

Moreover, the Town Councils which are taking over would usually set up their own computer systems to manage both their accounts and estates in order to serve their residents better. However, sometimes, miscommunication may occur.

Madam, in order to avoid any finger-pointing or confusion, I support clause 3 of the Bill which introduces a new section 3(3A) setting out the arrangements that are vital in ensuring a smooth handover of responsibilities between the incoming and outgoing Town Councillors. However, in order to enhance the effectiveness of this clause, I would urge the Ministry to lay out clear rules and procedures for Town Councils to comply with. This would include rules and procedures for the listing of property database, customer information, assets and liabilities, ongoing contracts and work in progress.

In the interest of fairness, the Ministry can also appoint an independent auditor to oversee both the handing and taking over of all Town Councils. Further, in the event of a dispute amongst the Town Councils, the Ministry can mediate or arbitrate the conflict and propose an amicable solution that will better serve the interests of the residents.

Third, handing over of new housing estate. Madam, finally, I wish to highlight my concerns with regard to the proposed amendment in clause 28 of the Bill which introduces a new section 54A that attempts to facilitate a smoother handover in relation to the control and management of common property in new housing estates.

Although HDB has developed a comprehensive management system to ensure the quality of new flats, building defects are still commonly found in flats that HDB hands over to the Town Councils. Common defects include frequent lift breakdowns, water leakages and seepages, wall and ceiling plaster cracks, and incomplete external site works. Most of these defects can often be attributed to either poor or impractical designs, or shoddy workmanship during construction.

Town Councils frequently experience great difficulty in getting the relevant consultants and contractors to rectify the defects properly and promptly due to their lack of authority over them. As a result, this has caused much anxiety and unhappiness amongst flat owners, MPs and Town Council staff.

Madam, instead of reminding Town Councils of their duty to manage common property, HDB should first take responsibility to ensure these new flats and common property are properly built to meet the expectations of flat owners. This includes ensuring that all defects identified during the defects liability period are properly rectified before it is handed over to the Town Council for management.

Thus, I would propose that HDB adopt the practice by private developers, where they will be required to take charge of the management of new flats and common property during the defects liability period. In this way, HDB will be directly responsible in ensuring the quality of both the design and construction of new flats which satisfy the needs of the flat owners before these flats are handed over to the Town Councils for management.

Mdm Speaker: Mr Pritam Singh.

2.46 pm

Mr Pritam Singh (Aljunied): Mdm Speaker, before I begin, I would like to declare my interest as the Chairman of the Aljunied-Hougang Town Council.

Mdm Speaker, this amendment Bill does not seek to review the original objectives of the Town Councils Act that is on the Government's agenda. We are debating this Bill with a view to improve the existing Act. I do not oppose the objective per se but, as an Opposition MP, my experience is that Town Councils operate quite differently by design in PAP and Opposition wards and, as such, are inevitably judged by different yardsticks.

The Workers' Party (WP) does not oppose raising governance standards for Town Councils, but we have specific concerns over the new Part VI A of the Bill which gives intrusive oversight powers to MND directed by political officeholders of any incumbent government, not just the PAP.

We believe an independent entity of inspectors, not appointed by the Government, should resolve disputes if and when they occur between MND and the affected Town Council, a point that Ms Sylvia Lim will build upon.

Let me reiterate. The additional scrutiny on Town Councils is not objectionable. It is the identity of the scrutiniser that warrants scrutiny. According to then Deputy Prime Minister Goh Chok Tong, there were two philosophical objectives behind the original Town Councils Act.

Firstly, it purported to transfer some power from HDB to the MPs and grassroots leaders. It gives the MPs and residents greater power and responsibility to manage their own affairs and to participate in the estate's development.

Secondly, because MPs will have increased authority and responsibility, voters will be more likely to vote carefully and sincerely to choose honest and effective MPs. However, the transfer of power from HDB to the MPs and, I stress, grassroots leaders, is only partial in an Opposition Town Council as the grassroots are, by design, not part of the Opposition Town Council's firmament.

This is because the Government cannot reconcile that an Opposition MP and, by extension, an Opposition Town Council, would support the Government's plans. It is also instructive that nowhere does the grassroots, Community Improvement Projects Committee (CIPC) or the People's Association appear in the Town Councils Act. Yet, the grassroots were acknowledged as a conspicuous and central part of the Town Council system when the Bill was debated in 1988. This is because the Town Councils Act was legislated to serve a dominant one-party state and, to that end, Government-sanctioned grassroots organisations do not work with elected MPs in Opposition Town Councils. This remains a fundamental omission vis-a-vis the operation of Town Councils in Opposition wards.

I have spoken on how the grassroots have a significant say on estate upgrading via CIPC funding in this House previously and I do not repeat those points here. The same can be said about the political control of critical Town Council management systems and software by politically influenced entities.

One can just compare the amount of state resources extended via the CIPC committee through the grassroots in PAP Town Councils compared to Opposition Town Councils. Certainly, lesser taxpayer funds to Town Councils will inevitably lower the esteem of Opposition-run Town Councils with attendant political ramifications. While I believe this should change and a fairer system ought to take form, as a political realist, I can see why the ruling party will rather institutionalise the status quo.

In view of some fundamental disparities between the Opposition and PAP Town Councils in practice, WP would have approached this amendment Bill with the words of the then Deputy Prime Minister Mr S Dhanabalan in his round-up speech on the original Town Council Bill some 30 years ago. He said, "The question really is not better or not there is a political purpose. The question is: is the purpose a good one for Singapore? Will it make for a better Singapore? Will it make for a more stable and secure Singapore? Will it make for a better life for our citizens? That is the question we ought to ask."

I would like to state for the record that WP is under no illusion that the purpose of the Town Councils Act is undeniably political. And since 1988, PAP politicians have come up openly to say so. So, that point has been settled. But the former Deputy Prime Minister's subsequent questions remain relevant today.

To that end, WP does not oppose five of the six amendments proposed in the Explanatory Statement to the Bill, namely, to promote and strengthen effective and efficient governance and accountability of Town Councils; to foster a culture of personal integrity and accountability for administrative officials of the Town Council; to ensure sound financial management; to promote better governance and to clarify the role of Town Councils in emergency planning.

However, the introduction of oversight mechanisms and monitoring powers over the Town Councils that are in the hands of the Government has the potential for abuse. This will not necessarily ensure good outcomes for Singapore but rather politically good outcomes for any ruling party.

Central to the working of the Town Councils are the powers of the elected MPs in relation to MND. Critical to the success of the Town councils is the protection of the MPs' autonomy, guaranteed as a political space for the MPs to work with local residents so that the same residents voting in the General Election can judge the MPs' performance.

If we return to the speech of the then Deputy Prime Minister Goh Chok Tong during the 1988 debate, he raised three important points. First, it was not the original intention that HDB become the management corporation for 80% of the population. Such an over-centralisation is undesirable. Second, when our people become too dependent on HDB, it will lose self-reliance and its responsibility for their own surroundings. In a sense, they will expect HDB to fix and do everything. Third, as such, to preserve the political autonomy of the MPs and self-reliance of the people, HDB should only intervene when there are hazards to public health, public safety and public order.

In principle, clause 24 of the Bill is problematic on these three points by reversing and diminishing the political autonomy of the elected MPs in relation to MND, which overseas HDB. If citizens know that MND will intervene when the town is not run effectively, then whether the candidates standing for election are honest and effective enough to run the Town Council potentially becomes irrelevant. As envisaged by the Town Councils Act originally, voters are responsible for the MPs they choose to run their towns and represent them in Parliament. If they do not like what they see, they can vote under-performing MPs out at the next elections.

MND having oversight over the Town Council does not mean just over-centralisation potentially but it also leads the two political pervasions. First, it risks politicisation of the Public Service where MND risks becoming a tool of the ruling party of the day to fix the Opposition. Second, it causes the elected MPs to answer to the unelected bureaucracy, subordinating the elected mandate of MPs to the Executive branch.

I would suggest to this House that there is a better way to move forward on this point while retaining the proposed oversight powers sought by this Bill that will, at the same time, preserve the central feature of Town Councils – the political autonomy of MPs.

Those oversight powers should be in the hands of independent parties not linked to the Ministry or the Government in general. This is critical to preserving the Town Councils as a ballast to our democracy. I would take the point made by hon Member Dr Teo Ho Pin about the potential of introducing an independent auditor during the time when an estate is handed over, especially between political parties. I think that concept should be pursued.

To conclude, Mdm Speaker, as late as 2009, a Straits Times report quoting the then Senior Minister Goh Chok Tong noted that in spite of the Town Councils' existence, residents did not seem to take a greater interest in the estates they lived in. It was noteworthy that one public poll commissioned by the Straits Times in 2013 found that close to 80% of those polled wish to have HDB replace Town Councils in the provision of services to residents. In fact, the same call was made more recently in the public consultation on this Bill.

It would be helpful if the Government looked into why many Singaporeans, or at least the polled Singaporeans, are not as enthusiastic about Town Councils in spite of its objectives, not all of which are necessarily objectionable. I do think there is much value in getting MPs involved in local politics and the nitty-gritty of constituency work. In spite of the different realities on the ground and the treatment between Opposition and PAP Town Councils, particularly as a result of the grassroots and, by extension, losing PAP political candidates to the People's Association, WP is determined to make the best of less than an equitable situation, managing it not with the cards we wish we had, but those that are in our hands.

Mdm Speaker: Mr Pritam Singh.

2.55 pm

Mr Desmond Lee: Madam, may I ask the hon Member for the purpose of me giving a fuller reply to his points later. Two clarifications. Firstly, with respect to his proposal for an independent person to exercise the powers under Part VI A, he was relying on what Dr Teo Ho Pin had mentioned, an independent auditor. Can he explain what his proposal is, so that I can better understand it?

Secondly, he referred to a 2009 Straits Times report as well as a subsequent poll, and I quote him, "Eighty percent of the people polled wanted HDB to take back estate management". That is what the poll said, but can I understand in this House what is his position and what is the position of WP in respect of the position of Town Councils in our elected system?

Mdm Speaker: Mr Pritam Singh.

Mr Pritam Singh: I will take the second question first. The 2013 poll polled 50 people and 41 of them wanted estate management returned to HDB. But to clarify, as I mentioned in my speech, there is value in having MPs run Town Councils. That position remains. It is not the position that the poll suggested. What the poll is telling us is that the public may have a different view about it and that is something for MND to consider.

The Senior Minister of State's first question was with regard to the inspectors who, under clause 24, could come into a Town Council. I would suggest that the provision that the Town Councils Act currently provides for, which is, for an independent agent to potentially look into issues which MND feels the Town Council ought to, is potentially sufficient. Because it is working in the current context as the Senior Minister of State would know in the case of Aljunied-Hougang Town Council. The key point is that if there is an independent individual, I think that will be a better position or better outcome for Singaporeans.

Mr Desmond Lee: I thank the Member for his clarification. On his second point, he said that if the auditor or the inspector is an independent inspector, he would support Part VI A. If I were to explain to him that Part VI A allows for MND to appoint independent auditors who would then conduct compliance reviews or investigations and who are then required by the legislation to report to both MND and the Town Council, would that change his and his Party's position?

Mr Pritam Singh: Senior Minister of State, I would suggest that it would, provided you can provide us with more details on how those independent investigators would be appointed. There is potential to review the position.

Mr Desmond Lee: I will explain later.

Mdm Speaker: Mr Zainal Sapari.

2.58 pm

Mr Zainal Sapari (Pasir Ris-Punggol): Mdm Speaker, I would like to declare my interest as the Chairman of Pasir Ris-Punggol Town Council in speaking on this Bill.

As a Town Council chairman who has had to hand over a constituency to another Town Council in 2013 and then take it back again in 2015, I can understand very well the need to have some of these amendments.

Mdm Speaker, under the current Act, to ensure public accountability, Town Councils are required to submit their annual audited financial statements as soon as practicable. The new amendment under section 38(11) requires a Town Council to submit these documents within six months after the close of the FY. I would like to seek a clarification on whether this applies to the audited financial statements on distribution of assets and liabilities for the purpose of the handover after a General Election.

Let me share my Town Council experience. After the by-election in 2013, Punggol East was handed over to the Aljunied-Hougang Town Council (AHTC). Pasir Ris-Punggol Town Council (PRPGTC) took 8.5 months to submit our audited financial statements on the distribution of assets and liabilities.

On the other hand, in 2015, after the General Election when Punggol East returned to PRPGTC, AHTC took 15 months in total. AHTC gave PRPGTC three different sets of audited financial statements on three different dates. AHTC withdrew the first and second sets on 26 January 2017, when PRPGTC perhaps identified some discrepancies in the first audited statements. AHTC only recently submitted the third. PRPGTC is looking through this third set carefully and we have already identified several discrepancies. There are two key learning points.

First, could the Minister consider setting a reasonable deadline for the preparation and submission of audited financial statements on the distribution of assets and liabilities if section 38(11) does not apply to the audited financial statements on the distribution of assets and liabilities?

Second, PRPGTC could have submitted our audited financial statements on the distribution of assets and liabilities earlier if both Town Councils could have agreed in writing on the allocation method to be used to distribute the assets and liabilities as required by our own auditors.

Hence, I would like the Minister to consider including in the Bill the allocation method to be used to determine the distribution of assets and liabilities or, alternatively, for the Bill to allow the Minister to determine the method to be used during the handover process.

Another area that I would like the Minister to consider is allowing a Town Council to maintain two separate financial accounts pending the submission of an unqualified audited financial statements of a constituency the Town Council is taking over.

PRPGTC has had an excellent record where our annual financial statements were all unqualified. To meet MND's statutory requirement for the submission of annual audited financial statements in August 2016, PRPTC had included Punggol East Single Member Constituency's (SMC's) unaudited financial statements into the PRPTC's FY2015/2016 audited financial statements. Our earlier request to maintain two separate accounts was denied by MND.

PRPGTC's FY2015/2016 audited financial statements were then qualified on the basis that the audit of the financial statements of Punggol East SMC as at 30 November has not been completed. It was unfortunate that the poor practices and failure of compliance by the outgoing Town Council then "contaminated" the entire set of accounts for the whole of PRPGTC, through no fault of our own.

The submission of audited financial statements is a standard practice and part and parcel of ensuring good governance. If a Town Council maintains good and proper Town Council record, it is a straightforward process. But if the appointed auditors are unable to verify the accounts due to lack of information, it is usually an early sign of poor financial and corporate governance.

I also am heartened to note that the Town Councils Act, section 3, has been amended to address the boundary change. The new amendment under section 3(3A)(e) requires the outgoing Town Council to provide another Town Council with all documents, information and other assistance as the Town Council may reasonably require to manage the area and serve the residents.

In our experience, despite the assurance of cooperation from the outgoing Town Council management, PRPGTC faced a lot of challenges to be operationally ready by 1 December 2015 to serve Punggol East due to the lack of documents and insufficient information provided to us. This directly affected our ability to serve the residents and had caused inconvenience to many households.

Operational difficulties faced by PRPGTC included being unable to share with residents the breakdown of S&CC arrears owing to the Town Council because AHTC's record only showed a lumpsum owed without showing a detailed monthly breakdown of the payment arrears.

PRPGTC also had to manage cases of residents accumulating arrears because they were not informed by AHPETC prior to 1 December 2015 that their general interbank recurring orders (GIRO) arrangements had been stopped. All of this essential information was not shared and affected the residents.

As such, with reference to section 3(3A)(e), I would like to ask the Minister if the incoming Town Council can apply to the Minister to instruct the outgoing Town Council to provide more data or information as required by the incoming Town Council. This is important because the lack of complete documents and information can hamper the ability of the incoming Town Council to serve and thereby causing much inconvenience to the residents.

I also support the amendments in the Bill to improve MND's regulatory oversight to ensure Town Councils comply with the Act and Rules. All Town Councils manage a substantial amount of money, and non-compliance by Town Councils can have repercussions downstream. Hence, it would be prudent to ensure MND has regulatory oversight.

One of the regulatory issues where compliance is required by a Town Council is to ensure quarterly transfers of the S&CC fees collected into the sinking fund. Failure to perform this quarterly transfer could imply two things. First, the Town Council is not doing their job well to manage their accounts; or second, the Town Council has overspent on routine maintenance and, hence, do not have sufficient funds to make the required sinking fund transfer. If MND has greater oversight, such a Town Council should be brought to task to observe the regulatory requirement and this will ensure that any regulatory non-compliance problem is detected early and solved before it escalates into a huge mess.

On the topic of accountability, the current Town Councils Act only holds two positions responsible, the Chairman and Secretary, for any cases of criminal liability. Clause 25 introduces a new section 48A that imposes on the Chairman or Secretary of a Town Council, or any person who was purporting to act in any such capacity, criminal liability for certain offences committed by the Town Council in certain circumstances.

I support this amendment because Town Council operations do require some decision-making to be done by various key officers or Town Councillors. As such, this amendment would ensure the key officers could be held accountable for their decision-making.

The KPMG report on AHTC illustrates the need for this amendment where several problems were uncovered. The Nanyang Technological University's (NTU's) accounting professor El'fred Boo was quoted during an interview with Channel NewsAsia (CNA) that the findings have, I quote, "serious and grave implications for the parties involved in the AHTC scandal, including a potential basis for filing criminal charges if a deliberate intent could be established".

Prof El'fred Boo further added, I quote, "One of the major findings centred on a series of payments of at least S$23 million, which, in the absence of approved controls in a severely weak control environment amid a conflict-of-interest situation, could suggest that the agent is approving and making payments to itself. This was corroborated by instances of overpayments, and payments without approval and certification of work performed".

The involvement of many individuals appointed by the Town Council illustrates the need why they need to be held accountable, other than the Chairman or Secretary, if criminal intent can be established. Mdm Speaker, please allow me to continue in Malay.

(In Malay): [Please refer to Vernacular Speech.] Mdm Speaker, the amendments in the Town Council (Amendment) Bill will ensure better public accountability and strengthen financial management in the Town Councils. In addition, these amendments would ensure that any inconvenience to residents would be minimised following changes to a Town Council after a General Election.

As Town Councils manage a substantial amount of public funds, the proposed regulatory oversight by MND will ensure that problems that are identified early can be nipped in the bud before they become a liability to all the residents if funds are mismanaged. The amendments would ensure that the key Town Council personnel will be held accountable if there is evidence of criminal intent in their decision-making while managing Town Council affairs.

Mdm Speaker: Ms Sylvia Lim.

Ms Sylvia Lim: Madam, I have clarifications for the Member.

Mdm Speaker: Yes, please.

Ms Sylvia Lim: Yes, I will start off my clarifications before Mr Singh does. Clarifications for Mr Zainal Sapari. He was going on about the handover of Punggol East and saying that Pasir Ris/Punggol East Town Council had a lot of operational problems and so on. But I am quite surprised to hear that because can he not confirm that AHTC and PRPGTC have actually met many times for the handover and has he ever raised these problems to our Chairman?

Mdm Speaker: Ms Lim, can you please address your comments to me?

Ms Sylvia Lim: Yes, sorry, Madam. That was the first clarification. The second clarification is that the Member talked about late transfers of sinking funds and his observation was that it could only mean that we have overspent our routine funds and so on. But does he not agree that if a Town Council is deprived of Government grants, that could also be a reason why it may not be able to make timely sinking fund transfers?

The third point is that the Member quoted a professor talking about the KPMG past payment review where the professor mentioned that there could be some criminal liability involved. I would like to ask Mr Zainal Sapari whether he has actually read the report and whether there is any finding of criminal intent.

Mdm Speaker: Mr Zainal Sapari.

Mr Zainal Sapari: Madam, let me answer the clarification sought by Ms Sylvia Lim. On the issue whether we have met several times to resolve some of these operational issues, yes, I think we have met several times. But during many of these meetings, while there is assurance of cooperation, our Town Council faced a lot of challenges. For example, data were provided in the PDF format instead in the format that we could actually use. We were also not given the information that we required in a timely manner and these all affected our ability to be able to serve our residents.

On the second point, with regard to the late transfer of sinking funds, I did not make any specific reference to any Town Council. I just said that if a Town Council is late in the transfer of sinking funds, it could imply the two things which I have mentioned in the speech. And I would like to state, looking at the records of AHTC, the transfer of sinking funds was late even before Government transfers were being withheld.

Then, on the third point about the quote that I cited from Prof El'fred Boo of criminal liability, I have read actually the report by KPMG. As to whether there is criminal liability, it is not for me to establish whether there is criminal intent.

Mdm Speaker: Ms Lim.

Ms Sylvia Lim: I would like to clarify with the Member about his reading of the KPMG report. My question is very simple − whether there was any finding that there is criminal intent.

Mr Zainal Sapari: Mdm Speaker, as I have mentioned, whether there is any finding of criminal intent is for other Government agencies to establish.

Mdm Speaker: Mr Pritam Singh.

Mr Pritam Singh: Can I just ask Mr Zainal Sapari, Ms Sylvia Lim asked him a question when there were these alleged difficulties that he mentioned at the operational level, did he write to, at least, the Chairman, myself or the vice-chairman of the Town Council what those problems were, so that we could help him resolve them? Because my understanding was we actually tried to work as best as we can in the circumstances that we were in to ensure a smooth handover.

With regard to the earlier comment made about some delay in handover of financial statements, eight and a half months and so forth, can I just ask the Member Mr Zainal Sapari when Punggol East was transferred to AHPETC after the 2013 Elections, when was the last instalment of sinking funds made by PRPGTC to AHTC? And how does that compare with the final instalment that was made to PRPGTC, as has been reported in the media today, I believe?

Mdm Speaker: Mr Zainal Sapari.

Mr Zainal Sapari: With regard to the first clarification whether we had engaged the Chairman of the Town Council, these are all done by the Secretariat, by the Town Council staff, to actually work directly with the staff from AHTC. What was shared with me was information that was told to me by my staff.

On the second point with regard to the transfer, we did explain, we did make the first transfer of $10 million within three months of the handover. The subsequent amount was eventually transferred to AHTC after we have resolved all the accounts.

Mdm Speaker: Mr Pritam Singh.

Mr Pritam Singh: With regard to the reply to the first question, the point remains that it was open to Mr Zainal Sapari to write to me and he chose not to.

On the second point, I believe that the final transfer of the sinking funds or outstanding funds to AHTC was made in September 2014, some one-and-a-half years after the by-election in Punggol East SMC. I believe the deadline is not too different from the final transfer or final instalment made by AHTC to PRPGTC.

Mdm Speaker: Mr Zainal Sapari.

Mr Zainal Sapari: Mdm Speaker, with regard to the second clarification, the thrust of my speech was not with regard to the amount that is being transferred; really, to the operational difficulties that PRPGTC faced when we were unable to get complete information or information that was given to us was after some time had actually lapsed.

Mdm Speaker: Mr Low Thia Khiang.

Mr Low Thia Khiang (Aljunied): Madam, the Member chose to repeat the allegation made by the NTU professor. I would like to ask him what is his view. He has read the report, that is what he said. Was there a finding in the report that there was criminal intent? That is question number one. Number two, since he has read the report, if there is no such finding, what is his view?

Mdm Speaker: Mr Zainal Sapari.

Mr Zainal Sapari: Mdm Speaker, with regard to the first clarification by Mr Low Thia Khiang whether there is a criminal intent based on the report, it is not for me to establish.

With regard to the second question, what is my view, that is the whole purpose of having this amendment − it is to make sure that we improve on our financial governance.

Mdm Speaker: Can I advise Members to address the Chair and not to talk to each other? Mr Png Eng Huat.

Mr Png Eng Huat (Hougang): Madam, I just want to ask the Member as this is the first time I am hearing that the data transfer and all these were having a lot of problems, that some of them are in PDF. We actually engaged the same contractor that did the transfer from Potong Pasir Town Council to the PAP Town Council. It is the same contractor and there is no issue raised. Actually, along the way, we keep asking the contractor any major issues, but there were no issues raised. So, this is the first time that I am hearing this. So, maybe the Member can explain what are these issues with the data transfer?

Mr Zainal Sapari: Mdm Speaker, during the meeting, all the issues that we raised are on the record. I do not have the records now. We could always share later on with AHTC, if it so desires, what were some of the information given to us and they were not complete for us to be operationally-ready.

Mdm Speaker: Senior Minister of State Desmond Lee.

Mr Desmond Lee: Madam, I have a point of order. This is the Second Reading, the purpose of which is to debate the principles behind the Bill. I understand that Mr Zainal Sapari had raised this as an example of certain concerns that he hopes the Bill will address. I also understand the Members from WP have got different points of view, and I think that has been registered. We will just seek Madam's leave to allow the principles of this Bill to continue to be debated as part of Second Reading.

Mdm Speaker: I agree entirely with the Senior Minister of State Desmond Lee. We are not debating specific issues here. We are debating about the general principles of the Bill. Can Ms Sylvia Lim please proceed with your speech?

3.20 pm

Ms Sylvia Lim: Mdm Speaker, I will focus on the conflicts of interest and the proposed mechanism for oversight by the Ministry. And in doing so, I will draw on my experience as the former Chairman of AHPETC and as the current Vice-Chairman of AHTC.

First, conflicts of interest. A key feature of this Bill is on conflicts of interest, as provided in clauses 8, 9, 10 and 13. First, let me say that WP agrees that conflicts of interest should be managed carefully. This certainly applies to Town Councils which handle tens of millions of dollars of public funds each year by way of S&CC payments from residents and Government grants.

The Bill recognises that conflicts of interest will arise from time to time and need to be managed. Indeed, the practice of declaring potential conflicts of interest and recusing oneself from decision-making is unobjectionable and has been in place in our Town Council since inception.

The Bill focuses on the potential conflicts that can arise where a Town Council appoints an MA to manage the Town. Clause 13 introduces a new section 20(1A) that a person who exercises a significant influence over the MA cannot hold a Town Council position of Secretary, General Manager, Finance Manager or their deputies.

The post of Town Council Secretary/General Manager (GM), is an onerous one involving both compliance with regulations and leadership of a large operation. Where town management is outsourced to an MA, the person appointed to assume the heavy duties of Secretary or GM will not be a junior staff from the MA. In fact, we know that prior to General Election 2011, Aljunied Town Council was managed by an MA where the Town Council Secretary/GM was the Managing Director of the MA. So, conflicts of potential conflicts exist in PAP Town Councils as well. Can the Minister tell the House how many of the current slate of Town Council Secretaries and GMs will have to leave their posts when this provision is effective?

Earlier in his Second Reading Speech, Senior Minister of State Desmond Lee mentioned that it would catch officers in the C-suite. But as it is phrased, it is about people having significant influence. I would argue that it is likely to be larger than the C-suite. So, I think the Ministry should clarify this point.

Madam, as far as conflicts of interest are concerned, we feel that in one respect, the Bill does not go far enough. The proposed section 15(2) will require the Town Council Secretary to maintain a Register of Declarations of interests and potential conflicts of interest made by Town Councillors. This Register of Interest of Declarations is to be kept and maintained by the Town Council Secretary, and each disclosure is to be brought up at the relevant Town Council meetings. In our view, this is useful but does not go far enough. Instead of just maintaining the Register, we would call for all such registers to be published for the scrutiny of residents. On our part, we are ready to publish the declarations related to AHTC.

Next, I move on to the proposed mechanism for oversight. I now turn to clause 24 which introduces a new Part VIA on Oversight and Monitoring of Town Councils. Part VIA introduces new sections 43A to 43H, basically giving tremendous power to the Minister to devise strategies for compliance reviews on Town Councils and for the Minister to order investigations into particular Town Councils.

These new provisions give the Minister powers that he did not have before. This Bill presents an about-turn from the original intent of Town Councils, which was to empower MPs to run towns with minimal interference from the Government. These new provisions are also a likely response to the Court judgment in the case filed by the Ministry against AHPETC, where it was held by both the High Court and the Court of Appeal that the Ministry was not the proper party to sue Town Councils. The Courts analysed that the framework of the Town Councils Act clearly showed that the Minister was only entitled to intervene in very few and specific circumstances and did not have a general power of oversight. Insofar as this Bill purports to enable the Ministry to manage or even curtail a Town Council's work, this goes against the original intent of forming Town Councils in the first place.

Madam, what is even more disturbing to me is the vast new powers given to the Minister to order investigations into the affairs of a Town Council if there are "reasonable grounds to suspect a material irregularity in or affecting the conduct of a Town Council's affairs". He may also order such an investigation if a Town Council under a compliance review does not produce certain information required by the review.

First, I would like to point out that there is already an existing framework in place. As it stands, Town Councils undergo annual audits, and auditors flag out issues on an annual basis. Where there is concern about a particular Town Council, the Auditor-General's Office (AGO) can be called in, just as the Government did to AHPETC in 2014. The AGO team would devote time and expertise to unravel any matters and issue public reports. Matters can also be referred to law enforcement agencies, if warranted, as with the case of the Ang Mo Kio Town Council's GM being referred to the Corrupt Practices Investigation Bureau (CPIB). So, why the extreme step of giving the Minister investigative powers over Town Councils? Furthermore, what amounts to "a reasonable suspicion of a material irregularity" is very subjective. The Bill does not even require any irregularity to be proved, just a suspicion of a material irregularity. What would trigger such an investigation is purely up to the Minister to interpret.

Secondly, and more importantly, Madam, the scheme, as proposed, perpetuates the biggest conflict of all. Who is the gatekeeper of this regime? The Minister for National Development. But the Minister himself is supposed to be running a Town Council, too, as are his Senior Minister of State and Minister of State. His bosses, the Prime Minister, the Deputy Prime Ministers and the Coordinating Minister for Infrastructure, are all also running Town Councils. Their comrades in arms are running all the Town Councils in Singapore except one − our WP Town Council. Is the Minister a suitable gatekeeper, with these massive conflicts of interest?

It is not possible to argue that the Ministry is a politically neutral body, as recent history, unfortunately, belies that claim. Singaporeans will recall that during the General Election campaign in 2015, the Ministry was an active campaigner against WP, issuing statements practically daily on the alleged misconduct of AHPETC. After Polling Day, the Ministry took a break and little was heard for weeks.

To take another example: we have also seen past records of how the Ministry advised a PAP Town Council how to make good a breach of TCFRs quietly behind closed doors, without any media release on the same. These are but two examples of the double standards practised by the current Government. It is, in our view, dangerous to arrogate to a partisan Minister the solemn duty of overseeing Town Councils, which are essentially political institutions.

Furthermore, according to the new section 43E, the persons the Minister will appoint as inspectors of Town Councils include public servants and HDB employees. Is this tenable? These civil servants depend on their jobs to support their families. Do we expect these HDB officers to issue stinging reports against the Town Councils run by the Prime Minister or the Minister for National Development? If they do, they should be ready to throw in their resignations.

From the corporate governance standpoint, experts have noted that having Town Councils report to MND is problematic. For instance, it was observed by Assoc Prof Mak Yuen Teen that the current model had MPs as Town Councillors responsible for Town Councils that are overseen by MND. But MND was also accountable to the same people who are Ministers or MPs. He said, "I think this creates, at least, perception issues… that the system might be unfair or lenient to Town Councils because the PAP dominates the Government".

Madam, the scheme proposed in Part VIA does not serve the public interest but the interest of the incumbent Government. We reject this scheme as being fundamentally flawed.

Having said that, Madam, we have two suggestions on how the public interest may be safeguarded in the context of Town Councils.

First, while we cannot accept what is proposed in Part VIA, we totally support the principle that Town Councils should be subject to regular audits and checks due to the significant amounts of public funds they manage. In our view, instead of having the Minister direct partisan investigations, we should revive the audits by AGO. Town Councils were in the past audited by AGO and we believe that AGO should be tasked to audit Town Councils on a rational basis, that is, a few Town Councils should be picked each year for audit.

Madam, AGO is an Organ of State under the Constitution. It fiercely defends its independence and has earned a good reputation for highlighting problems in Government departments and Statutory Boards. Such a scheme of AGO audits would engender greater confidence that the exercise is impartial and focus on what the public interest is, safeguarding of public monies.

Our second suggestion involves the resolution of disputes or differences between MND, HDB and other Government agencies on the one hand, and Town Councils and residents on the other hand.

The new section 21A will require Town Councils to work cooperatively and collaboratively with HDB, NEA and others. There seems to be a presumption in the Bill that the Government agency is always right, that Town Councils have no legitimate case, and Town Councils should simply comply with what HDB or NEA tell them to do. Town Councils will be liable to fines if there is non-compliance. This is not a balanced prospective.

I will just give three examples to illustrate. For instance, HDB may wish to erect structures which will become a burden for the Town Councils to maintain; or Government agencies may require information from Town Councils in certain prescribed formats, which non-PAP Town Councils will incur significant time and cost to produce; or HDB may take a hands-off approach when Town Councils or residents face problems with the Design, Build and Sell Scheme (DBSS) flats, resulting in slow resolution or non-resolution of issues by the developer. It may be natural for HDB to defend its own interest but that does not equate to the public interest.

Currently, the dispute resolution mechanism between Government agencies, Town Councils and residents is the Courts. This is not ideal as Court processes are time-consuming and costly to Town Councils and residents. Going to Court is also adversarial in nature and would jeopardise the relationship between the Government, the Town Council and residents.

It is necessary to put in place a simple mechanism to help resolve issues that crop up from time to time between MND, HDB, NEA and other agencies and Town Councils and residents. We suggest the setting up of an independent housing tribunal that tries to mediate and adjudicate disputes relating to the management of public housing. The tribunal should be chaired by a Judge and have members who are qualified in relevant fields, such as engineering, architecture, project management and horticulture.

The tribunal could function with procedures which are low-cost and less formal. Where the tribunal makes a decision, its decisions will be binding, unless on an error of law, which would be appealable to the Courts. The setting up of such a tribunal would go a long way towards having a more considered and just resolution of disputes, and residents will automatically benefit.

Madam, let me conclude. For the reasons I have stated, the Bill has some merits, such as explicitly requiring management of conflicts of interest and accountability which we fully support. But there are other parts, such as the new Part VIA which are fundamentally flawed to the extreme conflicts of interest they perpetuate. The provisions are also prone to abuse by the incumbent Government. We ask the Government to remove clause 24 that introduces the new Part VIA and instead use the existing laws and rotational audits by AGO to safeguard the public interest. In addition, we ask the Government to set up a housing tribunal along the lines of independence suggested. If the Government cannot agree to remove clause 24, WP will oppose the Bill.

Mdm Speaker: Mr Lim Biow Chuan.

3.34 pm

Mr Lim Biow Chuan (Mountbatten): Mdm Speaker, I declare my interest in speaking on this Bill as Chairman of Marine Parade Town Council.

According to the Town Councils Act, the role of the Town Council is to control, manage, maintain and improve the common property of the residential and commercial property in an HDB estate. On the ground, the actual work of the Town Council is very wide-ranging. For example, it is the Town Council that ensures that the common areas of the HDB estates are cleaned, that rubbish is cleared from rubbish bins, that rubbish chutes are flushed regularly, that the lights at the common corridors, void decks, car parks and other common areas are properly maintained, that the lifts are maintained and repaired whenever they break down.

In addition to the daily maintenance work of the HDB estate, the Town Council also carries out cyclical works like major repainting works, renewal and replacement of roofing system, replacement of water tanks, pumps and water supply system, fire-fighting and protection systems, water pipes and water pump sets and lifts.

These cyclical works involve huge expenses as the scope of the work is much larger. Many Town Councils also carry out improvement projects like installing children's playgrounds, fitness corners and building covered linkways.

The annual budget of most Town Councils range between $30 million and $40 million. This is a large sum of money. The revenue of the Town Council comes mainly from S&CC collected from residents and from Government grants. From the S&CC collected, Town Councils will have to set aside a proportion of its revenue to a sinking fund to cater to the future expenses for its cyclical works. Most Town Councils would need to set aside millions of dollars in its sinking funds because such cyclical works involve huge capital expenses. The Town Council needs to ensure that they have enough funds in its sinking funds to cater for future cyclical expenses as and when they are required.

Mdm Speaker, I have been involved in the Town Council since 1990. I served 16 years in the Legal and Finance committee of Jalan Besar Town Council and then moved on to serve in the Marine Parade Town Council from 2006 to today. Over these past years, a large part of my time doing Town Council-related matters is spent on reviewing contract awards. It is critical to ensure that contracts awarded by the Town Council are all done above board and that commercial decisions by the Town Council are made without any self-interest involved.

Many of the contracts awarded by Town Councils to their contractors are of high value and in the hundreds of thousands of dollars. Just to give the House a flavour of the amount involved, in a recent tender to carry out repairs and redecoration of 15 blocks of flats and a hawker centre, the tender bids alone were all above $1.6 million. So, these are large sums of money involved.

Because of the large sums of moneys involved and given the fact that the Town Council handles funds collected from the public, I support any rules to tighten financial management and to introduce rules of governance. I wish to touch briefly on four points in the Bill.

First, clause 9 talks about conflict of interest and disclosures. The requirement to disclose conflicts of interest at clause 9 is nothing new. It is already in section 15 of the existing Act. In many charities and voluntary welfare organisations (VWOs), similar requirements on disclosures are also imposed. What is fundamental to every organisation dealing with the award of contracts is the need to keep the system transparent and to have good governance. Otherwise, if a Town Council member with a business interest in a major project does not declare his interest, he may then be able to persuade members within the same committee to award a contract to him at an inflated price. In such a case, there is likelihood of abuse of the system. At the end of the day, the interest of the residents would suffer as the Town Council may be paying above market prices to its contractor who has a vested interest in serving in the Town Council. It also begs the question as to who is looking after the interest of the residents if there is conflict of interest.

I also support the amendment to extend the conflict of interest disclosure requirements to the Secretary, an employee, a staff or MA of the Town Council. Senior staff members of the Town Council sometimes do have influence over members of the Council because of friendship built up over the years. These staff members should also be required to disclose their interest in any contracts to be awarded by the Town Council to their company or to their associates. Otherwise, it would be easy for staff members to persuade Town Council members that the best contractor in any tender is their own company in which they have a vested interest. Given that the Town Council awards contracts of large values regularly, it would be easy for someone with a vested interest to benefit from these contracts.

Clause 21 of the Bill requires the Town Council to submit its audited financial statements to the Minister within six months after the close of FY. This is a common requirement for many Accounting and Corporate Regulatory Authority (ACRA)-registered companies. I was surprised that this six-month deadline was not a previous requirement. Submission of audited financial accounts to the Government is important because if there are any issues with the accounts, it is important that all parties sit down quickly to find out what these issues are and how to resolve them. It is also a form of public accountability because the Government gives each Town Council grants worth millions of dollars every year.

Next point, clause 14, interaction between Town Councils and statutory authorities. Clause 14 of the Bill introduces a new section 21A which imposes on the Town Council an obligation to work with HDB and any statutory body performing the functions listed at section 21A(1)(b) of the Bill.

I understand the intent behind the clause is to ensure that Town Councils do not impede the work of a statutory body for the purposes stated at section 21A, that is, to secure public safety, ensure public order, prevent disease or injury or create and maintain a healthy environment. In principle, I agree with this purpose. These are all clearly meant for the benefit of the residents of the HDB estate and to improve their quality of life.

However, I wish to raise an issue which the Town Council faces on the ground. To cite an example, Town Council issues summonses or notices to shopkeepers to keep the common area free of clutter. The shopkeeper may choose to pay the fine. Then, when a statutory body like the Singapore Civil Defence Force (SCDF) inspects the place, they ignore the fact that the Town Council has been trying to enforce the regulations. They ignore the fact that the Town Council does not have power to take injunctions against a recalcitrant shopkeeper. Instead, SCDF issues a summons to the Town Council for failure to comply with safety regulations.

Is there a better way in which the Town Council can work with HDB or statutory bodies to address such issues? If a Town Council is fully cooperative and wishes to ensure that there is compliance with the regulations imposed by the Government, can the Government agency consider that Town Council's efforts and attempts in getting the residents or shopkeepers to comply with the law? You see, even PAP Town Councils are not immune from the arms of the Government agencies.

Next point is clause 18 which talks about the lift replacement fund. This clause introduces a new requirement for the Town Council to establish a lift replacement fund. And each Town Council is required to set aside part of its sinking funds for the lift replacement fund. In Marine Parade, there are about 1,400 lifts. In some of the bigger towns, like Ang Mo Kio, there are more than 2,000 lifts. Each lift would have an operational lifespan after which the Town Council would eventually have to replace the lift. Thus, for older estates, if the flats are more than 30 years old, the lifts are likely to be 30 years old and prone to frequent breakdowns due to its mechanical age. Setting aside a lift replacement fund is a prudent and responsible thing to do. Otherwise, years from now, when the time comes to replace these lifts because they are no longer serviceable, then it is foreseeable that the Town Council may not have sufficient funds to pay for the replacement costs of all the lifts.

In some private estates, if a situation like this happens, the residents would be forced to pay a special capital levy of a large sum of money to pay for the lift replacement. The alternative is for the residents to do without the lift.

Thus, it is financially prudent that the Town Council set aside part of its sinking fund collection now to ensure that the Town Council does not have to suddenly raise funds to pay for a large bill when the time comes to pay for the lift replacement. It would be irresponsible for any Town Council to kick the can down the road and leave it to future residents to solve the problem of raising funds to pay for lift replacement.

When the Bill was tabled, one of the things that caused me some concern was clause 25 of the Bill. The clause inserts a new section 48A to the Town Councils Act and introduced the concept of personal liability for the Chairman or Secretary of the Town Council. Thus, if a Town Council had committed an offence under section 21A(4) or section 43D(4) of the Town Councils Act, not only would the Town Council be subject to a fine, the Chairman or Secretary of the Town Council would also be guilty of the same offence if the provisions of section 48A(1)(b) are met.

The clause does seem onerous for the Chairman and the Secretary as it involves personal liability for the two office bearers. If found guilty, the Chairman or the Secretary would be liable to a fine or to imprisonment.

I agree that if a Chairman or Secretary had consented or connived to effect the commission of an offence, or if that person had, by act or omission, knowingly been concerned in or is a party to the commission of an offence by the Town Council, then some degree of penalty on a personal basis is warranted. However, sub paragraph (iii) of section 48A(1) seems to place a heavier burden on that person. And in some circumstances, it is really not so easy to determine whether a person knew or ought reasonably to have known that the offence by the Town Council would be committed. Can the Senior Minister of State clarify under what circumstances would this clause be invoked?

Before I close, Mdm Speaker, allow me to comment on some of the views expressed earlier by hon Members of the House. As far as I can recall, Hougang Town Council has been in existence for many years. What I know is that Mr Low Thia Khiang had managed his Town Council well for many years. He gathered his own group of supporters and he was elected again and again. At the end of the day, if WP is able to manage the Town Council well and with proper governance, then clause 24 or Part VIA will not be implemented. The Government will not come in. It is for this reason we have clause 24 or Part VIA of this Bill. If my Town Council is badly managed, then I will expect that the Government will look after the interest of the residents and would interfere and would ensure that the compliance of the Town Council is taken seriously.

As an example, if Mr Pritam Singh's Town Council chooses not to transfer monies into its sinking fund, or uses its revenues for its routine operational expenses only, should the Government not be concerned that his Town Council is unable to carry out its functions, to carry out cyclical works in the future? Should the Government then do nothing to protect the interests of its citizens? So, for that reason, Mdm Speaker, I do support clause 24 Part VI A of the Bill.

Mdm Speaker, if this Bill is passed, it would really mean more work for each of the Chairman of every Town Council. However, I have no doubt that it is the right and responsible thing to do, as it would result in better public accountability and strengthen financial management. It is good and for the benefit of the residents and, therefore, I support the Bill.

3.46 pm

Mr Low Thia Khiang (Aljunied): Madam, may I have a clarification?

Mdm Speaker: Yes, Mr Low.

Mr Low Thia Khiang: Thank you, Madam. I wish to thank Mr Lim Biow Chuan for his comment on Hougang Town Council (HTC). Yes, WP has been managing the Town Council in the past 20 years without major problems or hiccups. I would say that even today, if you look at the management of a Town Council, whether it is AHPETC or HTC, we manage the Town Council relatively well, if you look at the Town Council Management Report of HDB. What the problem is, is financial accounting problem. Why are we having the problem? We have explained here before. But I would like to say and reiterate again − I would say that the problem is thanks to the company called Action Information Management Pte Ltd (AIM). We lacked the financial accounting system that is able to cope and manage a large Group Representation Constituency (GRC) —

Mdm Speaker: Mr Low Thia Khiang, you should confine your clarification to what Mr Lim Biow Chuan said.

Mr Low Thia Khiang: Yes, Madam. I wish to inform the House that we have a new tender for a new financial accounting system and we expect things to be improved.

Mdm Speaker: Order. I propose to take the break now. I suspend the Sitting and will take the Chair again at 4.15 pm.

Sitting accordingly suspended

at 3.48 pm until 4.15 pm.

Sitting resumed at 4.15 pm

[Mdm Speaker in the Chair]

Town Councils (Amendment) Bill

Debate resumed.

Mdm Speaker: Mr Charles Chong.

Mr Charles Chong (Punggol East): Mdm Speaker, I had been Chairman of a Town Council previously and I understand some of the challenges which are involved in running a Town Council.

This Bill is of great interest to me as the number of the prudential safeguards sought in the Bill are relevant to the circumstances in which I took over Punggol East SMC following the 2015 General Election.

Many of the points that I intended to make have already been said by PRPTC Chairman Mr Zainal Sapari and I will not repeat them. I will confine my remarks to the Bill to these prudential safeguards.

The last amendment of the Town Councils Act took place in 2005 and one of the changes which was effected then was the creation of an offence for the usage of funds in a manner not specifically authorised by the Act. The change was intended to, in the words of the then Minister of State Mr Heng Chee How, "to strengthen corporate governance of Town Councils going forward".

That was and remains a very relevant goal. There is much public interest in and scrutiny of the way public bodies conduct themselves these days. This is a good thing. It keeps the Government and public entities on their toes. This interest and scrutiny are even more pronounced when matters relating to public funds are concerned and I believe it is the right thing that we hold ourselves to the highest standard when it comes to stewardship of public money.

The expanded conflict of interest provisions in clause 9 of the amendment Bill, therefore, seeks to achieve this by requiring conflicts which members of Town Council may have in relation to a particular issue to be placed on record and by requiring a suspension of the exercise of powers of staff of a Town Council who may be in a position of conflict. While these are improvements over the current provisions, the provision set out in clause 9 of the Bill does not quite seem to go far enough.

On this point, I seem to strangely be in complete agreement with Ms Sylvia Lim. The Bill requires a Town Council member's interest to be recorded in the register of interest and for the Town Council staff to refrain from exercising the relevant power until the Town Council has been given approval. What appears to be missing is an element of public accountability in the sense that these conflicts can be approved by the Town Council itself without input from MND or HDB.

Given that such conflicts of interest may be connected to the spending of public money, I believe that it would be in the interest of Singaporeans if, first, any such conflict that has been raised are publicly notified to residents of the town and, secondly, if the matter involves the expenditure of Town Council funds, for the approval of HDB to be required to proceed with the matter notwithstanding the conflict.

Knowing that conflicts of interest are to be publicly scrutinised is something which would be beneficial to the governance structure of the Town Councils. In addition, requiring a third party to approve conflicts of interest will avoid any allegations of whitewashing of conflicts of interest which may otherwise arise.

Clause 14 of the amendment Bill proposes a change to set out clearly the relationship between Town Councils and statutory authorities and would require Town Councils to comply with certain directions of the authorities.

I agree with this approach. While Town Councils are run autonomously, they are not autonomous self-governing regions which are not subject to the laws of the land. Town Councils were constituted to serve a specific purpose for the residents living within a particular town. The Town Councils Act deems members, officers and employees of Town Councils to be public servants for the purpose of the Penal Code.

Whilst this confers certain additional protections, it does mean that they are, in certain respects, held to the highest standard than the man-in-the-street. Town Councils deal with public funds. They should also not seek to frustrate the functions of Government bodies by being uncooperative or non-responsive.

The proposed new section 48A gives further bite to the proposed section 21A by stipulating that the Chairman or Secretary of the Town Council may be personally liable for a Town Council's breach of section 21A. This would certainly help encourage the leadership of Town Councils to provide all necessary cooperation to various Government agencies. I welcome this change. The last thing you would want in the middle of an investigation is to be stonewalled. And the possibility that the Chairman or Secretary will be personally liable will certainly encourage them to get the Town Council to act more expeditiously or to cooperate with Government agencies charged with fact-finding.

The final change I would like to speak about is clause 20 of the amendment Bill which amends the provisions of the Town Councils Act relating to financial reporting. The current version of the Town Council Act already provides for the implementation of financial rules but the amendment Bill gives them bite.

Again, this is a welcomed change and now puts the rules on a statutory footing. The amended Town Councils Act will require Town Councils to, amongst other things, ensure timely collection of money payable and ensure money is properly spent by Town Councils. The proposed power of inspection and the power to require compliance reviews are also a welcome change. Town Councils which are managed properly should not be too concerned with these. And the changes will provide residents in the town with confidence that the Government is able to intervene, at an early stage, if there are concerns about governance in the town.

Mdm Speaker, some will see the changes proposed to be introduced by the Bill as a political act by the PAP Government to make running a Town Council more difficult for the Opposition. On the contrary, it imposes an equal burden on all Town Councils. There are currently 16 Town Councils, 15 of which are run by PAP. The changes to the Town Councils Act apply equally to PAP-led Town Councils as they do to AHTC which is led by WP.

The Government is actually raising standards in respect of conflicts of interest, financial reporting and general prudential matters. There is no free pass given to the PAP or the WP Town Councils. The amendment Bill is a clear demonstration of a commitment to clean governance which has always been one of this Government's guiding principles. What is of singular importance at the end of the day is that the public interest is preserved and that public funds are safeguarded even if it comes at the expense of more stringent requirements on the part of persons who are directly involved. I would be surprised if any Member would disagree with this objective.

Mdm Speaker, with your permission, allow me to address some of the points raised by Mr Pritam Singh and Ms Sylvia Lim. Mr Pritam Singh, if I heard him correctly, implied that the Town Councils (Amendment) Bill amendments are targeted at WP politically, and that it gives advantage to the PAP Town Councils.

Mdm Speaker, the amendment Bill applies across the board, both to PAP Town Councils and AHTC. There are only two targets here. One, incompetent governance of Town Councils and, two, attempts to frustrate investigations by the Government into the affairs of the Town Councils.

It is true that the amendment Bill does address conduct which WP engaged in in respect of the handover of funds attributable to Punggol East SMC. But that episode simply demonstrates how the existing framework and legislation were insufficient to protect the public good or the interest of residents in Punggol East. The Government surely cannot be expected to sit back and let this sort of event take place a second time. The Government would be remiss in its duty to Singaporeans if it allowed what happened to Punggol East to ever happen again.

There is also an implication by both Mr Pritam Singh and Ms Sylvia Lim that MND may not be neutral but may be partisan and will favour PAP Town Councils. I think this is merely a red herring. MND has taken firm action in respect of AHTC only because AHTC has not met the standards required to protect the public interest in its running of its town.

I can say with a high level of certainty that if AHTC held itself to the same high standards to which other Town Councils adhered to and conducted their affairs, with the same concern for proper governance as the PAP Town Councils, they would not have issues with MND. MND is acting in the interest of the public and not in the interest of PAP. While there are lapses in governance, even in the Prime Minister's constituency, as mentioned by Ms Sylvia Lim, these will be highlighted and dealt with transparently and decisively.

In addition to Mr Low Thia Khiang successfully running HTC, Mr Chaim See Tong ran Potong Pasir Town Council for many years, over two decades, without running into the same sort of mess which AHTC now finds itself.

In addition, it is not only MND which has raised concerns about the goings-on in AHTC. It is well documented that neutral parties − KPMG, the Courts, the Accountant-General's Office − have all raised concerns about the affairs at AHTC, in particular, AHTC's own auditors have not been able to issue a set of unqualified accounts in the last five years.

KPMG, an independent professional firm, has also used very strong language in describing the affairs at AHTC. Among other things, KPMG referred to pervasive control failures, inadequate qualified personnel and so on. I believe AHTC has only resolved less than half of the audit points which it is meant to address. It appears that some progress has been made. But should all these points have arisen in the first place? With that, Mdm Speaker, I would strongly support the Bill.

4.26 pm

Mdm Speaker: Ms Sylvia Lim.

Ms Sylvia Lim: I have a clarification for Mr Chong. In his speech, he was making a vague reference to AHTC's handling of funds vis-a-vis Punggol East. I am not sure what he is complaining about. Is he still sticking to the statements he made during the election campaign that $22.5 million worth of sinking funds handed over to us have been unaccounted for? That was the phrase that he used.

My second question is about control failures. He mentioned that AHTC has control failures and that these control failures should not have happened in the first place. Is he saying that PRPGTC has no observation points in their annual audits from the auditor?

Mdm Speaker: Mr Charles Chong.

Mr Charles Chong: Mdm Speaker, I will address the Member's second question first. Pasir Ris-Punggol and other Town Councils may have comments on it but none so bad as AHTC. We have so many agencies, the Courts and so on putting their concerns in.

On the first issue, at that time, after the elections, AHTC had yet to return the $20 million of sinking funds that we have transferred to AHTC. That amount has been returned but the final accounts which they had sent to us, we received only on 24 February. And it showed, by their calculation, that they still owed us more than $4 million.

They have paid that back after we served a letter of demand on them. But we are going through the accounts to ascertain if there are more funds owed to us. And we will let them know in due course after the auditors have examined their latest statement of accounts which we received only on 24 February this year.

Mdm Speaker: Mr Pritam Singh.

Mr Pritam Singh: Mdm Speaker, I would just like to clarify, when the Member refers to the letter of demand, is he referring to it in the legal sense of the word? Secondly, can the Member clarify what was the total amount that has been transferred to PRPGTC for Punggol East SMC in sinking funds by AHTC?

Mdm Speaker: Mr Charles Chong.

Mr Charles Chong: Mdm Speaker, I am surprised that Mr Pritam Singh has asked that because I believe he was the recipient of that letter of demand that we served on him. On the amount that was transferred to us, they had returned us $20 million which we had transferred to them. But in the two and half years that Punggol East was under control by them, they have not been able to account for it until just a short time ago, 24 February. And even then, I think they have submitted three sets of accounts to us at different times, and all of those indicated that they had owed in sinking funds more than $4 million to $5 million. And I think that money would not have been transferred if we had not served our letter of demand on them.

Mdm Speaker: Again, Mr Pritam Singh, last clarification. Let us not convert this into a debate on the specific issues. But this is a debate on the general principles of the Bill. Last clarification.

Mr Pritam Singh: Yes, Mdm Speaker, I recognise that but Mr Charles Chong has made certain insinuations which have to be corrected in the public interest. With regard to the comments made about financial statements which had been given to PRPGTC but then taken back by AHTC, the first set of accounts putting up the position of Punggol East SMC was handed over to Pasir Ris Punggol on 27 September 2016. This was then clarified. There were issues in there which PRPGTC wanted to meet AHTC to clarify. We did arrange for a meeting and our auditor actually met with officials from PRPGTC on 14 November.

I am a bit surprised to hear about these, almost complaints about "Look, the money has not been given" and so forth. I would like to remind Mr Charles Chong that the final instalment from PRPGTC to AHTC in 2013 after the by-election of 2013 was made in September 2014. It is not very much longer than the final transfer that we have just made yesterday.

Mdm Speaker: Mr Charles Chong.

Mr Charles Chong: Okay, I am equally surprised that Mr Pritam Singh is unaware of it. I think, as the Member mentioned, the first set of accounts that they sent to us in 2016, we found so many discrepancies that we sent it back. After the meeting, which was called and discussed, they agreed that there were discrepancies and, therefore, they withdrew that set of accounts.

The second set of accounts were sent recently, and they also voluntarily withdrew it for whatever reason, because they did not have enough time to examine it. And then they followed up with a third set of accounts on 24 February 2017. We are still trying to ascertain whether that is accurate, and it is a qualified account by the way.

Mdm Speaker: Dr Janil Puthucheary.

The Minister of State for Communications and Information and Education (Dr Janil Puthucheary): Mdm Speaker, I beg your indulgence. This point is not about the principles of the debate, but I have to clarify a comparison that Mr Pritam Singh is making, where the delay in transfer from PRPGTC to AHTC is being compared with the reverse transfer. The reasons for the delay in both cases are quite different.

In the first instance, where there was a delay of transfer to the new Punggol East Town Council under WP, the issue was about an agreement about the terms and conditions and the liabilities and so forth. The delay in the other direction, which Mr Charles Chong has just talked about, is as a result of what has happened under the WP Punggol East Town Council, we were unable to ascertain how much should be transferred in the first place.

There was a discrepancy between the first and the third sets of accounts that the WP themselves had submitted, so they were unable to ascertain, I believe, how much they should be transferring to us. If they were able to ascertain how much they were transferring to us, then there was no reason for it to be in three tranches, the last of which was only a few days ago, after the most recent sets of accounts.

So, the comparison between those two sets of delays is entirely false. There was a delay on both sets, but the comparison is entirely false, because the reasons for the delay are entirely different.

Mdm Speaker: Mr Pritam Singh.

Mr Pritam Singh: Mdm Speaker, I would not belabour this point. Yes, it is good to know that Minister of State Janil recognises that there was a delay for both different occasions, but the fact remains that the reason why those accounts were withdrawn was because Pasir Ris-Punggol said there were some problems with them. And in the right spirit, I believe we told the auditors: "Come, let's sit down. Let's talk about it then". [ Interruption] So, I am not sure what is so objectionable to the Minister of State Janil.

Mdm Speaker: Mr Louis Ng.

4.33 pm

Mr Louis Ng Kok Kwang (Nee Soon): Madam, I declare my interest as the Chairman of Nee Soon Town Council. Madam, this Bill helps to improve the governance of Town Councils and I stand in support of it.

I am encouraged by the new section 19(4) curbing substantial trading or financial activities. This new addition reinforces the spirit of the Act: that Town Councils should not lose sight of its core objectives, which is to manage the living conditions of residents and not take on ancillary activities which may not necessarily contribute directly to the interests of residents.

Having said that, can the Minister clarify what exactly is meant by "substantial trading or financial activities?" Will the Ministry be publishing clearer guidelines with regard to this?

Next, with regard to the interaction between Town Councils and Statutory Boards, which many members have highlighted, according to section 21A, Town Councils must comply with any directions from Statutory Boards, so long as the directions belong to the broad categories listed in the section, and failure to comply would result in criminal conviction. While this section ensures that Statutory Boards may carry out their work efficiently, it does not appear to provide any firm platform for Town Councils to raise their concerns or reject a direction from a Statutory Board on reasonable grounds. In this regard, can the Minister clarify if there are such guarantees in place for Town Councils to raise their concerns about directions from Statutory Boards?

Next, I note that the Minister may pass model by-laws, and Town Councils can amend the model by-laws and pass its own by-laws. However, by-laws made by the Town Councils must not be "inconsistent" with the model by-laws. The Bill further states that model by-laws could be made at any point in time.

How will the Ministry determine if the by-laws are "inconsistent?" Who will determine this and is there an appeal process? Can the Minister provide more clarifications about the model by-laws and whether a draft will be released to the Town Councils for our input and feedback soon?

I have no doubt that by-laws set by the Minister or Ministry would be done in the best interests of the residents. However, we need to have sight of what the model by-laws would be and knowledge of whether consultations and the frequency under which these would take place.

Finally, I note that this Bill does not address the issue of the handing and taking over of sinking funds when there is a change in the management of Town Councils. As Members of this House are aware, different Town Councils may adopt different calculation methods of how much sinking fund is to be transferred, whether it be by number of blocks in precincts or by the unused balance sinking fund. May I take this chance to request that the Ministry study this matter and amend or pass the relevant laws to resolve this matter, thereby providing clarity to the relevant parties, moving forward? Madam, notwithstanding the comments above, I stand in support of the Bill.

Mdm Speaker: Dr Chia Shi-Lu.

4.36 pm

Dr Chia Shi-Lu (Tanjong Pagar): Mdm Speaker, I rise in support of the amendment to the Town Council Act and declare my interest as the Vice Chairman of the Tanjong Pagar Town Council.

The Town Council, as we all know, is the key instrument through which the elected MP for that constituency is able to directly influence the living environment of his constituents, and the performance and integrity of the Town Council serves as a bellwether of the Member's fidelity to his or her residents. I feel that this municipal role of a sitting Member should not change, as the separation of the municipal and legislative roles will dilute the relationship between an MP and his constituents or could even result in unproductive conflicts.

Nonetheless, it has to be acknowledged, as many Members have done, that the Town Council is primarily a custodian of the properties within the Town, but also has heavy responsibilities regarding the immediate day-to-day upkeep of the precincts and also the long-term maintenance and rejuvenation of the Town, a key case in point being the need to plan for the replacement of lifts. Unlike the management of private housing projects, the Town Council has to factor in future large infrastructure investments into their operational considerations.

Over the past decade, if we look around us, there has been an increasing number of municipal councils around the world which have become insolvent, often, we must say, from factors beyond their direct control, for example, pension obligations, reductions in their traditional tax bases or even large lawsuits. One of the reasons is also that in many of these countries, there is a lack of regulatory oversight and also of intervention.

All of these town councils do have some form of audit and, many times, the audits do show this inexorable deterioration in their finances, but nothing can be done in most of these cases because the government of the day of that country did not have the ability to step in and correct the cause when it had to be done.

And so, it is here that I disagree with the WP position that we should just remain with the current state of affairs and rely on the AGO because that was the system that we had in the past. Audits and surveillance are really no substitutes for regulation or the proper intervention, when needed.

Here, I take an example from a field that I am very familiar with. As a doctor working in a hospital, we have audits and we have heard that in other countries, for example, in the UK, when audits show deficiencies in care − which have led to problems of loss of life, to mobility for the patients − many of these cases, because there was no direct regulatory intervention, it took a long time before the audit results would go to the proper people so that the proper steps could be done.

So, I think that this is the same situation here. There should be, in addition to an audit system or surveillance system, the proper regulation and also the intervention must be there to come in when needed, in this particular case, to safeguard the welfare and the benefits of the residents.

The next question, of course, is: should MND not be the regulator? Well, if MND should not be the regulator, then who else should it be? I think it is a fallacious argument to always try to set up a new committee, which is supposedly independent, every time we need regulation. I think we can suggest it in certain circumstances, but I do not think that is the way most governments work, because the whole thing becomes very unwieldy.

I also think we should give credit to the rule of law in Singapore and to our civil servants who perform their roles without fear or favour. If we keep on playing the persecution card and say that the cards are always stacked against us, there is no end to this argument and it is very hard for our nation to progress. That is why, in my opinion, MND is probably the best body in this particular case to step in when necessary, when Town Councils are in need of help.

I would like to move on to seek some clarity on the provisions for Town Councils which may be facing insolvency or have, perhaps, become insolvent. I understand that MND adheres to the principle that Town Councils should remain autonomous entities, but that should not preclude them from some protections as, ultimately, it will be the residents who bear the consequences. For instance, municipalities in countries like Germany and Canada cannot become bankrupt, as their public debts are implicitly guaranteed by the state.

Could I ask that perhaps some considerations should be given to the fact that Town Councils could also be afforded some protections against claims? For instance, limits can be imposed on certain of its liabilities.

I would also like to seek three further clarifications from the Minister.

First, on the amendment of section 38 regarding the timely submission of audited accounts, in the event that the Town Council is in default and unable to produce the audited accounts and a fine is imposed, is this fine to be paid from the Town Council's coffers, or by the Committee or the Chairman of the Town Council?

Second, with regard to section 31 − I know that Senior Minister of State Desmond Lee may have talked about it earlier − could I just confirm that Town Council staff and/or members of the MA will be barred from sitting on the Town Council Committee?

Finally, can the Ministry share some details of the proposed Code of Governance to encourage best practices? I support the Bill.

Mdm Speaker: Ms Thanaletchimi.

4.42 pm

Ms K Thanaletchimi (Nominated Member): Mdm Speaker, I declare my interest in this Bill as a dwelling resident of an HDB estate run by a Town Council. I am glad and fortunate to be living in Ang Mo Kio GRC, a precinct well-run by Dr Intan Azura. I truly believe in governance and accountability to every Town Council resident, for that matter. So, let me give a different perspective as a resident of a Town Council.

Madam, the amendments to the Town Councils Act, if passed, will, indeed, further strengthen Town Council governance as it demands greater transparency and gives the MND more power to compel Town Councils to declare their financials in an appropriate and timely manner.

The amendments will help tighten financial discipline and strengthen accountability and transparency by requiring Town Councils to submit the audited financial reports within six months of the FY and keep a registry of disclosures on conflicts of interest involving staff members or employees. This is important as residents do pay conservancy charges and it is important that they know where the money goes to. It further stresses that Town Councils that fail to comply with the Act will be fined up to $5,000 and key decision-makers can be prosecuted for the failure.

Madam, it is, indeed, notable that the Bill also proposes for a Code of Governance, setting out standards which Town Councils need to adhere to. In view of the fact that Town Councils in the first place were created to decentralise the estate management of the residential town, therefore, do the amendments intend to include a provision to allow different Town Council management regimes in the future?

If, or should the Town Council fail or does not perform satisfactorily or perform up to par, how would the Ministry, as the body with regulatory and oversight over the Town Council, deal with it? Madam, notwithstanding these, I rise in support of the Bill.

4.44 pm

Mr Ang Wei Neng (Jurong): Mdm Speaker, please allow me to declare my interest as I am the Chairman of Jurong-Clementi Town Council.

Clause 18 of the Town Council (Amendment) Bill seeks to amend section 33 to establish a new sinking fund called LRF. This is to recognise that many lifts and lift parts need to be replaced before the end of the lifespan of the lift, as stipulated during the procurement phase.

Otherwise, most, if not all the Town Councils, will not have sufficient sinking funds to do the replacement. At the same time, I am glad that MND is co-funding LRF, matching 50% of the Town Council's contributions to LRF.

As we debate the Town Council (Amendment) Bill, I have one suggestion and two clarifications for MND on points mentioned by the Senior Minister of State earlier.

Although HDB procures the lifts while Town Councils maintain the lifts, I would like to suggest that HDB need to have a mindset that HDB has a large stake in maintaining the lifts. In this way, HDB will go all out to obtain feedback from the party that maintains the lift and incorporate the feedback when procuring the next batch of lifts. For example, HDB needs to take greater cognisance of the lifecycle costing of the lifts, compared to the purchasing cost of the lifts.

In addition, HDB could also stipulate that the lift suppliers have a guarantee that all the lift spare parts, especially the parts that are under the sole proprietary right of the lift supplier, would be available throughout the lifespan of the lift at the inflation rate stipulated upfront. This will help to mitigate the issue of high lift maintenance costs and unavailability of spare parts.

As for the clarifications, I note that under clause 18 (l) of the Bill, the Town Council can now transfer whole or part of the surplus of its operating fund at the end of a FY to LRF. Could I clarify whether the transfer of the surplus to LRF will also attract MND's co-funding even though the Town Council has already met its minimum obligation to transfer 40% of the operating revenue to the sinking fund?

Meanwhile, I am also glad that MND will be providing a grant of $600 per lift owned and maintained by the Town Councils. Could I clarify if the Town Councils are obliged to contribute 40% of the $600 grant to the sinking fund? If so, this will mean that the net grant by MND to offset the lift maintenance cost is only $360 per lift instead of $600.

I hope the Minister can consider my suggestion and answer my two clarifications. Mdm Speaker, in Mandarin, please.

(In Mandarin): [Please refer to Vernacular Speech.] Mdm Speaker, I speak with a heavy heart as I join this debate on the Town Councils (Amendment) Bill. After the amendment, as the Chairman of a Town Council, I could go to jail if the Town Council is not managed appropriately. The highest punishment under clause 48A(1) is one year's imprisonment, or a fine of $5,000, or both. Why should I go to jail for mismanagement of the Town Council if I am not corrupt?

Town Councils manage funds running into hundreds of millions of dollars. Collected from the monthly S&CC paid by residents, these funds are the people's money and, of course, they should be well managed. The amendments this time will require the Town Councils to manage their funds properly and set out the accounts clearly. If a Town Council is not appropriately managed, its accounts not set out clearly, and it repeatedly disregards the authority's request to correct the errors by continuing to do what it did before, then the chairman will be prosecuted. MPs are representatives of the people, in charge of funds running into the millions, of course, they have the responsibility to run the Town Councils well.

Some people may ask, why should MPs manage the Town Council? Why not let the HDB manage the Town Councils directly? Honestly, when managing a Town Council, MPs must manage things big and small. Projects worth millions of dollars must be examined carefully to see whether the tenderers are capable and the price is reasonable or not. It is also important to make sure there is no nepotism when awarding the contract, to avoid being accused of corruption. For small things, matters, such as complaints about neighbours throwing sanitary napkins from high floors, must also be handled. Is this not troublesome? Some say, as representatives of the people, MPs just need to manage the big things of the country, and that the small things can be handled by the civil servants. But is it so?

It is said that whoever can be trusted in small things can be trusted in big things and whoever is dishonest in small things will be dishonest in big things, too. Those who do small things may not be able to do big things but those who cannot even do small things well cannot be expected to do big things.

And this is the purpose of letting MPs run the Town Council. When an MP advocates transparency in Parliament, we must see whether accounts of the Town Council that he/she is managing are transparent and in order. When an MP says in Parliament we must greatly reduce foreign labour, we must also see whether his/her Town Council can do without even one foreign worker. When the MP says in Parliament that we shall not raise the price of anything, we must see whether his/her Town Council can, without raising S&CC, give annual increments to the Town Council's staff and cleaners, and pay for the ever-increasing lift maintenance cost. In other words, without raising S&CC, can the Town Council afford to pay for higher lift maintenance cost and annual increment of its staff without running into a deficit? If, indeed, a deficit appears, how is it going to be tackled?

Running a Town Council is like running a local government. Clause 24 empowers the Town Councils to introduce by-laws. For example, the residents are not allowed to park or hold an event in certain areas. If the resident contravenes this rule, the Town Council can impose a fine. If an MP can manage the Town Council well whereby the public area is clean, the lifts are running smoothly and the accounts are kept orderly and balanced, then the people will feel assured that this MP can do bigger things, such as organising a government.

But if an MP cannot manage the Town Council well, say the estate is not clean, the accounts are in a mess and every year there is a deficit, then how can we expect this MP to manage the country well? Like in a certain Town Council, its accounts are so messy that even their own independent auditor dare not approve the accounts. I work in a listed company and I understand the importance of external auditing. If a listed company's accounts cannot pass external auditing, it means that the company's accounts are problematic and the shareholders will ask questions. If a listed company cannot pass external auditing, the share price of the company will drop significantly and the shareholders will lose confidence in the company. However, the particular Town Council that cannot even pass external auditing is still untouched even today. I am surprised.

Today, the very purpose of this amendment is to strengthen the transparency and control of the Town Councils to prevent similar mishaps from happening. I, therefore, support this amendment.

Mdm Speaker: Mr Darryl David.

4.52 pm

Mr Darryl David (Ang Mo Kio): Madam, before I begin, I wish to declare my interest as the Vice-Chairman of Ang Mo Kio Town Council.

Mdm Speaker, the amendments proposed in the Bill are meant to promote and strengthen effective and efficient governance and accountability of Town Councils and to ensure financial and infrastructure stability and sound financial management. I have just quoted a passage from the Bill itself.

One would be hard pressed to argue against having a stronger governance framework as this would only serve further to safeguard residents' interest and public funds from potential abuse and mismanagement. I do believe many of my colleagues in the House have taken that point of view as well.

While I do support this Bill, I would like to speak on two specific areas that in my opinion warrant closer scrutiny. The first is the amendment suggested in clause 14 of the Bill where it was stated in absolute terms that Town Councils must work cooperatively and collaboratively with HDB or any statutory authority or public officer when they discharge their duties or risk being penalised for non-compliance. My belief is that all collaboration between the Town Council and the other public agencies will always start with the right assumption that all agencies are working towards providing the best quality of service and benefits for residents, regardless of whichever Town Council or agency may be serving the residents in.

While the amendments of the Bill will vest HDB and any statutory authority with the power to enforce penalties on Town Councils if they are deemed to be non-compliant to the agency's request, I hope that this power will be exercised only when HDB and the other statutory authorities have exhausted all other means of bringing that particular Town Council in line with its mandated duty of serving the interests of the residents. This power should not be invoked in the first instance when there are differences in opinions of how duties are to be performed. I would urge HDB and other public agencies to carefully study the merits of differing opinions offered by Town Councils before arriving at the conclusion that the powers proposed in the Bill should be invoked.

Also, Madam, I would like to comment on some speeches earlier which seem to suggest that perhaps the agencies, be it HDB, NEA or even MND, could be impartial or even biased in executing their services and duties, depending on the Town Councils they were serving. To do so would be a very unfair comment on some of our public agencies and our public officers. I can honestly say that in my dealings with our agencies, it has not always been smooth. I have had instances where we have had disagreements and different points of view. But to suggest that the officers in these public agencies are not capable of being unbiased, not capable of being fair in their judgement, would, to me, be an insult to these officers. I would just like to state that for the record, Mdm Speaker.

I would also like to suggest that the Government also clarify the scope of responsibility of Town Councils and other public agencies when it comes to managing places that currently fall in areas where there are overlapping responsibilities. Let me give a specific example to illustrate my point. There was an incident that was an accident in my division a few weeks ago where a driver inadvertently reversed his car into the walls of a childcare centre at high speed and demolished the walls of the centre. Thankfully, it was a weekend and the centre was closed because the place where the car ended up was where the children normally sleep. If it had happened the next day, I shudder to think of the consequences, Madam.

We are now evaluating the design of the car park and all the car parks in our estate and plan to build safety bollards in car parks and/or void decks that have significant congregations of people where such accidents could possibly happen. The common areas in the void deck are being managed by the Town Council, the car park was designed and built by HDB. My question is: which agency should be responsible for the billing of the bollards, in this instance, where safety issues have risen from an inherent design flaw or a wrong decision of a car park that was designed and built by HDB? Should HDB take responsibility even if the areas of the bollards that are to be constructed happen to be managed by the Town Council?

I am sure that there are many such examples across the island and I hope there can be greater clarity on the scope of duties and responsibilities of Town Councils and public agencies in grey areas where the lines of responsibility are not so clearly delineated.

The second point, Madam, is on clause 18 which is about the setting up of the sinking fund to cover the costs of lift replacement and lift upgrading works. Given the large majority of residents in Singapore live in high-rise public housing, lifts can be viewed as a form of vertical public transport system that ferry people to their homes. A lift breakdown is extremely disruptive to residents' lives, especially for young children, the physically disabled and the elderly who might have trouble using the stairs. It is important that all these undergo regular maintenance services and the frequency of such preventive maintenance will only increase with the passage of time as lift parts get worn out at an exponential rate from age and heavy usage.

To finance the growing needs to maintain and service the lifts, I agree that more Town Council funds should be set aside specifically for the purpose of lift maintenance and replacement. The cost of lift maintenance is likely to increase exponentially over time, especially when ageing estates need to replace entire batches of lifts when the lifts reach the end of their service lifespan. So, I hope that the Government will continue to provide the grants to Town Councils to defray the servicing and replacement cost of lifts and also adjust the quantum of both grants from time to time.

Madam, there are approximately 63,000 passenger lifts in Singapore, with a disproportionately high number of those lifts located in public housing estates. Indeed, it was recently mentioned in a CNA report that Singapore would need an additional 1,000 lift technicians over the next three years in order to meet our overall lift maintenance needs. I do believe this point was highlighted by Minister Lim Swee Say during the recent Committee of Supply (COS) debate.

The lack of skilled technicians in lift servicing is a worrying concern since the demands for these technicians will only increase over time and the biggest bugbear that prevents new entrants from entering the sector is the relative tough job that technicians need to do and the lack of career prospects.

Given that we need more than 1,000 technicians over the next three years and the relative difficulty in attracting Singaporeans and locals into the sector, would HDB and MND work with MOM to get special dispensation with regard to the foreign worker quota for this job category? I believe the waiver of the foreign worker quota will, in the short and medium term, help alleviate the shortage of manpower in the sector while we attempt to build a stronger Singaporean Core in this area of work. I stress the aim must be to build a stronger Singaporean Core in this area of lift technicians and their similar skillsets and capability.

Madam, by and large, the proposed amendments in this Bill are meant to strengthen the regulatory and corporate governance framework of Town Councils which can only be beneficial to the residents and that they are things we should be focusing on regardless of all the discussions we have had. Strengthen the regulatory and corporate governance framework and benefit the residents. As such, I complete my speech in support of the Bill.

Mdm Speaker: Senior Minister of State Desmond Lee.

4.59 pm

Mr Desmond Lee: Mdm Speaker, I thank the various Members who have spoken and their comments. This House has broadly affirmed the need to strengthen Town Councils' public accountability and for the need for oversight on Town Councils.

Most issues and questions raised today pertain to the details of the proposed amendments and how they will play out in practice, whereas a few were far more fundamental in nature.

Let me first address the broader, more fundamental points. Both Mr Pritam Singh and Ms Sylvia Lim emphasised that they want the Town Councils' framework to be depoliticised. I have explained at the start of the debate what the purpose of the Town Council framework is. And Mr Singh, on behalf of WP, accepts this premise.

The purpose of the Town Council framework is to establish a more direct nexus between elected Town Councillors, their management of Town Councils to deliver services in our housing estates and their resident-voters, and to allow our housing estates to develop a more distinctive character of their own, with direct involvement of their elected MPs, guided by the residents.

As a political framework, Town Councils allow residents to see a side of their MPs that their performance in Parliament may not be able to demonstrate. Here in this House, MPs speak, argue, persuade, contribute ideas, demonstrating their thoughtfulness, mental acuity, their oratorical skills and their sense of empathy and compassion, largely through speeches and ideas.

But in the day-to-day running of the Town Council as well as the estate, people can judge for themselves a different perspective − whether their MPs can really do things or not. Is the estate clean? Are there improvements to the estate? Are there improvements to the environment? And is the Town Council financially sustainable and run honestly? They can see for themselves the governance style and philosophy in action, and not just in word. So, for instance, MPs may espouse the virtues of openness and transparency but are they really practising what they preach when they run an organisation?

So, in short, Madam, the Town Council framework has served as a neutral training ground for MPs and political parties, to show whether they have what it takes to run a public entity and manage an estate and, by extension, the government and the country.

More than 25 years on, the objectives of the Town Council still hold true. I am glad Mr Singh, on behalf of his Party, agrees with that. At the end of the day, if the Town Council is properly managed and the estate is well run, people may continue to support you at the ballot box, and the converse is equally true.

Madam, Ms Sylvia Lim said that the regulatory powers introduced in this Bill, in particular Part VIA, gave MND too much power to intervene or even interfere in the affairs of Town Councils. Allow me to reiterate the following key points. The proposed amendments do not fundamentally alter the character of Town Councils or their roles and functions. Under the revised Act, Town Councils will continue to enjoy broad autonomy and be empowered to run their estates, as they have been for the past 28 years. But these powers are not, and should not, be unfettered. Town Councils will continue to exercise autonomy to run their estates, but within broad rules laid down to ensure proper governance and to safeguard public interest. Autonomy does not give anyone a blank cheque to run down the Town Council or the estate, misuse funds, mismanage the system or break clearly established rules.

The Bill simply provides clarity on some of the existing boundaries within which Town Councils operate, for instance, Town Councils being subordinate to public laws and statutory authorities carrying out statutory duties. These minimise ambiguity on the ground. The Bill also puts in place safeguards and compliance mechanisms to enable MND as a regulator, as it has always been, to exercise more effective oversight of Town Councils on residents' behalf. In fact, some of the provisions in the Bill enhance the direct accountability that Town Councils are premised on, that is, accountability to residents and voters. For example, the Bill requires Town Councils to publish their key appointments and financial statements. Town Councils are also required to keep long-term projections so that they have an honest opinion as to whether their management style is for the short term or for the long haul. Unless the situation is so dire that the health or safety of residents is at risk, MND will not step into the shoes of Town Councils, which should do so as they are obliged to do.

Madam, Ms Sylvia Lim expressed concern about the independence of MND, the appropriateness and independence of MND as a regulator for Town Councils. She says the new enforcement powers of the Town Councils (Amendment) Bill are too wide-ranging and may be wielded as a political tool because the Head of the Ministry is a political officeholder. These are serious allegations, quite unwarranted and, perhaps, are indicative of the world view from which the WP comes from. That when a political entity and a politician gets into power, there is no trust in his integrity, there is no trust in the voter, he must be checked, fettered, locked up, chained, that you need ombudsmen for every aspect of his work, especially when it relates to issues that may pertain to the politics of the land.

First, let us all go back to fundamentals, and Mr Singh and Ms Lim are both lawyers, so they will understand this. When a government is elected by the people, political officeholders will helm the executive arm and be responsible for all the Ministries and agencies, including those that have law enforcement, regulatory and licensing powers, such as the Police, NEA, CPIB, the Inland Revenue Authority of Singapore and so on. And we are not unique in that sense. We are not a unique system to do this. And as a Parliamentary majority, the Government can and is obliged to make laws in the public interest. But, Madam, these powers and the laws that are made have to be used judiciously, fairly, justifiably and even-handedly.

In the case of the Town Councils Act, they have to be applied across all Town Councils, regardless of political affiliation. Some Members have spoken about how the Town Councils have been fined, some other Town Councils have been censured, embarrassed by agencies when they announced what has happened in the media, even the Prime Minister's Town Council. When allegations were made, they took the first step to make a report and now CPIB is investigating Ang Mo Kio Town Council. Is there an allegation or claim that the officers of CPIB will fear investigating Ang Mo Kio Town Council? Are they timorous souls?

I fear that the allegation goes a bit too far. Because these powers, Madam, are derived from the people and given with their trust and confidence. Trust and confidence are fragile things. There is no sweeping of things under the carpet. Our history has shown that this Government, this Party, will act against wrongdoings. It will not sweep things under the carpet. The recent Ang Mo Kio Town Council case is a case in point.

In the event of a conflict of interest, there are established and appropriate ways to deal with it. In the case of the Town Councils Act, if the Minister is required to recuse himself, then the other officeholders will have to step up and exercise those powers with the same good faith and with the same obligations as the Minister. And if all the officials or the MND political officeholders have to be recused, then some other Minister will have to be appointed to exercise those powers. If these powers are used in an unjustifiable manner for whatever reason, public trust will be seriously eroded. We can certainly count on members of the Opposition acting as sentinels to make allegations every now and so often, pointing to shadows, claiming conspiracies.

Madam, when prosecutions are instituted, as is envisioned possibly under the Town Councils Act, where there is wrongdoing, there is also the office of the Public Prosecutor who decides if charges should be filed and the Judiciary who decides if these should stand.

Mr Pritam Singh and Ms Sylvia Lim called for the appointment of independent persons. Ms Sylvia Lim mentioned independent ombudsman. Mr Singh talked about independent auditor or accountant. But these so-called independent ombudsman or independent accountants have to be appointed by somebody vested with the authority to take charge of the matter, somebody responsible for the policy of the issue.

So, will the allegations of biasness and partisanship really ever end? What about officeholders of other Ministries and agencies who may be responsible for the enforcement agencies or licensing agencies which might incidentally apply to Town Councils or to members of political parties, card-carrying members or to vocal pro-Opposition members? Does Ms Lim then say you need to have one law and one system for the common man and an independent ombudsman for all these other people that she has identified? Or should we have one law of the land and one system for everybody under the rule of law, under the scrutiny of the eyes of people and the protection of the Courts to ensure that the executive powers of the Government are exercised fairly?

Madam, let us look at what happened thus far for the AHTC or AHPETC saga. The whistle was first blown by AHPETC's own external auditors in 2011. The subsequent audit was carried out by AGO, an independent audit office which Ms Sylvia Lim referred to in her speech. It made very serious findings about mismanagement, improper payments, conflict of interest, poor record-keeping and internal processes. Equally serious conclusions were drawn by the Judiciary, both the High Court and the Court of Appeal, when the matter was brought to Court in 2015.

Pursuant to a Court order, AHTC appointed KPMG which came up with an independent report on the serious allegations of possible civil and criminal liability. And now, at HDB's request, firm request if I may say so, and confirmed through a Court order by the Court of Appeal, AHTC has delegated decision-making on recovery of losses and further action to an independent panel comprising Mr Philip Jeyaretnam, Mr N Sreenivasan and Mr Ong Pang Thye, three eminent professionals. With the amendments to the Town Councils Act, none of these avenues and options will be abrogated. I certainly hope Mr Singh and Ms Lim do not also dispute the fairness and independence of these platforms.

In fact, for the purposes of compliance reviews and investigations, under the Bill, MND can similarly appoint an independent auditor or independent panel as inspectors to carry out the review. These inspectors, as I have said in my opening speech, must report to both MND as regulator and the Town Council over whom the review or investigations are being carried out. In most instances, consistent with the political philosophy underlying Town Councils, we expect that the Town Councils will, in a light touch scenario, on their own accord, resolve issues identified by the inspectors promptly. If so, MND will not need to step in to issue any rectification order. But in any event, MND's rectification order can only reflect what the Town Council ought to have done in the first place and will not require the Town Council to take any action over and above what is necessary to bring the Town Council into compliance with the Town Councils Act and its subsidiary legislation.

Madam, in the Town Councils (Amendment) Bill, there is section 43A on compliance reviews or health checks, and section 43B on investigations. When an investigation needs to be carried out, MND is prepared to appoint independent auditors and professionals to carry out investigations and they will then have to report both to MND and the Town Council, as required by law.

Having said all this, perhaps let us go back and ask what really is AHTC's position on regulatory oversight? Is it, as I said earlier, a cynical fear that people who step up into politics and are elected by people into government are to be distrusted, that they will, in full glare of the public, misuse laws? Or was it really the case that Ms Lim is concerned about real problems being investigated by MND? But to really know what it is, let us look at what was said in Court, recorded by Court transcripts. This was when HDB sought the Court's intervention in 2015 to appoint an independent auditor to look into AHTC's problems and to take necessary action.

HDB applied for the Court to oversee this, the Court to appoint an auditor and for this auditor to be an independent auditor, not reporting to HDB or MND, reporting to Court, acting professionally and independently.

To our surprise, AHTC fought the application and tried to stop an independent auditor from being appointed by the Supreme Court of Singapore. Their lawyer argued explicitly in Court with his client behind him on AHTC's behalf that even if there was mismanagement of misspent funds, their view was that there was nothing that could be done, other than through the ballot. So, is it a willingness for appropriate independent, fair, justifiable regulatory oversight, or is there a preference for no oversight whatsoever?

Madam, MND will and has always exercised its regulatory powers with due care and regard to people and the residents' public interests, as it has always done. Apart from the public eye, there is always the recourse of the Courts under the framework of judicial review. Ours is a system where the rule of law and any abuse of public powers are subject to the jurisdiction of the Courts. I am sure Mr Singh and Ms Lim understand that very well.

Madam, Ms Sylvia Lim has also, perhaps in the heat of the moment, I hope, makes very serious allegations against public servants. This has been a difficult two weeks for public officers. First, some claimed that they have no heart; and now, they have a black heart.

Madam, these are public officers, Singaporeans, day in day out, working in the public interests. They understand the imperatives, they understand the need for fairness. They have their own mind and own heart and will act and do what is right. And in MND, we have a team of public officers overseeing Town Council matters fulltime. We have no doubt that these officers will carry out their duties professionally and objectively in serving the interests of residents and Singaporeans. This is what our public servants do and what this team of officers and their predecessors have been doing for the past 28 years of the Town Councils' existence.

Madam, Ms Sylvia Lim has made an insinuation about public officers acting in partisan ways and she cites a number of examples, the details of which are not in our possession today. But each year, MND receives the Town Councils' submitted financial statements and gives them the opportunity to correct inconsistencies and accounting errors in their accounts, part of due diligence that MND public servants undertake for every Town Council as they are submitted to this House.

In fact, this is exactly what MND Secretariat did, I am told, for AHTC's FY2015/2016 accounts yesterday. It was submitted six months late. I am told that the Secretariat wrote to the Town Council to point out certain errors and mistakes which were not publicly disclosed.

Next, I would address questions posed by different Members on specific regulatory powers, why they were introduced and the mechanisms for enforcement.

A few MPs have sought clarifications on the penalty provisions. Dr Chia Shi-Lu asked if fines against Town Councils will be paid out of Town Councils' funds. They will. This is no different from how Town Councils, companies and charities pay for fines imposed by other agencies for regulatory infringements.

Mr Lim Biow Chuan sought clarity on what key decision-makers would be held personally liable for an offence. This is not new. There are penalty provisions under the existing Town Councils Act that hold key decision-makers in the Town Councils, such as the Chairperson and Secretary, liable for offences committed by the Town Council with their consent and connivance. So, there is the mental element necessary. This treatment will be extended to the new offences under the amended Act.

Mr Zainal Sapari suggested making it mandatory for Town Councils to purchase professional liability insurance, to provide protection from claims arising from the negligence of key decision-makers. There is nothing to stop a Town Council from purchasing such insurance, if they see value in doing so. It is for individual Town Councils to decide. I will clarify, though, that a fine imposed on a key decision-maker, or a person purporting to act in that capacity, it is to be borne by the individual who is found liable for the offence and not be paid from the Town Council's funds.

Madam, just by way of correction, earlier in my Second Reading speech, I mentioned that the power of composition is an existing power. I would like to take this opportunity to clarify that it is not. It is a new power that gives the regulator the opportunity to have a gradation of remedies and actions and levers, depending on the severity of the infraction.

Ms Sylvia Lim asked about the conflict of interest provision that is embedded in the Bill which disqualifies people who have significant influence over the MA from being appointed to key officers in a Town Council. The legislation is quite clear on this phrase. But Ms Sylvia Lim talked about the GM of the Aljunied Town Council, from I think CPG or one the subsidiaries, when she took over. Back then, under the Financial Reporting Standards (FRS), CPG would not be a related party but FM Solutions and Services (FMSS) would be because of the personal direct pecuniary financial interest that both Ms How Weng Fan and the late Mr Danny Loh held in the MA. So, I think that makes it quite clear.

Members also sought clarification on the code of governance. MND will introduce this code of governance in consultation with Town Councils. Amongst other objectives, the code promulgates greater transparency and accountability in Town Councils' decision-making by setting out principles of good governance and highlighting best practices that can guide the Town Councils in executing their fiduciary responsibilities and improve accountability and disclosure. This code is likely to take some reference from provisions in the code of governance for charities and institutions of a public character and the code of corporate governance for companies and may cover the principles and mechanisms to ensure independent decision-making and manage potential conflicts of interest. Practices that ensure robust risk management and well-documented internal controls, systems and policies to protect stakeholders' interests and to safeguard Town Councils' assets.

Madam, Town Councils today generate revenue from S&CC charges that residents pay as well through activities, such as charging for the use of common property and for the use of advertising spaces in the towns. This is within the remit of Town Councils' role to manage common properties, subject to the rules.

Town Councils may also invest their funds to counter inflation, subject to safeguards in the Town Councils' financial rules. So, to Mr Louis Ng's question on what "substantial trading" means, the new provision prevents Town Councils from undertaking risky ventures, by deviating from the key mandate, for example, using Town Council funds to set up and run subsidiary companies or carrying out activities under the aegis of the Town Council which are unlicensed and incurring fines on the Town Councils' purse as a consequence.

As mentioned, this does not prevent the Town Councils from investing in stocks, funds and securities with advice from a qualified person or licensed body, subject to the existing safeguards in the TCFRs.

To allay Mr Darryl David's and Mr Lim Biow Chuan's concerns, the requirements for Town Councils to cooperate with public agencies, cater to scenarios where Town Councils unreasonably prevent a Government agency from carrying out its statutory duties in HDB estates. This is a rather extreme scenario and we do not expect this to be an ordinary occurrence.

While there are challenges on the ground, by and large, Town Councils and agencies have worked well. The key is that parties involved maintain open communications and work together to find solutions that best serve the residents. Notwithstanding that, the amendments provide an avenue for MND to intervene when critical works are delayed or hampered at the expense of residents' safety, health and well-being. To be clear, this provision only kicks in when a Town Council unreasonably refuses to grant access or support where public health, public safety and order are at stake.

One example is where HDB's lift upgrading works were once held up by a Town Council which refused to apply for the relevant licences required from the Energy Market Agency (EMA). Other statutory authorities have also met with resistance from some Town Councils on the installation of monitoring devices like surveillance cameras and the maintenance of common property. For example, one Town Council refused to allow NEA to deploy surveillance cameras to catch high-rise littering in 2014. That same Town Council also refused to repair a resident's letterbox. They wanted HDB to require all residents to sign an undertaking to maintain their own letterboxes. If they refused to sign it, the Town Council wanted HDB to hand over a copy of every resident's mailbox key to the Town Council, a request that was turned down by HDB. Some Town Councils raised questions when the Land Transport Authority stopped paying the Temporary Occupation Licence (TOL) fees for traffic monitoring equipment installed on HDB rooftops. Some of these incidents were amicably resolved after MND stepped in but other cases simply failed to find proper closure.

Before I end this point, I would like to address Ms Sylvia Lim's concerns that this Bill somehow gave the impression that the Town Council is always wrong and the public authorities are always right. The Town Council has a specific remit. It is a public authority, a public body constituted by an Act of Parliament, but it is also a statutory body with political characteristics, a point which I think WP also accepts.

The public agencies responsible for public health, public safety and public order are national authorities charged with very important functions. The first approach will be and has always been to discuss the matter with the Town Council. For instance, if NEA needs to prevent killer-litter and needs to put in a camera, they will ask the Town Council and tell them they need to put it here for whatever reason. And if there are legitimate reasons why the Town Council refuses, then the agencies and the Town Council should discuss. And if MND needs to come in to try and arbitrate the matter, our public officers will do so.

I will assure Ms Sylvia Lim that under the Bill, if a compliance order has to be issued, it will be because the agencies see that it is necessary to carry on to do what it needs to do on common property. If the Town Council, for whatever reasons, still refuses and believes that it is correct, then it should fight the matter in Court, let the judge decide as to whether the Town Council had reasonable cause to refuse to comply with the compliance order.

Mr Louis Ng also asked in this regard if the Town Council would have a platform to raise concerns or reject a compliance directive by statutory authorities. In my earlier response to Ms Syvia Lim, I have shown that this, in fact, would be woven into the process.

Mr Louis Ng asked about the model by-laws. To clarify, the intent to scope these by-laws narrowly is so as not to fetter the autonomy of Town Councils. Town Councils will still have autonomy to set the by-laws. But the provisions in the model by-laws would only relate to certain aspects of the management of common property, such as rules on damage of common property or the erection of unauthorised structures on common property. These are areas where although we want Town Councils to set their own rules and have flexibility, there are certain areas where we would need uniformity for national purposes.

These by-laws will provide a common baseline for all Town Councils to build upon and ensure that there is some consistency in the management of common properties across towns. Town Councils can still introduce additional by-laws based on their needs as long as they are not inconsistent with the model by-laws.

I would next address points made on the provisions relating to the financials of Town Councils, raised by a number of Members of this House. The Bill pushes Town Councils to regularly review their long-term financial health, and most, if not all, the Members who spoke support this intent and I thank them.

I fully agree with Dr Chia Shi-Lu that we should avoid a situation where a Town Council becomes financially insolvent, as it will ultimately be the residents who will bear the consequences. This is why we have, in the Bill, focused on pre-emptive measures. By putting in place mechanisms for Town Councils to prepare their long-term financials and as a reality check for themselves to review their financial positions regularly. This puts in place early warning signals, so that a Town Council, at risk of insolvency sometime down the road, can take timely steps to improve its cash flow situation and financial health, rather than wait for the situation to become dire.

But if it comes to that, MND will now have powers to make rules that prescribe steps that the Town Council should take or should not take. This includes the appointment of independent advisors to advise the Town Council on the management of its affairs, with the hope that it will turn the ship around.

As for Dr Chia Shi-Lu's suggestion on having the state guarantee all the debts of Town Councils, we will have to study very carefully how the examples he cited in Germany and Canada do it, while avoiding, I hope, the problems of serious moral hazard. We certainly do not want Town Councils to take on more risks than necessary, in the belief that the Government will bail them out should things go wrong.

Mr Ang Wei Neng asked whether Town Councils can be allowed not to set aside part of the Lift Maintenance Grants to their LRFs. To clarify, this grant, like other grants provided to the Town Councils, are meant both for immediate need as well as for long-term use. So, even in lift maintenance, there are both immediate maintenance and repair needs, and more long-term replacement, maintenance needs that may require it to be split into the two accounts, that is, operating and the sinking fund types of accounts. But we will take Mr Ang's suggestions and concerns into account.

Let me cover some of the more technical clarifications, some of which may fall outside the scope of this Bill.

Members have highlighted that on the ground and in practice, the responsibilities of Town Councils vis-a-vis other agencies and each other may be fuzzy, and good partnership is key. Not everything can be clarified in legislation, which articulates broad frames and principles. Sharp delineations of turf are often not possible and sometimes may lead to perverse outcomes. In areas where there is less clarity, I urge Members to be guided by what would most benefit residents. Where there are gaps, we will continue to work with Town Councils and Town Councillors to clarify mutual or overlapping responsibilities, as we have done with handover guidebooks, circulars and the Code of Governance that we will be developing in consultation with Town Councils.

Several Members, including Dr Teo Ho Pin, Mr Zainal Sapari and Mr Louis Ng, among others, suggested that MND introduce more specific guidelines and rules to facilitate handovers between Town Councils following an Election. Indeed, this is important. A smooth changeover of Town Councils ensures continuity in services to residents.

MND has taken steps to facilitate this. In 2013, we developed a Town Council handing-over/taking-over guide in consultation with various Town Council Chairmen. The guide clarifies some of the points raised today, such as the respective roles and responsibilities of the handing-over and taking-over of Town Councils and includes a checklist of the matters to be mutually agreed upon by the two Town Councils. "Mutually agreed upon" is an important phrase.

We circulated the guide to Town Councils before the 2015 General Election to provide a clear and easy reference for changeover of Town Councils. The Bill allows MND to make subsidiary legislation in relation to post-election handovers between Town Councils. This is not new as MND has already been making such Town Council orders after elections. Nevertheless, there are some amendments to the existing provisions to provide greater clarity and guidance, such as, first, clarifying what happens in exceptional scenarios when the election results of some constituencies are delayed, for instance, due to the need to tally overseas votes. Second, to clarify that the Minister can require an outgoing Town Council to furnish all the necessary information and documents relating to the transfer of an estate to the taking-over Town Council. This is still work-in-progress and we will take into account Members' feedback as we continue to look into how we can better facilitate Town Council handovers going forward.

Notwithstanding these improvements, the willingness of both sides to cooperate with each other on the transfer of the assets and information is key to a seamless transition. The legislative requirements have been kept broad because not every detailed situation can be anticipated, and to also allow Town Councils some latitude to discuss the issues that arise and to reach an amicable resolution that benefits their residents. Nevertheless, if there are irreconcilable differences in opinion, MND can and has facilitated discussions between Town Councils and made itself available to mediate any differences. In the event of an impasse, the Minister can require an outgoing Town Council to furnish the necessary information to the taking-over Town Council.

Madam, at the heart of it, transfers of Town Councils or transfers between Town Councils post-GE are changes of local government. Town Councils are political entities. The key, as I said earlier, is a willingness to work with each other, despite being of different partisan colours, to show maturity and to emphasise that the focus is, ultimately, on residents.

Mdm Speaker: Senior Minister of State, we should ask the Leader to move a Motion to extend your time?

Mr Desmond Lee: Yes, Madam.

Debate resumed.

Mdm Speaker: Senior Minister of State Desmond Lee.

5.37 pm

Mr Desmond Lee: Madam, I come now to the points raised by Dr Teo Ho Pin and I thank him for highlighting issues surrounding the handover of new developments to Town Councils. A moment ago, I talked about the handover between Town Councils. Now, I am talking about the handover from HDB of new BTOs to Town Councils. We accept there is always room to do better. HDB is continually seeking to improve its handover processes with Town Councils. As Members know, HDB has developed a handover procedure booklet which details various proposed improvements to the handover process. The proposed improvements are as follows.

First, HDB will notify Town Councils of the completion of common property three months in advance, so as to allow Town Councils to plan their resources early and to arrange for subsequent meetings. After that, HDB will arrange for a briefing to the Town Council on the essential mechanical and electrical (M&E) systems that are developed. It will also arrange for a meeting with the Town Council on site one month before completion so that the Town Council can take a look at the development and raise feedback early. This draft booklet was sent to all Town Councils on 1 March this year for comments. We hope Town Councils will give HDB their feedback and work with HDB to refine the procedures, which we will continue to improve along the way.

Various members also raised concerns about the performance of lifts in HDB estates. We have covered this fairly comprehensively during MND's Committee of Supply (COS) debate a few days ago. In essence, our approach is to ensure that our lifts remain safe and reliable, an approach which requires multi-pronged support from the Building and Construction Authority (BCA), HDB, Town Councils and the industry.

Madam, I thought it would be useful, since many Members asked about LRF and the long-term sustainability of lifts, to talk about this so that all of us here understand the challenges that we collectively face. As I have said at MND's COS, as our estates age, all of us, including Town Councils, will need to do more in maintaining and replacing our estate infrastructure, such as lifts, facades, water tanks and roofs, so that our estates remain liveable and safe. It is easy to build and continue to build and to agree to requests to build. It is less attractive to talk about the long tail of maintenance. But let us accept that this is an essential part of city living.

Since Town Councils bear the responsibility for the eventual replacement of estate infrastructure and such expenditures could be large and backloaded, Town Councils need to take a longer-term view of their finances, plan ahead and start saving today for the expenditures. A good example is the maintenance and replacement of lifts, which many Members talked about. To keep them reliable and safe, lifts need to be maintained regularly and replaced every 25 to 30 years, depending on specifications.

Mdm Speaker, with your permission, I will show a slide very quickly on the screen that will expedite the explanation.

Mdm Speaker: Yes, please. [A slide was shown to hon Members.]

Mr Desmond Lee: Lift replacements require significant expenditure. Based on our projections, over the next 30 years, Town Councils will need to progressively replace about 24,000 lifts across all HDB estates, at an estimated cost of about $6 billion. Many of the costs are backloaded, occurring beyond 2025. So, therefore, while Town Councils' current sinking fund balances, which may total up to $1 billion, seem healthy, they are not sufficient to cover the cost of future lift replacements, let alone other works like cyclical repainting and replacement of other key infrastructure.

Last September, we asked Town Councils to give us a sense of their financial projections over the next 10, 20, 30 years. We accept that the further you look ahead, the less reliable are your projections. The Town Councils are aware that at their current levels of income and sinking fund contribution rates, they are unlikely to have sufficient funds for the replacement costs for the long term. Some may even fall into deficits even earlier.

That is why we have reviewed the Town Councils' projections and announced some changes earlier. As the chart on the screen shows, Town Councils will have to set up a dedicated LRF, which will be created by this Bill, that is ring-fenced for the replacement of lifts and lift parts. Town Councils will have to set aside a minimum of 14% of their S&CC income and Government grants into LRF and a minimum 26% to the general sinking fund.

The minimum contribution rate for the LRF could have been higher if we had sized it based on a full lifecycle costing approach for lifts, a point which Mr Ang Wei Neng had asked about. However, we decided to ease in the changes for Town Councils and provide significant Government financial support to help Town Councils and residents with these costs.

MND had earlier announced the set of new grants and measures to provide additional financial support for Town Councils. First, a $450 million Lift Enhancement Programme over 10 years to help Town Councils fund the cost of lift enhancements. Second, additional matching grants to match half of Town Councils' quarterly contributions to their LRFs to help Town Councils build up their LRF more quickly. This will cost over $50 million a year to the Government. Third, a Lift Maintenance Grant to help Town Councils cope with higher lift-related servicing and maintenance costs, estimated at about $13 million a year.

As the chart on the screen shows, the extra funding that Town Councils will receive adds up to more than $100 million a year, or a billion dollars over the next 10 years. This is a substantial package, which is on top of the current S&CC Operating Grants that we issue to all Town Councils, and Goods and Services Tax (GST) Subvention Grants and the S&CC rebates, all of which amount to more than $120 million a year. This effectively doubles the amount of annual funding that Town Councils currently receive.

While the Government has taken the lead to share significantly in the costs of maintaining and replacing estate infrastructure, this is very much a shared responsibility. Town Councils need to do their part, to plan our finances, start saving now and gradually build up our sinking funds and LRF over time. This is a responsibility for all Town Councils to do.

We have seen how the dynamics have played out in private condominium estates. Immediate pressures from residents at annual general meetings (AGMs) to cause Management Corporation Strata Titles (MCSTs) to kick the can down the road and avoid raising their sinking fund contributions. But when there are major estate infrastructure works, these MCSTs find themselves unable to carry them out. All residents living at that point in time at the estate will then have to cough up a tremendously large amount of money to replace, say, a lift or an old water tank.

This is not how we should operate in our public estates. We should prepare and save for our collective future and not kick the can down the road, with everyone contributing their fair share towards improving our living environment rather than leave future generations to bear the costs.

Madam, I would round up by outlining what this Bill means for Town Councils and our residents. First, the new provision holds Town Councils to higher standards of governance, transparency and accountability in carrying out their duties. This is the right thing to do and Singaporeans expect this of Town Councils.

At the same time, the Bill puts in place a system for regular reporting and calibrated actions along with the necessary levers for enforcement. These will allow more timely and effective interventions to be taken when residents' interests are put at risk.

Mdm Speaker, I believe all Singaporeans elect their MPs in good faith. But recent developments suggest that we cannot assume that MPs will always act in the residents' best interests.

Our Town Councils continue to have broad autonomy and latitude in deciding how best to manage the estates under their charge. The Government also has a responsibility to put in place a framework of good governance and accountability, and to request for information, investigate and intervene when the trust is breached or when things go wrong.

Taking a light-touch approach does not mean that the Government adopts a no-touch policy. At the end of the day, the Government's overriding considerations must be to safeguard residents' interests and public funds. This Bill will set a strong foundation for the good governance of our Town Councils, taking into account developments over the years and building on 28 years of experience operating Town Councils. I thank Members for their support. [Applause.]

Mdm Speaker: Mr Pritam Singh.

5.47 pm

Mr Pritam Singh: Mdm Speaker, I would just like to clarify with the Senior Minister of State the early suggestion of the AGO doing rotational audits at various Town Councils, would the Ministry consider that as a way to improve the current Town Council governance structure?

Mr Desmond Lee: Madam, I said earlier that for section 43B, which is for investigations, they will be carried out by independent professionals and auditors or by AGO.

Mdm Speaker: Ms Sylvia Lim.

Ms Sylvia Lim: Madam, four clarifications for the Senior Minister of State. Earlier in his speech, he alluded to the Court case which MND brought against AHPETC and the position that we took at the time. I would like to clarify that we took the position based on legal advice and, as it turned out, the Court did rule that MND was not the proper party to sue the Town Council in that instance.

Secondly, regarding civil servants, the Senior Minister of State seems to suggest that I am implying that civil servants are not responsible or somehow biased. Let me just clarify that as a former civil servant myself, I do recognise that civil servants do their best to act responsibly. But in this case, what Part IVA is expecting HDB employees, for example, who are appointed as inspectors, to do is to possibly make adverse findings against their political masters. The investigation will be triggered by the Minister for National Development himself. While he may want to do the right thing or the public servants may want to do the right thing, the reality is such. I think those of us who are realists will know the problem.

Thirdly, regarding the issue of whether MND is the proper entity to implement or to supervise Town Councils as such, as the Senior Minister of State has repeated many times, fundamentally, Town Councils are political institutions. To vest a political officeholder with the decision-making power over political institutions, is just not tenable. As I mentioned in my speech, it is not just my view, but it is also the view of some corporate governance observers who have mentioned that, at least in terms of perception, it just does not look right. He also mentioned that MND has also been so-called quite nice to AHTC by writing to us to tell us that our accounts, maybe there are some things that we need to clarify but, at the same time, we see a media release yesterday, nicely timed for today's debate. So, this is just another example of the Ministry's behaviour.

For now, one last clarification. I am not too clear about what the Senior Minister of State meant regarding the conflicts of interest and the C-suite, which he talked about in his opening speech. Currently, the way the provisions are worded, so long as this person has a significant influence over the business of the MA, that person would not be able to be a Town Council Secretary or GM. The point is, is it just the Chief Executive Officer (CEO)? What is the meaning of significant influence? It cannot just be at that level.

Mr Desmond Lee: Madam, the first question was about whether MND was the right party to sue, what the Court found and what her lawyer said. AHTC, when it was brought to Court, was asked to respond to an application by MND to let the Court appoint an independent auditor to look into its difficulties. It was not a case of MND asking the Court to allow MND to go in. It was MND asking the Court to appoint an independent auditor. The first key point that struck us was that AHPETC or AHTC resisted that Court application as framed.

The point about MND being found by the Court not to be the right party had nothing to do with this point about whether anything could be done if there was mismanagement. It was purely based on the Court's reading of whether it was MND or HDB, and ultimately, they said it was HDB. And HDB made the application to the Court of Appeal.

The key point I would like this House to take away is that while Ms Sylvia Lim talked aspirationally about the need for independence, an independent oversight, what the Town Council was arguing in Court was that, where there was mismanagement of funds, nothing could be done beyond the ballot box.

The second point was about civil servants and about whether they are prepared to make adverse findings against political masters, I think she has just contradicted herself. First, she says on the one hand, she said her former colleagues are people of integrity and of spine and steel, and will do what is right, as is the ethos of this Public Service. And on the other, in a backhanded way, she says they will kowtow their timorous souls. In fact, that is what she is saying.

I think we object to that. Our officers are brought up with an ethos of integrity, service and excellence. There is, indeed, now ongoing, a CPIB investigation into certain individuals, or an individual in the Ang Mo Kio Town Council. That is reported in the news. What is Ms Lim's analogy extending to that case going to be?

Third, MND being political because the Minister is a politician and that Town Councils are political and, therefore, the Ministry should not be a regulator. The Ministry has been the regulator for 28 years. Yes, we have more powers today to intervene, but these powers are because the unspoken compact when the Town Councils were formed 28 years ago has been broken. That compact is premised on Town Councillors and elected Members, recognising the electoral accountability, the visibility to the residents, would do what is right to fix the problems and would proactively do it, as has been wont of many Town Councils by the Government who would report to CPIB and the Police when things are wrong.

But in AHPETC's case, despite its external auditor's findings, despite the AGO's report, despite the findings by the High Court and Court of Appeal, and despite KPMG's report, take the view that, "Come, the reports do not say that definitively; yes, there is a cloud, but you prove it and I will sit tight."

Even today, we have to wait for an independent panel, external from the Town Councillors, to take decisive action.

So, when it comes to whether MND is the appropriate regulator, I think it is. We have indicated to Mr Pritam Singh that in regard to clause 43B, it would be an independent auditor, independent individual, who will conduct investigations of all Town Councils.

As to conflict of interest, Madam, we have to decide where to draw the line. Where there is a conflict of interest, the first basis, the first thing you do, is to declare it, have it registered and recuse yourself. Do not take part in the decision because you are conflicted.

But we have gone much further to say that if you are a person wielding significant influence over the MA, you are not allowed to occupy key offices in the Town Council. We have to strike a balance between a recusal process and an absolute prohibition. And I think we have taken a high-water mark.

Mdm Speaker: Ms Lim, we are going around in circles, as you can see. Do you want to make another clarification?

Ms Sylvia Lim: To ask a question, Madam.

Mdm Speaker: Yes, please proceed.

Ms Sylvia Lim: Yes, Madam. To follow up on what the Senior Minister of State mentioned about the AGO, our proposal is that the AGO does rotational audits of all Town Councils. I think what the Senior Minister of State is responding to is that he is saying that under Part VIA, if the Minister should instruct so, the AGO may be activated. Fundamentally, to ensure an even keel and uniform standard throughout all the Town Councils, we see great value in getting the AGO to do rotational audits of Town Councils, whether or not the Minister triggers them.

Mr Desmond Lee: Madam, each year, Town Councils already have to be audited by external auditors and the AGO has decided that individual Town Councils can suggest auditors, which have to be approved. That is the case every year.

Madam, Ms Lim is confused between the annual financial audit and the audit in Part IVA. In Part IVA, there are two kinds of interventions. One is health checks, compliance reviews; and the other is where there are investigations arising from a reasonable suspicion of wrongdoing. In the latter, I have explained to Mr Pritam Singh that in regard of the investigation into Town Councils, it will be carried out by independent professionals. The AGO can already be triggered under the clauses in the Audit Act, as had been the case for AHPETC.

Question put, and agreed to.

Mdm Speaker: Ms Lim, do you wish to record your dissent?

Ms Sylvia Lim: Yes, Madam, we would like the WP Members' dissent to be specifically recorded that we cannot accept the Bill because of Clause 24.

Mdm Speaker: Can those who wish for their dissent to be recorded please stand up?

Hon Members Mr Low Thia Khiang, Ms Sylvia Lim, Mr Png Eng Huat, Mr Muhamad Faisal Bin Abdul Manap, Mr Chen Show Mao, Mr Pritam Singh, Assoc Prof Daniel Goh Pei Siong, Mr Dennis Tan Lip Fong and Mr Leon Perera stood at their seats for their dissent to be recorded.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Mr Desmond Lee.]

Bill considered in Committee; reported without amendment.

Question for Third Reading put, and agreed to.

Mdm Speaker: Members who are against it, please stand up. Yes, your dissent is recorded.

Hon Members Mr Low Thia Khiang, Ms Sylvia Lim, Mr Png Eng Huat, Mr Muhamad Faisal Bin Abdul Manap, Mr Chen Show Mao, Mr Pritam Singh, Assoc Prof Daniel Goh Pei Siong, Mr Dennis Tan Lip Fong and Mr Leon Perera stood at their seats for their dissent to be recorded.

Bill accordingly read a Third time and passed.