CHATROOM: MAK YUEN TEEN
Published in Straits Times, Jan 12, 2013
Key issues in review of town council ops
It may be better to depoliticise the institutions and set governance code
Mr Mak says that like any organisation, town councils must be well governed and managed and therefore a code of governance should be in place. He suggests that the codes of governance for listed companies and for charities can be the starting basis for such a code. — PHOTO: DIOS VINCOY JR FOR THE STRAITS TIMES
By Robin Chan
THE Prime Minister has ordered a full review of a controversial sale of software used by town councils to Action Information Management (Aim), a People’s Action Party-owned firm.
The review, to be conducted by the Ministry of National Development (MND), is “in the interest of transparency and maintaining trust in the system”, he said in a statement on Tuesday.
The ministry has also been asked to re-examine the “fundamental nature” of town councils, to ensure high standards of corporate governance.
The Aim sale came to light last month when the Workers’ Party cited the firm’s termination of an information technology contract with Aljunied-Hougang Town Council as a factor in the latter’s performance lapses in a recent government grading exercise.
Corporate governance expert Mak Yuen Teen, an associate professor at the National University of Singapore Business School, talks about the review.
What are the issues this review should clarify about the Aim transaction to reassure residents?
I think the main issues about the transaction itself are:
1. What was the basis for the decision to sell and lease back the system in the first place and was this carefully discussed from the point of view of what is in the best interest of the town councils (in terms of their effectiveness and efficiency) and the residents?
2. The procurement process – whether the tender specifications were clearly drawn up; the criteria for evaluating and awarding the tender are clear and make sense – for example, generally, this may involve price, whether the product or service meets requirements, any past experience with the supplier and the feedback about its performance, and whether the supplier is financially sound – and were agreed to before the tender was called.
Also, whether the tender was well publicised or qualified vendors were invited to bid and there was a sufficient notice period; whether there was a proper evaluation and approval process; and whether any conflicts of interest were disclosed and conflicted parties were involved in decision-making.
These are the key elements of a proper procurement process.
The Town Councils Financial Rules (TCFR) require tender notices to be advertised at least locally for three weeks. It is possible for a shorter period, but the town council chairman or his authorised officer must approve and this should be documented and disclosed to the town council.
The TCFR state that the lowest-priced quotation or tender for the item of acceptable quality that meets the specifications and requirements shall be accepted. Full justifications for not accepting the lowest-priced quotation or tender and waivers of tender should be recorded and open to scrutiny by the auditor.
If there was only one bid, it does not mean the bid should not be accepted and that another tender must be called. But the tender committee making the decision should question why this is so, and if the tender was not properly done, it ought to call for another tender.
Obviously, other issues have now arisen, such as who actually owns Aim – is it the former PAP MPs or the party itself as has now been reported?
I think many were surprised to hear that the party owns an IT firm, which then raises issues of whether there are other firms it owns and the implications of that. But these other issues would seem to involve broader issues of political and corporate governance beyond the mandate of the MND.
In the broader review of town councils and the re-examination of their fundamental nature, what are the key issues that should be addressed?
The first issue would be: Why do we have them and do we need them? If the answer is yes, then what kind of creature should they be, how should they be governed and managed, their regulatory framework, and so on.
Singapore is divided into constituencies, according to geographical regions, with each constituency governed administratively by a town council.
With the passing of the Town Council Act in Parliament in June 1988, the first town council was established in the following year.
There are currently 15 town councils in Singapore. Under the supervision of the Housing Board, they manage, maintain and improve common properties in public housing estates, as well as handle the estate funds.
Members of a town council are either elected MPs or are appointed. Elected MPs serve for the period in which they are in office, while the appointed members serve for two years and have to seek reappointment thereafter.
I think there is confusion about whether town councils are public institutions because elected MPs who are politicians play key roles in them. But this does not mean town councils are not public institutions.
If you look at their roles, they are to manage, maintain and improve common properties in public housing estates, as well as handle the estate funds – they almost look like the equivalent of a management committee in a condominium, but on a mega scale.
Further, town councils are empowered by the Town Council Act to “delegate… all or any of the powers, functions or duties” to managing agents and they in fact do so to a substantial extent.
I would consider them to be more public institutions set up to look after residents’ interests. But their definition is less important than what their purpose and roles are and how they should be governed and managed.
Some have also called for better guidelines for the transfer of town councils between political parties. What guidelines, or code of governance, should there be for a town council?
I would prefer to depoliticise the town councils, in which case, the issue of transfer between political parties would not arise.
But like any organisation, they must be well governed and managed, and therefore some sort of a code of governance, on top of laws and regulations similar to the case of other types of organisations like firms, charities and cooperatives, should be in place. The codes of governance for listed firms and for charities can be the starting basis for such a code.
I think depoliticising them can improve their governance. The MND can then regulate and oversee them, in the same way the Ministry of Culture, Community and Youth and sector administrators regulate and oversee charities, the Accounting and Corporate Regulatory Authority regulates firms, and the Monetary Authority of Singapore and Singapore Exchange regulate listed firms.
There will be perception issues about the ability of the MND and HDB to oversee town councils in the current set-up.
I think MPs can focus their energies on serving the residents in more impactful ways and on issues of national importance, rather than putting them on town councils.
But the intent of the town councils was to make MPs accountable for the running of their estates.
I am no political scientist, but I would turn that around and ask: “What were MPs doing before there were town councils in 1989?” Didn’t they have political accountability then?
The MND is part of the Government. Can it credibly assess town councils run by government MPs? There are definitely perception issues in terms of the MND regulating and assessing the town councils.
The MND is responsible for administering the Town Council Act and TCFR. I would assume it would have to present its findings in Parliament and there would be opportunities for these to be scrutinised, including by the opposition and Nominated MPs.
If they are not satisfied, then perhaps they can press for an independent review. We need to be conscious that we cannot set up independent panels every time an issue comes up. And even if you set one up, the debate may then shift to whether the members of the panels are sufficiently independent, and then what?
Actually, from a wider standpoint, perhaps it is time to consider the need for an ombudsman kind of position. But of course, this ombudsman function must be independent and protected.
Background story
PROPER PROCESS
If there was only one bid, it does not mean the bid should not be accepted and that another tender must be called. But the tender committee making the decision should question why this is so, and if the tender was not properly done, it ought to call for another tender.
– Corporate governance expert Mak Yuen Teen
