WE REFER to the commentary by Associate Professor Lee Kin Wai ("The problem with related party transactions"; Feb 18).
All town councils (TCs) are to prepare their financial statements in accordance with the Singapore Financial Reporting Standards (FRS). Under FRS 24, a TC is required to disclose related party transactions in the financial statements, in particular, the nature of the relationship and the amount of transactions.
Prof Lee referred to the revised FRS standards, which are applicable to financial statements for periods beginning on or after July 1 last year.
Under the revised standards, transactions between a TC and its managing agent (MA) will also be considered related party transactions, if the MA provides key management personnel services to the TC.
When this comes into effect, all TCs, except Bishan-Toa Payoh TC, which employs its own staff, will have to make related party transactions disclosure in their financial statements.
This new requirement will apply to the TCs' financial year (FY) 2015/2016 (April this year to March next year) and subsequent accounts.
It did not apply to their FY 2012/2013 accounts, which was the period of the Auditor-General's Office (AGO) audit of Aljunied-Hougang- Punggol East Town Council (AHPETC).
It will also not apply to the TCs' FY 2014/2015 accounts (April last year to next month) to be tabled in Parliament in October, since the accounts began before July 1 last year.
The AGO audit highlighted that AHPETC and its MA, FM Solutions and Services (FMSS), are considered related parties under the prevailing FRS 24.
This is because the key management personnel of AHPETC - its secretary Danny Loh, its general manager How Weng Fan and its deputy general manager Yeo Soon Fei - are also owners of FMSS providing paid services to AHPETC; they control FMSS and have a clear personal financial interest in transactions between FMSS and the TC.
FM Solutions and Integrated Services (FMSI) and AHPETC are also considered related parties because FMSI is a sole proprietorship owned by Mr Loh.
In no other TCs are their key management personnel also owners of their MA. They are either direct employees of the TCs, like in Bishan-Toa Payoh TC and the former Hougang TC, or employees of the MA, not owners.
With the exception of AHPETC, all other TCs' auditors did not raise any observation on related party transactions in their auditors' reports.
Christine Yap (Ms)
Director
Corporate Communications
Ministry of National Development
All town councils (TCs) are to prepare their financial statements in accordance with the Singapore Financial Reporting Standards (FRS). Under FRS 24, a TC is required to disclose related party transactions in the financial statements, in particular, the nature of the relationship and the amount of transactions.
Prof Lee referred to the revised FRS standards, which are applicable to financial statements for periods beginning on or after July 1 last year.
Under the revised standards, transactions between a TC and its managing agent (MA) will also be considered related party transactions, if the MA provides key management personnel services to the TC.
When this comes into effect, all TCs, except Bishan-Toa Payoh TC, which employs its own staff, will have to make related party transactions disclosure in their financial statements.
This new requirement will apply to the TCs' financial year (FY) 2015/2016 (April this year to March next year) and subsequent accounts.
It did not apply to their FY 2012/2013 accounts, which was the period of the Auditor-General's Office (AGO) audit of Aljunied-Hougang- Punggol East Town Council (AHPETC).
It will also not apply to the TCs' FY 2014/2015 accounts (April last year to next month) to be tabled in Parliament in October, since the accounts began before July 1 last year.
The AGO audit highlighted that AHPETC and its MA, FM Solutions and Services (FMSS), are considered related parties under the prevailing FRS 24.
This is because the key management personnel of AHPETC - its secretary Danny Loh, its general manager How Weng Fan and its deputy general manager Yeo Soon Fei - are also owners of FMSS providing paid services to AHPETC; they control FMSS and have a clear personal financial interest in transactions between FMSS and the TC.
FM Solutions and Integrated Services (FMSI) and AHPETC are also considered related parties because FMSI is a sole proprietorship owned by Mr Loh.
In no other TCs are their key management personnel also owners of their MA. They are either direct employees of the TCs, like in Bishan-Toa Payoh TC and the former Hougang TC, or employees of the MA, not owners.
With the exception of AHPETC, all other TCs' auditors did not raise any observation on related party transactions in their auditors' reports.
Christine Yap (Ms)
Director
Corporate Communications
Ministry of National Development
