Smokescreen formed! Do not answer to their own independent auditor’s reports about their town council’s mess and chose to divert attention. Well done well done!
Independent auditors have found that flawed governance in the Workers’ Party-run Aljunied-Hougang Town Council (AHTC) led to “improper payments” running into the millions to various parties, including to its former managing agent FM Solutions & Services (FMSS) and service provider FM Solutions and Integrated Services (FMSI).
Flagging “serious conflicts of interest” and a “failed control environment” at the town council in its latest report, KPMG also warned that if the improper payments were deliberate, “they could amount to criminal conduct, the implications of which the Town Council should consider”.
The report was made public by AHTC on its website on Tuesday (Nov 1). While it was still studying the report in detail, it noted that KPMG found no “fictitious, fraudulent or duplicate payments”, and its “broad definition of improper payment” included payments in breach of the town council’s internal control procedures and policies.
“KPMG acknowledged that while some payments were deemed to be made improperly, they do not appear to have an effect on the legitimacy of the underlying payments, (and) hence, may not necessarily be recoverable,” added the town council in a statement.
In the report, KPMG said improper payments to FMSS and FMSI alone amounted to over S$1.5 million, and AHTC also overpaid when it appointed FMSS as its managing agent by more than S$1.2 million.
Shareholders of FMSS, who also held senior positions at the town council, also approved 132 payment vouchers amounting to more than S$23 million from the town council to the company — effectively “approving payments to themselves”. AHTC was also found to have breached the Town Council Financial Rules in payments to third-party vendors, such as by engaging a higher-priced consultant without calling for a tender.
Such flawed governance has potential to “conceal and hinder the detection and identification of all instances of proper payment”, said the auditors. As a result, it was unable to conclude whether the improper payments and the amounts that ought to be recovered identified in the report are exhaustive.
KPMG was appointed by AHTC on court orders to help fix compliance and governance lapses uncovered in a special audit by the Auditor-General’s Office, and its latest report centered on improper payments made by the council to various parties, in particular to FMSS and FMSI, which were appointed between 2011 and last year. Before this, KPMG submitted six monthly reports to the Housing and Development Board on its audit of the town council, where it flagged systemic weaknesses and control failures, among other things.
In its report, KPMG said appointing FMSS and FMSI “exposed the Town Council to serious conflicts of interest as the direct owners of FMSS and FMSI (with a profit motive) concurrently held key management and financial control positions in the Town Council (charged with a service motive)”.
Meanwhile, the town councillors relinquished an “unacceptably high degree of financial responsibility” to the conflicted persons. As custodians of public funds entrusted to the town council, they bear a “personal and collective responsibility” for the losses reported, said KPMG.
The improper payments to FMSS and FMSI included overpayments for project management fees, overpayments to FMSS for purported overtime and CPF contributions payments to FMSS without certification that work had been performed, as well as payments made without the requisite co-signature of members of the town council. These amounted to about S$1.5 million, of which at least S$600,000 ought to be recovered by the town council, said KPMG.
The firm also said the tendering out of the contracts to FMSS and FMSI was “deficient in numerous respects”, particularly in terms of cost.
The spike in the managing agent’ s costs in the first year under FMSS amounted to approximately S$500,000, while under the second managing agent contract the rates were about S$700,000 more than what might have cost to retain CPG Facilities Management, the previous managing agent. AHTC also chose to engage a higher-priced consultant for 10 projects for architecture and civil engineering services, among other things, which involved payments totalling over S$2.79 million.
Noting that it is beyond the auditors’ mandate to conclude whether an offence has been committed, KPMG said: “While our work was not focused on identifying potential criminal acts arising from the issues we observed, we are advised that, had the shortcomings (identified in) this report been committed deliberately, they could amount to criminal conduct, the implications of which the town council should consider.”
The HDB and the Ministry of National Development said they were studying the report and would respond in due course.
What a pity. Singapore’s strongest opposition party is stuck in a quicksand. Their Aljunied Hougang Town Council’s accounts are sinking them softly.
Previously, we give them the benefit of doubt. They needed time to sort their accounts – okay with that. Use it to gain some political mileage, send stories that MIW is bullying them and pushing them to a corner – not wrong to play victim card (we are not in a simple world, just milk the situation).
There is only so much one can use for delaying tactics. WP should know that their accounts will eventually see light, numbers don’t lie.
Some interesting observations, first, how long do they need to correct the accounts? It’s already slightly more than a year since GE2015. Time is precious, no? If this is a measurement of effectiveness, they have failed miserably.
Second, Chief Low Thia Khiang has been managing Hougang TV prior to joining Aljunied. He will have all the know-hows and understood what’s conflict of interests and issues arising. Why is AHPTC and now AHTC facing such issues? Operating procedures and checks lacking?
Something is wrong somewhere, that’s for sure. He trusted the wrong people?
Third, silence is golden with Show Mao. I keep seeing kopi with Show Mao banners, isn’t Chen Show Mao chairman of finance committee? Why is he keeping quiet? This is very peculiar.
Along with Show Mao, the new members of WP are on the same tune. No tune. They are also keeping tight-lipped. Is this a case of knowing or suspecting something is not wrong but not in a position to comment. Is this good politics?
The WP brand is damaged. The TC issue will be there to haunt them in the next GE. How can Workers’ Parry recover from this episode? Very unlikely and it’s going downhill for sure.