Owen Hawkes, the executive director of KPMG, told the court on fifth day of the Aljunied-Hougang Town Council (AHTC) trial that S$60 million in payments to AHTC were manually recorded. According to Mr. Hawke, this bypassed controls. Other questionable practices were also brought to light.
Mr. Hawkes said that the payments were made for utility bills and were not listed as “accounts payable,” calling this a “significant control weakness.”
Defense lawyer Leslie Netto cross examined Mr. Hawkes on the fifth day of the AHTC and Pasir-Ris Punggol Town Council (PRPTC) trial.
Sylvia Lim, Low Thia Khiang and Pritam Singh, all of whom are Workers’ Party Members of Parliament, are being sued by the two town councils. Additional defendants in the case are the managing agent FM Solutions and Services (FMSS), Chua Zhi Hon and Kenneth Foo (AHTC town councillors), and How Weng Fan and Danny Loh, who worked for FMSS and who also held positions in AHTC.
The charges include breaking the Town Councils Financial Rules (TCFR), which clearly define the operations of town councils. Specifically, there are 56 invoices with a total of S$674,000 issued in November 2015 which had no signature from the department head. This is a breach of TCFR rules.
Those invoices for services or goods from landscape, construction security or other companies are connected to “improper” payments that AHTC made to FMSS and others.
Lawyers for the PRPTC are contending that there are also 12 invoices paid November of 2015 that have insufficient or even lacking supporting documents that prove that work was done. This lack of documentation caused these payments to be deemed as “improper.”
KPMG’s July 2016 audit report for AHTC showed “extensive use of manual journal entries” for payments with a total of S$60,660,927, some dating as far back as 2011. The report said, “This highly irregular shortcut makes effective oversight of payments by the finance department practically impossible. Such large-scale use of this practice raises questions about the management of AHTC’s finance function.”
The Workers Party (WP) took over the management of AHTC in 2011, after the General Election. During this time the town council computer management system (TCMS) was discontinued by Action Information Management, when they purchased the accounting and financial software.
The defense lawyer asked Mr. Hawkes if he knew then that the software was no longer used, and Mr. Hawkes replied yes. He added, “However, by the time KPMG was instructed to perform our review of various instances of non-compliance of the Town Councils Act, that was about five years later, which is quite a long time later, and when we looked into, for example, some of the entries in the accounts system, some of those entries dated back to 2011 and had never been investigated … I don’t think five years later, the accounting system should still be in a problematic state.”
Mr. Hawkes also said that AHTC held on to S$ 250,000 of FMSS’ fees, which resulted from “major lapses in governance and compliance” at the town council, according to the Auditor-General’s Office in a 2015 report.
Because of this, KPMG began to examine the accounts of AHTC and found significant issues as they worked with the town council for nearly two years.
Mr. Hawkes also told the court, “I think it was clear at the time that they (AHTC) were not very happy (with FMSS).”
The main problem, he said, was not with maintenance issues, but with how the town council was managed. “It’s the management of the town council’s affairs itself, rather than the maintenance that concerned us.”
The trial is set to continue on Friday, October 12.