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Workers’ Party run town council’s auditor flags concerns about criminal conduct and failures in governance

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Workers’ Party run town council’s independent auditors, KPMG, have found that their lapses in governance led to the exposed millions of dollars in public funds to improper use and application. KPMG said that improper payments were made to various parties, including to its former managing agent FM Solutions & Services (FMSS) and service provider FM Solutions and Integrated Services (FMSI). If the lapses in governance at Aljunied-Hougang Town Council (AHTC) were found to be deliberate, it could amount to criminal conduct said the KPMG’s report released today (1 Nov).

Town council members approved payments with a total value of at least $23 million constituting a serious conflict of interest. Such approvals raise questions if they were fully justified. KPMG identified $1.5 million as being improper payments and said that AHTC should recover at least $600,000 of such payments.

Screengrab: KPMG report
Screengrab: KPMG report

AHTC also overpaid when it appointed FMSS as its managing agent by more than S$1.2 million, said KPMG, which 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. The direct owners of FMSS and FMSI held key management and financial control positions in the town council at the same time.

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For instance, six shareholders of FM Solutions and Services (FMSS), which from 2011 to 2015 was engaged by the town council to be its managing agent and provider of essential maintenance services, held various positions in the town council during that period, including the posts of secretary, general manager and finance manager.

This meant that FMSS shareholders working in the town council effectively approved and made payments to themselves when they paid FMSS, said KPMG, adding that payments totalling $23,299,483 were approved by people in conflicting positions.

KPMG said: “The lack of discipline in financial operations and record-keeping results in incomplete information to support payments… and is such that we are unable to conclude whether the improper payments identified in this report are exhaustive and on the complete quantum of improper payments that ought to be recovered.”

Such failures in the control environment should not to have been permitted by AHTC, KPMG said, noting that given town councillors hold “fiduciary duties and responsibilities in respect of public funds entrusted to the town council”, they “bear a personal and collective responsibility for improper payments enabled or permitted by such a flawed system”.

KPMG added: “While our work was not focussed on identifying potential criminal acts arising from the issues we observed, we are advised that, had the shortcomings… been committed deliberately, they could amount to criminal conduct, the implications of which the Town Council should consider.”

AHTC said on Tuesday that it is studying the report and will provide a response in due course.

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