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KPMG’s conflict of interest charge pervades the entire town council system – not just WP’s

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By: Jin Tan

Many Singaporeans will have heard of KPMG’s Report on Improper Payments (“Report”) which was released publicly by AHTC on Tuesday morning.  Far fewer, however, would have read it and fully understood the findings it tried so hard to conceal.   From a review of the headlines published in the mainstream media, any ordinary person would be forgiven for thinking that the Report discloses serious wrongdoing on the part of AHTC.  On closer inspection, however, it is clear that the opposite is true.  This is not a point by point take down of the Report but merely hopes to raise for discussion two main issues which have been given much attention in the Report.

Conflicts of interest?

One major criticism in KPMG’s Report is that FMSS and FMSI personnel had serious conflicts of interest which called into question the payments administered by FMSS (as managing agent) for itself.   The argument proffered by KPMG is that FMSS personnel, in particular those who had a stake in the company were in a position of conflict more serious than that of other managing agents.

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While in theory, KPMG’s observation may seem fair, the more realistic assessment is that the same conflict of interest pervades the entire town council system – regardless of who is in charge.  Are the employees of a larger – and sometimes government-linked – managing agent really in position of a lesser conflict of interest as managing agent of a town council?

The only reasonable and realistic answer to this question is probably not.  For a mere employee of a managing agent to act as a proper safeguard, in other words, to identify that his or her own company has not performed its job up to standard – to the extent that warrants non-payment by a town council – requires whistle-blowing of remarkable proportions. This is common sense – an employee has a general duty of fidelity to his or her company, and not to the town council. He or she speaks out on her company’s shortcomings or wrongdoings at risk of dismissal.

Ultimately, the distinction drawn by KPMG between the FMSS’s conflict of interest and that of other managing agents is so fine that it is insignificant.  And whereas AHTC can now take steps to rectify such problems, residents of other town councils should be concerned about whether similar improper payments have been made by their town councils, and whether or how such problems are being addressed.

Taken from this perspective, the allegation that AHTC made millions worth of improper payments as reported by the mainstream media rings hollow, and is unsatisfactory to a fair-minded reader.

What the Report does not say

The other thing that is striking about the Report is what it claims is not within its scope.  For instance, despite the fact that the KPMG claims that it is not within its scope to comment on whether there has been any criminal wrongdoing, the Report mentions the potential for criminal wrongdoing repeatedly.   Why did KPMG repeatedly raise the possibility of criminal wrongdoing when it was not asked to comment on the same?  Unsurprisingly, the suggestion has utterly exhilarated the mainstream media, and no doubt, some opportunistic strategist on PAP’s side will jump at the chance to launch investigations on the back of these findings.

But what exactly does it mean when KPMG says it is not within its scope to comment on potential criminal wrongdoing?  It cannot be disputed that if KPMG had in fact found evidence suggesting there was criminal wrongdoing, it would be under a duty to report as much, given that such wrongdoing would definitely render the relevant payments improper. In its extensive and intensive analysis of AHTC’s communications, transactions, documents and interviews with its staff, it is clear that KPMG has not found anything to suggest any intentional wrongdoing.  KPMG’s failure to state categorically that its examination has not disclosed any fraud or criminal intent/ wrongdoing unfortunately casts a shadow on its findings, which in the writer’s humble opinion, are otherwise fair.

Indeed, the Report certainly lends itself to a common refrain of the Worker’s Party and its supporters that the PAP would have put them away much earlier if it had real reasons to do so.

No surprises, only sound and fury

To be clear, this is not to say that AHTC is entirely blameless in this entire saga.  The report discloses several instances of erroneous payments, which a more diligent town council might have easily spotted before making payment.  Instances of making over-payment beyond contractual requirements, or making payments without the required supporting documents are plainly unacceptable even if the work was done satisfactorily or the payment was legitimate.  This is accounting 101 – and ultimately, the town council has a duty to ensure that it residents’ monies are being utilized properly.

It should surprise no one that the first opposition party to win a GRC would face a tremendously rocky road, and the Worker’s Party would have expected its fair share of people waiting to catch it trip up.  Given the circumstances, it is disappointing that the AHTC town councilors did not go the extra mile to make sure that it was beyond reproach at all times.  On the other hand, to expect them to have been successful in doing so against the odds that it faced would have perhaps been naïve – in a political climate where a “big four” audit firm such as KPMG can criticize AHTC for engaging the only managing agent that participated in tender, it is clear that the Worker’s Party just can’t catch a break.

Politics, politics, politics

By now, most Singaporeans would have identified this entire episode (beginning first with the AGO report, then the lawsuit by MND and HDB which led to this Report, and most recently, PRPTC’s bid to join the fray) as what it really is: politics, politics, and more politics.  If the powers that be are lucky, the overwhelmingly negative coverage of the Report will dominate headlines in the days or weeks to come, but the real test of its effect will be at the next elections.  AHTC voters, being faced with the Hobson’s Choice of whether to vote for a somewhat bumbling town council administration or to surrender what little opposition voice we have in Parliament are in an unenviable position.

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