Aljunied-Hougang Town Council (AHTC) has just issued its statement on KPMG report that highlighted improper payments made by Aljunied-Hougang-Punggol-East Town Council (AHPETC) to individuals who were in conflict of interest.
The report, entitled “Report on Improper Payments” pointed out that the direct owners of two companies, FM Solutions and Services (FMSS) and FM Solutions and Integrated Services (FMSI) were appointed as its managing agent, as well as providers of essential maintenance services, they also held key management and financial control positions in the town council at the same time. Resulting in a conflict of interest as they were the ones who approved the work orders and payment orders.
The town council which is run by Workers’ Party since 2011, notes that the S$60 million direct payment journal entries highlighted in the July monthly report on progress, which had caused undue public alarm, has been addressed in this payment report.
AHTC further notes that in ‘Appendices to Report on Improper Payments’ section D.3.2, KPMG had conducted testing using the binomial statistical sampling approach and found no duplicate or fictitious payments.
The town council pointed out that KPMG’s work involved 8 months of intensive audit, deploying at least 72 KPMG personnel based in its town council office, using forensic data analytics to thoroughly examine millions of accounting entries and documents. KPMG also used corporate intelligence procedures, KPMG’s proprietary Vendor Anomaly Detection Model and corporate database analysis tools to scrutinise Aljunied-Hougang Town Council’s (“AHTC”) MPs, Councillors and Staffs’ personal particulars and work details, past and present, of spouses, children, parents and siblings.
KMPG had listed in its report, a total of around, $23.3 million worth of work orders were approved by town council members with a conflict of interest. It also listed work orders worth around $1.5 million that were gauged as improper payment which were also approved by the same town council members, and pointed that around $600,000 ought to be recovered.
However, AHTC pointed out that while some payments have been deemed to be made improperly by KPMG, the payments do not appear to have an effect on the legitimacy of the underlying payments, hence, may not necessarily be recoverable.
KPMG, in its report, wrote: “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.”
The town council also noted in its statement that KPMG’s broad definition of improper payment includes payments which are in breach of Town Council’s internal control procedures and policies.
AHTC has stated that it is studying the report in detail at this moment.
Interestingly, KPMG pointed out in its report on the possibility of criminal conduct, should the shortcomings had been dilberate, “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.”
KPMG was appointed by AHTC on 1 March 2016, in compliance with the Order of the Court of Appeal to establish, inter alia, “whether any past payments made by AHPETC were improper and ought therefore to be recovered.”