Investigations into AHTC likely, say observers

The Workers' Party-run Aljunied-Hougang Town Council.
The Workers' Party-run Aljunied-Hougang Town Council. PHOTO: ST FILE

Another auditor's report on town council raises possibility of criminal conduct

Corporate governance experts said it is likely the authorities will hold an investigation into the Workers' Party (WP) town council, following an auditor's report that said the town council had failed to ensure proper financial management.

The report, released by accounting firm PwC on Tuesday, found that circumstances surrounding the appointment of the town council's managing agent "may give rise to potential criminal offences under the Penal Code, including criminal breach of trust".

This comes seven months after the Aljunied-Hougang Town Council's (AHTC) independent auditor KPMG made a similar finding of possible criminal wrongdoing, after a review of the town council's past payments.

KPMG had said in its October report that AHTC town councillors may be liable for serious offences under the Penal Code, such as criminal breach of trust and abetment.

The reason is that as custodians of public funds entrusted to the town council, they have a fiduciary duty that entails "personal and collective responsibility''. If the improper payments had been made deliberately, "they could amount to criminal conduct", KPMG added.

 

Both auditing firms did not look into criminal liability in their reports, but said the findings may warrant further investigation by the authorities into potential offences at AHTC, which was previously known as Aljunied-Hougang-Punggol East Town Council (AHPETC).

Experts told The Straits Times the strong language used is highly unusual for accountants and auditors, and highlighted the gravity of the situation in the town council.

"Auditors don't use these words lightly. There must have been compelling evidence for them to bring up the issue of potential criminal breach of trust," said Singapore Management University accounting associate professor Themin Suwardy.

This was also the view of Nanyang Technological University accounting associate professor El'fred Boo, who said: "Accountants and auditors practise conservatism to a T. For PwC to make such a statement, the implications could be pretty grave for the town council."

PwC was brought in by the Pasir Ris-Punggol Town Council (PRPTC) to review past payments made by then AHPETC in relation to Punggol East, which the WP held from 2013 to 2015.

The People's Action Party (PAP) won Punggol East in the 2015 General Election, and the single-seat constituency has since come under the management of PRPTC.

PwC's 94-page report called into question the propriety of all payments made under AHTC's former managing agent FM Solutions and Services (FMSS). These payments add up to about $23 million.

Meanwhile, KPMG was appointed by AHTC to look into its books following a court order.

PwC said the circumstances around the selection of FMSS as managing agent show it was done by design, with FMSS assured of the job two months before it was formally appointed. FMSS had started charging AHTC in June 2011, before existing managing agent CPG was discharged in August.

PwC also found that Punggol East could have saved another $500,000 had proper procedure been followed by the town council.

Prof Suwardy said improper financial practices alone do not amount to criminal breach of trust.

"The key word is 'intentional'," he said referring to how the actions resulting in the loss must have been taken intentionally. "You can be very dumb, and did something badly, but that does not equate to criminal breach of trust."

He added: "Given the significant findings... I cannot see why a criminal investigation would not take place."

Agreeing, Prof Boo said: "The next logical move would be a thorough investigation to establish criminal breach of trust and getting to the bottom of how much was actually lost that needs to be recovered from the relevant parties."

The Ministry of National Development said on Tuesday it will forward the PwC report to an independent panel appointed by AHTC in February to look into getting back the improper payments made.

Singapore Management University law don Eugene Tan said it will be a "long-drawn process which will involve a fair bit of resources".

"The ball is in the PRPTC's court now. It's clear they will pursue the matter vigorously to recover what rightfully belongs to the Punggol East residents," he added.

When asked, Punggol East MP Charles Chong said PRPTC is studying the report and seeking legal advice on the matter, but has not made a police report.

The WP said it was studying the report and did not respond to queries for further comment.

A version of this article appeared in the print edition of The Straits Times on May 05, 2017, with the headline 'Investigations into AHTC likely, say observers'. Print Edition | Subscribe