Workers' Party (WP) chairman Sylvia Lim yesterday confirmed that the party's town council had received a legal demand for $3.5 million from its former managing agent, but insisted this would not hit its bottom line.
She said the amount demanded was for fees related to projects handled by the managing agent, and linked to the town council's sinking fund expenditure. But she declined to give further details, citing confidentiality agreements.
The New Paper reported yesterday that FM Solutions and Services (FMSS) sent a letter of demand to Aljunied-Hougang-Punggol East Town Council (AHPETC) to say the latter owed it more than $3.5 million for services provided between April and July 14. The letter was dated July 20, six days after the managing agent's contract with the town council ended on July 14.
After receiving the letter, AHPETC then did its own checks and withheld payment as it had "some questions about those claims", Ms Lim said.
The town council had also reportedly tried earlier to recoup $250,000 from FMSS, a sum it then raised to $450,000.
Yesterday, WP chairman Sylvia Lim downplayed the matter - which will go before mediators in October - saying it will not affect AHPETC's bottom line.
"We can confirm that we received this letter but this is actually quite old news because it has been overtaken by events... Most of the claims are related to the current financial year 2015/2016, and a substantial portion is related to sinking fund payments. So they do not actually impact on the routine funds," she said. Money in a town council's sinking fund is earmarked for long- term and cyclical projects, such as upgrading works.
Ms Lim also said that the town council had since paid off a substantial part of the $3.5 million amount and that the disputed sum will "not actually affect the bottom line in terms of surplus and deficit of the accounts".
News of the dispute broke two days after the Ministry of National Development (MND) released figures to show that there had been, in its words, "gross profiteering" on the part of FMSS from its only client, AHPETC.
Asked yesterday if her town council felt it had overpaid FMSS, Ms Lim replied: "A large part of the disputed claims is actually concerning projects which are a different kind of claim as compared to a claim for managing agent monthly rates. It is not connected with us looking (at) or reviewing the managing agent rates. It's not the case at all."
FMSS had been authorised to act as a project manager for the town council. When the firm handled projects, it was allowed to claim a percentage of the project value as additional fees, above and beyond its managing agent fees, said Ms Lim, adding that that was also the case at other town councils.
For now, both parties are headed for mediation in October to resolve the issue, said Ms Lim, adding that the case will not go to court.
On whether the WP had briefed its new candidates on the issue, Ms Lim said: "This is one of the matters that we're sorting out with our contractors under a process that's already been agreed, so we do not see why this should concern the new candidates because everything is according to our agreement."
She was also asked why AHPETC had not made public the matter earlier, given the large amount involved. She cited the confidentiality agreement, adding: "It's just a letter of demand. People can demand things, but whether they are legitimate or not and to what extent, that is another question altogether."