How KPMG report on AHTC came about

KPMG had been tasked to determine if any past payments made by AHTC were improper and should be recovered.
KPMG had been tasked to determine if any past payments made by AHTC were improper and should be recovered. PHOTO: ST FILE

The statement the Ministry of National Development issued yesterday was prompted by findings of improper payments by the Aljunied-Hougang Town Council.

Independent auditor KPMG, appointed by AHTC following a court order, found that the improper payments the town council made between 2011 and last year amounted to at least $6.9 million.

KPMG had been tasked to determine if any past payments made by AHTC were improper and should be recovered, as part of a review into the town council's books following lapses uncovered by the Auditor-General's Office in a special audit.These events came after the AHTC's own auditors declined to give an opinion about its financial performance and accounts four years in a row, indicating insufficient information.

In a report, released by AHTC on Tuesday, KPMG highlighted "pervasive control failures" in governance at the town council that had exposed $23 million of public funds to risks of improper use.

The sum was paid to AHTC's managing agent FM Solutions and Services (FMSS), and had been approved by six of the town council's key officers who were also shareholders of FMSS. KPMG found 748 transactions in which the six people had "effectively certified or approved payments to themselves".

Of the $23 million, more than $1.5 million has been determined by KPMG to be improper payments, including overpayments, payments for work or services without proof that they were performed, or payments in breach of the law or the town council's policies.

Separately, the accountant found AHTC had made another $5.4 million of improper payments through awarding tenders to higher-priced contractors and overpaying a town councillor, among other things.

AHTC, responding to KPMG, had disagreed that most of the payments were improper.

KPMG also said it was "outside our mandate to conclude whether any offence has or has not been committed", but added it had flagged instances where facts and circumstances observed could "potentially give rise to an offence"."We are advised that the issues identified... may give rise to personal claims against the town councillors or disclose the commission of criminality," it said.

KPMG also said the "lack of discipline in financial operations and record-keeping" at AHTC meant it could not "conclude whether the improper payments identified... are exhaustive".

Janice Heng

A version of this article appeared in the print edition of The Straits Times on November 05, 2016, with the headline 'How KPMG report came about'. Print Edition | Subscribe