The town councillors of Aljunied- Hougang Town Council (AHTC) may be liable for serious offences under the Penal Code, such as criminal breach of trust and abetment, independent auditor KPMG said in a report released yesterday .
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''.
So, KPMG said, if the improper payments had been made deliberately, "they could amount to criminal conduct".
The town councillors named in the report include Workers' Party MPs Low Thia Khiang, Sylvia Lim, Pritam Singh and Png Eng Huat.
All four sit on the WP's executive council: Mr Low is secretary-general; Ms Lim, the chairman; Mr Singh, the assistant secretary-general; and Mr Png, the organising secretary.
The report said payments totalling at least $23 million were approved by town council members with a conflict of interest. This raised questions about whether the payments were fully justified.
The auditors also identified improper payments totalling about $1.5 million, of which at least $624,000 ought to be recovered.
The report then went on to explain the duties and responsibilities of town councillors under the law.
Under the Town Council Financial Rules, an officer who makes a payment without proper authority or who incorrectly certifies a voucher shall be responsible for the amount. But such personal liability applies only when the officer did not act in good faith.
Town councillors, like public officers, have a fiduciary duty to two bodies: the Government and the public. The reason is that they are entrusted with the control and management of public funds.
Under the Town Council Act, members of a town council, like directors of a company, must declare their interests in transactions in which they are directly or indirectly interested. "This duty, to avoid a conflict of interest, goes to the heart of a fiduciary's duty to his principal," said KPMG.
It noted, among other lapses, the way AHTC governed matters related to its then managing agent FM Solutions and Services (FMSS) was seriously flawed. "An unacceptably high degree of financial responsibility was relinquished by the town councillors to the conflicted persons, in a control environment in which meaningful oversight by the town councillors was absent," the report said.
AHTC also had a "failed control environment", which showed in the lack of discipline in its financial operations and record-keeping.
"This exposed public funds to risks of erroneous payments, overpayments, payments for which services had not been sufficiently verified and payments without proper authority, as well as the potential for actual misappropriation or civil or criminal breach of trust," it said.
A public servant or agent guilty of criminal breach of trust can be jailed for life, or jailed up to 20 years and fined. Abetment of the offence carries the same punishment.
The report concluded that its findings "may give rise to personal claims against the town councillors, or disclose the finding of criminality". But KPMG stressed its findings are not meant to "conclusively" decide if the town councillors had broken the law.
"This report does not seek to make a finding on whether these circumstances, individually or collectively, demonstrate a deliberate course of action taken by the town councillors to benefit FMSS and (service provider FM Solutions and Integrated Services) FMSI," it said.
But should such conduct have taken place intentionally, it would potentially amount to an offence under the Penal Code, it said.