Workers' Party (WP) town councillors followed a set of guidelines to keep a "watchful eye" on their managing agent.
They did not, argued their lawyer Chelva Rajah, give FM Solutions & Services (FMSS) free rein to approve payments to itself, even though the firm's owners How Weng Fan and Danny Loh held key managerial roles in Aljunied-Hougang Town Council (AHTC).
This alleged conflict of interest came under scrutiny yesterday, the fourth day of a multimillion-dollar civil suit to recover alleged excess payments made to FMSS. At issue was whether the WP had put in proper controls to manage the alleged conflict of interest.
The Senior Counsel argued that the WP town councillors did, and thus could not be deemed to have made improper payments.
For example, former WP chief Low Thia Khiang had put in place a "standard operating procedure" (SOP) in December 2011 detailing the different issues a town council might face, such as estate feedback or personnel matters, the relevant person these should be brought up to, and how they would be resolved.
But KPMG executive director Owen Hawkes, who was being cross-examined, said the SOP appeared to be little more than a communications proposal.
While issues pertaining to estate management appeared to be more detailed, Mr Hawkes argued that the SOP or what he called communications proposal for administrative or policy matters did not "seem to be very fully thought out".
"(Mr Low's SOP) is not really an SOP - it is just decisions made by the town council and communicated by the chairman for adoption," he said.
How these issues were handled, he added, was among his key concerns when his firm was tasked to look into AHTC's books after the Auditor-General's Office (AGO) found significant governance lapses in a special audit.
Mr Rajah also sought to establish, referencing various e-mails, that the WP town councillors had indeed checked all the expenses they were signing off on, and had not approved them blindly.
He pointed out, among other things, that then AHTC chairman Sylvia Lim had highlighted FMSS' proposal to spend $11 million on lift maintenance and repairs, noting that the town council "could not afford" to spend that amount yearly.
But, Mr Hawkes said, she was merely turning down items that were not applicable, adding that the correspondence took place in June 2015, after the AGO report was out.
"So, maybe there is more sen-sitivity to the issue at this point," he said.
Mr Rajah also took issue with KPMG's suggestion that AHTC resolves its conflict of interest issue by getting an independent member of the town council to approve payments at each stage.
This was not practical as it would require a lot of time, he added.
Mr Hawkes replied: "It would be additional work, I agree. But additional conflicts require additional controls... Otherwise, you are effectively having your cake and eating it."
Mr Rajah said the previous town council, which was led by the People's Action Party, handled conflicts in a similar way. At the same time, Ms How and Mr Loh were known to WP town councillors for many years, and they considered the couple reliable and trustworthy.
Mr Hawkes retorted: "Trust is not a control - it is the enemy of control."
In wrapping up his cross-examination, Mr Rajah noted that of the $33 million paid to FMSS and deemed to be in contention, $1.5 million was deemed by KPMG to be improper. Also, an extra $2.8 million was paid to architects who were the costlier choice over another.
But of this total sum of $4.3 million, just over $600,000 was labelled by KPMG as "ought to be recovered". The rest could not be determined.
Even then, Mr Rajah said his clients disagreed with how most of these judgments were made. The total sum that ought to be recovered would in fact be closer to under $30,000, he added.
Besides Mr Low and Ms Lim, the other defendants in the case are WP chief Pritam Singh, town councillors Kenneth Foo and Chua Zhi Hon, FMSS and its owners, Ms How and her late husband Mr Loh, who is being represented by his wife.
The case continues today.