The setting up and appointment of the former managing agent (MA) for the town council run by the Workers' Party (WP) has been called into question in a new report.
Their tainted circumstances "would put the propriety of all payments made under two MA contracts to FMSS (FM Solutions and Services ) into question," said the report by accounting firm PwC, which sought an inquiry into the payments.
These contracts total at least $23 million uncovered last year in an audit of Aljunied-Hougang Town Council (AHTC) by KPMG.
Now, there is another $500,000, at least, that could have been saved in Punggol East constituency - when it was run by the WP - had proper procedure been followed, PwC said.
It uncovered this new amount following a review of other contracts and tender evaluation reports.
PwC added that while its report does not look into potential criminal liability, "the circumstances may warrant further investigations by the relevant authorities as to the relevant potential offences".
PwC was appointed by the Pasir Ris-Punggol Town Council (PRPTC) to review past payments made by AHTC in relation to Punggol East, which the WP held from 2013 to 2015. During that time, AHTC was called Aljunied- Hougang-Punggol East Town Council (AHPETC). PRPTC is under the People's Action Party (PAP), which won Punggol East in the 2015 General Election.
In the report, PwC said there was a lack of documentation on why contracts were sometimes awarded to those that did not submit the lowest bid.
The town council also did not make use of options in existing contracts to extend them at lower rates. Instead, it engaged the same vendors at significantly higher rates.
"The total cost savings that the town council could have saved (as well as payments made in some instances without proper supporting documents) add up to a total amount of (at least) $506,562.06."
Chiefly, PwC said the circumstances around the selection of FMSS as MA of AHTC show it was done by design, with FMSS assured of the job two months before it was formally appointed in August 2011.
FMSS had started charging AHTC for its services in June 2011, even before the previous managing agent CPG was discharged in August 2011.
PwC cited evidence suggesting FMSS owners How Weng Fan and her husband Danny Loh had been approached to set up a company to manage the new town council.
PwC said: "Apart from personal civil liability, it also appears to us that the circumstances collectively may give rise to inferences that a deliberate course of action could have been taken by some within the town council to appoint and install FMSS as the MA, and to benefit FMSS (and the conflicted persons) with such award of MA contract..."
"The conflicted persons were only able to get away with such conduct because the relevant elected town councillors had wholly failed to exercise proper due diligence and supervision in the award of the two MA Contracts to FMSS," it said.
"Accordingly, they should also bear personal responsibility for such improper payments made to FMSS," PwC added.
"A proper inquiry should be held (for instance, through legal proceedings) to determine the improper payments made to FMSS which ought to be recovered," it said.
In the report, PwC detailed how PRPTC said it was still reviewing the report but called its findings "deeply troubling". It also said it was seeking legal advice on how to proceed.
"PRPTC will also consider whether it should take steps to recover the losses suffered by Punggol East residents as a result of AHPETC's mismanagement," it said.
In a separate statement, the Ministry of National Development said the PwC report "reinforced our concerns regarding how public funds under the town council's charge had been managed".
The ministry noted that KPMG's report in October last year had raised similar questions on the propriety of payments made by AHPETC to FMSS. KPMG is the independent accountant of AHTC, as it is once again known now.
"The report also raised the possibility of civil and criminal liabilities," the ministry said.
It added that the report will be forwarded to the independent panel appointed by AHTC in February this year to look into improper payments made by the town council.
There was no comment from AHTC or KPMG on PwC's findings, the report noted. Yesterday, the WP told The Straits Times it would study the report.