SINGAPORE — Corporate governance experts and political analysts whom TODAY spoke to were yesterday taken aback and concerned about the problems uncovered by a KPMG report on the Aljunied-Hougang Town Council (AHTC).

In particular, Mr Gerard Ee, president of the Institute of Singapore Chartered Accountants, noted that a “failed control environment” — a phrase the auditors used in the report to describe the town council — was worrying. “Usually when we say the control environment is ‘weak’, that is bad enough. If it has failed, things are very bleak and serious. In this case, many things have gone wrong without anyone knowing,” Mr Ee said. “Their checks and balances are not working. The report paints a serious overall picture that justifies a deeper investigation.”

Associate Professor Lan Luh Luh, from the National University of Singapore’s Business School and Faculty of Law, said she was surprised that the Workers’ Party (WP)-run town council engaged in such “blatant and very clear” lapses. “There is no issue with supporters incorporating a company to service the town council, but they shouldn’t be the same people who approve the payments to themselves,” she said.

Nanyang Technological University accounting professor El’fred Boo reiterated that the findings have “serious and grave implications for the parties involved in the AHTC scandal, including a potential basis for filing criminal charges if a deliberate intent could be established”. He said: “One of the major findings centred on a series of payments of at least S$23 million, which, in the absence of approval controls in a severely weak control environment amid a conflict-of-interest situation, could suggest that the agent is approving and making payments to itself. This was corroborated by instances of overpayments, and payments without approval and certification of work performed.”

Following the KPMG report’s release, the town council issued a statement noting that KPMG’s work “involved eight months of intensive audit, deploying at least 72 KPMG personnel based in our office, using forensic data analytics to thoroughly examine millions of accounting entries and documents”. It also pointed out the extensive tools used by the auditors to scrutinise the “personal particulars and work details, past and present” of the town council’s Members of Parliament and employees as well of their “spouses, children, parents and siblings”. AHTC, which is studying the report in detail, stressed that “no fictitious, fraudulent or duplicate payments” were uncovered.

Political analyst Eugene Tan said the report was damaging for the WP. “The governance of AHTC looks like an issue that will dog the town council and the Workers’ Party in the short to medium term, with resolution still some way off,” said the Singapore Management University law don. The “glaring” lack of checks and balances should have been “plainly evident” to the town council, he said. Adding that WP’s credibility and standing are at stake, Assoc Prof Tan said AHTC will have to explain and remedy these conflicts to “rebuild trust and confidence” with its residents. “(The report) raises serious questions about the ability of the WP-run town council to fulfil its statutory and fiduciary duties. One hopes that lack of competency is at the heart of the issues,” said Assoc Prof Tan, who also questioned if the authorities could have done more to intervene earlier.

Last month, the Ministry of National Development proposed tighter rules on governance of town councils, among other proposals, following a three-year review of the Town Councils Act. The proposals, which are in the midst of a public consultation exercise, seek to clarify the roles and functions of town councils, improve their governance and financial management, and to enhance the MND’s regulatory oversight. A Bill is expected to be tabled by early next year. KELLY NG