SINGAPORE — The sole proprietor of a company that was engaged to provide services to Aljunied-Hougang-Punggol East Town Council (AHPETC) is also the secretary of the town council, with the power to co-sign cheques.

Mr Danny Loh Chong Meng is also a director and shareholder of another company engaged by AHPETC, called FM Solutions and Services (FMSS), as are his wife, AHPETC general manager How Weng Fan, and the town council’s two deputy general managers Yeo Soon Fei and Johnson Lieow Chong Sern.

These ownership interests were not fully disclosed when AHPETC entered into contracts involving “substantial sums” with these companies in FY2012/13, the Auditor-General’s Office (AGO) said in its audit report of the town council.

PricewaterhouseCoopers Consulting (PwC) was engaged by the AGO to go through the inflows and outflows of AHPETC’s six current-bank accounts. PwC said that for one managing agent (MA) contract awarded to FMSS, the minutes showed that Mr Loh and Ms How disclosed only that they were directors and employees of FMSS and that they were married to each other. Their ownership interest in FMSS and in another company also engaged by AHPETC — FM Solutions & Integrated Services (FMIS) — was not recorded. Mr Yeo’s ownership interest in FMSS was also not disclosed or documented.

“Given that the role of MA includes ensuring all expenses, disbursements and such other outgoings are duly paid and discharged out of the monies collected on behalf of the town council ... this conflict, and the safeguard to address this, is material and ought to have been fully disclosed to the (town council) and properly evaluated before the (contract) is entered into,” PwC said.

While it is normal practice for the MA’s employees to be appointed as officers of a town council, the real issue was that the staff members in question had ownership interests, they said.

In its review of 84 invoices and credit notes of FMSS and FMSI, PwC found that Mr Loh, Ms How and Mr Yeo played roles in reviewing the work done and approving payments from the town council to FMSS and FMSI.

For example, for nine invoices amounting to S$264,468.04, Mr Yeo verified the invoices, while Ms How was involved in approving the payments. The cheques were then signed by Mr Loh in addition to another signatory, the chairman or vice-chairman.

While these payments were based on contracts approved by AHPETC, both Ms How and Mr Yeo, as shareholders of FMSS, are “clearly interested parties” and could not be relied on in the circumstances to provide an independent verification in the best interests of AHPETC, PwC said.

In response, AHPETC said it had never disputed that the town council and FMSS were related parties. It said that since September 2011, every cheque to FMSS, regardless of the amount, had to be co-signed by the town council chairman or vice-chairman. Other controls have also been enhanced, such as having the chairman approve works orders before project claims are made.