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Risk of overpayment due to conflicts of interest, lack of safeguards: Judge

Risk of overpayment due to conflicts of interest, lack of safeguards: Judge

Source: Straits Times
Article Date: 12 Oct 2019
Author: Tham Yuen-C

Systemic control failures that represented a breach of duties of skill and care by the town councillors: Justice Ramesh

An inherent risk of overpayment was created from the involvement of people with conflicts of inte-rest in the approval process for payments to the managing agent of Aljunied-Hougang Town Council (AHTC) as well as from a lack of safeguards, said Justice Kannan Ramesh.

He made the observation in his judgment released yesterday in the civil suit brought by AHTC against its own town councillors, managing agent and this company's owners.

Giving his analysis of whether or not improper payments had been made to managing agent company FM Solutions & Services and its sister company FM Solutions and Integrated Services, the judge said there were systemic control failures that represented a breach of duties of skill and care by the town councillors.

While there was a standing order for all cheques issued by the town council to be co-signed by its chairman or vice-chairman, there was no system to ensure that each cheque was fully verified by independent parties.

In some instances, supporting documents were signed after a mere tallying exercise, he added.

In the judgment, he also found that the award of contracts and payments to some third-party contractors of the town council were problematic.

In some contracts, the companies that quoted a higher amount were appointed.

This was the case with LST Architects, which was engaged for seven out of 10 construction projects, costing the town council $2.8 million more in payment. The firm was the higher priced of two firms on the town council's panel.

However, it was picked for the projects as the tender committee felt the other firm, Design Metabolists, had shortcomings such that it was no longer a viable option.

Justice Ramesh said this was a breach of the Town Council Financial Rules, as the town councillors should have called a fresh tender if that was truly the case.

In other instances, the town council had not exercised the option of extending the contracts with its existing firms, although they were offering better rates.

For instance, Red-Power was appointed to maintain the estate's refuse chute flushing system and roller shutters, among other things, despite the existing providers Digo and Terminal 9 offering much lower rates.

In another instance, the town council had re-awarded contracts to its existing providers of cleaning works, J Keart and Titan, but at a higher rate. This happened despite the option to extend the existing contracts.

Citing the contracts, Justice Ramesh found there had been a breach of the duties of skill and care by Workers' Party MPs Sylvia Lim and Pritam Singh, as well as town councillors Kenneth Foo Sek Guan and David Chua Zhi Hon, all of whom were on the tenders committee.

But the judge found no breach of duties by the defendants in making payment for 12 invoices totalling $171,112.62 and 56 invoices totalling $674,388.70 to third-party contractors.

He said the fact that the 12 invoices were not accompanied by monthly service reports or other supporting documents did not mean there was a breach.

This was because they were invoices to third-party contractors for routine works, or works for which AHTC had since been reimbursed, added the judge.

For the 56 invoices, he said any breach of the Town Council Financial Rules was by the head of department, and there was insufficient evidence of any of the defendants' involvement in the payment approval process for these invoices.

Tham Yuen-C

Source: Straits Times © Singapore Press Holdings Ltd. Permission required for reproduction.

 

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Singapore Law Watch / 13 Nov 2019

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