TOC Note: 14 of our readers have sent emails, since Tuesday, to query their town councils on their investments. None of the town councils have replied so far. We’d like to urge more of our readers to do the same. Please click here to copy and paste the email to your town councils. Thanks.
The following is by Dr Teo Ho Pin, co-ordinating chairman of the 14 PAP town councils . From TODAY.
We would like to take this opportunity to clarify the recent commentaries and queries from your readers on Town Councils’ investments.
Why is there a need for Town Councils to accumulate sinking funds?
Town Councils are required to maintain sinking funds to finance the longer-term and expensive works such as replacement of lifts and water supply systems as well as repainting, re-roofing and electrical re-wiring works.
In addition, the Town Councils use sinking funds to co-pay for lift upgrading so that residents pay a smaller portion of the total cost.
By accumulating sinking funds over time, HDB residents do not have to pay an additional lump sum each time one of these major works needs to be done. For example, lift replacements are carried out every 28 years on average.
The 14 PAP Town Councils manage about 900,000 HDB flats or 9,000 HDB blocks in Singapore.
After almost two decades of accumulation, our sinking funds amount to under $2 billion or just over $200,000 per HDB block. This is not excessive as the overhaul cost of just one lift for a 12-storey block can cost about $100,000.
Some readers may have the impression that we are investing with short-term operating funds from S&CC collected. We would like to clarify that the investments are made with Sinking Funds and accumulated surpluses, which are meant for long-term use.
How are our sinking funds managed?
The PAP Town Councils are guided in their investment decisions by guidelines set by the Ministry of National Development and approved financial advisors and/or professional fund managers.
We are mindful that overly conservative investments generate a low rate of return and do not sufficiently protect the funds against inflation, thereby building up pressure to increase service and conservancy charges (S&CC).
We take a prudent stance by spreading our investments over a mix of deposits, securities and other financial products, within the approved investment framework.
Our aim is to generate higher returns during the good years to offset lower or even negative returns during the bad years, so that we can still achieve a healthy average return over the medium term.
We take a longer-term view of Town Council sinking funds, in line with the funds’ long-term objectives.
We recognise that the amount invested in Lehman Brothers’ related products is not a small sum in absolute terms ($16 million), even though it is only 0.8 per cent of the funds.
These losses arise from the unprecedented situation facing financial markets around the world, which saw the failure of an “A” rated bank and the near failure of other financial institutions that had received similarly good rating. Institutions and investments that were considered safe by most have failed and are now deemed high-risk on hindsight.
Out of the eight Town Councils that have been exposed to Lehman Brothers either directly or indirectly, six of them had their investments made by their fund managers.
The Town Councils invest our funds prudently as we understand our responsibility to our residents. We have not done poorly or mismanaged the funds.
Over the last 6 years, we have achieved an average rate of return on investments of over 3 per cent per annum. This is more than three times the average interest of about 0.9 per cent per annum earned on Fixed Deposits, and greater than the2.9 per cent from SGS 10-Year Bonds over the same period.
We wish to reassure our residents that we are financially secure. Estate maintenance and improvement plans will not be affected.
How will the PAP Town Councils make sure that their residents are kept informed of their Town Councils’ finances?
Our financial statements, including our statements on our sinking fund and disclosure on the fair value of our investments, are audited and published annually. They are prepared in accordance with the Financial Reporting Standards.
The residents can access our financial statements and annual reports via the Town Councils’ websites or from our Town Council offices.
As our investments and circumstances differ, the PAP Town Councils will reach out to their respective residents directly to address their queries and receive feedback through channels such as newsletters, town hall dialogues and websites.
We will continue to explore ways to better communicate with our residents and keep them informed of our finances.
In conclusion, we will continue to manage our Town Council funds in a prudent and pragmatic manner.
We wish to reassure our residents that their estate will be well-looked after and that there are sufficient funds for the proper maintenance of their town, both now and in the longer-term.
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truely 1st world country
everything is top-down approach
our opinion is not required; just follow what 1st class minister say
Stop rewinding, open up the book.
without knowing the ground, your senior claimed that investors went in with their eyes open, u have not tell us if you went to invest with your eyes open as well????
anyway, using the taxpayers monies to invest behind their back is already illegal, whether win or lose is not the point here, are we trying to say that CFOs of private companies can also secretly using the company’s fund to do investment without first consulting or informing the board of directors? so why are we arguing here when the case is already pproved ILLEGAL, and when it’s illegal, the person authorizing the transaction must be held accountable for and not let off scot free. There laws in singapore applies to everyone, well unless somebody. . . . . you guess is as good as mine!
Haha.. Dr Teo just don’t get it. He use our money to gamble and when the TCs got richer and gambled again and lost. “It’s not your money”, he said , “it’s the profit from your money,wat!”
How can any govt body use citizen’s money to deal in high risk investments without at least informing the public prior..I don’t get it..He keeps saying TCs are financially secure..we must be thankful.. Don’t worry be happy..I can’t take this! Can we get Bozo the clown to take his place?..No? Then how about those guys from Jackass the movie?..No?..oh dear.
If this happens to our CPF money..Then all is lost..
All our cpf monies will be lost, it is possible when things are done behind our back, this is illegal.
aiyoyo,
cpf $ can be ‘seen’ only sometime age 62 or 65,
how huh? still got several years to reach age 62/65…
not sure by age 62/65, got chance to take+spend our hard earn $ in cpf???
aiyoyo work very hard, and still ? mark whether we can use our cpf $ by then….
aiyoyo think life in this country getting tougher and tougher
FACT is FACT.
Figure is FACT.
Thought I could do some simple maths but shockingly I couldn’t find excuse for the loss.
$16m is lost.
$16m is reasonably pressumed to be the capital which is wiped out without recovery.
Risky structured product CLN is presumed to have a history of 2 yrs.
The 5% return is 3% more than the return from FD or FD equivalent about 2%, hence
The gain over the 2 years = $16m x 3% x 2 = $1m
Add to the 2-yr gain another 4-yr gain presumably another LB Minibond type CLN, the figure = $1m + $2m = $3m
The loss over the 6 years:
$16m – $3m = $13m
Obviously there were other investments (seems that it was the entire sinking fund) that could yield a return of more than $13m, or else how could the $13m be recouped?
It is now that we are told that the loss of $16m is from the $24m – an aggregate of 6 years return, so a simple mathematics suggests that the net return for a total of 6 years is only $6m (after the $16m is wipe out) which gives an average of $1m return in a year,
$1m/$2b, what is the rate of return? Excellent? Mediocre? Your judgement!
Is the figure wrong or my maths wrong?
In 107), it is obviously that there is a calculation error. Somebody works for ZaoPao said the $16m loss is a ‘calculated risk’ so chim but luckily mine is a only a calculation error . Must apology for the honest mistake for the simple maths I did with my eyes open.
$24m – $16 M = $ 6m
Where goes the other $2m?
This $2m is the provision for the likely $3m loss in TC’s another CLN investment in Pinnacle CLN series 6 arranged by Morgan Stanley.
Sorry for non-disclose of this material information: a provision for a potential $3m loss.
Why is Dengue still a proven in HDB estates?
Please use some of the money in the sinking fund to hire professsionals solve this age old problem.
1 life too many.
Great! we have so many supervisor here to supervise the quality services provided by the Town Council.
Yes! it’s time that the Citizen stand up to supervise our govt.
Stand up Singaporean, voice up Singaporean,, write out TOC……
I think we are all barking up the wrong tree. Teo Ho Pin was merely working according to the investment rules for a TC as stipulated by the Finance Ministry. And he has kept within the rules by limiting his gamble on toxic investments to less than 35%. So he has nothing to answer for. The person who should be blamed is the one who stipulates these investment rules. So, it is not difficult to see that the Finance Minister was soley responsible for this fiasco. Who was the Finance Minister who approves these rules? Could it be Tharman or his predecessor? Perhaps we should also be thankful to the Finance Minister for allowing only 35% to be gambled away. It could have been worse, right?
If this is the kind of loss that happened in a private condo management the manager or the Board of Management would have been sacked long ago.
111) anonymous on November 30th, 2008 12.48 pm
If this is the kind of loss that happened in a private condo management the manager or the Board of Management would have been sacked long ago.
What? they could have landed themselves in jail already, this is illegal.
Unfortunately, each and every singaporean is also responsible for the lack of transparency.
we are part of the equation – we cannot shun the responsibility. we did not ask for transparency before. thus , you have current situations. there may be deeper implication than what meets the eye.
i am sad to report that many many singaporeans really, as in REALLY, do not care about this issue. I swear, they really boh chap even when they are :
either:
1. the min bond investors who lost money, they do nothing about it. only a handful signed the petition even after so long. Fact is fact.
or
2. the one who pay and pay the S & C C.
do you want to retire?
btw, i do not find that annual reports is good enough info for me.
that is way too high level.
we need more details like what products have they invested in now and before.
how the money flows.
$100,000 for lift replacement is every 28 yrs. even if it is every 10 years the amount of $$ kept in sinking funds are too excessive.
aiyoyo
keep sinking funds, compare to funds keep inside our own pocket
got difference??
cant understand the logic leh..
aiyoyo
We can only comment on the tc based on what information we have.
We cannot say exactly how good it really is performing until we have all the necessary info. * this is the most important part of my message *
to me, a B/S or P/L is just a very summarised info.
it would be good to know where money is invested in what products and funds transfered from where to where or to where from where.
during election time, they said if they elected, there will be fund for lift upgrading, etc…..then why now TC needs to pay, residents also need to pay??? so in the end, who are the actual parties paying???
“After almost two decades of accumulation, our sinking funds amount to under $2 billion or just over $200,000 per HDB block. This is not excessive as the overhaul cost of just one lift for a 12-storey block can cost about $100,000.”
Err… so? Do we need to overhaul all HDB blocks any time soon? Then there must be something wrong with the way HDB build flats…
“Over the last 6 years, we have achieved an average rate of return on investments of over 3 per cent per annum. This is more than three times the average interest of about 0.9 per cent per annum earned on Fixed Deposits, and greater than the2.9 per cent from SGS 10-Year Bonds over the same period. ”
Doesn’t sound very impressive leh. What’s the point of comparing to Fixed Deposits? Did you guys actually manage to beat inflation or not?
If not, don’t collect so much in the first place la! The only reason for collecting excessive amounts in the first place is so that they can do whatever they want, and we would be none-the-wiser!
If they collect what they need for the short term, then they will have to tell us when they need more money what the money is for! And that kind of transparency is exactly what they fear!
why the need to be so exccessive? so they can do whatever they like and when the time comes for lift upgrading or painting, they will still call for increase of fees. If not becos of the financial saga, you think they will disclose to all you people of these sinking funds? many of the PAP TCs don’t even have any annual auditing reports for so many years, why? becos the master allows them to make these excess monies out of the citizens pockets. C’mon singaporeans, you people has been taken as bloody suckers for so many years by these coffers doing things behind your backs, and you people still want to believe them?
Why must singaporean sigh ?As a singaporean we have to accept what goverment arrange for our country future since now economy going slow
that doesnt mean we have to sigh for everthing PAP done so much for the
pass few years…look ahead…now singapore is a peace country n clean
must we still question abt all stupid question…hehe..life need to go on if we love our country dont asked for this and that because goverment do for the best for their citizens and country…im proud to be a singaporean