New rule to safeguard council funds

[johnlim]

ST Dec 2, 2007
New rule to safeguard council funds
By Tan Hui Yee & Mavis Toh

TOWN councils tempted to play the stock market to increase the returns on their sinking funds will now have to meet a new rule that caps how much they can put into higher-risk investments.

Councils, which have had some leeway when investing their cash, must limit their investments in non-government stocks, funds or securities to 35 per cent of the sinking fund.

This new rule, which kicked in yesterday, applies to more than $1 billion in sinking funds managed by the 16 town councils in Singapore.

The money is collected through monthly service and conservancy charges and government grants and is used for cyclical repairs, such as re-painting or re-roofing.

The Ministry of National Development brought the rule in to strike a balance between councils trying to get good returns on their funds and not taking undue risks with residents' money.

Some council cash has been going into shares and corporate bonds, which are considered riskier than government ones.

The president of the Society of Financial Service Professionals Leong Sze Hian said: 'Corporate bonds are only as good as the company can pay. The risk of a company running out of money is higher than that of the Government.'

Before the new rule, council investments were governed by the Trustees Act, which placed restrictions on some instruments. The new 35 per cent cap is seen as stricter, but no council contacted by The Sunday Times said it would have trouble complying.

The Hong Kah Town Council has about $150 million in its sinking fund, with one-third invested in government bonds returning 2 to 3 per cent. Another third is in short-term fixed deposits with returns of 1.5 to 3 per cent, with the rest handled by fund managers.

The investments can include corporate bonds and stocks, which are riskier. But this portion, handled by fund managers, nets about 8 to 10 per cent in returns a year, said council chairman Ang Mong Seng.

Sinking funds are typically parked in safe investment instruments, such as government bonds and fixed deposits. But a few years ago, many councils felt that they could do better by investing in other instruments, such as shares.

Many then let fund managers invest a bigger portion of their cash and reap better returns.

http://mrwangsaysso.blogspot.com/2007/12/you-give-your-money-to-your-town.html

Are we paying too much?

Why would the town councils be sitting on more than $1,000,000,000 in excess cash?

And you still have to pay them every month with ever increasing fees. :sweat:

 

[aeskywan]

It does bring to mind a few questions.

1) Why is there an such an excess
2) Why is the excess being put into funds
3) If there are returns, where does the money go to?
4) If there is a loss, who accounts for it?
5) Are we sitting on a every growing amount of money and if so why so?

Something to think about.....

 

[sammy888]

It does bring to mind a few questions.

1) Why is there an such an excess
2) Why is the excess being put into funds
3) If there are returns, where does the money go to?
4) If there is a loss, who accounts for it?
5) Are we sitting on a every growing amount of money and if so why so?

Something to think about.....

That does not scare me as much as knowing the fact that they are allowed to use the fund for speculation and other investment tools to generate (I read as gambling) more money. Are they allowed to be that enterprising and what stop them from pocketing the profit if they did make a killing in the market?

 

[aeskywan]

That does not scare me as much as knowing the fact that they are allowed to use the fund for speculation and other investment tools to generate (I read as gambling) more money. Are they allowed to be that enterprising and what stop them from pocketing the profit if they did make a killing in the market?

Read point 3 of my post..... where does this immense amount of excess money that will grow if invested properly go to? And we are still paying our fees with no returns.

 

[SianZronG]

yah where does the money go? back to teh fat bonuses of the top wings in the coucil members for getting big returns on he investments and the people who pay and pay town council just keep paying who gives a damm abt them anyway.....

 

[johnlim]

And nobody knows that the town councils are sitting on so much money until the news came out recently. And who are monitoring that sum of money? How much of those investment goes to the salaries of those who manage the money?:dunno:

With so much of the people's money ready for investment, why is there not enough money to upgrade our opposition ward?

 

[snowspeeder]

Maybe they should offer interest free loans to needy families.

 

[eikin]

Maybe they should offer interest free loans to needy families.

:think: sounds like an excellent idea