A REPORT card on how town councils are doing will be ready next year and it will assess how they run their estates and manage their finances.

One area in particular that the National Development Ministry will review is how much money has been set aside in sinking funds, said Senior Minister of State for National Development Grace Fu.

A preliminary study of these funds showed that the amounts are not excessive.

This was an issue raised by some residents who thought that this was excess money that should be returned to them, after it was revealed that eight town councils run by the People's Action Party (PAP) have about $16 million invested in troubled structured products.

The $16 million amounts to 0.8 per cent of the 14 PAP councils' investible funds. The 14 town councils together have about $2 billion in sinking funds, which are used to help pay for long-term maintenance work like lift-upgrading.

'We will look into the possibility of including financial adequacy in our performance management system, so that residents can have a better understanding of the financial position of their town councils,' said Ms Fu at the launch of an energy-saving effort in Serangoon North yesterday.

In reviewing the adequacy of sinking funds, the ministry will have to look at the size, age and layout of the areas managed and not just the amount of funds.

To make sure town councils have enough funds to replace a lift every 30 years or so, they will have to consider the impact of inflation on their funds, said Ms Fu.

Collect too little from residents and the town councils may have great difficulties later paying for the works, which may be delayed or left undone.

Collect too much upfront and the burden on residents may be too high, she added.

There are already rules governing how the funds can be managed, including not having more than 35 per cent of their investments in non-government stocks, funds or securities.

There are no plans to change this limit, said Ms Fu.

'Thirty-five per cent, which is one-third of total funds, we think is reasonable - a good balance between putting in safe deposits, very safe, risk-free but very low interest rates, and taking some risks with investments,' said Ms Fu.

'There's no need for a knee-jerk reaction' and the ministry has no intention to 'micromanage how they should invest'.

She also urged residents to understand that when it comes to investments, there are risks involved which sometimes cannot be anticipated or responded to.

The report card on town councils will also look into areas like estate management and cleanliness. The benchmarks and grades will be made public so residents can have a better understanding of the performance of their town councils.

On the funding criteria, president of the Society of Financial Service Professionals Leong Sze

Hian said that town councils should have an investment policy statement to be transparent and accountable in how and what exactly they are investing in.

'But from what has been disclosed, it does not appear that town councils are taking a lot of risks,' he said.

'A typical portfolio in the current turmoil would have lost 20 to 30 per cent of their money.'

mavistoh@sph.com.sg

---

Better picture

'We will look into the possibility of including financial adequacy in our performance management system, so residents can have a better understanding of the financial position of their town councils.'
MS GRACE FU, Senior Minister of State for National Development

SEE ALSO PAGE 6