TCs maintain two funds: An operating fund for short-term expenditure needs, and a sinking fund for the long-term maintenance needs.
Long-term expenditure needs generally involve costlier works, such as lift upgrading and repair work.
Funds are collected over time as part of the monthly service and conservancy charges. This way, residents do not have to fork out a large sum every time one of these works needs to be done.
Why do TCs need to invest their funds?
To ensure that TC funds are not eroded by inflation, they need to invest their funds prudently.
What kind of products can TCs invest in?
TCs are allowed to invest funds that are not needed for immediate use in Singapore dollar-denominated fixed deposits, stocks, funds and securities.
Who gives investment advice to TCs?
A qualified person. For example, an investment adviser holding a licence under the Securities and Futures Act, or a financial institution approved under the Monetary Authority of Singapore Act.
What is the cap on the amount TCs can invest?
The Ministry of National Development (MND) has imposed an investment cap of 35 per cent on TCs' investments in products that are not issued by the Government or any statutory body, or not guaranteed by the Government.
Should TCs be allowed to decide what they invest in?
Within the investment guidelines put in place by MND, TCs are in the best position to determine the balance that suits their respective financial requirement and risk tolerance.
It is neither practical nor desirable for MND to be overly prescriptive. The ministry has no intention to amend the investment guidelines.
Should TCs be allowed to invest in high-risk products?
When TCs were set up some 20 years ago, the idea was to devolve estate management functions to MPs.
That comes with responsibility and accountability for all decisions - including the amount of charges to impose and how they should provide for sinking funds over the long run.
Were the TCs aware of the risks when they made the investments?
That is a question for the TCs to answer. It's also a question residents have to ask.
How transparent are TC's financial statements?
They are audited and published annually, and are prepared according to the Financial Reporting Standards.
Also, the Town Council Financial Rules state that the type of investments placed by a TC-appointed fund manager and the market value of such investments must be disclosed in the annual accounts.
This story was first published in The New Paper on 18 November 2008.
