By Tan Dawn Wei and Zureena Habib

Town councils must be accountable to their residents for what they do with the money they collect from them, said National Development Minister Mah Bow Tan.

But the Government should not meddle with how these funds are managed, just as it does not interfere with the town councils' other operations.

'Each town council has the duty to explain to its residents how it invests its funds, what is its philosophy, what are the risks it takes,' said Mr Mah at a green event, Everyone Go Green Day, in Tampines yesterday.

'And demonstrate that it has made those decisions in a manner which is fair, reasonable and which residents would agree with.'

He was asked to respond to news that emerged last week that eight of the 14 town councils run by the People's Action Party have invested about $16 million in troubled structured products.

These include Minibonds linked to bankrupt United States investment bank Lehman Brothers and the now worthless Merrill Lynch Jubilee Series 3 LinkEarner Notes.

The town council in Mr Mah's Tampines GRC ward had $250,000 invested in Lehman Brothers bonds.

The investments came from the town councils' sinking funds, which are amassed from residents for long-term cyclical maintenance, including lift upgrading.

The Government stipulates that 20 to 25 per cent of money collected from monthly service and conservancy charges must go to a sinking fund.

But 'how that sinking fund is to be invested ultimately depends on the various town councils', said Mr Mah, in his first comments on the matter.

Last December, the Government introduced a cap limiting the councils' investments in non-government stocks, funds or securities to 35 per cent of their sinking funds.

Town councils can choose to put that 35 per cent in fixed deposits too, but it may give returns lower than inflation in the long run, he said.

The Government's job is to make sure that there are sufficient funds so residents' needs are taken care of.

To this end, Mr Mah said his ministry is looking at how to measure the performance of the town councils - 'KPI, as it were', he said. KPI stands for key performance indicators, a set of quantifiable measures used to gauge or compare performance in relation to goals set.

Results will also be published so residents know where their town councils rank.

Mr Mah also said the building and upgrading of HDB flats will go on regardless of how the economy fares. This year, HDB is building about 8,000 new flats.

The National Development Ministry yesterday said 1,000 two- and three-room flats will be offered under HDB's Build-To-Order scheme this year, to cope with demand from those who may downgrade because of financial problems.

These two- and three-room flats form about 20 per cent of the total supply of flats from 2006 to this year. Over the next few years, 2,000 or more of such flats will be offered annually, subject to demand.

HDB is also building more rental flats to cater to those who cannot afford to own a flat. 'For this small group of people, about 5 to 10 per cent of Singaporeans, we will make sure that there are new rental flats for them,' said Mr Mah.

Asked if there are any plans to bring back the deferred payment scheme, which allowed home buyers to postpone new property payments, but which was scrapped in October last year, Mr Mah said the Government is monitoring the property market closely.

'If there is a need for us to make further changes, we will certainly do so.'

This article was first published in The Straits Times on 23 November 2008.