Charity for Whom? 

News just came out that the Director of St John's Home for the Elderly has gone missing, together with over $3M of its $4M of bank deposit. While the criminality of this incident is still under investigation, I wonder why a home with just 60 residents to take care of requires such a large fund. Like old NKF management that raised big money but got into big trouble, St John's home seems better at raising money than spending it for the intended purpose.

Large amounts of money sitting idle in charity organization accounts are undesirable for a number of reasons: the money might have been better devoted to other, more urgent needs, the management may not have tried hard enough to expand its ervices, and it may have set up too large an organization for too small a service population, with the result that (a) it need to have enough money to pay overhead and guarantee continuing operation (b) yet it may not be spending enough on the servicing itself, but too much on maintaining the infrastructure; finally, idle sums of money would sooner or later attract the wrong kind of attention, such as wasteful or at least careless spending by administrators unconstrained by budget issues, criticism from outsiders and donors, and of course, sticky fingers.

In some countries, a charity organization would lose its tax free status if it fails to spend x% of its money on the intended purpose each year. This goes some way towards both the right amount of service provision, and right amount of fund raising - if an organization raises too much money it might end up merely paying the extra raising in tax!

Ren Ci under probe for financial discrepancies        

ANOTHER charity has come under probe. Ren Ci Hospital & Medicare Centre is being investigated by the Health Ministry for possible financial discrepancies, believed to have arisen from a few million dollars in interest-free loans to several companies in the past decade. The largest charity under the Health Ministry after the National Kidney Foundation (NKF), Ren Ci will lose its Institution of Public Character (IPC) status on Nov 27, when it is due to be renewed.This means that it can accept donations, but donors will not get tax exemptions. Ren Ci will continue tending to its 120 nursing-home patients and 300 chronically sick patients at its facilities in Jalan Tan Tock Seng and Buangkok through the probe. Health Minister Khaw Boon Wan told The Straits Times last night that he believed in a 'firm, fair and transparent' approach to the probe. While an inquiry was called for because the transactions had not been 'well explained' by Ren Ci's management, he said 'we should not jump to any conclusion until the inquiry is completed. That will not be fair to the parties involved'. His ministry said yesterday that a review of the charity had turned up 'possible irregularities in certain financial transactions' involving Ren Ci and some external parties, and that an inquiry would clarify them. The Straits Times understands that several companies had been given loans, some amounting to hundreds of thousands of dollars. But Ren Ci's books recorded loans that, in some cases, were several hundred thousand dollars more than what was reflected in the borrowers' books. These irregularities surfaced in the wake of the ministry tightening corporate governance among the charities under its wing last year, following the NKF scandal of 2005.In July last year, the ministry appointed accounting firm Ernst & Young to carry out a general review of the operations at its 12 largest IPCs, including Ren Ci. At the end of the review in February, Ren Ci was asked to split the role of board chairman and chief executive officer. Both positions were then held by Venerable Ming Yi, a colourful character who has performed death-defying stunts in the charity's popular annual televised fund-raisers. He has since become Ren Ci's honorary CEO. Mr Chua Thian Poh, chief executive of property developer Ho Bee Group, became the charity's chairman in September. The ministry next got Ernst & Young to delve deeper into Ren Ci's operations, which was when the loan discrepancies were uncovered. Yesterday, the ministry informed the Ren Ci board that a probe under the Charities Act would be convened. This is expected to take three months, after which the findings will be disclosed and 'appropriate measures' taken. Auditors were seen moving files into a room on the ground floor of the hospital's Buangkok premises just before 7pm yesterday. Venerable Ming Yi was seen on the premises, but declined to take calls to his cellphone. Mr Chua, contacted in China, where he is on a business trip, declined comment and referred The Straits Times to a statement put out by Ren Ci, which said: 'Ren Ci Hospital & Medicare Centre has a culture of strong corporate governance and transparency. When complaints are made, they will be fully investigated. 'We would like to reassure the public that the professional standards and services of Ren Ci will remain intact and the day-to-day operations and patient care will carry on undisrupted.' The charity employs more than 300 people and earned about $30 million last year - $9.5 million from donations, $10 million from grants and sponsorships, and $9.8 million from fund-raisers and other activities.

Where is My Money?

It is not much of an exaggeration to say that the above question is constantly on the mind of Singaporeans with respect to CPF. By collecting money from from a large number of small subscribers and investing it in the aggregate, CPF acts like a mutual fund, but it does not provide a mutual fund's freedom to cash out when you want (or to buy additional units if you think the deal would be advantageous), nor does it publish accounts on what investments it current holds and what profit/loss it may have incurred, or promise to distribute its surplus to subscribers.

Lack of information in such situations usually causes two opposite suspicions: (a) the money managers made huge profits but dont want to share them with me (b) they lost huge sums in bad investments but want to keep quiet about it. I would guess CPF by its nature would invest mostly in safe but rather low yield instruments, while mutual funds could, at least in part, be more daring.

It is believed in the past that CPF lends most of its money to HDB to build low cost housing for the public. This does not appear to be the case today, first because HDB now sells most of its apartments to their occupants, so that it would have enough cashflow to plough into new constructions without having to borrow, second because now banks, not HDB itself, provides loans for purchases from HDB, so that the cashflow is generated quickly rather than over the life of an HDB loan. Today most of the CPF funds are probably invested in government bonds.  Whereas both Temasek and GIC invested overseas, and Temasek deliberately sets out to be a trail blazer in various domains like technology and financial innovation, CPF's scope of operation has to ensure regular fund accumulation in order to guarantee the principle and interest due to its account holders.

But the, what does the government do with the raised from selling bonds? Captal investments produce assets that may be sold to GLCs or floated on the stock market; either way, they become part of the assets under the control of Temasek. The capital assets also provide income and enlarges the budget surpluses, which are then invested by GIC. So indirectly, CPF money does play a part in Temasek and GIC