Leong Sze Hian -
Last year, in November 29, 2009, the chairman of the NKF, Mr Gerard Ee [picture left] was reported to have said: "The charity has enough reserves to last for about five years.”
Its annual report for 2010 says that the current reserves are projected to last for about seven years, adjusted for inflation and projected capacity increase.
On 8 July 2010, NKF’s chief executive Janice Tay said: "[Based] on the calculations that we have on our reserves, our current reserves, we could last up to four years....if there were no donations coming in"
Confused? We are.
I refer to the article “NKF short of money and nurses” (ST, Jun 5).
Even if NKF continues to have an annual net deficit of $0.9 million like last year, its surplus of $9 million for the previous year may be enough to cover about 10 years of deficits.
The main reason for its investment income falling from $15.4 million in 2006 to $6.6 million last year, may be because the global investment markets for the last year, was the worst in the last 60 years or so, due to the financial melt-down.
With reserves of $247 million, if the rate of return on its reserve funds increase by just 0.4 per cent per annum, compared to the last year, the increased investment income may be enough to offset the annual deficit of $0.9 million.
Another way of looking at it is that the $247 million reserves may be sufficient to cover 274 years of its annual $0.9 million deficit.
With $247 million reserves now, compared to the $263 million in 2005 when the NKF scandal unfolded, I understand that the NKF is still the charity with the largest amount of reserves.
As its total funds is $278 million, if we include the Restricted Fund of $26 million and Endowment Fund of $4 million, does it mean that it now actually has more funds than in 2005?
With many charities still reeling from the economic recession last year, I feel that there may really be no real need for NKF to sound the alarm bells now to appeal for more donations, given its relatively sound financial situation.
Its annual report says that the current reserves are projected to last for about seven years, adjusted for inflation and projected capacity increase.
In my view, this reserves ratio may be somewhat pessimistic, as it assumes that that there will be zero donations for seven years.
Since the bulk of NKF’s funds - $200 million are managed by two fund managers on a capital guaranteed mandate - is it also assumed that there will be no investment income for seven years?
Given that it had $18.5 million donations for the last year, in the midst of Singapore’s worse economic recession, and that what perhaps riled Singaporeans most when the NKF scandal broke, was the issue of whether the NKF had three years of reserves or 30 years of reserves, I would like to suggest that the calculation of its reserves ratio be further clarified to include projected donations and investment income in the future.
Finally, as the current financial year ended on 30 June 2010, surely there are already some indication as to whether this year’s investment income, donations and net operating deficit, have increased or decreased compared to last year.
I am somewhat puzzled as to why NKF told the media that it was short of money and in the red in June, only to turn into the black just one month later, with a surplus of $5.8 million which is more than six times the previous year’s $0.9 million deficit?
So, how long actually can NKF’s reserves last - 5 years (Nov 29,2009), 4 years (Jul 8, 2010), 7 years or longer?
Picture from The Straits Times.