The $158 billion Singapore Budget Accounting Fraud: Part I

Balding's World

Respected companies like Olympus, Lehman Brothers, AIG, and the most notorious fraudster Bernie Madoff have all been caught blatantly manipulating accounting statements dating back many years.  As a result of their behavior, those responsible lost their jobs or went to prison.

What happens when arguably the largest accounting restatement in the history of human existence due to fraudulent accounting practice takes place in the Singaporean government?  Nothing.  Absolutely nothing.  No Singaporean public official to the best of my knowledge has even commented on a $158 billion SGD accounting restatement of Singaporean public finances.

We have been working with official Singaporean general and operational budget revenue, expenditure, and surpluses.  The general and operational data comes from both Statistics Singapore and the International Monetary Fund.  The results of each type of government surplus while all different, all produce generally similar numbers regardless of source.

Table 1-Singapore Cumulative Surpluses September 2011

As we can see in Table 1, the Singaporean surpluses from all sources while quite large produce broadly similar numbers with a low of $225-300 billion SGD since 1990 whether we take our numbers from Statistics Singapore or the IMF September 2011 World Economic Outlook or their International Financial Statistics databases.

However, in April 2012 the government of Singapore restated its public finance statistics going back to 1990.  Given the history and size of the restatement it would probably go back further and increase even more, but the IMF World Economic Outlook only provides Singaporean public finance data back to 1990.  The restatement of Singaporean public finances was not small, short, or insignificant in anyway.

Table 2—Cumulative Surpluses April 2012

Between September 2011 and April 2012, the government of Singapore restated its public finances raising it cumulative surplus from 1990 to 2010 from $271 billion SGD to $429 billion SGD.  Through an unannounced accounting restatement which Statistics Singapore data does not reflect, the cumulative surplus between 1990 and 2002 increased from $189 billion SGD to $311 billion SGD.  In other words, due to an accounting restatement of its own public finances, Singapore increased the size of its budget surplus by $158 billion SGD.

While a restatement increasing the size of the Singaporean surplus may at first seem like a good thing, it is in fact not a good thing.  The last Singaporean balance sheet listed $705 billion SGD in assets but also $359 billion SGD in debt giving it only $346 billion SGD in net assets.  In other words, through the investment magic of Temasek Holdings and GIC, Singapore managed to turn $428 billion SGD in government surpluses into $346 billion SGD in net equity.  The larger the surpluses in Singapore means the larger the losses and discrepancies in Temasek and GIC.

This restatement as a couple implications.  First, given the historical length and size of the accounting restatement, the government should be held accountable to provide detailed information about restated items.  $158 billion SGD restatements destroy any credibility and demand a public explanation.  Second, those responsible at the highest levels should be held accountable for accounting manipulation dating back more than twenty years.  $158 billion SGD is not an accounting rounding error.   A restatement of $158 billion is a deliberate manipulation.  Third, given the restatement, there is absolutely no way Temasek and GIC claims of long term returns can be considered accurate.  $428 billion SGD in surpluses does not turn into $346 billion in net equity by earning 7-17% over more than twenty years.

For a government who claims to value accountability and transparency, its attempt to cover up a restatement of $158 billion SGD or approximately 50% of GDP is appalling.  At what point does a restatement become worthy of a public statement by the government: $300 billion, $500 billion, $1 trillion?  If Singapore was a company, people would deservedly have lost their jobs.  Only in Singapore is a $158 billion SGD accounting fraud standard operating procedure.

Next week, I will detail the accounting restatement, provide examples of how accounting was manipulated by the government, and how this impacts the returns claimed by Temasek and GIC.