Established in 1999

Continued from FrontPage of Article

4.2.3 Going forward, the new NKF Board plans to spend at least 70% of total expenses for the year on dialysis patients. With the trimming of staff and other administrative costs combined with the reduction in fund-raising expenses, the new NKF Board is confident of achieving its desired ratio.
　

4.2.4. Under the new NKF Board, rebates given by drug companies with effect from (1 August 2005) have been passed on to patients.


5. ACCOUNTING AND FUND-RAISING PRACTICES

Q3: Whether there has been any accounting and/or fund-raising irregularities?

5.1. In the area of fund-raising and irregular accounting, KPMG found a number of areas lacking, including:

Compliance with the 30/70 rule. KPMG specifically looked at three fund-raising projects of NKF and found evidence of manipulation of the accounts, in order to comply with this rule.

5.2. The new NKF will paying closer attention to the way funds are raised and the methodology used. It has put in place proper financial management and controls, and will outsource its internal audit to an independent party. This will ensure impartial internal auditing, in particular its operational and accounting processes. The NKF’s Audited Financial Accounts for 2004 now conforms, as far as possible, to the UK SORP 2005 standards, and the NKF will post all future Audited Financial Accounts online for greater transparency.


6. COMPENSATION OF MR TT DURAI

Q4: Whether Mr TT Durai was appropriately or properly compensated?

6.1. KPMG concluded that Mr TT Durai received much more remuneration whilst appearing to accept less than the full official proposed salaries in his 1995 and 1997 increments. KPMG found that in fact, Mr Durai received more remuneration from an ostensibly lower salary than if his salary had been increased.

6.2. NKF has now detailed HR policies relating to salary, annual increments and performance bonuses, benefits and allowances, leave and transport and travel allowances.


7. USE OF DONATIONS

Q5: Whether the NKF used donations and/or similar forms of donation income for extravagant or excessive spending?

7.1. Air Travel. KPMG listed numerous travel trips taken by Board members, senior volunteers and staff. Travel was frequent and while Business Class was permitted, they travelled on First Class where the fare was equivalent to the Business Class fare of Singapore Airlines, purchased in Singapore.

7.2. Clear HR policies are now in place with guidelines on air travel, subsistence allowance to be used by staff or senior volunteers when they were overseas on official business.


8. THIRD PARTY CONTRACTS

Q6: Whether there existed any errors or lapses in judgment in the entering of contacts with ostensible third parties?

8.1. The former NKF Board entered into a contract each with Forte Systems Inc, and Protonweb Solutions Pte Ltd, for two major projects, but neither companies contracted delivered satisfactory results to the NKF despite payments already made to them. These contracts were worth a total of $7.5 million ($3 million with Forte Systems and $4.5 million with Protonweb)

8.2. KPMG’s report indicates that all members of the former NKF Executive Committee, including Mr TT Durai, took on a role akin to directorship.

8.3. The new NKF Board is of the view that in these circumstances, the former Directors/ExCO owed fiduciary duties to NKF, duties of loyalty and fidelity and the duty to take reasonable care in the management of the NKF. KPMG’s report further indicates that at least some Executive Committee members fell short on many occasions. In terms of loss to NKF, it was the entry into and administration of the contracts with Forte and Protonweb that have had the most adverse impact. The terms of these contracts were unusual, and the attitudes of the ExCo members to the poor performance of these contracts were extraordinary. The new Board has sought legal advice and is considering action against the ExCo members in relation to these contracts.

8.4. NKF has terminated its contracts with Forte Systems and Protonweb Solutions and will attempt to recover payments it has made to them.


9. CONFLICT OF INTEREST

Q7:Whether there existed any abuse of any actual or perceived conflict of interest?

9.1. KPMG found that several directors in the former NKF Board and key management personnel had interests in or were involved in companies who had business relationships with the NKF. Mr Pharis Aboobacker, a friend of TT Durai, was a recurrent figure in the business relationships between NKF and a number of companies


10. NKF RESERVES

Q8: Whether the NKF’s reserves are adequate in respect of its current programmes and if so, for how many years?

10.1 Based on different assumptions, KPMG’s calculation of the NKF’s reserves ranged from 2.35 years to 11.9 years. The set of assumptions that was most comparable to the set used by the NKF in its own calculations yielded a reserve figure of 6.6 years.

10.2 This figure is very close to the calculation by the new NKF Board of 6.7 years, as announced at a press conference held on 8 December 2005.

10.3 Whilst it is a comfortable position to have a reserve of 6.7 years, the new NKF Board is mindful that its patients are being cared for periods lasting more than 10 years. One patient has been with the NKF for 23 years now. The outcome of fund-raising efforts for any one year is always hard to predetermine. Thus, the ideal state is to have a reserve to cover 10 years of operating costs.

10.4 The new NKF Board has stated that it will immediately start on working to increase its support base. Even if new supporters each pledged $1 a month, it will provide the comfort of knowing that the support base exists and can be asked to help if there is a need to raise more money, such as for large capital expenditure in renewing existing dialysis centers or the building of new ones.

10.5 Our aim is to raise enough donations each year to at least breakeven and if possible, to provide a modest surplus to top up the reserves

10.6 The new NKF Board has no plans for any mega charity shows to rake in large sums of money. It will focus on its Life Drops programme, pledge cards and one-off individual and corporate donations. The new NKF will engage all these donors and ensure that they are regularly updated on the performance of NKF, operationally and financially.


11. REGULATORY OVERSIGHT OF THE NKF

Q9: Whether there was adequate regulatory supervision over the operations and activities of the NKF?

11.1. KPMG has made the following observations:

11.1.1. That while the Commissioner of Charities forms the central plank for the regulatory oversight of charities, there are various other bodies that participate in an assortment of roles which result in a sometimes confusing regulatory environment. The regulators play different roles, and not all are concerned with the welfare of charity beneficiaries, true owners of charities and their funds, or the management of the affairs of a charity. While some bodies have the power to initiate an investigation into the management of a charity, none did so in the case of the NKF, in the absence of formal complaint.

11.2. There is no straightforward answer to the question as to whether and which of the regulatory bodies is responsible for more extensive audit of NKF. The position of the new NKF Board is that it is the Boards of charitable organizations that must be ultimately responsible for good governance and effective management of their respective charities.


12. THE NEW NKF GOING FORWARD

12.1. The NKF is committed to set high standards of transparency and accountability, and will continue to keep donors and public informed on developments at NKF. Our fund raising strategies have been reviewed and there are checks and balances in place to ensure that donors’ money are well utilized to benefit patients.

12.2. Another top priority is to ensure that needy patients’ care and existing clinical services are not disrupted. We are focused on patient care and has brought down costs through prudent expenditure, and has also increased patient subsidies so that more can benefit.

12.3. There are many Singaporeans who have benefited from the work of the NKF and who continue to require care and assistance, and we seek the cooperation of all to continue to give their support to the NKF and other charitable organizations.

12.4. The NKF and our patients are very grateful to the 250,000 donors in our LIfeDrops Programme and individuals and corporations and religions organization who continued to support NKF course despite the very trying times over the last 5 months. We are looking into ways to engage and involve these steadfast and loyal donors and all future donors to help NKF shape how this charitable organization will be run.
　

Source: www.nkfs.org  Press Release 19 Dec 2005

STATEMENT BY HEALTH MINISTER KHAW BOON WAN ON KPMG'S REPORT ON THE NATIONAL KIDNEY FOUNDATION

Responses to KPMG report on NKF

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