Latest on the KPMG's audit findings:
KPMGs report on investigation into
the National Kidney Foundation (NKF)
1 INTRODUCTION
1.1. In July 2005, when the new NKF Board took office, it
commissioned KPMG to conduct an independent investigation into
NKFs past practices. KPMG has completed its investigation and
submitted its report to the NKF Board on Friday, 16 December
2005.
1.2. The full investigation into the past practices of the former
NKF board and management revealed poor management practices and a
lack of good governance of the NKF under its previous Board and
management, and even questionable ethical conduct.
1.3. Over the past 5 months, the new NKF Board has taken active
steps to improve governance and accountability, enhance
transparency, reduce operating costs and improve patient care. On
top of these, clear human resource and remuneration policies have
been established and financial management strengthened to prevent
abuse. The new Board recognizes that it is our moral imperative to
manage the NKF in accordance to the principles of good governance,
integrity and accountability to our donors, and will continue to
improve the NKFs governance framework and management practices to
regain the publics confidence.
2 KEY KPMG FINDINGS AND FOLLOW UP BY THE NEW NKF
2.1 For the investigation, KPMG devoted a team of forty
professionals and more than 10,000 man-hours in its investigation.
It sought to address questions in nine key areas.
2.2. In its report, KPMG has highlighted major weaknesses within
NKFs the governance framework. The new NKF Board is seeking legal
advice on whether there were corporate practices which might have
crossed the legal/regulatory line, and on the appropriate course of
actions to be taken against the former NKF Directors/EXCO Members
and others where applicable. NKF will have to be mindful of
balancing the cost of any actions and the interest of the
organisation.
2.3. In this press release, we assume that readers would have read
the full KPMG report. Hence only salient information in the report
will be highlighted for presentation.
2.4. The key KPMG findings are summarised below, together with the
new NKF Boards follow-up actions:
3. GOVERNANCE OF THE NKF
Q1: Whether there existed any deficiencies in control, oversight
and independence relating to issues of governance of the NKF?
3.1. Function of Former Board versus the Executive Commitee
3.1.1. KPMG found that the former NKF Board delegated all powers to
the Executive Committee, which in turn delegated most, if not all,
powers to the former Chief Executive Officer, Mr TT Durai. The
Board was largely an ineffective one, which resulted in the
concentration of power and authority in Mr TT Durai.
3.1.2. The new NKF Board consists of a panel of eminent
professionals who are experts in their respective fields. Their
roles and responsibilities are clearly spelt out and well
delineated from the executive management and staff. The Board has
also formed 7 committees in charge of specific areas: Audit
Committee, Finance Committee, Legal/Governance Committee,
HR/Remuneration Committee, Investment Committee, Nomination
Committee and Medical Committee.
3.1.3. The new Board and management have also revised the NKFs
administration organization structure to achieve a higher standard
of governance and accountability.
3.2. Human Resources
3.2.1. Under the former NKF management, the NKF did not have a
formal remuneration policy nor a comprehensive HR policy on staff
benefits, which led to the apparent arbitrary determination and
awarding of promotions, salary increment, performance bonus and
other discretionary payments.
3.2.2. Now, the NKF has new HR policies that contain clear
guidelines covering all aspects of staff benefits and entitlements
as well as HR processes. Some of these polices are already in force
while others, like the new salary policy, will be introduced from 1
Jan 2006. When the salary policy is implemented, the NKF will have
a clear salary and grade structure and therefore a progression path
for its staff. It will define salary ranges, annual increments,
performance payments and there will be defined processes.
3.3. Financial Management & Control
3.3.1. The former NKF Board had a Finance Committee, but was
largely ineffective. KPMG found numerous breaches of stated
purchasing policy and noted inadequacies in finance and accounting
controls.
3.3.2. The new NKF Board has put in place a clear finance policy
with checks and balances on approval limits and limits on cheque
signatories. This will ensure proper and controlled processes for
budgeting, purchasing, tenders, contract approvals and
claims.
3.4. Disclosure & Transparency
3.4.1. The NKF Boards Audit Committee was also found to be
ineffective.
3.4.2. The new NKF Board will outsource its Internal Audit work to
an independent CPA firm to ensure maximum
impartiality.
