since the tender was submitted. Although work on the second stage was due to be completed in May 1974, the building was not considered suitable to be handed over until June 1975.
80 The ultimate cost of the project amounted to $16 million, over three times that of the original proposal and twice that of the revised proposal. The final account submitted in June 1976, showed that increases in the provisional sums and variations to the original contract together amounted to over $1.3 million and further additional payments were made under the fluctuation of wages and materials clause of a little under $1 million. Having considered the circumstances in which these additional costs arose the Principal Government Architect was not prepared to state that the final cost was acceptable for subvention purposes, but even so the Government approved the release of the full capital subvention of some $8 million, more than twice that originally approved.
81 From my examination of this contract and from that of another contract in which a not dissimilar sequence of events occurred, I considered that there were serious weaknesses in the Group's management of construction contracts, stemming in part from a lack of suitably qualified personnel and undue fragmentation within the organisation of responsibility for handling building projects. I have been informed that a suitably qualified Property Manager has now been recruited to deal with the construction, repair and maintenance of all properties of the Group, and that proposals are in hand for a review of tender procedures.
82 As a very considerable proportion of the Group's finances is derived from public funds, it seemed appropriate for me to examine the extent to which those funds are supplemented by contributions from other sources. The Group has agreed with the Government that a proportion of its income from donations should be paid towards the recurrent expenditure of the Medical Division, so as to reduce the amount of the deficiency grant necessary from the Government. However I noted that for the past decade the Medical Division had been receiving a reducing share of the income derived from donations, the reason being that most of the donations were credited not to the Income and Expenditure Account, in which the money would have been subjected to the share arrangement with the Medical Division, but to an account designated as 'Funds Raised by the Directors', which was used primarily for capital works projects. In the period 1965-66 to 1975-76, when donations credited to this account increased eightfold, those credited to the Income and Expenditure Account barely doubled. It would appear that in at least some cases, moneys which had been credited to the Directors' fund raising account had in fact been donated towards meeting the Medical Division's recurrent expenditure and should have been devoted to that end. I have pointed out, for example, that as one of the stated purposes of the 1974 Charity Variety Show Appeal was to pay for part of the recurrent cost of running the Tung Wah hospitals, it would seem that some of the proceeds of over $1.5 million should have been so applied. I understand that as part of the overall reorganisa- tion to improve management and supervision, particular attention is now being paid to the designation of, and accounting for, all donations received, in order to avoid their misallocation, Meanwhile I have suggested to the Government that the terms of the agreement with the Group should be reconsidered to ensure that the Medical Division receives a due share of the proceeds from fund raising campaigns.
83 In administering fund raising activities and in organising ceremonies for the opening of buildings, the Tung Wah Group of Hospitals appears to have had little regard to cost and, as pointed out by the management consultants, to have exercised little budgetary control. Given the charitable nature of the Group it may be felt that some items of expenditure might perhaps have been better avoided. As a case in point I have invited attention to the circumstances attending the opening of the new wing of the Tung Wah Hospital. This was officially opened in 1976 with a ceremony costing over $5,700, which might be considered reasonable had it not followed a previous ‘opening ceremony' held two years earlier at a cost of over $9,200. To the latter expense must be added a payment of over $33,000 made to the contractor to prepare the premises for the ceremony, held more than a year before the building was completed. The Tung Wah No. 2 College opening ceremony cost $17,000, over a third of which was spent on a reception for guests.
84 Somewhat similarly the 1975 Annual Charity Ball held to raise funds for hospital and school building projects appears to have been a costly occasion, resulting in a deficit of nearly $22,000. Only just over half the persons attending had tickets which had been paid for, of the remainder 117 (31%) being ‘guests of honour' and 54 holding tickets obtained by 5 persons closely connected with the Group who failed to pay for them. In the latter case, although the amounts due totalled over $8,000, no attempt was made by the Group to follow up the initial demand notes sent to the defaulters. I suggested that there appeared to have been a failure to keep in sight the charitable objectives of the Ball and to exercise control over the cost of achieving them, but I was informed that the Annual Charity Ball and other functions should be regarded not only from the point of view of fund-raising, but as occasions for the promotion of goodwill and public relations. Nevertheless I have been advised that the Tung Wah Board has now accepted and implemented the advice of the Home Affairs Department to reduce the scale of expenditure for entertainment at the Group's functions, and that more restraint and budgetary control will in future be exercised over spending on campaigns.
85 Meanwhile sources of additional income readily available to the Group seem to have been ignored. On 31 March 1976 the cash in hand and on current account at bank amounted to over $15 million and in no month of the year 1975-76 did the total of the month-end current account balances fall below $9 million. I have calculated that if only part of those balances had been placed on interest-bearing deposit, they would have earned interest during the year of over $500,000. As long ago as 1966 the then Accountant General invited attention to the large sums held on current account, but it would appear that his advice, to place the money surplus to immediate requirements on fixed deposit or at call, was not followed, with the result that over the years the Group has lost considerable sums in interest that it could other- wise have earned. The Group has also failed to benefit from the proceeds of the sale of swill from its hospitals. In the
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