37. The review on revenue collection procedures in the Mass Transit Office was carried out concurrently with that in the Lands Department. A number of common areas where improvements could be made were identifie and new procedures designed to strengthen internal control in the Mass Transit Office were implemented in April. These procedures were concerned primarily with preventing the undercollection of revenue as a result of oversight or human error. A copy of the report on the review of the Lands Department revenue collection procedures was passed to the Director of Engineering Development in June 1984 who accepted the recommendations which had relevance to the Mass Transit Office. These recommendations were incorporated in a Mass Transit Office instruction which was issued in September 1984 and draft detailed instructions for the guidance of officers concerned with each step of the procedures relating to revenue collection were subsequently forwarded to the Director of Accounting Services for his comments in June 1985. To date the draft detailed instructions have not been approved by the Director of Accounting Services.
38. With regard to the assessment procedures in the Mass Transit Office, the Mass Transit Adviser has taken the initiative to produce a manual of practice covering all the activities of the Mass Transit Office to encapsulate both the practice and experience which has been evolved and developed over the years during the construction of the Modified Initial System, the Tsuen Wan Extension and the Island Line of the Mass Transit Railway. The draft manual of practice, which will include the assessment procedures, is scheduled to be completed by the end of 1985.
39. Head 11 - Fees and Charges. Subhead 025. Building Development Department – (020). Services to the Urban Council. In paragraph 152 of my previous report I referred to an omission by the Director of Building Development to recover from the Urban Council consultants' fees amounting to $368,000 incurred in respect of work on projects which were subsequently abandoned by the Council. The omission stemmed from the absence of a satisfactory system to ensure that such fees were duly recovered. In response to my observations, the Director of Building Development conducted a comprehensive review of other abandoned projects handled by consultants with a view to recovering from the Urban Council all costs incurred as soon as the accounts in question were finalized. As a result a sum of $1.5 million (including the amount of $368,000) has since been recovered from the Council.
40. In the course of a follow up audit inspection, I noted that the Urban Council had not been charged for abortive work on projects handled in-house by the Architectural Office of the Building Development Department which were subsequently abandoned, notwithstanding that under administrative arrangements made with the Urban Council in 1973 the Council was required to pay to the Government the full cost of all staff, services and materials provided by the Government. Based on a test check of such abandoned projects I estimated that an amount of $300,000 was recoverable from the Council. I suggested to the Director of Building Development that the Urban Council should be charged for the abortive work based on the estimated cost of each project and the stage of works reached when the decision to abandon the project was taken.
41.
In reply, the Director of Building Development has informed me that he is in general agreement with my proposal. The Director has commented that he has felt concerned for some time about the amount of abortive work which is being done by the Architectural Office in respect of Urban Council projects for which no recompense is received, citing the decision not to proceed with the Temporary Science Museum project as a good illustration. The Architectural Office had spent 1 440 mandays on this project before it was abandoned.
42. The Secretary for Lands and Works also supports the principle of charging outside clients for abortive work done by the Architectural Office, as he considers that such charging will act as a discipline upon the client which should reduce the amount of abortive work performed and hence make more effective use of the resources of the Architectural Office. Accordingly, the Director of Building Development has referred the matter to the Deputy Financial Secretary and suggested that the matter be taken up with both the Urban Council and the newly established Provisional Regional Council. The Deputy Financial Secretary has taken the view that as full statistics on the amount of time spent by the staff of the Architectural Office on abortive work for the Urban Council in the past are not available, the question of charging should be further considered once the statistics are available, say in two years' time.
43. Head 11 – Fees and Charges. Subhead 042. Electrical and Mechanical Services Department – (020). Services to the Urban Council. Under the Memorandum of Administrative Arrangements made with the Urban Council in 1973 the Council is required to pay to the Government the full cost of all staff, services and materials provided by the Government, unless otherwise specified. The provision of materials and services to the Council is charged either on an actual cost plus on-cost basis, or a fixed fee. For regular jobs which have been processed by the workshops of the Electrical and Mechanical Services Department the on-cost element is computed by reference to the workshop overhead absorption rate under the department's management information and cost accounting system. However it was noted that for a number of special jobs processed by the workshops on behalf of the Council, the on-cost was computed on the basis of a standard overheads charge of 20% instead of the workshop overhead absorption rate and based on the demand notes issued to the Council for the year 1984–85 there was an undercollection of $1.1 million.
44.
Government departments which supply services to the Urban Council are required to issue demand notes monthly to the Council in respect of all materials and services provided. In the Electrical and Mechanical Services Department the established accounting procedures provide that the estimate of the full year cost plus on-cost is initially recovered by equal monthly instalments with adjustments being made quarterly to actual costs, in order to recover as far as possible the actual cost plus on-cost incurred during each financial year. Audit checks revealed that in a number of cases the
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