Following is the full text of the "Government Minute in response to the Report No.34 of the Public Accounts Committee" tabled in the Legislative Council today (October 18):
REPORT ON THE RESULTS OF
VALUE FOR MONEY AUDITS
Chapter 1 - Services provided by the Official Receiver's Office
The Administration is committed to the provision of a sound and effective insolvency administration regime in Hong Kong. This is fundamental to our policy objective of maintaining our position as an international commercial and financial centre.
2. The Administration shares the Public Accounts Committee (PAC)'s concern over a number of weaknesses identified in the management control system of Official Receiver's Office (ORO) and the extensive improvement required. Since June 2000, the Administration has deployed an Administrative Officer Staff Grade B with extensive administrative skills and experience to a new post of Administrator in ORO to assist the Official Receiver in establishing an effective management control system in the department. The post is initially created for six months only. ORO has also set up a Task Force to oversee the implementation of the recommendations made in the PAC Report and the Director of Audit (D of A)'s Report. At the same time, the ORO management has put in place a number of new improvement measures. Some of these measures have produced significant improvements in such areas as the distribution of dividend to creditors.
* Monitoring of staff workload
3. ORO accepted PAC's recommendation in respect of the monitoring of staff workload. As a first step towards establishing performance measures for assessing the productivity of individual Insolvency Officers, ORO conducted in August 2000 a study on the time required for the different steps in processing different types of insolvency cases. ORO will then determine the average time required for processing different categories of insolvency cases and set performance targets. ORO will also assess the time frames for completing different categories of insolvency cases, taking into account the current caseload position, with a view to establishing more performance pledges. The established time frames and the progress reports produced by the computerised Management Information System will help the case management team leaders as well as the Assistant Official Receiver (Case Management) to monitor the progress of cases and the efficiency of Insolvency Officers.
4. At the same time, the Official Receiver has instructed all insolvency case officers to complete time record sheets under a time-recording system to record the time they spend on processing an insolvency case. The Technical Section will conduct random checks to ensure that these sheets are properly completed. The standard time requirement and performance targets to be established on the basis of the time study in August 2000 will be reviewed in six months in the light of the data collected through this time-recording system.
5. Furthermore, ORO will set up internal auditing to conduct random checks on insolvency cases to ensure that ORO officers comply with the ORO guidelines and instructions.
6. The Financial Services Bureau (FSB) in conjunction with ORO management have started investigation into those cases revealed by the D of A's Report whereby the contents of the technical circulars were not being complied with. We will continue this effort to ascertain if there are cases that warrant further action. The findings so far suggest that in the past years, there had been a misunderstanding between the management and the Insolvency Officers over the purpose of the technical circulars. The ORO management has set up a dedicated team to conduct a review of the mechanism and the enforcement of the technical circulars.
* Ascertaining and realisation of assets of insolvent estates
7. ORO is of the view that since the review and investigation of assets of insolvent estates are conducted on a need basis and there are many unforeseeable factors that can affect the investigation, the outcome cannot reflect whether the work done is worthwhile or represents value for money. This being the case, summary statistics on the results of the review and investigation of assets might not be a very effective tool for assessing the cost-effectiveness of the work of the Financial Services and Case Management Divisions. Nonetheless, ORO has established a management statistical information system to enhance the management tools of ORO and the credibility of ORO's work. The statistical returns include, among others, the results of the review and investigation of assets of insolvent estates.
8. ORO issued guidelines in 1992 on the writing off of debts when debt collection was handled by ORO's in-house staff. These guidelines are still valid and referred to by ORO staff in deciding whether they should accept a recommendation to write off the book debt by the debt-collection agent. A working group has been established recently to review the guidelines with a view to bringing them up-to-date for better monitoring of the work of the agent. The working group has just submitted its report to the Task Force. The debt-collection agent has also been required to remit all debt they collected on ORO's behalf within seven days of collection.
9. The contract with the current debt-collection agent will expire in May 2001. We shall conduct a tendering exercise in due course, taking into account the PAC's recommendation of appointing more than one debt-collection agent and having regard to the volume of work to be contracted out. Before entering into contracts with the debt-collection agents, the Official Receiver will seek legal advice where necessary. As recommended by the PAC, a provision will be included in future contracts to enable ORO to have access and the right to inspect the agents' records relating to the debt entrusted to them for collection.
* Distribution of realised assets and law enforcement
10. After the release of the draft Audit Report in January 2000, the Official Receiver has accorded top priority to the payment of dividend to creditors with which the PAC expressed deep concern. A total of 272 cases more than three years old were identified to have cash standing at $100,000 or more. Of these, dividends of 259 cases were distributed by April 2000 and dividends of a further eight cases were distributed by August 2000. Five cases are still outstanding pending resolution of various issues.
11. As to cases between one to three years old, there were 130 in which there was sufficient cash to pay a dividend. Payments were made in 129 cases by July 2000. Payment for the remaining case is still outstanding pending resolution of certain issues.
12. The Official Receiver issued a directive in April 2000 requiring a case officer to distribute a dividend to the creditors, where such can be paid, within nine months. In addition he has also strengthened the supervision of the day-to-day operation of the Dividend Unit at both the Senior Insolvency Officer and Insolvency Officer I levels with both officers dedicating more time in supervision work. The Senior Insolvency Officer supervising the Dividend Unit now reports directly to the Official Receiver on the progress of dividend payment work. Furthermore, the Case Management teams are now required to prepare monthly reports on dividend cases and the Assistant Official Receiver (Case Management) reviews the progress of dividend distribution on a monthly basis to ensure that the pledge of distributing dividend within nine months is achieved.
13. ORO is in the process of establishing performance targets and time frames for completing different categories of insolvency cases. These, when available, will be effective measures to ensure that the time spent by Insolvency Officers and legal officers on their work is in accordance with the level pre-determined by the management.
* Performance measurement and service delivery
14. Since 1 April 2000 ORO has established new performance pledges on the time required for in-house staff to deal with insolvency cases -
(a) 12 months for closing a summary procedure case with insufficient assets for a dividend distribution; and
(b) nine months to make a dividend distribution to creditors where the estate balance allowed for this.
15. During April to July 2000, there were 507 summary procedure cases with insufficient assets for distribution and their processing had taken around 12 months. Of these, 428 cases (84%) were closed within the target performance pledge of 12 months. The outstanding ones involve more complicated issues which require more time to resolve. ORO will closely monitor these cases to ensure that they are completed as soon as possible.
16. The Official Receiver has taken a further step to clear outstanding cases which are less than one year old and have, as at April 2000, sufficient cash to pay a dividend. A total of 141 cases have been identified and the target is to complete paying dividend for these cases by January 2001. Following the clearance of the backlog, future payment of dividend will be made within nine months as pledged where sufficient funds are available for distribution.
17. On the on-line search facilities, two terminals have been set up since 28 August 2000, as a first step, at the public reception area of ORO for bankruptcy and winding-up searches. Search results are available within one working hour as pledged. ORO will continue with other areas of enhancement of its Management Information System.
* Appointment of private insolvency practitioners (PIPs) to handle insolvency cases
18. We have finalised details of the tender system for the Panel B Scheme and issued the invitation to tender.
19. ORO fully supports the principle of further opening up for more competitive bids. The mechanism for appointment of PIPs and how the pool of insolvency expertise can be enlarged will be further looked into and included in a consultancy study on the Review of the Role of the Official Receiver.
* Monitoring of performance of PIPSs and their fees
20. ORO examines all half yearly accounts submitted by PIPs. On top of that it audits all accounts which contain material transactions involving receipts of over $4 million or payments of more than $2 million and 5% of the remainder. While in the past only accounting queries were raised with the PIPs, ORO has now also focussed on long outstanding cases and required the PIPs to provide reasons for such as well as to indicate when they expect to distribute dividend and complete the case. As regards payment of liquidator fees, ORO scrutinises all bills submitted by the PIPs before they are approved for payment. In cases where there are no Committee of Inspection, ORO's examination will be done in greater depth. ORO and the Hong Kong Society of Accountants are deliberating on a joint circular to provide guidelines for PIPs.
* Fees charged by the ORO
21. The Official Receiver has reminded his staff of the fundamental need to exercise proper control on expenditure to be charged to insolvent estates. The issues of cost recovery rate, the fee structure and fees to be charged will be looked into in the consultancy study on the Review of the Role of the Official Receiver. We will keep the PAC informed of the outcome of the consultancy study. Meanwhile, the Administration has reviewed the fees charged by the Official Receiver and propose to increase fee items in relation to bankruptcy, voluntary arrangement and winding up proceedings of companies by 10% with a view to moving closer to the target cost recovery rate.
22. We would like to point out that over the past few years, ORO has been heavily burdened with a drastic increase in workload. In addition, in the overwhelming majority of insolvency cases now handled by ORO the assets are insufficient to cover the fees of the Official Receiver. This explains why the department has continued to operate in deficit. Efforts are being made to streamline the work procedures as far as practicable but due to legal and other constraints, there are limits to the extent this can be achieved. While we will seek to identify areas, legislative or otherwise, where improvement may be made in the short term to simplify the work procedures without compromising the quality of service, the Administration recognises the need for a more fundamental review of the role of the Official Receiver in the provision of insolvency administration service. Such a review is considered timely having regard to the changing socio-economic situation in Hong Kong in the past decade as well as the changes that are taking place in other common-law jurisdictions recently. We aim to start the consultancy study in 2000-01. We issued letters inviting a general expression of interest in August 2000 to over 60 potentially suitable parties in Hong Kong, the United Kingdom and Australia. We shall invite short-listed consultancy firms to submit detailed proposals.
23. The Administration will continue its best endeavours in improving the services of ORO. FSB will continue to monitor the work of the department in implementing the PAC and D of A's recommendations. The Official Receiver will ensure that the management control systems put in place are effective and that quality services are being provided to the public.
Chapter 2 - Management of outdoor road maintenance staff
* Monitoring of Outdoor Staff
Set productivity standards
24. Following publication of the PAC report, the Highways Department (HyD) set up a dedicated Working Group chaired by the Deputy Director to consider the collection of operational data and development of productivity standards for better assessing the workload of maintenance staff and the Direct Labour Force (DLF). Under the Working Group, two Sub-groups examine respectively the setting of productivity standards and guidelines for staff performing both road maintenance and utility duties in various ranks/grades, and the best redeployment of the DLF. Standards recommended by the Working Group will initially be used to monitor the productivity of outdoor staff. HyD will consider employing an independent management consultant to advise on refining the standards and extending them to cover other ranks/grades and other functions of the department.
Better monitor the use of staff resources
25. Civil Service Bureau (CSB) will continue to work closely with HyD to ensure that their outdoor staff are properly supervised and monitored. All outdoor staff are now required to fill in log sheets to report the time and place of the site visit before leaving the office. The forms/record sheets have been modified to include the spot check requirements. The mechanism for collection, analysis and review of operational data is being studied by the Sub-group on productivity standards for implementation.
26. HyD has included in the Maintenance Administration Handbook relevant guidelines on the frequency and procedures for verifying the quantity and quality of work performed by the HyD's outdoor staff. The ISO 9000 standard was successfully introduced to the Structure Division of HyD in 1997. HyD is seeking to obtain full certification for the whole department.
Improve quality of site inspections
27. Random spot checks on Works Supervisors' reports are now carried out to ascertain whether they accurately reflect the actual site situation. The Research and Development Division of HyD closely monitors the quality of site inspections. All utility inspections will be recorded in the computerised Utility Management System. A draft Guidance Notes on Audit Inspection of Utility Site, including the requirements of random check on utility works, is being finalised. The Contract Adviser Unit of HyD also carries out regular auditing check on the quality of works. In addition to random checking, HyD has arranged joint inspections by the inspectors and work supervisors for training on site inspection standards. Refresher courses, with inspection standards included, are arranged for all serving Works Supervisors I and II. Separately, calibration exercises are now conducted regularly to provide independent assurance of the quality of site inspections. The requirement of regular calibration exercises has been incorporated in the Maintenance Administration Handbook.
* Management of the DLF
Run down the entire DLF
28. The Sub-group to draw up a programme for the run down of the DLF will monitor closely the running down of the DLF and report to the Working Group chaired by the Deputy Director. The DLF has now ceased to undertake road surfacing which is considered by the D of A as the least cost-effective work. Instead, the DLF now focuses on road testing works and road maintenance related works, such as patching of potholes and cleaning of road furniture (i.e. street name plates, traffic signs, directional signs, railing, barrier and planter walls at black spots). HyD targets to run down the DLF by March 2001 which is about the same time for the lapse of "Healthy Living into the 21st Century Campaign". The cleaning of road furniture will gradually be transferred to maintenance contractors.
29. As at 14 September 2000, the strength of the DLF was 89. Among them, 37 will retire either through the Voluntary Retirement Scheme or natural retirement and 52 will be redeployed to other sections of HyD and to the Government Land Transport Agency.
* Management of overtime work
30. The Sub-group to develop productivity standards will help assess the need for overtime work. All HyD offices are now strictly evaluating the operational need and demand for overtime work. In each overtime allowance application, the recommending officer has to explain why time off in lieu (TOIL) is not applicable. For taking TOIL, proper recording and control systems have also been established. Each TOIL application has to include the up-to-date balance of overtime worked to avoid granting excessive TOIL. The Account Section will help ensure that the spot check requirements are fulfilled before granting the overtime allowance. No irregularity of applications has been identified.
31. HyD recognised the need to establish a mechanism for the HyD's senior management to regularly review and monitor the management of overtime work. It is now a standard practice to report the TOIL and overtime allowance situation at the Senior Staff Conference held quarterly. As a result of the above measures, overtime allowance for the four months from April to July 2000 had dropped to $2.65 million which was only about one-third of $8.55 million for the same period in 1999.
32. In parallel, all HyD offices are reviewing and implementing the necessary work rescheduling and manpower redeployment. For example, the overtime for testing works by the DLF are all compensated by TOIL or rescheduling of duty hours. Shift duty rosters have also been drawn up by the Hong Kong Region for the reconstruction of Lockhart Road project to minimise overtime work. In the implementation of cyclic lane closure programme on high speed roads, work supervisors have also been working in shifts. Where possible, HyD will transfer maintenance and other works outside normal duty hours to private contractors.
* Senior management responsibility
33. The revised HyD Establishment Circular No. 2/2000 spells out more explicitly supervisory accountability. HyD will take necessary actions against those supervisors found not supervising properly. An investigation has been conducted on the Audit findings about the breach of departmental instructions by individual supervisory staff. The HyD Inquiry Committee held four meetings and interviewed ten officers concerned with the case studies in the D of A's Report No. 34. The interviewed officers included two Senior Engineers, two Engineers, two Chief Technical Officers, one Senior Inspector of Works, one Inspector of Works and two Assistant Inspectors of Works. The Inquiry Committee has recommended that verbal warnings and advisory letters under Civil Service Regulation 233 are to be issued to some of the interviewed officers found responsible for the irregularities in the case studies. The Director of Highways has endorsed the recommendations. The relevant disciplinary and advisory actions will be taken.
* Consider to set up an incentive scheme as additional means to publicise road defect/complaint system
34. HyD already has various user-friendly channels whereby the public can report road defects. HyD has publicised the 24-hour Complaint Hotline on radio programmes and is planning to give wider publicity to the hotline through radio announcements in the public interest (API). The API is now ready for release. HyD has also provided an on-line "Damage and Defect Report" form in its Internet homepage to facilitate suggestions and reporting of road defects by members of the public through the Internet. HyD will consider the feasibility and technicalities of setting up an incentive scheme as proposed by the PAC as an additional means to publicise the road defect report/complaint system.
Chapter 3 - The administration of the Judiciary
35. The Judiciary Administrator welcomes the recommendations made by the PAC in respect of the administration of the Judiciary. He is examining the feasibility of each and every recommendation in depth. In the meantime, he has taken the following actions in response to the recommendations -
* Court waiting time
36. The Judiciary shares the PAC's concern regarding the waiting time for civil cases, criminal cases, and appeals from magistrate's courts at the Court of First Instance of the High Court. The Judiciary Administrator has apprised the PAC of measures which have proved to be effective in bringing some noticeable improvements.
37. A factor which helps further reduce the waiting time at the Court of First Instance is the increase in the civil jurisdictional level of the District Court from $120,000 to $600,000 effective from 1 September 2000. This reduces the number of civil cases for the High Court, shorten waiting time for civil cases and facilitate the deployment of judges to deal with the backlog of criminal cases and appeals from magistrate's courts.
38. The Judiciary has included in its information systems strategy an Automated Leadership Resource Tool which, when implemented in 2001 as planned, will produce timely information on court resources and the effect of their utilisation at the different levels of court. Based on the information, the court leaders will be able to make optimal deployment decisions.
* Review of the financial limits of the civil jurisdiction of courts
39. The Court of First Instance of the High Court has already unlimited jurisdiction over all civil matters.
40. The District Court (Amendment) Ordinance, passed by the Legislative Council on 17 May 2000, raised the civil jurisdictional limit of the District Court from $120,000 to $600,000. The Amendment Ordinance came into operation on 1 September 2000.
41. The Judiciary is committed to reviewing the need for further increasing the civil jurisdictional limit of the District Court to $1 million in two years' time, having regard to -
(a) the impact on demand for court services;
(b) the pattern of litigation costs;
(c) the impact on waiting times for court hearings;
(d) the resource implications for the Judiciary in the light of the redistribution of caseloads; and
(e) the availability and provision of qualified judges and judicial officers to cope with the likely increases in caseload while maintaining quality.
The Judiciary is making preparations for the collection of relevant data (such as caseload, court waiting time, pre-trial interlocutories, length of trial, litigation costs, amount of claims and awards) from the High Court and the District Court for that purpose.
42. The financial jurisdictional limit of the Small Claims Tribunal was increased from $15,000 to $50,000 in October 1999. The Judiciary will review this limit together with the exercise for the District Court.
* Labour Tribunal
43. The backlog of cases in the Labour Tribunal was reduced to 320 cases from 640 at the beginning of this year. The success in clearing the backlog is attributable to a combination of measures which include the efforts made by the Tribunal Officers in helping the litigants reach pre-trial settlement, and the creation of two additional day courts in January 2000.
44. The Judiciary is committed to further clearing the backlog of cases. Since September 2000, the Labour Tribunal has adjusted the mix of courts and converted two call-over courts to become trial courts. There were hitherto six call-over courts, the primary function of which is to obtain information from the litigants regarding the readiness of the matters to proceed to trial. The conversion has increased the number of trial courts from four to six, thereby increasing the number of courts for conducting trials and reducing the waiting time.
45. The Judiciary Administrator has indicated that the appointment register has proved to be a good mechanism to enable resources to be mobilised in time to cope with any sudden increase in workload on a day-to-day basis. The aim is to ensure that all claimants can be properly catered for when they arrive at the Labour Tribunal to file their claims. Nevertheless, the Judiciary agrees that the system should be reviewed after the implementation of the measures outlined in the preceding paragraphs. The importance of supporting the Labour Tribunal as a judicial court to provide quick, simple and informal means of resolving labour disputes is fully recognised.
* Minor Employment Claims Adjudication Board (MECAB)
46. MECAB is a unit within the Labour Department to determine employment claims up to $8,000. It is outside the jurisdiction of the Judiciary. In view of the recommendation of the PAC to review the financial limit of MECAB, the Judiciary Administrator has held preliminary discussions with the Commissioner for Labour for the purpose of examining the matter further and will continue to keep the PAC informed of progress.
* Court sitting hours
47. The Judiciary is not aware of any standard indicators on court sitting hours used in other common law jurisdictions to reflect the performance of their courts. Nevertheless, the Judiciary Administrator is refining the management information available for discussion with the Chief Justice on the appropriateness of using some of them, in addition to currently published indicators, to reflect the performance of the Judiciary. The need for periodic surveys on judges' working hours will also be discussed.
* Building courtrooms of mixed sizes
48. The Judiciary Administrator is consulting the Architectural Services Department on the technical feasibility of constructing courtrooms of mixed and/or variable sizes. The new standards will be tried out in the Fanling Magistrate's Court which is due for completion in mid-2001.
* Support for Judges
49. The Judiciary Administrator has made arrangements for personal secretaries working for judges to receive further training on audio-typing and job-related English courses. Similarly, job-related English courses and computer training will continue to be provided for Judicial Clerks, in addition to training on court structure, criminal and civil litigation procedures.
50. Besides enhanced staff support for judges, the Judiciary Administrator has also been stepping up support in the area of information technology. Judges will soon be provided with Voice Recognition Software to help them prepare judgements and documents in English. On-line access to legal reference will also be improved by upgrading of hardware and conveying judges' needs to the relevant suppliers.
* User satisfaction surveys on court services
51. A user satisfaction survey on the services provided by the Information Counter in the High Court Building is being conducted. The Judiciary is now planning for surveys on other court services. These aim at improving court services for the litigants and the legal profession. The Judiciary Administrator will report the findings of the surveys to the PAC when available.
* Court Reporter Grade
52. The Court Reporter Grade is included in the Voluntary Retirement Scheme of the Civil Service. The Judiciary Administrator will conduct an overall review of the Grade in consultation with CSB when the actual number of Court Reporters applying for retirement under the Scheme is known in October.
53. In the meantime, the Judiciary Administrator has, through proper coaching and training, re-deployed ten Senior Court Reporters/Court Reporters to serve in other functions.
End/Wednesday, October 18, 2000