THE NATIONAL KIDNEY FOUNDATION (Statement by the Minister for Health)

Column No : 1031

THE NATIONAL KIDNEY FOUNDATION:

(Statement by the Minister for Health) Mr Khaw Boon Wan: Mr Speaker, Sir, the revelations in the High Court on 11th and 12th July by Mr T T Durai, then-CEO of the National Kidney Foundation (NKF), gripped the attention of Singaporeans and sparked widespread outrage. They eventually led to his resignation and the resignation of the entire Board of Directors.

The intensity of the public reaction is understandable. Many Singaporeans have donated to the NKF with good intentions of supporting the less fortunate who suffer from kidney, cancer and other diseases. The donors are naturally upset by the disclosures which seemed to suggest overly-generous staff compensation, improper spending, weak Board governance and misleading statements on fund reserves. They feel misled, betrayed and deceived.

While such emotions are understandable, we need, at the same time, to remain objective and not lose sight of the bigger picture. The NKF cause is a worthy one. There are real patients out there who have benefited from the work of the NKF and who continue to require care. I have visited the NKF dialysis centres before, and so have many Members of this House. We have spoken to the patients. They were sincerely grateful and happy with the work of the NKF in giving them a new lease of life.

I believe that Singaporeans know this and support the NKF's fundamental cause. That is why the NKF enjoys such widespread support, with more than half a million Singaporeans making donations to the NKF last year.

** Continued patient care **

Therefore, while it is important that we look into the issues which the court case has thrown up, we must not allow them to distract attention from the NKF's patients in need.

Our top priority must be to ensure that patient care and existing clinical services are not disrupted. The NKF runs 21 dialysis centres, serving 1,800 patients regularly. Professional standards and services must remain intact. Patients must continue to receive their medical treatments. They must continue to have access to their doctors and nurses, dialysis machines, medication and medical advice.

Equally important, we must not forget the staff of the NKF: the doctors, nurses, administrative and support staff. Their morale has taken a beating. They are a dedicated group, serving a cause which they believe in. They need the assurance that their work is appreciated, and that they can carry on delivering patient care without distraction or worries about their future. Despite a difficult week, they have rallied together to ensure that the work still gets done. They need our moral support.

** Regaining public confidence **

But NKF must acknowledge that public confidence has been shattered. For the NKF to continue its work, it must address this comprehensively.

Putting a new, strong Board in place

The immediate task is to put in place a new, strong Board to stabilise the situation. A few people have questioned my involvement, and by extension, the Government's involvement in this matter. They are concerned about the Government's intervention in the affairs of a voluntary organisation.

Mr Speaker, Sir, the NKF is indeed a private non-Governmental Voluntary Welfare Organisation (VWO). It was founded in 1969 and registered in 1984 under the Charities Act. It is not a Government-linked entity, nor is it run by the Government. It has its own governance framework to manage its organisational issues.

However, as public pressure built up last week, the NKF Board of Directors and its CEO came to see me on Thursday, 14th July. They asked for advice on how to respond to the crisis. They sought my help, presumably because patients' welfare was at stake, and their Institution of Public Character (IPC) status, which allows them to collect tax-exempt donations, was issued by my Ministry.

I told them candidly that they had lost the public trust. The NKF was built up by public donations. Without public support, the NKF could not continue. For the NKF to survive, its top priority was to regain public confidence. They agreed with my assessment and asked me if I could help shepherd the NKF through this crisis.

I told them bluntly that the status quo would not do. I added that a new Board and a new CEO would offer the best chance of winning back public confidence. They took in the message and offered to resign en-bloc to give me a free hand to reconstitute a new Board and to appoint a new CEO. That was how I got involved in this assignment. This was Friday, 14th July.

In my view, the key to preserving public confidence and sustaining a vibrant voluntary sector is full accountability and transparency of all charities and IPCs. This should be achieved, first and foremost, through the efforts of the voluntary organisations themselves - their ethos, culture and policies - as determined by their Boards of Directors.

This is why my first urgent task was to find a suitable Chairman for the NKF. After pondering a few possibilities, I approached Mr Gerard Ee. I am glad he is in the Chamber today. He is in the Public Gallery. I felt he was the best person to lead in this healing process. He is synonymous with charity and compassion, and is a well-known public figure. On 15th July, I got his agreement to chair the new Board.

Gerard and I quickly got on to the next task of forming the rest of the Board. To regain public confidence, the Board needed Directors with high standing in their professions and in the community, with reputations for integrity and high ethical standards.

Today, I am pleased to report that a new NKF Board of Directors has been appointed. In fact, they have already held their first Board Meeting. The new Board comprises:

(a) Mr Gerard Ee, as Chairman;

(b) Mr Koh Cher Siang, a retired Permanent Secretary and a former Commissioner of Charities, as Deputy Chairman;

The other Board Members are:

(a) Mr Gan Seow Aan, Executive Vice-President of Singapore Exchange Ltd;

(b) Mr Philip Jeyaretnam, a Senior Counsel and current President of the Singapore Law Society;

(c) Mr Ng Boon Yew, Chairman of Raffles Campus and a member of the Council that drew up the new Code of Governance of IPCs;

(d) Mr Peter Seah, Member of the Temasek Advisory Board and Chairman of both SembCorp Industries and ST Engineering;

(e) Mr Ernest Wong, Group CEO of MediaCorp. He is also a Director of the UOB Board and chairs Nanyang Technological University's Endowment Fund Investment Committee; and

(f) Prof. Woo Keng Thye, Senior Consultant Nephrologist at Singapore General Hospital.

These are competent and senior individuals, with vast experience and diverse skill sets, covering accounting, banking, business, corporate governance, legal and medical expertise. Together with Gerard Ee, they form a very strong Board with sound values and good community instincts. I know most of them personally, and I believe most are known to Members of this House too. They have good hearts and good heads. And this job requires a good balance of the heart and the head.

I was not at their first Board Meeting, because I have no business to be there, but I was told that the mood was cheerful and determined. I think the obvious competence of these Directors helped everyone feel comfortable. And Gerard Ee was, as usual, organised, confident and calm, calm without daily meditation. I am optimistic that the new leadership will enable the NKF to start afresh, on a sound footing.

Their first task is to appoint a new CEO. Choosing a good CEO is the single most important responsibility of any Board of Directors. They will need to take their time on this assignment. Being new to NKF, they would first need to be clear of the organisation, its mission and objectives, before they can decide on the skill sets that a CEO needs. They should not rush through this.

That said, there is much work to be done, with daily operations to run and reviews to address the various issues which have been raised.

Hence, I suggested to the Board that, in the meantime, I ask a hospital cluster to second a senior hospital administrator to be the interim CEO. An experienced hospital administrator who is familiar with managing healthcare facilities will be most appropriate at this time of need. I have such a candidate in mind but the person has to be acceptable to the new Board. We hope to settle this and announce it within the next few days.

Meanwhile, the Board has to identify and prioritise the many issues confronting the NKF. As I see it, six crucial areas require their early attention.

First, is the continuation of patient care and the restoration of staff morale, which I touched on earlier.

Second, they must fully address the public unease and disquiet over allegations of questionable practices and inappropriate spending of charity funds. Let me note here that the NKF's accounts have been audited by PriceWaterhouseCoopers (PWC) since 1999. Based on the Ministry of Health records, no major findings were raised, at least post-2001 when NKF's IPC came under the Ministry of Health.

The new Board will no doubt want to discuss further with PriceWaterhouseCoopers, to get their insights on the NKF based on their past audit experience. Nevertheless, it would be helpful for the Board to commission a fresh, detailed review of financial controls within the organisation. They need to specifically ask the questions which Singaporeans have been asking: Have donations been wasted on inappropriate things? Were charitable funds used lavishly or improperly? Have there been lapses in judgment? Were any funds misappropriated? If so, could these lapses have been detected earlier?

The new Board has moved very quickly and appointed KPMG to conduct this review. The Terms of Reference of the review are being discussed. I will advise the Board to make public the findings in due course.

Third, the Board should review the adequacy of the reserves built up for dialysis patients. Is it three years, as presented by the NKF, or 30 years, as argued by the Singapore Press Holdings in the High Court? This will help the Board determine its immediate fund-raising needs. Meanwhile, I am glad that the NKF has taken my advice not to embark on new fund-raising activities until the Board has deliberated and determined what the funding needs of the NKF are.

Fourth, they should review corporate governance. A Board of Directors has fiduciary responsibility for overall good governance. Did the NKF Board maintain sufficient independence from the management, to provide the necessary oversight and checks on management? How was CEO's compensation determined? What was the basis of his bonus payment? Court disclosures suggest that the organisation's system of checks and balances was inadequate. Was this the case? If so, what safeguards should the Board put in place to prevent a recurrence?

Fifth, the Board should review the NKF's communications with its donors. Are there misleading claims? Are there errors? If so, they should correct any misleading statements.

Sixth, they should review the pricing and subsidy policies of the NKF's dialysis programmes to ensure that adequate assistance is provided to the intended recipients. Over the last few days, I have received several emails advising me that the NKF should provide dialysis services for free since it has such healthy reserves. This I must strongly advise against. It is one sure and quick way to kill the NKF.

The NKF has been able to build a significant reserve precisely because it does not unconditionally give away free services. Patients are means-tested, and the level of subsidy varies according to the patients' ability to pay. One reason for such a stand is its belief that patients and their families should take co-responsibility for themselves. By making an effort to earn a living, the patients retain their self-esteem and live their lives more confidently. I fully endorse this philosophy, but the Board should review if the subsidy rules have been unduly stringent.

Ensuring a robust regulatory framework

A second component of restoring public confidence is putting in place a robust regulatory framework for charities and IPCs. Arising from the NKF incident, Singaporeans are asking if the Government had adequate safeguards against abuses and malpractices by charities and IPCs, and whether a tighter regulatory framework could have prevented the sad turn of events for the NKF.

Current approach towards governance of charities and IPCs

Charities and IPCs are governed by two pieces of legislation, through which the Government sets the basic requirements for governance and transparency. The framework is basically sound, and the legislation has served us well.

First, all charities are subject to the Charities Act. The Act promotes the effective use of charitable resources by encouraging the development of better administration, giving charity trustees information on any matter affecting the charity, and investigating and checking abuses. Under the Act, the Commissioner of Charities, who is concurrently the Commissioner of Inland Revenue, is vested with investigative and enforcement powers to regulate charities. As a charity, the NKF comes under the ambit of the Charities Act; and

Second, charities which acquire IPC status are subject to the Income Tax Act. The Act requires IPCs to submit audited accounts and post financial information online. Under the Act, the Ministry of Finance appoints Ministries as Central Fund Administrators (CFAs) to assess and approve IPCs for tax-deductible donations. There are quite a number of CFAs, and my Ministry handles healthcare-related VWOs. As a CFA, my Ministry ensures that an IPC maintains proper donation and accounting records, and uses any tax-deductible donation within the Income Tax guidelines. The NKF's tax-deductible fund-raising activities are covered by its IPC status under the purview of my Ministry.

The Government has been mindful to monitor developments and enhance the framework whenever necessary. Last year, the Government set up a Council on Governance of IPCs to review existing practices and to recommend enhancements to the standards of governance of IPCs. The Council was chaired by Ms Lim Soo Hoon, then-Permanent Secretary of the Ministry of Community Development, Youth and Sports. It comprised experts from the public, private and people sectors.

After extensive consultations and deliberations, the Council published its recommendations in May this year. Most of their recommendations were accepted by the Government. In essence, the recommendations were to subject all IPCs to stricter mandatory requirements from 1st January 2007. These include:

(a) Ensuring that information provided to donors, potential donors and the general public is not misrepresented;

(b) Disclosing the intended use of funds when soliciting donations; and

(c) Ensuring that funds and donations are used according to donors' intentions and the specific purpose communicated when soliciting for donations.

The charities and IPCs need some time to comply with the new rules and best practices. Hence, the Council has set the deadline for mandatory compliance at 1st January 2007. I would, however, encourage them to adopt these guidelines and the best practices as soon as possible, ahead of 2007.

For a professionally-run IPC like the NKF, they should be the first to achieve the higher standards and be the model for the other IPCs to emulate. I will ask the new Board to set this as part of their mission.

Meanwhile, the public can and should play their part in encouraging their target charities to adopt these rules and best practices voluntarily. They should not feel that they must accept the charity's word when making donations. Vote with your donations. If the charity does not measure up to your expectations, donate to another cause instead.

Moving forward: balancing regulation and flexibility in a diverse landscape

Notwithstanding the current regulatory framework, one may ask if we need more and tighter rules for charities and IPCs to prevent future mishaps. The answer is not straightforward.

One key issue is finding the right balance between regulation and flexibility. This balance is not easy to strike. If rules and regulations are inadequate, the risk of abuse is high. Yet, if we go for a very stringent standard, and hard-wire onerous regulatory requirements into the system, we are likely to snuff out many charities and IPCs which focus on assisting specific groups of the needy, and which lack the resources for elaborate administrative overheads to fulfil regulatory requirements.

The issue is further complicated by the diverse range of charities and IPCs in Singapore. There are nearly 1,800 charities and 900 IPCs. They represent a wide spectrum of organisations of different sizes and scales, with different philosophies, interests, target beneficiaries and programmes. They cover social services, education, health, self-help groups, sports, arts and culture, advancement of religion or the community. While some people may consider this an untidy situation, it collectively represents our ecosystem of people-sector organisations supporting the needy and other worthy causes across multiple niches. All play a part in inculcating the spirit of giving and helping others.

Given this situation, it is not practical to adopt a one-size-fits-all framework in regulating charities and IPCs. We must leave room for smaller charities, which rely on a "traditional" or "cottage-industry" approach to do good work without too much fuss. We were all students once, and those of us with children will still be familiar with school flag sales, lucky draw coupons, and sponsored sports activities and challenges to support charities. It is important to have organisations continue to serve in this niche. In addition to delivering aid to the needy in specific areas, they also actively engage the community and the younger generation in community efforts. This is critical for sustainable people-sector renewal and community-building.

At the same time, we must cater to other models of charity. We must be prepared to accept larger, more sophisticated organisations which want to and can mobilise the ground, garner support and donations, and systematically raise large amounts for charity. Unlike smaller groups, these charities can deliver higher levels of service to different corners of the island, employing professionals to ensure that beneficiaries get the care they need, and that the quality of medical care is continually improved. They have to plan for the long-term, so as not to worry excessively where their donations for the next month will come from. They have the focus and staying power to develop and grow programmes which take longer to yield results for their beneficiaries.

We therefore need to work out a framework with sufficient regulatory controls on larger charities, and yet which does not stifle the small charities. There is a need for differential regulation, so that larger charities with large funds may have to follow some requirements from which small charities are exempt. Indeed, the Council on Governance of IPCs has included, in its May recommendations, the principle of subjecting bigger charities to higher standards, such as reporting standards.

The Council's recommendations on differential regulation do not specifically recommend differential rates of the expense ratio. The current expense ratio requirement limits charities' fund-raising expenses to below 30% of funds raised. Some people think that large fund-raisers should be subjected to lower expense ratio. But it is not clear that there are economies of scale in fund-raising. In fact, each incremental dollar may take more effort to bring in. But we can certainly re-look this particular issue. I will definitely ask the new NKF Board, after they have settled down, to consider the expense ratio that they should be aiming for.

But, frankly speaking, no expense ratio or disclosure requirement will be tight enough to catch a gold-plated tap. That is a matter of self-restraint and tone of the organisation and its leaders, which the charities themselves should set.

Over the years, the NKF has grown into a large and complex charity. It has made many positive, innovative contributions to the Singapore community, not only in dialysis. Let me give you some examples.

(a) The NKF conducts preventive health screening for up to a quarter million Singaporeans a year. It must be the largest health-screening service provider now. It operates three prevention centres and five mobile "prevention buses";

(b) The NKF Children's Medical Fund, set up in 2001, now supports six centres of excellence in local hospitals and institutions, provides support to children under seven clinical programmes, and provides help to other children's charities;

(c) The NKF Cancer Fund, set up more recently, has begun to support some 140 cancer patients, because this is a very new programme for them. Indeed, the recent NKF shows on TV were not to raise funds for kidney dialysis, but for this new programme which is meant for cancer patients; and

(d) The NKF also trains 500 clinical staff in Nephrology nursing under the NKF's Institute of Nursing, Education and Research, including continuing education in partnership with overseas universities.

From a small local VWO, the NKF is today recognised as one of the leading dialysis providers in the world, with very good clinical results. The NKF has a vision to become a pace-setter on the international stage. It organises international medical conferences on nephrology and transplants, in conjunction with world-renowned nursing institutions.

It has even exported its operating model to the South Pacific. Last year, the Samoa Health Minister visited Singapore because they had heard of the NKF. Kidney disease is a big problem in the Pacific Islands. Samoa had no local kidney dialysis facilities. Patients had to be sent to New Zealand. Therefore, very few received treatment, because dialysis means permanent residence in New Zealand. Very costly. I arranged a working lunch for the Samoa Health Minister and Mr T T Durai. This was last year. Within a few months, the NKF helped them set up the Samoan Kidney Dialysis Unit. When it was opened in Samoa in March this year, practically all the Health Ministers in the South Pacific attended the launch. It was a major event in the South Pacific.

In fact, just an hour before coming to Parliament this morning, I happened to receive a letter from the Samoa Health Minister. I just received it although it was dated and sent quite sometime ago. I suppose postal service takes some time. Unfortunately, the font size is very small. But the gist is that Singapore's NKF seconded a few staff, paid for by Samoa, led by one Dr Prabhakar. He is a renal physician, and together with two other NKF staff, helped to supervise and run this centre. They were so pleased with this arrangement and the whole service that is being provided that the Prime Minister of Samoa has decided to bestow a High Chief title called muagututi�? to Dr Prabhakar. The award has already been given and the letter was to inform me that they have decided on this and partly also to thank me for the match-making role.

Incidentally, Dr Prabhakar is my constituent in Moulmein. Just three days ago, on Sunday, when I was doing my house-to-house visit, the wife was there when I knocked at the unit. I cannot recognise her but she can recognise me. She said that her husband is right now in Samoa. We talked a little bit about NKF. So I have not neglected my constituency duties.

Soon after the opening of the Samoan dialysis centre, the Fiji Health Minister visited me and I could guess what was the motive. He asked me to persuade the NKF to do the same thing in Fiji. Again, I set up a working lunch between him and Mr T T Durai. This was about two to three months ago. I understand that discussions with Fiji, as well as Seychelles, are now ongoing.

We cannot and should not ignore, nor discount these visions and achievements.

I know many find such developments jarring. They are used to the traditional model of charity. Yesterday, Dr Robert Loh wrote to the Straits Times to suggest that the NKF should return to this traditional model. Bob Loh is another person synonymous with charity and compassion. He is a former President of the National Council of Social Services. He personifies kindness and decency, a most wonderful man. He even finds time to help me in my Moulmein Constituency as a grassroots leader. Volunteers like him, Gerard Ee and Jennie Chua spend much of their time, energy, expertise and resources contributing to charity work without any compensation. They teach us and spread the message of philanthropy. Singapore is a much stronger society because of such individuals.

But I believe that our charity landscape can accommodate a diversity of models. There is nothing wrong with a large charity outfit run by professionals instead of volunteers, provided it is properly governed and managed. As one commentator pointed out, it is not wrong to combine "the passion of a social mission with an image of business-like discipline, innovation, and determination". We should not lose sight of the possibility that there can some day be a Singapore Oxfam or the equivalent of an International Red Cross but based in Singapore.

Running such a large charity outfit will require full-time professionals. To recruit and retain such talent, the charity outfit has to pay a competitive wage. It is the responsibility of the Board to determine what this wage is and to defend their decision, if necessary. To avoid abuses and criticisms, the Board will need a robust human resource management system to design an appropriate compensation scheme, a sensible incentive bonus programme and proper checks-and-balances which ensure independence between the Board and the CEO. Unfortunately, the former NKF Board appears to have fallen short in this regard.

It will also be necessary for such an outfit to be transparent in its disclosure, so that donors can be satisfied that their money is being put to good use. There is a dilemma here - if the charity declares every detail of its senior staff's remuneration, many capable people may not want to work there, but if it does not do so, donors may be unsatisfied, and may take their donations elsewhere. This is a real problem which many organisations face. There is no ideal solution to be found in governance rules or disclosure standards, though these are necessary. In the end, we must depend on putting people of integrity in charge, and earning the trust of the public that honourable men are doing their best for a good cause.

_

Conclusion: _

Mr Speaker, Sir, charity's work is never done. There will continue to be many needing help, and those who are more fortunate will always need to reach out to lend a helping hand. That is what being a society, and indeed, a nation, is all about.

I am most heartened by the outpouring of constructive suggestions and offers to help. Over the last few days, I must have received so many emails from people volunteering to contribute their effort and time to improve the NKF. Such civic responsibility and social conscience of Singaporeans will certainly help to build a stronger volunteer and charity sector.

I am confident that, together, we can turn this unhappy saga into a fruitful learning experience with a positive outcome. The cause for charity should not be diminished by this episode. If we learn the right lessons, and are skilful in managing the growth of our charities and IPCs, our charity landscape and our society will emerge stronger, to the benefit of all Singaporeans. While the process of change takes place, I appeal to Singaporeans to remain objective, patient and generous.

Meanwhile, Singaporeans with the passion, expertise and knowledge should continue to step forward and help our many charities. They can offer to serve on Boards to help improve governance, or serve as volunteers to help charities provide better services at lower cost. Indeed, many Singaporeans are making a difference to the community every day. Let us not allow one sad episode to discourage us from doing good. Instead, let us pick ourselves up and do even more to help our fellows in need. [ Applause ].

Mr Speaker, Sir, pursuant to Standing Order No. 44, I beg to move,

That the Ministerial Statement on the National Kidney Foundation be considered by Parliament.

Question proposed.

Dr Wang Kai Yuen (Bukit Timah): Mr Speaker, Sir, with your permission, I will ask the Clerk to distribute a table giving a comparison between the two voluntary welfare organisations (VWOs) providing kidney dialysis service in Singapore, namely, National Kidney Foundation (NKF) and Kidney Dialysis Foundation (KDF). I tried my best to be as accurate as possible, pulling information from multiple sources. I seek your indulgence if the data presented are not entirely accurate.

First, I would draw your attention to the donations received by NKF. Its tax-deductible donations in 2003 amounted to $38.5 million or 57.3% of the total. By itself, it is already higher than the Direct Charitable Expense of $36.2 million. Given that the co-payment of patients amounted to $24.4 million, NKF's tax-deductible donations alone would have more than covered the needs of the dialysis activities after making allowance for operations and administrative costs of $8 million in the same year. Nonetheless, NKF went out to raise $28.78 million in non-tax-deductible donations which I would gather to mean television shows and telemarketing, etc.

On the expense side, it incurs $16.57 million in fund-raising. Sir, I do not know what is the proportion spent for tax-deductible donations and what is the proportion spent for non-tax-deductible donation activities, but we knew it spent a total of $16.57 million to bring in a total of $67.4 million, or an expense ratio of 24.6%. In 2001, the corresponding figure was 21.4%. In 2002, the figure was 22.1%. In other words, in the three years from 2001 to 2003, NKF raised a total of $193.1 million in donation. Cost of fund-raising amounted to $43.7 million. Net of cost, the amount of disposable income, Sir, is $149.4 million. Sir, I give all these numbers just to illustrate the matter. I am sure that we recall Mr T T Durai earned a total of $1.8 million over the same period. Some would say that amount is large, some would say that it is animal feed. But if NKF were a commercial enterprise, indeed, his take of 1% of net income is very reasonable.

Next, I would like to refer to the number of patients served by the two VWOs. The numbers were quoted from the Minister for Health in his disclosure in Parliament. In NKF, it was 1,512, and 147 in the case of KDF. Let us look at the number of employees of the two organisations, 996 for NKF and 20 for KDF. Therefore, the patient-to-employee ratio for NKF is a low 1.5:1 and a substantially higher number of 8.7 for KDF. Sir, imagine one NKF employee serving 1.5 kidney dialysis patients. Maybe, the comparison is not entirely appropriate but it gives us a scope of the efficiency or the purpose of the organisation and who and what they are serving.

Furthermore, the staff cost of NKF amounted to $27 million in 2003, while the total staff cost of KDF amounted to a very small $573,000, which is still a tag less than the $600,000 Mr T T Durai drew as an NKF CEO.

Yes, Sir, I understand that NKF and KDF operate on different clinical models. For NKF, clinical staff are on its payroll whereas for KDF, clinical service is contracted out. Indeed, according to a press report, close to 500 of the NKF staff are clinical staff. So if you just take the clinical staff and compute the patient-employee ratio, it is still a very low number of 3:1. Perhaps, I might be mistaken, but I hope our hospitals operate at a more efficient number than this.

Sir, one is prompted to ask: what is the other substantially large number of NKF staff doing in the organisation?

As the Minister has pointed out, some are dedicated to prevention programmes. But, presumably, a sizable number is deployed to canvass for donations. We do not know what is the number because NKF had not been too transparent about this.

Many have spoken up justifying the annual compensation of T T Durai. Indeed, he has done the nation service in building up NKF into an organisation looking after a great majority of kidney patients in Singapore - 44% to be precise. In looking after its 1,512 patients, it is also effectively self funding with very little subsidy from the Government. In fact, Government only provided $574 subsidy per NKF patient, while it provided a sum of $6,896 subsidy for every KDF patient. From that performance measure, we all would say that NKF has done a very good job. Yet, this comes at a cost to the patients. Despite its success in fund-raising, NKF recovers more from the patients than KDF. If Members look at the table, the average dialysis fee paid by the patients is $16,138 per year, a recovery rate of 67.4% while the corresponding figure for KDF is $9,195, or a recovery rate of 41.9%. Of course, KDF was able to do so because of Government's subsidy which amounted to $1.2 million in that particular year. But, on the other hand, if KDF were to charge the same fee as NKF from its patients, then the subsidy from the Government per patient for KDF would have dropped to $753. As to why they cannot charge that number, I think it could be a self-selecting exercise. Therefore, if we were to look more closely, I would say that NKF is performing not better than the new kid on the block despite its ability to benefit from economies of scale. Could NKF have done a better job, becoming leaner, slimmer and channelling more of its resources to the patients, thereby fulfilling its core mission for existence?

Sir, we all know that in one measure, NKF outperforms everybody - KDF and any other VWOs - and that is in fund-raising. Even in this area, many people are increasingly turned off by its hard-sell tactics and putting patients on display that sometimes borders on bad taste, an issue brought up by Prof. Ong. So, when one sings praise for NKF and T T Durai today, we are primarily praising him for his ability and his talent to raise funds. Sir, would it not be a sad day for Singapore when the value of an organisation - and a charitable one at that - is based entirely on its ability to accumulate surpluses? That we could justify a person's pay just because of the reserves accumulated from the small donations from millions of hardworking Singaporeans - money that we have parted because we believe it was meant for a good cause. Does that say something about ourselves, about our own value system as individuals and also as a society?

Sir, looking at the table I have given out comparing the two organisations, I would leave it to you to draw your own conclusions as to what kind of organisation NKF has morphed into. On good authority, I understand that donation staff of NKF have part of their pay based on commission, and they are able, when they are successful, to collect up to 12 months' bonus. We all read about T T Durai's work schedule - six days a week, up to 18 hours a day. If the bonus of the CEO of NKF were indeed tied to the amount of donations collected - and this is a question asked by every Singaporean - then considering the unusually top heavy staffing situation in NKF, a reasonable person would ask: in whose interest is T T Durai working so hard for? For the kidney dialysis patients who have to cough out 67.4% of his dialysis cost? For the kidney patients of the future, as he has reportedly said so? To build up the reserves of NKF for a rainy day, which happened to come but completely unexpected? Or could it be possible, just possible, that he is also partly motivated to meet a donation target? These are the questions, I think, the audit and the new board should enlighten us.

Sir, I am not here to bury NKF. By its own doing, NKF is now in the pit of a major confidence crisis. It would take the new team many months to restore confidence of its donors to the organisation. Furthermore, with the suspension of major donation drives like TV shows and telemarketing, I suspect NKF could not reasonably maintain the current staff strength of close to 1,000. If the redundant staff were to be retrenched, this would aggravate staff morale in the immediate future.

Sir, I am here to look at the lessons we could learn from this episode of how the largest and the most successful VWO in Singapore lost the confidence of the majority of Singaporeans overnight.

The revelations of the law suit have caused unprecedented disquiet amongst Singaporeans. Public confidence in the accountability of NKF has collapsed, but the Minister said "shattered", and close to 15,000 donors have cancelled their monthly contributions. Everyone had assumed that in well-run Singapore, as part of the VWOs under the auspices of the Commissioner of Charities, NKF would be properly supervised and monitored. The revelations show that this might not be the case. While T T Durai has stated that he has done nothing legally wrong, public outrage has clearly shown that there is a significant gap - a very big gap - between the code of governance he subscribed to and what the public expected of NKF, or for that matter, of all IPCs. I think it falls on this House to implore the Government to promulgate an enhanced code of governance for IPCs so that it is more in tune with the public expectation.

Sir, perhaps we can take one step back and ask: what is behind a VWO movement like the NKF? What gives a VWO life? In a word, it is our values. The purpose of a VWO is nothing short of making the world a better place, based on its vision of what that world should be. Thus, VWOs are the spirit and the conscience of our citizens. They raise funds by appealing to our value system. That is the reason why individuals, young and old, rich and poor, dig into their pockets and part with their hard-earned money to support VWOs. Therefore, a VWO is very different from a commercial organisation. It has a moral underpinning based on care and love. Individuals working for a VWO should get involved based primarily on their solidarity and compassion for the well-being of their fellow citizens. Pay should be a secondary consideration.

Sir, up to now, we still do not know how the bonus of the CEO was determined. If the bonus of the CEO of NKF proved indeed to be tied to donations raised, then I could understand why NKF became such a sleek fund-raising machine with close to half of its staff being non-clinical staff. We can also understand why NKF branched into fund-raising for other heart-wrenching medical conditions involving children, elbowing out other VWOs already engaged in those activities. If indeed NKF became what it is because of one person's drive to collect as much donation money as possible, and if part of that drive is to meet a certain bonus target, then I would surmise that there is a clear failure in the exercise of governance by the NKF Board, which the Minister had also referred to. It would indeed be a disgrace to everyone involved in that governance if the righteous cause of NKF got hijacked to serve a different agenda. Furthermore, we should also realise that the total pool of charity money in Singapore is a finite amount. And this fact is clearly evident from the impact to the other charities resulting from the donation drive for the tsunami victims of 26th December last year. Thus, when NKF takes more, there will be less in the pool for the other equally deserving VWOs.

Sir, until the acceptance of the recommendations of the Council of Governance of IPCs in May this year, I think governance of VWOs rests primarily on the fear of backlash of public opinion. This fear is a powerful deterrent, as amply demonstrated by the episode of NKF. However, the price of governance based on backlash is a heavy one. Besides the cost paid by the individual, such as the CEO and the Board, the future of NKF today hangs in the balance. If the damage to NKF.s reputation could not be repaired, it would be, as the Minister mentioned, a monumental loss to Singapore, as two out of three Singaporeans have contributed to its development and growth over the last 40 years. Furthermore, the collapse of public confidence in the accountability of NKF is affecting the public confidence of the rest of the IPCs as well.

Sir, we need to move on to a more rigorous framework of accountability. Already, we are holding key executives of public listed companies to a very high standard of disclosure and transparency. There are codes on insider trading and corporate governance. I do not think we should hold the individuals involved in the running of IPCs to a lower standard of transparency and disclosure.

Sir, in May, the Minister mentioned that the Government accepted 15 out of 19 measures put forward by the Council on Governance of IPCs. Some of the recommendations were rejected, partly because they were considered too stringent. The new rules are to take effect from January 2007. From the episode of NKF, I feel that these guidelines should be strengthened. It is regrettable that a key proposal to disclose the salaries of the top three executives of VWOs was not even included in the 19 recommendations. I suggest that this requirement be made mandatory, in particular, for the larger IPCs and for professionally-run IPCs like NKF.

Sir, the other parameter that did not receive mention is the 30% allowable expenditure of fund-raising of an IPC. Today, this allowable limit is the same regardless of how much money is raised. Whether we are raising $100,000 or $100 million, the allowable expenditure is still 30%. But, clearly, $30 million is a quantum leap from $30,000. In the case of NKF, it raised $193 million in three years

and spent 22.6% of this amount or $43.7 million doing so. I think, by any reasonable comparison, that is a lot of money to spend to raise such money. Furthermore, with so much money involved, I believe that in the regime of poor transparency and disclosure, problems can arise. This could be one of the reasons why NKF started down the road deviating from its key charitable mission. Of course, the question of limits on fund raising does not come about because no IPC in the past would have been able to raise so much money. Perhaps, my suggestion is that we could adopt a sliding scale based on the total amount raised, ranging from 30% all the way down to maybe a reasonable number like 15%.

Furthermore, today, the code of governance does not prevent NKF to branch into other activities. I believe that the code should be enhanced to hold the charity to its original terms of reference, its original mission. I see no reason why a charitable organisation with the name of National Kidney Foundation should engage itself with children cancer and other medical domains.

Sir, the Government has intervened and NKF is given a fresh start. There remain many kidney patients who need help. And a new Chairman and a new Board of very eminent persons have been appointed. If the public were to stop supporting the cause, the patients would be the ones who would suffer. For those who have cancelled their GIRO donations to NKF, I would urge them to reinstate them. But if they cannot find in their heart to do so, I urge them to switch their support to KDF. Furthermore, I also would urge the new Board of NKF to undertake a total review of its mission and operations and to benchmark perhaps its performance measures with another organisation, such as KDF.

It is time to restore confidence of the public in donating for charitable purposes. Not just for NKF but for all charitable organisations in Singapore. I am glad that a thorough audit is now ongoing in NKF. I am confident that if we could strengthen the code of governance along the line I have suggested, Singaporeans of all income groups will continue to donate to public charities when the current storm blows over. Many of us, Sir, give out of compassion. For those with meagre income, the amount they give, though very meagre, is a significant portion of their disposable income. They give from their hearts. It is our responsibility to ensure that their trust is not betrayed. Let donating to charity be the hallmark of Singaporeans. Let the compassion for an unfortunate fellow human being be what Singapore, as a nation, is known for. I urge this House to call for a more enhanced code of governance so that the debacle of NKF would not be repeated.

Mr Speaker: Order. I propose to take the break now. I suspend the Sitting and will take the Chair again at 4.25 pm.

Sitting accordingly suspended

at 4.04 pm until 4.25 pm.

Sitting resumed at 4.25 pm

[Mr Speaker in the Chair]

THE NATIONAL KIDNEY FOUNDATION: Debate resumed.

Mr Tan Soo Khoon (East Coast): Mr Speaker, Sir, the revelations in last week's court case between the National Kidney Foundation and Singapore Press Holdings have shocked Singaporeans like no other scandal in recent times. Because two out of three Singaporeans have donated to the NKF, the extent of public backlash over the way donors' funds have been used, the excesses of its CEO, the exaggeration over the number of patients it actually treats, and the misinformation over how long its reserves will actually last, is understandable. People from all walks of life, rich and poor, young and old, contribute to the NKF. For 36 years, they had unquestionable faith in the NKF and it has become Singapore's largest charity, and now they feel very emotional and they vent their anger.

They have every right to feel angry about what has happened. Nobody wants to see the hard-earned money he gives away, believing it would benefit a good cause, mismanaged in any way. But I want to appeal to Singaporeans not to let their anger cloud their judgement of the larger picture. Over the years, the NKF has saved countless lives. It has become a highly regarded institution, a brand name, so to speak. And as we heard earlier on from the Minister, other countries have even come here to learn about how the NKF runs its programmes. Even as we are appalled by what has been revealed, we must not overlook the achievements of the NKF. As an MP, I have on many occasions referred constituents who suffer from kidney problems to the NKF for dialysis treatment. I know that many of these people would not be alive today if not for the NKF. To withhold our support for the NKF, to cancel our automatic GIRO deductions, to even ask for our money back, as some had done in the past few days, cannot help those who are suffering. Two wrongs will not make a right. Patients, instead of being people who will continue to receive good quality treatment and care and who are given hope, well, they will just end up as victims of our own vitriol. Looking after the needs of the NKF's patients, and restoring the morale of the staff - because they are the ones who ensure that the patients are well taken care of - must now be our top priority, and this can only be achieved if Singaporeans do not withhold their support.

Sir, to regain public support, efforts must therefore now be focused on restoring public faith and confidence in NKF, in fact in all charities, because what has happened in this NKF episode has unfortunately made many people think hard about donating to charity, which should not be the case. One swallow does not make a summer. The Board members and its CEO have resigned and the Government has moved quickly to name a new Chairman and a new Board who will have the unenviable task of cleaning up the act. Many of us know Mr Gerard Ee well. He served as a Member of this House as a Nominated Member for four years and I have confidence that he and the new Board members will know how to put things right very quickly. But, having listened to the list of names announced by the Minister earlier on, and I must say that these are people who are well regarded, and I believe that they will certainly know what to do to help Mr Gerard Ee, I could not help but wonder why there is no representation

for a very important group of stakeholders, and that is the donors. Here, I would like to suggest to the Minister that he considers some representation from important donors like the foundations who give a lot of money to NKF and to charities.

Sir, no less than a full and thorough investigation into what has been happening in the NKF must take place; Singaporeans want to know what else could have come out if the court case had not abruptly ended after two days, and what else could have been rolled out from the many cartons of material that the defence lawyers brought into court. Many questions burn in the minds of the public: have there been other excesses or any misuse of funds; what is the exact number of patients treated by the NKF? Is it 1,500, 2,000 or 3,000? Do the NKF reserves last three years, or is it 30 years? Why does it cost the NKF $30,000 per patient a year to provide treatment when the Kidney Dialysis Foundation does it for about half that amount? If there have been management problems, then the new Board must seek to put them right. If individuals have committed wrong, then they must answer to a court of law, but we must avoid bashing an institution that has been around for so long and at its very core still remains an incredible organisation that has saved countless lives.

The second step towards restoring public confidence is to continue to push for better disclosure and greater accountability and this must apply not just to the NKF but also to all IPCs and charities. There was much debate in the past, both inside and outside the House, about the extent to which Government should regulate their activities. In finally accepting the recommendations of the Council on Governance of IPCs, the Government wanted to strike the right balance in ensuring certain mandatory requirements and minimum standards in critical areas on the one hand, and, on the other hand, the need to ensure that IPCs, particularly smaller ones, are not overburdened by too onerous requirements to the extent that they feel stifled.

But in the light of what has happened at the NKF, perhaps we can look into some of these areas. The Government agreed with the views of the IPCs that there is no need to disclose the salaries of the top executives of IPCs. I suspect that the furore over Mr T T Durai's salary was not just only about the amount that he got. Indeed, one can argue till the cows come home over whether his pay packet was too much or whether it commensurated with the work he put in, just as we will never stop arguing about salaries of our public officials and CEOs of listed companies, but herein lies the difference: even if you disagree with what our public officials or CEOs are paid, we know that there is transparency. So I suspect that the public outcry this time stems from a deeper frustration over the NKF's persistent and steadfast refusal in the past to reveal such information when asked. The NKF is, on record, as dismissing such queries as without merit and purely of curiosity value. This is where I could not understand why the Government turned down the recommendation of the Council on Governance of IPCs. Of course, we all know that it is necessary to pay competitive salaries to attract good people, and, of course, we know that salary is a sensitive matter, but in ensuring that we provide information on how much we pay people in Government from the top down, how much the CEOs of listed companies are paid, we established this unshakeable principle of transparency and accountability that we did not apply to IPCs. Minority shareholders in our listed companies - and they probably number a few thousand for each company or maybe tens of thousands - have access to such information and, yet, the NKF management failed to recognise all this while that, over the years, if you take two out of three Singaporeans, that works out to 2 1/2 million Singaporeans have made contributions to the organisation, and to the salaries of the staff, surely they have a right to ask and get answers.

So, when finally the truth had to be extricated in court, it came as a rude shock to all, not just for its amount, but more because people felt that, "See, I told you so, they had something to hide." I would, therefore, urge that the annual remuneration of top executives be disclosed in salary bands, the way listed companies are now required to do. Paying competitive salaries is an acceptable fact of life, but providing such information will ensure that IPCs will remove doubts in the minds of their most important stakeholders, the donors, who, in the end, are the ones who decide whether they survive or not.

Sir, IPCs must exercise extreme care over their expenditure. The cap of 30% on expenditure is generous but there is that old argument that smaller charities have to spend more to raise smaller amounts. This is not entirely correct. I know of charities and, at least one, which raised $5 million in the last few years, last three years I think, but whose annual expenditure is about $20,000 per annum. So while the 30% cap is loosely bandied about like a benchmark, it behoves well for IPCs to find means and ways to scrutinise closely their expenditure and their methods of raising funds. Sometimes, the ends do not always justify the means. They have to ask themselves: do they exercise prudence in expending public donations? Mere compliance with the rules and regulations may now not be enough to satisfy the concerns of the public. Present levels of disclosure may now show to be inadequate and we may have to enhance transparency levels. I would strongly urge IPCs to voluntarily conduct themselves with standards even higher than the official requirements. They must not balk at this by arguing that this will raise administrative costs. Do not wait for the Government to impose more stringent requirements. Instead, take steps yourself to boost transparency and accountability. Better still, welcome closer scrutiny, whether it is from individuals, the donors, or from the media. In the end, you instill confidence and ensure that donations continue flowing in for your causes.

Mr Speaker, Sir, charities in Singapore do a lot of good, that is what I want to remind everyone, and we must quickly remove any doubts and suspicions in our minds so that the anger can quickly dissipate. I have faith that when the dust has settled on this sad saga - and it must very quickly - Singaporeans will once again demonstrate their generosity and philanthropic nature and continue to help those who are less fortunate.

Mr Chew Heng Ching (East Coast): Mr Speaker, Sir, with your indulgence, I would like to raise a few comments. It is indeed of grave concern to all Members of this House and the public at large about the recent media reports regarding transparency and accountability of the administration and the governance of NKF. I am particularly concerned about the potential impact that it has on the viability of NKF in the long term and the direct consequence on society and the needy who continue to need the services of NKF.

In this regard, Sir, the steps taken by the Minister for Health to restore confidence and the immediate appointment of Mr Gerard Ee are timely and should be applauded.

I would like to raise a wider issue and which is the chorus of recommendations arising from this episode to further tighten up the code of governance of VWOs. Whilst I am in full support of greater disclosure and transparency which create an environment where the informed public can choose, decide and channel financial contributions to the causes that are worthy of supporting, I fear that without taking a more measured and well-considered approach, legislating many of these best practices or introducing even more rules and regulations may serve more harm than good.

Let me elaborate, Sir. As has been the case of other "corporate type" failures in the past and in recent times, CAO, Citiraya, among others, it is easy to suggest a further tightening of rules and regulations with the underlying assumption that rules and legislation alone will be the panacea to solve such problems and prevent further recurrence. Whilst legislation will serve to allow for penalties to be enforced and perhaps a deterrence, the impact on the actual practices of boards of governance for public, commercial or charitable organisations will only be as far as individuals who sit on the boards. It is, indeed, substance over form.

Fundamentally, we need good men and women of ability, integrity and credibility on boards of listed companies and VWOs, and who can conduct themselves in good faith and work to deliver the objectives of these organisations. This has to be balanced against a set of basic regulatory framework that encourages transparency and accountability, and not rigidity.

On this, I would like to make reference to the code of corporate governance that governs listed companies. I note that the authorities responsible for drawing up the Code of Corporate Governance for publicly listed companies, of which I must declare I am a party, have carefully considered the need to balance compliance costs versus leaving it to the market to reward and punish good or poor corporate governance, being mindful of the potential burden of too many rules on companies and the deterrent effect it may have on able men and women coming forward to serve as directors and lead these companies.

Sir, we should take note of this experience when we tighten up our rules on governance of VWOs. If we over tighten, the net effect could be that less able men and women would come forward to serve in executive positions and sit on the boards of VWOs, much to the detriment of society at large and the needy who require such support. I am therefore heartened when Minister Khaw opined that there is no need to further tighten rules and regulations regarding the management of VWOs. However, I would urge the Government to consider advancing the implementation of the new code of governance for VWOs by one year, perhaps as early as 2006, instead of waiting until 2007.

Sir, let us be clear that the NKF was successful in raising funds to deliver the cause. It was successful in creating enough surpluses for the long-term sustainability of the organisation to benefit the public. Beyond the emotive issues that have been raised and reported in the media, I believe they have done a reasonably good job and have helped many people. However, in so doing, the NKF could have been more transparent. The board should have exercised greater oversight in managing issues of potential conflict between staff and itself and act in good faith. These failures can be addressed in substance by encouraging the right people to come forward to serve and to lead, who can both deliver the results that the charities need and conduct themselves with greater integrity and transparency, like instituting best practices in the running of NKF. I am sure Mr Gerard Ee, with his many years of experience as a public accountant, dealing with boards of listed companies, together with the new board members, all of whom are competent, able and men of high integrity, would know what to do next.

In summary, Sir, I do not see the need for any "knee-jerk" reaction to fix the NKF

problem by introducing more rules or regulations or tightening legislation, as has been suggested by many. In so doing, we may have addressed the form of the issue at high cost to our charities, deterred some good people from coming forward to serve and to volunteer, but may miss out on the substance, which is the bigger picture, ie, what is the best means with reasonable level of disclosure and accountability to help meet the needs of the needy in our society?

The NKF has started a new chapter under the chairmanship of Mr Gerard Ee and his new members. They have a formidable task ahead. Let us give them all the support they need.

Mr Chiam See Tong (Potong Pasir): Thank you, Sir, for allowing me to join in the debate.

The NKF episode, in my view, is a good thing that has happened in Singapore. It is a wake-up call, a lesson to the people of Singapore. They have to be vigilant. They cannot completely trust people who hold high offices in charitable organisations and Institutions of Public Character. In the case of private commercial companies, we know that there are regulatory frameworks to check them. But as far as I know, where charitable organisations are concerned, it would appear that the rules are not that strict. The surveillance on political parties under the Political Donations Act is perhaps stricter than that for charitable organisations. The checks on charitable institutions come mainly from within. This, of course, can miserably fail, as shown in the NKF case.

The NKF Board seemed to have condoned or overlooked many things which are quite irregular for a charitable organisation. The NKF Board did not object to the payment of excessively high salaries, exorbitant bonuses or luxurious perks to its CEO, and also to allow the NKF to disseminate false information to gain sympathy from the public in its donation drives.

I think the public must be reminded that, for all charitable and public organisations, there must be elements of transparency, accountability and sensitivity to the feelings of the common man. The best form of transparency, of course, is to have independent checks on the finances and affairs of the charitable bodies. For this, I would recommend to the Minister to get the Opposition involved in the boards and committees of important charities in Singapore. I think that is the surest way of ensuring transparency.

On the issue of insisting on independent checks, I must say that this has always been the position of the Opposition in this House. The Opposition has, on many occasions in this House, called for independent committees to be formed to check on the functions of the Government, the latest of which is the call for an independent commission to supervise matters concerning the election. But the Government routinely dismisses such requests. This kind of action on the part of the Government sends wrong signals to the public. The Government is telling the public that they do not accept the practice of independent checks on public affairs, which I think is wrong. On the contrary, I think that this kind of practice must be made the norm in Singapore, because independent checks on all public affairs is the surest way to ensure transparency and to prevent abuse of power, corruption and nepotism.

Accountability is the second pillar to ensure that public bodies function completely above board. Again, in this area, there must be independent checks, without which the public will never know or find out the goings-on inside of public bodies. The public which supports charities must wake up to their duties in relation to them. The public must insist that independent checks be immediately instituted in all charitable and public organisations.

The third point which I wish to make is that people working in organisations of public character must have sensitivity to the feelings of the man-in-the-street. I think it is terribly insensitive to say that a salary of $600,000 a year paid to a CEO of NKF is peanuts. One must not forget that, in the case of charity, the salary of CEOs comes from donations. Donations do not only come from wealthy people but much of them also come from the hard-earned or sweat money of working people. To a working man earning $800 or $1,000 a month, a salary of $600,000 a year is quite incomprehensible, and it is certainly not peanuts.

I now take the opportunity to pay tribute to the people of Singapore for being so supportive of worthwhile charities. I hope this unpleasant saga of the NKF will not make the public lose confidence in the NKF and other charitable institutions. I would urge all Singaporeans to continue to donate to the NKF, because its main function is providing subsidised kidney dialysis which is a truly worthwhile cause. The NKF has saved many lives.

Dr Amy Khor Lean Suan (Hong Kah): Sir, like many Singaporeans, I am shocked and saddened by recent disclosures about the affairs of the NKF. I have always had great respect for the work that the NKF is doing in providing affordable, accessible and high-quality dialysis treatment and care for its patients. In fact, its innovative ways of fund raising and publicising the NKF cause, which some criticise while others praise, has made the NKF easily the most recognisable charitable organisation in Singapore.

Perhaps, this is why the public outrage against these disclosures has been tremendous and the revelations were a bombshell to many who have loyally supported and sacrificially donated to the NKF.

Sir, I would thus like to make two key observations and recommendations:

Firstly, the formation of an independent committee of inquiry. Sir, although the potential fallout of the NKF disclosures is now, I believe, contained, with the resignation of the previous CEO and the Board and the swift appointment of a very well-respected volunteer and philanthropist, Mr Gerard Ee, to helm the organisation, numerous questions remain unanswered.

For instance, it was revealed that, of the $31.6 million expended for dialysis and transplantation treatment in 2003, the fees collected from patients were $22.9 million and the actual out-of-pocket expense by NKF was only $7.2 million. One wonders why the overall average subsidy level is only 23% when the NKF has managed to raise large amounts of funds and amass huge reserves of $262 million.

I fully understand the justification for reserves in that, when one takes on a dialysis patient, it is for the long term and hence NKF is committed to the patients for their lifetime. However, what then is enough as reserves since fund-raising activities are also ongoing, what is the reserve policy, who sets and approves the policy, and how is its adequacy measured?

Furthermore, whilst it continues to be very successful in raising funds, why has the NKF's share of kidney patients dropped from more than 50% in 2002 to 44% in 2003? As mentioned by the Minister for Health, have the subsidy levels set been so stringent that many patients have been driven away? Some of the revelations appear to be serious violations of public trust, such as the apparent inflation of the patient number to 3,000 when, in fact, it is only about 2,000.

Sir, although we should not go on a witch hunt, the public disquiet over the many unanswered questions regarding the NKF must be fully addressed, with no stones unturned. Otherwise, this could lead to a very cynical public with deep mistrust for charities and, hence, lower philanthropy participation rate and giving. Although our philanthropy participation rate of 97%, according to an NVPC survey, is very high, our donation per capita is actually very low, compared to countries like Hong Kong, the US and UK. So, we can ill afford to have a cynical public that cuts back on their giving for charity. Already, due to the tsunami relief efforts, many charities are lamenting that they are not receiving the charity dollars they need.

Sir, I therefore propose that, besides an internal probe, an independent committee of inquiry be set up to thoroughly investigate the issues and concerns that have been raised as a result of the recent revelations in court. The committee should comprise members who are experts in the area of volunteerism and philanthropy, senior civil servants from the relevant Ministries, experts in corporate governance and accounting standards, and well respected by the public. And I think these clearly may not be the Opposition, as Mr Chiam See Tong tried to suggest.

There should be a timeline set for the completion of the committee's inquiry, so as not to allow the public disquiet to fester longer than necessary. The committee's findings and recommendations should be made public. We should face the issues and mistakes made, if any, squarely, learn from them, and then move on.

Secondly, fine-tuning and tightening regulations. Sir, the Council on Governance of Institutions of Public character, which was appointed by the Minister for Finance, had in May 2005 made recommendations to promote good governance and transparency among institutions of public character. These relate to board governance, fund-raising and financial controls.

Sir, it may be presumed that the charities themselves were supportive of the original 19 recommendations made by the Council, as they recognise that greater transparency and accountability would earn them the trust of the donating public. In the light of the recent revelations and feedback from the public, more comprehensive rules and regulations should be drawn up, especially for large IPCs. These should be as rigorous as for any listed companies, to ensure a high standard of corporate governance, transparency and ethics. As there is a wide range of charities, it is recognised that we clearly cannot have a one-size-fits-all set of rules. Hence, we should look at a tiered approach and even some customisation.

Sir, whilst I generally agree that charities should be regulated with a light touch, as otherwise they would be overburdened with tight regulations which could stifle volunteerism, light regulation certainly does not mean that we allow our charity sector to run like the wild, wild west. In relation to the NKF fiasco, for instance, there have been some sentiments on the ground that the Government could have been more pro-active and intervened earlier when there were already some grumblings from members of the public and the charity sector.

With regard to the further review of rules and regulations governing charities, I would like to make three proposals:

Audits, annual reports and general meeting with the public

Sir, while voluntary welfare organisations are required to submit their year-end audited accounts to the NCSS and post them online, there is no requirement for independent audits to be conducted on these non-profit organisations to ensure that the funds are used prudently. Such

independent audits would lead to greater transparency and accountability for the funds raised.

The Government should thus consider making it mandatory for large IPCs to undertake independent audits. Additionally, they should be required to publish annual reports and audited financial statements which should be made available online to the public for greater accountability and transparency.

The recommendations recently made by the Council on Governance of Institutions of Public Character only recommend this as a best practice and not made compulsory. It is also proposed that they hold annual meetings where the public can ask questions regarding their operations to keep the public fully informed of their activities.

National agency watchdog

In fact, there should be, without exception, a national overseeing agency or watchdog for all VWOs to streamline and ensure that minimum standards of ethical practice and prudence are adhered to. Currently, there are various Central Fund Administrators (CFAs) appointed by the Ministry of Finance to grant IPC status to institutions in their respective sectors. The CFAs are involved to some extent in promoting good governance amongst IPCs but these are limited.

The national agency watchdog could be a Ministry like MCYS or the Ministry of Finance or the NCSS. It could issue practice guide to VWOs from time to time and be empowered to investigate any complaints that the public may have regarding the practices of certain charities.

A framework for investigations and penalties for those who flout the rules could be incorporated, say, into the Code of Governance. Those who abuse the trust of the Government and the public must be taken to task.

Disclosure of key officers' salaries

Sir, the size of Mr Durai's pay packet is one of the key causes of the public outburst although obviously there are many other contributory factors. Currently, there is no requirement for charities to disclose the salaries of their key officers.

As IPCs are largely run by volunteers together with some paid staff, there have been some notions that IPCs need not be held to a higher standard of accountability and transparency than listed companies. However, large charities are really not any different from listed companies. Their donors are akin to the shareholders of listed companies. In the case of listed companies, directors' pay is revealed to help ensure that board remuneration policies are fair and less prone to criticism. The level of transparency of large charities should not be any lower than that of listed companies since the funds they receive are from the public and they are thus accountable to the public. The Government should thus relook at the whole issue of remuneration disclosure in the light of the NKF fiasco.

In 2004, the second Minister for Finance then, Mr Lim Hng Kiang, had noted the dilemma NKF faced in deciding whether to disclose their CEO's pay. He said that if they do not disclose, then there will be critics who say they are not transparent. But if they did disclose, there will be critics who will say that whatever they pay are too high.

However, I think that revealing the pay of key officers of VWOs is no different from those of listed companies. If there are sound bases and justifications for the pay given, then the organisation should be prepared and able to stand up to public scrutiny. The benefits of greater transparency, accountability and building up of better understanding and trust with the donors through the publication of administrator's pay, amongst others, should outweigh the concerns over public scrutiny and criticism.

Conclusion

Sir, the NKF saga comes at a time when corporate governance, transparency and accountability are buzzwords in the corporate world due to recent high profile debacles, such as China Aviation Oil and Citiraya. Judging by the huge public outcry, public confidence and trust even in charities have definitely been shaken now. However, this should not stop us from volunteering or giving to charities as there remain countless genuine needs out there of the needy and the sick who depend on our every little effort and donation for their survival.

Hence, now that a new chairman has been appointed and a new board constituted, let us continue to support the good work that the staff and volunteers of NKF had done and continue to do. In fact, I salute the staff of NKF who had steadfastly soldiered on with their work despite the public outbursts and pressure they faced. There is much experience, expertise and value the NKF had built up over the years which we should cherish and protect. Indeed, this saga can be taken as a wake-up call to all charities as well as the donating and volunteering public.

Let us all learn from this most unfortunate episode and make changes to the charity sector so that it will become more resilient, efficient and effective in promoting their worthy causes and delivering aid to those in need.

Dr Lily Neo: Mr Speaker, Sir, thank you for allowing me to speak, but I shall be very brief. I only want to pose the following eight questions to the Minister for Health. But before I do that, I would like to declare that NKF's patients' welfare is my main concern and I hope that this unfortunate episode will not deprive them the continuum of care.

(1) May I ask the Minister whether he should check on the practices of NKF with regard to patients' eligibility for care?

(2) How many kidney patients have been rejected over the years?

(3) What have been the criteria used to admit dialysis patients?

(4) Is NKF too stringent on its minimum health criteria on patients' eligibility for admission?

(5) Should NKF take the responsibility on which patients to save?

(6) Is it justifiable for NKF to collect about 80% co-payment for its dialysis cost amounting to about $24 million a year from needy dialysis patients to whom the public is donating to help?

(7) How many dialysis patients have been turned away for the lack of funds to co-pay due to their co-payment requirement?

(8) Is it true that Kidney Dialysis Foundation (KDF) was set up in 1995 to take in rejected NKF dialysis patients?

Mr Gan Kim Yong (Holland-Bukit Panjang): Mr Speaker, Sir, thank you for allowing me to join in the debate on the Ministerial Statement on NKF. First, I would like to declare my interest as a director of a voluntary organisation, Care Corner Limited.

[Mr Deputy Speaker (Mr Chew Heng Ching) in the Chair]

5.08 pm

Sir, first, I would like to commend Minister Khaw for his handling of the issue. His swift, firm and transparent approach has helped to stabilise the situation and restored calm to the community. A new Chairman was quickly identified and put in place. The Minister just informed us that a new board has been appointed and soon, a new CEO will come on board and NKF, hopefully, would be able to start on a new sheet and put its troubles behind. However, there are lessons to be learnt from this incident and if we can learn from this unfortunate event, we would help NKF to be stronger and we would also be able to help other charities to mature and grow. Sir, I would like to urge the Minister to consider three aspects.

Firstly, we need to conduct a thorough investigation by way of a board of inquiry or otherwise. The NKF incident has generated a lot of public interest. I can understand the anxiety as many Singaporeans have donated to the charity. They are genuinely shocked by the turn of events and wanted to know the truth of the matter. There are many rumours and stories circulating around, which can be quite damaging if they are not properly addressed. I think, in the interest of transparency, we should carry out a thorough investigation into NKF's affairs.

I am not so concerned with the debate on the salary and perks of the CEO, as this is a matter for the NKF Board to determine, and for the people to judge whether they have been overly generous. But we need to determine, through the investigation, whether there has been any breach of governance, any impropriety or misconduct on the part of the CEO and the Board. I am not suggesting for a moment that there is any impropriety or fraudulent practices, but it is important for us to determine conclusively to have closure to that matter. If there is, then appropriate legal action must follow. If there is not, then we should conclusively put this matter behind us. This is a crucial step towards restoring credibility of the NKF and rebuilding confidence of its supporters and donors. Arguably, it is also in the interest of the CEO and the Board to have the whole matter clarified through an independent investigation so that their role and credibility could be restored. It is no doubt a painful process, but it is inevitable.

Secondly, I would like to suggest that the relevant Ministry should review the regulatory system governing charitable organisations. Sir, I appreciate that there is a need for some balance. We should not over-react because of one incident. We need to ensure that certain basic rules are followed, yet allow sufficient flexibility for the organisations to develop and grow. We can understand that charitable organisations depend, to a large extent, on volunteers at many levels. This is not wrong as volunteerism is the foundation of charity. But as volunteers, they cannot operate like commercial enterprises with very elaborate governance procedures, rules and regulations. It is just not possible to operate.

However, they are similar in many ways to commercial enterprises. They raise funds from the public to pursue commercial interests. Charitable organisations also raise funds from the public to pursue their charitable causes. The requirement for accountability is the same. Certain basic rules must be there to ensure that essential information is disclosed. We have hitherto left it to the community to decide. We hope that people will be wise in donating their money and support the transparent organisations so as to put natural pressure on others to improve their transparency. However, unlike commercial enterprises, charitable organisations often appeal to the emotional side of the donors, which is not always rational.

Therefore, I feel strongly that there is a need for us to specify certain minimum disclosure requirements. We should include an indication of what proportions of the donations go directly to serve the stated cause and what proportions are spent on fund-raising efforts and overheads. There should also be some checks and balances in the operation of the charity. For example, there should be certain requirements for independent directors on the board as well as regular internal audit processes. A possible model could be one that separates fund-raising activities from the provision of charitable services and each separately accounted for. I would suggest that a review panel be set up, comprising IRAS, MCYS and other relevant Ministries to thoroughly review the governance issues of charitable organisations.

Thirdly, we must not lose sight of the need for professionalism in the charitable organisations. My fear is that this NKF episode may have a severe negative impact on the overall landscape of charitable organisations. I hope that our charitable organisations, which have been pushing for greater professionalism, will not take a step backwards. Charitable organisations need to continue to inject greater professionalism into their organisations. This is the only way for these organisations to develop and grow. The NKF problem is not one of professionalism, but one of transparency, or rather, the lack of it. We must all thank Mr Gerard Ee for agreeing to work as Chairman of the NKF for free. But we cannot expect the next CEO to also work for free. It is important that we pay the new CEO appropriately, taking into account the charity's affordability, the job's responsibility and the candidate's capability. The new Board must weigh all these factors and decide accordingly and be ready to defend its decision publicly. The public can then decide whether the Board has been reasonable and whether they deserve continuous support and donations. Only this way can our charitable organisations grow in professionalism.

In conclusion, Sir, I would like to urge the Minister to carry out a thorough investigation into the affairs of NKF to ensure that there is no misdeed, to review our regulations governing charitable organisations, to ensure basic disclosure and governance rules are adhered to, and continue to encourage our charitable organisations not to let up in their pursuit of excellence through professionalism.

Ms Irene Ng Phek Hoong (Tampines): Sir, the public outrage over the NKF saga is really quite unprecedented in Singapore.

We can see the outpourings of anger in newspapers and also in terms of the way they demonstrated in drawing graffiti on boards and buildings, which I feel is something quite terrible and should not be encouraged in Singapore. While I think public outrage in most cases is justified, I feel that the way that some Singaporeans have responded to this should be lamented and should be discouraged, because it does not help us to build confidence in VWOs and give confidence in how we respond to difficulties and crises that charities will go through again and again.

Sir, I am sad that some Singaporeans have chosen to take out their anger on staff and volunteers as well. This does not say much for our sense of community spirit. The issue, I feel, revolves around, as my colleagues before me have pointed out, transparency and accountability because, at the end of the day, this involves public money. To my mind, this NKF saga marks a defining moment. It is a defining moment because it challenges us in a deeper way by asking us to choose between two ideals which we hold both equally worthy. It is not choosing between right and wrong. Nobody is accusing NKF or its former CEO of being corrupt. It is about balancing our notion of meritocracy which is about paying the right amount for the right man, given the value of the job, and social justice, which is about creating a fairer and more just society. This is why I feel this debate is important. It is more than just about good governance of NKF or charities, but we form our national character in defining moments like this because we commit to irreversible courses of action that sharpen our collective identity. And we test ourselves because then we will discover what we will live up to and what we hold dear to us.

Sir, we do not have a quarrel with meritocracy as an ideal - paying a person according to his performance and the value of his job. But still many Members of the public were outraged at the $600,000 annual income and perks of T T Durai. I must confess that I myself was taken aback as I know of few people who are paid such generous 10-12 months' bonuses. So the question that arises is: what has he done to deserve this generous pay? And for the public to make an enlightened judgment, we need more facts, and the facts that come out through litigation are not the best way to disclose such sensitive information. We need VWOs to be transparent, to be ready to put out such facts without being cross-examined in the witness box. At the same time, we need to be clear in our minds about whether we think CEOs of large charities should be paid according to their talent and capabilities that they bring to the job.

Sir, I must admit that I can understand how a person living in a 2-, 3- or 4-room flat will feel about his public donations being used to pay a CEO with such high salaries. The question is not how much or who donates, but the question is whether the person who does the job is doing it to the best of his ability and bringing the maximum benefits to the patients and to the causes that they support. My understanding is that the members of the NKF Board are not paid. So it is a volunteer spirit. They are very community-minded men who are helming the Board of NKF. And the CEO - I do not know him personally - my understanding is that he believes in the cause of NKF. But the question is whether he has lost focus, whether he has been excessive in the way he runs NKF.

Sir, at the heart of the issue is the need for transparency. And I am glad to hear from the Health Minister that benchmarks have been provided for disclosure practices, but the benchmarks have been shown to be flawed in NKF's case, and the result is a credibility gap that will undermine people's trust and confidence in our VWOs. The world might be moving in the direction of more professionally-run VWOs with business models, but the trust that the people have in the biggest player which personifies this has weakened. This is a contradiction that is bound to cause serious problems if it is not resolved quickly. What is the use of wanting better-run charities with better paid staff when our largest charity is starting to be viewed as being out of step with everyone in ways that damage people's trust in them?

Sir, I would like to address a sticking point, which is the CEO's salary. Many donors are understandably interested in how much the leaders of charities earn. In the US and the UK, this information is public record and can be found in websites. There is a website called CharityNavigator which provides the CEO's salary as a percentage of total expenses so that donors can quickly put the salary in perspective. The CharityNavigator is America's largest independent charity evaluator. Its position is that the compensation for a charity CEO should be not small. It should be commensurate with how much the organisation spends and raises.

The Minister mentioned Oxfam as a charity worth emulating. Sir, Oxfam is one of the world's foremost aid agencies, experienced in delivering emergency relief to trouble spots, such as East Timor, as well as managing long-term projects all around the world. Oxfam America pays its top man about $300,000 in 2003, which is about 0.67% of the organisation's total functional expenses. How does this compare to NKF? T T Durai's pay is $600,000 out of total expenses of $84 million, which means he makes about 0.71% of total expenses. It is arguable whether it is too high, given that NKF's role and reach are not quite that of Oxfam America.

The Minister mentioned that he has already in mind a candidate to be CEO, and the candidate that he has in mind is someone who has experience in running hospitals and in healthcare services. The question then arises whether perhaps the benchmark for the pay of the CEO of NKF should be that of a CEO of a hospital rather than a CEO of a social service VWO, which is what the public has in mind.

The Minister also mentioned the dilemma of making public the salaries of senior management in charities. He is worried, and perhaps rightly, that people will not join VWOs as senior management if their pay is made public. Perhaps a way out of this is to present it as a ratio rather than the nitty-gritty of dollars and cents. This is also done in some websites I found just a few minutes ago while I was scrolling through. Many of the websites that track charities maintain that it is unrealistic to expect organisations to spend very little on management. And according to one reliable website which tracks charities, it mentioned that, typically, charities spend between 5% and 13% of their total expenditure on senior management. I am not sure if NKF falls within this range because the pay of its senior management is not made available. But the key is accountability. Donors should be able to ask the charity what is spent on administration and, if appropriate, ask them to justify their performance and not wait until they are called to court proceedings in a witness stand.

I would also like to stress on the function of the Board. They must know their function and their roles, which are to provide direction to the CEO. In this case, I am not sure whether the NKF Board of Directors are calling the shots or is it the CEO that is calling the shots. I think it is important to have some independent directors on the Board as well.

Sir, my last point is on the need to convey to the media and the public the role of charities and the changing faces of charities. In the UK, just this month on 11th July, their National Council for Voluntary Organisations has come out with a new coalition, which is called Impact Coalition. "Impact" stands for improving accountability, clarity and transparency, launched on 11th July, to improve public trust and confidence in their sector, their values and the way they work. Their main task is to convey to the public why they raise money the way they do, what is the fund-raising ratio, why do they pay their top people the way they do. It should not be the role of Government only. The VWOs should engage with the public actively, to form their own coalition, to build public trust and to convince the public that, indeed, if you are a complex organisation needing high pay to attract the people, then that should be the way to go. And I think it should not be the job only of this Parliament but also for VWOs to band and stand together to build public trust.

Mr Leong Horn Kee (Bishan-Toa Payoh): Mr Deputy Speaker, Sir, thank you for allowing me to join in this debate.

Minister Khaw Boon Wan has given a very clear and comprehensive statement on the affairs of NKF and what he considers need be done going forward.

The Minister said that about half a million Singaporeans donated to NKF last year. This means that many Singaporeans, including students and young children, have been donating to NKF. This includes poor and low-income families who were touched by the emotional appeals of NKF fund-raising exercises. Even though they could be having barely enough money for themselves, many still give a few dollars a month to NKF. This generous gesture of all Singaporeans to donate to help the kidney patients is indeed most heartening and praiseworthy. We should all salute them.

The donors are what I would call "stakeholders" in NKF. When it became public that certain practices of the NKF were indeed excessive and not so prudent in the use of funds, it was therefore natural that the public, especially the donors or "stakeholders", were outraged and betrayed - to quote the word used by the Minister. Why is there a need to have a golden tap, first-class travel and a fleet of eight cars? I would say that even very large local companies and MNCs do not have such extravagant practices.

Need for high transparency and good governance

I agree, therefore, with the move to install a new CEO and a new Board in NKF. The purpose is to enable the new CEO and the Board to introduce a high level of transparency in NKF, so that donors are aware of how and where the funds are spent. I am pleased that the Minister has said that the framework of governance and code of conduct for the charities and IPCs will be reviewed further to allow for more transparency and good governance.

I wish to suggest that there should be guidelines on how much the charities and IPCs should raise each year, and how much reserve they should generally target to achieve. The purpose is not so much to restrict their fund-raising per se. We should definitely not curtail the competent and professional fund-raisers who can raise more funds than others. But this is to allow fund-raising activities to be spread out so that all charities can have a reasonable share of public donations. Public donation is finite. There is a limit on how much we can raise from corporations and the public each year. We cannot tap from the same sources every time, because they get exhausted. What we should aim for is to achieve more orderly and balanced fund-raising activities by all charity groups.

Charities, like public-listed companies, approach the public for funds. Hence, I would strongly advocate that charities should adopt closely the good governance practices of public-listed companies. They should have a majority of directors on the Board who are "independent directors". These are people who are not appointed by or friends of the executives and therefore are obliged or beholden to the management. These independent directors can help to check against excesses and wrong practices of the management. I feel that there should also be a proper Audit Committee and internal audit teams if their size justifies it.

The revised guidelines should indeed be applicable and practised religiously by all charities and IPCs seeking to source donations from the public.

Guidelines on fund-raising methods

I would also like to urge the Government to consider issuing guidelines on the fund-raising methods by charity groups. People are prepared to donate to help the poorer segment, under-privileged and medically unwell. However, most people would prefer that the "marketing tactics" of these charity groups to be within reasonable bounds of sensitivity and humility. There should not be "pressure selling", aggressive or pushy methods, and insensitive marketing to people who are either too young, very old or uneducated.

More importantly, the charities seeking donations should explain clearly what are the objectives, the uses and the target sums to be raised. The manner and process of donation should be clear and transparent. For example, we, as MPs, have received many appeals by residents to cancel their telephone donations to NKF because they were not aware that each phone call to donate cost $1 or $5. I have a case of a poor resident whose children unwittingly made many calls, and ended up having to pay $2,000 donation to NKF, which they obviously can ill afford to pay. Although the donation was eventually cancelled by NKF, the entire episode caused much distress and acrimony within the family unnecessarily.

On-going investigations into the affairs of NKF

We hear from the Minister that a thorough investigation will be conducted to ensure that there are no serious wrong-doings in NKF. This is commendable and necessary as the public wants to know whether there are other skeletons in the NKF's cupboard. More importantly, the exercise is not so much a witch-hunt, but to clean up the organisation and restore confidence of the public in NKF. Many people have lost faith with NKF. Many thousands have withdrawn their donations.

Thus, the cleaning up exercise is to tell the public that there is nothing else wrong with NKF. Please come forward to support and donate again to this charity. Of course, the public should be aware that there is the alternative of donating to the Kidney Dialysis Foundation (KDF), as mentioned by my colleague, Dr Wang Kai Yuen. The KDF is also doing an excellent job to help kidney patients.

We read that an investigation is now being conducted by the IRAS. The IRAS is very competent in investigating tax matters. The Minister has said that the PWC are the current auditors of NKF.

I wonder why the auditors did not uncover and surface some of these financially non-prudent practices of the management to the Board. And why did the Board not object to these practices if they were so informed?

I am pleased to hear from the Minister that the new Board has appointed another set of auditors, KPMG, to do a thorough audit of NKF. I hope that the proposed audit will cover both operational and financial matters, and be very comprehensive. In addition, I would like to suggest that the audit, when completed, should be made public, as this is of high interest to the donors. It is required to be transparent to restore confidence. I wish to ask whether NKF currently has an internal audit team and an Audit Committee. If they do not have, maybe they should consider doing so since they are holders of such a huge amount of funds and do such large collections every year.

Therefore, there are presently many unanswered questions on the past practices of the NKF. Notably, why has the Board of Directors not checked on Mr Durai? We need to know, and we need to see what are the undesirable practices that can be removed before public confidence can be restored to NKF.

Safeguard on the $220 million reserves

Sir, I read that the NKF has a huge reserve of $220 million. This is quite a remarkable achievement. Now that this huge sum is sitting in NKF, I would like to know what safeguards are in place on the use of this fund. Is there a sound and prudent investment policy? Who decides on the fund management and usage? As it is said that the reserve could last over 30 years, then how is this fund being invested meanwhile? What checks and balances, and controls are there to ensure that the money is prudently and safely invested? Perhaps the Minister or NKF can enlighten the House and the public on this matter.

Political patronage

Mr Deputy Speaker, Sir, I wish to touch on the matter of political patronage. Many charities, temples and IPCs like to seek out Ministers and MPs to be their patrons, so as to provide prestige and political patronage to their organisations. This is understandable. If a charity can get the President, Mr Nathan, or the Prime Minister to be its patron, it can gain enhanced recognition and stature immediately. It is definitely of great help to their fund raising exercises. Spouses of Ministers are also sought to give such patronage.

In the case of NKF, the wife of SM Goh was the patron. Unfortunately, because of her presence at the two days of court hearings and the remarks she made to the press, it created much unfavourable reactions.

In principle, I do support patronage given by Ministers, MPs and their spouses to worthwhile charities and IPCs. There are many worthwhile charities deserving support and patronage. However, I feel that patrons should generally stay above the fray and not involve themselves in executive matters. The Prime Minister has recently issued fresh guidelines to Ministers and PAP MPs on their dealings with the public, rules on accepting of gifts, and roles and obligations as company directors. I wish to propose that the Prime Minister consider including in his directive, new guidelines for Ministers, PAP MPs and their spouses, on rules when they agree to serve as patrons of charities and IPCs. These guidelines can include types of bodies to give consent to be patrons, expectations and involvement level as patrons, and immediate withdrawal of their patronage at any hint of misdemeanour by the organisation. This is another step towards achieving greater transparency.

Conclusion

Mr Deputy Speaker, Sir, I wish to conclude by expressing that it is indeed regretful that this entire episode of the NKF has brought about so much agony, controversy and outcry. As the Minister has said, the NKF cause is a very worthy one. Many kidney patients deserve our help. The silver lining, if I may say, is that this incident demonstrates the more mature level of civil society that we have attained. Many people donate to charities, but they demand to know how the funds are channelled and used. This saga also enables the Government to do a review of the current practices and regulations, so that higher clarity and transparency can be achieved.

We hope that the end-result is to restore public confidence and support not just for the NKF but for all other charities in Singapore. All these charities do need our help and our generous donations. So may I urge all Singaporeans, go forth and donate.

Mdm Halimah Yacob: Mr Deputy Speaker, Sir, thank you for allowing me to join in this debate. First, let me thank the Minister for his Statement outlining the measures that will be taken to restore stability and confidence.

Sir, when news first broke out about Mr T T Durai's pay and that the NKF's figures on the number of its patients and how long its reserves would last were misrepresented, I felt as if I was under siege. As wherever I went, people demanded to know what the Government would do. So I was quite relieved when the NKF finally invited Minister Khaw to assist them. The Minister's intervention has restored some amount of confidence because people trust the Government and believe that the Government will get to the bottom of things and put the house in order. But looking ahead, I also wonder what would have happened if the NKF had decided not to involve the Ministry of Health. Is there a mechanism for the Government to intervene to protect public interest? This points out to me the importance of having a system in place to ensure proper checks and control so that intervention can be made much more earlier, and not only when the situation has become so serious.

Sir, I can understand how Singaporeans feel. At every union meeting that I attended over the next couple of days after the story broke, I was besieged with a deluge of questions about NKF. There were many angry words, frustration and, above all, a sense of betrayal. These feelings are to be expected. Almost two out of every three Singaporeans had donated to the NKF. Among these were many low-income workers who had donated a part of their hard earned money to the NKF because they believed that their money would be put to good use. A unionist recounted how his unemployed son who had used his savings to donate had quarrelled with him for accidentally throwing away the NKF pledge form during house-cleaning. Such was the intensity of feelings that the NKF was able to invoke through the many years of their fund-raising efforts to appeal to Singaporeans to help the kidney patients. When events turned out this way, Singaporeans were angry, particularly because the last few years had been tough years for them as many had lost their jobs, suffered wage cuts or enjoyed lower increments. Many were outraged to find out that in 2003, during SARS when some of them had to take no-pay leave or work reduced hours to keep their jobs, the CEO of NKF was paid 12 months of bonus and all in the name of charity.

It is true that we cannot expect those who work for charity full-time to be lowly paid. If we want the best people who can mobilise others, raise funds and run effective programmes for worthy causes, we have to pay them a reasonable or decent salary. But the real issue here is how much is enough or reasonable, especially when payment is made out of charity dollars. Singaporeans have overwhelmingly voiced their opinion that $600,000 is excessive. I think that any attempt to try and justify this amount would only make things worse.

But, Sir, we are all agreed on one point - we, as a society, should move ahead. We should not allow this whole incident from deflecting support for the NKF or the worthy cause that it is promoting - a mission to save the lives of fellow Singaporeans afflicted with kidney disease. We should also not let this affect our support for other charities as it would be unfair and unthinkable if Singaporeans were to stop helping the needy one day. We would be a very sad and uncaring society if this day were to come.

In moving ahead, Sir, the real issue that we need to deal with is not the question of how much we should pay the CEO of NKF. Of greater importance is the issue of how should charities, which are given autonomy to raise money from the money, be governed. What accountability should there be to the public which provides such charities and, more importantly, the needy constituents their lifeline? What are the checks and balances that are in place to ensure that there is no misuse of public funds? Who should test the system periodically to ensure that the rules are not flouted? Is it reasonable now that we can see how much money in charities, such as NKF can amass, to leave everything to self-regulation? When questioned during cross-examination as to why he did not disclose to the public about his pay and other perks, Mr T T Durai replied that he had no legal obligation to do so.

Sir, I think that this is a fundamental issue. We need to decide on the kind of regulatory regime that we want to put in place. I believe that charities should be governed by legislation, particularly those of a certain income size, if regulating all would be too onerous. If we want charities to upgrade and professionalise themselves and to be run as companies, and if we argue that their staff should also be well-paid to attract the best, then surely they should also be subject to the same rigours of accountability as companies, which are governed by legislation. I do not believe that introducing laws would make the system more rigid. Certainly, it would introduce some amount of administrative work but charities which are well-run and organised should not be concerned about this. If we do not think that legislation is the way ahead and still opt for the self-regulation mode, then we need to have a system in place where full and complete disclosure is possible, and the public is given sufficient information for it to make an informed decision and to have trust and faith in the charities.

Applying this principle to the NKF, the kind of disclosure that the public would like to see would cover the following areas: How much reserves does it have and how long will those reserves last? How many patients does the NKF have? What is the subsidy policy? And is the subsidy adequate, as some of us have been approached for assistance by those turned away by the NKF? What percentage of the fund-raising should be used for expenditure and how much must go towards helping the needy? What are the disclosure guidelines and processes that charities must adopt to improve on their transparency and accountability? Is there an audit committee? What does it audit and what is its responsibility? Are independent auditors already appointed, and are they performing a reasonably good job? What is the role of the Board of Directors? As in the NKF's case, the Board's supervisory role is clearly absent. Is there a system where volunteers or staff can raise concerns, bearing in mind that one such volunteer was sued in court for raising the very same issues that are now the subject of today's debate? Are whistle-blowers protected, Sir? For the Government is now thinking of protecting whistle-blowers when it comes to corporate governance for companies. It seems to me that what is lacking now is that we have opted for a scheme of self-regulation, but there is no system in place to check whether this is working. This has resulted, in the NKF's case, in a serious lack of transparency and accountability.

Sir, I call upon the MOH to conduct a thorough investigation of the affairs of the NKF so as to restore trust and confidence in charities which have taken a severe beating. At the end of the day, I must also say that no matter what checks and balances are put in place, a lot depends on the integrity of those who run these charities. We have seen that even in America, despite the more rigorous corporate governance laws that are in place, fiascos such as Enron can still happen. In Singapore, businesses are subject to thorough and tough business and company laws, financial guidelines and regulatory practices to ensure that they carry out their businesses properly and honestly and are answerable to their stakeholders. What about our charities who are dealing with public donations and funds? Should they not be more well-governed than private companies?

What is equally important is also our own vigilance. As donors, we should be more discerning, discriminating and demanding, to quote Mr Gerard Ee's words. Perhaps, as donors, supporters and contributors of NKF, we also cannot completely absolve ourselves from blame. How many of us must have felt somewhat uncomfortable with the glitz and gloss associated with the NKF's fund-raising efforts, including the television shows? We must have wondered and asked ourselves many questions, but never took the trouble to seriously articulate them. Or have we allowed ourselves to be intimidated by the law suits that we knew NKF could well bring against critics?

On the positive side, this whole NKF episode is actually a good lesson on the importance of good corporate governance for all charities. I hope that other charities will also take a leaf from this and do their own housekeeping if their house is not in order.

Let me conclude, Sir, by appealing to all Singaporeans - I understand your anger and frustrations. But let us not add more confusion to the already complex situation. The Ministry of Health has promised that it will do a thorough investigation together with the new Board. And we should give them our support so that they can do their work effectively without hassle.

Sir, notwithstanding the recent fiasco, the NKF has done good work and can continue to do so after some rigorous housekeeping. What we need to do now is to focus on the lives of those Singaporeans who need kidney dialysis and for whose sake, we need to support the NKF. For the NKF is not about Mr T T Durai, it is larger than that. It is about saving the lives of fellow Singaporeans, many of whom are low income workers who need the support of the NKF.

Mr Ang Mong Seng (Hong Kah): ( In Mandarin ): Mr Deputy Speaker, Sir, since it started in 1969, the National Kidney Foundation has expanded significantly and contributed substantially to help kidney patients in Singapore . It was first established by a group of individuals who cared deeply about kidney patients at the Singapore General Hospital and they had built up this renowned organisation from nothing over 30 years. It has achieved a brand name which is known internationally. At the moment, NKF has 21 dialysis centres and served about 1,800 kidney patients, providing high quality medical attention. It has become one of the top dialysis centres in the world. Visitors to Singapore , including some leaders from China , were deeply impressed by the good work done by NKF and were full of admiration for it, after visiting the dialysis centres run by NKF.

Recently, the series of revelations has sparked off much controversy in Singapore . Minister Khaw has come out quickly to pacify the public outrage, acted swiftly to set up a new Board of Directors and appointed an interim Chairman. This is a wise and correct decision. We must continue to support NKF and should not allow this organisation, which has been built up through many years of hard work by many people, to be destroyed overnight. In order to continue to serve our kidney patients, we must look at the big picture and together continue to support NKF and restore public confidence in NKF. At the same time, we must strengthen the corporate governance and transparency of NKF, which continues to serve the unfortunate patients and save lives. I would like to suggest that NKF consider the model that has been established by the Town Councils. NKF is a charitable organisation and the Town Council is a non-profit organisation. Both manage funds contributed by the public.

I would like to make the following suggestions.

Firstly, appropriate use of the funds raised. Each year, NKF receives huge sums of donations. Town Councils put aside 30% to 35% of the service and conservancy charges collected from the residents for redevelopment and reconstruction of facilities in the towns they manage. Similarly, NKF can consider setting aside about 30% of the funds raised as its reserves. Part of the reserves could be deposited in the banks to earn interest and part of them could be used to build new dialysis centres, purchase new equipment, and make cyclical improvements to the facilities of these centres.

Secondly, in terms of administration, Town Councils generally spend about 20% of the service and conservancy charges on administrative expenses, such as staff salaries and daily operational expenses. So I would like to suggest that NKF also spends about 20% of the donations on administrative expenses.

According to NKF's Annual Report 2003, the income was $100 million. For a staff of 996, the total salary was $27 million, accounting for 27% of the total income. This is rather high. Perhaps, the new Board of Directors can review these administrative expenses. In addition, besides this 20%, the balance of 50% of the funds should be spent on the kidney patients. According to the report, of all the donations received by NKF, only 12% is spent on the patients. This is rather low. Public donations must be used to help the patients, especially those from lower income families because they are sick and unemployed and do not have any income. According to statistics, there are 4,000 patients in Singapore , and only 2,000 patients are receiving treatment at either NKF or KDF. At present, there are still about 2,000 kidney patients who are waiting for their turn to receive dialysis. In order to increase the opportunities for dialysis, I suggest that the new Board of Directors consider using part of the reserves to set up new centres to provide early treatment for these 2,000 who are as yet unattended to. I would like to suggest that 50% of all donations should be used on the patients in order to reduce their financial burden. For those who are poor, they should receive greater subsidies.

Some donors to NKF told me that the NKF Directors have recently deleted the Chinese name of NKF. I have read the Chinese newspapers, Lianhe Zaobao , Shin Min, but I do not see a Chinese name for NKF. They just use NKF. What is the reason for this? Why delete the Chinese name? Every year, during the Hungry Ghost or "Seventh Moon" festival, the participants would donate generously to NKF. During these Seventh Moon dinners, they use Mandarin or even Hokkien to raise funds for NKF, and they have received the generous support and response from the residents.

This recent episode has made many donors unhappy and they remarked, "When you wanted money, you talked in Hokkien. Now that you have money, you speak in English." In other words, they speak our language only when they need our money. Since much of their support comes from the Chinese community, why do they abandon the use of the Chinese name for NKF? I would like to know whether the new Board of Directors will explain the reason for this decision so that the public at large will understand why the NKF's name in Chinese has been abandoned.

Finally, I support the suggestion to look at the whole cause and effect of all these donations raised by PM Lee. By doing this, we can provide a good opportunity to let the Board of Directors and the former CEO, Mr Durai, to explain their position, and I am confident that the new Board appointed by the Minister will be more effective and transparent in carrying out the work and make NKF more effective and visible, in order to serve the patients and protect the international brand name and image of NKF.

Mr Steve Chia Kiah Hong (Non-Constituency Member): Thank you, Mr Deputy Speaker, Sir, for allowing me to participate in this debate. I also thank the Minister for Health for allowing us to speak in this debate today.

Like all Singaporeans, I am troubled to read of what the former NKF's CEO had been forced to admit in court. Sir, what troubles me and many other Singaporeans is not that Mr T T Durai is earning $600,000 salary a year. It is that he is earning this very high salary and 10 months' bonuses from the charity donation money without informing the public donors about it. If NKF and its CEO had been transparent about the CEO's pay and the other expenses, then the donating public would know who and how the money is being used, and there will be no anger as we had seen in the last week.

Sir, it is this betrayal of trust of the public. The public had trusted the NKF management to be honourable in their dealings. They had implicit trust that the money they had donated was being put to good use, by subsidising and helping the kidney patients. Singaporeans, young and old, healthy and sick, are constantly encouraged, urged and, to some extent, pestered to donate their limited hard-earned money to the NKF to help the needy kidney patients, and they have done so, not knowing how the donated money is to be spent.

Some members of the public had worked out the NKF figures and emailed me. In the 2003 NKF Report, NKF had spent $31.6 million on dialysis and transplantations but collected back $24.4 million from its patients, thus spending only $7.2 million on subsidising the patients. Yet, it collected $68.2 million in donations with a fund-raising expense of $16.6 million. Sir, this worked out to a cost of 24.3 cents per $1 raised, which is within the charity fund-raising law. However, if you include the public relations, education, administration and salary expenses, we realise that the non-clinical-related expenses are actually $37.5 million. This is 55% of the donations received and that means, for every $1 that the NKF raised or received, 24.3 cents go to the fund-raising exercise, 30.6 cents go to the public relations, education, administration and salaries, 34.6 cents go to the NKF reserves and, I repeat, only 10.5 cents go directly to subsidise the patients.

Mr Deputy Speaker, Sir, only 10.5% of each dollar raised goes to help these needy patients. More than 50% of the money goes to non-clinical expenses that do not help the patients. Like what Dr Wang said earlier, the NKF model is highly inefficient and, to some extent, I would say, unethical. They are highly successful in their marketing campaign, but clearly unethical in the way they market for charity donations. As we all now know, they lied about patient figures. The amount of subsidy money used and the extent the funds will last the existing operations of NKF, their pre-occupied concerns seem to be fund-raising, fund-raising and more fund-raising - raise as much funds for the NKF as the public stays ignorant. Telling the truth to the donating public is not important and totally irrelevant, it seems.

Transparency and public accountability seem to be out of the vocabulary of the past CEO. I do not know, but he seems to have learnt it somewhere in Singapore. Everything can be hidden in the name of personal privacy and the bigger national agenda, and entitlements can be constantly extended and maximised with a compliant and supportive board, as the fund-raisings go up. It seems that greed had taken root in the NKF leadership.

Sir, I do not know, but is there a possibility of fraud or violations of our laws with regard to the NKF? I hope the investigative agencies will do a very thorough investigation and a full report presented to Parliament as soon as possible. Sir, I am not proposing fraud or corruption here. I am pressing hard for a full inquiry on the NKF and their past dealings and practices now because, like many Singaporeans out there, we believe that the truth is somewhere out there. The public needs to know the truth, nothing but the whole truth, whatever the truth is, whether there is fraud or there is no fraud. If there is no fraud, we have to give a certain clarification back to Mr T T Durai. We need to know all these, so that there is proper closure and every one, ie, the donors, helpers, volunteers, including the new management of NKF under the leadership of Mr Gerard Ee, can move on with the good work of caring for the sick.

Sir, I am not trying to destroy NKF with the speech here. I do not believe in destroying any established charitable institution that is doing good work for the sick and needy. What I press for, and as what the Minister had also earlier agreed, is greater transparency and accountability. This is to provide closure and to regain the public's trust in the NKF. No one, no matter how good, hardworking or how much he or she had contributed to our society or to the needy, is above the law. If there are legal violations, they should be dealt with by due process of law. But let us, citizens, not take the law into our own hands with vandalism and such.

Finally, Sir, I have four nagging questions which I hope the Minister and the Government can help to answer and address.

First, why is NKF allowed to be registered as a private limited company here? Why was the public not informed of this privatisation process? As a private limited company, are they allowed to ask for charity donation dollars from the public and are there any more other charities registering themselves as private limited companies here?

Second, will the charity fund-raising law be tightened to ensure that, for those institutions that raise much money from the public, especially with the help of the mass media and their artistes, will more be demanded of them, ie, will a greater level of transparency and accountability for the funds raised be asked of them, including the salaries of their top management?

Third, what is the Minister's philosophy on charity fund-raising? Should charity institutions be allowed to keep raising funds and as much as they like, despite having more than enough money to cover their operating expenses for "x" number of years, say, five, seven or maybe 10 years? Will there be a limit? Should the law be amended to place a cap on how much a charitable institution can continue to raise funds if its existing funds can last their operations for, say, five years? I believe this practice is already well practised in the US since their biggest charity fraud case in 1992.

Fourth, I hope the Minister can also clarify if it is the Government's thinking that a CEO's salary should be pegged to the amount of money a public institution has in its reserves, ie, the more they have in their reserves, the more the CEO and/or the management team should be paid. Is this the Government's thinking? This is in relation to the issue of paying peanuts for top management.

Lastly, Sir, I believe there is one big insight that we and all Singaporeans can learn from this saga, ie, that every one of us needs to constantly demand greater transparency and accountability from the private and public institutions, be it the NKF, NCSS, ComChest, the Tsunami Fund, the Town Councils, GLCs, even Temasek Holdings and the Government Investment Corporation. The management should also learn to be more forthcoming with greater transparency, public disclosures and accountability, if they want continued public support.

Mr Deputy Speaker: Dr Ong Seh Hong. Please be reminded that we are adjourning by 6.30 pm today. Do make your speech short.

Dr Ong Seh Hong (Aljunied): (In Mandarin ): Mr Deputy Speaker, Sir, thank you for allowing me to participate in this debate. First of all, I would like to declare that I am working at Renci Hospital, which is a charitable hospital operated by a voluntary welfare organisation.

Mr Deputy Speaker, Sir, over the last two weeks, the NKF episode has aroused much controversies and some very emotional reactions from the public. However, I hope that the public, the Government and even the other voluntary welfare organisations would not over react to this matter, so as not to cause long-term harmful effects on our local charities. In fact, if we adopt a positive and correct attitude to deal with this matter in a calm and rational manner we would even derive valuable experience from this episode. Then it would be a meaningful development to the benefit of the public, the welfare organisations and the beneficiaries of these welfare organisations.

While investigations and auditing of the NKF are still in progress, and the Government and the relevant authorities have yet to issue any report, we should not speculate and arrive at all sorts of hasty conclusions. I think we should wait patiently for the reports to be released by the relevant authorities before we pass judgment on any individual or any practice of the NKF. We should remind the public that NKF and the many other voluntary welfare organisations should continue with their normal operation and look after the unfortunate people, whether they are kidney or cancer patients - men, women, young or old. Life must go on! We have to look after these unfortunate people.

Fortunately, from the reports I read yesterday, it would appear that after the initial response, some members of the public are restoring their donations to NKF, after Mr Gerard Ee has taken over control of the NKF. I think people are beginning to respond in a calm and rational manner now. In fact, we should learn from this episode and derive valuable experience, so that it would benefit everybody.

I have a number of hopes:

I hope, first of all, that members of the public will have a better understanding of the challenges and difficulties faced by the local welfare organisations, particularly the problems they have in raising funds and getting the right talents to work for them.

Secondly, I hope that more people would be attracted to participate in voluntary part-time or full-time work in the welfare organisations.

Thirdly, I hope that the Government and the relevant authorities could propose some recommendations on the remunerations and welfare of the staff of these voluntary welfare organisations, and also some guidelines on fund-raising and the building up of reserves. In this way, we will be able to clear the doubts and suspicions of the public.

Mr Deputy Speaker, Sir, for any organisation to succeed, we must, first of all, have sound management, outstanding leaders and good workers. The same applies to the voluntary welfare organisations. They face the big challenges trying to get enough funds and talents, and talents would include the leaders and other professionals who are required for these organisations, plus some ordinary workers. For example, in a hospital, apart from a very competent CEO, we must also have a good supply of experienced doctors, nurses, therapists and social workers to satisfy the needs of the patients 24 hours a day. We should not expect all these people who join voluntary welfare organisations to work on a voluntary and unpaid basis.

Indeed, the VWOs have problems attracting people to work for them. Are their salaries attractive enough? What are the career development prospects for these people? Can they be promoted to better and higher positions? What about their welfare and benefits, and so on? In fact, some people are worried that the organisations may not be financially stable, and would close down if they cannot raise enough funds to sustain their operation, and the staff will not get their salaries. These are some problems faced by the voluntary welfare organisations. No doubt, we do have people who join these VWOs because they want to do charitable work and good deeds. However, we should not expect every one of them to work for free. I think, for some of the big charitable organisations, this is all the more not feasible.

Like anywhere else, the employees of these organisations have families to look after. Their children have to go to school, they need to eat and pay for their bus fares and utilities. I think they should be compensated reasonably. While we want charitable organisations to be professionalised, we should not fall into the trap of expecting the professionals to be doing charity all their lives.

We are faced with this problem: what type of compensation is reasonable and what type of welfare and bonus is appropriate, and whether or not they should be linked to the profit-making commercial organisations? I do not have an answer to these questions. I hope that the relevant authorities will give us a clear guideline on these issues.

However, one thing is very clear to me, ie, the non-profit making voluntary welfare organisations should not be linked to the commercial enterprises in terms of salaries and welfare, because the objectives of these VWOs are definitely different from the commercial enterprises. In fact, people who join the voluntary welfare organisations must, to a certain extent, have this perception that they want to serve the society. Only then can they meet the objective of the voluntary welfare organisations. I personally feel that the Government may perhaps consider linking the salaries and welfare of the VWOs to the public service. I think the public service salaries and welfare scheme could be a source of reference for the VWOs. I think there is a lot in common. The main purpose of the public service and the VWOs is to serve the people. I feel that if we take the standard of the public service for VWOs, it would be acceptable to the vast majority of the people.

As for the funds of the VWOs, I think for any organisation to be able to operate smoothly, they need to have adequate funds. The same applies to the voluntary welfare organisations. Apart from their daily expenses, they also need additional funds to develop new services and facilities. They also need to provide training to their staff. Therefore, for VWOs to organise some fund-raising activities from time to time is reasonable. When the economy is no good, they may not be able to raise enough funds for their activities. When the economy is good, they should raise more funds so as to set up some reserves for the rainy days.

However, this NKF episode has given rise to this question: What should be the target of the fund-raising and how much reserve is reasonable so that it would not be too excessive? There should be some clear indications or guidelines from the authorities. As Dr Wang Kai Yuen has mentioned, if some voluntary welfare organisations have raised more funds than they need, they could be regarded as an organisation that is just raising funds for the purpose of raising funds. I think we need to have some clear indications and guidelines by the relevant authorities so that the VWOs know what they should do and this would also clear the doubts of the people.

Mr Deputy Speaker, Sir, we should learn from our past experience. We should adopt a positive and prudent attitude to deal with this matter. I firmly believe that under the leadership of Minister Khaw Boon Wan, the NKF episode should bring positive effect on our charity works in Singapore so that members of the public would have more confidence in our charitable organisations. I would urge more Singaporeans to join these welfare organisations, donate their money, put in their efforts and even join in full-time to help these organisations and become the backbone elements of these welfare organisations.