THE GOVERNMENT MINUTE in response to the REPORT OF THE PUBLIC ACCOUNTS COMMITTEE No. 71 of February 2019 15 May 2019 THE GOVERNMENT MINUTE IN RESPONSE TO THE PUBLIC ACCOUNTS COMMITTEE REPORT NO. 71 DATED FEBRUARY 2019 REPORT ON THE RESULTS OF VALUE FOR MONEY AUDITS (Report No. 68) MATTERS OUTSTANDING Monitoring of charitable fund-raising activities (Chapter 2 of Part 4 of PAC Report No. 68) Government departments concerned have been following up on the recommendations made by the Audit Commission (Audit) and the Public Accounts Committee (PAC) on the monitoring of charitable fund-raising activities. The progress made is reported below. 2. Home Affairs Bureau (HAB) has been assigned to co-ordinate inputs from relevant Bureaux/Departments (B/Ds) in formulating a response to the Law Reform Commission (LRC)’s recommendations for the Government’s overall consideration. HAB is actively following up the matter and will make reference to the improvement measures recommended in the Audit Report as well as in the PAC Report. 3. The Government notes public concerns over the accountability of charities, in particular in relation to charitable fund-raising activities. HAB has co-ordinated with the relevant departments, and the Government introduced a series of administrative measures with effect from 1 August 2018 after making reference to the recommendations in the LRC Report, the Audit Report and the PAC Report, with a view to enhancing the transparency of charitable fund-raising activities, safeguarding the interests of donors and facilitating the conduct of fund-raising activities. 4. Since 1 April 2019, the Government has introduced a logo for charitable fund-raising activities for display by holders of licences and permits relating to charitable fund-raising during charitable fund-raising activities for identification by members of the public. 5. A summary of the latest progress on follow-up actions of the specific Encl. 1 recommendations of Audit and PAC is at Enclosure 1. - 2 - Management of squatter and licensed structures (Chapter 3 of Part 4 of PAC Report No. 68) 6. The Government has been taking follow-up actions as appropriate to address Audit’s recommendations. A summary of the updated progress of the Encl. 2 outstanding items is set out in the Enclosure 2. Kai Tak Cruise Terminal (Chapter 5 of Part 4 of PAC Report No. 68) 7. The Government agrees with the recommendations made by the Director of Audit regarding Kai Tak Cruise Terminal and the overall cruise tourism development in Hong Kong. The Tourism Commission (TC), together with relevant departments, has implemented in full all the recommendations except the recommendation for the TC to monitor the expected economic benefits brought by the cruise industry, the progress of which is reported in paragraph 8 below. 8. In response to Audit’s recommendation, TC is processing data collected in 2018 with regard to the number of ship calls, cruise passenger throughput and cruise passenger spending for a mid-term assessment of the economic benefits brought by the cruise industry and to closely monitor industry performance. We will make available the findings of the mid-term assessment to the public and the Legislative Council (LegCo) when ready. 9. A summary of the latest progress made by the Government in Encl. 3 implementing the recommendation in paragraph 8 above is at Enclosure 3. Management of projects financed by the Lotteries Fund (Chapter 6 of Part 4 of PAC Report No. 68) 10. The Social Welfare Department (SWD) has taken appropriate actions to follow up on the recommendations made by the Audit regarding the management of projects financed by the Lotteries Fund. - 3 - 11. Regarding the assignment of the social centre for the elderly to the Government in Case 7, SWD has since October 2005 been urging the grantee and the developer, through the Government Property Agency (GPA) and the Lands Department (LandsD), to complete the assignment as soon as possible. After rounds of exchange on its multiple submissions with GPA, the solicitor of the developer (the solicitor) submitted the revised title documents relating to the Government Accommodation, the draft legal opinion and the further revised draft assignment to GPA on 17 January 2019. After vetting, GPA informed the solicitor on 23 January 2019 that there was no further comment on the revised draft assignment but requested the solicitor to submit the revised assignment plan duly certified by an Authorized Person. The solicitor submitted the revised assignment plan on 27 March 2019, and GPA informed the solicitor on 9 April 2019 that they had no further comment on it. The assignment procedure will be completed pending the solicitor’s confirmation of the conditions of assignment and payment arrangement. 12. SWD will continue to work with GPA and LandsD with a view to completing the assignment procedure as soon as possible. When the assignment document is finalised between GPA and the developer, the assignment procedure will be completed, and SWD will arrange finalisation of the project accounts after reimbursement of the project cost to the developer. - 4 - REPORT ON THE RESULTS OF VALUE FOR MONEY AUDITS (Report No. 68A) MATTERS OUTSTANDING Government’s support and monitoring of charities (Chapter 1 of Part 4 of PAC Report No. 68A) 13. Government departments concerned have been following up on the recommendations made by the Audit and the PAC on the Government’s support and monitoring of charities. The progress made is reported below. Administration of tax exemption of charities and tax-deductible donations 14. The Inland Revenue Department (IRD) has proactively followed up and implemented the recommendations of Audit and PAC on the administration of tax exemption of charities and tax-deductible donations. Regarding the recommendation that IRD should review the taxability of the income derived by the relevant charities from the commercial operations of the 13 sites for revenue Encl. 4 protection, the latest progress is set out at Enclosure 4. As all the follow-up actions on the recommendations have been completed or will continue to be implemented on an on-going basis, we recommend that this part should be deleted from the next progress report. Administration of land granted to charities for operating welfare/social services Monitoring of application and proper use of income generated from hostel/serviced residence on site granted by private treaty grant 15. For the cases named in the Audit Report in which the leases specifically permitted the running of hostel/dormitories, the LandsD has continued to liaise with the relevant supporting B/Ds to confirm if the current use or operation of the hostels/dormitories is to their satisfaction. As at February 2019, the relevant B/Ds have confirmed that they are satisfied with the current use or operation of hostels/dormitories under Leases F, G, H, I, J, M and N. For details, please refer to the progress report at Enclosure 4. - 5 - Stock-taking exercise for private treaty grants granted at nil/nominal/ concessionary premium 16. As at May 2019, LandsD had completed the stock-taking of private treaty grants (PTGs) granted at nil/nominal/concessionary premium during the period from 1 January 2012 to 31 December 2017. LandsD will continue to undertake the stock-taking exercise in phases and share the findings with relevant B/Ds, subject to the priority of other tasks in hand, with a view to reminding the relevant B/Ds of their monitoring roles and responsibilities under the relevant protocol in respect of the PTGs overseen by them. Regulation of Chinese temples 17. In respect of the issue of renewing the expired delegation agreements of two delegated temples, the Chinese Temples Committee (CTC) re-entered into an agreement with one of the delegated organisations in December 2017. The CTC Secretariat has also been actively discussing with the other delegated organisation with a view to re-entering into an agreement as soon as possible. 18. The CTC has actively enhanced the transparency of the operation of its temples. Specific measures include uploading the financial information of the directly administered and delegated temples onto the CTC’s website for public inspection, and advising registered temples to adopt the “Good Practice Guide on Charitable Fund-raising” (the Guide) issued by the Government. 19. The CTC Secretariat has also stepped up its monitoring work to ensure that the delegated organisations make timely submission of reports as required under the delegation agreement. Way Forward 20. The LRC made recommendations on the regulation of charitable organisations and charitable fund-raising activities in its Report in December 2013. The recommendations touch upon the duties and responsibilities of a number of Government B/Ds. The HAB has been assigned to co-ordinate inputs from relevant B/Ds for formulating a response to LRC’s recommendations for the Government’s overall consideration. It is actively following up the co-ordination in formulating a response for the Government’s consideration. In this process, HAB will make reference to the improvement measures recommended in the Audit Report as well as in the PAC Report Nos. 68 and 68A (PAC Reports). - 6 - 21. Meanwhile, the Government notes the public concerns over the accountability of charities, in particular in relation to charitable fund-raising activities. HAB has co-ordinated with relevant departments, and the Government introduced a series of administrative measures with effect from 1 August 2018 after making reference