The Neighbourhood Advice-Action Council (NAAC), a government-funded social service organization, is now in financial trouble because of inadequate budget planning and overspending, according to an internal probe.
In a report released on Tuesday, an internal inquiry committee chaired by Tai Keen-man blamed financial controller Chow Ka-lok and executive director Tung Chi-fat for the organization’s financial woes, and said they should resign, the Hong Kong Economic Journal reports.
Founded in 1968, NAAC promotes the values of self-help, integration and mutual support in the neighborhood. It offers a wide range of community development and welfare services to children, young people, families and the elderly.
Media reported in September that NAAC planned to terminate 21 projects providing short-term services in different regions earlier than scheduled. The plan will affect 117 of its workers, some of whom are set to be sacked.
According to the internal investigation report, NAAC did not notify the Social Welfare Department before stopping those services, as it should have done so.
The NAAC used to have huge reserves, but instead of returning the money to the government, it adopted multiple measures to spend it over the past three financial years, the report said.
These included giving one-time bonuses and benefits amounting to HK$77 million to its employees, adjusting employees’ pay grades, and launching the aforementioned short-term services that created more than 100 temporary positions.
The services, which caused a surge in personnel expenditures, were the major factor behind its current financial distress, the report said.
Tai cited serious negligence in financial analysis of the organization’s operation, adding that the management should have exercised more vigilance and caution when signs of financial trouble emerged last year.
He estimated that NAAC will see a deficit of HK$13.9 million by 2019 should it continue to offer its short-term services until October next year as scheduled, while terminating them can help the organization keep its head above water.
The investigation panel offered some suggestions to improve the situation, including finding a capable person to serve as executive director and implementing financial reforms.
It is understood that Tung has submitted his resignation and will leave by the end of the year, but Chow has not submitted his resignation letter, although he has announced that he will quit.
The NAAC executive committee has made it clear that Chow will be asked to resign if he fails to quit on his own.
Meanwhile, the Lump Sum Grant Independent Complaints Handling Committee under the Social Welfare Department has reportedly launched its own probe into NAAC.
Lawmaker Shiu Ka-chun, who represents the social welfare functional constituency, also blamed the government’s lump sum grant subvention system for the situation at NAAC, noting that it allows subsidized organizations to fully control its finances.
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