Value for Money Audit and Improvements in Project Planning

1. Value for Money Audit and Improvements in Project Planning Mr Benjamin Tang Director of Audit 30 May 2008

2. Role of the Director of Audit • provides an independent and professional audit service to help the Government enhance public sector efficiency, accountability and performance 審 計 署 Audit Commission

3. Value for money (VFM) Audit • Economy • Efficiency • Effectiveness The three “E”s 審 計 署 Audit Commission

4. 3 Es of VFM Audit • Economyis concerned with minimising the cost of inputs used for an activity having regard to appropriate quality • Efficiencyis concerned with improving productivity. It is the relationship between outputs and inputs used to produce them • Effectivenessis concerned with the extent to which objectives have been achieved 審 計 署 Audit Commission

5. 3 Es of VFM Audit Value for Money Audit Economy Efficiency Effectiveness Costs ($) Inputs Outputs Outcomes Objectives 審 計 署 Audit Commission

6. VFM Audit : Hong Kong Harbour Fest • Objective: to boost local consumption and tourism by delivering entertainment services • Music concerts held in October and November 2003 • Underwritten by the Government up to HK$ 100 million 審 計 署 Audit Commission

7. VFM Audit: Hong Kong Harbour Fest • Feasibility not fully examined • No option analysis • No formal business plan • No contingency planning • Inadequate monitoring mechanism Inadequacies in project planning 審 計 署 Audit Commission

8. VFM Audit: Hong Kong Harbour Fest • The importance of adhering to key processes in project planning should not be overlooked and pre-empted by other considerations lightly Lesson learnt for project planning 審 計 署 Audit Commission

9. VFM Audit : Administration ofHK Post Certification Authority • HK Post Certification Authority (CA) was set up in 2000 to issue “e-Cert” to individuals and organisations • Cumulative operating deficit of $200 million up to March 2007 審 計 署 Audit Commission

10. VFM Audit : Administration ofHK Post Certification Authority • EU Scoping Study (1998) considered that the local market was still limited, and the business viability might not be there yet • A survey commissioned by HK Post in 1998 also concluded that the CA service should not be aimed at breaking even in a short time 審 計 署 Audit Commission

11. VFM Audit : Administration ofHK Post Certification Authority • HK Post Business Study (1999) • projected a high annual growth rate of digital certificates and would break even in 2000-01 • concluded the CA business would be profitable 審 計 署 Audit Commission

12. VFM Audit : Administration ofHK Post Certification Authority Audit findings • could not find any records showing the basis used in projecting the high demand for digital certificates • unable to assess the reasonableness of the projections which appeared to be optimistic 審 計 署 Audit Commission

13. VFM Audit : Administration ofHK Post Certification Authority • Need to state clearly and document the basis of service level projection to facilitate future planning and review, particularly if it is at significant variance with the findings of other studies Lesson learnt for project planning 審 計 署 Audit Commission

14. VFM Audit : Administration ofHK Post Certification Authority • Low take-up rate of e-Certs (June 2003) • HK Post consultant questioned the financial sustainability of CA (Feb 2002) • Results of other studies and overseas experience indicated low demand for e-Certs • Financial projections were revised downwards but HK Post still launched a series of initiatives to promote e-Certs (2003 and 2004) 審 計 署 Audit Commission

15. VFM Audit : Administration ofHK Post Certification Authority • “Hope for the best, plan for the worst” - adopt a prudent approach in making projections and assessing financial sustainability • Incorporate procedures for managing changes - Plan for and take earlier action if actual out-turn deviates significantly from original estimates Lesson learnt for project planning 審 計 署 Audit Commission

16. VFM Audit : Government Outsourcing Audit reviewed the outsourcing activities of three departments in 2007 • FEHD: environmental hygiene services • HD: management of public rental housing estates • LCSD: cleansing, security, horticultural maintenance and sports centre management 審 計 署 Audit Commission

17. VFM Audit : Government Outsourcing Audit finding on risk management • Risks due to reliance on dominant contractors and weak financial position of contractors • Departmental contingency plans had not been prepared to address the risk of service disruption if the outsourcing contractors fail to provide service 審 計 署 Audit Commission

18. VFM Audit : Government Outsourcing • Risks to the project should be identified and properly addressed at the planning stage • A risk management plan containing risk and impact analysis and mitigation strategies should be prepared Lesson learnt for project planning 審 計 署 Audit Commission

19. VFM Audit : HK Tourism Board’s planning of marketing activities Audit finding on consulting stakeholders • External consultation was only confined to the travel trade in a Stakeholders Communication Session held in February/March • Need to gauge the views of other stakeholders of the tourism industry 審 計 署 Audit Commission

20. VFM Audit : HK Tourism Board’s planning of marketing activities • Government projects will likely affect the public, NGOs and other external stakeholders • A strategy should be formulated for identifying and communicating with stakeholders at all project stages to ascertain their views and inform them on project progress and changes Lesson learnt for project planning 審 計 署 Audit Commission

21. VFM Audit : HK Tourism Board’s planning of marketing activities Audit finding on resource planning • Need to lay down, and periodically review, guidelines and objective criteria for establishing Worldwide Offices and Representative Offices • Need to review the staff establishments of Worldwide Offices in the Mainland 審 計 署 Audit Commission

22. VFM Audit : HK Tourism Board’s planning of marketing activities • Planning for and getting the right resources are prerequisites of success in project implementation • It is also important that the level of resources are regularly reviewed in light of changes in current service levels and future requirements Lesson learnt for project planning 審 計 署 Audit Commission

23. End of Presentation Thank You 審 計 署 Audit Commission