Rounding-up speech by Minister for Health on the NKF

21 Jul 2005

By Mr Khaw Boon Wan, Minister for Health

Venue: Parliament

Mr Speaker, Sir, I took this assignment on July 14 to shepherd the NKF through its crisis. I knew it would be a big challenge, but I had faith that the good sense and charitable nature of Singaporeans will prevail. Yesterday was Day 6 of my assignment. I heard the speeches by 13 Members of this House. Today I heard from another 7.

I must confess that when I came to Parliament yesterday, I was not sure which views would prevail. Would they be negative and destructive: going for blood, witch-hunting, demolishing the NKF through speeches? Or would they be positive and constructive: taking the helicopter view, seeing the larger picture, rising above the fray, and shining the light forward.

The 20 speeches cheered me up considerably. All noted the gravity of the situation. All conveyed in no uncertain terms the public anger over the revelations. But all noted the larger issues at stake. Although views on approaches to address these issues inevitably differed, by airing and debating these views openly in this House, we can then begin to find the answers and start the process to re-shape the NKF and the charities landscape in Singapore.

FUTURE OF NKF

We are all agreed that the good work done by NKF should continue. There are real patients out there and much of NKF's activities genuinely save lives.

Thankfully, nobody called for the NKF to be shut down. As Dr Wang Kai Yuen put it, the destruction of the NKF would be a "monumental loss to Singapore". All Members spoke on the charitable side of Singaporeans. Otherwise no amount of marketing skills and TV shows could deliver tens of millions of dollars, from all walks of life, to the NKF every year.

Helpfully, Mdm Halimah, Mdm Ho Geok Choo and many others have urged calm and patience, lest we all get lost in the woods. Mr Tan Soo Khoon wisely reminded Singaporeans not to direct their anger at the patients or the NKF staff. As Ms Irene Ng pointed out, coming together to express public outrage is one thing. Vandalising NKF buildings is unbecoming of a society which we want to belong to.

I fully support these sentiments.

REGAINING PUBLIC CONFIDENCE

All Members agreed that the best way for the NKF to regain public confidence is to pursue greater transparency and accountability.

I am sure Mr Gerard Ee has taken this message back to his Board and they will do their best to bring this about. I note and am thankful for the ringing endorsement of the new Board of Directors. This is important for they must be assured that they have the backing of the House and the public. At the same time, they would have noted the lofty expectations which they must meet.

And I am optimistic that they can deliver. Given the professional competence of the NKF staff, the NKF could be a shining example of good governance, of transparency and accountability. This is my intent. Outside of Singapore, NKF has a reputation as a pace-setter in kidney dialysis. In Singapore, I would like the NKF to now be the pace-setter of what good governance, transparency and accountability ought to be, for all charities and IPCs.

As a refinement, Mr Tan Soo Khoon suggested that key donors like the Foundations ought to be represented on the Board. Mdm Ho Geok Choo suggested that unions be represented on the Board. We will bear these suggestions in mind, when the final Board is constituted after the current priorities have been fully discharged.

I know as a fact that many of the new Board Members are long time donors and regular supporters of the NKF and other charities. More importantly, the NKF donors are best served by knowing that the NKF would now have a strong board which will make the right decisions, the tough decisions.

But I am not sure if it is a good idea to politicise the charities by inviting opposition politicians on board, as suggested by Mr Chiam. Let us keep politics out of charities.

INVESTIGATIONS INTO ALLEGATIONS

All Members have called for a full and thorough investigation. As Dr Amy Khor put it, many questions remain unanswered and public unrest should be addressed. We certainly intend to do so.

Dr Khor suggested that a committee of inquiry be convened to look into the matter. The Commissioner of Charities has the powers to initiate such investigations. But due process must be observed. The Commissioner must first establish clear evidence of wrongdoing, which includes getting the charity's side of the story.

At the end of the day, it is the substance of the investigations that matters, and not the form, whether it is called a commission of inquiry, an investigation or independent audit. We are all committed to finding answers to the many questions raised by Singaporeans and getting to the bottom of this matter. That is what counts.

The new Board has appointed KPMG to do an independent review. Let us give them time to work on this thoroughly, away from the public glare and emotions, so that assessment can be made objectively and calmly. All the questions that I asked in my statement yesterday will be addressed. Their findings will be made public.

The various Government agencies are comfortable at this point to have the new Board lead the investigation into past practices. Knowing them, I know they will get to the bottom of the issues. Precisely because of the high standing and reputations of the individuals serving on the Board, this House and the public can feel confident that their review will be full, thorough and that sound judgement will be applied.

In the course of the review, if it is found that laws have been broken, the relevant authorities will certainly step in. I fully agree with Mr Tan Soo Khoon that any wrong-doers must face the law. If there has been any criminal act, the law will take its course. If there have been poor judgements, they will be acknowledged. If there are systemic flaws, they will be fixed.

As I said on July 14, I do not condone fraudulent practices. But we cannot conclude, a priori, that there were criminal acts on the basis of what has been published to date. We are a law-based society. Let us follow the due process.

Let us also try to look at this issue from the perspective of Mr Durai's family. His daughter emailed the Prime Minister. Let me quote a few lines from her email. She is a young student in JC but very mature for her age. She wrote: "I was adversely affected by this fiasco". She added: "Since I was young, my father had very little time to spend with us. I always asked myself why my father had no time for us. Were we less important to him than his patients? Was his work more important than us?"

She went on to ask the PM: "after the review by the new board, you will help him to restore his reputation and honour", if no wrong doings were found?

From the media report on the man, Mr Durai looks to me to be an arrogant man. His achievements are real and significant. But may be the ego and arrogance went to his head, leading to poor judgement and insensitivity.

I think there are lessons for us here. No matter how great our achievements are, we live for others. Look at the late Mr Hon Sui Sen. There was no ego in the man. He completely personified humility. Likewise the late President Wee Kim Wee and hence the huge outpouring of emotions at his funeral. President SR Nathan is another such humble man who has done great for society, but remains his past self.

I scanned through the local media today. I could not help noticing the different spin the Straits Times put to the MPs' speeches yesterday, compared to all the other local media, like TODAY and ZaoBao. Let us hope arrogance has not also gone to the head of the victor in the Court case.

REGULATION OF IPCs

Coming back to the debate, not surprising, ensuring a robust regulatory framework for IPCs was a central theme of Members' speeches.

Striking the Right Balance

Many Members have noted the need for balance between regulation and flexibility. Mr Chew Heng Ching, Mr Gan Kim Yong and Dr Ong Seh Hong cautioned against knee-jerk reactions. They advised that we do not over-react and introduce new and tighter rules that may inadvertently cause more collective harm than good, particularly for smaller charities.

On the other hand, Dr Wang Kai Yuen, Mdm Halimah, Amy Khor and Mr Tan Soo Khoon argued for additional and tighter rules. They felt the existing regulatory regime would appear to be too loose for large charities, if episodes like the NKF's could occur.

As always, the best way forward may be the middle path. We should not rush or force an immediate solution. Let us dive into the problems at the NKF first, grasp the full details, weigh the options and assess the implications, before we decide on the way forward.

As I said yesterday, I see value in differential regulation, to apply different degrees of regulation and compliance to different charities.

This is particularly so for quantitative controls like the expense ratio which many Members touched upon. Dr Wang Kai Yuen suggested a sliding scale for limiting expense ratios, ranging from say 15% for the large charities to 30% for the small ones. Dr Amy Khor suggested a tiered approach which sounds similar in concept. We would certainly have to give all these suggestions serious consideration.

In any case, the recommendations of the Council of Governance on IPCs on a set of mandatory rules for all IPCs, which the Government had earlier accepted, will kick in by 1 Jan 2007. We will see if we can advance this implementation deadline as proposed by Mr Chew Heng Chin. But I will challenge the new NKF Board to achieve compliance for the NKF within 6 months.

Regulatory Structure

In terms of regulatory structure, Dr Amy Khor proposed a national watchdog to investigate and punish charities which flout the rules and abuse public trust. This is actually the purview of the Commissioner of Charities. The Charities Act gives him extensive power to investigate any abuses. He has power to remove trustees and de-register charities. Whether we need to strengthen his teeth, we can study. After we have completed the independent review on the NKF, we can ask the Commissioner to go for a dental appointment.

Mdm Halimah wondered whether the Government would have intervened, if the previous NKF Board had not sought my involvement. This is now a hypothetical question. But looking back at the sequence of events, I would be surprised if the Commissioner of Charities had sat on his hands and let the crisis fester.

Dr Khor asked if it was more effective to have a single body guiding all VWOs, instead of spreading the work among various Central Fund Administrators (CFA). She has a point, but there are arguments both ways. The CFA model was adopted to better spread out resources in assessing IPCs. Each of the 12 CFAs handles a number of IPCs, specific to that Ministry's area of expertise. If all 1,700 charities from temples to churches to nursing homes were to be centrally managed by a single agency, I worry that the required government machinery would be huge and cumbersome.

On the other hand, there may be some gaps in regulating a complex institution like the NKF which is a company limited by guarantee, a charity and has IPC status. For instance, the NKF also receives donations which are not tax-deductible and this is not under the purview of my Ministry as the overseeing CFA. A learning point for Government from this is to have a more coherent approach to guiding the larger and more complex institutions.

Transparency and Disclosure

Mdm Halimah, Dr Wang Kai Yuen, Dr Amy Khor felt strongly that salaries of top executives should be disclosed as a mandatory requirement of all IPCs.

This was in the original recommendations of the Council on Governance. But the Council discarded it, after extensive consultations with the IPCs yielded overwhelming negative feedback.

As I mentioned yesterday, all charities face this tension between protecting the privacy of their top executives and maintaining transparency with their donors. It is not an easy dilemma to resolve. Ms Irene Ng noted that this dilemma is faced by well-known international charities, like OXFAM, too. But somehow, they seem to have found satisfactory ways to resolve the dilemma. She mentioned a US charity website which released such sensitive information as a percentage of operating cost or collections. I intend to study these various models solutions to see if we can emulate it here.

Miss Eunice Olsen asked for greater transparency along the same light, and we intend to do so.  And the message to the VWOs is - to voluntarily, as part of their clients' servicing, and the donors are their clients, be open with them.  My own belief is that the more open you are with your donors, greater public trust is bound to yield greater support - cause and effect.  The Buddhists would say yin guo (the cause and effect).

Dr Amy Khor proposed that all IPCs undertake independent audits and publish their annual reports and statements online. All IPCs are already required to provide their CFAs with annual independently-audited financial statements. We should certainly push the larger charities to publish annual reports and accounts online for greater transparency.

Many Members spoke on the public disgust over Mr Durai's $600,000 pay packet, especially the reported reluctance of NKF to have this made public.

$600,000 is certainly not a small sum. But whether it is too large depends on (a) the size of the job, (b) on how the pay package is determined, (c) on whether the Board had a proper process such as a staff compensation committee and salary benchmarks, and (d) on the measured performance of the CEO. These are serious matters which an independent and competent board should have properly established so that their decision could be defended in public. The review of the NKF will shed light on this important subject.

Going forward, I have no doubts the new board under Mr Gerard Ee has the expertise and the experience to help install a high-standard HR Remuneration System for the new NKF.

As for the interim CEO, I have said that our hospital would second a senior hospital administrator to the NKF. If the NKF Board approves the selection and the arrangement, the NKF would have to fully reimburse the hospital for the services of the seconded staff. Public hospitals have established policies of seconding staff and receiving seconded staff from other organisations. There are clear rules governing inter-agency reimbursement for seconded staff. We will follow the rules strictly.

Fund-raising Activities

Dr Wang commented that the NKF appears to have gone overboard with its fund-raising activities. He felt that "Singaporeans are increasingly turned off" and the NKF shows are "bordering on bad taste".

Yesterday, we had some discussion with Prof. Ong on this issue of TV shows which she raised again this morning. I am just the Minister for Health.  Ministry of Health does not govern TV shows.  TV shows come under MICA, but I did the Question yesterday because originally we were not sure that there would be a Ministerial Statement.  So, may I suggest that the Member file a proper Question to the right Minister.  I am sure he will give her a full reply, including from the Minister for Home Affairs.  But I have noted her proposed new priority for the Board.  I have suggested six priorities for the Board, and she said quite rightly that there ought to be a priority too on how NKF ought to deal with its patients.

     I heard and I am worried about some of the comments and feedback by Dr Warren Lee that, apparently, patients are being coerced to do certain things, otherwise the line may be pulled. Let me repeat myself here.  I find it completely and totally unacceptable and unethical to do so.  But I think with the new leadership, I am sure if, indeed, that was the case, the matter would change overnight.  Once I have settled down - I still got the Ministry of Health to run - I plan to visit the dialysis centres again, talk to the patients, and hopefully in a candid way, let me gather some of the feedback directly from them.  But let me caution on one point.  Some of the feedback might be motivated by wanting NKF to provide services for free, a point which I have addressed yesterday.  

I do not think that is the right approach.  The need for co-payment is there, provided the criteria are open and objectively applied, and not unduly stringent, I am sure Singaporeans can accept.

Several MPs speculated that the NKF incentive structure might have fuelled the management's drive to collect donations at the expense of all else. I do not know at this point. Until the review of the NKF's processes is concluded, I would not like to speculate as to whether staff bonuses were based on funds raised and therefore led to perverse incentives. We need to understand their HR policy and the remuneration system. This is an aspect which the review will uncover.

We should bear in mind, however, that there are two separate functions in NKF. One is the provision of medical service at subsidised rates. This must be done by competent professionals as lives are at stake. These professionals must be paid a market wage for their services.

The other component is fund-raising to pay for the subsidies. This can be done be volunteers or paid staff. Where small sums are required by a charity, using volunteers would be adequate and probably the best way. But where huge sums are required on a continuing basis like NKF, the charity may have to fall back on professional fund-raisers like some big American foundations. The question is then how to remunerate these paid fund-raisers.

Mr Speaker, Sir, structuring an appropriate performance remuneration system is an important part of human resource management in all organisations. If we want the professionals to do their best, they need to be properly incentivise. Some are self-motivated, like Mr Gerard Ee and Dr Robert Loh. They work out of basic kindness, or just "coffee and cakes" as Gerard Ee puts it. But some charities do need professional fund-raisers to help in their charity work, so that they are free from the burden of fund-raising and can concentrate on providing services to their targeted beneficiaries. Under such a model, it may not be wrong to incentivise performance of fund-raisers based on funds raised.

But it must be a basis that a sound Board of Directors is willing to publicly defend. Also, as any of our many listed and professionally run businesses will tell you, the human resource management practices of organisations must be anchored by the organisation's core values and code of ethics. These values must be lived by the Board, the management and staff and be coherent across all dimensions of the organisation, be it in the way they serve their customers, the way they do business with partners and the way they run the organisation internally.

VWOs can be run by paid professionals but they must be underpinned by strong ethics and guided by a moral compass. As Jack Welch, formerly of GE noted the most difficult type of managers he had to decide on were the type that "does not share the value, but delivers the numbers". His conclusion was "we have to remove these managers because they have the power, by themselves, to destroy the open trust-based culture that we need to win today and tomorrow". He was talking about a commercial for-profit organisation, let alone a charity. I challenge the new Board to put this right in the NKF, and I am confident that it could be done.

Reserves Policy of NKF

For example, it is a basic ethical rule of fund-raising that we do not mislead donors and potential donors.  We do not coerce and exploit beneficiaries in order to arouse donor sympathy.  And when we have collected enough, we suspend fund-raising.  As an aside, for the PAP Community Foundation (PCF), every year we do fund-raising for charity.  Dr Ng Eng Hen and myself are responsible for organising the PCF fund-raising for this year. We decide how much we want to raise and set a target.  Between the two of us, we are quite resourceful.  We can raise large amounts of donations if we want to.  But once we hit our limit, we stop and say, "Enough. Thank you very much."  That should be the way fund raisers conduct themselves.

     This is why we need a review on the NKFyyys reserves policy.  We need to piece together their strategic intent on reserves and projected needs.  Dr Tan Sze Wee mentioned his view on this. He knows - he is a medical doctor - the need for chronic care and the funds required depend on your assumption.  Do you provide for 10 years of liabilities, or three years, or 20 years?  Intuitively, I agree with him that unlikely the so-called 30 years of reserves is the case.

     Dr Geh Min asked some questions.  What is the life expectancy of dialysis patients?  If I am not mistaken, the first patient on dialysis in Singapore is still alive.  How many cases are there in Singapore today?  I think we have something like 3,500 dialysis patients.  NKF's market share is about half, 1,800 or so, and every year about 200 patients are added, and this is cumulative.

One observation I want to make is that their recent major donation drives were not for kidney patients, but for cancer patients. This is a new programme for the NKF and clearly there is a need to raise funds.

However, Dr Wang raised a more fundamental question of whether NKF should not just stick to kidney dialysis and not wander to other areas. I keep an open mind on this issue for the moment. I see values in some competition between charities, provided it is applied properly. Already there have been suggestions that we merge NKF with KDF. I am not sure if that would be a wise move.

Currently, dialysis patients have several choices: NKF, KDF, public hospitals, private hospitals, and private dialysis centres. If they all compete to deliver the best value at lowest possible cost, what is wrong with that?

MISCELLANEOUS ISSUES

Patient Care / Clinical Programmes

Dr Lily Neo asked for the criteria used by the NKF on assessing patients for admission to their dialysis programme. She asked if too many were rejected and whether KDF was started precisely because of the need to look after the rejects from NKF. These are details which I have no answers to. The review on the NKF would cover these issues in due course.

Cost Effectiveness

Dr Wang Kai Yuen questioned the cost-effectiveness of the NKF in kidney dialysis. He produced data to show that the KDF seemed more cost-effective in comparison.

We will bear this comment in mind. We need to dive into the cost details in due course. I share Dr Wang's objective that NKF should try to be as lean and slim as possible, so that the savings could be passed on to the patients. After all, this must be the basic mission of the NKF: to deliver kidney dialysis services to its patients at the lowest possible cost, commensurate to a good standard of clinical care.

CONCLUSION

Mr Speaker, Sir, we have had 2 days of fruitful debate in this House. Unfortunate though the entire NKF saga may be, I am cheered by the fact that all Members saw this as an opportunity in the way we collectively handle this crisis, for both NKF and in fact the charity sector to emerge stronger and more resilient. More broadly, Miss Irene Ng described this NKF incident as a "defining moment", an opportunity for Singaporeans to sharpen our collective identity. I agree. And I am not the only one. Members may know of Mr Jack Sim, an active Singaporean volunteer, passionate about toilets. He started the WTO: not the one in Geneva, but the World Toilets Organisation based in Singapore. He sent me an email to say that he saw the NKF incident becoming a nation building exercise. As he put it: "now you know we are not Bo Chap Singaporeans. Everyone is a patriot at heart, and maybe a stronger Singaporean identity will emerge, including Singlish".

Let us now, therefore, allow the dust to settle, and let the new NKF Board get on with the necessary restoration work.

The old NKF has great strengths but also weaknesses. Let us build on the strengths and correct the flaws.

The new NKF must remain creative, innovative and professional. Being the largest charity in Singapore, it must take on a pace-setter role, and be a shining example of good governance, transparency and accountability. To achieve this, it must fix all its inadequacies and root out bad practices.

Most importantly, the NKF must remember that the core of all charity is basic humility and a simple desire to help our fellow human beings. The NKF, and indeed all charities, exists because of the people, and it is the people it must serve, and not the other way round.