Hong Kong ICAC - Integrity and Quality Building Management

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FAQ
     
1. Q

Can a MC member accept any gift, discount (e.g. for decoration of the home of the member) or entertainment (e.g. meal gathering) from the tenderer or contractor?

  A

A MC member should not solicit or accept any advantage, including any gift, loan, reward, discount or free service, etc. in relation to the tender or project provided by the tenderer or contractor.  Otherwise, he/she will breach the Code of Practice on Procurement of Supplies, Goods and Services issued under the Building Management Ordinance and even Section 9 of the Prevention of Bribery Ordinance

Although entertainment is not defined as an advantage by law, MC members should not accept lavish and frequent entertainment from tenderers and contractors to avoid feeling obliged and embarrassed when discharging their duties and attracting suspicion and criticism.
     
2. Q

What offence will a person commit if he uses a false receipt to claim money from the owners' corporation (OC)?

  A
It is an offence under Section 9(3) of the Prevention of Bribery Ordinance for an agent (e.g. MC members, staff or contractors) to use any false document, receipt or account to deceive his principal (e.g. OC).  For details of the provisions, please see Laws & Regulations.  Relevant cases are also provided at Cases in Perspective.
     
3. Q

How should OCs handle MC members' or employees' declarations of conflict of interest in relation to their duties?

  A

Regarding declarations of conflict of interest made by MC members or  employees, under the Code of Practice on Procurement of Supplies, Goods and Services and on Building Management and Maintenance issued under the Building Management Ordinance, OCs should:

  • ensure that any such declaration is made to the MC in writing by the MC member or employee involved and is properly documented;
  • report and discuss the matter in the relevant MC meetings or general meetings of the OC, and record related decisions in the notes of the meetings;
  • prohibit the MC member or employee concerned from participating in any discussions of the tenders / issue concerned;
  • in the case of an MC member, have that member abstain from voting in the selection of tenders / issue concerned; and
  • prohibit the MC member or employee concerned from performing the duty concerned.
     
4. Q

What are the essential elements for a code of conduct for an OC?

  A

A code of conduct aims at providing integrity guidelines and standards for the members and employees of OCs to follow and thus should be practical and user-friendly. It should cover the following aspects:

  • prohibition of solicitation and acceptance of advantages;
  • limitation on acceptance of entertainment;
  • declaration of conflict of interest; and
  • proper protection of data and handling of accounts / records.

 Please click here to browse a sample code of conduct.

     
5. Q

Is it mandatory for an OC to select consultants / contractors for its maintenance works by tender?

  A

According to Section 20A(2) of the Building Management Ordinance, supplies, goods or services the value of which exceeds or is likely to exceed:

  • the sum of $200,000; or
  • 20% of the OC's annual budget;

 (whichever is the lower) shall be procured by invitation to tender by the OC.

If the value of the procurement is over 20% of the OC's annual budget, whether the tender is accepted or not shall be decided by a resolution passed by a majority vote at a general meeting of the OC.

In addition, the OC must abide by the Code of Practice on Procurement of Supplies, Goods and Services issued by the Home Affairs Department when conducting the tender exercise.  The code of practice is available at District Offices and on the building management webpage of the Home Affairs Department.
     
6. Q

How can OCs identify suitable project consultants and contractors?

  A

OCs can refer to the lists of Authorized Persons / Registered Structural Engineers maintained by the Buildings Department and consult other OCs which have recently conducted similar exercises in order to appoint competent project consultants.

Most likely, OCs are required to engage Registered General Building Contractors (RGBC) for large-scale maintenance works, particularly when dealing with works involving many work trades or structural repairs.  OCs can refer to the various lists of contractors maintained by relevant government departments.
     
7. Q

What corruption prevention measures should OCs adopt in the receipt and opening of tenders?

  A

OCs should adopt the following corruption prevention measures when receiving and opening tenders:

  • register all tenders received and deposit them in a strong double-locked box marked "Tender Box" securely located at a prominent place in the building, with the two keys held separately by the chairman, secretary or treasurer;
  • open tenders after the closing time in the presence of at least three management committee members, and sign and date each tenders and against the quoted price;
  • check the number of tenders received against the register;
  • reject late tenders;
  • circle and sign against all amendments found on the tenders;
  • keep all tenders confidential before tender evaluation; and
  • conduct tender evaluation / selection as soon as practicable.
     
8. Q

Must an OC select the lowest tender?

  A

The selection of a tender should be based on the evaluation criteria determined by the MC before the submission of tenders. If the predetermined selection criterion is tender price only, the tenderers are all competent to carry out the work, and the MC considers that the lowest tender conforms and the tender price is reasonable, then the MC should select the lowest tender.

If the MC wishes to take into account other factors, such as the tenderers' past experience or performance in the selection process, these factors should be included in the evaluation and marking criteria. The MC should then select the tender which conforms and has the highest combined score.

     
9. Q

How can an OC draw up an effective maintenance contract?

  A

An OC may engage a professional to prepare a maintenance contract, which should include the following:

  • clearly defined roles, rights, obligations, responsibilities, and performance requirements;
  • scope of work and specifications, including any drawings, specifications of materials and their standards (e.g. the specifications or brand names of pipes, pumps, paints, tiles, glass panels, locks and switches) as agreed with the consultant / contractor;
  • pricing schedule for works items as tendered;
  • contract terms and conditions including:
    • commencement and completion dates
    • payment arrangements subject to certification by the consultant on the work done
    • insurance
    • termination clauses
    • liquidated damages
    • extension of time
    • material guarantees
    • defects liability period
    • surety bond / retention money
    • ethical commitment clauses for contract
    • confidentiality clauses

The OC may also make reference to the sample contract documents published by the professional bodies (e.g. the Hong Kong Institute of Surveyors and the Hong Kong Institute of Architects).

     
10. Q

How can MC members who are mostly not professional in the maintenance field supervise the project effectively?

  A

MC members and owners should play an active role in monitoring the progress and quality of the project.  Although the project consultant can take care of the technical aspects, the MC should play the following coordinating and monitoring role:

  • request the project consultant, before the commencement of the works contract, to submit a site supervision plan, and to require the contractor to submit a work programme showing the stages and deliverables of the maintenance works required;
  • conduct regular meetings with the project consultant and contractor to monitor the progress of work against the work programme;
  • post the work programme in a prominent place in the building for owners' information and monitoring;
  • require the contractor to report on any delay in the schedule, with an explanation and proposed remedial measures.
     
11. Q

Can staff of a project consultant or a property management company accept any advantage from a building contractor under its supervision? How to prevent this from happening?

  A

Staff of a project consultant or a property management company hired by an OC are agents of the OC.  According to the Prevention of Bribery Ordinance, they cannot accept / solicit any advantage in relation to their duty without the OC's consent.

For renovation projects, the impartiality of consultants is important.  They play a role in selecting contractor, supervising the quality of works carried out and certifying payments to the contractor.  Hence, it is important to ensure their impartiality.  If OCs / owners employ the contractor first and rely on the contractor to appoint a consultant to liaise with the relevant government department for complying with statutory requirements, then the consultant employed would not be in a position to act impartially to protect the interest of the OC. In selecting a project consultant or property management company, the OC should pay attention to whether the company upholds staff integrity, for example, whether it has drawn up a code of conduct and arranges integrity training for staff, etc.  In addition, the OC can include probity clauses in the contract to restrict the acceptance of advantages in relation to the job for the protection of the OC's interests.
     
12. Q

How can an OC enhance the effectiveness of checking the completion of works?

  A

An OC should take heed of the following points when checking the completion of works:

  • inspect and assess work according to standards set out in the terms and conditions of the contract;
  • keep proper records, including photos, to show major work progress and completion of work;
  • reject inferior / incomplete works; and
  • obtain user feedback and report the findings to the MC and owners.
     
13. Q

What are the corruption prevention measures for making project payments?

  A

Depending on the project scale, an OC would pay the contractor in different stages.  To prevent claims based on false documents / vouchers and expedition or delay of payments by corrupt means, OCs should adopt the following measures:

  • segregate the authority and duty for certifying and approving the work done from that for processing of payment;
  • set and make known to the contractor the processing time for certification and payment upon receipt of the necessary documents;
  • make payments according to work progress and contract terms, supported by proper documents / records;
  • require the project consultant to report on sub-standard or non-complying works and exclude these works from the payment certificate;
  • cheques for payment to be signed jointly by the treasurer and at least two designated MC members;
  • file all the payment vouchers and supporting documents for future reference and audit purposes; and
  • employ a consultant Quantity Surveyor to assess contract payments and exercise cost control for large and complicated maintenance projects.
     
14. Q

Why is it necessary for more than one signatory for issuing cheques of OCs and can more blank cheques / bank withdrawal forms be signed for convenience?

  A

The advice for OCs to designate no less than two signatories to sign cheques and bank withdrawal forms and that blank cheques / bank withdrawal forms should not be signed for convenience is to provide appropriate check and balance and prevent misappropriation of OC funds.

Furthermore, OCs should keep their cheque books, bank books and official chop in a secure place, and establish limits for cheque payment above which approval from a higher authority is required.  Details of key controls on payment are available in the Building Financial Management Toolkit.

     
15. Q

Can a property owner inspect or seek copies of financial documents of the OC?

  A

Under the Building Management Ordinance (BMO), the MC should permit owners to inspect the books of account at any reasonable time.  Owners may request in writing the OC to supply them on payment of a reasonable copying charge as determined by the MC with copies of:

  • the financial statements;
  • the accountant's report (if the financial statement are required to be audited by an accountant under BMO; or
  • a summary of the income and expenditure.

If an owner wants to inspect bills, invoices, vouchers, receipts or other documents referred to in the books or records of account and other records, he may adopt the following courses of action:

  • not less than 5% of the owners may request the MC to permit them or any person authorised by them to inspect the documents concerned; or
  • an owner may apply to the court for an order authorising him or any other person named in the application to inspect the documents concerned.  The court may make an order if it is satisfied that the application is made in good faith and is for a proper purpose.
     
16. Q

What should the MC do if it discovers that in the middle of year, the budget is not enough to cover the expenses of the building?

  A

Under the Building Management Ordinance (BMO), a revised budget may be prepared if the MC is of the opinion that any sum set out in the budget is insufficient to meet the expenditure.

To enhance the transparency, the revised budget should be sent with reasons for the changes to all owners or displayed in a prominent location in the building for owners' information.

     
17. Q

Can an MC member obtain an "old" computer of the OC for his own use when it is replaced by a new one?

  A
The "old" computer is the property or asset of the OC and should be disposed of according to the policy and procedures adopted by the MC with proper documentation.  For asset with a resale value, the MC may seek offers from more than one prospective buyers, preferably nominated by different MC / staff members.
     
18. Q

Will the ICAC proactively offer services to OCs or buildings requiring repair?

  A

ICAC offers corruption prevention and education services to OCs or buildings requiring repair proactively through the following channels:

  • sending letters to OCs or buildings which receive repair orders from the Buildings Department or the Fire Safety Directions from the Fire Services Department for common areas;
  • organizing publicity programmes and district workshops jointly with the Hong Kong Housing Society, Home Affairs Department and District Councils to promote integrity and quality building management and maintenance; and
  • producing and distributing to OCs concerned a free Building Maintenance Toolkit with a video.

Please click here for details of ICAC products and activities on building maintenance.

     
19. Q

Can OCs request ICAC officers to evaluate tenders and monitor renovation projects?

  A

ICAC will not involve itself directly in the operation of OCs but is always pleased to provide relevant corruption prevention services, e.g. assisting OCs in formulating code of conduct, offering advice on how to improve system control of contract tendering, management, and financial arrangements, and arranging training for MC members and employees of OCs.

     
20. Q

Is it necessary to provide concrete evidence when lodging a report to the ICAC on corruption relating to building maintenance? Will the complainant be accused of making a malicious report if the complaint is found to be unsubstantiated?

  A

Anybody who suspects corruption or comes across an act violating the Prevention of Bribery Ordinance can lodge a report to the ICAC.  The ICAC will conduct investigations into each and every pursuable report.

Any person who knowingly makes a false report or provides false information to mislead an ICAC officer will breach Section 13(B) of the ICAC Ordinance and the maximum penalty is one year's imprisonment and a fine of $20,000.  However, a complainant will not be prosecuted merely because he cannot provide concrete evidence.
     
21. Q

If an owner is not available for an OC meeting but he wishes to vote for a certain resolution, what should he pay attention to when appointing proxy?

  A

The owner should exercise extreme care in appointing proxy to the person he trusts as the proxy represents the voting right of the owner and will affect the outcome of crucial matters in the management of the building. To ensure the proxies vote as instructed, owners could enter in the explanatory note attached to the instrument of proxy their choice and sign against any amendments. The instrument appointing a proxy shall be in the statutory form set out in the BMO and should be lodged with the MC secretary at least 48 hours before the time of the meeting. The owner should make sure that a receipt is issued by the MC Secretary to acknowledge receipt of the instrument before the time of the meeting.

The owner should make sure that a receipt is issued by the MC Secretary to acknowledge receipt of the instrument before the time of the meeting.

     
22. Q

What should the MC do if the Manager has a financial interest in the business of a cleaning contractor which is tendering for the OC’s contract?

  A

It is a conflict of interest situation. It was essential to establish a mechanism to manage it to protect the interest of the OC. As such, the MC should

  • draw up a standard form to facilitate declaration of conflict of interest;
  • assign the Secretary or designate a staff member at a senior level as the contact person to handle all declarations of conflict of interest;
  • authorise the Chairman or a committee, or designate a senior staff member to determine the action to take upon receiving a declaration;
  • document the conflicts declared and the actions taken; and
  • open up the records for inspection by owners if necessary.
     
23. Q

Why is it important for the MC to appraise the performance of the Manager?

  A

As the manager bears the multiple role of goods/services procurement, building management funds management and service providers monitoring, the performance of the manager is crucial to the quality of the management of the building. Therefore, it is important for the MC to appraise the performance of the manager to maintain a high standard of building management by:

  • checking the manager’s compliance with the requirements on procurement, accounting and monitoring of the service providers;
  • verifying the prices of goods and services procured by the manager against the market prices;
  • comparing the income and expenditure accounts with the approved budget at reasonable intervals; and
  • adopting a system to appraise the manager’s performance at the end of the contract.
     
24. Q

Could quotations be obtained verbally when making purchase of goods for the OC?

  A

Yes. But proper record of the date of receiving the quotation, the supplier, the offered price and the name of the responsible MC staff should be kept on the Purchase Requisition Form. Besides, the staff responsible for procurement should also comply with the requirements set out in the Code of Practice on Procurement of Supplies, Goods & Services and the BMO.

     
25. Q

Could the OC buy third person insurance from the MC chairperson who is an insurance agent?

  A

The OC has the authority to engage any insurance companies to buy insurance for the building. However, the MC chairperson should declare such conflict of interest to the OC and refrain from taking part in the selection of the insurance company.

     
26. Q

The contract of an OC with a property management company (PMC) is going to expire. As the performance of the PMC is satisfactory, can the MC renew the contract with the existing PMC without conducting a tendering exercise?

  A

According to BMO, the OC may decide by a resolution of owners at a general meeting to renew the contract of an existing supplier or service provider without tendering, provided that there is no change to the type of goods or services procured. In drafting the contract, it is also essential to specify the contract period and avoid any terms enabling the automatic renewal of the contract upon the expiry of the contract.

     
27. Q

Could the MC terminate the contract with the cleaning contractor immediately if the MC is not satisfied with the contractor’s performance?

  A

Whether the contract could be terminated immediately depends on the terms and conditions set out in the contract between the MC and the cleaning service provider. However, in case of substandard service, the MC should have the right to issue a verbal or written warning to the contractor. The MC should also keep a record of the cleaning contractor’s adverse performance for future consideration in contract renewal. A termination clause should also be included by either party of the contract when drafting the contract to protect the interests of the OC.

     
28. Q

It might seem impersonal prohibiting caretakers or cleaners to accept red packets from residents during Chinese New Year. What could the OC do?

  A

Caretakers or cleaners may be allowed by the OC or PMC to accept but not solicit red packets during festivals. To further prevent unfair treatment, owners/tenants may be advised to contribute voluntarily in a collection box with the proceeds distributed proportionally to the staff concerned afterwards.

     
29. Q

Could a caretaker refer tenants/ buyers to flat owners of the building for a commission?

  A

It may be regarded as outside work if the extra work is not the duty of the caretaker. The OC should make known to its employees and the owners/tenants whether the employees are allowed to do outside work during or outside their working hours. In formulating such policy or approving application for outside work, the impact of such outside work on the normal duties and possible conflict of interest should be carefully considered. The scope of service should also be specified in the contract to protect the interest of the OC.

     
30. Q

What should the MC do for repeated complaints from flat owners against the cleaning contractor of the building?

  A

The MC should assign a member or staff or the Manager to look into the problem by carrying out spot checks on site and take photographs if necessary as evidence to support observations or complaints of substandard service. Any actions taken and the corresponding time should be recorded properly. The complainants should also be informed of the investigation findings and actions taken. The findings should be referred to when the renewal of the cleaning contract is considered.

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