An independent panel's report has revealed that Polytechnic University had no thorough business plan, budget forecast or exit strategy before setting up dozens of subsidiaries which eventually lost the public-funded university more than HK$50 million. The panel also discovered that PolyU senior managers did not regularly report to the university council about the companies' operations. Some important company documents had gone missing. 'Major financial loss is the norm,' the panel said of the PolyU subsidiaries in its 30-page report released yesterday. It recommended that the university stop making cash investments and not appoint any senior staff to run such companies. Dr York Liao, chairman of the three-person review panel, said yesterday: 'PolyU has to think twice whether it, as a university, can appropriately and efficiently carry out commercial activities.' The panel suggested the university establish effective governance of all its companies and consider exit strategies in initial business plans. In March, an open letter signed by staff - including outspoken former legislator Dr Fernando Cheung Chiu-hung - was sent to the university council urging it to improve PolyU's governance and transparency. The letter asked why the university lost a record HK$900 million last year and urged the council to investigate why business deals worth HK$1.4 billion had been done by companies linked to some council members. Cheung and his colleagues demanded to know why senior university managers were on the boards of some of the companies and whether they received additional income for such roles. The university set up the panel in mid-March to investigate. The panel's brief focused on 25 of PolyU's 42 subsidiaries, associates and jointly controlled entities - those set up to commercially exploit technology and knowledge. These companies included PolyU Modern TCM Research Institute, set up by PolyU and four of its former council members in 2003 to develop and market traditional Chinese medicine. After a three-month investigation, the panel discovered PolyU failed to use subsidiaries, associates and joint ventures as vehicles for technology transfer. 'There seems to be a lack of well-thought-out analysis of its effectiveness, cost, conflicts, liabilities,' the report said. The panel said the university companies had no annual budget or quantitative targets. In many instances it could not find policy papers relating to the companies from the council or the president (former president Poon Chung-kwong who retired in 2008). The panel cited an agreement signed by the university to commit about HK$4 million annually to a business partner and HK$13 million for research without any projections of investment returns. It found that the university council had little information about cash invested in its companies. Decisions had been made by a small group of people on the so-called the Entrepreneurial and Incubation Programmes Management Committee. The committee included former PolyU vice-president Alexander Tzang The report said the committee's first meeting in 2000 was told by its chairman that HK$7 million-HK$10 million worth of non-University Grants Committee funds would be used in initial investments. 'The subsequent exposure, far in excess of this figure, was never brought to the attention of the council in a timely manner,' the report said. The panel found that some company-formation documents were missing. PolyU executive vice-president Nicholas Yang said yesterday that the university had invested HK$103.6 million in the 25 companies. About half of that was in cash. The other half was in-kind investment - technology and knowledge. Yeung said the 25 companies lost HK$50.7 million, of which HK$43.9 million was attributable to impairments/disposal losses on in-kind investments. 'The university accepted all of the recommendations that the panel made to us,' PolyU president Timothy Tong said. He refused to disclose how much managers had pocketed from sitting on company boards. Dr Lam Pun-lee, an associate professor at PolyU who co-signed the open letter, said he was shocked to read in the report that as of March 10 this year, Poly U had spent HK$249 million in all of its subsidiaries, associates and joint ventures. Of that, HK$101 million was spent on establishing a company in Shenzhen. PolyU Student Union president Sam Wong Kai-hing said he wanted the university to trace the missing papers. 'These are important documents which might show who should be held responsible for the mismanagement and losses,' he said.