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LCQ2: Subvented NGOs

    Following is an oral reply by the Secretary for Labour and Welfare, Mr Matthew Cheung Kin-chung, to a question by the Hon Fernando Cheung on the subvented non-governmental welfare organizations in the Legislative Council today (May 7):


    The Lump Sum Grant Subvention System ("LSGSS") has been implemented since January 2001.  The staff salary structures of non-governmental welfare organizations subvented under LSGSS ("subvented NGOs") have been delinked from those of the civil service.  It has been reported that despite the continuous downward adjustments in the overall remuneration of the staff in subvented NGOs in the past few years, the salaries of senior staff in some NGOs have risen instead.  In this connection, will the Government inform this Council:

(a)  of the 10 subvented NGOs which had been allocated the highest amounts of subventions each year between 2001 and 2008, and whether it knows the respective annual salaries of the five staff members of each NGO who had the highest annual salaries in the relevant year;

(b)ˇ@whether it has monitored the use of subventions by subvented NGOs, in particular, the expenditure on staff remuneration; if it has, of the details of such monitoring work, including the means to prevent subvented NGOs from adopting a salary structure which rewards the upper-ranked staff generously but gives the lower-ranked staff a niggardly pay; and

(c)  whether the Social Welfare Department will make public the salary structures adopted by subvented NGOs; if not, of the reasons for that?


Madam President,

    The Lump Sum Grant (LSG) subvention system was introduced in 2001 and has since largely replaced the conventional social welfare subvention system which was then considered inflexible, overly complex and bureaucratic, and involving excessive administrative procedures.  At present, 162 out of 173 subvented non-governmental organisations (NGOs) have joined the LSG subvention mode on a voluntary basis, and this testifies to its wide acceptance by NGOs.

    Under the LSG subvention system, the Government no longer imposes rigid requirements on NGOs' staff establishment, salary structures and individual items of expenditure.  Hence, NGOs are given greater autonomy, and can more flexibly deploy the lump sum resources and re-engineer their services to meet the changing needs of society.  NGOs' boards of directors or management committees are free to formulate their own policies on human resources management according to their individual circumstances, flexibly use their resources on staff remuneration and adjust salary levels in accordance with their policies and the prevailing conditions of the labour market.

    The NGOs subvented by the Social Welfare Department (SWD) can also expand their welfare services on a self-financing or fee-charging basis.  In fact, the scope of service of many NGOs is not limited to the provision of government-subvented welfare services. Some of their staff members, particularly those senior staff members at the management level, may be responsible for a number of service areas according to actual needs, and their remuneration may come from different sources and is not limited to SWD's subvention.  Members may wish to note this point when considering the remuneration of staff members, in particular those of senior ranks in subvented NGOs.

    My replies to the questions raised by the Hon Dr Fernando Cheung are set out belowˇR

(1) & (3)  The top ten NGOs that received the highest amount of annual subvention under the LSG subvention system from SWD between 2001-02 and 2007-08 are set out at Annex for Members' reference.  Under the LSG subvention system, SWD does not have information on the annual salaries of individual staff members or the pay structures of these NGOs.

(2)  Under the Funding and Service Agreement (FSA), NGOs subvented by SWD are required to submit Annual Financial Reports, audit reports prepared by external auditors and audited Annual Financial Statements of the organisations.  The audits must comply with the Practice Note published by Hong Kong Institute of Certified Public Accountants, and cover the NGOs' financial and accounting records as well as the adequacy and effectiveness of internal control.  The NGOs are also required to submit Management Letters issued by external auditors in the course of auditing their annual financial statements.  SWD will scrutinise the Annual Financial Reports, Annual Financial Statements and Management Letters submitted by NGOs.

    The NGOs subvented by SWD must ensure that the subvention can only be used to provide specified subvented services.  Pursuant to the accounting requirements imposed by SWD on the subvented NGOs, each NGO has to maintain its basic accounting books and records.  The Finance Branch of SWD will conduct on-site "subvention inspection" of the subvented NGOs regularly so as to ensure that these NGOs provide the specified subvented services in compliance with the terms and conditions of the Lump Sum Grant Manual and FSA.

    In handling complaints about subvention, SWD will, depending on individual circumstances, visit the service units concerned for on-site assessment.

    Subvented NGOs must take speedy action to rectify anomalies of practice, if any, identified during SWD's audits.  SWD can withhold or terminate the LSG subvention if a subvented NGO fails to exercise reasonable and prudent financial management; fails to comply with the LSG rules; and/or cannot provide the specified subvented services in accordance with the terms and conditions of the FSAs, and is unable to work out improvement measures and complete the relevant action plans within a specified period of time.

Ends/Wednesday, May 7, 2008
Issued at HKT 15:30


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