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LCQ7: Use of public funds by tertiary institutions funded by the University Grants Committee

     Following is a question by the Hon Lau Wong-fat and a written reply by the Secretary for Education, Mr Eddie Ng Hak-kim, in the Legislative Council today (October 15):


     It has been reported that the University of Hong Kong (HKU) has made huge amount of advanced payments for the University of Hong Kong-Shenzhen Hospital (Shenzhen Hospital) since its establishment, which it operates in collaboration with the Shenzhen Municipal Government, and such payments are unlikely to be recovered in the near future. In this connection, will the Government inform this Council:

(1) whether it knows if the University Grants Committee (UGC) has required tertiary institutions funded by UGC (UGC-funded institutions) to notify UGC when they set up self-financing organisations outside Hong Kong to be operated collaboratively or independently, so as to ensure that such institutions do not use public funds to subsidise their self-financing projects;

(2) as HKU has indicated that the operation of Shenzhen Hospital has all along been in compliance with the policy of no cross-subsidisation set out in the UGC Notes on Procedures, whether it knows if UGC has carried out any verification to address public concern; and

(3) given the allocation of matching grants by the Government to UGC-funded institutions under the Matching Grant Scheme launched for the tertiary education sector, whether the authorities will investigate if HKU has used the matching grants allocated to it by the Government to meet any expenses in relation to Shenzhen Hospital (including set-up costs and advanced payments)?



(1 to 3) The University of Hong Kong (HKU) is an independent and autonomous statutory body, which enjoys institutional autonomy in conducting self-financing activities, including setting up jointly-run or self-administered establishments outside Hong Kong. Nevertheless, the HKU as an institution funded by the University Grants Committee (UGC) should ensure that its self-financing operations will not affect the core work of the institution in Hong Kong and that there is distinct separation of resources between self-financing operations and publicly-funded activities. The UGC Notes on Procedures provide that UGC resources should not be used to subsidise self-financing operations. To avoid cross-subsidisation of non-fundable activities, institutions should charge self-financing activities of the relevant overheads. The UGC set up the Financial Affairs Working Group in 2011 to look at the financial situation of its funded institutions and study whether UGC funding had been used appropriately. The Working Group released its report in 2013, making recommendations on the cost recovery and cost charging mechanisms, and the demarcation and deployment of surpluses among self-financing activities, as well as the financial transparency of institutional finance. The Working Group will continue to monitor institutions' position of implementing such measures and the relevant progress.

     According to the information provided to the UGC Secretariat by the HKU, in operating the University of Hong Kong-Shenzhen Hospital (Shenzhen Hospital), the HKU has been adhering to the policy on preventing cross-subsidisation of non-fundable activities as laid down in the Notes on Procedures, and it also recovers from such activities the full cost for UGC resources consumed pursuant to the rules. It keeps separate operating accounts for the Shenzhen Hospital and the UGC funded activities. Furthermore, as required by the Notes on Procedures, the HKU, in addition to the annual audits of the financial statements compiled, has commissioned independent external auditors to provide separate assurance. As revealed by the findings of the independent auditors, the HKU has not used UGC funding for purposes other than those prescribed by the UGC and has not acted contrary to the guidelines or other regulations issued to institutions by the UGC. The UGC is satisfied with the audit results of the independent auditors.

     According to the operating guide for all six rounds of Matching Grant Schemes, the HKU must not use the matching grants allocated under such Schemes and the matching private donations received to support any activities of the Shenzhen Hospital. As shown in the independently audited reports submitted for these Schemes by the HKU, the independent auditors have not identified any irregularities suggesting that the HKU has failed to follow the Operating Guide to the Matching Grant Schemes (Operating Guide) regarding the use of matching grants and private donations.

     The UGC will continue to monitor the HKU's compliance with the Operating Guide in the use of matching grants and private donations. The UGC will safeguard the principles of financial governance and ensure the proper use of public funds.

Ends/Wednesday, October 15, 2014
Issued at HKT 12:29


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