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LC: CS presents Government Minute in response to Report of Public Accounts Committee No. 62

     Following is the speech (translated from Chinese) by the Chief Secretary for Administration, Mrs Carrie Lam, in presenting the Government Minute in response to the Report of the Public Accounts Committee No. 62 in the Legislative Council today (October 22):


     Laid on the table today is the Government Minute (GM) responding to Report No. 62 of the Public Accounts Committee (PAC).

     When presenting Report No. 62 on July 9 to the Legislative Council, the Chairman of PAC gave comments on Three chapters in the Director of Audit's Reports, namely:
(a) Planning, construction and redevelopment of public rental housing flats;
(b) Mega Events Fund; and
(c) Promoting the development of social enterprises.

     We are grateful for the time and efforts that the PAC has devoted to examining these subjects. We accept the Committee's recommendations and have set out in detail the specific responses of the relevant bureaux/departments in the GM. Today, I would like to highlight the key measures that we have taken in these important policy areas and the progress.

Planning, construction and redevelopment of public rental housing flats

     The Government is committed to providing public rental housing (PRH) to low-income families who cannot afford private rental accommodation. Our target is to maintain the average waiting time (AWT) of around three years for general applicants (i.e. family and elderly one-person applicants). According to the established methodology, waiting time refers to the time taken between registration for PRH and first flat offer, excluding any frozen period during the application period (e.g. when the applicant has not yet fulfilled the residence requirement; the applicant has requested to put his/her application on hold pending arrival of family members for family reunion; or the applicant is imprisoned). The AWT refers to the average of the waiting time of those general applicants who were housed to PRH in the past 12 months. It has become increasingly challenging to maintain the AWT for general applicants at around three years given the increasing number of PRH applicants. We have made various changes in terms of policies and actual work, including increasing long-term supply, in order to address the housing needs of low-income families.

     In his 2014 Policy Address, the Chief Executive adopted the public housing target of 280 000 units, of which 200 000 are PRH units and 80 000 are Home Ownership Scheme units. We have secured the land required for a total of 179 000 PRH units as pledged last year, and preparation is also under way to identify the additional land required to meet the new target announced in the 2014 Policy Address. To deliver the new housing supply target is undeniably a big challenge for both the Government and the community. While the Government endeavours to expeditiously take forward various land use planning and development projects, these medium to long term land supply measures take time to materialise. There are not many easy or feasible options to increase land supply in the short to medium run.

     In this connection, the Government has been carrying out land use reviews, including reviews on government land currently vacant, under short term tenancies or different short-term or government uses, as well as the second stage of review on Green Belt sites. As reported in the 2014 Policy Address, we have identified about 80 new sites that can be made available from 2014-15 to 2018-19, involving a total area of over 150 hectares with an estimated capacity of providing some 89 000 flats. Including some of those identified in earlier land use reviews, we estimate that some 150 sites can be made available from 2014-15 to 2018-19 for providing over 210 000 public and private housing units, subject to timely completion of statutory planning procedures to convert their land use and/or increase the development intensity, as well as completion of such works as infrastructure, land resumption/clearance, reprovisioning of existing/planning facilities, etc. to be expeditiously carried out by various departments. Our preliminary estimate is that among these some 150 sites, about 60% are for public housing development, and in terms of flat number to be constructed thereat, over 70% are public housing units.

     Regarding the management of PRH construction projects, we have been striving to expedite the whole construction process without compromising quality and site safety.

     In the past, certain PRH sites were returned to the Government for reasons prevailing at that time. In line with the 2014 Policy Address, the Government has pledged to provide sufficient land to the Housing Authority (HA) for PRH production so as to meet the production target. To this end, HA and the relevant government departments have been and are in close liaison to identify sufficient sites for development of public housing, and discuss how to streamline the procedures to fast-track the site delivery for meeting the new PRH production target.

     We recognise the future challenges of HA, in particular the land requirement for public housing development, the lead time required for planning and land development process, the increasing challenge to meet the AWT target for general applicants at around three years, and the need to see to the financial requirement for the 10-year PRH development programme.

     We have referred to HA for consideration Audit Commission (Audit)'s recommendations and observations, views received during PAC's public hearings and views collected during the public consultation on Long Term Housing Strategy (LTHS). We will also take into account the above in formulating the Government's LTHS.

Mega Events Fund

     On the Mega Events Fund (MEF), since the inception of the Fund in 2009, the Tourism Commission (TC) has taken its supervisory responsibility over the MEF seriously, and has continuously sought to enhance the operation and monitoring of the MEF with experience gained.

     The MEF has so far supported 24 mega events with a total earmarked funding of around $100 million. These events have attracted tens of thousands of local residents and visitors and received positive feedback. A number of them were broadcast or widely reported by the international media. In all fairness, the MEF-supported events have contributed to reinforcing Hong Kong's status as a world-class travel destination and the events capital of Asia.

     Nevertheless, the Administration agrees that there is room for improvement in the operation of the MEF, in particular those areas as identified by the Audit in its Report. We appreciate the effort of the PAC in examining the operation of the MEF. However, I would like to take today's opportunity to state the Administration's position on certain issues that came up during the hearings.

     Firstly, we do not agree with the PAC that the Finance Committee (FC) may have been hindered from making an informed decision on whether to support the extension of the MEF in 2012 because the FC's attention was not drawn to a letter sent by the Corruption Prevention Department (CPD) of the Independent Commission Against Corruption to the Commissioner for Tourism in November 2010. The CPD's letter dated May 20, 2014 to the Clerk of the PAC stated clearly that when the CPD submitted its report to the Corruption Prevention Advisory Committee (CPAC) for endorsement in 2010, a member mentioned that the MEF was a one-off funding scheme set up during the time of financial difficulties and doubted the need for its continuation as the economic situation had changed. Echoing this member's view, another member added that the TC's staff might try to dish out funds loosely in order to use up the MEF before it expired. The member suggested that the TC should consider returning the unused funds to the Government.

     This letter of the CPD confirmed the view of the Administration at the time, i.e. the view of members of the CPAC set out in the CPD's letter to the TC back in 2010 was not directly related to corruption prevention, but was more a policy question. The TC subsequently took the relevant policy view into account when reviewing the way forward for the MEF in 2011, and concluded that although Hong Kong's economic situation had indeed changed, we faced fierce competition from neighbouring cities in seeking to host mega events. The TC considered that the operation of the MEF should be extended, but that the scheme should be revised to help bring internationally acclaimed mega events to Hong Kong. This conclusion was explained in the Administration's submission to the FC in 2012. Our judgment at that time was that there was no need to mention the CPD's letter in the submission to the FC. Against this background, the Administration could not agree with the description of the CPD's letter in paragraph 1.11 of the Audit Report, nor the views of PAC members.

     Secondly, the PAC was of the view that the Administration failed to draw sufficient lessons from the experience from the Hong Kong Harbour Fest. I would like to point out that when the MEF was set up, specific measures were introduced in the light of the Harbour Fest experience, including specifying the use of MEF funding and the relevant terms and conditions governing the use of funding in the funding agreements; requiring organisers of MEF-supported events to keep the project accounts and relevant books and records for inspection; as well as requiring organisers to submit post-event reports containing the final audited accounts prepared by an independent registered Certified Public Accountant upon the completion of the event. The final audited accounts should further include the independent auditor's opinion on whether it is reasonably believed that the organiser has fully complied with the terms and conditions of the funding agreement; and an assurance that the MEF funding was spent in accordance with such terms and conditions. In addition, the MEF Assessment Committee (AC) and its Secretariat also perform a supervisory role to cross-check the post-event evaluation reports and the final audited accounts. This mechanism has enabled the MEFAC Secretariat to impose financial sanctions on 11 events which have been assessed as failing to achieve the predetermined targets.

     To further improve the operation of the MEF in the light of the Audit Report and the PAC hearings, the Administration has taken the following actions:

(a) a review on the modus operandi for the MEF Tier-2 scheme has been conducted. Clearer description of the targets and deliverables are required in the applications for easier assessment and more effective cross-checking. To address the concern of the Audit and the PAC on conflict of interest, applicants must declare in writing any potential conflict of interest, in particular those involving monetary transactions, and disclose their management teams and any associates who will be actively involved in organising the proposed events. Furthermore, applicants must also disclose their intention to stage any events of similar content or nature in close proximity to the event under application for MEF support;

(b) internal guidelines and scoring guidelines to improve the assessment and scoring of MEF applications have been drawn up. To address the PAC and the Audit's concern about the appropriateness of using the number of additional paid jobs created as one of the key criteria to measure the performance of Tier-2 events, the weighting accorded to job creation will be revised downwards, while the standard MEF funding agreement will be revised such that job creation will no longer be a key performance indicator;

(c) a more robust mechanism to validate whether the deliverables and targets of MEF-supported events have been achieved as reported by the organisers has been put in place;

(d) organisers of MEF-supported events must also report their procurement and staff recruitment mechanisms with supporting documents (e.g. tender documents, quotations). They must ensure that all event expenditure items are supported by official invoices or receipts, which are subject to random checks by the MEFAC Secretariat. Any explanation and clarification made by the organisers during the inspection process will be properly documented; and

(e) the TC has started redeploying staff with accounting background to assist with the verification and cross-checking of post-event evaluation reports and final audit accounts. The TC is identifying resources to deploy on a longer-term basis adequate staff with accounting or audit knowledge to assist in supervising the MEF's operation.

     The MEF will expire in March 2017. The Administration will conduct a comprehensive review on the way forward for the MEF before that, and will take into account the comments made by the PAC and the Audit when conducting the review.

Promoting the development of social enterprises

     Finally, on promoting the development of social enterprises (SEs). The Government endeavours to promote the development of SEs. An SE is a business in nature. Its profits will be principally reinvested in the business for the social objectives that it pursues. Hence, our policies and various measures aim to provide support to SEs to operate as businesses, and the target of such support does not limit to SEs operated by social welfare organisations. In fact, the development of SEs in Hong Kong has been making steady progress. The number of SEs has increased from 260 six years ago to some 450 now and the services involved are getting more diversified and innovative. Although most of the SEs are still small in scale, many of them are able to break even or gain profits.

     The Enhancing Self-Reliance Through District Partnership (ESR) Programme of the Home Affairs Department and the Enhancing Employment of People with Disabilities through Small Enterprise Project
(3E Project) of the Social Welfare Department (SWD) provide funding for the establishment and development of SEs. Both programmes have achieved positive results. As at April 2014, a total of 155 SE projects were approved under the ESR Programme, involving around $180 million in funding. Nearly 80% of the SEs are still in operation after the expiry of their funding period. In addition to fulfilling social objectives such as environmental protection, rehabilitation, support for the disadvantaged, around 2 500 job opportunities were created.

     In response to the recommendations made by both PAC and the Audit, the Administration has introduced a series of measures to further enhance the funding and support services to SEs. The measures include: (a) speeding up the processing of applications; (b) enhancing the existing mechanism to effectively prevent duplication of grants; (c) strengthening the support and promotion services to approved projects; (d) enhancing the synergistic effect among various schemes and extending the scope of beneficiaries as far as possible; and (e) improving further the indicators for monitoring funded projects and supporting services.

     SWD agrees with the recommendations of the Audit and PAC regarding the 3E Project. SWD has followed up closely on the recommended improvement measures to maximise the effectiveness of the 3E Project and assist more persons with disabilities in securing stable employment.

     We note that both the Audit and PAC have raised the question of whether Hong Kong should introduce legislation and a definition for SEs as adopted by some overseas jurisdictions. As we have explained to PAC, the mode of SE development in different places has evolved out of their own social and historical backgrounds. At present, as local SEs are in their incubation stage, it is better to encourage diversity in their developments and thus we have not adopted the legislative approach. Moreover, we agree very much with the Audit Report that we should continue to take note of the development need of SEs and update the strategies and projects to support them. The Home Affairs Bureau (HAB) has commissioned a study earlier to assess the current landscape and future needs in SE development. HAB will release the study report and consider carefully the results of the study and formulate future strategies to support the further development of SEs in collaboration with the Social Enterprise Advisory Committee, social enterprise organisations and other stakeholders.

     Thank you, President.

Ends/Wednesday, October 22, 2014
Issued at HKT 13:14


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