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LCQ11: Financial position of University Grants Committee-funded institutions

     Following is a question by the Hon Albert Ho Chun-yan and a written reply by the Acting Secretary for Education, Mr Kevin Yeung, in the Legislative Council today (June 29):


     The 2015 Policy Address stated that "the community colleges of University Grants Committee-funded institutions have experienced rapid growth and some have accumulated large surpluses. We will ask the institutions to critically review their financial position and consider ways to use their surpluses to benefit their students, such as lowering tuition fees and offering scholarships or bursaries for underprivileged students." In reply to a question raised at the meeting of this Council of May 18 this year, the authorities stated that in response to the aforesaid recommendation put forth in the Policy Address, the authorities had issued letters to the various funded institutions to request them to review the financial position of their self-financing community colleges or other self-financing arms or affiliates offering self-financed sub-degree programmes as well as the use of their surpluses for the benefits of students. The authorities also indicated that they did not possess any information concerning the total amounts of students' tuition fees reduced or waived and scholarships or bursaries offered for underprivileged students by those institutions in the past five years. In this connection, will the Government inform this Council:

(1) of the justifications for making the statement that "some (institutions) have accumulated large surpluses" in the Policy Address; the policy bureaux or government departments that had confirmed and verified such a statement beforehand; whether there are currently systems or measures in place to ensure beforehand the accuracy of information contained in the Policy Address;

(2) whether it knows how the various funded institutions conduct auditing on their financial position; whether the authorities have verified the financial information furnished by various funded institutions, and whether there are other channels available for grasping such information for the purpose of cross checking; if they have verified and there are such other channels, of the details; if not, the reasons for that; and

(3) whether the Chief Executive's report of work in July this year will give an account of the progress of the authorities' follow-up to the accumulation of large surpluses by funded institutions; if so, of the details; if not, the reasons for that?



     At present, seven out of the eight universities funded by the University Grants Committee (UGC) (except the Hong Kong University of Science and Technology) have established self-financing community colleges or other similar self-financing arms offering sub-degree programmes. A total of nine organisations are relevant, namely the School of Professional and Continuing Education of The University of Hong Kong, School of Continuing and Professional Studies of The Chinese University of Hong Kong, Hong Kong Community College of the Hong Kong Polytechnic University, Community College of City University (CCCU), School of Continuing Education of Hong Kong Baptist University, Academy of Film under Hong Kong Baptist University's School of Communication, Lingnan Institute of Further Education, Community College at Lingnan University, and Unit of Associate Degree Studies of the Education University of Hong Kong.

     My reply to the question raised by the Hon Albert Ho Chun-yan is as follows:

(1) and (3) Based on the information provided by the institutions, the surplus or deficit recorded by each institution for the 2014-15 financial year and the amount of their accumulated surpluses or deficits are set out at Annex. Some institutions have indeed accumulated surpluses, which is consistent with the relevant statement in the 2015 Policy Address. Meanwhile, some institutions have accumulated deficits.

     As stated in our reply to a relevant Legislative Council question on May 18, 2016, in response to the recommendation put forth in the 2015 Policy Address, the Education Bureau (EDB) has issued letters to the institutions concerned to request their review of the financial position of their self-financing community colleges or other similar self-financing arms (i.e. self-financing arms or affiliates offering sub-degree programmes) as well as the use of their surpluses (if any) for the benefits of students.

     In view of the concern expressed by the Chief Executive in his Policy Address, the institutions realised that they had to enhance the transparency of their financial position and to proactively identify ways to use their surpluses (if any) to benefit students. The institutions concerned are all non-profit-making organisations. Although some of them had accumulated surpluses, they pointed out that, as a result of the review, the financial surpluses needed to be (or would be) used for improving campus facilities, developing new school premises, repaying loans under the Government's Start-up Loan Scheme, enhancing teaching and learning (including the provision of support for students with different financial needs in various aspects, e.g. e-learning, internship/student exchange programmes), and/or offering scholarships or bursaries, with a view to benefiting the students eventually. This was exactly the purpose of the Policy Address in calling on the institutions to use their surpluses to benefit their students in various ways. Besides, the institutions pointed out that they needed to keep sufficient reserves to maintain their operation in view of volatilities and uncertainties that might arise each year, and given the decline in the number of secondary school leavers in the coming few years. The EDB acknowledges such needs.

(2) The UGC Notes on Procedures (NoP) clearly set out the requirements on the eight UGC-funded universities' financial reporting, audit and assurance. In preparing their annual financial statements, universities should follow the prevailing Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the Statement of Recommended Practice for the UGC-funded Institutions. The annual financial statements of a university shall report its overall financial position (including that of its self-financing arms and subsidiaries) and be audited by an independent external auditor. As far as audit and assurance is concerned, in addition to the annual audit of the financial statements, universities are required to engage independent external auditors to provide assurance as to whether they have accounted for the income and expenditure in respect of the funds received from the UGC in accordance with the relevant provisions of the UGC NoP and the allocation letters; and submit an annual return.

     Moreover, to provide further assurance of the proper use and application of public funds as represented in the audited financial statements and the annual return, Heads of Universities are requested to provide a Certificate of Accountability to the UGC annually, after the close of each financial year, to confirm that public funds allocated via the UGC and matched donations under the Matching Grant Schemes have been spent in accordance with the UGC NoP, allocation letter and other guidelines and approved Government policies.

Ends/Wednesday, June 29, 2016
Issued at HKT 17:31


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