For discussion FCR(96-97)77
on 6 December 1996

ITEM FOR FINANCE COMMITTEE

CAPITAL WORKS RESERVE FUND
HEAD 710 - COMPUTERISATION
Treasury
New Subhead "Replacement of the Government Cash Receipting System"

Members are invited to approve the creation of a new Subhead "Replacement of the Government Cash Receipting System" with a commitment of $25 million under Head 710 Computerisation.

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PROBLEM
PROPOSAL
JUSTIFICATION

Present mode of operation
Benefits of the proposed system
FINANCIAL IMPLICATIONS
Non-recurrent cost
Recurrent costs
Implementation Plan
BACKGROUND INFORMATION

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PROBLEM

The existing Government Cash Receipting System (GCRS) is obsolete and difficult to maintain, resulting in frequent breakdowns.

PROPOSAL

2. The Director of Accounting Services (DAS) proposes to replace the existing GCRS with a new system at a non-recurrent cost of $25 million.

JUSTIFICATION

Present mode of operation

3. The GCRS is a computerised system installed at 35 collection centres for receiving payments due to Government from the public, issuing receipts against payments made either over the counter or through postal remittance, and recording the receipting details in Government’s accounts.

4. DAS installed the GCRS in 1988. Given the normal wear and tear over the years, the system suffers frequent breakdowns. The frequency of breakdowns is increasing due to the ageing of the system and heavy usage of the workstations throughout the opening hours of the collection centres. In 1995, DAS recorded 3 512 workstation-hours of breakdowns. This represented an increase of 33% over the number of breakdowns recorded in 1994. In the first eight months in 1996, the figure reached 2 692 workstation-hours, representing an increase of 19% over the same period last year. The frequent breakdowns resulted in a reduction of the total service time of the collection centres and in turn an increase in the queuing time of payers at the counters. At present, if one of the receipting machines in the collection centre breaks down during peak hours, a payer may have to queue up for about 10 more minutes, making the total queuing time up to about 40 minutes, against a pledged target of 35 minutes during peak hours DAS envisages that the performance of the GCRS will deteriorate further as the system gets older.

5. Owing to the obsolescence of the computer software and hardware, maintenance of the system is increasingly difficult. Moreover, given the incompatibility between the new model of workstations available in the market and the old servers used in the collection centres, addition of new receipting stations poses great difficulty. Also, as the existing system has reached the limit of its design capacity, no further major enhancement is possible.

6. In view of the above limitations and deficiencies, DAS proposes to develop a new system before the existing one reaches the end of its life span in about two years.

Benefits of the proposed system

7. The new system based on modern day technology will provide more user-friendly, and improved functions and features to streamline the operation. These include more user-friendly input screens, and more comprehensive enquiry, reporting and analysis facilities. These features will improve the overall operational control. In addition, the new system can support future expansion and enhancement to cope with increasing demand for services for making payments over the counter or through postal remittance.

8. With the new system in place, we will be able to instantly address the problem of frequent breakdown of workstations, and thereby to minimisinge any inconvenience to members of the public. making payments over the counter. The streamlining of the operation will also enable us to provide a more efficient service to the public at all times. However, whether we could further shorten the queuing time at our collection centres would depend on the number of payments made over the counter. With an aim to improving service to the community and achieving cost-efficiency in providing the collection service, DAS will continue to promote the use of autopay and other electronic means of payments.

FINANCIAL IMPLICATIONS

Non-recurrent cost

9. DAS estimates that implementation of the proposed new system will require a non-recurrent cost of $25,000,000, broken down as follows -

10. As regards paragraph 9(a), the cost of $12,000,000 is for the acquisition of 208 receipting workstations with scanners and printers and 74 servers for 35 collection centres (12 on Hong Kong Island, 9 in Kowloon and 14 in the New Territories).

11. As regards paragraph 9(b), the cost of $9,835,000 is for the acquisition of software and the services for the system development, implementation and training.

12. As regards paragraph 9(c), the cost of $1,975,000 is for site preparation works including electrical installation, cabling, delivery and installation of the new system.

13. As regards paragraph 9(d), the cost of $1,190,000 represents a 5% contingency on the cost items set out in paragraphs 9(a), (b) and (c).

14. The Treasury will redeploy existing staff for managing and supporting the development and implementation of the proposed system by the contractors.

Recurrent costs

15. The estimated annually recurrent cost of maintaining and supporting the proposed new system after implementation is $4,488,000, made up as follows -

16. The estimated annually recurrent cost of $4,488,000 represents an increase of $1,392,000 over that required for the existing system. This is attributed to the anticipated increase in the maintenance charge for the new system. maintenance charge of the existing system is below market value because the initial maintenance charge was extraordinary an artificially level atendering bid by the successful tenderer in subsequent years In estimating tThe maintenance charge of the new system, we have, in line with the current market norm, assumed that it will represent has been assumedabout 12% of the total hardware and software costto be .

Implementation Plan

17. DAS plans to implement the proposed system according to the following schedule -

BACKGROUND INFORMATION

18. The GCRS provides facilities to collection centres of Treasury, Inland Revenue Department, Home Affairs Department, Water Supplies Department and Judiciary for receipting Government demand notes on water charges, rates, taxes, Crown rent, fixed penalty traffic tickets etc. settled by members of the public.

19. DAS installed the existing system in 1988 and the previous one in 1978. In 1988, there were 21 collection centres with 141 receipting workstations. Over the years, we have extended the use of the system has also been extended to the magistracies, thereby increasing the number of collection centres to 35 and the number of workstations to 208. The GCRS handles approximately 16 million transactions a year. The average time for processing one transaction is 15 seconds, including the scanning of demand note information and the printing of two receipting lines. Allowing 25 seconds for manual inputting and cash/cheque handling, the average time for each transaction is 40 seconds. The efficiency of the system has, however, been hampered by machine failure in recent years.

20. In spite of the availability and active promotion of alternative payment methods such as autopay and payment by phone, the volume of counter payments has remained fairly steady and there is no sign yet that the counter transaction volume will decrease. Government therefore needs to maintain a satisfactory standard of service to the public making payments over the counter. Moreover, the GCRS workstations also process payment by postal remittance, which is another popular payment method used by the public.workstations. An efficient GCRS is therefore essential for the collection of Government revenue.

Finance Branch
November 1996

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