Provisional Legislative Council

PLC Paper No. CB(2) 1021

Ref : CB2/PL/WS

Panel on Welfare Services

Minutes of Special Meeting held on Wednesday, 26 November 1997 at 8:30 am in the Chamber of the Legislative Council Building

Members present :

Hon WONG Siu-yee (Chairman)
Hon CHAN Choi-hi (Deputy Chairman)
Hon David CHU Yu-lin
Hon HO Sai-chu, JP
Hon Eric LI Ka-cheung, JP
Hon Mrs Elsie TU, GBM
Hon Mrs Peggy LAM, JP
Dr Hon LEONG Che-hung, JP
Hon MOK Ying-fan
Hon HUI Yin-fat, JP
Hon CHAN Yuen-han
Hon Frederick FUNG Kin-kee
Hon LO Suk-ching

Members absent :

Hon LEE Kai-ming
Hon Mrs Sophie LEUNG LAU Yau-fun, JP
Hon Howard YOUNG, JP
Hon YEUNG Yiu-chung
Hon LAU Kong-wah
Hon CHOY Kan-pui, JP
Hon TAM Yiu-chung, JP
Hon CHOY So-yuk

Public officers attending :

Item I

Mr Robin GILL
Deputy Secretary for Health and Welfare (3)

Miss Victoria TANG
Principal Assistant Secretary for Health and Welfare (2)

Mr Andrew LEUNG, JP
Director of Social Welfare

Mrs Louise WONG, JP
Deputy Director of Social Welfare (Administration)

Mr Paul WONG
Assistant Director of Social Welfare (Subvention)

Mrs Loretta CHAU
Chief Social Work Officer (Service Performance Unit)

Ms Jenny LUI
Senior Treasury Accountant (Subvention Finance)

Item II

Assistant Director of Social Welfare (Social Security)

Mr WU Shu-wing
Chief Social Security Officer (3)

Ms Miranda CHIU
Principal Assistant Secretary for Health and Welfare(1)

Mr Stephen MAK
Assistant Director of Information Technology Services

Attendance by invitation :

Item I

Hong Kong Council of Social Service

Ms Cynthia CHAU, JP
Committee on Agency Finance and Administration

Mr NG Chi-wing, JP
Vice Chairperson
Committee on Agency Finance and Administration

Mrs LO CHU Yin Kwan

Committee on Agency Finance and Administration

Ms Kay KU, JP
Assistant Director (Development)

Hong Kong Social Workers Association
Mr CHUA Hoi-wai
Mr CHAN Wing-kin

Alliance on Concern for Social Welfare Service Development
Mr CHOI Shing-kiu
Mr PANG Siu-wing
Mr YU Sze-ming
Miss YIP Shuk-yee

Clerk in attendance :

Ms Doris CHAN
Chief Assistant Secretary (2) 4

Staff in attendance :

Ms Joanne MAK
Senior Assistant Secretary (2) 4

I. The new funding formula for subventing welfare non-governmental organizations (NGOs)

(PLC Papers Nos. CB(2) 647 (01) - (03) )

1. Mr HUI Yin-fat declared interest as the Chairman of the Hong Kong Council of Social Service (HKCSS).

2.A representative of HKCSS said that HKCSS found the Government's proposed funding system for subventing welfare NGOs unacceptable for the following reasons -

  1. The new subvention system emphasized mainly on output performance, which had no direct relationship with the quality of services. Likewise, the proposed Service Quality Standards which emphasized procedural requirements would only create large amount of administrative work without guarantee of service quality. In order to cope with the additional administrative work, staff would have less time to spend on direct services.

  2. The Fixed Funding Formula would cause financial problems to NGOs in hiring staff with a Personal Emolument (PE) requirement above mid point. It was noted that under the new formula, subvention for each service unit would be calculated at Mid-Point PE based on the recognized staffing structure, with a 2% deduction for natural wastage/vacancy in the sector. An additional factor of 6.1% as provisions for Provident Fund contribution would be provided. As a result, relatively senior staff at a salary point above the mid point of their respective salary ranges would become a financial burden to their agencies.

  3. As the subventions calculated by the new funding formula would be inadequate to NGOs, the saying that the new subvention system would give NGOs a greater degree of flexibility in using their subventions was pointless. In fact, it was known that under the proposed subvention system, some NGOs would receive an amount of subvention unable to cover their expenditures. The NGOs concerned then might have to cut their expenditures by delinking their staff from civil service pay scales, reducing the number of staff or replacing the existing staff with junior ones.

  4. It was unfair that accumulation of unspent funds by NGOs as reserves was subject to a cap of 20% of the respective agencies’ annual subvention allocation, but there would be no provision for incremental creep nor topping up for deficits arising from whatever cause.

  5. As all the new subvented units would have to join the new fixed funding scheme, NGOs which opted to stay on the existing funding system would have to administer two entirely different subvention systems should they bid for new projects.

  6. The new subvention system could not provide any incentive to NGOs for making improvement to their services.

3.The representative pointed out the existing funding system also had the following problems -

  1. There was excessive input control by the Government and NGOs did not have sufficient flexibility in re-deployment of resources among subvented items and service units.

  2. Application procedures and payment system should be streamlined to avoid unnecessary administrative work.

  3. Central administrative support was inadequate; and

  4. No incentive was provided to NGOs to make more efficient use of their resources under the existing system.

4.The representative said that the Fixed Funding Formula should be improved in the following ways -

  1. Salaries of staff should be met in full and there should not be a 2% reduction in the calculation. Moreover, there should be full provisions for Provident Fund contribution.

  2. Incentive measures should be provided under the new funding system.

  3. New service units should be allowed to choose whether to join the existing or the proposed subvention system.

5.The representative said that the greatest merit of the existing funding system was that NGOs were guaranteed sufficient provisions to meet the full staffing costs and other charges. However, it was still in need of the following improvements -

  1. the policy of conditional grants should be abolished;

  2. NGOs should be given greater flexibility in combining certain grades of staff for re-deployment; and

  3. NGOs should be allowed free virement, without claw back, among provisions for Other Charges within the same agency except for the food item of residential care service units.

6.The representative said that for NGOs which opted to stay on the existing system, the Administration should still implement the agreed improvement measures with regard to central administration, staffing arrangements, upgrading of supervisory staff and so on. In particular, the agreed formula for calculation of central administrative cost should be implemented first. Moreover, the Administration should apply the same selection criteria to NGOs which stayed on the existing system when they bid for new projects.

7.A representative of the Hong Kong Social Workers Association expressed concern about the impact of the proposed subvention system on the quality of services and professional development of staff in the sector. He pointed out that qualifications and experiences possessed by staff affected directly their services. However, under the new subvention system, NGOs would receive subvention calculated at Mid-Point PE based on the recognized staffing structure, and were free to determine the qualification requirements of their staff. In the circumstances, it was worried that NGOs would avoid employing staff with long service and/or higher qualifications in a bid to cut cost. He considered that this would have serious impact on the quality of services.

8.The representative pointed out that the provision of adequate subvention to NGOs was important so that NGOs could focus on improving the quality of service only. However, under the new subvention system, NGOs would be prone to financial difficulties and the staff pre-occupied with the task of finding means to make ends meet. These would result in deterioration in service quality.

9.The representative noted the Administration's claim that the subventions for the welfare sector had not exceeded the Mid-Point PE over the past 30 years. However, he pointed out that the situation today was different from the past. He said that the pace of development of the social welfare sector had been fast in the past 30 years with many services developed to a relatively consolidated stage now. As a result, staff cost was increasing towards or above the mid point PE due to staff's accumulation of experience. Therefore, he doubted whether funding calculated by the Fixed Funding Formula would be adequate to meet the staff cost.

10.A representative of the Alliance on Concern for Social Welfare Service Development said that the Alliance was also opposed to the new subvention system and pointed out the following -

  1. The new measure of allowing NGOs to flexibly decide on their own staffing structure might lead to reduction in staff and large increases in workload thereby affecting the quality of service.

  2. Some NGOs in support of the new system had not thoroughly consulted their front-line staff on their opinions. The Administration should make it a mandatory requirement for NGOs to conduct consultations with their staff regarding the new system.

  3. Service recipients should also be consulted on their views on the new system.

  4. The proposed system had been implemented in Australia and proved to be a failure. The Administration should take that into account and learn from the country's experience.

  5. Some 5,000 signatures had been collected within the sector in support of shelving the proposed system.

11.At the Chairman's invitation to respond, the Director of Social Welfare (DSW) said that the Administration was still in the course of consultation with the subvented sector on the proposed system. The Administration would further consider the views expressed by the deputations and the feedback received from NGOs. He stressed that no decision had been taken yet on the way forward and denied that the Administration was going to implement the new system on 1 April 1998. Adm

12.DSW said that a demerit of the existing system was that it had operated on a reimbursement basis which provided no incentive for NGOs to make more efficient use of resources. Under the system, NGOs could not retain any unspent funds and the Government would finance any deficit they had. To a large degree, the financial responsibility of NGOs rested with the Government which had to exercise stringent input control on NGOs. By introducing the new subvention system, the Administration aimed to enhance transparency, fairness and accountability of the subvention system. For example, the new Service Performance Monitoring System would put greater emphasis on output performance.

13.DSW considered that the Fixed Funding Formula was the bone of contention. He agreed to examine the two-pronged approach suggested by HKCSS earlier, which was to review critically the proposed funding formula and, at the same time, seek improvements as far as possible to the existing funding system.

14.Regarding the new system, DSW highlighted that NGOs would join the Fixed Funding Scheme on a completely voluntary basis. Feasibility of the new funding scheme was supported by the recent survey which had found that 70 % of NGOs had a staff cost below Mid-Point PE and that staff cost of NGOs had not exceeded Mid-Point PE over the past 30 years. Contrary to the deputations' views expounded above, DSW considered that social welfare developed at a fast pace only in the recent ten years. DSW also invited members’ attention to the point that agencies operating at a staff cost above Mid-Point PE would be funded at Mid-Point PE only in the sixth year, or whenever their staff cost dropped to Mid-Point PE during the first to the fifth years after joining the new system.

15.In response to deputation's criticism of some NGOs for not conducting internal consultation on the new system, DSW said that the Administration always took the view that NGOs management staff should consult their field staff as the latter's support was vital to the implementation of the new system. He said that the Administration had stressed this point to NGOs when it first put forward the proposals to them.

16.In reply to the Chairman's enquiries, DSW said that the Working Group on Funding had included representatives from the management staff of NGOs because they were familiar with the operation and problems of the existing system. A consultation exercise was also being conducted by the Social Welfare Department (SWD) to collect views of the subvented sector. DSW considered that there was general support for the setting up of a service performance monitoring system based on a set of service quality standards and Funding and Service Agreements. However, the commencement date for implementation of the monitoring system had yet to be set. As to the Fixed Funding Formula, DSW said that in view of the objections raised, the proposal would be further reviewed to address the concerns of the sector. Admin

17.Mr HUI Yin-fat pointed out that the representatives of NGOs in the Working Group on Funding actually could not participate in working out details of the funding proposal. They were only able to comment on the proposal only after it had been drawn up in every detail by the Administration. He considered that there was little representation from the subvented sector in the process of working out the funding recommendations. In response, DSW explained that there were technical problems in inviting representatives from the existing 173 NGOs to work out together details of the proposal. He said that the Working Group had met representatives from various NGOs in the course of its work. Furthermore, the Administration was now conducting a two-month consultation with the sector which would provide a good chance for NGOs to express their views and to seek information on the new subvention system. In response to the Chairman's comments, DSW agreed to consider extending the membership of the three working groups on the new subvention system to include more NGO representatives.

18.Mr HO Sai-chu commented that the Administration should strengthen its co-operation with HKCSS which could assist in collecting views from the subvented sector. Such views should be fully considered by the Administration before it finalised its recommendations. DSW pointed out that the Working Group on Funding had included senior management staff of HKCSS as representatives. As to why the Administration had drawn up the funding proposal unilaterally without involvement of NGOs at the first stage, DSW explained that it was because HKCSS had requested that the Administration should provide HKCSS with a concrete proposal if it wanted HKCSS to conduct consultation with the sector on the new arrangements . Adm

19.Mr HUI Yin-fat clarified that the staff of HKCSS appointed to the Working Group on Funding served in their personal capacities only and not as representatives of HKCSS. He reiterated that the Administration should have thoroughly consulted the Working Group before drawing up details of the funding proposal.

20.The Deputy Director of Social Welfare (Administration) (DD(A) ), who was the Chairman of the Working Group on Funding, explained that the Fixed Funding Scheme had been developed having regard to the sector's preference for the Standard Cost subvention mode introduced in 1981. She said that the Working Group had put forward the new funding proposal having considered the fact that the staff costs of NGOs at present were still far below Mid-Point PE and with the support of some members of the Working Group.

21.Members noted that according to a recent survey conducted by SWD (which had a response rate of 70%), less than 1-2% of respondents accepted completely the Administration's proposals. 16.5% of respondents said that they would accept the proposals subject to improvements. As to the rest, they were either in objection to the proposals or unclear about the details.

22.A representative of HKCSS questioned whether the two-pronged approach discussed would incur additional cost, and whether NGOs could cope with the additional administrative work created by the implementation of the new system. In response, DSW clarified that the Administration had yet to decide whether it would adopt the two-pronged approach. On the new subvention system, the Administration took the view that it would neither incur additional cost nor generate savings for Government. However, irrespective of the mode of subvention system in place, the Administration would continue to bid for additional resources to improve welfare services and cater for additional demands. DSW said that the Administration was considering to allocate additional resources to some NGOs which might experience difficulties in coping with the additional administrative workload arising from the new system. However, he believed that the new subvention system, if introduced, would create less administrative work for NGOs in the long term as it advocated streamlined procedures and greater flexibility to NGOs in the use of resources.

23.In response to Mr CHAN Choi-hi's enquiries, DSW explained why the Administration would not absorb any deficits of NGOs under the new system. He emphasized that it was voluntary for NGOs to join the Fixed Funding Scheme. Therefore, NGOs should have adequate time to examine their financial positions and their staff turnover, and to consult the views of their staff before they decided whether or not to join the new system. He reiterated that the objective of the new funding scheme was to encourage NGOs to introduce management measures to make optimal use of resources. Therefore, if NGOs were provided with the guarantee that their deficits would be absorbed by the Government, the whole purpose of a fixed funding grant would be defeated. He added that SWD would closely monitor the financial position and operation of NGOs which opted to join the new subvention system. The Administration would also ensure that no welfare services would be affected because of financial problems of individual NGOs.

24.Responding to Miss CHAN Yuen-han's comments, DSW agreed that it would be a problem to an NGO if it had to operate under two different subvention systems and there might be inconsistencies in its policies. He said that the Administration would review the arrangements.

II. Implementation of Information System Strategy Phase I : Computerized Social Security System
(PLC Paper No. CB(2) 647 (04) )

25.The Assistant Director of Social Welfare (Social Security) (AD(SS)) highlighted the salient points of the Administration's funding proposal for implementing Phase I of the Information Systems Strategy for SWD.

26.Referring to the proposed non-recurrent staff cost for setting up a team in the Information and Technology Services Department (ITSD) to supervise the Computerized Social Security System (CSSS), Mr HUI Yin-fat asked for the justifications for the creation of 38 additional posts to support CSSS. He also questioned why the Administration would need to deploy Social Security Officers to support the CSSS.

27.In response, AD(SS) said that there was currently a team in SWD responsible for overseeing a similar feasibility study which was also headed by a Chief Social Security Officer. She explained that Social Security Officers had adapted very well to the computerization of social security payment system. They were thus a better option than Information and Technology grade (IT) staff as they not only understood the information and technology aspects but also the operation of the Social Security Field Unit (SSFU).

28.DD(A) said that there would be reduction of staff by implementing CSSS -

  1. Paperwork would be reduced and the workload of Assistant Clerical Officers / Clerical Assistants would be reduced by 25% and 55% respectively;

  2. No Typists would be needed in SSFUs after implementation of CSSS; and

  3. Scrutiny of some applications for social security payments could be performed by more junior staff.

29.The Chief Social Security Officer (3) (CSSO(3) ) said that the division of work amongst the proposed 38 additional staff would be as follows -

  1. 21 additional staff were required for the setting up of the Central Casefile Depository (CCD) and transfer of all the existing paper casefiles to CCD;

  2. 15 additional staff would be responsible for supporting staff in the use of CSSS; and

  3. two additional staff were to provide the relevant training.

30.The Assistant Director of IT Services (AD(IT) ) added that the proposed additional SWD posts were also required to provide input for the maintenance and support of CSSS. He stressed that the work of the 38 additional SWD staff would not overlap with the work of the 21 proposed IT staff.

31.Miss CHAN Yuen-han asked for further information on the improvements to be made by CSSS to customer service and details of the re-deployment of those general grade staff who would become redundant after implementation of CSSS. In reply, DD(A) said that the new system would greatly reduce the waiting times of clients for attendance by counter staff and for processing of applications. In addition, waiting times for payment to Traffic Victims Assistance and Criminal and Law Enforcement Injuries Compensation cases would also be reduced. As CSSS also supported the use of portable computers and printers, this would eliminate the need for field staff to return to the main offices for checking computer records and making reference to old casefiles.

32.DD(A) said that although some clerical staff and Typists would not be required under CSSS, they would be absorbed within SWD or other government departments.

33.In response to Mr CHAN Choi-hi's question as to why it would take three years to set up CSSS, AD(IT) explained that the expected completion date could not be advanced due to the large volume of work involved. Mr CHAN remarked that the Administration could consider applying for ISO 9000 if schedule allowed.

34.In response to Mr MOK Yin-fan's enquiry, AD(IT) agreed that when SWD undertook feasibility studies on the Client Information System and Technical Infrastructure systems, the Administration would consider including the information kiosk services in the systems.

35.At the Chairman's enquiries, AD(IT) said that there would be another feasibility study on the Information System Strategy Phase II but a schedule had not yet been drawn up. Regarding the staffing implications of CSSS, DD(A) said that the additional staff required would be offset by the staff savings achieved by implementing the system. Adm

36.The meeting ended at 10:40 am

Provisional Legislative Council Secretariat
13 March 1998