(Summary Translation)

(Letterhead of The Alliance on Concern for Social Welfare Service Development)

To :Honourable Members of the Provisional Legislative Council

From :The Alliance on Concern for Social Welfare Service Development

Date : 6 November 1997

Contact Persons:Mr Choi Shing-kiu (7206 9723)
Mr LEUNG King-man (7116 8222 A/C 8964)
Email: kingman@hkstar.com

Objecting to the Privatization of Social Welfare Services and Protesting Against the Government's Attempt to Evade its Responsibility

The Social Welfare Department (SWD) has formally put forward its proposal on the new funding formula for subventing social welfare services. The Administration proposes to introduce a "Fixed Funding Formula Based on Mid-point Personal Emoluments" (Fixed Funding Formula) and hopes to put it into effect from April 1998. We do not agree with the Administration's claim that the new formula has five merits. Our comments are as follows:



Under the new formula, non-governmental organizations (NGOs) will know the exact subvention level for each of their service units.

FACT: This is not a merit at all. The problems can only be solved if adequate subvention is given to the NGOs. It is of little use to know the exact subvention level. Under the existing system of reimbursing NGOs for the actual costs incurred in delivering services, the agencies do not have to worry about how to make ends meet in case the actual costs exceed the subvention granted by the Administration.


SWD: It lifts the stringent monetary control under the existing system and removes the need for NGOs to seek approval from the SWD for virement of funds and variations to recognized staffing structure.

FACT:In 1997, the subvention for welfare services to NGOs by the Government amounts to $4.6 billion. The Government must carefully monitor the operation of NGOs in order to ensure the proper use of such a large sum of public funds.


SWD: NGOs will enjoy full flexibility in determining their staffing structure and remuneration package, thereby facilitating NGOs to fill vacancies.

FACT:If the agencies are allowed to determine their own staffing structure and remuneration package, the remuneration package will certainly become less favourable. This phenomenon will deal a severe blow to staff morale.

It is evidently impossible to ensure the delivery of quality service if a uniform staffing structure is not stipulated for the provision of services of the same nature. While the Administration will monitor service performance under the Funding and Service Agreements, the control on the deployment of staff shall always come first. The basic staffing structure for each type of service is determined on the basis of many years of practical experience. If the agencies are subject to tight financial constraints, it is unavoidable for agencies to lower the staffing requirements instead of improving the staffing structure. Consequently, the quality of services will be jeopardized. In case the agencies exercise the flexibility by lowering the staffing requirements to a level which is below the basic standard, the service users will be the ones to be victimized in the end.


SWD: This new formula allows the free virement of funds between Personal Emoluments (PE) and Other Charges (OC) and between subvented units, and the use of accumulated reserves on subvented units at NGOs' discretion.

FACT:The expenditure under OC is incurred directly from client-related items, such as providing catering and activity subsidies to clients. It is therefore highly undesirable for the agencies to transfer funds between PE and OC. As we have elaborated in the preceding paragraphs, if the funds for PE are already inadequate, how can there be spare funds under PE to meet costs under OC?


SWD:It allows existing units the option of staying on the existing funding system if the NGOs concerned do not wish to join the new fixed funding scheme.

FACT:While claiming that the agencies are given the freedom of choice, the SWD stipulated that new service units must be subvented under the new funding formula. It stresses only the benefits that may be brought by the new funding formula, and fails to give an objective assessment on the impacts that may be exerted upon the general public, the service users and the personnel in the social welfare sector. In fact, the SWD did not give any justifications for proposing to change thoroughly the existing reimbursement system. Neither did SWD give any statistics to prove that the new funding formula can actually improve the quality of services and better utilize social resources. If a few agencies have no alternative but to join the new system for whatever reason, the SWD can then establish a fact that the new funding system is already put into practice. If such is the case, SWD will be given the best pretext to force the other agencies into accepting the proposal.

The Alliance is very dissatisfied with the ways in which the SWD deal with this issue. We have the following standpoints:

  1. We are firmly opposed to the new funding formula proposed by the SWD and strongly request the SWD to withdraw this proposal.
  2. We request the SWD to maintain the existing subvention method of offering subsidies on a reimbursement basis, and welcome the phased implementation of the new service performance monitoring system.
  3. We request for the establishment of a committee comprising representatives of the front-line workers, the service users, the agencies and the Government, to conduct regular reviews on and to make recommendations in respect of the provision of welfare services
  4. .

Last but not least, we hold that the new funding system is a brand new system that has never be implemented or tested in Hong Kong. It is both risky and irresponsible to implement this new funding system so hastily. If the Administration really believes that the system has so many advantages, we suggest the SWD should take the lead by operating itself in the form of a trading fund. When the SWD has accumulated sufficient practical experience, it may then extend such a mode of operation to NGOs.