For discussion FCR(96-97)43
on 12 July 1996

ITEM FOR FINANCE COMMITTEE

HEAD 46 - GENERAL EXPENSES OF THE CIVIL SERVICE
New Recurrent Account Subhead “Recoverable salaries and allowances (Electrical and Mechanical Services Trading Fund)”
HEAD 25 - ARCHITECTURAL SERVICES DEPARTMENT
HEAD 28 - CIVIL AVIATION DEPARTMENT
HEAD 30 - CORRECTIONAL SERVICES DEPARTMENT
HEAD 34 - INTERNAL SECURITY : MISCELLANEOUS MEASURES
HEAD 37 - DEPARTMENT OF HEALTH
HEAD 42 - ELECTRICAL AND MECHANICAL SERVICES DEPARTMENT
HEAD 45 - FIRE SERVICES DEPARTMENT
HEAD 51 - GOVERNMENT PROPERTY AGENCY
HEAD 80 - JUDICIARY
HEAD 100 - MARINE DEPARTMENT
HEAD 122 - POLICE : ROYAL HONG KONG POLICE FORCE
HEAD 177 - SUBVENTIONS : NON-DEPARTMENTAL PUBLIC BODIES
HEAD 186 - TRANSPORT DEPARTMENT
CAPITAL INVESTMENT FUND
HEAD 972 - TRADING FUNDS
New Subhead “Loan to Electrical and Mechanical Services Trading Fund”

Members are invited to approve, with effect from 1 August 1996 -

  1. the creation of a new Recurrent Account Subhead “Recoverable salaries and allowances (Electrical and Mechanical Services Trading Fund)” under Head 46 General Expenses of the Civil Service;
  2. supplementary provision of $711.8 million for various Heads of expenditure under the General Revenue Account as shown in the Enclosure; and
  3. the creation of a new Subhead “Loan to Electrical and Mechanical Services Trading Fund” under Head 972 Trading Funds of the Capital Investment Fund with a commitment of $150 million.


PROBLEM

We need to provide -

  1. a mechanism for the Electrical and Mechanical Services Trading Fund (EMSTF) to reimburse the General Revenue Account (GRA) with the full staff costs of civil servants in the Electrical and Mechanical Services Department (EMSD) engaged in EMSTF activities;
  2. additional funds for government departments and subvented organisations to meet the cost of services to be provided under the EMSTF which are presently provided without charge by EMSD; and
  3. the EMSTF with sufficient working capital to meet cash flow requirements at the early stage of the trading fund operation.

PROPOSAL

2. We propose to -

  1. create a new Recurrent Account Subhead “Recoverable salaries and allowances (Electrical and Mechanical Services Trading Fund)”, with the Director of Electrical and Mechanical Services (DEMS) as the Controlling Officer, under Head 46 General Expenses of the Civil Service;
  2. approve supplementary provision of $711.8 million for various Heads of expenditure under the GRA as shown in the Enclosure; and
  3. create a new Subhead “Loan to Electrical and Mechanical Services Trading Fund” under Head 972 Trading Funds of the Capital Investment Fund with a commitment of $150 million.

JUSTIFICATION

Creation of a new Recurrent Account Subhead under Head 46 General Expenses of the Civil Service

3. Under the trading fund arrangements, staff working in the EMSD will remain civil servants irrespective of whether they are engaged in trading fund activities. However, the EMSTF, being a separate financial and accounting entity, has to meet all its expenditure from the trading fund, including the full staff cost of civil servants being employed. To facilitate the disbursement of salaries and allowances for these civil servants from the GRA in the first instance and the subsequent reimbursement by the EMSTF, it is necessary, as in the case of other trading funds, to create a new Recurrent Account Subhead under Head 46 General Expenses of the Civil Service. As regards staff on-costs reimbursed by the EMSTF, we shall credit them to Head 9 Loans, Reimbursements, Contributions and Other Receipts of the Revenue Estimates. DEMS estimates that there will be 5 368 EMSD staff engaged exclusively in trading fund activities.

4. Staff working on regulatory services such as electricity and gas safety and on central supporting services will continue to be funded in the normal manner under Head 42 EMSD. DEMS estimates that about 343 staff belong to this category. For central supporting services to be funded under Head 42 in the first instance, DEMS will work out the full operating costs and will bill EMSTF for the portion borne by EMSTF.

Supplementary provision and additional allocation for government departments and subvented organisations which will be required to pay EMSTF for services provided

5. Under the existing Operating Services Account (OSA) arrangements, we have included provision in the Estimates for the payment of some of EMSD’s services. These include repair and maintenance of vehicles and plant and other services provided by the EMSD workshops. On the implementation of the EMSTF, the above services will become part of the trading fund services. In addition, there are other EMSTF services which at present are provided free of charge to other government departments and subvented organisations. These include operation and maintenance services at major installations such as office buildings, hospitals, airport and civic venues, maintenance of electronic, building services and air-conditioning plants, systems and equipment, project management and consultancy services in relation to electrical, mechanical, electronic, building services and air-conditioning plants, systems and equipment and services provided to the Kwai Chung Incineration Plant. We need to provide user departments and organisations with additional funds to meet these additional charges. DEMS estimates that a total of $875.0 million is required in 1996-97. Of this, $795.0 million will be required under the GRA and $80.0 million under the Capital Works Reserve Fund. In many of these cases, we are able to provide the additional funds under delegated authority. The balance of $711.8 million will require Members’ approval. A breakdown is at the Enclosure.

Loan from Capital Investment Fund

6. During the initial period of operation, the EMSTF will need sufficient working capital to cover expenses and to take over current assets from the Government. As a trading fund, the EMSTF will be financially independent of the government accounts. It will maintain its own bank accounts and will meet its expenses from revenue received. In order to provide initial working capital, we propose to provide the EMSTF with a repayable interest-bearing loan with credit limit to the extent of $150 million from the Capital Investment Fund.

FINANCIAL IMPLICATIONS

7. The proposed creation of the new Subhead “Recoverable salaries and allowances (Electrical and Mechanical Services Trading Fund)” has no financial implications for the GRA as the expenditure will be fully reimbursed by the EMSTF. We require a gross provision of $710.5 million for the salaries and allowances for the holders of existing 5 368 permanent posts being 12 directorate and 5 356 non-directorate posts to be reimbursed from the EMSTF. As with other recoverable salaries and allowances subheads under Head 46, DEMS may under his delegated powers, create or delete non-directorate posts. Before exercising his delegated powers, DEMS has to ensure that the gross estimate of $710.5 million must not be exceeded without the prior approval of the Secretary for the Treasury.

8. We estimate that the amount which departments and subvented organisations will have to pay for services provided by the EMSTF in 1996-97 and for which the existing OSA arrangements have not provided will be about $875.0 million, of which $795.0 million will come under the GRA and $80.0 million under the CWRF. Subject to Members’ approval, we shall offset the supplementary provision of $711.8 million detailed in the Enclosure by deleting an equivalent amount under Head 106 Miscellaneous Services Subhead 251 Additional commitments.

9. From 1997-98 onwards we shall provide adequate provision under the relevant heads of expenditure for government departments and subvented organisations to meet EMSTF charges and make necessary adjustments to Head 42 EMSD in the annual Estimates.

10. With the EMSTF meeting all expenditure on its activities, we estimate that we can reduce the approved provision under Head 42 EMSD and Head 25 Architectural Services Department in the 1996-97 Estimates by $628.2 million and $74.7 million respectively. For expenditure control purposes, the Secretary for the Treasury will reserve the provision and the NAMS value of $900.2 million under Head 42 in respect of posts now transferred to the EMSTF.

11. The proposed working capital loan of $150 million to the EMSTF is a one-off commitment. The loan will provide an overdraft facility to the EMSTF with a credit limit of $150 million. The EMSTF will draw down the loan as and when necessary and repay any outstanding balance in full by 31 July 2006. We will charge interest on the amount drawn at the average of the best lending rates quoted by the note-issuing banks.

BACKGROUND INFORMATION

12. On 4 March 1992 the Legislative Council (LegCo) passed a resolution under the Public Finance Ordinance to establish the Electrical and Mechanical Services Department Vehicle Maintenance Services Suspense Account with effect from 1 April 1992. On 24 February 1993 LegCo passed another resolution to extend the scope of the suspense account to cover all workshop services. Through this Operating Services Account (OSA) the EMSD has been able to account for and charge its workshop services provided to other departments and the two Municipal Councils.

13. On 26 June 1996 LegCo passed a resolution under the Trading Funds Ordinance to establish the EMSTF with effect from 1 August 1996 which will replace the OSA. The EMSTF will provide the maintenance of the electrical, mechanical, electronic and building services systems and equipment and operation of these systems and equipment at major installations, such as hospitals, airport and government offices, maintenance of vehicles; and design, construction, project management and other technical consultancy services in relation to electrical, mechanical and electronic systems and vehicle fleets.

14. We shall move a resolution to close the EMSD OSA at a later stage when we complete all residual accounting transactions relating to the OSA.

Works Branch
July 1996


Enclosure to FCR(96-97)43

Breakdown of supplementary provision for government departments and subvented organisations 1 August 1996 to 31 March 1997

Head

Departments/
Organisations

Subhead

$million

EMSTF
services provided

25

Architectural Services

1251

9.80

management and supervision of contractors on maintenance work for electrical installations in all kinds of buildings - government wide

maintenance of electronics, building services, electrical and mechanical installations/equipment in various locations

28

Civil Aviation

1492

53.67

operation and maintenance of electronics, building services, electrical and mechanical installations/equipment in Hong Kong International Airport

30

Correctional Services

149

19.52

maintenance of electronics, building services, electrical and mechanical installations/equipment in various locations

operation and maintenance of electronics, building services, electrical and mechanical installations/equipment in Pik Uk Laundry

34

Internal Security :
Miscellaneous Measures

1963

40.86

operation and maintenance of electronics, building services, electrical and mechanical installations/equipment in military camps

37

Health

149

21.66

operation and maintenance of electronics, building services, electrical and mechanical installations/equipment in clinics

42

Electrical and Mechanical Services

149
6614

40.15
12.07

operation and maintenance of electronics, building services, electrical and mechanical installations/equipment in Kwai Chung Incinerator

professional advice and supervision on electronics projects

45

Fire Services

149

22.32

maintenance of electronics, building services, electrical and mechanical installations/equipment in Fire/Ambulance Stations

51

Government Property Agency

125

116.46

operation and maintenance of electronics, building services, electrical and mechanical installations/equipment in government buildings, including closed military camps

80

Judiciary

149

14.48

operation and maintenance of electronics, building services, electrical and mechanical installations/equipment in Courts/Magistracies

100

Marine

149

27.34

operation and maintenance of electronics, building services, electrical and mechanical installations/equipment in China Ferry Terminal and Macau Ferry Terminal

maintenance of electronics, building services, electrical and mechanical installations/equipment in Public Cargo Working Areas, Dockyards, Marine Vessels and various locations

122

Police : RHKPF

149

35.36

operation and maintenance of electronics, building services, electrical and mechanical installations/equipment in Police Stations

177

Subventions:

Non-Departmental Public Bodies

5145

288.56

operation and maintenance of electronics, building services, electrical and mechanical installations/equipment in hospitals and clinics

consultancy advice on projects and procurements of biomedical engineering equipment

186

Transport

125

9.55

operation and maintenance of electronics, building services, electrical and mechanical installations/equipment in various locations



Total :

711.8



Last Updated on 2 December 1998