Paper for Briefing of Finance Committee
One-Line Vote for Selected Departments in the 1999-2000 EstimatesIntroduction
This paper seeks advice from Members of the Finance Committee of our proposed arrangement to introduce a one-line vote arrangement for a number of departments in the 1999-2000 Estimates.
Expenditure Control under the Public Finance Ordinance
2. Government funding of services and activities is voted by the Legislative Council (LegCo) annually in accordance with the provisions of the Public Finance Ordinance (PFO). For this purpose, we prepare the annual Estimates of Expenditure in the manner as prescribed in section 5(3) of the PFO, that is, the Estimates of Expenditure shall -
- classify expenditure under heads and subheads with the ambit of each head described;
- in respect of each head show the estimated total expenditure, the provision sought in respect of each subhead, the establishment of posts (if any), and the limit (if any) to the commitments which may be entered into in respect of expenditure which is not annually recurrent; and
- specify the controlling officer designated in respect of each head and subhead.
3.In the 1998-99 Estimates, there are a total of 90 heads of expenditure. A head usually corresponds to a policy bureau, a department or a non-Government agency. In compliance with the above-mentioned PFO requirements, the total expenditure under each head of expenditure is broken down into subheads and capital account commitments. For financial control and analysis purposes, expenditure under a head of expenditure is classified as follows -
||Subheads (not exhaustive)
007 Job-related Allowances
||106 Temporary staff
111 Hire of services and professional fees
121 Contract maintenance
149 General departmental expenses
||Various subheads for significant expenditure peculiar to a particular department's operation, e.g. Police has an OC subhead for pay and allowances for the auxiliary services, Department of Health has an OC subhead for contracting out of dental prosthesis
||Plant, Equipment and Works
||Subhead 600 Works
Subhead 603 Plant, vehicles and equipment
Subhead 661 Minor plant, vehicles and equipment (block vote)
||Subhead 700 General other non-recurrent
4. Section 6(3) of the PFO specifies that expenditure for the financial year arranged in accordance with the heads and subheads shall be limited by the provision in each subhead shown in the Estimates of Expenditure as approved. Under Section 8 of PFO, any subsequent changes to the approved Estimates of Expenditure can only be made with the approval of Finance Committee upon a proposal of the Financial Secretary. Such changes include, but are not confined to, the creation of new heads or subheads, supplementary provision in approved or new subheads, variations in the establishment of posts and increases in the limit of commitments of expenditure which is not annually recurrent. The Finance Committee may delegate authority to the Financial Secretary (also means the Secretary for the Treasury by virtue of Cap. 1) subject to specified conditions.
5. The above taken together means that expenditure provided to meet the needs of a Government department is controlled by expenditure subheads (or line by line as opposed to a global budget manner) and any virement of funds between subheads in the course of the financial year, even when such changes do not incur additional expenditure, will require approval of the Finance Committee or in some cases S for Tsy under delegated authority1. This rigidity has given rise to situations where departments cannot efficiently deploy unspent funds in one subhead to another subhead to meet their operational needs. It also tends to promote a culture of managing resources in a compartmentalised manner which is not conducive to efficient and effective deployment of resources in modern day financial and human resource management.
What is a One-Line Vote?
6. As opposed to the present line by line expenditure control, a one-line vote seeks to place all recurrent expenditure provided for the operation of a department under one single subhead (to be called Operational Expenses) which in turn will be subject to tight budgetary control, that is, operating on a cash-limited budget2. There will no longer be external subhead controls or pre-determined provision under individual expenditure subheads. Within the global budget, the Controlling Officer is given autonomy and flexibility in deploying the funds between the various categories, components and items of expenditure.
7. The premise for a one-line vote is that departments and agencies, being closest to the people they are serving and in charge of the financial and human resources they are managing, are in the best position to decide how resources could be used optimally and should therefore be entrusted with the authority to do so. We believe that devolution of authority will also bring about the following benefits -
- speed up the decision-making process in resource management. This will enable departments to respond to changes more promptly;
- develop a sense of ownership among managers in departments which in turn would encourage more innovative thinking in better utilisation of resources;
- provide departments the flexibility to decide on the most optimal mix of manpower and other input resources to do the job.
We are confident that a one-line vote will be an effective means to help departments achieve enhanced productivity.
8. Given an expenditure subhead on Operational Expenses, a one-line vote would comply with the provisions of the PFO. At this stage, we do not intend to lift completely the control on headcount. We also do not propose to make changes to the Capital Account as expenditure in this component is non-recurrent and is generally earmarked for specified projects.
9. We wish to assure Members that proper internal controls over the use of public funds and accountability will not be compromised by the adoption of one-line votes. The safeguards include -
Selected Departments for One-Line Vote
- establishment controls in the form of the Notional Annual Mid-point Salaries (NAMS) system will stay. Changes to the NAMS ceiling and directorate posts will continue to be subject to the approval of Finance Committee through its Establishment Subcommittee;
- Controlling Officers will continue to explain to Members in their Controlling Officers' reports in the Estimates how the money sought under their respective heads of expenditure will be used, relating the expenditure on activities within individual policy areas to their objectives and to the results expected. Where appropriate, the output indicators will be strengthened;
- for disclosure but not control purposes, we will continue to analyse expenditure by key components in the Estimates so that the trend in spending in different expenditure components over time can be monitored;
- although voting of funds takes the form of a global budget, actual expenditure will continue to be recorded at the same level of details (e.g. salaries for civil servants will continue to be charged to specific items) so that such information may be produced as and when required;
- accounts of the one-line vote departments will continue to be maintained in the Treasury's computerised Ledger Accounting Financial Information System (LAFIS).
10. Amongst the 90 Heads of Expenditure, Head 112 Legislative Council Commission is currently operating on a one-line vote. For the 1999-2000 Estimates, we intend to allow one-line votes for five departments, namely the Hong Kong Police Force, the Treasury, the Intellectual Property Department, the Civil Service Training & Development Institute and the Office of the Ombudsman. These five departments represent a good sample of departments of various sizes.
11. The layout of the Estimates in respect of the one-line vote departments, with particular reference to the Details of Expenditure by Subhead (DES) pages will be slightly different. Using the Hong Kong Police Force as an illustration, Enclosure 1 shows the current layout and content of the DES pages. A mock-up of how this section will look in the 1999-2000 Draft Estimates is at Enclosure 2. Given the unique nature of spending on rewards and special services as well as expenses of witnesses, prisoners and deportees, the Commissioner of Police proposes that expenditure on these two areas should continue to be accounted for under separate subheads. (For comparison, provision for remuneration and reimbursements for Members of the Legislative Council is also accounted for under a separate subhead under Head 112 Legislative Council Commission.) The bulk of the Force's operating expenditure including staff salaries and allowances will be captured under a single subhead Operational expenses within which the Commissioner may deploy the funds approved with greater flexibility than the current system permits.
1.Currently, FC has delegated to S for Tsy authority to approve supplementary provision to a Recurrent Account subhead of up to $10 million and authority to enter into commitments in respect of expenditure which is not annually recurrent of up to $10 million.
2.In the course of the year, we will only provide supplementary provision to the salaries and allowances portion of the Operational Expenses in line with the civil service pay adjustment.