Madam President,

On behalf of the Public Accounts Committee, I have the honour to table our Report No. 39 today.

The Report corresponds with the Report of the Director of Audit on the Accounts of the Government of the Hong Kong Special Administrative Region for the year ended 31 March 2002 and his Report No. 39 on the results of value for money audits, which were submitted to you on 30 October 2002 and tabled in the Legislative Council on 20 November 2002.

The Public Accounts Committee’s Report No. 39 tabled today contains three main parts:

At the time when PAC Report No. 38 was finalised, the Committee’s deliberations on the subject “Residential services for the elderly” were continuing. A full report on this chapter was therefore deferred. The Committee has now concluded its deliberations and has tabled the supplemental report on this chapter together with our Report No. 39.

As in previous years, the Committee has selected for detailed examination only those chapters in the Director of Audit’s Report No. 39 which, in our view, referred to more serious irregularities or shortcomings. The Report tabled today covers our deliberations on five of the six subjects selected. We have decided to defer a full report on the subject “Primary education – The administration of primary schools” as we shall hold a second public hearing on 24 February 2003 to examine, among other things, the recruitment of teaching staff in primary schools. The Committee will endeavour to finalise our report to the Council at the earliest opportunity.

I now turn to the substantive issues covered in this Report.

Residential Services for the Elderly

The Committee’s report on the subject “Residential services for the elderly” had been deferred as we needed time to examine the complex issues involved.

Having deliberated the provision of infirmary places, the Committee is dismayed that as at 31 March 2001, there were 5,218 elderly persons on the waiting list for infirmary places, who on average needed to wait for 31 months. At the same time, the provision of 1,134 infirmary places by the Hospital Authority for Central Infirmary Waiting List applicants was well below the demand for such places. Even if 338 additional infirmary beds will be made available for such applicants by March 2003, there will still be a significant shortfall in the supply of such beds.

The Committee expresses deep regret and sadness that more than 7,000 elderly persons passed away in the years 1997-98 to 1999-2000 while waiting for infirmary places.

Regarding subsidized nursing-home places, the Committee is dismayed that the provision of 1,400 nursing-home places by non-governmental organizations under Government subvention only represented 1.9 nursing-home places per 1,000 elderly persons aged 65 or over. On the other hand, as at 31 March 2001, there were 4,729 elderly persons on the waiting list for such places.

The Committee is also dismayed that without going through proper consultation and a proper policy revision process, the Administration regards that the planning ratio of five infirmary places per 1,000 elderly persons is no longer appropriate.

We note that the Secretary for Health, Welfare and Food has undertaken to implement, by July 2003, a work plan to address the issues relating to the provision of subsidized nursing-home and infirmary places. The work plan will include implementing a central registration system for subsidized long-term care services; rationalizing and re-engineering a wide spectrum of existing community care and support services; providing additional places, in new contract residential care homes for the elderly, for elderly persons whose health conditions necessitate their admission to nursing homes; and conducting a review covering the basis of planning, the changing needs for infirmary beds and the role of the Hospital Authority in the provision of such beds.

The Customs and Excise Department’s Efforts to Protect Government Revenue from Dutiable Commodities

When considering the subject of “The Customs and Excise Department’s efforts to protect government revenue from dutiable commodities”, the Committee is concerned that because of the small percentage of travelers intercepted for checking at the customs examination counters, abusers of cigarette duty-free concessions could easily escape customs detection. Besides, the Customs and Excise Department did not monitor the sales activities at the duty-free shops to ensure compliance with the licence conditions. We are also concerned about the practicability of requiring duty-free shops to complete each transaction in five seconds as specified in the “Guidelines and Procedures on Crowd Control System and Operating Arrangement”, and about the slow progress made by the Customs and Excise Department in implementing the measures identified in the February 2000 departmental paper for enforcing the 24-hour rule. In addition, the existing baggage examination procedures at the customs examination counters have little deterrent effect on abusers of duty-free concessions, because the procedures allow abusers to escape penalty even if they are intercepted at the counters for checking.

We acknowledge that the Customs and Excise Department has revised the licence conditions for the duty-free shops to ensure that the new procedures implemented from 1 January 2003 are effective and practicable under the five-second requirement. Also, the Department, with the assistance of the Immigration Department, will implement new measures to enforce the 24-hour rule.

Special Finance Scheme for Small and Medium Enterprises

In examining the subject “Special Finance Scheme for small and medium enterprises”, the Committee notes that from mid-1998 to the end of 1999, repeated concerns had been expressed by some bankers, the Hong Kong Monetary Authority, the Treasury, and the Financial Services and the Treasury Bureau about the possible abuse of the Scheme by the participating lending institutions (PLIs) through the offloading of bad loans onto the Scheme. They had also expressed concerns about the adequacy of the safeguards against such abuse. The Committee is dismayed that despite these concerns, no specific provisions to restrict such offloading were added to the deed signed between the Government and a PLI.

We are also dismayed that the Administration had been economical with the truth when seeking funding approval by the Legislative Council. This is evidenced by the fact that despite a LegCo Member’s direct question at the Finance Committee meeting held on 23 April 1999 about the possibility of some PLIs using the Scheme to offset other loans acquired by the applications, the then Director-General of Industry did not reveal in his response the concerns of various government parties about such possible abuse. Moreover, when seeking the FC’s funding approval for the Scheme in 1998, the Administration only informed the FC of the possibility that the capital commitment of the Government under the Scheme would not be recovered, in part or in whole. But it did not reveal the Government’s internal assumption of a 25% default rate of the guaranteed loans under the Scheme, which was the default rate assessed by the Small and Medium Enterprises Committee.

Small House Grants in the New Territories

Regarding the subject “Small house grants in the New Territories”, the Committee is seriously concerned that soon after the issuance of the Certificates of Compliance, some indigenous villagers sold their small houses built under building licences or through land exchanges, notwithstanding the fact that in their applications for small house grant to the Lands Department, they had declared that they had never made and had no intention to make any private arrangements for their rights under the small house policy to be sold to other individuals or developers. The problem is not new and the Committee had commented on it in its Report No. 10 in January 1998.

We acknowledge that the Secretary for Housing, Planning and Lands has undertaken to pursue within the tenure of his office the review of the small house policy and related issues in a comprehensive manner, and that he hopes to resolve the problems associated with the policy once and for all within this time scale.

Primary Education – Planning and Provision of Primary School Places

Turning to the subject “Primary education – Planning and provision of primary school places”, the Committee is concerned that by 2010, the overall supply of primary school places would exceed the overall demand by 27,600 school places, which is equivalent to 35 standard schools, and mismatches would occur in nine of the 18 districts. Also, the expected excess supply of primary school places is unlikely to reverse, as the number of children in the age group of six to eleven is expected to remain at a low level for the next two decades.

We are also concerned that a serious over-enrolment situation existed in some classes where the actual number of students exceeded the standard class size by seven or more; and a serious under-enrolment existed in some classes where the unfilled places were eleven or more.

We are seriously dismayed that some schools had not made use of their vacant classrooms although they had been left idle for a long time.

On the School Improvement Programme (SIP), we are concerned that this can be more cost-effectively carried out in schools with many vacant classrooms by converting vacant classrooms into various function rooms, instead of building additional floor area. Had such an approach been adopted, the cost of the SIP works carried out would have been reduced significantly.

Primary Education – Delivery of Effective Primary Education

When considering the subject “Primary education – Delivery of effective primary education”, the Committee is concerned that the Education Department had adopted the “last in, first out” arrangement to identify teachers for laying-off arising out of the reduction of classes. The arrangement is at variance with good human resource management practices. We acknowledge that the Secretary for Education and Manpower has undertaken to expeditiously review the arrangement.

We urge the Secretary for Education and Manpower to incorporate into any revised arrangement for laying off teachers the need to take into account teachers’ performance and a proper appeal mechanism. We further urge the Secretary to consult the LegCo and relevant parties in the review.

Concluding Remarks

Madam President, the Director of Audit’s Report No. 39 contains three chapters on primary education and our Report today sets out our conclusions and recommendations on two of them. I take this opportunity to urge the Secretary for Education and Manpower to proactively take action to inform all primary schools of Audit’s observations as well as the Committee’s conclusions and recommendations, so as to ensure that they are made aware of these and will rectify any similar irregularities.

Lastly, I wish to register my appreciation of the contributions made by members of the Committee. Our gratitude also goes to the representatives of the Administration and other organizations who have attended before the Committee. We are also grateful to the Director of Audit and his colleagues, the clerk to the Committee and the other staff of the Legislative Council Secretariat for their unfailing support and hard work which has made it possible for us to make this Report to the Council within the tight timeframe.

Thank you.

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