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Speech by Dr. Hon Eric Li Ka-cheung, GBS, JP
Chairman, Public Accounts Committee
In tabling the Public Accounts Committee Report No. 40
In the Legislative Council on 9 July 2003

Madam President

On behalf of the Public Accounts Committee (PAC), I have the honour to table our Report No. 40 today.  This Report corresponds with the Director of Audit’s Report No. 40 on the results of value for money audits, which was submitted to you on 7 April 2003 and tabled in the Legislative Council on 30 April 2003.

At the time when PAC Report No. 39 was finalised, the Committee’s deliberations on the subject “Primary education - The administration of primary schools” 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. 40.

As in previous years, the Committee has selected for detailed examination only those chapters in the Director of Audit’s Report No. 40 which, in our view, contained more serious allegations of irregularities or shortcomings.  The Report tabled today covers our deliberations on one of the four chapters selected.  To allow ourselves more time to examine the issues in the Director of Audit’s Report which relate to the University Grants Committee funded institutions, the Committee has decided to defer a full report on these three chapters.  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.

Primary education - The administration of primary schools

In examining the subject “Primary education - The administration of primary schools”, the Committee is seriously concerned that although the Education Department (ED) had issued a total of 190 circulars and guidelines as at 31 December 2002, neither the school inspections nor the external audits and the School Management Committees (SMCs) have effectively ensured full compliance of the numerous detailed requirements stated in the circulars and guidelines.  Cases of non-compliance appear to be commonplace among the 18 primary schools selected by Audit for examination.

Regarding human resource management of primary schools, the Committee is dismayed that some schools had not set up a proper system for recruiting teaching staff.  There were also some schools that had not conducted the recruitment procedures properly.  As a result, there was no assurance that the most suitable candidates had been selected to fill the posts.

The Committee is dismayed that there is no provision in the Education Regulations explicitly stating how and when the vote of the SMCs in respect of the appointment and dismissal of a teacher is to be taken.  As a result, it became essential that such procedures should be provided in the constitutions of individual schools.  However, the Director of Education had not exercised his power under Regulation 75(1) of the Education Regulations to require a written constitution from schools for his approval.  The Committee is also dismayed that the supervisors of the ten schools (mentioned in paragraph 3.9 of the Audit Report) had signed on the prescribed appointment forms confirming that prior approval of their SMCs had been sought regarding the appointment of teaching staff, while there is no documentary proof relating to the SMC’s prior approval.  Moreover, the ED had routinely accepted appointment forms without the date of the SMC’s approval.

The Committee considers that if the Director of Education had exercised his power to require all schools to submit their constitutions for his approval, any doubt on the form or timing of the SMC’s approval could have been removed.

The Committee urges the Education and Manpower Bureau, after the Education (Amendment) Bill 2002 has passed into law, to carry out an exercise to review the various circulars and guidelines, with a view to further reducing their number within a reasonable time frame and providing schools with easy reference.

Subvention for staff emoluments of The Legislative Council Commission

As regards the subject “Subvention for staff emoluments of The Legislative Council Commission (the LCC)”, the Committee is concerned that since 1994, the funding for staff emoluments and general expenses of the LCC has been greater than its actual requirement, leading to the build-up of the LCC’s reserve.  Moreover, the LCC had offered non-professional and supporting staff contract gratuities at a level of 15% of their basic salary, instead of no more than 10% as stipulated in the Financial Services and the Treasury Bureau’s guidelines for subvented organisations.  The Committee appreciates the constitutional status of the Legislative Council and that the LCC enjoys a high degree of financial autonomy, but considers that it should follow as closely as possible the guidelines on the best management practices as provided in the Financial Bureau Circular Memorandums.  Any decision to deviate from the guidelines should be made with strong justifications.  The LCC should specifically inform the Financial Services and the Treasury Bureau of material deviations from the guidelines.  It should also consider establishing a suitable avenue to explain such deviations publicly.

The Committee notes that the existing design of the one-line vote funding arrangement has partly contributed to the surpluses of funding for the LCC’s staff emoluments and general expenses.  It has failed to recognise the significant decrease in cash allowance rates, and the reduction in the LCC’s funding requirements due to some staff of the Legislative Council Secretariat (the Secretariat) having chosen not to receive the cash allowance.  Besides, the arrangement has failed to recognise that the Secretariat’s annual submissions since 1997-98 had included 100% (instead of 15%) of the contract gratuities in respect of the new posts created during 1996-97 to 1998-99.  It had also failed to recognise that the Secretariat’s submission in May 1995 had included the contract gratuities for posts that were not filled by contract staff during the period April 1994 to April 1995.

The Committee considers that under the one-line vote funding arrangement, where the funding to the LCC has been surplus to requirements and no fundamental review has been carried out over a long period of time to ascertain the LCC’s actual requirements, this could lead to the build-up of a substantial amount of reserve.  We consider that the LCC would exercise its statutory autonomy responsibly so that the situation would not get out of control.

The Committee recommends that the Secretary for Financial Services and the Treasury should discuss with the LCC whether or not a ceiling for the LCC’s reserve should be set, having regard to the constitutional status of the Legislature; the long-standing policy to accord the LCC financial autonomy; the fact that some subvented organisations do not have a ceiling set for their reserve; as well as the LCC’s operational needs, its past spending pattern, its decision made in 2002 to fund the operation of future select committees from its reserve, and other possible uses of its reserve.

As for the LCC, the Committee recommends that it should, in the light of its substantial reserve, provide to the Financial Services and the Treasury Bureau justifications for maintaining a reserve at its current level vis-à-vis its future expenditure requirements.  If the LCC agrees to set a ceiling for its reserve, and at the end of a financial year the level of reserve exceeds the ceiling, it should return the excess amount to the Government.  Alternatively, if it is agreed not to set a ceiling for the LCC’s reserve and its reserve level is higher than future expenditure and contingency requirements, the LCC should consider making a voluntary offer to make a one-off payment of the excess amount to the Government.

Concluding remarks

Madam President, as always, in performing our duty, the Committee is mindful of our role in safeguarding the public interest by continuing to prod for the delivery of high quality public services in an efficient and cost-effective manner.

I wish to record my appreciation of the contributions made by members of the Committee.  Our gratitude also goes to the representatives of the Administration and the LCC who have attended before the Committee.  We are grateful to the Director of Audit and his colleagues as well as the staff of the Legislative Council Secretariat for their unfailing support and hard work.

Thank you.

 

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