Government's commitment to welfare services has increased
I refer to your editorial ('Time for a new social welfare blueprint', November 10) and would like to clear the air on the Lump Sum Grant Subvention System.
The system, which replaces the former conventional and rigid welfare subvention system, provides non-governmental organisations with greater autonomy and flexibility in delivering quality welfare services to better meet the ever-changing needs of our society. NGOs on the lump sum grant enjoy a greater say in their management and control on staffing structures, levels of pay and deployment of government subvention. Greater latitude, however, does not mean minimal oversight. The Social Welfare Department monitors the service performance of these NGOs in terms of quality, quantity and essential service requirements through funding and service agreements.
NGOs are required to submit annual financial reports to the department, audited reports prepared by external auditors and audited annual financial statements. The department conducts on-site inspections to ensure the proper use of subvention and effective service delivery. Enhanced corporate governance is also a key feature of the lump sum grant system. NGOs' boards of directors or management committees are tasked to formulate policies on human resources management and held accountable for the cost-effectiveness of their services and using public money on subvented welfare services within the ambit of funding and service agreements.
The government's commitment to welfare services has increased with the advent of lump sum grants. Total subvention on welfare services has risen significantly from HK$6.453 billion in 2000-01 when the grants were introduced to HK$9.382 billion in 2009-10, up by 45.4 per cent. There is no question of the government abrogating its responsibility to provide for the well-being of our needy and disadvantaged.
On the question of reserves, it is important to put the matter in its proper perspective. Under the LSG system, the level of cumulative reserves that an NGO is allowed to keep at the end of a financial year is capped at 25 per cent of its operating expenditure (excluding Provident Fund expenditure). Any excess is subject to clawback in the following financial year.
The reserve of HK$2.05 billion mentioned in your editorial was a cumulative total resulting from a one-off facilitating measure between 2004-05 and 2006-07 to assist NGOs to honour their staff contractual commitment in their transition to the LSG regime and to enable NGOs to achieve financial viability more effectively in the long run. In consultation with the welfare sector, the government will develop a best practice manual to provide guidance to NGOs on various management issues, including the level of reserves and their gainful deployment.
The lump sum grant system is working properly after years of improvements. A critical review of the system by an independent committee last year reaffirmed the merits of the system and concluded that it should be retained. The committee made 36 recommendations to streamline its operation and most of these have already been implemented.
Looking ahead, we will join hands with NGOs and all stakeholders to perfect the system and ensure that our welfare services move with the times and serve the needy better.
Matthew Cheung Kin-chung, Secretary for Labour and Welfare