Parents want answers over ESF schools' HK$21m loss
How can the English Schools Foundation's two private independent schools sustain losses of HK$21.3 million without it having any impact on its 14 publicly-funded schools?
That is the question angry parents are asking, worried they have been 'indirectly but effectively subsidising' the colleges through fee increases over the past five years.
The foundation has opened its books on Renaissance College and Discovery College to explain how the HK$110 million it invested in building the former and HK$168 million paid towards construction of the latter is being repaid over a 20-year period.
ESF chief executive Heather Du Quesnay insists the schools will be able to repay the HK$278 million within the repayment period and that they were never expected to generate a profit in their first years of operation.
The HK$278 million, which was paid out from the ESF cash balance over several years before the launch of Renaissance College in 2006, is an investment repaid annually with a return based on the Hong Kong inter bank offer rate plus 1 per cent.
Vivian Cheung, the ESF's chief financial officer, said Renaissance College had repaid the full returns for its first four years of operation totalling HK$12.5 million as well as HK$20 million of the capital sum, leaving HK$90 million still to pay.
But Discovery College, which opened in 2007, had paid just HK$8.5 million of its three years of returns totalling HK$11.7 million, and none of its HK$168 million capital. Indeed, further investment increased the principal to HK$170 million.
Cheung said that in 2007-8 the college was to pay returns of HK$5.7 million but was allowed to pay just HK$530,000 because it was its first year of operation.
'The returns that remained unpaid in 2007-8 were rolled over into 2008-9,' she said. 'In 2008-9, the return due from Discovery College was HK$3.99 million and they actually paid HK$3.2 million.
'And the college has increased their annual repayment from HK$3.2 million to HK$5.3 million in the third year of operation.' But after paying the cumulative return for 2009-10, Discovery College was left HK$19 million in the red on August 31,while Renaissance College was HK$2.3 million in debt, after paying back HK$10.3 million.
Cheung said that because the private independent schools were part of a separate commercial entity, ESF Educational Services Ltd, the ESF's 14 publicly funded schools were insulated from fluctuations in their finances.
'The subvented side of the organisation has a total income of HK$1.3 billion, and its internal expenses are HK$1.2 billion,' she said.
'So, the subvented schools are not suffering on a day-to-day basis in any way as a result of the capital investment in the two private independent schools.
'And at the end of the 20-year repayment period, the ESF subvented sector will have received more cash back from the private independent schools than was originally invested in them. The returns are paid straight back into the ESF's cash account and are available for use on the ESF subvented sector at the board's discretion.'
But the Concerned ESF Parents Group said there were no fixed terms to require the schools to pay back the money within the 20 years.
The group's spokeswoman, Ada Cheng, pointed to a line in the 2008-09 auditor's report on the ESF, which states the 'amount due from/to ESF Education Services Ltd is unsecured, interest free and has no fixed terms of repayment'.
She said: 'Parents want the ESF management to give a clear account of how they are going to ensure that Discovery College repays its outstanding debts and both schools meet the timeframe of 20 years.'