The Education Bureau will review its supervision of direct-subsidy schools after serious irregularities were found in the operation of a school that is surrendering its operating rights. Pegasus Social Service Christian Organisation - sponsoring body of the Pegasus Philip Wong Kin Hang Christian Primary School cum Junior Secondary School in Yau Tong - was found to have been running under a provisional licence since its establishment in 2001. Education Secretary Michael Suen Ming-yeung said yesterday a formal licence had not been issued because the school management committee had failed to register as a company and as a non-government organisation, the two basic conditions for registration. 'It, however, does not mean the organisation is operating without a licence,' he said. Mr Suen added that the organisation had failed to hand in its audited budget reports for the past two years despite repeated requests. 'Every school must be responsible for their finances and they must hand in reports audited by authorised auditors every year. The school has not done it,' he said. Asked if the bureau would reinforce its supervision of direct-subsidy schools, Mr Suen replied: 'We will definitely do it.' According to a government source, three government-subsidised and one direct-subsidy schools were operating under provisional licences. 'But we do not see there is a problem. They have been operating for a short time - less than a year to three years - and it takes quite a while to obtain the licence,' the source said without naming the schools. The source said the Pegasus incident was rare. Asked why the school failed to obtain company or NGO registration, the source said: 'I don't have a clue and I also want to know.' The source said the bureau had been escalating its action against the school since 2005, with verbal and written advice, and had appointed four officials to the board of directors - two last year and two last week. Regarding the school's failure to hand in audited financial reports, the source said: 'It can be deemed mismanagement or maladministration.'