Review Report on the Lump Sum Grant Subvention ... - lwb.gov.hk

enchmark level. Two-thirds of the NGOs, however, had a funding level below thebenchmark at the time of joining the LSGSS. They received an immediate increasein funding up to the benchmark level. Although the 2% adjustment processmentioned above was originally scheduled to start in 2006-07, actual implementationwas deferred twice and did not commence until 2008-09.1.8 Under the LSGSS, NGOs can retain unspent funds in a reserve to meetfuture liabilities. The reserve (including interest income but excluding PF reserve) iscapped at 25% of the annual operating expenditure of the NGO. Any amountabove the 25% cap has to be returned to the Government in the following financialyear, unless the NGO has applied to, and obtained the permission of, the Director ofSocial Welfare (DSW) to lift the cap. The reserve can be used at the discretion ofNGOs on activities related to the Funding and Service Agreements (FSAs) they signwith the SWD and relevant support services, but PF reserve can only be used for PFexpenses.1.9 The formula for calculating the LSG as well as other general rulesgoverning the LSGSS are set out in the LSG Manual. It is an agreement between theGovernment and the NGOs concerned, and is binding on both. It also containsguidelines for NGOs on good management practices and processes. As such, it isintended as a useful reference for all stakeholders under the LSGSS.1.10 An important feature of the LSGSS is the shift from input control to outputmeasurement. The Service Performance Monitoring System (SPMS), which wasalready in place before the introduction of the LSGSS and further improved down theroad, measures each NGO’s performance in terms of output requirements and servicestandards, against the FSAs and the Service Quality Standards (SQSs) that the SWDstipulates.1.11 To monitor the implementation of the LSGSS, a Lump Sum Grant SteeringCommittee (LSGSC) was established in 2001. It is chaired by the DSW andcomprises representatives of the NGOs’ management, staff unions and service users.1.12 There is much more to the LSGSS than determining the benchmark orputting in place the LSG Manual, the SPMS and the LSGSC. The flexibility in staffremuneration and the use of resources, the scope for re-engineering, the call on theNGOs’ accountability and corporate governance, etc. are also pertinent issues inimplementing the system. They will all be examined in greater detail in the- 3 -