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

4.18 NGOs have also asked for a different price adjustment factor that can trulyreflect the price changes of their specific expenditure items. That OC is adjustedaccording to the Government-wide price adjustment factor is an arrangement agreedbetween the SWD and NGOs, as documented in section 2.13 of the LSG Manual. Ithas the advantage of being a consistent and handy reference for application across thepublic sector. It is also simple to administer. The obvious limitations, however, arethat the factor does not cater for variations in users’ spending patterns, and can onlybe obtained retrospectively and applied after a further delay. The importantquestions are : To what extent do these limitations affect the operation of welfareNGOs? Do they outweigh the convenience of the existing adjustment mechanism,such that we need to consider changes?4.19 According to the SWD, the spending patterns of welfare NGOs and theGovernment are broadly comparable. The procurement items classified under“Other Purchases of Goods and Services” are also mostly relevant to NGOs. Slightvariations are inevitable, but they do not amount to a serious mismatch. Even if fooditems do not normally constitute the Government’s departmental expenditures and arenot among those captured by “Other Purchases of Goods and Services”, the overallimpact of this difference should not be significant, as less than half of subventedNGOs provide meal services, and for these NGOs, food costs only make up about 5%of their recurrent subventions. With the flexibility in resource deployment under theLSGSS, NGOs should be able to absorb such variations. The reserve facilityavailable to them should also allow them to tide over temporary inadequacies in OCprovision. All in all, the LSGSS should have the built-in capacity to accommodatethe system’s limitations in terms of OC adjustment.4.20 The IRC accepts that, on the whole and over a longer time frame, thecurrent OC adjustment mechanism is running reasonably well. However, this doesnot mean that shortcomings must be tolerated if service quality is genuinely at stake.The IRC recommends that in exceptional cases such as rapid inflation hikes, NGOsshould be allowed to apply to the SWD for advance payment of their OC subventions,so that they can cater for immediate service requirements. This, being an adjustmentto cashflow to catch up with inflation, should be cost neutral to the Government.Recommendation 8In exceptional and justifiable cases, the SWD should allow NGOs to advance OCsubventions.- 41 -