1 Forums on Lump Sum Grant Review Forum Two 8 April 2008

2 1Progress Update Progress re: CA and PA Posts Progress re: request for additional subventions for subvented agencies not on LSG mode Coming meeting with LSG Independent Review Committee – 14 April 2008 Coming seminar organized by LSG Independent Review Committee – 29 April &

3 Brief recap on major views of Agency Members in Forum One Spirit & principles of LSG: - flexibility - transparency - partnership between SWD & NGOs - benchmark approach in allocations Irregularities & inconsistencies in actual implementation Inadequacy of funds Use of LSG reserve Unforeseen shortage in para-medical professional labour market

4 2 Focus of today’s discussion: LSG Review 2.1Flexibility, efficiency and cost- effectiveness in the use of funds & service delivery 2.2Accountability and corporate governance of NGOs

5 LSG Independent Review The Terms of Reference of the Committee: 1.To review LSG with a view to assessing its overall effectiveness and identifying areas and scope for improvement covering but not limited to- a)overall implementation; b)flexibility, efficiency & cost-effectiveness in the use of public funds and in service delivery by subvented NGOs; c)the accountability and corporate governance of subvented NGOs; d)the impact of the LSG on the quality of welfare service; and e)the handling of complaints related to implementation. 2.To report findings and make recommendations to the Secretary for Labour and Welfare

6 Flexibility, efficiency and cost effectiveness in the use of funds & service delivery According to the LSG Manual, “NGOs will be given flexibility in the deployment of funds to meet the service needs….With the exception of a few designated items, NGOs may freely deploy the funds as long as the required objectives, outputs, results and standards are met…….”

7 Flexibility, efficiency and cost effectiveness in the use of funds & service delivery The LSG Manual states that “….NGOs are expected to ……be flexible and proactive in responding to the changing needs of the community”. However, with FSA, NGOs could not really ‘deploy’ funds in delivering services beyond the FSA scope even though they are much needed in the community ---- flexibility only in a narrow sense of deployment of funds on staffing/PE, i.e., on pay level, no. of staff & staff mix; but not on meeting the service needs which can be changing very fast.

8 Flexibility, efficiency and cost effectiveness in the use of funds & service delivery How much flexibility is given to agencies? With EPP/ES, agencies are not given the true benchmark allocations → with inadequate resources, how can an agency be flexible?

9 Flexibility, efficiency and cost effectiveness in the use of funds & service delivery FSA related Vs non-FSA related activities → must ensure no cross-subsidies nor beyond scope → no mechanism for agencies to handle/meet new service needs

10 Flexibility, efficiency and cost effectiveness in the use of funds & service delivery Agencies are committed to honouring the contractual commitment with snapshot staff must reserve adequate designated funds for honouring the commitment

11 Flexibility, efficiency and cost effectiveness in the use of funds & service delivery Without planning mechanism, in the name of service integration, agencies are providing lots of add-on services, which are eating up the resources of central administration and middle-management In view of present social & economic situation and growing complexity of problems, whether there is adequacy of funds provided to NGOs in light of the current notional staff establishment of each service?

12 Flexibility, efficiency and cost effectiveness in the use of funds & service delivery Lots of tedious workload for agencies: (i) Lots of reporting & making justifications on agencies’ expenditures (e.g., on items over 5% variance as compared with the previous year) (ii) Lots of checking/disagreements on ‘recognized’ & ‘non-recognized’ items (e.g., directors’ & officers’ liability insurance) (iii) Lots of checking in ‘preventing’ cross-subsidies for non-LSG activities

13 Flexibility, efficiency and cost effectiveness in the use of funds & service delivery Reduce in staffing, increase in workload Salaries delinked from civil service pay Reduce service quality to cut costs High fee charging Unjustified high level of LSG reserve Users & frontline workers’ criticisms against LSG flexibility:

14 Flexibility, efficiency and cost effectiveness in the use of funds & service delivery Issues of contention: Level of reserve & usage Notional staffing establishment & flexibility in deployment Salary adjustments Use of ‘time-limited’ contracts Dialogue and trust building with staff Mechanism of review of funding adequacy, FSA and staffing requirements

15 Accountability and corporate governance of NGOs According to the LSG Manual, “…NGOs receiving Government subventions are responsible for effective planning and the cost effective administration and of the services and activities governed by the FSAs….NGOs are expected to build in accountability mechanism …”

16 Accountability and corporate governance of NGOs To ensure the provision of quality services to the public & to enhance accountability → implemented SPMS, under which performance of service units is assessed based on FSAs drawn up for each of the subvented services and evaluated against a set of well-defined SQSs

17 Accountability and corporate governance of NGOs Under LSG, the key areas on Corporate Governance are : -the role of NGO Boards and Management -the involvement of staff in management matters -the involvement of service users in service planning, delivery and monitoring

18 Accountability and corporate governance of NGOs At the moment, both LSG Steering Committee and SWD would handle complaints against NGOs though there is concern of NGOs on screening of ‘pursuable’ and ‘non-pursuable’ complaints

19 Accountability and corporate governance of NGOs Improvements to SWD’s financial audit process and transparency in allocation for new and basic LSG service units Involvement of staff and users in agencies’ management and corporate governance of NGOs Communication and conflict resolution channel Issues of Contention :