Financial situation of the Hong Kong Examinations and Assessment Authority

LEGCO QUESTION NO.17

Date of sitting: 13 November 2002

Asked by: Hon SZETO Wah

Replied by: SEM

Question:

It is learnt that the Hong Kong Examinations and Assessment Authority ("HKEAA") had a deficit of $30 million in the last financial year; the estimated deficit for the current year would amount to $17 million; and its accumulated surplus at the end of the year would only be about $17 million. In this connection, will the Government inform this Council:

of the items of revenue and expenditure of HKEAA and their respective amounts for the past three years and for the coming year and, among them, of the new items of expenditure and their respective amounts as well as those items which were launched at the request of the Administration;
whether HKEAA has taken any measures to curb its persistent financial deficit; if so, of the details; and
as HKEAA is an administratively and financially independent statutory body, whether the Administration will give financial assistance to HKEAA in case the latter has an accumulated financial deficit; if it will, of the details; if not, the reasons for that?

Reply:

Madam President:

The income and expenditure items of the HKEAA and their respective amounts for the past three years and the coming year are listed as follows:

		1999/2000 Audited ($000)	2000/2001 Audited ($000)	2001/2002 Provisional Estimated ($000)	2002/2003 Estimated ($000)
Income
	HKAL/HKCE Exams	161,112	158,979	158,150	155,741
	Overseas and professional Exams	28,334	28,853	27,835	28,557
	Language Proficiency Assessment for Teachers(LPAT)	2,690	5,070	4,946	5,364
	Basic Competency Assessments (BCA)	-	4,549	20,430	28,758
	Sale of publications	14,631	13,849	14,735	14,960
	Bank interest	9,266	7,786	2,466	2,851
	Other	4,087	4,241	3,818	3,861

Total income		220,120	223,327	232,380	240,092


Expenditure
	Staff costs	92,118	101,587	114,940	117,310
	Other personnel expenses	83,010	80,556	87,833	86,829
	Admin/Operation	31,399	34,250	45,220	46,740

Total expenditure		206,527	216,393	247,993	250,879


Recurrent surplus (deficit)		13,593	6,934	(15,613)	(10,787)

Non-recurrent expenditure		6,346	3,558	13,500	7,013


Surplus (deficit)		7,247	3,376	(29,113)	(17,399800)

Reserve		60,936	64,312	35,199	17,399
% of total annual income		28%	29%	15%	7%

Notes:
- The financial year of the HKEAA is from 1 September to 31 August of the following year.
- The detailed supplementary schedules to the 1999/2000 and 2000/01 audited income and expenditure account were tabled at the Legislative Council in 2001 and 2002 respectively.

New expenditure items include the followings:

		1999/2000 Audited ($000)	2000/2001 Audited ($000)	2001/2002 ProvisionalEstimated ($000)	2002/2003 Estimated* ($000)

LPAT (excluding admin overhead)		1,387	3,443	3,706	4,121
BCA (excluding admin overhead)			4,368	24,014	28,758
Establishment of Research and Communication Divisions			1,850	2,934	3,592
Other additional staff			1,402	1,444	4,205
Enhancing proofreading and assessment of question papers for HKCE/HKAL Exams			42	1,052	1,052

	Total	1,387	11,105	33,150	41,728


Non-recurrent expenditure
	Renovation of building	3,376	2,063	5,490	246
	Computer systems	2,355	771	4,860	5,217
	Research projects	-	154	1,000	-
	Consultancy service	566	424	317	1,450
	Furniture and equipment	49	146	1,833	100

	Total	6,346	3,558	13,500	7,013

* After netting off savings from relevant measures to reduce costs.

In 1999 and 2000, the Government has commissioned the HKEAA to provide services for the Language Proficiency Assessment for Teachers (LPAT) and the Basic Competency Assessments (BCA) respectively, at a service charge.

The HKEAA appreciates the urgency to address the issue of financial deficit. It is now actively identifying ways to reduce expenses and to diversify sources of income.

On the former, apart from reducing pay level in line with civil service pay reduction, the HKEAA is also examining its expenditure item-by-item with a view to identifying scope for economy, including for instance, possible reduction in staff benefits and overtime pay, and reflection of deflation in various fees paid. Nevertheless, the HKEAA fully recognises the need to ensure that any economy drive should not prejudice the quality of its services to the community.

On the revenue side, noting the current economic climate of Hong Kong, the HKEAA's preference is to diversify sources of income rather than resorting to the convenient option of raising fees for the HKCEE and HKALE. In respect of income diversification, apart from the LPAT and BCA, the HKEAA has assumed new income generating services. For instance, since 1999, it has undertaken over 30 new overseas and professional examinations and will continue to be proactive in identifying and running new examinations for which there is a local demand. Furthermore, the HKEAA is now working with the Administration to seek to have the law changed to enable the HKEAA to conduct examinations outside Hong Kong. Though the primary objective of this proposed legislative amendment is to facilitate the promotion of Hong Kong as an education centre, it is anticipated that the conduct of examinations outside Hong Kong will provide a new stream of income to the Authority. The HKEAA is also exploring schools' request for feedback on students' HKCEE and HKALE at a fee.
The HKEAA has been operating on a self-financing basis. The Administration notes that the HKEAA is now taking measures to address the problem of financial deficit and monitor the progress closely. At the moment, we do not envisage any need for subsidies from the Government.

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Financial situation of the Hong Kong Examinations and Assessment Authority