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[Archive] Education Commission Report No.7 Quality School Education - FUNDING FLEXIBILITY


Chapter 4



The existing school funding system

4.1 The consultation document pointed out that the existing school funding system was not entirely conducive to school quality reform. It did not provide adequate flexibility or incentive for improvement. Schools basically receive the same level of funding regardless of their individual needs, or whether they have optimised resources or made efforts to improve.

The School Management Initiative

4.2 The SMI, introduced in 1991, provides participating schools with school planning/staff development days, approved collection of charges for specific purposes, and computer system for school administration. It also provides participating aided schools with more funding flexibility in the form of a Block Grant. This includes the Administration Grant (optional for aided primary and special schools), the School and Class Grant, the recurrent Furniture and Equipment (F&E) Grant, and the optional Substitute Teacher Grant (STG). The SMI experience suggests that the Block Grant arrangement, coupled with other flexible measures in school management, helps schools achieve school-based goals and formulate long-term plans. In the spirit of the SMI, the consultation document proposed that the school funding system should be able to :

  1. meet the basic needs of students to ensure fairness across the school sector;
  2. provide schools with greater flexibility in the effective use of resources in order to achieve individuality; and
  3. encourage schools to take initiatives and achieve better results, and to assist and take appropriate remedial action where necessary.

School-based management

4.3 The consultation document proposed that schools should be given management and funding flexibility as incentives to practise school-based management. At the same time, as they were given greater autonomy in the use of resources, they should be held more accountable for their performance. This principle was widely supported during public consultation. We recommend that all schools which have put in place school-based management mentioned in paragraph 3.5 should be allowed to enjoy the management and funding flexibility under the SMI.

Provision of more funding flexibility

4.4 As noted during consultation, the existing incentives provided under the SMI were inadequate, both in terms of amount or flexibility. We recommend a Block Grant comprising the School & Class Grant, the Administration Grant, the recurrent F&E Grant and the STG to be provided to all schools which have put in place school-based management, to give them greater flexibility in the use of resources. Enhancement to specific funding arrangements as set out in the following paragraphs, including the provision of block subject grant, retention of savings, and approved collection of fees should also be provided.

Administration Grant and School & Class Grant

4.5 At present, the Administration Grant for aided schools is used to employ administrative and janitor staff, calculated respectively on the mid-point and maximum point of their salary scales. It is optional for aided primary and special schools. The School and Class Grant is used to fund school-based items such as expenditure on staff training, minor repairs, and class-based items such as fuel, light and power.
4.6 The consultation document proposed to extend the Block Grant, which includes among other things, the Administration Grant and the School and Class Grant to all schools, in order to give them greater flexibility in the use of resources. During consultation, the proposal received overwhelming support. However, some respondents commented that as the Administration Grant covered only the mid-point of the clerical staff salary scale, it would be unfavourable to aided primary schools and special schools as they usually have only one clerical staff, who often would have reached the maximum point of the salary scale. In view of this concern, we recommend that :

  1. as a transitional measure, all aided primary and special schools should pay the actual salary of their clerical staff through the Salaries Grant;
  2. at the same time, they should pay the salary of their janitors through a revised Administration Grant, covering the maximum point of their salary scales. They should be encouraged to use the Grant more flexibly, for example, to employ contractors or part-timers to undertake some of the janitor duties; and
  3. in the long run when more clerical support is provided, aided primary and special schools should pay the salaries of both janitors and clerical staff through an Administration Grant, calculated respectively on the maximum point and mid-point of their salary scales.

Furniture and Equipment Grant

4.7 At present, aided schools can apply to ED for a non-recurrent grant relating to F&E according to their needs. Aided schools which have participated in the SMI are given a Block Grant including a recurrent F&E Grant. Experience shows that the basis of calculating the recurrent F&E Grant does not meet the needs of many schools, particularly the older schools. While schools may apply for an additional non-recurrent F&E Grant if they have a proven need, this will be paid only upon certification that the surplus (if any) in the Block Grant for the previous school year and the recurrent F&E Grant for the current school year has been exhausted for the purchase of standard items.

4.8 The consultation document proposed that the existing arrangement for schools not yet adopting SMI to apply for the non-recurrent F&E Grant on a need basis should continue. It accordingly proposed that the recurrent F&E Grant for the SMI schools be taken out from the Block Grant until a fairer basis of calculation was worked out.

4.9 During consultation, many respondents viewed the proposal to replace the provision of recurrent F&E Grant by the application for non-recurrent F&E Grant by schools on a need basis as a retrograde step, which would undermine the spirit of financial autonomy under school-based management. They suggested to retain the recurrent F&E Grant as part of the Block Grant, and to enhance the basis for calculating the recurrent F&E Grant by taking into account the age of schools and the F&E depreciation factor.

4.10 While supporting the increase of the recurrent F&E Grant, we do not agree that straightforward amortisation of the F&E cost should be used as the basis for calculating the recurrent F&E Grant, and paid to all schools regardless of their years of operation and actual needs. The proposal might induce some schools to spend needlessly in the first few years, and subsequently end up with inadequate money to replace the F&E items. Accordingly, we recommend that :

  1. all schools should be allowed to enjoy flexibility with the recurrent F&E Grant in the Block Grant, so that they can use the funds more effectively to meet their needs and priorities;
  2. the amount of the recurrent F&E Grant should be increased, taking into account the needs of schools;
  3. school principals should regularly review the need for maintenance and replacement of the F&E for their schools to ensure a pleasant teaching and learning environment;
  4. schools should continue to be allowed to apply for the non-recurrent F&E Grant to meet their specific needs;
  5. the existing criteria to be met by schools before they can apply for the non-recurrent F&E Grant should be reviewed; and
  6. the procedures for processing applications for the non-recurrent F&E Grant should be streamlined.

4.11 In parallel, we recommend ED to review the arrangements for major repairs to give schools further flexibility as more schools put in place satisfactorily the key elements of school-based management.

Substitute Teacher Grant

4.12 At present, schools can employ supply teachers to fill teaching posts vacant for three days or more. SMI schools with teaching vacancies have the option of either recruiting in the normal way or leaving vacancies unfilled up to 5% of the teaching establishment to claim the STG, provided that such vacancies are not filled for 14 continuous days or more. Schools may use the STG for staff training or other educational purposes.

4.13 The consultation document recommended the Government to consider extending the above flexibility to all schools provided that the SMC, teachers and parents were agreeable to the arrangement, that the quality of the school concerned was not affected, and that it was a temporary measure.

4.14 During consultation, some respondents suggested that schools should be allowed to leave vacant up to 10% of the teaching posts. Others suggested that the qualifying period should be reduced from 14 to three days so that more schools, in particular primary schools, could benefit. We recommend that :

  1. to provide more flexibility to schools, they should be allowed to freeze not more than 10% of the teaching establishment. The arrangement should be subject to regular review; and
  2. in order to enable schools (especially primary schools) to utilise the STG through more effective redeployment of existing teaching staff, the qualifying period should be shortened to three days.

Subject Grant

4.15 At present, ED allocates subject grants according to the needs of individual subjects. Schools are not allowed to use the money interchangeably between subjects.
4.16 The consultation document recommended that schools be given a block allocation for all subjects to allow them a degree of autonomy and flexibility in this aspect. During consultation, there were mixed views on how much flexibility schools should have in utilising the subject grants. Many respondents considered that a block allocation for all subjects should be given to schools. Others expressed concern that schools might spend excessively on certain main subjects (e.g. languages and science) at the expense of other subjects such as art & design, and music. Taking into account the public views, we recommend that :

  1. a block allocation for all subjects should be given to all schools to allow them greater flexibility;
  2. the utilisation of the block allocation should be monitored through target-setting in school development plan, self-evaluation by schools and audit inspection by ED;
  3. the SMC should devise a set of criteria for utilisation, for example, requiring the expenditure on each subject to be not less than 70% of its entitlement; and
  4. the utilisation pattern of the block allocation should be reviewed periodically.

Retention of savings

4.17 At the present rate of provision, a school not yet adopting SMI is allowed to retain about three months' provision of the Administration Grant and six months' provision of the School and Class Grant. An SMI school is allowed to retain about four months' provision of the Block Grant.

4.18 The consultation document proposed that schools should be allowed to retain savings for the purposes of improving school facilities, in-service teacher training, student activities or long-term development projects. There should be a ceiling for such savings to be kept by schools, i.e. not more than four months' provision in the Block Grant. The intended use of savings should also be made known to the public in the school development plan in order to avoid abuse. During consultation, some respondents suggested that schools should be allowed to retain savings for a longer period, say six to 12 months.

4.19 Taking into account the views of the education sector, we now recommend that all aided schools should be allowed to retain savings of not more than 12 months' provision in the Block Grant. This will give them greater flexibility. They may save up sufficient funds for school-related purposes, for example, special projects to improve the teaching and learning environment.

Approved collection of fees

4.20 Under the existing SMI arrangement, schools are given the discretion to make collection from students for specific purposes such as electricity charges for air-conditioning the school portion, employing additional full/part-time teachers to teach subjects outside the normal curriculum, or paying for instructors' fees for various cultural activities, subject to the following conditions :

  1. the collection should be spent on items beyond standard provision to provide more than basic education to students;
  2. the approved limits are $200 and $150 per year for each secondary and primary school student respectively;
  3. should the collection exceed the approved ceilings, prior approval of D of E will still be required;
  4. schools should inform parents of the proposed plans and get the endorsement of most parents for the collection (needy families should be exempted); and
  5. at the end of the school year, schools should write to parents to inform them how the money collected has been spent.

4.21 During consultation, some respondents suggested that the amount of collectable fees should be increased, while others were concerned that the increased fees might not be affordable by all families. We recommend that :

  1. all schools should be allowed to collect fees from students for specific school-related purposes, subject to the existing conditions set out in paragraph 4.20; and
  2. the approved limits be adjusted annually to take into account the inflation factor.

Government schools

4.22 The consultation document proposed that government schools should be provided with the same degree of funding and management flexibility as aided schools. This was supported by respondents during consultation as government schools should also head towards quality school management at the same pace as aided schools to improve the quality of school education.

4.23 We note that government schools are subject to service-wide financial and civil service rules and procedures. We consider that as a matter of principle, government schools should enjoy the same degree of flexibility as aided schools. Government schools should eventually be on par with aided schools. We recommend that ED should review the present arrangement and follow up the proposal with EMB, the Civil Service Bureau (CSB) and the Finance Bureau (FB).

The way forward

4.24 We recommend that consideration should be given to allowing schools which have the following characteristics greater flexibility in management and funding arrangements :

  1. schools which are already implementing the SMI arrangements effectively;
  2. schools which have put in place satisfactorily all key elements of school-based management as set out in paragraph 3.5; or
  3. schools which have demonstrated value-added improvement in performance.

4.25 In this connection, we recommend that in the long run, the option of providing an aggregate Block Grant should be pursued, so that schools can enjoy more flexibility in the use of all items of resources. In parallel, we recommend ED to review the present financial assistance to Direct Subsidy Scheme (DSS) schools, so that the scheme can be more attractive to aided schools aspiring for even greater management and funding flexibility, and to examine the feasibility of extending the scheme to aided primary schools.

Last revision date: 20 January 2010
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