UGC funding for the UGC-funded institutions is
composed of recurrent
grants and capital
Recurrent grants support
work and related administrative activities; and capital grants are
used to finance major works projects and minor campus improvement
(A) Recurrent Grants
The recurrent funding for the 2009/10 to 2011/12
triennium was approved by the Finance Committee of the Legislative
Council in January 2009. The total approved recurrent funding for the
UGC-funded sector in the triennium amounts to $33,992 million. This
recurrent funding covers block grants and earmarked grants.
The bulk of the recurrent grants are disbursed to
institutions normally on a triennial basis to tie in with the academic
planning cycle, and in the form of a block grant, to provide
institutions with maximum flexibility. Once allocations are approved,
institutions have a high degree of freedom in deciding on how the
resources available are put to best use. Determination of the grants
to institutions is largely based on an established formula. The amount
of block grants comprises three elements:
Teaching element is based on student numbers, their levels (i.e.
sub-degree, undergraduate, taught postgraduate and research
postgraduate), mode of study (i.e. part-time and full-time) and
disciplines of study. Some subjects are more expensive than
others because they require special equipment, laboratories,
more staff time, etc. Relative cost weightings by broad academic
programme categories (APCs) have been grouped into three price
groups with effect from the 2005/06 to 2007/08 triennium.
Details are shown at Chart 1.
Research element is primarily related to the quality and number
of active research staff and the cost of research in respective
fields. The number of active research staff in each cost centre
is identified in the context of a Research Assessment Exercise
which assesses the research performance of different cost
centres within institutions.
Professional Activity element is associated with professional
activities which the Research Assessment Exercise is unable to
assess or to assess adequately, but should be undertaken by all
members of academic staff. These include, for example, community
service undertaken and advice rendered on societal or
professional issues. It is calculated based on the number of
Relative Cost Weightings by Price Groups of Academic Programme
funding formula is the key parameter used to assess institutions'
needs. But in finalising its funding recommendations, the UGC also
takes into account the special needs of individual institutions and
other factors not captured by the formula and will introduce
extra-formulaic adjustments where required.
Earmarked grants for specific
purposes are allocations outside the block grant system. Examples are
the earmarked research grants, grants for knowledge transfer
activities, grants for areas of excellence scheme and central
allocation vote project grants.
Once determined, recurrent funding
for a triennium will not be adjusted during the period except for
adjustments to take into account changes in the indicative tuition fee
levels, new initiatives from the Government and civil service pay
adjustments. Following the civil service pay cut which took effect
from 1 January 2010, the subvention for 2009/10 was reduced by
approximately $165 million.
of UGC Recurrent Grant Cycle
The UGC-funded institutions are autonomous statutory bodies governed by
their respective Ordinances. They enjoy considerable institutional
autonomy in such areas as curriculum design, selection and recruitment
of staff and students, and internal allocation of finances. While
respecting the institutional autonomy of our funded institutions in
allocating and managing their internal finances, the UGC adopts an
accountable and transparent approach in ensuring the public money
entrusted to the institutions are applied meaningfully and of value
provide institutions with substantial financial freedom, the bulk of
the subvention to institutions are chiefly in the form of the block
grant, which provides for a "one-line" allocation of resources
for a funding period (usually a triennium) without prescription
attached as to how it should be spent. The major requirement is that
such grant must be applied within the ambit of "UGC-fundable
activities" while adhering to approved student number targets. The
precise amount of the block grant has to be approved by the Finance
Committee of the Legislative Council before the start of every
triennial funding period, after which it is squarely upon the
institutions to take charge of the responsibility to apply those funds
Institutions are accountable for any
unspent balances of the public funds
being entitled to maintain a general reserve of up to 20% of the
institution's total approved recurrent grants (excluding any
earmarked grants) in a triennium for future and new development needs,
any excess of that level has to be returned to the UGC. The use of the
general reserve is subject to the same rules and regulations governing
the use of recurrent grants. For grants earmarked for specific
purposes, any amount unspent after the close of financial year or
approved funding period must be returned.
Institutions provide regular reports
on their finances to the UGC
require institutions to submit for each financial year an annual
return on the use of all UGC funds. We also require Heads of
Institutions to provide a Certificate of Accountability to the UGC
annually to confirm that the public funds allocated via the UGC had
been spent in accordance with the rules and guidelines as agreed with
Institutional finances are subject
to professional accounting standards and external audit processes
are required to keep proper accounting records in accordance with the
Hong Kong Financial Reporting Standards and the house guidelines on
recommended accounting practice adopted by the UGC where appropriate.
Institutions also arrange their own external annual audits on their
financial statements and the annual return, in accordance with
prevalent assurance engagement standards adopted by the audit
profession. For the purpose of efficient use of public funds,
institutions are also subject to examination by the Director of Audit.
time to time, the UGC may express interest in the financial well-being
of UGC-funded institutions and enquire on specific financial issues
concerning the UGC sector.
UGC supports capital works projects of institutions for UGC-approved
activities by capital grants which are sought from the Government on
an annual basis under the Capital Programme and the Alterations,
Additions, Repairs and Improvements (AA&I) Programme. Details are
at the chapter "Activities Review - Capital Works".
capital grants are charged to the Capital Works Reserve Fund and are
part of the Capital Works Programme (CWP) of the Government.
Institutions' projects under capital subvention are required to
follow the procedures for creating and managing a capital works
project under the CWP. Institutions assume full responsibility and
accountability for their projects under capital subvention. They
should ensure that works expenditure stays strictly within the
approved project estimate in accordance with the approved project
scope i.e. the scope approved by the Legislative Council for capital
works projects exceeding $21 million, and the scope approved by the
UGC for AA&I projects up to $21 million.
should ensure that an appropriate system of cost control and
monitoring is in place for overseeing the spending of public money
having regard to economy, efficiency and effectiveness in the delivery
of their projects under capital subvention and use of public funds. In
particular, institutions should ensure proper procurement procedures
are in place for purchases under capital subvention with reference to
Government's latest rules and regulations applicable to public
funds for the projects are released to the institutions on a monthly
basis. Upon completion of a project, the institution should submit a
statement of final accounts to the UGC and return any unspent balance
or unapproved expenditure to the Government.