Chapter 2: Academic Development and Funding


In considering funding recommendations for the institutions, the UGC takes into account primarily institutions' teaching and research needs. The primary objective is to ensure that institutions are adequately financed to pursue activities appropriate to their roles and missions.

Funding for institutions is composed of recurrent grants and capital grants. Capital grants are sought on an annual basis while recurrent grants are sought from the Administration on a triennial basis to tie in with the academic planning cycle. The former are to fund institutions' various capital works programmes and minor Alterations, Additions and Improvements works, while the latter are primarily used to support institutions' teaching and research activities. Additional funding is also provided to institutions for the implementation of the UGC Home Financing Scheme.

The total recurrent grants given by the Administration for allocation to the institutions during the 1998-2001 triennium were close to HK$40 billion. The recurrent grants were distributed to the institutions (except for HKIEd) in the form of a block grant to provide institutions with the needed flexibility in pursuit of their mission. For HKIEd, the Committee considered that the recurrent grants should continue to be provided in the form of earmarked grants in view of the Institute's relatively early stage of development. The approved recurrent grants for the 1998-2001 triennium are detailed at Figure 2.2.

  Figure 2.2 - Approved Recurrent Grants 1998-2001      
Figure 2.2 - Approved Recurrent Grants 1998-2001

Funding Principles

The UGC's funding methodology is based primarily on a formula driven model to calculate separately the funding requirements of teaching, research and professional activities of each institution.

The teaching element of the recurrent grants is calculated by taking into account student numbers and their distribution among different disciplines, levels and teaching modes which have an impact on costing.

The research element of the recurrent grants is primarily related to the number of research-active staff. The proportion of active research workers in each department is one of the outcomes of the Research Assessment Exercise (RAE) conducted by the UGC.

There is also an element of funding on a fixed per capita basis for all academic staff to take into account the time they spend on professional activities which the RAE is unable to assess or to assess adequately.

Since the funding formula is unlikely to capture fully the various needs within a complex higher education system such as that in Hong Kong, the outcome of the formula is used as the beginning of the UGC's grant assessment process and not the end. In finalising its funding recommendation, the UGC also takes into account factors associated with individual institutions which are not normally captured by the funding formula, e.g. stage of development, teaching quality, etc.


Central Allocations

During the reporting triennium, the UGC set aside a total of about HK$2.2 billion from the recurrent grants as central allocations for distribution to the institutions under different schemes.

The purpose of this "top-sliced" reserve was, as in the previous triennia, to advance on sector-wide initiatives to which the UGC attached great importance. This was also to promote inter-institutional collaboration, thereby hopefully achieving some long-term savings. Such central reserve also allowed the UGC to respond to unforeseen new demands arising during the course of the triennium.

Like previous triennia, the bulk of the central allocations for the 1998-2001 triennium were distributed as earmarked research grants through the Research Grants Council, other earmarked grants under established schemes like Teaching Development Grants and Language Enhancement Grants, etc. Details of these grants will be discussed in the relevant chapters of this report.


Other major projects supported by the central allocation vote in 1998-2001 included an upgrading exercise of Hong Kong Academic and Research Network and re-development of Joint Institution Job Information System.

In the 1998-2001 triennium, the UGC also utilised part of the allocation to commission an Areas of Excellence Scheme. The purpose of the Scheme is to nurture the existing strengths of the institutions to new levels of excellence through encouraging internal differentiation of funding. Details of the scheme can be found in Chapter 4.
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