To facilitate subvented Non-governmental Organisations (NGOs)’ compliance of financial management requirements set out in the Lump Sum Grant (LSG) Manual, the Social Welfare Department (SWD) has prepared a set of “Points to Note on Financial Management for Subvented Non-governmental Organisations”, which summarises the common observations during Accounting Inspection conducted by SWD, for reference by subvented NGOs.

This set of “Points to Note on Financial Management for Subvented Non-governmental Organisations” is intended to provide reference for NGOs.  They should be read in conjunction with the LSG Manual and should not be regarded as a substitute for the relevant contents of the LSG Manual. 

1. 

Provident Fund (PF) – Proper reporting of actual rate / amount of employer’s PF contributions in Snapshot Staff position to the Social Welfare Department (SWD) 

• Non-governmental organisation (NGO) should report accurately the actual rate/ amount of employer’s PF contributions in the September Snapshot Staff position submitted to SWD. SWD would calculate the PF subvention for Snapshot Staff for next year according to the updated staff position as reported by NGOs in September each year with contribution rates capped at previous recognised level (i.e. 5% for Snapshot staff with contributory service for the first 10 years, 10% for the 11th to 15th years and 15% for the 16th year or over), unless a lower rate is advised by NGOs for PF contribution purpose.

• If the staff participated in the Occupational Retirement Schemes Ordinance (ORSO) Scheme, the employer’s PF contributions should be calculated based on the basic salary.  If staff participated in the Mandatory Provident Fund (MPF) Scheme, the employer’s PF contributions should be calculated based on the relevant income.

2.

• PF for Snapshot Staff and 6.8% posts should be separately stated in respect of the PF subvention received and PF expenditure in the non-governmental organisations’ accounting records.

• Where a Snapshot Staff member is replaced by a non-Snapshot Staff member, the PF contribution for the non-Snapshot Staff should be charged to the PF subvention for “6.8% and Other posts” and not the PF subvention for “Snapshot Staff”.

• Provisional PF subvention for both Snapshot and non-Snapshot Staff of next year are calculated and paid according to the position reported in the September return.  When the actual PF subvention is determined, the actual surplus / shortfall for Snapshot Staff PF subvention as well as the additional PF subvention for 6.8% posts arising from departure of Snapshot Staff will be taken into account. 

• Income and expenses from operating other miscellaneous services incidental to the operation of the subvented service should be separately accounted for and reported in the annual audited financial statements and Annual Financial Report.

• When operating income generating activities, non-governmental organisations should ensure that the activities are in line with the aims and objectives of their organisations, the relevant legal requirements are strictly abided by (such as the terms of the land grant and tenancy agreements, the licensing requirement and copyright issue), subvented activities are not affected and in general there is no detrimental effect on welfare services.

• An AFR in respect of all its Funding and Service Agreement (FSA) activities (including support services to FSA activities) funded under Lump Sum Grant Subvention System should be prepared by non-governmental organisation.  Grants from SWD not under the Lump Sum Grant Subvention System including Block Grant under Lotteries Fund, etc. should not be included in the AFR.  Likewise, the related expenditure should be excluded from the AFR.  

• AFRs should be prepared on cash accounting basis for stewardship purposes and in line with the Government accounts. That is, income is recognised upon receipt of cash and expenditure is recognised when expenses are paid. Non-cash items such as depreciation, provisions and accruals should not be included in the AFR.

• Internal control is fundamental to sound and prudent financial management.  Non-governmental organisations (NGOs) should always ensure that adequate internal controls are in place having regard to the nature and size of and the services provided by the organisation.

• NGO may make reference to the set of internal controls provided in Annex 8 of the LSG Manual, which are examples of good practice.

• The Social Welfare Department may review if the procedures are appropriate during accounting inspection with reference to Annex 8 of the LSG Manual and give advice thereon.