The Hong Kong Institute of Education 2002-2003 Annual Report

GENERAL INCOME
General income for the year was $917 million, representing a 3.1% increase from $889 million in 2001-02. The increase was mainly attributable to the increase in tuition fee of $32 million due to the increase in the number of students enrolled but was partly offset by the reduction of $8 million in interest and miscellaneous income mainly due to the drop in bank deposit interest rates.

GENERAL EXPENDITURE
With the introduction of productivity enhancement initiatives in 2002-03, general expenditure for the year decreased by $63 million from $888 million in 2001-02 to $825 million. About $25 million of the $63 million represented a decrease in staffing expenditure mainly due to cost containment measures and the downward general salary adjustment, which followed the general reduction to the salaries in the Civil Service. A reduction in the purchases of office and teaching equipment contributed another $14 million to the overall decrease. Operating expenses such as maintenance of premises, office expenses and expenditure in general education also decreased by $18 million through the implementation of various cost control measures.

RESERVES
As at 30 June 2003, reserves totaled $328 million, an increase of $78 million due to a net transfer of the funding surplus to the General and Development Reserve Fund.

CAPITAL / DEVELOPMENT PROJECTS GRANTS
A total of $46 million was spent on capital/development projects, mainly representing the remaining payment for the construction of the Institute's Tai Po Campus and subsequent alteration and improvement works in the Campus.

One of the main contractors, Aoki Corporation (Aoki), that was responsible for the construction of the Amenities Building, the Institute's Lodge, the Student Hostels and the Staff Quarters on the Tai Po Campus failed to complete the construction work in accordance with the time stipulated in the contract. The Institute has submitted claims on Aoki for liquidated damages and for substandard and defects rectification work totaling about HK$160 million. Progress payments otherwise payable to Aoki and amounting to $64 million have been withheld by the Institute in view of the damages.

The Institute and Aoki agreed to settle the above claims through arbitration. The arbitration hearing commenced in September 2003 and completed by end of October 2003. Based on legal and professional advice, the Institute has made appropriate adjustment for the contingent liabilities.

GRANTS FOR SPECIFIC PURPOSES
The Institute spent a total of $173 million (2001-02: $120 million) under the various earmarked grants. These included the grants for the Home Financing Scheme (HFS) and for housing-related expenses other than HFS, the Blister Programmes as well as other activities such as language enhancement. Any surplus relating to these grants after the close of the financial year or the approved funding period would normally have to be returned to the UGC, unless approval from the UGC to carry-over the unspent balance is obtained.

DEFERRED INCOME
As explained earlier, unspent balances of Government grants (including capital project grants) received for specific purposes were, starting from 2002-03, recognised as deferred income to be matched by relevant expenditure to be incurred in subsequent years. The amount of the deferred income as at 30 June 2003 was $32 million, of which $29 million, $1 million and $2 million were attributed to Earmarked Grants, Capital Development Project Grants and Specific Funds respectively.

INSTITUTE FUNDS
Endowment, donations, scholarships, bursaries and other sponsorships received during the year amounted to $39 million, of which $32 million was the donation from the Hong Kong Jockey Club Charitable Trust to fund the remaining payment for the construction of the HKIEd Jockey Club Primary School that was completed in August 2002.

During the year, the Government introduced a matching grant scheme to assist the UGC-funded institutions in fund raising and to encourage the emergence of a philanthropic culture in Hong Kong. The total size of the matching grant is $1 billion, and $500 million will be set aside for the first phase of the scheme, i.e. in the year 2003-04. The grant will be disbursed on a dollar-for-dollar matching basis in respect of donations received.

Other operating income increased by $14 million to $68 million (2001-02: $54 million), and was mainly derived from the Institute's continuing professional education programmes/courses and the newly completed Jockey Club Student Quarters.