Tung Wah Group of Hospitals

In response to a recent newspaper commentary concerning the approval of grant by the Social Welfare Department to “cash-rich” organizations, Tung Wah Group of Hospitals (TWGHs) proclaims that the analysis of the Group’s financial data in the commentary is faulty. It is incorrect to state that the Group has held a large amount of cash exceeding the 25% limit of operating expenses as prescribed by the Social Welfare Department, and that the comment about TWGHs not using cash in community services also deviates from the facts.

Cash held by TWGHs has been ear-marked for services of specified purposes

According to the Statement of Financial Position of TWGHs as of 31 March 2011, cash and cash equivalents amount to about $1.5 billion. Nevertheless, this “cash and cash equivalents” item, far from being idle money, is composed of funding ear-marked for services of specified purposes, such as

i) Government subventions, the usage of which is governed by the regulatory terms of the subvented service projects;

ii) Cash balance of independent bank accounts, which is maintained by TWGHs schools with usage restricted by the government to meet special or operating expenses of the schools concerned; and

iii) Funds in the custody of the Group as requested by certain donors, the usage of which is restricted by donors’ wish to generate bank interests for the purpose of setting up scholarships or achieving specific purposes of the funds. The Group is obligated to provide custody of these funds in accordance with the preferences of donors.

Surplus of TWGHs represents 4.85% of the Group’s yearly expenses

The surplus for the year 2010/2011 is $131 million and will be used to enhance the services provided by the Group, as well as to subsidize services and projects which are not under government subventions. In addition, the surplus will be used to finance various large-scale redevelopment projects of the Group. As the running expenses amount to $2.7 billion annually (excluding the 5 hospitals’ operating expenses), the surplus total represents a modest 4.85% of the Group’s annual expenditures.

Surplus from Lump Sum Grant represents 15% of total expenditures of community services

According to the audited financial statement for the year ending 31 March 2010, the Group’s Lump Sum Grant surplus that amounts to $110 million has represented 15% of the Group’s total expenses on community services, a ratio far below the 25% statutory ceiling of the Social Welfare Department. In effect, the inappropriate comparison between “the total value of cash, stocks, and annual expense ratio” and “the maximum Lump Sum Grant surplus” in the article is misleading.

TWGHs has been subsidized by the Social Welfare Department in the form of Lump Sum Grant for 11 years since 2000 to provide community welfare services. In 2000, the Social Welfare Department approved a Lump Sum Grant based on the mid-point pay scale of Tung Wah’s staff. Other than shouldering the “above mid-point” payroll of the Group’s snapshot staff, the Group has also used the Lump Sum Grant surplus to cover additional payroll resulting from improved employment terms of professional staff and addition of staff.

Since the year 2006 / 2007, the operation of community service had been in deficit for 4 years. With the Group expecting continued deficit in the coming years to be financed by the Lump Sum Grant surplus, and its Lump Sum Grant surplus representing a modest 15% of its total expenditures on community welfare services, it is fallacious to say that TWGHs is a cash-rich organization.

Reasons for getting increased subventions from the Social Welfare Department

The subventions allocated to the Group by the Social Welfare Department for the year 2011/2012 is $710 million, representing a 4% increase ($30.935 million). The increased amount of subventions is mainly made up of:

i) Increased resources allocated by the Social Welfare Department to enhance existing services provided by TWGHs;

ii) Additional grants for newly launched services approved by the Social Welfare Department;

iii) Full-year impact of those new services launched last year for running the whole year in 2011/2012; and

iv) The payroll increments adjusted according to prevailing pay scale system.

Project tenders offered by the Social Welfare Department in recent years are not assessed solely by tender price, but on the contrary, assessed on the quality of service mode and concept to be operated under a regulated amount of government subventions.

Hence, while it is true that an NGO with the lowest bid may not be selected, it is equally true to say that those large-scale NGOs do not have privileges over the small ones when submitting a bid for service project of the government.

For press enquiries, please contact Ms. Ivy LAU, Principal Corporate Communications Manager, at 2859 7853.