LC Paper No. AS 48/98-99

Ref : AM 15/01/01 (VIII)

Discussion Paper for the Subcommittee on Review of Allowances
for Members of the Legislative Council

Financial Arrangement for
Reimbursement of Operating and Setting Up Expenses

Purpose

This paper proposes the provision of operating funds to Members for them to handle their day to day Legislative Council related business.

Background

2. An Independent Commission on Remuneration for Members of the Executive Council and the Legislature of the Hong Kong Special Administrative Region (the Independent Commission) was appointed on 11 March 1997 by the Chief Executive to review, among other things, the remuneration package for Members of the HKSAR legislature. In June 1997, the Independent Commission endorsed the remuneration and reimbursement system which was in use by the former Legislative Council.

3. Members are issued "A Guide for Claiming Monthly Operating Expenses Reimbursement, District Office Allowance, Postage Expenses, Setting Up and Winding Up Allowances". The reimbursement guide sets out in detail the reimbursement conditions and procedures.

4. Under the reimbursement system, Members are provided with an operating expenses reimbursement and a district office allowance, totalling $112,500 a month. Except for the claiming of a non-accountable travelling and entertainment allowance of $7,030, Members have to present certified receipts to support their payment before getting a reimbursement. As reimbursement is on a monthly basis, Members usually accumulate their expense receipts and present their reimbursement claims in the following month. If all necessary documents are certified and presented, reimbursement normally takes place within 10 working days after submission.

5. In addition to the monthly reimbursement, Members can also be reimbursed with a total of $100,000 for setting up their district office(s) and $50,000 for setting up the central office provided by the Legislative Council Secretariat. To keep the administrative cost to the minimum, reimbursement claim for each office set up is on a one-off basis. Members may spend half a year to set up one office and accumulate receipts during the setting up period. Several offices may be set up at any time during a Member's term, either in parallel or at different times.

Problem

6. Under the reimbursement system, a Member has to pay his/her LegCo-related expenses first and get the receipts to prove his/her expenses before he/she could get any reimbursement. Obviously, there is a time gap between payment and reimbursement. Based on the operating cycle described in para. 4 above, the gap usually ranges from one and a half months to three months in the case of reimbursing monthly expenses and over half a year in the case of claiming setting up expenses, depending on how early a claim is submitted and whether all the reimbursement conditions are met on first submission.

7. In other words, a Member has to draw on his/her own financial resources to cover about two months' operating expenses, viz $225,000. In addition, another $100,000 or $150,000 may be locked up for some time in setting up his/her offices.

8. Some Members have indicated that they have difficulty in raising the initial operating fund. Borrowing to fund such expenses would incur interest which is not reimbursable. Even if a Member need not resort to borrowing, it is unfair to freeze some $200,000 of his/her own financial resources until he/she ceases to be a LegCo Member.

Suggested Solutions

9. An operating fund equivalent to two months' operating expenses (ie $225,000 at present reimbursement level) could be advanced to a Member on his/her application, and be repaid to the LegCo Secretariat when he/she ceases office. Reimbursement of monthly expenses should remain to be claimed in the way set out in the reimbursement guide.

10. As the reimbursement level is reviewed annually in October according to the movement of the Hang Seng Consumer Index, the ceiling of the operating fund should be revised accordingly. Members may have the operating fund held by them increased to the new ceiling by applying to the LegCo Secretariat.

11. With regard to the setting up expenses, as they are not on an on-going basis and a Member may choose not to set up his/her office or do so at anytime, an advance without any restriction would not be appropriate. It is suggested that a Member may apply for an advance of not more than $100,000 for setting up a district office and another advance of $50,000 for the central office, subject to his/her remaining allowance balance in each case. Moreover, instead of allowing six months for setting up an office when personal funds are used, a Member must complete the setting up and submit the relevant receipts within three months after he/she has received public funds in advance.

Financial Implications

12. $13,500,000 will be needed on the introduction of an operating fund for monthly expenses, if every Member applies for the full amount being proposed.

13. As Members have to repay those advanced amounts, the proposal involves no additional expenditure on the part of the Administration or The Legislative Council Commission. However, the Commission would lose an annual interest income of $1,215,000 if deposit interest is at 9% pa. Besides, there is a slim chance that the Commission would have difficulty in recovering an advance from an outgoing Member.

14. On the advance of setting up allowance, if a maximum of $9,000,000 is made for three months, at an interest of 9% pa, the Commission would lose an interest income of $202,500 in each LegCo term.

15. In terms of cash flow, the Commission should be able to manage with its current financial resources. Nonetheless, any recommendation of this Subcommittee on the Commission's financial arrangement of Members' allowances should be submitted to the Commission for its consideration.

Members' Advice

16. Members are requested to consider whether the proposals in paras 9 to 11 are appropriate.

Legislative Council Secretariat
July 1998

g/mem-all/operate.doc