Department A had a provision of $100 million under its cash-limited Departmental Expenses (DE) subheads for the year 1997-98.  It was now end January 1998 and the provision was only 75% spent, largely as a result of economy and stringent control in the early part of the year.  In the normal course of events, the Department might end up with $8 million unspent.  The Controlling Officer of Department A was worried, quite legitimately because of the so-called "underspending factor" applied by FB in determining baseline provision for next year, that the amount underspent would be deducted in next year's baseline.  He decided to run down his "unspent funds" before the close of accounts by end March.  

Now.....  

The same Department A has a provision of $100 million under its cash-limited DE subheads for the year 1999-2000.  It is now end January 2000 and the Controlling Officer is anticipating a year-end "underspent" of $8 million.  The Controlling Officer has been assured that the amount underspent will not be deducted from his baseline (as FB has removed the "underspending factor" for cash-limited DE subheads since the 1999-2000 baseline exercise).  There is no need to rush to spend that $8 million.  He takes pride in his department's ability to use less resources than forecast for the delivery of the policy objectives.  He knows that his department's effort will be rewarded as half of the amount "underspent" will be credited to his department's "Save & Invest Account" for implementing initiatives to enhance productivity in the future.  

Save $$$ and Invest in Productivity 

You can see from the above the change in spending culture.  In a gist, bureaux and departments are now encouraged to economise.  Half of the resources saved can be used as "seed money" for future initiatives to achieve productivity gains.  

What is the "Save & Invest Account"?  

Availability  

The "Save & Invest Account" facility is available to all Government bureaux and departments.  It is not available to subvented organisations receiving recurrent subventions as many of them already have an arrangement to keep unspent funds in their reserves.  For subvented organisations which at present are subject to claw back of unspent funds, Finance Bureau will discuss with the respective Controlling Officers to devise alternative arrangements.  

What can be saved?  

The "Save & Invest Account" is an administrative arrangement.  Half of a bureau's/department's cash-limited DE underspending in the year will be saved in its own separate Account with the Centre.   The underspending will be calculated with reference to the actual outturn compared to the approved provision (net of any sum reserved).  Windfall savings (such as earmarked expenses for a new project to be commissioned in the year which has been considerably delayed to the following year), and saving which clearly are not attributable to the effort of the bureaux/departments will not be taken into account when calculating the amount that could be credited to the Account.  

Based on bureaux'/departments' actual cash-limited DE spending in 1998-99, we have already created separate "Save & Invest Accounts" for them and credited to them the amount due.  Statements of the Account opening balance were sent to respective Controlling Officers in July 1999.  

Validity Period  

The "savings" made in respect of a year can be used for the subsequent three years before they lapse, e.g. the amount saved from underspending in 1998-99 may be used in 1999-2000, 2000-01 or 2001-02.  

Use of the Account Balance  

Bureaux/departments may only draw from their Accounts to spend on one-off projects.  These projects should be initiatives leading to productivity gains and may range from purchase of plant and equipment, investment in IT, to training and cultural change workshops, etc.  Any recurrent costs arising from such projects will need to be absorbed by bureaux/departments themselves.  

The Account provides a more certain source of funding as bureaux/departments do not have to compete with others for capital funding in the annual Resource Allocation Exercise.   More importantly, it can be drawn upon at any time throughout the year, as the Controlling Officer sees fit.  

Application  

To draw funds from their Accounts, bureaux/departments are requested to submit to Finance Bureau an application in the prescribed format.  The existing levels of authorisation and delegation of authority for the use of funding still apply.  For example, any item exceeding $10 million will require the approval of the Finance Committee of the Legislative Council in the normal manner. 

Others  

Since the "Save & Invest Account" is only an administrative arrangement, there is no real money in any separate Account.  Hence, sorry, no interest will be credited to the balance in the Account.  

For details of operation of the Account, please refer to Annex B to FBCM 12/99 and the section on "Answers to Frequently Asked Questions" below.  

If you have any suggestions on the operation of the "Save & Invest Account", please write to us.