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as a form of standardised cost arrangement.
However, I think
that Dr. Ip was probably envisaging something more like the
standard cost system which is being introduced for social
welfare services. Under this system each agency receives a
fixed amount of subvention that is sufficient to provide the
service to approved standards. The agency must work within
this sum,
as any deficit at the end of a financial year
would not be made up. On the other hand, any surpluses accumulated
may be held by the agency in a special reserve account which
may be used for other activities that are approved by the
Social Welfare Department.
22.
The standard cost system has been introduced for
a total of eight social welfare services, but some difficulties
have been encountered. The main problem is that staff costs
can vary quite widely between different agencies which are
providing the same service, because of the differing
seniority of the staff, which affects their position on the
incremental salary scales. When standard cost was introduced
it was decided to base the staff element of the grants on the
mid-points of salary scales, but this has resulted in over-
large subventions being paid to a number of agencies. This is
clearly undesirable, since large surpluses are being accumulated
in agencies' reserves which could be put to better use in
developing other badly-needed services. We are trying to find
a way of overcoming this problem, but I fear that it may have
to be at the expense of the flexibility which Dr. Ip rightly
values.
/There..