14-UCT-1992 11:51
FB GS
+ 852 868 5279′′
P.27
4. Probable
causes
Paper 6 (P. 3 0f 13)
underspending on capital
07
expenditure
On PWP :
J
-
Works Departments
expenditure in any
perception that actual
one year must remain within
the year's provision, even though it is the
'approved project estimates
overall
that is the controlling factor rather than the annual expenditure (cash flow) target. This misleading perception arises in
in part from the fact that estimates submitted by departments
departments are almost always trimmed by Finance
Finance Branch.
There is
therefore psychological pressure on departments to inflate their estimates of cash flow
requirements
for anticipated reductions
to
cater
this reflects the need of matching
a sensible view on physical progress of works with a realistic view on cash flow requirements.
The
perception problem in the Works Departments may have been strengthened by a directive to
them in mid-1991 to reduce 20% from the
resources allocated to each programme area. This, combined with the delay in the decision in
the Airport Core Programme, contributes to underspending in the last 2 years.
In addition, until this year, it was the Finance Branch practice to provide for inflation in preparing annual estimates and an anticipated
full
the
year's inflation was added uniformly onto estimated cash flow requirements put forward by the Works Departments, without due regard to the physical progress of the works in question. This has resulted in a degree of over-provision.
Other major Factors include:
include statutory delay,
provision of land, objections and changes
in clients requirements etc.
e.g.