promulgated by the Secretary for the Environment. The Secretary for the New Territories has agreed that because of this delay other losses of revenue may have occurred in respect of assessments determined in the period from March to June, 1975. Meanwhile, despite steps taken by the Secretary for the New Territories in his endeavour to ensure that files are brought up three months before the expiry of building covenant periods and his warning to his staff that he might take disciplinary action against them if the proper procedure was not followed, cases were still observed in audit in which District Officers had not followed strictly the timetable prescribed in departmental instructions for the extension of those periods. The danger of loss of revenue by the failure to demand premia before the expiration of the covenant periods, to which I invited attention in paragraph 20 of my previous report, is therefore still present.
18. Head 11-Water. Subhead 010. Chargeable water. Several years ago, with a view to assessing the extent of any illicit consumption of water, I endeavoured to carry out a reconciliation of the volume drawn from storage reservoirs with the aggregate volume of water legitimately supplied, but I was unable to do so as no accurate figures of billed and authorized free supplies were available. However I have recently been given to understand that a substantial amount of water is indeed being stolen and that an estimated 10% of average daily consumption is lost as the result of illegal connections and theft from Government mains. One official estimate places the value of the annual loss at $40 million, equal to over 20% of total water revenue, but although this may perhaps be overstating the case, it is nevertheless clear that theft of water presents a serious and intractable problem. In the Hong Kong environment some degree of loss may well be inevitable but it would seem that a contributory factor to the increase in the illegal tapping of the water supply may have been an undue tolerance of offenders in the past. In an attempt to bring the situation under control the Director of Water Supplies has recently established a special unit within the Consumer Services Division to investigate and prosecute alleged offences, but it is yet too early to say how successful this will be in deterring transgressors.
19. Salt water supplied to domestic premises for flushing purposes is assessed as a fixed ratio of fresh water consumption and charged at appropriate rates. An audit of connection records indicated that in a number of cases no action had been taken to raise charges for salt water so supplied and a consequent review carried out by staff of the Waterworks Office found that, because of the omission of the relevant entries in the billing records, approximately 4,700 consumers had not been charged a total of over $80,000. It is most likely that, but for the initial audit query, this revenue (which would undoubtedly have increased with the effluxion of time and the possibility of further similar omissions) would not have been billed and steps have been taken by the Waterworks Office to prevent a recurrence of such lapses in procedure.
20. Head 15-Reimbursements. Subhead 080. Departmental services to the Urban Council. The administra- tive arrangements between the Government and the Urban Council require the Council to pay for materials and services provided by Government departments to the Council. These services include bacteriological tests of food and water carried out by the Medical and Health Department but no provision for payment of the relevant fees was made by the Council between 1st April, 1973 and 31st March, 1976, during which time the amount due to Government for the service totalled nearly $1 million. After considerable correspondence between the Government and the Council it was agreed that, as the need to make provision for payment of the fees had not been brought to the Council's attention, the arrears should be remitted and that the Council should pay for the service only with effect from 1st April, 1976.
21. Head 15—Reimbursements. Subhead 100. Staff oncost-Housing Authority. Subhead 110. Staff oncost- Urban Council. The Housing Authority and the Urban Council are staffed by public officers, for whom posts are provided in the Government Estimates and whose emoluments are paid through the Treasury and reimbursed to Government by the bodies concerned. The administrative arrangements made with each of the organizations stipulate that in addition to reimbursement of the actual emoluments paid to the staff, Government may recover an oncost, calculated by way of a percentage addition, to meet the expense of providing benefits such as passages, quarters, medical treatment, pensions, etc. which cannot readily be isolated and charged separately. The percentage rate of oncost to be applied is reviewed from time to time in order to ensure that it properly represents the cost to Government of all the relevant overheads and following one such review in early 1975, the Housing Authority and the Urban Council were advised that with effect from 1st April, 1975 the rates of oncost charged to them would be increased from 30% to 36% and from 26% to 28.5% respectively. The Urban Council has declined to meet the increase until the Government is able to demonstrate precisely why the percentage should so rise, whilst it was agreed that the Housing Authority throughout 1975-76 should be allowed to continue paying at the original rate. On the premise that the proposed revised rates of oncost properly reflected the increased cost to Government of providing the services of the public officers to the two bodies concerned, the failure to proceed with the proposal to increase the oncost in 1975-76 had the effect in that year of furnishing a subsidy to the Housing Authority in addition to the amounts otherwise provided, of some $5.3 million and to the Urban Council of approximately $3.7 million.
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