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NGO Actuarial Study for Finance and HR
Background of Lump Sum Grant (LSG)Utilization of LSGPatterns and corresponding effects of using LSGWhat can we help?
Background of LSG
The Lump Sum Grant (LSG) aims to give NGOs flexibility and greater autonomy to deploy resources and re-engineer services to meet changing community needs
During the financial year of 2022/23, the government subsidized over HK$20 Billion to 170 NGOs
However, a significant concern is that the LSG reserve has exceeded
HK$5 billion
Surpassing 25% of the Social Welfare Department's (SWD) subvention. Some organizations have even accumulated LSG reserves of more than HK$0.3 billion
In 2021/22, 47 NGOs recorded a reserve balance exceeding the 25% threshold
resulting in a total refund of HK$80 million to the SWD. This highlights the importance of effectively utilizing the grant to avoid unnecessary financial burdens and ensure optimal resource allocation.
Can organizations effectively utilize the LSG considering the growing severity of frontline staff turnover, given that the largest expense covered by the LSG is personal enrolments of staff?
Utilization of LSG
Proportion of expenses
Factors affecting LSG
1
Composite Consumer Price Index
2
Civil Service Salary Adjustment
3
New Service Units
4
Financial Budget of the GovernmentPatterns and corresponding effects of using LSG
Over Conservative
Over Aggressive
Common Practice
- Max. Salary Point = Mid Point of MPS
- Limited Employee Benefits
Common Practice
- Max. Salary Point = Last Point of MPS
- Competitive Employee Benefits
Effects
Challenges in retaining talents and hiring new staff
Increased risk of a high turnover rate
Potential compromise on service quality
Refunding of excess reserve (>25%) to the government
VS
Effects
Challenges in forecasting the organization's financial sustainability
Risk of facing deficit, or even a negative reserve
Potential impact on long-term commitments and obligations
The necessity for additional funding
Does LSG usage lead to talent outflow?
The issue is less about the LSG itself, and more about how it's managed.Ineffective financial planning can cause talent loss and impact service quality.
Since 2008, the Social Welfare Department has been encouraging organizations to conduct financial actuarial research. The goal is to address issues related to government subsidy recovery, improve the decision-making capabilities of organizations, and enable more effective utilization of the reserves and optimal allocation of contributions from the provident fund.
How can we help via the acturial studies?
Explore reserve issues and formulate effective strategies
- Perform in-depth analysis of factors, identifying the underlying causes
- Implement targeted adjustments to HR plan to imrpove employee retention
- Propose viable transition plans to the government and optimize resource utilization efficiency
Assist in budget and human resources assessments
- Expand budget planning to a 10-year timeframe, enhancing long-term vision
- Conduct a comprehensive assessment and develop targeted strategies
- Analyze reserve status and formulate flexible response strategies
Optimize Provident Fund Contributions with Actuarial Studies
- Design contribution plans based on employee positions and years of service
- Utilize matrix analysis to determine employees' actual contribution rates
- Provide improved contribution plans to meet the needs of various types of employees
Use Actuarial Studies for Better Planning and People Management
- Identify the long-term risks and opportunities for organizational growth
- Continuously monitor and evaluate actuarial assumptions and methods to adapt to evolving market conditions and regulatory requirements
- Collaborate with actuarial professionals and industry experts to grasp best practices and emerging trends
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