The Direct Subsidy Scheme was born in 1991 to help schools breathe beyond bureaucracy: to free schools from government control, letting them decide everything from their fee levels and curriculum to admission rules and class sizes.
But they must take responsibility to use their funds wisely and to manage their affairs within the rules.
The extent to which that did not happen is seen in the recent, damning report from the Director of Audit - a catalogue of unsound financial practices, sloppy management and poor accountability at all but one of the 73 DSS schools. The possibility of such abuses was evident long ago. Fanny Law Fan Chiu-fun, the permanent secretary for education and manpower from 2002 to 2006, saw the need for a code for DSS schools after finding minor irregularities in internal audits.
'In one case, there was a principal who charged her monthly cross-harbour [tunnel] fees to the government account. That was clearly wrong so we required her to rectify it,' Law said yesterday. Finding one or two more such problems, 'we said there will have to be a much more comprehensive code of aid for DSS schools', she said.
As Law sees it, if schools are to manage themselves - without bureaucrats overseeing their every move - then parents must take a strong role in seeing where the money goes and what the priorities are.
'There was a very big row within the school sponsoring bodies because we want the authority but they don't want the responsibility,' Law said. 'There must come a point where there are checks and balances. The school management committee is the check and balance.
'It is up to the parents, the alumni and the government to ensure that these schools use funds as they should. The parents have to ensure that extra schools fees are properly used. The government has to ensure that its funds are used properly.'
That clearly has not happened in recent years, according to the auditor's report. Among the most serious allegations, Good Hope School in Kowloon, run by the Missionary Sisters of the Immaculate Conception, was accused of using surplus funds to speculate on the stock market, accumulating a portfolio valued in February at HK$71 million. The investments breached a rule that unused school funds be held in savings accounts or term deposit accounts.
Logos Academy in Tseung Kwan O was rapped for using HK$10 million to buy three properties for native English-speakers' staff quarters. The properties were bought without safeguards to ensure the school was the legal owner.
Delia Memorial School was accused of using government funds to pay a HK$4.1 million tax bill and to donate HK$5.1 million to an unspecified beneficiary. But alongside the more flagrant alleged breaches, the report also described systemic failures to meet the scheme's fundamental principles, such as the rule that schools must put aside 10 per cent of their fee income to provide scholarships and fee remission plans.
Twenty-two schools failed to set aside the minimum sum required for financial aid, and three were more than HK$750,000 below the threshold. Some 35 per cent of the schools do not even mention the fee remission schemes on their websites.
The report faults the government for failing to keep watch. Director of Audit Benjamin Tang Kwok-bun is recommending that Secretary for Education Michael Suen Ming-yeung take a far more active role in monitoring the schools. In a tacit admission of the scale of the problem, Suen has agreed with many of the report's recommendations. Lai Tsang-hing, the chairman of the Hong Kong Parents Association, said they were concerned by the report's findings.
What worried them most were schools using government funding to invest in the stock market, failing to tell parents about financial aid, and not providing financial information when applying for fee rises, Lai said.
'Schools should not reserve such large amounts and they should have good budgeting,' he said.
Surpluses should be used to enhance the school environment and educational experience, he added.