SCMP Thursday, November 16, 2000

AUDIT COMMISSION
Schools flouting guidelines on profits
JIMMY CHEUNG and CYNTHIA WAN
Kindergartens have flouted government guidelines, making profits of up to 159 per cent by imposing a wealth of miscellaneous charges on parents, the auditor says.
Some kindergartens made more than $2 million in profits but were still given rent and rates reimbursement of more than $460,000, according to the report released yesterday.
A profit limit of 15 per cent is set by the Education Department, but the average profit margin of the 50 cases studied by the auditor was 159 per cent. In one case, the profit was as high as 445 per cent. The income from miscellaneous fees accounted for 18 per cent of the total school income.
The level of school fees is now approved by the department, but miscellaneous charges - such as for textbooks, uniforms and school bags - are only governed by the 15 per cent guideline.
"Because of the lack of control, many kindergartens derived substantial profits from miscellaneous fees," the report said.
The watchdog suggested withholding subsidies or exposing non-compliant kindergartens.
The Government reimbursed rent and rates worth $160 million to non-profit kindergartens last year. But the auditors found nine per cent of kindergartens studied saw profits of more than $1 million in 1998-99.
"It is doubtful whether the Government should continue to provide financial assistance to these kindergartens," the report said.
The commission also challenged the remission of $311 million in school fees to less wealthy parents. It said many applicants applied with a "self-certified" income statement for the means test without further verification.