AS AT 30 JUNE 2019
2019
$million 2018
$million Non-Current Assets
Property, Plant and Equipment 5,338 5,157
Intangible Assets 13 11
Held-to-Maturity Financial Assets 0 65
Financial Assets at Amortised cost 105 0
Available-for-Sale Financial Assets 0 421
Financial Assets at Fair Value through Other
Comprehensive Income 477 0
Financial Assets at Fair Value through Income and Expenditure 6,593 6,354
Interest in an Associate 83 83
Bank Deposits with Original Maturity over One Year 385 0
12,994 12,091
Current Assets
Held-to-Maturity Financial Assets 0 4
Financial Assets at Amortised cost 1 0
Inventories 1 1
Accounts Receivable and Prepayments 411 255
Bank Deposits with Original Maturity over Three Months 1,776 1,412
Cash and Cash Equivalents 656 257
2,845 1,929
Current Liabilities
Accounts Payable and Accruals 1,153 793
Provision for Staff Benefits 185 180
Deferred Income 868 719
Tax Payable 2 1
2,208 1,693
Net Current Assets 637 236
Total Assets Less Current Liabilities 13,631 12,327
Non-Current Liabilities
Provision for Staff Benefits 36 27
Deferred Income 768 0
Deferred Capital Funds 4,086 3,950
4,890 3,977
NET ASSETS 8,741 8,350
UGC Funds 2,591 2,617
Restricted Funds 1,248 1,253
Other Funds 4,902 4,480
TOTAL FUNDS 8,741 8,350
Approved by the Council on 17 October 2019
ANNUAL REPORT 2018-19 APPENDICES
APPENDIX V
INTERNAL CONTROL AND RISK MANAGEMENT
SUMMARY OF INTERNAL CONTROL AND MEASURES
The University has developed a system of internal control based on a framework issued by the Committee of Sponsoring Organizations of Treadway Commission (COSO). The five components of COSO Framework, namely Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring, are adopted by the University in ensuring the effectiveness of University governance.
In order to provide assurance about the effectiveness of internal controls to the Council and Senior Management of the University, the following arrangements are in place:
(a) Whistleblowing Policy is in place and operating to provide a safe and protective means by which staff, students and other stakeholders of the University are enabled to raise concerns with the appropriate University authorities against any malpractice within the University.
(b) The Internal Audit team is responsible to prepare the annual risk-based audit plans and perform independent reviews to assess adequacy of the design and operating effectiveness of the control as well as providing recommendations to streamline processes for efficiency increase.
(c) In addition to the statutory annual audit of the University’s financial statements, the external auditors also carry out an independent assurance engagement on the University’s compliance with the guidelines, terms and conditions imposed by the Government’s University Grants Committee.
(d) The Audit Committee (The AC) of the University approves the annual audit plan, supervises the scope of work performed by the internal audit team, reviews the internal audit reports or concerns on internal controls raised by the internal and/or external auditors. Furthermore, the Audit Committee has an oversight role on the appointment and performance of both internal and external audit team to ensure independence of the reporting line for the auditors and objectivity of the work performed by the auditors.
Risk Management
The University’s risk management process (“The Process”) is implemented in accordance with the Strategic Risk Management Policy. The Process complies with the recommendation on management of major institutional risks included in the Newby Report on Governance in UGC-funded Higher Education Institutions in Hong Kong, published on 30 March 2016.
The report on risk assessment and supporting risk registers were presented to the Council for approval in October 2019. The following is a summary of the risk assessment results extracted from the report.
Overall Conclusion
The University faces a number of strategic risks that are classified under reputational, operational and financial risks. In general, there are appropriate mitigation actions to mitigate the identified risks. The University also has reliable sources of assurance that the mitigation is effective.
Furthermore, management is well aware of the societal issues faced by the general public in Hong Kong, including the University. Management reaffirms the University’s core values of inclusiveness, diversity and respect in mitigating the external risks arising from the societal issues. The University values and respects the differences of individuals, whether in terms of race, gender, cultural backgrounds, religion, personal interests and in other dimensions, and strives to embrace these diverse forces to foster an inclusive and caring environment. Management continues to emphasize that it is essential that all parties, public or private, adopt an open and approachable attitude in listening to one another by means of direct conversation. The University is trying its utmost to provide a safe environment for teaching and learning with an expression of sharing, dialogue and intellectual stimulation within our campus setting. Management also stands ready to provide support to all members, especially those who are new to the University family.
The University also recognizes that new strategic risks may emerge at any time. Going forward, management with the support of the Internal Audit Office will continue to monitor and review the risk registers to identify and assess existing and emerging risks that could lead to serious consequences. The Internal Audit Office will also help to follow up on the completion status of risk mitigating activities at least annually.
publicly funded institution. The University undergoes periodic exercises such as Research Assessment Exercise (RAE) and Quality Assurance Council (QAC) audits to ascertain and uphold the standards of academic and research excellence.
Financial Risks
As a public university, key funding for administrative services, campus development, academic and research related activities is mainly provided by the government. Apart from public funding, there are also non-government funding sources from the self-financed academic programs, donations and investment in the financial markets to support the University’s development and activities. In light of the societal issues in Hong Kong, the University is expected to face substantial challenges in managing the budget for the coming year. There will be significant pressures on the income generated from operating activities due to uncertainties of student enrolment and other factors. At the same time, higher expenditures will be incurred for enhanced campus security. For non-government funding sources such as donations, the University may also need to come up with a contingency plan of depending more on investment returns to finance operational needs. A team of professional external advisors and investment managers is engaged to assist in the investment portfolio management. Risks arising from investment in the financial markets are mitigated by a diversified investment strategy with acceptable risk and return objectives approved by Council. Information on financial risks and relevant mitigating plan is published in the University’s financial statements.
Operational Risks
The University aims to develop an exemplar of best-in-class standards, practices, and operations, as an agile and effective organization. To achieve the objective, the University strives to provide an inspirational and sustainable campus to work, study and live in. Management has planned risk mitigating activities for the development and renewal of campus facilities, IT system network, safety and sustainability of University environment. There are also continuous efforts to attract and retain best administrative talents as well as streamline administrative processes to develop best-in-class practices. The University has also implemented measures to tighten campus safety and security, such as campus access controls, Graduated Security Response Plan and others.
The societal issues have impacted the recruitment of faculty members and students, especially those from overseas.
Management exerts efforts in attracting and retaining faculty members through various supporting measures. By recruiting high caliber academic leaders in applied research, achievement of the University’s strategic objective in becoming a power for innovation and entrepreneurship could be accelerated. Management upholds and promotes the University’s core values of inclusiveness, diversity and respect to provide assurance to prospective and existing students that the campus is a safe environment for teaching and learning for sharing, dialogues, and intellectual stimulation.