Case Study of Lump Sum Grant in Hong Kong: Successes and Failures

• In Event: Funding for the common good?

Abstract

The impact of New Public Management (NPM) related policies on nonprofit organisations has been debated recently (Alexander, 2000). This study examines the impact of the Lump Sum Grant (LSG) policy in Hong Kong, which is an NPM-inspired funding approach for nonprofit organisations (Leung, 2002). The LSG policy aims to enhance the efficiency of social services provided by nonprofits through subsidising a budgeted all-inclusive grant to cover all costs. This research seeks to understand the successes and failures of the LSG policy after its implementation for more than 20 years. The study contributes to the broader discussion on NPM's impact on the welfare state and the nonprofit sector.
LSG policy provides a block grant to each nonprofit organisation and the full autonomy to use it for staff, equipment, and other general expenditures. On one hand, LGS successfully capped the government expenditure on social welfare provision (Chan, 2021). On the other hand, to ensure accountability, LSG requires nonprofit organisations to meet clear output standards (e.g., enrollment rates, hours of service) and outcome standards (Law, 2003). Together, they realised the key objective of NPM to increase efficiency (Schubert, 2009). However, there are also unintended consequences of LGs, including but not limited to compromise on service quality, weakened power for policy advocacy, and mismanagement within nonprofits (Dai, Jiang, & Li, 2022; Lai, & Chan, 2009). Hong Kong government published one review report on LSG in 2008 and another in 2021, both of which consolidated feedback from various stakeholders and made essential revision to the LSG policy.
This policy analysis adopts the document analysis design to examine the LSG policy's successes and failures (Cardno, 2018; Karppinen, & Moe, 2012). Data was generated by analysing news articles, policy consultation reports, and policy amendment documents related to the LSG policy in Hong Kong. This approach allows for a macro-level understanding of the LSG policy's impact on nonprofit organisations.
Preliminary findings indicate that LSG mobilised the senior managers of nonprofits to cut costs and increase efficiency, which also led to changes in front-line operations. Besides, it inspires innovation in project design and resource allocation. However, it hinders nonprofits' ability to adapt to the dramatically changing societal needs. It also poses crises in human resources development and retention. Some challenges of further revising LSG are also discussed.
This study's findings contribute to the ongoing debate on the impact of NPM-related policies on nonprofit organisations (Anheier, 2014). The mixed results of the LSG policy in Hong Kong suggest that while such policies may achieve some of their intended goals, they may also lead to unintended negative consequences that can undermine the nonprofit sector's value, and position (Eikenberry & Kluver, 2004). Ultimately, this research aims to inform policymakers and practitioners in shaping more effective and sustainable funding policies for nonprofit organisations that balance efficiency, quality, and stakeholder satisfaction (Salamon et al., 2017).

References

References (Facilitated by GPT-4)
Alexander, J. (2000). Adaptive strategies of nonprofit human service organizations in an era of devolution and new public management. Nonprofit management and leadership, 10(3), 287-303.
Anheier, H. K. (2014). Nonprofit organizations: Theory, management, policy. Routledge.
Cardno, C. (2018). Policy Document Analysis: A Practical Educational Leadership Tool and a Qualitative Research Method. Educational Administration: Theory & Practice, 24(4), 623-640.
Chan, R. K. (2021). Financing the welfare state system in Hong Kong. In Financing Welfare State Systems in Asia (pp. 177-197). Routledge.
Dai, H., Jiang, N., & Li, R. (2022). Social worker turnover under the lump sum grant subvention system in Hong Kong: Organisation-level analyses. The British Journal of Social Work, 52(3), 1683-1702.
Eikenberry, A. M., & Kluver, J. D. (2004). The marketization of the nonprofit sector: Civil society at risk?. Public administration review, 64(2), 132-140.
Karppinen, K., & Moe, H. (2012). What we talk about when we talk about document analysis. Trends in communication policy research: New theories, methods and subjects, 177-193.
Lai W. H. F., & Chan K. T. T. (2009). Social work in Hong Kong: from professionalization to ‘re-professionalization’. China Journal of Social Work, 2(2), 95-108.
Law, P. S. (2003). The impact of the lump sum grant system on professional social workers in Hong Kong (Doctoral dissertation, Chinese University of Hong Kong).
Leung, J. C. (2002). The advent of managerialism in social welfare: The case of Hong Kong. The Hong Kong journal of social work, 36(01n02), 61-81.
Salamon, L. M., Sokolowski, S. W., & Haddock, M. A. (2017). Explaining civil society development: A social origins approach. JHU Press.
Schubert, T. (2009). Empirical observations on new public management to increase efficiency in public research—Boon or bane?. Research policy, 38(8), 1225-1234.

Author

• Ke Lu, University of Hong Kong