​​​In 2019-21, our operational and capital expenditures have been funded principally from the government grant. This will continue into 2021-22 but our operational expenditure will be fully funded from the levies when they start on 1 January 2022.

In 2021-22, we will be consolidating our rapid growth, which was necessary in 2019- 21 to transform the FRC into Hong Kong's full-fledged independent auditor regulator. Our headcount reflects that growth.  The 2019-21 budget  assumed 48 staff throughout the year, which was expected to grow to 63 by the end of 2021-22.

The actual position, reflected in the 2019-21 forecast, is different. With only 25 staff at 1 October 2019, during the period we filled the other 23 of the 48 budgeted positions and brought forward (with Board approval and as notified to FSTB) 11 positions originally expected to be added in 2021-22. Going into 2021-22, we therefore forecast 59 positions, only four less than the 63 we originally expected by the end of 2021-22.

Our 2021-22 budget recognises the need to optimise fiscal discipline in the current economic circumstances. We assume no increase in headcount or salary levels in   our budgeted staff salaries, bonuses, variable pay and  MPF  contributions.  I can admit that this a little tighter than I would ideally like in other circumstances but I am confident  we are still able to deliver all of  our statutory functions effectively. However, I hope circumstances will allow us to revisit this in the following year.

Since my arrival in October, I have worked closely with my management team. There is scope for enhanced efficiency in our second financial year given our first cycle experience of inspection and oversight. Our investigation function is making progress in addressing its case backlog and it has capacity for new cases now starting to    arise. And we will have a small but complete disciplinary function by the end of Q1 2021-22. If I anticipate any new challenges as our experience evolves, I won't   hesitate to discuss the resource implications with the Board.

Other budgeted expenditures are broadly consistent with recurring levels at 31 March 2021. Selective increases to support efficiency and effectiveness include:

• An increased staff training and development budget of HK$370,000. This reflects implementation of a new competency and performance management system to support our recruitment, development and retention of high quality staff, who are essential to our effective performance.
• Reinstating conference and duty visits to the Mainland at a cost of HK$580,000 reflects the regulatory significance of the audit work carried out there and is critical to relationship development with the Mainland regulators and Bureaux.
• IT capital expenditure of HK$5 million on HR and work flow management systems will increase depreciation by HK$700,000. They are critical to effective staff performance and development and efficient management of our functions.

This budget allows us to consolidate and enhance the efficiency and effectiveness of our inspection, investigation and oversight functions, to establish our discipline function, and to respond with agility and transparency to new public interest issues.