Universities warned to expect security law-related audits

The head of Hong Kong’s financial watchdog, the Audit Commission, has said that full audits of the city’s tertiary education institutions could look into “every aspect of legal compliance” including universities’ adherence to the National Security Law.

Nelson Lam Chi-yuen, Hong Kong’s director of audits, told local media on 2 December that the auditor’s role included inspecting publicly funded universities. His comments were made after it emerged that the Audit Commission had carried out a special audit of Chinese University of Hong Kong (CUHK), including its compliance with the National Security Law (NSL).

Sources said that the inspection of CUHK by the Audit Commission began in April this year. The results of the audit were published in the commission’s latest annual report released last week, marking the first time the Audit Commission has included a publicly funded university in its financial ‘value for money’ report.

“In future, chances are that we will look into all other universities [in Hong Kong] for every dollar they receive from the government. We will also see if the institutions concerned have complied with the law, including the National Security Law,” Lam said.

The NSL was imposed by Beijing on the city in July 2020, criminalising acts of secession, subversion, terrorism and collusion with foreign forces.

CUHK, one of Hong Kong’s top universities, has come under attack in recent months over the constitution of its governing body. The Audit Commission’s report came just a few weeks after the Hong Kong legislature passed a bill on 1 November to reform CUHK’s governing council, reducing the influence of staff and academics in the running of the university.

The reforms will see the university’s governing council downsized from 55 seats to 34. It will have 23 external members and only 11 internal members. In July more than 1,500 people signed a petition opposing the bill.

Against the backdrop of recent criticism of CUHK by pro-Beijing legislators, Lam denied CUHK was specifically targeted for inspection, and insisted the Audit Commission treats all institutions the same as long as they meet the criteria of receiving over half their funding from public sources.

Speaking a few days after the audit report release, he noted a positive ripple effect of the university audit, with other institutions performing a “self-check” as a result of the report.

First audit of a university

The NSL-related audit of CUHK has attracted much attention in Hong Kong as the first by the commission to hold a university to account on procedures and possible financial issues related to the NSL.

However, the audit has been criticised by CUHK alumni and by some Hong Kong legislators. They say it is ‘nitpicking’ and wasting time on close scrutiny of CUHK’s externally operated businesses, including its canteens, campus bookshop and other facilities.

As of 1 July, the university had 39 campus facilities, including 33 catering outlets, two bank branches, a bookstore, a convenience store, hair salon and a supermarket.

The report said that the university had yet to incorporate national security safeguards in its tender documents, contracts and guidelines, calling on the institution to strengthen its “guidance and regulations” for facilities operated by external contractors including the campus bookstore.

For example, the university only required the bookstore operator to not involve CUHK in any unlawful or immoral action and not to display or sell merchandise of an obscene or immoral nature.

“However, CUHK did not issue any guidelines related to the safeguarding of national security for the operation of the bookstore,” the report said.

The report noted that CUHK’s vice-chancellor agreed with its recommendations.

In a statement on 29 November, CUHK said that the bookstore is operated by the Chinese-owned Commercial Press.

“All contracts have a clause to comply with the laws of the Hong Kong Special Administrative Region. This clause will be revised as soon as possible to specify the inclusion of the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region,” it said.

Criticism of audit report

Academics in Hong Kong noted that the Audit Commission had in the past always been ‘apolitical’, sticking purely to financial matters in reviewing other publicly funded bodies, and they pointed out that publicly funded universities in Hong Kong have autonomy over how their government-allocated budget is spent.

“This shows that the Beijing-imposed National Security Law is seeping into every aspect of public spending including universities,” said one CUHK academic speaking on condition of anonymity.

“What the Audit Commission is essentially saying is that the university should be responsible for vetting every one of its many suppliers to ensure they are not breaking NSL. By not doing so, the commission is suggesting the University itself is in breach of NSL. This is absurd,” said the source.

Carsten Holz, professor of social science at Hong Kong University of Science and Technology, told University World News that publicly funded universities should be held to the highest standards of accountability and transparency.

“In Hong Kong, there appears to be very little transparency – unlike in the US, where even faculty salaries at public universities are made public online – and accountability may at best be to a government department, not to stakeholders, let alone taxpayers,” Holz said.

However, he added: “The fact that the Hong Kong government stoops so low as to single out CUHK for an exceptional audit and then makes a mountain out of a molehill in its findings, after having just rewritten CUHK’s constitution to ensure government control of CUHK’s council, and after denying a work visa for a returning CUHK professor, makes the Hong Kong government look more like powerful Red Guards than a government intent on promoting Hong Kong as an educational hub.”

In his comments about the work visa, Holz was referring to CUHK’s recent sacking of history academic Rowena He after she was denied a visa by Hong Kong immigration authorities.

Micro-management

Some Hong Kong lawmakers have also criticised the audit report saying the Audit Commission had gone “too far” and was “detached from reality”.

Heung Shu-fai, a lawmaker who opposed the reform of CUHK’s governing body, said the report focused on “petty and trivial issues not worth the manpower spent”, but the only option for the university was “to swallow it”.

Others said some parts of the commission’s report amounted to “micromanaging” of the university’s finances and pointed to the commission highlighting the sale of trinkets and other non-book items in the university bookstore.

Holz added with heavy irony: “The Audit Commission made explicit that it is all about "national security", which a bookstore, selling, apart from books, toy model cars, might, just possibly, endanger.”

However, CUHK council member Bill Tang, who is also a member of the Hong Kong legislature, said the findings on tenders “raised concerns” and the university’s governing body would follow up. Tang was one of three lawmakers behind the controversial bill to reform the CUHK council.

Tang said that he agreed with the audit’s criticism of the lack of national security safeguards. The university’s management “should have known better” as the law had already been in place for almost three years, he added.