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No.3, 2008 (General Serial No.27): 2007 Annual Certify Audit Findings on 117 Foreign Loan and Aid Projects
2008-07-04日   Soure : :

2007 Annual Certify Audit Findings on 117 Foreign Loan and Aid Projects

(Announced on March 24, 2008)

In accordance with the provisions of the Audit Law of the People’s Republic of China and the relevant foreign loan and aid agreements and complying with the international audit standards and the national audit standards of China, in 2007 the National Audit Office of China (CNAO) conducted certify audits of the financial revenue and expenditure and the implementation of the projects in fiscal 2006 of 117 foreign loan and aid projects implemented or organized by central departments. The CNAO provided 126 audit reports to the related foreign loan and aid agencies (at the request of foreign loan and aid agencies, more than one audit report were provided for 5 projects).

1.       The Basic Situation

The 117 foreign loan and aid projects audited in 2007 included 28 loan projects and 89 aid projects.  In terms of loan and aid agencies, there were 46 World Bank projects, 8 Asian Development Bank projects, 27 United Nations Development Program (UNDP) projects, 11 projects of Multilateral Fund for the Implementation of the Montreal Protocol (Multilateral Fund, Montreal), 13 Global Environment Fund projects, 5 projects of the Department for International Development of the United Kingdom, and 7 projects of the European Union, Asia-Europe Credit Fund, Japan Social Development Fund and others. The planned investment of the 117 projects amounted to 173.274 billion yuan, of which the contracted foreign investment stood at 38.669 billion yuan (US$4.952 billion). By December 31, 2006, the accumulated investment was 110.019 billion yuan of which the accumulated foreign investment reached 24.551 billion yuan (US$3.144 billion). The projects covered the fields of agriculture, energy, communications, education, health, urban construction, environmental protection, etc.

Of the 126 audit reports provided, there were 119 unqualified audit reports, representing 94.45% of the total number, 6 qualified audit reports, representing 4.76% of the total and 1 audit report was inability to form an opinion, representing 0.79% of the total.

The audit findings indicate that the majority of the undertaking units have conscientiously abided by the state financial and economic laws and regulations and loan and aid agreements, truthfully and fairly recorded and stated the economic activities of the projects and ensured a their smooth implementation. The implementation of these projects has achieved relatively good economic and social effect and played a positive role in promoting our economic and social development and environmental protection and drawing on international advanced experience in management. However, the audits have found some problems in financial calculation, fund management and project implementation.

2.       Main Audit Findings

(1) The domestic counterpart fund was not appropriated in a timely manner and in its entirety. Such problems existed in 11 projects, accounting for 9.4% of the total, involving 1,421.9417 million yuan of fund, representing 1.66% of the total counterpart fund of 85.468 billion yuan in the 117 projects.

(2) Withholding project fund. Provincial, municipal or county financial departments or project units withheld project fund, leading to no timely appropriation of fund in 4 projects, accounting for 3.42% of the total, involving 31.2782 million yuan of fund.   

(3) Contravention of regulations in bid and tender invitation. Bid and tender invitation were not conducted in strict compliance with the loan or aid agreements and the relevant rules of the state in 4 projects, accounting for 3.42% of the total, involving 27.8012 million yuan of fund.

(4) Financial management was not standardized and accounting calculations did not conform to the rules. To differing degrees, there existed the problems of non-standardized financial management and accounting calculations not conforming to the rules in 42 projects (representing 35.9% of the total). The problems mainly were reflected in not setting up books of account according to the rules, incomplete accounting calculations, incorrect accounting practices, inadequate expense evidence, untimely clearing of current fund.

(5) Slow implementation of projects. Project construction was not completed according to the plan and there existed low ratio of the completed project investment or slow drawing up of fund or reimbursement in 23 projects, accounting for 19.66% of the total.

3.      Implementation of Audit Recommendations

The CNAO, in accordance with law, issued audit reports and put forward audit opinions and audit recommendations in regard to the problems found in the audits. The CNAO issued audit decisions according to law for the handling of the problems of contravening state regulations.

The relevant project departments attached great importance to the problems found in the audits and earnestly rectified them. By the end of November 2007, the rectification of the majority of problems had been completed and the rectification of the remaining ones was in progress. Among them, of the 1340.003 million yuan of fund not appropriated in time and in its totality, 989.9112 million yuan had been allocated, with the ratio of problem rectification being 74%. Of the withheld fund of 31.2782 million project fund, 27.6616 million yuan had been appropriated, with the ratio of problem rectification being 88%. As for the contravention of rules in bid and tender invitation, the related project departments enhanced the management and supervision of the implementation of the projects and further standardized bid and tender invitation in the projects. With regard to non-standardized financial management and breaches of rules in accounting calculations, the relevant project departments adjusted account, improved financial management regimes and stepped up the training of financial staff. For the slow progress in project implementation, the related project units accelerated the construction of the projects through quicker equipment procurement and boosted progress management of project construction. The drawing of fund and reimbursement were sped up through enhancing the communication and coordination with the financial departments, improving reimbursement procedures and stepping up professional training.  

Appendix 1

Table of Problems of Non-Appropriation of Domestic Counterpart Fund and

Their Rectification

Serial

No.

    Title of Project

Fund Involved in Problems (Million Yuan)

Fund Appropriated at End of Nov. 2007, (Million Yuan)

Percent Rectified

         Remarks

1

National Railway Project II, with loan from World Bank (WB)

1,075.6264

826.5159

77%

Local government promised to allocate un-appropriated fund as soon as possible.

2

China TB Control Project, with loan from World Bank and grant from United Kingdom Department for International Development (UKDID)

65.5501

1.3065

2%

1.3065 million yuan of counterpart fund was appropriated in subproject in Hebei while Henan, Gansu, Shaanxi and Hubei are taking measures for rectification

3

Enhancing Irrigated Agriculture Project, Phase III, with WB loan

137.1139

132.0798

96%

Remaining unallocated 5.0341 million yuan will gradually be appropriated with progress of project.

4

Forestry Sustainable Development Project,  (part of artificial afforestation), with WB loan

25.78

4.685

18%

4.685 million yuan was appropriated with remaining fund being allocated by relevant provinces

5

Agricultural Science and Technology Project, with WB loan

22.5408

22.5408

100%

All the fund has been allocated.

6

No. 9 Health Development Project, with WB loan

10.4746

0.8332

8%

0.8332 million yuan of counterpart fund was appropriated by Xinjiang while Jilin, Hunan, Guizhou and Hainan provinces are taking measures to allocate fund

7

China Rural Water Conservancy Reform Project Oriented to Poor Population (part of Rural Development Office), with grant from UKDID

1.832

1.35

74%

Gansu Province promised to allocate remaining 0.482 million yuan of counterpart fund in 2008

8

Project of Capacity Building in Preventing and Controlling Land Degeneration, with grant from Global Environment Fund (GEF)

0.6

0.6

100%

All the fund has been appropriated.

9

Public Utilities Agencies Reform Theme Project, with WB grant

0.4294

0

0%

With the project completed, not possible to allocate counterpart fund.

10

China Minor River Basin Control and Administration Project, with grant from UKDID

0.0558

0

0%

Extremely difficult to allocate counterpart fund. Rectification is yet to start.

11

Yellow River Flood Control Project, with loan from Asian Development Bank (ADB)

No specific amount is available.

The project department has taken measures to actively coordinate with local government for allocation of counterpart fund.

Total

1,340.0030

989.9112

74%

                                   

Appendix 2

      Table of Problems of Withholding Project Fund and Their Rectification

Serial

No.

    Title of Project

Amount of Fund Involved in Problems (Million Yuan)

Fund Allocated by End of Nov., 2007, (Million Yuan)

Rectification

Ratio

         Remarks

1

Forestry Sustainable Development Project (part of artificial afforestation), with WB loan

14.97

14.97

100%

Rectification completed.

2

Enhancing Irrigated Agriculture Phase III Project, with WB loan

11.2853

11.2853

100%

Rectification completed.

3

No. 9 Health Development Project with WB loan

3.8053

0.9859

26%

The remaining withheld 2.8194 million yuan is being allocated.

4

China TB Control Project, with loan from WB and grant from UKDID

1.2176

0.4204

35%

The remaining withheld 0.7972 million yuan is being allocated.

Total

31.2782

27.6616

88%

Note: The above projects are arranged in the order of their amounts, from big to small, of problem fund involved.

Appendix 3

Table of Problems of Contravention of Regulations

in Bid and Tender Invitation and Their Rectification

Serial

No.

Title of Project

Amount of Fund Involved in Problems, (Million Yuan)

             Rectification

1

Tongbo Pumping and Energy Storage Electric Plant Project, with WB loan

22.7663

In ensuing construction, public bidding was carried out in strict compliance with rules.

2

Poverty Reduction Project of Green Energy in China’s Minority Areas aid from UNDP

3.4749

After the problems were pointed out, supervision and management in implementation of project were enhanced and regulations on bid and tender invitation strictly abided by.

3

Yellow River Flood Control

Project, with loan from Asian

Development Bank (ADB)

1.56

After the problem was pointed out, the personnel in charge of project earnestly studied relevant policies, laws and regulations and bid and tender invitation were standardized.

4

Zhengzhou-Xi’an Railway Project, with ADB loan

No specific amount of fund involved is available, but report confirmed

The project department committed to strictly standardize future bid and tender invitation and prevent such problems from happening existence of such problem.

Total

27.8012

Note: The above projects are arranged in the order of their amounts, from big to small, of problem fund involved.

Appendix 4

     Table of List of Projects with Problems of Non-Standardized Financial

   Management and Contravention of Regulations in Accounting Calculations

                       and Their Rectification

Serial

No.

    Title of Project with Problems of Non-Standardized Financial Management and

Contravention of Regulations in Accounting Calculations  

Rectification

1

No. 9 Health Development Project, with loan from World Bank (WB)

rectified

2

Enhancing Irrigated Agriculture Phase III Project, with loan from WB

rectified

3

Agricultural Science and Technology Project, with loan from WB

rectified

4

Hunan Electricity Development Project, with loan from WB

rectified

5

Waigaoqiao Coal-Fired Electric Project, with loan from WB

rectified

6

Response Project of China’s SARS and Other Infectious Diseases, with loan from

WB and grant from United Kingdom Department for International Development (UKDID)

rectified

7

Study Project of Compulsory Education of Migrant Workers’ Children, with grant from

WB

rectified

8

Project of Drawing Up China National Program in Response to Climatic Change and

Popularization to Provinces, with grant from WB

rectified

9

Project of Comprehensive Management of Haihe River Basin Water Resources and

Environment, with grant from WB

rectified

10

Project of Capacity Building in Precision Calculation for Social Insurance of Ministry of

Finance, with grant from WB

rectified

11

West Region Distance Training Project, with grant from WB

rectified

12

Project of Building Statistics, Monitoring and Analysis System of Public Debt of

Chinese Government, with grant from WB

rectified

13

Labor Force Market Analysis and Policy Expansion Project, with grant from WB

rectified

14

Hebei Zhanghewan Pumping and Energy Storage Project, with loan from Asian

Development Bank (ADB)

rectified

15

Zhengzhou-Xi’an Railway Project, with loan from ADB

rectified

16

Yichang-Wanzhou Railway Project, with loan from ADB

rectified

17

Yellow River Flood Control Project, with loan from ADB

rectified

18

China Judiciary System Reform Project, with aid from UNDP

rectified

19

Public Administration Reform Project (Phase III), with aid from UNDP

rectified

20

Project of HIV/AIDS Care, Prevention and Poverty Relief Based on Communities,

with aid from UNDP

rectified

21

21st Century Urban Planning, Administration and Development Project, with aid from

UNDP

rectified

22

Project of Support for China Building Moderately Prosperous Society in All-Round Way,

with aid from UNDP

rectified

23

Project of Participation of China’s Poor Area Farmers in Dairy Production and

Poverty Relief Capacity Building, with aid from UNDP

rectified

24

Project of China Capacity Building in Financial and Taxation Reform for Poverty

Reduction Promotion, with aid from UNDP

rectified

25

Project of Supporting Establishment of China-Africa Chamber of Commerce,

with aid from UNDP

rectified

26

Project of Building China International Poverty Relief Center, with aid from UNDP

rectified

27

Project of Enhancing Strategic Partnership and National Implementation in Regard to

Emerging Hotspot Problems, with aid from UNDP

rectified

28

Project of Capacity Building in Aiding the Infected and Their Care and Support,

with aid from UNDP

rectified

29

Project of China Rural Poverty Reduction and Innovation through Science and Technology

and Long-Term Mechanism Exploration, with aid from UNDP

rectified

30

Project of Overall ODS Elimination Plan of China Cleaning Industry, Multilateral Fund,

Montreal,

rectified

31

Project of China Overall Halon Elimination Plan, Multilateral Fund, Montreal

rectified

32

Project of China Elimination of Carbon Tetrachloride Production and Consumption of

Carbon Tetrachloride, Trichlorotrifluoroethane Used as 25 Chemical Auxiliaries (CTC),

Multilateral Fund, Montreal

rectified

33

Project of China Application Industrial Plan of Carbon Tetrachloride Production and

Consumption (Phase II) (CTC), Multilateral Fund, Montreal

rectified

34

China-EU Cooperative Project of Venereal Diseases, AIDS Prevention and Control

and Community Reproduction Health Service (part of counterpart fund)

rectified

35

China Energy End-Efficiency Project, with grant from Global Environment Fund

rectified

36

China Energy Conservation Promotion Project, Phase II, with grants from WB

and Global Environment Fund

rectified

37

Renewable Energy Development Project, with grants from WB and

Global Environment Fund

rectified

38

Forestry Sustainable Development Project, Part of Administration of Protected Areas,

with grant from Global Environment Fund

rectified

39

China TB Control Project, with loan from World Bank and grant from UKDID

rectified

40

Basic Health Service Supportive Project, with grant from UKDID

rectified

41

China Rural Water Conservancy Reform Project Oriented to Poor Population, with grant

from UKDID

rectified

42

China Minor River Basin Control and Administration Project, with grant from UKDID

rectified

Appendix 5

Table of Problems of Slow Project Implementation and Their Rectification

Serial

No.

Title of Project

Problems Affecting Progress of Project Implementation

Rectification by End of

Nov. 2007

1

No. 9 Health Development Project, with loan from World Bank (WB)

Slow drawing up of fund and reimbursement by the project in Hainan Province.

Hainan project office stepped up staff training and increased speed of drawing up of fund and reimbursement

2

National Railway II Project, with loan from WB

Slow project checking and cost calculation in electrification upgrading of Zhejiang-Jiangxi line (under jurisdiction of Shanghai Railway Bureau)

Final account at completion of project is being drawn up to accelerate project checking and cost calculation

3

Enhancing Irrigated Agriculture Phase III Project, with loan from WB

By end of 2006, accumulated investment by project in Anhui Province accounted for only 21.31% of the plan

Anhui Province took measures and by end of June 2007, 80% of the plan was fulfilled.

4

Agricultural Science and Technology Project, with loan from WB

By end of 2006, accumulated investment by project in Anhui Province accounted for only 21.68% of the plan

Anhui Province took measures and more than 50% of investment plan is completed in project construction

5

Hebei Zhanghewan Pumping and Energy Storage Project, with loan from Asian Development Bank (ADB)

Relocation and settlement of residents were not fulfilled according to schedule

Relocation of residents is being promoted in an all-round way.

6

Dali-Lijiang Railway Project, with loan from ADB

Frequent changes in design affected progress of project construction

Project department accelerated construction.

7

Yellow River Flood Control Project, with loan from ADB

Slow construction for some subprojects and relocation of residents not completed according to schedule

Active coordination among relevant departments under way for allocation of fund to speed up construction and relocation of residents.

8

China TB Control Project, with loan from WB and grant from UK Department for International Development (UKDID)

Slow drawing up of fund and reimbursement in some provincial and municipal subprojects

Coordination is being conducted among financial and project departments to speed up drawing up of project fund

9

China Water Conservancy Reform Project Oriented to Poor Population (part of Rural Development Office), with grant from UKDID

Slow subproject implementation, drawing up of fund and reimbursement in some provinces

Reimbursement procedure in county financial agencies was improved and reimbursement process sped up.

10

China-UK Urban Community Health Service and Poverty Rescue Project, with grant from UKDID

Implementation of Yinchuan subproject will expire in 2007, at end of 2006 only 56.33% of the plan was fulfilled.

Designated staff of Yinchuan project office urged the fulfillment of project construction and 95% of annual plan was completed.

11

China Minor River Basin

Control and Administration

Project, with grant from UKDID

In 2006, only 46.63% of

planned grant was used.

Measures have been taken to speed up reimbursement.

12

China Overall Halon Elimination Project, Multilateral Fund, Montreal 

Slow progress in study program of fire-extinguishing agent hexafluoropropane standard formulation and checking technology implemented by Tianjin Firefighting Institute of Ministry of Public Security

After rectification, Tianjin Firefighting Institute accelerated implementation

13

Project of China Elimination of Carbon Tetrachloride Production and Consumption of Carbon Tetrachloride, Trichlorotrifluoroethane Used as 25 Chemical Auxiliaries (CTC), Multilateral Fund, Montreal

CSM production line of Calcium Carbide Plant of Jilin Petrochemical Co, China National Petroleum Corporation was not dismantled in time limit stipulated in contract.

The enterprise is studying plan of new production line and the old one may be dismantled in first half of 2008.

14

Project of Overall Elimination of China PU Foam Plastic Sector CFC 11, Multilateral Fund, Montreal

Slow progress in three substitution projects of Yongxing, Fenghua; Jingxin, Xinjiang; Ningyu, Jining

Relevant enterprises took measures so that construction tangibly sped up.

15

Project of Capacity Building in Prevention and Control of Land Degeneration, with grant from Global Environment Fund

Slow use of grant fund.

Consultations were conducted with Ministry of Finance and ADB and part of fund use plan adjusted so reimbursement was sped up.

16

Project of Improvement of Competence of Teachers in China’s Western Poor Areas through Distance Education and ICT, with aid from UNDP

Only 62.03% of 2006 annual plan was fulfilled.

Measures were taken to step up management, scientifically draw up budget, urge project implementation unit to carry out project strictly according to plan.

17

Project of China Capacity Building along Silk Road (Phase II), with aid from UNDP

Only 41.86% of 2006 annual plan was fulfilled. 

Measures were taken to step up management, scientifically draw up budget, urge project implementation unit to carry out project strictly according to plan.

18

Project of Building China International Poverty Reduction Center, with aid from UNDP

Only 57.33% of 2006 annual plan was fulfilled.

Measures were taken to step up management, scientifically draw up budget, urge project implementation unit to carry out project strictly according to plan.

19

Umbrella Project of Reform of Promoting China Judiciary Development, with aid from UNDP

Only 49.37% of 2006 annual plan was fulfilled.

Measures were taken to step up management, scientifically draw up budget, urge project implementation unit to carry out project strictly according to plan.

20

Project of Promotion of China Customs Modernization, Facilitating Trade and Fair Development, with aid from UNDP

Only 64.76% of 2006 annual plan was fulfilled.

Measures were taken to step up management, scientifically draw up budget, urge project implementation unit to carry out project strictly according to plan.

21

Preparatory Project of China Biodiversity Partnership Framework (Framework), with grant from Global Environment Fund

Only 54.1% of 2006 annual plan was fulfilled.

Measures were taken to step up management, scientifically draw up budget, urge project implementation unit to carry out project strictly according to plan.

22

Project of Substitution of China’s Dicofol and Engineering Improvement PDF-B, with grant from Global Environment Fund

Only 51.87% of 2006 annual plan was fulfilled.

Measures were taken to step up management, scientifically draw up budget, urge project implementation unit to carry out project strictly according to plan.

23

China-EU Biodiversity Project

Only 49.67% of 2006 annual plan was fulfilled.

Measures were taken to step up management, scientifically draw up budget, urge project implementation unit to carry out project strictly according to plan.

Note: Of the 37 aid projects of UNDP, Global Environment Fund, Montreal Protocol implemented by the China

International Economic and Technological Exchange Center, those with less than 70% of their plans fulfilled are

listed in this table as projects with slow implementation.

(In this announcement the exchange rate of the RMB against the US dollar is the benchmark exchange rate on December 31, 2006: 1 dollar equals 7.8087