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No.5, 2008 (General Serial No.29): Audit Findings on the Safeguard,Application and Management of Expenditures for Rural Compulsory Education in 54 Cou
2008-12-22日   Soure : :

Audit Findings on the Safeguard,

Application and Management of

Expenditures for Rural Compulsory Education in 54 Counties

(Announced on July 4, 2008)

In accordance with the provisions of the Audit Law of the People’s Republic of China, the National Audit Office of China(CNAO) carried out audits over the expenditures for the compulsory education in 54 counties (cities, leagues) of 16 provinces (regions, municipalities) from January 2006 to June 2007. And now the audit findings are publicly announced as follows:

1.     Reform on rural compulsory education expenditure safeguard system has achieved fairly good results

The audit findings has indicated that the governments at various levels and relevant departments did took a serious approach to the implementation of the central government’s plan and policy by putting in place a new expenditure safeguard mechanism for compulsory education in rural areas whereby the central government and the localities share the cost, while provinces are responsible for pooling resources to be managed by various levels with the counties playing the leading role. This mechanism has basically come into existence, and achieved fairly good results.

(1)  The responsibilities of the governments at various levels have been enhanced and the expenditures for compulsory education in rural areas have registered a large-scale increase. In the course of the implementation of the compulsory education expenditure safeguard mechanism in rural areas, the central government has strengthened its special transfer payments to various localities with emphasis on central and west part of China. In 2006 and the first half of 2007, the central financial subsidies given to 16 provinces for rural compulsory education in the form of special expenditures amounted to 15.326 billion yuan and 9.849 billion yuan respectively, up 90.49% and 59.55% from the previous year. The provincial governments made great efforts in pooling province-wide resources as evidenced in the financial inputs of the 16 provinces for that purpose, which totaled 16.294 and 9.55 billion yuan in 2006 and in the first half of 2007, a rise of 72.82% and 60.32% respectively compared with the previous year. The contributions given by 54 counties amounted to 5.192 billion yuan and 3.053 billion yuan, an increase of 9.26% and 27.03% over the previous year.

(2)  The safeguard standards of schools have been improved while their management conditions have been remarkably upgraded. In 2006, public expenditures paid by the 54 counties for rural compulsory education reached 1.492 billion yuan, a jump of 20.78% from the previous year; the average per student public expenditure came to 281.74 yuan, up 24.31% from the previous year. In 2006 and the first half of 2007, 959 million yuan had been invested in maintenance and renovation of the primary and middle school buildings in 54 counties, thereby dramatically improving the conditions for school management. They had placed 540.9 thousand sets of new classroom desks and chairs, added 6.9204 million titles of books, 479.5 thousand sets of teaching instruments and apparatuses, and repaired and rebuilt 1.94 million square meters of school buildings.

(3)  Both students and their families have been relieved of some economic burden, thereby securing the all-round enforcement of rural compulsory education. In 2006, in 31 counties of west China that carried out new mechanism , the central government and the governments at various levels had earmarked 602 million yuan for rural compulsory education in the form of “two frees and one subsidy”. They exempted the students from tuitions and miscellaneous fees to the amount of 460 million yuan for the benefit of 3.0056 million students; provided free textbooks costing 98.6792 million yuan benefiting 1.2845 million poor students, and subsidized poor students boarding and living expenses to the amount of 43.6105 million yuan benefiting 210.9 thousand poor student boarders. The total amount given by the state to the poor student boarders averaged 436.71 yuan per capita annually, and as a result, the unaffordable schooling expenses in the course of the compulsory education stage have, by and large, been solved. Compared with 2005, the year 2006 saw the average rural primary school admission rate in 54 counties rise from 99.55% to 99.72% and the average middle school admission rate soar from 95.53% to 96.48%, whereas the average dropout rate in primary schools fell from 0.4% to 0.22%, and the average middle school dropout rate declined from 1.72% to 1.37%.

2.     Problems found by the auditors

(1)  Part of the localities failed to secure the expenditures for rural compulsory education.

First, part of the localities failed to secure the funding totaling 122 million yuan for which they were responsible. Of the 16 provinces subject to audit, three did not secure the full amount of funding in accordance with the prescribed proportions, and thereby falling short of 108 million yuan, which accounted for 8.65% of their due shares. Of the 54 counties under audit, eight of them failed to secure their due shares of 13.5058 million yuan, or 71.78% of the total amount.

Second, five county-level governments cut back on the investment in the rural compulsory education expenditures. Compared with 2005, they had cut back 31.8690 million yuan in 2006, down by 13.2%.

Third, the funding was not appropriated in time, and instead, held up in financial or educational departments. Of the 16 audited provinces, six held in custody 189 million yuan of the special expenditures for “two free and one subsidy”, and two provincial educational departments held in custody or retained the balance (127 million yuan) from the compulsory education projects in poor areas, modern distant learning in rural primary and middle schools as well as other ear-marked funding arranged in previous years. Of the 54 audited counties, 29 counties failed to the have their financial and educational departments allocate and appropriate the funding to the amount of 110 million yuan to the accounts of relevant primary and middle schools within the time limit prescribed by educational departments, which accounted for 45.32% of similar expenditures of 29 counties. 13 counties were six months late in paying the fund, and some even were more than one year late; the total amount in question being 33.01 million yuan, or 30% of the total amount that should have been appropriated in time.

(2)   Part of the localities mismanaged the expenditures for rural compulsory education.

First, Taking illegal possession and misappropriation of earmarked expenditures for rural compulsory education was a common occurrence. Of the 54 audited counties, the primary and middle schools as well as the educational and financial departments in 46 of them took illegal possession and diverted such expenditures for public spending, upkeep and maintenance of school buildings totaling 115 million yuan, which accounted for 3.8% of similar expenditures. Of the total amount of money misused, 56.7% or 65.1351 million yuan were spent on teaching and administrative staff; 25.99% or 29.8609 million yuan on capital construction in schools; and 8.85%, or 10.1684 million yuan on overhead of leading educational organs, and 7.36%, or 8.4499 million yuan on debt repayment, and 1.1%, or 1.2609 million yuan on car purchase and other items

Second, part of the financial resources was rather mismanaged. Of the 54 counties subject to audits, 142 units including educational departments and schools in 16 counties, a total of 40.6515 million yuan obtained from fees collected from students or on others’ behalf for examination, teaching and guidance material, expenditure appropriations, difference in canteen prices and house rentals was kept off- the- books or in private bank books of which there were 129 and whose amount reached 24.9784 million yuan.

(3)  Part of localities had free tuition coupled with chaotic charge of fees.

This was basically evident from unauthorized formulation of projects for fee-collection purpose. They charged students clearly banned fees amounting to 51.0999 million yuan. Four counties collected fees amounting to 19.6098 million yuan, or 38.37 % through such disguised forms as donations and sponsorships. Nine others charged fees for make-up lessons, after-school trainings and others totaling 12.5033 million yuan, or 24.47%. 17 others collected fees for examinations and examination-related affairs to the amount of 9.1183 million yuan, or 17.84%. Four counties charged fees for temporary schoolings and school selections amounting to 3.3673 million yuan, or 6.59%. 12 counties charged fees for heating meals, drinking water, bike parking, which reached 2.5022 million yuan, or 4.9%. 16 others collected fees for education with audio-visual aids, printing of material, computers totaling 3.999 million yuan, or 7.83%.

Second, they collected unauthorized fees on others’ behalf totaling 111.8158 million yuan. Among others, 34 counties collected fees for guidance material on others’ behalf amounting to 66.2336 million yuan, or 59.23%. 17 counties collected insurance premiums for others totaling 33.5203 million yuan, or 29.98%. 17 counties collected school uniform fees, physical examination fees, immunization fees on others’ behalf to the amount of 12.0619 million yuan, or 10.79%

(4)  Heavy debt hampered the sound development of compulsory education in rural areas.

On the basis of the survey made in the 54 counties, by the year-end of 2005, primary and middle schools involved in rural compulsory education had had an outstanding debt of 2.872 billion yuan. And as of the end of June 2007, they had repaid 863 million yuan, but at the same time they had owed another 679 million yuan. Therefore, they still had 2.688 billion yuan to repay. The average debt per county was 49.78 million yuan. Based on the investigations and analysis of the new debts in nine counties including Kazuo, Liaoning province and Xiji, Ningxia Autonomous Region, these counties owed 123 million yuan from 2005 through June 2007. The borrowed money spent on new school buildings or refurbishing dangerous buildings amounted to 96.2604 million yuan, or 78.45%; the money spent on purchase of educational aids came to 11.6559 million yuan, or 9.5%; the money spent on payment of interest on old debt and new borrowings reached the total of 14.7877 million yuan, or 12.05%. As of June 2007, there was still 644 million yuan of debt to be repaid. It had become a regular occurrence that part of the schools was forced to close down by creditors and students were compelled to stop schooling due to heavy debt burden or failure to service debt. Other schools were taken to court and forced to be denied their rural compulsory education funding, thus affecting the normal running of schools.

The primary reason for the above phenomena was, first and foremost, attributable to the failure of a few localities to take on the full responsibilities for safeguarding the rural compulsory education expenditures. In the course of the reform on the mechanism for safeguarding rural compulsory education expenditures, the central government had made it clear in explicit terms about the shares that provinces and counties should commit to. However, in practice, some provinces made little effort to pool their financial resources with the result that the provincial input fell short of their commitment. Certain localities simply shifted their responsibilities to the lower levels and eventually the county level finance had to pick the tab. As those counties were already financially overburdened, they failed to secure their shares of financial input. Second, part of the localities were still far from measuring up to the statutory budget management requirements of their primary and middle school. Some even failed to have educational bureaus to manage schools’ properties. Some principals of primary and middle schools had been beyond the external control for too long, and as a result, the schools’ in-house control was lax enough to have the malpractice of keeping off-the-book public money and arbitrary fee-charging addressed in a timely manner. Third, part of the localities, the poor –stricken ones in particular, were cash- strapped, and at a time when their classrooms and school buildings had outlived their usefulness and were badly in need of improving their school operation, their only way out was to take illegal possession of public expenditures and make new borrowings in the absence of sufficient subsidies from higher-ups and financial constraints at county level.

3.     Auditor’s proposals

(1)  Efforts should be made to follow through the expenditure safeguard mechanism for rural compulsory education. The local governments at various levels should, on the basis of fine-tuning the mechanism for filing for expenditures used in rural compulsory education and mechanism for allocation, conform with the proportions prescribed by the central government and delegate responsibility for the share level by level to each local government. The provincial governments should enhance their efforts to pool resources with an emphasis on giving greater transfer payments to poor areas, and upgrade the expenditure safeguard level, making the expenditure safeguard mechanism for rural compulsory education a reality.

(2)  Efforts should be made to set up a sound internal control system and a tightened external supervision. Each primary or middle school should have a sound in-house control system in place to regulate and tighten the fiscal accounting and day-to-day income and expenditure management, take a conscientious approach to the open running of schools and open accounting books. The financial and educational departments, for their part, should perfect the financial management system of having the educational department look after the schools’ money and keep a close administrative watch, and introduce a practice of public notice regarding the input and spending of the expenditure for rural compulsory education so as to secure the timely disbursement of the expenditures and raise the efficiency of fund employment.

(3)  Practical steps should be taken to look into and punish the arbitrary collection of fees, and bring to a resolute end to such malpractice. The educational, financial and pricing department at various levels need to investigate into and punish the acts of chaotic charging fees for rural compulsory education, and regulate the practice of collecting money on others’ behalf. In cases where the illegal charging of fees and in particular charging fees in the interest of a small group, those persons concerned should be held accountable.

(4)  Steps should be taken to clear up and gradually solve the debts owed by the rural compulsory education. The financial and educational department of the local governments at various levels should take practical steps to enforce  relevant documents of the central government in clearing up debts one by one owed for rural compulsory education, and raise fund from multiple sources so as to relieve the burden of old debts while monitoring such schools’ borrowings, engaging in centralized planning and gradually building their capacity for running schools with a view to heading off new debts and securing a sound development of compulsory education in rural areas.

4.     The way the problems found by the auditors were addressed

The Ministry of Education and the Ministry of Finance as well as the local governments at various levels had attached great importance to this audit. During the audit, the Ministry of Education made field trips to the places in question to keep itself informed, had a full picture about the problems found by auditors and delved into them by issuing a Circular Note on Paying Attention to the Better Management in Response to the Problems Found in Special-Item Audit of Rural Compulsory Education Expenditures jointly with the Ministry of Finance in which the local governments were informed of the problems found by the audit, and required to streamline the management in the context of the problems. Following the on-the-spot audits, the Ministry of Education called a special meeting attended by leading members of educational departments of provinces, regions and municipalities, and asked the 16 provinces subject to the audits to report on their respective rectification measures, and demanded other provinces to make much of those problems. The Ministry of Finance, for its part, lost no time to improve relevant systems in addressing the problems by detailing and specifying the responsibility of each local government for safeguard and management of the financial input and setting up a day-to-day monitoring system for the earmarked expenditure appropriations and the way they were spent on rural compulsory education. The 16 audited provinces had informed their relevant units of the audit findings by various means and demanded ratifications. In some localities special investigation groups were formed to verify one by one the way the problems were addressed.

Thanks to the efforts, the ratification of local governments has yielded certain results. Some practices at odds with the policy have been done away with. Just to name a few: arbitrary recommendation of  guidance material to students in the stage of receiving compulsory education, making use of the schools’ compounds and teaching staff  to train students for a fee. Second, The late appropriation, overlong retaining and diversion of educational expenditures have  been corrected  by either giving out the money long overdue or returning them to their original sources, thereby ensuring the schools implementing compulsory education to get their expenditures. Third, those illegally collected fees have been returned to students, and the persons in question have been given disciplinary penalties. Fourth, the off-the-book money and “private coffers” have been done away with, and the revenue and expenditure as well as the fiscal management are clearly regulated.

With reference to the debts incurred from the rural compulsory education, the departments and localities concerned, in compliance with the requirements set forth by the Party’s Central Committee and the State Council, have given priority to relieve the burden of debts owed as a result of implementing the rural nine-year compulsory education as part of their efforts to clear up rural debts. And they plan to spend two years starting December 2007 to basically accomplish the debt-clearing businesses while setting up a new, stable and always-effective mechanism to pre-empt new debts incurred from rural compulsory education.